<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 4, 1997.
REGISTRATION NO. 333-40709
================================================================================
SECURITIES AND EXCHANGE COMMISSION
------------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
CHIQUITA BRANDS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEW JERSEY 0100 04-1923360
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
incorporation or organization) Classification Code Number) No.)
</TABLE>
250 EAST FIFTH STREET
CINCINNATI, OHIO 45202
(513) 784-8000
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
ROBERT W. OLSON, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CHIQUITA BRANDS INTERNATIONAL, INC.
250 EAST FIFTH STREET
CINCINNATI, OHIO 45202
(513) 784-8804
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
with copies to:
<TABLE>
<S> <C>
TIMOTHY E. HOBERG, ESQ. FRANK J. PELISEK, ESQ.
TAFT, STETTINIUS & HOLLISTER MICHAEL BEST & FRIEDRICH LLP
1800 STAR BANK CENTER SUITE 3300
425 WALNUT STREET 100 E. WISCONSIN AVENUE
CINCINNATI, OHIO 45202-3957 MILWAUKEE, WISCONSIN 53202
(513) 381-2838 (414) 271-6560
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES
EFFECTIVE.
------------------------------
IF THE SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED IN CONNECTION
WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS COMPLIANCE WITH GENERAL
INSTRUCTION G, CHECK THE FOLLOWING BOX. [ ]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE> 2
[STOKELY USA, INC. LETTERHEAD]
DECEMBER 8, 1997
Dear Fellow Shareholder:
The Annual Meeting of Shareholders of Stokely USA, Inc. ("Stokely") will be
held at 10:00 a.m., Milwaukee time, at the Milwaukee Athletic Club, 758 North
Broadway, Milwaukee, Wisconsin on Thursday, January 15, 1998.
AT THE ANNUAL MEETING, YOU WILL BE ASKED TO CONSIDER AND APPROVE AN
AGREEMENT AND PLAN OF REORGANIZATION FOR STOKELY, PROVIDING FOR THE MERGER OF
STOKELY WITH A WHOLLY-OWNED SUBSIDIARY OF CHIQUITA BRANDS INTERNATIONAL, INC.
("CHIQUITA"). As described in the accompanying proxy statement, in the merger,
each of your shares of Stokely common stock will be converted into the right to
receive the equivalent of $1.00 per share in the form of shares of Chiquita
common stock.
STOKELY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER, BELIEVES
THE MERGER IS IN YOUR BEST INTERESTS AND STRONGLY URGES YOU TO VOTE FOR THE
PROPOSAL TO APPROVE AND ADOPT THE MERGER BY SIGNING, DATING AND PROMPTLY
RETURNING THE ENCLOSED WHITE PROXY CARD, USING THE POSTAGE-PAID ENVELOPE
PROVIDED.
------------------------------
CAUTION
------------------------------
Stokely's financial condition, primarily as a result of economic, market
and competitive pressures, combined with its high debt level, has deteriorated
during the past few years. That deterioration has continued in the last several
quarters to a point where Stokely's negative cash flow and working capital
positions will likely become critical in the upcoming quarters.
IF THE PROPOSED MERGER IS NOT APPROVED BY STOKELY'S SHAREHOLDERS OR IS NOT
CONSUMMATED FOR ANY OTHER REASON, AND IF PROCESSED VEGETABLE MARKET CONDITIONS
DO NOT SIGNIFICANTLY IMPROVE, WE BELIEVE THAT STOKELY ULTIMATELY MAY BE REQUIRED
TO SEEK PROTECTION FROM CREDITORS UNDER THE BANKRUPTCY CODE. In that case,
Stokely's Board of Directors believes it is unlikely you would receive anything
close to the value offered to you by the proposed merger.
THE PROPOSED MERGER HAS BEEN REVIEWED CAREFULLY BY STOKELY'S INDEPENDENT
FINANCIAL ADVISOR, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, WHICH
HAS CONCLUDED THAT THE PROPOSED MERGER IS FAIR TO STOKELY'S SHAREHOLDERS FROM A
FINANCIAL POINT OF VIEW. Stokely's Board of Directors also has concluded that
the proposed merger with Chiquita is in your best interests because it offers,
among other things, the best immediate and long-term value available for
Stokely's shareholders.
DO WHAT'S BEST FOR YOU
The accompanying materials contain important information which you should
review carefully before deciding how you wish to vote on the proposed merger. An
affirmative vote by owners of two-thirds of Stokely's outstanding shares of
common stock is required to approve the merger. ACCORDINGLY, A FAILURE TO VOTE
WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER PROPOSAL.
VOTE "FOR" ADOPTION OF THE MERGER PROPOSAL TODAY
FOR THE REASONS DESCRIBED ABOVE AND IN THE ACCOMPANYING PROXY STATEMENT,
STOKELY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ADOPTION
OF THE MERGER PROPOSAL BY SIGNING, DATING AND PROMPTLY RETURNING THE ENCLOSED
WHITE PROXY CARD, USING THE POSTAGE-PAID ENVELOPE PROVIDED.
You also will be voting on the election of three directors to hold office
until the merger is consummated (or, if the merger is not consummated, for a
term of three years expiring at Stokely's Annual Meeting of Shareholders in the
year 2000 or until their successors are elected and qualified).
<PAGE> 3
You should not send in certificates for your shares of Stokely common stock
with your proxy card; if the Merger is consummated, you will be sent
instructions regarding the exchange of your stock certificates at that time.
If you need assistance in voting your shares, please call our proxy
solicitor, D.F. King & Co., Inc., toll free at 1-800-549-6697.
On behalf of the Board of Directors,
[SIG]
Stephen W. Theobald
President and Chief Executive Officer
IMPORTANT
If your shares of Stokely Common Stock are held for you by a brokerage
firm, only your brokerage firm can vote your shares and only after receiving
your specific voting instruction.
To ensure that your shares are voted, please promptly complete and mail the
enclosed voting instruction form, using the postage-paid envelope provided.
PLEASE ACT PROMPTLY
<PAGE> 4
STOKELY USA, INC.
1230 CORPORATE CENTER DRIVE
OCONOMOWOC, WISCONSIN 53066
------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JANUARY 15, 1998
------------------------------
TO THE HOLDERS OF COMMON STOCK OF STOKELY USA, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Annual
Meeting") of Stokely USA, Inc. ("Stokely") will be held on January 15, 1998, at
10:00 a.m., Milwaukee time, at the Milwaukee Athletic Club, 758 North Broadway,
Milwaukee, Wisconsin. The Annual Meeting is for the purpose of considering and
voting upon the following matters, all of which are described more completely in
the enclosed materials:
1. To consider and vote upon the approval and adoption of the
Agreement and Plan of Reorganization, dated as of September 17,
1997, among Chiquita Brands International, Inc. ("Chiquita"),
Chiquita Acquisition Corp. and Stokely, providing among other
things for the merger of Chiquita Acquisition Corp. with and into
Stokely, and for Stokely to be the surviving corporation and to
become a wholly-owned subsidiary of Chiquita (the "Merger"). In the
Merger, each outstanding share of Stokely common stock will be
converted into the right to receive a fractional share of Chiquita
common stock having a value of $1.00. The size of the fractional
amount will be based on the average closing price of Chiquita's
common stock on the New York Stock Exchange over the 15 trading
days preceding the Merger. The number of whole shares of Chiquita
common stock to be received by each Stokely shareholder will depend
on the number of shares of Stokely common stock held by the
shareholder. No fractional shares of Chiquita common stock will be
issued and cash will be paid in lieu of fractional shares.
2. To elect three directors to serve until consummation of the Merger
(or, if the Merger is not consummated, for a three-year term
expiring at Stokely's 2000 annual meeting of shareholders, or until
their successors have been elected and qualified).
3. To adjourn the Annual Meeting to solicit additional votes in favor
of the Merger Agreement in the event that the required vote for
approval and adoption of the Merger Agreement has not been obtained
by the date of the Annual Meeting.
4. To consider and act upon such other matters as may properly come
before the Annual Meeting or any adjournments or postponements
thereof. The Board of Directors is not aware of any such other
business.
The Board of Directors has established November 20, 1997 as the record date
for the determination of shareholders entitled to notice of and to vote at the
Annual Meeting. Only shareholders of record as of the close of business on that
date will be entitled to vote at the Annual Meeting or any adjournments or
postponements thereof. In the event there are not sufficient votes for a quorum
or to approve any of the
<PAGE> 5
foregoing proposals at the time of the Annual Meeting, the Annual Meeting may be
adjourned or postponed in order to permit further solicitation of proxies by
Stokely.
BY ORDER OF THE BOARD OF DIRECTORS
[SIG.]
Robert M. Brill
Secretary
Oconomowoc, Wisconsin
December 8, 1997
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE
ANNUAL MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY
BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE
THEREOF.
DO NOT SEND IN YOUR SHARE CERTIFICATES FOR STOKELY COMMON STOCK WITH YOUR PROXY
CARD. UPON APPROVAL OF THE MERGER, INSTRUCTIONS FOR EXCHANGING YOUR SHARE
CERTIFICATES WILL BE SENT TO YOU SHORTLY THEREAFTER.
<PAGE> 6
STOKELY USA, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 15, 1998
------------------------
CHIQUITA BRANDS INTERNATIONAL, INC.
PROSPECTUS
UP TO 3,204,349 SHARES OF COMMON STOCK
This combined Proxy Statement and Prospectus ("Proxy Statement/Prospectus")
is being furnished to the holders of common stock, $0.05 par value per share
("Stokely Common Stock"), of Stokely USA, Inc., a Wisconsin corporation
("Stokely"), in connection with the solicitation of proxies by the Stokely Board
of Directors for use at the Annual Meeting of Shareholders (the "Annual
Meeting") to be held on January 15, 1998, at the Milwaukee Athletic Club, 758
North Broadway, Milwaukee, Wisconsin, commencing at 10:00 a.m., local time, and
at any adjournment or postponement of the Annual Meeting. The primary purpose of
the Annual Meeting is for shareholders to consider and vote upon the merger (the
"Merger") as a result of which Stokely will become a direct, wholly-owned
subsidiary of Chiquita Brands International, Inc., a New Jersey corporation
("Chiquita"). The Merger will be effected in accordance with an Agreement and
Plan of Reorganization, dated as of September 17, 1997, by and among Chiquita,
Chiquita Acquisition Corp., a Wisconsin corporation ("Acquisition Sub"), and
Stokely (the "Merger Agreement"). At the Annual Meeting, shareholders of Stokely
also will consider and vote upon the election of three directors and the
possible adjournment of the Annual Meeting, if necessary, to solicit additional
votes in favor of the Merger.
In the Merger, each outstanding share of Stokely Common Stock will be
converted into the right to receive a fractional share of Chiquita Common Stock
having a value of $1.00. The size of the fractional amount will be based on the
average closing price of Chiquita Common Stock on the New York Stock Exchange
("NYSE") over the 15 trading days preceding the Merger. The number of whole
shares of Chiquita Common Stock to be received by each Stokely shareholder will
depend on the number of shares of Stokely Common Stock held by the shareholder.
No fractional shares of Chiquita Common Stock will be issued and cash will be
paid in lieu of fractional shares. Additionally, in connection with the Merger,
(i) holders of $31.8 million principal amount of Stokely debt have agreed to
exchange that indebtedness for shares of Chiquita Common Stock and (ii) certain
Stokely suppliers have agreed to forgive $1.0 million in accounts receivable.
For a more detailed description of the terms of the Merger, see "PROPOSAL TO
APPROVE THE MERGER."
This Proxy Statement/Prospectus also constitutes a prospectus of Chiquita
with respect to up to 3,204,349 shares of Chiquita Capital Stock, par value $.33
per share ("Chiquita Common Stock"), which may be issued in exchange for
outstanding shares of Stokely Common Stock in the Merger and for certain
outstanding indebtedness of Stokely in connection with the Merger. This Proxy
Statement/Prospectus and accompanying appointment form of proxy ("Proxy") are
first being mailed to shareholders of Stokely as of November 20, 1997 (the
"Voting Record Date") on or about December 10, 1997. This Proxy
Statement/Prospectus also is being furnished to the holders of the Stokely
indebtedness to be exchanged in connection with the Merger.
SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH SHOULD BE CONSIDERED IN CONNECTION WITH THE ACQUISITION OF CHIQUITA COMMON
STOCK.
All information contained in this Proxy Statement/Prospectus relating to
Stokely has been supplied by Stokely, and all information relating to Chiquita
has been supplied by Chiquita. Neither Stokely nor Chiquita warrants the
accuracy or completeness of information relating to the other.
THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE NOT
BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
------------------------
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS DECEMBER , 1997.
<PAGE> 7
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE
HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY STOKELY, CHIQUITA OR ANY OTHER PERSON.
THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY,
IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY
SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF STOKELY OR CHIQUITA SINCE THE DATE HEREOF OR THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
AVAILABLE INFORMATION
Stokely and Chiquita are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, file reports, proxy statements and other information with
the Securities and Exchange Commission (the "SEC " or "Commission"). The
reports, proxy statements and other information filed by Stokely and Chiquita
with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices at 7 World
Trade Center, Suite 1300, New York, New York 10048 and CitiCorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material may be obtained from the Public Reference Section of the Commission,
Washington, D.C. 20549 at prescribed rates. Reports, proxy and information
statements and other information regarding Stokely and Chiquita also may be
obtained through the Website maintained by the Commission at http://www.sec.gov.
Chiquita Common Stock is listed on the New York, Boston and Pacific Stock
Exchanges. Reports, proxy and information statements and other information
concerning Chiquita may be inspected and copied at the Library of the New York
Stock Exchange at 20 Broad Street, New York, New York 10005; at the Secretary's
Offices of the Boston Stock Exchange at One Boston Place, Boston, Massachusetts;
and at the Listing Department of the Pacific Exchange, Inc. at 301 Pine Street,
San Francisco, California.
Chiquita has filed with the Commission a Registration Statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act") with respect to the
Chiquita Common Stock to be issued in connection with the Merger. This Proxy
Statement/Prospectus does not contain all the information set forth in the
Registration Statement. Such additional information may be obtained from the
Commission's principal office in Washington, D.C. Statements contained in this
Proxy Statement/Prospectus or in any document incorporated by reference in this
Proxy Statement/Prospectus as to the contents of any contract or other document
referred to herein or therein are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement or such other document, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Proxy Statement/Prospectus incorporates documents by reference which
are not presented herein or delivered herewith. Such documents (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference) are available to any person, including any beneficial owner to whom
this Proxy Statement/Prospectus is delivered, on written or oral request,
without charge, in the case of documents relating to Stokely, directed to
Stokely USA, Inc., 1230 Corporate Center Drive, Oconomowoc, Wisconsin 53066
(telephone number (414) 569-1800), Attention: Robert M. Brill, or, in the case
of documents relating to Chiquita, directed to Chiquita Brands International,
Inc., 250 East Fifth Street, Cincinnati, Ohio 45202, Attention: Vice President,
Corporate Affairs (telephone number (513) 784-6366). In order to ensure timely
delivery of the documents, any requests should be made by January 8, 1998.
ii
<PAGE> 8
The following documents filed with the Commission by Chiquita (File No.
1-1550) pursuant to the Exchange Act are incorporated by reference in this Proxy
Statement/Prospectus:
1) Chiquita's Annual Report on Form 10-K for the year ended December
31, 1996.
2) Chiquita's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997.
3) Chiquita's Current Reports on Form 8-K dated September 15, 1997 and
November 20, 1997.
Copies of Stokely's Form 10-K/A for the fiscal year ended March 31, 1997
and Form 10-Q/A for the quarter ended September 30, 1997 accompany this Proxy
Statement/Prospectus. Stokely amended its Form 10-K by means of a Form 10-K/A
filed on July 29, 1997 and a Form 10-K/A filed on October 14, 1997. The Form
10-K/A (filed on October 14, 1997) includes all of the information contained in
the Form 10-K as originally filed, updated to reflect subsequent occurring
events; however, since the information included in the Form 10-K/A (filed on
July 29, 1997) is included in this Proxy Statement/Prospectus, the Form 10-K/A
(filed on July 29, 1997) is not enclosed.
The following documents filed with the Commission by Stokely (File No.
0-13943) pursuant to the Exchange Act are incorporated by reference in this
Proxy Statement/Prospectus:
1) Stokely's Annual Report on Form 10-K and amendments thereto on Form
10-K/A (filed on July 29, 1997 and on October 14, 1997) for the
fiscal year ended March 31, 1997.
2) Stokely's Quarterly Reports on Form 10-Q for the quarters ended
June 30, 1997 (as amended by Form 10-Q/A filed on October 23, 1997)
and September 30, 1997 (as amended by Form 10-Q/A filed on December
4, 1997).
3) Stokely's Current Report on Form 8-K dated September 17, 1997.
All documents and reports filed by Chiquita and Stokely pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy
Statement/Prospectus and prior to the date of the Annual Meeting shall be deemed
to be incorporated by reference in this Proxy Statement/Prospectus and to be a
part hereof from the date of filing of such documents or reports. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement/Prospectus to the extent that such a statement contained herein or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statements. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement/Prospectus.
The information relating to Chiquita and Stokely contained in this Proxy
Statement/Prospectus does not purport to be complete and should be read together
with the information in the documents that accompany this Proxy
Statement/Prospectus and the additional information that is incorporated by
reference herein.
FORWARD-LOOKING STATEMENTS
Cautionary Statement for Purposes of the Private Securities Litigation Reform
Act of 1995
This Proxy Statement/Prospectus, including the information incorporated by
reference herein, information included in, or incorporated by reference from,
future filings by Chiquita or Stokely with the Commission and information
contained in written material, press releases and oral statements issued by or
on behalf of Chiquita or Stokely, contains, or may contain, certain statements
that may be deemed to be "forward-looking statements" within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act. All
statements, other than statements of historical facts, included in this Proxy
Statement/Prospectus that address activities, events or developments that
Chiquita or Stokely expect, believe or anticipate will or may occur in the
future are forward-looking statements. These statements are based on certain
assumptions and analyses made by Chiquita or Stokely in light of their
experience and perception of historical trends, current conditions, expected
future developments and other factors they believe are appropriate under the
circumstances. Such statements are subject to a number of assumptions, risks and
uncertainties, such as (i) the prices at which Chiquita and Stokely can sell
their products, (ii) the costs at which they can purchase (or grow) fresh
produce and other raw materials and inventory, and (iii) the various market,
competitive and agricultural factors which may impact those prices and costs,
many of which are beyond the control of Chiquita or Stokely. In the case of
Chiquita, some of these risks are described in more detail below under "Risk
Factors." Investors are cautioned that any such statements are not guarantees of
future performance and that actual results or developments may differ materially
from the expectations expressed in the forward-looking statements.
iii
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION....................................... ii
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. ii
FORWARD-LOOKING STATEMENTS.................................. iii
SUMMARY..................................................... 1
The Companies............................................. 1
The Annual Meeting........................................ 2
The Merger................................................ 2
Chiquita Summary Historical Financial Information......... 9
Stokely Summary Historical Financial Information.......... 10
Summary Pro Forma Financial Information................... 11
Comparative Per Share Data................................ 12
Comparative Per Share Market Information.................. 13
RISK FACTORS................................................ 14
INTRODUCTION................................................ 17
General................................................... 17
Parties to the Merger..................................... 17
THE ANNUAL MEETING.......................................... 18
Place, Time and Date...................................... 18
Purpose................................................... 18
Voting Record Date; Shares Entitled to Vote............... 18
Vote Required............................................. 18
No Appraisal or Dissenters' Rights........................ 19
Proxies................................................... 19
PROPOSAL TO APPROVE THE MERGER (Proposal No. 1)............. 20
Background of and Reasons for the Merger.................. 20
Recommendation of the Stokely Board....................... 25
Opinion of Financial Advisor.............................. 28
Interests of Certain Persons in the Merger................ 31
The Merger Agreement...................................... 33
Voting on the Merger................................... 33
Effective Time and Date of the Merger.................. 33
Conversion of Stokely Common Stock in the Merger....... 33
Exchange of Certificates in the Merger................. 34
Representations and Warranties......................... 34
Business of Stokely Pending the Merger................. 35
Conditions; Waivers.................................... 35
Exchange of Stokely Debt............................... 36
Regulatory Approvals................................... 37
Amendment; Termination................................. 37
Termination Fee........................................ 37
Accounting Treatment................................... 38
Certain Federal Income Tax Consequences of the
Merger................................................ 38
No Appraisal or Dissenters' Rights..................... 39
Resale of Chiquita Common Stock by Stokely
Affiliates............................................ 39
PRO FORMA FINANCIAL INFORMATION............................. 39
</TABLE>
iv
<PAGE> 10
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INFORMATION CONCERNING CHIQUITA............................. 43
General................................................ 43
Chiquita's Reasons for the Merger...................... 43
DESCRIPTION OF CHIQUITA STOCK............................... 43
Description of Chiquita Common Stock...................... 44
Description of Chiquita Preferred Stock................... 44
Description of Chiquita Preference Stock.................. 45
COMPARISON OF SHAREHOLDERS' RIGHTS.......................... 46
Directors................................................. 46
Voting Rights Generally................................... 47
Special Meetings of Shareholders.......................... 47
Charter Amendments........................................ 48
Mergers, Consolidations and Sales of Assets............... 48
Appraisal Rights.......................................... 49
Transactions Involving Directors.......................... 49
Anti-Takeover Provisions; Transactions with Interested
Shareholders........................................... 50
Liability and Indemnification............................. 51
LEGAL MATTERS............................................... 52
EXPERTS..................................................... 52
ELECTION OF DIRECTORS (Proposal No. 2)...................... 52
MEETINGS OF THE STOKELY BOARD OF DIRECTORS AND ITS
COMMITTEES................................................ 54
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS............ 56
Executive Compensation.................................... 56
Severance Agreement with Mr. Wiersma...................... 57
Employment Agreements..................................... 57
Deferred Compensation Plan for Key Executives............. 58
Deferred Compensation Agreement........................... 58
Benefits.................................................. 58
Stock Option Plans........................................ 59
Directors' Compensation................................... 60
COMPENSATION COMMITTEE REPORT............................... 61
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN PERFORMANCE
GRAPH FOR STOKELY USA, INC. .............................. 63
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS............. 64
INDEPENDENT AUDITORS........................................ 65
CERTAIN TRANSACTIONS........................................ 65
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..... 65
PROPOSAL TO ADJOURN THE ANNUAL MEETING (Proposal No. 3)..... 66
PROPOSALS BY STOKELY SHAREHOLDERS........................... 66
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE ANNUAL
MEETING................................................... 66
APPENDIX A: Agreement and Plan of Reorganization............ A-1
APPENDIX B: Opinion of Financial Advisor.................... B-1
</TABLE>
v
<PAGE> 11
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. Reference is made to, and this summary is
qualified in its entirety by, the more detailed information contained, or
incorporated by reference, in this Proxy Statement/Prospectus and its
Appendices. Unless otherwise defined herein, capitalized terms used in this
summary have the meanings ascribed to them elsewhere in this Proxy
Statement/Prospectus. Shareholders are urged to read this Proxy
Statement/Prospectus and its Appendices in their entirety. As used in this Proxy
Statement/Prospectus, the terms "Chiquita" and "Stokely" refer to such
corporations, respectively, and where the context requires, such corporations
and their subsidiaries on a consolidated basis.
THE COMPANIES
CHIQUITA................... Chiquita is a leading international marketer,
producer and distributor of bananas and other
quality fresh and processed food products sold
under the Chiquita and other brand names. In
addition to bananas, these products include other
tropical fruit, such as mangoes, kiwi and citrus,
and a wide variety of other fresh produce.
Chiquita's products also include fruit and
vegetable juices and beverages; processed bananas
and other processed fruits and vegetables; fresh
cut and ready-to-eat salads; and edible oil-based
consumer products.
Chiquita's Friday Canning Corporation,
headquartered in New Richmond, Wisconsin, operates
vegetable canning facilities in Wisconsin. In
September 1997, Chiquita acquired the Owatonna
Canning group of companies (the "Owatonna
Companies") and signed a definitive agreement to
acquire American Fine Foods, Inc. ("AFF"). These
companies produce and sell processed vegetables in
the private label, food service and branded
segments, both domestically and for export. The
principal executive offices of Chiquita are located
at 250 East Fifth Street, Cincinnati, Ohio 45202
and the telephone number is (513) 784-8000. See
"AVAILABLE INFORMATION" and "INFORMATION CONCERNING
CHIQUITA."
STOKELY.................... Stokely produces a broad range of canned vegetables
in the United States under customer private labels
and under the Stokely's Finest(R), Stokely's
Gold(TM) and other brand labels. Stokely sells
brand label vegetables through the retail,
foodservice and industrial channels of distribution
and sells private label canned vegetables to many
supermarket chains and wholesalers. Stokely also
exports canned vegetables to Europe and Asia. Prior
to February 1996, Stokely also processed, marketed
and sold frozen vegetables, primarily in bulk size
quantities for the industrial market. In February
1996, Stokely announced it was exiting the frozen
vegetable processing business and sold essentially
all of the assets of this business during fiscal
1997. The principal executive offices of Stokely
are located at 1230 Corporate Center Drive,
Oconomowoc, Wisconsin 53066, and its telephone
number is (414) 569-1800. See "AVAILABLE
INFORMATION."
1
<PAGE> 12
ACQUISITION SUB............ Acquisition Sub is a Wisconsin corporation and a
direct wholly-owned subsidiary of Chiquita which
was incorporated on August 27, 1997 in order to
effectuate the Merger. Acquisition Sub has not
transacted, and is not expected to transact, any
business or take any actions other than in
connection with the Merger.
THE ANNUAL MEETING
TIME, DATE AND PLACE....... The Annual Meeting will be held on January 15, 1998
at the Milwaukee Athletic Club, 758 North Broadway,
Milwaukee, Wisconsin commencing at 10:00 a.m.,
local time, subject to any adjournments or
postponements thereof. See "THE ANNUAL MEETING --
Place, Time and Date."
PURPOSES OF THE ANNUAL
MEETING.................. The purposes of the Annual Meeting are to consider
and vote upon a proposal to approve the Merger and
the Merger Agreement attached hereto as Appendix A
and to elect three directors to serve until
consummation of the Merger or, if the Merger is not
consummated, for a three year term expiring at the
2000 annual meeting of shareholders or until their
successors have been elected and qualified. The
Stokely Board also is soliciting proxies for
approval to adjourn the Annual Meeting for the
purpose of soliciting additional votes in favor of
the Merger Agreement in the event that the required
vote for approval and adoption of the Merger
Agreement has not been obtained by the date of the
Annual Meeting. See "THE ANNUAL MEETING --
Purpose."
RECORD DATE; SHARES
ENTITLED TO VOTE........... Holders of record of shares of Stokely Common Stock
as of the close of business on November 20, 1997,
the Voting Record Date, are entitled to notice of
and to vote at the Annual Meeting. On November 20,
1997, there were 11,390,871 shares of Stokely
Common Stock outstanding, each of which is entitled
to one vote on each matter to be acted upon or
which may properly come before the Annual Meeting.
Shareholders who execute proxies retain the right
to revoke them at any time prior to being voted at
the Annual Meeting or any postponements or
adjournments thereof. See "THE ANNUAL MEETING --
Voting Record Date; Shares Entitled to Vote."
THE MERGER
VOTE REQUIRED.............. The approval of the Merger Agreement by Stokely
shareholders will require the affirmative vote of
the holders of two-thirds of the outstanding shares
of Stokely Common Stock. Stokely's directors and
executive officers and their affiliates
beneficially own 3.45% of the outstanding shares of
Stokely Common Stock and intend to vote in favor of
the Merger. See "THE ANNUAL MEETING -- Vote
Required."
2
<PAGE> 13
THE REQUIRED VOTE OF STOKELY SHAREHOLDERS ON THE
MERGER AGREEMENT IS BASED UPON THE TOTAL NUMBER OF
OUTSTANDING SHARES OF STOKELY COMMON STOCK, AND NOT
JUST THOSE REPRESENTED AT THE ANNUAL MEETING.
ACCORDINGLY, THE FAILURE TO SUBMIT A PROXY CARD
(OR, IF THE SHARES ARE HELD BY A BROKER, TO RETURN
VOTING INSTRUCTIONS) OR TO VOTE IN PERSON AT THE
ANNUAL MEETING, OR THE ABSTENTION FROM VOTING BY A
STOKELY SHAREHOLDER, WILL HAVE THE SAME EFFECT AS A
"NO" VOTE WITH RESPECT TO THE MERGER AGREEMENT.
BROKER NON-VOTES WILL NOT BE COUNTED AS HAVING BEEN
VOTED IN PERSON OR BY PROXY AT THE ANNUAL MEETING
AND WILL HAVE THE SAME EFFECT AS A "NO" VOTE WITH
RESPECT TO THE MERGER AGREEMENT.
THE MERGER TRANSACTION..... In the Merger: (i) Acquisition Sub will be merged
with and into Stokely, and Stokely will be the
surviving corporation and become a direct, wholly-
owned subsidiary of Chiquita, and (ii) outstanding
shares of Stokely Common Stock will be converted
into the right to receive shares of Chiquita Common
Stock. Each outstanding share of Stokely Common
Stock will be converted into a fractional share of
Chiquita Common Stock having a value of $1.00. The
size of the fractional amount will be based on the
average closing price of Chiquita Common Stock on
the NYSE over the 15 trading days preceding the
Merger. The number of whole shares of Chiquita
Common Stock to be received by each Stokely
shareholder will depend on the number of shares of
Stokely Common Stock held by the shareholder. No
fractional shares of Chiquita Common Stock will be
issued and cash will be paid in lieu of fractional
shares.
Additionally, in connection with the Merger: (i)
holders of $31.8 million principal amount of
Stokely debt have agreed to exchange that
indebtedness for shares of Chiquita Common Stock;
(ii) certain Stokely suppliers have agreed to
forgive $1.0 million in accounts receivable; and
(iii) it is a condition of closing that Stokely's
revolving credit lender will agree to leave in
place at least $20 million of outstanding revolving
credit indebtedness. See "PROPOSAL TO APPROVE THE
MERGER -- The Merger Agreement."
OUTSTANDING CHIQUITA COMMON
STOCK.................... As of December 5, 1997, there were outstanding
shares of Chiquita Common Stock (not
including up to approximately 2.2 million shares of
Chiquita Common Stock to be issued in connection
with the acquisition of AFF). In the Merger,
approximately 800,000 shares of Chiquita Common
Stock will be issued to holders of Stokely Common
Stock and approximately 2,400,000 shares will be
issued in exchange for certain debt of Stokely.
When issued, the approximately 3.2 million total
shares to be issued in the Merger will represent
approximately 5% of the then outstanding Chiquita
Common Stock (including the shares to be issued in
the Merger and in the AFF acquisition).
3
<PAGE> 14
STOKELY'S RECENT FINANCIAL
RESULTS AND MARKET FOR
STOKELY COMMON STOCK..... For the three and six months ended September 30,
1997, Stokely posted net losses of $3.9 million and
$6.7 million, respectively, largely due to
continued low selling prices. The low selling
prices that prevailed during the first quarter of
fiscal 1998 continued through the second quarter,
and continue to be depressed. Current selling
prices remain below year-ago levels, historical
averages and levels anticipated at the beginning of
the fiscal year by Stokely management based on
industry planting intentions reported by the USDA
in April 1997, which indicated significant
reductions in planting from prior years.
Furthermore, since May 1997, Stokely has been in
violation of certain covenants applicable to its
Senior Secured Notes due January 2000 (which
constitutes an event of default) and certain of its
Industrial Development Revenue Bonds ("IRBs").
Since July 1997, Stokely also has been in violation
of certain covenants applicable to most of its
other IRBs. Through December 5, 1997, Stokely has
not been notified by any of these debt-holders that
they intend to accelerate the maturity date of
their obligations as a result of the events of
default or the covenant violations.
Stokely's deteriorating operating results and
financial condition and anticipated liquidity
problems are of sufficient severity and magnitude
that it will be unable to continue normal
operations or achieve profitability for an extended
period absent a sale of Stokely. Based upon these
subsequent-occurring events, Deloitte & Touche LLP,
Stokely's independent auditors, issued a revised
audit opinion for the fiscal year ended March 31,
1997, indicating that these events raise
substantial doubt about Stokely's ability to
continue as a going concern.
Additionally, on November 24, 1997, Stokely
received notification from The Nasdaq Stock Market,
Inc. ("Nasdaq") that, based on their review of
Stokely's Form 10-Q for the quarter ended September
30, 1997, the Stokely Common Stock appears to no
longer meet the requirements for continued
inclusion in the Nasdaq National Market as a result
of Stokely's net tangible assets falling below the
required $4.0 million level. If upon further
review, after submission by Stokely of additional
information, Nasdaq determines that the Stokely
Common Stock does not warrant continued inclusion,
it will commence the delisting process. Stokely
anticipates that if this process is commenced in
the near future, the Stokely Common Stock may be
formally delisted as early as January 1998.
Stokely's inability to continue to list the Stokely
Common Stock on Nasdaq is likely to have the effect
of decreasing the depth, liquidity and orderliness
of the public market for shares of Stokely Common
Stock. Holders of Stokely Common Stock should
recognize that the absence of an active trading
market may make it more difficult to sell shares
of, and adversely affect the market price of,
Stokely Common Stock.
BACKGROUND OF AND REASONS
FOR MERGER................. The Stokely Board of Directors has explored
multiple alternatives to the proposed Merger with
the assistance of its outside financial advisor,
Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), and has
4
<PAGE> 15
concluded that Stokely's deteriorating operating
results and financial condition, and anticipated
liquidity problems, are of sufficient severity and
magnitude that it will be unable to continue normal
operations or achieve profitability for an extended
period absent a sales transaction. Stokely's
restructuring efforts over the past several years
have been unsuccessful due to economic, market and
competitive pressures, combined with Stokely's high
debt level, and the Stokely Board has determined
that there is no feasible financing alternative to
the Merger. In addition, the alternative of a
bankruptcy filing was considered with the
assistance of an outside bankruptcy expert,
Silverman Korenthal & Co. The Stokely Board and
management agreed with the outside bankruptcy
expert that this option would not yield the maximum
benefit to Stokely shareholders. In light of the
foregoing, in early 1997, the Stokely Board
authorized DLJ to conduct a formal auction of
Stokely. The Chiquita proposal, as provided for in
the Merger Agreement, was the best offer received
and, the Stokely Board believes, is the best
alternative available to Stokely and its
shareholders. See "PROPOSAL TO APPROVE THE MERGER
-- Background of and Reasons for the Merger."
RECOMMENDATION OF STOKELY'S
BOARD OF DIRECTORS....... The Board of Directors of Stokely unanimously
recommends that shareholders vote FOR the Merger
Agreement. The Board believes that the terms of the
Merger Agreement are in the best interests of
holders of Stokely Common Stock and that the Merger
affords shareholders of Stokely the opportunity to
receive fair value for their shares. See "PROPOSAL
TO APPROVE THE MERGER -- Recommendation of the
Stokely Board."
OPINION OF FINANCIAL
ADVISOR.................... DLJ was retained by the Stokely Board to act as its
financial advisor. DLJ has carefully reviewed the
proposed Merger. DLJ has delivered to the Stokely
Board its written opinion dated September 17, 1997,
and confirmed December 5, 1997, to the effect that
the consideration to be received in the Merger is
fair from a financial point of view to the holders
of Stokely Common Stock. Shareholders of Stokely
should read DLJ's opinion, which sets forth the
assumptions it made, matters it considered and
limits of its review, and which is set forth in its
entirety as Appendix B to this Proxy
Statement/Prospectus. See "PROPOSAL TO APPROVE THE
MERGER -- Opinion of Financial Advisor."
STOKELY'S POSITION
REGARDING FAIRNESS OF THE
MERGER................... In arriving at its recommendation in favor of the
Merger, the Stokely Board considered a number of
factors, including without limitation: (i) the
receipt of the fairness opinion from DLJ, and the
bases upon which DLJ relied in order to render its
opinion; (ii) Stokely's deteriorating operating
results and financial condition; (iii) the absence
of other alternatives to the Merger, including
restructuring, financing or other strategic
combination alternatives; (iv) the estimated impact
of bankruptcy on Stokely's shareholders and
creditors; (v) the historical market prices of
shares of Stokely Common Stock; (vi) the terms of
the Merger; and (vii) the status of Stokely should
the Merger not be approved or consummated. See
"PROPOSAL TO APPROVE THE MERGER -- Background of
and Reasons for the Merger," "PROPOSAL TO APPROVE
THE MERGER -- Recommen-
5
<PAGE> 16
dation of the Stokely Board" and "PROPOSAL TO
APPROVE THE MERGER -- Opinion of Financial
Advisor."
CONSIDERATION OF HISTORICAL
MARKET PRICES OF STOKELY
COMMON STOCK............. In the Merger, each outstanding share of Stokely
Common Stock will be converted into the right to
receive a fractional share of Chiquita Common Stock
having a value of $1.00, which is less than the
$1.56 per share closing price of Stokely Common
Stock on September 17, 1997, the last full trading
day immediately preceding the public announcement
of the signing of the Merger Agreement. The market
prices for the shares of Stokely Common Stock
ranged from a high of $2.50 to a low of $0.625
between the period beginning January 1, 1997 and
ending September 17, 1997. In evaluating the
proposed terms of the Merger, the Stokely Board and
DLJ reviewed the historical market price data and
noted that one buyer, Exeter Ventures, UBOT
("Exeter"), an entity unrelated to the Company, its
directors or executive officers, bought a large
(8%) position in Stokely on June 27, 1997, a date
upon which some of the trades of Stokely Common
Stock were executed at $0.625 per share, and made a
public announcement that it had done so. In the
three weeks following that public announcement, the
stock rose from $0.625 per share to $2.50 per
share, on particularly strong volume, before
falling off to approximately $1.50 per share
shortly before the announcement of the Merger. For
the reasons set forth above and in "PROPOSAL TO
APPROVE THE MERGER -- Background of the Merger",
the Stokely Board and DLJ felt that Stokely's stock
price was not an accurate reflection of the equity
value of the Company at the time of announcement of
the Merger. See "PROPOSAL TO APPROVE THE MERGER --
Recommendation of the Stokely Board."
SECURITY OWNERSHIP OF
STOKELY COMMON STOCK....... On November 20, 1997, directors and executive
officers of Stokely beneficially owned 393,422
shares of Stokely Common Stock, or 3.45% of the
outstanding shares of Stokely Common Stock, not
including 55,500 shares subject to options which
were not exercised prior to the Voting Record Date
and cannot be voted at the Annual Meeting. See
"SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS."
EFFECTIVENESS OF THE
MERGER..................... It is expected that the Merger will occur as
promptly as practicable after the requisite
shareholder approval has been obtained and all
other conditions to the Merger have been satisfied
or waived. See "PROPOSAL TO APPROVE THE MERGER --
The Merger Agreement: Conditions; Waivers."
EXCHANGE OF CERTIFICATES;
DELIVERY OF CHIQUITA
COMMON STOCK............. Shortly after approval and completion of the
Merger, Stokely shareholders will be sent a letter
of transmittal (with instructions) to be used to
exchange their Stokely Common Stock certificates
for Chiquita Common Stock certificates. PLEASE DO
NOT SEND IN YOUR CERTIFICATES FOR STOKELY COMMON
STOCK UNTIL YOU RECEIVE THE LETTER OF TRANSMITTAL
AND INSTRUC-
6
<PAGE> 17
TIONS. See "PROPOSAL TO APPROVE THE MERGER -- The
Merger Agreement: Conversion of Stokely Common
Stock in the Merger."
CONDITIONS TO THE MERGER;
TERMINATION OF THE MERGER
AGREEMENT................ The obligations of Chiquita and/or Stokely to
consummate the Merger are subject to the
satisfaction, or in certain cases waiver, of
certain conditions, including: (i) requisite
shareholder approval having been obtained; (ii) no
court or governmental or regulatory proceedings
having been commenced or threatened seeking to
prevent the Merger; (iii) all options and warrants
to purchase Stokely Common Stock having been
cancelled; (iv) holders of at least $31.8 million
of Stokely debt having exchanged such indebtedness
for Chiquita Common Stock and, with limited
exceptions, there being no default as to the
non-exchanging debt; (v) Stokely's suppliers having
forgiven at least $1.0 million in accounts
receivable; (vi) Stokely's net losses for the
quarter ended December 31, 1997 being within
certain limitations; and (vii) Stokely's revolving
credit lender leaving in place at least $20 million
of outstanding revolving credit indebtedness. See
"PROPOSAL TO APPROVE THE MERGER -- The Merger
Agreement: Conditions; Waivers."
Notwithstanding the approval and adoption of the
Merger Agreement by the shareholders of Stokely,
the Merger Agreement is subject to termination at
the option of either Chiquita or Stokely if the
Merger is not consummated on or before January 31,
1998 (unless waived by mutual consent of the
parties), and on or prior to such time upon the
occurrence of certain other events. See "PROPOSAL
TO APPROVE THE MERGER -- The Merger Agreement:
Amendment; Termination."
INTERESTS OF CERTAIN
PERSONS IN THE MERGER...... Certain members of the Stokely Board and management
may be deemed to have interests in the Merger in
addition to their interests, if any, as holders of
Stokely Common Stock. These interests include,
among other things: (i) rights of certain executive
officers to payments under Change in Control
Contingent Employment Agreements if such officers
are terminated for any reason other than for
"cause", or they elect to terminate their
employment for a permitted reason, at or following
the Merger; (ii) rights of certain directors and
executive officers to benefits under certain
retirement benefit plans maintained by Stokely;
(iii) rights of certain executive officers to
continued participation following the Merger in
Stokely's Split Dollar Life Insurance Plan; (iv)
rights of certain executive officers to continued
participation following the Merger under deferred
compensation agreements previously entered into
with Stokely; and (v) indemnification rights of the
executive officers and directors of Stokely
following the Merger.
In addition, Mr. Stephen W. Theobald, Stokely's
President and Chief Executive Officer, will receive
a retention bonus equal to his current annual
salary of $170,500 if the Merger is consummated and
he remains in the employ of Stokely; the bonus
would be paid as follows: (1) one-half (or $82,250)
on the date of the Merger if he remains in the
employ
7
<PAGE> 18
of Stokely up to such date, and (2) one-half (or
$82,250) on June 30, 1998, if he remains in the
employ of Stokely up to such date. See "PROPOSAL TO
APPROVE THE MERGER -- Interests of Certain Persons
in the Merger."
TERMINATION FEE............ If the Merger is not approved by the Stokely
shareholders or is not completed for certain other
reasons, Stokely is obligated to pay Chiquita a fee
of $250,000 and to issue to Chiquita a number of
shares of Preferred Stock of Stokely having a
redemption value of $2,750,000 ("Stokely Preferred
Stock"). Additionally, if within twelve months of
the termination of the Merger Agreement, a person
or entity other than Chiquita acquires Stokely or a
majority interest in Stokely, or if Stokely agrees
to such a transaction, Stokely is obligated to pay
Chiquita $3,000,000. If a termination fee already
has been paid, no additional fee will be owed, but
the Stokely Preferred Stock will be required to be
redeemed as provided in the Merger Agreement. See
"PROPOSAL TO APPROVE THE MERGER -- The Merger
Agreement: Termination Fee."
NO APPRAISAL OR DISSENTERS'
RIGHTS................... Under the Wisconsin Business Corporation Law (the
"WBCL"), holders of shares of a Wisconsin
corporation quoted on the Nasdaq National Market on
the record date for a meeting at which shareholders
are to vote on a merger are not entitled to
appraisal or dissenters' rights. Shares of Stokely
Common Stock were quoted on the Nasdaq National
Market on the Voting Record Date. Therefore,
holders of Stokely Common Stock are not entitled to
dissenters' rights in connection with the Merger.
See "PROPOSAL TO APPROVE THE MERGER -- The Merger
Agreement: No Appraisal or Dissenters' Rights."
ACCOUNTING TREATMENT....... The Merger will be accounted for as a purchase of
Stokely by Chiquita for accounting and financial
reporting purposes.
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES............. The Merger is intended to be a tax-free
reorganization so that no gain or loss would be
recognized by any holder of Stokely Common Stock
upon the receipt of Chiquita Common Stock in
connection with the Merger (except upon the receipt
of cash in lieu of any fractional share of Chiquita
Common Stock). Stokely has received an opinion of
counsel to the effect that the Merger will qualify
as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). See "PROPOSAL TO APPROVE THE
MERGER -- The Merger Agreement: Certain Federal
Income Tax Consequences of the Merger."
8
<PAGE> 19
CHIQUITA SUMMARY HISTORICAL FINANCIAL INFORMATION
The summary historical financial information of Chiquita set forth below
for the years ended December 31, 1992 through December 31, 1996 was derived from
Chiquita's audited consolidated financial statements. The information set forth
below for interim periods was derived from Chiquita's unaudited consolidated
financial statements and, in the opinion of management, includes all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the results of operations for the interim periods. This information should be
read in conjunction with the financial statements and other financial
information which are incorporated into this Proxy Statement/Prospectus by
reference. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE." Results for interim periods are subject to significant seasonal
variations and are not necessarily indicative of the results for a full fiscal
year.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- --------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................... $1,833,904 $1,880,085 $2,435,248 $2,565,992 $2,505,826 $2,532,925 $2,723,250
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income (loss)(1).......... 133,907 148,842 84,336 175,770 71,185 103,848 (96,588)
Interest income..................... 12,481 21,976 28,276 28,157 22,902 20,377 43,301
Interest expense.................... (82,482) (100,742) (130,232) (163,513) (167,464) (169,789) (155,036)
Other income (expense), net......... 656 656 892 1,455 2,566 6,483 (8,385)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from continuing
operations before income
taxes........................... 64,562 70,732 (16,728) 41,869 (70,811) (39,081) (216,708)
Income taxes........................ (8,200) (11,000) (11,000) (13,900) (13,500) (12,000) (5,000)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) from continuing
operations...................... 56,362 59,732 (27,728) 27,969 (84,311) (51,081) (221,708)
Discontinued operations(2).......... -- -- -- (11,197) 35,611 -- (62,332)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before extraordinary
item............................ 56,362 59,732 (27,728) 16,772 (48,700) (51,081) (284,040)
Extraordinary loss from debt
refinancing....................... -- (22,838) (22,838) (7,560) (22,840) -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)............... $ 56,362 $ 36,894 $ (50,566) $ 9,212 $ (71,540) $ (51,081) $ (284,040)
========== ========== ========== ========== ========== ========== ==========
Fully diluted earnings (loss) per
common share:
Continuing operations........... $ 0.77 $ 0.93 $ (0.72) $ 0.37 $ (1.76) $ (0.99) $ (4.28)
Discontinued operations(2)...... -- -- -- (0.21) 0.69 -- (1.20)
Extraordinary item.............. -- (0.41) (0.41) (0.14) (0.44) -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)............... $ 0.77 $ 0.52 $ (1.13) $ 0.02 $ (1.51) $ (0.99) $ (5.48)
========== ========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA:
Cash and marketable
securities.................... $ 172,330 $ 286,615 $ 285,558 $ 271,418 $ 165,523 $ 151,226 $ 413,181
Working capital................. 359,232 425,988 379,977 366,893 230,434 266,793 482,338
Total assets.................... 2,415,198 2,544,441 2,466,934 2,623,533 2,774,239 2,722,824 2,873,699
Short-term debt................. 126,825 145,667 135,089 172,333 221,051 192,207 229,286
Long-term debt.................. 981,346 1,077,643 1,079,251 1,242,046 1,364,836 1,438,378 1,411,319
Shareholders' equity............ 812,676 816,045 724,253 672,207 644,809 584,069 667,962
OTHER DATA:
Capital expenditures(3)......... $ 52,096 $ 57,637 $ 74,641 $ 64,640 $ 136,981 $ 196,554 $ 472,273
Dividends declared per common
share......................... $ 0.15 $ 0.15 $ 0.20 $ 0.20 $ 0.20 $ 0.44 $ 0.66
</TABLE>
- -------------------------
(1) Includes the following unusual items:
- write-downs and costs of $70 million in 1996 resulting from industry-wide
flooding in Costa Rica, Guatemala and Honduras, certain strategic
undertakings designed to achieve further long-term reductions in the
delivered product cost of bananas, and certain claims relating to prior
European Union quota restructuring actions; $12 million of these charges,
relating to flooding in Costa Rica, are included in the nine months ended
September 30, 1996;
- a net gain of $19 million in 1995 resulting primarily from divestitures of
operations and sales of older ships;
- charges and losses of $67 million in 1994 resulting primarily from farm
closings and write-downs of banana cultivations following a strike in
Honduras and the substantial reduction of the Company's Japanese "green"
banana trading operations; and
- restructuring and reorganization charges of $61 million in 1992.
(2) Includes net operating results (and, in 1992, provision for loss on
disposal) of the Company's Meat Division operations, which were sold in
December 1995. See Note 2 to Chiquita's Consolidated Financial Statements
for the year ended December 31, 1996.
(3) Includes capital expenditures in connection with the acquisition of ships
and containers of approximately $70 million in 1994, $120 million in 1993
and $280 million in 1992.
9
<PAGE> 20
STOKELY SUMMARY HISTORICAL FINANCIAL INFORMATION
The summary historical financial information of Stokely set forth below for
the fiscal years ended March 31, 1993 through March 31, 1997 was derived from
Stokely's audited consolidated financial statements. The information set forth
below for interim periods was derived from Stokely's unaudited consolidated
financial statements and, in the opinion of management, includes all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the results of operations for the interim periods. This information should be
read in conjunction with the financial statements and other financial
information which are incorporated into this Proxy Statement/Prospectus by
reference. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS
BY REFERENCE." Results for interim periods are subject to significant seasonal
variations and are not necessarily indicative of the results for a full fiscal
year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30, AT OR FOR THE YEAR ENDED MARCH 31,
-------------------- ----------------------------------------------------------
1997 1996 1997(A) 1996(A) 1995 1994 1993(B)(C)
---- ---- ------- ------- ---- ---- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................ $ 74,009 $ 93,973 $184,850 $206,251 $231,422 $256,145 $281,382
Net earnings (loss)...... (6,682) (19,175) (20,923) (28,821) 570 (2,215) (31,127)
Net earnings (loss) per
share.................. (0.59) (1.69) (1.84) (2.54) 0.06 (0.27) (3.75)
BALANCE SHEET DATA:
Total assets............. 148,797 177,992 $130,742 $175,721 $181,294 $158,535 $232,843
Short-term debt(d)....... 91,025 48,436 18,135 35,037 21,827 21,860 59,712
Long-term debt (less
current maturities).... 2,100 55,951 68,041 77,230 78,497 80,438 82,854
Stockholders' equity..... 2,109 10,539 8,807 29,567 58,378 32,640 34,777
COMMON STOCK DATA:
Stockholders' equity per
share.................. $ 0.19 $ 0.93 $ 0.78 $ 2.61 $ 5.15 $ 3.92 $ 4.18
Dividends declared per
share.................. -- -- -- -- -- -- --
Shares outstanding at
period end............. 11,391 11,373 11,374 11,326 11,325 8,325 8,316
</TABLE>
- -------------------------
(a) Stokely recorded nonrecurring charges of $12,929 and $12,500 in the first
six months of fiscal 1997 and the fourth quarter of fiscal 1996,
respectively. These charges accounted for $1.14 and $1.10 of the loss per
share in fiscal 1997 and fiscal 1996, respectively. The non-recurring charge
in fiscal 1997 relates primarily to the restructuring of Stokely's core
canned vegetable business. The non-recurring charge in fiscal 1996 relates
to Stokely's decision to exit its frozen vegetable business. For a further
description of these charges, see Note J to Notes to Consolidated Financial
Statements in Stokely's Form 10-K (as amended) for the fiscal year ended
March 31, 1997.
(b) In connection with a restructuring plan, Stokely sold, closed or downsized
certain processing facilities, resulting in a nonrecurring charge during
fiscal 1993 from the write-down of such processing facilities, equipment and
inventories to their estimated net realizable value and from provisions for
severance, consolidation costs and plant closing costs. This restructuring
resulted in a pre-tax charge of $21,145 or a $2.54 loss per share.
(c) Fiscal 1993 includes a charge of $1,650, or a $0.20 loss per share, due to a
post-retirement benefits accounting method change.
(d) Short-term debt includes Notes Payable, Current Maturities on Long-term Debt
and Additional Long-term Debt Classified as Current.
10
<PAGE> 21
SUMMARY PRO FORMA FINANCIAL INFORMATION
The summary unaudited pro forma financial information set forth below gives
effect to the Merger, as well as the acquisition by Chiquita of the Owatonna
Companies and the proposed acquisition of AFF. For financial reporting purposes,
each transaction has been or will be accounted for as a purchase. The unaudited
pro forma income statement information for the year ended December 31, 1996 and
for the nine months ended September 30, 1997 have been prepared assuming all of
the acquisitions had occurred on January 1, 1996. The unaudited pro forma
balance sheet information at September 30, 1997 has been prepared assuming the
pending acquisitions had occurred on September 30, 1997. This pro forma
information is not necessarily indicative of the actual operating results or
financial position that would have occurred if the Merger or the acquisitions of
the Owatonna Companies and AFF had been consummated as of the assumed dates, nor
is it necessarily indicative of future operating results or financial position.
This information should be read in conjunction with the more detailed pro forma
financial information appearing herein under "PRO FORMA FINANCIAL INFORMATION"
and the separate historical consolidated financial statements of Chiquita and
Stokely which are incorporated by reference in or delivered with this Proxy
Statement/Prospectus.
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1997 DECEMBER 31, 1996
------------------ -----------------
<S> <C> <C>
INCOME STATEMENT DATA
Net sales................................................... $2,041,792 $2,736,023
Operating income............................................ 137,683 85,115(a)
Income (loss) before extraordinary item..................... 55,716 (32,874)(a)
Income (loss) per share before extraordinary item (primary
and fully diluted)........................................ .66 (.71)(a)
BALANCE SHEET DATA
Total assets................................................ $2,593,372
Long-term debt.............................................. 983,446
Shareholders' equity........................................ 885,328
Book value per share of Common Stock........................ 9.84
Common shares outstanding................................... 64,200
</TABLE>
- -------------------------
(a) The unaudited pro forma income statement information for the year ended
December 31, 1996 does not reflect any adjustment to eliminate $12.9 million
($.20 per share on a pro forma basis) of nonrecurring charges of Stokely
which are principally associated with the closing and write-down of plant
and office facilities.
11
<PAGE> 22
COMPARATIVE PER SHARE DATA
The following table presents (i) certain per share data derived from the
historical financial statements of Chiquita (which have been adjusted to reflect
the acquisition by Chiquita of the Owatonna Companies and the proposed
acquisition by Chiquita of AFF) and of Stokely, and (ii) unaudited pro forma per
share data adjusted to reflect consummation of the Merger. The pro forma book
value per share data have been prepared assuming the Merger and the acquisition
of AFF occurred on September 30, 1997. The pro forma income (loss) and cash
dividends per share data for the year ended December 31, 1996 and nine months
ended September 30, 1997 have been prepared assuming all of the acquisitions
occurred on January 1, 1996. The pro forma information is not necessarily
indicative of the actual operating results or financial position that would have
occurred if the Merger or the acquisitions of the Owatonna Companies and AFF had
been consummated as of the assumed dates, nor is it necessarily indicative of
future operating results or financial position.
<TABLE>
<CAPTION>
HISTORICAL
(ADJUSTED)(A) PRO FORMA
PER SHARE OF CHIQUITA COMMON STOCK: ------------- ---------
<S> <C> <C>
Nine months ended September 30, 1997
Net income (primary and fully diluted).................... $ .79 $ .66
Book value................................................ 9.60 9.84
Cash dividends............................................ .15 .15
Year ended December 31, 1996
Loss before extraordinary item (primary and fully
diluted)............................................... $ (.46) $(.71)
Book value................................................ (b) (b)
Cash dividends............................................ .20 .20
</TABLE>
<TABLE>
<CAPTION>
EQUIVALENT
HISTORICAL PRO FORMA
PER SHARE OF STOKELY COMMON STOCK: ---------- ----------
<S> <C> <C>
Six months ended September 30, 1997
Net income (loss) (primary and fully diluted)............. $ (.59) $ .04(c)
Book value................................................ .19 .66
Cash dividends............................................ -- .01
Year ended March 31, 1997
Net loss/Loss before extraordinary item on an equivalent
pro forma basis (primary and fully diluted)............ $(1.84) $(.05)(c)
Book value................................................ .78 (b)
Cash dividends............................................ -- .01
</TABLE>
- -------------------------
(a) The historical per share information of Chiquita has been adjusted to
reflect the acquisition by Chiquita of the Owatonna Companies and the
proposed acquisition by Chiquita of AFF. The historical book value per share
data of Chiquita have been adjusted assuming the acquisition of AFF occurred
on September 30, 1997. The historical income (loss) per share data of
Chiquita for the nine months ended September 30, 1997 and for the year ended
December 31, 1996 have been adjusted assuming these acquisitions occurred on
January 1, 1996. See "CHIQUITA SUMMARY HISTORICAL FINANCIAL INFORMATION" for
a summary of selected historical financial data that excludes these
acquisitions.
(b) Because the historical (adjusted) and pro forma book value per share data of
Chiquita Common Stock have been prepared assuming all of the acquisitions
occurred on September 30, 1997, the book value per share amounts for
Chiquita Common Stock at December 31, 1996 and the equivalent pro forma book
value per share amount for Stokely Common Stock at March 31, 1997 are not
meaningful.
(c) The equivalent pro forma income (loss) per share amounts for Stokely Common
Stock have been determined by multiplying the Chiquita pro forma income
(loss) per share amounts for the nine months ended September 30, 1997 and
the year ended December 31, 1996 by an assumed exchange ratio of
approximately .07 share of Chiquita Common Stock for each share of Stokely
Common Stock.
12
<PAGE> 23
COMPARATIVE PER SHARE MARKET INFORMATION
Chiquita Common Stock and Stokely Common Stock are both publicly traded.
Chiquita Common Stock is listed on the NYSE and on the Boston and Pacific Stock
Exchanges and Stokely Common Stock currently is listed on the Nasdaq National
Market. The information presented in the table below represents the high and low
sales prices per share reported for each security during the periods indicated
on the NYSE and Nasdaq, respectively.
<TABLE>
<CAPTION>
PRICE PER SHARE OF COMMON STOCK
----------------------------------
CHIQUITA STOKELY
---------------- --------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
QUARTER ENDED:
1995
March 31.................................................... $14.50 $12.25 $6.13 $5.13
June 30..................................................... 14.00 12.63 6.63 5.13
September 30................................................ 17.25 13.63 7.44 5.13
December 31................................................. 18.00 13.38 6.94 4.88
1996
March 31.................................................... 16.38 12.63 5.25 2.38
June 30..................................................... 15.50 13.00 3.81 2.38
September 30................................................ 13.50 11.50 3.63 2.13
December 31................................................. 13.88 11.50 2.88 1.25
1997
March 31.................................................... 16.00 12.75 2.00 1.25
June 30..................................................... 15.88 13.75 1.88 .63
September 30................................................ 16.13 13.75 2.50 .81
December 31................................................. 18.00 15.94 .97 .69
(through December 3, 1997)
</TABLE>
On September 17, 1997, the last full day of trading immediately preceding
the public announcement of the signing of the Merger Agreement, the closing
prices of Chiquita Common Stock and Stokely Common Stock were $14.56 and $1.56,
respectively. The equivalent market value of Stokely Common Stock at such date
after giving effect to the Merger would be $1.00 per share based upon the
issuance of approximately .07 share of Chiquita Common Stock for each share of
Stokely Common Stock. On December 3, 1997, the closing prices per share of
Chiquita Common Stock and Stokely Common Stock were $17.69 and $.75,
respectively. See "-- The Merger: Stokely's Recent Financial Results and Market
for Stokely Common Stock" and "-- The Merger: Consideration of Historical Market
Prices of Stokely Common Stock."
13
<PAGE> 24
RISK FACTORS
Prospective investors should carefully consider the following information
before making a decision concerning the Merger and the acquisition of Chiquita
Common Stock. This information should be read in conjunction with the other
information set forth or incorporated by reference in this Proxy
Statement/Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
RECENT LOSSES. From 1984 to 1991, Chiquita reported a continuous record of
growth in annual earnings. However, Chiquita reported losses from continuing
operations for 1992, 1993, 1994 and 1996 of $222 million, $51 million, $84
million and $28 million, respectively, and earnings of $28 million in 1995. The
1994 loss included charges and losses totaling $67 million resulting primarily
from farm closings and banana cultivation write-downs in Honduras following an
unusually severe strike and the substantial reduction of Chiquita's Japanese
"green" banana trading operations. The 1995 earnings included a net gain of $19
million primarily resulting from divestitures of operations, sales of older
ships and other actions taken as part of Chiquita's ongoing program to improve
shareholder value. The 1996 loss included write-downs and costs of $70 million
resulting from industry-wide flooding in Costa Rica, Guatemala and Honduras;
certain strategic undertakings designed to achieve further long-term reductions
in the delivered product cost of Chiquita bananas through the modification of
distribution logistics and the wind-down of particular production facilities;
and certain claims relating to prior EU quota restructuring actions.
For the first nine months of 1997, the Company reported net income from
continuing operations of $56 million, after giving effect to a loss of $28
million in the third quarter. At September 30, 1997, Chiquita's accumulated
deficit totaled $103 million. The Company's interim results are subject to
significant seasonal variations; typically the first six months of the calendar
year are the stronger period. See "-- Competition and Pricing." Operating income
in the third quarter of 1997 compared to the third quarter of 1996 was adversely
affected by (1) a stronger dollar, mitigated in part by the Company's foreign
currency hedging program, and (2) increased banana production costs arising from
weather-related effects and other influences on current productivity; the
adverse impact of these items was partially offset by the benefit of higher
local currency pricing for bananas in Europe. These trends, including higher
production costs, have continued into the fourth quarter.
EUROPEAN UNION BANANA REGULATION. On July 1, 1993, the European Union
("EU") implemented a new quota regulation effectively restricting the volume of
Latin American bananas imported into the EU, which had the effect of decreasing
Chiquita's volume and market share in Europe. The quota regulation is
administered through a licensing system which grants preferred status to
producers and importers within the EU and its former colonies. The regulation
also imposes quotas and tariffs on bananas imported from other sources,
including Latin America, Chiquita's primary source of fruit. Since imposition of
the EU quota regime, prices within the EU have increased to a higher level than
the levels prevailing prior to the quota. Banana prices in other worldwide
markets, however, have been lower than in years prior to the EU quota, as the
displaced EU volume has entered those markets.
In two separate rulings, General Agreement on Tariffs and Trade ("GATT")
panels found the EU banana policy to be illegal. In March 1994, four of the
countries which had filed GATT actions against the EU banana policy (Costa Rica,
Colombia, Nicaragua and Venezuela) reached a settlement with the EU by signing a
"Framework Agreement." The Framework Agreement authorizes the imposition of
additional restrictive and discriminatory quotas and export licenses on U.S.
banana marketing firms, while leaving EU firms exempt. Costa Rica and Colombia
implemented this agreement in 1995, significantly increasing Chiquita's cost to
export bananas from these countries.
In July 1996, the EU adopted an interim measure that increased its annual
banana quota to adjust for the entry of Sweden, Finland and Austria into the EU
and made its preferential licensing system applicable to the increase. Prior to
their entry into the EU, these countries had had unregulated banana markets in
which Chiquita supplied a significant portion of the bananas. Implementation of
the quota and licensing regime continues to evolve, and there can be no
assurance that the EU banana regulation will not change further.
14
<PAGE> 25
In September 1994, Chiquita and the Hawaii Banana Industry Association made
a joint filing with the Office of the U.S. Trade Representative ("USTR") under
Section 301 of the U.S. Trade Act of 1974, charging that the EU quota and
licensing regime and the Framework Agreement are unreasonable, discriminatory,
and a burden and restriction on U.S. commerce. In response to this petition, the
U.S. Government initiated formal investigations of the EU banana import policy
and of the Colombian and Costa Rican Framework Agreement export policies. In
January 1995, the U.S. Government announced a preliminary finding against the EU
banana import policy and, in January 1996, the USTR announced it had found the
banana Framework Agreement export policies of Costa Rica and Colombia to be
unfair.
In September 1995, based on information obtained in the USTR's
investigation under Section 301, the United States, joined by Guatemala,
Honduras and Mexico, commenced a new international trade challenge against the
EU regime using the procedures of the World Trade Organization ("WTO"). In
February 1996, Ecuador, the world's largest exporter of bananas, joined the
United States, Guatemala, Honduras and Mexico in challenging the EU regime and
Framework Agreement under the WTO. During the fourth quarter of 1996, a WTO
arbitration panel heard the case against the EU quota and licensing regime and
Framework Agreement. In May 1997, the WTO panel hearing the case issued its
final report, finding that the licensing and quota systems under the EU regime
and the Framework Agreement violate numerous international trade obligations to
the detriment of Latin American supplying countries and U.S. marketing firms
such as Chiquita. The report recommends that the WTO request the EU to bring its
import regime for bananas into conformity with these obligations. In June 1997,
the EU appealed the report and in September 1997 the WTO appellate body upheld
the panel report. The full WTO body has adopted the panel and Appellate Body
reports, which now require the EU to bring its import regime for bananas into
conformity with these reports. In October 1997, the EU notified the WTO that it
will honor its international obligations. The EU has a "reasonable" period of
time (not to exceed 15 months) to implement the reports' recommendations. If the
EU fails to comply within a reasonable period of time, the injured governments
may engage in retaliatory trade measures against the EU.
Both the WTO and Section 301 authorize retaliatory measures, such as
tariffs or withdrawal of trade concessions, against the offending countries.
However, there can be no assurance as to the ultimate outcome of the WTO and
Section 301 proceedings, the nature and extent of actions that may be taken by
the affected countries, or the impact on the EU quota regime or the Framework
Agreement.
LEVERAGE. As of September 30, 1997, Chiquita and its subsidiaries had
short-term notes and loans payable of $36 million and long-term debt (including
current maturities) of approximately $1.1 billion; the percentage of total debt
to total capitalization for Chiquita was 58%. As of September 30, 1997,
maturities for the remainder of 1997 and for the years 1998 through 2001 are $20
million, $88 million, $50 million, $41 million and $174 million, respectively.
SUBSIDIARIES. Most of Chiquita's operations are conducted through its
subsidiaries and Chiquita is therefore dependent on the cash flow of its
subsidiaries to meet its obligations. The claims of holders of Chiquita Common
Stock will be subordinate to any existing and future obligations of Chiquita and
will be structurally subordinated to any existing and future obligations
(whether or not for borrowed money) of its subsidiaries, many of which have
direct obligations to lenders and other third-party creditors. As of September
30, 1997, the total debt of Chiquita's subsidiaries aggregated $411 million, of
which $253 million represented non-recourse long-term debt of Chiquita's
shipping subsidiaries secured by ships and related equipment and $36 million
represented short-term notes and loans payable.
COMPETITION AND PRICING. Approximately 60% of Chiquita's 1996 consolidated
net sales were attributable to the sale of bananas. Banana marketing is highly
competitive. While smaller companies, including growers' cooperatives, are a
competitive factor, Chiquita's primary competitors are a limited number of other
international banana importers and exporters. Chiquita has been able to obtain a
premium price for its bananas due to its reputation for quality and its
innovative marketing techniques. In order to compete successfully, Chiquita must
be able to source bananas of uniformly high quality and, on a timely basis,
transport and distribute them to worldwide markets. Bananas are highly
perishable and must be brought to market and sold generally within 60 days after
harvest. Therefore, the selling price which an importer receives
15
<PAGE> 26
for bananas depends on several factors, including: availability of bananas and
other fruit in each market; the relative quality of competing fruit; and
wholesaler and retailer acceptance of bananas offered by competing importers.
Excess supplies may result in increased price competition. Competition in the
sale of bananas also comes from other fresh fruit, which may be seasonal in
nature. The resulting seasonal variations in demand cause banana pricing to be
seasonal, with the first six months of the calendar year being the stronger
period.
Chiquita's vegetable canning business competes with numerous producers of
both branded and private-label vegetables, as well as with numerous marketers of
frozen and fresh vegetable products.
ADVERSE WEATHER CONDITIONS AND CROP DISEASE. Bananas are vulnerable to
adverse local weather conditions, which are quite common but difficult to
predict, and to crop disease. These factors may result in lower sales volume and
increased costs, but may also restrict worldwide supplies and lead to increased
prices for bananas. However, competitors may be affected differently, depending
upon their ability to obtain adequate supplies from sources in other geographic
areas. Chiquita has a greater number and geographic diversity of sources of
bananas than any of its competitors. During 1996, approximately 30% of all
bananas sold by Chiquita were sourced from Panama. Bananas are sourced from
numerous other countries, including Colombia, Costa Rica, Ecuador, Guatemala and
Honduras which comprised 5% to 21% (depending on the country) of bananas sold by
Chiquita during 1996.
The vegetable processing industry is also affected by the availability of
produce, which can vary due to local weather conditions.
LABOR RELATIONS. Chiquita employs approximately 36,000 employees.
Approximately 32,000 of these employees are employed in Central and South
America, including 23,000 workers covered by approximately 70 labor contracts.
Approximately 25 contracts covering approximately 10,000 employees are currently
being renegotiated or expire through September 30, 1998. Strikes or other
labor-related actions are sometimes encountered upon expiration of labor
contracts or during the term of the contracts.
OTHER RISKS OF INTERNATIONAL OPERATIONS. Certain of Chiquita's operations
are heavily dependent upon products grown and purchased in Central and South
American countries; at the same time, Chiquita's operations are a significant
factor in the economies of many of these countries. These activities are subject
to risks that are inherent in operating in these countries, including government
regulation, currency restrictions and other restraints, risks of expropriation
and burdensome taxes. There is also a risk that legal or regulatory requirements
will be changed or that administrative policies will change. Certain of the
activities are substantially dependent upon leases and other agreements with the
governments of these countries. Chiquita's overall risk from these factors, as
well as from political changes, is reduced by the large number and geographic
diversity of its sources of bananas. Chiquita's worldwide operations and
products are subject to numerous governmental regulations and inspections by
environmental, food safety and health authorities. Although Chiquita believes it
is substantially in compliance with such regulations, actions by regulators have
in the past required, and in the future may require, operational modifications
or capital improvements at various locations or the payment of fines and
penalties, or both.
SHARES AVAILABLE FOR FUTURE SALE. No prediction can be made as to the
effect, if any, that future sales of shares of Chiquita Common Stock, or the
availability of such shares for future sales, will have on the market price
prevailing from time to time of Chiquita Common Stock. Sales of substantial
amounts of Chiquita Common Stock, or the perception that such sales could occur,
could adversely affect prevailing market prices for Chiquita Common Stock. At
December 5, 1997, there were outstanding shares of Chiquita Common
Stock, including 23,996,295 shares held, directly or indirectly, by American
Financial Group, Inc. ("AFG"). The outstanding shares include approximately 3
million shares of Chiquita Common Stock issued in a private transaction in
connection with the recent acquisition of the Owatonna Companies, of which up to
500,000 shares may be registered for resale between September 24, 1997 and
September 23, 1998. In addition, up to approximately 2.2 million shares of
Chiquita Common Stock are expected to be issued in connection with the
acquisition of AFF.
16
<PAGE> 27
INTRODUCTION
GENERAL
This Proxy Statement/Prospectus is being furnished to the holders of
Stokely Common Stock in connection with the solicitation of proxies by the Board
of Directors of Stokely (the "Stokely Board"), for use at the Annual Meeting of
Stokely to be held on January 15, 1998, at 10:00 a.m., Milwaukee, Wisconsin
time, at the Milwaukee Athletic Club, 758 North Broadway, Milwaukee, Wisconsin,
or at any adjournments or postponements thereof. This Proxy Statement/Prospectus
also constitutes the Prospectus of Chiquita with respect to up to 3,204,349
shares of Chiquita Common Stock to be issued to holders of Stokely Common Stock
pursuant to the Merger Agreement and to certain holders of Stokely indebtedness
upon consummation of the Merger.
At the Annual Meeting, holders of record of Stokely Common Stock as of the
close of business on November 20, 1997, the Voting Record Date, will consider
and vote upon a proposal to approve the Merger Agreement. Pursuant to the Merger
Agreement, Acquisition Sub will be merged with and into Stokely and Stokely will
be the surviving corporation and will become a direct, wholly-owned subsidiary
of Chiquita. In the Merger, each outstanding share of Stokely Common Stock will
be converted into the right to receive a fractional share of Chiquita Common
Stock having a value of $1.00. The size of the fractional amount will be based
on the average closing price of Chiquita Common Stock on the NYSE over the 15
trading days preceding the Merger. The number of whole shares of Chiquita Common
Stock to be received by each Stokely shareholder will depend on the number of
shares of Stokely Common Stock held by the shareholder. No fractional shares of
Chiquita Common Stock will be issued and cash (without interest) will be paid in
lieu of fractional shares. Additionally, in connection with the Merger: (i)
holders of $31.8 million principal amount of Stokely debt have agreed to
exchange that indebtedness for shares of Chiquita Common Stock; (ii) certain
Stokely suppliers have agreed to forgive $1.0 million in accounts receivable;
and (iii) it is a condition of closing that Stokely's revolving credit lender
will agree to leave in place at least $20 million of outstanding revolving
credit. The Stokely Board has unanimously approved the terms of the Merger
Agreement and recommends that shareholders of Stokely vote FOR the proposal to
approve and adopt the Merger Agreement. See "PROPOSAL TO APPROVE THE MERGER."
PARTIES TO THE MERGER
Chiquita is a leading international marketer, producer and distributor of
bananas and other quality fresh and processed food products sold under the
Chiquita and other brand names. In addition to bananas, these products include
other tropical fruit, such as mangoes, kiwi and citrus, and a wide variety of
other fresh produce. Chiquita's products also include fruit and vegetable juices
and beverages; processed bananas and other processed fruits and vegetables;
fresh cut and ready-to-eat salads; and edible oil-based consumer products.
Chiquita's Friday Canning Corporation, headquartered in New Richmond, Wisconsin,
operates eight vegetable canning facilities in Wisconsin and participates in a
vegetable canning joint venture in China. In September 1997, Chiquita acquired
the Owatonna Companies, a vegetable canner headquartered in Owatonna, Minnesota
with six canning facilities in Minnesota and Illinois and entered into a
definitive agreement to acquire AFF, a vegetable canning company headquartered
in Payette, Idaho, with four canning facilities in the northwestern United
States. These companies sell processed vegetables in the private label, food
service and branded segments, both domestically and for export. The principal
executive offices of Chiquita are located at 250 East Fifth Street, Cincinnati,
Ohio 45202 and the telephone number is (513) 784-8000. AFG owns, either directly
or indirectly through its subsidiaries, approximately 40% of the outstanding
shares of Chiquita Common Stock. Approximately 46% of the outstanding common
stock of AFG is beneficially owned by Carl H. Lindner, members of his family and
trusts for their benefit.
Stokely produces a broad range of canned vegetables in the United States
under customer private labels and under the Stokely's Finest(R), Stokely's
Gold(TM)and other brand labels. Stokely sells brand label vegetables through the
retail, foodservice and industrial channels of distribution and sells private
label canned vegetables to many supermarket chains and wholesalers. Stokely also
exports canned vegetables to Europe and Asia. Prior to February 1996, Stokely
also processed, marketed and sold frozen vegetables, primarily in bulk size
quantities for the industrial market. In February 1996, Stokely announced it was
exiting the frozen vegetable
17
<PAGE> 28
processing business and sold essentially all of the assets of this business
during fiscal 1997. The principal executive offices of Stokely are located at
1230 Corporate Center Drive, Oconomowoc, Wisconsin 53066, and its telephone
number is (414) 569-1800. Copies of Stokely's Form 10-K/A for its fiscal year
ended March 31, 1997 and Form 10-Q/A for the quarter ended September 30, 1997
accompany this Proxy Statement/Prospectus. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
THE ANNUAL MEETING
PLACE, TIME AND DATE
The Annual Meeting of Shareholders of Stokely will be held on January 15,
1998, at 10:00 a.m., Milwaukee, Wisconsin time, at the Milwaukee Athletic Club,
758 North Broadway, Milwaukee, Wisconsin. This Proxy Statement/Prospectus is
being sent to holders of shares of Stokely Common Stock and is accompanied by a
Proxy which is being solicited by the Stokely Board for use at the Annual
Meeting or any adjournments or postponements thereof.
PURPOSE
The purpose of the Annual Meeting is: (i) to consider and vote upon the
approval and adoption of the Merger Agreement described herein, providing for,
among other things, the merger of Acquisition Sub with and into Stokely, and for
Stokely to be the surviving corporation and to become a direct, wholly-owned
subsidiary of Chiquita; (ii) to elect three directors to serve until
consummation of the Merger (or, in the event the Merger is not consummated, for
a three year term expiring at the 2000 annual meeting of shareholders, or until
their successors have been elected and qualified); (iii) to obtain approval to
adjourn the Annual Meeting for the purpose of soliciting additional votes in
favor of the Merger Agreement in the event that the required vote for approval
and adoption of the Merger Agreement has not been obtained by the date of the
Annual Meeting, under the terms and conditions described herein; and (iv) to act
upon such other matters, if any, as may properly come before the Annual Meeting
or any adjournments or postponements thereof.
VOTING RECORD DATE; SHARES ENTITLED TO VOTE
The Stokely Board has fixed the close of business on November 20, 1997 as
the Voting Record Date for the determination of shareholders entitled to notice
of and to vote at the Annual Meeting. Only those holders of Stokely Common Stock
of record on the Voting Record Date will be entitled to notice of and to vote at
the Annual Meeting or any adjournments or postponements thereof. Each share of
Stokely Common Stock will be entitled to one vote on each matter presented for
action at the Annual Meeting. As of the Voting Record Date, 11,390,871 shares of
Stokely Common Stock were issued and outstanding, and Stokely had no other class
of securities issued and outstanding.
STOKELY SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES FOR STOKELY COMMON
STOCK WITH THEIR PROXY CARDS. AS DESCRIBED UNDER "PROPOSAL TO APPROVE THE
MERGER-EXCHANGE OF CERTIFICATES IN THE MERGER," UPON APPROVAL OF THE MERGER EACH
STOKELY SHAREHOLDER WILL BE PROVIDED WITH A LETTER OF TRANSMITTAL FOR EXCHANGING
SHARES OF STOKELY COMMON STOCK, AND SHOULD FOLLOW THE INSTRUCTIONS SET FORTH
THEREIN.
VOTE REQUIRED
A majority of the shares of Stokely Common Stock entitled to vote,
represented in person or by proxy, will constitute a quorum for the transaction
of business at the Annual Meeting. Abstentions and broker non-votes will be
considered present for purposes of determining whether a quorum exists. The
following votes are required for the various actions to be taken at the Annual
Meeting:
- The affirmative vote of the holders of two-thirds of the shares of
Stokely Common Stock entitled to vote at the Annual Meeting is required
for approval and adoption of the Merger Agreement. Abstentions and broker
non-votes will have the same effect as votes cast against approval of the
Merger Agreement.
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- A plurality of the votes cast at the Annual Meeting by the holders of
shares of Stokely Common Stock entitled to vote is required for the
election of directors. A plurality vote means that the individuals who
receive the largest number of votes, up to the maximum number of
directors to be chosen at the Annual Meeting, will be elected as
directors. Any shares not voted will have no effect on the election of
directors provided that a quorum for the transaction of business is
present at the Annual Meeting.
- The affirmative vote of a majority of the total votes cast in person or
by proxy is necessary to approve the proposal to adjourn the Annual
Meeting to solicit additional votes in favor of the Merger proposal. Any
shares not voted will have no effect on the proposal to adjourn the
Annual Meeting provided that a quorum is present at the Meeting.
Stokely's directors and executive officers and their affiliates own 3.45% of the
outstanding shares of Stokely Common Stock and intend to vote in favor of the
Merger.
THE REQUIRED VOTE OF STOKELY SHAREHOLDERS ON THE MERGER AGREEMENT IS BASED
UPON THE TOTAL NUMBER OF OUTSTANDING SHARES OF STOKELY COMMON STOCK, AND NOT
JUST THOSE REPRESENTED AT THE ANNUAL MEETING. ACCORDINGLY, THE FAILURE TO SUBMIT
A PROXY CARD (OR, IF THE SHARES ARE HELD BY A BROKER, TO RETURN VOTING
INSTRUCTIONS) OR TO VOTE IN PERSON AT THE ANNUAL MEETING, OR THE ABSTENTION FROM
VOTING BY A STOKELY SHAREHOLDER, WILL HAVE THE SAME EFFECT AS A "NO" VOTE WITH
RESPECT TO THE MERGER AGREEMENT. BROKER NON-VOTES WILL NOT BE COUNTED AS HAVING
BEEN VOTED IN PERSON OR BY PROXY AT THE ANNUAL MEETING AND WILL HAVE THE SAME
EFFECT AS A "NO" VOTE WITH RESPECT TO THE MERGER AGREEMENT.
NO APPRAISAL OR DISSENTERS' RIGHTS
Holders of shares of Stokely Common Stock have no appraisal or dissenters'
rights in connection with the Merger. See "PROPOSAL TO APPROVE THE MERGER -- The
Merger Agreement: No Appraisal or Dissenters' Rights."
PROXIES
Holders of shares of Stokely Common Stock may vote either in person or by
properly executed Proxy. Shares of Stokely Common Stock represented by a
properly executed Proxy received prior to or at the Annual Meeting or any
postponements or adjournments thereof will, unless such Proxy is revoked, be
voted in accordance with the instructions indicated on such Proxy. If no
instructions are indicated on a properly executed Proxy, the shares covered
thereby will be voted FOR the proposal to approve the Merger Agreement, FOR the
slate of directors nominated for election and FOR approval of the proposal to
adjourn the Annual Meeting to permit further proxy solicitation in favor of the
Merger Agreement. If any other matters are properly presented at the Annual
Meeting for consideration, including, among other things, a motion to adjourn
the Annual Meeting to another time and/or place (other than for the purpose of
soliciting additional proxies), the persons named in the Proxy and acting
thereunder will have discretion to vote on such matters in accordance with their
best judgment. As of the date hereof, Stokely knows of no other such matters.
Any Proxy given pursuant to this solicitation or otherwise may be revoked
by the person giving it at any time before it is voted by (i) filing with the
Secretary of Stokely written notice of revocation (Robert M. Brill, Secretary,
Stokely USA, Inc., 1230 Corporate Center Drive, Oconomowoc, Wisconsin 53066);
(ii) submitting a duly-executed Proxy bearing a later date; or (iii) appearing
at the Annual Meeting and giving the Secretary notice of his or her intention to
vote in person. If you are a shareholder whose shares are not registered in your
own name, you will need additional documentation from your record holder to vote
personally at the Annual Meeting.
If a quorum is not obtained, or if fewer shares of Stokely Common Stock are
voted in favor of the Merger Agreement than the number required for approval, it
is expected that the Annual Meeting will be postponed or adjourned for the
purpose of allowing additional time to solicit Proxies or votes in favor of the
Merger Agreement. See "PROPOSAL TO ADJOURN THE ANNUAL MEETING."
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PROPOSAL TO APPROVE THE MERGER
(PROPOSAL NO. 1)
BACKGROUND OF AND REASONS FOR THE MERGER
The Stokely Board has explored multiple alternatives to the proposed Merger
Agreement with the assistance of its outside financial advisor, DLJ, and has
concluded Stokely's deteriorating operating results and financial condition and
anticipated liquidity problems are of sufficient severity and magnitude that it
will be unable to continue normal operations or achieve profitability for an
extended period absent a sales transaction. The Stokely Board and management
believe there are no presently available alternatives to the Merger Agreement
that would permit Stokely to operate normally for an extended period or achieve
profitability.
Current and Historical Deteriorating Operating Results and Financial
Condition of Stokely. Stokely has lost $82.5 million in its last five fiscal
years and has incurred net losses in five of its last six fiscal years. Stokely
has attempted to restructure its operations three times in the previous six-year
period and, while the Board and management believe Stokely has attained
significant benefits from these restructuring programs, Stokely has continued to
record significant losses. Stokely posted a net loss of $2.8 million in its
first fiscal quarter ended June 30, 1997, and a net loss of $3.9 million in its
second fiscal quarter ended September 30, 1997.
Abnormally low selling prices that prevailed during the first quarter did
not abate during the second quarter. Current selling prices remain below
year-ago levels, historical averages and levels anticipated at the beginning of
the fiscal year by management based on industry planting intentions reported by
the United States Department of Agriculture ("USDA") in April 1997, which
indicated significant reductions in planting from prior years. As a result,
Stokely incurred a net loss of $3.9 million in its second fiscal quarter ended
September 30, 1997. Furthermore, if current market conditions prevail for the
balance of the fiscal year, the Board and management believe Stokely will
experience losses of similar magnitude in its third and fourth fiscal quarters.
These losses are expected to continue to erode Stokely's liquidity position and
net worth. Stokely discussed the implications of these liquidity issues in its
Form 10-Q (as amended) for the quarter ended June 30, 1997 and its Form 10-Q (as
amended) for the quarter ended September 30, 1997. As noted in Stokely's Current
Report on Form 8-K, dated September 17, 1997 and filed on September 29, 1997,
Stokely's Form 10-Q/A for the three months ended June 30, 1997, filed on October
23, 1997, and Stokely's Form 10-Q/A for the three months ended September 30,
1997, filed on December 4, 1997, since May 1997, Stokely has been in violation
of certain covenants applicable to Stokely's Senior Secured Notes due 2000
("Senior Notes"), which constitutes an event of default, and certain of its
Industrial Development Revenue Bonds ("IRBs"). Since July 1997, Stokely also has
been in violation of certain covenants applicable to most of its other IRBs.
Through December 5, 1997, Stokely had not been notified by any of these
debt-holders that they intend to accelerate the maturity date of their
obligations as a result of the events of default or the covenant violations.
Furthermore, the holders of the Senior Notes and certain holders of the IRBs
have signed a Debt-Holder Agreement dated September 16, 1997, whereby they
agreed to exchange their outstanding debt for shares of Chiquita Common Stock in
the proposed Merger.
Should current market conditions continue, Stokely's anticipated negative
cash flow and working capital positions will seriously affect Stokely's
liquidity in the upcoming quarters. Stokely's deteriorating operating results
and financial condition and anticipated liquidity problems are of sufficient
severity and magnitude that it will be unable to continue normal operations or
achieve profitability for an extended period absent a sale of Stokely. Based
upon these subsequent-occuring events, Deloitte & Touche LLP, Stokely's
independent auditors, have issued a revised audit opinion for the fiscal year
ended March 31, 1997 indicating that these events raise substantial doubt about
Stokely's ability to continue as a going concern.
Additionally, on November 24, 1997, Stokely received notification from
Nasdaq that, based on their review of Stokely's Form 10-Q for the quarter ended
September 30, 1997, the Stokely Common Stock appears to no longer meet the
requirements for continued inclusion in the Nasdaq National Market as a result
of Stokely's net tangible assets falling below the required $4.0 million level.
If upon further review, after submission by Stokely of additional information,
Nasdaq determines that the Stokely Common Stock does not warrant continued
inclusion, it will commence the delisting process. Stokely anticipates that if
this process is commenced in the near future, the Stokely Common Stock may be
formally delisted as early as January 1998.
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Stokely's inability to continue to list the Stokely Common Stock on Nasdaq is
likely to have the effect of decreasing the depth, liquidity and orderliness of
the public market for shares of Stokely Common Stock. Holders of Stokely Common
Stock should recognize that the absence of an active trading market may make it
more difficult to sell shares of, and adversely affect the market price of,
Stokely Common Stock.
The book value of Stokely on its June 30, 1997 balance sheet was $6.1
million, and the book value of Stokely on September 30, 1997 was $2.1 million.
Should current market conditions persist through Stokely's third fiscal quarter,
the book value of Stokely effectively will be eliminated.
When the Stokely Board met in August and September to consider the Merger
Agreement, it considered the following issues related to Stokely's operating
performance and financial condition: (1) the prospect of continuing operating
losses particularly given current market conditions; (2) Stokely's high degree
of leverage (i.e., debt) which, when coupled with current market conditions,
reduces Stokely's borrowing availability and seriously affects its current
liquidity; (3) the very limited sources of possible additional cash, whether
from asset sales or additional borrowing capacity; (4) the existing violations
of financial covenants under its Senior Notes and IRBs; and (5) the longer-term
viability of Stokely as an independent organization given the above factors, the
fact that its existing revolving credit facility expires in May 1998, the fact
that approximately $7.5 million of principal payments are due in fiscal 1999
under its existing long-term debt agreements and the fact that Stokely will be
required to post security of approximately $5.0 million with the Wisconsin
Department of Agriculture, Trade and Consumer Protection ("WDA") in calendar
1998 (versus security of $2.0 million required in calendar 1997).
Longer-Term Liquidity Issues. Stokely has a $70 million revolving credit
facility with Congress Financial Corporation (Central) ("Congress") which
expires in May 1998. The Congress facility represents the third credit facility
Stokely has operated under since 1992. The current revolving credit facility has
fewer restrictive financial covenants, higher collateral advance rates and a
larger total credit facility than Stokely's two previous credit facilities.
Given Stokely's historical operating results and its more recent operating
performance, it is uncertain whether Stokely could successfully negotiate an
extension of its current facility or replace it with a facility which provides
comparable credit terms.
Scheduled principal payments on Stokely's long-term debt total
approximately $2.0 million in its fiscal years 1997 and 1998. Scheduled
principal payments on Stokely's long-term debt for its fiscal year 1999 are
approximately $7.5 million. There is substantial doubt regarding Stokely's
ability to meet these debt payments in fiscal 1999.
As previously discussed in Stokely's Annual Report on Form 10-K (as
amended) for its fiscal year ended March 31, 1997, Stokely is subject to various
state regulations in order to operate as a vegetable contractor in those states.
Effective July 11, 1996, the WDA amended its regulations governing when
vegetable contractors are required to pay cash for raw products upon delivery,
file security with the WDA, or file financial statements that meet minimum
financial standards. Stokely was required to file security of approximately $2.0
million on April 2, 1997, as it did not meet the minimum financial standards in
the amended regulations. Accordingly, Stokely posted a surety bond with the WDA
to meet this security requirement. This security was required to be 25% of the
estimated maximum liability expected to be owed to Wisconsin vegetable growers
in the calendar year ended December 31, 1997. The security requirement increases
to 50% for the calendar year ended December 31, 1998, and 75% thereafter for
those companies not meeting the minimum financial standards. Stokely currently
anticipates that it will not meet the minimum financial standards in calendar
1998 and will be required to either pay cash upon delivery of raw products or
file security of approximately $5.0 million in calendar 1998. Stokely believes
it would be extremely disadvantaged in obtaining grower contracts if it were to
attempt to pay cash upon delivery of raw products and, as such, Stokely
estimates it would need to post security of approximately $5.0 million in
calendar 1998. Because of Stokely's operating performance, it is anticipated
that the security to be posted in calendar 1998 would be in the form of a letter
of credit or a surety bond which would be fully supported by a letter of credit.
In either case, the letter of credit would further reduce Stokely's borrowing
availability and thus adversely affect Stokely's liquidity.
History of Restructuring Initiatives. Stokely has undertaken multiple
initiatives since the early 1990s intended to make it a viable, value-creating
entity in a changing market place. The market place changes began with the Del
Monte Foods leveraged buyout in January 1990 which precipitated a market share
battle
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in the brand label canned vegetable arena and ultimately resulted in brand
pricing temporarily falling below private label pricing. Since Stokely's primary
strategy up to that point had been to expand its brand business, this market
event forced management and the Stokely Board to reevaluate Stokely's strategic
direction. To assist in the evaluation, in January 1992, Stokely retained Bain &
Co. ("Bain") to analyze the industry, Stokely's position and relative
performance in the industry, and the potential value of various strategic
alternatives going forward.
The conclusions of the Bain analysis were twofold. First, on an operating
basis, Bain believed Stokely was attempting to do too many things and was not
cost-effective as a result. In the then existing declining price environment,
Bain advised Stokely to narrow its focus to the areas in which it had the
greatest expertise and cost effectiveness and, therefore, the greatest prospects
for success. Consequently, Stokely shifted its strategic priority to the private
label channel. For numerous reasons, including scale and experience, the private
label channel had historically returned the highest margins for Stokely.
Additionally, it was determined that to continue to achieve historical returns
in an intensely competitive environment, Stokely needed to discontinue certain
non-core product lines (tomatoes, fruits, southern vegetables) and exit non-core
channels of distribution (frozen retail and frozen foodservice).
Second, Bain's evaluation questioned the long-term prospects for a company
of Stokely's size in the vegetable processing industry. As a result, in October
1992 Stokely engaged Morgan Stanley & Co. Incorporated to actively explore the
option of the sale of Stokely. The Stokely Board elected to pursue the sale
alternative based upon the conclusions reached during the strategic analysis
process that, given present and projected changes in the industry, Stokely did
not have sufficient scale to maintain current returns or to achieve historical
return levels. The Stokely Board believed the solution was to combine with
another industry participant, with the resulting entity possessing the requisite
size to achieve profitable results. As Stokely was not in a financial position
to be a buyer, the Stokely Board and management believed a sale was the proper
course of action. Unfortunately, the formal sale process, which involved
approaching many potential buyers, was unsuccessful as no bids were received.
Consequently, in May 1993, Stokely announced a restructuring of its operations
(which included discontinuance of certain non-core product lines and exiting
certain non-core distribution channels), resulting in a nonrecurring pretax
charge of $21.1 million in the quarter ended March 31, 1993, and began to pursue
diligently the private label strategy identified with the assistance of Bain,
mindful that ultimately it likely would need to enter into some type of
strategic combination.
By June 1994, the combination of reduced costs due to the restructuring
initiatives undertaken in 1993 and improved market conditions had resulted in
substantial improvement in Stokely's performance. The Stokely Board determined
that it would be appropriate to raise additional equity to pay down debt and
reduce the risk inherent in Stokely's highly leveraged balance sheet. Further,
the Stokely Board believed that this course of action would better position
Stokely to evaluate and pursue a strategic combination. Accordingly, Stokely
proceeded with a secondary equity offering in November 1994, raising $25.2
million.
In June 1995, the Stokely Board concluded it would again be appropriate to
attempt to identify a strategic combination and authorized management to engage
an investment banking firm to assist in that process. DLJ was retained in July
1995, and from July 1995 to May 1996 discussions were held with industry
participants, including Chiquita, as well as some non-industry companies. The
results were a disappointment as no buyers could be identified who were willing
to pay even an amount equal to Stokely's outstanding debt.
Beginning in late 1994 and continuing into 1996, market conditions in the
canned vegetable industry had again weakened and, given Stokely's leverage
position, Stokely was in more serious trouble. Performance had deteriorated to
the point that Stokely was in default under certain terms of its working capital
facility and its Senior Notes. As a result, Stokely's banks were restricting its
borrowings such that it faced a major liquidity crisis. At the same time, the
Stokely Board concluded that prior restructuring efforts had been inadequate and
that, given the realities of the marketplace, radical steps were needed to bring
Stokely's costs in line with market conditions.
The immediate priority was entering into a new working capital facility. In
May 1996, Stokely entered into a new agreement with Congress which alleviated
its immediate liquidity crisis and, because of higher advance rates, gave
Stokely some additional liquidity going forward. Stokely also was able to
accomplish a
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restructuring of the terms of its Senior Notes in a manner that acknowledged the
reality of its highly leveraged situation. However, Stokely continued to have
concerns regarding its liquidity. It needed either to sell its frozen business,
which was unprofitable, or to close it down before losses generated by the
frozen division consumed all of the additional liquidity in the new working
capital facility. A buyer of the frozen business was identified and the sale was
consummated in July 1996. Additionally, to help meet its urgent need to cut
costs and conserve cash, Stokely also sold its corporate headquarters building
in January 1997.
While working on urgent liquidity priorities, Stokely also continued to
assess what needed to be done to improve the performance of its core business.
Previous efforts to improve Stokely's performance by eliminating non-core
products and distribution channels and cutting costs were appropriate but, in an
intensely competitive industry in which Stokely was hampered by its leverage,
not sufficient. These efforts failed to address adequately the fundamental
manner in which the core canned vegetable business was operated. A new analysis
began, based on the premise that Stokely was targeting too high a sales volume
in order to run its plants at full capacity and achieve the lowest possible unit
cost. If this was the case, achieving that sales level was likely to require
excessive price discounting, resulting in margin compression. Stokely did a
complete analysis of profitability by customer to test the hypothesis. The
results confirmed the initial premise and Stokely redefined its sales volume to
approximately 85% of existing levels, identified the most efficient production
configuration to service the newly defined customer base, and undertook a
complete analysis of the administrative support necessary to operate the
reconfigured company. The resulting plan was presented to, and approved by, the
Stokely Board in September 1996. In approving the operating plan, the Stokely
Board recognized that a corporate finance solution was ultimately still
necessary and directed management to continue to work with DLJ once the
fundamental elements of the operating plan were in place.
DLJ Sales Process and Stokely Board Consideration of the Merger
Agreement. As noted above, Stokely has undertaken various restructuring
initiatives to address the continuing margin compression and operating losses it
has struggled with during the last six years, but the benefits of its efforts
have been largely offset by persistent erosion of its selling prices. In
approving its latest restructuring plan in September 1996, the Stokely Board
also directed management to continue to explore corporate finance alternatives
with the assistance of DLJ as a means of stabilizing Stokely's capital structure
and operating performance. Given the continuing price deterioration in the
processed vegetable markets and resulting deterioration in Stokely's balance
sheet and liquidity position, the Stokely Board concluded in April 1997 that
management and DLJ should aggressively pursue the sale of Stokely, as that
alternative would likely provide the greatest value to the Stokely shareholders.
On April 18, 1997, DLJ made a presentation to the Stokely Board relating to
conducting a formal auction of Stokely, and the Stokely Board voted to pursue
this course of action. The Stokely Board authorized DLJ to prepare a package of
information about Stokely and explore a possible merger by contacting, on a
confidential basis and subject to the execution of confidentiality agreements,
those entities that were believed by the Stokely Board and DLJ to be the most
likely merger candidates.
Subsequently, as part of the auction process, DLJ approached seven likely
strategic acquirors for Stokely: Chiquita, Del Monte USA (owned by Texas Pacific
Group), Seneca Foods Corp., Tri Valley Growers, Dean Foods Company, Allen
Canning Company and Del Monte, Mexico (owned by Hicks, Muse, Tate & Furst). DLJ
offered to make formal presentations with Stokely management to each of these
entities concerning the opportunity to acquire Stokely. During May 1997,
Stokely's management made presentations to the three potential acquirors who
expressed interest. Of that group, two parties, Del Monte USA and Chiquita,
conducted a formal due diligence review of Stokely, including further meetings
with management, plant and site visits, and extensive review of legal and other
documents. This due diligence occurred during June and July 1997. On July 24,
1997, after completion of due diligence, the best offer received and the best
alternative available was the offer from Chiquita.
The Stokely Board met on July 29, 1997 to consider Chiquita's proposal,
which was presented and analyzed by DLJ. This proposal attached an implied
enterprise value to Stokely of between $91.2 million and $92.3 million and
offered to exchange Stokely Common Stock for Chiquita Common Stock, with a range
of value between $.44 and $.54 per share to the holders of Stokely Common Stock.
Among other things, it included requirements that the holders of at least $37
million in principal amount of Stokely's approximately $45 million of Senior
Notes and IRBs agree to exchange such indebtedness for Chiquita Common Stock
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having a value equal to the face amount of the notes and bonds exchanged, and
that Congress continue to finance at least $20 million of the revolving credit
balance owed by Stokely at the Effective Time of the Merger.
DLJ recommended that negotiations continue with Chiquita to attempt to
improve the financial terms of the proposal in order to make the proposal more
acceptable to Stokely's shareholders, and its recommendation was accepted by the
Stokely Board after thorough discussion. Accordingly, DLJ proposed to Chiquita
an offer which would have resulted in a payment to Stokely's shareholders of
$20.0 million (or $1.76 per share) and included a closing condition that $31.8
million, rather than $37 million, of Stokely's Senior Notes and IRBs be
exchanged for Chiquita Common Stock. Chiquita accepted the $31.8 million minimum
debt exchange requirement but rejected the proposed payment to Stokely
shareholders and made a counterproposal, as its best and final offer, of $1.00
per share of Stokely Common Stock (payable in Chiquita Common Stock).
During August 1997, Stokely's management engaged in extensive negotiations
with its debtholders in order to obtain their consent to Chiquita's
stock-for-indebtedness exchange proposal, and DLJ and Stokely continued to
negotiate with Chiquita on other terms of the draft Merger Agreement. The
Stokely Board met again on September 4, 1997 to review the latest Chiquita
proposal and the negotiations with Chiquita. At that time a draft Merger
Agreement among Chiquita, Chiquita Acquisition Sub and Stokely was presented and
discussed in detail. The draft agreement reflected the increase in the
consideration offered to Stokely's shareholders to $1.00 per share of Stokely
Common Stock, in the form of an exchange of Stokely Common Stock for Chiquita
Common Stock. The Stokely Board was informed that the holders of $31.8 million
in principal amount of Stokely's Senior Notes and IRBs had agreed to exchange
such debt on the date of the Merger for Chiquita Common Stock of equal value.
The Stokely Board was further informed that Chiquita had advised Stokely's
management of concerns over new information, received subsequent to making its
counterproposal, regarding Stokely's anticipated second and third quarter
financial results, and as a result had indicated that it was not prepared to
execute a definitive agreement at that time without a $4.0 million reduction in
the total purchase price.
The Stokely Board considered alternatives to the Merger but none was
considered to be a viable alternative on the basis of shareholder value.
Therefore, the Stokely Board directed management to continue negotiations with
Chiquita to bring Chiquita and Stokely to final agreement and to initiate
negotiations with Stokely's trade creditors with the objective of offsetting the
impact of the proposed $4.0 million reduction in the total purchase price, as
such reduction otherwise would have reduced the amount paid to Stokely's
shareholders from $1.00 per share to $.65 per share.
The Stokely Board met again on September 12, 1997 to receive an update from
management on the status of negotiations with Chiquita and with Stokely's trade
creditors. Management informed the Stokely Board that discussions with its trade
creditors were continuing but no significant progress had been made.
On September 17, 1997, the Stokely Board met to consider a revised Merger
Agreement which represented the results of the final negotiations with Chiquita
and Stokely's debt holders and trade creditors. Approval of this revised Merger
Agreement was recommended by management and DLJ. It included the $31.8 million
debt exchange for Chiquita Common Stock and a $1.0 million debt reduction in
Stokely trade credit as conditions to closing, and provided for consideration to
Stokely shareholders of $1.00 per share of Stokely Common Stock, in the form of
an exchange of Stokely Common Stock for Chiquita Common Stock.
Following extensive discussions concerning the revised Merger Agreement and
the related transactions, other possible alternatives to the Merger (including
bankruptcy and reorganization or liquidation), the estimated value to Stokely
shareholders if Stokely remained independent, the operational, legal and
regulatory issues relating to Chiquita's proposal, a presentation by DLJ
regarding financial aspects of the proposed Merger, and receipt of an opinion
from DLJ that the consideration to be received by Stokely shareholders pursuant
to the proposed revised Merger Agreement would be fair to Stokely shareholders
from a financial point of view, the Stokely Board unanimously approved the
revised Merger Agreement.
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The Merger Agreement contains the following material provisions:
1. All outstanding shares of Stokely Common Stock will be converted
into the right to receive in the aggregate shares of Chiquita Common Stock
having a value of $11,390,871, or $1.00 per share of Stokely Common Stock.
2. It is a condition to closing that the holders of at least $31.8
million in principal amount of Stokely's approximately $45 million in
principal amount of Senior Notes and IRBs will exchange such debt for
Chiquita Common Stock having a value equal to the amount of the debt
exchanged. Holders of the requisite $31.8 million in principal amount have
agreed in writing to such exchange. They also have agreed to forego a $2.8
million prepayment penalty, to defer payment of scheduled principal and
interest until closing and to accept Chiquita Common Stock in payment of
the deferred principal and interest.
3. It is a condition to closing that Congress will continue to provide
at least $20.0 million under the current revolving credit facility which
shall thereafter remain available to Stokely until the end of the credit
facility's current term.
4. It is a condition to closing that certain of Stokely's suppliers
shall have forgiven, in the aggregate, at least $1.0 million of their
accounts receivable from Stokely. Stokely has obtained a written agreement
to forgive the requisite $1.0 million of accounts receivable.
The Stokely Board and management believe there are presently no available
alternatives to the Merger Agreement that would permit Stokely to continue
normal operations or achieve profitability for an extended period absent a sales
transaction. As an alternative to the Merger, the Stokely Board also considered
the alternative of a bankruptcy proceeding. Following such consideration, the
Stokely Board unanimously concluded that pursuing the Merger was preferable to
the bankruptcy alternative because:
(i) Stokely shareholders were likely to receive less in a bankruptcy
scenario than they would receive in the Merger. This determination was
based on the fact that potential acquirors who would propose a purchase of
Stokely in a bankruptcy proceeding likely would base that proposal on the
complete or substantial elimination of shareholder value; Stokely's
assessment that in a liquidation of Stokely, the Stokely shareholders would
receive little, if any, value; and the Stokely Board's belief that
Stokely's business would deteriorate substantially in any type of
bankruptcy proceeding or following any bankruptcy filing.
(ii) Stokely's debtholders and creditors were likely to receive
greater payments in a merger or acquisition than in a bankruptcy. Moreover,
in a liquidation, Stokely's assessment was that creditors would receive
less than the face value of the amounts owed to them.
(iii) A bankruptcy filing would be likely to affect negatively
Stokely's customer and supplier base and to jeopardize Stokely's ongoing
operations.
This analysis of the bankruptcy alternative underscores the importance of
successfully concluding the proposed Merger.
RECOMMENDATION OF THE STOKELY BOARD
The terms of the Merger Agreement are the result of arms-length
negotiations between representatives of Stokely and Chiquita. The Stokely Board
believes that the Merger is in the best interests of the shareholders of
Stokely. In arriving at its recommendation, the Stokely Board considered a
number of factors, including, without limitation, the following:
Fairness Opinion. The Stokely Board gave significant weight to the fairness
opinion it received from DLJ, and the bases upon which DLJ relied in order to
render its opinion. See "-- Opinion of Financial Advisor" for a further
discussion of the financial analyses and methods applied by DLJ in rendering its
fairness opinion.
Financial Condition. Stokely's financial condition, primarily as a result
of economic, market and competitive pressures, combined with its leverage, has
deteriorated during the past few years. That
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deterioration has recently worsened substantially due to the unanticipated
continuation of abnormally low selling prices. Current selling prices remain
below year-ago levels, historical averages and levels anticipated at the
beginning of the fiscal year by management based on industry planting intentions
reported by the USDA in April 1997, which indicated significant reductions in
planting from prior years. Should current market conditions continue, Stokely's
anticipated negative cash flow and working capital positions are expected to
seriously affect Stokely's liquidity in the upcoming quarters. The Stokely Board
gave significant weight to the fact that Stokely continues to be unable to
operate profitably under current market conditions, despite its restructuring
efforts and the cost-cutting measures it has taken. See "-- Background of and
Reasons for the Merger."
Alternatives to the Merger. As discussed above, for the last several years
Stokely has pursued a variety of alternatives to return to profitability, in
light of the difficult market conditions which existed and continue to exist in
the vegetable processing industry. Assuming the continuation of the current
depressed market conditions in the vegetable processing industry, the current
and anticipated financial condition and cash position of Stokely is such that,
without the infusion of additional equity or debt financing, there is doubt
about Stokely's ability to continue to operate for an extended period absent a
sale transaction, or to generate meaningful, if any, profits. Stokely has been
unsuccessful in obtaining additional external financing from any third parties,
and the Stokely Board and its financial advisor, DLJ, believe it is unlikely
that any third parties are prepared to make capital investments in Stokely at
this time which would provide greater short-term or long-term value for the
Stokely shareholders than the proposed Merger. As discussed above, Stokely has
undertaken multiple restructuring actions which have been unsuccessful and with
the help of its financial advisor, DLJ, Stokely has evaluated various financing
alternatives. See "-- Background of and Reasons for the Merger."
On April 18, 1997, DLJ made a formal presentation to the Stokely Board
relating to conducting a formal auction of Stokely. The Stokely Board voted to
pursue this course of action during that meeting. As part of the auction
process, DLJ approached seven likely strategic acquirors for Stokely: Chiquita,
Del Monte USA (owned by Texas Pacific Group), Seneca Foods Corp., Tri Valley
Growers, Dean Foods Company, Allen Canning Company and Del Monte, Mexico (owned
by Hicks, Muse, Tate & Furst). DLJ offered to make formal presentations with
Stokely management to each of these entities concerning the opportunity to
acquire Stokely. During May 1997, Stokely's management made presentations to the
three potential acquirors who expressed interest. Of that group, two parties,
Del Monte USA and Chiquita, conducted formal due diligence of Stokely, including
further meetings with management, plant and site visits, and extensive review of
legal and other documents. This due diligence occurred during June and July
1997. Final bids were received for Stokely as of July 24, 1997. Subsequent to
the final bid date, as noted herein, DLJ and Stokely conducted substantial
further negotiations with Chiquita related to its bid. In light of this
comprehensive process, the Stokely Board concluded that the Merger represented
the best available alternative to enable Stokely shareholders to preserve, and
possibly enhance, a portion or all of their capital investment.
As an alternative to the Merger, the Stokely Board also considered the
alternative of a bankruptcy proceeding. Following such consideration, the
Stokely Board unanimously concluded that pursuing the Merger was preferable to
the bankruptcy alternative because:
(i) Stokely shareholders were likely to receive less in a bankruptcy
scenario than they would receive in the Merger. This determination was
based on the fact that potential acquirors who would propose a purchase of
Stokely in a bankruptcy proceeding likely would base that proposal on the
complete or substantial elimination of shareholder value; Stokely's
assessment that in a liquidation of Stokely, the Stokely shareholders would
receive little, if any, value; and the Stokely Board's belief that
Stokely's business would deteriorate substantially in any type of
bankruptcy proceeding or following any bankruptcy filing.
(ii) Stokely's debtholders and creditors were likely to receive
greater payments in a merger or acquisition than in a bankruptcy. Moreover,
in a liquidation, Stokely's assessment was that creditors would receive
less than the face value of the amounts owed to them.
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(iii) A bankruptcy filing would be likely to affect negatively
Stokely's customer and supplier base and to jeopardize Stokely's ongoing
operations.
Historical Market Prices of Stokely Common Stock. The Stokely Board and DLJ
reviewed the historical market prices for the shares of Stokely Common Stock,
which ranged from a high of $2.50 to a low of $0.625 between the period
beginning January 1, 1997 and ending September 17, 1997, the last trading day
prior to the announcement that Stokely had entered into the Merger Agreement. In
addition, the Stokely Board and DLJ noted that one buyer, Exeter Ventures UBOT
("Exeter"), an entity unrelated to Stokely, its directors or executive officers
or Chiquita, bought a large (8%) position in Stokely on June 27, 1997, a date
upon which some of the trades of Stokely Common Stock were executed at $0.625
per share, and made a public announcement that it had done so. In the three
weeks following that public announcement, the stock rose from $0.625 per share
to $2.50 per share, on particularly strong volume, before falling off to a range
around $1.50 per share shortly before announcement of the Merger. Due to the
preceding factors, the Stokely Board and DLJ felt that Stokely's stock price was
not an accurate reflection of the equity value of Stokely at the time of the
announcement of the Merger.
Terms of the Merger. The Stokely Board gave significant weight to the fact
that the terms of the Merger Agreement were negotiated at arms-length and that,
after long negotiations, the consideration to be paid to Stokely shareholders in
the Merger was the highest price that Chiquita would be willing to pay. The
Stokely Board also considered significant the requirement that the Merger must
be approved by two-thirds of the outstanding shares of Stokely Common Stock. As
noted herein, the terms of the Merger are the result of a thorough sales process
developed by DLJ and implemented by Stokely with the assistance of DLJ.
Ultimately, the proposed Merger Agreement was negotiated with Chiquita, which
had submitted the most attractive purchase proposal, and Stokely's debt holders
and trade creditors. Negotiation of the Merger Agreement was difficult due to
Stokely's financial condition. Throughout the negotiation process, the value to
be received by Stokely shareholders, in the form of an exchange of Stokely
Common Stock for Chiquita Common Stock, fluctuated between the final value of
$1.00 per share and significantly lower amounts. It was only through extensive
negotiation with Stokely's debt holders and some of its major trade creditors,
as well as with Chiquita, that the consideration to be paid to the Stokely
shareholders rose to the level contained in the Merger Agreement. The Merger
Agreement requires that holders of at least $31.8 million in principal amount of
the Senior Notes and IRBs exchange their debt for Chiquita Common Stock.
Additionally, such holders agreed to forego a $2.8 million prepayment penalty,
to defer payment of scheduled principal and interest until closing and to accept
Chiquita Common Stock in payment of the deferred principal and interest. After a
thorough review, the Stokely Board concluded that the Merger represents the most
attractive strategic alternative available to Stokely and will give Stokely
shareholders a stake in a larger, more diversified food company.
Status of Stokely Should the Merger Not Be Approved or Consummated. If the
Merger is not approved by the Stokely shareholders, or if the Merger is not
consummated for any other reason, and if, as expected, Stokely's financial
condition and liquidity position continue to deteriorate, the Stokely Board
believes Stokely ultimately may be required to seek protection from creditors
under the bankruptcy laws.
In addition, pursuant to the Merger Agreement, Stokely is required to pay
Chiquita a fee of $250,000 and a number of shares of Stokely Preferred Stock
having a redemption value of $2,750,000: (i) if the Merger Agreement is
terminated solely as a result of the failure to receive approval of Stokely's
shareholders; (ii) if the Stokely Board fails to continue to recommend the
Merger Agreement; or (iii) if a competing offer is made to Stokely, the Stokely
Board approves and recommends that offer to Stokely shareholders, the Merger is
not consummated and the transaction underlying the competing offer also is not
consummated. Additionally, if within twelve months of termination of the Merger
Agreement a person or entity other than Chiquita acquires 50% or more of the
Stokely Common Stock or all or substantially all of Stokely's assets or if
Stokely is a party to a merger, consolidation or similar transaction, or if
Stokely agrees to such a transaction, Stokely is obligated to pay Chiquita a fee
of $3,000,000. If a fee already has been paid as provided above, no additional
fee will be owed, but the Stokely Preferred Stock will be required to be
redeemed in accordance with the terms set forth in the Merger Agreement. See "--
The Merger Agreement: Termination Fee."
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OPINION OF FINANCIAL ADVISOR
In its role as financial advisor to Stokely, DLJ was asked by Stokely to
render an opinion to the Stokely Board as to the fairness to the holders of
Stokely Common Stock, from a financial point of view, of the Exchange Ratio
pursuant to the terms of the Merger Agreement. For purposes of this section, the
term "Exchange Ratio" means the amount of Chiquita Common Stock (plus any cash
in lieu of fractional shares) to be received by Stokely shareholders in the
Merger in exchange for Stokely Common Stock.
A COPY OF THE DLJ OPINION IS ATTACHED HERETO AS APPENDIX B. STOKELY
SHAREHOLDERS ARE URGED TO READ THE DLJ OPINION IN ITS ENTIRETY FOR ASSUMPTIONS
MADE, PROCEDURES FOLLOWED, OTHER MATTERS CONSIDERED AND LIMITS OF THE REVIEW BY
DLJ.
On September 17, 1997, DLJ delivered to the Stokely Board its oral opinion
to the effect that the Exchange Ratio was fair to the holders of Stokely Common
Stock from a financial point of view, based on and subject to the assumptions,
factors and limitations set forth in its written opinion and as described below.
This opinion was confirmed in a written opinion (the "DLJ Opinion"), dated
September 17, 1997, to the Stokely Board to the effect that, as of September 16,
1997 and based upon and subject to the assumptions, limitations and
qualifications set forth in such opinion, the Exchange Ratio is fair to the
holders of Stokely Common Stock from a financial point of view. DLJ confirmed
the DLJ Opinion on December 5, 1997.
The DLJ Opinion was prepared for the Stokely Board and is directed only to
the fairness of the Exchange Ratio to holders of Stokely Common Stock from a
financial point of view and does not constitute a recommendation to any Stokely
shareholder as to how such shareholder should vote at the Stokely Annual Meeting
on the proposed Merger.
The DLJ Opinion does not constitute an opinion as to the price at which
Chiquita Common Stock will actually trade at any time. The type and amount of
consideration was determined in arms-length negotiations between Stokely and
Chiquita, in which negotiations DLJ advised Stokely. No restrictions or
limitations were imposed by Stokely upon DLJ with respect to the investigations
made or the procedure followed by DLJ in rendering its opinion.
In arriving at its opinion, DLJ reviewed the Merger Agreement and financial
and other information that was publicly available or furnished to it by Stokely,
including information provided during discussions with Stokely's management.
Included in the information provided during discussions with management was
certain forward looking information relating to Stokely, prepared by Stokely's
management. In addition, DLJ compared certain financial and securities data of
Stokely with various other companies whose securities are traded in public
markets, reviewed prices and premiums paid in certain other business
combinations and conducted such other financial studies, analyses and
investigations as DLJ deemed appropriate for purposes of its opinion.
In rendering its opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
it from public sources, that was provided to it by Stokely or its
representatives, and that was otherwise reviewed. With respect to the forward
looking information supplied to it, DLJ assumed that it had been reasonably
prepared on the basis reflecting the best currently available estimates and
judgments of Stokely's management. Stokely informed DLJ that there will be
11,390,871 shares of Stokely Common Stock outstanding immediately prior to
consummation of the Merger. DLJ did not assume any responsibility for making an
independent evaluation of Stokely's assets or liabilities or for making any
independent verification of any of the information that it reviewed.
The DLJ Opinion is necessarily based on economic, market, financial and
other conditions as they existed on, and on the information made available to
DLJ as of, the dates of the DLJ Opinion and its confirmation of its opinion. It
should be understood that, although subsequent developments may affect its
opinion, DLJ does not have any obligation to update, revise or reaffirm the DLJ
Opinion.
The following is a summary of the presentation made by DLJ to the Stokely
Board at its September 17, 1997 Stokely Board meeting. Valuations for Stokely
were calculated on an enterprise value basis (as defined below) and converted to
a per share basis based upon $85.5 million of net debt (total debt less cash)
and 11,390,871 million shares of Stokely Common Stock outstanding. The debt
level used for analyzing the
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Chiquita bid was based upon an average revolver balance for Stokely of $45.0
million. DLJ believed that using the average revolver balance of the business in
its analysis more accurately reflected the value of the Chiquita bid than using
a higher balance which may be outstanding at the time the transaction closes.
Analysis of Selected Publicly Traded Comparable Companies. DLJ compared
certain financial and forward looking information for Stokely with four publicly
traded companies that compete in its industry (the "Public Comparables"). The
Public Comparables were: Seneca Foods Corp., Chiquita Brands International,
Inc., Dean Foods Company and International Multifoods, Inc. Of these, DLJ was of
the opinion that Seneca Foods Corp. was the most comparable to Stokely. DLJ
analyzed, among other things, the enterprise value (defined to be the market
value of the common stock plus total debt less cash, cash equivalents and other
investments) of each Public Comparable, as of September 8, 1997, as a multiple
of the latest twelve months' ("LTM") revenue, earnings before interest, taxes,
depreciation and amortization ("EBITDA"), and earnings before interest and taxes
("EBIT "), of each company. DLJ did not perform valuations based upon
calculations of market price per share to earnings and anticipated earnings
because the valuations based upon these calculations were not relevant due to
Stokely's actual and anticipated net losses.
DLJ applied a range of multiples (derived from the high and low multiples
of the Public Comparable information analyzed by DLJ) of 0.3x to 0.7x to
Stokely's LTM revenue, 6.8x to 10.7x to Stokely's LTM EBITDA, and 9.0x to 18.6x
to Stokely's LTM EBIT. Based upon these multiple ranges, DLJ estimated the
enterprise value and equity value to range between $53.6 million and $125.2
million and ($2.80) to $3.48 per share, respectively, based upon revenue
multiples; between $70.7 million and $111.3 million and ($1.30) to $2.26 per
share, respectively, based upon EBITDA multiples; and between $37.8 million and
$78.1 million and ($4.19) to ($0.65) per share, respectively, based upon EBIT
multiples. Applying the trading multiples of Seneca Foods Corp. of 0.6x LTM
revenues, 6.8x LTM EBITDA and 12.7x LTM EBIT to Stokely's financial results
returned enterprise values and equity values per share of $107.3 million, $70.7
million and $53.3 million and $1.91, ($1.30) and ($2.82) per share,
respectively, based upon revenues, EBITDA and EBIT, respectively. DLJ believes
that the EBITDA and EBIT valuations are more relevant than the revenue valuation
due to the profit margins of Stokely.
Selected Comparable Acquisitions Analysis. DLJ also reviewed certain
information relating to four relevant business combination transactions: Texas
Pacific Group's acquisition of Del Monte USA, Curtis Burns Foods, Inc.'s
acquisition of Pro-Fac Cooperative, Inc., International Multifoods' acquisition
of Doskocil and Dean Foods' acquisition of the Birds Eye division of Kraft Foods
(collectively, the "Comparable Acquisitions"). Of these transactions, DLJ
believes that the Texas Pacific Group's acquisition of Del Monte USA is the
closest comparable acquisition to the acquisition of Stokely by Chiquita due to
the product line similarity and the recent completion of the transaction.
DLJ reviewed the offer value as a multiple of LTM revenues, LTM EBITDA and
LTM EBIT of the target company for each of the transactions. DLJ applied a range
of multiples (derived from the high and low multiples for the Comparable
Acquisitions information analyzed by DLJ) of 0.6x to 0.8x to Stokely's LTM
revenues, 5.7x to 6.9x to Stokely's LTM EBITDA, and 7.6x to 11.5x to Stokely's
LTM EBIT. Based upon these multiple ranges, DLJ estimated the enterprise value
and the equity value to range between $107.3 million and $143.0 million and
$1.92 to $5.06 per share, respectively, based upon revenue multiples; between
$59.3 million and $71.8 million and ($2.31) to ($1.21) per share, respectively,
based upon EBITDA multiples; and between $31.9 million and $48.3 million and
($4.71) to ($3.27) per share, respectively, based upon EBIT multiples. As was
the case in the comparable publicly traded company analysis, DLJ believes that
the EBITDA and EBIT valuations are more relevant than the revenue valuation due
to the profit margins of Stokely. Applying the multiples implied by the Texas
Pacific Group's acquisition of Del Monte USA of 0.8x LTM revenues, 6.9x LTM
EBITDA and 9.2x LTM EBIT to Stokely's financial results returned enterprise
values and equity values of $143.0 million, $71.8 million and $38.6 million and
$5.06, ($1.21) and ($4.12) per share, respectively, based upon revenues, EBITDA
and EBIT, respectively.
Discounted Cash Flow Analysis. DLJ performed a discounted cash flow
analysis of Stokely based upon estimates of financial performance prepared by
Stokely's management for the fiscal years 1998 to 2002. Utilizing these
estimates, DLJ calculated a range of present values for Stokely based upon the
discounted net present value of the sum of (i) the estimated stream of after-tax
unlevered free cash flows of Stokely (defined
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as operating cash flow available after working capital, capital spending and tax
requirements) to the year 2002; and (ii) the projected terminal value of Stokely
at such year based upon a range of multiples of Stokely's estimated EBITDA in
such year. Applying discount rates ranging from 10% to 12% and multiples of
terminal EBITDA ranging from 6.0x to 8.0x, DLJ estimated the enterprise value
and equity value per share for Stokely to range between $76.8 million and $99.3
million and ($0.76) and $1.21 per share, respectively.
Leveraged Buyout Analysis. DLJ performed a leveraged buyout analysis of
Stokely based upon the same estimates of financial performance used in preparing
the discounted cash flow analysis. The leveraged buyout analysis is performed to
determine the price which a financial buyer might be willing to pay for Stokely,
assuming a range of expected equity returns of 25% and 30% and terminal EBITDA
multiples of 6.0x to 8.0x. Based upon this analysis, DLJ estimated the
enterprise value and equity value which could be paid by a financial buyer for
Stokely to range between $50.0 million and $70.0 million and ($3.12) and ($1.36)
per share, respectively.
The summary set forth above does not purport to be a complete description
of the analyses by DLJ but describes, in summary form, the principal elements of
the presentation made by DLJ to the Stokely Board on September 16, 1997. The
preparation of a fairness opinion involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
these methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to partial or summary description. Each of the analyses
conducted by DLJ was carried out in order to provide a different perspective on
the transaction and add to the total mix of information available. DLJ did not
form a conclusion as to whether any individual analysis, considered in
isolation, supported or failed to support an opinion as to the fairness from a
financial point of view. Rather, in reaching its conclusion, DLJ considered the
results of the analyses in light of each other and ultimately rendered its
opinion based on the results of all the analyses taken as a whole. DLJ did not
place particular reliance or weight on any individual analysis, but instead
concluded that its analyses, taken as a whole, supported its determination.
Accordingly, notwithstanding the separate factors summarized above, DLJ believes
that its analyses must be considered as a whole and that selecting portions of
its analyses and of the factors considered by it, without considering all such
factors and analyses, could create a misleading view of the process underlying
the analyses set forth in the DLJ Opinion. The analyses performed by DLJ are not
necessarily indicative of actual, past or future results or value, which may be
significantly more or less favorable than such estimates or those suggested by
such analyses.
Financial Advisor Fee. Pursuant to the terms of an engagement letter, dated
March 1, 1996, Stokely agreed to pay DLJ a fee of 1.5% of the enterprise value
of the price ultimately to be paid for Stokely (including $350,000 upon
notification that DLJ was prepared to deliver the DLJ Opinion and the remainder
upon closing of the transaction). Based upon the Merger Consideration, the
aggregate fee to be paid to DLJ by Stokely is approximately $1,500,000. Stokely
also agreed to reimburse DLJ promptly for all out-of-pocket expenses (including
the reasonable fees and out-of-pocket expenses of counsel) incurred by DLJ in
connection with its engagement, and to indemnify DLJ and certain related persons
against certain liabilities in connection with its engagement, including
liabilities under the federal securities laws. The terms of the fee arrangement
with DLJ, which DLJ and Stokely believe are customary in transactions of this
nature, were negotiated at arms-length between Stokely and DLJ and the Stokely
Board was aware of such arrangement, including the fact that a significant
portion of the aggregate fee payable to DLJ is contingent upon consummation of
the Merger.
The Stokely Board selected DLJ to render a fairness opinion because DLJ is
an internationally recognized investment banking firm with substantial expertise
in transactions similar to the Merger and because it is familiar with Stokely
and its business. DLJ, as part of its investment banking services, is regularly
engaged in the valuation of businesses and securities in connection with the
mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Stokely Board, shareholders should
be aware that certain members of the Stokely Board and management may be deemed
to have interests in the Merger in addition to their interests, if any, as
holders of Stokely Common Stock.
If Stokely were to file for bankruptcy rather than proceed with the Merger,
the executive officers' rights to certain payments under various employment
agreements and benefit plans and the officers' and directors' indemnification
rights could be subordinate to senior claims and, therefore, would be at risk of
non-payment.
Employment Agreements. Stokely is a party to Change In Control Contingent
Employment Agreements (the "Contingent Employment Agreements") with many of its
officers and employees, including executive officers Stephen W. Theobald, Peter
P. Caputa, Robert M. Brill, Eddie W. Foster, John R. McCormick and Jack R.
McDowell. Under the Contingent Employment Agreements, in the event of a change
of control, Stokely (or the surviving corporation) shall continue, following the
date of the change of control, to employ Mr. Theobald for three years, Messrs.
Caputa and Brill for two years, and Messrs. Foster, McCormick and McDowell for
one year. The Merger would constitute a "change of control" under the Contingent
Employment Agreements. In the event of a change in control, the employee will
continue to be employed by Stokely (or the surviving corporation) for the
applicable number of years and will receive a salary equal to his salary on the
date of the change of control, subject to annual upward adjustments commensurate
with increases awarded to other officers and employees. If, after a change of
control, Stokely (or the surviving corporation) terminates the employee for any
reason other than for "cause," or if the employee elects to terminate his
employment for a permitted reason, he shall continue to be paid monthly an
amount equal to his then current monthly base salary plus one-twelfth of the
annual average of the executive incentive program payments and all bonuses paid
to the employee in the preceding five years, and he shall continue to be
entitled to receive all other employee benefits and perquisites made available
to other employees of comparable status until the end of his employment term. If
the employee is terminated for "cause," the employee is entitled to receive only
his compensation through the date of termination. Assuming no increases in base
salary are granted and no additional bonuses are paid prior to the Merger, if
the executive officers are terminated for any reason other than cause, or any
executive officer elects to terminate his employment for a permitted reason, on
the date of the Merger the executive officers would be entitled to receive
monthly payments under their Contingent Employment Agreements as follows: Mr.
Theobald, $14,208; Mr. Caputa, $11,667; Mr. Brill, $8,575; Mr. Foster, $9,171;
Mr. McCormick, $9,584; and Mr. McDowell, $9,583.
Stokely also is a party to an Employment Agreement with Jack R. McDowell
dated February 11, 1997. Under this Employment Agreement, Stokely agreed to
employ Mr. McDowell as Vice President-Manufacturing for a period of one year
ending February 10, 1998. This Employment Agreement is rendered null and void in
the event of a "change in control" of Stokely and, if the Merger is consummated,
will be superseded by Mr. McDowell's Contingent Employment Agreement.
Deferred Compensation Agreement. In 1990, Stokely entered into a deferred
compensation agreement with Thomas W. Mount, Stokely's former President and
Chairman. Under this agreement, Stokely is obligated to pay Mr. Mount (or his
designated beneficiaries, in the event of his death) deferred compensation in
monthly installments of $7,500 for a period of 120 consecutive months (or at his
election, in one lump sum based upon a present value calculation) following his
death, disability or retirement. Mr. Mount retired in April 1993, and Stokely
commenced the monthly installment payments at that time. Under the terms of the
Merger Agreement, Stokely will continue to make the monthly payments (or pay the
remaining portion in one lump sum).
Supplemental Employee Retirement Plan. Stokely established the Supplemental
Employee Retirement Plan (the "SERP") in 1995, in which Mr. Theobald and Mr.
Brill participate. For Mr. Theobald, the SERP provides a maximum benefit at
retirement (based on 25 years of service) of 120 equal monthly payments which
will equal, on an annual basis, 40% of the salary (excluding bonus) earned by
Mr. Theobald during the final twelve months of his employment with Stokely. For
Mr. Brill, the SERP provides a maximum benefit at retirement (based on 25 years
of service) of 120 equal monthly payments which will equal, on an annual basis,
20% of the salary (excluding bonus) earned by Mr. Brill during the final twelve
months of his employment
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with Stokely. The monthly payments for Mr. Theobald and Mr. Brill are reduced on
a percentage basis to the extent that years of service are less than 25 at the
end of their respective employment periods. At the time of the Merger, Mr.
Theobald will be vested in this benefit based on eleven years of service and Mr.
Brill based on eight years of service. In the Merger Agreement, Chiquita has
agreed to cause Stokely to honor the SERP following the Merger for the benefit
of the current vested participants.
Split Dollar Life Insurance Plan. In 1990, Stokely established the Split
Dollar Life Insurance Plan (the "Split Dollar Plan"), in which Messrs. Theobald,
Brill, Foster and McCormick, as well as other key employees, participate. The
life insurance benefit is equal to four times the executive's salary. The
executive pays a portion of the premium representing the economic value of the
insurance and Stokely is responsible for the balance of the premium. Upon the
executive's death, retirement or termination, Stokely will receive all premiums
paid by it on behalf of the executive and the executive will receive the
remainder of the death benefit or the cash surrender value. In the Merger
Agreement, Chiquita has agreed to cause Stokely to honor the Split Dollar Plan
following the Merger for the benefit of the current participants.
Deferred Compensation Plan For Key Executives. In 1995, Stokely entered
into deferred compensation agreements with Messrs. Theobald, Brill and McCormick
(as well as certain other key employees) pursuant to a Deferred Compensation
Plan (the "Deferred Compensation Plan"). Under the Deferred Compensation Plan,
participants may elect to defer compensation earned in any year subject to the
limitation that the maximum amount that may be deferred in any calendar year is
20% of the participant's annual compensation less the maximum amount that may be
deferred on an annual basis by such participant pursuant to the Stokely
Retirement Savings Plan. In any year in which Stokely makes a matching
contribution to a participant in the Stokely Retirement Savings Plan who is also
a participant in the Deferred Compensation Plan, Stokely accrues a matching
contribution for such participant in the Deferred Compensation Plan. Both
matching contributions are based on a factor of 25% of the contribution up to an
aggregate not to exceed 6% of the gross annual compensation of the participant
in the applicable year. Chiquita has agreed to cause Stokely to honor the
Deferred Compensation Plan following the Merger for the benefit of the current
participants.
Deferred Compensation Plan For Directors. Under the Deferred Compensation
Plan for Directors, participants (directors who are not also employees of
Stokely) are able to defer cash compensation earned from Stokely into a Deferred
Compensation Account. On a quarterly basis, the cash in the Deferred
Compensation Account is converted into shares of Stokely Common Stock at the
closing price per share on the Nasdaq National Market on the last trading day
preceding the last day of the quarter. These accounts are increased or changed
to reflect the value of the shares as if owned by the participant. On or before
the date of the Merger, all Deferred Compensation Accounts will be cashed out,
using the $1.00 per share of Stokely Common Stock value in the Merger, and the
Deferred Compensation Plan for Directors will be terminated. Directors Bradley,
Britt, Fish, DeWees and Carey and former director Foster will receive $1,816,
$17,106, $17,087, $348, $2,407 and $1,057, respectively, based upon the number
of shares credited to their accounts as of December 1, 1997 and payment of the
$1.00 per share of Stokely Common Stock value in the Merger.
Board of Directors' Retirement Plan. Under the Board of Directors'
Retirement Plan, directors who have served at least two three-year terms on the
Stokely Board and are Stokely Board members upon attaining the age of 72 years
become eligible to receive a benefit of $500 per month for life beginning the
month following their retirement. Under the terms of the Merger Agreement,
Chiquita has agreed to cause Stokely to honor this obligation as it relates to
the directors eligible to receive this benefit (i.e., Messrs. Bradley, Fish and
Carey).
Stay Bonus. On July 29, 1997, the Stokely Board granted Mr. Theobald a
retention or "stay" bonus equal to his current annual salary of $170,500 to be
paid in installments if the Merger is consummated as follows: (1) one-half (or
$85,250) on the date of the Merger if he remains in the employ of Stokely up to
such date, and (2) one-half (or $85,250) on June 30, 1998, if he remains in the
employ of Stokely or its successor up to such date. The Stokely Board granted
this bonus to Mr. Theobald in recognition of both past services rendered to
Stokely and the critical importance which his involvement had to the continued
negotiation of the Merger Agreement and has to the consummation of the Merger.
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Indemnification; Directors' and Officers' Insurance. The Merger Agreement
provides that, after the Merger, Stokely will indemnify and hold harmless, to
the fullest extent required by law (or, if greater, to the fullest extent
provided under Stokely's Articles of Incorporation and By-laws), any person who
has, prior to the Merger, been a director, officer or employee of Stokely or its
subsidiaries (each such person, an "Indemnified Party") against any losses,
claims, damages, liabilities, costs, expenses, judgments, fines and amounts paid
in settlement in connection with any threatened or actual claim, action, suit,
proceeding or investigation (whether asserted or arising before or after the
Merger) (collectively, the "Indemnified Claims"). In addition, in the event of
any such Indemnified Claim, the Indemnified Parties may retain counsel
satisfactory to them after consultation with Chiquita, provided that Chiquita
has not assumed the defense thereof, and provided that certain other conditions
are met. Stokely's obligations under these provisions will continue in full
force and effect for a period of seven years after the Merger; provided,
however, that all rights to indemnification in respect of a claim asserted or
made within such period shall continue until the final disposition thereof. The
Merger Agreement also provides that Stokely will, subject to the conditions set
forth in the Merger Agreement, use its best efforts to maintain directors' and
officers' liability insurance "tail" coverage with respect to wrongful acts
and/or omissions committed or allegedly committed prior to the Merger. At or
prior to the Merger, Stokely intends to pay all of the necessary premium amounts
for this insurance for the seven-year period after the Merger.
THE MERGER AGREEMENT
The following summary of certain aspects of the Merger Agreement does not
purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, which is attached as Appendix A to this Proxy
Statement/Prospectus and is incorporated by reference herein. Please consult the
text of the Merger Agreement for full information regarding any or all of its
provisions.
Voting on the Merger. Under the WBCL, the holders of two-thirds of the
outstanding shares of Stokely Common Stock must vote in favor of the Merger for
the Merger to be approved.
THE REQUIRED VOTE OF STOKELY SHAREHOLDERS ON THE MERGER AGREEMENT IS BASED
UPON THE TOTAL NUMBER OF OUTSTANDING SHARES OF STOKELY COMMON STOCK, AND NOT
JUST THOSE REPRESENTED AT THE ANNUAL MEETING. ACCORDINGLY, THE FAILURE TO SUBMIT
A PROXY CARD (OR, IF THE SHARES ARE HELD BY A BROKER, TO RETURN VOTING
INSTRUCTIONS) OR TO VOTE IN PERSON AT THE ANNUAL MEETING, OR THE ABSTENTION FROM
VOTING BY A STOKELY SHAREHOLDER, WILL HAVE THE SAME EFFECT AS A "NO" VOTE WITH
RESPECT TO THE MERGER AGREEMENT. BROKER NON-VOTES WILL NOT BE COUNTED AS HAVING
BEEN VOTED IN PERSON OR BY PROXY AT THE ANNUAL MEETING AND WILL HAVE THE SAME
EFFECT AS A "NO" VOTE WITH RESPECT TO THE MERGER AGREEMENT.
Effective Time and Date of the Merger. If the Merger is approved by the
requisite vote of Stokely shareholders and the other conditions to the Merger
are satisfied or waived (where permissible), the Merger will become effective at
the close of business (the "Effective Time") on the date (the "Effective Date")
on which the Articles of Merger are received by the Department of Financial
Institutions of the State of Wisconsin. It is presently contemplated that the
Effective Date and Time of the Merger will occur as promptly as practicable
after satisfaction or waiver of the conditions set forth in the Merger
Agreement. See "-- The Merger Agreement -- Conditions; Waivers."
Conversion of Stokely Common Stock in the Merger. At the Effective Time,
each outstanding share of Stokely Common Stock will be converted into and become
the right to receive such fraction of a share of Chiquita Common Stock as is
equal to $1.00 divided by the average of the last reported sales price per share
of Chiquita Common Stock on the NYSE for the 15 consecutive trading days ending
with the last trading day prior to the Effective Time, except that no fractional
shares of Chiquita Common Stock will be issued. Any holder of Stokely Common
Stock who otherwise would be entitled to a fractional share of Chiquita Common
Stock instead will receive a cash payment in an amount equal to the product of
such fraction multiplied by the average of the last reported sales price per
share of Chiquita Common Stock on the NYSE for the 15 consecutive trading days
ending with the last trading day prior to the Effective Time, without any
interest thereon. For example, if you own 100 shares of Stokely Common Stock,
and the average closing price of
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Chiquita Common Stock on the NYSE for the fifteen trading days prior to the
Merger is $15, you would be entitled to receive six shares of Chiquita Common
Stock and $10 in cash upon consummation of the Merger.
Exchange of Certificates in the Merger. Within three business days after
the Effective Time,
(the "Exchange Agent"), will mail a letter of transmittal and instructions to
each holder of record of Stokely Common Stock. The letter of transmittal (or a
copy) should be used to forward a holder's certificates for Stokely Common Stock
for surrender and exchange for certificates representing the number of shares of
Chiquita Common Stock (and cash in lieu of any fractional share) which the
holder has the right to receive pursuant to the Merger. Until exchanged as
provided above, certificates for Stokely Common Stock will be deemed to
represent solely the right to receive certificates representing the number of
shares of Chiquita Common Stock (and cash in lieu of any fractional share) into
which the shares of Stokely Common Stock represented by such certificates were
converted in the Merger, and the holders of the Stokely certificates will not be
entitled to receive dividends or any other distributions until such certificates
are so exchanged. Upon surrender of a certificate, there will be paid to the
person in whose name the Chiquita Common Stock is issued any dividends or other
distributions which have a record date after the Effective Time and which became
payable prior to surrender with respect to such shares of Chiquita Common Stock.
Although the shares of Chiquita Common Stock issuable in the Merger will be
deemed to be outstanding on Chiquita's stock records after consummation of the
Merger, former Stokely shareholders will not be able to vote such shares until
they have surrendered their certificates as described above. Regardless of how
long a former Stokely shareholder waits to exchange his or her certificates, no
interest will be paid on the Chiquita Common Stock or cash in lieu of fractional
shares issuable as a result of the Merger or on any dividend payments or other
distributions on those shares of Chiquita Common Stock.
STOKELY SHAREHOLDERS ARE REQUESTED NOT TO SURRENDER THEIR CERTIFICATES FOR
EXCHANGE UNTIL THE LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED.
Representations and Warranties. The Merger Agreement includes
representations and warranties by Stokely as to: (i) the corporate organization,
status and power of Stokely and its subsidiaries; (ii) the capitalization of
Stokely and its subsidiaries; (iii) the authorization of the Merger Agreement;
(iv) except as specified, the Merger Agreement's noncontravention of any
agreement, law or the Articles of Incorporation or By-laws of Stokely or any of
its subsidiaries and the absence of the need (except as specified) for
governmental or third party consents to the Merger; (v) the accuracy of
Stokely's financial statements and filings with the Commission; (vi) matters
relating to the real and personal property of Stokely and its subsidiaries;
(vii) matters relating to the accounts receivable and inventory of Stokely and
its subsidiaries; (viii) matters relating to the intellectual property of
Stokely and its subsidiaries; (ix) insurance owned or held by Stokely or its
subsidiaries; (x) compliance with laws and governmental authorizations; (xi)
material contracts to which Stokely or any of its subsidiaries is a party; (xii)
pending or threatened litigation; (xiii) environmental matters; (xiv) taxes and
tax returns involving Stokely and its subsidiaries; (xv) labor relations; (xvi)
employee benefits plans; (xvii) the conduct of business by Stokely and its
subsidiaries in the ordinary course and the absence of any material adverse
change in the financial condition, business or results of operations of Stokely
and its subsidiaries; (xviii) matters relating to customers and suppliers of
Stokely and its subsidiaries; (xix) the brokers and finders employed by Stokely;
(xx) the accuracy of information supplied by Stokely and the accuracy of
information to be supplied by Stokely for inclusion in filings with the
Commission required by the transactions contemplated by the Merger Agreement;
(xxi) Stokely and its subsidiaries being current with respect to obligations to
their employees for services performed; and (xxii) effectiveness of and
compliance with leases, governmental permits, licenses, approvals and other
authorizations.
The Merger Agreement also includes representations and warranties by
Chiquita and Acquisition Sub as to: (i) the corporate organization, status and
power of Chiquita and Acquisition Sub; (ii) the capitalization of Chiquita and
Acquisition Sub; (iii) the authorization of the Merger Agreement and its
non-contravention of any agreement, law or the articles of incorporation or
bylaws of Chiquita or Acquisition Sub; (iv) the absence of the need (except as
specified) for governmental or third party consents to the Merger; (v) the
accuracy of Chiquita's financial statements and filings with the Commission;
(vi) the conduct of Chiquita's and its
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consolidated subsidiaries' business in the ordinary course and the absence of
any material adverse change in the financial condition, business or results of
operations of Chiquita and its consolidated subsidiaries; (vii) neither Chiquita
(nor any Chiquita subsidiary) being a "Significant Shareholder" (as defined in
the WBCL), or an affiliate of a Significant Shareholder, of Stokely, except as a
result of the Merger; and (viii) the accuracy of information supplied by
Chiquita and Acquisition Sub and the accuracy of information to be supplied by
Chiquita for inclusion in filings with the Commission required by the
transactions contemplated by the Merger Agreement.
Many of the representations and warranties contained in the Merger
Agreement are qualified by materiality standards contained therein and/or by the
disclosure schedules provided pursuant to the Merger Agreement. The respective
representations and warranties of Stokely, Chiquita and Acquisition Sub will
terminate at the Effective Time.
Business of Stokely Pending the Merger. Stokely has agreed that, among
other things, prior to the Effective Time or earlier termination of the Merger
Agreement, it and its subsidiaries will each carry on its business in the
ordinary course consistent with past practice and will use its best efforts to
keep its business organization intact, including its present relationships with
employees, customers and suppliers and others having business relations with it.
Stokely has agreed that, unless Chiquita grants its prior consent or except as
otherwise permitted in the Merger Agreement, prior to the Effective Time neither
Stokely nor any of its subsidiaries will: (i) increase compensation to any
executive officer or director or provide for a general increase in the rate of
compensation of its employees subject to limited exceptions; (ii) enter into or
amend any employment contract or collective bargaining agreement; (iii) except
when falling below certain dollar limitations, make any capital expenditures,
enter into any lease of capital equipment or real estate, or enter into any
other contract with any other entity or entities; (iv) enter into any
transaction other than in the ordinary course of business; (v) create, assume,
incur or guarantee any indebtedness other than pursuant to Stokely's revolving
line of credit with Congress, trade debt and borrowings in the ordinary course
of business; (vi) except in the ordinary course of business or consistent with
past practices, discharge or satisfy any lien or encumbrance or pay or satisfy
any obligation or liability; (vii) authorize or issue any shares of capital
stock or declare or pay any dividend or make any sale of, or distribution with
respect to, capital stock or directly or indirectly redeem or otherwise acquire
any capital stock or carry out any stock split, reverse stock split, or other
form of recapitalization of its capital stock; (viii) make any amendments to or
changes in its Articles of Incorporation or By-laws; (ix) perform any act or
attempt to do anything which will cause a breach of any obligation to which it
is a party or to which it is bound and which would have a material adverse
effect on Stokely and its subsidiaries; (x) acquire any other person or acquire
a material amount of assets of any other person except pursuant to existing
contracts or commitments or in the ordinary course or consistent with past
practice; (xi) sell, lease, license or otherwise dispose of any material assets
or property except pursuant to existing contracts or commitments or in the
ordinary course or consistent with past practice; or (xii) except as
specifically permitted in the Merger Agreement, take any action that is intended
or may reasonably be expected to result in any of Stokely's representations or
warranties set forth in the Merger Agreement being or becoming untrue in any
material respect, any of the conditions to the Merger not being satisfied, or a
violation of any covenant contained in the Merger Agreement.
Conditions; Waivers. The respective obligations of Chiquita, Stokely and
Acquisition Sub to effect the Merger are subject to the satisfaction of certain
conditions at or prior to the Effective Time, including: (i) approval of the
Merger by the holders of two-thirds of the outstanding shares of Stokely Common
Stock; (ii) receipt of requisite regulatory approvals to consummate the
transactions contemplated by the Merger Agreement; (iii) no court or
governmental or regulatory authority having enacted, issued, promulgated or
enforced any statute, rule, regulation, executive order, decree, injunction or
other order which restricts, prevents or prohibits consummation of the
transactions contemplated by the Merger Agreement; (iv) no proceeding having
been commenced or threatened by any governmental or regulatory authority seeking
to prevent consummation of the transactions contemplated by the Merger
Agreement; (v) the Registration Statement for the shares of Chiquita Common
Stock to be issued pursuant to the Merger Agreement having been declared
effective; (vi) the absence of any stop order suspending the effectiveness of
the Registration Statement; (vii) there being no action, suit, proceeding or
investigation to suspend effectiveness of the
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Registration Statement; and (viii) all necessary approvals under state and
Federal securities laws relating to the issuance and trading of the Chiquita
Common Stock issuable in connection with the Merger having been obtained.
The obligations of Stokely to effect the Merger are subject to certain
normal and customary conditions, as well as to the receipt of an opinion from
DLJ to the effect that consideration to be received by Stokely shareholders in
the Merger is fair to the shareholders of Stokely from a financial point of
view. See "PROPOSAL TO APPROVE THE MERGER -- Opinion of Financial Advisor."
In addition to certain normal and customary conditions, the obligations of
Chiquita and Acquisition Sub to effect the Merger are subject to the following
conditions: (i) all options ("Stokely Stock Options") and warrants ("Stokely
Warrants") to purchase Stokely Common Stock having been cancelled or cashed out
at no value; (ii) holders of at least $31.8 million in principal amount (less
any principal payments made thereon after the date of the execution of the
Merger Agreement up to the Effective Time) of Stokely debt having exchanged such
indebtedness for Chiquita Common Stock; (iii) at the Effective Time, no event of
default having occurred or being continuing with respect to non-exchanging
holders of Senior Notes or the IRBs unless the event of default has been waived
or certain other exceptions are applicable; (iv) Congress having agreed, on
terms and conditions reasonably satisfactory to Chiquita, that its existing loan
agreement with Stokely will remain in place, with at least $20 million in credit
remaining available to Stokely until the end of its current term; (v) a total of
at least $1.0 million in accounts receivable having been forgiven by Stokely's
suppliers; (vi) the absence of any event that has had, or has a reasonable
possibility of having, a material adverse effect on Stokely, including that
Stokely's consolidated net loss (calculated in accordance with the terms
specified in the Merger Agreement and amendments thereto) is not greater than
$3.38 million for the quarter ended September 30, 1997 and is not (or, in
Chiquita's reasonable judgment, is not likely to be) greater than $3.0 million
for the quarter ending December 31, 1997; and (vii) holders of not more than 5%
of the total issued and outstanding shares of Stokely Common Stock having
exercised and perfected dissenters' rights pursuant to the WBCL. No appraisal or
dissenters' rights exist in connection with the Merger. As of December 5, 1997,
there are no non-exchanging holding of Senior Notes and there was no event of
default that had occurred with respect to the Senior Notes and IRBs not being
exchanged. Furthermore, for the quarter ended September 30, 1997, Stokely's net
loss, calculated in accordance with the terms specified in the Merger Agreement
and amendments thereto, was not greater than $3.38 million. Finally, provided
the Merger is consummated on or before January 31, 1998, Stokely's suppliers
have already agreed to forgive at least $1.0 million in accounts receivable.
The Merger Agreement provides that any or all conditions to any party's
obligations may, at any time prior to the Effective Time, be waived by such
party in whole or in part, to the extent permitted by applicable law. However,
after approval of the Merger Agreement by Stokely shareholders, the amount and
form of consideration to be delivered to Stokely shareholders may not be reduced
without resoliciting the Stokely shareholders.
Exchange of Stokely Debt. It is a condition of Chiquita's obligation to
effect the Merger that, at the Effective Time, certain outstanding debt of
Stokely be exchanged for shares of Chiquita Common Stock. Holders of $19.6
million in outstanding principal amount (at September 30, 1997) of Stokely's
Senior Notes have agreed to exchange the Senior Notes, at their par value, for
Chiquita Common Stock, to surrender certain related warrants for no
consideration and to accept Chiquita Common Stock in payment of interest accrued
on the Senior Notes from June 30, 1997 until the closing of the Merger, provided
the Merger is consummated on or before January 31, 1998. Similarly, the holder
of $12.2 million of outstanding IRBs (together with the Senior Notes, the
"Stokely Debt "), for which Stokely is obligated, has agreed to exchange the
IRBs, at their par value, and to exchange accrued interest on the IRBs for
shares of Chiquita Common Stock. In each case, the Chiquita Common Stock will be
valued on the basis of the average closing price of Chiquita Common Stock on the
NYSE for the 15 consecutive trading days immediately preceding the closing of
the Merger.
Based upon the $ per share closing price of Chiquita Common Stock on
December 5, 1997, it is estimated that approximately million shares of
Chiquita Common Stock (representing approximately 3%
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of the Chiquita Common Stock to be outstanding after the Merger) will be issued
in exchange for the Stokely Debt. These shares of Chiquita Common Stock have
been registered on the Registration Statement of which this Proxy
Statement/Prospectus is a part and, upon issuance, will be freely tradeable by
the recipients. Sales of substantial amounts of Chiquita Common Stock, or the
perception that such sales could occur, could adversely affect prevailing market
prices for the Chiquita Common Stock. See "RISK FACTORS -- Shares Available for
Future Sale."
Regulatory Approvals. Pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act"), the Merger may not be
consummated until certain information has been submitted to the Antitrust
Division of the Federal Trade Commission ("FTC ") and specified HSR Act waiting
period requirements have been satisfied. On October 7, 1997, Stokely and
Chiquita made their respective HSR Act filings by submitting the required
information to the FTC. The FTC had the opportunity to commence litigation under
the antitrust laws of the United States to enjoin the Merger during a 30-day
waiting period (which could have been extended under certain circumstances). On
October 29, 1997, the FTC granted Chiquita's request for early termination of
the waiting period.
Amendment; Termination. At any time prior to the Effective Time, the
parties to the Merger Agreement may amend the Merger Agreement by action of
their Boards of Directors; except that, after approval of the Merger Agreement
by the shareholders of Stokely, no amendment may be made which reduces the
amount of the consideration to be delivered to Stokely shareholders, other than
as contemplated by the Merger Agreement, without the further approval of the
Stokely shareholders.
The Merger Agreement may be terminated at any time prior to the Effective
Time: (i) by mutual consent of the Boards of Directors of Stokely, Chiquita and
Acquisition Sub; (ii) by either Stokely or Chiquita if the Merger has not been
consummated by January 31, 1998 (provided that the right to terminate will not
be available to any party whose failure to perform or observe any covenants or
agreements under the Merger Agreement has been the cause of or resulted in the
failure of the Merger to occur on or before such date); (iii) by Chiquita if any
of the conditions to all parties' obligations or any of the conditions to
Chiquita's obligations have not been fulfilled and have not been waived on or
before January 31, 1998 or have become impossible of fulfillment; (iv) by
Stokely if any of the conditions to all parties' obligations or any of the
conditions to Stokely's obligations have not been fulfilled and have not been
waived on or before January 31, 1998 or have become impossible of fulfillment;
or (v) by either Stokely or Chiquita if the Merger Agreement has not been
approved on or before January 31, 1998 (or such later date as may be mutually
agreed upon) by the requisite vote of Stokely's shareholders.
Termination Fee. Stokely is required to pay Chiquita a fee of $250,000 and
a number of shares of Stokely Preferred Stock having a redemption value of
$2,750,000: (i) if the Merger Agreement is terminated solely as a result of the
failure to receive approval of Stokely's shareholders; (ii) if the Stokely Board
fails to continue to recommend the Merger Agreement; or (iii) if a competing
offer is made to Stokely, the Stokely Board approves and recommends that offer
to Stokely shareholders, the Merger is not consummated and the transaction
underlying the competing offer also is not consummated. The Stokely Preferred
Stock would have priority over Stokely Common Stock in the event of any
bankruptcy or liquidation of Stokely. The designation, rights and preferences of
the Stokely Preferred Stock are set forth as Exhibit D to the Merger Agreement.
Additionally, if within twelve months of termination of the Merger Agreement a
person or entity other than Chiquita acquires 50% or more of the Stokely Common
Stock or all or substantially all of Stokely's assets, or if Stokely is a party
to a merger, consolidation or similar transaction, or if Stokely agrees to such
a transaction, Stokely is obligated to pay Chiquita a fee of $3,000,000. If a
fee already has been paid as provided above, no additional fee will be owed, but
the Preferred Stock will be required to be redeemed in accordance with the terms
set forth in the Merger Agreement.
Except as provided in the foregoing paragraph, whether or not the Merger is
consummated, each party to the Merger Agreement generally will pay its own
expenses in connection with the Merger.
Accounting Treatment. The Merger will be accounted for as a purchase of
Stokely by Chiquita for accounting and financial reporting purposes.
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Certain Federal Income Tax Consequences of the Merger. Stokely has received
an opinion of Michael Best & Friedrich LLP that the Merger will qualify as a
reorganization under Section 368(a)(1)(A) and 368(a)(2)(E) of the Code and that,
accordingly, no gain or loss will be recognized by any Stokely shareholder upon
the exchange of Stokely Common Stock solely for Chiquita Common Stock in
connection with the Merger (except upon the receipt of cash in lieu of
fractional shares of Chiquita Common Stock). The Internal Revenue Service (the
"Service") has not been asked to rule upon the tax consequences of the Merger to
any person and no such request will be made. The opinion of Michael Best &
Friedrich LLP is based upon the Code, regulations now in effect thereunder,
current administrative rulings and practice, and judicial authority, all of
which are subject to change, which change may be retroactive. Unlike a ruling
from the Service, an opinion of counsel is not binding on the Service and there
can be no assurance, and none is hereby given, that the Service will not take a
position contrary to one or more positions reflected herein or that the opinion
will be upheld by the courts if challenged by the Service.
EACH STOKELY SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX AND
FINANCIAL ADVISORS AS TO THE EFFECT OF THE FEDERAL INCOME TAX CONSEQUENCES ON
HIS OR HER OWN PARTICULAR FACTS AND CIRCUMSTANCES AND ALSO AS TO ANY STATE,
LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES ARISING OUT OF THE MERGER.
Based upon the opinion of Michael Best & Friedrich LLP, which in turn is
based upon various representations and is subject to various assumptions and
qualifications, the following federal income tax consequences to Stokely
shareholders will result from the Merger:
1. Provided that the Merger qualifies as a statutory merger under
applicable law, the Merger will qualify as a reorganization within the
meaning of Section 368(a)(1)(A) and 368(a)(2)(E) of the Code, and Chiquita,
Acquisition Sub and Stokely will each be "a party to a reorganization"
within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by a Stokely shareholder upon
the exchange of Stokely Common Stock solely for Chiquita Common Stock
pursuant to the Merger (except in respect of cash received in lieu of a
fractional share of Chiquita Common Stock, as discussed below).
3. A Stokely shareholder who receives cash in lieu of a fractional
share interest in Chiquita Common Stock in the Merger will be treated as if
he or she actually received such fractional share interest and it was
subsequently redeemed by Chiquita. Such cash will be treated as having been
received as full payment in exchange for the stock redeemed as provided in
Section 302(a) of the Code. Gain or loss will be recognized upon such
exchange, and will be capital gain or loss, provided that the Stokely
Common Stock was a capital asset in the hands of the holder on the date of
the Merger.
4. A Stokely shareholder's initial aggregate adjusted tax basis in the
shares of Chiquita Common Stock received in the exchange (including any
fractional share to which he or she may be entitled) will be equal to the
aggregate adjusted tax basis of the shares of Stokely Common Stock
surrendered therefor.
5. The holding period of Chiquita Common Stock received by a Stokely
shareholder pursuant to the Merger will include the holding period during
which the Stokely Common Stock exchanged therefor was held, provided that
the Stokely Common Stock surrendered was a capital asset on the date of the
Merger.
The foregoing is only a general description of certain anticipated federal
income tax consequences of the Merger for shareholders who are U.S. persons (as
defined in Section 7701(a)(30) of the Code) and who hold their shares as capital
assets, without regard to the particular facts and circumstances of the tax
situation of each shareholder. It may not apply to a holder subject to special
treatment under the Code, such as a holder that is a bank, an insurance company,
a dealer in securities or foreign securities or a tax-exempt organization, or to
a holder that acquired his or her Stokely Common Stock pursuant to the exercise
of an employee stock option or otherwise as compensation. The discussion does
not purport to be a complete analysis of all potential tax effects of the Merger
and related transactions, and does not, for example, address any tax
consequences that may result from cancellation of Stokely options and warrants,
the forgiveness by Stokely suppliers of any accounts receivable from Stokely, or
the exchange by Stokely debt holders of debt for Chiquita Common Stock. The
discussion does not address the state, local or foreign tax consequences of the
Merger.
38
<PAGE> 49
Chiquita believes that no tax gain or loss will be recognized by Chiquita,
Stokely or Acquisition Sub as a result of the Merger.
No Appraisal or Dissenters' Rights. Under the WBCL, holders of shares of a
Wisconsin corporation quoted on the Nasdaq National Market on the record date
for a meeting at which shareholders are to vote on a merger are not entitled to
appraisal or dissenters' rights. Shares of Stokely Common Stock were quoted on
the Nasdaq National Market on the Voting Record Date. Therefore, holders of
Stokely Common Stock are not entitled to appraisal or dissenters' rights in
connection with the Merger.
Resale of Chiquita Common Stock by Stokely Affiliates. All shares of
Chiquita Common Stock received by Stokely shareholders in the Merger will be
freely transferable, except that shares of Chiquita Common Stock received by
persons who are deemed to be "affiliates" (as such term is defined under the
Securities Act) of Stokely prior to the Merger or Chiquita after the Merger may
be resold by them only in transactions permitted by the resale provisions of
Rule 145 promulgated under the Securities Act (or Rule 144 in the case of
persons who become affiliates of Chiquita) or as otherwise permitted under the
Securities Act. Persons who may be deemed to be affiliates of Chiquita or
Stokely generally include individuals or entities that control, are controlled
by, or are under common control with, such party and may include certain
officers and directors of such party as well as principal shareholders of such
party.
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined financial statements give effect
to the Merger based on the assumptions described in the accompanying notes.
These financial statements have been prepared from the historical consolidated
financial statements of Chiquita (which have been adjusted to reflect the
acquisition by Chiquita of the Owatonna Companies and the proposed acquisition
by Chiquita of AFF) and Stokely and should be read in conjunction therewith. The
historical financial statements of Chiquita and Stokely are incorporated by
reference in this Proxy Statement/Prospectus and summary historical financial
information about Chiquita and Stokely is set forth in the Summary at the
beginning of this Proxy Statement/Prospectus. In addition, historical financial
statements of Owatonna Canning Company, the only significant Owatonna Company,
are included in Chiquita's Current Report on Form 8-K dated September 15, 1997
and are incorporated herein by reference. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE." This pro forma information is not necessarily
indicative of actual or future operating results or financial position that
would have occurred or will occur upon consummation of the Merger or the
acquisition of AFF.
The unaudited pro forma combined balance sheet is based on the balance
sheets of Chiquita (including the Owatonna Companies which were acquired in
September 1997), AFF and Stokely at September 30, 1997 and has been prepared to
reflect the pending acquisition of AFF and the Merger assuming they had occurred
on September 30, 1997. The unaudited pro forma income statements for the year
ended December 31, 1996 and for the nine months ended September 30, 1997 give
effect to all the acquisitions (including the Merger) as if they had occurred on
January 1, 1996. Each transaction has been or will be accounted for as a
purchase.
39
<PAGE> 50
CHIQUITA BRANDS INTERNATIONAL, INC.
PRO FORMA COMBINED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHIQUITA
(INCLUDING
OWATONNA PRO FORMA PRO FORMA PRO FORMA
COMPANIES) AFF ADJUSTMENTS SUBTOTAL STOKELY ADJUSTMENTS COMBINED
---------- --- ----------- -------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets
Cash and equivalents.......... $ 172,330 $ 179 $(23,252)(a) $ 149,257 $ 1,515 $(22,725)(A) $ 128,047
Trade receivables, net........ 203,788 5,776 -- 209,564 12,931 -- 222,495
Other receivables, net........ 65,726 317 -- 66,043 -- -- 66,043
Inventories................... 321,616 42,444 -- 364,060 91,469 -- 455,529
Other current assets.......... 39,595 3,377 (572)(b) 42,400 750 -- 43,150
---------- ------- -------- ---------- -------- -------- ----------
Total current assets........ 803,055 52,093 (23,824) 831,324 106,665 (22,725) 915,264
Property, plant and equipment,
net........................... 1,143,005 10,504 -- 1,153,509 39,625 -- 1,193,134
Investments and other assets... 312,574 922 -- 313,496 2,507 -- 316,003
Intangibles, net............... 156,564 -- 1,752(c) 158,316 -- 10,655(B) 168,971
---------- ------- -------- ---------- -------- -------- ----------
Total assets................ $2,415,198 $63,519 $(22,072) $2,456,645 $148,797 $(12,070) $2,593,372
========== ======= ======== ========== ======== ======== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current liabilities
Notes and loans payable....... $ 36,395 $20,998 $(20,998)(a) $ 36,395 $ 47,725 $(22,725)(A) $ 61,395
Long-term debt due within one
year........................ 90,430 1,142 (1,142)(a) 90,430 43,300 (32,085)(A) 101,645
Accounts payable.............. 208,307 5,873 -- 214,180 45,017 -- 259,197
Accrued liabilities........... 108,691 6,664 500(d) 115,855 5,663 2,200(C) 123,718
---------- ------- -------- ---------- -------- -------- ----------
Total current liabilities... 443,823 34,677 (21,640) 456,860 141,705 (52,610) 545,955
Long-term debt of parent
company....................... 696,731 -- -- 696,731 -- -- 696,731
Long-term debt of
subsidiaries.................. 284,615 1,112 (1,112)(a) 284,615 2,100 -- 286,715
Accrued pension and other
employee benefits............. 87,107 521 712(e) 88,340 2,883 (826)(D) 90,397
Other liabilities.............. 90,246 1,193 (3,193)(b) 88,246 -- -- 88,246
---------- ------- -------- ---------- -------- -------- ----------
Total liabilities........... 1,602,522 37,503 (25,233) 1,614,792 146,688 (53,436) 1,708,044
---------- ------- -------- ---------- -------- -------- ----------
Shareholders' equity
Preferred stock............... 253,239 -- 173(f) 253,412 -- -- 253,412
Capital stock................. 19,786 865 (217)(f)(g) 20,434 572 395(A)(E)(F) 21,401
Capital surplus............... 642,881 2,498 25,858(f)(g) 671,237 43,508 (1,000)(A)(E)(F) 713,745
Other shareholders' equity.... -- (526) 526(g) -- (296) 296(F)
Accumulated deficit........... (103,230) 23,179 (23,179)(g) (103,230) (41,675) 41,675(F) (103,230)
---------- ------- -------- ---------- -------- -------- ----------
Total shareholders'
equity.................... 812,676 26,016 3,161 841,853 2,109 41,366 885,328
---------- ------- -------- ---------- -------- -------- ----------
Total liabilities and
shareholders' equity...... $2,415,198 $63,519 $(22,072) $2,456,645 $148,797 $(12,070) $2,593,372
========== ======= ======== ========== ======== ======== ==========
</TABLE>
- -------------------------
NOTE: This Pro Forma Combined Balance Sheet has been prepared to reflect the
acquisition by Chiquita of Stokely and AFF.
For the AFF acquisition (and the acquisition of the Owatonna Companies in the
case of note (f)), pro forma adjustments have been made to reflect:
(a) Assumed repayment of $23.3 million of AFF debt with cash.
(b) Elimination of deferred tax assets and liabilities.
(c) Excess of acquisition cost (including transaction costs) over the fair value
of AFF net assets acquired.
(d) Estimated transaction costs for professional services incurred in connection
with the acquisition.
(e) Adjustment of the accumulated postretirement benefit liability of AFF.
(f) Issuance of $27.2 million (1.8 million shares) of Chiquita Common Stock in
exchange for 100% of the equity of AFF and estimated additional
consideration of $1.8 million (.1 million shares) of Chiquita Common Stock
and $.2 million (3,500 shares) of Chiquita Series C Preference Stock in
connection with the acquisition of the Owatonna Companies. The historical
Chiquita balance sheet includes preliminary consideration of $42 million
(3.0 million shares) of Chiquita Common Stock and $4 million (.1 million
shares) of Chiquita Series C Preference Stock issued in connection with the
acquisition of the Owatonna Companies.
(g) Elimination of the shareholders' equity accounts.
For the Stokely Merger, pro forma adjustments have been made to reflect:
(A) Assumed repayment of $32.1 million of Stokely long-term debt with
approximately 2.1 million shares of Chiquita Common Stock and assumed
reduction of Stokely working capital loans payable to $25 million using
cash.
(B) Excess of acquisition cost (including transaction costs) over the fair value
of Stokely's net assets acquired.
(C) Estimated transaction costs for professional services and related expenses
incurred in connection with the acquisition.
(D) Adjustment of the accumulated postretirement benefit liability of Stokely.
(E) Issuance of Chiquita Common Stock with a value of approximately $11.4
million (.8 million shares) to the former shareholders of Stokely.
(F) Elimination of the shareholders' equity accounts of Stokely.
This Pro Forma Combined Balance Sheet is based on a preliminary allocation of
purchase price to the net assets acquired. Furthermore, it is not necessarily
indicative of the actual or future financial position that would have occurred
or will occur upon consummation of the Merger or the acquisition of AFF.
40
<PAGE> 51
CHIQUITA BRANDS INTERNATIONAL, INC.
PRO FORMA COMBINED INCOME STATEMENT (UNAUDITED)
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
OWATONNA PRO FORMA PRO FORMA PRO FORMA
CHIQUITA COMPANIES AFF ADJUSTMENTS SUBTOTAL STOKELY ADJUSTMENTS COMBINED
-------- --------- --- ----------- -------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............ $2,435,248 $61,885 $81,111 -- $2,578,244 $198,108 $(40,329)(A) $2,736,023
---------- ------- ------- ------- ---------- -------- -------- ----------
Operating expenses
Cost of sales...... 1,947,888 32,346 69,178 -- 2,049,412 160,622 (38,900)(A) 2,171,134
Selling, general and
administrative... 313,490 18,243 5,458 $ 44(a) 337,235 30,632 (1,044)(A)(B) 366,823
Depreciation....... 89,534 2,690 1,692 -- 93,916 6,675 (569)(A) 100,022
Nonrecurring
charges.......... -- -- -- -- -- 25,429 (12,500)(A) 12,929
---------- ------- ------- ------- ---------- -------- -------- ----------
Operating income
(loss)........... 84,336 8,606 4,783 (44) 97,681 (25,250) 12,684 85,115
Interest income...... 28,276 573 12 (1,250)(b) 27,611 -- (500)(C) 27,111
Interest expense..... (130,232) (365) (1,645) 1,640(b) (130,602) (11,066) 6,760(A)(C) (134,908)
Other income, net.... 892 163 53 -- 1,108 -- -- 1,108
---------- ------- ------- ------- ---------- -------- -------- ----------
Income (loss) before
income taxes....... (16,728) 8,977 3,203 346 (4,202) (36,316) 18,944 (21,574)
Income taxes......... (11,000) (2,755) (1,339) 3,794(c) (11,300) -- -- (11,300)
---------- ------- ------- ------- ---------- -------- -------- ----------
Income (loss) before
extraordinary
item............... (27,728) 6,222 1,864 4,140 (15,502) (36,316) 18,944 (32,874)
Less dividends on
preferred stock.... (11,955) -- -- (208)(d) (12,163) -- -- (12,163)
---------- ------- ------- ------- ---------- -------- -------- ----------
Loss before
extraordinary item
attributable to
common shares...... $ (39,683) $ 6,222 $ 1,864 $ 3,932 $ (27,665) $(36,316) $ 18,944 $ (45,037)
========== ======= ======= ======= ========== ======== ======== ==========
Loss per common share
before
extraordinary item
-- primary and
fully diluted...... $ (0.72) $ (0.71)
========== ==========
Shares used to
calculate loss per
common share before
extraordinary
item............... 55,167 63,338
========== ==========
</TABLE>
- -------------------------
NOTE: This Pro Forma Combined Income Statement gives effect to the acquisition
of the Owatonna Companies and the proposed acquisitions of Stokely and AFF by
Chiquita.
For the Owatonna Companies and AFF acquisitions, pro forma adjustments have been
made to reflect:
(a) Amortization of goodwill arising from the acquisitions on a straight-line
basis over 40 years.
(b) Reductions of interest expense of $1.6 million due to the assumed repayment
of all AFF debt with cash. Interest income is reduced by $1.3 million to
reflect the use of cash equivalents for these debt repayments.
(c) Elimination of tax expense of the Owatonna Companies and federal tax expense
of AFF as a result of including these companies in the Chiquita consolidated
tax returns.
(d) Dividends on Chiquita Series C Preference Stock issued in connection with
the acquisition of the Owatonna Companies.
For the Stokely Merger, pro forma adjustments have been made to reflect:
(A) Elimination of: revenues and direct operating expenses of Stokely's frozen
vegetable business; interest expense ($1.6 million) from borrowings
associated with frozen vegetable assets; and nonrecurring charges resulting
from Stokely's sale of this business. The acquisition of Stokely by Chiquita
does not include any assets or operating activity in the frozen vegetable
business.
(B) Amortization of goodwill ($.3 million) arising from the acquisition on a
straight-line basis over 40 years.
(C) Reductions of interest expense of $4.3 million due to the assumed repayment
of $32.1 million of Stokely long-term debt with approximately 2.1 million
shares of Chiquita Common Stock and $.9 million due to the assumed reduction
of Stokely working capital loans payable remaining after giving effect to
the disposition of the frozen vegetable business to an average balance of
$25 million using cash. Interest income is reduced by $.5 million to reflect
the use of cash equivalents for these debt repayments.
The Pro Forma Combined Income Statement does not include any adjustment to
eliminate $13.5 million ($.21 per share on a pro forma basis) of nonrecurring
charges which are principally associated with the closing and write-down of
plant and office facilities and are included in Stokely's historical operating
income.
The Pro Forma Combined Income Statement is based on a preliminary allocation of
purchase price to the net assets acquired. Furthermore, it is not necessarily
indicative of the actual operating results of the combined companies had the
acquisitions occurred on January 1, 1996 or of future results of the combined
companies.
41
<PAGE> 52
CHIQUITA BRANDS INTERNATIONAL, INC.
PRO FORMA COMBINED INCOME STATEMENT (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO
OWATONNA PRO FORMA PRO FORMA FORMA
CHIQUITA COMPANIES AFF ADJUSTMENTS SUBTOTAL STOKELY ADJUSTMENTS COMBINED
-------- --------- --- ----------- -------- ------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales............. $1,833,904 $44,714 $53,611 -- $1,932,229 $109,563 -- $2,041,792
---------- ------- ------- ------- ---------- -------- ------ ----------
Operating expenses
Cost of sales....... 1,412,100 25,930 43,772 -- 1,481,802 87,335 -- 1,569,137
Selling, general and
administrative.... 223,479 17,255 4,163 (1,867)(a)(b) 243,030 20,384 $ 175(A)(B) 263,589
Depreciation........ 64,418 2,171 1,163 -- 67,752 3,631 -- 71,383
---------- ------- ------- ------- ---------- -------- ------ ----------
Operating income
(loss)............ 133,907 (642) 4,513 1,867 139,645 (1,787) (175) 137,683
Interest income....... 12,481 330 6 (500)(c) 12,317 -- (600)(C) 11,717
Interest expense...... (82,482) (177) (645) 645(c) (82,659) (7,334) 3,955(C) (86,038)
Other income, net..... 656 164 34 -- 854 -- -- 854
---------- ------- ------- ------- ---------- -------- ------ ----------
Income before income
taxes............... 64,562 (325) 3,908 2,012 70,157 (9,121) 3,180 64,216
Income taxes.......... (8,200) 109 (1,264) 855(d) (8,500) -- -- (8,500)
---------- ------- ------- ------- ---------- -------- ------ ----------
Net income (loss)..... 56,362 (216) 2,644 2,867 61,657 (9,121) 3,180 55,716
Less dividends on
preferred stock..... (12,672) -- -- (152)(e) (12,824) -- -- (12,824)
---------- ------- ------- ------- ---------- -------- ------ ----------
Net income (loss)
attributed to common
shares.............. $ 43,690 $ (216) $ 2,644 $ 2,715 $ 48,833 $ (9,121) $3,180 $ 42,892
========== ======= ======= ======= ========== ======== ====== ==========
Earnings per common
share:
-- Primary.......... $ 0.77 $ 0.66
-- Fully diluted.... $ 0.77 $ 0.66
Shares used to
calculate earnings per
common share:
-- Primary.......... 56,869 64,733
-- Fully diluted.... 56,979 64,843
</TABLE>
- -------------------------
NOTE: This Pro Forma Combined Income Statement gives effect to the acquisition
of the Owatonna Companies and the proposed acquisitions of Stokely and AFF by
Chiquita.
For the Owatonna Companies and AFF acquisitions, pro forma adjustments have been
made to reflect:
(a) Amortization of goodwill arising from the acquisitions on a straight-line
basis over 40 years.
(b) Transaction costs for professional services incurred by the acquired
companies totaling $1.9 million.
(c) Reductions of interest expense of $.6 million due to the assumed repayment
of all AFF debt with cash. Interest income is reduced by $.5 million to
reflect the use of cash equivalents for these debt repayments.
(d) Elimination of tax expense of the Owatonna Companies and federal tax expense
of AFF as a result of including these companies in the Chiquita consolidated
tax returns.
(e) Dividends on Chiquita Series C Preference Stock issued in connection with
the acquisition of the Owatonna Companies.
For the Stokely Merger, pro forma adjustments have been made to reflect:
(A) Amortization of goodwill ($.2 million) arising from the acquisition on a
straight-line basis over 40 years.
(B) Transaction costs for professional services incurred by Stokely.
(C) Reductions of interest expense of $2.9 million due to the assumed repayment
of $32.1 million of Stokely long-term debt with approximately 2.1 million
shares of Chiquita Common Stock and $1.1 million due to the assumed
reduction of Stokely working capital loans payable to an average balance of
$25 million using cash. Interest income is reduced by $.6 million to reflect
the use of cash equivalents for these debt repayments.
The Pro Forma Combined Income Statement is based on a preliminary allocation of
purchase price to the net assets acquired. Furthermore, it is not necessarily
indicative of the actual operating results of the combined companies had the
acquisitions occurred on January 1, 1996 or of future results of the combined
companies.
42
<PAGE> 53
INFORMATION CONCERNING CHIQUITA
GENERAL
Chiquita is a leading international marketer, producer and distributor of
bananas and other quality fresh and processed food products sold under the
Chiquita and other brand names. In addition to bananas, these products include
other tropical fruit, such as mangoes, kiwi and citrus, and a wide variety of
other fresh produce. Chiquita's products also include fruit and vegetable juices
and beverages; processed bananas and other processed fruits and vegetables;
fresh cut and ready-to-eat salads; and edible oil-based consumer products.
The principal executive offices of Chiquita are located at 250 East Fifth
Street, Cincinnati, Ohio 45202 and the telephone number is (513) 784-8000. AFG
owns, either directly or indirectly through its subsidiaries, approximately 40%
of the outstanding shares of Chiquita Common Stock. Approximately 46% of the
outstanding common stock of AFG is beneficially owned by Carl H. Lindner,
members of his family and trusts for their benefit.
Other information with respect to Chiquita is contained in Chiquita's
documents incorporated herein by reference. See "AVAILABLE INFORMATION" and
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."
CHIQUITA'S REASONS FOR THE MERGER
Although Chiquita's primary business is the marketing, production and
distribution of bananas and other fresh fruits and vegetables, Chiquita also
owns Friday Canning Corporation ("Friday"), which is engaged in processing and
canning vegetables. Headquartered in New Richmond, Wisconsin, Friday operates
eight vegetable canning facilities in Wisconsin and participates in a vegetable
canning joint venture in China. Chiquita acquired Friday in 1992 and has
operated it as a stand-alone company since its acquisition. Since that time,
Chiquita has sought opportunities to grow its canning business in ways that are
appropriate for the business. In addition to the proposed Merger, in September
1997 Chiquita acquired the Owatonna Companies, a vegetable canner headquartered
in Owatonna, Minnesota with six canning facilities in Minnesota and Illinois,
and signed a definitive agreement to acquire AFF, a vegetable canning company
headquartered in Payette, Idaho, with four canning facilities in the
northwestern United States. It is expected that the AFF acquisition will be
completed in December 1997. These companies sell processed vegetables in the
private label, food service and branded segments, both domestically and for
export. Chiquita believes the Merger, along with the acquisition of the Owatonna
Companies and the proposed acquisition of AFF, will accomplish Chiquita's
objective of expanding its capacity, product lines and geographic coverage in
the vegetable canning business, resulting in more efficient and cost-effective
operations.
DESCRIPTION OF CHIQUITA STOCK
Chiquita has 150,000,000 authorized shares of Capital Stock, par value $.33
per share (the "Chiquita Common Stock"). Chiquita also has authorized 10,000,000
shares of Non-Voting Cumulative Preferred Stock, par value $1.00 per share (the
"Preferred Stock") and 4,000,000 shares of Cumulative Preference Stock, without
par value (the "Preference Stock"). The main difference between the Preferred
Stock and the Preference Stock is that the Preference Stock has broad voting
rights and the Preferred Stock has voting rights only in limited circumstances.
Each of the Preferred Stock and the Preference Stock may be issued in one or
more series having such designated preferences and rights, qualifications and
limitations as the Board of Directors may from time to time determine without
requiring any vote of the shareholders.
The issuance of Preferred Stock or Preference Stock by the Board of
Directors could be utilized, under certain circumstances, as a method of
preventing a takeover of Chiquita. There are no other provisions in Chiquita's
Second Restated Certificate of Incorporation, as amended (the "Certificate of
Incorporation") or By-laws that would have an effect of delaying, deferring or
preventing a change in control of Chiquita. However, there are provisions in
some of Chiquita's debt agreements which might require Chiquita to pay off some
or all of the related debt upon a change in control.
43
<PAGE> 54
Various debt instruments of Chiquita restrict, among other things,
dividends and other distributions on, and repurchases or redemptions of,
Chiquita's capital stock. At September 30, 1997, these restrictions would have
allowed the payment of approximately $335 million for dividends and other
corporate distributions, redemptions or repurchases. The ability of Chiquita to
pay dividends when, as and if declared by the Board of Directors, may be subject
to restrictions contained in future debt agreements and to limitations contained
in future series or classes of preferred or preference shares and is subject to
the legal availability of funds.
DESCRIPTION OF CHIQUITA COMMON STOCK
Of the 150 million authorized shares of Chiquita Common Stock, on December
5, 1997, approximately 59.4 million shares were outstanding and approximately 45
million shares were reserved for issuance, including 16 million shares reserved
for issuance under employee benefit plans, and 29 million shares reserved for
issuance upon the conversion, if any, of the Series A and Series B Preferred
Stock, the Series C Preference Stock and Chiquita's 7% Convertible Debentures
due 2001. In connection with the Merger, it is expected that approximately 2.7
million to 3.2 million shares of Chiquita Common Stock will be issued. In
connection with the acquisition of AFF, it is expected that up to 2.2 million
shares will be issued.
Holders of Chiquita Common Stock are entitled to one vote per share on the
election of directors and all other matters submitted to a vote of shareholders.
Shares of Chiquita Common Stock do not have cumulative voting rights.
Holders of Chiquita Common Stock are entitled to receive dividends, when
and as declared by Chiquita's Board of Directors, out of funds legally available
therefor; provided, however, that all dividends on any outstanding Preferred and
Preference Stock must be fully paid or declared and set apart before any
dividends can be paid or declared and set apart with respect to the Chiquita
Common Stock.
Upon liquidation, dissolution or winding-up of Chiquita, the holders of
Chiquita Common Stock are entitled to share ratably in the assets of Chiquita
remaining after the payment of its obligations and liabilities and after payment
due the holders of Chiquita's Preferred and Preference Stock.
Holders of Chiquita Common Stock have no preemptive or other rights to
subscribe for or purchase additional securities of Chiquita. All outstanding
shares of Chiquita Common Stock are fully paid and nonassessable.
DESCRIPTION OF CHIQUITA PREFERRED STOCK
Chiquita has 10,000,000 authorized shares of Preferred Stock. The Preferred
Stock may be issued in one or more series and the rights, preferences,
privileges and restrictions, including dividend rights, conversion rights, terms
of redemption and liquidation preferences on each series may be fixed or
designated by the Board of Directors of Chiquita without any further vote or
action by Chiquita's shareholders; except that no series of Preferred Stock may
be given the right to vote unconditionally in the election of directors of
Chiquita. There are currently 5,175,000 shares of Preferred Stock issued and
outstanding in two series: 2,875,000 shares of $2.875 Non-Voting Cumulative
Preferred Stock, Series A (the "Series A Preferred Stock"), and 2,300,000 shares
of $3.75 Convertible Preferred Stock, Series B (the "Series B Preferred Stock").
Series A Preferred Stock. Dividends on the Series A Preferred Stock accrue
at an annual rate of $2.875 per share, are cumulative and are payable quarterly
in arrears. The shares of Series A Preferred Stock have a liquidation preference
of $50.00 per share plus dividends in arrears, if any. The Series A Preferred
Stock is listed on the NYSE.
Until February 15, 2001, the Series A Preferred Stock is convertible, in
whole or in part, at the option of Chiquita, for such number of shares of
Chiquita Common Stock as are issuable at a conversion rate of 2.6316 shares of
Chiquita Common Stock for each share of Series A Preferred Stock, subject to
adjustment in certain circumstances. Chiquita may exercise this option only if
for 20 trading days within any period of 30 consecutive trading days, including
the last trading day of the 30 trading day period, the closing price of Chiquita
Common Stock on the NYSE exceeds $24.70, subject to adjustment in certain
circumstances. On and after February 15, 2001, the Series A Preferred Stock will
be convertible, in whole or in part, at the option
44
<PAGE> 55
of Chiquita, into that number of shares of Chiquita Common Stock which have a
current market price (calculated by averaging the closing prices of the Chiquita
Common Stock on the NYSE for the five trading days immediately preceding the
conversion date) equal to $50.00 per share of Series A Preferred Stock. However,
in no event may the number of shares of Chiquita Common Stock into which each
share of Series A Preferred Stock is convertible exceed 10, subject to
adjustment in certain circumstances.
Each share of Series A Preferred Stock is convertible at any time, at the
holder's option, into 2.6316 shares of Chiquita Common Stock, subject to
adjustment in certain circumstances.
Adjustment in the conversion rates referred to above will occur in
connection with stock splits, stock dividends and certain other transactions
affecting the Chiquita Common Stock.
The Series A Preferred Stock is not redeemable for cash, and there is no
redemption or sinking fund obligation with respect to the Series A Preferred
Stock.
Series B Preferred Stock. Dividends on the Series B Preferred Stock accrue
at an annual rate of $3.75 per share, are cumulative and are payable quarterly
in arrears. The shares of Series B Preferred Stock have a liquidation preference
of $50.00 per share plus dividends in arrears, if any. The Series B Preferred
Stock is listed on the NYSE.
The Series B Preferred Stock is not convertible at the option of Chiquita
prior to September 10, 1999. On and after September 10, 1999, each share of
Series B Preferred Stock will be convertible (and the series will be
convertible, in whole or in part), at Chiquita's option, into that number of
shares of Chiquita Common Stock which have a current market price (calculated by
averaging the closing prices of the Chiquita Common Stock on the NYSE for the
fifteen consecutive trading days ending on the second trading day preceding the
conversion date) equal to $51.50, if converted during the twelve-month period
beginning September 10, 1999 (and of amounts decreasing thereafter to $50.00 if
converted on or after September 10, 2001). However, in no event may the number
of shares of Chiquita Common Stock into which each share of Series B Preferred
Stock is convertible exceed 10, subject to adjustment in certain circumstances.
Each share of Series B Preferred Stock is convertible at any time prior to
and including the business day preceding a Chiquita conversion, at the holder's
option, into 3.3333 shares of Chiquita Common Stock, subject to adjustment in
certain circumstances.
Adjustments in the conversion rates referred to above will occur in
connection with stock splits, stock dividends and certain other transactions
affecting the Chiquita Common Stock.
The Series B Preferred Stock is not redeemable for cash, and there is no
redemption or sinking fund obligation with respect to the Series B Preferred
Stock.
DESCRIPTION OF CHIQUITA PREFERENCE STOCK
The Board of Directors of Chiquita may provide for the issuance of up to
4,000,000 shares of Preference Stock in one or more series. The rights,
preferences, privileges and restrictions, including dividend rights, voting
rights, conversion rights, terms of redemption and liquidation preferences of
each series may be fixed or designated by the Board of Directors without any
further vote or action by Chiquita's shareholders. Currently, there are 79,659
shares of Preference Stock issued and outstanding, all of one series designated
$2.50 Convertible Preference Stock, Series C (the "Series C Preference Stock").
Series C Preference Stock. Dividends on the Series C Preference Stock
accrue at an annual rate of $2.50 per share, are cumulative from June 30, 1997,
and are payable quarterly in arrears commencing December 7, 1997. The shares of
Series C Preference Stock have a liquidation preference of $50.00 per share,
plus dividends in arrears, if any. The Series C Preference Stock is not listed
or quoted on any securities exchange or other public trading market.
The Series C Preference Stock is not convertible at the option of Chiquita
prior to June 30, 2000. On and after June 30, 2000, each share of Series C
Preference Stock will be convertible (and the series will be convertible, in
whole or in part), at Chiquita's option, into that number of shares of Chiquita
Common Stock
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which shall have a current market price (calculated by averaging the closing
prices of the Chiquita Common Stock on the NYSE for the fifteen consecutive
trading days immediately preceding the second trading day prior to the
conversion date) equal to (a) $51.50, if converted during the twelve-month
period beginning June 30, 2000, (b) $50.75, if converted during the twelve-month
period beginning June 30, 2001, and (c) $50.00, if converted on or after June
30, 2002. In no event, however, shall the number of shares of Chiquita Common
Stock into which each share of Series C Preference Stock is converted exceed 10,
subject to adjustment in certain circumstances.
Each share of Series C Preference Stock is convertible at any time prior to
and including the business day preceding a Chiquita conversion, at the holder's
option, into 2.922 shares of Chiquita Common Stock, subject to adjustment in
certain circumstances.
Adjustments in the conversion rates referred to above will occur in
connection with stock splits, stock dividends and certain other transactions
affecting the Chiquita Common Stock.
The Series C Preference Stock is not redeemable for cash, and there is no
redemption or sinking fund obligation with respect to the Series C Preference
Stock.
Generally, holders of Series C Preference Stock are entitled to one vote
per share on the election of directors and all other matters submitted to a vote
of shareholders of Chiquita Common Stock. Also, generally, the Series C
Preference Stock and the Chiquita Common Stock vote together as a single class.
In certain limited circumstances, holders of Series C Preference Stock will have
greater voting rights and the Series C Preference Stock will vote as a separate
class.
COMPARISON OF SHAREHOLDERS' RIGHTS
Upon consummation of the Merger, the shareholders of Stokely, a Wisconsin
corporation, will become holders of Chiquita Common Stock. Chiquita is a New
Jersey corporation. The Chiquita Common Stock is described above under
"DESCRIPTION OF CHIQUITA STOCK." Differences between provisions of the corporate
laws of Wisconsin and New Jersey, as well as between the Articles of
Incorporation and By-laws of Stokely and the Certificate of Incorporation and
By-laws of Chiquita, will result in certain changes in the rights of
shareholders of Stokely as holders of Chiquita Common Stock.
The following summary discusses certain significant provisions relating to
shareholders' rights but is not meant to be an exhaustive list or a detailed
discussion of the provisions discussed and is qualified in its entirety by
reference to the Articles of Incorporation and By-laws of Stokely, the
Certificate of Incorporation and By-laws of Chiquita, and the corporate laws of
Wisconsin and New Jersey.
DIRECTORS
Stokely. Stokely's Articles of Incorporation and By-laws currently provide
that it shall have not less than nine nor more than 15 directors, as determined
from time to time by resolution of the Stokely Board. The Stokely Board may
amend the By-laws to increase or decrease the number of directors. Under the
Articles of Incorporation of Stokely, the Stokely Board is divided into three
classes. One class is elected each year for a three-year term. The classified
Stokely Board is intended to provide for continuity of the Stokely Board and to
make it more difficult and time consuming for a shareholder group to fully use
its voting power to gain control of the Stokely Board without the consent of the
incumbent Stokely Board.
In addition, a director may be removed from office only for cause and only
by the affirmative vote of at least 80% of the outstanding shares entitled to
vote for the election of such director, and any vacancy so created may be filled
only by the affirmative vote of at least 80% of such shares. The staggered board
provisions and the provision regarding the 80% vote required for removal of a
director by shareholders may only be amended by the affirmative vote of
shareholders possessing at least 80% of the outstanding shares entitled to vote.
Chiquita. Chiquita's By-laws currently provide that it shall have not less
than five nor more than fifteen directors, as determined from time to time by
resolution of the Chiquita Board of Directors (the "Chiquita
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Board"). The Chiquita Board may amend the By-laws to increase or decrease the
number of directors. New Jersey law permits a corporation to provide in its
Certificate of Incorporation for the classification of its Board of Directors.
Chiquita's Certificate of Incorporation does not provide for a classified Board.
Chiquita's Certificate of Incorporation does provide that shareholders of
certain classes or series of Preferred or Preference Stock have the right to
elect directors upon the occurrence of stated events, primarily related to the
failure of Chiquita to pay dividends on outstanding shares of that stock.
Directors of Chiquita may be removed with or without cause by the
affirmative vote of the majority of votes cast by shareholders entitled to vote
for the election of directors. Additionally, the Chiquita Board, by the
affirmative vote of a majority of the directors in office, may remove one or
more directors for cause where, in the judgment of such majority, the
continuation of such director or directors in office would be harmful to the
corporation. Any vacancy on the Chiquita Board, however caused, including newly
created directorships, may be filled by the affirmative vote of a majority of
the remaining directors, even though less than a quorum of the Board, or by a
sole remaining director.
VOTING RIGHTS GENERALLY
Stokely. Subject to Section 180.1150(2) of the WBCL (described below under
"-- Anti-Takeover Provisions; Transactions with Interested Shareholders"),
holders of Stokely Common Stock are entitled to one vote for each share of
Stokely Common Stock held by them on all matters properly presented to
shareholders. The outstanding shares of Stokely Common Stock are legally issued,
fully paid and nonassessable, except for certain statutory liabilities which may
be imposed by Section 180.0622 of the WBCL for unpaid employee wages.
Under the WBCL, actions to be taken by vote of the shareholders of a
Wisconsin corporation shall be authorized by a majority of the votes cast at a
meeting of shareholders by the holders of shares entitled to vote thereon (in
person or proxy) unless a greater plurality is required by the Articles of
Incorporation or other provisions of the WBCL. The WBCL provides that the
affirmative vote of holders of at least two-thirds of the number of shares
outstanding and entitled to vote is required for certain corporate actions,
including mergers, for corporations organized under Wisconsin law prior to
January 1, 1973 (such as Stokely). The Articles of Incorporation and By-laws of
Stokely do not specify different requirements.
Chiquita. Under New Jersey law, actions to be taken by vote of the
shareholders of a New Jersey corporation shall be authorized by a majority of
the votes cast at a meeting of shareholders by the holders of shares entitled to
vote thereon (in person or by proxy) unless a greater plurality is required by
the Certificate of Incorporation or other provision of New Jersey law. New
Jersey law requires that the affirmative vote of holders of two-thirds of the
votes cast by holders of shares outstanding and entitled to vote is required for
certain actions for corporations organized prior to January 1, 1969 (such as
Chiquita). Chiquita's Certificate of Incorporation and By-laws do not specify
different requirements. In addition, if any class or series of shares is
entitled to vote as a class, the affirmative vote of two-thirds of the votes
cast in each class vote is required.
SPECIAL MEETINGS OF SHAREHOLDERS
Stokely. Under the WBCL and Stokely's By-laws, a special meeting of
shareholders may be called by the Chairman of the Board, a majority of the
Stokely Board or by the holders of at least ten percent of all the votes
entitled to be cast on any issue to be considered at the proposed special
meeting. In addition, Stokely's By-laws provide procedures by which shareholders
may raise matters at annual meetings and may call special meetings. The
affirmative vote of either (i) the holders of a majority of the voting power of
shares entitled to vote in the election of directors, or (ii) a majority of the
directors then in office, is required to amend, repeal or adopt any provision
inconsistent with the foregoing By-law provisions.
Chiquita. Under New Jersey law and Chiquita's By-laws, special meetings of
shareholders may be called by Chiquita's Chairman of the Board, President or the
Chiquita Board. In addition, the Superior Court of the State of New Jersey may,
upon application of holders of not less than 10% of the shares entitled to vote
at a meeting, for good cause shown, order a special meeting of shareholders.
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CHARTER AMENDMENTS
Stokely. Stokely's Articles of Incorporation may be amended upon approval
of the Stokely Board and by the affirmative vote of the holders of at least
two-thirds of the number of shares entitled to vote on the amendment. In
addition, if any class or series of shares is entitled to vote thereon as a
class, the affirmative vote of the holders of at least two-thirds of the number
of shares in each class is required.
Chiquita. Chiquita's Certificate of Incorporation may be amended upon
approval of the Chiquita Board and of two-thirds of the votes cast by holders of
shares entitled to vote on the amendment. In addition, if any class or series of
shares is entitled to vote as a class, the affirmative vote of two-thirds of the
votes cast in each class is required. Holders of any class or series of Chiquita
Preferred or Preference Stock are entitled to vote as a class on any amendment
that would, among other things, (i) limit their voting rights, (ii) cancel or
otherwise adversely affect dividends that are accrued but not yet declared,
(iii) change the designations, preferences, limitations or relative rights of
the shares, or (iv) create a new class or series having rights or preferences
with priority over such shares (but not including issuing series of Chiquita's
authorized but unissued Preferred or Preference Stock). In certain
circumstances, Chiquita's Certificate of Incorporation may be amended by action
of its Board without shareholder approval, including in connection with the
issuance of new classes or series of Preferred or Preference Stock and the
determination of the relative rights, preferences, and limitations of such
shares.
MERGERS, CONSOLIDATIONS AND SALES OF ASSETS
Stokely. As applicable to Stokely, the WBCL generally requires the approval
of mergers, consolidations and sales of substantially all assets outside the
ordinary course of business of a corporation by its Board of Directors and by
the affirmative vote of the holders of at least two-thirds of the number of
shares entitled to vote thereon. In addition, if any class or series is entitled
to vote thereon as a class, the affirmative vote of two-thirds of the number of
shares in each class is required.
Notwithstanding the foregoing, if Stokely is to be the surviving
corporation in a merger, no vote of its shareholders is required if all of the
following conditions are satisfied: (a) the Articles of Incorporation of Stokely
after the merger will not differ from the Articles of Incorporation prior to the
merger (except for certain amendments outlined in the WBCL); (b) each
shareholder of Stokely whose shares were outstanding immediately before the
effective date of the merger will hold the same number of shares, with identical
designations, preferences, limitations and relative rights, immediately after
the merger; (c) the number of voting shares outstanding immediately after the
merger, plus the number of voting shares issuable as a result of the merger,
either by the conversion of securities issued pursuant to the merger or the
exercise of rights and warrants issued pursuant to the merger, will not exceed
by more than 20% the total number of voting shares of the Stokely outstanding
immediately before the merger; and (d) the number of shares entitled to
participate without limitation in distributions ("participating shares") which
are outstanding immediately after the merger, plus the number of participating
shares issuable as a result of the merger, either by the conversion of
securities issued pursuant to the merger or the exercise of warrants or rights
issued pursuant to the merger, will not exceed by more than 20% the total number
of participating shares of Stokely outstanding immediately before the merger.
There are no dissenters' rights or appraisal rights in such a merger.
Chiquita. As applicable to Chiquita, New Jersey law generally requires the
approval of mergers, consolidations and sales of substantially all assets
outside of the ordinary course of business of a corporation by its Board of
Directors and by the affirmative vote of two-thirds of the votes cast by holders
of shares entitled to vote thereon. In addition, if any class or series is
entitled to vote thereon as a class, the affirmative vote of two-thirds of the
votes cast in each class vote is required. Under certain circumstances, New
Jersey law and Chiquita's Certificate of Incorporation grant holders of shares
of Chiquita's Preferred and Preference Stock the right to vote as a class.
Notwithstanding the foregoing, if Chiquita is to be the surviving
corporation in a merger, no vote of its shareholders is required, if all of the
following conditions are satisfied: (a) the plan of merger does not amend
Chiquita's Certificate of Incorporation in a manner that would require approval
of shareholders; (b) each shareholder of Chiquita whose shares were outstanding
immediately prior to the effective date of the merger
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will hold the same number of shares, with identical designations, preferences,
limitations and rights, immediately after the merger; (c) the number of voting
shares outstanding immediately after the merger, plus the number of voting
shares issuable upon conversion of other securities or in exercise of rights and
warrants issued pursuant to the merger, will not exceed by more than 40% the
total number of voting shares of Chiquita outstanding immediately before the
merger; and (d) the number of shares entitled to participate without limitation
in distributions outstanding immediately after the merger, plus the number of
such shares issuable upon conversion of other securities or in exercise of
rights and warrants issued pursuant to the merger, will not exceed by more than
40% the total number of such shares of Chiquita outstanding immediately before
the merger. There are no dissenters' rights of appraisal in such a merger.
APPRAISAL RIGHTS
Stokely. For a description of appraisal rights provided by Wisconsin law in
the event of a merger, see "PROPOSAL TO APPROVE THE MERGER -- The Merger
Agreement: No Appraisal or Dissenters' Rights."
Chiquita. New Jersey law confers rights of appraisal on dissenting
shareholders of a corporation with respect to a merger, consolidation, or sale
or other disposition of substantially all the assets of a corporation not in the
usual course of business. However, unless the corporation's Certificate of
Incorporation provides otherwise, no statutory right of appraisal exists (i)
where the stock of the corporation is (a) listed on a national securities
exchange or (b) held of record by not less than 1,000 holders, or (ii) where the
consideration to be received pursuant to the merger, consolidation or sale
consists of cash and/or securities or other obligations which, after the
transaction, will be listed on a national securities exchange or held of record
by not less than 1,000 holders. Chiquita's Certificate of Incorporation does not
provide for appraisal rights in such cases.
TRANSACTIONS INVOLVING DIRECTORS
Stokely. Under the WBCL and Stokely's By-laws, a "conflict of interest"
transaction with respect to a director means a transaction with Stokely in which
a director has a direct or indirect interest. The circumstances in which a
director of Stokely is deemed to have an indirect interest in a transaction
include but are not limited to transactions under any of the following
circumstances: (a) another entity in which the director has a material financial
interest or in which the director is a general partner is a party to the
transaction; or (b) another entity of which the director is a director, officer
or trustee is a party to the transaction and the transaction is or, because of
its significance to Stokely, should be considered by the Stokely Board. A
conflict of interest transaction is not voidable by Stokely solely because of
the director's interest in the transaction if (i) the material facts of the
transaction and the director's interest were disclosed or known to the Stokely
Board (or a committee of the Stokely Board) and the Stokely Board (or committee)
authorized, approved or specifically ratified the transaction; (ii) the material
facts of the transaction and the director's interest was disclosed or known to
the shareholders of the corporation entitled to vote and they authorized,
approved or specifically ratified the transaction; or (iii) the transaction was
fair to the corporation.
Chiquita. Under New Jersey law, no contract or other transaction between a
corporation and one or more of its directors, or between a corporation and any
entity in which one or more of its directors is otherwise interested, is void or
voidable solely by reason of such common directorship or interest, or solely
because such director or directors are present at the meeting of the Board or
committee which authorizes or approves the contract or transaction, or solely
because his or their votes are counted for such purpose, if any one of the
following is true: (a) the contract or other transaction is fair and reasonable
as to the corporation at the time it is authorized; or (b) the fact of common
directorship or interest is disclosed or known to the Board or committee and the
Board or committee authorizes, approves and ratifies the contract or transaction
by unanimous written consent (provided at least one director so consenting is
disinterested) or by affirmative vote of a majority of the disinterested
directors (even though the disinterested directors shall be less than a quorum);
or (c) the fact of the common directorship or interest is disclosed or known to
the shareholders, and they authorize, approve or ratify the contract or
transaction.
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ANTI-TAKEOVER PROVISIONS; TRANSACTIONS WITH INTERESTED SHAREHOLDERS
Stokely. Acquisitions of control of Stokely are subject to various
restrictions under the WBCL. In addition to these restrictions, there are
various provisions in Stokely's Articles of Incorporation and By-laws which may
be deemed to restrict the ability of a person, firm or entity to acquire
Stokely. These provisions provide for, among other things, staggered terms of
office for members of the Stokely Board and limits on the calling of special
meetings of shareholders. Such provisions render the replacement of the current
Stokely Board more difficult. The issuance of Preferred Stock by Stokely also
could have the effect of delaying or preventing a change of control of Stokely.
All of these provisions could have the effect of discouraging a takeover attempt
which was not approved by the Stokely Board but which shareholders of Stokely
deemed to be in their best interests or in which shareholders received a
substantial premium for their shares over the then-current market price. These
provisions also could decrease the likelihood of temporary increases in the
trading price of the Stokely Common Stock, which frequently result from
non-negotiated takeover attempts, and could tend to perpetuate existing
management. Additionally, certain of these statutory restrictions could have the
effect of discouraging or making it more difficult for a person to acquire a
substantial equity interest in Stokely and could otherwise restrict the market
for the purchase or sale of a significant number of the shares of Stokely Common
Stock.
Section 180.1150(2) of the WBCL provides that the voting power of shares of
an "issuing public corporation," such as Stokely, which are held by any persons
holding in excess of 20% of the voting power of the issuing public corporation's
shares, shall be limited to such 20% of the voting power plus 10% of the voting
power of such excess shares. This statute is a "scaled voting rights/control
share acquisition" statute and is designed to protect corporations against
uninvited takeover bids. This statutory voting restriction is not applicable to
shares of Stokely Common Stock acquired prior to April 22, 1986, shares acquired
directly from Stokely and shares acquired in certain other circumstances more
fully described in the WBCL.
The WBCL also provides that certain business combinations not meeting
specified adequacy-of-price standards set forth in the statute must be approved
by the vote of at least (i) 80% of the votes entitled to be cast by
shareholders, and (ii) two-thirds of the votes entitled to be cast by holders of
voting shares other than voting shares beneficially owned by a "significant
shareholder" or an affiliate or associate thereof who is a party to the
transaction. The term "business combination" is defined to include, subject to
certain exceptions, a merger or consolidation of an issuing public corporation,
such as Stokely, with, or the sale or other disposition of substantially all
assets of an issuing public corporation to, any significant shareholder or
affiliate thereof. "Significant shareholder" is defined generally to include a
person that is the beneficial owner of 10% or more of the voting power of the
shares of the issuing public corporation. These provisions will not apply to the
Merger.
Additionally, the WBCL provides that a "resident domestic corporation,"
such as Stokely, may not engage in a "business combination" with an "interested
stockholder" (a person beneficially owning 10% or more of the aggregate voting
power of the stock of such corporation) for three years after the date (the
"stock acquisition date") the interested stockholder acquired his or her 10% or
greater interest, unless the business combination (or the acquisition of the 10%
or greater interest) was approved before the stock acquisition date by such
corporation's board of directors. After the three-year period, a business
combination that was not so approved may be consummated only if it is approved
by a majority of the outstanding voting shares not held by the interested
stockholder or is made at a specified formula price intended to provide a fair
price for the shares held by disinterested shareholders. These provisions will
not apply to the Merger.
Stokely's Articles of Incorporation provide that if any person or entity
(the "Acquiring Person") is the beneficial owner of 50% or more of the
outstanding shares of Stokely Common Stock and if any of such shares of
Stokely's Common Stock were acquired pursuant to a tender offer not recommended
by the Stokely Board, then all holders of Stokely Common Stock (and holders of
rights, options, warrants and securities then exercisable or convertible into
Stokely Common Stock), with the exception of the Acquiring Person, shall have
the right to have their shares of Stokely Common Stock redeemed by Stokely for
cash ("Repurchase Rights"). Stokely is required to provide shareholders with
notice of their Repurchase Rights (the "Repurchase Notice") within 30 days of
the date Stokely first receives notice that any person or entity has become an
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Acquiring Person. The repurchase price shall be the highest of: (i) the highest
price per share, including any commissions paid to brokers or dealers, at which
shares held by an Acquiring Person were acquired at any time pursuant to a
tender offer or in any market purchase within the 18-month period prior to the
date shareholders received a Repurchase Notice from Stokely; (ii) the highest
sales price per share of Stokely Common Stock for any trading day during the
18-month period prior to the date shareholders received a Repurchase Notice from
Stokely; or (iii) shareholders' equity per share of Stokely Common Stock as
reflected in any report published by Stokely as of the fiscal quarter prior to
the date shareholders received a Repurchase Notice from Stokely. These
provisions will not apply to the Merger.
Chiquita. The New Jersey Shareholder Protection Act (the "NJSPA") prohibits
certain transactions involving an "interested shareholder" and a "resident
domestic corporation." An "interested shareholder" is one that is directly or
indirectly a beneficial owner of 10% or more of the voting power of the
outstanding voting stock of a resident domestic corporation. The NJSPA prohibits
certain business combinations between an interested shareholder and a resident
domestic corporation for a period of five years after the date the interested
shareholder acquired its stock, unless the business combination was approved by
the resident domestic corporation's Board of Directors prior to the stock
acquisition date. After the five-year period expires, the prohibition continues
unless the combination is approved by the affirmative vote of two-thirds of the
voting stock not beneficially owned by the interested shareholder or certain
fair price provisions are satisfied.
LIABILITY AND INDEMNIFICATION
Stokely. Under the WBCL, Stokely is required to indemnify a director or
officer, to the extent such person is successful on the merits or otherwise in
the defense of a proceeding, for all reasonable expenses incurred in the
proceeding if such person was a party because he or she was a director or
officer of Stokely. In all other cases, Stokely is required to indemnify a
director or officer against liability incurred in a proceeding to which such a
person was a party because he or she was a director or officer of Stokely,
unless it is determined that he or she breached or failed to perform a duty owed
to Stokely and the breach or failure to perform constitutes: (i) a willful
failure to deal fairly with Stokely or its shareholders in connection with a
matter in which the director or officer has a material conflict of interest;
(ii) a violation of criminal law, unless the director or officer had reasonable
cause to believe his or her conduct was unlawful; (iii) a transaction from which
the director or officer derived an improper personal profit; or (iv) willful
misconduct. Subject to certain limitations, the mandatory indemnification
provisions do not preclude any additional right to indemnification or allowance
of expenses that a director or officer may have under Stokely's Articles of
Incorporation, By-laws, a written agreement or a resolution of the Stokely Board
or shareholders.
It is the public policy of the State of Wisconsin to require or permit
indemnification, allowance of expenses and insurance, to the extent required to
be permitted under the WBCL, for any liability incurred in connection with a
proceeding involving a federal or state statute, rule or regulation regulating
the offer, sale or purchase of securities.
The WBCL also provides that, with certain exceptions, a director is not
liable to a corporation, its shareholders, or any person asserting rights on
behalf of the corporation or its shareholders, for damages, settlements, fees,
fines, penalties or other monetary liabilities arising from a breach of, or
failure to perform, any duty resulting solely from his or her status as a
director, unless the person asserting liability proves that the breach or
failure to perform constitutes any of the four exceptions to mandatory
indemnification under the WBCL referred to above.
Under Article VII of Stokely's By-laws, directors and officers are
indemnified against liability, in both derivative and nonderivative suits, which
they may incur in their capacities as such, subject to certain determinations by
the Stokely Board, independent legal counsel or the shareholders that the
applicable standards of conduct have been met. The scope of such indemnification
is substantially the same as permitted and described in the WBCL.
Chiquita. New Jersey law permits a corporation's Certificate of
Incorporation to limit or eliminate a director's or officer's liability for
damages for breach of any duty owed to the corporation or its shareholders
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except for (a) a breach of the person's duty of loyalty, (b) acts not in good
faith or involving a knowing violation of law or (c) acts resulting in receipt
of an improper personal benefit. The Certificate of Incorporation of Chiquita
includes a provision eliminating a director's or officer's liability to the
fullest extent permitted by New Jersey law.
New Jersey law permits a corporation to indemnify a corporate agent
(defined to include directors, officers, employees and agents) against expenses
and liabilities in connection with any proceeding involving the corporate agent
by reason of the agent being or having been a corporate agent, other than a
proceeding by or in the right of the corporation, if (a) the corporate agent
acted in good faith and in a manner reasonably believed to be in or not opposed
to the best interest of the corporation and (b) with respect to any criminal
proceeding, the corporate agent had no reasonable cause to believe the conduct
was unlawful. In the case of any action or proceeding by or in the right of the
corporation, indemnification may only be made if the corporate agent acted in
good faith and in a manner the agent reasonably believed to be in or not opposed
to the best interest of the corporation; except that, if the corporate agent is
adjudged to be liable to the corporation, indemnification may only be made if a
court determines that the agent is entitled to indemnity. A New Jersey
corporation must indemnify a corporate agent if the agent is successful on the
merits in the defense of any action or proceeding of the nature described above.
Chiquita's By-laws provide that Chiquita will indemnify any director, officer,
employee or other authorized representative to the fullest extent not prohibited
by New Jersey law.
LEGAL MATTERS
The legality of the shares of Chiquita Common Stock and certain other legal
matters in connection with the Merger will be passed upon for Chiquita by Robert
W. Olson, Senior Vice President, General Counsel and Secretary of Chiquita. Mr.
Olson presently holds shares of Chiquita Common Stock and employee stock options
to purchase shares of Chiquita Common Stock, as well as shares of AFG common
stock and options to purchase shares of AFG common stock.
EXPERTS
The consolidated financial statements of Chiquita appearing (or
incorporated by reference) in its Annual Report (Form 10-K) for the year ended
December 31, 1996, have been audited by Ernst & Young LLP, independent auditors,
as set forth in their report thereon included (or incorporated by reference)
therein and incorporated herein by reference. The financial statements of
Owatonna Canning Company for the years ended February 28, 1997, February 29,
1996 and February 28, 1995 appearing in Chiquita's Current Report on Form 8-K
dated September 15, 1997 have been audited by Hutton, Nelson & McDonald LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such Chiquita consolidated financial
statements and Owatonna Canning Company financial statements are incorporated
herein by reference in reliance upon such reports given upon the authority of
such firms as experts in accounting and auditing.
The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from Stokely's Annual
Report on Form 10-K for the year ended March 31, 1997 (as amended) have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
ELECTION OF DIRECTORS
(PROPOSAL NO. 2)
The Stokely Board currently consists of nine directors divided into three
classes with staggered terms of three years each. At the Annual Meeting,
shareholders of Stokely will elect three directors to hold office until the
Merger is consummated (or, if the Merger is not consummated, for a term of three
years expiring at the 2000 annual meeting, or until their successors are elected
and qualified). Directors of the remaining two
52
<PAGE> 63
classes will continue to hold office until the Merger is consummated (or, if the
Merger is not consummated, until the expiration of their respective terms and
until their successors are elected and qualified). Upon Mr. Orren J. Bradley's
retirement at the Annual Meeting, the number of directors will be reduced to
eight.
Unless otherwise directed, each proxy executed and returned by a
shareholder will be voted FOR the election of the nominees for director listed
below. If any person named as nominee should be unable or unwilling to stand for
election at the time of the Annual Meeting (or any postponements or adjournments
thereof), the proxies will nominate and vote for any replacement nominee or
nominees recommended by the Stokely Board. At this time, the Stokely Board knows
of no reason why any of the nominees listed below may not be able to serve as a
director if elected.
There are no family relationships among the executive officers and
directors of Stokely, and there are no arrangements or understandings pursuant
to which any of them were elected as executive officers and/or directors or are
being nominated to serve as directors. The following tables present information
concerning the nominees for director and each director serving an unexpired
term.
<TABLE>
<CAPTION>
POSITION WITH STOKELY DIRECTOR OF
NAME AGE AND PRINCIPAL OCCUPATION STOKELY SINCE
---- --- ------------------------ -------------
Nominees for Director for Terms Expiring Upon Consummation of
the Merger or, if the Merger is not Consummated, until 2000
<S> <C> <C> <C>
James H. DeWees...................... 64 Retired; Chairman, President and Chief 1994
Executive Officer, Godfrey Company, a
division of Fleming Companies, Inc., a
wholesale food distributor, 1984-94; Vice
President, Fleming Companies, Inc., 1987-94;
Chairman, Village of Manor Park Foundation;
Director, Village of Manor Park, Inc. and
Green Bay Packer Hall of Fame; Member, First
Bank Milwaukee Business Advisory Board and
Marquette University Business Advisory
Council.
Carol Ward Knox...................... 46 Principal, Morgan & Myers, Inc., a public 1993
relations consulting company, since 1982;
Former Chairperson, Wisconsin Department of
Agriculture, Trade and Consumer Protection
Board; Former Member, Board of Visitors,
University of Wisconsin College of
Agriculture and Life Science, and Wisconsin
Rural Leadership Program Board.
Thomas W. Mount...................... 66 Retired; Chairman of Stokely, 1992-93; 1966
President and Chief Operating Officer of
Stokely, 1975-92; joined Stokely in 1957;
Director, Fiduciary Capital Growth Fund,
Inc., and Focus Fund, Inc.; Former Chairman,
National Food Processors Association.
Director Whose Term Expires at the Annual Meeting
Orren J. Bradley..................... 72 Senior Vice President, Laub Groups, Inc., an 1985
insurance operations company, since 1985;
Chairman, Boston Store Division of Federated
Department Stores, Inc., 1967-85; Director,
Hanger-Tight Company, Great Lakes Credit
Corporation and Oshkosh B'Gosh, Inc., an
apparel manufacturer.
</TABLE>
53
<PAGE> 64
<TABLE>
<CAPTION>
POSITION WITH STOKELY DIRECTOR OF
NAME AGE AND PRINCIPAL OCCUPATION STOKELY SINCE
---- --- ------------------------ -------------
<S> <C> <C> <C>
Directors Whose Terms Expire in 1998
Russell W. Britt..................... 71 Retired; President, Chief Operating Officer 1985
and a Director of Wisconsin Energy Corp., a
utility service company, 1987-91 and Vice
President, 1981-87; Executive Officer and
Director of Wisconsin Electric Power Co. and
Wisconsin Natural Gas Co., subsidiaries of
Wisconsin Energy Corp., 1982-91.
Ody J. Fish.......................... 72 Private Investor; President, Pal-O-Pak 1985
Insulation Co., Inc., an insulation
manufacturing company, 1951-86; Director,
Quest Technologies, Inc., f/k/a La Belle
Industries, Inc.; Director of all of the
funds included in the Marshall Family of
Mutual Funds; Former Member, University of
Wisconsin Board of Regents; Chairman,
Wisconsin Education Commission.
Stephen W. Theobald.................. 51 President and Chief Executive Officer of 1980
Stokely since April 1996; Vice-Chairman and
Treasurer of Stokely, 1992-96; Vice
President-Administration and Treasurer of
Stokely, 1990-92; Vice President-
Administration of Stokely, 1985-90; joined
Stokely in 1985.
Directors Whose Terms Expire in 1999
Charles J. Carey..................... 72 Consultant since 1989; President and Chief 1989
Executive Officer, National Food Processors
Association, a trade association, 1972-89.
Frank J. Pelisek..................... 67 Chairman of the Stokely Board and Executive 1983
Committee of the Stokely Board since August
1993; Acting Chief Executive Officer and
Chairman of the Executive Committee of the
Stokely Board, June 1992-August 1993;
Partner, Michael Best & Friedrich LLP, legal
counsel to Stokely, since 1965; Director,
various privately held companies.
</TABLE>
THE AFFIRMATIVE VOTE OF A PLURALITY OF THE VOTES CAST IS REQUIRED FOR THE
ELECTION OF THE NOMINEES. UNLESS OTHERWISE SPECIFIED, THE SHARES OF STOKELY
COMMON STOCK REPRESENTED BY THE PROXIES SOLICITED HEREBY WILL BE VOTED IN FAVOR
OF ELECTION OF THE ABOVE-DESCRIBED NOMINEES. THE STOKELY BOARD RECOMMENDS THAT
YOU VOTE FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR.
MEETINGS OF THE STOKELY BOARD OF DIRECTORS AND ITS COMMITTEES
During the fiscal year ended March 31, 1997, the Stokely Board held four
regular meetings and one special meeting. No incumbent director attended fewer
than 75% of the aggregate total number of meetings of the Stokely Board held and
the total number of committee meetings on which such director served during the
fiscal year ended March 31, 1997. The Stokely Board has standing Executive,
Audit, Compensation, Retirement Plan Advisory and Nominating Committees.
The Executive Committee has the authority during the intervals between
Stokely Board meetings to exercise the powers of the Stokely Board, except for
certain powers reserved exclusively for the Stokely Board.
54
<PAGE> 65
The Executive Committee consists of Messrs. Pelisek (Chairman), Britt, Fish,
Mount and Theobald. The Executive Committee held two meetings during the fiscal
year ended March 31, 1997.
The Audit Committee reviews the scope and timing of the audit of Stokely's
financial statements by Stokely's independent public accountants and reviews
with the independent public accountants Stokely's management policies and
procedures with respect to auditing and accounting controls. The Audit Committee
also reviews and evaluates the independence of Stokely's accountants, approves
services rendered by such accountants and recommends to the Stokely Board the
engagement, continuation or discharge of Stokely's accountants. The Audit
Committee consists of Messrs. Britt (Chairman), Bradley and DeWees. The Audit
Committee held one meeting during the fiscal year ended March 31, 1997.
The Compensation Committee is responsible for overseeing the management of
human resources activities of Stokely, including compensation for directors and
executive officers, and the establishment of employee pension plans and
benefits. The Compensation Committee also is responsible for determining the
recipients and terms of stock options granted under the Stokely USA, Inc. 1994
Executive Stock Option Plan. The Compensation Committee consists of Messrs. Fish
(Chairman), Carey, Pelisek and Ms. Knox, and met one time during the fiscal year
ended March 31, 1997.
The Retirement Plan Advisory Committee is responsible for overseeing the
management of Stokely's various 401(k), profit sharing and retirement plans. The
Retirement Plan Advisory Committee consists of Messrs. DeWees (Chairman), Fish,
Mount and Ms. Knox, and did not meet during the fiscal year ended March 31,
1997.
The Nominating Committee selects nominees for directors to stand for
election at Stokely's annual meetings, and consists of Messrs. Pelisek
(Chairman), Britt, Fish and Theobald. The Nominating Committee did not meet
during the fiscal year ended March 31, 1997. In June 1997, the entire Stokely
Board acted as a Nominating Committee for the selection of the nominees for
director to stand for election at the Annual Meeting. Stokely's By-Laws allow
for shareholder nominations of directors and require such nominations to be made
pursuant to timely notice to the Chief Executive Officer or President of
Stokely.
55
<PAGE> 66
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
EXECUTIVE COMPENSATION
The following table summarizes the total compensation earned by Stokely's
President and Chief Executive Officer and the next three highest compensated
executive officers whose compensation (salary and bonus) exceeded $100,000
during Stokely's fiscal years ended March 31, 1995, 1996 and 1997. On April 16,
1996, Mr. Vernon L. Wiersma resigned as President and Chief Executive Officer of
Stokely and the Stokely Board appointed Mr. Stephen W. Theobald as President and
Chief Executive Officer. In addition, on March 28, 1997, Mr. Russell J. Trunk
retired as Senior Vice President, Operations.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-----------------------
ANNUAL VALUE OF
COMPENSATION(1) RESTRICTED NUMBER OF
------------------- STOCK OPTION ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(2) AWARDS(3) COMPENSATION(4)
--------------------------- ---- ------ ----- ---------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Stephen W. Theobald.............. 1997 $170,500 -- -- 0 --
Current President and Chief 1996 170,500 -- -- 19,000 $ 12,636
Executive Officer; Vice 1995 160,400 -- -- 15,000 25,375
Chairman and Treasurer during
fiscal 1996
Vernon L. Wiersma................ 1997 -- -- -- 0 $220,000(5)
Former President and Chief 1996 $220,000 -- $61,750 0 13,160
Executive Officer 1995 205,000 -- -- 30,000 26,399
Russell J. Trunk................. 1997 $124,000 $78,600(6) -- 0 --
Former Senior Vice President, 1996 124,000 -- -- 10,000 $ 15,282
Operations 1995 118,000 -- -- 6,000 31,666
John McCormick................... 1997 $103,997 -- -- 3,000 --
Vice President, Sales and
Marketing; Vice President,
Retail Sales in 1996 and 1995
</TABLE>
- -------------------------
(1) Perquisites provided to the named executive officers by Stokely did not
exceed the lesser of $50,000 or 10% of each named executive officer's total
annual salary during fiscal 1995, 1996 or 1997 and, accordingly, are not
included.
(2) Amount shown in this column represents the value of 25,000 shares of Stokely
Common Stock issued to Mr. Wiersma on April 16, 1996, based on the value of
Stokely Common Stock at March 31, 1996 ($2.47 per share). See "-- Severance
Agreement with Mr. Wiersma."
(3) Amounts shown represent the total number of options awarded under the 1985
Incentive Stock Option Plan, the 1994 Executive Stock Option Plan and
outside such option plans during the fiscal years indicated.
(4) Except as indicated, amounts shown represent contributions by Stokely for
the benefit of the named individuals pursuant to the Stokely USA, Inc.
Retirement Savings Profit Sharing Plan ("Retirement Savings Plan") and the
Split Dollar Plan in the form of premium payments on behalf of the named
executive officers during the fiscal years indicated.
(5) During fiscal 1997, Mr. Wiersma received $220,000 pursuant to the terms of a
severance agreement with Stokely. See "-- Severance Agreement with Mr.
Wiersma."
(6) Mr. Trunk's bonus payment was not made under Stokely's Annual Incentive
Plan. See "--Compensation Committee Report."
56
<PAGE> 67
SEVERANCE AGREEMENT WITH MR. WIERSMA
On May 29, 1996, Stokely entered into a severance agreement (the "Severance
Agreement") with Mr. Wiersma setting forth the terms and conditions of his
resignation as President, Chief Executive Officer and Director of Stokely,
effective April 16, 1996. Pursuant to the Severance Agreement, Mr. Wiersma will
be paid $18,333 per month from April 16, 1996 through May 30, 1998, and in the
event of Mr. Wiersma's death, such amounts shall be paid to his spouse, or if
she is deceased, to the personal representative of his estate. In the event of a
Change of Control of Stokely (as defined in the Contingent Employment Agreements
which were in effect during fiscal 1997 and which are discussed herein), the
Severance Agreement provides that Mr. Wiersma shall be paid the then present
value of such monthly payments in a single sum. For the period commencing April
16, 1996 through May 30, 1998 or such earlier date as of the effective date of
coverage for Mr. Wiersma under any other employer's health insurance program,
Mr. Wiersma and his eligible dependents are entitled to participate in Stokely's
group health and disability insurance programs at the same cost to Mr. Wiersma
as of the date of his resignation. Pursuant to the Severance Agreement, Stokely
will continue to pay the semi-annual premium of $14,523 under the split dollar
life insurance contract covering Mr. Wiersma through May 30, 1998, and Mr.
Wiersma shall have the option to purchase the contract from Stokely by paying to
Stokely the aggregate value of the premiums paid by Stokely from the date the
contract was entered into to the date Mr. Wiersma exercises such option to
purchase. In addition, pursuant to the Severance Agreement, in recognition that
a portion of the grant of 50,000 shares of restricted Stokely Common Stock to
Mr. Wiersma on June 15, 1995 reflected compensation for prior services, vesting
of 25,000 shares was accelerated and such shares were issued to Mr. Wiersma.
Pursuant to the terms of the restricted stock grant, Stokely is obligated to pay
an amount equal to the income tax payable by Mr. Wiersma as a result of the
grant of such shares. All rights under agreements and/or plans which Mr. Wiersma
had with respect to options granted to him prior to April 16, 1996 also remained
in effect in accordance with the terms of such agreements and/or plans. Mr.
Wiersma is entitled to all benefits accrued under the Supplemental Employee
Retirement Plan ("SERP") payable pursuant to the terms of the SERP, upon Mr.
Wiersma's attaining age 65, or, in the event of a Change of Control, Stokely
shall pay to Mr. Wiersma the then present value of such benefits, discounted at
the rate of 7% per annum, in a single sum. In addition, Mr. Wiersma received
$2,530 as payment for the aggregate Stokely contributions accrued for his
benefit under the Deferred Compensation Plan. In lieu of outplacement services,
Stokely paid to Mr. Wiersma a lump sum of $20,000 and paid $5,000 to Mr.
Wiersma's legal counsel for costs incurred in connection with negotiating the
Severance Agreement.
EMPLOYMENT AGREEMENTS
In 1992, Stokely entered into Contingent Employment Agreements with Messrs.
Theobald and McCormick. Under the Contingent Employment Agreements, if a change
of control occurs, Stokely will continue to employ Mr. Theobald for three years,
and Mr. McCormick for one year, following the date of the change of control.
"Change of Control," as defined in the Contingent Employment Agreements,
includes the acquisition of 20% or more of Stokely Common Stock, a merger,
consolidation or reorganization, the sale of substantially all of Stokely's
assets or a significant change in the composition of the Stokely Board. In the
event of a Change of Control, the employee shall be employed by Stokely for the
applicable number of years and shall receive a salary equal to his salary on the
date of the Change of Control, subject to annual upward adjustments commensurate
with increases awarded to other officers and employees. If, after a Change of
Control, Stokely terminates the employee for any reason other than for cause or
if the employee elects to terminate his employment for a permitted reason, he
shall continue to be paid monthly an amount equal to his then current monthly
base salary plus a certain amount of incentive payments and shall continue to be
entitled to receive all other employee benefits and perquisites made available
to other employees of comparable status until the end of his employment term. If
Stokely terminates the employee for "cause" (as defined in the Contingent
Employment Agreements), the employee is entitled to receive only his
compensation through the date of termination. For purposes of the Contingent
Employment Agreements, the current base salary for Mr. Theobald is $170,500, and
for Mr. McCormick is $115,000. The amount of the base salary and any incentive
payments are reviewed regularly by the Compensation Committee of the Stokely
Board. Stokely also has entered into similar Contingent Employment Agreements
with other key officers and employees of Stokely.
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<PAGE> 68
DEFERRED COMPENSATION PLAN FOR KEY EXECUTIVES
On January 1, 1995, Stokely entered into deferred compensation agreements
with Messrs. Theobald and McCormick pursuant to a Deferred Compensation Plan. In
accordance with the terms of the Deferred Compensation Plan, Stokely accrues
amounts equal to the contributions that would have been made by Stokely under
the Retirement Savings Plan but for the maximum annual contribution and
compensation limits under the Code. In addition, pursuant to the Deferred
Compensation Plan, the executives may elect to defer compensation earned in any
year. The maximum amount that may be deferred in any calendar year is 20% of the
executives' annual compensation less the maximum amount that may be deferred on
an annual basis by such executive pursuant to the Retirement Savings Plan.
Interest is accrued on deferrals and Stokely contributions at the rate of
interest equal to the average of the U.S. Treasury Bond rate as published in the
Wall Street Journal on the last day of the calendar year and the last day of the
previous three quarters of the calendar year. Executives may become eligible for
receipt of deferred compensation and Stokely contributions under the Deferred
Compensation Plan upon death, disability, retirement or termination. The
deferred compensation agreements are nonqualified, unfunded contractual
liabilities of Stokely. Stokely also has entered into similar deferred
compensation agreements with other key officers and employees of Stokely.
DEFERRED COMPENSATION AGREEMENT
In 1990, Stokely entered into a deferred compensation agreement with Mr.
Mount under which Stokely is obligated to pay Mr. Mount (or his designated
beneficiaries in the event of his death) deferred compensation in monthly
installments of $7,500 for a period of 120 consecutive months (or at his
election in one lump sum based upon a present value calculation) following his
death, disability or retirement. The agreement constitutes a non-tax qualified,
unfunded deferred compensation plan. Mr. Mount retired in April 1993, and
Stokely commenced the monthly installment payments at that date.
BENEFITS
Split Dollar Plan. Stokely established the Split Dollar Plan, effective
February 1, 1990, in which Messrs. Mount, Theobald, Trunk and McCormick and
other key officers and employees of Stokely participate. The life insurance
benefit is equal to four times the executive's salary. The executive pays a
portion of the premium representing the economic value of the insurance and
Stokely is responsible for the balance of the premium. Stokely may use dividends
paid pursuant to the terms of the insurance policies for payment of premium.
Upon the executive's death or the retirement of the executive, Stokely will
receive all premiums paid by it on behalf of the executive and the executive
will receive the remainder of the death benefit or the cash surrender value. For
the fiscal year ended March 31, 1997, Mr. Wiersma also participated in the Split
Dollar Plan. For further information regarding the Split Dollar Plan arrangement
with respect to Mr. Wiersma made in connection with his resignation, see "--
Severance Agreement with Mr. Wiersma."
Supplemental Employee Retirement Plan. Stokely established the SERP,
effective January 1, 1995, in which Messrs. Theobald and Trunk participate. For
Mr. Theobald, the SERP provides a benefit at retirement (based on 25 years of
service) of 120 equal monthly payments which equal, on an annual basis, 40% of
the salary (excluding bonus) individually earned during the twelve months
preceding retirement. For Mr. Trunk, the SERP provides a benefit at retirement
(based on 25 years of service) of 120 equal monthly payments which equal, on an
annual basis, 20% of the salary (excluding bonus) individually earned during the
twelve months preceding retirement. The monthly payment is reduced on a
percentage basis of years of service that are less than 25 at the time of
retirement. For information relating to the SERP arrangements made with respect
to Mr. Wiersma in connection with his resignation, see "-- Severance Agreement
with Mr. Wiersma."
Retirement Savings Plan. Stokely's Retirement Savings Plan covers all of
its eligible employees. Employees are eligible to participate after completing a
twelve-month period of 1,000 or more hours of employment. The Retirement Savings
Plan involves a Company Profit Sharing Contribution account, a Voluntary
Contribution account and a 401(k) Salary Deferral account. Subject to Stokely's
operating results, Stokely may make contributions up to 8% of pre-tax profits to
the Profit Sharing Contribution account which would be allocated to participants
pro rata based upon their eligible compensation. Participants become 20%
58
<PAGE> 69
vested in the profit sharing contributions credited to their accounts and the
earnings thereon after three years of credited service, and 20% per year
thereafter until 100% vested after seven years. Participants also become 100%
vested upon death, disability or attainment of age 62. The Voluntary
Contribution account permits participants to make voluntary after-tax savings
contributions in amounts between 2% and 10% of their annual compensation.
Participants in the Voluntary Contribution account are 100% vested in their
contributions and the earnings thereon. Under the Retirement Savings Plan,
through the 401(k) Salary Deferral account, participants are permitted, subject
to the limitations imposed by Section 401(k) of the Internal Revenue Code to
make voluntary tax-deferred contributions in amounts between 1% and 10% of their
annual compensation. Stokely may make a matching contribution to the 401(k)
Salary Deferral account in an amount up to 25% of the first 6% of compensation
deferred by the participant for participants who meet all eligibility and
participant requirements. Participants in the 401(k) Salary Deferral account are
100% vested in their contributions, Stokely's matching contribution and the
earnings thereon. Under the Retirement Savings Plan, a separate account is
maintained for each type of account and each participating employee.
Participating employees direct the Retirement Savings Plan trustee with respect
to the investment of assets held in their accounts among up to six investment
options made available by the trustee, including shares of Stokely Common Stock.
STOCK OPTION PLANS
Incentive Stock Option Plan. Stokely established the 1985 Incentive Stock
Option Plan (the "Incentive Stock Option Plan") in which key employees of
Stokely and its subsidiaries, as determined by the Compensation Committee, are
eligible to participate. As of March 31, 1997, there were 23 eligible employees.
The Incentive Stock Option Plan authorizes the grant of options to purchase
shares of Stokely Common Stock intended to qualify as incentive stock options
under Section 422 of the Code. The Compensation Committee administers the
Incentive Stock Option Plan. As of March 31, 1997, options to purchase 79,600
shares of Stokely Common Stock had been granted and were outstanding under the
Incentive Stock Option Plan. No additional options will be granted under the
Incentive Stock Option Plan, and all outstanding options will be cancelled in
connection with the Merger.
Executive Stock Option Plan. On June 3, 1994, the Board of Directors of
Stokely adopted the Stokely USA, Inc. 1994 Executive Stock Option Plan (the
"Executive Stock Option Plan"). The Executive Stock Option Plan was ratified by
shareholders of Stokely at the Annual Meeting of Shareholders held on August 26,
1994. All key full-time employees of Stokely and its subsidiaries are eligible
to participate in the Executive Stock Option Plan. At March 31, 1997, Stokely
and its subsidiaries had 467 eligible employees. The Executive Stock Option Plan
provides for the granting of (i) incentive stock options ("ISOs"), (ii)
non-qualified stock options ("NSOs"), and (iii) stock appreciation rights
("SARs"). At March 31, 1997, options to purchase 249,817 shares had been granted
and were outstanding under the Executive Stock Option Plan and options for a
total of 150,183 shares of Stokely Common Stock were available for granting to
eligible participants. Options for a total of 258,631 shares of Stokely Common
Stock were granted under the Executive Stock Option Plan in fiscal 1997. The
Compensation Committee of the Stokely Board, or such other committee appointed
by the Stokely Board, administers the Executive Stock Option Plan. Under the
Executive Stock Option Plan, the maximum number of shares for which grants may
be made to any eligible employee may not exceed 50,000 shares. All outstanding
options under the Executive Stock Option Plan will be cancelled or cashed out at
no value in connection with the Merger.
59
<PAGE> 70
The following table sets forth certain information concerning the grant of
stock options to the current executive officers listed in the Summary
Compensation Table during the fiscal year ended March 31, 1997.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE
% OF TOTAL AT ASSUMED
OPTIONS PER SHARE ANNUAL RATES OF
GRANTED TO EXERCISE APPRECIATION(1)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ----------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
---- ------- ------------ --------- ---------- -- ---
<S> <C> <C> <C> <C> <C> <C>
John McCormick........................ 3,000 1.16% $ 2.8125 9/11/06 $8,859 $9,281
</TABLE>
- -------------------------
(1) Amount shown represents the potential realizable value, net of the option
exercise price, assuming that the underlying market price of the Stokely
Common Stock appreciates in value from the date of the grant to the end of
the option term at annualized rates of 5% and 10%. These amounts represent
certain assumed rates of appreciation only. Actual gains, if any, on stock
option exercises are dependent upon the future performance of the Stokely
Common Stock and overall stock market conditions. There can be no assurance
that amounts reflected in this table will be achieved.
No options issued under the Incentive Stock Option Plan, the Executive
Stock Option Plan or outside of either option plans were exercised by any of the
named executive officers in the Summary Compensation Table during fiscal 1997.
The number and total value of unexercised in-the-money options held by such
individuals at March 31, 1997 are shown in the following table.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
NUMBER OF OPTIONS OPTIONS AT
SHARES AT FISCAL YEAR-END FISCAL YEAR END(1)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen W. Theobald.......... 0 $0 30,000 -- -- --
Russell J. Trunk............. 0 0 10,000 -- -- --
John McCormick............... 0 0 8,000 -- -- --
</TABLE>
- -------------------------
(1) The value of unexercised in-the-money options is based upon the difference
between the fair market value of the securities underlying the options of
$1.375 at March 31, 1997 and the exercise price of the options. No options
held by the named executive officers were in-the-money at March 31, 1997.
DIRECTORS' COMPENSATION
Non-employee directors receive compensation of $6,000 per year for service
on the Stokely Board plus $500 for each Stokely Board or Committee meeting
attended. Directors may defer all or any portion of such compensation under a
Directors' Deferred Compensation Plan adopted in 1985. Deferred compensation is
credited to the account of a participating director in the form of "phantom
stock" of Stokely based on the market price at the time of each quarterly
credit. Shares credited to the accounts of directors electing to participate in
the Directors' Deferred Compensation Plan during the fiscal year ended March 31,
1997, were as follows: Mr. Britt, 3,443 shares; and Mr. Fish, 3,589 shares. In
addition, in fiscal 1995, each member of the Stokely Board was granted 5,000
shares of restricted Stokely Common Stock, which vest 25% per year commencing in
1996. Directors who have served two full terms (six years) and are Stokely Board
members upon attaining the age 72 become eligible for retirement compensation of
$500 per month upon completion of service.
60
<PAGE> 71
COMPENSATION COMMITTEE REPORT
Stokely shareholders should note that the following Compensation Committee
Report was prepared during April 1997 in conjunction with the preparation of
Stokely's annual report on Form 10-K (as amended) and, accordingly, does not
reflect the decision to proceed with the Merger.
Compensation Committee. The Compensation Committee of Stokely reviews and
establishes compensation levels and benefits applicable to executive officers
and employees of Stokely and makes recommendations with respect to all issues
pertaining to executive compensation for ratification by the Stokely Board.
Compensation Committee Interlocks and Insider Participation. For the fiscal
year ended March 31, 1997, the Compensation Committee of the Stokely Board was
composed of Messrs. Fish, Carey, Pelisek and Ms. Knox, each of whom are not
officers or employees of Stokely. There are no interlocks, as defined under the
rules and regulations of the Securities and Exchange Commission ("SEC"), between
the Compensation Committee and corporate affiliates of members of the
Compensation Committee.
Compensation Committee Report. Under rules established by the SEC, Stokely
is required to provide certain data and information regarding the compensation
and benefits provided to executive officers of Stokely. The rules require a
report of the Compensation Committee which explains the rationale and
considerations that led to fundamental compensation decisions affecting such
individuals. The Compensation Committee of Stokely has prepared the following
report, at the direction of the Stokely Board, for inclusion in this Proxy
Statement/Prospectus.
It is the policy of Stokely to maintain a compensation program which will
attract, motivate, retain and reward employees at all levels of the organization
and provide appropriate incentives intended to generate long-term financial
results which will benefit Stokely and the shareholders of Stokely. The
executive compensation program of Stokely incorporates a pay-for-performance
policy that compensates executives for both corporate and individual
performance.
The executive compensation program is designed to achieve the following
objectives:
- Provide Stokely with the ability to compete for and retain talented
executives that are critical to Stokely's long-term success;
- Provide incentives to achieve Stokely's financial performance objectives
and strategic business initiatives with the objective of enhancing
shareholder value;
- Provide competitive compensation packages comparable to those offered by
other peer group companies; and
- Reward executives for individual performance in long-term strategic
management.
Stokely's executive compensation package consists of three major
components: (i) cash compensation, including base salary and an annual incentive
bonus; (ii) long-term incentive compensation in the form of stock options
(including options awarded under the Incentive Stock Option Plan and the
Executive Stock Option Plan); and (iii) executive benefits.
In determining specific cash compensation for executive officers for the
fiscal year ended March 31, 1997, the Compensation Committee considered the
following factors:
1. Stokely performance relative to certain goals and objectives in
effect during the prior year;
2. Individual performance relative to certain goals and objectives in
effect during the prior year;
3. Stokely performance compared to broader based industry performance;
and
4. Salary surveys for positions with similar responsibilities in
similar sized companies.
The annual incentive bonus is determined under Stokely's Annual Incentive
Plan (the "Incentive Plan") which was developed to recognize and reward
performance and provide a total annual cash bonus consistent with Stokely's
executive compensation strategy. Under the Incentive Plan, executives earn
incentive
61
<PAGE> 72
compensation if Stokely achieves various targets set for profits (defined as
income before taxes and before profit-sharing expense) as a percent of sales.
Incentive compensation earned is established as a percentage of each officer's
base salary, and the applicable percentage is dependent upon the individual's
base salary amount. If the financial performance of Stokely falls below the
threshold level, no awards will be earned. If threshold levels of the
performance indicators are achieved, the Incentive Plan provides for payment of
incentive compensation in amounts ranging between 10% to 25% of an individual's
base salary. If target levels are achieved by Stokely, the Incentive Plan
provides for payment of incentive compensation in amounts ranging from 20% to
50% of an individual's base salary. Incentive compensation may exceed 50% of an
individual's base salary if Stokely surpasses target levels, but may not exceed
75% of an individual's base salary. Prior to payment of incentive compensation
after completion of Stokely's financial audit, the Compensation Committee
certifies the performance objectives of the Incentive Plan have been met.
Based on the above noted factors and economic constraints facing Stokely,
there were no increases in executive base salaries for the fiscal year ended
March 31, 1997. No incentive bonus payments were made to executive officers for
the fiscal year ended March 31, 1997 (with the exception of Mr. Trunk) because
the targets set for profits under the above-described Incentive Plan were not
achieved. Mr. Trunk was paid a lump-sum bonus of $78,600 on April 30, 1996 to
compensate him for postponing his planned retirement for one year to assist
Stokely in implementation of the core business restructuring.
The base salary for the Chief Executive Officer is determined by the
Compensation Committee in general accordance with the same criteria noted herein
for determining compensation for all executive officers. Based on those factors,
the Compensation Committee implemented no increase in Mr. Theobald's base salary
for the fiscal year ended March 31, 1997. No incentive bonus payments were made
to Mr. Theobald for the fiscal year ended March 31, 1997, because the targets
set for profits under the above-described Incentive Plan were not achieved. The
Committee did note that at Mr. Theobald's request, no compensation adjustment
was made in his base salary at the time of his promotion to President and Chief
Executive Officer and that appropriate adjustments would be made based on the
Committee's assessment of his performance.
The Compensation Committee believes aligning the financial interests of
employees more closely with those of the shareholders influences the creation of
shareholder value. To encourage stock ownership among executive and other
employees, Stokely has two stock option plans which it administers, the
Incentive Stock Option Plan and the Executive Stock Option Plan. The stock
option plans are designed to encourage and create ownership and retention of
Stokely Common Stock by key employees. Through the option grants, the objective
of aligning key employees' long-range interests with those of shareholders may
be met by providing key employees with the opportunity to build, through
achievement of corporate goals, a meaningful stake in Stokely.
In fiscal 1997, the Committee granted a total of 258,631 options under the
Executive Stock Option Plan. The options were awarded as an incentive to help
assure successful implementation of the core business restructuring undertaken
in September, 1996. The Committee, in a departure from past practice, elected to
grant options to all fulltime employees, with the exception of Messrs. Theobald
and Trunk and certain other senior executives. Mr. McCormick received an option
grant of 3,000 shares in fiscal 1997 prior to being promoted to his current
position of Vice President of Sales and Marketing. The Committee believes this
broad option grant approach should contribute to successful implementation of
the restructure initiatives by acknowledging the importance of individual
employee contributions to the organization's success and by providing an
opportunity to, and an incentive for, employees to share in that success.
For a discussion of the executive benefits made available to officers of
Stokely during the fiscal year ended March 31, 1997, see "-- Compensation of
Executive Officers and Directors -- Benefits." Executive benefits paid by
Stokely to its executive officers were based upon each executive officer's
contribution to the success of Stokely and reflected each executive officer's
position, salary and specific responsibilities.
62
<PAGE> 73
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
PERFORMANCE GRAPH FOR STOKELY USA, INC.
Set forth below is a line graph comparing the cumulative shareholder return
on the shares of Stokely Common Stock, based on the market price of the Stokely
Common Stock and assuming reinvestment of dividends, with the cumulative total
return of companies included in the Center for Research on Security Prices Index
for Nasdaq Stock Market companies and a peer group chosen by Stokely. The peer
group includes Nasdaq-listed companies included in Standard Industrial
Classification (SIC) codes 2030-2039 (Canned, Frozen and Preserved Fruits,
Vegetables and Food Specialties) and AMEX and NYSE companies with 2030-2039 SIC
codes.
[graph to be inserted in definitive Proxy Statement]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
<TABLE>
<CAPTION>
STOKELY USA, INC. NASDAQ NYSE/AMEX/NASDAQ
----------------- ------ ----------------
<S> <C> <C> <C>
3/31/92 $100.0 $100.0 $100.0
3/31/93 95.4 115.0 113.0
3/31/94 98.5 124.1 105.4
3/31/95 67.7 138.0 131.8
3/29/96 30.4 187.4 163.5
3/31/97 16.2 208.3 209.8
</TABLE>
The index level for all series was set to $100.0 on 3/31/92.
63
<PAGE> 74
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of Stokely's Common Stock as of October 31, 1997 (except as noted
below), (i) by each person who is known to Stokely to beneficially own more than
5% of the Stokely Common Stock, (ii) by each of the current and former executive
officers of Stokely appearing in the Summary Compensation Table, (iii) by each
director of Stokely, and (iv) by all current directors and executive officers as
a group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SHARES OF SHARES OF COMMON
COMMON STOCK STOCK BENEFICIALLY
NAME BENEFICIALLY OWNED(1) OWNED
---- --------------------- ------------------
<S> <C> <C>
Exeter Ventures, UBOT(2).................................. 916,700 8.05%
Morgan Stanley/Miller Anderson & Sherrerd(3).............. 781,000 6.86
Heartland Advisors(4)..................................... 640,000 5.62
Dimensional Fund Advisors(5).............................. 591,000 5.19
Vernon L. Wiersma(6)...................................... 25,000 *
Stephen W. Theobald(7).................................... 200,691 1.76
John R. McCormick(8)...................................... 13,175 *
Frank J. Pelisek.......................................... 10,900 *
Orren J. Bradley.......................................... 3,000 *
Russell W. Britt.......................................... 2,700 *
Charles J. Carey.......................................... 2,700 *
James H. DeWees........................................... 3,500 *
Ody J. Fish............................................... 3,500 *
Carol Ward Knox........................................... 8,500 *
Thomas W. Mount........................................... 181,756 1.60
All current directors and executive officers as a group
(14 persons)(9)......................................... 448,922 3.92%
</TABLE>
- -------------------------
* Amount represents less than 1% of the total shares of Stokely Common Stock
outstanding.
(1) Unless otherwise indicated, includes shares of Stokely Common Stock held
directly by the individuals as well as by members of such individual's
immediate family who share the same household, shares held in trust and
other indirect forms of ownership over which shares the individuals exercise
sole or shared voting and/or dispositive power.
(2) Based on a Schedule 13D, dated July 17, 1997, filed by Exeter Ventures,
UBOT, located at P.O. Box 4226, Ormond Beach, FL 32175, which indicated sole
voting power of 916,700 shares of Stokely Common Stock.
(3) Based on a Schedule 13G, dated February 14, 1997, filed by Morgan Stanley
Group, Inc. and Miller Anderson & Sherrerd LLP, located at 1585 Broadway,
New York, New York 10036 and 1 Tower Bridge, Suite 1100, West Conshohocken,
PA 19428, respectively, which indicated shared dispositive and voting power
of 781,000 shares of Stokely Common Stock.
(4) Based on a Schedule 13G, dated February 12, 1997, filed by Heartland
Advisors, Inc., located at 790 North Milwaukee Street, Milwaukee, WI 53202,
which indicated sole dispositive voting power of 640,000 shares of Stokely
Common Stock.
(5) Based on a Schedule 13G, dated February 5, 1997, filed by Dimensional Fund
Advisors, located at 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401,
which indicated sole voting power of 409,400 shares of Stokely Common Stock
and shared voting power of 181,600 shares of Stokely Common Stock.
(6) On April 16, 1996, Mr. Wiersma resigned as President and Chief Executive
Officer of Stokely.
(7) Includes 162,191 shares of Stokely Common Stock held by Mr. Theobald as
co-trustee for which he has shared dispositive and voting power with The
First National Bank of Chicago, and 30,000 shares of Stokely Common Stock
issuable pursuant to presently exercisable stock options.
(8) Includes 8,000 shares of Stokely Common Stock issuable pursuant to presently
exercisable stock options.
(9) Excluding 55,500 shares subject to unexercised options (all of which have
exercise prices in excess of $1.875 and consequently are unlikely to be
exercised prior to the Merger), all current directors and officers as a
group beneficially own 393,422 shares of Stokely Common Stock, or 3.45% of
the outstanding shares of Stokely Common Stock.
64
<PAGE> 75
INDEPENDENT AUDITORS
Deloitte & Touche LLP served as Stokely's independent auditors for the
fiscal year ended March 31, 1997 and are serving in such capacity for the
current fiscal year. The appointment of independent auditors is made annually by
the Stokely Board. The decision of the Stokely Board is based on the
recommendation of the Audit Committee of the Stokely Board, which reviews both
the audit scope and estimated audit fees. Representatives of Deloitte & Touche
LLP are expected to be present at the Annual Meeting and will have the
opportunity to make a statement if they desire to do so and to respond to
appropriate questions.
CERTAIN TRANSACTIONS
On March 21, 1996, the United States District Court for the Eastern
District of Wisconsin dismissed a consolidated class action lawsuit brought
against Stokely, all of the individual members of the Stokely Board (in both
their capacity as individual members of the Board of Directors and as executive
officers, as applicable), William Blair & Company and Dain Bosworth, Inc. This
class action was a consolidated action, including the action filed by Philip D.
Freeman in January 1995 and a second class action lawsuit filed by Daniel J.
Sweeney in May 1995 which made similar claims against Stokely and certain
officers arising from the same facts and events. In conjunction with dismissing
the consolidated action, the court denied plaintiff's motion to certify the
class as moot. The lawsuit raised claims under various provisions of the
Securities Act and the Exchange Act. The plaintiffs alleged that they sustained
losses in connection with the purchase of shares of Stokely Common Stock during
the period from October 17, 1994 to December 19, 1994, as a result of Stokely's
alleged misleading statements and alleged omissions to state material facts in
the prospectus and other materials. The court dismissed the action after finding
that the alleged misrepresentations were not actually made by Stokely and/or
were not misrepresentations, and that the alleged omissions of material facts
were in fact adequately disclosed to investors. Further, the court refused to
permit the plaintiff to amend the complaint, stating that an amendment would be
futile because the court's dismissal was based on the conclusion that the
prospectus and other materials did not contain the misrepresentations or
omissions alleged in the complaint. A judgment dismissing the case was entered
March 22, 1996. On April 8, 1996, the plaintiff filed a Motion for
Reconsideration requesting that the Court reconsider its decision refusing
plaintiff leave to amend the complaint. On March 27, 1997, the court denied that
motion and the judgment dismissing the case became final on April 28, 1997 as
the appeal period expired without an appeal being filed.
Stokely has adopted a policy governing related party transactions providing
that any transaction by and between Stokely and officers, directors, principal
shareholders or their affiliates will be for bona fide business purposes and on
terms no less favorable to Stokely than those obtainable in arms-length
transactions with unaffiliated parties, and will be subject to approval of a
majority of Stokely's outside directors.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Stokely's officers and
directors, and persons who own more than ten percent of the shares of Stokely
Common Stock outstanding, to file reports of ownership and changes in ownership
with the SEC by certain dates. Officers, directors and greater than ten percent
shareholders are required by regulation to furnish Stokely with copies of all
Section 16(a) forms they file. Based upon review of the information provided to
Stokely, Stokely believes that during the fiscal year ended March 31, 1997,
officers, directors and greater than ten percent shareholders complied with all
Section 16(a) filing requirements. In July 1997, Stokely's non-employee
directors, including Messrs. Charles J. Carey, Frank J. Pelisek, Orren J.
Bradley, James H. DeWees, Thomas W. Mount, Russell W. Britt, Ody J. Fish and Ms.
Carol Ward Knox reported grants of restricted stock awarded to each of them in
May 1995 which inadvertently were not reported on a timely basis in fiscal 1996
as required by Section 16(a) of the Exchange Act.
65
<PAGE> 76
PROPOSAL TO ADJOURN THE ANNUAL MEETING
(PROPOSAL NO. 3)
As described herein, the Stokely Board believes that shareholder approval
of the Merger proposal is in the best interests of Stokely's shareholders. Also
as noted herein, approval of the Merger proposal requires an affirmative vote by
holders of two-thirds of the outstanding shares of Stokely Common Stock as of
the Voting Record Date.
In the event that the required vote for approval of the Merger proposal has
not been obtained by the date of the Annual Meeting, including any adjournments
thereof, the Stokely Board intends to sponsor a proposal (or proposals), at such
times and as often as necessary, to adjourn the Annual Meeting to a later date
for the purpose of soliciting additional votes on the Merger proposal, and the
proxies named in the Stokely Board's proxy card will vote shares on a Stokely
Board sponsored or recommended adjournment proposal as indicated on the card.
The time, date and place at and to which the Annual Meeting would be reconvened
will be announced at the Annual Meeting, and at any adjournments thereof.
Chiquita or Stokely may terminate the Merger Agreement if the Merger is not
consummated by January 31, 1998 (the "Termination Date"). Furthermore, certain
other closing conditions depend upon the Merger being consummated on or before
the Termination Date. Due to the January 15, 1998 date of the Annual Meeting,
the Termination Date will occur before any adjourned meeting could be
conveniently reconvened. If the Annual Meeting is adjourned to a later date, the
Stokely Board would seek to obtain an extension of the Termination Date from
Chiquita and would seek to ensure that the other closing conditions dependent
upon the January 31, 1998 Termination Date were not adversely affected. No
assurances can be made that Chiquita will agree to the extension, or that the
other closing conditions would not be adversely affected. See "PROPOSAL TO
APPROVE THE MERGER -- The Merger Agreement: Amendment; Termination." The fact of
the possible extension of the Termination Date will not be deemed to invalidate
proxies previously received, unless Stokely receives a later-dated proxy
superseding a prior one.
PROPOSALS BY STOKELY SHAREHOLDERS
To be considered for inclusion in the proxy statement relating to the 1998
Annual Meeting of Shareholders of Stokely, in the event the Merger is not
consummated, shareholder proposals must be received at the principal executive
offices of Stokely located at 1230 Corporate Center Drive, Oconomowoc, Wisconsin
53066-0248, Attention: Robert M. Brill, Secretary, no later than August 7, 1998.
If such proposal is in compliance with all of the requirements of 17 C.F.R. sec.
240.14a-8 ("Rule 14a-8") of the Rules and Regulations under the Exchange Act, it
will be included in the proxy statement and set forth on the appointment form of
proxy issued for such annual meeting of shareholders.
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE ANNUAL MEETING
The Stokely Board knows of no business which will be presented for
consideration at the Annual Meeting or any adjournments or postponements thereof
other than as stated in the Notice of Annual Meeting of Shareholders. If,
however, other matters are properly brought before the Annual Meeting,
including, among other things, a motion to adjourn the Annual Meeting in order
to permit further solicitation of proxies by Stokely, it is the intention of the
persons named in the accompanying Proxy to vote the shares of Stokely Common
Stock represented thereby on such matters in accordance with their best
judgment; provided, however, that no Proxy which is voted against the proposals
set forth in this Proxy Statement/Prospectus will be voted in favor of any
adjournment.
Copies of Stokely's Form 10-K, as amended (without exhibits), for the
fiscal year ended March 31, 1997 and Form 10-Q, as amended, for the quarter
ended September 30, 1997, as filed with the SEC, are being furnished herewith;
additional copies may be obtained by shareholders of record upon written request
to Stokely USA, Inc., Robert M. Brill, Secretary, 1230 Corporate Center Drive,
Oconomowoc, Wisconsin 53066-0248.
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO SIGN
AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE PAID
ENVELOPE.
66
<PAGE> 77
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article VI of Chiquita's By-Laws provides directors and officers with the
right to indemnification and advancement of expenses to the fullest extent not
prohibited by the New Jersey Business Corporation Act. Directors and officers of
Chiquita are indemnified generally against expenses and liabilities incurred in
connection with any proceedings, including proceedings by or on behalf of
Chiquita, relating to their service to or at the request of Chiquita. However,
no indemnification may be made if a final adjudication establishes that a
person's acts or omissions (a) breached the person's duty of loyalty to Chiquita
or its shareholders, (b) were not in good faith or involved a knowing violation
of law, or (c) resulted in receipt by the person of an improper personal
benefit. Section VIII of Chiquita's Certificate of Incorporation (Restated) also
limits the liability of Chiquita's directors and officers, to the fullest extent
permitted by the New Jersey Business Corporation Act, to Chiquita or its
shareholders for monetary damages for breach of any duty, except in the
situations set forth in (a) through (c) above.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) See Index to Exhibits commencing on page II-4.
The Registrant will furnish to the Commission upon request its long-term debt
instruments not furnished pursuant to this Item.
(b) Financial statement schedule
Schedule II -- Allowance for Doubtful Accounts Receivable (filed as a part
of the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by
reference).
(c) Opinion of Financial Advisor to Stokely USA, Inc. (included as Exhibit 99.2
and to be attached as Appendix B to the Proxy Statement/Prospectus forming a
part of this Registration Statement)
ITEM 22. UNDERTAKINGS.
Regulation S-K, Item 512 Undertakings
* (b) The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
* (h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
* Paragraph references correspond to those of Item 512 of Regulation S-K.
II-1
<PAGE> 78
Form S-4 Undertakings
(b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-2
<PAGE> 79
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment to Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Cincinnati,
State of Ohio, as of the 4th day of December, 1997.
CHIQUITA BRANDS INTERNATIONAL, INC.
By: /s/ ROBERT W. OLSON
------------------------------------
Robert W. Olson
Senior Vice President,
General Counsel and Secretary
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons in the
capacities indicated as of the 4th day of December, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* Chairman of the Board and Chief Executive
- ----------------------------------------------------- Officer
Carl H. Lindner
* Vice Chairman of the Board
- -----------------------------------------------------
Keith E. Lindner
* Director, President, Chief Operating Officer
- ----------------------------------------------------- and Chief Financial Officer
Steven G. Warshaw
* Director
- -----------------------------------------------------
Fred J. Runk
* Director
- -----------------------------------------------------
Jean Head Sisco
* Director
- -----------------------------------------------------
William W. Verity
* Director
- -----------------------------------------------------
Oliver W. Waddell
/s/ WILLIAM A. TSACALIS Vice President and Controller
- ----------------------------------------------------- (Chief Accounting Officer)
William A. Tsacalis
-------------------------
*Pursuant to Power of Attorney
/s/ ROBERT W. OLSON
- -----------------------------------------------------
Robert W. Olson, Attorney-in-Fact
</TABLE>
II-3
<PAGE> 80
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
*2-a Agreement and Plan of Reorganization, dated September 17,
1997, among Chiquita Brands International, Inc., Chiquita
Acquisition Corp. and Stokely USA, Inc. (to be included as
Appendix A to the Proxy Statement/Prospectus forming a part
of this Registration Statement) filed as Exhibit 2.1 to
Stokely's Current Report on Form 8-K dated September 17,
1997
*2-b Letter agreement among Chiquita, Acquisition Sub and Stokely
relating to the interpretation of certain terms set forth in
the Merger Agreement, filed as Exhibit 2.1 to Stokely's
Quarterly Report on Form 10-Q for the Quarter ended
September 30, 1997
*3-a Second Restated Certificate of Incorporation, filed as
Exhibit 3(a) to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994, as amended by the Certificate
of Amendment establishing the terms of the Series B
Preferred Stock, filed as Exhibit 3(a) to Quarterly Report
on Form 10-Q for the quarter ended June 30, 1996 and by the
Certificate of Amendment establishing the terms of the
Series C Preference Stock, filed as Exhibit 3.1 to Current
Report on Form 8-K dated September 15, 1997
*3-b By-Laws, filed as Exhibit 3-b to Annual Report on Form 10-K
for the year ended December 31, 1992
*4 Indenture dated as of February 15, 1994 between Chiquita and
The Fifth Third Bank, Trustee, with respect to Senior Debt
Securities, under which Chiquita's 9 1/8% Senior Notes due
2004 and Chiquita's 10 1/4% Senior Notes due 2006 have been
issued (incorporated by reference to Exhibit 4(c) of
Registration Statement 333-00789), as supplemented by the
First Supplemental Indenture dated as of June 15, 1994
(incorporated by reference to Exhibit 6(a)99(c) to Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994) and
by the Second Supplemental Indenture dated as of July 15,
1996 (incorporated by reference to Exhibit 4 to Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996);
and as further supplemented by the Certificate of the Vice
President and Controller of Chiquita establishing the terms
of the 9 1/8% Senior Notes (incorporated by reference to
Exhibit 7(c)(3) to Current Report on Form 8-K dated February
8, 1994) and by the Terms of 10 1/4% Senior Notes approved
by the Executive Committee of the Board of Directors of
Chiquita (incorporated by reference to Exhibit 7(c)99.6 to
Current Report on Form 8-K dated July 22, 1996)
*5 Opinion of Counsel
*8 Opinion of Michael Best & Fredrich LLP
*10-a Lease of Lands and Operating Contract between United Brands
Company, Chiriqui Land Company, Compania Procesadora de
Frutas and the Republic of Panama, dated January 8, 1976,
effective January 1, 1976, filed as Exhibit 10-a to Annual
Report on Form 10-K for the year ended December 31, 1993
*10-b Agreement dated January 11, 1996 effective January 1, 1996
between Tela Railroad Company and the Honduran National
Railroad, filed as Exhibit 10-b to Annual Report on Form
10-K for the year ended December 31, 1995
*10-c Stock Purchase Agreement dated December 20, 1995 between
Smithfield Foods, Inc. ("Smithfield") and the Company filed
as Exhibit 7.1 to Schedule 13D dated December 20, 1995 filed
by the Company and certain other persons with respect to
Smithfield common stock
*10-d Credit Agreement dated December 31, 1996 among Chiquita
Brands International, Inc., The First National Bank of
Boston, as administrative agent, and the financial
institutions which are lenders thereunder relating to the
Company's $125 million revolving credit facility, filed as
Exhibit 10-d to Annual Report on Form 10-K for the year
ended December 31, 1996
</TABLE>
II-4
<PAGE> 81
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
Executive Compensation Plans
*10-e 1986 Stock Option and Incentive Plan, as amended, filed as
Exhibit 10-e to Annual Report on Form 10-K for the year
ended December 31, 1996
*10-f Individual Stock Option Plan and Agreement, filed as Exhibit
4 to Registration Statement on Form S-8 No. 33-25950 dated
December 7, 1988
*10-g Amended and Restated Deferred Compensation Plan, filed as
Exhibit 10-g to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997
*10-h Deferred Compensation Plan for Board of Directors of
Chiquita Brands International, Inc. dated January 1, 1997,
filed as Exhibit 10-h to Annual Report on Form 10-K for the
year ended December 31, 1996
*11 Computation of Earnings Per Common Share, filed as Exhibit
11 to Annual Report on Form 10-K for the year ended December
31, 1996 and to Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997
*13 Chiquita Brands International, Inc. 1996 Annual Report to
Shareholders (pages 25 through 50 and page 52), filed as
Exhibit 13 to Annual Report on Form 10-K for the year ended
December 31, 1996
*21 Subsidiaries of Registrant, filed as Exhibit 21 to Annual
Report on Form 10-K for the year ended December 31, 1996
23-a Consent of Ernst & Young LLP
23-b Consent of Deloitte & Touche LLP
23-c Consent of Hutton, Nelson & McDonald LLP
*23-d Consent of Counsel (included in Exhibit 5)
*23-e Consent of Donaldson, Lufkin & Jenrette Securities
Corporation
*23-f Consent of Michael Best & Fredrich LLP (included in Exhibit
8)
23-g Consent of Silverman Korenthal & Co.
24 Power of Attorney
*99.1 Opinion of Financial Advisor (Donaldson, Lufkin & Jenrette
Securities Corporation)
*99.2 Form of Proxy
</TABLE>
- -------------------------
*Previously filed or incorporated by reference.
II-5
<PAGE> 1
Exhibit 23-a
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement of Chiquita Brands International, Inc. ("Chiquita") on
Form S-4 No. 333-40709, as amended by Amendment No-1 thereto filed on
December 4, 1997, and related Proxy Statement/Prospectus of Stokely USA, Inc.
and Chiquita for the registration of shares of Chiquita's common stock and to
the incorporation by reference therein of our report dated February 19, 1997,
with respect to the consolidated financial statements and schedule of Chiquita
included (or incorporated by reference) in its Annual Report (Form 10-K) for
the year ended December 31, 1996, filed with the Securities and Exchange
Commission.
/S/ ERNST & YOUNG LLP
Cincinnati, Ohio
December 4, 1997
<PAGE> 1
Exhibit 23-b
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in Amendment No. 1 to this
Registration Statement of Chiquita Brands International, Inc. on Form S-4 of
our report dated June 19, 1997 (October 10, 1997 as to Note L) appearing
in the Annual Report on Form 10-K/A of Stokely USA, Inc. for the year ended
March 31, 1997 and incorporated by reference in the Chiquita Brands
International Inc. Current Report on Form 8-K dated November 20, 1997, and to
the reference to our firm under the heading "Experts" in the Registration
statement.
/s/ DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
December 4, 1997
<PAGE> 1
Exhibit 23-c
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
the Registration Statement of Chiquita Brands International, Inc. ("Chiquita")
on Form S-4 No. 333-40709, as amended by Amendment No. 1 thereto filed on
December 4, 1997, and related Proxy Statement/Prospectus of Stokely USA, Inc.
and Chiquita for the registration of shares of Chiquita's common stock and to
the incorporation by reference therein of our report dated March 26, 1997, with
respect to the financial statements of Owatonna Canning Company for the years
ended February 28, 1997, February 29, 1996 and February 28,1995 included in the
Chiquita Current Report on Form 8-K dated September 15, 1997, filed with the
Securities and Exchange Commission.
/S/ HUTTON, NELSON & MCDONALD LLP
Oakbrook Terrace, Illinois
December 4, 1997
<PAGE> 1
Exhibit 23-f
SILVERMAN KORENTHAL & CO.
CONSENT OF SILVERMAN KORENTHAL & CO.
We hereby consent to the reference to our firm and our analyses,
observations and beliefs set forth under the heading "SUMMARY- Background of
and Reasons for Merger" contained in the Proxy Statement/Prospectus which is
part of this Registration Statement on Form S-4. We also confirm the accuracy
in all material respects of the description and summary of our analyses,
observations, beliefs and conclusions relating thereto set forth under the
heading "SUMMARY-Background of and Reasons for Merger" and "PROPOSAL TO
APPROVE THE MERGER." In giving such consent, we do not admit that we come
within the category of persons where consent is required under Section 7 of
the Securities Act of 1933 and the rules and regulations issued thereunder.
SILVERMAN KORENTHAL & CO.
By: /s/ Michael A. Silverman
Skokie, Illinois
December 3, 1997
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
I appoint each of Robert W. Olson and William A. Tsacalis as my
attorneys-in-fact to (a) sign a Form S-4 Registration Statement to be filed by
Chiquita Brands International, Inc., registering shares of its Capital Stock to
be issued in connection with the acquisition of Stokely USA, Inc., and any
amendments (including post-effective amendments) to such Registration Statement
and (b) file such Registration Statement and amendments (with all exhibits and
related documents) with the Securities and Exchange Commission.
Executed pursuant to the requirements of the Securities Act of 1933, on
November 21, 1997 at Washington, D.C.
/s/ Jean Head Sisco
--------------------
Jean Head Sisco
<PAGE> 2
POWER OF ATTORNEY
I appoint each of Robert W. Olson and William A. Tsacalis as my
attorneys-in-fact to (a) sign a Form S-4 Registration Statement to be filed by
Chiquita Brands International, Inc., registering shares of its Capital Stock to
be issued in connection with the acquisition of Stokely USA, Inc., and any
amendments (including post-effective amendments) to such Registration Statement
and (b) file such Registration Statement and amendments (with all exhibits and
related documents) with the Securities and Exchange Commission.
Executed pursuant to the requirements of the Securities Act of 1933, on
November 19, 1997 at Cincinnati, Ohio.
/s/ Keith E. Lindner
--------------------
Keith E. Lindner
<PAGE> 3
POWER OF ATTORNEY
I appoint each of Robert W. Olson and William A. Tsacalis as my
attorneys-in-fact to (a) sign a Form S-4 Registration Statement to be filed by
Chiquita Brands International, Inc., registering shares of its Capital Stock to
be issued in connection with the acquisition of Stokely USA, Inc., and any
amendments (including post-effective amendments) to such Registration Statement
and (b) file such Registration Statement and amendments (with all exhibits and
related documents) with the Securities and Exchange Commission.
Executed pursuant to the requirements of the Securities Act of 1933, on
November 17, 1997 at Cincinnati, Ohio.
/s/ Steven G. Warshaw
---------------------
Steven G. Warshaw
<PAGE> 4
POWER OF ATTORNEY
I appoint each of Robert W. Olson and William A. Tsacalis as my
attorneys-in-fact to (a) sign a Form S-4 Registration Statement to be filed by
Chiquita Brands International, Inc., registering shares of its Capital Stock to
be issued in connection with the acquisition of Stokely USA, Inc., and any
amendments (including post-effective amendments) to such Registration Statement
and (b) file such Registration Statement and amendments (with all exhibits and
related documents) with the Securities and Exchange Commission.
Executed pursuant to the requirements of the Securities Act of 1933, on
November 19, 1997 at Cincinnati, Ohio.
/s/ Fred J. Runk
---------------------
Fred J. Runk
<PAGE> 5
POWER OF ATTORNEY
I appoint each of Robert W. Olson and William A. Tsacalis as my
attorneys-in-fact to (a) sign a Form S-4 Registration Statement to be filed by
Chiquita Brands International, Inc., registering shares of its Capital Stock to
be issued in connection with the acquisition of Stokely USA, Inc., and any
amendments (including post-effective amendments) to such Registration Statement
and (b) file such Registration Statement and amendments (with all exhibits and
related documents) with the Securities and Exchange Commission.
Executed pursuant to the requirements of the Securities Act of 1933, on
November 18, 1997 at Cincinnati, Ohio.
/s/ William W. Verity
---------------------
William W. Verity
<PAGE> 6
POWER OF ATTORNEY
I appoint each of Robert W. Olson and William A. Tsacalis as my
attorneys-in-fact to (a) sign a Form S-4 Registration Statement to be filed by
Chiquita Brands International, Inc., registering shares of its Capital Stock to
be issued in connection with the acquisition of Stokely USA, Inc., and any
amendments (including post-effective amendments) to such Registration Statement
and (b) file such Registration Statement and amendments (with all exhibits and
related documents) with the Securities and Exchange Commission.
Executed pursuant to the requirements of the Securities Act of 1933, on
November 19, 1997 at Cincinnati, Ohio.
/s/ Oliver W. Waddell
---------------------
Oliver W. Waddell
