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<SEC-DOCUMENT>0000950137-03-001625.txt : 20030321
<SEC-HEADER>0000950137-03-001625.hdr.sgml : 20030321
<ACCEPTANCE-DATETIME>20030321143820
ACCESSION NUMBER: 0000950137-03-001625
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 11
CONFORMED PERIOD OF REPORT: 20021231
FILED AS OF DATE: 20030321
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: CORN PRODUCTS INTERNATIONAL INC
CENTRAL INDEX KEY: 0001046257
STANDARD INDUSTRIAL CLASSIFICATION: CANNED, FROZEN & PRESERVED FRUIT, VEG & FOOD SPECIALTIES [2030]
IRS NUMBER: 223514823
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-13397
FILM NUMBER: 03612143
BUSINESS ADDRESS:
STREET 1: 5 WESTBROOK CORPORATE CENTER
CITY: WESTCHESTER
STATE: IL
ZIP: 60154
BUSINESS PHONE: 7085512600
MAIL ADDRESS:
STREET 1: CORN PRODUCTS INTERNATIONAL INC
STREET 2: PO BOX 7100
CITY: WESTCHESTER
STATE: IL
ZIP: 60154
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>c75436e10vk.txt
<DESCRIPTION>FORM 10-K
<TEXT>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
Commission file number 1-13397
CORN PRODUCTS INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
<Table>
<S> <C>
DELAWARE 22-3514823
- --------------------------------------------------------- -------------------------------------
(State or Other Jurisdiction of Incorporation or (I.R.S. Employer
Organization) Identification No.)
5 WESTBROOK CORPORATE CENTER, WESTCHESTER, ILLINOIS 60154
- --------------------------------------------------------- -------------------------------------
(Address of Principal Executive Offices) (Zip Code)
</Table>
Registrant's telephone number, including area code (708) 551-2600
Securities registered pursuant to Section 12(b) of the Act:
<Table>
<Caption>
Title of Each Class Name of Each Exchange on Which Registered
- ------------------- -----------------------------------------
<S> <C>
Common Stock, $.01 par value per share New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
(currently traded with Common Stock)
</Table>
Securities registered pursuant to Section 12(g) of the Act:
NONE
- --------------------------------------------------------------------------------
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No [ ]
The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant (based upon the per share closing price of
$31.12 on June 28, 2002, and, for the purpose of this calculation only, the
assumption that all Registrant's directors and executive officers are
affiliates) was approximately $1,043,000,000.
The number of shares outstanding of the Registrant's Common Stock, par
value $.01 per share, as of March 3, 2003, was 35,726,408.
Documents Incorporated by Reference:
Information required by Part II (Items 5, 6, 7 and 8) and Part IV (Item
15(a)(1)) of this document is incorporated by reference to certain portions of
Exhibit 13.1 included as part of this 2002 Annual Report on Form 10-K.
Information required by Part III (Items 10, 11, 12 and 13) of this document
is incorporated by reference to certain portions of the Registrant's definitive
Proxy Statement distributed in connection with its 2003 Annual Meeting of
Stockholders.
<PAGE>
PART I.
ITEM 1. BUSINESS
THE COMPANY
Corn Products International, Inc. (the "Company") is incorporated as a
Delaware corporation and its common stock is traded on the New York Stock
Exchange. Corn Products International, Inc., together with its subsidiaries,
produces a large variety of food ingredients and industrial products derived
from the wet milling of corn and other starch-based materials (such as tapioca).
The Company is one of the largest corn refiners in the world and the leading
corn refiner in Latin America. In addition, it is the world's leading producer
of dextrose and has strong regional leadership in cornstarch and liquid
sweeteners. The Company had consolidated net sales of $1.87 billion in 2002.
Approximately 65 percent of the Company's 2002 revenues were provided from its
North America operations with the remainder coming from its South America and
Asia/Africa operations.
Corn refining is a capital-intensive two-step process that involves the wet
milling and processing of corn. During the front-end process, corn is steeped in
a water-based solution and separated into starch and by-products such as animal
feed and germ. The starch is then either dried for sale or further modified or
refined through various processes to make sweeteners and other starch-based
products designed to serve the particular needs of various industries. The
Company's sweetener products include high fructose corn syrups ("HFCS"), glucose
corn syrups, high maltose corn syrups, dextrose, maltodextrins and glucose and
corn syrup solids. The Company's starch-based products include both industrial
and food grade starches.
The Company supplies a broad range of customers in many industries. Most of
the Company's customers are in the food and beverage, pharmaceutical, paper
products, corrugated and laminated paper, textile and brewing industries and in
the animal feed markets worldwide. The Company believes its local approach to
production and service is of high value to its customers.
PRODUCTS
The Company's sweetener products have grown to account for more than one
half of net sales while starch products and co-products each account for one
quarter or less of net sales.
Sweetener Products. The Company's sweetener products represented
approximately 55 percent, 57 percent and 55 percent of the Company's net sales
for 2002, 2001 and 2000, respectively.
High Fructose Corn Syrup: The Company primarily produces two types of
high fructose corn syrup: (i) HFCS-55, which is mainly used as a sweetener
in soft drinks; and (ii) HFCS-42, which is used as a sweetener in various
consumer products such as fruit-flavored beverages, yeast-raised breads,
rolls, dough, ready-to-eat cakes, yogurt and ice cream.
Glucose Corn Syrups: Corn syrups are fundamental ingredients in many
industrial products and are widely used in food products such as baked
goods, snack foods, beverages, canned fruits, condiments, candy and other
sweets, dairy products, ice cream, jams and jellies, prepared mixes and
table syrups. The Company offers corn syrups that are manufactured through
an ion exchange process, a method that creates the highest quality, purest
corn syrups.
High Maltose Corn Syrup: This special type of glucose syrup has a
unique carbohydrate profile, making it ideal for use as a source of
fermentable sugars in brewing beers. High maltose corn syrups are also used
in the production of confections, canning and some other food processing
applications.
Dextrose: The Company was granted the first U.S. patent for dextrose
in 1923. The Company currently produces dextrose products that are grouped
in three different categories -- monohydrate, anhydrous and specialty.
Monohydrate dextrose is used across the food industry in many of the same
products as glucose corn syrups, especially in confectionery applications.
Anhydrous dextrose is used to make solutions for intravenous injection and
other pharmaceutical applications, as well as some specialty food
applications. Specialty dextrose products are used in a wide range of
applications, from confectionery
2
<PAGE>
tableting to dry mixes to carriers for high intensity sweeteners. Dextrose
also has a wide range of industrial applications, including use in wall
board and production of biodegradable surfactants (surface agents),
humectants (moisture agents), and as the base for fermentation products
including vitamins, organic acids, amino acids and alcohol.
Maltodextrins and Glucose and Corn Syrup Solids: These products have
a multitude of food applications, including formulations where liquid corn
syrups cannot be used. Maltodextrins are resistant to browning, provide
excellent solubility, have a low hydroscopicity (do not retain moisture),
and are ideal for their carrier/bulking properties. Corn syrup solids have
a bland flavor, remain clear in solution, and are easy to handle and also
provide bluing properties.
Starch Products. Starch products represented approximately 20 percent, 20
percent and 21 percent of the Company's net sales for 2002, 2001 and 2000,
respectively. Starches are an important component in a wide range of processed
foods, where they are used particularly as a thickener and binder. Cornstarch is
also sold to cornstarch packers for sale to consumers. Starches are also used in
paper production to produce a smooth surface for printed communications and to
improve strength in today's recycled papers. In the corrugating industry,
starches are used to produce high quality adhesives for the production of
shipping containers, display board and other corrugated applications. The
textile industry has successfully used starches for over a century to provide
size and finishes for manufactured products. Industrial starches are used in the
production of construction materials, adhesives, pharmaceuticals and cosmetics,
as well as in mining, water filtration and oil and gas drilling.
Co-Products and others. Co-products and others accounted for 25 percent,
23 percent and 24 percent of the Company's net sales for 2002, 2001 and 2000,
respectively. Refined corn oil is sold to packers of cooking oil and to
producers of margarine, salad dressings, shortening, mayonnaise and other foods.
Corn gluten feed is sold as animal feed. Corn gluten meal and steepwater are
sold as additives for animal feed. Until the Company's sale of its wholly-owned
subsidiary, Enzyme Bio-Systems Ltd., in early February 2002, enzymes were
produced and marketed for a variety of food and industrial applications.
GEOGRAPHIC SCOPE AND OPERATIONS
The Company operates in one business segment, corn refining, and is managed
on a geographic regional basis. The business includes regional operations in
North America, South America and Asia/Africa. In 2002, approximately 65 percent
of the Company's net sales were derived from operations in North America, while
South America and Asia/Africa represented approximately 22 percent and 13
percent, respectively. See Note 14 to the Consolidated Financial Statements
entitled "Segment Information," included herewith as part of Exhibit 13.1, for
certain financial information with respect to geographic areas.
The Company's North America region consists of operations in the U.S.,
Canada and Mexico, and, prior to the December 2002 dissolution of
CornProductsMCP Sweeteners LLC ("CPMCP"), included its then non-consolidated
equity interest in that entity. For a further discussion of CPMCP and the
dissolution, see Note 5 to the Consolidated Financial Statements entitled "Joint
Marketing Company" included herewith as part of Exhibit 13.1. The region's
facilities include 10 plants producing regular and modified starches, dextrose,
high fructose and high maltose corn syrups and corn syrup solids, dextrins and
maltodextrins, caramel color and sorbitol. The Company's plant in Bedford Park,
Illinois is a major supplier of starch and dextrose products for the Company's
U.S. and export customers. The Company's other U.S. plants in Winston-Salem,
North Carolina and Stockton, California enjoy strong market shares in their
local areas, as do the Company's Canadian plants in Cardinal, London and Port
Colborne, Ontario. The Company is the largest corn refiner in Mexico with plants
in Guadalajara (2 plants), Mexico City and San Juan del Rio.
The Company is the largest corn refiner in South America, with leading
market shares in Argentina, Brazil, Chile and Colombia. The Company's South
America region includes 12 plants that produce regular, modified, waxy and
tapioca starches, high fructose and high maltose corn syrups and corn syrup
solids, dextrins and maltodextrins, dextrose, caramel color, sorbitol and
vegetable adhesives.
3
<PAGE>
The Company's Asia/Africa region consists of corn and tapioca refining
operations in Kenya, Malaysia, Pakistan, South Korea and Thailand. The region's
facilities include 6 plants that produce modified, regular, waxy and tapioca
starches, dextrins, glucose, dextrose, high fructose corn syrups and caramel
color.
In addition to the operations in which it engages directly, the Company has
strategic alliances through technical license agreements with companies in South
Africa, Zimbabwe and Venezuela. As a group, the Company's strategic alliance
partners produce high fructose, glucose and high maltose syrups (both corn and
tapioca), regular, modified, waxy and tapioca starches, dextrose and dextrins,
maltodextrins and caramel color. These products have leading positions in many
of their target markets.
COMPETITION
The corn refining industry is highly competitive. Many of the Company's
products are viewed as commodities that compete with virtually identical
products and derivatives manufactured by other companies in the industry. The
U.S. is a highly competitive market. Competitors include ADM Corn Processing
Division ("ADM") (a division of Archer-Daniels-Midland Company), Cargill, A.E.
Staley Manufacturing Co. ("Staley") (a subsidiary of Tate & Lyle, PLC), National
Starch and Chemical Company ("National Starch") (a subsidiary of Imperial
Chemicals Industries plc) and several others. Mexico and Canada face competition
from U.S. imports and local producers including ALMEX, a Mexican joint venture
between ADM and Staley. In South America, Cargill and National Starch have
corn-refining operations in Brazil. Other local corn refiners also operate in
many of our markets. Competition within markets is largely based on price,
quality and product availability.
Several of the Company's products also compete with products made from raw
materials other than corn. High fructose corn syrup and monohydrate dextrose
compete principally with cane and beet sugar products. Co-products such as corn
oil and gluten meal compete with products of the corn dry milling industry and
with soybean oil, soybean meal and others. Fluctuations in prices of these
competing products may affect prices of, and profits derived from, the Company's
products.
CUSTOMERS
The Company supplies a broad range of customers in over 60 industries.
Approximately 21 percent of the Company's 2002 net sales were to companies
engaged in the processed foods industry and approximately 17 percent of the
Company's 2002 net sales were to companies engaged in the soft drink industry.
Additionally, approximately 16 percent of the Company's 2002 net sales were to
feed users.
RAW MATERIALS
The basic raw material of the corn refining industry is yellow dent corn.
The supply of corn in the United States has been, and is anticipated to continue
to be, adequate for the Company's domestic needs. The price of corn, which is
determined by reference to prices on the Chicago Board of Trade, fluctuates as a
result of three primary supply factors -- farmer planting decisions, climate and
government policies -- and three major market demand factors -- livestock
feeding, shortages or surpluses of world grain supplies and domestic and foreign
government policies and trade agreements.
Corn is also grown in other areas of the world, including Canada, South
Africa, Argentina, Brazil, China and Australia. The Company's affiliates outside
the United States utilize both local supplies of corn and corn imported from
other geographic areas, including the United States. The supply of corn for
these affiliates is also generally expected to be adequate for the Company's
needs. Corn prices for the Company's non-U.S. affiliates generally fluctuate as
a result of the same factors that affect U.S. corn prices.
Due to the competitive nature of the corn refining industry and the
availability of substitute products not produced from corn, such as sugar from
cane or beet, end product prices may not necessarily fluctuate in relation to
raw material costs of corn.
The Company follows a policy of hedging its exposure to commodity
fluctuations with commodities futures contracts for certain of its North
American corn purchases. All firm-priced business is hedged. Other
4
<PAGE>
business may or may not be hedged at any given time based on management's
judgment as to the need to fix the costs of its raw materials to protect the
Company's profitability. See Registrant's Management's Discussion and Analysis
of Financial Condition and Results of Operations, section entitled "Risk and
Uncertainties -- Commodity costs," included herewith as part of Exhibit 13.1.
PRODUCT DEVELOPMENT
The Company's product development activity is focused on developing product
applications for identified customer and market needs. Through this approach,
the Company has developed value-added products for use in the corrugated paper,
food, textile, baking and confectionery industries. The Company usually
collaborates with customers to develop the desired product application either in
the customers' facilities, the Company's technical service laboratories or on a
contract basis. These efforts are supported by the Company's marketing, product
technology and technology support staff.
SALES AND DISTRIBUTION
Salaried sales personnel, who are generally dedicated to customers in a
geographic region, sell the Company's products directly to manufacturers and
distributors. In addition, the Company has a staff that provides technical
support to the sales personnel on an industry basis. In 2001 and 2002, the
Company sold and distributed certain designated sweetener production destined
for sale in the U.S. through CPMCP. See also Note 5 to the Consolidated
Financial Statements included herewith as part of Exhibit 13.1. Following the
December 2002 dissolution of CPMCP, the Company reverted to selling sweeteners
in the U.S. directly to manufacturers and distributors (as was the case prior to
2001). The Company generally contracts with trucking companies to deliver bulk
products to customer destinations but also has some of its own trucks for
product delivery. In North America, the trucks generally ship to nearby
customers. For those customers located considerable distances from Company
plants, a combination of railcars and trucks is used to deliver product.
Railcars are generally leased for terms of five to fifteen years.
PATENTS, TRADEMARKS AND TECHNICAL LICENSE AGREEMENTS
The Company owns a number of patents, which relate to a variety of products
and processes, and a number of established trademarks under which the Company
markets such products. The Company also has the right to use certain other
patents and trademarks pursuant to patent and trademark licenses. The Company
does not believe that any individual patent or trademark is material. There is
not currently any pending challenge to the use or registration of any of the
Company's significant patents or trademarks that would have a material adverse
impact on the Company or its results of operations.
The Company is a party to several technical license agreements with third
parties in other countries whereby the Company provides technical, management
and business advice on the operations of corn refining businesses and receives
royalties in return. These arrangements provide the Company with product
penetration in the various countries in which they exist, as well as experience
and relationships that could facilitate future expansion. The duration of the
agreements range from one to ten years or longer, and most of these
relationships have been in place for many years. These agreements in the
aggregate provide approximately $1 million of annual revenue to the Company.
EMPLOYEES
As of December 31, 2002, the Company had approximately 6,500 employees, of
which approximately 800 were located in the U.S. Approximately 37 percent of
U.S. and 53 percent of non-U.S. employees are unionized. The Company believes
its union and non-union employee relations are good.
GOVERNMENT REGULATION AND ENVIRONMENTAL MATTERS
As a manufacturer and maker of food items and items for use in the
pharmaceutical industry, the Company's operations and the use of many Company
products are subject to various U.S., state, foreign and local statutes and
regulations, including the Federal Food, Drug and Cosmetic Act and the
Occupational
5
<PAGE>
Safety and Health Act, and to regulation by various government agencies,
including the United States Food and Drug Administration, which prescribe
requirements and establish standards for product quality, purity and labeling.
The finding of a failure to comply with one or more regulatory requirements can
result in a variety of sanctions, including monetary fines. The Company may also
be required to comply with U.S., state, foreign and local laws regulating food
handling and storage. The Company believes these laws and regulations have not
negatively affected its competitive position.
The operations of the Company are also subject to various U.S., state,
foreign and local laws and regulations with respect to environmental matters,
including air and water quality and underground fuel storage tanks, and other
regulations intended to protect public health and the environment. Based upon
current laws and regulations and the enforcement and interpretations thereof,
the Company does not expect that the costs of future environmental compliance
will be a material expense, although there can be no assurance that the Company
will remain in compliance or that the costs of remaining in compliance will not
have a material adverse effect on the Company's future financial condition and
results of operations.
The Company currently anticipates that it may spend an immaterial amount in
fiscal 2003 for environmental control and wastewater treatment equipment to be
incorporated into existing facilities and in planned construction projects. This
equipment is intended to enable the Company to continue its policy of compliance
with existing environmental laws and regulations. Under the U.S. Clean Air Act
Amendments of 1990, air toxin regulations will be promulgated for a number of
industry source categories. The U.S. Environmental Protection Agency has
proposed standards for industrial boilers. Once these standards are finalized,
the Company's U.S. facilities may require additional pollution control devices
to meet these standards. Currently, the Company cannot accurately estimate the
ultimate financial impact of the industrial boiler standards.
The Company's Internet address is www.cornproducts.com. The Company makes
available, free of charge through its Internet website, its annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended. These reports are made
available as soon as reasonably practicable after the respective reports are
electronically filed with or furnished to the Securities and Exchange
Commission.
EXECUTIVE OFFICERS OF THE REGISTRANT
Set forth below are the names and ages of all executive officers of the
Company, indicating their positions and offices with the Company.
<Table>
<Caption>
NAME AGE ALL POSITIONS AND OFFICES WITH THE COMPANY
- ---- --- ------------------------------------------
<S> <C> <C>
Samuel C. Scott III............ 58 Chairman and Chief Executive Officer of Corn Products since
February 2001 and President of Corn Products since 1997. Mr.
Scott also served as Chief Operating Officer of Corn
Products from 1997 through January 2001. Prior thereto, he
served as President of Bestfoods' worldwide Corn Refining
Business from 1995 to 1997 and was President of Bestfoods'
North American Corn Refining Business from 1989 to 1997. He
was elected a Vice President of Bestfoods in 1991. Mr. Scott
is a director of Motorola, Inc.
Cheryl K. Beebe................ 47 Vice President, Finance since July 2002 and Treasurer of
Corn Products since 1997. Ms. Beebe served as Vice President
from 1999 to 2002 and as Director of Finance and Planning
for the Bestfoods Corn Refining Business worldwide from 1995
to 1997 and as Director of Financial Analysis and Planning
for Corn Products North America from 1993. Ms. Beebe joined
Bestfoods in 1980 and served in various financial positions
in Bestfoods.
</Table>
6
<PAGE>
<Table>
<Caption>
NAME AGE ALL POSITIONS AND OFFICES WITH THE COMPANY
- ---- --- ------------------------------------------
<S> <C> <C>
Marcia E. Doane................ 61 Vice President, General Counsel and Corporate Secretary of
Corn Products since 1997. Ms. Doane served as Vice
President, Legal and Regulatory Affairs of the Corn Products
Division of Bestfoods from 1996 to 1997. Prior thereto, she
served as Counsel to the Corn Products Division from 1994 to
1996. Ms. Doane joined Bestfoods' legal department in 1989
as Operations Attorney for the Corn Products Division.
Jorge L. Fiamenghi............. 47 Vice President and President of the South America Division
of Corn Products since 1999. Mr. Fiamenghi served as Acting
President, US-Canadian region from August 2001 to February
2002. Mr. Fiamenghi served as President and General Manager
Corn Products Brazil from 1996 to 1999. Mr. Fiamenghi was
General Manager for the Bestfoods Corn Refining affiliate in
Argentina beginning in 1991. Prior thereto, he was Financial
and Planning Director for the Bestfoods South American Corn
Refining division from 1989 to 1991 and served as Financial
and Administrative Manager for the Bestfoods Corn Refining
division in Mexico beginning in 1987. Mr. Fiamenghi joined
Bestfoods in 1971 and served in various financial and
planning positions in Bestfoods.
Jack C. Fortnum................ 46 Vice President since 1999 and President US business since
February 2002. Mr. Fortnum served as Executive Vice
President, US-Canadian Region from August 2001 until
February 2002. Prior to that, Mr. Fortnum served as the
Controller of Corn Products since 1997, as the Vice
President of Finance for Refineries de Maize, Bestfoods'
Argentine subsidiary, from 1995 to 1997, as the Director of
Finance and Planning for Bestfoods' Latin America Corn
Refining Division from 1993 to 1995, and as the Vice
President and Comptroller of Canada Starch Operating Company
Inc., the Canadian subsidiary of Bestfoods, and as the Vice
President of Finance of the Canadian Corn Refining Business
from 1989.
Jeffrey B. Hebble.............. 47 Vice President since 2000 and President of the Asia/Africa
Division of Corn Products since February 2001. Prior
thereto, Mr. Hebble served as Vice President of the
Asia/Africa Division since 1998. Mr. Hebble joined Bestfoods
in 1986 and served in various positions in the Corn Products
Division and in Stamford Food Industries Sdn. Berhad, a Corn
Products subsidiary in Malaysia.
James J. Hirchak............... 48 Vice President -- Human Resources of Corn Products since
1997. Mr. Hirchak joined Bestfoods in 1976 and held various
Human Resources positions in Bestfoods until 1984, when he
joined Bestfoods' Corn Products Division. In 1987, Mr.
Hirchak was appointed Director, Human Resources for Corn
Products' North American operations and he served as Vice
President, Human Resources for the Corn Products Division of
Bestfoods from 1992 to 1997.
Robin A. Kornmeyer............. 54 Vice President of Corn Products since September 2002 and
Controller since January 2002. Prior to that, Mr. Kornmeyer
served as Corporate Controller at Foster Wheeler Ltd., a
worldwide engineering and construction company, from 2000 to
2002 and as its Director of Corporate Audit Services from
1997 to 2000.
</Table>
7
<PAGE>
<Table>
<Caption>
NAME AGE ALL POSITIONS AND OFFICES WITH THE COMPANY
- ---- --- ------------------------------------------
<S> <C> <C>
Eugene J. Northacker........... 61 Vice President and President of the North America Division
since February 2002. Mr. Northacker came out of retirement
to serve as Acting President of the South America Division
from August 2001 to February 2002. Prior to his retirement
from the Company in January 2000, he served as Vice
President and President of the South America Division since
1997. Mr. Northacker was appointed President of Bestfoods'
Latin America Corn Refining Division and elected a Vice
President of Bestfoods in 1992. Prior to that, he served as
Business Director of Bestfoods' Latin America Corn Refining
Division from 1989 to 1992, and as Corn Refining General
Manager of Bestfoods' then Mexican subsidiary from 1984 to
1986. Mr. Northacker joined Bestfoods in 1968 in the
financial group of Bestfoods' North American consumer foods
division and has held executive assignments in several
Bestfoods subsidiaries.
James W. Ripley................ 59 Vice President and Chief Financial Officer of Corn Products
since 1997 and Vice President, Finance from 1997 to July
2002. Mr. Ripley served as Comptroller of Bestfoods from
1995 to 1997. Prior thereto, he served as Vice President of
Finance for Bestfoods' North American Corn Refining Division
from 1984 to 1995. Mr. Ripley joined Bestfoods in 1968 as
chief international accountant and subsequently served as
Bestfoods' Assistant Corporate Comptroller, Corporate
General Audit Coordinator and Assistant Comptroller for
Bestfoods' European Consumer Foods Division.
Richard M. Vandervoort......... 59 Vice President -- Strategic Business Development, Investor
Relations and Government and Regulatory Affairs of Corn
Products since 1998. Mr. Vandervoort served as Vice
President -- Business Development and Procurement, Corn
Products International North American Division from 1997 to
1998. Prior thereto, he served as Vice President -- Business
Management and Marketing for Bestfoods' Corn Products
Division from 1989 to 1997. Mr. Vandervoort joined Bestfoods
in 1971 and served in various executive sales positions in
Bestfoods' Corn Products Division and in Peterson/Puritan
Inc., a Bestfoods subsidiary.
</Table>
ITEM 2. PROPERTIES
The Company operates, directly and through its consolidated subsidiaries,
28 manufacturing facilities, 27 of which are owned and one of which is leased
(Jundiai, Brazil). In addition, the Company leases its corporate headquarters in
Westchester, Illinois. The following list details the locations of the Company's
manufacturing facilities within each of its three geographic regions:
<Table>
<Caption>
NORTH AMERICA SOUTH AMERICA ASIA/AFRICA
------------- ------------- -----------
<S> <C> <C>
Cardinal, Ontario, Canada Baradero, Argentina Eldoret, Kenya
London, Ontario, Canada Chacabuco, Argentina Petaling, Jaya,
Port Colborne, Ontario, Canada Balsa Nova, Brazil Malaysia
San Juan del Rio, Queretaro, Mexico Cabo, Brazil Faisalabad, Pakistan
Guadalajara, Jalisco, Mexico (2 plants) Conchal, Brazil Ichon, South Korea
Mexico City, Edo. de Mexico Jundiai, Brazil Inchon, South Korea
Stockton, California, U.S. Mogi-Guacu, Brazil Sikhiu, Thailand
Bedford Park, Illinois, U.S. Llay-Llay, Chile
Winston-Salem, North Carolina, U.S. Barranquilla, Colombia
Cali, Colombia
Medellin, Colombia
Guayaquil, Ecuador
</Table>
8
<PAGE>
While the Company has achieved high capacity utilization, the Company
believes its manufacturing facilities are sufficient to meet its current
production needs. The Company has preventive maintenance and de-bottlenecking
programs designed to further improve grind capacity and facility reliability.
The Company has electricity co-generation facilities at all of its U.S. and
Canadian plants, as well as at its plants in San Juan del Rio, Mexico; Baradero,
Argentina; and Faisalabad, Pakistan, that provide electricity at a lower cost
than is available from third parties. The Company generally owns and operates
such co-generation facilities itself, but has two large facilities at its
Stockton, California and Cardinal, Ontario locations that are owned by, and
operated pursuant to, co-generation agreements with third parties.
The Company believes it has competitive, up-to-date and cost-effective
facilities. In recent years, significant capital expenditures have been made to
update, expand and improve the Company's facilities, averaging in excess of $100
million per year for the last five years. The Company believes these capital
expenditures will allow the Company to operate highly efficient facilities for
the foreseeable future with further annual capital expenditures that are in line
with historical averages.
ITEM 3. LEGAL PROCEEDINGS
Under the terms of the agreements relating to the spin-off of the Company
from Bestfoods, the Company agreed to indemnify Bestfoods for certain
liabilities relating to the operation of the Corn Refining Business prior to the
spin-off, including liabilities relating to the antitrust legal proceedings
described below.
In July 1995, Bestfoods received a federal grand jury subpoena in
connection with an investigation by the Antitrust Division of the U.S.
Department of Justice of U.S. corn refiners regarding the marketing of high
fructose corn syrup and other "food additives" (the investigation of Bestfoods
relates only to high fructose corn syrup). Bestfoods produced the documents
sought by the Justice Department and the federal grand jury has since been
disbanded. Bestfoods, as a high fructose corn syrup producer, was also named as
one of the defendants in a number of private treble damage state class actions
by direct and indirect customers, and in one individual action, alleging
violations of federal and state antitrust laws. Following the certification of
the consolidated federal class actions, Bestfoods entered into settlements of
the federal claims and the one individual action. A state law action filed in
Alabama was terminated on April 5, 2002 by order of the Circuit Court of Coosa
County, Alabama upon defendants' motions for summary judgement and to dismiss.
Bestfoods remains a party to the state law actions filed in California, the
District of Columbia, Kansas and West Virginia, each of which was filed in 1995
or 1996. The amount of damages claimed in the various pending state law actions
is either unspecified or stated as not exceeding $50,000 per claimant.
On January 28, 2003, the Company filed with the United Mexican States a
Notice of Intent to Submit a Claim to Arbitration under Section B of Chapter 11
of the North American Free Trade Agreement. The notice declares the Company's
intention to seek compensation from the Mexican government for breaches of its
obligations under NAFTA. The Company seeks compensation for past and potential
damages, estimated in the notice to be approximately $250 million, flowing from
the imposition by the Mexican Congress of a highly discriminatory tax on soft
drinks containing HFCS. In the months following service of the notice, and
before service of the actual claim, the Company and Mexico are obliged under
NAFTA to undertake efforts to resolve the dispute.
The Company is currently subject to various other claims and suits arising
in the ordinary course of business, including certain environmental proceedings.
The Company does not believe that the results of such legal proceedings, even if
unfavorable to the Company, will be material to the Company. There can be no
assurance, however, that any claims or suits arising in the future, whether
taken individually or in the aggregate, will not have a material adverse effect
on the Company's financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
2002.
9
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Shares of Corn Product's Common Stock are traded on the New York Stock
Exchange ("NYSE") under the ticker symbol "CPO." The range of the NYSE reported
high, low and closing market prices of the Company's Common Stock, holders of
record and quarterly dividends are incorporated by reference from the
Registrant's Consolidated Financial Statements filed herewith as part of Exhibit
13.1, section entitled "Common Stock Market Prices and Dividends."
The Company's policy is to pay a modest dividend. The amount and timing of
the dividend payment, if any, is based on a number of factors including
estimated earnings, financial position and cash flow. The payment of a dividend
is solely at the discretion of the Company's Board of Directors. It is subject
to the Company's financial results and the availability of surplus funds to pay
dividends.
ITEM 6. SELECTED FINANCIAL DATA
Incorporated by reference from the Registrant's Consolidated Financial
Statements filed herewith as part of Exhibit 13.1, section entitled "Ten-Year
Financial Highlights."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Incorporated by reference from Exhibit 13.1 filed herewith, section
entitled "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
International Operations and Foreign Exchange. The Company has operated a
multinational business subject to the risks inherent in operating in foreign
countries and with foreign currencies for many years. The Company's U.S. dollar
denominated results are subject to foreign currency exchange fluctuations and
its operations are subject to political, economic and other risks.
The Company primarily sells world commodities and, therefore, believes that
local prices will adjust relatively quickly to offset the effect of a local
devaluation. The Company may occasionally hedge commercial transactions and
certain liabilities that are denominated in a currency other than the currency
of the operating unit entering into the underlying transaction.
In each country where we conduct business, the business and assets are
subject to varying degrees of risks and uncertainty. The Company insures its
business and assets in each country against insurable risk in a manner that it
deems appropriate. Because of its geographic dispersion, the Company believes
that a loss from non-insurable events in any one country would not have a
material adverse effect on the Company's operations as a whole.
Uncertain Ability to Generate Adequate Financial Performance. The
Company's ability to generate operating income and to increase profitability
depends to a large extent upon its ability to price finished products at a level
that will cover manufacturing and raw material costs and provide a profit
margin. The Company's ability to maintain appropriate price levels is determined
by a number of factors largely beyond the Company's control, such as aggregate
industry supply and market demand, which may vary from time to time, and the
economic condition of the geographic region of the Company's operations.
Uncertain Ability to Contain Costs or to Fund Capital Expenditures. The
Company's future profitability and growth also depends on the Company's ability
to contain operating costs and per-unit product costs, to maintain and/or
implement effective cost control programs and to develop value-added products
and new product applications successfully, while at the same time maintaining
competitive pricing and superior quality products, customer service and support.
The Company's ability to maintain a competitive cost structure depends on
continued containment of manufacturing, delivery and administrative costs as
well as the implementation of cost-effective purchasing programs for raw
materials, energy and related manufacturing requirements. The Company plans to
focus capital expenditures on implementing productivity improvements
10
<PAGE>
and, if supported by profitable customer demand, expand the production capacity
of its facilities. The Company may need additional funds for working capital as
the Company grows and expands its operations. To the extent possible, the
Company expects to fund its capital expenditures from operating cash flow. If
the Company's operating cash flow is insufficient to fund such expenditures, the
Company may either reduce its capital expenditures or utilize certain general
credit facilities. The Company may also seek to generate additional liquidity
through the sale of debt or equity securities in private or public markets or
through the sale of non-productive assets. The Company cannot provide any
assurance that cash flows from operations will be sufficient to fund anticipated
capital expenditures or that additional funds can be obtained from financial
markets or from the sale of assets at terms favorable to the Company. If the
Company is unable to generate sufficient cash flows or raise sufficient
additional funds to cover capital expenditures, it may not be able to achieve
its desired operating efficiencies and expansion plans, which may adversely
impact the Company's competitiveness and, therefore, its results of operations.
Interest Rate Exposure. Approximately 46 percent of the Company's
borrowings are fixed rate bonds and loans. The remaining 54 percent of the
Company's borrowings are at floating interest rates of which approximately 41
percent are long-term loans and 13 percent are short-term credit facilities.
Should short-term rates change, this could affect the Company's interest cost. A
hypothetical increase of 1 percentage point in the weighted average floating
interest rate for 2002 would have increased interest expense and lowered pretax
income for 2002 by approximately $2 million.
At December 31, 2002 and 2001, the carrying and fair value of long-term
debt, including the current portion, were as follows:
<Table>
<Caption>
2002 2001
--------------------- ---------------------
CARRYING CARRYING
VALUE FAIR VALUE VALUE FAIR VALUE
-------- ---------- -------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C>
U.S. revolving credit facility................. $ -- $ -- $277 $277
8.45% senior notes, due 2009................... 198 209 200 192
8.25% senior notes, due 2007................... 253 266 -- --
Canadian term loans, due 2005.................. 25 25 57 57
Korean term loans, due 2003-2004............... 51 51 62 62
Others, due in varying amounts through 2008,
fixed and floating interest rates ranging
from 5.9%-7.4%............................... 1 1 6 6
---- ---- ---- ----
Total..................................... $528 $552 $602 $594
==== ==== ==== ====
</Table>
Competition. The Company operates in a highly competitive environment.
Almost all of the Company's products compete with virtually identical or similar
products manufactured by other companies in the corn refining industry. In the
United States, there are other corn refiners, several of which are divisions of
larger enterprises that have greater financial resources and some of which,
unlike the Company, have vertically integrated their corn refining and other
operations. Many of the Company's products also compete with products made from
raw materials other than corn. Fluctuation in prices of these competing products
may affect prices of, and profits derived from, the Company's products.
Competition within markets is largely based on price, quality and product
availability.
Price Volatility and Uncertain Availability of Corn. Corn purchasing
costs, which include the price of the corn plus delivery cost, account for 40
percent to 65 percent of the Company's product costs. The price and availability
of corn is influenced by economic and industry conditions, including supply and
demand factors such as crop disease and severe weather conditions such as
drought, floods or frost, that are difficult to anticipate and cannot be
controlled by the Company. In addition, government programs supporting sugar
prices indirectly impact the price of corn sweeteners, especially high fructose
corn syrup. The Company cannot assure that it will be able to purchase corn at
prices that it can adequately pass on to customers or in quantities sufficient
to sustain or increase its profitability.
11
<PAGE>
Commodity Costs. The Company's finished products are made primarily from
corn. In North America, the Company sells a large portion of finished product at
firm prices established in supply contracts typically lasting for periods of up
to one year. In order to minimize the effect of volatility in the cost of corn
related to these firm-priced supply contracts, the Company enters into corn
futures contracts, or takes hedging positions in the corn futures market. From
time to time, the Company may also enter into anticipatory hedges. These
contracts typically mature within one year. At expiration, the Company settles
the derivative contracts at a net amount equal to the difference between the
then-current price of corn and the fixed contract price. While these hedging
instruments are subject to fluctuations in value, changes in the value of the
underlying exposures the Company is hedging generally offset such fluctuations.
While the corn futures contracts or hedging positions are intended to minimize
the volatility of corn costs on operating profits, occasionally the hedging
activity can result in losses, some of which may be material. Outside of North
America, sales of finished product under long-term, firm-priced supply contracts
are not material.
The Company's commodity price hedging instruments generally relate to
contracted firm-priced business. Based on the Company's overall commodity hedge
exposure at December 31, 2002, a hypothetical 10 percent change in market rates
applied to the fair value of the instruments would have no material impact on
the Company's earnings, cash flows, financial position or fair value of
commodity price and risk-sensitive instruments over a one-year period.
Energy costs for the Company represent a significant portion of its
operating costs. The primary use of energy is to create steam in the production
process and in dryers to dry product. The Company consumes coal, natural gas,
electricity, wood and fuel oil to generate energy. The market prices for these
commodities vary depending on supply and demand, world economies and other
factors. The Company purchases these commodities based on its anticipated usage
and the future outlook for these costs. The Company cannot assure that it will
be able to purchase these commodities at prices that it can adequately pass on
to customers to sustain or increase profitability.
Volatility of Markets. The market price for the common stock of the
Company may be significantly affected by factors such as the announcement of new
products or services by the Company or its competitors; technological innovation
by the Company, its competitors or other vendors; quarterly variations in the
Company's operating results or the operating results of the Company's
competitors; general conditions in the Company's and its customers' markets;
changes in the earnings estimates by analysts or reported results that vary
materially from such estimates. In addition, the stock market has experienced
significant price fluctuations that have affected the market prices of equity
securities of many companies that have been unrelated to the operating
performance of any individual company. These broad market fluctuations may
materially and adversely affect the market price of the Company's common stock.
Uncertainty of Dividends. The payment of dividends is at the discretion of
the Company's Board of Directors and will be subject to the Company's financial
results and the availability of surplus funds to pay dividends. No assurance can
be given that the Company will continue to pay dividends.
Certain Anti-Takeover Effects. Certain provisions of the Company's Amended
and Restated Certificate of Incorporation (the "Corn Products Charter") and the
Company's By-laws (the "Corn Products By-Laws") and of the Delaware General
Corporation Law (the "DGCL") may have the effect of delaying, deterring or
preventing a change in control of the Company not approved by the Company's
Board. These provisions include (i) a classified Board of Directors, (ii) a
requirement of the unanimous consent of all stockholders for action to be taken
without a meeting, (iii) a requirement that special meetings of stockholders be
called only by the Chairman of the Board or the Board of Directors, (iv) advance
notice requirements for stockholder proposals and nominations, (v) limitations
on the ability of stockholders to amend, alter or repeal the Corn Products
By-Laws and certain provisions of the Corn Products Charter, (vi) authorization
for the Company's Board to issue without stockholder approval preferred stock
with such terms as the Board of Directors may determine and (vii) authorization
for the Company's Board to consider the interests of creditors, customers,
employees and other constituencies of the Company and its subsidiaries and the
effect upon communities in which the Company and its subsidiaries do business,
in evaluating proposed corporate transactions. With certain exceptions, Section
203 of the DGCL ("Section 203") imposes certain restrictions on mergers and
12
<PAGE>
other business combinations between the Company and any holder of 15 percent or
more of the Company's Common Stock. In addition, the Company has adopted a
stockholder rights plan (the "Rights Plan"). The Rights Plan is designed to
protect stockholders in the event of an unsolicited offer and other takeover
tactics, which, in the opinion of the Company's Board, could impair the
Company's ability to represent stockholder interests. The provisions of the
Rights Plan may render an unsolicited takeover of the Company more difficult or
less likely to occur or might prevent such a takeover.
These provisions of the Corn Products Charter and Corn Products By-laws,
the DGCL and the Rights Plan could discourage potential acquisition proposals
and could delay or prevent a change in control of the Company, although such
proposals, if made, might be considered desirable by a majority of the Company's
stockholders. Such provisions could also make it more difficult for third
parties to remove and replace the members of the Company's Board. Moreover,
these provisions could diminish the opportunities for a stockholder to
participate in certain tender offers, including tender offers at prices above
the then-current market value of the Company's Common Stock, and may also
inhibit increases in the market price of the Company's Common Stock that could
result from takeover attempts or speculation.
Limited Relevance of Historical Financial Information. The Company's
historical financial information may not necessarily reflect the results of
operations, financial position and cash flows of the Company in the future.
Reliance on Major Customers. A substantial portion of the Company's 2002
worldwide sales were made to companies engaged in the processed foods industry
and the soft drink industry. If the Company's processed foods customers or soft
drink customers were to substantially decrease their purchases, the business of
the Company might be materially adversely affected. However, the Company
believes there is no concentration of risk with any single customer or supplier,
or small group of customers or suppliers, whose failure or non-performance would
materially affect the Company's results.
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains or may contain forward-looking
statements concerning the Company's financial position, business and future
earnings and prospects, in addition to other statements using words such as
anticipate, believe, plan, estimate, expect, intend and other similar
expressions. These statements contain certain inherent risks and uncertainties.
Although we believe our expectations reflected in these forward-looking
statements are based on reasonable assumptions, stockholders are cautioned that
no assurance can be given that our expectations will prove correct. Actual
results and developments may differ materially from the expectations conveyed in
these statements, based on factors such as the following: fluctuations in
worldwide commodities markets and the associated risks of hedging against such
fluctuations; fluctuations in aggregate industry supply and market demand;
general political, economic, business, market and weather conditions in the
various geographic regions and countries in which we manufacture and sell our
products, including fluctuations in the value of local currencies, energy costs
and availability and changes in regulatory controls regarding quotas, tariffs,
taxes and biotechnology issues; increased competitive and/or customer pressure
in the corn-refining industry; the outbreak or continuation of hostilities; and
stock market fluctuation and volatility. Our forward-looking statements speak
only as of the date on which they are made and we do not undertake any
obligation to update any forward-looking statement to reflect events or
circumstances after the date of the statement. If we do update or correct one or
more of these statements, investors and others should not conclude that we will
make additional updates or corrections. For a further description of risk
factors, see the Company's most recently filed Annual Report on Form 10-K and
subsequent reports on Forms 10-Q or 8-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Incorporated by reference from Exhibit 13.1 filed herewith, sections
entitled "Report of Management," "Report of Independent Auditors," "Consolidated
Financial Statements and Notes" and "Supplemental Financial Information."
13
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information contained under the headings "Board of Directors," "Matters
To Be Acted Upon -- Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's definitive proxy statement for
the Company's 2003 Annual Meeting of Stockholders (the "Proxy Statement") and
the information contained under the heading "Executive Officers of the
Registrant" in Item 1 hereof is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information contained under the heading "Executive Compensation" in the
Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The information contained under the headings "Equity Compensation Plan
Information as of December 31, 2002" and "Security Ownership of Certain
Beneficial Owners and Management" in the Proxy Statement is incorporated herein
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained under the heading "Certain Relationships and
Related Transactions" in the Proxy Statement is incorporated herein by
reference.
PART IV
ITEM 14. CONTROLS AND PROCEDURES
The Chief Executive Officer and the Chief Financial Officer performed an
evaluation of the effectiveness of the Company's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this Form
10-K report. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer concluded that the disclosure controls and procedures are
effective in ensuring that all material information required to be filed in this
report has been made known to them in a timely fashion. There have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect the Company's internal controls subsequent to the
date the Chief Executive Officer and Chief Financial Officer completed their
evaluation.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
ITEM 15(a)(1) CONSOLIDATED FINANCIAL STATEMENTS
Incorporated by reference from Exhibit 13.1 filed herewith, sections
entitled "Report of Management," "Report of Independent Auditors," "Consolidated
Financial Statements and Notes" and "Supplemental Financial Information."
ITEM 15(a)(2) FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted because the information
either is not required or is otherwise included in the consolidated financial
statements and notes thereto.
14
<PAGE>
ITEM 15(a)(3) EXHIBITS
The Exhibits set forth in the accompanying Exhibit Index are filed as a
part of this report. The following is a list of each management contract or
compensatory plan or arrangement required to be filed as an Exhibit to this
report:
<Table>
<Caption>
EXHIBIT
NUMBER
- -------
<S> <C>
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
</Table>
ITEM 15(B) REPORTS ON FORM 8-K
On November 18, 2002, the Company filed a report on Form 8-K to disclose
that it entered into the Second Supplemental Indenture which supplements the
Indenture dated as of August 18, 1999, as supplemented by the First Supplemental
Indenture dated as of July 8, 2002, between the Company and The Bank of New
York, a New York banking corporation, as trustee.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 21st day of
March, 2003.
CORN PRODUCTS INTERNATIONAL, INC.
By: /s/ SAMUEL C. SCOTT III
------------------------------------
Samuel C. Scott III
Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant, in the capacities indicated and on the 21st day of March, 2003.
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
/s/ SAMUEL C. SCOTT III Chairman, President and Chief Executive Officer
---------------------------------------------------
Samuel C. Scott III
/s/ JAMES W. RIPLEY Chief Financial Officer
---------------------------------------------------
James W. Ripley
/s/ ROBIN A. KORNMEYER Controller
---------------------------------------------------
Robin A. Kornmeyer
/s/ *RICHARD J. ALMEIDA Director
---------------------------------------------------
Richard J. Almeida
/s/ *IGNACIO ARANGUREN-CASTIELLO Director
---------------------------------------------------
Ignacio Aranguren-Castiello
/s/ *ALFRED C. DECRANE, JR. Director
---------------------------------------------------
Alfred C. DeCrane, Jr.
/s/ *GUENTHER E. GREINER Director
---------------------------------------------------
Guenther E. Greiner
/s/ *RONALD M. GROSS Director
---------------------------------------------------
Ronald M. Gross
/s/ *KAREN L. HENDRICKS Director
---------------------------------------------------
Karen L. Hendricks
/s/ *BERNARD H. KASTORY Director
---------------------------------------------------
Bernard H. Kastory
</Table>
16
<PAGE>
<Table>
<Caption>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
/s/ *WILLIAM S. NORMAN Director
---------------------------------------------------
William S. Norman
/s/ *JAMES M. RINGLER Director
---------------------------------------------------
James M. Ringler
/s/ *CLIFFORD B. STORMS Director
---------------------------------------------------
Clifford B. Storms
*By: /s/ MARCIA E. DOANE
---------------------------------------------
Marcia E. Doane
Attorney-in-fact
</Table>
(Being the principal executive officer, the principal financial officer, the
controller and all of the directors of Corn Products International, Inc.)
17
<PAGE>
CERTIFICATIONS
I, Samuel C. Scott III, certify that:
1. I have reviewed this annual report on Form 10-K of Corn Products
International, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
/s/ SAMUEL C. SCOTT III
--------------------------------------
Samuel C. Scott III
Chairman, President and
Chief Executive Officer
Date: March 21, 2003
18
<PAGE>
CERTIFICATIONS
I, James W. Ripley, certify that:
1. I have reviewed this annual report on Form 10-K of Corn Products
International, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this annual report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
/s/ JAMES W. RIPLEY
--------------------------------------
James W. Ripley
Vice President and
Chief Financial Officer
Date: March 21, 2003
19
<PAGE>
EXHIBIT INDEX
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
3.1* Amended and Restated Certificate of Incorporation of the
Company, filed as Exhibit 3.1 to the Company's Registration
Statement on Form 10, File No. 1-13397
3.2* Amended By-Laws of the Company, filed as Exhibit 3.ii to the
Company's quarterly report on Form 10-Q for the quarter
ended September 30, 2000, File No. 1-13397
4.1* Rights Agreement dated as of November 19, 1997 (Amended and
Restated as of September 9, 2002), between the Company and
The Bank of New York, filed as Exhibit 4 to the Company's
quarterly report on Form 10-Q for the quarter ended
September 30, 2002, File No. 1-13397
4.2* Certificate of Designation for the Company's Series A Junior
Participating Preferred Stock, filed as Exhibit 1 to the
Company's Registration Statement on Form 8-Al2B, File No.
1-13397
4.3 3-Year Revolving Credit Agreement dated as of October 15,
2002 among the Company and the agent and banks named therein
4.4* Indenture Agreement dated as of August 18, 1999 between the
Company and The Bank of New York, as Trustee, filed on
August 27, 1999 as Exhibit 4.1 to the Company's current
report on Form 8-K, File No. 1-13397, as amended by First
Supplemental Indenture filed on July 8, 2002 as Exhibit 99.4
to the Company's current report on Form 8-K, File No.
1-13397, and by Second Supplemental Indenture filed on
November 18, 2002 as Exhibit 4 to the Company's current
report on Form 8-K, File No. 1-13397
4.5* First Supplemental Indenture dated July 8, 2002 between the
Company and The Bank of New York, as Trustee, filed on July
8, 2002 as Exhibit 99.4 to the Company's current report on
Form 8-K, File No. 1-13397
4.6* Second Supplemental Indenture dated November 18, 2002
between the Company and The Bank of New York, as Trustee,
filed on November 18, 2002 as Exhibit 4 to the Company's
current report on Form 8-K, File No. 1-13397
10.1* CornProductsMCP Sweeteners LLC Limited Liability Company
Agreement dated December 1, 2000 between the Company and
Minnesota Corn Processors, LLC, filed as Exhibit 10.5 to the
Company's annual report on Form 10-K for the year ended
December 31, 2000, File No. 1-13397, as amended by Amendment
dated July 1, 2002, filed as Exhibit 10 to the Company's
quarterly report on Form 10-Q for the quarter ended
September 30, 2002, File No. 1-13397
10.2* Amendment to CornProductsMCP Sweeteners LLC Limited
Liability Company Agreement dated July 1, 2002, filed as
Exhibit 10 to the Company's quarterly report on Form 10-Q
for the quarter ended September 30, 2002, File No. 1-13397
10.3* 1998 Stock Incentive Plan of the Company, filed as Exhibit
4.D to the Company's Registration Statement on Form S-8,
File No. 333-43525, as amended by Amendments Nos. 1 and 2,
filed as Exhibits 10.19 and 10.20, respectively, to the
Company's annual report on Form 10-K for the year ended
December 31, 2000, File No. 1-13397, and Amendment No. 3
filed as Exhibit 17 to the Company's annual report on Form
10-K for the year ended December 31, 2002, File No. 1-13397
10.4** Deferred Stock Unit Plan of the Company
10.5** Form of Severance Agreement entered into by each of S.C.
Scott, E.J. Northacker, J.W. Ripley, J.L. Fiamenghi and J.C.
Fortnum (the "Named Executive Officers")
10.6* Form of Amendment to Executive Severance Agreement entered
into by each of the Named Executive Officers, filed as
Exhibit 10.10 to the Company's annual report on Form 10-K
for the year ended December 31, 2000, File No. 1-13397
10.7* Separation Agreement dated September 20, 2001 between the
Company and M.R. Pyatt, filed as Exhibit 10 to the Company's
quarterly report on Form 10-Q for the quarter ended
September 30, 2001, File No. 1-13397
10.8** Form of Indemnification Agreement entered into by each of
the members of the Company's Board of Directors and the
Named Executive Officers
10.9* Deferred Compensation Plan for Outside Directors of the
Company (Amended and Restated as of September 19, 2001),
filed as Exhibit 4(d) to the Company's Registration
Statement on Form S-8, File No. 333-75844
</Table>
20
<PAGE>
<Table>
<Caption>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
10.10* Supplemental Executive Retirement Plan (Amended and Restated
as of January 1, 2001), filed as Exhibit 10 to the Company's
quarterly report on Form 10-Q/A for the quarter ended March
31, 2002, File No. 1-13397
10.11** Executive Life Insurance Plan
10.12** Deferred Compensation Plan, as amended by Amendment No. 1
filed as Exhibit 10.21 to the Company's annual report on
Form 10-K/A for the year ended December 31, 2001, File No.
1-13397
10.13* Annual Incentive Plan, filed as Exhibit 10.18 to the
Company's annual report on Form 10-K for the year ended
December 31, 1999, File No. 1-13397
10.14* Performance Plan, filed as Exhibit 10.19 to the Company's
annual report on Form 10-K for the year ended December 31,
1999, File No. 1-13397
10.15* Amendment No. 1 to 1998 Stock Incentive Plan dated January
20, 1999, filed as Exhibit 10.19 to the Company's annual
report on Form 10-K for the year ended December 31, 2000,
File No. 1-13397
10.16* Amendment No. 2 to 1998 Stock Incentive Plan dated November
21, 2000, filed as Exhibit 10.20 to the Company's annual
report on Form 10-K for the year ended December 31, 2000,
File No. 1-13397
10.17 Amendment No. 3 to 1998 Stock Incentive Plan dated November
20, 2002
10.18* Amendment No. 1 to Deferred Compensation Plan dated January
19, 2002, filed as Exhibit 10.21 to the Company's annual
report on Form 10-K/A for the year ended December 31, 2001,
File No. 1-13397
10.19** Tax Sharing Agreement dated December 1, 1997 between the
Company and Bestfoods
10.20* Employee Benefits Agreement dated December 1, 1997 between
the Company and Bestfoods, filed as Exhibit 4.E to the
Company's Registration Statement on Form S-8, File No.
333-43525
11.1 Earnings Per Share Computation
12.1 Computation of Ratio of Earnings to Fixed Charges
13.1 Management's Discussion and Analysis of Financial Condition
and Results of Operations and Consolidated Financial
Statements and Notes
18.1* Preferability letter from KPMG, filed as Exhibit 18.1 to the
Company's annual report on Form 10-K for the year ended
December 31, 2000, File No. 1-13397
21.1 Subsidiaries of the Registrant
23.1 Consent of KPMG LLP
24.1 Power of Attorney
99.1 CEO Certification Pursuant to Section 1350 of Chapter 63 of
Title 18 of the United States Code as created by the
Sarbanes-Oxley Act of 2002
99.2 CFO Certification Pursuant to Section 1350 of Chapter 63 of
Title 18 of the United States Code as created by the
Sarbanes-Oxley Act of 2002
</Table>
- ---------------
* Incorporated herein by reference as indicated in the exhibit description.
** Incorporated herein by reference to the exhibits filed with the Company's
Annual Report on Form 10-K for the year ended December 31, 1997.
21
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.3
<SEQUENCE>3
<FILENAME>c75436exv4w3.txt
<DESCRIPTION>3-YEAR REVOLVING CREDIT AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 4.3
3-YEAR REVOLVING CREDIT AGREEMENT
Dated as of October 15, 2002
CORN PRODUCTS INTERNATIONAL, INC., a Delaware corporation (the
"Borrower"), the banks (the "Banks") and issuers of letters of credit (the
"Initial Issuing Banks") listed on the signature pages hereof, SUNTRUST BANK
("SunTrust"), as administrative agent (the "Administrative Agent") for the
Lenders (as hereinafter defined), agree as follows:
ARTICLE I. DEFINITIONS AND ACCOUNTING TERMS
Section 1.01 Certain Defined Terms.
As used in this Agreement, the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"Administrative Agent" has the meaning specified in the
recital of parties to this Agreement.
"Advance" means an advance by a Lender to the Borrower as part
of a Borrowing and refers to a Base Rate Advance or a Eurodollar Rate
Advance, each of which shall be a "Type" of Advance.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person.
For purposes of this definition, the term "control" (including the
terms "controlling," "controlled by" and "under common control with")
of a Person means the possession, direct or indirect, of the power to
vote 5% or more of the Voting Stock of such Person or to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or
otherwise.
"Anniversary Date" means October 15, 2003 and October 15 in
each succeeding calendar year occurring during the term of this
Agreement.
"Applicable Facility Fee" means, for each day, the rate of
interest per annum (expressed in basis points, i.e., 1/100 of 1%) set
forth below opposite the Applicable Performance Level in effect on the
immediately preceding last day of March, June, September and December,
as the case may be.
<Table>
<Caption>
Applicable Performance Applicable Facility Fee
Level
---------------------- -----------------------
<S> <C>
1 15.0
2 20.0
3 25.0
4 30.0
</Table>
1
<PAGE>
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of a Base
Rate Advance and such Lender's Eurodollar Lending Office in the case of
a Eurodollar Rate Advance.
"Applicable Margin" means, at any time, the rate of interest
per annum (expressed in basis points, i.e., 1/100 of 1%) set forth
below opposite the Applicable Performance Level in effect on the first
day of the Interest Period therefor, in the case of a Eurodollar Rate
Advance or in effect, from time to time, in the case of a Base Rate
Advance.
<Table>
<Caption>
Applicable Performance Applicable Margin
Level
Base Rate Eurodollar Rate
<S> <C> <C>
1 0.00 60.0
2 0.00 90.0
3 0.00 125.0
4 0.00 145.0
</Table>
"Applicable Performance Level" shall mean the applicable level
for adjusting the Applicable Facility Fee and Applicable Margin as
follows:
<Table>
<Caption>
Applicable Performance
Level
<S> <C>
1 Interest Coverage Ratio > or = to 7.5 and Debt to EBITDA
Ratio < or = to 2.0
2 Interest Coverage Ratio > or = to 6.0 but < or = to 7.5 and Debt to
EBITDA Ratio > or = to 2.0 but < or = to 2.25
3 Interest Coverage Ratio > or = to 4.5 but < or = to 6.0 and Debt to
EBITDA Ratio > or = to 2.25 but < or = to 2.5
4 (x) Interest Coverage Ratio < or = to 4.5 or Debt to EBITDA
Ratio > or = to 2.5 or (y) Public Debt Rating is BB+ or
lower by S&P and Ba1 or lower by Moody's
</Table>
provided that (A) the Applicable Facility Fee and Applicable Margin
shall be set in accordance with Applicable Performance Level 3 until
December 31, 2002, (B) no change in the Applicable Facility Fee or the
Applicable Margin shall be effective until three Business Days after
the date on which the Administrative Agent receives financial
statements pursuant to Section 5.01(d)(i)(A) or (ii)(A) and a
certificate of an Authorized Financial Officer of the Borrower
demonstrating the Borrower's Debt to EBITDA Ratio and Interest Coverage
Ratio and (C) if the Borrower has not submitted to the Administrative
Agent the information described in clause (B) of this proviso as and
when required under Section 5.01(d)(i)(A) or (ii)(A), as the case may
be, the Applicable Facility Fee and Applicable Margin shall be at
Applicable Performance Level 4 for so long as such information has not
been received by the Administrative Agent.
2
<PAGE>
"Arranger" means SunTrust Capital Markets, Inc.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, acknowledged and
consented to by the Borrower and accepted by the Administrative Agent,
in accordance with Section 8.07 and in substantially the form of
Exhibit C hereto.
"Assuming Lender" has the meaning specified in Section
2.17(c).
"Assumption Agreement" has the meaning specified in Section
2.17(c).
"Authorized Financial Officer" means any one of the Vice
President and Treasurer of the Borrower or any other duly authorized
corporate officer of the Borrower who is responsible for and familiar
with the financial affairs of the Borrower.
"Available Amount" of any Letter of Credit means, at any time,
the maximum amount available to be drawn under such Letter of Credit at
such time (assuming compliance at such time with all conditions to
drawing).
"Bank" has the meaning specified in the recital of parties to
this Agreement.
"Base Rate" shall mean the higher of (i) the per annum rate
which the Administrative Agent publicly announces from time to time to
be its prime lending rate, as in effect from time to time, or (ii) the
Federal Funds Rate, as in effect from time to time, plus one-half of
one percent (0.50%). The Administrative Agent's prime lending rate is a
reference rate and does not necessarily represent the lowest or best
rate charged to customers. The Administrative Agent may make commercial
loans or other loans at rates of interest at, above or below the
Administrative Agent's prime lending rate. Each change in the
Administrative Agent's prime lending rate shall be effective from and
including the date such change is publicly announced as being
effective.
"Base Rate Advance" means an Advance which bears interest at a
rate per annum determined on the basis of the Base Rate, as provided in
Section 2.07(a)(i).
"Borrowing" means a borrowing consisting of simultaneous
Advances of the same Type made by each of the Lenders pursuant to
Section 2.01.
"Business Day" means a day of the year on which banks are not
required or authorized to close in New York City and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings
are carried on in the London interbank market.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the regulations promulgated and rulings issued
thereunder.
"Commitment" means a Revolving Credit Commitment or a Letter
of Credit Commitment.
3
<PAGE>
"Commitment Date" has the meaning specified in Section
2.18(b).
"Commitment Increase" has the meaning specified in Section
2.18(a).
"Consenting Lender" has the meaning specified in Section
2.17(b).
"Consolidated" refers to the consolidation of the accounts of
the Borrower and its Subsidiaries in accordance with generally accepted
accounting principles, including principles of consolidation,
consistent with those applied in the preparation of the Consolidated
financial statements referred to in Section 4.01(e).
"Convert", "Conversion" and "Converted" each refers to a
conversion of Advances of one Type into Advances of the other Type
pursuant to Section 2.08 or 2.09.
"Debt" means (i) indebtedness for borrowed money, (ii)
obligations evidenced by bonds, debentures, notes or other similar
instruments, (iii) obligations to pay the deferred purchase price of
property or services, (iv) obligations as lessee under leases which
shall have been or should be, in accordance with generally accepted
accounting principles, recorded as capital leases, (v) all obligations
of such Person in respect of acceptances, letters of credit or similar
extensions of credit, in each case upon the issuance thereof, (vi) all
Invested Amounts, (vii) all Synthetic Lease Obligations of such Person,
(viii) obligations under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness or obligations of others of the kinds referred to in
clauses (i) through (vii) above, (ix) liabilities of the Borrower or
any ERISA Affiliate in respect of any Insufficiency, (x) withdrawal
liability within the meaning of Section 4201 of ERISA incurred by the
Borrower or any ERISA Affiliate to any Multiemployer Plan, (xi)
liabilities incurred by the Borrower or any ERISA Affiliate to the PBGC
upon the termination under Section 4041 or Section 4042 of ERISA of any
Plan and (xii) any increase in the amount of contributions required to
be made by the Borrower and its ERISA Affiliates in each fiscal year of
the Borrower to Multiemployer Plans over the amount of such
contributions required to be made on the date hereof due to the
reorganization or termination of any such Multiemployer Plan within the
meaning of Title IV of ERISA.
"Debt to EBITDA Ratio" means, for any Measurement Period, the
ratio of Consolidated Net Borrowed Debt of the Borrower to Consolidated
EBITDA of the Borrower and its Subsidiaries during such Measurement
Period, as determined in accordance with GAAP by reference to the
Consolidated financial statements of the Borrower required to be
delivered pursuant to Section 5.01(d)(i)(A) or (ii)(A).
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender, or such other office
of such Lender as such Lender may from time to time specify to the
Borrower and the Administrative Agent.
4
<PAGE>
"EBITDA" means, for any period, an amount equal to
Consolidated net income (or net loss) of the Borrower plus the sum of
(a) interest expense (b) income tax expense, (c) depreciation expense,
(d) amortization expense and (e) minority interest earnings and minus
minority interest losses, in each case determined in accordance with
GAAP by reference to the Consolidated financial statements of the
Borrower required to be delivered pursuant to Section 5.01(d)(i)(A) or
(ii)(A).
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (i) a commercial bank organized
under the laws of the United States, or any State thereof, having total
assets of not less than $5,000,000,000; (ii) a commercial bank having
total assets of not less than $5,000,000,000 (or its equivalent in
another currency), and organized under the laws of any other country
which is a member of the Organization for Economic Cooperation and
Development ("OECD") or has concluded special lending arrangements with
the International Monetary Fund associated with its General
Arrangements to Borrow, or a political subdivision of any such country,
provided that such bank is acting through a branch or agency located in
the United States; (iii) the central bank of any country which is a
member of the OECD; (iv) such other financial institutions as the
Administrative Agent and the Borrower may agree on from time to time;
and (v) an Affiliate of a Lender.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, judgment,
decree or judicial or agency interpretation, policy or guidance
relating to the environment, health, safety or Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title
IV of ERISA is a member of the Borrower's controlled group or under
common control with such Person, as the case may be, within the meaning
of Section 414 of the Internal Revenue Code.
"ERISA Default" means
(a) that either
(i) any Termination Event with respect to a
Plan shall have occurred and be continuing, or
(ii) either the Borrower or any of its ERISA
Affiliates shall have been notified by the sponsor of
a Multiemployer Plan that such Person or such ERISA
Affiliate, as the case may be, has incurred
Withdrawal Liability to such Multiemployer Plan or
that such Multiemployer Plan is in reorganization or
is being terminated, within the meaning of Title IV
of ERISA, and
5
<PAGE>
(b) that at the time of such occurrence or notice the
sum of
(i) the Insufficiency of such Plan for which
a Termination Event has occurred together with the
Insufficiency of any and all other Plans with respect
to which a Termination Event shall have occurred and
then exist (or, in the case of a Plan with respect to
which a Termination Event described in clause (ii) of
the definition of Termination Event shall have
occurred and then exist, the liability related
thereto), plus
(ii) the Withdrawal Liability to such
Multiemployer Plan, determined as of the notification
date referred to in clause (a)(ii) above, together
with the aggregate amount then outstanding and
required to be paid to all other Multiemployer Plans
for which there is then a Withdrawal Liability, plus
(iii) the excess of (A) aggregate annual
contributions of the Borrower and its ERISA
Affiliates to all Multiemployer Plans for the plan
years in which such notice of reorganization has been
received over (B) the aggregate annual contributions
of such Person and its ERISA Affiliates to such
Multiemployer Plans for the plan year which includes
the date hereof,
shall equal or exceed $5,000,000.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender (or, if no such office
is specified, its Domestic Lending Office), or such other office of
such Lender as such Lender may from time to time specify to the
Borrower and the Administrative Agent.
"Eurodollar Rate" means, for the Interest Period for each
Eurodollar Rate Advance comprising part of the same Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a) the British Bankers' Association Interest Settlement Rate
per annum for deposits in US Dollars for a period equal to such
Interest Period appearing on the display designated as Page 3750 on the
Dow Jones Markets Service (or such other page on that service or such
other service designated by the British Bankers' Association for the
display of such Association's Interest Settlement Rates for US Dollar
deposits) as of 11:00 a.m. (London, England time) on the day that is
two Business Days prior to the first day of the Interest Period or if
such Page 3750 is unavailable for any reason at such time, the rate
which appears on the Reuters Screen ISDA Page as of such date and such
time; provided, that if the Administrative Agent determines that the
relevant foregoing sources are unavailable for the relevant Interest
Period, the Eurodollar Rate shall mean the rate of interest determined
by the Administrative Agent to
6
<PAGE>
be the average (rounded upward, if necessary, to the nearest 1/100th of
1%) of the rates per annum at which deposits in US Dollars are offered
to the Administrative Agent two (2) Business Days preceding the first
day of such Interest Period by leading banks in the London interbank
market as of 10:00 a.m. (London, England time) for delivery on the
first day of such Interest Period, for the number of days comprised
therein and in an amount comparable to the amount of the Eurodollar
Rate Advance of the Administrative Agent by (b) a percentage equal to
100% minus the Eurodollar Rate Reserve Percentage for such Interest
Period.
"Eurodollar Rate Advance" means an Advance which bears
interest at a rate per annum determined on the basis of the Eurodollar
Rate, as provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" of any Lender for any
Interest Period for all Eurodollar Rate Advances comprising part of the
same Borrowing means the reserve percentage applicable two Business
Days before the first day of such Interest Period under regulations
issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental
or other marginal reserve requirement) for a member bank of the Federal
Reserve System in New York City with respect to liabilities or assets
consisting of or including Eurocurrency Liabilities (or with respect to
any other category of liabilities that includes deposits by reference
to which the interest rate on Eurodollar Rate Advances is determined)
having a term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Extension Date" has the meaning specified in Section 2.17(b).
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day which is
a Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"Hazardous Materials" means petroleum and petroleum products,
byproducts or breakdown products, radioactive materials,
asbestos-containing materials, radon gas and any other chemicals,
materials or substances designated, classified or regulated as being
"hazardous" or "toxic," or words of similar import, under any federal,
state, local or foreign statute, law, ordinance, rule, regulation,
code, order, judgment, decree or judicial or agency interpretation,
policy or guidance.
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements.
7
<PAGE>
"Increase Date" has the meaning specified in Section 2.18(a).
"Increasing Lender" has the meaning specified in Section
2.18(b).
"Insufficiency" means, with respect to any Plan, the amount, if any, of
its unfunded benefit liabilities within the meaning of Section
4001(a)(18) of ERISA.
"Interest Coverage Ratio" means for any Measurement Period,
the ratio of Consolidated EBITDA of the Borrower and its Subsidiaries
during such Measurement Period to interest payable on, and amortization
of debt discount in respect of, all Debt during such Measurement Period
by the Borrower and its Subsidiaries.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Borrowing, the period commencing on the
date of such Eurodollar Rate Advance or the date of Conversion of any
Base Rate Advance into such Eurodollar Rate Advance and ending on the
last day of the period selected by the Borrower pursuant to the
provisions below and, thereafter, each subsequent period commencing on
the last day of the immediately preceding Interest Period and ending on
the last day of the period selected by the Borrower pursuant to the
provisions below. The duration of each Interest Period shall be one,
two, three or six months, and if available to all Lenders, nine or
twelve months, in each case as the Borrower may, upon notice received
by the Administrative Agent not later than 11:00 A.M. (New York City
time) on the third Business Day prior to the first day of such Interest
Period, select; provided, however, that:
(w) the duration of any Interest Period which
commences before the Termination Date and would otherwise end
after the Termination Date shall end on the Termination Date
(subject to Section 8.04(b));
(x) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Borrowing
shall be of the same duration;
(y) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, provided, however, that, if
such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding
Business Day; and
(z) whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there
is no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end on the last Business Day of such
succeeding calendar month.
"Invested Amounts" means the amounts invested by investors,
other than Affiliates of the Borrower, in connection with receivables
securitization programs to which accounts receivable originated by the
Borrower or its Subsidiaries are subject, where such invested amounts
are in part reduced by the aggregate amounts received by
8
<PAGE>
such investors from the payment of amounts owing in connection with
such accounts receivable originated by the Borrower or its
Subsidiaries.
"Issuing Bank" means each Initial Issuing Bank or any Eligible
Assignee to which a portion of the Letter of Credit Commitment
hereunder has been assigned pursuant to Section 8.07 so long as such
Eligible Assignee expressly agrees to perform in accordance with their
terms all of the obligations that by the terms of this Agreement are
required to be performed by it as an Issuing Bank and notifies the
Administrative Agent of its Applicable Lending Office (which
information shall be recorded by the Administrative Agent in the
Register), for so long as such Initial Issuing Bank or Eligible
Assignee, as the case may be, shall have a Letter of Credit Commitment.
"L/C Cash Collateral Account" means an interest bearing cash
collateral account to be established and maintained by the
Administrative Agent, over which the Administrative Agent shall have
sole dominion and control, upon terms as may be satisfactory to the
Administrative Agent.
"L/C Related Documents" has the meaning specified in Section
2.07(b)(i).
"Lenders" means the Banks, the Issuing Banks, each Assuming
Lender that shall become a party hereto pursuant to Section 2.17 or
2.18 and each Eligible Assignee that shall become a party hereto
pursuant to Section 8.07.
"Letter of Credit" has the meaning specified in Section
2.01(b).
"Letter of Credit Agreement" has the meaning specified in
Section 2.03(a).
"Letter of Credit Commitment" means, with respect to each
Initial Issuing Bank, the amount set forth opposite such Initial
Issuing Bank's name on the signature pages hereto under the caption
"Letter of Credit Commitment" or, if such Initial Issuing Bank has
entered into one or more Assignment and Acceptances, the amount set
forth for such Issuing Bank in the Register maintained by the
Administrative Agent pursuant to Section 8.07(d) as such Issuing Bank's
"Letter of Credit Commitment", as such amount may be reduced at or
prior to such time pursuant to Section 2.05.
"Letter of Credit Facility" means, at any time, an amount
equal to the lesser of (a) the amount of the Issuing Banks' Letter of
Credit Commitments at such time and (b) $5,000,000, as such amount may
be reduced at or prior to such time pursuant to Section 2.05.
"Lien" shall have the meaning specified in Section 4.01(l).
"Loan Documents" means this Agreement, the Notes and the
Letter of Credit Agreements.
"Majority Lenders" means at any time Lenders having at least
51% of the outstanding Advances at such time, or, if no such principal
amount is then outstanding, Lenders having at least 51% of the
Revolving Credit Commitments.
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"Margin Stock" has the meaning given that term in Regulation U
of the Board of Governors of the Federal Reserve System, as in effect
from time to time.
"Material Adverse Effect" means a material adverse effect on
(a) the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Borrower and its
Subsidiaries, taken as a whole, (b) the rights and remedies of the
Administrative Agent or any Lender under this Agreement or any other
Loan Document or (c) the ability of the Borrower to perform its
obligations under this Agreement or any other Loan Document.
"Measurement Period" means, as of any date of determination,
the most recently completed four consecutive fiscal quarters of the
Borrower ending on or immediately prior to such date.
"Moody's" means Moody's Investor Services, Inc.
"Multiemployer Plan" means a "multiemployer plan", as defined
in Section 4001(a)(3) of ERISA, to which the Borrower or any of its
ERISA Affiliates is making or accruing an obligation to make
contributions, or has within any of the preceding five plan years made
or accrued an obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Borrower or any of its ERISA Affiliates and at least
one Person other than such Person and its ERISA Affiliates or (b) was
so maintained and in respect of which such Person or any of its ERISA
Affiliates could have liability under Section 4064 or 4069 of ERISA in
the event such plan has been or were to be terminated.
"Net Borrowed Debt" means, as of any date, with respect to the
Borrower and its Subsidiaries, (a) the sum of (v) all indebtedness for
borrowed money and obligations evidenced by bonds, debentures, notes or
other similar instruments, (w) all Invested Amounts, (x) all
obligations in respect of acceptances, letters of credit or similar
extensions of credit, in each case when issued, (y) all obligations as
lessee under leases which shall have been or should be, in accordance
with generally accepted accounting principles, recorded as capital
leases and (z) all Synthetic Lease Obligations minus (b) cash on the
Consolidated balance sheet of the Borrower to the extent cash exceeds
$50,000,000, provided that the amount of cash subtracted pursuant to
this clause (b) shall be $0 on any date on which Advances are
outstanding and shall be $0 on each date on and after April 15, 2004.
"Non-Consenting Lender" has the meaning specified in Section
2.17(b).
"Note" means a promissory note of the Borrower payable to the
order of any Lender, in substantially the form of Exhibit A hereto,
evidencing the aggregate indebtedness of the Borrower to such Lender
resulting from the Advances made by such Lender.
"Notice of Borrowing" has the meaning specified in Section
2.02(a).
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"Notice of Continuation/Conversion" has the meaning specified
in Section 2.09.
"Obligation" means, with respect to any Person, any obligation
of such Person of any kind, including, without limitation, any
liability of such Person on any claim, whether or not the right of any
creditor to payment in respect of such claim is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, disputed,
undisputed, legal, equitable, secured or unsecured, and whether or not
such obligation is discharged, stayed or otherwise affected by any
proceeding referred to in Section 6.01(e). Without limiting the
generality of the foregoing, the Obligations of the Borrower under the
Loan Documents include (a) all principal, interest, charges, expenses,
fees, attorneys' fees and disbursements, indemnities and any other
amounts payable by the Borrower under any Loan Document and (b) any
amount in respect of any of the foregoing payable by the Borrower under
or in respect of any Loan Document, that any Lender, in its sole
discretion and upon five Business Days' notice to the Borrower may
elect to pay or advance on behalf the Borrower.
"Other Taxes" has the meaning specified in Section 2.14(b).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, partnership, corporation
(including a business trust), limited liability company, joint stock
company, trust, unincorporated association, joint venture or other
entity, or a government or any political subdivision or agency thereof.
"Plan" means a Single Employer Plan or a Multiple Employer
Plan.
"Pro Rata Share" of any amount means, with respect to any
Lender at any time, the product of such amount times a fraction the
numerator of which is the amount of such Lender's Revolving Credit
Commitment at such time (or, if the Revolving Credit Commitments shall
have been terminated pursuant to Section 2.05 or 6.01, such Lender's
Revolving Credit Commitment as in effect immediately prior to such
termination) and the denominator of which is the aggregate amount of
all Revolving Credit Commitments at such time (or, if the Revolving
Credit Commitments shall have been terminated pursuant to Section 2.05
or 6.01, the aggregate amount of all Revolving Credit Commitments as in
effect immediately prior to such termination).
"Public Debt Rating" means, as of any date, the better of (a)
the lowest rating of any class of long-term public unsecured senior
debt issued by the Borrower as most recently announced by Moody's and
(b) the lowest rating of the Borrower's long-term public unsecured
senior debt as most recently announced by S&P, as the case may be, or,
if either Moody's or S&P is no longer in existence on such date, a
Substitute Rating Agency, provided, however, that (i) if any rating
established by S&P or Moody's (or any Substitute Rating Agency) shall
be changed, such change shall be effective as of the date on which such
change is first announced publicly by the rating agency making such
change; and (ii) if S&P or Moody's (or any Substitute Rating Agency)
shall change the basis on which ratings are established, each reference
to the Public Debt Rating
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announced by S&P or Moody's (or any Substitute Rating Agency), as the
case may be, shall refer to the then equivalent rating by S&P or
Moody's (or any Substitute Rating Agency), as the case may be.
"Register" has the meaning specified in Section 8.07(c).
"Revolving Credit Commitment" means, with respect to any
Lender at any time, the amount set forth opposite such Lender's name on
the signature pages hereto under the caption "Revolving Credit
Commitment" or, if such Lender has entered into one or more Assignment
and Acceptances, set forth for such Lender in the Register maintained
by the Administrative Agent pursuant to Section 8.07(d) as such
Lender's "Revolving Credit Commitment", as such amount may be reduced
at or prior to such time pursuant to Section 2.05 or increased pursuant
to Section 2.18.
"S&P" means Standard & Poor's Ratings Group, a division of The
McGraw-Hill Companies, Inc.
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (i) is maintained for
employees of the Borrower or any of its ERISA Affiliates and no Person
other than such Person and its ERISA Affiliates, or (ii) was so
maintained and in respect of which the Borrower or its ERISA Affiliates
could have liability under Section 4069 of ERISA in the event such plan
has been or were to be terminated.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such partnership, joint
venture or limited liability company or (c) the beneficial interest in
such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries.
"Substitute Rating Agency" means a nationally recognized
credit rating organization designated by the Borrower and approved by
the Administrative Agent.
"Synthetic Lease Obligation" means the monetary obligation of
a Person under a synthetic, off-balance sheet or tax retention lease or
any other monetary obligation arising under a similar transaction.
"Taxes" has the meaning specified in Section 2.14(a).
"Termination Date" means the earlier of (a) October 15, 2005,
subject to the extension thereof pursuant to Section 2.17, and (b) the
date of termination in whole of the aggregate Commitments pursuant to
Section 2.05 or 6.01, provided, however, that the Termination Date of
any Lender that is a Non-Consenting Lender to any requested
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extension pursuant to Section 2.17 shall be the Termination Date in
effect immediately prior to the applicable Extension Date for all
purposes of this Agreement.
"Termination Event" means (i) the occurrence of a "reportable
event", as such term is described in Section 4043 of ERISA, with
respect to any Plan (other than a "reportable event" not subject to the
provision for 30-day notice to the PBGC), or an event described in
Section 4062(e) of ERISA, or (ii) the withdrawal of the Borrower or any
of its ERISA Affiliates from a Multiple Employer Plan during a plan
year in which it was a "substantial employer", as such term is defined
in Section 4001(a)(2) of ERISA, or the incurrence of liability by any
such Person or any ERISA Affiliate under Section 4064 of ERISA upon the
termination of a Multiple Employer Plan, or (iii) the distribution of a
notice of intent to terminate a Plan pursuant to Section 4041(a)(2) of
ERISA or the treatment of a Plan amendment as a termination under
Section 4041 of ERISA, or (iv) the conditions set forth in Section
302(f)(l)(A) and (B) of ERISA to the creation of a lien upon property
or rights to property of such Person or any ERISA Affiliate for failure
to make a required payment to a Plan are satisfied, or (v) the adoption
of an amendment to a Plan requiring the provision of security to such
Plan, pursuant to Section 307 of ERISA, or (vi) the institution of
proceedings to terminate a Plan by the PBGC under Section 4042 of
ERISA, or (vii) any other event or condition which might constitute
grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan.
"Unused Commitment" means, with respect to each Lender at any
time, (a) such Lender's Revolving Credit Commitment at such time minus
(b) the sum of (i) the aggregate principal amount of all Advances made
by such Lender (in its capacity as a Lender) that are outstanding at
such time, plus (ii) such Lender's Pro Rata Share of (A) the aggregate
Available Amount of all the Letters of Credit outstanding at such time
and (B) the aggregate principal amount of all Advances made by each
Issuing Bank pursuant to Section 2.03(c) that have not been ratably
funded by such Lender and outstanding at such time.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even though the right so to vote has been suspended by the
happening of such a contingency.
"Withdrawal Liability" shall have the meaning given such term
under Part 1 of Subtitle E of Title IV of ERISA.
Section 1.02 Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".
Section 1.03 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Section 4.01(e) ("GAAP").
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ARTICLE II. AMOUNTS AND TERMS OF THE ADVANCES
Section 2.01 The Advances and Letters of Credit. (a) Advances. Each
Lender severally agrees, on the terms and conditions hereinafter set forth, to
make Advances to the Borrower from time to time on any Business Day during the
period from the Effective Date until the Termination Date in an aggregate amount
not to exceed at any time such Lender's Unused Commitment at such time. Each
Borrowing shall be in an aggregate amount of $10,000,000 or an integral multiple
of $1,000,000 in excess thereof; provided that Borrowings consisting of Base
Rate Advances made pursuant to Section 2.03(c) may be in lesser amounts as
provided therein, and shall consist of Advances of the same Type made on the
same day by the Lenders ratably according to their respective Revolving Credit
Commitments. Within the limits of each Lender's Revolving Credit Commitment, the
Borrower may borrow under this Section 2.01(a), prepay pursuant to Section 2.10
and reborrow under this Section 2.01(a).
(b) Letters of Credit. Each Issuing Bank agrees, on the terms
and conditions hereinafter set forth, in reliance upon the agreements of the
other Lenders set forth in this Agreement, to issue letters of credit (each, a
"Letter of Credit") for the account of the Borrower from time to time on any
Business Day during the period from the Effective Date until 30 days before the
Termination Date in an aggregate Available Amount (i) for all Letters of Credit
issued by each Issuing Bank not to exceed at any time the lesser of (x) the
Letter of Credit Facility at such time and (y) such Issuing Bank's Letter of
Credit Commitment at such time and (ii) for each such Letter of Credit not to
exceed an amount equal to the Unused Commitments of the Lenders at such time. No
Letter of Credit shall have an expiration date (including all rights of the
Borrower or the beneficiary to require renewal) later than 10 Business Days
before the Termination Date. Within the limits referred to above, the Borrower
may request the issuance of Letters of Credit under this Section 2.01(b), repay
any Advances resulting from drawings thereunder pursuant to Section 2.03(c) and
request the issuance of additional Letters of Credit under this Section 2.01(b).
Section 2.02 Making the Advances. (a) Each Borrowing shall be made on
notice, given not later than (A) 11:00 A.M. (New York City time) on the third
Business Day prior to the date of the proposed Borrowing if the Borrower selects
a Eurodollar Rate Advance or (B) 11:00 A.M. (New York City time) on the date of
the proposed Borrowing (which shall be a Business Day) if the Borrower selects a
Base Rate Advance, by the Borrower to the Administrative Agent, which shall give
to each Lender prompt notice thereof. Each such notice of a Borrowing (a "Notice
of Borrowing") shall be by telex or telecopier, confirmed immediately in
writing, in substantially the form of Exhibit B hereto, specifying therein the
requested (i) date of such Borrowing, (ii) Type of Advances comprising such
Borrowing, (iii) aggregate principal amount of such Borrowing and (iv) in the
case of a Borrowing consisting of Eurodollar Rate Advances, the initial Interest
Period for each such Advance (subject to the provisions of the definition of
Interest Period). Each Lender shall, before 1:00 P.M. (New York City time), (x)
on the date of such Borrowing if the Borrower selects a Eurodollar Rate Advance
or (y) on the date of such Borrowing if the Borrower selects a Base Rate
Advance, make available for the account of its
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Applicable Lending Office to the Administrative Agent at its address referred
to in Section 8.02, in same day funds, such Lender's ratable portion of such
Borrowing. The Administrative Agent will make such Advances available to the
Borrower by promptly crediting the amounts that it receives, in like funds by
the close of business on such proposed date, to an account maintained by the
Borrower with the Administrative Agent or at the Borrower's option, by effecting
a wire transfer of such amounts to an account designated by the Borrower to the
Administrative Agent.
(b) Anything in subsection (a) above to the contrary
notwithstanding, the Borrower may not select Eurodollar Rate Advances for any
Borrowing if the obligations of the Lenders to make Eurodollar Rate Advances
shall then be suspended pursuant to Section 2.08 or 2.12.
(c) Each Notice of Borrowing shall be irrevocable and binding
on the Borrower. In the case of any Borrowing which the related Notice of
Borrowing specifies is to be comprised of Eurodollar Rate Advances, the Borrower
shall indemnify each Lender against any loss, cost or expense incurred by such
Lender as a result of any failure to fulfill, on or before the date specified in
such Notice of Borrowing for such Borrowing, the applicable conditions set forth
in Article III, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund the
Advance to be made by such Lender as part of such Borrowing when such Advance,
as a result of such failure, is not made on such date.
(d) Unless the Administrative Agent shall have received notice
from a Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's ratable portion of such
Borrowing, the Administrative Agent may assume that such Lender has made such
portion available to the Administrative Agent on the date of such Borrowing in
accordance with subsection (a) of this Section 2.02 and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower on such
date a corresponding amount. If and to the extent that such Lender shall not
have so made such ratable portion available to the Administrative Agent, such
Lender and the Borrower severally agree to repay to the Administrative Agent on
demand such corresponding amount together with interest thereon, for each day
from the date such amount is made available to the Borrower until the date such
amount is repaid to the Administrative Agent, at (i) in the case of the
Borrower, the interest rate applicable at the time to the Advances comprising
such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate until
the second Business Day after such demand and thereafter the Base Rate. The
Administrative Agent will demand such repayment from such Lender prior to
demanding such repayment from the Borrower. If such Lender shall repay to the
Administrative Agent such corresponding amount, such amount so repaid shall
constitute such Lender's Advance as part of such Borrowing for purposes of this
Agreement.
(e) The failure of any Lender to make the Advance to be made
by it as part of any Borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Advance on the date of such Borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Advance to be made by such other Lender on the date of any Borrowing.
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Section 2.03 Issuance of and Drawings and Reimbursement Under Letters
of Credit. (a) Request for Issuance. Each Letter of Credit shall be issued upon
written notice, given not later than 12:00 noon (New York City time) on the
third Business Day prior to the date of the proposed issuance of such Letter of
Credit, by the Borrower to any Issuing Bank, and such Issuing Bank shall give
the Administrative Agent, prompt notice thereof by telex, telecopier, telephone
or cable. Each such notice of issuance of a Letter of Credit (a "Notice of
Issuance") shall be by telex, telecopier, telephone or cable, confirmed
immediately in writing, specifying therein the requested (A) date of such
issuance (which shall be a Business Day), (B) Available Amount of such Letter of
Credit, (C) expiration date of such Letter of Credit, (D) name and address of
the beneficiary of such Letter of Credit and (E) form of such Letter of Credit,
and shall be accompanied by such application and agreement for letter of credit
as such Issuing Bank may reasonably specify to the Borrower for use in
connection with such requested Letter of Credit (a "Letter of Credit
Agreement"). If the requested form of such Letter of Credit is acceptable to
such Issuing Bank in its sole discretion, unless such Issuing Bank has received
notice from the Administrative Agent on or before the Business Day immediately
preceding the date such Issuing Bank is to issue the requested Letter of Credit
directing such Issuing Bank not to issue the Letter of Credit because such
issuance is not then permitted hereunder because of the limitations set forth in
Section 2.03 or that one or more conditions specified in Article III are not
then satisfied, then, subject to the terms and conditions hereof, such Issuing
Bank shall, on the requested date, issue such Letter of Credit in accordance
with such Issuing Bank's usual and customary business practices. In the event
and to the extent that the provisions of any Letter of Credit Agreement shall
conflict with this Agreement, the provisions of this Agreement shall govern.
(b) Participations. By the issuance of a Letter of Credit (or
an amendment to a Letter of Credit increasing the amount thereof) and without
any further action on the part of the applicable Issuing Bank or the Lenders,
such Issuing Bank hereby grants to each Lender, and each Lender hereby acquires
from such Issuing Bank, a participation in such Letter of Credit equal to such
Lender's Pro Rata Share of the aggregate amount available to be drawn under such
Letter of Credit. The Borrower hereby agrees to each such participation. In
consideration and in furtherance of the foregoing, each Lender hereby absolutely
and unconditionally agrees to pay to the Administrative Agent, for the account
of such Issuing Bank, such Lender's Pro Rata Share of each drawing made under a
Letter of Credit funded by such Issuing Bank and not reimbursed by the Borrower
on the date made, or of any reimbursement payment required to be refunded to the
Borrower for any reason. Each Lender acknowledges and agrees that its obligation
to acquire participations pursuant to this paragraph in respect of Letters of
Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including any amendment, renewal or extension of any
Letter of Credit or the occurrence and continuance of an Event of Default, or
event which with the giving of notice or lapse of time or both would be an Event
of Default, or reduction or termination of the Revolving Credit Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever.
(c) Drawing and Reimbursement. The payment by an Issuing Bank
of a draft drawn under any Letter of Credit shall constitute for all purposes of
this Agreement the making by any such Issuing Bank of an Advance, which shall be
a Base Rate Advance, in the amount of such draft. Upon written demand by such
Issuing Bank, with a copy of such demand to the
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Administrative Agent, each Lender shall pay to the Administrative Agent such
Lender's Pro Rata Share of such outstanding Advance, by making available for the
account of its Applicable Lending Office to the Administrative Agent for the
account of such Issuing Bank, by deposit to the Administrative Agent's Account,
in same day funds, an amount equal to the portion of the outstanding principal
amount of such Advance to be funded by such Lender. Promptly after receipt
thereof, the Administrative Agent shall transfer such funds to such Issuing
Bank. Each Lender agrees to fund its Pro Rata Share of an outstanding Advance on
(i) the Business Day on which demand therefor is made by such Issuing Bank,
provided that notice of such demand is given not later than 12:00 noon (New York
City time) on such Business Day, or (ii) the first Business Day next succeeding
such demand if notice of such demand is given after such time. If and to the
extent that any Lender shall not have so made the amount of such Advance
available to the Administrative Agent, such Lender agrees to pay to the
Administrative Agent forthwith on demand such amount together with interest
thereon, for each day from the date of demand by any such Issuing Bank until the
date such amount is paid to the Administrative Agent, at the Federal Funds Rate
for its account or the account of such Issuing Bank, as applicable. If such
Lender shall pay to the Administrative Agent such amount for the account of any
such Issuing Bank on any Business Day, such amount so paid in respect of
principal shall constitute an Advance made by such Lender on such Business Day
for purposes of this Agreement, and the outstanding principal amount of the
Advance made by such Issuing Bank shall be reduced by such amount on such
Business Day.
(d) Letter of Credit Reports. Promptly following the end of
each fiscal quarter, each Issuing Bank shall deliver (through the Administrative
Agent) to each Lender and the Borrower a report describing the aggregate Letters
of Credit outstanding at the end of such fiscal quarter. Upon the request of any
Lender from time to time, each Issuing Bank shall deliver to such Lender any
other information reasonably requested by such Lender with respect to each of
its respective Letters of Credit then outstanding.
(e) Failure to Make Advances. The failure of any Lender to
make the Advance to be made by it on the date specified in Section 2.03(c) shall
not relieve any other Lender of its obligation hereunder to make its Advance on
such date, but no Lender shall be responsible for the failure of any other
Lender to make the Advance to be made by such other Lender on such date.
Section 2.04 Fees. (a) Facility Fee. The Borrower agrees to pay each
Lender a facility fee on the aggregate amount of such Lender's Revolving Credit
Commitment (whether used or unused), from the date hereof until the Termination
Date, payable in arrears on the last day of each March, June, September and
December, during the term of such Lender's Revolving Credit Commitment,
commencing on December 31, 2002, and on the Termination Date, at a rate for each
day during such period equal to the Applicable Facility Fee for such day.
(b) Letter of Credit Fees (i) The Borrower shall pay to the
Administrative Agent for the account of each Lender a commission on such
Lender's Pro Rata Share of the average daily aggregate Available Amount of all
Letters of Credit outstanding from time to time at a rate per annum equal to the
Applicable Margin for Eurodollar Rate Advances in effect from time to time,
payable in arrears quarterly on the last day of each March, June, September and
December, commencing December 31, 2002, and on the Termination Date.
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(ii) The Borrower shall pay to each Issuing Bank, for
its own account, such commissions, issuance fees, fronting fees,
transfer fees and other fees and charges in connection with the
issuance or administration of each Letter of Credit as the Borrower and
such Issuing Bank shall agree.
(c) Agency Fees. The Borrower agrees to pay to the
Administrative Agent for its own account such fees as may from time to time be
agreed upon by the Borrower and the Administrative Agent.
Section 2.05 Termination or Reduction of the Commitments. The Borrower
shall have the right, upon at least three Business Days' notice (which such
notice shall be irrevocable) to the Administrative Agent, to terminate in whole
or reduce ratably in part, in each case permanently, the unused portions of the
respective Revolving Credit Commitments of the Lenders, provided that the
aggregate amount of the Revolving Credit Commitments of the Lenders shall not be
reduced to an amount which is less than the aggregate amount of the Advances and
Available Amount of the Letters of Credit then outstanding and provided further
that each partial reduction shall be in the aggregate amount of $10,000,000 or
an integral multiple of $1,000,000 in excess thereof.
Section 2.06 Repayment of Advances. (a) The Borrower shall repay to the
Administrative Agent (whether from the proceeds of Advances made pursuant to
Section 2.01 of this Agreement or otherwise) for the ratable account of the
Lenders on the first Business Day after each drawing under a Letter of Credit
the aggregate principal amount of the Advances resulting from such drawing. The
Borrower shall repay to each Lender on the Termination Date the aggregate
principal amount of the Advances owing to such Lender on such date.
(b) The obligations of the Borrower under this Agreement, any
Letter of Credit Agreement and any other agreement or instrument relating to any
Letter of Credit shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement, such Letter of Credit
Agreement and such other agreement or instrument under all circumstances,
including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of this Agreement,
any Note, any Letter of Credit Agreement, any Letter of Credit or any
other agreement or instrument relating thereto (all of the foregoing
being, collectively, the "L/C Related Documents");
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations of the Borrower in
respect of any L/C Related Document or any other amendment or waiver of
or any consent to departure from all or any of the L/C Related
Documents;
(iii) the existence of any claim, set-off, defense or other
right that the Borrower or any Subsidiary or Affiliate of the Borrower
may have at any time against any beneficiary or any transferee of a
Letter of Credit (or any Persons for which any such beneficiary or any
such transferee may be acting), any Issuing Bank, any Administrative
Agent, any Lender or any other Person, whether in connection with the
transactions contemplated by the L/C Related Documents or any unrelated
transaction;
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(iv) any statement or any other document presented under a
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(v) payment by any Issuing Bank under a Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of such Letter of Credit;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any guarantee, for all or any of the obligations of the
Borrower in respect of the L/C Related Documents;
(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing, including, without limitation,
any other circumstance that might otherwise constitute a defense
available to, or a discharge of, the Borrower or a guarantor; or
(viii) the existence of an Event of Default.
Section 2.07 Interest on Advances. (a) Scheduled Interest. The Borrower
shall pay interest on the unpaid principal amount of each Advance made by each
Lender from the date of such Advance until such principal amount shall be paid
in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is
a Base Rate Advance, a rate per annum equal at all times to the sum of
(x) the Base Rate in effect from time to time plus (y) the Applicable
Margin in effect from time to time, payable monthly in arrears on the
last day of each month during such periods and on the date such Base
Rate Advance shall be Converted or paid in full.
(ii) Eurodollar Rate Advances. During such periods as such
Advance is a Eurodollar Rate Advance, a rate per annum equal at all
times during each Interest Period for such Advance to the sum of (x)
the Eurodollar Rate for such Interest Period for such Advance plus (y)
the Applicable Margin in effect from time to time, payable in arrears
on the last day of such Interest Period and, if such Interest Period
has a duration of more than three months, on each day that occurs
during such Interest Period every three months from the first day of
such Interest Period and on the date such Eurodollar Rate Advance shall
be Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the
continuance of an Event of Default under Section 6.01(a), the Borrower shall pay
interest on (i) the unpaid principal amount of each Advance owing to each
Lender, payable in arrears on the dates referred to in clause (a)(i) or (a)(ii)
above, at a rate per annum equal at all times to 2% per annum above the rate per
annum required to be paid on such Advance pursuant to clause (a)(i) or (a)(ii)
above, and (ii) the amount of any interest, fee or other amount payable
hereunder that is not paid when due, from the date such amount shall be due
until such amount shall be paid in full, payable in arrears on the date such
amount shall be paid in full and on demand, at a rate per annum equal at all
times to 2% per annum above the rate per annum required to be paid on Base Rate
Advances pursuant to clause (a)(i) above.
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Section 2.08 Interest Rate Determination.
(a) The Administrative Agent shall determine each interest
rate applicable to the Loans hereunder and shall promptly notify the Borrower
and the Lenders of such rate in writing (or by telephone, promptly confirmed in
writing). Any such determination shall be conclusive and binding for all
purposes, absent manifest error.
(b) If, with respect to any Eurodollar Rate Advances, the
Majority Lenders notify the Administrative Agent that the Eurodollar Rate for
any Interest Period for such Advances will not adequately reflect the cost to
such Majority Lenders for making, funding or maintaining their respective
Eurodollar Rate Advances for such Interest Period, the Administrative Agent
shall forthwith so notify the Borrower and the Lenders, whereupon
(i) each Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a
Base Rate Advance, and
(ii) the obligation of the Lenders to make, or to Convert
Advances into, Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist.
(c) If the Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower and the Lenders and
such Advances will automatically, on the last day of the then existing Interest
Period therefor, Convert into Base Rate Advances.
(d) On the date on which the aggregate unpaid principal amount
of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by
payment or prepayment or otherwise, to less than $10,000,000 such Advances shall
automatically Convert into Base Rate Advances, and on and after such date the
right of the Borrower to Convert such Advances into Eurodollar Rate Advances
shall terminate.
(e) Upon the occurrence and during the continuance of any
Event of Default under Section 6.01(a), (i) each Eurodollar Rate Advance will
automatically, on the last day of the then existing Interest Period therefor,
Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make,
or to Convert Advances into, Eurodollar Rate Advances shall be suspended.
Section 2.09 Optional Conversion of Advances. The Borrower may on any
Business Day, upon prior written notice (or telephonic notice promptly confirmed
in writing) substantially in the form of Exhibit F attached hereto ("Notice of
Continuation/Conversion") given to the Administrative Agent not later than 11:00
A.M. (New York City time) on the third Business Day prior to the date of the
proposed Conversion and subject to the provisions of Sections 2.08, 2.12 and
2.13, Convert all Advances of one Type comprising the same Borrowing into
Advances of the other Type; provided, however, that any Conversion of Eurodollar
Rate Advances into Base Rate Advances shall be made only on the last day of an
Interest Period for such Eurodollar Rate Advances. Each such notice of a
Conversion shall, within the restrictions specified above,
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specify (i) the date of such Conversion, (ii) the Advances to be Converted, and
(iii) if such Conversion is into Eurodollar Rate Advances, the duration of the
Interest Period for each such Advance. Each notice of Conversion shall be
irrevocable and binding on the Borrower.
Section 2.10 Prepayments of Advances. (a) The Borrower shall have no
right to prepay any principal amount of any Advance other than as provided in
(b) below.
(b) The Borrower may (i) upon at least three days after the
date of Borrowing and upon notice given to the Administrative Agent not later
than 11:00 A.M. (New York City time) on the date of the proposed prepayment
(which date shall be a Business Day), stating the proposed date and aggregate
principal amount of the prepayment in the case of Base Rate Advances or (ii)
upon at least two Business Days' notice given to the Administrative Agent
stating the proposed date and aggregate principal amount of the prepayment in
the case of Eurodollar Rate Advances, and if such notice is given the Borrower
shall, prepay the outstanding principal amounts of the Advances comprising part
of the same Borrowing in whole or ratably in part, together with accrued
interest to the date of such prepayment on the principal amount prepaid and, in
the case of Eurodollar Rate Advances, any additional losses, costs or expenses,
if any, required to be paid by the Borrower pursuant to Section 8.04(b);
provided, however, that each partial prepayment shall be in an aggregate
principal amount of not less than $10,000,000 or an integral multiple of
$1,000,000 in excess thereof.
Section 2.11 Increased Costs and Increased Capital. (a) If, due to
either (i) the introduction of or any change in or in the interpretation of any
law or regulation or (ii) the compliance with any guideline or request from any
central bank or other governmental authority (whether or not having the force of
law), there shall be any increase in the cost to any Lender of agreeing to make
or making, funding or maintaining Eurodollar Rate Advances or of agreeing to
issue or of issuing or maintaining or participating in Letters of Credit, then
the Borrower shall from time to time, upon demand by such Lender (with a copy of
such demand to the Administrative Agent), pay to the Administrative Agent for
the account of such Lender additional amounts sufficient to compensate such
Lender for such increased cost; provided that, before making any such demand,
each Lender agrees to use its best efforts (consistent with its internal policy
and legal and regulatory restrictions) to designate a different Applicable
Lending Office if the making of such a designation would avoid the need for, or
reduce the amount of, such increased costs and would not be disadvantageous to
such Lender. A certificate as to the amount of such increased cost, submitted to
the Borrower and the Administrative Agent by such Lender, shall be conclusive
and binding for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender or any corporation controlling such Lender and that the amount of such
capital is increased by or based upon the existence of such Lender's commitment
to lend hereunder and other commitments of this type, then, upon demand by such
Lender (with a copy of such demand to the Administrative Agent), the Borrower
shall immediately pay to the Administrative Agent for the account of such
Lender, from time to time as specified by such Lender, additional amounts
sufficient to compensate such Lender or such corporation in the light of such
circumstances, to the extent that such Lender reasonably determines such
increase in
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capital to be allocable to the existence of such Lender's commitment to lend
hereunder. A certificate as to such amounts submitted to the Borrower and the
Administrative Agent by such Lender shall be conclusive and binding for all
purposes, absent manifest error.
(c) Within 20 days following the date of a demand by a Lender
pursuant to Section 2.11(a) or (b), as the case may be, such Lender and the
Borrower shall enter into negotiations in good faith with a view to agreeing to
an adjustment to the amounts payable by the Borrower sufficient to compensate
such Lender as contemplated in such Section. If, at the expiration of 45 days
from the giving of such demand, such Lender and the Borrower shall not have
agreed to any such adjustment, the Borrower shall within five days elect (and
shall notify such Lender and the Administrative Agent of such election) to
either:
(i) pay such Lender, from time to time commencing on the date
of such demand by such Lender and as specified by such Lender, the
additional amounts so demanded,
(ii) terminate in whole such Lender's Commitments on a date
specified in the notice sent by the Borrower, and such Lender's
Commitments shall terminate on such date, or
(iii) require that such Lender assign to the Borrower's
designated assignee or assignees in accordance with Section 8.07 all
Advances then owing to such Lender and all rights and obligations
provided that (A) each such assignment shall be either an assignment of
all of the rights and obligations of the assigning Lender under this
Agreement or an assignment of a portion of such rights and obligations
made concurrently with another such assignment or assignments which
together cover all of the rights and obligations of the assigning
Lender under this Agreement, (B) no Lender shall be obligated to make
any such assignment as a result of a demand by the Borrower pursuant to
this Section 2.11(c) unless and until such Lender shall have received
one or more payments from either the Borrower or one or more assignees
in an aggregate amount at least equal to the aggregate outstanding
principal amount of the Advances owing to such Lender, together with
accrued interest thereon to the date of payment of such principal
amount, all commitment fees and other fees and letter of credit
commissions payable to such Lender and all other amounts payable to
such Lender under this Agreement (including, but not limited to, any
increased costs or other additional amounts as so demanded (computed in
accordance with this Section 2.11), and any Taxes, incurred by such
Lender prior to the effective date of such assignment and amounts
payable under Section 8.04(a)), (C) each such assignment shall be made
pursuant to an Assignment and Acceptance and (D) in connection with
each such assignment to any Person that immediately prior to such
assignment was not a Lender, the Borrower shall pay to the
Administrative Agent the processing and recordation fee of $3500
referred to in Section 8.07;
provided, however, that a termination under clause (ii) above shall not be
effective, and an assignment under clause (iii) above shall not be effective,
if, after giving effect thereto, the aggregate amount of the Revolving Credit
Commitments so terminated and assigned during the term of this Agreement would
exceed 20% of the amount of the Revolving Credit Commitments
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as of the date hereof or such terminations and assignments would have become
effective for more than three Lenders during the term of this Agreement, and
provided further that no such termination may be made, and no such assignment
may be required, if an Event of Default, or event which with the giving of
notice or lapse of time or both would be an Event of Default, has occurred and
is continuing either on the date the Borrower notifies such Lender and the
Administrative Agent of such termination or requested assignment, or on the date
on which such termination or assignment is scheduled to become effective. Upon
termination of a Lender's Commitments under Section 2.11(c)(ii), the Borrower
shall on the date such termination becomes effective pay, prepay or cause to be
prepaid the aggregate principal amount of the Advances owing to such Lender,
together with accrued interest thereon to the date of payment of such principal
amount, all commitment fees and other fees and letter of credit commissions
payable to such Lender and all other amounts payable to such Lender under this
Agreement (including, but not limited to, any increased costs or other
additional amounts as so demanded (computed in accordance with this Section
2.11), and any Taxes, incurred by such Lender prior to the effective date of
such assignment and amounts payable under Section 8.04(a)). Upon such payments
and prepayments, the obligations of such Lender hereunder, by the provisions
hereof, shall be released and discharged. Such Lender's rights under Sections
2.11 and 8.04(b), and its obligations under Section 7.05, shall survive such
release and discharge as to matters occurring prior to the date of such
termination.
Section 2.12 Illegality. Notwithstanding any other provision of this
Agreement, if any Lender shall notify the Administrative Agent that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for any Lender or its Eurodollar Lending
Office to perform its obligations hereunder to make Eurodollar Rate Advances or
to fund or maintain Eurodollar Rate Advances hereunder, (i) the obligation of
the Lenders to make, or to Convert Advances into, Eurodollar Rate Advances shall
be suspended until the Administrative Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer exist and (ii)
the Borrower shall forthwith prepay in full all Eurodollar Rate Advances of all
Lenders then outstanding, together with interest accrued thereon, unless the
Borrower, within five Business Days of notice from the Administrative Agent,
Converts all Eurodollar Rate Advances of all Lenders then outstanding into Base
Rate Advances in accordance with Section 2.09.
Section 2.13 Payments and Computations. (a) The Borrower shall make each
payment hereunder not later than 11:00 A.M. (New York City time) on the day when
due in U.S. dollars to the Administrative Agent at the Administrative Agent's
office located at 303 Peachtree Street, Atlanta, GA 30308, or such other
location as to which the Administrative Agent shall have given prior written
notice to the Borrower and the other Lenders in same day funds. The
Administrative Agent will promptly thereafter cause to be distributed like funds
relating to the payment of principal, interest, fees or letter of credit
commissions ratably (other than amounts payable pursuant to Section 2.04(b)(ii)
or (c), 2.11, 2.14 or 8.04(b)) to the appropriate Lenders for the account of
their respective Applicable Lending Offices, and like funds relating to the
payment of any other amount payable to any Lender to such Lender for the account
of its Applicable Lending Office, in each case to be applied in accordance with
the terms of this Agreement. Upon any Assuming Lender becoming a Lender
hereunder as a result of a Commitment Increase pursuant to Section 2.18 or an
extension of the Termination Date pursuant
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to Section 2.17, and upon the Administrative Agent's receipt of such Lender's
Assumption Agreement and recording of the information contained therein in the
Register, from and after the applicable Increase Date or Extension Date, as the
case may be, the Administrative Agent shall make all payments hereunder and
under any Notes issued in connection therewith in respect of the interest
assumed thereby to the Assuming Lender. Upon its acceptance of an Assignment and
Acceptance and recording of the information contained therein in the Register
pursuant to Section 8.07(c), from and after the date of such Assignment and
Acceptance, the Administrative Agent shall make all payments hereunder in
respect of the interest assigned thereby to the Lender assignee thereunder, and
the parties to such Assignment and Acceptance shall make all appropriate
adjustments in such payments for periods prior to such effective date directly
between themselves.
(b) The Borrower hereby authorizes each Lender, if and to the
extent payment owed to such Lender is not made when due hereunder, to charge
from time to time against any or all of the Borrower's accounts with such Lender
any amount so due.
(c) All computations of interest based on the Base Rate shall
be made by the Administrative Agent on the basis of a year of 365 or 366 days,
as the case may be, and all computations of interest based on the Eurodollar
Rate or the Federal Funds Rate and of fees and letter of credit commissions
shall be made by the Administrative Agent on the basis of a year of 360 days, in
each case for the actual number of days (including the first day but excluding
the last day) occurring in the period for which such interest, fee or commission
is payable. Each determination by the Administrative Agent of an interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
(d) Whenever any payment hereunder shall be stated to be due
on a day other than a Business Day, such payment shall be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest, fees or letter of credit
commissions, as the case may be; provided, however, if such extension would
cause payment of interest on or principal of Eurodollar Rate Advances to be made
in the next following calendar month, such payment shall be made on the next
preceding Business Day.
(e) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to any Lender
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each such Lender on
such due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the
Administrative Agent, each such Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate.
Section 2.14 Taxes. (a) Any and all payments by the Borrower hereunder
or under the Notes shall be made, in accordance with Section 2.13, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and
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all liabilities with respect thereto, excluding, in the case of each Lender and
the Administrative Agent, taxes imposed on its income, and franchise taxes
imposed on it in lieu of income taxes, by the jurisdiction under the laws of
which such Lender or the Administrative Agent (as the case may be) is organized
or any political subdivision thereof and, in the case of each Lender, taxes
imposed on its income and franchise taxes imposed on it, by the jurisdiction of
such Lender's Applicable Lending Office or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "Taxes"). If the Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable by
such party hereunder or under any other Loan Document to any Lender or the
Administrative Agent, (i) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 2.14) such Lender or the
Administrative Agent (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law.
(b) In addition, each of the Borrower agrees to pay any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies that arise from any payment made hereunder or
under the other Loan Documents or from the execution, delivery or registration
of, or otherwise with respect to, this Agreement or the other Loan Documents
(hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender and the
Administrative Agent for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed by any jurisdiction on
amounts payable under this Section 2.14) paid by such Lender or the
Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
This indemnification shall be made within 30 days from the date such Lender or
the Administrative Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes by
the Borrower, the Borrower will furnish to the Administrative Agent, at its
address referred to in Section 8.02, the original or a certified copy of a
receipt evidencing payment thereof. In the case of any payment hereunder or
under the other Loan Documents by or on behalf of the Borrower through an
account or branch outside the United States or on behalf of the Borrower by a
payor that is not a United States person, if the Borrower determines that no
Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause
such payor to furnish, to the Administrative Agent, at such address, a
certificate from each appropriate taxing authority, or an opinion of counsel
acceptable to the Administrative Agent, in either case stating that such payment
is exempt from or not subject to Taxes. For purposes of this subsection (d), the
terms "United States" and "United States person" shall have the meaning
specified in Section 7701 of the Code.
(e) Each Lender organized under the laws of a jurisdiction
outside the United States shall, on or prior to the date of its execution and
delivery of this Agreement in the case of each Bank, and each such Lender that
is not a party hereto on the date hereof shall on or prior to the date on which
such Lender becomes a Lender pursuant to Sections 2.17, 2.18 or 8.07 (as the
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case may be), and from time to time thereafter if requested in writing by the
Borrower or the Administrative Agent (but only so long thereafter as such Lender
remains lawfully able to do so), provide the Administrative Agent and the
Borrower with Internal Revenue Service form W-8ECI or W-8BEN, as appropriate, or
any successor or other form prescribed by the Internal Revenue Service,
certifying that such Lender is exempt from or entitled to a reduced rate of
United States withholding tax on payments of interest pursuant to this Agreement
or the other Loan Documents. If the form provided by a Lender at the time such
Lender first becomes a party to this Agreement indicates a United States
interest withholding tax rate in excess of zero, in the case of each Bank, or in
excess of the rate applicable to the Lender assignor on the date of the
Assignment and Acceptance pursuant to which it became a Lender or as of the date
such party becomes a Lender pursuant to Section 2.17 or 2.18, in the case of
each other Lender, withholding tax at such rate shall be considered excluded
from Taxes as defined in Section 2.14(a). If any form or document referred to in
this subsection (e) requires the disclosure of information, other than
information necessary to compute the tax payable and information required on the
date hereof by Internal Revenue service form W-8ECI or W-8BEN, that the Lender
reasonably considers to be confidential, the Lender shall give notice thereof to
the Borrower and shall not be obligated to include in such form or document such
confidential information.
(f) For any period with respect to which a Lender has failed
to provide the Borrower with the appropriate form described in subsection (e)
(other than if such failure is due to a change in law occurring after the date
on which a form originally was required to be provided or if such form otherwise
is not required under the first sentence of subsection (e) above), such Lender
shall not be entitled to indemnification under subsection (a) with respect to
Taxes imposed by the United States; provided, however, that should a Lender
become subject to Taxes because of its failure to deliver a form required
hereunder, the Borrower shall take such steps as such Lender shall reasonably
request to assist such Lender to recover such Taxes.
(g) Any Lender claiming any additional amounts payable
pursuant to this Section 2.14 shall use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Eurodollar Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender.
(h) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in this Section 2.14 shall survive the payment in full of principal
and interest hereunder and under the other Loan Documents.
Section 2.15 Sharing of Payments, Etc. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Advances owing to it (other than
pursuant to Section 2.11, 2.14 or 8.04(b)) in excess of its ratable share of
payments on account of the Advances obtained by all the Lenders, such Lender
shall forthwith purchase from the other Lenders such participations in the
Advances made by them as shall be necessary to cause such purchasing Lender to
share the excess payment ratably with each of them; provided, however, that if
all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be
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rescinded and such Lender shall repay to the purchasing Lender the purchase
price to the extent of such recovery together with an amount equal to such
Lender's ratable share (according to the proportion of (i) the amount of such
Lender's required repayment to (ii) the total amount so recovered from the
purchasing Lender) of any interest or other amount paid or payable by the
purchasing Lender in respect of the total amount so recovered. The Borrower
agrees that any Lender so purchasing a participation from another Lender
pursuant to this Section 2.15 may, to the fullest extent permitted by law,
exercise all its rights of payment (including the right of set-off) with respect
to such participation as fully as if such Lender were the direct creditor of the
Borrower in the amount of such participation.
Section 2.16 Use of Proceeds. The proceeds of the Advances shall be
available (and the Borrower agrees that it shall use such proceeds) for general
corporate purposes, including commercial paper backstop.
Section 2.17 Extension of Termination Date. (a) At least 45 days but
not more than 60 days prior to any Anniversary Date, the Borrower, by written
notice to the Administrative Agent, may request an extension of the Termination
Date in effect at such time by one calendar year from the then scheduled
Termination Date. The Administrative Agent shall promptly notify each Lender of
such request, and each Lender shall in turn, in its sole discretion, at least 20
days but not more than 30 days prior to the applicable Anniversary Date, notify
the Borrower and the Administrative Agent in writing as to whether such Lender
will consent to such extension. If any Lender shall fail to notify the
Administrative Agent and the Borrower in writing of its consent to any such
request for extension of the Termination Date by the 20th day prior to the
applicable Anniversary Date, such Lender shall be deemed to be a Non-Consenting
Lender with respect to such request. The Administrative Agent shall notify the
Borrower not later than the 20th day prior to such Anniversary Date of the
decision of the Lenders regarding the Borrower's request for an extension of the
Termination Date.
(b) If all of the Lenders consent in writing to any such
request in accordance with subsection (a) of this Section 2.17, the Termination
Date shall, effective as at such next Anniversary Date (the "Extension Date"),
be extended for one calendar year from the then scheduled Termination Date;
provided that on each Extension Date, no Event of Default, or event that with
the giving of notice or passage of time or both would constitute an Event of
Default, shall have occurred and be continuing, or shall occur as a consequence
thereof. If Lenders holding at least a majority in interest of the aggregate
Revolving Credit Commitments at such time consent in writing to any such request
in accordance with subsection (a) of this Section 2.17, the Termination Date in
effect at such time shall, effective as at the applicable Extension Date, be
extended as to those Lenders that so have consented (each a "Consenting Lender")
but shall not be extended as to any other Lender (each a "Non-Consenting
Lender"). To the extent that the Termination Date is not extended as to any
Lender pursuant to this Section 2.17 and the Commitments of such Lender are not
assumed in accordance with subsection (c) of this Section 2.17 on or prior to
the applicable Extension Date, the Commitments of such Non-Consenting Lender
shall automatically terminate in whole on such unextended Termination Date
without any further notice or other action by the Borrower, such Lender or any
other Person; provided that such Non-Consenting Lender's rights under Sections
2.11, 2.14, 8.04 and 8.09, and its obligations under Section 7.05, shall survive
the Termination Date for such Lender as to matters occurring prior to such date.
It is understood and agreed that no Lender shall have any obligation whatsoever
to agree to any request made by the Borrower for any requested extension of the
Termination Date.
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(c) If Lenders holding at least 51% of the aggregate Revolving
Credit Commitments at any time consent to any such request pursuant to
subsection (a) of this Section 2.17, the Borrower may arrange for one or more
Consenting Lenders or, to the extent that the Consenting Lenders decline to
assume any Non-Consenting Lender's Revolving Credit Commitment, other Eligible
Assignees (each such Eligible Assignee that accepts an offer to assume a
Non-Consenting Lender's Revolving Credit Commitment as of the applicable
Extension Date and each Eligible Assignee that accepts an offer to participate
in a requested Commitment Increase in accordance with Section 2.18(c) being an
"Assuming Lender") to assume, effective as of the Extension Date, any
Non-Consenting Lender's Revolving Credit Commitment and all of the obligations
of such Non-Consenting Lender under this Agreement thereafter arising, without
recourse to or warranty by, or expense to, such Non-Consenting Lender; provided,
however, that if the Borrower makes an offer to any Consenting Lender to assume
any Non-Consenting Lender's Revolving Credit Commitment, it shall make such
offer to all Consenting Lenders on a pro rata basis based on their respective
Revolving Credit Commitments and such Non-Consenting Lender's Revolving Credit
Commitment shall be allocated among those Consenting Lenders which accept such
offer on a pro rata basis based on their respective Revolving Credit
Commitments, provided further however, that the amount of the Revolving Credit
Commitment of any such Assuming Lender as a result of such substitution shall in
no event be less than $10,000,000 unless the amount of the Revolving Credit
Commitment of such Non-Consenting Lender is less than $10,000,000, in which case
such Assuming Lender shall assume all of such lesser amount; and provided
further that:
(i) any such Consenting Lender or Assuming Lender shall have
paid to such Non-Consenting Lender (A) the aggregate principal amount
of, and any interest accrued and unpaid to the effective date of the
assignment on, the outstanding Advances, if any, of such Non-Consenting
Lender plus (B) any accrued but unpaid facility fees owing to such
Non-Consenting Lender as of the effective date of such assignment;
(ii) all additional costs reimbursements, expense
reimbursements and indemnities payable to such Non-Consenting Lender,
and all other accrued and unpaid amounts owing to such Non-Consenting
Lender hereunder, as of the effective date of such assignment shall
have been paid to such Non-Consenting Lender; and
(iii) with respect to any such Assuming Lender, the applicable
processing and recordation fee required under Section 8.07(a) for such
assignment shall have been paid;
provided further that such Non-Consenting Lender's rights under Sections 2.11,
2.14, 8.04 and 8.09, and its obligations under Section 7.05, shall survive such
substitution as to matters occurring prior to the date of substitution. At least
three Business Days prior to any Extension Date, (A) each such Assuming Lender,
if any, shall have delivered to the Borrower and the Administrative Agent an
assumption agreement, in form and substance satisfactory to the Borrower and the
Administrative Agent (an "Assumption Agreement"), duly executed by such Assuming
Lender, such Non-Consenting Lender, the Borrower and the Administrative Agent,
(B) any such Consenting Lender shall have delivered confirmation in writing
satisfactory to the
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Borrower and the Administrative Agent as to the increase in the amount of its
Revolving Credit Commitment, (C) each Non-Consenting Lender being replaced
pursuant to this Section 2.17 shall have delivered to the Administrative Agent
any Note or Notes held by such Non-Consenting Lender and (D) the Borrower shall
have delivered to the Administrative Agent a new Note payable to the order of
each Assuming Lender in a principal amount equal to the amount of Revolving
Credit Commitment assumed by such Assuming Lender. Upon the payment or
prepayment of all amounts referred to in clauses (i), (ii) and (iii) of the
immediately preceding sentence, each such Consenting Lender or Assuming Lender,
as of the Extension Date, will be substituted for such Non-Consenting Lender
under this Agreement and shall be a Lender for all purposes of this Agreement,
without any further acknowledgment by or the consent of the other Lenders, and
the obligations of each such Non-Consenting Lender hereunder shall, by the
provisions hereof, be released and discharged.
(d) If all of the Lenders (after giving effect to any
assignments pursuant to subsection (b) of this Section 2.17) consent in writing
to a requested extension (whether by execution or delivery of an Assumption
Agreement or otherwise) not later than one Business Day prior to such Extension
Date, the Administrative Agent shall so notify the Borrower, and, so long as no
Event of Default, or event that with the giving of notice or passage of time or
both would constitute an Event of Default, shall have occurred and be continuing
as of such Extension Date, or shall occur as a consequence thereof, the
Termination Date then in effect shall be extended for the additional one year
period described in subsection (a) of this Section 2.17, and all references in
this Agreement and in the other Loan Documents, if any, to the "Termination
Date" shall, with respect to each Consenting Lender and each Assuming Lender for
such Extension Date, refer to the Termination Date as so extended. Promptly
following each Extension Date, the Administrative Agent shall notify the Lenders
(including, without limitation, each Assuming Lender) of the extension of the
scheduled Termination Date in effect immediately prior thereto and shall
thereupon record in the Register the relevant information with respect to each
such Consenting Lender and each such Assuming Lender.
Section 2.18 Increase in the Aggregate Commitments. (a) The Borrower
may not more than once in any calendar year prior to the Termination Date and
provided that the Borrower has not elected to reduce the Commitments during such
calendar year pursuant to Section 2.05, by notice to the Administrative Agent,
request that the aggregate amount of the Commitments be increased by an amount
of $50,000,000 or an integral multiple of $5,000,000 in excess thereof (each a
"Commitment Increase") to be effective as of a date that is at least 90 days
prior to the scheduled Termination Date then in effect (the "Increase Date") as
specified in the related notice to the Administrative Agent; provided, however,
that (i) in no event shall the aggregate amount of the Commitments at any time
exceed $250,000,000 and (ii) no Event of Default, or event that with the giving
of notice or passage of time or both would constitute an Event of Default, shall
have occurred and be continuing as of the date of such request or as of the
applicable Increase Date, or shall occur as a result of such Commitment
Increase.
(b) The Administrative Agent shall promptly notify the Lenders
of a request by the Borrower for a Commitment Increase, which notice shall
include (i) the proposed amount of such requested Commitment Increase, (ii) the
proposed Increase Date and (iii) the date by which Lenders wishing to
participate in the Commitment Increase must commit to an increase in the amount
of their respective Commitments (the
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"Commitment Date"). Each Lender that is willing to participate in such requested
Commitment Increase (each an "Increasing Lender") shall give written notice to
the Administrative Agent on or prior to the Commitment Date of the amount by
which it is willing to increase its Commitment. If the Lenders notify the
Administrative Agent that they are willing to increase the amount of their
respective Commitments by an aggregate amount that exceeds the amount of the
requested Commitment Increase, the requested Commitment Increase shall be
allocated among the Lenders willing to participate therein based on a ratio of
each existing Lender's proposed Commitment increase, if any, to the aggregate of
all of the existing Lenders' proposed Commitment increases.
(c) Promptly following each Commitment Date, the
Administrative Agent shall notify the Borrower as to the amount, if any, by
which the Lenders are willing to participate in the requested Commitment
Increase. If the aggregate amount by which the Lenders are willing to
participate in any requested Commitment Increase on any such Commitment Date is
less than the requested Commitment Increase, then the Borrower may extend offers
to one or more Eligible Assignees to participate in any portion of the requested
Commitment Increase that has not been committed to by the Lenders as of the
applicable Commitment Date.
(d) On each Increase Date, each Eligible Assignee that accepts
an offer to participate in a requested Commitment Increase in accordance with
Section 2.18(c) as an Assuming Lender shall become a Lender party to this
Agreement as of such Increase Date and the Commitment of each Increasing Lender
for such requested Commitment Increase shall be so increased by such amount (or
by the amount allocated to such Lender pursuant to the last sentence of Section
2.18(b)) as of such Increase Date; provided, however, that the Administrative
Agent shall have received on or before such Increase Date the following, each
dated such date:
(i) (A) certified copies of an Authorized Financial Officer of
the Borrower, approving the Commitment Increase and the corresponding
modifications to this Agreement and (B) an opinion of counsel for the
Borrower (which may be in-house counsel), in substantially the form of
Exhibit E-1 hereto;
(ii) an Assumption Agreement from each Assuming Lender, if
any, in form and substance satisfactory to the Borrower and the
Administrative Agent, duly executed by such Eligible Assignee, the
Administrative Agent and the Borrower; and
(iii) confirmation from each Increasing Lender of the increase
in the amount of its Commitment in a writing satisfactory to the
Borrower and the Administrative Agent.
On each Increase Date, upon fulfillment of the conditions set forth in the
immediately preceding sentence of this Section 2.18(d), the Administrative Agent
shall notify the Lenders (including, without limitation, each Assuming Lender)
and the Borrower, on or before 1:00 P.M. (New York City time), by facsimile, of
the occurrence of the Commitment Increase to be effected on such Increase Date
and shall record in the Register the relevant information with respect to each
Increasing Lender and each Assuming Lender on such date.
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ARTICLE III. CONDITIONS OF LENDING
Section 3.01 Conditions Precedent to Initial Advances. Section 2.01 of
this Agreement shall become effective on and as of the first date (the
"Effective Date") on which the following conditions precedent have been
satisfied:
(a) the Administrative Agent shall have received on or before
the day of such initial Borrowing the following, each dated such day, in form
and substance satisfactory to the Administrative Agent and (except for the
Notes) in sufficient copies for each Lender:
(i) The Notes to the order of the Lenders, respectively;
(ii) Certified copies of the resolutions of the Board of
Directors of the Borrower duly authorizing the Borrower to execute and
deliver, and perform its obligations under, this Agreement and the
other Loan Documents and to make Borrowings or guaranty Obligations, as
the case may be, and of all documents evidencing other necessary
corporate action and governmental approvals, if any, with respect to
this Agreement and the other Loan Documents;
(iii) A certificate of the Secretary or an Assistant Secretary
of the Borrower certifying the names and true signatures of the
officers of the Borrower authorized to sign this Agreement, the other
Loan Documents and the other documents to be delivered hereunder;
(iv) certified copies of the articles or certificate of
incorporation of Borrower, together with certificates of good standing
or existence, as may be available from the Secretary of State of the
jurisdiction of organization of Borrower;
(v) A favorable opinion of Marcia E. Doane, Vice President and
General Counsel for the Borrower, substantially in the form of Exhibit
E-1 hereto and as to such other matters as any Lender through the
Administrative Agent may reasonably request; and
(vi) A favorable opinion of Sidley Austin Brown & Wood LLP,
counsel for the Borrower, substantially in the form of Exhibit E-2
hereto and as to such other matters as any Lender through the
Administrative Agent may reasonably request.
(b) the Borrower shall have paid all accrued fees and expenses
of the Administrative Agent and the Arranger (including the accrued fees and
expenses of counsel to Administrative Agent and the Arranger then due and
payable); and
(c) the termination of the commitments of the lenders and the
payment in full of all Debt outstanding under the Revolving Credit Agreement
dated as of December 17, 1997
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among the Borrower, the lenders parties thereto, The First National Bank of
Chicago (now known as Bank One, NA), as documentation agent, The Chase Manhattan
Bank (now know as JPMorgan Chase Bank), as co-agent, CPC International Inc., as
interim Guarantor, and Citibank, N.A, as administrative agent. By execution of
this Agreement, each of the Lenders that is a lender under the credit agreement
referred to above hereby waives any requirement set forth in such credit
agreement of prior notice to the termination of their commitments thereunder.
Section 3.02 Conditions Precedent to Each Borrowing, Each Letter of
Credit, Each Extension Date and Each Commitment Increase. The obligation of each
Lender to make an Advance on the occasion of each Borrowing (including the
initial Borrowing), the obligation of each Issuing Bank to issue a Letter of
Credit, the effectiveness of any Extension Date and each Commitment Increase
shall be subject to the further conditions precedent that on the date of such
Borrowing, issuance, extension or increase (a) the following statements shall be
true (and the Administrative Agent shall have received for the account of such
Lender a certificate signed by an Authorized Financial Officer of the Borrower,
dated the date of such Borrowing, issuance, extension or increase, stating
that):
(i) The representations and warranties contained in Article IV
(other than, in the case of a Borrowing or the issuance of a Letter of
Credit, the representations and warranties contained in Section
4.01(e)(ii) or Section 4.01(f)(i)) are correct on and as of the date of
such Borrowing, issuance, extension or increase, before and after
giving effect thereto and to the application of the proceeds therefrom,
as though made on and as of such date, and
(ii) No event has occurred and is continuing, or would result
from such Borrowing, issuance, extension or increase or from the
application of the proceeds therefrom, which constitutes an Event of
Default or would constitute an Event of Default but for the requirement
that notice be given or time elapse or both;
and (b) the Administrative Agent shall have received such other approvals,
opinions or documents as any Lender through the Administrative Agent may
reasonably request.
Section 3.03 Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Administrative Agent responsible for the transactions contemplated by
this Agreement shall have received notice from such Lender prior to the date
that the Borrower, by notice to the Lenders, designates as the proposed
Effective Date, specifying its objection thereto. The Administrative Agent shall
promptly notify the Lenders of the occurrence of the Effective Date.
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ARTICLE IV. REPRESENTATIONS AND WARRANTIES
Section 4.01 Representations and Warranties of the Borrower. The
Borrower represents and warrants as follows:
(a) The Borrower and each of its Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(b) The execution, delivery and performance by the Borrower of
this Agreement and the other Loan Documents, and the consummation of the
transactions contemplated hereby, are within the Borrower's corporate powers,
have been duly authorized by all necessary corporate action, and do not
contravene (i) the Borrower's charter or by-laws or (ii) any law or contractual
restriction binding on or affecting the Borrower.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by the Borrower of this
Agreement or the other Loan Documents.
(d) This Agreement is, and each of the other Loan Documents
when delivered hereunder will be, the legal, valid and binding obligations of
the Borrower enforceable against the Borrower in accordance with their
respective terms.
(e) (i) The Consolidated balance sheet of the Borrower and its
Subsidiaries as at December 31, 2001 and the related Consolidated statements of
income and retained earnings of the Borrower and its Subsidiaries for the fiscal
year then ended, and the Consolidated balance sheet of the Borrower and its
Subsidiaries as at June 30, 2002 and the related Consolidated statements of
income and retained earnings of the Borrower and its Subsidiaries for the six
months then ended, fairly present, subject, in the case of said balance sheet as
at June 30, 2002 and the related Consolidated statements of income and retained
earnings of the Borrower and its Subsidiaries for the six months then ended, to
year end audit adjustments, the financial condition of the Borrower and its
Subsidiaries as at such dates and the results of the operations of the Borrower
and its Subsidiaries for the periods ended on such dates, all in accordance with
generally accepted accounting principles consistently applied. The Borrower has
previously delivered to the Administrative Agent (who will send a copy to each
Lender) copies of the Borrower's report on Form 10-K or Form 10K/A, as
appropriate, for the fiscal year ended December 31, 2001 and the Borrower's
report on Form 10-Q for the fiscal quarter ended June 30, 2002.
(ii) Since June 30, 2002 no event or condition has occurred
that has had, or is reasonably likely to have, a material adverse
effect on the business, conditions (financial or otherwise),
operations, performance or properties of the Borrower or the Borrower
and its Subsidiaries taken as a whole except as publicly disclosed
prior to this Agreement.
(f) (i) Except as publicly disclosed in the Borrower's most
recent annual report on Form 10-K/A as filed with the United States Securities
and Exchange Commission, there is no pending or threatened action or proceeding
affecting the Borrower or any of its Subsidiaries before any court, governmental
agency or arbitrator which is reasonably likely to have a Material Adverse
Effect; and
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(ii) there is no pending or threatened action or proceeding
affecting the Borrower or any of its Subsidiaries before any court, governmental
agency or arbitrator which purports to affect the legality, validity, binding
effect or enforceability of this Agreement or any other Loan Document;
(g) No Termination Event has occurred or, to the knowledge of
the Borrower, is reasonably expected to occur with respect to any Plan that has
resulted or, to the knowledge of the Borrower, is reasonably likely to result in
a liability of the Borrower that exceeds $5,000,000.
(h) Neither the Borrower nor any ERISA Affiliate of the
Borrower has incurred or, to the knowledge of the Borrower, is reasonably
expected to incur any Withdrawal Liability exceeding $5,000,000 to any
Multiemployer Plan.
(i) Neither the Borrower nor any ERISA Affiliate of the
Borrower has been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or has been terminated, within the
meaning of Title IV of ERISA, and, to the knowledge of the Borrower, no
Multiemployer Plan is reasonably expected to be in reorganization or to be
terminated, within the meaning of Title IV of ERISA.
(j) No single lien, security interest or other charge or
encumbrance (including liens or retained security titles of conditional vendors)
of any nature whatsoever on any properties of the Borrower or any of its
Subsidiaries (a "Lien") as of the date hereof secured any Debt in excess of
$25,000,000 and that the aggregate of such Liens did not secure any Debt in
excess of $100,000,000.
(k) Following application of the proceeds of each Advance, not
more than 25 percent of the value of the assets (either of the Borrower only or
of the Borrower and its Subsidiaries on a consolidated basis) which are subject
to the provisions of Sections 5.02(a) or 5.02(e) or subject to any restriction
contained in any agreement or instrument between the Borrower and any Lender or
any Affiliate of any Lender relating to Debt of the Borrower and its
Subsidiaries which is outstanding in a principal amount of at least $25,000,000
will be Margin Stock.
(l) Neither the Borrower nor any of its Subsidiaries is an
"investment company," or an "affiliated person" of, or a "promoter" or
"Principal underwriter" for, an "investment company," as such terms are defined
in the Investment Company Act of 1940, as amended.
(m) Except as publicly disclosed prior to the date of this
Agreement, the operations and properties of the Borrower and each of its
Subsidiaries do not violate any Environmental Laws in a manner that will cause a
Material Adverse Effect.
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ARTICLE V. COVENANTS
Section 5.01 Affirmative Covenants. So long as any Advance shall remain
unpaid or any Lender shall have any Commitment hereunder or any Letter of Credit
shall be outstanding, the Borrower, unless the Majority Lenders shall otherwise
consent in writing, will:
(a) Compliance with Laws, Payment of Taxes, Etc. Comply, and
cause each of its Subsidiaries to comply, in all material respects with all
applicable laws, rules, regulations and orders, such compliance to include,
without limitation, compliance with ERISA, and paying before the same become
delinquent (i) all taxes, assessments and governmental charges imposed upon it
or upon its property and (ii) all lawful claims that, if unpaid, might by law
become a Lien upon its property except to the extent otherwise permitted under
Section 5.02(a) or to the extent contested in good faith, and to comply, and
cause each of its Subsidiaries to comply, with all applicable Environmental Laws
in a manner so that the violation of such laws does not have a Material Adverse
Effect on such Person.
(b) Maintenance of Books and Records. Maintain proper
Consolidated books of record and account, in which full and correct entries
shall be made of all financial transactions and the Consolidated assets and
business of such Person and its Subsidiaries in accordance with generally
accepted accounting principles consistently applied.
(c) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each of its Subsidiaries to preserve and maintain, its
corporate existence, rights (charter and statutory) and franchises, except to
the extent otherwise permitted under Section 5.02(e) provided, however, that
each such Person and its Subsidiaries may consummate any merger or consolidation
permitted under Section 5.02(b) and may wind up, liquidate or dissolve any of
their respective inactive Subsidiaries, and provided further, that neither such
Person nor any of its Subsidiaries shall be required to preserve any right or
franchise if the Board of Directors of such Person or such Subsidiary shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of such Person or such Subsidiary, as the case may be, and that the
loss thereof is not disadvantageous in any material respect to such Person, such
Subsidiary or the Lenders.
(d) Reporting Requirements. Furnish to the Administrative
Agent (who promptly will send a copy to each Lender):
(i) (A) As soon as available and in any event within
45 days after the end of each of the first three quarters of
each fiscal year of the Borrower, the Consolidated balance
sheet of the Borrower and its Subsidiaries as of the end of
such quarter and the Consolidated statement of income and
retained earnings of the Borrower and its Subsidiaries for the
period commencing at the end of the previous fiscal year and
ending with the end of such quarter, certified in its
customary manner by an Authorized Financial Officer, and
(B) At the time of delivery of the financial
statements referred to in clause (A) above, a certificate
signed by an Authorized Financial Officer of the Borrower (i)
stating that no event has occurred and is continuing which
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constitutes an Event of Default or would constitute an Event
of Default but for the requirement that notice be given or
time elapse or both and (ii) setting forth in reasonable
detail calculations demonstrating compliance with Section
5.02(f) and (g); and
(ii) (A) As soon as available and in any event within
90 days after the end of each fiscal year of the Borrower, a
copy of the annual report for such year for the Borrower and
its Subsidiaries, containing financial statements for such
year certified in a manner acceptable to the Majority Lenders
by KPMG LLP or other independent public accountants acceptable
to the Majority Lenders, such acceptance not to be
unreasonably withheld, and
(B) At the time of delivery of the financial
statements referred to in clause (A) above, a certificate
signed by an Authorized Financial Officer of the Borrower (i)
stating that no event has occurred and is continuing which
constitutes an Event of Default or would constitute an Event
of Default but for the requirement that notice be given or
time elapse or both and (ii) setting forth in reasonable
detail calculations demonstrating compliance with Section
5.02(f) and (g); and
(iii) as soon as possible and in any event within
five days after the occurrence of each Event of Default and
each event which, with the giving of notice or lapse of time,
or both, would constitute an Event of Default, continuing on
the date of such statement, a statement of an Authorized
Financial Officer setting forth details of such Event of
Default or event and the action which the Borrower has taken
and proposes to take with respect thereto;
(iv) promptly after the sending or filing thereof,
copies of all reports which the Borrower sends to any of its
security holders, and copies of all reports and registration
statements which such Person or any Subsidiary files with the
Securities and Exchange Commission or any national securities
exchange;
(v) as soon as the Borrower knows, and in any event
immediately upon the occurrence, of a change in a Public Debt
Rating, a statement of an Authorized Financial Officer setting
forth the new Public Debt Rating and the date of such change
in the Public Debt Rating;
(vi) promptly after the commencement thereof, notice
of all actions and proceedings before any court, governmental
agency or arbitrator affecting the Borrower or any of its
Subsidiaries of the type described in Section 4.01(f);
(vii) as soon as possible and in any event (A) within
15 Business Days after the Borrower knows or has reason to
know that any Termination Event described in clause (i) of the
definition of Termination Event with respect to any Plan of
the Borrower or any ERISA Affiliate has occurred where such
event is reasonably likely to result in the imposition of a
liability of more than $5,000,000 on Borrower, and (B) within
10 Business Days after the Borrower knows or has
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reason to know that any other Termination Event with respect
to any Plan of the Borrower or any ERISA Affiliate has
occurred where such event is reasonably likely to result in
the imposition of a liability of more than $5,000,000 on
Borrower, a statement of an Authorized Financial Officer
describing such Termination Event and the action, if any,
which the Borrower or such ERISA Affiliate proposes to take
with respect thereto;
(viii) promptly and in any event within 15 Business
Days after receipt thereof by the Borrower, copies of each
notice received by the Borrower or any ERISA Affiliate from
the PBGC stating its intention to terminate any Plan of the
Borrower or such ERISA Affiliate or to have a trustee
appointed to administer any such Plan;
(ix) promptly, upon request by Administrative Agent
or any Lender, after the filing thereof with the Internal
Revenue Service, copies of each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) with
respect to each Plan of the Borrower or any ERISA Affiliate;
(x) promptly and in any event within 15 Business Days
after receipt thereof by the Borrower from the sponsor of a
Multiemployer Plan, a copy of each notice received by the
Borrower or any ERISA Affiliate concerning (A) the imposition
of Withdrawal Liability by a Multiemployer Plan, (B) the
determination that a Multiemployer Plan is, or is expected to
be, in reorganization within the meaning of Title IV of ERISA,
(C) the termination of a Multiemployer Plan within the meaning
of Title IV of ERISA, or (D) the amount of liability incurred,
or expected to be incurred, by such Person or such ERISA
Affiliate in connection with any event described in clause
(A), (B) or (C) above; and
(xi) such other information respecting the condition
or operations, financial or otherwise, of such Person or any
of its Subsidiaries as any Lender through the Administrative
Agent may from time to time reasonably request.
(e) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance (including, without limitation, liability
insurance) with responsible and reputable insurance companies or associations in
such amounts and covering such risks as is usually carried by companies engaged
in similar businesses and owning similar properties in the same general areas in
which such Person or such Subsidiary operates.
(f) Visitation Rights. At any reasonable time and from time to
time, at the request of the Majority Lenders, permit the Administrative Agent
and any of the Lenders or any agents or representatives thereof, to examine and
make copies of and abstracts from the records and books of account of, and visit
the properties of, the Borrower and any of its Subsidiaries, and to discuss the
affairs, finances and accounts of the Borrower and any of its Subsidiaries with
any of their officers or directors and with their independent certified public
accountants.
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(g) Maintenance of Properties, Etc. Maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, all of its material
properties that are used in the conduct of its business.
Section 5.02 Negative Covenants. So long as any Advance shall remain
unpaid or any Lender shall have any Commitment hereunder or any Letter of Credit
shall be outstanding, the Borrower, without the written consent of the Majority
Lenders, will not:
(a) Liens, Etc. Create or suffer to exist, or permit any of
its Subsidiaries to create or suffer to exist, any lien, security interest or
other charge or encumbrance, or any other type of preferential arrangement, upon
or with respect to its properties, whether now owned or hereafter acquired, or
assign, or permit any of its Subsidiaries to assign, any right to receive
income, in each case to secure or provide for the payment of any Debt of any
Person, other than (i) liens or security interests existing on the date hereof
and set forth on Schedule 5.02(a), (ii) purchase money liens or purchase money
security interests upon or in any property acquired or held by such Person or
any Subsidiary in the ordinary course of business to secure the purchase price
of such property or to secure indebtedness incurred solely for the purpose of
financing the acquisition of such property, (iii) liens or security interests
existing on such property at the time of its acquisition (other than any such
lien or security interest created in contemplation of such acquisition), (iv)
liens, security interests or other charges or encumbrances (other than those
referred to in clauses (i), (ii) and (iii) above) at any time outstanding
securing an aggregate principal amount of Debt not exceeding $100,000,000 at any
time (or its equivalent in another currency), or (v) liens existing pursuant to
a securitization program permitted under Section 5.02(c), provided that the
aggregate principal amount of the Debt secured by the liens or security
interests referred to in clauses (ii) and (iii) above shall not exceed
$75,000,000, (or its equivalent in another currency) at any time outstanding.
(b) Mergers, Etc. Merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one transaction or
in a series of transactions) all or substantially all of its assets, (whether
now owned or hereafter acquired) to, any Person, or permit any of its
Subsidiaries to do so, except that any Subsidiary of such Person may merge or
consolidate with or into, or transfer assets to, or acquire assets of, any other
Subsidiary of such Person and except that any Subsidiary of such Person may
merge into or transfer assets to such Person and such Person may merge or
consolidate, and any Subsidiary of such Person may merge or consolidate, with or
into any other Person, provided in each case that, immediately after giving
effect to such proposed transaction, no Event of Default or event which, with
the giving of notice or lapse of time, or both, would constitute an Event of
Default would exist and in the case of any such merger or consolidation to which
such Person is a party, the Person into which such Person shall be merged or
formed by any such consolidation shall first or simultaneously assume such
Person's obligations hereunder and under the other Loan Documents, in each case,
in an agreement or instrument satisfactory in form and substance to the Majority
Lenders.
(c) Debt. Create, incur, assume or suffer to exist, or permit
any of its Subsidiaries to create, incur, assume or suffer to exist, any Debt if
such creation, incurrence, assumption or suffrage would cause (i) the aggregate
principal amount of Consolidated Debt owing by the Borrower's Subsidiaries to
non-Affiliates to exceed 45% of the aggregate principal
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amount of Consolidated Debt of the Borrower and its Subsidiaries or (ii)
Consolidated Debt of the Borrower and its Subsidiaries which constitutes
Invested Amounts to exceed $75,000,000.
(d) Change in Nature of Business. Make, or permit one or more
of its Subsidiaries to make, any material change in the nature of the business
of such Person and its Subsidiaries taken as a whole as carried on at the date
hereof.
(e) Disposition of Assets. Lease, sell, transfer or otherwise
dispose of, and cause its Subsidiaries to lease, sell, transfer or otherwise
dispose of, voluntarily or involuntarily, any assets except for consideration in
an amount not less than the fair market value of such asset as determined in
good faith by such Person's Board of Directors and only if such Person promptly
notifies the Administrative Agent of such lease, sale, transfer, or other
disposition, excluding, however, (i) sales of inventory in the ordinary course
of business, (ii) sales, transfers and other dispositions of equipment
determined to be obsolete or no longer useful, (iii) sales, transfers or other
dispositions of Margin Stock, (iv) sales, transfers and other dispositions of
accounts receivable originated by the Borrower or any Subsidiary thereof that
are subject to a securitization program permitted under Section 5.02(c) and (v)
sales, transfers or other dispositions of other assets of such Person and its
Subsidiaries to the extent that the aggregate fair market value of all such
other assets so leased, sold (including, without limitation, sale and leaseback
transactions), transferred and disposed after the date hereof shall not exceed
$50,000,000 (or its equivalent in another currency).
(f) Debt to EBITDA Ratio. Permit the Debt to EBITDA Ratio to
exceed the ratios indicated below for the periods set forth below:
<Table>
<Caption>
Fiscal Quarter Ended Ratio
- ------------------------------------- ------------
<S> <C>
On or prior to December 31, 2002 3.00 to 1.00
January 1, 2003 to December 31, 2003 2.75 to 1.00
January 1, 2004 and thereafter 2.50 to 1.00
</Table>
(g) Interest Coverage Ratio. Permit the Interest Coverage
Ratio to be less than the ratios indicated below for the periods set forth
below:
<Table>
<Caption>
Fiscal Quarter Ended Ratio
- ------------------------------------- ------------
<S> <C>
On or prior to December 31, 2002 3.50 to 1.00
January 1, 2003 to December 31, 2003 3.75 to 1.00
January 1, 2004 and thereafter 4.00 to 1.00
</Table>
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ARTICLE VI. EVENTS OF DEFAULT
Section 6.01 Events of Default. If any of the following events ("Events
of Default") shall occur and be continuing:
(a) (i) The Borrower shall fail to pay any principal of any
Advance when it becomes due and payable, (ii) the Borrower shall fail to pay any
interest on any Advance within three Business Days of when it becomes due and
payable or (iii) the Borrower shall fail to make any other payment under this
Agreement or under any other Loan Document if such failure shall remain
unremedied for five days after a demand for payment is given to such Person by
the Administrative Agent or any Lender; or
(b) Any representation or warranty made herein by either the
Borrower or any of its officers in connection with this Agreement shall prove to
have been incorrect in any material respect when made; or
(c) The Borrower shall fail to perform or observe (i) any
term, covenant or agreement required to be performed or observed by it contained
in Section 5.01(c), 5.01(d)(iii), 5.01(f) or 5.02, or (ii) any other term,
covenant or agreement contained in this Agreement on its part to be performed or
observed if such failure shall remain unremedied for 10 days after written
notice thereof shall have been given to the Borrower by the Administrative Agent
or any Lender; or
(d) (i) The Borrower or any of its Subsidiaries shall fail to
pay any principal of or premium or interest on any Debt which is outstanding in
a principal amount, or shall fail to make any payments in respect of Hedge
Agreements having a notional amount of at least $25,000,000 (or its equivalent
in another currency) in the aggregate (but, excluding Debt evidenced by the
Notes or otherwise arising under this Agreement), in each case when the same
becomes due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Debt or Hedge Agreement; or any other event shall occur or
condition shall exist under any agreement or instrument relating to any such
Debt or Hedge Agreement and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such event or
condition is to accelerate, or to permit the acceleration of, the maturity of
such Debt or Hedge Agreement; or any such Debt or Hedge Agreement shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), redeemed, purchased or defeased, or an
offer to prepay, redeem, purchase or defease such Debt or Hedge Agreement shall
be required to be made, in each case prior to the stated maturity thereof; or
(e) The Borrower or any of its Subsidiaries shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or against the
Borrower or any of its Subsidiaries seeking to adjudicate it a bankrupt or
insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of debtors, or
seeking the entry of an order for relief or the appointment of a receiver,
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trustee, custodian or other similar official for it or for any substantial part
of its property; or such Person or any of its Subsidiaries shall take any
corporate action to authorize any of the actions set forth above in this
subsection (e); or
(f) Any judgment or order for the payment of money in excess
of $25,000,000 (or its equivalent in another currency) shall be rendered against
such Person or any of its Subsidiaries and either (i) enforcement proceedings
shall have been commenced by any creditor upon such judgment or order or (ii)
there shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(g) (i) Any Person or two or more Persons acting in concert
shall have acquired beneficial ownership (within the meaning of Rule 13d-3 of
the Securities and Exchange Commission under the Securities Exchange Act of
1934), directly or indirectly, of Voting Stock of the Borrower (or other
securities convertible into such Voting Stock) representing 20% or more of the
combined voting power of all Voting Stock of the Borrower; or (ii) during any
period of up to 24 consecutive months, commencing after the date of this
Agreement, individuals who at the beginning of such 24-month period were
directors of the Borrower shall cease for any reason (other than due to death or
disability) to constitute a majority of the board of directors of the Borrower
(except to the extent that individuals who at the beginning of such 24-month
period were replaced by individuals (x) elected by 66-2/3% of the remaining
members of the board of directors of the Borrower or (y) nominated for election
by a majority of the remaining members of the board of directors of the Borrower
and thereafter elected as directors by the shareholders of the Borrower); or
(iii) any Person or two or more Persons acting in concert shall have acquired by
contract or otherwise, or shall have entered into a contract or arrangement
that, upon consummation, will result in its or their acquisition of, the power
to exercise, directly or indirectly, a controlling influence over the management
or policies of the Borrower; or
(h) An ERISA Default shall occur and be continuing or a lien
under Section 4068 of ERISA shall be imposed against the assets of the Borrower
or any of its Subsidiaries;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Majority Lenders, by notice to the Borrower,
declare the obligation of each Lender to make Advances (other than Advances by
an Issuing Bank or a Lender pursuant to Section 2.02(b)) and of the Issuing
Banks to issue Letters of Credit to be terminated, whereupon the same shall
forthwith terminate, and (ii) shall at the request, or may with the consent, of
the Majority Lenders, by notice to the Borrower, declare the Notes and all
Advances then outstanding, all interest thereon and all other amounts payable
under this Agreement to be forthwith due and payable, whereupon the Notes and
all Advances then outstanding, all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Borrower; provided, however, that in the event of an actual or deemed entry of
an order for relief with respect to the Borrower or any of its Subsidiaries
under the Federal Bankruptcy Code, (A) the obligation of each Lender to make
Advances (other than Advances by an Issuing Bank or a Lender pursuant to Section
2.02(b)) and of the Issuing Banks to issue Letters of Credit shall automatically
be terminated and (B) the Notes and all such Advances then outstanding, all such
interest and all such amounts shall automatically become and be due and
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payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby expressly waived by each of the Borrower.
Section 6.02 Actions in Respect of the Letters of Credit upon Default.
If any Event of Default shall have occurred and be continuing, the
Administrative Agent may with the consent, or shall at the request, of the
Majority Lenders, irrespective of whether it is taking any of the actions
described in Section 6.01 or otherwise, make demand upon the Borrower to, and
forthwith upon such demand the Borrower will, (a) pay to the Administrative
Agent on behalf of the Lenders in same day funds at the Administrative Agent's
office designated in such demand, for deposit in the L/C Cash Collateral
Account, an amount equal to the aggregate Available Amount of all Letters of
Credit then outstanding or (b) make such other arrangements in respect of the
outstanding Letters of Credit as shall be acceptable to the Majority Lenders. If
at any time the Administrative Agent determines that any funds held in the L/C
Cash Collateral Account are subject to any right or claim of any Person other
than the Administrative Agent and the Lenders or that the total amount of such
funds is less than the aggregate Available Amount of all Letters of Credit, the
Borrower will, forthwith upon demand by the Administrative Agent, pay to the
Administrative Agent, as additional funds to be deposited and held in the L/C
Cash Collateral Account, an amount equal to the excess of (a) such aggregate
Available Amount over (b) the total amount of funds, if any, then held in the
L/C Cash Collateral Account that the Administrative Agent determines to be free
and clear of any such right and claim. Upon the drawing of any Letter of Credit,
to the extent funds are on deposit in the L/C Cash Collateral Account, such
funds shall be applied to reimburse the Issuing Banks to the extent permitted by
applicable law.
ARTICLE VII. THE ADMINISTRATIVE AGENT
Section 7.01 Authorization and Action. Each Lender (in its capacities
as a Lender and Issuing Bank (as applicable)) hereby appoints and authorizes the
Administrative Agent to take such action as agent on its behalf and to exercise
such powers and discretion under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto. As to any matters not expressly
provided for by this Agreement (including, without limitation, enforcement or
collection of the Debt resulting from the Advances), the Administrative Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Majority Lenders,
and such instructions shall be binding upon all Lenders and all holders of the
Notes; provided, however, that the Administrative Agent shall not be required to
take any action which exposes the Administrative Agent to personal liability or
which is contrary to this Agreement or applicable law. The Administrative Agent
agrees to give to each Lender prompt notice of each notice given to it by the
Borrower pursuant to the terms of this Agreement.
Section 7.02 Administrative Agent's Reliance, Etc. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or omitted to be taken by it or them under
or in connection with this Agreement, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, the Administrative Agent: (i) may treat the Lender that made any
Advance as the holder of the Debt resulting therefrom until the Administrative
Agent receives and accepts an
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<PAGE>
Assumption Agreement entered into by an Assuming Lender as provided in Section
2.17 and 2.18 or an Assignment and Acceptance entered into by such Lender, as
assignor, and an Eligible Assignee, as assignee as provided in Section 8.07;
(ii) may consult with legal counsel (including counsel for the Borrower),
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken in good faith by it in
accordance with the advice of such counsel, accountants or experts; (iii) makes
no warranty or representation to any Lender and shall not be responsible to any
Lender for any statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement; (iv) shall not have any duty
to ascertain or to inquire as to the performance or observance of any of the
terms, covenants or conditions of this Agreement on the part of the Borrower or
to inspect the property (including the books and records) of the Borrower; (v)
shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant hereto; and (vi) shall incur
no liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier,
telegram, cable or telex) believed by it to be genuine and signed or sent by the
proper party or parties.
Section 7.03 SunTrust and Affiliates. With respect to its Commitments,
the Advances made by them and the Notes issued to it, SunTrust shall have the
same rights and powers under this Agreement as any other Lender and may exercise
the same as though it were not the Administrative Agent; and the term "Lender"
or "Lenders" shall, unless otherwise expressly indicated, include SunTrust in
its individual capacity. SunTrust and its respective Affiliates may accept
deposits from, lend money to, act as trustee under indentures of, and generally
engage in any kind of business with, the Borrower, any of their respective
Subsidiaries and any Person who may do business with or own securities of the
Borrower or any such Subsidiary, all as if SunTrust were not the Administrative
Agent and without any duty to account therefor to the Lenders.
Section 7.04 Lender Credit Decision. Each Lender acknowledges that it
has, independently and without reliance upon the Administrative Agent or any
other Lender and based on the financial statements referred to in Section 4.01
and such other documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement.
Section 7.05 Indemnification. The Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed by the Borrower) from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against the
Administrative Agent in any way relating to or arising out of this Agreement or
any action taken or omitted by the Administrative Agent under this Agreement,
provided that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Administrative Agent's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Administrative Agent promptly upon demand for
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<PAGE>
its ratable share of any out-of-pocket expenses (including counsel fees)
incurred by the Administrative Agent in connection with the preparation,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement, to the
extent that the Administrative Agent is not reimbursed for such expenses by the
Borrower. In the case of any investigation, litigation or proceeding giving rise
to any Indemnified Costs, this Section 7.05 applies whether any such
investigation, litigation or proceeding is brought by the Administrative Agent,
any Lender or a third party.
(b) Each Lender severally agrees to indemnify the Issuing
Banks (to the extent not promptly reimbursed by the Borrower) from and against
such Lender's ratable share (determined as provided below) of any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against any such Issuing Bank in any way
relating to or arising out of this Agreement or any action taken or omitted by
such Issuing Bank hereunder or in connection herewith; provided, however, that
no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from such Issuing Bank's gross negligence or willful
misconduct as found in a final, non-appealable judgment by a court of competent
jurisdiction. Without limitation of the foregoing, each Lender agrees to
reimburse any such Issuing Bank promptly upon demand for its ratable share of
any costs and expenses (including, without limitation, reasonable fees and
expenses of counsel) payable by the Borrower under Section 8.04, to the extent
that such Issuing Bank is not promptly reimbursed for such costs and expenses by
the Borrower.
(c) For purposes of this Section 7.05, the Lenders' respective
ratable shares of any amount shall be determined, at any time, according to the
sum of (i) the aggregate principal amount of the Advances outstanding at such
time and owing to the respective Lenders, (ii) their respective Pro Rata Shares
of the aggregate Available Amount of all Letters of Credit outstanding at such
time and (iii) their respective Unused Commitments at such time; provided that
the aggregate principal amount of Advances owing to the Issuing Banks as a
result of drawings under Letters of Credit shall be considered to be owed to the
Lenders ratably in accordance with their respective Revolving Credit
Commitments. The failure of any Lender to reimburse the Administrative Agent or
any such Issuing Bank, as the case may be, promptly upon demand for its ratable
share of any amount required to be paid by the Lenders to the Administrative
Agent or such Issuing Bank, as the case may be, as provided herein shall not
relieve any other Lender of its obligation hereunder to reimburse the
Administrative Agent or such Issuing Bank, as the case may be, for its ratable
share of such amount, but no Lender shall be responsible for the failure of any
other Lender to reimburse the Administrative Agent or any such Issuing Bank, as
the case may be, for such other Lender's ratable share of such amount. Without
prejudice to the survival of any other agreement of any Lender hereunder, the
agreement and obligations of each Lender contained in this Section 7.05 shall
survive the payment in full of principal, interest and all other amounts payable
hereunder and under the other Loan Documents.
Section 7.06 Successor Administrative Agent. The Administrative Agent
may resign at any time by giving written notice thereof to the Lenders and the
Borrower and may be removed at any time with or without cause by the Majority
Lenders. Upon any such resignation or
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<PAGE>
removal, the Majority Lenders shall have the right to appoint a successor
Administrative Agent. If no successor Administrative Agent shall have been so
appointed by the Majority Lenders, and shall have accepted such appointment,
within 30 days after the retiring Administrative Agent's giving of notice of
resignation or the Majority Lenders' removal of the retiring Administrative
Agent, then the retiring Administrative Agent may, on behalf of the Lenders,
appoint a successor Administrative Agent, which shall be a commercial bank
organized under the laws of the United States of America or of any State thereof
and having a combined capital and surplus of at least $1,000,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations under this Agreement. After
any retiring Administrative Agent's resignation or removal hereunder as
Administrative Agent, the provisions of this Article VII shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement.
Section 7.07 Arranger, Documentation Agent and Syndication Agent . The
Arranger, Documentation Agent and the Syndication Agent shall have no duties or
obligations under this Agreement or the other Loan Documents in their respective
capacities as Arranger, Documentation Agent and the Syndication Agent.
ARTICLE VIII. MISCELLANEOUS
Section 8.01 Amendments, Etc. No amendment or waiver of any provision
of this Agreement or the Notes, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Majority Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that no amendment, waiver or consent shall, unless in
writing and signed by all the Lenders, do any of the following: (a) waive any of
the conditions specified in Section 3.01 or 3.02, (b) increase the Commitments
of the Lenders or subject the Lenders (other than as provided in Section 2.18)
or to any additional obligations, (c) reduce the principal of, or interest on,
the Notes or any fees or other amounts payable hereunder, (d) postpone any date
fixed for any payment of principal of, or interest on, the Notes or any fees or
other amounts payable hereunder, (e) change the percentage of the Revolving
Credit Commitments or of the aggregate unpaid principal amount of the Notes, or
the number of Lenders, which shall be required for the Lenders or any of them to
take any action hereunder or (f) amend this Section 8.01; provided further that
no amendment, waiver or consent shall, unless in writing and signed by all the
Lenders, waive any of the conditions specified in Section 3.03, provided
further, that no amendment, waiver or consent shall, unless in writing and
signed by the Administrative Agent in addition to the Lenders required above to
take such action, affect the rights or duties of the Administrative Agent under
this Agreement or any other Loan Document; and provided further that no
amendment, waiver or consent shall, unless in writing and signed by the Issuing
Banks in addition to the Lenders required above to take such action, affect the
rights or obligation of the Issuing Banks under this Agreement.
Section 8.02 Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex) and mailed (postage
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prepaid, return receipt requested), telegraphed, telecopied, telexed or
delivered, if to the Borrower, at its address at Corn Products International,
Inc., P.O. Box 7100, 5 Westbrook Corporate Center, Westchester, IL 60154,
Attention: Treasurer; if to any Bank, at its Domestic Lending Office specified
opposite its name on Schedule I hereto; if to any other Lender, at its Domestic
Lending Office specified in the Assignment and Acceptance pursuant to which it
became a Lender; and if to the Administrative Agent, at its address at 303
Peachtree Street, Atlanta, GA 30308, Attn: Greg Cannon; or, as to each party, at
such other address as shall be designated by such party in a written notice to
the other parties. All such notices and communications shall, when mailed,
telegraphed, telecopied or telexed, be effective when deposited in the mails,
telecopied, delivered to the telegraph company or confirmed by telex answerback,
respectively, except that notices and communications to the Administrative Agent
pursuant to Article II, III or VII shall not be effective until received by the
Administrative Agent, notices to the Borrower pursuant to Article VI shall not
be effective until received by the Borrower.
Section 8.03 No Waiver; Remedies. No failure on the part of any Lender
or the Administrative Agent to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
Section 8.04 Costs and Expenses. (a) The Borrower agrees to pay on
demand all reasonable costs and expenses of both the Administrative Agent and
the Arranger in connection with the preparation, execution, delivery,
administration, modification and amendment of this Agreement, the other Loan
Documents and the other documents to be delivered hereunder, including, without
limitation, (A) all due diligence, syndication (including printing, distribution
and bank meetings), transportation, computer, duplication, appraisal,
consultant, and audit expenses and (B) the reasonable fees and out-of-pocket
expenses of counsel for the Administrative Agent and the Arranger with respect
thereto and with respect to advising the Administrative Agent and the Arranger
as to each such party's respective rights and responsibilities under this
Agreement. The Borrower further agrees to pay on demand all costs and expenses
of the Administrative Agent and the Lenders, if any (including, without
limitation, reasonable counsel fees and expenses of the Administrative Agent and
each Lender), in connection with the enforcement (whether through negotiations,
legal proceedings or otherwise) of this Agreement, the other Loan Documents and
the other documents to be delivered hereunder including, without limitation,
reasonable counsel fees and expenses for the Administrative Agent and each
Lender in connection with the enforcement of rights under this Section 8.04(a).
(b) If any payment of principal of, or Conversion of, any
Eurodollar Rate Advance is made by the Borrower to or for the account of a
Lender other than on the last day of the Interest Period for such Advance, as a
result of a payment or Conversion pursuant to Section 2.08(f), 2.09, 2.10 or
2.12 or acceleration of the maturity of the Notes pursuant to Section 6.01 or
for any other reason, the Borrower shall, upon demand by any Lender (with a copy
of such demand to the Administrative Agent), pay to the Administrative Agent for
the account of such Lender any amounts required to compensate such Lender for
any additional losses, costs or expenses which it may reasonably incur as a
result of such payment or Conversion, including, without limitation, any loss
(including loss of anticipated profits), cost or expense incurred by
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<PAGE>
reason of the liquidation or reemployment of deposits or other funds acquired by
any Lender to fund or maintain such Advance. A certificate setting forth with
reasonable specificity the basis for and amount of such losses, costs or
expenses shall be submitted to the Borrower and the Administrative Agent by such
Lender and shall be conclusive and binding for all purposes, absent manifest
error.
(c) Without prejudice to any other rights which the Lenders
may have hereunder or under applicable law, the Borrower agrees to indemnify and
hold harmless the Administrative Agent, the Arranger, each Lender, any of their
Affiliates and each of their respective directors, officers, employees, advisors
and agents (each, an "Indemnified Party") from and against any and all claims,
damages, losses, liabilities and expenses (including, without limitation, fees
and disbursements of counsel), that may be incurred by or asserted against the
Administrative Agent, the Arranger, such Lender or any of their Affiliates or
any such director, officer, employee, advisor or agent which would not have been
incurred by or asserted or awarded against any Indemnified Party but for the
Administrative Agent or such Lender being a party to this Agreement, in each
case arising out of or in connection with or by reason of, or in connection with
the preparation for a defense of, any investigation, litigation, or proceeding
arising out of, related to or in connection with (i) this Agreement or any other
Loan Document, or related to any transaction or proposed transaction (whether or
not consummated) in which any proceeds of any Borrowing are applied or proposed
to be applied, directly or indirectly, by the Borrower (including, without
limitation, any such application or proposed application by the Borrower related
to any acquisition or proposed acquisition by the Borrower or any Subsidiary or
affiliate of the Borrower of all or any portion of the stock or substantially
all of the assets of any Person), or the actual or proposed use of the proceeds
of the Advances or any Letter of Credit, whether or not the Administrative
Agent, the Arranger, such Lender or any of their Affiliates or any such
director, officer, employee, advisor or agent is a party to such transaction or
(ii) the Borrower's entering into this Agreement or the other Loan Documents, or
to any actions or omissions of the Borrower, any of its respective Subsidiaries
or affiliates or any of its or their respective directors, officers, employees,
advisors, affiliates or agents in connection therewith, in each case whether or
not such investigation, litigation or proceeding is brought by the Borrower, its
directors, shareholders or creditors or an Indemnified Party or any other Person
or any Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated, except to the extent such
claim, damage, loss, liability or expense (A) is found in a final, non-appealed
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct or (B) arising from
disputes among two or more Lenders (but not including any such dispute that
involves a Lender to the extent that such Lender is acting in any different
capacity (such as an Administrative Agent or Arranger)). The Borrower also
agrees not to assert any claim against the Administrative Agent, the Arranger,
any Lender, any of their Affiliates, or any of their respective directors,
officers, employees, advisors and agents, on any theory of liability, for
consequential or punitive damages arising out of or otherwise relating to this
Agreement, the other Loan Documents, any of the transactions contemplated herein
or the actual or proposed use of the proceeds of the Advances. The obligations
of the Borrower under this subsection (c) shall survive the Termination Date,
provided that this subsection (c) shall not apply to derivative claims of the
stockholders of any Lender against such Lender if such claims are based upon
occurrences subsequent to the Termination Date.
47
<PAGE>
(d) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in Sections 2.14, 7.05 and 8.04 shall survive the payment in full of
principal, interest and all other amounts payable hereunder and under the other
Loan Documents.
Section 8.05 Right of Set-off. Upon (a) the occurrence and during the
continuance of any Event of Default and (b) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Notes due and payable pursuant to the
provisions of Section 6.01, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender or such Affiliate to or for the credit or the account
of the Borrower against any and all of the obligations of the Borrower now or
hereafter existing under this Agreement and the other Loan Documents, whether or
not such Lender shall have made any demand under this Agreement or such other
Loan Document and although such obligations may be unmatured. Each Lender agrees
promptly to notify the Borrower after any such set-off and application, provided
that the failure to give such notice shall not affect the validity of such
set-off and application. The rights of each Lender and each of its Affiliates
under this Section are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which such Lender and each of its
Affiliates may have.
Section 8.06 Binding Effect. This Agreement shall become effective
(other than Section 2.01 which shall only become effective upon satisfaction of
the conditions precedent set forth in Section 3.01, 3.02 and 3.03) when it shall
have been executed by the Borrower and the Administrative Agent and when the
Administrative Agent shall have been notified by each Lender that such Lender
has executed it and thereafter shall be binding upon and inure to the benefit of
the Borrower, the Administrative Agent, each Lender and their respective
successors and assigns, provided that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Lenders except as a result of a merger or consolidation permitted
by Section 5.02(e).
Section 8.07 Assignments and Participations. (a) Each Lender may (and
shall if requested to do so by the Borrower pursuant to Section 2.11(c)) assign
to any Person, all or a portion of its rights and obligations under this
Agreement and the Notes (including, without limitation, all of its Revolving
Credit Commitment, the Advances owing to it and the Note or Notes held by it);
provided, however, that (i) other than in the case of an assignment to a Person,
that immediately prior to such assignment was a Lender, or an Affiliate of a
Lender (whereupon notice thereof shall promptly be given to the Borrower and the
Administrative Agent), each such assignment shall be to an Eligible Assignee to
which the Borrower and the Administrative Agent have consented (with respect to
an assignment of all of such Lender's rights and obligations hereunder, such
consents may not be unreasonably withheld), (ii) unless such assignment shall be
made to a Person that, immediately prior to such assignment was a Lender, or an
Affiliate of a Lender (whereupon notice thereof shall promptly be given to the
Borrower and the Administrative Agent), such assignment shall be for all of such
assigning Lender's rights and obligations under the Loan Documents or shall be
for a minimum amount of such assigning Lender's Commitment hereunder (together
with those rights and obligations related thereto) equal to $10,000,000 or a
multiple of $1,000,000 in excess thereof, and (iii) the parties to each
48
<PAGE>
such assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance, together
with any Note or Notes subject to such assignment and a processing and
recordation fee of $3,500 if the assignee is not already a Lender. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, which effective date shall be at
least five Business Days after the execution and delivery thereof to the
Administrative Agent, (x) the assignee thereunder shall be a party hereto and,
to the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have the rights and obligations of a
Lender hereunder and (y) the Lender assignor thereunder shall, to the extent
that rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).
(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in, or in connection with, this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other instrument or document
furnished pursuant hereto; (ii) such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (iv) such assignee will, independently and without
reliance upon the Administrative Agent, such assigning Lender or any other
Lender and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
action under this Agreement; (v) such assignee confirms that it is an Eligible
Assignee; (vi) such assignee appoints and authorizes the Administrative Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender or an Issuing Bank, as the case may be.
(c) The Administrative Agent shall maintain at its address
referred to in Section 8.02 a copy of each Assignment and Acceptance delivered
to and accepted by it and a register for the recordation of the names and
addresses of each of the Lenders and the Commitments of, and principal amount of
the Advances owing to, each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Administrative Agent and the Lenders shall
treat each Person whose name is recorded in the Register as a Lender hereunder
for all purposes of
49
<PAGE>
this Agreement. The Register shall be available for inspection by the Borrower
or any Lender at any reasonable time and from time to time upon reasonable prior
notice.
(d) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee representing that it is an Eligible
Assignee the Administrative Agent shall, if such Assignment and Acceptance has
been completed and is in substantially the form of Exhibit C hereto, (i) accept
such Assignment and Acceptance, (ii) record the information contained therein in
the Register and (iii) give prompt notice thereof to the Borrower. Within five
Business Days after its receipt of such notice, the Borrower shall execute and
deliver to the Administrative Agent in exchange for the surrendered Note or
Notes a new Note to the order of such Eligible Assignee in an amount equal to
the Revolving Credit Commitment assumed by it pursuant to such Assignment and
Acceptance and, if the assigning Lender has retained a Revolving Credit
Commitment hereunder, a new Note to the order of the assigning Lender in an
amount equal to the Revolving Credit Commitment retained by it hereunder. Such
new Note or Notes shall be in an aggregate principal amount equal to the
aggregate principal amount of such surrendered Note or Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of Exhibit A hereto.
(e) Each Lender may sell participations to one or more banks
or other entities in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its Revolving
Credit Commitment, the Advances owing to it and the Note or Notes held by it);
provided, however, that (i) such Lender's obligations under this Agreement
(including, without limitation, its Revolving Credit Commitment to the Borrower
hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note or Notes for all
purposes of this Agreement, (iv) the Borrower, the Administrative Agent and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, and
(v) no participant under any such participation shall have any right to approve
any amendment or waiver of any provision of this Agreement or any Note, or any
consent to any departure by the Borrower therefrom, except to the extent that
such amendment, waiver or consent would reduce the principal of, or interest on,
the Notes or any fees or other amounts payable hereunder, in each case to the
extent subject to such participation, or postpone any date fixed for any payment
of principal of, or interest on, the Notes or any fees or other amounts payable
hereunder, in each case to the extent subject to such participation. If the
Administrative Agent or such Lender shall request the written consent of such
participant to any of the actions set forth in this paragraph (e), and shall not
receive either the consent thereto or denial thereof in writing within five
Business Days of making such request, such participant shall be deemed to have
given its consent.
(f) Any Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
8.07, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to such Lender
by or on behalf of the Borrower; provided that, prior to any such disclosure,
the assignee or participant or proposed assignee or participant shall agree to
preserve the confidentiality of any confidential information relating to the
Borrower received by it from such Lender by executing and delivering to the
Administrative Agent in the case of an assignment, and to such Lender in the
case of a participation, a letter in substantially the form of Exhibit D hereto.
50
<PAGE>
(g) Each Issuing Bank may assign to an Eligible Assignee its
rights and obligations or any portion of the undrawn Letter of Credit Commitment
at any time; provided, however, that (i) the amount of the Letter of Credit
Commitment of the assigning Issuing Bank being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $1,000,000 or an
integral multiple of $1,000,000 in excess thereof, and (ii) the parties to each
such assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance, together
with a processing and recordation fee of $3,500.
(h) Notwithstanding any other provision set forth in this
Agreement, any Lender may at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and the Notes held by it) in favor of any Federal Reserve
Bank in accordance with Regulation A of the Board of Governors of the Federal
Reserve System.
Section 8.08 Acknowledgements. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation, execution and delivery of
this Agreement and the other Loan Documents; (b) neither the Administrative
Agent nor any Lender has any fiduciary relationship with or fiduciary duty to
the Borrower arising out of or in connection with this Agreement or any of the
other Loan Documents, and the relationship between the Administrative Agent and
the Lenders, on the one hand, and the Borrower, on the other hand, in connection
herewith or therewith is solely that of debtor and creditor; and (c) no joint
venture is created hereby or by the other Loan Documents or otherwise exists by
virtue of the transactions contemplated hereby among the Lenders or among the
Borrower and the Lenders or between the Borrower and the Administrative Agent.
Section 8.09 Consent to Jurisdiction. (a) The Borrower hereby
irrevocably submits to the jurisdiction of any New York State or Federal court
sitting in New York City and any appellate court from any thereof in any action
or proceeding arising out of or relating to this Agreement, and the Borrower
hereby irrevocably agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or in such Federal
court. The Borrower hereby irrevocably waives, to the fullest extent that it may
effectively do so, the defense of an inconvenient forum to the maintenance of
any such action or proceeding. The Borrower irrevocably consents to the service
of any and all process in any such action or proceeding by the mailing of copies
of such process to the Borrower at its address specified in Section 8.02. The
Borrower agrees that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment or
in any other manner provided by law.
(b) Nothing in this Section 8.09 shall affect the right of the
Administrative Agent or any Lender to serve legal process in any other manner
permitted by law or affect the right of the Administrative Agent or any Lender
to bring any action or proceeding against the Borrower or its property in the
courts of any other jurisdictions including the Federal and State courts sitting
in the State of Illinois.
51
<PAGE>
Section 8.10 GOVERNING LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
Section 8.11 Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of this Agreement by telecopier shall be
effective as delivery of a manually executed counterpart.
Section 8.12 No Liability of the Issuing Banks. The Borrower assumes
all risks of the acts or omissions of any beneficiary or transferee of any
Letter of Credit with respect to its use of such Letter of Credit. Neither an
Issuing Bank nor any of its officers or directors shall be liable or responsible
for: (a) the use that may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank
against presentation of documents that do not comply with the terms of a Letter
of Credit, including failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or (d) any other circumstances whatsoever in
making or failing to make payment under any Letter of Credit, except that the
Borrower shall have a claim against such Issuing Bank, and such Issuing Bank
shall be liable to the Borrower, to the extent of any direct, but not
consequential, damages suffered by the Borrower that the Borrower proves were
caused by (i) such Issuing Bank's willful misconduct or gross negligence as
determined in a final, non-appealable judgment by a court of competent
jurisdiction in determining whether documents presented under any Letter of
Credit comply with the terms of such Letter of Credit or (ii) such Issuing
Bank's willful failure to make lawful payment under a Letter of Credit after the
presentation to it of a draft and certificates strictly complying with the terms
and conditions of the Letter of Credit. In furtherance and not in limitation of
the foregoing, such Issuing Bank may accept documents that appear on their face
to be in order, without responsibility for further investigation, regardless of
any notice or information to the contrary.
Section 8.13 Waiver of Jury Trial. Each of the Borrower, the
Administrative Agent and the Lenders hereby irrevocably waives all right to
trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to this Agreement, the
other Loan Documents or the actions of the Administrative Agent, the Arranger or
any Lender in the negotiation, administration, performance or enforcement
thereof.
52
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
CORN PRODUCTS INTERNATIONAL, INC., as
Borrower
By /s/ Cheryl K. Beebe
----------------------------------
Title: VP Finance & Treasurer
By /s/ Kimberly A. Hunter
----------------------------------
Title: Director
SUNTRUST BANK
as Administrative Agent
By /s/ Gregory L. Cannon
----------------------------------
Title: Gregory L. Cannon, Director
[SIGNATURE PAGE TO 3-YEAR REVOLVING CREDIT AGREEMENT]
<PAGE>
Initial Issuing Banks
Letter of Credit Commitment
$5,000,000 SunTrust Bank, as Issuing Bank
By /s/ Gregory L. Cannon
----------------------------------
Title: Gregory L. Cannon, Director
$5,000,000 Total of the Letter of Credit Commitments
[SIGNATURE PAGE TO 3-YEAR REVOLVING CREDIT AGREEMENT]
<PAGE>
Commitments Banks
$50,000,000 (40.00%) SUNTRUST BANK
By /s/ Gregory L. Cannon
----------------------------------
Title: Gregory L. Cannon, Director
[SIGNATURE PAGE TO 3-YEAR REVOLVING CREDIT AGREEMENT]
<PAGE>
$25,000,000 (20.00%) ING CAPITAL, LLC
By /s/ Bill Redmond
--------------------------------
Title: William B. Redmond, Director
[SIGNATURE PAGE TO 3-YEAR REVOLVING CREDIT AGREEMENT]
<PAGE>
$25,000,000 (20.00%) HARRIS TRUST AND SAVINGS BANK
By /s/ Jennifer Wendrow
--------------------------
Title: Vice President
[SIGNATURE PAGE TO 3-YEAR REVOLVING CREDIT AGREEMENT]
<PAGE>
$15,000,000 (12.00%) THE BANK OF NEW YORK
By /s/ Mark O'Connor
---------------------------------
Title: Mark O'Connor, Vice President
[SIGNATURE PAGE TO 3-YEAR REVOLVING CREDIT AGREEMENT]
<PAGE>
$10,000,000 (8.00%) COMERICA BANK
By /s/ Lisa Davidson McKinnon
--------------------------
Title: Vice President
$125,000,000 Total of the Commitments
[SIGNATURE PAGE TO 3-YEAR REVOLVING CREDIT AGREEMENT]
<PAGE>
EXECUTION COUNTERPART
U.S. $125,000,000
3-YEAR REVOLVING CREDIT AGREEMENT
Dated as of October 15, 2002
Among
CORN PRODUCTS INTERNATIONAL, INC.
as Borrower,
THE LENDERS NAMED HEREIN
as Lenders,
SUNTRUST BANK
as Administrative Agent,
SUNTRUST CAPITAL MARKETS, INC.
as Arranger,
HARRIS BANK AND SAVINGS BANK
as Syndication Agent,
and
ING CAPITAL, LLC,
as Documentation Agent
-60-
<PAGE>
TABLE OF CONTENTS
Page
Schedule I List of Applicable Lending Offices
Schedule 5.02(a) Existing Liens
Exhibit A Form of Note
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Assignment and Acceptance
Exhibit D Form of Confidentiality Agreement
Exhibit E-1 Form of Opinion of In-House Counsel for the Borrower
Exhibit E-2 Form of Opinion of Outside Counsel for the Borrower
Exhibit F Form of Continuation/Conversion
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.17
<SEQUENCE>4
<FILENAME>c75436exv10w17.txt
<DESCRIPTION>AMENDMENT NO. 3 TO 1998 STOCK INCENTIVE PLAN
<TEXT>
<PAGE>
EXHIBIT 10.17
AMENDMENT NO. 3 TO
CORN PRODUCTS INTERNATIONAL, INC.
1998 STOCK INCENTIVE PLAN
Amendment No. 3, dated as of November 20, 2002 (this "Amendment"), to
the 1998 Stock Incentive Plan (the "Plan").
WHEREAS, the Company established the Plan for the benefit of certain of
its employees;
WHEREAS, the Company desires to amend the Plan in certain respects; and
WHEREAS, the Board of Directors of the Company is authorized under
Section 5.2 of the Plan to amend the Plan.
NOW, THEREFORE, pursuant to the power of amendment contained in Section
5.2 of the Plan, the Plan is hereby amended, effective immediately, as follows:
Section 1.3 is hereby amended by adding the following paragraph to the
end of the current text of Section 1.3:
"Notwithstanding anything in the Plan to the contrary, in accordance
with Section 157 of the Delaware General Corporation Law, the Committee may, by
resolution, authorize one or more executive officers of the Company to do one or
both of the following: (i) designate non-director and non-executive officer
employees of the Company or any of its subsidiaries to be recipients of rights
or options entitling the holder thereof to purchase from the Company shares of
its capital stock of any class or other awards hereunder; and (ii) determine the
number of such rights, options, or awards to be received by such non-director
and non-executive officer employees; provided, however, that the resolution so
authorizing such executive officer or officers shall specify the total number of
rights, options, or awards such executive officer or officers may so award. The
Committee may not authorize an executive officer to designate himself or herself
or any director or other executive officer of the Company to be a recipient of
any such rights, options, or awards."
FURTHERMORE, the Board of Directors of the Company hereby delegates to
the Compensation and Nominating Committee of the Board of Directors all the
Board's rights, duties, responsibilities, and authority under Section 157 of the
Delaware General Corporation Law and authorizes the Committee to take action
pursuant to Section 157 on behalf of the Board of Directors and to authorize one
or more executive officers of the Company to take such action pursuant to
Section 157 as the Committee so determines.
IN WITNESS WHEREOF, Corn Products International, Inc. has caused this
Amendment to be executed by its duly authorized officer on the day and year
first above written.
CORN PRODUCTS INTERNATIONAL, INC.
By: /s/ James J. Hirchak
--------------------------------
Vice President, Human Resources
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-11.1
<SEQUENCE>5
<FILENAME>c75436exv11w1.txt
<DESCRIPTION>EARNINGS PER SHARE COMPUTATION
<TEXT>
<PAGE>
.
.
.
EXHIBIT 11.1
EARNINGS PER SHARE
CORN PRODUCTS INTERNATIONAL, INC.
COMPUTATION OF NET INCOME PER SHARE OF CAPITAL STOCK
(in thousands, except per share data)
<Table>
<Caption>
Year Ended
December 31, 2002
-----------------
<S> <C>
Basic
Shares outstanding at the start of the period 35,406
Weighted average of new shares issued during the period --
Weighted average of treasury shares issued during the period for exercise of stock
options, other compensatory plans, and acquisitions 188
Weighted average of treasury shares purchased during the period (14)
------------
Average shares outstanding - basic 35,580
Effect of Dilutive Securities
Dilutive shares outstanding - assuming dilution 167
------------
Average shares outstanding - assuming dilution 35,747
Net income $ 63,422
Income Per Share - Basic
Net income $ 1.78
Income Per Share - Dilutive
Net income $ 1.77
</Table>
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.1
<SEQUENCE>6
<FILENAME>c75436exv12w1.txt
<DESCRIPTION>COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TEXT>
<PAGE>
.
.
.
EXHIBIT 12.1
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
CORN PRODUCTS INTERNATIONAL, INC.
COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES
<Table>
<Caption>
(in millions, except ratios)
2002 2001 2000 1999 1998
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
*Income before income taxes
and minority interest $ 121.4 $ 102.1 $ 121.9 $ 122.0 $ 71.0
Fixed charges 41.4 62.1 69.6 47.3 24.0
Capitalized interest (1.3) (2.0) (9.4) (6.3) (3.7)
---------- ---------- ---------- ---------- ----------
$ 161.5 $ 162.2 $ 182.1 $ 163.0 $ 91.3
========== ========== ========== ========== ==========
RATIO OF EARNINGS TO FIXED
CHARGES 3.90 2.61 2.62 3.45 3.80
========== ========== ========== ========== ==========
FIXED CHARGES:
Interest expense on debt $ 39.3 $ 60.5 $ 68.1 $ 45.8 $ 22.5
Amortization of discount on debt 0.9 0.2 0.2 -- --
Interest portion of rental expense
on operating leases 1.2 1.4 1.3 1.5 1.5
---------- ---------- ---------- ---------- ----------
Total $ 41.4 $ 62.1 $ 69.6 $ 47.3 $ 24.0
========== ========== ========== ========== ==========
Income before income taxes and
minority interest $ 117.1 $ 102.1 $ 101.9 $ 122.0 $ 71.0
Restructuring charges 4.3 0.0 20.0 0.0 0.0
---------- ---------- ---------- ---------- ----------
Adj. Income $ 121.4 $ 102.1 $ 121.9 $ 122.0 $ 71.0
========== ========== ========== ========== ==========
</Table>
* - Income before income taxes and minority interest does not include
restructuring charges.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.1
<SEQUENCE>7
<FILENAME>c75436exv13w1.txt
<DESCRIPTION>MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONDITION
<TEXT>
<PAGE>
EXHIBIT 13.1
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The year 2002 proved to be a challenging one for Corn Products
International, Inc. given the enactment of a discriminatory tax on soft drinks
sweetened with high fructose corn syrup ("HFCS") in Mexico (see Recent
Developments and Outlook section below) and difficult economic conditions in
South America. Despite these difficulties, however, our net income increased
from the prior year driven by substantially lower financing costs and the
discontinuation of goodwill amortization. Additionally, our operating cash flows
grew 20 percent and our debt level was substantially reduced.
In North America, significantly lower operating income in Mexico caused by
the discriminatory tax on beverages sweetened with HFCS more than offset
improved earnings throughout the rest of the region, resulting in a 14 percent
decline in operating income for the region. In South America, operating earnings
decreased 15 percent reflecting difficult economic conditions and local currency
weakness throughout the region. In Asia/Africa, higher sales volume, stronger
Asian currencies and the discontinuation of goodwill amortization drove
operating income up 20 percent from 2001.
In 2001, we began selling, marketing and distributing designated sweetener
production destined for sale in the United States through CornProductsMCP
Sweeteners LLC ("CPMCP"), a limited liability joint marketing company owned by
the Company and Minnesota Corn Processors, LLC ("MCP"). On July 11, 2002, MCP
announced that it had signed a merger agreement with Archer-Daniels-Midland
Company ("ADM"), whereby MCP would merge with a subsidiary of ADM. The
consummation of the merger was subject to a number of conditions, including
approval from the unit holders of MCP and various regulatory agencies. On
September 5, 2002, the unit holders of MCP approved the proposed sale. Shortly
thereafter, the United States Justice Department's Antitrust Division filed a
lawsuit in U.S. District Court, formally blocking the proposed transaction, and
simultaneously also filed a consent decree approving the sale and requiring
CPMCP to be dissolved by December 31, 2002.
On September 6, 2002, we were notified of MCP's desire to dissolve CPMCP
effective December 31, 2002. On December 27, 2002, the Company and MCP agreed in
principle to a plan of dissolution that will allow for the orderly wind up of
CPMCP activities. Under the terms of the plan of dissolution, MCP agreed to pay
us an $11 million termination fee as required under the CPMCP Limited Liability
Company Agreement between the Company and MCP dated December 1, 2000. We
received this payment on December 31, 2002. In addition, we recorded an $8
million charge for our share of costs incurred relating to the dissolution.
These expenses consist primarily of direct incremental costs related to the
termination of employees, early termination of leases, losses on the disposition
of assets and other wind-down costs. The net non-recurring income of $3 million
($2 million after-tax, or $0.06 per diluted share) is included in other income
in the 2002 Consolidated Statement of Income.
RECENT DEVELOPMENTS AND OUTLOOK
On January 1, 2002, a discriminatory tax on soft drinks sweetened with HFCS
approved by the Mexican Congress late in 2001, became effective. This tax was
temporarily suspended on March 5, 2002. In response to the enactment of the tax,
which at the time effectively ended the use of HFCS for soft drinks in Mexico,
we ceased production of HFCS 55 at our San Juan del Rio plant, one of our four
plants in Mexico. Effective with the March 5, 2002 suspension of the tax, we
resumed the production and sale of HFCS in Mexico, although at levels below
historical volumes. On July 12, 2002, the Mexican Supreme Court annulled the
temporary suspension of the tax, thereby resuming the tax, and we curtailed the
production of HFCS 55 at our San Juan del Rio plant. On December 10, 2002, the
Mexican Congress declined to repeal the controversial tax on soft drinks
sweetened with HFCS.
We are disappointed with the Mexican Congress' decision to retain the tax
on soft drinks sweetened with HFCS. However, we continue to explore all options
for resolving the situation and minimizing any potential
22
<PAGE>
long-term negative financial impact that might occur. We have engaged in
discussions regarding the matter with both U.S. and Mexican government trade
officials, and have received informal assurances from both sides that repeal of
the tax is a condition precedent to resolving certain trade issues between the
countries. These same officials have also implied that a resolution of these
matters is expected in the near term. However, we cannot predict with any
certainty whether these trade matters will ultimately be resolved or the
likelihood or timing of repeal of the tax on soft drinks sweetened with HFCS. In
the meantime, we are attempting to mitigate the negative effects of the tax on
HFCS demand in Mexico by exploring other markets for our HFCS production
capacity in and around Mexico. We are continuing the restructuring of our
Mexican operations in an effort to improve efficiency and reduce operating
costs. We have also initiated formal action to seek compensation for damage to
our Mexican operations under the provisions of the North American Free Trade
Agreement (NAFTA).
On January 28, 2003, we notified the Government of Mexico of our intention
to submit to arbitration a claim for compensation under the investment
provisions of the NAFTA. We believe that the Government of Mexico has violated
certain of its obligations with respect to foreign investors under the NAFTA,
including those regarding non-discriminatory treatment and expropriations. The
claim, which approximates $250 million, seeks compensation for past and
potential lost profits and other costs related to our operations in Mexico as
well as our costs in pursuing resolution of this matter. The filing of the
notice of intent is the first step required by the NAFTA in pursuing the
resolution of an investment dispute. The NAFTA requires the Company to serve
written notice of its intention to submit a claim at least three months prior to
submitting the claim to arbitration. Pursuant to the process, the Company and
the Government of Mexico must continue to attempt to resolve the situation
through consultation or negotiation during this period.
Until there is a favorable resolution of the Mexican tax on soft drinks
sweetened with HFCS, we expect that we will be unable to make any significant
sales of HFCS to the soft drink industry in Mexico. Management continues to seek
a permanent repeal of the tax and currently believes that the matter will
ultimately be resolved through negotiations between the governments of the
United States and Mexico. Until that occurs, however, our operating results and
cash flows will continue to be adversely affected by the Mexican tax on soft
drinks sweetened with HFCS.
We currently believe that 2003 net income will improve from the past year
despite the Mexican HFCS tax.
RESULTS OF OPERATIONS
2002 COMPARED TO 2001
Net Income. We reported net income of $63 million, or $1.77 per diluted
common share for the year 2002, as compared to $57 million, or $1.60 per diluted
common share for 2001. The 2002 results include $8 million ($5 million
after-tax) of net non-recurring earnings consisting primarily of a gain from the
sale of a business unit, net of certain one-time charges, and the impact from
the dissolution of CPMCP. The non-recurring earnings include an $8 million
pretax gain from the February 2002 sale of Enzyme-Bio Systems Ltd. ("EBS") and
$3 million of net non-recurring earnings related to the dissolution of CPMCP,
partially offset by $4 million of charges principally related to workforce
reductions in North America. Additionally, a one-time gain of $1 million
resulting from the curtailment of certain benefit costs pertaining to the EBS
sale and workforce reduction was recorded. The 2001 results include $5.4 million
($3.5 million after-tax) of net non-recurring earnings related to a value-added
tax refund net of certain one-time charges. Excluding the net non-recurring
income from both 2002 and 2001, we earned $58 million, or $1.63 per diluted
share in 2002, compared to $53 million, or $1.50 per diluted share in 2001. This
increase primarily reflects significantly lower financing costs and, to a lesser
extent, the discontinuation of goodwill amortization which more than offset a
reduction in operating income mainly attributable to lower earnings in North
America and South America and an increase in minority interest. Results for 2001
include goodwill amortization expense of $12 million ($8 million after-tax), or
$0.21 per diluted share. We discontinued amortization of goodwill following the
adoption of Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets," effective January 1, 2002.
23
<PAGE>
Net Sales. Net sales for 2002 declined slightly to $1.87 billion from
$1.89 billion in 2001, as decreased sales in South America more than offset
increased sales in Asia/Africa and North America.
A summary of net sales by geographic region is shown below:
<Table>
<Caption>
INCREASE
2002 2001 (DECREASE) % CHANGE
------ ------ ---------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
North America.................................. $1,219 $1,212 $ 7 1%
South America.................................. 401 440 (39) (9)%
Asia/Africa.................................... 251 235 16 7%
------ ------ ---- ----
Total.......................................... $1,871 $1,887 $(16) (1)%
====== ====== ==== ====
</Table>
Weaker foreign currencies, particularly in South America, reduced sales by
11 percent, which offset improved price/product mix worldwide. Volume declines
reduced sales by 1 percent.
Sales in North America increased 1 percent, as a 3 percent price/product
mix improvement was offset by a volume decline of 1 percent and slightly weaker
local currencies. Sales in South America fell 9 percent, as price/product mix
improvements, while significant (up 37 percent), lagged local currency
devaluation throughout the region. Additionally, volume in the region was down 1
percent. Sales in Asia/Africa increased 7 percent, reflecting 4 percent volume
growth and stronger local currencies. Price/product mix in the region was
essentially unchanged from 2001.
Cost of Sales and Operating Expenses. Cost of sales for 2002 increased 1
percent to $1.60 billion from $1.59 billion in 2001. Excluding the effect of
certain non-recurring items from 2001, cost of sales for 2002 was flat as
compared with last year, while gross profit margin declined to 14 percent from
15 percent in 2001. The lower gross profit percentage principally reflects
reduced operating margins mainly due to the HFCS tax issue in Mexico and
economic weakness in Brazil.
Selling, general and administrative ("SG&A") expenses for 2002 decreased to
$134 million from $154 million in 2001, due primarily to the discontinuation of
goodwill amortization in 2002. We recorded $12 million of goodwill amortization
in 2001. SG&A expenses include non-recurring costs of $3 million and $5 million
in 2002 and 2001, respectively. Excluding the effect of these non-recurring
items and goodwill amortization, SG&A expenses for 2002 represented 7.0 percent
of net sales, down from 7.2 percent in 2001. This decrease principally reflects
cost reductions in North America and lower expenses in South America
attributable to weaker local currencies.
Earnings from Non-Consolidated Affiliates and Other Income. Earnings from
non-consolidated affiliates and other income for 2002 decreased to $20 million
from $21 million in 2001, as the previously mentioned gain from the sale of EBS
($8 million) and income from the CPMCP dissolution ($3 million) were
substantially offset by a $7 million reduction in earnings from non-consolidated
affiliates. Additionally, other income for 2001 included a $3 million gain from
the cancellation of a long-term obligation.
24
<PAGE>
Operating Income. A summary of operating income is shown below:
<Table>
<Caption>
FAVORABLE FAVORABLE
(UNFAVORABLE) (UNFAVORABLE)
2002 2001 VARIANCE % CHANGE
---- ---- ------------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
North America................................ $ 56 $ 65 $ (9) (14)%
South America................................ 58 68 (10) (15)%
Asia/Africa.................................. 54 45 9 20%
Corporate expenses........................... (23) (17) (6) (35)%
---- ---- ---- -----
Total........................................ $145 $161 $(16) (10)%
Non-recurring items, net..................... 8 5 3 60%
---- ---- ---- -----
Operating income............................. $153 $166 $(13) (8)%
==== ==== ==== =====
</Table>
Operating income for 2002 decreased 8 percent to $153 million from $166
million in 2001. Excluding the net non-recurring earnings from both years and
goodwill amortization from the 2001 period, operating income decreased 16
percent from 2001, reflecting significantly lower earnings in North America and
South America. North America operating income decreased 14 percent from a
year-ago, as significantly lower results for Mexico due to the imposition of the
Mexican HFCS tax more than offset earnings improvements throughout the rest of
the region. Excluding goodwill amortization from the prior year, operating
income in North America dropped 18 percent from 2001. South America operating
income fell 15 percent, primarily due to the difficult economic conditions and
weaker currencies throughout the region, particularly in Brazil. Excluding
goodwill amortization from last year's results, operating income in South
America declined 16 percent from last year. Asia/Africa operating income
increased 20 percent from a year ago largely due to the discontinuation of
goodwill amortization. Excluding goodwill amortization, Asia/Africa operating
income for 2002 was up 3 percent from last year, primarily reflecting stronger
local currencies and increased volume.
Financing Costs. Financing costs decreased to $36 million in 2002 from $64
million in 2001. The decrease primarily reflects lower interest rates, reduced
debt levels and foreign currency transaction gains. We recorded $1 million of
foreign currency transaction gains in 2002 as compared with foreign currency
transaction losses of $8 million in 2001.
Provision for Income Taxes. Our effective tax rate was 36 percent in 2002,
up from 35 percent in 2001. The higher tax rate is mainly due to a change in the
mix of domestic and foreign earnings for 2002 as compared with 2001.
Minority Interest in Earnings. Minority interest in earnings increased to
$12 million in 2002 from $9 million in 2001. The increase primarily reflects
improved earnings in the Southern Cone of South America and Korea, which more
than offset a reduction in minority interest attributable to our increased
ownership in Arancia Corn Products, S.A. de C .V. ("Arancia"). Arancia became a
wholly-owned subsidiary on March 4, 2002.
Comprehensive Loss. We recorded a comprehensive loss of $22 million in
2002 compared to a comprehensive loss of $93 million in 2001. The decrease in
the comprehensive loss reflects a $36 million favorable variance in the currency
translation adjustment, gains from cash flow hedges (net of income taxes) and an
increase in net income. For 2002, we recorded a negative currency translation
adjustment of $94 million, compared to a negative currency translation
adjustment of $130 million in 2001. The unfavorable currency translation
adjustment for 2002 relates primarily to the negative impact of weakened local
currencies, particularly in Argentina and Brazil.
2001 COMPARED TO 2000
Net Income. We reported net income of $57 million, or $1.60 per diluted
common share for the year 2001, as compared to $48 million, or $1.35 per diluted
common share for 2000. The 2001 results include $5.4 million ($3.5 million
after-tax) of non-recurring earnings from a tax refund, net of certain one-time
25
<PAGE>
charges. The results for 2000 include special charges of $20 million ($13
million after-tax) pertaining to a workforce reduction program ($17.5 million)
and the write-off of certain capital projects ($2.5 million). Excluding the
non-recurring earnings from the 2001 results and the special charges recorded in
2000, the Company earned $53 million, or $1.50 per diluted share in 2001, down
from $61 million, or $1.72 per diluted share in 2000. This decrease principally
reflects weaker foreign currencies, higher energy costs and increased financing
costs, which more than offset favorable contributions from sales volume growth,
improved selling prices and a reduction in minority interest in earnings.
Net Sales. Net sales for 2001 grew 1 percent to $1.89 billion from $1.87
billion in 2000, as increased sales in North America more than offset sales
declines in South America and Asia/Africa. A summary of net sales by geographic
region is shown below:
<Table>
<Caption>
INCREASE
2001 2000 (DECREASE) % CHANGE
------ ------ ---------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
North America.................................. $1,212 $1,157 $ 55 5 %
South America.................................. 440 460 (20) (4)%
Asia/Africa.................................... 235 248 (13) (5)%
------ ------ ---- ---
Total.......................................... $1,887 $1,865 $ 22 1 %
====== ====== ==== ===
</Table>
Increased volume worldwide and improved price/mix resulted in net sales
growth of 4 percent and 3 percent, respectively, which was largely offset by a 6
percent reduction attributable to weaker foreign currencies, particularly in
Brazil and Korea. Sales in North America grew 5 percent, reflecting 3 percent
volume growth and 2 percent price/product mix improvement. Significantly higher
volume and improved price/product mix in both Canada and Mexico more than offset
a volume decline in the United States. South America sales declined 4 percent as
currency weakness throughout the region more than offset an 8 percent growth
attributable to increased volume and a 3 percent price/product mix improvement.
The value of local currencies in relation to the US dollar fell in each country
within the region, with the decline in the Brazilian Real having the most
significant impact. Local currency weakness also caused sales in Asia/Africa to
decline in terms of U.S. dollars from the prior year. Sales in Asia/Africa
decreased 5 percent as weaker currencies in Korea, and to a lesser extent in
Pakistan, more than offset a 4 percent price/product mix improvement and 2
percent volume growth in the region.
Cost of Sales and Operating Expenses. Cost of sales for 2001 increased 2
percent to $1.59 billion from $1.56 billion in 2000, on sales volume growth of 4
percent. Excluding the effect of non-recurring items, cost of sales increased
approximately 3 percent from 2000, while gross margin declined to 15 percent
from 16 percent in 2000. The reduction in the gross profit margin principally
reflects higher energy costs and lower by-product selling prices, particularly
during the first half of 2001.
SG&A expenses for 2001 increased to $154 million from $139 million in 2000,
due in part to the recording of certain non-recurring costs. Excluding the
non-recurring costs, SG&A expenses totaled $149 million, representing 7.9
percent of net sales, up from 7.5 percent in 2000. This increase resulted mainly
from higher administrative costs and increased general corporate expenses.
Earnings from Non-Consolidated Affiliates and Other Income. Earnings from
non-consolidated affiliates and other income for 2001 increased to $21 million
from $9 million in 2000, primarily due to the recording of our share of the
earnings of CPMCP, partially offset by reduced fee and royalty income.
Additionally, other income for 2001 included a $3 million gain from the
cancellation of a long-term obligation.
26
<PAGE>
Operating Income. A summary of operating income is shown below:
<Table>
<Caption>
FAVORABLE FAVORABLE
(UNFAVORABLE) (UNFAVORABLE)
2001 2000 VARIANCE % CHANGE
---- ---- ------------- -------------
(IN MILLIONS)
<S> <C> <C> <C> <C>
North America................................ $ 65 $ 77 $(12) (16)%
South America................................ 68 61 7 11%
Asia/Africa.................................. 45 54 (9) (17)%
Corporate expenses........................... (17) (16) (1) (6)%
---- ---- ---- ----
Total........................................ $161 $176 $(15) (9)%
Non-recurring items, net..................... 5 (20) 25 nm*
---- ---- ---- ----
Operating income............................. $166 $156 $ 10 6%
==== ==== ==== ====
</Table>
- ---------------
* nm -- not meaningful
Operating income for 2001 increased 6 percent to $166 million from $156
million in 2000. However, excluding the non-recurring earnings recorded in 2001
and the special charges taken in 2000, operating income declined 9 percent to
$161 million from $176 million in 2000. The decline in operating income reflects
reduced earnings in North America and Asia/Africa of 16 percent and 17 percent,
respectively, which more than offset an 11 percent improvement in South America.
The decrease in North America resulted primarily from higher energy costs and
lower by-product selling prices, particularly during the first half of 2001. The
lower results in Asia/Africa principally reflect unfavorable translation effects
associated with the previously mentioned currency weakness in the region. South
America operating income grew 11 percent as earnings in the Southern Cone of
South America almost doubled from 2000, more than offsetting lower operating
profits in Brazil.
Financing Costs. Financing costs increased to $64 million in 2001 from $54
million in 2000. This increase was primarily due to the recognition of $8
million of foreign currency transaction losses in 2001 ($7 million of which
resulted from the January 6, 2002 devaluation of the Argentine peso), as
compared to foreign currency transaction gains of $1 million in 2000. A decrease
in capitalized interest and higher average outstanding indebtedness due to
acquisition related borrowings, partially offset by lower weighted average
interest rates, also contributed to the increased financing costs.
Provision for Income Taxes. Our effective tax rate was 35 percent for both
2001 and 2000. The tax rates reflect the favorable effect of foreign source
income in countries where tax rates are generally lower than in the United
States.
Minority Interest in Earnings. Minority interest in earnings decreased to
$9 million in 2001 from $18 million in 2000. This decrease mainly reflects the
increase in our ownership interest in Doosan Corn Products Korea, Inc., our
Korean affiliate, from 50 to 75 percent, effective January 2001.
Comprehensive Loss. We recorded a comprehensive loss of $93 million in
2001 compared to a comprehensive loss of $15 million in 2000. The increased loss
principally reflects unfavorable currency translation adjustments and, to a
lesser extent, net losses of $20 million (net of tax effects) on cash flow
hedges. For 2001, we recorded a negative currency translation adjustment of $130
million, compared to a negative currency translation adjustment of $63 million
in 2000. The unfavorable currency translation adjustment for 2001 primarily
reflects the impact of the Argentine currency devaluation and the continued
weakness of other local currencies relative to the U.S. dollar, particularly the
Brazilian Real.
LIQUIDITY & CAPITAL RESOURCES
At December 31, 2002, our total assets were $2.02 billion, down from $2.23
billion at December 31, 2001. This decrease primarily reflects unfavorable
translation effects resulting from the stronger U.S. dollar in relation to
foreign currencies, particularly in Argentina and Brazil. Additionally, improved
working capital
27
<PAGE>
management, the sale of EBS and fixed asset depreciation in excess of capital
spending contributed to the decrease in total assets. Stockholders' equity
declined to $828 million at December 31, 2002 from $857 million at December 31,
2001, principally due to unfavorable currency translation effects, which more
than offset net income.
On June 28, 2002, the Company sold $200 million of 8.25 percent senior
notes due July 15, 2007. The net proceeds from the sale of the notes were used
to repay $197 million of borrowings outstanding under our then existing $340
million U.S. revolving credit facility. On October 15, 2002, we entered into a
new 3-year, $125 million revolving credit agreement (the "Revolving Credit
Agreement"). The Revolving Credit Agreement replaced the Company's previously
existing $340 million revolving credit facility, which has been terminated.
Borrowings that had been outstanding under the $340 million revolving credit
facility were repaid with excess cash. On November 18, 2002, the Company sold an
additional $55 million of 8.25 percent senior notes due July 15, 2007. The net
proceeds from the sale of the notes were used to repay indebtedness.
At December 31, 2002, we had total debt outstanding of $600 million,
compared to $756 million at December 31, 2001. The debt outstanding includes
$255 million of 8.25 percent senior notes due 2007, $200 million of 8.45 percent
senior notes due 2009 and $65 million of affiliate long-term debt. The current
portion of long-term debt is $12 million. We also have $72 million of affiliate
short-term borrowings outstanding.
The principal source of our liquidity comes from our internally generated
cash flow, which we supplement as necessary with our ability to raise funds in
both the equity and debt markets. We currently have a shelf registration
statement on file under which we can issue an additional $145 million of debt.
In addition, we have a $125 million revolving credit facility that extends to
October 15, 2005, and under which there were no outstanding borrowings at
December 31, 2002. We also have a total of $360 million of unused operating
lines of credit in the various foreign countries in which we operate.
The weighted average interest rate on total Company indebtedness was
approximately 5.4 percent and 7.1 percent for 2002 and 2001, respectively. On
March 14, 2002, we entered into interest rate swap agreements that effectively
converted the interest rate associated with the Company's 8.45 percent senior
notes to a variable interest rate. The fair value of these agreements at
December 31, 2002 ($27 million) is reflected in the Consolidated Balance Sheet
as an offset to the increase in the fair value of the hedged debt obligation.
Net Cash Flows
A summary of operating cash flows is shown below:
<Table>
<Caption>
2002 2001
----- -----
(IN MILLIONS)
<S> <C> <C>
Net income.................................................. $ 63 $ 57
Depreciation and amortization............................... 103 127
Earnings from non-consolidated affiliates................... (7) (14)
Gain on sale of business.................................... (8) --
Gain on dissolution of business............................. (3) --
Foreign currency transaction (gains) losses................. (1) 8
Deferred taxes.............................................. (6) 2
Minority interest in earnings............................... 12 9
Changes in working capital.................................. 65 (16)
Other....................................................... (12) (2)
---- ----
Cash provided from operations............................. $206 $171
==== ====
</Table>
We generated $206 million of cash from operations in 2002, compared to $171
million last year. This increase primarily reflects a significant improvement in
cash flow pertaining to changes in working capital, compared to last year. The
increased cash flow from working capital changes resulted principally from
28
<PAGE>
improved systems and procedures, particularly in the area of trade accounts
receivable collections and accounts payable processing. The cash provided from
operations was used primarily to reduce indebtedness and fund capital
expenditures. Listed below are the Company's primary investing and financing
activities for 2002 (in millions):
<Table>
<Caption>
<S> <C>
Capital expenditures........................................ $78
Payments to acquire additional business..................... 42
Proceeds from the sale of EBS............................... 35
Dividends paid (including dividends to minority interest
shareholders)............................................. 19
Payments on debt............................................ 407
Proceeds from borrowings.................................... 263
</Table>
As described in Note 4 of the notes to the consolidated financial
statements, we control approximately 73 percent of our Southern Cone of South
America businesses. The minority interest shareholders of the Company's Southern
Cone of South America businesses have the right to either: (i) require the
Company to sell an amount of shares of the Southern Cone businesses back to the
minority interest shareholders until the minority interest shareholders own 49.5
percent of the Southern Cone businesses; or (ii) require the Company to purchase
the approximately 27 percent ownership interest in the Southern Cone businesses
currently held by the minority interest shareholders. It is anticipated that the
Company will purchase the shares from the minority interest shareholders in
March 2003 at a cost of approximately $52 million.
We expect that our operating cash flows and borrowing availability under
our credit facilities will be more than sufficient to fund our anticipated
capital expenditures, dividends and other investing and/or financing strategies
for the foreseeable future.
KEY PERFORMANCE METRICS
Beginning in 2002 we began using certain key metrics to better monitor our
progress towards achieving our strategic business objectives. These metrics
include the tracking as to whether we are achieving an adequate return on
stockholders' equity through returning our cost of "Capital Employed". We also
monitor our financial leverage by looking at our "Debt to Capitalization Ratio"
to assure that we are properly financed. Other key metrics include "Return on
Net Sales" and "Working Capital as a percentage of Net Sales".
The fundamentals of these key metrics for 2002 with comparison to the prior
year are as follows:
<Table>
<Caption>
RETURN ON CAPITAL EMPLOYED 2002 2001
- -------------------------- ------- -------
($S IN MILLIONS)
<S> <C> <C>
Total stockholders' equity.................................. $ 828 $ 857
Add:
Cumulative translation adjustment......................... 407 313
Minority interest in subsidiaries......................... 93 147
Total debt................................................ 600 756
Less:
Cash and cash equivalents................................. (36) (65)
------ ------
Capital employed(a)......................................... $1,892 $2,008
------ ------
Operating income............................................ $ 153 $ 166
Adjusted for:
Income taxes (at rates of 36% and 35%, respectively)...... (55) (58)
------ ------
Adjusted operating income, net of tax(b).................... $ 98 $ 108
------ ------
Return on Capital Employed(b/a)............................. 5.2% 5.4%
====== ======
</Table>
29
<PAGE>
<Table>
<Caption>
DEBT TO CAPITALIZATION RATIO 2002 2001
- ---------------------------- ------- -------
($S IN MILLIONS)
<S> <C> <C>
Short-term debt............................................. $ 84 $ 444
Long-term debt.............................................. 516 312
------ ------
Total debt(a)............................................. $ 600 $ 756
------ ------
Deferred income tax liabilities............................. $ 163 $ 186
Minority interest in subsidiaries........................... 93 147
Stockholders' equity........................................ 828 857
------ ------
Total capital............................................. $1,084 $1,190
------ ------
Total debt and capital(b)................................... $1,684 $1,946
------ ------
Debt to Capitalization Ratio(a/b)........................... 35.6% 38.8%
====== ======
</Table>
<Table>
<Caption>
RETURN ON NET SALES 2002 2001
- ------------------- ------- -------
($S IN MILLIONS)
<S> <C> <C>
Net income.................................................. $ 63 $ 57
Add back:
Minority interest in earnings............................. 12 9
------ ------
Net income before minority interest(a)...................... $ 75 $ 66
------ ------
Net sales(b)................................................ $1,871 $1,887
------ ------
Return on Net Sales(a/b).................................... 4.0% 3.5%
====== ======
</Table>
<Table>
<Caption>
WORKING CAPITAL AS A % OF NET SALES 2002 2001
- ----------------------------------- ------- -------
($S IN MILLIONS)
<S> <C> <C>
Current assets.............................................. $ 485 $ 555
Less: current liabilities................................... (347) (675)
------ ------
Working capital............................................. $ 138 $ (120)
Add back:
Short-term debt........................................... 84 444
------ ------
Adjusted working capital(a)................................. $ 222 $ 324
------ ------
Net Sales(b)................................................ $1,871 $1,887
------ ------
Working Capital as a percentage of Net Sales(a/b)........... 11.9% 17.2%
====== ======
</Table>
Commentary on Key Performance Metrics:
In accordance with the Company's long-term objectives, we have set certain
goals relating to key performance metrics that we will endeavor to meet over the
next three to five years. The Company has made progress towards achieving these
goals during 2002. Three of the four performance metrics improved in 2002
despite two significant events that transpired beyond the control of management.
The first was the imposition of a tax on soft drinks sweetened with HFCS in
Mexico that effectively ended the use of HFCS for soft drinks in that country.
The second was the devaluation of currencies in South America that reduced
earnings in dollar terms and significantly reduced the capitalization of the
Company. The effect of the Mexican tax had a significant unfavorable impact on
the Company's earnings for 2002. While the Company believes that the tax will be
rescinded, we are exploring alternative business strategies in the event that
the tax remains in place. The final resolution of this matter could have a
material impact on the attainment of the metrics in the specified time frame.
The Mexican tax event is more fully described in the Recent Developments and
Outlook section of this MD&A.
30
<PAGE>
Return on Capital Employed -- Our goal is to achieve a Return on Capital
Employed in excess of 8.5 percent, which is our average Cost of Capital as
calculated based upon our current financing profile. In determining this
performance metric, the negative cumulative translation adjustment is added back
to stockholders' equity to calculate returns based on the Company's original
investment costs. The decline in 2002 to 5.2 percent from 5.4 percent in 2001 is
directly related to the following two events. During 2002 South America
operating income fell 15 percent, primarily due to difficult economic conditions
and weaker currencies in the region. In addition, the discriminatory tax in
Mexico had a significant unfavorable impact on operating income in 2002.
Debt to Capitalization Ratio -- Our goal is to maintain a Debt to
Capitalization Ratio in the range of 32 to 35 percent. During 2002 we improved
this ratio from 38.8 percent at December 31, 2001 to 35.6 percent at December
31, 2002. This was accomplished primarily as a result of strong cash flow
generation, which contributed significantly to the reduction in our adjusted
working capital from $324 million to $222 million. We will strive to maintain
this ratio in the established range as we focus our growth on leveraging our
assets through strategic acquisitions, joint ventures and alliances and selling
those assets that do not meet our long-term strategy.
Return on Net Sales -- Our goal is to improve our Return on Net Sales to
the range of 7 to 9 percent. During 2002 our Return on Net Sales improved from
3.5 percent last year to 4.0 percent in 2002. The improvement primarily reflects
achieved cost reductions. Further improvement is anticipated to result from the
expected restart of our Mexican HFCS business and gains from new products and
customers in both our existing business as well as from geographic expansion and
alliances.
Working Capital as a % of Net Sales -- Our goal is to maintain working
capital in a range of 10 to 12 percent of the Company's net sales. During 2002
we made significant progress in this performance metric through a major
initiative to reduce our working capital. This resulted in a 5 percent
improvement in Working Capital as a Percentage of Net Sales, from just over 17
percent in 2001 to just under 12 percent in 2002.
RISK AND UNCERTAINTIES
The Company operates in one business segment, corn refining, and is managed
on a geographic regional basis. In each country where we conduct business, the
business and assets are subject to varying degrees of risk and uncertainty. We
insure our business and assets in each country against insurable risks in a
manner that our management deems appropriate. Because of our geographic
dispersion, we believe that a loss from non-insurable events in any one country
would not have a material adverse effect on our operations as a whole. We
believe there is no concentration of risk with any single customer or supplier,
or small group of customers or suppliers, whose failure or non-performance would
materially affect our results. We have also established policies to help manage
other financial risks as discussed below.
Commodity Costs. The Company's finished products are made primarily from
corn. Purchased corn accounts for between 40 percent and 65 percent of finished
product costs. In North America, we sell a large portion of our finished product
at firm prices established in supply contracts that typically extend for up to
one year. In order to minimize the effect of volatility in the cost of corn
related to these firm-priced supply contracts, we enter into corn futures
contracts or take hedging positions in the corn futures market. From time to
time, we may also enter into anticipatory hedges. All of these derivative
contracts typically mature within one year. At expiration, we settle the
derivative contracts at a net amount equal to the difference between the
then-current price of corn and the fixed contract price. While these hedging
instruments are subject to fluctuations in value, changes in the value of the
underlying exposures we are hedging generally offset such fluctuations. While
the corn futures contracts or hedging positions are intended to minimize the
volatility of corn costs on operating profits, occasionally the hedging activity
can result in losses, some of which may be material. Outside of North America,
sales of finished product under long-term, firm-priced supply contracts are not
material.
Our hedging instruments generally relate to contracted firm-priced
business. Based on the Company's overall commodity hedge exposure at December
31, 2002, a hypothetical 10 percent change in market rates applied to the fair
value of the instruments would have no material impact on the Company's
earnings, cash
31
<PAGE>
flows, financial position or the fair value of commodity price and
risk-sensitive instruments over a one-year period.
International Operations and Foreign Exchange. We have operated a
multinational business subject to the risks inherent in operating in foreign
countries and with foreign currencies for many years. Our non-U.S. operations
are subject to foreign currency exchange fluctuations, as well as to political,
economic and other risks, such as those previously described in the Recent
Developments and Outlook section pertaining to Mexico.
Because we primarily sell world commodities, we believe that local prices
will adjust relatively quickly to offset the effect of a local devaluation. We
may occasionally hedge commercial transactions and certain liabilities that are
denominated in a currency other than the currency of the operating unit entering
into the underlying transaction.
Interest Rate Exposure. Approximately 46 percent of our borrowings are
fixed rate bonds and loans. The remaining 54 percent of our borrowings are at
floating interest rates of which approximately 41 percent are long-term loans
and 13 percent are short-term credit facilities. Should short-term rates change,
this could affect our interest cost. A hypothetical increase of 1 percentage
point in the weighted average floating interest rate for 2002 would have
increased interest expense and reduced pretax income for 2002 by approximately
$2 million.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results may differ from these
estimates under different assumptions and conditions.
The Company's management has identified the most critical accounting
policies upon which the financial statements are based and that involve the most
complex and subjective decisions and assessments. These policies relate to our
major long-lived assets, including the valuation of goodwill and other
intangible assets, and the recognition of depreciation and impairment in the
carrying value of property, plant and equipment. Senior management of the
Company has discussed the development, selection and disclosure of these
policies with members of the Audit Committee of our Board of Directors. These
accounting policies are disclosed in the notes to the consolidated financial
statements. The discussion that follows should be read in conjunction with the
consolidated financial statements and related notes included elsewhere in this
Annual Report on Form 10-K.
Long-Lived Assets. The Company has substantial investments in property,
plant and equipment and goodwill. For property, plant and equipment we recognize
the cost of depreciable assets in operations over the estimated useful life of
the assets, and we evaluate the recoverability of these assets whenever events
or changes in circumstances indicate that the carrying value of the assets may
not be recoverable. For goodwill we perform an annual impairment assessment (or
more frequently if impairment indicators arise) as required by Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets."
We have chosen to perform this annual impairment assessment in December of each
year. An impairment loss is assessed and recognized in operating earnings if the
fair value of either goodwill or property, plant and equipment is less than its
carrying amount.
In analyzing the fair value of goodwill and assessing the recoverability of
the carrying value of property, plant and equipment, we have to make projections
regarding future cash flows. In developing these projections, we make a variety
of important assumptions and estimates that have a significant impact on our
assessments of whether the carrying values of goodwill and property, plant and
equipment should be adjusted to reflect impairment. Among these are assumptions
and estimates about the future growth and profitability of the related business
unit, anticipated future economic, regulatory and political conditions in the
business unit's
32
<PAGE>
market, the appropriate discount rates relative to the risk profile of the unit
or assets being evaluated and estimates of terminal or disposal values.
We completed the required annual test of goodwill impairment for all of our
affected reporting units in December 2002. In each case, based on our
assumptions about future cash flows we expect to be able to generate from each
reporting unit, the fair value of the reporting unit was in excess of the
related carrying amounts, and accordingly, no impairment of goodwill was
required to be measured and recognized. We also concluded that the Mexican
Congress' December 10, 2002 decision not to repeal the tax on soft drinks
sweetened with HFCS constituted a triggering event which necessitated that we
assess the recoverability of the carrying value of our HFCS production-related
long-term assets in Mexico. We also completed this assessment in December 2002
and concluded, based on our assumptions about future cash flows we expect to be
able to generate from these assets, that their carrying values were not
impaired. For additional information regarding the status of the Mexican
Government's tax on soft drinks sweetened with HFCS, refer to the "Recent
Developments and Outlook" section above and to Note 3 of the notes to the
consolidated financial statements.
Our ability to fully recover the carrying value of our long-term investment
in Mexico, which consists primarily of goodwill and property, plant and
equipment associated with our Mexican operations, is dependent upon the
generation of sufficient cash flows from the use or other disposition of these
assets. The Company's ability to generate these cash flows will be significantly
affected by a variety of factors, including the timing and permanence of any
repeal of the tax on soft drinks sweetened with HFCS, the timing and extent of
any recovery in the demand for HFCS by the Mexican soft drink industry, the
extent to which alternative markets for HFCS develop in and around Mexico, the
success of the Company's restructuring activities in Mexico, and the amount of
the proceeds received from the resolution of the Company's NAFTA claim against
the Government of Mexico, if any, as well as by management's ability to develop
and implement a successful long-term business strategy in Mexico. Based on our
long-term forecasts of operating results, we believe that the Company will
generate sufficient cash flows from the use or other disposition of these
long-term assets to fully recover their carrying values. In developing our
estimates of the cash flows that will be generated from the Company's Mexican
operations, we have assumed that the tax on soft drinks sweetened with HFCS will
be permanently repealed in the near future, and that sales of HFCS to the
Mexican soft drink industry will return to the levels realized prior to the
imposition of the tax by the end of 2003. Under these assumptions about future
HFCS sales in Mexico, the estimated fair value of the Company's Mexican business
exceeds its carrying amount by approximately $90 million. In the event actual
results differ from those assumed, the Company could be required to recognize an
impairment of goodwill and property, plant and equipment, and the amount of such
impairment could be material.
It is reasonably possible that we could have used different assumptions in
making our estimates of future operating results and cash flows in making our
impairment calculations, particularly those related to our Mexican business. For
example, if we assumed that the tax on soft drinks sweetened with HFCS would not
be repealed, our projections of future cash flows in Mexico would be different.
While we believe that the tax will ultimately be repealed, we have nevertheless
begun to develop an alternative business strategy with respect to our Mexican
operations in the less likely event the tax is not rescinded. This strategy
includes, among other things, the following: (i) developing new uses and new
customers for HFCS; (ii) increasing sales of our current product portfolio, as
well as developing new products for the region; (iii) investing capital to
increase production output for current and new products; (iv) the potential
transfer of certain HFCS equipment to plants outside of Mexico; and (v)
continuing our cost reduction program. Based on our projections of operating
results and cash flows that would be generated under this alternative business
model for our Mexican operations, we may be required to record an impairment
charge to write-down the carrying value of goodwill in the event the tax is not
repealed. These assumptions are subject to change based on business conditions
and the results of the impairment calculations could be significantly different
if performed at a later date.
In concluding that an impairment of our Mexican goodwill may arise if the
tax is not repealed, we assumed that no proceeds will be received from our claim
for compensation under NAFTA against the Mexican Government. Any recovery we
receive from the resolution of this claim would reduce the amount of
33
<PAGE>
any impairment to be recognized. However, no assurance can be made that we will
be successful in either asserting our claim or in recovering damages.
NEW ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 143, "Accounting for Asset Retirement Obligations" ("SFAS 143"), which
addresses financial accounting and reporting for legal obligations associated
with the retirement of tangible long-lived assets and the related asset
retirement costs. The Company is required to adopt SFAS 143 effective January 1,
2003. The adoption of SFAS 143 is not expected to have a significant effect on
the Company's consolidated financial statements.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"), which addresses
financial accounting and reporting for costs associated with exit or disposal
activities. SFAS 146 replaces EITF Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". SFAS 146 is required to
be applied prospectively to exit or disposal activities initiated after December
31, 2002. The adoption of SFAS 146 is not expected to have a significant effect
on the Company's consolidated financial statements.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"), which addresses financial
accounting and reporting for obligations under certain guarantees. FIN 45
requires, among other things, that a guarantor recognize a liability for the
fair value of an obligation undertaken in issuing a guarantee, under certain
circumstances. The recognition and measurement provisions of FIN 45 are required
to be applied prospectively to guarantees issued or modified after December 31,
2002. The adoption of FIN 45 is not expected to have a significant effect on the
Company's consolidated financial statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure, an amendment of FASB Statement No.
123" ("SFAS 148"). SFAS 148 amends SFAS 123 to provide alternative methods of
transition for a voluntary change to the fair value method of accounting for
stock-based employee compensation. In addition, SFAS 148 amends the disclosure
requirements for SFAS 123 to require prominent disclosures in both annual and
interim financial statements. Certain of the disclosure modifications are
required for fiscal years ending after December 15, 2002 and are included in the
notes to the consolidated financial statements included elsewhere in this
report.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51" ("FIN 46"), which
addresses the consolidation of variable interest entities as defined in the
Interpretation. FIN 46 applies immediately to variable interests in variable
interest entities created after January 31, 2003, and to variable interests in
variable interest entities obtained after January 31, 2003. The application of
FIN 46 is not expected to have a material effect on the Company's consolidated
financial statements.
FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K contains or may contain forward-looking
statements concerning the Company's financial position, business and future
earnings and prospects, in addition to other statements using words such as
anticipate, believe, plan, estimate, expect, intend and other similar
expressions. These statements contain certain inherent risks and uncertainties.
Although we believe our expectations reflected in these forward-looking
statements are based on reasonable assumptions, stockholders are cautioned that
no assurance can be given that our expectations will prove correct. Actual
results and developments may differ materially from the expectations conveyed in
these statements, based on factors such as the following: fluctuations in
worldwide commodities markets and the associated risks of hedging against such
fluctuations; fluctuations in aggregate industry supply and market demand;
general political, economic, business, market and weather conditions in the
various geographic regions and countries in which we manufacture and sell our
products, including fluctuations in the value of local currencies, energy costs
and availability and changes in regulatory controls regarding quotas, tariffs,
taxes and biotechnology issues; increased competitive and/or
34
<PAGE>
customer pressure in the corn-refining industry; the outbreak or continuation of
hostilities; and stock market fluctuation and volatility. Our forward-looking
statements speak only as of the date on which they are made and we do not
undertake any obligation to update any forward-looking statement to reflect
events or circumstances after the date of the statement. If we do update or
correct one or more of these statements, investors and others should not
conclude that we will make additional updates or corrections. For a further
description of risk factors, see the Company's most recently filed Annual Report
on Form 10-K and subsequent reports on Forms 10-Q or 8-K.
35
<PAGE>
REPORT OF MANAGEMENT
THE MANAGEMENT OF CORN PRODUCTS INTERNATIONAL, INC. is responsible for the
financial and operating information contained in this Annual Report on Form
10-K, including the consolidated financial statements covered by the independent
auditors' report. These financial statements were prepared in conformity with
accounting principles generally accepted in the United States of America and
include, where necessary, informed estimates and judgements.
The Company maintains systems of accounting, disclosure and internal
control designed to provide reasonable assurance that assets are safeguarded
against loss, and that transactions are executed and recorded properly so as to
ensure that the financial records are reliable for preparing financial
statements and that the financial statements and disclosures are accurately
reported.
Elements of these control systems include the establishment and
communication of accounting and administrative policies and procedures, the
selection and training of qualified personnel and a continuous program of
internal audit.
The Company's consolidated financial statements are reviewed by its Audit
Committee, which is composed entirely of independent outside directors. This
Committee meets regularly with management, the Company's internal auditors and
with the independent auditors to review the scope and results of the annual
audit and interim reviews, to discuss their evaluation of internal controls and
the quality of financial reporting, and to carry out the Audit Committee's
oversight role with respect to internal auditing, internal controls and
financial reporting matters. Both the independent auditors and the internal
auditors meet privately with, and have direct access to, the Audit Committee to
discuss the results of their audits.
James W. Ripley
Chief Financial Officer
January 28, 2003
36
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders of Corn Products International, Inc.:
We have audited the accompanying consolidated balance sheets of Corn
Products International, Inc. and its subsidiaries (the "Company") as of December
31, 2002 and 2001, and the related consolidated statements of income,
comprehensive income, stockholders' equity and cash flows for each of the years
in the three-year period ended December 31, 2002. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Corn
Products International, Inc. and its subsidiaries as of December 31, 2002 and
2001, and the results of their operations and their cash flows for each of the
years in the three-year period ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States of America.
As described in Note 2 to the consolidated financial statements, the
Company adopted Statement of Financial Accounting Standard (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities, as of January 1,
2001 and SFAS No. 142, Goodwill and Other Intangible Assets, as of January 1,
2002.
KPMG LLP
Chicago, Illinois
January 28, 2003
37
<PAGE>
CORN PRODUCTS INTERNATIONAL, INC.
CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
FOR THE YEAR ENDED DECEMBER 31, 2002
38
<PAGE>
CORN PRODUCTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
------------------------
2002 2001 2000
------ ------ ------
(IN MILLIONS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
Net sales before shipping and handling costs................ $1,979 $2,034 $2,036
Less -- shipping and handling costs......................... 108 147 171
------ ------ ------
Net sales................................................... 1,871 1,887 1,865
Cost of sales............................................... 1,604 1,588 1,559
------ ------ ------
GROSS PROFIT................................................ 267 299 306
------ ------ ------
Selling, general and administrative costs................... 134 154 139
Special charges............................................. -- -- 20
Earnings from non-consolidated affiliates and other
income.................................................... (20) (21) (9)
------ ------ ------
114 133 150
------ ------ ------
OPERATING INCOME............................................ 153 166 156
Financing costs -- net...................................... 36 64 54
------ ------ ------
Income before income taxes and minority interest............ 117 102 102
Provision for income taxes.................................. 42 36 36
Minority interest in earnings............................... 12 9 18
------ ------ ------
NET INCOME.................................................. $ 63 $ 57 $ 48
====== ====== ======
Weighted average common shares outstanding:
Basic..................................................... 35.6 35.3 35.3
Diluted................................................... 35.7 35.5 35.3
Earnings per common share:
Basic..................................................... $ 1.78 $ 1.60 $ 1.35
Diluted................................................... 1.77 1.60 1.35
</Table>
See notes to the consolidated financial statements.
39
<PAGE>
CORN PRODUCTS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
AS OF DECEMBER 31,
--------------------------
2002 2001
----------- -----------
(IN MILLIONS, EXCEPT SHARE
AND PER SHARE AMOUNTS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.............................. $ 36 $ 65
Accounts receivable -- net............................. 244 279
Inventories............................................ 194 201
Prepaid expenses....................................... 11 10
------- -------
TOTAL CURRENT ASSETS...................................... 485 555
------- -------
Property, plant and equipment, at cost
Land................................................... 97 92
Buildings.............................................. 286 326
Machinery and equipment................................ 2,203 2,328
------- -------
2,586 2,746
Less accumulated depreciation.......................... (1,432) (1,453)
------- -------
1,154 1,293
Goodwill and other intangible assets (less accumulated
amortization of $27 and $26)........................... 280 283
Deferred tax assets....................................... 33 20
Investments............................................... 26 41
Other assets.............................................. 37 35
------- -------
TOTAL ASSETS.............................................. $ 2,015 $ 2,227
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings and current portion of long-term
debt.................................................. $ 84 $ 444
Accounts payable....................................... 164 143
Accrued liabilities.................................... 99 88
------- -------
TOTAL CURRENT LIABILITIES................................. 347 675
------- -------
Non-current liabilities................................... 68 50
Long-term debt............................................ 516 312
Deferred income taxes..................................... 163 186
Minority interest in subsidiaries......................... 93 147
STOCKHOLDERS' EQUITY
Preferred stock -- authorized 25,000,000
shares -- $0.01 par value, none issued................ -- --
Common stock -- authorized 200,000,000 shares -- $0.01
par value -- 37,659,887 issued at December 31, 2002
and 2001.............................................. 1 1
Additional paid-in capital............................. 1,073 1,073
Less: Treasury stock (common stock; 1,956,113 and
2,253,578 shares in 2002 and 2001, respectively) at
cost.................................................. (48) (56)
Deferred compensation -- restricted stock.............. (4) (3)
Accumulated other comprehensive loss................... (418) (333)
Retained earnings...................................... 224 175
------- -------
TOTAL STOCKHOLDERS' EQUITY................................ 828 857
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................ $ 2,015 $ 2,227
======= =======
</Table>
See notes to the consolidated financial statements.
40
<PAGE>
CORN PRODUCTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
-------------------------
2002 2001 2000
------ ------- ------
(IN MILLIONS)
<S> <C> <C> <C>
NET INCOME.................................................. $ 63 $ 57 $ 48
Other comprehensive income (loss):
Gain (loss) on cash flow hedges:
Cumulative effect of adoption of SFAS 133, net of
income taxes of $8 million............................ -- 14 --
Unrealized gains (losses) on cash flow hedges, net of
income tax effect of $2 million and $11 million,
respectively.......................................... (4) (21) --
Amount of (gains) losses on cash flow hedges
reclassified to earnings, net of income tax effect of
$8 million and $7 million, respectively............... 14 (13) --
Currency translation adjustment........................... (94) (130) (63)
Minimum pension liability, net of income tax effect....... (1) -- --
---- ----- ----
COMPREHENSIVE LOSS.......................................... $(22) $ (93) $(15)
==== ===== ====
</Table>
See notes to the consolidated financial statements.
41
<PAGE>
CORN PRODUCTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<Table>
<Caption>
ACCUMULATED
ADDITIONAL OTHER
COMMON PAID-IN TREASURY DEFERRED COMPREHENSIVE RETAINED
STOCK CAPITAL STOCK COMPENSATION INCOME (LOSS) EARNINGS
------ ---------- -------- ------------ ------------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1999..................... $1 $1,073 $(20) $(2) $(120) $ 98
== ====== ==== === ===== ====
Net income................................... 48
Dividends declared........................... (14)
Issuance of restricted common stock as
compensation............................... 1 (1)
Issuance of common stock in connection with
acquisition................................ 3
Purchase of treasury stock................... (44)
Currency translation adjustment.............. (63)
-- ------ ---- --- ----- ----
BALANCE, DECEMBER 31, 2000..................... $1 $1,073 $(60) $(3) $(183) $132
== ====== ==== === ===== ====
Net income................................... 57
Dividends declared........................... (14)
Cumulative effect of adoption of SFAS 133,
net of income taxes of $8 million.......... 14
Unrealized gains (losses) on cash flow
hedges, net of income tax effect of $11
million.................................... (21)
Amount of (gains) losses on cash flow hedges
reclassified to earnings, net of income tax
effect of $7 million....................... (13)
Issuance of common stock on exercise of stock
options.................................... 4
Currency translation adjustment.............. (130)
-- ------ ---- --- ----- ----
BALANCE, DECEMBER 31, 2001..................... $1 $1,073 $(56) $(3) $(333) $175
== ====== ==== === ===== ====
Net income................................... 63
Dividends declared........................... (14)
Unrealized gains (losses) on cash flow
hedges, net of income tax effect of $2
million.................................... (4)
Amount of (gains) losses on cash flow hedges
reclassified to earnings, net of income tax
effect of $8 million....................... 14
Issuance of common stock in connection with
acquisition................................ 2
Issuance of restricted common stock as
compensation............................... 2 (2)
Amortization to compensation expense of
restricted common stock.................... 1
Issuance of common stock on exercise of stock
options.................................... 4
Currency translation adjustment.............. (94)
Minimum pension liability, net of income tax
effect..................................... (1)
-- ------ ---- --- ----- ----
BALANCE, DECEMBER 31, 2002..................... $1 $1,073 $(48) $(4) $(418) $224
== ====== ==== === ===== ====
</Table>
See notes to the consolidated financial statements.
42
<PAGE>
CORN PRODUCTS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
------------------------
2002 2001 2000
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net income................................................ $ 63 $ 57 $ 48
Non-cash charges (credits) to net income:
Depreciation and amortization.......................... 103 127 135
Deferred income taxes.................................. (6) 2 15
Minority interest in earnings.......................... 12 9 18
Earnings from non-consolidated affiliates.............. (7) (14) (1)
Gain on sale of business............................... (8) -- --
Gain on dissolution of business........................ (3) -- --
Foreign currency transaction (gains) losses............ (1) 8 (1)
Changes in trade working capital:
Accounts receivable and prepaid expenses............... 9 (30) 3
Inventories............................................ (6) 20 (12)
Accounts payable and accrued liabilities............... 62 (6) 8
Other..................................................... (12) (2) (25)
----- ----- -----
Cash provided by operating activities..................... 206 171 188
----- ----- -----
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Capital expenditures...................................... (78) (94) (143)
Proceeds from disposal of plants and properties........... 1 2 1
Proceeds from sale of business............................ 35 -- --
Proceeds from dissolution of business..................... 11 -- --
Payments for acquisitions, net of cash acquired........... (42) (79) (120)
----- ----- -----
Cash used for investing activities........................ (73) (171) (262)
----- ----- -----
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Payments on debt.......................................... (407) (83) (135)
Proceeds from borrowings.................................. 263 129 267
Dividends paid (including to minority interest
shareholders).......................................... (19) (23) (14)
Issuance (repurchase) of common stock..................... 4 4 (44)
----- ----- -----
Cash (used for) provided by financing activities.......... (159) 27 74
----- ----- -----
Effects of foreign exchange rate changes on cash.......... (3) (3) --
----- ----- -----
Increase (decrease) in cash and cash equivalents.......... (29) 24 --
Cash and cash equivalents, beginning of period............ 65 41 41
----- ----- -----
Cash and cash equivalents, end of period.................. $ 36 $ 65 $ 41
===== ===== =====
</Table>
See notes to the consolidated financial statements.
43
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF THE BUSINESS
Corn Products International, Inc. (the "Company") was founded in 1906 and
became an independent and public company as of December 31, 1997, after being
spun off from CPC International Inc. ("CPC"). The Company operates domestically
and internationally in one business segment, corn refining, and produces a wide
variety of products.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation -- The consolidated financial statements consist of
the accounts of the Company, including all significant subsidiaries.
Intercompany accounts and transactions are eliminated in consolidation.
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these estimates.
Certain prior year amounts have been reclassified to conform with the
current year's presentation. These reclassifications had no effect on previously
recorded net income or stockholders' equity.
Assets and liabilities of foreign subsidiaries, other than those whose
functional currency is the U.S. dollar, are translated at current exchange rates
with the related translation adjustments reported in stockholders' equity as a
component of accumulated other comprehensive income (loss). Income statement
accounts are translated at the average exchange rate during the period. Where
the U.S. dollar is considered the functional currency, monetary assets and
liabilities are translated at current exchange rates with the related adjustment
included in net income. Non-monetary assets and liabilities are translated at
historical exchange rates. The Company incurs foreign currency transaction
gains/losses relating to assets and liabilities that are denominated in a
currency other than the functional currency. For 2002, 2001 and 2000 the Company
incurred foreign currency transaction (gains) losses of ($1 million), $8 million
and ($1 million), respectively.
Cash and cash equivalents -- Cash equivalents consist of all instruments
purchased with an original maturity of three months or less, and which have
virtually no risk of loss in value.
Inventories -- Inventories are stated at the lower of cost or net
realizable value. Costs are determined using the first-in, first-out (FIFO)
method.
Investments -- Investments in the common stock of affiliated companies over
which the Company does not exercise significant influence are accounted for
under the cost method and are carried at cost or less. Investments that enable
the Company to exercise significant influence, but do not represent a
controlling interest, are accounted for under the equity method; such
investments are carried at cost or less, adjusted to reflect the Company's
proportionate share of income or loss, less dividends received. The Company
would recognize a loss on these investments when there is a loss in value of an
investment which is other than a temporary decline.
Property, plant and equipment and depreciation -- Property, plant and
equipment are stated at cost less accumulated depreciation. Depreciation is
generally computed on the straight-line method over the estimated useful lives
of depreciable assets, which range from 10 to 50 years for buildings and 3 to 20
years for all other assets. Where permitted by law, accelerated depreciation
methods are used for tax purposes. The Company reviews the recoverability of the
net book value of property, plant and equipment for impairment whenever events
and circumstances indicate that the net book value of an asset may not be
recoverable from estimated future cash flows expected to result from its use and
eventual disposition. If this review indicates that the carrying values will not
be recovered, the carrying values would be reduced and an impairment loss would
be recognized.
44
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Goodwill and other intangible assets -- Goodwill ($277 million at December
31, 2002) represents the excess of cost over fair value of net assets acquired.
The Company also has a $3 million intangible asset related to the recognition of
a minimum pension liability at December 31, 2002. The carrying amount of
goodwill and other intangible assets by geographic segment as of December 31,
2002 was as follows:
<Table>
<Caption>
(IN MILLIONS)
<S> <C>
North America............................................... $122
South America............................................... 21
Asia/Africa................................................. 137
----
Total....................................................... $280
====
</Table>
Effective January 1, 2002, the Company adopted Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS
142"), which supersedes APB Opinion No. 17, "Intangible Assets". SFAS 142
addresses how intangible assets that are acquired individually or with a group
of other assets (but not those acquired in a business combination) should be
accounted for in financial statements upon their acquisition. SFAS 142 also
addresses how goodwill and other intangible assets should be accounted for after
they have been initially recognized in the financial statements. SFAS 142
stipulates that goodwill should no longer be amortized and should instead be
subject to an annual (or more frequent if impairment indicators arise)
impairment assessment. Upon adoption of SFAS 142, the Company completed the
transitional impairment test required by the statement. The Company has
established December 31 as the date of its annual test for impairment of
goodwill. Based upon the transitional and annual impairment tests completed
during 2002, the Company concluded that the balance of goodwill is fully
recoverable and no impairment loss was required to be recognized.
The adoption of SFAS 142's provisions relating to goodwill amortization
resulted in the Company discontinuing the amortization of goodwill beginning
January 1, 2002. Prior to the adoption of SFAS 142, goodwill was amortized using
the straight-line method over its estimated useful or legal life, not to exceed
40 years. On a pretax basis, the Company recorded goodwill amortization of $12
million in each of 2001 and 2000. On an after-tax basis, goodwill amortization
was $8 million in both 2001 and 2000. The following table provides a comparison
of the effects of adopting SFAS 142 for the years ended December 31, 2002, 2001
and 2000:
<Table>
<Caption>
2002 2001 2000
-------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE)
<S> <C> <C> <C>
Net income................................................. $ 63 $ 57 $ 48
Add back: goodwill amortization (net of income taxes)...... -- 8 8
----- ----- -----
Adjusted net income........................................ $ 63 $ 65 $ 56
===== ===== =====
Diluted earnings per common share:
As reported earnings per share............................. $1.77 $1.60 $1.35
Add back: goodwill amortization (net of income taxes)...... -- 0.21 0.23
----- ----- -----
Adjusted earnings per share................................ $1.77 $1.81 $1.58
===== ===== =====
</Table>
Revenue recognition -- The Company recognizes operating revenues at the
time title to the goods and all risks of ownership transfer to customers. This
generally occurs upon the date of shipment, except in the case of consigned
inventories where title passes and the transfer of ownership risk occurs when
the goods are used by the customer.
Hedging instruments -- Effective January 1, 2001, the Company adopted
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"), as amended by SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain
45
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Hedging Activities, an Amendment of SFAS 133" ("SFAS 138"). SFAS 133 and 138
establish standards for recognition and measurement of derivatives and hedging
activities and require that all derivative instruments be recorded on the
balance sheet at their respective fair values. Upon adoption, the Company
recorded a cumulative effect type credit of $14 million (net of income taxes of
$8 million) to other comprehensive income (loss), to recognize at fair value all
derivatives that were designated as hedges of variable cash flows of certain
forecasted transactions. Gains and losses on derivatives that were previously
deferred as adjustments to the carrying amount of hedged items were not
adjusted.
The Company uses derivative financial instruments principally to offset
exposure to market risks arising from changes in commodity prices and interest
rates. Derivative financial instruments currently used by the Company consist of
commodity futures contracts and interest rate swap agreements. The Company
enters into futures contracts, which are designated as hedges of specific
volumes of commodities (corn and natural gas) that will be purchased and
processed in a future month. These readily marketable exchange-traded futures
contracts are recognized in the Consolidated Balance Sheets at fair value. The
Company has also entered into interest rate swap agreements to take advantage of
the current interest rate environment by effectively converting the interest
rate on certain fixed rate debt to a variable rate. The fair value of these
interest rate swap agreements is recognized in the Consolidated Balance Sheet as
an offset to the increase to the fair value of the hedged debt obligation.
On the date a derivative contract is entered into, the Company designates
the derivative as either a hedge of variable cash flows to be paid related to
certain forecasted purchases of corn or natural gas used in the manufacturing
process ("a cash-flow hedge") or as a hedge of the fair value of certain fixed
rate debt obligations ("a fair-value hedge"). This process includes linking all
derivatives that are designated as fair-value or cash-flow hedges to specific
assets and liabilities on the balance sheet or to specific firm commitments or
forecasted transactions. For all hedging relationships, the Company formally
documents the hedging relationships and its risk-management objective and
strategy for undertaking the hedge transactions, the hedging instrument, the
item, the nature of the risk being hedged, how the hedging instrument's
effectiveness in offsetting the hedged risk will be assessed, and a description
of the method of measuring ineffectiveness. This includes linking all
derivatives that are designated as cash-flow or fair-value hedges to specific
forecasted transactions or to specific assets and liabilities on the
Consolidated Balance Sheet. The Company also formally assesses, both at the
hedge's inception and on an ongoing basis, whether the derivatives that are used
in hedging transactions are highly effective in offsetting changes in cash flows
or fair values of hedged items. When it is determined that a derivative is not
highly effective as a hedge or that it has ceased to be a highly effective
hedge, the Company discontinues hedge accounting prospectively.
Changes in the fair value of a futures contract that is highly effective
and that is designated and qualifies as a cash-flow hedge are recorded in other
comprehensive income, net of applicable income taxes, and recognized in the
Consolidated Statement of Income when the finished goods produced using the
hedged item are sold. The maximum term over which the Company hedges exposures
to the variability of cash flows for commodity price risk is 12 months. Changes
in the fair value of an interest rate swap agreement that is highly effective
and that is designated and qualifies as a fair-value hedge, along with the loss
or gain on the hedged debt obligation that is attributable to the hedged risk,
are recorded in earnings. The ineffective portion of the change in fair value of
a derivative instrument that qualifies as either a cash-flow hedge or a
fair-value hedge is reported in earnings.
The Company discontinues hedge accounting prospectively when it is
determined that the derivative is no longer effective in offsetting changes in
the cash flows or fair value of the hedged item, the derivative expires or is
sold, terminated or exercised, the derivative is de-designated as a hedging
instrument because it is unlikely that a forecasted transaction will occur, or
management determines that designation of the derivative as a hedging instrument
is no longer appropriate. When hedge accounting is discontinued because it is
probable that a forecasted transaction will not occur, the Company continues to
carry the derivative on the Consolidated Balance Sheet at its fair value, and
gains and losses that were accumulated in other comprehensive income are
recognized immediately in earnings. When hedge accounting is discontinued
46
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
because it is determined that the derivative no longer qualifies as an effective
fair-value hedge, the Company continues to carry the derivative on the
Consolidated Balance Sheet at its fair value and no longer adjusts the hedged
asset or liability for changes in fair value. The adjustment of the carrying
amount of the hedged asset or liability is accounted for in the same manner as
other components of the carrying amount of that asset or liability. In all other
situations in which hedge accounting is discontinued, the Company continues to
carry the derivative at its fair value on the Consolidated Balance Sheet and
recognizes any changes in its fair value in earnings.
Stock-based compensation -- The Company has a stock incentive plan that
provides for stock-based employee compensation, including the granting of stock
options and shares of restricted stock, to certain key employees. The plan is
more fully described in Note 13. The Company accounts for the stock incentive
plan in accordance with the recognition and measurement principles of APB
Opinion No. 25, "Accounting for Stock Issued to Employees", and related
Interpretations. Under this method, compensation expense is recorded on the date
of grant only if the current market price of the underlying stock exceeded the
exercise price. Under the Company's stock incentive plan, stock options are
granted at exercise prices that equal the market value of the underlying common
stock on the date of grant. Therefore, no compensation expense related to stock
options is recorded in the Consolidated Statements of Income.
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123"), established accounting and disclosure
requirements using a fair-value based method of accounting for stock-based
employee compensation plans. As allowed by SFAS 123, the Company has elected to
continue to apply the intrinsic-value-based method of accounting described
above, and has adopted only the disclosure requirements of SFAS 123. The
following table illustrates the effect on net income and earnings per share if
the fair-value-based recognition provisions of SFAS 123 had been applied to all
outstanding and unvested awards in each period:
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------------------------------
2002 2001 2000
-------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE)
<S> <C> <C> <C>
Net income, as reported.................................... $ 63 $ 57 $ 48
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards,
net of related tax effects............................... (1) (3) (4)
----- ----- -----
Pro forma net income....................................... $ 62 $ 54 $ 44
===== ===== =====
Earnings per share:
Basic -- as reported....................................... $1.78 $1.60 $1.35
Basic -- pro forma......................................... $1.74 $1.52 $1.25
Diluted -- as reported..................................... $1.77 $1.60 $1.35
Diluted -- pro forma....................................... $1.73 $1.52 $1.25
</Table>
Earnings per common share -- Basic earnings per common share is computed by
dividing net income by the weighted average number of shares outstanding, which
totaled 35.6 million for 2002 and 35.3 million for 2001 and 2000. Diluted
earnings per share (EPS) is computed by dividing net income by the weighted
average number of shares outstanding, including the dilutive effect of stock
options outstanding. The weighted average number of shares outstanding for
diluted EPS calculations were 35.7 million, 35.5 million and 35.3 million for
2002, 2001 and 2000, respectively. In 2002, 2001 and 2000, options to purchase
975,166, 1,001,666 and 1,829,366 shares of common stock, respectively, were
excluded from the calculation of the weighted average number of shares
outstanding for diluted EPS because their effects were anti-dilutive.
Risks and uncertainties -- The Company operates domestically and
internationally in one business segment. In each country, the business and
assets are subject to varying degrees of risk and uncertainty. The
47
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company insures its business and assets in each country against insurable risks
in a manner that it deems appropriate. Because of this geographic dispersion,
the Company believes that a loss from non-insurable events in any one country
would not have a material adverse effect on the Company's operations as a whole.
Additionally, the Company believes there is no significant concentration of risk
with any single customer or supplier, or small group of customers or suppliers,
whose failure or non-performance would materially affect the Company's results.
Recently issued accounting standards -- In June 2001, the Financial
Accounting Standards Board (FASB) issued SFAS No. 143, "Accounting For Asset
Retirement Obligations" ("SFAS 143"), which addresses accounting and reporting
for asset retirement obligations. SFAS 143 will require the Company to record
the fair value of an asset retirement obligation as a liability in the period in
which it incurs a legal obligation associated with the retirement of tangible
long-lived assets that results from the acquisition, construction, development,
and/or normal use of the assets. The Company will also record a corresponding
asset that will be depreciated over the life of the related asset. Subsequent to
the initial measurement of the asset retirement obligation, the obligation will
be adjusted at the end of each period to reflect the passage of time and changes
in the estimated future cash flows underlying the obligation. The Company is
required to adopt SFAS 143 on January 1, 2003. The adoption of SFAS 143 is not
excepted to have a material effect on the Company's consolidated financial
statements.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146"), which addresses
financial accounting and reporting for costs associated with exit or disposal
activities. SFAS 146 replaces EITF Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)". SFAS 146 is required to
be applied prospectively to exit or disposal activities initiated after December
31, 2002. The adoption of SFAS 146 is not expected to have a material effect of
the Company's consolidated financial statements.
In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"), which addresses financial
accounting and reporting for obligations under certain guarantees. FIN 45
requires, among other things, that a guarantor recognize a liability for the
fair value of an obligation undertaken in issuing a guarantee, under certain
circumstances. The recognition and measurement provisions of FIN 45 are required
to be applied prospectively to guarantees issued or modified after December 31,
2002. The adoption of FIN 45 is not expected to have a significant effect on the
Company's consolidated financial statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure, an amendment of FASB Statement No.
123" ("SFAS 148"). This Statement amends SFAS 123 to provide alternative methods
of transition for a voluntary change to the fair value method of accounting for
stock-based employee compensation. In addition, SFAS 148 amends the disclosure
requirements of SFAS 123 to require prominent disclosures in both annual and
interim financial statements. Certain of the disclosure modifications are
required for fiscal years ending after December 15, 2002 and are included in the
notes to these consolidated financial statements.
In January 2003, the FASB issued Interpretation No. 46, "Consolidation of
Variable Interest Entities, an interpretation of ARB No. 51" ("FIN 46"), which
addresses the consolidation of variable interest entities as defined in the
Interpretation. FIN 46 applies immediately to variable interests in variable
interest entities created after January 31, 2003, and to variable interests in
variable interest entities obtained after January 31, 2003. The application of
FIN 46 is not expected to have a material effect on the Company's consolidated
financial statements.
NOTE 3 -- MEXICAN TAX ON BEVERAGES SWEETENED WITH HFCS
On January 1, 2002, a discriminatory tax on soft drinks sweetened with high
fructose corn syrup ("HFCS") approved by the Mexican Congress late in 2001,
became effective. This tax was temporarily
48
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
suspended on March 5, 2002. In response to the enactment of the tax, which at
the time effectively ended the use of HFCS for soft drinks in Mexico, the
Company ceased production of HFCS 55 at its San Juan del Rio plant, one of its
four plants in Mexico. Effective with the March 5, 2002 suspension of the tax,
the Company resumed the production and sale of HFCS in Mexico, although at
levels below historical volumes. On July 12, 2002, the Mexican Supreme Court
annulled the temporary suspension of the tax, thereby resuming the tax, and the
Company curtailed the production of HFCS 55 at its San Juan del Rio plant. On
December 10, 2002, the Mexican Congress declined to repeal the controversial tax
on soft drinks sweetened with HFCS.
The Company is disappointed with the Mexican Congress' decision to retain
the imposition of the tax on soft drinks sweetened with HFCS. However, the
Company continues to explore all options for resolving the situation and
minimizing any potential long-term negative financial impact that might occur.
The Company has engaged in discussions regarding the matter with both U.S. and
Mexican government trade officials, and has received informal assurances from
both sides that repeal of the tax is a condition precedent to resolving certain
trade issues between the countries. These same officials have also implied that
a resolution of these matters is expected in the near term. However, the Company
cannot predict with any certainty whether these trade matters will ultimately be
resolved, or the likelihood or timing of repeal of the tax on soft drinks
sweetened with HFCS. In the meantime, the Company is attempting to mitigate the
negative effects of the tax on HFCS demand in Mexico by exploring other markets
for its HFCS production capability in and around Mexico. The Company is also
continuing the restructuring of its Mexican operations in an effort to improve
efficiency and reduce operating costs. The Company also initiated formal action
to seek compensation for damage to its Mexican operations under the provisions
of the North American Free Trade Agreement (NAFTA).
On January 28, 2003, the Company notified the Government of Mexico of its
intention to submit to arbitration a claim for compensation under the investment
provisions of the NAFTA. The Company believes that the Government of Mexico has
violated certain of its obligations with respect to foreign investors under the
NAFTA, including those regarding non-discriminatory treatment and
expropriations. The claim, which approximates $250 million, seeks compensation
for the Company's costs for past and potential lost profits and other costs
related to its operations in Mexico, as well as the Company's costs in pursuing
resolution of this matter. The filing of the notice of intent is the first step
in pursuing the resolution of an investment dispute. The NAFTA requires the
Company to serve written notice of its intention to make a claim at least three
months prior to submitting the claim to arbitration. Pursuant to the process,
the Company and the Government of Mexico must continue to attempt to resolve the
situation through consultation or negotiation during this period.
Until there is a favorable resolution of the Mexican tax on soft drinks
sweetened with HFCS, the Company expects that it will be unable to make any
significant sales of HFCS to the soft drink industry in Mexico. Management
continues to seek a permanent repeal of the tax and currently believes that the
matter will ultimately be resolved through negotiations between the governments
of the United States and Mexico. Until that occurs, however, the Company's
operating results and cash flows will continue to be adversely affected by the
Mexican tax on soft drinks sweetened with HFCS.
The Company's ability to fully recover the carrying value of its long-term
investment in Mexico, which consists primarily of goodwill and property, plant
and equipment associated with its Mexican operations, is dependent upon the
generation of sufficient cash flows from the use or other disposition of these
assets. The Company's ability to generate these cash flows will be significantly
affected by a variety of factors, including the timing and permanence of any
repeal of the tax on soft drinks sweetened with HFCS, the timing and extent of
any recovery in the demand for HFCS by the Mexican soft drink industry, the
extent to which alternative markets for HFCS develop in and around Mexico, the
success of the Company's restructuring activities in Mexico, and the amount of
proceeds received from the resolution of the Company's NAFTA claim against the
Government of Mexico, if any, as well as by management's ability to develop and
implement a successful long-term business strategy in Mexico. Based on long-term
forecasts of operating results, management believes that the Company will
generate sufficient cash flows from the use or other disposition of
49
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
these long-term assets to fully recover their carrying values, and accordingly,
no impairment of either goodwill or other long-term assets related to Mexico was
recognized as of December 31, 2002. In developing its estimate of the cash flows
that will be generated from the Company's Mexican operations, management has
assumed that the tax on soft drinks sweetened with HFCS will be permanently
repealed in the near future and that sales of HFCS to the Mexican soft drink
industry will return to the levels realized prior to the imposition of the tax
by the end of 2003. Under these assumptions about future HFCS sales in Mexico,
the estimated fair value of the Company's Mexican business exceeds its carrying
amount by approximately $90 million. In the event actual results differ from
those assumed, the Company could be required to recognize an impairment of
goodwill and property, plant and equipment, and the amount of such impairment
could be material.
NOTE 4 -- ACQUISITIONS/DISPOSITION
On February 5, 2002, the Company sold its interest in Enzyme Bio-Systems
Ltd. of Beloit, Wisconsin ("EBS") for approximately $35 million in cash. The
Company recorded a pretax gain from the sale of approximately $8 million, which
is included in other income in the 2002 Consolidated Statement of Income.
In October 1998, the Company entered into certain agreements to purchase
its then 49 percent owned non-consolidated affiliate, Arancia S.A. de C.V.
("Arancia"), in a series of three transactions that would be completed over the
next several years. In accordance with the agreements, on December 2, 1998 the
Company completed the first in the series of transactions by acquiring a
controlling interest in Arancia and began to consolidate this business in its
financial statements. On January 18, 2000, the Company completed the second in
the series of transactions by increasing its ownership in Arancia to 90 percent
for consideration of $41 million, consisting of cash and common stock. On March
4, 2002, the Company increased its ownership in Arancia from 90 percent to 100
percent by paying $39 million in cash and issuing 70,000 shares of common stock
valued at $2 million.
During 2000, the Company completed a multi-step transaction that resulted
in the acquisition of a controlling interest in Industrias de Maiz S.A.
("IMASA") of Argentina. As a result of the transaction, the Company has control
of approximately 73 percent of its Southern Cone of South America businesses,
which include IMASA, Productos de Maiz of Argentina, and its businesses in Chile
and Uruguay. The Company paid $83 million in cash to acquire net assets with a
fair value of $14 million, consisting of $124 million of assets and $110 million
of liabilities. Goodwill of $69 million was recorded in connection with the
transaction. The minority interest shareholders have the right to either: (i)
require the Company to sell an amount of shares of the Southern Cone businesses
back to the minority interest shareholders until the minority interest
shareholders own 49.5 percent of the Southern Cone businesses; or (ii) require
the Company to purchase the approximately 27 percent ownership interest in the
Southern Cone businesses currently held by the minority interest shareholders.
It is anticipated that the Company will purchase the shares from the minority
interest shareholders in March 2003 at a cost of approximately $52 million.
On January 5, 2001, the Company increased its ownership interest in Doosan
Corn Products Korea, Inc. ("DCPK"), its consolidated Korean subsidiary, from 50
percent to 75 percent for $65 million in cash. The Company recorded $10 million
of goodwill related to this purchase. The Company accounts for its Korean
operations as a consolidated subsidiary as it has a controlling interest in
DCPK. Beginning in 2005, the Company will have the option to acquire, and the
minority interest shareholder will have the right to require the Company to
acquire, the 25 percent ownership interest in DCPK currently held by the
minority interest shareholder.
On March 2, 2001, the Company acquired a controlling 60 percent interest in
a small starch and sweetener company in Thailand. In 2002, the Company increased
its ownership interest in this business to approximately 83 percent.
All of the Company's acquisitions were accounted for under the purchase
method. Had the acquisitions/disposition described above occurred at the
beginning of the respective years, the effect on the Company's consolidated
financial statements would not have been significant.
50
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 -- JOINT MARKETING COMPANY
On December 1, 2000, the Company and Minnesota Corn Processors, LLC ("MCP")
consummated an operating agreement to form CornProductsMCP Sweeteners LLC
("CPMCP"), a joint marketing company that, effective January 1, 2001, began
distributing throughout the United States sweeteners supplied from the Company
and MCP. On July 11, 2002, MCP announced that it had signed a merger agreement
with Archer-Daniels-Midland Company ("ADM"), whereby MCP would merge with a
subsidiary of ADM. The consummation of the merger was subject to a number of
conditions, including approval from the unit holders of MCP and various
regulatory agencies. On September 5, 2002, the unit holders of MCP approved the
proposed sale. Shortly thereafter, the United States Justice Department's
Antitrust Division filed a lawsuit in U.S. District Court, formally blocking the
proposed transaction, and simultaneously also filed a consent decree approving
the sale if CPMCP was dissolved by December 31, 2002.
On September 6, 2002, the Company was notified of MCP's desire to dissolve
CPMCP effective December 31, 2002. On December 27, 2002 the Company and MCP
agreed in principle to a plan of dissolution that would allow for the orderly
wind up of CPMCP's activities. Under the terms of the plan of dissolution, MCP
agreed to pay the Company an $11 million termination fee as required under the
terms of the CPMCP Limited Liability Company Agreement between the Company and
MCP dated December 1, 2000. This payment was received by the Company on December
31, 2002. In addition, the Company recorded an $8 million charge for its share
of costs incurred relating to the dissolution. These expenses consist primarily
of direct incremental costs incurred by CPMCP as a result of the dissolution,
including expenses related to the termination of employees, early termination of
leases, losses on the disposition of assets and other wind-down costs. The net
non-recurring income of $3 million ($2 million after-tax, or $0.06 per diluted
share) is included in other income in the 2002 Consolidated Statement of Income.
Prior to the dissolution, CPMCP was owned equally by the Company and MCP
through membership interests that provided each company with a 50 percent voting
interest in CPMCP. Additionally, CPMCP's Board of Directors was composed of an
equal number of representatives from both members. The Company accounted for its
interest in CPMCP as a non-consolidated affiliate using the equity method of
accounting.
Both the Company and MCP owned and operated their respective production
facilities and sold all U.S. production of certain designated sweeteners to
CPMCP for exclusive distribution in the United States. Additionally, any
designated sweetener production from the Company's operations in Canada and
Mexico that was sold in the U.S. was distributed through CPMCP. Sales to CPMCP
were made at predetermined market-related prices.
Sales to CPMCP were recognized at the time title to the goods and all risks
of ownership transferred to CPMCP. The Company eliminated 100 percent of the
profit associated with sales to CPMCP until the risk of ownership and title to
the product passed from CPMCP to its customers.
The Company recorded its share of CPMCP's net earnings as earnings from a
non-consolidated affiliate. The amount recorded represented the Company's
allocated share of the net earnings of CPMCP, based upon the percentage of
designated product volumes supplied to CPMCP by the Company as compared to the
total designated product volumes supplied to CPMCP by the Company and the
venture partner, MCP.
51
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes the Company's transactions with CPMCP for
the periods indicated:
<Table>
<Caption>
2002 2001
----- -----
(IN MILLIONS)
<S> <C> <C>
Sales to CPMCP.............................................. $417 $416
Purchases from CPMCP........................................ 30 23
Commission expense to CPMCP................................. 1 2
Fees and charges from CPMCP................................. 14 14
Receivables due from CPMCP at December 31................... 30 36
Payables due to CPMCP at December 31........................ 2 3
</Table>
The Company believes the receivables due from CPMCP are fully recoverable.
Summarized financial information for CPMCP is shown below:
<Table>
<Caption>
AT DECEMBER 31,
---------------
2002 2001
----- -----
(IN MILLIONS)
<S> <C> <C>
Current assets.............................................. $68 $100
Non-current assets.......................................... -- 3
--- ----
Total assets................................................ $68 $103
=== ====
Current liabilities......................................... $53 $ 74
Total equity................................................ 15 29
--- ----
Total liabilities and equity................................ $68 $103
=== ====
</Table>
<Table>
<Caption>
YEAR ENDED
DECEMBER 31,
-------------
2002 2001
----- -----
(IN MILLIONS)
<S> <C> <C>
Net sales................................................... $849 $782
Gross profit................................................ 22 38
Net income.................................................. $ 12 $ 27
==== ====
</Table>
NOTE 6 -- SPECIAL CHARGES
One of the Company's continuing business strategies is to improve North
American profitability. In order to remain competitive while improving margins,
the Company implemented a restructuring plan in 2002 that included the
termination of approximately 200 employees throughout the three North American
countries in which it operates and the cancellation of certain lease
obligations. In connection with this restructuring plan, the Company recorded
charges of $4.3 million during the first quarter of 2002. Of this amount,
approximately $3.5 million represented employee severance costs and related
benefits and the balance represented provisions relating to the lease
obligations. The charge of $4.3 million was classified in general and
administrative expenses. As of December 31, 2002, all of the employee
terminations under the restructuring plan were completed and the restructuring
accrual was fully utilized.
In 2000, the Company recorded a $20 million charge pertaining to a
workforce reduction program and the write-off of nonproductive assets. The
charges consisted of $17.5 million for severance, pension and other post-
employment benefit costs associated with the workforce reduction and $2.5
million related to the write-off of certain capital projects. The workforce
reduction program affected approximately 266 employees, 109 of whom were located
in the United States. The workforce reduction principally affected employees in
U.S. sales and business development, as well as employees in North America and
South America manufacturing
52
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
operations, and included the integration of the Southern Cone sales and
administrative functions following the IMASA acquisition. As of December 31,
2000, all 266 of the employees affected by the workforce reduction program had
terminated employment with the Company and the Company had utilized the entire
$20 million accrual.
NOTE 7 -- FINANCIAL INSTRUMENTS, DERIVATIVES AND HEDGING ACTIVITIES
Fair value of financial instruments:
The carrying values of cash equivalents, accounts receivable, accounts
payable and short-term borrowings approximate fair values. The fair value of the
Company's long-term debt is estimated by discounting the future cash flows of
each instrument at rates currently available to the Company for similar debt
instruments of comparable maturities. Based on market quotes of the yields at
which the Company could issue debt with similar terms and remaining maturities,
the fair value of long-term debt, including the current portion of long-term
debt, at December 31, 2002 and 2001, was $552 million and $594 million,
respectively.
Derivatives:
The Company uses derivative financial instruments primarily to manage the
exposure to price risk related to corn and natural gas purchases used in the
manufacturing process and to manage its exposure to changes in interest rates on
outstanding debt instruments. The Company generally does not enter into
derivative instruments for any purpose other than hedging the cash flows
associated with specific volumes of commodities that will be purchased and
processed in a future month, and hedging the exposure related to changes in the
fair value of outstanding fixed-rate debt instruments. The Company occasionally
hedges commercial transactions and certain liabilities that are denominated in a
currency other than the currency of the operating unit entering into the
underlying transaction. The Company does not speculate using derivative
instruments.
The derivative financial instruments that the Company uses in its
management of commodity-price risk consist of open futures contracts and options
traded through regulated commodity exchanges. The derivative financial
instruments that the Company uses in its management of interest rate risk
consist of interest rate swap agreements. By using derivative financial
instruments to hedge exposures to changes in commodity prices and interest
rates, the Company exposes itself to credit risk and market risk. Credit risk is
the risk that the counterparty will fail to perform under the terms of the
derivative contract. When the fair value of a derivative contract is positive,
the counterparty owes the Company, which creates credit risk for the Company.
When the fair value of a derivative contract is negative, the Company owes the
counterparty and, therefore, it does not possess credit risk. The Company
minimizes the credit risk in derivative instruments by entering into
transactions only with investment grade counterparties. Market risk is the
adverse effect on the value of a financial instrument that results from a change
in commodity prices or interest rates. The market risk associated with
commodity-price and interest rate contracts is managed by establishing and
monitoring parameters that limit the types and degree of market risk that may be
undertaken.
The Company maintains a commodity-price risk management strategy that uses
derivative instruments to minimize significant, unanticipated earnings
fluctuations caused by commodity-price volatility. For example, the
manufacturing of the Company's products requires a significant volume of corn
and natural gas. Price fluctuations in corn and natural gas cause market values
of corn inventory to differ from its cost and the actual purchase price of corn
and natural gas to differ from anticipated prices.
The Company periodically enters into futures and option contracts for a
portion of its anticipated corn and natural gas usage over the next twelve
months, in order to hedge the price risk associated with fluctuations in market
prices. The contracts limit the unfavorable effect that price increases will
have on corn and natural gas purchases. All of the Company's futures and option
contracts have been designated as cash flow hedges.
53
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Unrealized gains and losses associated with marking the corn and natural
gas futures and option contracts to market are recorded as a component of other
comprehensive income (loss) and included in the stockholders' equity section of
the Consolidated Balance Sheets as part of accumulated other comprehensive
income (loss). These amounts are subsequently reclassified into earnings in the
month in which the related corn or natural gas is used or in the month a hedge
is determined to be ineffective.
The Company assesses the effectiveness of a hedge with a corn or natural
gas futures or option contract based on changes in the contract's intrinsic
value. The changes in the market value of such contracts has historically been,
and is expected to continue to be, highly effective at offsetting changes in the
price of the hedged item. The amounts representing the ineffectiveness of these
cash flow hedges are not significant.
The Company assesses its exposure to variability in interest rates by
continually identifying and monitoring changes in interest rates that may
adversely impact future cash flows and the fair value of existing debt
instruments, and by evaluating hedging opportunities. The Company maintains risk
management control systems to monitor interest rate risk attributable to both
the Company's outstanding and forecasted debt obligations as well as the
Company's offsetting hedge positions. The risk management control systems
involve the use of analytical techniques, including sensitivity analysis, to
estimate the expected impact of changes in interest rates on the fair value of
the Company's outstanding and forecasted debt instruments.
The Company uses a combination of fixed and variable rate debt to finance
its operations. The debt obligations with fixed cash flows expose the Company to
variability in the fair value of outstanding debt instruments due to changes in
interest rates. The Company has entered into interest rate swap agreements that
effectively convert the interest rate on certain fixed-rate debt to a variable
rate. These swaps call for the Company to receive interest at a fixed rate and
to pay interest at a variable rate, thereby creating the equivalent of
variable-rate debt.
The Company has designated the interest rate swap agreements as hedges of
the changes in fair value of the fixed-rate debt obligation attributable to
changes in interest rates. Changes in the fair value of interest rate swaps
designated as hedging instruments that effectively offset the variability in the
fair value of outstanding fixed-rate, long-term debt obligations are reported in
earnings. These amounts offset the gain or loss (that is, the change in fair
value) of the hedged fixed-rate debt instrument that is attributable to changes
in interest rates (that is, the hedged risk) which is reflected as an adjustment
to the carrying amount of the fixed-rate debt obligation and also recognized
currently in earnings. The net gain or loss recognized in earnings during 2002
representing the amount of the hedges' ineffectiveness and the component of the
derivative instruments' gain or loss excluded from the assessment of hedge
effectiveness was not significant.
At December 31, 2002, the Company's accumulated other comprehensive income
(loss) account included $10 million of unrealized losses, net of a $4 million
tax benefit, related to derivative instruments that hedge the anticipated cash
flows from future transactions, which are expected to be recognized in earnings
within the next twelve months. Transactions and events expected to occur over
the next twelve months that will necessitate reclassifying these derivatives
losses to earnings include the sale of finished goods inventory that includes
previously hedged purchases of raw corn. There were no cash flow hedges
discontinued during the year.
NOTE 8 -- FINANCING ARRANGEMENTS
The Company had total debt outstanding of $600 million and $756 million at
December 31, 2002 and 2001, respectively. Short-term borrowings at December 31,
2002 consist primarily of amounts outstanding under various unsecured local
country operating lines of credit.
54
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Short-term borrowings consist of the following at December 31:
<Table>
<Caption>
2002 2001
----- -----
(IN MILLIONS)
<S> <C> <C>
Borrowings in various currencies (at rates of
2.5% -- 26.5%)............................................ $72 $154
Current portion of long-term debt........................... 12 290
--- ----
Total short-term borrowings............................... $84 $444
=== ====
</Table>
On October 15, 2002, the Company entered into a new three-year $125 million
revolving credit agreement (the "Revolving Credit Agreement"). The Revolving
Credit Agreement replaced the Company's previously existing $340 million
revolving credit agreement, which has been terminated. In 1999, the Company
filed a shelf registration with the Securities and Exchange Commission for
borrowings of up to $600 million and issued $200 million of 8.45 percent senior
notes thereunder. In 2002, the Company issued a total of $255 million of
five-year 8.25 percent senior notes under the shelf registration. The Company
can issue an additional $145 million of debt under the shelf registration.
Long-term debt consists of the following at December 31:
<Table>
<Caption>
2002 2001
----- -----
(IN MILLIONS)
<S> <C> <C>
U.S. revolving credit facility borrowings, due 2005
(interest at 2.33% in 2001)............................... $ -- $277
8.45% senior notes, due 2009................................ 198 200
8.25% senior notes, due 2007................................ 253 --
Korean term loans, due 2003 -- 2004, (at rates of
5.5% -- 9.1%)............................................. 51 62
Canadian term loans, due 2005 (at rates of 4.3% -- 4.4%).... 25 57
Others, due in varying amounts through 2008, fixed and
floating interest rates ranging from 5.9% -- 7.4%......... 1 6
---- ----
Total..................................................... $528 $602
---- ----
Less current maturities..................................... 12 290
---- ----
Long-term debt............................................ $516 $312
==== ====
</Table>
Maturities of long-term debt are $12 million in 2003, $46 million in 2004,
$19 million in 2005, nil in 2006, $255 million in 2007 and $200 million
thereafter.
On March 14, 2002, the Company entered into interest rate swap agreements
to take advantage of the current interest rate environment by effectively
converting the interest rate associated with the Company's 8.45 percent $200
million senior notes due 2009 to a variable rate. These agreements involve the
exchange of fixed rate payments (at 8.45 percent) for variable rate payments on
$200 million of notional principal without the exchange of the underlying face
amount. Under the terms of the agreements, the Company receives fixed rate
payments and makes variable rate payments based on the six-month U.S. dollar
LIBOR rate plus a spread. The fair value of these interest rate swap agreements
at December 31, 2002 ($27 million) is reflected in the Consolidated Balance
Sheet as an offset to the increase in the fair value of the hedged debt
obligation. Interest rate differentials to be paid or received under these
agreements are recognized as adjustments to interest expense using the accrual
method. The Company does not hold or issue interest rate swap agreements for
trading purposes.
55
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9 -- LEASES
The Company leases rail cars and certain machinery and equipment under
various operating leases. Rental expense under operating leases was $21.9
million, $21.1 million and $20.4 million in 2002, 2001 and 2000, respectively.
Minimum lease payments due on leases existing at December 31, 2002 are shown
below:
<Table>
<Caption>
YEAR MINIMUM LEASE PAYMENT
- ---- ---------------------
(IN MILLIONS)
<S> <C>
2003........................................................ $16.5
2004........................................................ 11.7
2005........................................................ 9.7
2006........................................................ 8.2
2007........................................................ 7.9
Balance thereafter.......................................... 19.4
</Table>
NOTE 10 -- INCOME TAXES
The components of income before income taxes and the provision for income
taxes are shown below:
<Table>
<Caption>
2002 2001 2000
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Income (loss) before income taxes:
United States............................................. $ 22 $ (9) $(10)
Outside the United States................................. 95 111 112
---- ---- ----
Total.................................................. $117 $102 $102
---- ---- ----
Provision for income taxes:
Current tax expense
U.S. federal.............................................. $ 10 $ 2 $ 1
State and local........................................... 4 2 1
Foreign................................................... 34 30 19
---- ---- ----
Total current.......................................... $ 48 $ 34 $ 21
---- ---- ----
Deferred tax expense (benefit)
U.S. federal.............................................. $ (8) $ (6) $ (4)
State and local........................................... (1) (1) (1)
Foreign................................................... 3 9 20
---- ---- ----
Total deferred......................................... $ (6) $ 2 $ 15
---- ---- ----
Total provision............................................. $ 42 $ 36 $ 36
==== ==== ====
</Table>
56
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Deferred income taxes are provided for the tax effects of temporary
differences between the financial reporting basis and tax basis of assets and
liabilities. Significant temporary differences at December 31, 2002 and 2001,
are attributable to:
<Table>
<Caption>
2002 2001
----- -----
(IN MILLIONS)
<S> <C> <C>
Deferred tax liabilities attributable to:
Plants and properties.................................. $163 $186
Other.................................................. -- 13
---- ----
Total gross deferred tax liabilities...................... 163 199
---- ----
Deferred tax assets attributable to:
Employee benefit reserves.............................. 12 14
Pensions............................................... 4 3
Hedging/derivative contracts........................... 6 11
Other.................................................. 19 13
---- ----
Total gross deferred tax assets........................... 41 41
---- ----
Valuation allowance....................................... (8) (8)
---- ----
Net deferred tax assets................................... 33 33
---- ----
Total net deferred tax liabilities.......................... $130 $166
==== ====
</Table>
The Company maintained a valuation allowance of $8 million at December 31,
2002 and 2001, as it is management's belief that it is more likely than not that
certain foreign net operating loss carry forwards and tax credits will not be
fully utilized to offset taxable income before they expire.
A reconciliation of the federal statutory tax rate to the Company's
effective tax rate follows:
<Table>
<Caption>
2002 2001 2000
---- ---- ----
<S> <C> <C> <C>
Provision for tax at U.S. statutory rate.................... 35.0% 35.0% 35.0%
Taxes related to foreign income............................. 0.3 (0.1) (2.2)
State and local taxes -- net................................ 1.5 0.4 1.8
Nondeductible goodwill...................................... -- 1.0 1.1
Tax credits................................................. (1.3) (1.0) --
Other items -- net.......................................... 0.5 (0.3) (0.7)
---- ---- ----
Provision at effective tax rate............................. 36.0% 35.0% 35.0%
==== ==== ====
</Table>
Provisions are made for estimated U.S. and foreign income taxes, less
credits that may be available, on distributions from foreign subsidiaries to the
extent dividends are anticipated. No provision has been made for income taxes on
approximately $420 million of undistributed earnings of foreign subsidiaries at
December 31, 2002, as such amounts are considered permanently reinvested.
NOTE 11 -- BENEFIT PLANS
The Company and its subsidiaries sponsor noncontributory defined benefit
pension plans covering substantially all employees in the United States and
Canada, and certain employees in other foreign countries. Plans for most
salaried employees provide pay-related benefits based on years of service. Plans
for hourly employees generally provide benefits based on flat dollar amounts and
years of service. The Company's general funding policy is to make contributions
to the plans in amounts that are within the limits of deductibility under
current tax regulations. Certain foreign countries allow income tax deductions
without regard to contribution
57
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
levels, and the Company's policy in those countries is to make the contribution
required by the terms of the applicable plan. Domestic plan assets consist
primarily of common stock, corporate debt securities and short-term investment
funds.
Domestic salaried employees are covered by a defined benefit "cash balance"
pension plan, which provides benefits based on service and Company credits to
the participating employees' accounts of between 3 percent and 10 percent of
base salary, bonus and overtime.
The Company also provides healthcare and life insurance benefits for
retired employees in the United States and Canada. U.S. salaried employees are
provided with access to postretirement medical insurance through Retirement
Health Care Spending Accounts. U.S. salaried employees accrue an account during
employment, which can be used after employment to purchase postretirement
medical insurance from the Company and Medigap or Medicare HMO policies after
age 65. The accounts are credited with a flat dollar amount and indexed for
inflation annually during employment. The accounts also accrue interest credits
using a rate equal to a specified amount above the yield on five-year Treasury
notes. Employees can use the amounts accumulated in these accounts, including
credited interest, to purchase postretirement medical insurance. Employees
become eligible for benefits when they meet minimum age and service
requirements. The Company recognizes the cost of these postretirement benefits
by accruing a flat dollar amount on an annual basis for each domestic salaried
employee. The Company has the right to modify or terminate these benefits.
Healthcare benefits for retirees outside the United States and Canada are
generally covered through local government plans.
Pension plans -- Net pension cost (income) consisted of the following for
the years ended December 31, 2002, 2001 and 2000:
<Table>
<Caption>
U.S. PLANS NON-U.S. PLANS
------------------ ------------------
2002 2001 2000 2002 2001 2000
---- ---- ---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Service cost................................... $ 2 $ 2 $ 2 $ 1 $ 2 $ 1
Interest cost.................................. 3 4 4 4 3 3
Expected return on plan assets................. (3) (5) (6) (4) (4) (4)
Credit due to salaried voluntary severance
program...................................... -- -- (2) -- -- --
--- --- --- --- --- ---
Net pension cost............................... $ 2 $ 1 $(2) $ 1 $ 1 $--
=== === === === === ===
</Table>
58
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The changes in benefit obligations and plan assets during 2002 and 2001, as
well as the funded status and the amounts recognized in the Company's
consolidated balance sheets related to the Company's pension plans at December
31, 2002 and 2001, were as follows:
<Table>
<Caption>
NON-U.S.
U.S. PLANS PLANS
----------- -----------
2002 2001 2002 2001
---- ---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C> <C>
Benefit obligation
At January 1............................................ $ 53 $ 52 $55 $55
Service cost............................................ 2 2 1 2
Interest cost........................................... 3 4 4 3
Benefits paid........................................... (5) (1) (2) (2)
Actuarial (gain) loss................................... (3) 4 1 --
Settlements............................................. -- (9) -- --
Amendments.............................................. -- 1 -- --
Foreign currency translation............................ -- -- 1 (3)
---- ---- --- ---
Benefit obligation at December 31......................... $ 50 $ 53 $60 $55
==== ==== === ===
Fair value of plan assets
At January 1............................................ $ 42 $ 55 $52 $56
Actual return on plan assets............................ (2) (4) (1) 1
Employer contributions.................................. -- 1 2 1
Benefits paid........................................... (5) (10) (2) (3)
Foreign currency translation............................ -- -- 1 (3)
---- ---- --- ---
Fair value of plan assets at December 31.................. $ 35 $ 42 $52 $52
==== ==== === ===
Funded status............................................. $(15) $(11) $(8) $(3)
Unrecognized net actuarial loss (gain).................. -- (3) 13 7
Unrecognized prior service cost......................... 3 4 1 1
---- ---- --- ---
Net prepaid pension asset (liability)..................... $(12) $(10) $ 6 $ 5
==== ==== === ===
</Table>
The above information includes cost and funded status data related to the
Company's nonqualified pension plans. For these nonqualified plans, the
projected benefit obligation exceeded the fair value of plan assets by $6
million and $4 million as of December 31, 2002 and December 31, 2001,
respectively. Also, the accumulated benefit obligation exceeded the fair value
of these plan assets by $5 million as of December 31, 2002 and $4 million as of
December 31, 2001. For qualified plans in the U.S., the projected benefit
obligation and accumulated benefit obligation exceeded the fair value of plan
assets by $8 million and by $10 million, respectively, as of December 31, 2002.
As of December 31, 2001, the projected benefit obligation and accumulated
benefit obligation for these same plans exceeded the fair value of plan assets
by $7 million and $4 million, respectively. The Company recognized an additional
minimum liability of $4 million at December 31, 2002 related to an under-funded
plan. In connection with the recognition of this minimum liability, the Company
recorded an intangible asset of $3 million and a charge to other comprehensive
income of $1.0 million ($0.6 million, net of deferred income taxes of $0.4
million). The minimum pension liability will change from year to year as a
result of revisions to actuarial assumptions, experience gains or losses and
settlement rate changes.
59
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following weighted average assumptions were used to determine the
Company's obligations under the pension plans:
<Table>
<Caption>
U.S. PLANS NON-U.S. PLANS
------------------- ------------------
2002 2001 2000 2002 2001 2000
----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Discount rate............................. 6.75% 7.5% 8.0% 6.5% 6.5% 6.5%
Rate of compensation increase............. 3.75% 4.5% 5.0% 4.5% 4.5% 4.5%
Expected return on plan assets............ 8.25% 9.0% 9.5% 8.5% 8.5% 8.5%
===== ==== ==== ==== ==== ====
</Table>
The Company and certain of its subsidiaries also maintain defined
contribution plans. The Company makes matching contributions to these plans
based on a percentage of employee contributions. Amounts charged to expense for
defined contribution plans totaled $4.3 million, $5.5 million and $5.6 million
in 2002, 2001 and 2000, respectively.
Postretirement benefit plans -- Net postretirement benefit costs consisted
of the following for the years ended December 31, 2002, 2001 and 2000:
<Table>
<Caption>
2002 2001 2000
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Service cost................................................ $1 $1 $1
Interest cost............................................... 2 2 1
Curtailment gain on divestiture of Enzyme Bio-Systems....... (1) -- --
Charge related to voluntary separation program.............. -- -- 2
-- -- --
Net postretirement benefit costs............................ $2 $3 $4
== == ==
</Table>
The Company's postretirement benefit plans currently are not funded. The
changes in the benefit obligations of the plans during 2002 and 2001, and the
amounts recognized in the Company's consolidated balance sheets at December 31,
2002 and 2001, were as follows:
<Table>
<Caption>
2002 2001
----- -----
(IN MILLIONS)
<S> <C> <C>
Accumulated postretirement benefit obligation
At January 1.............................................. $29 $26
Service cost.............................................. 1 1
Interest cost............................................. 2 2
Actuarial (gain) loss..................................... 1 (1)
Benefits paid............................................. (1) --
Amendments................................................ -- 1
Curtailments.............................................. (1) --
--- ---
Benefit obligation at December 31......................... $31 $29
Unrecognized net actuarial (loss) gain.................... (3) 2
Unrecognized prior service cost........................... 1 (2)
--- ---
Accrued postretirement benefit costs........................ $29 $29
=== ===
</Table>
In measuring the postretirement benefit obligation, the Company assumed an
increase in the per capita cost of healthcare benefits of 10 percent for 2002
and 9 percent for 2001, declining to 5 percent by the year 2012 and remaining at
that level thereafter. An increase in the assumed healthcare cost trend rate by
1 percentage point would increase the accumulated postretirement benefit
obligation at December 31, 2002 by $3 million, while a decrease in the rate of 1
percentage point would decrease the obligation by $3 million, with a
corresponding effect on the service and interest cost components of the net
periodic postretirement benefit
60
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
cost for the year then ended of $0.4 million. The accumulated postretirement
benefit obligation for U.S. plans was determined using an assumed discount rate
of 6.75 percent and 7.5 percent at December 31, 2002 and 2001, respectively. The
accumulated postretirement benefit obligation at December 31, 2002 and 2001, for
Canadian plans was determined using an assumed discount rate of 6.5 percent.
NOTE 12 -- SUPPLEMENTARY INFORMATION
Balance Sheet -- Supplementary information is set forth below:
<Table>
<Caption>
AT DECEMBER 31,
----------------
2002 2001
------ ------
(IN MILLIONS)
<S> <C> <C>
Accounts receivable -- net:
Accounts receivable -- trade.............................. $193 $234
Accounts receivable -- other.............................. 59 52
Allowance for doubtful accounts........................... (8) (7)
---- ----
Total accounts receivable -- net.......................... $244 $279
==== ====
Inventories:
Finished and in process................................... $ 89 $ 91
Raw materials............................................. 76 75
Manufacturing supplies.................................... 29 35
---- ----
Total inventories......................................... $194 $201
==== ====
Accrued liabilities:
Compensation expenses..................................... $ 19 $ 11
Dividends payable......................................... 4 4
Accrued interest.......................................... 18 8
Accrued income taxes...................................... 15 14
Taxes payable other than income taxes..................... 20 14
Other..................................................... 23 37
---- ----
Total accrued liabilities................................. $ 99 $ 88
==== ====
Non-current liabilities:
Employees' pension, indemnity, retirement, and other...... $ 67 $ 48
Other non-current liabilities............................. 1 2
---- ----
Total non-current liabilities............................. $ 68 $ 50
==== ====
</Table>
61
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Income Statement -- Supplementary information is set forth below:
<Table>
<Caption>
YEAR ENDED
DECEMBER 31,
------------------
2002 2001 2000
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Earnings from non-consolidated affiliates and other income:
Earnings from non-consolidated affiliates................. $ 7 $14 $ 3
Gain from sale of EBS..................................... 8 -- --
Gain from dissolution of CPMCP............................ 3 -- --
Gain from cancellation of long-term obligation............ -- 3 --
Other..................................................... 2 4 6
--- --- ---
Total earnings from non-consolidated affiliates and other
income................................................. $20 $21 $ 9
=== === ===
Financing costs:
Interest expense.......................................... $39 $59 $59
Interest income........................................... (2) (3) (4)
Foreign currency transaction losses (gains)............... (1) 8 (1)
--- --- ---
Financing costs -- net.................................... $36 $64 $54
=== === ===
</Table>
Statements of Cash Flow -- Supplementary information is set forth below:
<Table>
<Caption>
YEAR ENDED
DECEMBER 31,
------------------
2002 2001 2000
---- ---- ----
(IN MILLIONS)
<S> <C> <C> <C>
Interest paid............................................... $29 $62 $70
Income taxes paid........................................... 47 30 34
</Table>
NOTE 13 -- STOCKHOLDERS' EQUITY
Preferred stock and stockholders' rights plan:
The Company has authorized 25 million shares of $0.01 par value preferred
stock, of which 1 million shares were designated as Series A Junior
Participating Preferred Stock for the stockholders' rights plan. Under this
plan, each share of the Company's common stock carries with it the right to
purchase one one-hundredth of a share of preferred stock. The rights will at no
time have voting power or pay dividends. The rights will become exercisable if a
person or group acquires or announces a tender offer that would result in the
acquisition of 15 percent or more of the Company's common stock. When
exercisable, each full right entitles a holder to buy one one-hundredth of a
share of Series A Junior Participating Preferred Stock at a price of $120. If
the Company is involved in a merger or other business combination with a
stockholder holding at least 15 percent of the Company's outstanding voting
securities, each full right will entitle a holder to buy a number of the
acquiring company's shares having a value of twice the exercise price of the
right. Alternatively, if a 15 percent stockholder engages in certain
self-dealing transactions or acquires the Company in such a manner that Corn
Products International, Inc. and its common stock survive, or if any person
acquires 15 percent or more of the Company's common stock, except pursuant to an
offer for all shares at a fair price, each full right not owned by a stockholder
holding at least 15 percent of the Company's outstanding voting securities may
be exercised for Corn Products International, Inc. common stock (or, in certain
circumstances, other consideration) having a market value of twice the exercise
price of the right. The Company may redeem the rights for one cent each at any
time before an acquisition of 15 percent or more of its voting securities.
Unless redeemed earlier, the rights will expire on December 31, 2007.
62
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Treasury Stock:
During 2002, the Company issued, from treasury, 70,000 restricted common
shares and 176,812 common shares upon the exercise of stock options under the
stock incentive plan. During 2001, the Company issued, from treasury, 19,930
restricted common shares and 141,310 common shares upon the exercise of stock
options under the stock incentive plan. Also, in connection with the Arancia
acquisition, the Company issued from treasury 70,000 common shares and 78,794
common shares in 2002 and 2000, respectively.
The Company retired 19,126, 22,905 and 18,335 shares of its common stock to
treasury during 2002, 2001 and 2000, respectively, by both repurchasing shares
from employees under the stock incentive plan and through the cancellation of
forfeited restricted stock. The Company repurchased shares from employees at
average purchase prices of $29.75, $27.92 and $23.10, or fair value at the date
of purchase, during 2002, 2001 and 2000, respectively. Additionally, in 2000 the
Company purchased, on the open market, 1,865,400 shares of its common stock at
an average purchase price of $23.91 per share. All of the acquired shares are
held as common stock in treasury, less shares issued to employees under the
stock incentive plan.
On January 21, 2000, the Company's Board of Directors authorized an
increase in the stock repurchase program from the previously authorized 2
million shares to 6 million shares of common stock over a five-year period. At
both December 31, 2002 and 2001, 2,549,650 shares had been repurchased under
this program at a total cost of approximately $64 million.
Set forth below is a reconciliation of common stock share activity for the
years ended December 31, 2000, 2001 and 2002.
<Table>
<Caption>
SHARES OF COMMON STOCK
---------------------------------------
ISSUED HELD IN TREASURY OUTSTANDING
------ ---------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Balance at December 31, 1999...................... 37,660 703 36,957
Issuance in connection with acquisition......... -- (79) 79
Issuance of restricted stock as compensation.... -- (100) 100
Stock options exercised......................... -- (17) 17
Purchase/acquisition of treasury stock.......... -- 1,884 (1,884)
------ ----- ------
Balance at December 31, 2000...................... 37,660 2,391 35,269
Issuance of restricted stock as compensation.... -- (19) 19
Stock options exercised......................... -- (141) 141
Purchase/acquisition of treasury stock.......... -- 23 (23)
------ ----- ------
Balance at December 31, 2001...................... 37,660 2,254 35,406
Issuance in connection with acquisition......... -- (70) 70
Issuance of restricted stock as compensation.... -- (70) 70
Stock options exercised......................... -- (177) 177
Purchase/acquisition of treasury stock.......... -- 19 (19)
------ ----- ------
Balance at December 31, 2002...................... 37,660 1,956 35,704
====== ===== ======
</Table>
Stock Incentive Plan:
The Company has established a stock incentive plan for certain key
employees. In addition, following the spin-off from CPC, all existing CPC stock
options held by Company employees were converted to stock options to acquire
Corn Products International, Inc. common stock. These stock options retained
their original vesting schedules and expiration dates. The Company granted
additional nonqualified options to purchase 523,400, 546,300 and 805,500 shares
of the Company's common stock during 2002, 2001 and 2000, respectively. These
options are exercisable upon vesting, which occurs in 50 percent increments at
the one and
63
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
two-year anniversary dates of the date of grant. As of December 31, 2002,
certain of these nonqualified options have been forfeited due to the termination
of employees.
In addition to stock options, the Company awards shares of restricted stock
to certain key employees. The cost of these awards is being amortized to expense
over the applicable restriction periods.
The Company accounts for stock-based compensation using the intrinsic value
method. Pro forma disclosures of net income and earnings per share, assuming the
fair value method was used to account for stock options under SFAS 123, are
provided in Note 2 of these notes to the consolidated financial statements in
the section entitled "Stock-based compensation". For purposes of making the pro
forma disclosure, the estimated fair market value of stock option awards is
amortized to expense over the applicable vesting period. The fair value of the
stock option awards was estimated at the grant dates using the Black-Scholes
option pricing model with the following weighted average assumptions for 2002,
2001 and 2000, respectively: risk-free interest rates of 3.82 percent, 5.88
percent and 5.98 percent in 2002, 2001 and 2000; volatility factor of 1.54
percent, 1.42 percent and 8.28 percent in 2002, 2001 and 2000; and a weighted
average expected life of the awards of 6.92 years, 7.4 years and 7.84 years in
2002, 2001 and 2000. A dividend yield of 1.32 percent, 1.13 percent and 1.38
percent was assumed for 2002, 2001 and 2000, respectively.
The Black-Scholes model requires the input of highly subjective assumptions
and does not necessarily provide a reliable measure of fair value.
A summary of stock option and restricted stock transactions for the last
three years follows:
<Table>
<Caption>
WEIGHTED SHARES OF
STOCK OPTION STOCK OPTION AVERAGE RESTRICTED
SHARES PRICE RANGE EXERCISE PRICE STOCK
------------ ---------------- ---------------- ----------
(SHARES IN THOUSANDS)
<S> <C> <C> <C> <C>
Outstanding at January 1,
2000......................... 1,878 $13.06 to $32.31 $28.72 154
Granted...................... 806 22.75 to 27.41 25.39 93
Exercised/vested............. (17) 20.76 to 22.55 21.47 (46)
Cancelled.................... (114) 26.87 to 32.31 28.89 (7)
------------ ----------
Outstanding at December 31,
2000......................... 2,553 13.06 to 32.31 27.71 194
Granted...................... 546 27.78 to 32.31 28.71 26
Exercised/vested............. (141) 13.06 to 32.31 25.40 (31)
Cancelled.................... (54) 22.75 to 32.31 27.55 (19)
------------ ----------
Outstanding at December 31,
2001......................... 2,904 13.90 to 32.31 28.05 170
Granted...................... 523 28.65 to 33.13 28.80 70
Exercised/vested............. (177) 15.00 to 32.31 25.30 (16)
Cancelled.................... (100) 15.00 to 32.31 27.59 (6)
------------ ----------
Outstanding at December 31,
2002......................... 3,150 $13.90 to $33.13 $28.35 218
============ ==========
</Table>
64
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 2002:
<Table>
<Caption>
WEIGHTED AVERAGE WEIGHTED
AVERAGE REMAINING AVERAGE
OPTIONS EXERCISE CONTRACTUAL OPTIONS EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING PRICE LIFE (YEARS) EXERCISABLE PRICE
- ------------------------ ----------- -------- ------------ ----------- --------
(SHARES IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
$13.90 to 16.5650............... 60 $15.49 1.9 60 $15.49
16.5651 to 23.1910.............. 381 22.15 6.1 381 22.15
23.1911 to 26.5040.............. 107 24.03 4.1 107 24.03
26.5041 to 29.8170.............. 1,627 28.17 8.2 881 27.69
29.8171 to 33.1300.............. 975 32.33 5.1 957 32.31
----- ------ --- ----- ------
3,150 $28.35 6.7 2,386 $28.19
===== ====== === ===== ======
</Table>
The number of options exercisable at December 31, 2002 and 2001 was 2.4
million and 2.02 million, respectively. The weighted average fair value of
options granted during 2002, 2001, and 2000 was $4.17, $7.72 and $7.05,
respectively.
NOTE 14 -- SEGMENT INFORMATION
The Company operates in one business segment, corn refining, and is managed
on a geographic regional basis. Its North America operations include
corn-refining businesses in the United States, Canada and Mexico and, prior to
the December 2002 dissolution of CPMCP, its then non-consolidated equity
interest in that entity. This region also included EBS until it was sold in
February 2002. The Company's South America operations include corn-refining
businesses in Brazil, Argentina, Colombia, Chile, Ecuador and Uruguay. The
Company's Asia/Africa operations include corn-refining businesses in Korea,
Pakistan, Malaysia, Thailand and Kenya. Certain operating expenses that had
previously been reflected in North America operating income
65
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
are now classified as corporate expenses. Prior years' information has been
reclassified to conform to the current year presentation.
<Table>
<Caption>
2002 2001 2000
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
Net sales to unaffiliated customers (a):
North America............................................ $1,219 $1,212 $1,157
South America............................................ 401 440 460
Asia/Africa.............................................. 251 235 248
------ ------ ------
Total.................................................... $1,871 $1,887 $1,865
====== ====== ======
Operating income (b):
North America............................................ $ 56 $ 65 $ 77
South America............................................ 58 68 61
Asia/Africa.............................................. 54 45 54
Corporate................................................ (23) (17) (16)
Non-recurring earnings................................... 8 5 --
Special charges.......................................... -- -- (20)
------ ------ ------
Total.................................................... $ 153 $ 166 $ 156
====== ====== ======
Total assets (c):
North America............................................ $1,316 $1,430 $1,396
South America............................................ 360 489 647
Asia/Africa.............................................. 339 308 296
------ ------ ------
Total.................................................... $2,015 $2,227 $2,339
====== ====== ======
Depreciation and amortization:
North America............................................ $ 80 $ 87 $ 93
South America............................................ 17 28 29
Asia/Africa.............................................. 6 12 13
------ ------ ------
Total.................................................... $ 103 $ 127 $ 135
====== ====== ======
Capital expenditures:
North America............................................ $ 41 $ 52 $ 104
South America............................................ 16 28 28
Asia/Africa.............................................. 21 14 11
------ ------ ------
Total.................................................... $ 78 $ 94 $ 143
====== ====== ======
</Table>
- ---------------
Notes:
(a) Sales between segments for each of the periods presented are insignificant
and therefore are not presented.
(b) Includes earnings from non-consolidated affiliates accounted for under the
equity method as follows: North America -- $6 million and $13 million in
2002 and 2001, respectively; South America -- $1 million in each of 2002,
2001 and 2000.
(c) Includes investments in non-consolidated affiliates accounted for under the
equity method as follows: North America -- $13 million at December 31, 2001;
South America -- $3 million at December 31, 2002, $4 million at December 31,
2001 and $3 million at December 31, 2000.
66
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table presents net sales to unaffiliated customers by country
of origin for the last three years:
<Table>
<Caption>
NET SALES
------------------------
2002 2001 2000
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
United States.............................................. $ 605 $ 599 $ 629
Mexico..................................................... 332 390 359
Canada..................................................... 281 224 169
Brazil..................................................... 195 200 256
Korea...................................................... 162 155 172
Argentina.................................................. 63 100 95
Others..................................................... 233 219 185
------ ------ ------
Total...................................................... $1,871 $1,887 $1,865
====== ====== ======
</Table>
The following table presents long-lived assets by country at December 31:
<Table>
<Caption>
LONG-LIVED ASSETS
------------------------
2002 2001 2000
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
United States.............................................. $ 406 $ 434 $ 446
Mexico..................................................... 433 457 464
Canada..................................................... 147 151 163
Brazil..................................................... 88 131 145
Korea...................................................... 210 186 188
Argentina.................................................. 67 135 242
Others..................................................... 146 158 134
------ ------ ------
Total...................................................... $1,497 $1,652 $1,782
====== ====== ======
</Table>
67
<PAGE>
SUPPLEMENTAL FINANCIAL INFORMATION
UNAUDITED QUARTERLY FINANCIAL DATA
Summarized quarterly financial data is as follows:
<Table>
<Caption>
1ST QTR 2ND QTR 3RD QTR 4TH QTR
-------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
2002
Net sales before shipping and handling costs........ $ 458 $ 515 $ 507 $ 499
Less: shipping and handling costs................... 26 29 27 26
----- ----- ----- -----
Net sales........................................... $ 432 $ 486 $ 480 $ 473
Gross profit........................................ 59 72 70 66
Net income.......................................... 11* 19 17 16**
Basic earnings per common share..................... $0.31* $0.52 $0.48 $0.46**
Diluted earnings per common share................... $0.31* $0.52 $0.48 $0.46**
</Table>
- ---------------
* Includes a $5 million ($3 million, net of tax, or $0.08 per diluted common
share) gain primarily related to the sale of EBS, net of restructuring
charges.
** Includes a $3 million ($2 million, net of tax, or $0.06 per diluted common
share) gain from the dissolution of CPMCP.
<Table>
<Caption>
1ST QTR 2ND QTR 3RD QTR 4TH QTR
-------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
2001
Net sales before shipping and handling costs........ $ 499 $ 521 $ 506 $ 508
Less: shipping and handling costs................... 44 39 32 32
----- ----- ----- -----
Net sales........................................... $ 455 $ 482 $ 474 $ 476
Gross profit........................................ 75 73 84 67
Net income.......................................... 13 15 20* 9**
Basic earnings per common share..................... $0.36 $0.43 $0.55* $0.26**
Diluted earnings per common share................... $0.36 $0.43 $0.55* $0.26**
</Table>
- ---------------
* Includes net non-recurring income of $5 million ($3.5 million, net of tax, or
$0.10 per diluted common share) relating to a value-added tax refund, net of
certain one-time charges.
** Includes a $7 million ($4.6 million, net of tax, or $0.13 per common share)
foreign currency transaction loss, related to the January 6, 2002 devaluation
of the Argentine peso.
68
<PAGE>
COMMON STOCK MARKET PRICES AND DIVIDENDS
The Company's common stock is listed and traded on the New York Stock
Exchange. The following table sets forth, for the periods indicated, the high,
low and closing market prices of the common stock and common stock cash
dividends.
<Table>
<Caption>
1ST QTR 2ND QTR 3RD QTR 4TH QTR
------- ------- ------- -------
<S> <C> <C> <C> <C>
2002
Market price range of common stock
High............................................... $34.04 $34.42 $31.23 $30.90
Low................................................ 26.64 29.69 23.68 27.11
Close.............................................. 31.87 30.90 28.65 30.13
Dividends declared per common share................ $ 0.10 $ 0.10 $ 0.10 $ 0.10
2001
Market price range of common stock
High............................................... $29.19 $32.00 $33.64 $37.00
Low................................................ 24.85 24.50 27.65 27.30
Close.............................................. 25.66 32.00 28.73 35.25
Dividends declared per common share................ $ 0.10 $ 0.10 $ 0.10 $ 0.10
</Table>
The number of shareholders of the Company's stock at December 31, 2002 was
approximately 11,600.
69
<PAGE>
TEN-YEAR FINANCIAL HIGHLIGHTS*
<Table>
<Caption>
2002 2001 2000 1999 1998 1997 1996 1995 1994 1993
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Net sales......................... $1,871 $1,887 $1,865 $1,735 $1,448 $1,418 $1,524 $1,387 $1,385 $1,243
Net income (loss) as previously
reported........................ 63 57 48 77 43 (75) 23 135 100 99
Adjustment for effect of a change
in accounting for inventories... -- -- -- (3) -- (1) 2 1 (2) 2
Net income (loss) as adjusted..... 63 57 48 74 43 (76) 25 136 98 101
Basic earnings (loss) per common
share:
Net income (loss) as previously
reported...................... $ 1.78 $ 1.60 $ 1.35 $ 2.06 $ 1.19 $(2.10) $ 0.64 $ 3.79 $ 2.81 $ 2.78
Adjustment for effect of a
change in accounting for
inventories................... -- -- -- (0.08) (0.01) (0.03) 0.06 0.03 (0.06) 0.06
Net income (loss) as adjusted... $ 1.78 $ 1.60 $ 1.35 $ 1.98 $ 1.18 $(2.13) $ 0.70 $ 3.82 $ 2.75 $ 2.84
Cash dividends declared per common
share........................... $ 0.40 $ 0.40 $ 0.40 $ 0.36 $ 0.16 -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
BALANCE SHEET DATA
Working capital................... $ 138 $ (120) $ 69 $ 104 $ 46 $ (83) $ 151 $ 33 $ 113 $ 44
Property, plant and
equipment-net................... 1,154 1,293 1,407 1,349 1,298 1,057 1,057 920 830 792
Total assets...................... 2,015 2,227 2,339 2,217 1,956 1,676 1,676 1,315 1,214 1,121
Total debt........................ 600 756 720 544 404 350 350 363 294 209
Stockholders' equity.............. 828 857 960 1,030 1,059 992 1,033 606 555 491
Shares outstanding, year end...... 35.7 35.4 35.3 36.9 37.6 35.6 -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
STATISTICAL DATA
Depreciation and amortization..... $ 103 $ 127 $ 135 $ 122 $ 95 $ 95 $ 88 $ 82 $ 80 $ 78
Capital expenditures.............. 78 94 143 162 91 100 192 188 145 122
Maintenance and repairs........... 72 82 78 84 67 69 61 65 65 57
Total employee costs.............. 187 194 195 192 131 142 170 164 149 177
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</Table>
- ---------------
* All periods prior to 2000 have been retroactively restated to reflect the
change in accounting for inventories effective January 1, 2000.
Note: 1997 and prior per share amounts are pro forma and have been
computed by dividing net income (loss) by the shares outstanding, which were
35.6 million at December 31, 1997, the spin-off and distribution date. For the
purpose of this calculation, the shares outstanding at December 31, 1997 were
assumed to be outstanding for all periods prior.
70
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>8
<FILENAME>c75436exv21w1.txt
<DESCRIPTION>SUBSIDIARIES OF THE REGISTRANT
<TEXT>
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
Following is a list of the Registrant's subsidiaries and their subsidiaries
showing the percentage of voting securities owned, or other bases of control, by
the immediate parent of each.
DOMESTIC - 100 PERCENT
Corn Products Development, Inc. (Delaware)
Corn Products Sales Corporation (Delaware)
Crystal Car Line, Inc. (Illinois)
Feed Products Limited (New Jersey)
The Chicago, Peoria and Western Railway Company (Illinois)
Cali Investment Corp. (Delaware)
Colombia Millers Ltd. (Delaware)
Hispano-American Company, Inc. (Delaware)
Inversiones Latinoamericanas S.A. (Delaware)
Bedford Construction Company (New Jersey)
Corn Products Puerto Rico Inc. (Delaware)
FOREIGN - 100 PERCENT
Argentina: Corn Products Southern Cone S.A.
-Starch Holding Argentina S.A.
Barbados: Corn Products International Sales Company, Inc.
Brazil: Corn Products Brasil-Ingredientes Industriais Ltda.
Canada: Canada Starch Company Inc.
-Canada Starch Operating Company Inc.
-Casco Inc.
-Casco Sales Company Inc.
-Corn Products Canada Inc.
Colombia: Industrias del Maiz S.A. - Corn Products Andina
.. Honduras: Almidones del Istmo, S.A. de C.V.
Japan: Corn Products Japan Ltd.
Kenya: Corn Products Kenya Limited
Malaysia: Stamford Food Industries Sdn. Berhad
Mexico: Arancia Corn Products, S.A. de C.V.
-Aracorn, S.A. de C.V.
-Arrendadora Gefemesa, S.A. de C.V.
-Campotec Nacional, S.A. de C.V.
-Maiz y Agroproductos Nacionales, S.A. de C.V.
Singapore: Corn Products Trading Co. Pte. Ltd.
Venezuela: Corn Products Venezuela, C.A.
Ecuador: Indumaiz del Ecuador S.A.
<PAGE>
OTHER
Argentina: Productos de Maiz, S.A. - 72.24 percent
-Macher Financier S.A. - 76.08 percent
Chile: Corn Products Chile-Inducorn S.A. - 72.24 percent
Uruguay: Productos de Maiz Uruguay S.A. - 72.24 percent
Brazil: GETEC Guarabara Quimica Industrial S/A - 20.17 percent
Ecuador: Poliquimicos del Ecuador S.A. - 91.72 percent
Pakistan: Rafhan Maize Products Co. Ltd. - 70.31 percent
Korea: Doosan Corn Products Korea, Inc. - 75 percent
Japan: Nihon Shokuhin Kako Kabishiki Kaisha (NSKK) - Japan Maize
Products Co., Ltd.- 22.96 percent
Thailand: Corn Products Amardass (Thailand) Limited - 82.60 percent
The Company also has other subsidiaries, which, if considered in the aggregate
as a single subsidiary, would not constitute a significant subsidiary.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>9
<FILENAME>c75436exv23w1.txt
<DESCRIPTION>CONSENT OF KPMG LLP
<TEXT>
<PAGE>
EXHIBIT 23.1
CONSENT OF KPMG LLP
The Board of Directors and Stockholders
Corn Products International, Inc.:
We consent to the incorporation by reference in the registration statements on
Forms S-8 (No. 333-43479, 333-43525, 333-71573, 333-75844, and 333-33100) and
Form S-3 (No. 333-83557) of Corn Products International, Inc. of our report
dated January 28, 2003, relating to the consolidated balance sheets of Corn
Products International, Inc. and subsidiaries as of December 31, 2002 and 2001,
and the related consolidated statements of income, stockholders' equity,
comprehensive income and cash flows for each of the years in the three-year
period ended December 31, 2002, which report is included in the December 31,
2002 annual report on Form 10-K of Corn Products International, Inc. Our report
contains an explanatory paragraph that describes the Company's adoption of
Statement of Financial Accounting Standard (SFAS) No. 133 as of January 1, 2001
and SFAS No. 142 as of January 1, 2002.
/s/ KPMG LLP
Chicago, Illinois
March 21, 2003
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24.1
<SEQUENCE>10
<FILENAME>c75436exv24w1.txt
<DESCRIPTION>POWER OF ATTORNEY
<TEXT>
<PAGE>
EXHIBIT 24.1
CORN PRODUCTS INTERNATIONAL, INC.
POWER OF ATTORNEY
Form 10-K for the Fiscal Year Ended December 31, 2002
KNOW ALL MEN BY THESE PRESENTS, that I, as a director of Corn Products
International, Inc., a Delaware corporation, (the "Company"), do hereby
constitute and appoint MARCIA E. DOANE as my true and lawful attorney-in-fact
and agent, for me and in my name, place and stead, to sign the Annual Report on
Form 10-K of the Company for the fiscal year ended December 31, 2002, and any
and all amendments thereto, and to file the same and other documents in
connection therewith with the Securities and Exchange Commission, granting unto
said attorney-in-fact full power and authority to do and perform each and every
act and thing requisite and necessary to be done in the premises, as fully to
all intents and purposes as I might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact may lawfully do or cause to be done by
virtue thereof.
IN WITNESS WHEREOF, I have executed this instrument this 21st day of
March, 2003.
/s/ Richard J. Almeida
- --------------------------------------
Richard J. Almeida
/s/ Ignacio Aranguren-Castiello
- --------------------------------------
Ignacio Aranguren-Castiello
/s/ Alfred C. DeCrane, Jr.
- --------------------------------------
Alfred C. DeCrane, Jr.
/s/ Guenther E. Greiner
- --------------------------------------
Guenther E. Greiner
/s/ Ronald M. Gross
- --------------------------------------
Ronald M. Gross
/s/ Karen L. Hendricks
- --------------------------------------
Karen L. Hendricks
/s/ Bernard H. Kastory
- --------------------------------------
Bernard H. Kastory
/s/ William S. Norman
- --------------------------------------
William S. Norman
/s/ James M. Ringler
- --------------------------------------
James M. Ringler
/s/ Samuel C. Scott III
- --------------------------------------
Samuel C. Scott III
/s/ Clifford B. Storms
- --------------------------------------
Clifford B. Storms
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.1
<SEQUENCE>11
<FILENAME>c75436exv99w1.txt
<DESCRIPTION>CEO CERTIFICATION PURSUANT TO SECTION 1350
<TEXT>
<PAGE>
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
SECTION 1350 OF CHAPTER 63 OF TITLE 18
OF THE UNITED STATES CODE AS CREATED BY
THE SARBANES-OXLEY ACT OF 2002
I, Samuel C. Scott III, the Chief Executive Officer of Corn Products
International, Inc., certify that (i) the report on Form 10-K for the fiscal
year ended December 31, 2002 as filed with the Securities and Exchange
Commission on the date hereof (the "Report") fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934
and (ii) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of Corn
Products International, Inc.
/s/ Samuel C. Scott III
- -------------------------------
Samuel C. Scott III
Chief Executive Officer
March 21, 2003
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.2
<SEQUENCE>12
<FILENAME>c75436exv99w2.txt
<DESCRIPTION>CFO CERTIFICATION PURSUANT TO SECTION 1350
<TEXT>
<PAGE>
EXHIBIT 99.2
CERTIFICATION PURSUANT TO
SECTION 1350 OF CHAPTER 63 OF TITLE 18
OF THE UNITED STATES CODE AS CREATED BY
THE SARBANES-OXLEY ACT OF 2002
I, James W. Ripley, the Chief Financial Officer of Corn Products
International, Inc., certify that (i) the report on Form 10-K for the fiscal
year ended December 31, 2002 as filed with the Securities and Exchange
Commission on the date hereof (the "Report") fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934
and (ii) the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of Corn
Products International, Inc.
/s/ James W. Ripley
- -------------------------------
James W. Ripley
Chief Financial Officer
March 21, 2003
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----