SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File
December 31, 1998 Number 1-1550
CHIQUITA BRANDS INTERNATIONAL, INC.
Incorporated under the I.R.S. Employer I.D.
Laws of New Jersey No. 04-1923360
250 East Fifth Street, Cincinnati, Ohio 45202
(513) 784-8000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
- -------------------- -------------------------
Common Stock ($.01 par value) New York, Pacific, Boston
$2.875 Non-Voting Cumulative
Preferred Stock, Series A New York
$3.75 Convertible Preferred
Stock, Series B New York
Securities registered pursuant to Section 12(g) of the Act: None
Other securities for which reports are submitted pursuant to Section 15(d) of
the Act:
9-1/8% Senior Notes due March 1, 2004
9-5/8% Senior Notes due January 15, 2004
10-1/4% Senior Notes due November 1, 2006
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
As of March 16, 1999, there were 65,722,921 shares of Common Stock
outstanding. The aggregate market value of Common Stock held by non-affiliates
at March 16, 1999 was approximately $462 million.
Documents Incorporated by Reference
Portions of the Chiquita Brands International, Inc. 1998 Annual Report to
Shareholders are incorporated by reference in Parts I and II. Portions of the
Chiquita Brands International, Inc. Proxy Statement for the 1999 Annual Meeting
of Shareholders are incorporated by reference in Part III.
CHIQUITA BRANDS INTERNATIONAL, INC.
TABLE OF CONTENTS
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Part I -----
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Item 1. Business 1
Item 2. Properties 9
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a
Vote of Security Holders 10
Executive Officers of the Registrant 11
Part II
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Item 5. Market for Registrant's Common
Equity and Related Stockholder
Matters 12
Item 6. Selected Financial Data 12
Item 7. Management's Discussion and
Analysis of Financial
Condition and Results
of Operations 12
Item 7A. Quantitative and Qualitative
Disclosures About Market Risk 12
Item 8. Financial Statements and
Supplementary Data 12
Item 9. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure 12
Part III
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Item 10. Directors and Executive Officers
of the Registrant 13
Item 11. Executive Compensation 13
Item 12. Security Ownership of Certain
Beneficial Owners and Management 13
Item 13. Certain Relationships and
Related Transactions 13
Part IV
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Item 14. Exhibits, Financial Statement
Schedules, and Reports on
Form 8-K 13
Signatures 14
This Annual Report on Form 10-K includes, in Items 1, 7, 7A and elsewhere,
statements that may be deemed "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. All statements included
in this report, in future filings with the Securities and Exchange Commission
("SEC") and in written and verbal statements by the Company and its
representatives that address events, developments or financial results that the
Company expects, believes or estimates will or may occur in the future are
forward-looking statements that are intended to be covered by the safe harbor
provisions of that Act. These statements are based on the Company's assumptions
and estimates made in light of its experience and analysis of historical trends,
current conditions, expected future developments and other factors it believes
are appropriate under the circumstances. They are subject to a number of
assumptions, risks and uncertainties, many of which are beyond the control of
Chiquita, including the prices at which Chiquita can sell its products, the
costs at which it can purchase or grow (and availability of) fresh produce and
other raw materials, currency exchange rate fluctuations, natural disasters and
unusual weather conditions, operating efficiencies, labor relations, access to
capital, actions of governmental bodies, actions of or failures to act of
customers, suppliers and other third parties with respect to Year 2000 readiness
issues, and other market and competitive conditions. Investors are cautioned
that the forward-looking statements speak as of the date made and are not
guarantees of future performance. Actual results or developments may differ
materially from the expectations expressed or implied in the forward-looking
statements.
PART I
ITEM 1 - BUSINESS
GENERAL
Chiquita Brands International, Inc. ("Chiquita" or the "Company") is a
leading international marketer, producer and distributor of quality fresh fruits
and vegetables and processed foods sold under the "Chiquita" and other brand
names. The Company has capitalized on its "Chiquita" and other premium brand
names by building on its reputation for quality and worldwide leadership
position in the marketing, distribution and sourcing of bananas and other fresh
produce and by expanding its processed fruit and vegetable operations.
The Company conducts business in two segments, organized primarily on a
product line basis, with each segment offering a variety of different but
related products. The Fresh Produce segment includes the production,
transportation, distribution and marketing of Chiquita bananas and a wide
variety of other fresh fruits and vegetables. The Processed Foods segment
consists of the production, distribution and marketing of the Company's private-
label and branded canned vegetables, branded fruit and vegetable juices and
beverages, processed bananas and edible oil based consumer products. Financial
information by business segment and geographic area for the last three years is
set forth in Note 13 to the Consolidated Financial Statements included in the
Company's 1998 Annual Report to Shareholders.
In 1993, the European Union ("EU") implemented a banana quota regime which
restricts the importation into the EU of bananas from Latin America, Chiquita's
primary source of fruit. The quota regime has significantly affected the
worldwide banana industry and severely burdened Chiquita's operations. (See
RISKS OF INTERNATIONAL OPERATIONS.) Since 1993, the Company has reduced
operating costs and taken other measures to adjust to the quota regime. In
addition to these measures, the Company's primary strategic objectives have
included:
* building value from Chiquita bananas and the "Chiquita" brand name;
* expanding the marketing and distribution of fresh produce;
* growing in processed foods; and
* reducing debt and interest costs, strengthening the balance sheet
and increasing cash flow.
In connection with these objectives, in 1997 and early 1998, Chiquita
completed acquisitions of three vegetable canning companies which expanded the
capacity, product lines and geographic coverage of its existing vegetable
canning operations (see "Processed Foods"). In mid 1998, the Company expanded
its Fresh Produce operations by acquiring a fresh mushroom business in
Australia. These acquisitions also strengthened the balance sheet, as they were
financed through the issuance of Chiquita stock. For additional discussion of
these acquisitions, see Note 15 to the Consolidated Financial Statements
included in the Company's 1998 Annual Report to Shareholders. The Company has
significantly reduced debt from its peak level of $1.7 billion in 1993 to $1.2
billion at the end of 1998. Debt has been reduced through prepayments of high
cost public debentures and subsidiary debt using proceeds from public offerings
of preferred shares and senior notes, as well as cash generated by operations
and sales of non-core assets.
Fresh Produce sales, as a percent of consolidated net sales, amounted to 82%
in 1998, 90% in 1997 and 92% in 1996. The Company's Processed Foods business
contributed the balance of consolidated net sales. This business has expanded
since 1996 through the acquisitions of vegetable canning companies described
above. No individual customer accounted for more than 10% of the Company's
consolidated net sales during any of the last three years.
For a discussion of factors affecting Chiquita's results of operations for
the last three years, see "Management's Analysis of Operations and Financial
Condition" and Note 15 to the Consolidated Financial Statements included in the
Company's 1998 Annual Report to Shareholders. Factors that may cause
fluctuations in operating results are also discussed below.
Fresh Produce
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The Company markets an extensive line of fresh fruits and vegetables sold
under the "Chiquita" and other brand names. Chiquita's fresh fruits and
vegetables include bananas, berries, citrus, mangoes, melons, tomatoes, lettuce,
mushrooms and a wide variety of other fresh produce. In 1998, approximately
half of Fresh Produce sales were in North America and the remainder were in
Europe and other international markets. The core of Chiquita's Fresh Produce
operations is the marketing, distribution and sourcing of bananas. Sales of
bananas accounted for approximately 70% of Fresh Produce net sales in each of
the last three years.
Chiquita believes it derives competitive benefits in the marketing,
distribution and sourcing of fresh produce through:
* recognized brand names and a reputation for quality;
* strong market positions in North America and Europe, its principal
markets;
* a modern, cost-efficient fresh fruit transportation system;
* an industry leading position in terms of number and geographic diversity
of major sources of bananas;
* state-of-the-art banana ripening techniques; and
* best-demonstrated agricultural practices.
These characteristics enhance Chiquita's ability to provide customers with
premium quality products on a consistent basis.
DISTRIBUTION AND MARKETING. Chiquita sells and distributes a variety of
quality fruit and vegetable products through a network of fresh produce
operations in North America, Europe and the Pacific Rim. Some of these
operations involve the production, distribution and marketing of fresh fruits
and vegetables while others involve only distribution and marketing. The
Company has regional sales organizations and utilizes commissioned agents to
sell to retail customers and wholesalers. The retail customers include large
chain stores with which Chiquita enters into supply contracts, typically for a
one year term.
Bananas are sold under the "Chiquita," "Chiquita Jr.," "Consul" and "Amigo"
brand names. Other fresh fruits are also sold under the "Chiquita" and other
brand names and include apples, apricots, berries, cherries, grapes, peaches,
pears, plums and tomatoes. Fresh vegetables, such as asparagus, beans,
broccoli, carrots, celery, cucumbers, lettuce, mushrooms, onions, peppers and
potatoes, are sold under the "Premium" and other brand names.
Fresh produce, including bananas, is highly perishable and must be brought to
market and sold generally within 30 to 60 days after harvest. Some items, such
as lettuce and berries, must be sold more quickly, while other items, such as
apples and pears, can be held in cold storage for longer periods of time.
The selling price received for each type of fruit or vegetable depends on
several factors, including:
* the availability and quality of the produce item in the market; and
* the availability and quality of competing types of produce.
For example, although banana production tends to be relatively stable throughout
the year, banana pricing is seasonal. This is because bananas compete against
other fresh fruit which generally comes to market beginning in the summer. As a
result, banana prices are typically higher during the first half of the year.
Adverse weather may restrict the availability of fresh produce and result in
increased prices. However, competing producers and distributors may be affected
differently, depending upon their ability and the cost to obtain alternate
supplies.
Bananas are distributed and marketed internationally in a highly competitive
environment. 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. 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. Chiquita sells
approximately one-fourth of all bananas imported into North America and Europe,
its principal markets.
Chiquita sources fresh fruit from Central and South America for
international distribution in order to increase the year-round availability of
certain types of seasonal produce. In other instances, the sourcing and
distribution of fresh produce is more regionalized. Typically in these regional
markets, no single competitor has a dominant market share.
To control quality, bananas are normally ripened under controlled
conditions. Most other types of fresh produce are already ripe when shipped or
ripen naturally. The Company sells some bananas ripened in its own facilities
or under contractual ripening arrangements. Chiquita generally obtains a
premium price for its bananas due to its reputation for quality and its
innovative ripening and marketing techniques, which include providing retail
marketing support services to its customers.
LOGISTICS. Transportation costs are significant in Chiquita's Fresh Produce
business. Fresh produce distributed internationally is transported primarily by
ocean-going vessels. Chiquita ships its tropical fruit in refrigerated vessels
owned or chartered by the Company. All of Chiquita's tropical fruit shipments
into the North American market are delivered using pallets or containers. This
minimizes damage to the product by eliminating the need to handle individual
boxes. Chiquita owns or controls under long-term lease approximately 70% of its
aggregate shipping capacity. The remaining capacity is operated under
contractual arrangements having terms of approximately one year. (See also ITEM
2 - PROPERTIES and Notes 4 and 5 to the Consolidated Financial Statements
included in the Company's 1998 Annual Report to Shareholders.) Chiquita also
operates loading and unloading facilities which it owns or leases in Central and
South America and various ports of destination. Fresh produce grown near its
intended market is generally transported to customers via truck. Common
carriers and trucks owned or leased by the Company are used to ship this
produce.
SOURCING. Chiquita has a greater number and geographic diversity of major
sources of bananas than any of its competitors. During 1998, approximately one-
fourth of all bananas sold by Chiquita were sourced from Costa Rica. Bananas
are also sourced from numerous other countries. Colombia, Ecuador, Guatemala,
Honduras, Panama and the Philippines produced between 5% and 18% (depending on
the country) of the bananas sold by Chiquita during 1998.
In 1998, approximately half the bananas sourced by Chiquita were produced by
subsidiaries and the remainder were purchased under fruit supply arrangements
from other growers. Generally, these arrangements require less initial capital
investment by the Company than owned production facilities. Under some of these
fruit supply arrangements, Chiquita furnishes financial and technical assistance
to its suppliers to support the production and preparation of bananas for
shipment. Approximately 15% of the bananas sold by Chiquita in 1998 were
purchased from one supplier in Ecuador. No other single supplier provided more
than 5% of Chiquita's bananas.
The most significant cost in the production of bananas is labor, which
varies depending on the country of origin. Since bananas are packed in
cardboard boxes for shipment, paper cost is also significant.
In addition to its extensive production of bananas, Chiquita produces
mushrooms and berries in Australia, grapefruit in Florida and apples and grapes
in Chile. However, the majority of other fresh produce marketed by Chiquita is
purchased from numerous geographically diverse producers and importers. Some of
these production operations and purchase arrangements involve joint ventures.
Other arrangements involve formal long-term purchase contracts or informal
market trading with unrelated suppliers. Under these arrangements, Chiquita may
provide financial assistance. None of these arrangements accounts for more than
5% of the Company's consolidated net sales.
Fresh produce is vulnerable to adverse weather conditions including
windstorms, floods, drought and temperature extremes, which are quite common but
difficult to predict. Fresh produce is also vulnerable to crop disease and
pests. These factors may result in lower sales volume and increased costs, but
may also restrict supplies and lead to an increase in prices for fresh produce.
In addition, production may be affected by political changes in countries where
fruits and vegetables are grown. However, competitors may be affected
differently, depending upon their ability and the cost to obtain adequate
supplies from sources in other geographic areas. Chiquita's overall risk from
these factors is reduced by the low concentration of its fresh produce
production in individual producing locations.
In late October and early November of 1998, Chiquita sustained significant
damage to its operations in Honduras and Guatemala as a result of widespread
flooding caused by Hurricane Mitch. Nearly all of the banana plantings on the
Company's 17,000 acres of cultivations in Honduras were destroyed; approximately
two-thirds of the plantings on the Company's 8,000 acres of cultivations in
Guatemala were destroyed or severely damaged. Nevertheless, the Company expects
it will be able to meet its banana volume requirements through improved
productivity in its other farm divisions, including the western Panama division
which returned to full production in December 1998 after a strike earlier in the
year, and through purchases of fruit from associate producers.
Industry-wide, the damage caused by Hurricane Mitch will significantly
reduce 1999 banana volume from Honduras and Guatemala. This lost banana
production may be offset by increased industry exports from Ecuador, whose 1998
banana exports were negatively affected by El Nino.
Processed Foods
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Chiquita's Processed Foods include:
* private-label and branded canned vegetables sold in North America and
abroad;
* fruit and vegetable juices and beverages sold in North America and Europe;
* processed bananas sold primarily in North America, Europe and the Far
East under the "Chiquita" brand; and
* other consumer products (primarily edible oils) sold in Honduras under
the "Numar" and other brand names.
Sales of canned vegetables accounted for 81% of Processed Foods net sales in
1998 and 63% in each of 1997 and 1996.
Acquisitions of the Owatonna Canning group of companies and American Fine
Foods, Inc. in 1997 and Stokely USA, Inc. in early 1998 expanded the capacity,
product lines and geographic coverage of Chiquita's existing vegetable canning
operations. At the end of 1998, Chiquita merged these companies with its
existing Friday Canning Corporation subsidiary to form Chiquita Processed Foods,
L.L.C. The integration of these operations is expected to improve operating
efficiency and realize cost savings. This vegetable canning subsidiary operates
19 processing facilities and markets a full line of over twenty-five types of
processed vegetables, including corn, green beans, peas, pumpkin, root
vegetables and other related products, to retail and food service customers
throughout the U.S. and in over 40 other countries. Corn is Chiquita's leading
canned vegetable product, accounting for approximately 30% of Processed Foods
net sales. Chiquita's vegetable canning operations enjoy the largest share of
the U.S. private-label canned vegetable business. Branded products are sold
under the "Stokely's," "Read" and other labels. These operations compete
directly with a few major producers of both branded and private-label canned
vegetables, as well as indirectly with numerous marketers of frozen and fresh
vegetable products.
Operating results for Chiquita's vegetable canning operations are dependent on
product availability and market prices. Market prices tend to decrease as more
product is available and increase when product is scarce. The availability of
vegetables for canning is a direct result of planting acreage, weather and
growing conditions and crop yields. Favorable growing conditions increase both
crop size and crop quality.
Prior to each growing season, the Company enters into fixed-price supply
agreements with growers to purchase the vegetables to be processed in its
canning facilities. These supply agreements are typically for one year. To
ensure the quality and freshness of the vegetables used in its products, the
Company:
* selects growers located near its canning facilities;
* requires growers to use seed furnished by the Company; and
* controls the harvest process and its timing.
Chiquita's canned vegetable products are shipped to customers via truck or
rail. The Company ships to its customers both directly from its plants and from
regional storage and distribution centers. This maximizes customer service and
efficiency.
Sales of canned vegetables are not highly seasonal, although some products,
such as canned pumpkin, have higher sales volume in certain months. Since the
availability of vegetables for canning is predominantly seasonal, the production
of canned vegetables is also seasonal. As a result, Chiquita's canned vegetable
operations require a higher level of working capital to meet production
requirements during these periods.
The Company sells "Chiquita" branded fruit juices and beverages primarily in
North America. These include a full line of tropical blends which are
manufactured by others to Chiquita's specifications and sold in shelf-stable,
refrigerated and frozen varieties. Shelf-stable servings are sold through club
stores and mass merchandisers throughout most of the United States. In
addition, a national fruit juice producer produces and sells refrigerated and
frozen juice products in the United States using the "Chiquita" brand name and
pays Chiquita a license fee. "Chiquita" branded fruit juices are also sold in
Europe in shelf-stable and refrigerated varieties through a joint venture. In
the western United States, the Company also produces and markets natural fresh
fruit and vegetable juices sold under the "Ferraro's Earth Juice" and "Naked
Juice" brand names. The Company's juice products compete with a wide variety of
beverages in the highly competitive commercial beverages industry, which
includes other regional and national producers of juice and juice drink
products.
Chiquita's processed banana products include banana puree, frozen banana
pieces, sliced bananas and other specialty products. These products are sold to
producers of baby food, fruit beverages, baked goods and fruit-based products,
to wholesalers of bakery and dairy food products, and to selected licensees
including Beech-Nut and General Mills. Chiquita produces these products in
processing facilities in Costa Rica and Honduras. Although Chiquita enjoys the
largest share of the worldwide processed banana market, this industry remains
highly competitive due to the existence of numerous other producers with
available processing capacity, including other banana growers, fruit ingredients
companies and large, international food companies.
The Company's processed banana facility in Honduras has significantly
reduced its production as a result of the local shortage of bananas caused by
Hurricane Mitch. The Company has replaced this lost production by increasing
production at its facility in Costa Rica and by purchasing product from co-
packers.
The Company's consumer products operations in Honduras are conducted through
a 50%-owned joint venture. The joint venture produces and sells its edible oil
and other products under the "Numar," "Clover" and other brand names. It
competes principally with a number of small local firms and subsidiaries of
multinational corporations.
RISKS OF INTERNATIONAL OPERATIONS
The Company conducts operations in many foreign countries. Information
about the Company's operations by geographic area is in Note 13 to the
Consolidated Financial Statements included in the Company's 1998 Annual Report
to Shareholders and is incorporated herein by reference. These operations are
subject to a variety of risks inherent in doing business in those countries.
On July 1, 1993, the European Union implemented a quota system effectively
restricting the volume of Latin American bananas imported into the EU, which had
the effect of decreasing the Company's overall volume and market share in
Europe. The quota regime is administered through a licensing system and grants
preferred status to producers and importers within the EU and its former
colonies, while imposing restrictive 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 increased and have
remained at a higher level than the levels prevailing prior to the quota.
Banana prices in other worldwide markets, however, declined as the displaced EU
volume entered those markets and have remained lower than in years prior to the
EU quota.
In two separate rulings, General Agreement on Tariffs and Trade ("GATT")
panels found the EU banana policies to be illegal. In March 1994, four of the
five countries which had initiated GATT complaints, Costa Rica, Colombia,
Nicaragua and Venezuela, settled their GATT actions against the EU by entering
into a "Framework Agreement" which guaranteed them preferential EU market access
for bananas. The Framework Agreement was implemented in 1995 and imposed
additional restrictive and discriminatory quotas and export licenses on U.S.
banana marketing firms, while leaving EU firms exempt. This significantly
increased the Company's cost to export bananas.
Since implementation of the quota system:
* 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 September 1995, the United States, Guatemala, Honduras and Mexico
commenced a challenge against the EU quota regime using the procedures of
the World Trade Organization ("WTO"). Ecuador, the world's largest
exporter of bananas, joined these countries in filing a new WTO action in
February 1996.
* In May 1997, a WTO arbitration panel issued a report ruling that the
licensing and quota systems under the EU quota 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.
* In September 1997, the WTO Appellate Body upheld the panel's report and the
full WTO body later adopted both the panel and Appellate Body reports.
* In January 1998, a WTO arbitrator ruled that the EU must fully implement
banana policies consistent with the WTO report findings not later than
December 31, 1998.
* In July 1998, the EU adopted a revised quota and license regime which was
implemented in January 1999. The five governments which filed the WTO
complaint, joined by Panama which became a WTO member after the initial
complaint was filed, have all indicated that they do not believe the
revised EU regime complies with the WTO rulings.
* In January 1999, the United States requested WTO authorization to impose
prohibitive (100% of value) duties on selected EU products accounting for
annual exports to the United States of $520 million, which the United
States calculates as the amount of harm to the United States caused by the
continuing failure of the revised EU banana regime to be WTO consistent.
* On March 2, 1999, a WTO arbitration panel hearing the EU's objections to
the proposed sanctions announced that it would rule on whether the revised
EU banana regime is WTO consistent as well as the level of permissible
sanctions if it finds the revised regime to be WTO inconsistent. The panel
indicated that its ruling will be issued soon after March 15, 1999 and will
not be subject to appeal.
* Effective March 3, 1999, the United States conditionally imposed the
prohibitive duties for which it is seeking WTO authorization, but announced
that it would refrain from collecting the higher duties until the WTO panel
has ruled in the pending arbitration.
There can be no assurance as to the results of the WTO proceedings, including
the pending arbitration, the nature and extent of actions that may be taken by
the affected countries, the impact on the EU quota regime or the Framework
Agreement or the impact on the Company's business.
The Company'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.
The Company's operations in some Central and South American countries are
dependent upon leases and other agreements with the governments of these
countries. Chiquita leases all the land it uses in Panama from the Republic of
Panama. There are two leases, one for land on the Caribbean coast and the other
for land on the Pacific coast. The leases each have an initial term of 20 years
expiring at the end of 2017, with consecutive 12-year extension periods. Either
lease can be canceled by Chiquita at any time on three years' prior notice; the
Republic of Panama has the right not to renew either lease at the end of the
initial term or any extension period, provided that it gives four years' prior
notice. In Honduras, the Company terminated its lease with the government for a
railroad and other facilities in that country primarily as a result of the
severe damage caused by Hurricane Mitch.
The Company's worldwide operations and products are subject to numerous
governmental regulations and inspections by environmental, food safety and
health authorities. These regulations directly affect day-to-day operations.
The Company believes it is substantially in compliance with applicable
regulations. However, actions by regulators in the past have required, and in
the future may require, operational modifications or capital improvements at
various locations. In addition, if violations occur, regulators can impose
fines, penalties and other sanctions.
The Company's operations involve transactions in a variety of currencies.
Accordingly, its operating results may be significantly affected by fluctuations
in currency exchange rates. These fluctuations affect Chiquita's operations
because many of its costs are incurred in currencies different from those
received from the sale of its products. In addition, there is normally a time
lag between the incurrence of production costs and collection of the related
sales proceeds. The Company's policy is to exchange local currencies for
dollars immediately upon receipt, thus reducing exchange risk. The Company also
engages in various hedging activities to further reduce potential losses on cash
flows originating in currencies other than the U.S. dollar. For information
with respect to currency exchange, see Notes 1 and 7 to the Consolidated
Financial Statements and "Management's Analysis of Operations and Financial
Condition" included in the Company's 1998 Annual Report to Shareholders.
LABOR RELATIONS
The Company employs approximately 37,000 associates. Approximately 27,000
of these associates are employed in Central and South America, including 23,000
workers covered by 56 labor contracts. Contracts covering fewer than 1,000
employees are currently being renegotiated or expire in 1999. The Company
employs approximately 1,600 full-time employees in its vegetable canning
operations, of which less than 500 are covered by labor contracts. The number
of employees at the vegetable canning operations increases to approximately
4,200 during peak production times. Strikes or other labor-related actions are
sometimes encountered upon expiration of labor contracts or during the term of
the contracts.
In early 1998, approximately 5,000 workers in the Company's Armuelles
division in western Panama went on a two-month strike. The strike occurred even
though these workers had recently entered into a new collective bargaining
agreement with the Company. Because the Company was unable to properly maintain
banana plants during the strike, plants at the affected farms had to be
rehabilitated. This interrupted banana production until December 1998, when the
division returned to full production.
ITEM 2 - PROPERTIES
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The Company owns approximately 90,000 acres and leases approximately 50,000
acres of improved land, principally in Colombia, Costa Rica, Honduras and
Panama. This land is primarily used for the cultivation of bananas and support
activities, including the maintenance of floodways. The Company also owns
warehouses, power plants, packing stations, irrigation systems and loading and
unloading facilities used in connection with its Fresh Produce operations.
The Company owns or controls under long-term bareboat charters 16
refrigerated vessels and has 8 additional vessels under time charters, primarily
for transporting tropical fruit sold by Chiquita. From time to time, excess
capacity may be utilized by transporting cargo for third parties or by
chartering or subchartering vessels to other shippers. In addition, the Company
enters into spot charters and contracts of affreightment as necessary to
supplement its transportation resources. Chiquita also owns or leases other
related equipment, including refrigerated container units, used to transport
fresh produce. The owned ships are pledged as collateral for related
financings.
Properties used by the Company's Processed Foods operations include a total
of 19 vegetable canning facilities in Idaho, Illinois, Iowa, Michigan,
Minnesota, Oregon, Washington and Wisconsin and fruit processing facilities in
Costa Rica and Honduras. Other operating units of the Company own, lease and
operate properties, principally in the United States, Europe, and Central and
South America. The Company leases the space for its headquarters in Cincinnati,
Ohio.
The Company believes its property and equipment are generally well
maintained, in good operating condition and adequate for its present needs. The
Company typically insures its assets against standard risks with third party
insurers, with the exception of banana cultivations in Central and South
America. The Company self-insures its banana cultivations because of the high
total cost of insurance from third parties and the geographic diversity of its
banana sources.
For further information with respect to the Company's physical properties,
see the descriptions under ITEM 1 - BUSINESS - GENERAL above, and Notes 4 and 5
to the Consolidated Financial Statements included in the Company's 1998 Annual
Report to Shareholders.
ITEM 3 - LEGAL PROCEEDINGS
- --------------------------
A number of legal actions are pending against the Company. Based on
information currently available to the Company and on advice of counsel,
management does not believe this litigation will, individually or in the
aggregate, have a material adverse effect on the financial statements of the
Company.
On May 3, 1998, a Cincinnati, Ohio newspaper published accounts describing
alleged improper environmental and business practices by the Company in certain
of its operations in Central and South America. The newspaper reported that one
of its sources had previously provided to the SEC information furnished to the
newspaper. In late June 1998, the newspaper renounced the series of articles as
containing untrue accusations and conclusions and creating a false and
misleading impression of Chiquita's business practices.
In April 1998, the Company was notified that it is the subject of a
confidential investigation by the SEC seeking to determine whether the Company
has complied with certain provisions of the Securities Exchange Act of 1934 (the
"Exchange Act"), including provisions of the Foreign Corrupt Practices Act (the
"FCPA"). The investigation seeks to determine whether the Company, with respect
to certain operations in Central and South America, has complied with FCPA
provisions relating to the making or offering of illegal payments to foreign
officials and the maintenance of fair and accurate books, records and accounts
and an appropriate system of internal accounting controls or has complied with
Exchange Act provisions relating to the making, or filing with the SEC of
reports containing, untrue statements of material fact or omissions of material
fact. The Company believes that it has not violated the Exchange Act or the
FCPA and is cooperating with the investigation.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
Carl H. Lindner (age 79) - Mr. Lindner has been Chairman of the Board and
Chief Executive Officer of the Company since 1984. He is also Chairman of the
Board and Chief Executive Officer of American Financial Group, Inc. ("AFG")
which, through its subsidiaries, is engaged primarily in property and casualty
insurance businesses and in the sale of annuities and life insurance. For 40
years, Mr. Lindner has been Chairman of the Board and Chief Executive Officer of
American Financial Corporation ("AFC"), which became an AFG subsidiary in 1995.
Keith E. Lindner (age 39) - Mr. Lindner has been Vice Chairman of the Board
since 1997 and was President and Chief Operating Officer of the Company from
1989 to 1997. He has served the Company in various executive capacities since
1984. Mr. Lindner is also Co-President and a Director of AFG and AFC.
Steven G. Warshaw (age 45) - Mr. Warshaw has been President and Chief
Operating Officer and a Director of the Company since 1997. He served as Chief
Financial Officer from 1994 to March 1998, and as Executive Vice President and
Chief Administrative Officer of the Company from 1990 to 1997. Mr. Warshaw has
served the Company in various capacities since 1986.
Anthony D. Battaglia (age 54) - Mr. Battaglia has been President of the
Company's Diversified Foods Group since 1997. From 1994 to 1997 he served as
President of the Company's Processed Foods Group and from 1991 to 1994 as its
Chief Operating Officer. Mr. Battaglia has served the Company in various
capacities since 1985.
Peter A. Horekens (age 50) - Mr. Horekens has been President and Chief
Operating Officer of the Company's Chiquita Banana Group - Europe since 1997.
Mr. Horekens had previously been employed by Kellogg Company, a multi-national
food company, for over five years, most recently as Vice President and Director
of Asian Operations.
Robert F. Kistinger (age 46) - Mr. Kistinger has been President and Chief
Operating Officer of the Company's Chiquita Banana Group since 1997. He was
Senior Executive Vice President of the Chiquita Banana Group from 1994 to 1997
and President of Chiquita Banana Group - North America from 1996 to 1997. He
has served the Company in various capacities since 1980.
Warren J. Ligan (age 45) - Mr. Ligan has been Senior Vice President and
Chief Financial Officer since March 1998. Mr. Ligan has served the Company in
various capacities since 1993, most recently as Vice President, Taxation.
Robert W. Olson (age 53) - Mr. Olson has been Senior Vice President, General
Counsel and Secretary of the Company since 1996. From 1995 to 1996, he was the
Company's Vice President, General Counsel and Secretary. From 1987 to 1995, he
served as Senior Vice President, General Counsel and Secretary of American
Premier Underwriters, Inc. (formerly named The Penn Central Corporation), an
affiliate of AFG. He was Senior Vice President and Secretary of AFG from April
1995 until he joined the Company.
Benjamin Paz (age 49) - Mr. Paz has been President and Chief Operating
Officer of the Company's Chiquita Banana Group - North America since 1997. Mr.
Paz had previously been employed by Dole Food Company, Inc., a multi-national
food company, for over five years, most recently as President of its Latin
American division.
William A. Tsacalis (age 55) - Mr. Tsacalis has been Vice President and
Controller of the Company since 1987. He was Controller from 1984 to 1987 and
has served the Company in various capacities since 1980.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
- ------------------------------------------------------------
The Company's common stock is listed for trading on the New York, Boston and
Pacific Stock Exchanges under the symbol "CQB." At March 16, 1999, there were
5,583 common shareholders of record. Price and dividend information for the
Company's common stock is in Note 16 to the Consolidated Financial Statements
included in the Company's 1998 Annual Report to Shareholders. Restrictions on
the Company's ability to declare and pay dividends are described in Note 8 to
the Consolidated Financial Statements included in the Company's 1998 Annual
Report to Shareholders. The information in Notes 8 and 16 described above is
incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
- ----------------------------------
This information is included in the table entitled "Selected Financial Data"
on page 58 of the Company's 1998 Annual Report to Shareholders and is
incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
- ----------------------------------------------------------
This information is included under the caption "Management's Analysis of
Operations and Financial Condition" included on pages 31 through 36 of the
Company's 1998 Annual Report to Shareholders and is incorporated herein by
reference.
ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
- --------------------------------------------------------
This information is included under the caption "Management's Analysis of
Operations and Financial Condition - Management of Market Risk" included on page
36 of the Company's 1998 Annual Report to Shareholders and is incorporated
herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- ------------------------------------------------------
The Consolidated Financial Statements of Chiquita Brands International, Inc.
on pages 37 through 57 of the Company's 1998 Annual Report to Shareholders,
including "Quarterly Financial Data" in Note 16 to the Consolidated Financial
Statements, are incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
- ----------------------------------------------------------
None.
PART III
Except for information relating to the Company's executive officers included
in Part I of this report, the information required by the following Items will
be included in Chiquita's definitive Proxy Statement which will be filed with
the Securities and Exchange Commission in connection with the 1999 Annual
Meeting of Shareholders and is incorporated herein by reference.
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------------------------------------------------------------
ITEM 11 - EXECUTIVE COMPENSATION
- ---------------------------------
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
- ----------------------------------------------------------
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ---------------------------------------------------------
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
- ----------------------------------------------------------
(a) 1. FINANCIAL STATEMENTS. The following consolidated financial
statements of the Company and the Report of Independent Auditors are
included in the Company's 1998 Annual Report to Shareholders and are
incorporated by reference in Part II, Item 8:
</TABLE>
<TABLE>
<CAPTION>
Page of
Annual Report
-------------
<S> <C>
Report of Independent Auditors 30
Consolidated Statement of Income for
1998, 1997 and 1996 37
Consolidated Balance Sheet at December 31,
1998 and 1997 38
Consolidated Statement of Shareholders'
Equity for 1998, 1997 and 1996 39
Consolidated Statement of Cash Flow for
1998, 1997 and 1996 40
Notes to Consolidated Financial Statements 41
</TABLE>
2. FINANCIAL STATEMENT SCHEDULE. Financial Statement
Schedule II - Allowance for Doubtful Accounts Receivable
is included on page 16 of this Annual Report on Form 10-K.
All other schedules are not required under the related
instructions or are not applicable.
3. EXHIBITS. See Index of Exhibits (pages 17 and 18) for a
listing of all exhibits to this Annual Report on Form 10-K.
(b) There were no reports on Form 8-K filed by the Company during the quarter
ended December 31, 1998.
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 29, 1999.
CHIQUITA BRANDS INTERNATIONAL, INC.
By /s/ Carl H. Lindner
---------------------
Carl H. Lindner
Chairman of the Board and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated below on
March 29, 1999:
/s/ Carl H. Lindner Chairman of the Board and
Carl H. Lindner Chief Executive Officer
/s/ Keith E. Lindner Vice Chairman of the Board
Keith E. Lindner
/s/ Steven G. Warshaw Director, President and
Steven G. Warshaw Chief Operating Officer
/s/ Fred J. Runk Director
Fred J. Runk
Jean Head Sisco* Director
Jean Head Sisco
William W. Verity* Director
William W. Verity
Oliver W. Waddell* Director
Oliver W. Waddell
/s/ Warren J. Ligan Senior Vice President and
Warren J. Ligan Chief Financial Officer
/s/ William A. Tsacalis Vice President and Controller
William A. Tsacalis (Chief Accounting Officer)
* By /s/ William A. Tsacalis
Attorney-in-Fact**
** By authority of powers of attorney filed with this Annual Report on
Form 10-K.
CHIQUITA BRANDS INTERNATIONAL, INC.
SCHEDULE II - ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE
(In thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Balance at beginning
of period $10,683 $9,832 $11,310
------- ------- -------
Additions:
Charged to costs
and expenses 2,401 3,049 3,685
------- ------- -------
Deductions:
Write-offs 3,011 1,441 4,268
Other, net (530) 757 895
------- ------- -------
2,481 2,198 5,163
------- ------- -------
Balance at end of period $10,603 $10,683 $9,832
======= ======= =======
</TABLE>
CHIQUITA BRANDS INTERNATIONAL, INC.
Index of Exhibits
Exhibit
Number Description
- ------- -----------
*3(i) 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 (1) 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; (2) the Second
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) the Third Certificate of Amendment
increasing the number of authorized shares and changing the title and par
value of the common stock, filed as Exhibit 4 to Amendment No. 1 to Form
8-A dated June 18, 1998; and (4) the Fourth Certificate of Amendment
reducing the number of shares designated as Series C Preference Stock,
filed as Exhibit 5 to Amendment No. 1 to Form 8-A dated June 18, 1998
*3(ii) 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 the Company and The
Fifth Third Bank, Trustee, with respect to Senior Debt Securities, under
which the Company's 9 1/8% Senior Notes due 2004 and the Company's 10
1/4% Senior Notes due 2006 have been issued, filed as Exhibit 4(c) of
Registration Statement 333-00789, as supplemented by (1) the First
Supplemental Indenture dated as of June 15, 1994, filed as Exhibit
6(a)99(c) to Quarterly Report on Form 10-Q for the quarter ended June 30,
1994 and by (2) the Second Supplemental Indenture dated as of July 15,
1996, filed as Exhibit 4 to Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996; and as further supplemented by (3) the Certificate
of the Vice President and Controller of the Company establishing the
terms of the 9 1/8% Senior Notes, filed as Exhibit 7(c)(3) to Current
Report on Form 8-K dated February 8, 1994 and by (4) the Terms of the
10 1/4% Senior Notes approved by the Executive Committee of the Board
of Directors of the Company, filed as Exhibit 7(c)99.6 to Current Report
on Form 8-K dated July 22, 1996
The Company has no other outstanding debt issues exceeding 10% of its
consolidated total assets. The Company will furnish to the Securities and
Exchange Commission, upon request, copies of all agreements and
instruments defining the rights of security holders for debt issues not
exceeding 10% of consolidated total assets.
*10-a Operating contracts dated February 18, 1998 between the
Republic of Panama and Chiriqui Land Company consisting of Contract of
Operations (Bocas del Toro), Contract of Operations (Armuelles),
Amendment and Extension of the Lease Land Contract, and related
documents as published in the Republic of Panama Official Gazette
No. 23,485, filed as Exhibit 10-b to Annual Report on Form 10-K for
the year ended December 31, 1997
*10-b 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
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, as amended by Amendment No. 1 dated as of
December 8, 1997, filed as Exhibit 10-c to Annual Report on
Form 10-K for the year ended December 31, 1997
10-c Second Amended and Restated Loan and Security Agreement dated
February 26, 1999 between Congress Financial Corporation (Central) and
Chiquita Processed Foods, L.L.C. relating to an $85 million revolving
credit facility for Chiquita's vegetable canning subsidiary
Executive Compensation Plans
----------------------------
10-d 1986 Stock Option and Incentive Plan, as Amended and Restated
effective May 13, 1998
*10-e 1998 Stock Option and Incentive Plan, included as Appendix A to
the Company's definitive Proxy Statement filed on Schedule 14A dated
April 8, 1998
10-f 1997 Amended and Restated Deferred Compensation Plan (conformed to
include amendments effective January 1, 1998)
10-g 1997 Deferred Compensation Plan for the Board of Directors
(conformed to include amendments effective January 1, 1998)
13 Chiquita Brands International, Inc. 1998 Annual Report to
Shareholders (pages 30 through 58)
21 Subsidiaries of Registrant
23 Consent of Independent Auditors
24 Powers of Attorney
27 Financial Data Schedule
- ----------------------
* Incorporated by reference.
EXHIBIT 10C
-----------
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
by and between
CONGRESS FINANCIAL CORPORATION (CENTRAL)
as Lender
and
CHIQUITA PROCESSED FOODS, L.L.C.
as Borrower
Dated: February 26, 1999
SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
This Second Amended and Restated Loan and Security Agreement (this
"Agreement") dated February 26, 1999 by and between Congress Financial
Corporation (Central), an Illinois corporation ("Lender"), and Chiquita
Processed Foods, L.L.C., a Delaware limited liability company ("Borrower"),
amends and restates in its entirety that certain Amended and Restated Loan and
Security Agreement dated January 16, 1998 by and between Lender and Stokely USA,
Inc. ("Stokely"), as amended (the "Original Agreement").
W I T N E S S E T H:
WHEREAS, pursuant to the Merger Agreement (defined herein) and that certain
Waiver and Assumption Agreement dated as of December 28, 1998 among Borrower,
Stokely and Lender, Stokely was merged into Borrower and Borrower assumed all of
the liabilities and obligations of Stokely including, without limitation, the
Obligations of Stokely to the Lender under the Original Agreement;
WHEREAS, Borrower has requested that Lender amend the Original Agreement as
provided for herein;
WHEREAS, Lender is willing to amend the Original Agreement and to provide
financial accommodations to the Borrower on the terms and conditions set forth
herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code as in effect in the State of Illinois shall have the
meanings given therein unless otherwise defined in this Agreement. All
references to the plural herein shall also mean the singular and to the singular
shall also mean the plural. All references to Borrower and Lender pursuant to
the definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. An
Event of Default shall exist or continue or be continuing until such Event of
Default is waived in accordance with Section 11.3. Any accounting term used
herein unless otherwise defined in this Agreement shall have the meanings
customarily given to such term in accordance with GAAP. For purposes of this
Agreement, the following terms shall have the respective meanings given to them
below:
1.1. "ACCEPTABLE FOREIGN ACCOUNT" means an Account for which the chief
executive office of the account debtor with respect thereto is located outside
the United States and either (i) the account debtor has delivered to Borrower an
irrevocable letter of credit issued or confirmed by a bank satisfactory to
Lender, sufficient to cover such Account, in form and substance satisfactory to
Lender and, if required by Lender, the original of such letter of credit has
been delivered to Lender or Lender's agent and the issuer thereof notified of
the assignment of the proceeds of such letter of credit to Lender, (ii) such
Account is subject to credit insurance payable to Lender issued by an insurer
and on terms and in an amount acceptable to Lender or (iii) the account debtor
with respect to such Account is one of the entities listed on Exhibit B hereto
or a Person otherwise acceptable to Lender in its discretion.
1.2. "ACCEPTABLE THIRD PARTY AGREEMENT" shall mean an agreement executed by
the appropriate Person (i) in the form of Exhibit C hereto or (ii) in form and
substance satisfactory to Lender acknowledging Lender's first priority security
interest in all of the Inventory of Borrower in the possession of such Person or
located on property owned by such Person or which such Person has a mortgage (or
similar interest), as applicable, waiving security interests and claims by such
Person against such Inventory and permitting Lender access to, and the right to
remain on, the applicable premises to exercise Lender's rights and remedies and
otherwise deal with Collateral.
1.3. "ACCOUNTS" shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.4. "ADJUSTED EURODOLLAR RATE" shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next 1/100 of 1%) determined by dividing (1) the Eurodollar
Rate for such Interest Period by (2) a percentage equal to: (i) one (1) minus
(ii) the Reserve Percentage. For purposes hereof, "Reserve Percentage" shall
mean the reserve percentage, expressed as a decimal, prescribed by any United
States or foreign banking authority for determining the reserve requirement
which is or would be applicable to deposits of United States dollars in a non-
United States or an international banking office of Reference Bank used to fund
a Eurodollar Rate Loan or any Eurodollar Rate Loan made with the proceeds of
such deposit, whether or not the Reference Bank actually holds or has made any
such deposits or loans. The Adjusted Eurodollar Rate shall be adjusted on and
as of the effective day of any change in the Reserve Percentage.
1.5. "ADJUSTED TANGIBLE NET WORTH" shall mean as to any Person, at any
time, in accordance with GAAP (except as otherwise specifically set forth
below), on a consolidated basis for such Person and its subsidiaries (if any),
the amount equal to the sum of (a) the difference between: (i) the aggregate
net book value of all assets of such Person and its subsidiaries (excluding the
book value of goodwill, non-competition agreements, patents, trademarks,
copyrights, licenses and other intangible assets), calculating the book value of
inventory for this purpose on an average cost basis, after deducting from such
book values all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization)
and (ii) the aggregate amount of the indebtedness and other liabilities of such
Person and its subsidiaries (including tax and other proper accruals) included
on the balance sheet of such person in accordance with GAAP, plus (b)
indebtedness of such Person and its subsidiaries which is subordinated in right
of payment to the full and final payment of all of the Obligations on terms and
conditions acceptable to Lender. For purposes of this definition only, GAAP
shall refer to GAAP as in effect on the date hereof, and shall not reflect any
changes in GAAP which may hereafter become effective.
1.6. "AVAILABILITY RESERVES" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Revolving Loans and Letter of Credit Accommodations which
would otherwise be available to Borrower under the lending formula(s) provided
for herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, do or may affect either (i) the Collateral
or any other property which is security for the Obligations or its value, (ii)
the assets, business or prospects of Borrower or any Obligor or (iii) the
security interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender's good
faith belief that any collateral report or financial information furnished by or
on behalf of Borrower or any Obligor to Lender is or may have been incomplete,
inaccurate or misleading in any material respect or (c) in respect of any state
of facts which Lender determines in good faith constitutes an Event of Default
or may, with notice or passage of time or both, constitute an Event of Default;
provided, however, that no Availability Reserves shall be established as a
result of any event, condition, contingency or risk which is appropriately
reserved for pursuant to the Supplier Reserve.
1.7. "BLOCKED ACCOUNTS" shall have the meaning set forth in Section 6.3
hereof.
1.8. "BREAKAGE FEES" shall mean with respect to any Eurodollar Rate Loan
which is at any time paid prior to the last day of its Interest Period,
regardless of the reason for such prepayment, the positive difference, if any,
between the total amount of interest that would have been due for the balance of
the scheduled Interest Period on such Eurodollar Rate Loan if it had not been so
prepaid and the amount of interest that would be earned if the amount of the
prepaid Eurodollar Rate Loan were invested for the remaining balance of such
Interest Period at the CD Rate in effect on the first day of the month in which
such prepayment occurs. As used herein, "CD Rate" shall mean the rate quoted in
the "Money Rates" section of The Wall Street Journal for the average of the top
rates paid by New York banks on primary new issues of negotiable certificates of
deposit in amounts of $1 million and more having a 1-month maturity, as
published on the first Business Day of the month in which any prepayment of a
Eurodollar Rate Loan occurs.
1.9. "BUSINESS DAY" shall mean (a) with respect to any borrowing, payment
or rate selection relating to Eurodollar Rate Loans, a day other than Saturday
or Sunday on which banks are open for business in the States of New York,
Illinois and North Carolina and on which dealings in United States dollars are
carried on in the London interbank market or other applicable Eurodollar Rate
market, and (b) for all other purposes, a day other than Saturday or Sunday on
which banks are open for business in the States of New York, Illinois and North
Carolina.
1.10. "CHIQUITA" shall mean Chiquita Brands International, Inc. a New
Jersey corporation.
1.11. "CODE" shall mean the Internal Revenue Code of 1986, as the same
now exists or may from time to time hereafter be amended, modified, recodified
or supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.12. "COLLATERAL" shall have the meaning set forth in Section 5 hereof.
1.13. "EFFECTIVE DATE" shall have the meaning set forth in Section 4.1.
1.14. "ELIGIBLE ACCOUNTS" shall mean Accounts (other than Accounts
which arise from the sale of seed) created by Borrower which are and continue to
be acceptable to Lender based on the criteria set forth below. In general,
Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and shipment
(or, in the case of bill and hold goods, billing) of goods by Borrower or
rendition of services by Borrower in the ordinary course of its business which
transactions are completed in accordance with the terms and provisions contained
in any documents related thereto;
(b) such Accounts are not unpaid more than one hundred and twenty (120)
days after the date of the original invoice for them;
(c) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed sale,
sale and return, sale on approval, or other terms under which payment by the
account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with respect to such
Accounts is located in the United States of America or such Accounts are
Acceptable Foreign Accounts;
(f) such Accounts do not consist of progress billings, bill and hold
invoices or retainage invoices, except as to bill and hold invoices, if Lender
shall have received an agreement in writing from the account debtor, in form and
substance satisfactory to Lender, confirming the unconditional obligation of the
account debtor to take the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not asserted a
counterclaim, defense or dispute and does not have, and does not engage in
transactions which may give rise to, any right of setoff against such Accounts;
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and perfected
security interest of Lender and any goods giving rise thereto are not, and were
not at the time of the sale thereof, subject to any liens except those permitted
in this Agreement;
(j) neither the account debtor nor any officer or employee of the account
debtor with respect to such Accounts is an officer, employee or agent of or
affiliated with Borrower directly or indirectly by virtue of family membership,
ownership, control, management or otherwise;
(k) the account debtors with respect to such Accounts are not any foreign
government, the United States of America, any State, political subdivision,
department, agency or instrumentality thereof, unless, if the account debtor is
the United States of America, any State, political subdivision, department,
agency or instrumentality thereof, either (i) upon Lender's request, the Federal
Assignment of Claims Act of 1940, as amended or any similar State or local law,
if applicable, has been complied with in a manner satisfactory to Lender or (ii)
Lender has not made any such request;
(l) there are no proceedings or actions which the Borrower has knowledge
of (or reasonably should have knowledge of) which are threatened or pending
against the account debtors with respect to such Accounts which might result in
any material adverse change in any such account debtor's financial condition;
(m) such Accounts of a single account debtor or its affiliates do not
constitute more than thirty percent (30%) of all otherwise Eligible Accounts
(but the portion of the Accounts not in excess of such percentage may be deemed
Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has Accounts
unpaid more than one hundred twenty (120) days after the date of the original
invoice for them which constitute more than fifty (50%) percent of the total
Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total indebtedness to
Borrower does not exceed the credit limit with respect to such account debtors
as reasonably determined by Lender from time to time (but the portion of the
Accounts not in excess of such credit limit may still be deemed Eligible
Accounts);
(p) such Accounts are owed by account debtors deemed creditworthy at all
times by Lender, as reasonably determined by Lender;
(q) such Accounts are payable in U.S. Dollars in the United States of
America; and
(r) the account debtor is not located in New Jersey, Tennessee, Indiana,
Minnesota or West Virginia unless Borrower has (i) filed a Notice of Business
Activities Report with the applicable state taxing authority in such state, or
(ii) qualified as a foreign corporation in good standing in such state.
General criteria for Eligible Accounts may be established and revised from
time to time by Lender in good faith to reflect other matters or circumstances
which may impact the collectability of one or more Accounts. Any Accounts which
are not Eligible Accounts shall nevertheless be part of the Collateral.
1.15. "ELIGIBLE INVENTORY" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of Borrower and raw
seeds which are acceptable to Lender based on the criteria set forth below. In
general, Eligible Inventory shall not include (a) work-in-process (other than
Inventory in transit between locations as long as such Inventory would otherwise
constitute Eligible Inventory were it located at either of such locations); (b)
components which are not part of finished goods; (c) spare parts for equipment;
(d) packaging and shipping materials; (e) supplies used or consumed in
Borrower's business; (f) Inventory at premises other than those owned and
controlled by Borrower (other than Inventory in transit between locations as
long as such Inventory would otherwise constitute Eligible Inventory were it
located at either of such locations), except if Lender shall have received an
Acceptable Third Party Agreement from the person in possession of such Inventory
and/or the owner or operator of such premises; (g) Inventory subject to a
security interest or lien in favor of any person other than Lender except those
permitted in this Agreement; (h) bill and hold goods, the sale of which has
given rise to an Account; (i) unserviceable, obsolete or slow moving Inventory;
(j) Inventory which is not subject to the first priority, valid and perfected
security interest of Lender; (k) returned, damaged and/or defective Inventory;
and (l) Inventory purchased or sold on consignment. General criteria for
Eligible Inventory may be established and revised from time to time by Lender in
good faith to reflect other matters or circumstances which may impact the
saleability or value of such Inventory or the Lender's first priority perfected
security interest therein. Any Inventory which is not Eligible Inventory shall
nevertheless be part of the Collateral.
1.16. "ENVIRONMENTAL LAWS" shall mean all federal, state, district,
local and foreign laws, rules, regulations, ordinances, and consent decrees
relating to health, safety, hazardous substances, pollution and environmental
matters applicable to Borrower's business and facilities (whether or not owned
by it), including laws relating to emissions, discharges, releases or threatened
releases of pollutants, contamination, chemicals, or hazardous, toxic or
dangerous substances, materials or wastes into the environment (including,
without limitation, ambient air, surface water, ground water, land surface or
subsurface strata) or otherwise relating to the generation, manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, chemicals, or hazardous, toxic or
dangerous substances, materials or wastes.
1.17. "EQUIPMENT" shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers, computer hardware, owned and licensed
computer software, vehicles, tools, furniture, fixtures, all attachments,
accessions and property now or hereafter affixed thereto or used in connection
therewith, and substitutions and replacements thereof, wherever located.
1.18. "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.19. "ERISA AFFILIATE" shall mean any person required to be aggregated
with Borrower or any of its Subsidiaries under Sections 414(b), 414(c), 414(m)
or 414(o) of the Code.
1.20. "EURODOLLAR RATE" shall mean, with respect to any Interest Period
for a Eurodollar Rate Loan requested by Borrower by not less than three (3)
Business Days' prior notice to Lender, the interest rate per annum equal to the
arithmetic mean of the rates of interest per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) at which Reference Bank is offered deposits
of United States dollars in the London interbank market (or other Eurodollar
Rate market selected by Borrower and approved by Lender, which approval shall
not be unreasonably withheld) at or about 9:00 a.m. (New York time) two (2)
Business Days prior to the commencement of such Interest Period in amounts
substantially equal to the principal amount of the Eurodollar Rate Loans
requested by and available to Borrower in accordance with this Agreement, with a
maturity of comparable duration to the Interest Period selected by Borrower.
Upon receipt of Borrower's request for a Eurodollar Rate Loan, Lender will, if
requested, provide Borrower with an indication of the prevailing Eurodollar Rate
on the Business Day of such request; provided, however, that the actual
Eurodollar Rate which is applicable to the requested Interest Period shall be
determined as provided above and may be higher or lower than such indicative
rate.
1.21. "EURODOLLAR RATE LOANS" shall mean any Loans or portion thereof
on which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.22. "EVENT OF DEFAULT" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.23. "FINANCING AGREEMENTS" shall mean, collectively, this Agreement
and all notes, guarantees, security agreements, trademark security agreements,
blocked account agreements, and other agreements, documents and instruments now
or at any time hereafter executed and/or delivered by Borrower or any Obligor in
connection with this Agreement, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
1.24. "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Boards which are applicable to the
circumstances as of the date of determination consistently applied.
1.25. "HAZARDOUS MATERIALS" shall mean any hazardous, toxic or
dangerous substances, materials and wastes, including, without limitation,
hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde insulation,
radioactive materials, biological substances, polychlorinated biphenyls,
pesticides, herbicides and any other kind and/or type of pollutants or
contaminants (including, without limitation, materials which include hazardous
constituents), sewage, sludge, industrial slag, solvents and/or any other
similar substances, materials, or wastes and including any other substances,
materials or wastes that are regulated under any Environmental Law (including,
without limitation any that are classified as hazardous or toxic under any
Environmental Law).
1.26. "INFORMATION CERTIFICATE" shall mean the Information Certificate
of Borrower constituting Exhibit A hereto containing information with respect to
Borrower, its business and assets provided by or on behalf of Borrower to Lender
in connection with the preparation of this Agreement and the other Financing
Agreements and the financing arrangements provided for herein.
1.27. "INTEREST PERIOD" shall mean for any Eurodollar Rate Loan, a
period of approximately one (1), two (2) or three (3) months duration as
Borrower may elect, the exact duration to be determined in accordance with the
customary practice in the applicable Eurodollar Rate market; provided that
Borrower may not elect an Interest Period which will end after the last day of
the then-current term of this Agreement.
1.28. "INTEREST RATE" shall mean: (a) as to Revolving Loans which are
Prime Rate Loans and all other non-contingent Obligations not expressly covered
in the following clause (b), a rate equal to the Prime Rate, and (b) as to (i)
82.3529% of the Revolving Loans which are Eurodollar Rate Loans, a rate of two
percent (2.00%) per annum in excess of the Adjusted Eurodollar Rate and (ii)
17.6471% of the Revolving Loans which are Eurodollar Rate Loans, a rate of
three-quarters of one percent (0.75%) per annum in excess of the Adjusted
Eurodollar Rate, in each case under clause (b), for the applicable Interest
Period selected by Borrower in accordance with the terms hereof; provided that
the Interest Rate shall mean the rate of (c) two percent (2.00%) per annum in
excess of the Prime Rate as to Revolving Loans which are Prime Rate Loans and
all other non-contingent Obligations not expressly covered in the following
clause (d) and (d) (i) four percent (4.00%) per annum in excess of the Adjusted
Eurodollar Rate as to 82.3521% of the Revolving Loans which are Eurodollar Rate
Loans and (ii) two and three quarters percent (2.75%) per annum in excess of the
Adjusted Eurodollar Rate as to 17.6471% of the Revolving Loans which are
Eurodollar Rate Loans, in each case in clauses (c) and (d), at Lender's option,
without notice, (e) for the period on and after the date of termination or
non-renewal hereof, or the date of the occurrence of any Event of Default for so
long as such Event of Default is continuing as determined by Lender and until
such time as such Event of Default has been waived or all Obligations are
indefeasibly paid in full (notwithstanding entry of any judgment against
Borrower) and (f) on the Revolving Loans at any time outstanding in excess of
the amounts available to Borrower under Section 2 (if such excess(es) arise or
are made without Lender's consent); provided, however, that Lender reserves the
right to condition any consent to such excess(es) and/or waiver of an Event of
Default resulting therefrom, inter alia, on receiving the higher Interest Rates
set forth in the preceding proviso.
1.29. "INVENTORY" shall mean all of Borrower's now owned and hereafter
existing or acquired crops, farm products, seed, raw materials, work in process,
finished goods and all other inventory of whatsoever kind or nature, wherever
located.
1.30. "LETTER OF CREDIT ACCOMMODATIONS" shall mean the letters of
credit, merchandise purchase or other guaranties which are from time to time
either (a) issued or opened by Lender for the account of Borrower or any Obligor
or (b) with respect to which Lender has agreed to indemnify the issuer or
guaranteed to the issuer the performance by Borrower of its obligations to such
issuer.
1.31. "LETTER OF CREDIT PERCENTAGE" shall mean, at any time, one
hundred percent (100%) minus the percentage being applied for advances against
Eligible Inventory of the type being acquired in the transaction which the
applicable letter of credit relates to.
1.32. "LOANS" shall mean the Revolving Loans.
1.33. "MATERIAL ADVERSE CHANGE" shall mean a change in the assets,
liabilities, operations, properties or condition, financial or otherwise, of
Borrower which has a materially adverse effect on (i) the ability of Borrower to
repay the Obligations or otherwise perform any of its covenants under this
Agreement, (ii) the ability of Lender to liquidate the Collateral after an Event
of Default for an amount that will repay all of the Obligations in full, or
(iii) the ability of the Lender to enforce its rights in the Collateral after an
Event of Default, PROVIDED, HOWEVER, that Material Adverse Change shall not
include (a) any damage to or destruction of assets of Borrower, or any
interruption of Borrower's business resulting from such damage or destruction,
or any liabilities incurred or suffered by Borrower, as long as such assets or
liabilities or business interruption are covered by insurance required to be
maintained under Section 9.5 and no dispute exists as to the Lender's right to
receive such proceeds in accordance with the terms hereof, (b) any changes in or
affecting Borrower's industry or economic conditions generally, including
without limitation fluctuations in commodities prices which do not affect the
Borrower more adversely than others in the industry, or (c) the mere existence
of any operating losses of Borrower which do not reduce Borrower's Adjusted
Tangible Net Worth to a level below $100,000,000.
1.34. "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on
the Collateral or the business, properties, assets (tangible or intangible),
goodwill or condition (financial or otherwise) of Borrower and its subsidiaries
taken as a whole.
1.35. "MAXIMUM CREDIT" shall mean $85,000,000, as such amount may be
adjusted from time to time by Borrower in accordance with Section 2.3.
1.36. "MERGER AGREEMENT" shall mean, collectively, the various
agreements, plans of merger, articles of merger and similar documents executed
among Stokely, Borrower and the other various parties thereto, each dated on or
about December 28, 1998.
1.37. "NET AMOUNT OF ACCEPTABLE FOREIGN ACCOUNTS" shall mean the gross
amount of Acceptable Foreign Accounts less (a) sales, excise or similar taxes
included in the amount thereof and (b) returns, discounts, claims, credits and
allowances of any nature at any time issued, owing, granted, outstanding,
available or claimed with respect thereto.
1.38. "NET AMOUNT OF ELIGIBLE DOMESTIC ACCOUNTS" shall mean the gross
amount of Eligible Accounts (other than Acceptable Foreign Accounts) less (a)
sales, excise or similar taxes included in the amount thereof and (b) returns,
discounts, claims, credits and allowances of any nature at any time issued,
owing, granted, outstanding, available or claimed with respect thereto.
1.39. "OBLIGATIONS" shall mean any and all Revolving Loans, Letter of
Credit Accommodations and all other obligations, liabilities and indebtedness of
every kind, nature and description owing by Borrower to Lender and/or its
affiliates, including principal, interest, charges, fees, costs and expenses,
however evidenced, whether as principal, surety, endorser, guarantor or
otherwise, whether arising under this Agreement or otherwise, whether now
existing or hereafter arising, whether arising before, during or after the
initial or any renewal term of this Agreement or after the commencement of any
case with respect to Borrower under the United States Bankruptcy Code or any
similar statute (including, without limitation, the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case), whether direct or indirect, absolute or contingent, joint or several, due
or not due, primary or secondary, liquidated or unliquidated, secured or
unsecured, and however acquired by Lender.
1.40. "OBLIGOR" shall mean any guarantor, endorser, acceptor, surety or
other person now or hereafter liable on or with respect to the Obligations or
who is the owner of any property which is now or hereafter security for the
Obligations, other than Borrower.
1.41. "PACA" shall mean the Perishable Agricultural Commodities Act, 7
U.S.C. section 499 et seq.
1.42. "PAYMENT ACCOUNT" shall have the meaning set forth in Section 6.3
hereof.
1.43. "PERMITTED DIVIDENDS" shall mean dividends or distributions in
respect of any membership interests of Borrower made when each of the following
conditions are met: (i) Lender is provided not less than three (3) Business
Days' prior written notice of the amount thereof, (ii) Borrower demonstrates to
Lender's satisfaction that Borrower's trade payables are not past due and being
paid on a current basis, (iii) no Event of Default or event, which with the
passage of any applicable grace or cure period, the giving of notice, or both,
would result in an Event of Default is then outstanding or will result by virtue
of the proposed dividend or distribution, (iv) the Borrower shall possess unused
loan availability (computed in accordance with the terms of Section 2.1 as in
effect at such time) immediately after giving effect to such proposed dividend
or distribution in an amount not less than twenty percent (20%) of the then
applicable Maximum Credit, and (v) monthly financial statements, as contemplated
by Section 9.6(a)(i), shall have been delivered for the immediately prior
reporting month (notwithstanding the provisions of the penultimate sentence of
Section 9.6(a) hereof) at least three (3) Business Days prior to the date of the
payment.
1.44. "PERSON" or "PERSON" shall mean any individual, sole
proprietorship, partnership, corporation (including, without limitation, any
corporation which elects subchapter S status under the Internal Revenue Code of
1986, as amended), business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.45. "PREDECESSOR" shall mean individually and collectively, (i)
Friday Canning Corporation, a Wisconsin corporation, (ii) American Fine Foods,
Inc., an Idaho corporation, (iii) Oconomowoc Canning Company, Inc., a Wisconsin
corporation, and (iv) Stokely USA, Inc., a Wisconsin corporation.
1.46. "PRIME RATE" shall mean the rate from time to time publicly
announced by First Union National Bank, or its successors, at its office in
Charlotte, North Carolina, as its prime rate, whether or not such announced rate
is the best rate available at such bank.
1.47. "PRIME RATE LOANS" shall mean any Loans or portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.48. "RECORDS" shall mean all of Borrower's present and future books
of account of every kind or nature, purchase and sale agreements, invoices,
ledger cards, bills of lading and other shipping evidence, statements,
correspondence, memoranda, credit files and other data relating to the
Collateral or any account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets or containers
in or on which the foregoing are stored (including any rights of Borrower with
respect to the foregoing maintained with or by any other person).
1.49. "REFERENCE BANK" shall mean First Union National Bank, or such
other bank as Lender may from time to time reasonably designate.
1.50. "RESPONSIBLE OFFICER" shall mean (i) any of the following
employees or officers of Borrower or any of its subsidiaries: president, senior
vice-president, chief financial officer, corporate controller, treasurer,
assistant treasurer, general counsel and any internal counsel having
responsibilities for any legal matters for the Borrower or its subsidiaries, or
(ii) any such officer or internal counsel of Chiquita having responsibilities
for any operational and/or legal matters for the Borrower or its subsidiaries.
1.51. "REVOLVING LOANS" shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.52. "SUPPLIER RESERVE" at any time shall mean a reserve equal to the
aggregate amount owed by Borrower at such time to any and all Persons as the
purchase price of agricultural goods.
1.53. "SURPLUS INTELLECTUAL PROPERTY" shall mean any of the
intellectual property listed on Schedule 8.13 and any other intellectual
property which Lender may, from time to time, agree to designate as Surplus
Intellectual Property.
1.54. "VALUE" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on an average cost basis in
accordance with GAAP or (b) market value.
SECTION 2. CREDIT FACILITIES
2.1. REVOLVING LOANS.
(a) Subject to, and upon the terms and conditions contained herein, Lender
agrees to make Revolving Loans to Borrower from time to time in amounts
requested by Borrower up to the amount equal to the sum of:
(i) eighty-five percent (85%) of the Net Amount of Eligible Domestic
Accounts, plus
(ii) eighty-five percent (85%) of the Net Amount of Acceptable Foreign
Accounts described in clause (i) of the definition of Acceptable Foreign
Account, plus
(iii) seventy percent (70%) of the Net Amount of Acceptable
Foreign Accounts (other than Acceptable Foreign Accounts described in clause (i)
of the definition of Acceptable Foreign Account), plus
(iv) the lesser of: (A) the sum of (1) seventy percent (70%) of the
Value of Eligible Inventory consisting of finished goods which have been
appropriately packaged in cans plus (2) fifty percent (50%) of the Value of
Eligible Inventory consisting of raw seed or (B) the amount equal to: (1) the
Maximum Credit at such time minus (2) the aggregate of the Letter of Credit
Percentages of the then undrawn amounts of the outstanding Letter of Credit
Accommodations for the purpose of purchasing Eligible Inventory, less
(v) the Supplier Reserve at such time, less
(vi) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not less than
five (5) days prior notice to Borrower, (i) reduce the lending formula with
respect to Eligible Accounts and/or Acceptable Foreign Accounts to the extent
that Lender determines in good faith that: (A) the dilution with respect to the
Accounts for any period (based on the ratio of (1) the aggregate amount of
reductions in Accounts other than as a result of payments in cash to (2) the
aggregate amount of total sales) has increased in any material respect or may be
reasonably anticipated to increase in any material respect above historical
levels, or (B) the general creditworthiness of account debtors has declined or
(ii) reduce the lending formula(s) with respect to Eligible Inventory to the
extent that Lender determines that: (A) the number of days of the turnover of
the Inventory for any period has changed in any material respect or (B) the
liquidation value of the Eligible Inventory, or any category thereof, has
decreased, or (C) the nature and quality of the Inventory has deteriorated. In
determining whether to reduce the lending formula(s), Lender may consider
events, conditions, contingencies or risks which are also considered in
determining Eligible Accounts, Acceptable Foreign Accounts, Eligible Inventory
or in establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the Loans and
the Letter of Credit Accommodations outstanding at any time shall not exceed the
Maximum Credit. In the event that the outstanding amount of any component of
the Loans, or the aggregate amount of the outstanding Loans and Letter of Credit
Accommodations, exceed the amounts available under the lending formulas, the
sublimits for Letter of Credit Accommodations set forth in Section 2.2(c) or the
Maximum Credit, as applicable, such event shall not limit, waive or otherwise
affect any rights of Lender in that circumstance or on any future occasions and
Borrower shall, upon demand by Lender, which may be made at any time or from
time to time, immediately repay to Lender the entire amount of any such
excess(es) for which payment is demanded.
2.2. LETTER OF CREDIT ACCOMMODATIONS.
(a) Subject to, and upon the terms and conditions contained herein, at the
request of Borrower, Lender agrees to provide or arrange for Letter of Credit
Accommodations for the account of Borrower containing terms and conditions
acceptable to Lender and the issuer thereof. Any payments made by Lender to any
issuer thereof and/or related parties in connection with the Letter of Credit
Accommodations shall constitute additional Revolving Loans to Borrower pursuant
to this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank or
issuer in connection with the Letter of Credit Accommodations, Borrower shall
pay to Lender a letter of credit fee at a rate equal to one and one half percent
(1.5%) per annum on the average daily outstanding balance of the Letter of
Credit Accommodations for the immediately preceding month (or part thereof),
payable in arrears as of the first day of each succeeding month. Such letter of
credit fee shall be calculated on the basis of a three hundred sixty (360) day
year and actual days elapsed and the obligation of Borrower to pay such fee
shall survive the termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless on the
date of the proposed issuance of any Letter of Credit Accommodations, the
Revolving Loans available to Borrower (subject to the Maximum Credit and any
Availability Reserves) are equal to or greater than: (i) if the proposed Letter
of Credit Accommodation is for the purpose of purchasing Eligible Inventory for
which Lender has a first priority perfected security interest in any and all
documents of title related to such Inventory, the sum of (A) the Letter of
Credit Percentage of the cost of such Eligible Inventory, plus (B) freight,
taxes, duty and other amounts which Lender estimates must be paid in connection
with such Inventory upon arrival and for delivery to one of Borrower's locations
for Eligible Inventory within the United States of America and (ii) if the
proposed Letter of Credit Accommodation is for any other purpose, an amount
equal to one hundred (100%) percent of the face amount thereof and all other
commitments and obligations made or incurred by Lender with respect thereto.
Effective on the issuance of each Letter of Credit Accommodation, the amount of
Revolving Loans which might otherwise be available to Borrower shall be reduced
by the applicable amount set forth in Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, (i) the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith, shall not at any time exceed
$10,000,000 and (ii) the amount of all outstanding Letter of Credit
Accommodations for the purpose of purchasing Eligible Inventory and all other
commitments and obligations made or incurred by Lender in connection therewith
shall not at any time exceed: the amount of the then Revolving Loans available
to Borrower but not outstanding based on Eligible Inventory pursuant to Section
2.1(a)(iv) hereof. At any time an Event of Default exists or has occurred and
is continuing, upon Lender's request, Borrower will either furnish cash
collateral to secure the reimbursement obligations to the issuer in connection
with any Letter of Credit Accommodations or furnish cash collateral to Lender
for the Letter of Credit Accommodations, and in either case, the Revolving Loans
otherwise available to Borrower shall not be reduced as provided in Section
2.2(c) to the extent of such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from and against any
and all losses, claims, damages, liabilities, costs and expenses which Lender
may suffer or incur in connection with any Letter of Credit Accommodations and
any documents, drafts or acceptances relating thereto, including, but not
limited to, any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation; provided, however, that Borrower shall not be required to
indemnify Lender for any claims, damages, losses, liabilities, costs or expenses
to the extent caused by (i) the willful misconduct or gross negligence of Lender
in determining whether a request presented under any Letter of Credit
Accommodation complied with the terms of such Letter of Credit Accommodation or
(ii) Lender's failure to pay under any Letter of Credit Accommodation after the
timely presentation to it of a request for payment strictly complying with the
terms and conditions of such Letter of Credit Accommodation. Borrower assumes
all risks with respect to the acts or omissions of the drawer under or
beneficiary of any Letter of Credit Accommodation and for such purposes the
drawer or beneficiary shall be deemed Borrower's agent. Borrower assumes all
risks for, and agrees to pay, all foreign, Federal, State and local taxes,
duties and levies relating to any goods subject to any Letter of Credit
Accommodations or any documents, drafts or acceptances thereunder. Borrower
hereby releases and holds Lender harmless from and against any acts, waivers,
errors, delays or omissions, whether caused by Borrower, by any issuer or
correspondent or otherwise with respect to or relating to any Letter of Credit
Accommodation. The provisions of this Section 2.2(e) shall survive the payment
of Obligations and the termination or non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to grant
Borrower any right or authority to pledge the credit of Lender in any manner.
Lender shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender has duly
executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Borrower shall be bound by any interpretation made in good faith by Lender, or
any other issuer or correspondent under or in connection with any Letter of
Credit Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Borrower. Lender shall have the sole and exclusive right and
authority to, and Borrower shall not, at any time an Event of Default exists or
has occurred and is continuing, (A) approve or resolve any questions of non-
compliance of documents, (B) give any instructions as to acceptance or rejection
of any documents or goods and/or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders. Lender may take
such actions either in its own name or in Borrower's name. Without the prior
written consent of Lender, Borrower shall not (i) grant any extensions of the
maturity of, time of payment for, or time of presentation of, any drafts,
acceptances, or documents and/or (ii) agree to any amendments, renewals,
extensions, modifications, changes or cancellations of any of the terms or
conditions of any of the applications, Letter of Credit Accommodations, or
documents, drafts or acceptances thereunder or any letters of credit included in
the Collateral.
(g) Any rights, remedies, duties or obligations granted or undertaken by
Borrower to any issuer or correspondent in any application for any Letter of
Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Any duties or
obligations undertaken by Lender to any issuer or correspondent in any
application for any Letter of Credit Accommodation, or any other agreement by
Lender in favor of any issuer or correspondent relating to any Letter of Credit
Accommodation, shall be deemed to have been undertaken by Borrower to Lender and
to apply in all respects to Borrower.
2.3. OPTIONAL CHANGES IN MAXIMUM CREDIT.
(a) Borrower may, at its option, from time to time, request in writing
that the Maximum Credit be reduced to any amount not less than $45,000,000 or
reinstated to a level not to exceed $85,000,000. Any such request shall be
irrevocable, unless Lender shall otherwise agree.
(b) Effective on the first Business Day which is fifteen (15) days after
the date of the receipt by Lender of such written request, the Maximum Credit
shall, as the case may be, either be reduced or reinstated as requested by
Borrower; provided, that, there shall be no more than two (2) reinstatements in
any twelve (12) month period; provided, that, each such change shall be in the
aggregate amount of $10,000,000 or an integral multiple of $10,000,000 in excess
thereof, and provided, further that, no reinstatement of the Maximum Credit may
occur at any time when an Event of Default or an event which with the passage of
any applicable grace or cure period, the giving of notice, or both, would result
in an Event of Default is outstanding.
(c) Without limiting any of the other rights of Lender pursuant to the
terms hereof, effective on each date when any reduction is effective pursuant to
Section 2.3(b) above, Borrower agrees to automatically and without demand make a
payment to Lender in respect of the Loans in an amount equal to the excess, if
any, of the aggregate principal amount of the Loans and outstanding Letter of
Credit Obligations then outstanding over the amount of the Loans then available
to Borrower pursuant to the Maximum Credit as so reduced. All interest accrued
on the principal amount of the Loans paid pursuant to this Section 2.3(c) shall
be paid, or may be charged to any of the loan account(s) of Borrower maintained
by Lender, at Lender's option, on the date such payment of principal is due.
2.4. AVAILABILITY RESERVES. All Revolving Loans otherwise available to
Borrower pursuant to the lending formulas and subject to the Maximum Credit and
other applicable limits hereunder shall be subject to Lender's continuing right
to establish and revise Availability Reserves.
SECTION 3. INTEREST AND FEES
3.1. INTEREST.
(a) Borrower shall pay to Lender interest on the daily average outstanding
principal amount of the Loans and, to the extent permitted by applicable law,
the other non-contingent Obligations from and after the date when actually paid
by Lender, at the Interest Rate. All interest accruing hereunder on and after
the date of any Event of Default or termination or non-renewal hereof shall be
payable on demand. Lender shall make a good faith effort to pay third-party
fees and expenses when due and not to charge Borrower's loan account for
reimbursement of such Obligations until actually paid by Lender.
(b) Borrower may from time to time request that Prime Rate Loans be
converted to Eurodollar Rate Loans, that Eurodollar Rate Loans be converted to
Prime Rate Loans and/or that any existing Eurodollar Rate Loans continue for an
additional Interest Period. Such request from Borrower shall specify the amount
of the Prime Rate Loans which will be converted to Eurodollar Rate Loans
(subject to the limits set forth below) and the Interest Period to be applicable
to such Eurodollar Rate Loans on not less than three (3) Business Days prior
notice to Lender. Subject to the terms and conditions contained herein, three
(3) Business Days after receipt by Lender of such a request from Borrower, such
Prime Rate Loans shall be converted to Eurodollar Rate Loans or such Eurodollar
Rate Loans shall continue, as the case may be, provided that (i) no Event of
Default, or event which, merely with notice or passage of time or both, would
constitute an Event of Default, exists or has occurred and is continuing, (ii)
no party hereto shall have sent any notice of termination or non-renewal of this
Agreement, (iii) Borrower shall have complied with all reasonable and customary
procedures as are established by Lender and specified by Lender to Borrower from
time to time for requests by Borrower for Eurodollar Rate Loans, (iv) no more
than four (4) Interest Periods may be in effect at any one time, (v) the
aggregate amount of the Eurodollar Rate Loans must be in an amount not less than
$5,000,000 or an integral multiple of $1,000,000 in excess thereof, (vi) the
maximum amount of the Eurodollar Rate Loans at any time requested by Borrower
shall not exceed the amount equal to sixty-six and two thirds percent (66 2/3%)
of the daily average of the principal amount of the Revolving Loans which it is
anticipated will be outstanding during the applicable Interest Period, in each
case as reasonably determined by Borrower pursuant to a good faith written
computation (but with no obligation of Lender to make such Revolving Loans
except as otherwise provided in this Agreement), and (vii) Lender shall have
determined that the Interest Period or Adjusted Eurodollar Rate is available to
Lender through the Reference Bank and can be readily determined as of the
Business Day following the date of the request for such Eurodollar Rate Loan by
Borrower. Any request by Borrower to convert Prime Rate Loans to Eurodollar
Rate Loans or to continue any existing Eurodollar Rate Loans shall be
irrevocable. Notwithstanding anything to the contrary contained herein, Lender
and Reference Bank shall not be required to purchase United States Dollar
deposits in the London interbank market or other applicable Eurodollar Rate
market to fund any Eurodollar Rate Loans, but the provisions hereof shall be
deemed to apply as if Lender and Reference Bank had purchased such deposits to
fund the Eurodollar Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime Rate
Loans upon the last day of the applicable Interest Period, unless Lender has
received a request to continue such Eurodollar Rate Loan at least three (3)
Business Days prior to such last day in accordance with the terms hereof. Any
Eurodollar Rate Loans shall, at Lender's option, upon notice by Lender to
Borrower, convert to Prime Rate Loans in the event that (i) an Event of Default
shall exist, (ii) this Agreement shall terminate or not be renewed, or (iii) the
aggregate principal amount of the Prime Rate Loans which have previously been
converted to Eurodollar Rate Loans or existing Eurodollar Rate Loans continued,
as the case may be, at the beginning of an Interest Period shall at any time
during such Interest Period exceed the sum of the then outstanding principal
amount of the Loans then available to Borrower under Section 2 hereof. Borrower
shall pay to Lender, upon demand by Lender (or Lender may, at its option, charge
any loan account of Borrower) any Breakage Fees and, without duplication
thereof, any other reasonable and customary amounts required to compensate
Lender, the Reference Bank or any Participant for any loss (including loss of
anticipated profits), cost or expense reasonably incurred by such person, as a
result of the conversion of Eurodollar Rate Loans to Prime Rate Loans pursuant
to any of the foregoing; provided, however, that no such Breakage Fee or other
costs shall be payable if such conversion of Eurodollar Rate Loans to Prime Rate
Loans prior to the end of the applicable Interest Period results from Lender's
establishment of Availability Reserves, changes in criteria for Eligible
Accounts or Eligible Inventory, or reduction of the lending formula set forth in
Section 2.1(a).
(d) Interest shall be payable by Borrower to Lender monthly in arrears not
later than the first Business Day of each calendar month and shall be calculated
on the daily average principal balance of the non-contingent Obligations
outstanding on the basis of a three hundred sixty (360) day year and actual days
elapsed (including the date of borrowing but excluding the date of payment if
made in accordance with Section 6.3(b)). The interest rate on non-contingent
Obligations (other than Eurodollar Rate Loans) shall increase or decrease by an
amount equal to each increase or decrease in the Prime Rate effective on the
first day of the month after any change in such Prime Rate is announced based on
the Prime Rate in effect on the last day of the month in which any such change
occurs. In no event shall charges constituting interest payable by Borrower to
Lender exceed the maximum amount or the rate permitted under any applicable law
or regulation, and if any such part or provision of this Agreement is in
contravention of any such law or regulation, such part or provision shall be
deemed amended to conform thereto.
3.2. SERVICING FEE. Borrower shall pay to Lender a servicing fee in an
amount equal to $50,000 per annum in respect of Lender's services for each year
(or part thereof) while this Agreement remains in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be fully
earned as of the date hereof and will be payable in advance in quarterly
installments beginning March 1, 1999 and on the first day of each calendar
quarter thereafter.
3.3. UNUSED LINE FEE. Borrower shall pay to Lender monthly an unused line
fee at a rate equal to one quarter of one percent (.25%) per annum calculated
upon the amount by which (i) the product of .8 multiplied by the average daily
Maximum Credit (the "Line Fee Basis") exceeds (ii) the average daily principal
balance of the outstanding Revolving Loans and Letter of Credit Accommodations
during the immediately preceding month (or part thereof) while this Agreement is
in effect and for so long thereafter as any of the Obligations are outstanding,
which fee shall be payable on the first day of each month in arrears. Effective
as of the date one year from the date hereof, Borrower may at its option, by
written notice to Lender, change the Line Fee Basis to an amount equal to the
aggregate average daily principal balance of the outstanding Revolving Loans and
Letter of Credit Accommodations during the one year period beginning on the date
hereof. Notwithstanding anything in this Section 3.3 to the contrary, the term
"Maximum Credit" as used in this Section 3.3 shall mean $70,000,000 as such
amount may be adjusted from time to time by Borrower in accordance with Section
2.3 but not to exceed $70,000,000 at any time.
3.4. CHANGES IN LAWS; INCREASED COSTS OF LOANS; BREAKAGE FEES.
(a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Lender to Borrower, convert to Prime
Rate Loans in the event that any change in applicable law or regulation (or the
interpretation or administration thereof by a banking authority or regulator)
shall make it unlawful for Lender, Reference Bank or any Participant to make or
maintain Eurodollar Rate Loans or to comply with the terms hereof in connection
with the Eurodollar Rate Loans. In the event that any change in applicable law
or regulation (or the interpretation or administration thereof by a banking
authority or regulator) shall (i) result in the increase in the costs to Lender,
Reference Bank or any Participant of making or maintaining any Eurodollar Rate
Loans or (ii) reduce the amounts received or receivable by Lender in respect
thereof, by an amount deemed by Lender to be material, Borrower shall pay to
Lender, upon demand by Lender (or Lender may, at its option, charge any loan
account of Borrower) any amounts required to compensate Lender, the Reference
Bank or any Participant with Lender for any loss (including loss of anticipated
profits), cost or expense reasonably incurred by such person as a result of the
foregoing, including, without limitation, any such loss, cost or expense
reasonably incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by such person to make or maintain the Eurodollar Rate
Loans or any portion thereof. A certificate of Lender setting forth the basis
for the determination of such amount necessary to compensate Lender as aforesaid
shall be delivered to Borrower and shall be conclusive, absent manifest error.
In the event that Lender shall determine that the applicable Eurodollar Rate
does not adequately reflect the cost to Lender of making or maintaining the
Eurodollar Rate Loans, then, unless Borrower compensates Lender for Lender's
increased cost of funds, Lender may suspend generally the prospective
availability of the Eurodollar Rate option for new Interest Periods and/or Loans
until such condition no longer exists.
(b) If any payments or prepayments in respect of the Eurodollar Rate Loans
are received by Lender other than on the last day of the applicable Interest
Period (whether pursuant to acceleration, upon maturity or otherwise), including
any payments pursuant to the application of collections under Section 6.3 or any
other payments made with the proceeds of Collateral, Borrower shall pay to
Lender upon demand by Lender (or Lender may, at its option, charge any loan
account of Borrower) Breakage Fees and, without duplication thereof, any other
reasonable and customary amounts required to compensate Lender, the Reference
Bank or any Participant with Lender for any additional loss (including loss of
anticipated profits), cost or expense reasonably incurred by such person as a
result of such prepayment or payment, including, without limitation, any loss,
cost or expense reasonably incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof. A certificate of Lender setting
forth the basis for the determination of such amount necessary to compensate
Lender as aforesaid shall be delivered to Borrower and shall be conclusive,
absent manifest error.
SECTION 4. CONDITIONS PRECEDENT
4.1. CONDITIONS PRECEDENT TO EFFECTIVENESS. This Agreement (other than
Section 12.6 hereof which shall be effective on the date hereof) shall become
effective on the Business Day on which each of the following conditions
precedent shall have been satisfied (such date, the "Effective Date"):
(a) Lender shall have received evidence, in form and substance reasonably
satisfactory to Lender with respect to any filings required as a result of the
completion of the transactions contemplated by the Merger Agreement or any
amendments to the Information Certificate or the Schedules thereto, that Lender
has valid perfected and first priority security interests in and liens upon the
Collateral and any other property which is intended to be security for the
Obligations or the liability of any Obligor in respect thereof, subject only to
the security interests and liens permitted herein or in the other Financing
Agreements;
(b) all requisite limited liability company action and proceedings in
connection with this Agreement and the other Financing Agreements shall be
satisfactory in form and substance to Lender, and Lender shall have received all
information and copies of all documents, including, without limitation, records
of requisite limited liability company action and proceedings which Lender may
have requested in connection therewith, such documents where requested by Lender
or its counsel to be certified by appropriate company officers or governmental
authorities;
(c) no Material Adverse Change shall have occurred since the date of
Lender's latest field examination on December 9, 1998 and no change or event
shall have occurred which would impair the ability of Borrower or any Obligor to
perform its obligations hereunder or under any of the other Financing Agreements
to which it is a party or of Lender to enforce the Obligations or realize upon
the Collateral;
(d) Lender shall have received, in form and substance reasonably
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the other Financing Agreements, including, without limitation, acknowledgments
by lessors, mortgagees and warehousemen of Lender's security interests in the
Collateral, waivers by such persons of any security interests, liens or other
claims by such persons to the Collateral and agreements permitting Lender access
to, and the right to remain on, the premises to exercise its rights and remedies
and otherwise deal with the Collateral, in any case required as a result of the
completion of the transactions contemplated by the Merger Agreement or any
amendments to the Information Certificate or the Schedules hereto;
(e) Lender shall continue to be in receipt of the evidence of insurance
and loss payee endorsements required hereunder and under the other Financing
Agreements, in form and substance satisfactory to Lender, including certificates
of insurance policies and/or endorsements naming Lender as loss payee;
(f) Lender shall have received an opinion letter of counsel to Borrower in
the form of Schedule 4.1(f);
(g) the transactions contemplated by the Merger Agreement shall have been
consummated in accordance with the Merger Agreement (and the Lender shall have
received a certificate, duly executed by a Responsible Officer, certifying that
such transactions have so occurred);
(h) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance satisfactory to Lender; and
(i) Borrower shall have used its best efforts to obtain a signed
acknowledgment letter from each landlord currently a party to an Acceptable
Third Party Agreement, in form and substance satisfactory to Lender.
4.2. CONDITIONS PRECEDENT TO ALL LOANS AND LETTER OF CREDIT ACCOMMODATIONS.
Each of the following is an additional condition precedent to Lender making
Loans and/or providing Letter of Credit Accommodations to Borrower, including
the initial Loans and Letter of Credit Accommodations and any future Loans and
Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the other
Financing Agreements shall be true and correct in all material respects with the
same effect as though such representations and warranties had been made on and
as of the date of the making of each such Loan or providing each such Letter of
Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with notice or
passage of any applicable grace or cure period, or both, would constitute an
Event of Default, shall exist or have occurred and be continuing on and as of
the date of the making of such Loan or providing each such Letter of Credit
Accommodation and after giving effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
To secure payment and performance of all Obligations, Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Lender as security, the following
property and interests in property, whether now owned or hereafter acquired or
existing, and wherever located (collectively, the "Collateral"):
5.1. Accounts;
5.2. all present and future contract rights, general intangibles
(including, but not limited to, tax and duty refunds, registered and
unregistered patents, trademarks, service marks, copyrights, trade names,
applications for the foregoing, trade secrets, goodwill, processes, drawings,
blueprints, customer lists, licenses, whether as licensor or licensee, choses in
action and other claims and existing and future leasehold interests in
equipment, real estate and fixtures), chattel paper, documents, instruments,
letters of credit, bankers' acceptances and guaranties;
5.3. all present and future monies, certificated and uncertificated
securities, investment property, credit balances, deposits, deposit accounts and
other property of Borrower now or hereafter held or received by or in transit to
Lender or its affiliates or at any other depository or other institution from or
for the account of Borrower, whether for safekeeping, pledge, custody,
transmission, collection or otherwise, and all present and future liens,
security interests, rights, remedies, title and interest in, to and in respect
of Accounts and other Collateral, including, without limitation, (a) rights and
remedies under or relating to guaranties, contracts of suretyship, letters of
credit and credit and other insurance related to the Collateral, (b) rights of
stoppage in transit, replevin, repossession, reclamation and other rights and
remedies of an unpaid vendor, lien or secured party, (c) goods described in
invoices, documents, contracts or instruments with respect to, or otherwise
representing or evidencing, Accounts or other Collateral, including, without
limitation, returned, repossessed and reclaimed goods, and (d) deposits by and
property of account debtors or other persons securing the obligations of account
debtors;
5.4. Inventory;
5.5. Records; and
5.6. all products and proceeds of the foregoing, in any form, including,
without limitation, insurance proceeds and all claims against third parties for
loss or damage to or destruction of any or all of the foregoing.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1. BORROWER'S LOAN ACCOUNT. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrower and (c) all other appropriate debits and
credits as provided in this Agreement, including, without limitation, fees,
charges, costs, expenses and interest. All entries in the loan account(s) shall
be made in accordance with Lender's customary practices as in effect from time
to time.
6.2. STATEMENTS. Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been mailed by Lender.
Until such time as Lender shall have rendered to Borrower a written statement as
provided above, the balance in Borrower's loan account(s) shall be presumptive
evidence of the amounts due and owing to Lender by Borrower.
6.3. COLLECTION OF ACCOUNTS.
(a) Borrower shall establish and maintain, at its expense, blocked
accounts or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Lender may specify, with such banks as are acceptable to Lender
into which Borrower shall promptly deposit and direct its account debtors to
directly remit all payments on Accounts and all payments constituting proceeds
of Inventory or other Collateral in the identical form in which such payments
are made, whether by cash, check or other manner. The banks at which the
Blocked Accounts are established shall enter into an agreement, in form and
substance satisfactory to Lender, providing that all items received or deposited
in the Blocked Accounts are the property of Lender, that the depository bank has
no lien upon, or right to setoff against, the Blocked Accounts, the items
received for deposit therein, or the funds from time to time on deposit therein
and that the depository bank will wire, or otherwise transfer, in immediately
available funds, on a daily basis, all funds received or deposited into the
Blocked Accounts to such bank account of Lender as Lender may from time to time
designate for such purpose ("Payment Account"). Borrower agrees that all
payments made to such Blocked Accounts or other funds received and collected by
Lender, whether on the Accounts or as proceeds of Inventory or other Collateral
or otherwise shall be the property of Lender.
(b) For purposes of calculating interest on the Obligations, such payments
or other funds received will be applied (conditional upon final collection) to
the Obligations one (1) Business Day following the date of receipt of
immediately available funds by Lender in the Payment Account. For purposes of
calculating the amount of the Revolving Loans available to Borrower such
payments will be applied (conditional upon final collection) to the Obligations
on the business day of receipt by Lender in the Payment Account, if such
payments are received within sufficient time (in accordance with Lender's usual
and customary practices as in effect from time to time) to credit Borrower's
loan account on such day, and if not, then on the next business day.
(c) Borrower and all of its affiliates, subsidiaries, members, managers,
employees or agents shall, acting as trustee for Lender, receive, as the
property of Lender, any monies, checks, notes, drafts or any other payment
relating to and/or proceeds of Accounts or other Collateral which come into
their possession or under their control and immediately upon receipt thereof,
shall deposit or cause the same to be deposited in the Blocked Accounts, or
remit the same or cause the same to be remitted, in kind, to Lender. In no
event shall the same be commingled with Borrower's own funds. Borrower agrees
to reimburse Lender on demand for any amounts owed or paid to any bank at which
a Blocked Account is established or any other bank or person involved in the
transfer of funds to or from the Blocked Accounts arising out of Lender's
payments to or indemnification of such bank or person. The obligation of
Borrower to reimburse Lender for such amounts pursuant to this Section 6.3 shall
survive the termination or non-renewal of this Agreement.
6.4. PAYMENTS. All Obligations shall be payable to the Payment Account as
provided in Section 6.3 or such other place as Lender may designate from time to
time. Lender may apply payments received or collected from Borrower or for the
account of Borrower (including, without limitation, the monetary proceeds of
collections or of realization upon any Collateral) to such of the Obligations,
in such order and manner as Lender determines. At Lender's option, all
principal, interest, fees, costs, expenses and other charges provided for in
this Agreement or the other Financing Agreements may be charged directly to the
loan account(s) of Borrower. Borrower shall make all payments to Lender on the
Obligations free and clear of, and without deduction or withholding for or on
account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts,
fees, deductions, withholding, restrictions or conditions of any kind. If after
receipt of any payment of, or proceeds of Collateral applied to the payment of,
any of the Obligations, Lender is required to surrender or return such payment
or proceeds to any Person for any reason, then the Obligations intended to be
satisfied by such payment or proceeds shall be reinstated and continue and this
Agreement shall continue in full force and effect as if such payment or proceeds
had not been received by Lender. Borrower shall be liable to pay to Lender, and
does hereby indemnify and hold Lender harmless from the amount of any payments
or proceeds surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
6.5. AUTHORIZATION TO MAKE LOANS. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of Borrower or
other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of
Credit Accommodations hereunder shall specify the date on which the requested
advance is to be made or Letter of Credit Accommodations established (which day
shall be a Business Day) and the amount of the requested Loan. Requests
received after 11:00 a.m. Chicago time on any day shall be deemed to have been
made as of the opening of business on the immediately following business day.
All Loans and Letter of Credit Accommodations under this Agreement shall be
conclusively presumed to have been made to, and at the request of and for the
benefit of, Borrower when deposited to the credit of Borrower or otherwise
disbursed or established in accordance with the instructions of Borrower or in
accordance with the terms and conditions of this Agreement.
6.6. USE OF PROCEEDS. All Loans made or Letter of Credit Accommodations
provided by Lender to Borrower pursuant to the provisions hereof shall be used
by Borrower only for general operating, working capital and other proper
corporate purposes of Borrower not otherwise prohibited by the terms hereof.
None of the proceeds will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security or for the purposes of reducing or
retiring any indebtedness which was originally incurred to purchase or carry any
margin security or for any other purpose which might cause any of the Loans to
be considered a "purpose credit" within the meaning of Regulation G of the Board
of Governors of the Federal Reserve System, as amended.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1. COLLATERAL REPORTING. Borrower shall provide Lender with the
following documents in a form satisfactory to Lender: (a) on a regular basis as
required by Lender, a schedule of Accounts; (b) on a monthly basis or more
frequently as Lender may request, (i) perpetual inventory reports, (ii)
inventory reports by category and (iii) agings of accounts payable, (c) on a
weekly basis or as more frequently requested by Lender, a listing of the amounts
owing by Borrower to Persons as the purchase price of agricultural goods, (d)
upon Lender's request, (i) copies of customer statements and credit memos,
remittance advices and reports, and copies of deposit slips and bank statements,
(ii) copies of shipping and delivery documents, and (iii) copies of purchase
orders, invoices and delivery documents for Inventory acquired by Borrower; (e)
agings of accounts receivable on a monthly basis or more frequently as Lender
may request; and (f) such other reports as to the Collateral as Lender shall
request from time to time. If any of Borrower's records or reports of the
Collateral are prepared or maintained by an accounting service, contractor,
shipper or other agent, Borrower hereby irrevocably authorizes such service,
contractor, shipper or agent to deliver such records, reports, and related
documents to Lender and to follow Lender's instructions with respect to further
services at any time that an Event of Default exists or has occurred and is
continuing.
7.2. ACCOUNTS COVENANTS.
(a) Borrower shall notify Lender promptly of: (i) any material delay in
Borrower's performance of any of its obligations to any material account debtor
or the assertion of any claims, offsets, defenses or counterclaims by any
material account debtor, or any material disputes with material account debtors,
or any settlement, adjustment or compromise thereof, (ii) all material adverse
information of which a Responsible Officer obtains actual knowledge relating to
the financial condition of any material account debtor and (iii) any event or
circumstance of which a Responsible Officer obtains actual knowledge and which
would cause any material amount of then-existing Eligible Accounts to no longer
qualify as Eligible Accounts based on the objective criteria set forth in the
definition of Eligible Accounts or otherwise specified, from time to time, by
the Lender pursuant hereto. No credit, discount, allowance or extension or
agreement for any of the foregoing shall be granted to any account debtor
without Lender's consent, except in the ordinary course of Borrower's business
in accordance with practices and policies previously disclosed in writing to
Lender (or otherwise disclosed to Lender during Lender's due diligence process
or a routine audit). So long as no Event of Default exists or has occurred and
is continuing, Borrower may settle, adjust or compromise any claim, offset,
counterclaim or dispute with any account debtor. At any time that an Event of
Default exists or has occurred and is continuing, Lender shall, at its option,
have the exclusive right to settle, adjust or compromise any claim, offset,
counterclaim or dispute with account debtors or grant any credits, discounts or
allowances.
(b) Borrower shall promptly and properly record on its books and records
each and every return of Inventory by an account debtor and shall report
directly to Lender any return of a material amount of Inventory by an account
debtor. At any time that Inventory is returned, reclaimed or repossessed, the
related Account shall not be deemed an Eligible Account. In the event any
account debtor returns Inventory when an Event of Default exists or has occurred
and is continuing, Borrower shall, upon Lender's request, (i) hold the returned
Inventory in trust for Lender, (ii) segregate all returned Inventory from all of
its other property, (iii) dispose of the returned Inventory solely according to
Lender's instructions, and (iv) not issue any credits, discounts or allowances
with respect thereto without Lender's prior written consent.
(c) With respect to each Eligible Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given in the ordinary course of Borrower's business in
accordance with practices and policies previously disclosed to Lender (or
otherwise disclosed to Lender during Lender's due diligence process or a routine
audit), (iv) there shall be no material setoffs, deductions, contras, defenses,
counterclaims or disputes existing or asserted with respect thereto except as
reported to Lender in accordance with the terms of this Agreement, (v) none of
the transactions giving rise thereto will violate any applicable State or
Federal laws or regulations in any material respect, all documentation relating
thereto will be legally sufficient under such laws and regulations and all such
documentation will be legally enforceable in accordance with its terms, except
as such enforceability may be limited by bankruptcy or other insolvency
proceedings or laws.
(d) Lender shall have the right at any time or times, in Lender's name or
in the name of a nominee of Lender, to verify the validity, amount or any other
matter relating to any Account or other Collateral, by mail, telephone,
facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments which Borrower now owns or may at any time acquire
immediately upon Borrower's receipt thereof, except as Lender may otherwise
agree.
(f) Lender may, at any time or times that an Event of Default exists or
has occurred and is continuing, (i) notify any or all account debtors that the
Accounts have been assigned to Lender and that Lender has a security interest
therein and Lender may direct any or all accounts debtors to make payment of
Accounts directly to Lender, (ii) extend the time of payment of, compromise,
settle or adjust for cash, credit, return of merchandise or otherwise, and upon
any terms or conditions, any and all Accounts or other obligations included in
the Collateral and thereby discharge or release the account debtor or any other
party or parties in any way liable for payment thereof without affecting any of
the Obligations, (iii) demand, collect or enforce payment of any Accounts or
such other obligations, but without any duty to do so, and Lender shall not be
liable for its failure to collect or enforce the payment thereof nor for the
negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Lender may deem necessary or desirable for the protection
of its interests. At any time that an Event of Default exists or has occurred
and is continuing, at Lender's request, all invoices and statements sent to any
account debtor shall state that the Accounts and such other obligations have
been assigned to Lender and are payable directly and only to Lender and Borrower
shall deliver to Lender such originals of documents evidencing the sale and
delivery of goods or the performance of services giving rise to any Accounts as
Lender may require.
7.3. INVENTORY COVENANTS. With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Lender may request on or after an Event of Default, and promptly
following such physical inventory shall supply Lender with a report in the form
and with such specificity as may be reasonably satisfactory to Lender concerning
such physical count; (c) Borrower shall not remove any Inventory from the
locations set forth herein or for which Borrower has complied with the
requirements set forth in Section 9.2 hereof, without the prior written consent
of Lender, except for sales of Inventory in the ordinary course of Borrower's
business and except to move Inventory directly from one such location to another
such location; (d) after an Event of Default and upon Lender's request, Borrower
shall, at its expense, at any time or times as Lender may request on or after an
Event of Default, deliver or cause to be delivered to Lender written reports or
appraisals as to the Inventory in form, scope and methodology acceptable to
Lender and by an appraiser acceptable to Lender, addressed to Lender or upon
which Lender is expressly permitted to rely; (e) Borrower shall produce, use,
store and maintain the Inventory, with all reasonable care and caution and in
accordance with applicable standards of any insurance and in material conformity
with applicable laws (including, but not limited to, the requirements of the
Federal Fair Labor Standards Act of 1938, as amended and all rules, regulations
and orders related thereto); (f) Borrower assumes all responsibility and
liability arising from or relating to the production, use, sale or other
disposition of the Inventory; (g) Borrower shall not sell Inventory to any
customer on approval, or any other basis which entitles the customer to return
or may obligate Borrower to repurchase such Inventory; (h) Borrower shall keep
the Inventory in good and marketable condition, except with respect to Inventory
that expires or is damaged in the ordinary course of Borrower's business; and
(i) Borrower shall not, without prior written notice to Lender, acquire or
accept any Inventory on consignment or approval (other than empty cans or pie
filling).
7.4. POWER OF ATTORNEY. Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default or event which with notice or passage of
time or both would constitute an Event of Default exists or has occurred and is
continuing (i) demand payment on Accounts or other proceeds of Inventory or
other Collateral, (ii) enforce payment of Accounts by legal proceedings or
otherwise, (iii) exercise all of Borrower's rights and remedies to collect any
Account or other Collateral, (iv) sell or assign any Account upon such terms,
for such amount and at such time or times as the Lender deems advisable, (v)
settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign Borrower's name on any proof
of claim in bankruptcy or other similar document against an account debtor,
(viii) notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender, and open and dispose of all
mail addressed to Borrower, (ix) do all acts and things which are necessary, in
Lender's determination, to fulfill Borrower's obligations under this Agreement
and the other Financing Agreements and (x) sign Borrower's name on any
verification of Accounts and notices thereof to account debtors and (b) at any
time to (i) take control in any manner of any item of payment or proceeds
thereof, (ii) have access to any lockbox or postal box into which Borrower's
mail is deposited, (iii) endorse Borrower's name upon any items of payment or
proceeds thereof and deposit the same in the Lender's account for application to
the Obligations, (iv) endorse Borrower's name upon any chattel paper, document,
instrument, invoice, or similar document or agreement relating to any Account or
any goods pertaining thereto or any other Collateral, and (v) with respect to
Collateral, execute in Borrower's name and file any UCC financing statements or
amendments thereto. Borrower hereby releases Lender and its officers, employees
and designees from any liabilities arising from any act or acts under this power
of attorney and in furtherance thereof, whether of omission or commission,
except as a result of Lender's own gross negligence or willful misconduct as
determined pursuant to a final non-appealable order of a court of competent
jurisdiction.
7.5. RIGHT TO CURE. Lender may, at its option, (a) cure any default by
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral (except those permitted by the terms of this Agreement) and
(c) pay any amount, incur any expense or perform any act which, in Lender's
judgment, is necessary or appropriate to preserve, protect, insure or maintain
the Collateral and the rights of Lender with respect thereto. Lender may add
any amounts so expended to the Obligations and charge Borrower's account
therefor, such amounts to be repayable by Borrower on demand. Lender shall be
under no obligation to effect such cure, payment or bonding and shall not, by
doing so, be deemed to have assumed any obligation or liability of Borrower.
Any payment made or other action taken by Lender under this Section shall be
without prejudice to any right to assert an Event of Default hereunder and to
proceed accordingly.
7.6. ACCESS TO PREMISES. From time to time as requested by Lender, at the
cost and expense of Borrower, (a) Lender or its designee shall have complete
access to all of Borrower's premises during normal business hours and after
notice to Borrower, or at any time and without notice to Borrower if an Event of
Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including, without limitation, the Records, (b) Borrower shall
promptly furnish to Lender such copies of such books and records or extracts
therefrom as Lender may request, and (c) Lender may use during normal business
hours such of Borrower's personnel, equipment, supplies and premises as may be
reasonably necessary for the foregoing and if an Event of Default exists or has
occurred and is continuing for the collection of Accounts and realization of
other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement):
8.1. LIMITED LIABILITY COMPANY EXISTENCE, POWER AND AUTHORITY;
SUBSIDIARIES. Borrower is a limited liability company duly organized and in
good standing under the laws of its state of formation and is duly qualified as
a foreign limited liability company and in good standing in all states or other
jurisdictions where the nature and extent of the business transacted by it or
the ownership of assets makes such qualification necessary, except for those
jurisdictions in which the failure to so qualify would not have a Material
Adverse Effect. The execution, delivery and performance of this Agreement, the
other Financing Agreements and the transactions contemplated hereunder and
thereunder are all within Borrower's limited liability company powers, have been
duly authorized and are not in contravention of law or the terms of Borrower's
certificate of formation, operating agreement, or other organizational
documentation, or any indenture, agreement or undertaking to which Borrower is a
party or by which Borrower or its property are bound. This Agreement and the
other Financing Agreements constitute legal, valid and binding obligations of
Borrower enforceable in accordance with their respective terms. Borrower does
not have any subsidiaries except as set forth on the Information Certificate.
8.2. FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE. All financial
statements relating to Borrower or any Predecessor which have been or may
hereafter be delivered by Borrower or any Predecessor to Lender have been
prepared in accordance with GAAP and fairly present, on a pro forma basis if
applicable, the financial condition and the results of operation of Borrower or
any Predecessor as at the dates and for the periods set forth therein (provided
that monthly or quarterly statements are subject to normal year-end adjustments
and may not contain all footnote information required by GAAP). Except as
disclosed in any interim financial statements furnished by Borrower or any
Predecessor to Lender prior to the date of this Agreement or in Schedule 8.2
hereto, there has been no Material Adverse Change since the date of the most
recent audited financial statements furnished by Borrower or any Predecessor to
Lender prior to the date of this Agreement.
8.3. CHIEF EXECUTIVE OFFICE; COLLATERAL LOCATIONS. The chief executive
office of Borrower, Borrower's Records concerning Accounts, Borrower's other
places of business and the only other locations of Collateral, if any, are the
addresses set forth in the Information Certificate, subject to the right of
Borrower to establish new locations in accordance with Section 9.2 below. The
Borrower is not "engaged" in "farming operations" within the meanings of such
terms under Section 9-109 of the Uniform Commercial Code as in effect from time
to time in any or all applicable jurisdictions. The Information Certificate
correctly identifies any of such locations which are not owned by Borrower and
sets forth the owners and/or operators thereof and to the best of Borrower's
knowledge, the holders of any mortgages on such locations.
8.4. PRIORITY OF LIENS; TITLE TO PROPERTIES. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to existing liens indicated on Schedule 8.4
hereto and, with respect to Collateral other than Accounts and Inventory, the
other liens permitted under Section 9.8 hereof. Borrower has good and
marketable title to all of its properties and assets subject to no liens,
mortgages, pledges, security interests, encumbrances or charges of any kind,
except those granted to Lender and such others as are specifically listed on
Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5. TAX RETURNS. Borrower and each Predecessor, as applicable, has filed,
or caused to be filed, in a timely manner (including extensions permitted by
law) all tax returns, reports and declarations which are required to be filed by
it. All information in such tax returns, reports and declarations is complete
and accurate in all material respects. Borrower and each Predecessor has paid
or caused to be paid all taxes due and payable or claimed due and payable in any
assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower or any Predecessor and with respect to which adequate
reserves have been set aside on its books. Adequate provision has been made for
the payment of all accrued and unpaid Federal, State, county, local, foreign and
other taxes whether or not yet due and payable and whether or not disputed.
8.6. LITIGATION. Except as set forth on the Information Certificate, there
is no present investigation by any governmental agency pending, or to the best
of Borrower's knowledge threatened, against or affecting Borrower, its assets or
business and there is no action, suit, proceeding or claim by any Person
pending, or to the best of Borrower's knowledge threatened, against Borrower or
its assets or goodwill, or against or affecting any transactions contemplated by
this Agreement, which if adversely determined against Borrower would result in
any Material Adverse Change or would impair the ability of Borrower to perform
its obligations hereunder or under any of the other Financing Agreements to
which it is a party or of Lender to enforce any Obligations or realize upon any
Collateral.
8.7. COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS. Other than
defaults in existence on the date hereof and described on Schedule 8.7 hereto,
Borrower is not in default in any material respect under, or in violation in any
material respect of any of the terms of, any material agreement, contract,
instrument, lease or other commitment to which it is a party or by which it or
any of its assets are bound (it being understood that Borrower may from time to
time enter into arrangements pursuant to which suppliers of cans extend the time
period for the payment of amounts due from Borrower to such supplier) and
Borrower is in compliance in all material respects with all applicable
provisions of laws, rules, regulations, licenses, permits, approvals and orders
of any foreign, Federal, State or local governmental authority excluding
Environmental Laws and related regulations or matters disclosed on Schedule 8.8
hereto and excluding ERISA and related regulations.
8.8. ENVIRONMENTAL COMPLIANCE.
(a) Except as set forth on Schedule 8.8 hereto, to Borrower's best
knowledge, neither Borrower nor any Predecessor has generated, used, stored,
treated, transported, manufactured, handled, produced or disposed of any
Hazardous Materials, on or off its premises (whether or not owned by it) in any
manner which at any time violates any applicable Environmental Law or any
license, permit, certificate, approval or similar authorization thereunder and
the operations of Borrower comply in all material respects with all
Environmental Laws and all licenses, permits, certificates, approvals and
similar authorizations thereunder.
(b) Except as set forth on Schedule 8.8 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor is any pending or
to the best of Borrower's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
Borrower or any Predecessor or the release, spill or discharge, threatened or
actual, of any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials or any other environmental, health or safety matter, which materially
affects Borrower or its business, operations or assets or any properties at
which Borrower or any Predecessor has transported, stored or disposed of any
Hazardous Materials.
(c) Except as set forth on Schedule 8.8 and to the Borrower's best
knowledge, Borrower has no material liability (contingent or otherwise) in
connection with a release, spill or discharge, threatened or actual, of any
Hazardous Materials or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials.
(d) Except as set forth on Schedule 8.8 and to the Borrower's best
knowledge, Borrower has or will promptly apply for all licenses, permits,
certificates, approvals or similar authorizations required to be obtained or
filed in connection with the operations of Borrower under any Environmental Law
and all of such licenses, permits, certificates, approvals or similar
authorizations are valid and in full force and effect subject to the renewal
procedures required by applicable law.
8.9. EMPLOYEE BENEFITS.
(a) Neither Borrower nor any Predecessor has engaged in any transaction in
connection with which Borrower, any Predecessor or any of their respective ERISA
Affiliates could be subject to either a civil penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code, including
any accumulated funding deficiency described in Section 8.9(c) hereof and any
deficiency with respect to vested accrued benefits described in Section 8.9(d)
hereof.
(b) No liability to the Pension Benefit Guaranty Corporation has been or
is expected by Borrower to be incurred with respect to any employee pension
benefit plan of Borrower, any Predecessor or any of their respective ERISA
Affiliates. There has been no reportable event (within the meaning of Section
4043(b) of ERISA) or any other event or condition with respect to any employee
pension benefit plan of Borrower, any Predecessor or any of their respective
ERISA Affiliates which presents a risk of termination of any such plan by the
Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which Borrower, any
Predecessor or any of their respective ERISA Affiliates is required under
Section 302 of ERISA and Section 412 of the Code to have paid under the terms of
each employee pension benefit plan as contributions to such plan as of the last
day of the most recent fiscal year of such plan ended prior to the date hereof,
and no accumulated funding deficiency (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, exists with respect to any
employee pension benefit plan, including any penalty or tax described in Section
8.9(a) hereof and any deficiency with respect to vested accrued benefits
described in Section 8.9(d) hereof.
(d) Except as described on Schedule 8.9 hereto, the current value of all
vested accrued benefits under all employee pension benefit plans maintained by
Borrower that are subject to Title IV of ERISA does not exceed the current value
of the assets of such plans allocable to such vested accrued benefits, including
any penalty or tax described in Section 8.9(a) hereof and any accumulated
funding deficiency described in Section 8.9(c) hereof. The terms "current
value" and "accrued benefit" have the meanings specified in ERISA.
(e) Except as described on Schedule 8.9 hereto, neither Borrower, any
Predecessor nor any of their respective ERISA Affiliates is or has ever been
obligated to contribute to any "multiemployer plan" (as such term is defined in
Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.
8.10. ACCURACY AND COMPLETENESS OF INFORMATION. All information
furnished by or on behalf of Borrower in writing to Lender in connection with
this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including, without limitation, all information
on the Information Certificate is true and correct in all material respects on
the date as of which such information is dated or certified and does not omit
any material fact necessary in order to make such information not misleading.
No event or circumstance has occurred which has had or could reasonably be
expected to have a Material Adverse Effect and which has not been fully and
accurately disclosed to Lender in writing.
8.11. ASSIGNMENT OF FUTURES CONTRACTS. Borrower shall continue to
enter into futures, options and forward purchase contracts in the ordinary
course of its business and consistent with Stokely's past practices. If
Borrower enters into agreements to hedge its risks with respect to finished
goods, Borrower shall execute and deliver to Congress assignments of such
contracts or such other documents as Congress may request to assign to it
Borrower's rights as Collateral. From and after an Event of Default, Borrower
shall not withdraw any funds from its brokerage accounts relating to any or all
of such arrangements or agreements without the prior written consent of
Congress.
8.12. PURCHASE OF FARM PRODUCTS. Borrower will take reasonable actions
consistent with Stokely's past practices to ensure that all farm products
purchased by it are free and clear of all Liens (other than the trust under
PACA), including conducting Lien searches for new suppliers and monitoring the
receipt of notices of Liens and shall, whenever a Lien exists, issue joint
checks to the seller and the secured party or otherwise obtain a release of the
Lien. Borrower will furnish to Congress such information as Congress may
request in order to monitor such matters. Borrower has received no notice given
pursuant of the Federal Food Security Act and there has not been filed any
financing statement or notice, purporting to perfect a security interest in
farm products purchased by Borrower in favor of a secured creditor of the seller
of such farm products. Borrower has registered, pursuant to the Federal Food
Security Act, with the Secretary of State of each State in which are produced
farm products purchased by Borrower and which has established or hereafter
establishes a central filing system, as a buyer of farm products produced in
such State (and each such registration is in full force and effect).
8.13. SURVIVAL OF WARRANTIES; CUMULATIVE. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1. MAINTENANCE OF EXISTENCE. Borrower shall at all times preserve, renew
and keep in full, force and effect its limited liability company existence and
rights and franchises with respect thereto and maintain in full force and effect
the trademarks "Stokley," "Stokley's Finest," "Stokley's Gold," "Stokley's
Traditional," "Newport" and "School Days" and all permits, licenses, trademarks,
tradenames, approvals, authorizations, leases and contracts necessary to carry
on the business as presently or proposed to be conducted. Borrower shall give
Lender thirty (30) days prior written notice of any proposed change in its
limited liability company name, which notice shall set forth the new name and
Borrower shall deliver to Lender a copy of the amendment to the Certificate of
Formation of Borrower providing for the name change certified by the Secretary
of State of the jurisdiction of formation of Borrower as soon as it is
available.
9.2. NEW COLLATERAL LOCATIONS. Borrower may open, or move Collateral to,
any new location within the continental United States provided Borrower (a)
gives Lender five (5) Business Days (or such lesser time as agreed to by Lender)
prior written notice of the intended opening of any such new location, (b)
executes and delivers, or causes to be executed and delivered, to Lender such
agreements, documents, and instruments as Lender may deem reasonably necessary
or desirable to protect its interests in the Collateral at such location,
including, without limitation, UCC financing statements and (c) if applicable,
delivers appropriate Acceptable Third Party Agreements with respect to such
location.
9.3. COMPLIANCE WITH LAWS, REGULATIONS, ETC.
(a) Borrower shall, at all times, comply in all material respects with all
laws, rules, regulations, licenses, permits, approvals and orders applicable to
it and duly observe all applicable requirements of any Federal, State or local
governmental authority, including, without limitation, the Employee Retirement
Security Act of 1974, as amended, the Occupational Safety and Hazard Act of
1970, as amended, the Fair Labor Standards Act of 1938, as amended, and all
applicable statutes, rules, regulations, orders, permits and stipulations
relating to environmental pollution and employee health and safety, including,
without limitation, all of the Environmental Laws.
(b) Borrower shall establish and maintain, at its expense, a system to
assure and monitor its continued compliance with all Environmental Laws in all
of its operations, which system shall include annual reviews of such compliance
by employees or agents of Borrower who are familiar with the requirements of the
Environmental Laws. Borrower shall take prompt and appropriate action to
respond to any non-compliance with any of the Environmental Laws which could
reasonably likely be expected to result in a Material Adverse Effect and shall
regularly report to Lender on such response.
(c) If Borrower or any Subsidiary of Borrower shall receive written notice
(i) that any violation of any Environmental Laws may have occurred or is about
to occur in connection with the facilities or operations owned or controlled by
Borrower or any such subsidiary which could reasonable likely be expected to
result in a Material Adverse Effect; (ii) that any administrative or judicial
complaint or order has been filed or is about to be filed against Borrower or
any such subsidiary alleging any violation of Environmental Laws or requiring
Borrower or any such subsidiary to take any action in connection with the
release or threatened release of any Hazardous Material into the environment
which could reasonably likely to be expected to result in a Material Adverse
Effect, or (iii) that Borrower or any such subsidiary may be liable or
responsible for response costs associated with a release or threatened release
of any Hazardous Material into the environment or any damages caused thereby
which could reasonably likely be expected to result in a Material Adverse
Effect, then and in each case Borrower shall provide Lender with a copy of such
notice within 15 Business Days of a Responsible Officer of Borrower or any
subsidiary becoming aware thereof.
(d) If Borrower or any Subsidiary discovers or otherwise becomes aware of
(i) any release of any Hazardous Material at or from the operations and
facilities owned or controlled by Borrower or any subsidiary of Borrower, or
(ii) any violation of Environmental Laws arising out of or in connection with
the operations and facilities owned or controlled by Borrower or any such
Subsidiary, which release or violation could reasonably be expected to have a
Material Adverse Effect, then Borrower shall provide Lender with written notice
of such release or violation within 15 Business Days of a Responsible Officer of
Borrower or any Subsidiary of Borrower becoming aware thereof.
(e) Upon request, Borrower shall provide Lender with a copy of any final
report which it or any subsidiary of Borrower prepares or causes to be prepared
of any environmental audit, study or other investigation relating to the
operations and facilities owned or controlled by Borrower or the subsidiaries of
Borrower.
(f) Borrower shall indemnify and hold harmless Lender, its directors,
officers, employees, agents, invitees, representatives, successors and assigns,
from and against any and all losses, claims, damages, liabilities, costs, and
expenses (including attorneys' fees and legal expenses) directly or indirectly
arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including, without limitation, the costs of
any required or necessary repair, cleanup or other remedial work with respect to
any property of Borrower and the preparation and implementation of any closure,
remedial or other required plans. All representations, warranties, covenants
and indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
9.4. PAYMENT OF TAXES AND CLAIMS. Borrower shall duly pay and discharge
all taxes, assessments, contributions and governmental charges upon or against
it or its properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Borrower shall be liable for any tax or penalties imposed
on Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require Borrower to pay any
income or franchise taxes (or penalties related thereto) attributable to the
income of Lender from any amounts charged or paid hereunder to Lender and
provided further that nothing contained herein shall be construed to require
Borrower to pay any taxes (or penalties related thereto) attributable to income
or gain of Lender from the sale, assignment or transfer of all or any part of
the Obligations. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
9.5. INSURANCE. Borrower shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts including
deductibles customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. Such insurance may be provided under policies which insure Borrower
and its affiliates as a group. Said policies of insurance shall be reasonably
satisfactory to Lender as to form, amount and insurer. Borrower shall furnish
certificates, policies or endorsements to Lender as Lender shall require as
proof of such insurance, and, if Borrower fails to do so, Lender is authorized,
but not required, to obtain such insurance at the expense of Borrower. All
policies relating to the Collateral shall provide for at least thirty (30) days
prior written notice to Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for Borrower in obtaining, and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrower shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies relating to the Collateral and Borrower
shall obtain non-contributory lender's loss payable endorsements to all
insurance policies relating to the Collateral in form and substance satisfactory
to Lender. Such lender's loss payable endorsements shall specify that the
proceeds of such insurance shall be payable to Lender as its interests may
appear and further specify that Lender shall be paid regardless of any act or
omission by Borrower or any of its affiliates. At its option, Lender may apply
any insurance proceeds received by Lender at any time to the cost of repairs or
replacement of Collateral and/or to payment of the Obligations, whether or not
then due, in any order and in such manner as Lender may determine or hold such
proceeds as cash collateral for the Obligations.
9.6. FINANCIAL STATEMENTS AND OTHER INFORMATION.
(a) Borrower shall keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in relation
to the Collateral and the business of Borrower and its subsidiaries (if any) in
accordance with GAAP and Borrower shall furnish or cause to be furnished to
Lender: (i) within thirty (30) days after the end of each fiscal month other
than the last fiscal month of a fiscal quarter, monthly unaudited consolidated
financial statements, and, if Borrower has any subsidiaries, unaudited
consolidating financial statements (including in each case balance sheets,
statements of income and loss and statements of shareholders' equity), all in
reasonable detail, fairly presenting the financial position and the results of
the operations of Borrower and its subsidiaries as of the end of and through
such fiscal month, subject to normal year-end adjustments, (ii) within forty-
five (45) days after the end of each fiscal quarter or sixty (60) days after the
end of each fiscal year, quarterly or annual (as the case may be) unaudited
consolidated financial statements and, if Borrower has any subsidiaries,
unaudited consolidating financial statements (including in each case balance
sheets, statements of income and loss and statements of shareholders' equity),
all in reasonable detail, fairly presenting the financial position and the
results of the operations of Borrower and its subsidiaries as of the end of and
through such fiscal period, subject, in the case of quarterly reports, to normal
year-end adjustments and (iii) within ninety (90) days after the end of each
fiscal year, audited consolidated financial statements and, if Borrower has any
subsidiaries, unaudited consolidating financial statements of Borrower and its
subsidiaries (including in each case balance sheets, statements of income and
loss, statements of cash flow and statements of shareholders' equity), and the
accompanying notes thereto, all in reasonable detail, fairly presenting the
financial position and the results of the operations of Borrower and its
subsidiaries as of the end of and for such fiscal year, together with the
opinion of independent certified public accountants, which accountants shall be
an independent accounting firm selected by Borrower and reasonably acceptable to
Lender, that such financial statements have been prepared in accordance with
GAAP, and present fairly the results of operations and financial condition of
Borrower and its subsidiaries as of the end of and for the fiscal year then
ended. Notwithstanding the foregoing, Borrower need not comply with the
reporting obligations in (i) above for any month when, as of the end of that
monthly period, the following conditions are satisfied: (i) no Event of Default
or event, which with the passage of any applicable grace or cure period, the
giving of notice, or both, would result in an Event of Default is then
outstanding, (ii) the condition set forth in Section 1.45 (iv) (the definition
of Permitted Dividends) shall be satisfied, and (iii) the Adjusted Tangible Net
Worth as of the end of such month is greater than $120,000,000. If a change in
GAAP shall occur after the date hereof which would affect the calculation of
Adjusted Tangible Net Worth were it not for the last sentence of the definition
thereof, Borrower shall also include with each set of financial statements
delivered pursuant to this Section 9.6(a) a detailed reconciliation showing the
proper calculation of Adjusted Tangible Net Worth at the end of such period.
(b) Borrower shall promptly notify Lender in writing of the details of (i)
any loss, damage, investigation, action, suit, proceeding or claim relating to
the Collateral or any other property which is security for the Obligations which
would result in any Material Adverse Change and (ii) the occurrence of any Event
of Default or event which, with the passage of time or giving of notice or both,
would constitute an Event of Default.
(c) Borrower shall, at any time that Borrower has any publicly issued
securities outstanding, promptly after the sending or filing thereof furnish or
cause to be furnished to Lender copies of all reports which Borrower sends to
its stockholders or noteholders generally and copies of all reports and
registration statements which Borrower files with the Securities and Exchange
Commission, any national securities exchange or the National Association of
Securities Dealers, Inc.
(d) Borrower shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrower, as Lender may, from time to time, reasonably
request. Lender is hereby authorized to deliver a copy of any financial
statement or any other information relating to the business of Borrower to any
court or other government agency or to any participant or assignee or
prospective participant or assignee who shall be directed to maintain the
confidentiality of such information. From and after the occurrence of any Event
of Default or event which, with the passage of time or giving of notice, or
both, would constitute an Event of Default, Borrower hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Lender, at
Borrower's expense, copies of the financial statements of Borrower and any
reports or management letters prepared by such accountants or auditors on behalf
of Borrower and to disclose to Lender such information as they may have
regarding the business of Borrower; Borrower agrees promptly to provide Lender
with copies of the foregoing at any time Lender requests the same from Borrower.
Any documents, schedules, invoices or other papers delivered to Lender may be
destroyed or otherwise disposed of by Lender one (1) year after the same are
delivered to Lender, except as otherwise designated by Borrower to Lender in
writing.
(e) Not later than January 1 of each year hereafter during the term of
this Agreement, Borrower shall deliver to Lender, via certified mail, return
receipt requested, an updated letter addressed to Borrower's auditors
substantially in the form of the auditors' letter delivered by Borrower on or
before the date of the initial Loan.
9.7. SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC. Borrower
shall not, directly or indirectly, (a) merge into or with or consolidate with
any other Person or permit any other Person to merge into or with or consolidate
with it, or (b) sell, assign, lease, transfer, abandon or otherwise dispose of
any stock (other than stock of the Borrower), indebtedness or all or
substantially all of its assets to any other Person, or (c) form or acquire any
subsidiaries, or (d) wind up, liquidate or dissolve or (e) agree to do any of
the foregoing. In addition, Borrower shall give Lender at least twenty days
prior notice of any disposition of any material portion of its assets. For
purposes of greater certainty, nothing contained in this Section 9.7 shall
prohibit (i) sales of Inventory in the ordinary course of business, (ii) the
disposition of Surplus Intellectual Property having a fair market value of no
more than $1,500,000 or worn-out or obsolete Equipment or Equipment or Real
Estate no longer used in the business of Borrower so long as such sales do not
involve Equipment and/or Real Estate having an aggregate fair market value in
the aggregate in excess of $10,000,000 for all such Equipment and/or Real Estate
disposed of in any fiscal year of Borrower, or (iii) other sales of assets which
are made with the prior written consent of Lender (in its sole discretion).
Notwithstanding the terms of any other Financing Agreements to the contrary,
Borrower may allow the lapse or termination of any Surplus Intellectual Property
if it reasonably determines the cost of maintaining the rights with respect
thereto materially exceeds the likely value thereof and it notifies Lender of
that fact at least thirty (30) days prior to such lapse or termination and
Lender shall, from time to time, execute documents reasonably requested by
Borrower to effect the release of any liens on Surplus Intellectual Property
having a fair market value of up to $1,500,000 (in the aggregate throughout the
course of this Agreement) which is being simultaneously sold pursuant hereto if
satisfactory provisions are made to assure that the proceeds of any such sale
are paid to Lender.
9.8. ENCUMBRANCES. Borrower shall not create, incur, assume or suffer to
exist any security interest, mortgage, pledge, lien, charge or other encumbrance
of any nature whatsoever on any of its assets or properties, including, without
limitation, the Collateral, except: (a) liens and security interests of Lender;
(b) liens securing the payment of taxes, either not yet overdue or the validity
of which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and with respect to which adequate reserves
have been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of
Borrower's business to the extent: (i) such liens secure indebtedness which is
not overdue or (ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower, in each
case prior to the commencement of foreclosure or other similar proceedings and
with respect to which adequate reserves have been set aside on its books; (d)
zoning restrictions, easements, licenses, covenants and other restrictions
affecting the use of real property which do not interfere in any material
respect with the use of such real property or ordinary conduct of the business
of Borrower as presently conducted thereon or materially impair the value of the
real property which may be subject thereto; (e) purchase money security
interests in Equipment (including capital leases) and purchase money mortgages
on real estate not to exceed $20,000,000 in the aggregate at any time
outstanding so long as such security interests and mortgages do not apply to any
property of Borrower other than the Equipment or real estate so acquired, and
the indebtedness secured thereby does not exceed the cost of the Equipment or
real estate so acquired, as the case may be; and (f) the security interests and
liens set forth on Schedule 8.4 hereto.
9.9. INDEBTEDNESS. Borrower shall not incur, create, assume, become or be
liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except (a) the Obligations; (b) trade obligations and normal
accruals in the ordinary course of business not yet due and payable, or with
respect to which the Borrower is contesting in good faith the amount or validity
thereof by appropriate proceedings diligently pursued and available to Borrower,
and with respect to which adequate reserves have been set aside on its books;
(c) purchase money indebtedness (including capital leases) to the extent not
incurred and paid or secured by liens (including capital leases) in violation of
any other provision of this Agreement; and (d) obligations or indebtedness set
forth on the Information Certificate; provided, that, (i) Borrower may only make
regularly scheduled payments of principal and interest in respect of such
indebtedness in accordance with the terms of the agreement or instrument
evidencing or giving rise to such indebtedness as in effect on the date hereof,
(ii) Borrower shall not, directly or indirectly, (A) amend, modify, alter or
change the terms of such indebtedness or any agreement, document or instrument
related thereto as in effect on the date hereof, or (B) redeem, retire, defease,
purchase or otherwise acquire such indebtedness, or set aside or otherwise
deposit or invest any sums for such purpose, and (iii) Borrower shall furnish to
Lender all notices or demands in connection with such indebtedness either
received by Borrower or on its behalf, promptly after the receipt thereof, or
sent by Borrower or on its behalf, concurrently with the sending thereof, as the
case may be.
9.10. LOANS, INVESTMENTS, GUARANTEES, ETC. Borrower shall not,
directly or indirectly, make any loans or advance money or property to any
person, or invest in (by capital contribution, dividend or otherwise) or
purchase or repurchase the stock or indebtedness or all or a substantial part of
the assets or property of any person, or guarantee, assume, endorse, or
otherwise become responsible for (directly or indirectly) the indebtedness,
performance, obligations or dividends of any Person or agree to do any of the
foregoing, except: (a) the endorsement of instruments for collection or deposit
in the ordinary course of business; (b) investments in: (i) short-term direct
obligations of the United States Government, (ii) negotiable certificates of
deposit issued by any bank satisfactory to Lender, payable to the order of the
Borrower or to bearer and delivered to Lender, and (iii) commercial paper rated
A1 or P1; provided, that, as to any of the foregoing, unless waived in writing
by Lender, Borrower shall take such actions as are deemed necessary by Lender to
perfect the security interest of Lender in such investments (c) the guarantees
set forth in the Information Certificate and (d) loans and advances to employees
in the ordinary course of business for travel and moving expenses in an
aggregate amount not to exceed $1,000,000 at any time outstanding.
9.11. DIVIDENDS AND REDEMPTIONS. Borrower shall not, directly or
indirectly, declare or pay any dividends or distributions on account of any
membership interests of Borrower now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any membership interests (or set aside or
otherwise deposit or invest any sums for such purpose) for any consideration
other than membership interests or apply or set apart any sum, or make any other
distribution (by reduction of capital or otherwise) in respect of any such
membership interests or agree to do any of the foregoing, except for Permitted
Dividends.
9.12. TRANSACTIONS WITH AFFILIATES. Borrower shall not enter into any
transaction (other than sales of Inventory to Friday U.K., Limited in the
ordinary course of Borrower's business consistent with Borrower's past
practices) for the purchase, sale or exchange of property or the rendering of
any service to or by any affiliate, except in the ordinary course of and
pursuant to the reasonable requirements of Borrower's business and upon fair and
reasonable terms no less favorable to the Borrower than Borrower would obtain in
a comparable arm's length transaction with an unaffiliated person.
9.13. COMPLIANCE WITH ERISA. Borrower shall not with respect to any
"employee pension benefit plans" maintained by Borrower or any of its ERISA
Affiliates:
(a) (i) terminate any of such employee pension benefit plans so as to
incur any liability to the Pension Benefit Guaranty Corporation established
pursuant to ERISA, (ii) allow or suffer to exist any prohibited transaction
involving any of such employee pension benefit plans or any trust created
thereunder which would subject Borrower or such ERISA Affiliate to a tax or
penalty or other liability on prohibited transactions imposed under Section 4975
of the Code or ERISA, (iii) fail to pay to any such employee pension benefit
plan any contribution which it is obligated to pay under Section 302 of ERISA,
Section 412 of the Code or the terms of such plan, (iv) allow or suffer to exist
any accumulated funding deficiency, whether or not waived, with respect to any
such employee pension benefit plan, (v) allow or suffer to exist any occurrence
of a reportable event or any other event or condition which presents a material
risk of termination by the Pension Benefit Guaranty Corporation of any such
employee pension benefit plan that is a single employer plan, which termination
could result in any liability to the Pension Benefit Guaranty Corporation or
(vi) incur any withdrawal liability with respect to any multiemployer pension
plan.
(b) As used in this Section 9.13, the term "employee pension benefit
plans," "employee benefit plans", "accumulated funding deficiency" and
"reportable event" shall have the respective meanings assigned to them in ERISA,
and the term "prohibited transaction" shall have the meaning assigned to it in
Section 4975 of the Code and ERISA.
9.14. USE OF PROCEEDS. No proceeds of any Loan shall be used to make a
payment on or with respect to any indebtedness (other than trade credit incurred
and paid in the ordinary course of business) of Borrower other than (i) payments
hereunder, (ii) payments on or with respect to indebtedness at the time and in
the amount scheduled therefor as of the date hereof (or as of the date of
incurrence of such indebtedness, if such indebtedness is originally incurred
after the date hereof) and (iii) with the prior written consent of Lender (which
consent shall not be unreasonably withheld), such other payments as so consented
to by Lender.
9.15. COSTS AND EXPENSES. Borrower shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including, but not limited to: (a)
all costs and expenses of filing or recording (including Uniform Commercial Code
financing statement filing taxes and fees, documentary taxes, intangibles taxes
and mortgage recording taxes and fees, if applicable); (b) all title insurance
and other insurance premiums, appraisal fees and search fees; (c) costs and
expenses of remitting loan proceeds, collecting checks and other items of
payment, and establishing and maintaining the Blocked Accounts, together with
Lender's customary charges and fees with respect thereto; (d) charges, fees or
expenses charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (e) costs and expenses of preserving and protecting the
Collateral; (f) costs and expenses paid or incurred in connection with obtaining
payment of the Obligations, enforcing the security interests and liens of
Lender, selling or otherwise realizing upon the Collateral, and otherwise
enforcing the provisions of this Agreement and the other Financing Agreements or
defending any claims made or threatened against Lender arising out of the
transactions contemplated hereby and thereby (including, without limitation,
preparations for and consultations concerning any such matters); (g) all out-of-
pocket expenses and costs heretofore and from time to time hereafter incurred by
Lender during the course of periodic field examinations of the Collateral and
Borrower's operations, plus a per diem charge at the rate of $650 per person per
day for Lender's examiners in the field and office; and (h) the reasonable fees
and disbursements of counsel (including legal assistants) to Lender in
connection with any of the foregoing.
9.16. COMPLIANCE WITH FEDERAL FOOD SECURITY ACT. Borrower will
register, pursuant to the Federal Food Security Act, with the Secretary of State
of each state in which are produced farm products purchased by Borrower and
which has established or hereafter establishes a central filing system, as a
buyer of farm products produced in such state, and Borrower will maintain each
such registration in full force and affect. Borrower will give written notice
to Lender, no later than 30 days after the end of each fiscal quarter of
Borrower, of each state in which it is required to file a registration under the
Federal Food Security Act, accompanied by evidence that Borrower has made such
required filings.
9.17. ADJUSTED TANGIBLE NET WORTH. The Borrower shall not permit its
Adjusted Tangible Net Worth as of the last day of any fiscal month to be less
than $100,000,000.
9.18. FURTHER ASSURANCES. At the request of Lender at any time and
from time to time, Borrower shall, at its expense, duly execute and deliver, or
cause to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In
the event of such request by Lender, Lender may, at its option, cease to make
any further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. With respect to Collateral and where
permitted by law, Borrower hereby authorizes Lender to execute and file one or
more UCC financing statements signed only by Lender.
SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1. EVENTS OF DEFAULT. The occurrence or existence of any one or
more of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) Borrower (i) shall fail to pay to Lender any principal of or interest
on the Obligations within five (5) days of when due or fees and any other
Obligations owing to Lender within five (5) days after receipt of written notice
that such fee or other Obligations is past due, (ii) shall breach the terms of
Section 9.17 hereof, and such breach shall continue for ten (10) days after the
financial statements for the applicable fiscal month are required to be
delivered to the Lender pursuant to Section 9.6(a)(i) hereof or (iii) shall
breach any other term, covenant, condition or provision of this Agreement or any
of the Loan Documents which does not otherwise constitute an Event of Default
under this Section 10.1 and fail to cure such breach within ten (10) days after
a Responsible Officer obtains knowledge thereof;
(b) any representation, warranty, or statement of fact made to Lender at
any time of Borrower is false or misleading in any material respect when made;
provided, however, that if Borrower discloses to Lender information which must
be listed on the Information Certificate or any Schedules corresponding or
relating to Sections 8.2, 8.6, 8.7 or 8.9 to avoid a breach of such Sections
within the earlier to occur of a Responsible Officer obtaining knowledge thereof
or three (3) Business Days after the occurrence thereof, no Event of Default
shall be deemed to exist solely by virtue of any requested Revolving Loans which
were funded during such intervening period; provided, further, that if Borrower
discloses to Lender information which must be listed on any Schedules
corresponding to Section 8.8 to avoid a breach of such Section within ten (10)
days after any Responsible Officer or any officers charged by the Borrower's
Board of Managers with responsibility for environmental matters obtaining
knowledge thereof, no Event of Default shall be deemed to exist solely by virtue
of any requested Revolving Loans which were funded during such intervening
period; as used, the term "knowledge" shall mean the actual conscious awareness
of a person;
(c) any Obligor revokes, terminates or fails to perform any of the terms,
covenants, conditions or provisions of any guarantee, endorsement or other
agreement of such party in favor of Lender;
(d) any judgment for the payment of money is rendered against Borrower or
any Obligor in excess of $100,000 in any one case or in excess of $500,000 in
the aggregate and shall remain undischarged or unvacated for a period in excess
of thirty (30) days or execution shall at any time not be effectively stayed, or
any judgment other than for the payment of money, or injunction, attachment,
garnishment or execution is rendered against Borrower or any Obligor or any of
their assets;
(e) any Obligor (being a natural person or a general partner of an Obligor
which is a partnership) dies or Borrower or any Obligor, which is a partnership
or corporation, dissolves or suspends or discontinues doing business;
(f) Borrower or any Obligor becomes insolvent (however defined or
evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(g) a case or proceeding under the bankruptcy laws of the United States of
America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction now or hereafter in effect (whether at law or in equity) is
filed against Borrower or any Obligor or all or any part of its properties and
such petition or application is not dismissed within thirty (30) days after the
date of its filing or Borrower or any Obligor shall file any answer admitting or
not contesting such petition or application or indicates its consent to,
acquiescence in or approval of, any such action or proceeding or the relief
requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United States of
America now or hereafter in effect or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction now or hereafter in effect (whether at a law or equity) is
filed by Borrower or any Obligor or for all or any part of its property;
(i) any default by Borrower or any Obligor under any agreement, document
or instrument relating to any indebtedness for borrowed money owing to any
person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any case
in an amount in excess of $1,000,000 if the effect of such default is that the
applicable Person has accelerated the maturity of any or all of the obligations
under any or all of the applicable documents;
(j) any default (other than a default in existence on the date hereof and
described on Schedule 8.7 hereto) by Borrower or any Obligor under any material
contract, lease, license or other obligation to any person other than Lender,
which default continues for more than the applicable cure period, if any, with
respect thereto if such default may have a Material Adverse Effect; or
(k) Chiquita and/or Persons of which Chiquita owns, directly or
indirectly, at least 50% of the outstanding voting power, shall cease to have
(as among all such Persons) 100% of the outstanding voting power of Borrower.
10.2. REMEDIES.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and remedies may be exercised without notice
to or consent by Borrower or any Obligor, except as such notice or consent is
expressly provided for hereunder or required by applicable law. All rights,
remedies and powers granted to Lender hereunder, under any of the other
Financing Agreements, the Uniform Commercial Code or other applicable law, are
cumulative, not exclusive and enforceable, in Lender's discretion,
alternatively, successively, or concurrently on any one or more occasions, and
shall include, without limitation, the right to apply to a court of equity for
an injunction to restrain a breach or threatened breach by Borrower of this
Agreement or any of the other Financing Agreements. Lender may, at any time or
times, proceed directly against Borrower or any Obligor to collect the
Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of Default exists
or has occurred and is continuing, Lender may, in its discretion and without
limitation, (a) accelerate the payment of all Obligations and demand immediate
payment thereof to Lender (provided, that, upon the occurrence of any Event of
Default described in Sections 10.1(g) and 10.1(h), all Obligations shall
automatically become immediately due and payable), (ii) with or without judicial
process or the aid or assistance of others, enter upon any premises on or in
which any of the Collateral may be located and take possession of the Collateral
or complete processing, manufacturing and repair of all or any portion of the
Collateral, (iii) require Borrower, at Borrower's expense, to assemble and make
available to Lender any part or all of the Collateral at any place and time
designated by Lender, (iv) collect, foreclose, receive, appropriate, setoff and
realize upon any and all Collateral, (v) remove any or all of the Collateral
from any premises on or in which the same may be located for the purpose of
effecting the sale, foreclosure or other disposition thereof or for any other
purpose, (vi) sell, lease, transfer, assign, deliver or otherwise dispose of any
and all Collateral (including, without limitation, entering into contracts with
respect thereto, public or private sales at any exchange, broker's board, at any
office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrower and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Lender. If notice of disposition of Collateral is
required by law, five (5) days prior notice by Lender to Borrower designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and Borrower waives any other notice. In the event
Lender institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrower waives the posting of any bond
which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually received by
Lender from any sale, lease, foreclosure or other disposition of the Collateral
to payment of the Obligations, in whole or in part and in such order as Lender
may elect, whether or not then due. Borrower shall remain liable to Lender for
the payment of any deficiency with interest at the highest rate provided for
herein and all costs and expenses of collection or enforcement, including
attorneys' fees and legal expenses.
(d) Without limiting the foregoing, upon the occurrence of an Event of
Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans and Letter of Credit
Accommodations available to Borrower and/or (ii) terminate any provision of this
Agreement providing for any future Loans or Letter of Credit Accommodations to
be made by Lender to Borrower.
(e) At any time when an Event of Default exists or has occurred and is
continuing, Lender may terminate Borrower's right to reinstate the Maximum
Credit pursuant to Section 2.3 by giving Borrower notice to that effect.
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1. GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY TRIAL
WAIVER.
(a) The validity, interpretation and enforcement of this Agreement and the
other Financing Agreements and any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise,
shall be governed by the internal laws of the State of Illinois (without giving
effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the non-
exclusive jurisdiction of the Illinois and the United States District Court for
the Northern District of Illinois and waive any objection based on venue or
forum non conveniens with respect to any action instituted therein arising under
this Agreement or any of the other Financing Agreements or in any way connected
with or related or incidental to the dealings of the parties hereto in respect
of this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Lender shall have the right to bring any action or
proceeding against Borrower or its property in the courts of any other
jurisdiction which Lender deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against Borrower or its
property).
(c) Borrower hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth on the signature
pages hereof and service so made shall be deemed to be completed five (5) days
after the same shall have been so deposited in the U.S. mails, or, at Lender's
option, by service upon Borrower in any other manner provided under the rules of
any such courts. Within thirty (30) days after such service, Borrower shall
appear in answer to such process, failing which Borrower shall be deemed in
default and judgment may be entered by Lender against Borrower for the amount of
the claim and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS AGREEMENT OR
ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND LENDER EACH HEREBY
AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL
BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER OR LENDER MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO
TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in tort,
contract, equity or otherwise) for losses suffered by Borrower in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Lender, that the losses were the result of
acts or omissions constituting gross negligence or willful misconduct.
11.2. WAIVER OF NOTICES. Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on Borrower which Lender may elect to give shall entitle Borrower
to any other or further notice or demand in the same, similar or other
circumstances.
11.3. AMENDMENTS AND WAIVERS. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender. Lender shall not, by any act, delay, omission or otherwise be deemed to
have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically
set forth therein. A waiver by Lender of any right, power and/or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise.
11.4. WAIVER OF COUNTERCLAIMS. Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto; provided, however, that nothing contained in this
Section shall prohibit the Borrower from bringing a separate action with respect
to any claim that it has.
11.5. INDEMNIFICATION. Borrower shall indemnify and hold Lender, and
its directors, agents, employees and counsel, harmless from and against any and
all losses, claims, damages, liabilities, costs or expenses imposed on, incurred
by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including, without limitation, amounts paid in settlement, court costs, and the
fees and expenses of counsel. To the extent that the undertaking to indemnify,
pay and hold harmless set forth in this Section may be unenforceable because it
violates any law or public policy, Borrower shall pay the maximum portion which
it is permitted to pay under applicable law to Lender in satisfaction of
indemnified matters under this Section. The foregoing indemnity shall survive
the payment of the Obligations and the termination or non-renewal of this
Agreement.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1. TERM.
(a) This Agreement and the other Financing Agreements shall become
effective as of the Effective Date and shall continue in full force and effect
for a term ending August 31, 1999 (the "Renewal Date"); provided, that, Lender
may, at its option, and upon Borrower's request, extend the Renewal Date to the
date one (1) year from the date of the then current Renewal Date. On each
extension of the Renewal Date, Borrower shall pay Lender a renewal fee equal to
one quarter of one percent (.25%) of the initial $85,000,000 Maximum Credit,
which fee shall be fully earned and payable on each applicable Renewal Date.
Lender or Borrower may terminate this Agreement and the other Financing
Agreements effective on the then current Renewal Date by giving to the other
party at least sixty (60) days prior written notice; provided, that, this
Agreement and all other Financing Agreements must be terminated simultaneously.
Borrower may also terminate this Agreement and the other Financing Agreements in
connection with a refinancing by another financial institution during the period
from May 31, 1999 to August 31, 1999 by giving Lender at least forty-five (45)
days prior written notice and, notwithstanding any provision of Section 12.1(c)
below, the early termination fee shall be waived provided that Lender or one of
its affiliates shall have been given the right of first refusal during such
period of time to provide such financing and have failed to provide the same on
terms as favorable as those of the refinancing lender. Upon the effective date
of any termination or non-renewal of the Financing Agreements, Borrower shall
pay to Lender, in full, all outstanding and unpaid Obligations and shall furnish
cash collateral to Lender in such amounts as Lender determines are reasonably
necessary to secure Lender from loss, cost, damage or expense, including
attorneys' fees and legal expenses, in connection with any contingent
Obligations, including issued and outstanding Letter of Credit Accommodations
and checks or other payments provisionally credited to the Obligations and/or as
to which Lender has not yet received final and indefeasible payment. Such cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrower for such purpose. Interest shall be due until and including the next
business day, if the amounts so paid by Borrower to the bank account designated
by Lender are received in such bank account later than 12:00 noon, Chicago time.
(b) No termination of this Agreement or the other Financing Agreements
shall relieve or discharge Borrower of its respective duties, obligations and
covenants under this Agreement or the other Financing Agreements until all
Obligations have been fully and finally discharged and paid, and Lender's
continuing security interest in the Collateral and the rights and remedies of
Lender hereunder, under the other Financing Agreements and applicable law, shall
remain in effect until all such Obligations have been fully and finally
discharged and paid.
(c) If for any reason this Agreement is terminated prior to the end of the
then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount equal
to one quarter of one percent 1/4%) of the initial $85,000,000 Maximum Credit.
12.2. NOTICES. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower at
its chief executive office set forth below, or to such other address as either
party may designate by written notice to the other in accordance with this
provision, and (b) deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12.3. PARTIAL INVALIDITY. If any provision of this Agreement is held
to be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4. SUCCESSORS. This Agreement, the other Financing Agreements and
any other document referred to herein or therein shall be binding upon and inure
to the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.5. ENTIRE AGREEMENT. This Agreement, the other Financing
Agreements, any supplements hereto or thereto, and any instruments or documents
delivered or to be delivered in connection herewith or therewith represents the
entire agreement and understanding concerning the subject matter hereof and
thereof between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written.
12.6. ORIGINAL AGREEMENT. This Agreement is intended to amend and
restate the provisions of the Original Agreement and, as of the Effective Date,
except as expressly modified herein: (a) all of the terms and provisions of the
Original Agreement shall continue to apply for the period prior to the Effective
Date, including any determinations of payment dates, interest rates, Events of
Default or any amount that may be payable to Lender or the Participants, and (b)
the Obligations (as defined in the Original Agreement) under the Original
Agreement shall continue to be paid or prepaid in accordance with the Original
Agreement on or prior to the Effective Date, and be secured by the Collateral,
and shall from and after the Effective Date continue to be owing and be subject
to the terms of this Agreement. All Interest Periods (as defined in the
Original Agreement) shall continue as Interest Periods hereunder and shall be
scheduled to end hereunder on the date that they were scheduled to end under the
Original Agreement. All references in the Financing Agreements to the Original
Agreement shall be deemed to include references to this Agreement, as it may be
amended, restated, supplemented or otherwise modified from time to time, and
such Financing Agreements are hereby amended to reflect such changed reference.
As of the Effective Date, all of the covenants set forth in the Original
Agreement shall be of no further force and effect, it being understood that all
obligations of Stokely with respect to the Obligations (as defined in the
Original Agreement) shall be assumed by the Borrower and be governed by this
Agreement from and after the Effective Date.
12.7. Confidentiality. (a) Lender shall use all reasonable efforts
to keep confidential, in accordance with its customary procedures for handling
confidential information and safe and sound lending practices, any non-public
information supplied to it by Borrower pursuant to this Agreement which is
clearly and conspicuously marked as confidential at the time such information is
furnished by Borrower to Lender, provided, that, nothing contained herein shall
limit the disclosure of any such information: (i) to the extent required by
statute, rule, regulation, subpoena or court order, (ii) to bank examiners and
other regulators, auditors and/or accountants, (iii) in connection with any
litigation to which Lender is a party, (iv) to any assignee or participant (or
prospective assignee or participant) so long as such assignee or participant (or
prospective assignee or participant) shall have first agreed in writing to treat
such information as confidential in accordance with this Section 12.7, or (v) to
counsel for Lender or any participant or assignee (or prospective participant or
assignee).
(b) In no event shall this Section 12.7 or any other provision of this
Agreement or applicable law be deemed: (i) to apply to or restrict disclosure
of information that has been or is made public by Borrower or any third party
without breach of this Section 12.7 or otherwise become generally available to
the public other than as a result of a disclosure in violation hereof, (ii) to
apply to or restrict disclosure of information that was or becomes available to
Lender on a non-confidential basis from a person other than Borrower, (iii)
require Lender to return any materials furnished by Borrower to Lender or (iv)
prevent Lender from responding to routine informational requests in accordance
with the Code of Ethics for the Exchange of Credit Information promulgated by
The Robert Morris Associates or other applicable industry standards relating to
the exchange of credit information. The obligations of Lender under this
Section 12.7 shall supersede and replace the obligations of Lender under any
confidentiality letter signed prior to the date hereof.
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
LENDER BORROWER
CONGRESS FINANCIAL CORPORATION CHIQUITA PROCESSED FOODS, L.L.C.
(CENTRAL)
By: /s/Thomas C. Lannon By: /s/J. John Gelp
Title: Vice President Title: VP-CFO
ADDRESS: CHIEF EXECUTIVE OFFICE:
150 South Wacker Drive, Suite 2200 150 West Fifth Street
Chicago, Illinois 60606 New Richmond, Wisconsin 54017
Attention: William Bloom Attention: John Gelp
EXHIBIT 10D
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CHIQUITA BRANDS INTERNATIONAL, INC.
1986 STOCK OPTION AND INCENTIVE PLAN
(as Amended and Restated Effective May 13, 1998)
SECTION I.
OBJECTIVES
The objectives of this 1986 Stock Option and Incentive Plan (the "Plan"),
as amended and restated, are to enable Chiquita Brands International, Inc. (the
"Company") to compete successfully in retaining and attracting key employees of
outstanding ability, to stimulate the efforts of such employees toward the
Company's objectives and to encourage the identification of their interests with
those of the Company's shareholders.
SECTION II.
DEFINITIONS
For purposes of this Plan, the following terms shall have the following
meanings:
2.1"ADVISOR" means any person who provides bona fide advisory or
consultation services to the Company or a Subsidiary other than services in
connection with the offer or sale of securities in a capital-raising
transaction.
2.2"AWARD" means any form of Stock Option, Stock Appreciation Right,
Restricted Stock Award, Unrestricted Stock Award or Performance Award granted
under this Plan.
2.3"AWARD AGREEMENT" means a written agreement setting forth the terms of
an Award.
2.4"AWARD DATE" or "GRANT DATE" means the date designated by the Committee
as the date upon which an Award is granted.
2.5"AWARD PERIOD" or "TERM" means the period beginning on an Award Date
and ending on the expiration date of such Award.
2.6"BOARD" means the Board of Directors of the Company.
2.7"CHANGE OF CONTROL" means the occurrence of any of the following
events:
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act), other than an Exempt Holder or Exempt Entity, is or
becomes the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under
the Exchange Act, except that a person shall be deemed to have "beneficial
ownership" of all shares that such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of 30% or more of the total voting power of
all of the Company's voting securities then outstanding ("Voting Shares"),
PROVIDED, that Exempt Holders "beneficially own" (as so defined), on a
combined basis, a lesser percentage of the Voting Shares than such other
person and do not have the right or ability by voting power, contract or
otherwise to elect or designate for election a majority of the Board of
the Company;
(ii) on any date, the individuals who constituted the Company's Board
at the beginning of the two-year period immediately preceding such date
(together with any new directors whose election by the Company's Board, or
whose nomination for election by the Company's shareholders, was approved
by a vote of at least two-thirds of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority of the directors then in office; or
(iii) immediately after a merger or consolidation of the Company
or any Subsidiary of the Company with or into, or the sale or other
disposition of all or substantially all of the Company's assets to, any
other corporation (where pursuant to the terms of such transaction
outstanding Awards are assumed by the surviving, resulting or acquiring
corporation or new Awards are substituted therefor), (a) the Voting Shares
of the Company outstanding immediately prior to such transaction do not
represent (either by remaining outstanding or by being converted into
voting securities of the surviving or acquiring entity or any parent
thereof) more than 50% of the total voting power of the voting securities
of the Company or surviving or acquiring entity or any parent thereof
outstanding immediately after such merger or consolidation; and (b) either
(x) a person or group (other than an Exempt Entity) beneficially owns a
percentage of the total voting power of the Company or surviving or
acquiring entity or any parent thereof which exceeds both 20% and the
percentage owned, on a combined basis, by the Exempt Holders or (y) the
Exempt Holders beneficially own, on a combined basis, less than 2% of such
voting power.
2.8"CODE" means the Internal Revenue Code of 1986, as amended, or any
successor legislation. Reference to any particular section of the Code includes
any successor amendments or replacements of such section.
2.9"COMMITTEE" means the committee appointed by the Board and consisting
of two or more Directors of the Company, none of whom shall be eligible to
receive any Award pursuant to this Plan except as provided in Section 7.5, and
each of whom shall be a "non-employee director" as defined in Rule 16b-3 and an
"outside director" as defined in Section 162(m) of the Code.
2.10 "COMMON STOCK" means the Company's Common Stock, $.01 par value per
share.
2.11 "COMPANY" means Chiquita Brands International, Inc.
2.12 "CONTROL" means the power to direct or cause the direction of the
management and policies of a corporation or other entity.
2.13 "DIRECTOR" means any person serving on the Board of Directors of
the Company or any of its Subsidiaries who is not an Officer (or officer) or
Employee of the Company or any Subsidiary.
2.14 "DISABILITY" means a "permanent and total disability" within the
meaning of Section 22(e)(3) of the Code, or in the case of an Employee, a
disability which qualifies as a long-term disability under the Company's Long
Term Disability insurance, or any other definition of disability adopted by the
Committee.
2.15 "ELIGIBLE PERSON" means any person who is either an Employee,
Director or Advisor, except that no Director of the Company shall be deemed an
Eligible Person with respect to any Award other than those granted pursuant to
Section 7.5.
2.16 "EMPLOYEE" means (i) any officer or employee of the Company or a
Subsidiary (including those employees on a temporary leave of absence approved
by the Company or a Subsidiary); or (ii) any person who has received and
accepted an offer of employment from the Company or a Subsidiary; or (iii) if
approved by the Committee, a person who at the request of the Company or a
Subsidiary accepts employment with any corporation or partnership in which the
Company has a direct or indirect substantial interest. Solely for purposes of
Section XII, unless otherwise determined by the Committee, a person specified in
clause (iii) above shall be considered an employee of a Subsidiary.
2.17 "EXCHANGE ACT" means the Securities Exchange Act of 1934.
2.18 "EXEMPT ENTITY" means (i) an institution that is entitled under
Rule 13(d)-1 of the Exchange Act (or any successor rule or regulation) to report
its ownership of equity securities of the Company through the filing of a
statement on Schedule 13G under the Exchange Act, in lieu of Schedule 13D, for
so long as such institution remains so entitled, (ii) an underwriter temporarily
holding securities pursuant to an offering of such securities, and (iii) the
Company, any of its subsidiaries or any employee benefit plan (or related trust)
sponsored or maintained by the Company or any of its subsidiaries.
2.19 "EXEMPT HOLDER" means American Financial Group, Inc., each of its
subsidiaries and affiliates, Carl H. Lindner, his spouse, his children and their
spouses and his grandchildren (or the legal representative of any such person)
and each trust for the benefit of each such person.
2.20 "FAIR MARKET VALUE" means, as of any date, the average of the
highest and lowest quoted selling prices of a Share as reported on the New York
Stock Exchange Composite Transactions Tape (or such other consolidated
transaction reporting system on which the Shares are primarily traded), or if
the Shares were not traded on such day, then the next preceding day on which the
Shares were traded, all as reported by such source as the Committee may select.
If the Shares are not traded on a national securities exchange or other market
system, Fair Market Value shall be determined in the manner established by the
Committee.
2.21 "IMMEDIATE FAMILY" means any child, stepchild, grandchild, spouse,
son-in-law or daughter-in-law and shall include adoptive relationships;
provided, however, that if the Committee adopts a different definition of
"immediate family" (or similar term) in connection with the transferability of
Stock Options and SARs awarded under this Plan, such definition shall apply,
without further action of the Board.
2.22 "INCENTIVE STOCK OPTION" means any Stock Option awarded under
Section VII of this Plan intended to be and designated as an "Incentive Stock
Option" within the meaning of Section 422 of the Code or any successor
provision.
2.23 "NON-QUALIFIED STOCK OPTION" means any Stock Option awarded under
Section VII of this Plan that is not an Incentive Stock Option.
2.24 "OFFICER" means a person who has been determined to be an officer
of the Company under Rule 6a-1(f) in a resolution adopted by the Board.
2.25 "OPTION PRICE" or "EXERCISE PRICE" means the price per share at
which Common Stock may be purchased upon the exercise of an Option or an Award.
2.26 "PARTICIPANT" means an Eligible Person to whom an Award has been
made pursuant to this Plan.
2.27 "PERFORMANCE AWARD" means an Award granted pursuant to Section X.
2.28 "REFERENCE PRICE" has the meaning set forth in Section 8.4.
2.29 "REPLACEMENT OPTION" means a Non-Qualified Stock Option granted
pursuant to Subsection 7.4, upon the exercise of a Stock Option granted pursuant
to this Plan where the Option Price is paid with previously owned shares of
Common Stock.
2.30 "RESTRICTED STOCK" means those shares of Common Stock issued
pursuant to a Restricted Stock Award which are subject to the restrictions set
forth in the related Award Agreement.
2.31 "RESTRICTED STOCK AWARD" means an award of a fixed number of Shares
to a Participant which is subject to forfeiture provisions and other conditions
set forth in the Award Agreement.
2.32 "RETIREMENT" means any termination of an Employee's employment
with, or a Director's service on the Board of, the Company or a Subsidiary (in
each case other than by death or Disability) by an Employee or a Director who is
(i) at least 65 years of age or (ii) at least 55 years of age with at least 10
years of employment with, or service on the Board of, the Company or a
Subsidiary.
2.33 "RULE 16B-3" AND "RULE 16A-1(F)" mean Rules 16b-3 and 16a-1(f)
under the Exchange Act or any corresponding successor rules or regulations.
2.34 "SHARE" means one share of the Company's Common Stock.
2.35 "STOCK APPRECIATION RIGHT" OR "SAR" means the right to receive,
for each unit of the SAR, cash and/or shares of Common Stock equal in value to
the excess of the Fair Market Value of one Share on the date of exercise of the
SAR over the Reference Price per share of Common Stock established on the date
the SAR was granted.
2.36 "STOCK OPTION" or "OPTION" means the right to purchase shares of
Common Stock (including a Replacement Option) granted pursuant to Section VII of
this Plan.
2.37 "SUBSIDIARY" means any corporation, partnership, joint venture, or
other entity (i) of which the Company owns or controls, directly or indirectly,
25% or more of the outstanding voting stock (or comparable equity participation
and voting power) or (ii) which the Company otherwise controls (by contract or
any other means); except that when the term "Subsidiary" is used in the context
of an award of an Incentive Stock Option, the term shall have the same meaning
given to it in the Code.
2.38 "TRANSFER" means alienation, attachment, sale, assignment, pledge,
encumbrance, charge or other disposition; and the terms "Transferred" or
"Transferable" have corresponding meanings.
2.39 "UNRESTRICTED STOCK AWARD " means an Award granted pursuant to
Section 9.3.
2.40 "VEST" means, in the case of any Award, to become exercisable or
become free of restrictions solely as a result of either (i) the passage of
required time periods specified under the terms of the Award ("Passage of Time
Criteria") or (ii) the inapplicability of Passage of Time Criteria due to a
Change of Control or a termination of employment or service as a Director
pursuant to the provisions of Section XI. For purposes of this Plan, "Vest"
does not refer to an Award becoming exercisable or free of restrictions due to
the attainment of performance criteria or any other criteria not solely related
to the passage of time ("Other Criteria"). An Award whose terms specify Other
Criteria that have not been fully satisfied at the time of a Change of Control
or termination of employment or service will not Vest (unless otherwise
determined by the Committee or specifically provided by such terms) as a result
of such Change of Control or termination (even if the terms of such Award
contain Passage of Time Criteria in addition to, in combination with, or as an
alternative to such Other Criteria).
SECTION III.
ADMINISTRATION
3.1 THE COMMITTEE. This Plan shall be administered and interpreted by
the Committee, except that any function of the Committee also may be performed
by the Board. Actions of the Committee may be taken by a majority of its
members at a meeting or by the unanimous written consent of all of its members
without a meeting.
3.2 POWERS OF THE COMMITTEE. The Committee shall have the power and
authority to operate, manage and administer the Plan on behalf of the Company
which includes, but is not limited to, the power and authority:
(i) to grant to Eligible Persons one or more Awards consisting
of either or a combination of Stock Options, Stock
Appreciation Rights, Restricted Stock, Unrestricted Stock,
and Performance Awards;
(ii) to select the Eligible Persons to whom Awards may be granted;
(iii) to determine the types and combinations of Awards to be
granted to Eligible Persons;
(iv) to determine the number of Shares or monetary units which
may be subject to each Award;
(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Award (including, but not
limited to, the term, price, exercisability, method of exercise
and payment, any restriction or limitation on transfer, any
applicable performance measures or contingencies, any
vesting schedule or acceleration, or any forfeiture
provisions or waiver, regarding any Award) and the
related Shares, based on such factors as the Committee
shall determine; and
(vi) to modify or waive any restrictions, contingencies or
limitations contained in, and grant extensions to the terms
or exercise periods of, or accelerate the vesting of, any
outstanding Awards as long as such modifications, waivers,
extensions or accelerations are not inconsistent with the
terms of the Plan, but no such changes shall impair the
rights of any Participant without his or her consent.
3.3 GUIDELINES. The Committee shall have the authority to adopt, alter
and repeal administrative rules, guidelines and practices governing the Plan and
perform all acts, including the delegation of its administrative duties, powers
and responsibilities pursuant to Section 3.4, as it deems advisable; to construe
and interpret the terms and provisions of the Plan and any Award issued under
the Plan; and otherwise to supervise the administration of the Plan. The
Committee may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or in any related Award Agreement in the manner and to
the extent it deems necessary to carry the Plan into effect.
3.4 DELEGATION OF AUTHORITY. The Committee may delegate to one or more of
the Company's employees (in the case of ministerial duties only) or Officers all
or any portion of the Committee's authority, powers, responsibilities and
administrative duties under the Plan, with such conditions and limitations as
the Committee shall prescribe in writing; provided, however, that only the
Committee is authorized to grant Awards to, or make any decisions with respect
to Awards granted to, Officers. A record of all actions taken by any Officer
to whom the Committee has delegated a portion of its powers or responsibilities
shall be filed with the minutes of the meetings of the Committee and shall be
made available for review by the Committee upon request.
3.5 DECISIONS FINAL. Any action, decision, interpretation or
determination by or at the direction of the Committee (or of any person acting
under a delegation pursuant to Section 3.4) concerning the application or
administration of the Plan shall be final and binding upon all persons and need
not be uniform with respect to its determination of recipients, amount, timing,
form, terms or provisions of Awards.
SECTION IV.
SHARES SUBJECT TO PLAN
4.1 SHARES. Subject to adjustment as provided in Section 4.4, the
aggregate number of Shares which may be issued under this Plan shall not exceed
fifteen million (15,000,000) Shares. If any Award granted under this Plan shall
expire, terminate or be canceled for any reason without having been exercised in
full, the number of unacquired Shares subject to such Award shall again be
available for future grants. The Committee may make such other determinations
regarding the counting of Shares issued pursuant to this Plan as it deems
necessary or advisable, provided that such determinations shall be permitted by
law.
4.2 MAXIMUM SHARES PER PARTICIPANT. Subject to adjustment as provided in
Section 4.4, the maximum number of Shares that may be subject to awards (of any
and all types) granted under this Plan to any Eligible Person during any
consecutive three calendar years shall not exceed 1,500,000 Shares.
4.3 RE-USE OF SHARES. If any Award granted under this Plan shall
expire, terminate or be forfeited or canceled for any reason before it has
vested or been exercised in full, the number of unissued or undelivered Shares
subject to such Award shall again be available for future grants. The Committee
may make such other determinations regarding the counting of Shares issued
pursuant to this Plan as it deems necessary or advisable, provided that such
determinations shall be permitted by law.
4.4 ADJUSTMENT PROVISIONS.
(a) ADJUSTMENT FOR CHANGE IN CAPITALIZATION. If the Company shall at
any time change the number of issued Shares without new consideration to the
Company (such as by stock dividend, stock split, recapitalization,
reorganization, exchange of shares, liquidation, combination or other change in
corporate structure affecting the Shares) or make a distribution to shareholders
of cash or property, which in the Committee's sole judgment, has a substantial
impact on the value of outstanding Shares, the total number of Shares reserved
for issuance under the Plan, the number of Shares covered by each outstanding
Award, and the Option Price or Reference Price for each outstanding Award shall
be proportionately adjusted in such manner as the Committee in its sole judgment
determines to be equitable and appropriate.
(b) OTHER EQUITABLE ADJUSTMENTS. Notwithstanding any other provision
of the Plan, and without affecting the number of Shares reserved or available
hereunder, the Committee may authorize the issuance, continuation or assumption
of Awards or provide for equitable adjustments or changes in the terms of
Awards, in connection with any merger, consolidation, sale of assets,
acquisition of property or stock, recapitalization, reorganization or similar
occurrence in which the Company is the continuing or surviving corporation, upon
such terms and conditions as it may deem equitable and appropriate.
SECTION V.
CHANGE OF CONTROL; MERGER, CONSOLIDATION, ETC.
5.1. EFFECT OF CHANGE OF CONTROL ON OUTSTANDING AWARDS. In the event
of, and upon a Change of Control, all Awards outstanding on the date of such
Change of Control shall become fully (100%) Vested.
5.2 TERMINATION OF EMPLOYMENT AFTER CHANGE OF CONTROL. In the event
that an Employee's employment by the Company or a Subsidiary is terminated by
the Company or such Subsidiary for any reason, other than for Cause, within one
(1) year after a Change of Control, all of the outstanding Vested Stock Options
and SAR's held by such Employee on the date of termination of employment shall
be exercisable for a period ending the earlier to occur of the first anniversary
of the date of termination or the Expiration Dates of such Stock Options and
SAR's.
5.3 MERGER, CONSOLIDATION, ETC. In the event that the Company shall,
pursuant to action by its Board of Directors, propose to (i) merge into,
consolidate with, sell or otherwise dispose of all or substantially all of its
assets, to another corporation or other entity and provision is not made
pursuant to the terms of such transaction for the assumption by the surviving,
resulting or acquiring corporation of outstanding Awards under the Plan, or the
substitution of new Awards therefor, or (ii) dissolve or liquidate, then (A) the
Committee shall cause written notice of such proposed transaction to be given to
each Participant not less than 30 days prior to the anticipated date of such
proposed transaction, and (B) all outstanding Awards that are not so assumed or
substituted for shall become fully (100%) Vested immediately prior, but subject,
to actual consummation of the transaction. Prior to a date specified in the
notice, which shall not be more than 3 days prior to the consummation of such
transaction, each Participant shall have the right to exercise all Stock Options
and SAR's held by such Participant that are not so assumed or substituted for on
the following basis: (i) such exercise shall be conditioned on consummation of
such transaction, (ii) such exercise shall be effective immediately prior to the
consummation of such transaction, and (iii) the Option Price for such Stock
Options shall not be required to be paid until 7 days after written notice by
the Company to the Participant that such transaction has been consummated. If
such transaction is consummated, each Option, to the extent not previously
exercised prior to the date specified in the foregoing notice of proposed
transaction, shall terminate upon the consummation of such transaction. If such
transaction is abandoned, (a) any and all conditional exercises of Stock Options
and SAR's in accordance with this Section 4.3 shall be deemed annulled and of no
force or effect and (b) to the extent that any Award shall have Vested solely by
operation of this Section 4.3, such Vesting shall be deemed annulled and of no
force or effect and the Vesting provisions of such Award shall be reinstated.
SECTION VI.
DURATION OF PLAN
This Plan shall continue in effect until December 31, 2015 unless
terminated sooner by the Board pursuant to Section XII.
SECTION VII.
STOCK OPTIONS
7.1 GRANTS. Stock options may be granted alone or in addition to other
Awards granted under this Plan. Each Option granted shall be designated as
either a Non-Qualified Stock Option or an Incentive Stock Option and in each
case such Option may or may not include Stock Appreciation Rights. One or more
Stock Options and/or Stock Appreciation Rights may be granted to any Eligible
Person, except that only Non-Qualified Stock Options may be granted to any
Director of or Advisor to the Company.
7.2 TERMS OF OPTIONS. Except as otherwise required by Sections 7.3,
7.4 and 7.5, Options granted under this Plan shall be subject to the following
terms and conditions and shall be in such form and contain such additional terms
and conditions, not inconsistent with the terms of this Plan, as the Committee
shall deem desirable:
(a) OPTION PRICE. The Option Price per share of Common Stock purchas
able under a Stock Option shall be determined by the Committee at the time of
grant, except that no stock option may be granted to an Officer, and no
Incentive Stock Option may be granted to any Eligible Person, for an Option
Price less than 100% of Fair Market Value on the Grant Date.
(b) OPTION TERM. The Term of each Stock Option shall be fixed by the
Committee, but no Incentive Stock Option shall be exercisable more than ten
years after its Award Date, and no Non-Qualified Stock Option shall be
exercisable more than 20 years after its Award Date.
(c) EXERCISABILITY. A Stock Option shall be exercisable at such time
or times and subject to such terms and conditions as shall be specified in the
Award Agreement; provided, however, that an Option may not be exercised as to
less than 100 Shares at any time unless the number of Shares for which the
Option is exercised is the total number available for exercise at that time
under the terms of the Option.
(d) METHOD OF EXERCISE. Stock Options may be exercised in whole or in
part at any time during the Option Term by giving written notice of exercise to
the Company specifying the number of Shares to be purchased. Such notice shall
be accompanied by payment in full of the Option Price in cash unless some other
form of consideration is approved by the Committee at or after the grant.
Payment in full or in part also may be made in the form of Shares of Common
Stock owned by the Participant for at least six (6) months prior to exercise,
which Shares shall be valued at the Fair Market Value of the Common Stock on the
Exercise Date. The Committee may in its sole discretion authorize the payment
of the Option Price, in full or in part, by reducing the number of Shares to be
issued upon the exercise of the Option based upon the Fair Market Value of the
Common Stock on the date of exercise of the Option.
(e) CASHLESS EXERCISE. A Participant may elect to pay the Exercise
Price upon the exercise of an Option by authorizing a broker to sell all or a
portion of the Shares acquired upon exercise of the Option and remit to the
Company a sufficient portion of the sale proceeds to pay the entire Exercise
Price and any tax withholding resulting from such exercise.
(f) NON-TRANSFERABILITY OF OPTIONS. Stock Options shall be
Transferable only to the extent provided in Section 13.3 of this Plan.
(g) TERMINATION. Stock Options shall terminate in accordance with
Section XI of this Plan.
(h) BUYOUT AND SETTLEMENT PROVISIONS. The Committee may at any time
offer to buy out an Option previously granted, based on such terms and
conditions as the Committee shall establish. The Committee may also substitute
new Stock Options for previously granted Stock Options having higher Option
Prices than the new Stock Options being substituted therefor.
7.3 INCENTIVE STOCK OPTIONS. Incentive Stock Options shall be subject
to the following terms and conditions:
(a) AWARD AGREEMENT. Any Award Agreement relating to an Incentive
Stock Option shall contain such terms and conditions as are required for the
Option to be an "incentive stock option" as that term is defined in Section 422
of the Code.
(b) TEN PERCENT SHAREHOLDER. An Incentive Stock Option shall not be
awarded to any person who, at the time of the Award, owns Shares possessing more
than ten percent (10%) of the total combined voting power of all classes of
stock of the Company and its Subsidiaries.
(c) QUALIFICATION UNDER THE CODE. Notwithstanding anything in this
Plan to the contrary, no term of this Plan relating to Incentive Stock Options
shall be interpreted, amended or altered, nor shall any discretion or authority
granted under this Plan be exercised, so as to disqualify this Plan under
Section 422 of the Code, or, without the consent of an affected Participant, to
disqualify any Incentive Stock Option under Section 422 of the Code, except as
may result in the event of a Change of Control.
(d) NOTIFICATION OF DISQUALIFYING DISPOSITION. Each Award Agreement
with respect to an Incentive Stock Option shall require the Participant to
notify the Company of any disposition of Shares of Common Stock issued pursuant
to the exercise of such Option under the circumstances described in Section
421(b) of the Code (relating to certain disqualifying dispositions), within ten
(10) days of such disposition.
7.4 REPLACEMENT OPTIONS. The Committee may provide either at the time of
grant or subsequently that an Option shall include the right to acquire a
Replacement Option upon the exercise of such Option (in whole or in part) prior
to an Employee's termination of employment if the payment of the Option Price is
paid in Shares. In addition to any other terms and conditions the Committee
deems appropriate, the Replacement Option shall be subject to the following
terms:
(a) NUMBER OF SHARES. The number of Shares subject to the Replacement
Option shall not exceed the number of whole Shares used to satisfy the Option
Price (whether by delivery of Shares to the Company or by reduction of Shares
otherwise deliverable to the Participant on exercise) of the original Option and
the number of whole Shares, if any, used to satisfy the payment for withholding
taxes (whether by such delivery or such reduction) in accordance with Section
13.6.
(b) GRANT DATE. The Replacement Option Grant Date will be the date of
the exercise of the original Option.
(c) OPTION PRICE. The Option Price per share shall be the Fair Market
Value of a Share on the Replacement Option Grant Date.
(d) VESTING. The Replacement Option shall be exercisable no earlier
than one (1) year after the Replacement Option Grant Date.
(e) TERM. The Term of the Replacement Option will not extend beyond
the Term of the original Option.
(f) NON-QUALIFIED. The Replacement Option shall be a Non-Qualified
Stock Option.
(g) WITHDRAWAL OF RIGHT. The Committee may without the consent of the
Employee rescind the right to receive a Replacement Option at any time prior to
an Option being exercised.
7.5 AWARD OF OPTIONS TO DIRECTORS OF THE COMPANY. All Options granted to
Directors of the Company shall be governed by the terms and conditions of this
Section 7.5 and no Director of the Company shall be eligible to receive any
Awards under this Plan except as set forth in this Section 7.5.
(a) AUTOMATIC GRANTS. The Company shall make the following grants of
Non-Qualified Stock Options to Directors:
(i) INITIAL GRANT. On the date on which a person first be
comes a Director of the Company, whether by election or appointment, such
Director shall automatically be granted a Non-Qualified Stock Option for
10,000 Shares.
(ii) ANNUAL GRANT. Each Director who has served on the Board
of the Company for at least six (6) months shall automatically receive an
annual grant of a Non-Qualified Stock Option for 10,000 Shares. The award
shall be made on the same date that the Committee decides the total number
of Shares subject to Awards to be granted to Employees in connection with
the Company's annual total compensation review.
(b) TERMS AND CONDITIONS OF OPTIONS GRANTED TO DIRECTORS OF THE
COMPANY. All Stock Options granted to Directors of the Company shall be subject
to the following terms and conditions:
(i) TERM. The Term of all Options shall be twenty (20) years
from the Award Date of the Option.
(ii) OPTION PRICE. The Option Price of all Options shall be the
Fair Market Value of a Share on the Award Date.
(iii) VESTING. All Options shall Vest over a ten (10) year period
with nine percent (9%) of the Option Shares being immediately exercisable
on the Award Date and an additional nine percent (9%) becoming exercisable
on each anniversary of the Award Date thereafter until the tenth
anniversary when the remaining ten percent (10%) of the Option Shares
shall become exercisable.
(iv) METHOD OF EXERCISE. All Options shall be exercisable in
the manner provided in Subsection 7.2(d) and such Directors shall
also be entitled to make payments for withholding taxes in accordance
with the provisions of Section 13.6.
(v) NON-TRANSFERABILITY AND TERMINATION. All Options shall be
Transferable only to the extent provided in Section 13.3 of this Plan and
shall terminate in accordance with Section XI of this Plan, except that
the timing provisions of Subsections 11.1(a) and 11.1(c) may not be varied
by Committee determination.
SECTION VIII.
STOCK APPRECIATION RIGHTS
8.1 GRANT. A Stock Appreciation Right may be granted either with or
without reference to all or any part of a Stock Option. A "Tandem SAR" means an
SAR granted with reference to a Stock Option (the "Reference Option"). A "Non-
Tandem SAR" means an SAR granted without reference to a Stock Option. If the
Reference Option is a Non-Qualified Stock Option, a Tandem SAR may be granted at
or after the date of the Reference Option; if the Reference Option is an
Incentive Stock Option, the Grant Date of a Tandem SAR must be the same as the
Grant Date of the Reference Option. Any SAR shall have such terms and
conditions, not inconsistent with this Plan, as are established by the Committee
in connection with the Award.
8.2 TERM. A Tandem SAR shall terminate and no longer be exercisable upon
the termination of its Reference Option. A Non-Tandem SAR may have a term no
longer than 20 years from its Grant Date.
8.3 EXERCISE. A Tandem SAR may only be exercisable at the times and, in
whole or in part, to the extent that its Reference Option is exercisable. The
exercise of a Tandem SAR shall automatically result in the surrender of the
applicable portion of its Reference Option. A Non-Tandem SAR shall be
exercisable in whole or in part as provided in its Award Agreement. Written
notice of any exercise must be given in the form prescribed by the Committee.
8.4 PAYMENT. For purposes of payment of an SAR, the Reference Price per
Share shall be the Option Price of the Reference Option in the case of a Tandem
SAR, and shall be the Fair Market Value of a Share on the Grant Date in the case
of a Non-Tandem SAR. The Committee shall determine the form of payment.
8.5 NON-TRANSFERABILITY AND TERMINATION. Stock Appreciation Rights shall
be Transferable only to the extent provided in Section 13.3 of this Plan and
shall terminate in accordance with Section XI of this Plan.
SECTION IX.
RESTRICTED AND UNRESTRICTED STOCK AWARDS
9.1 GRANTS OF RESTRICTED STOCK AWARDS. The Committee may, in its
discretion, grant one or more Restricted Stock Awards to any Eligible Person.
Each Restricted Stock Award shall specify the number of Shares to be issued to
the Participant, the date of such issuance, the price, if any, to be paid for
such Shares by the Participant and the restrictions imposed on such Shares. The
Committee may grant Awards of Restricted Stock subject to the attainment of
specified performance goals, continued employment or such other limitations or
restrictions as the Committee may determine.
9.2 TERMS AND CONDITIONS OF RESTRICTED AWARDS. Restricted Stock Awards
shall be subject to the following provisions:
(a) ISSUANCE OF SHARES. Shares of Restricted Stock may be issued
immediately upon grant or upon vesting as determined by the Committee.
(b) STOCK POWERS AND CUSTODY. If shares of Restricted Stock are issued
immediately upon grant, the Committee may require the Participant to deliver a
duly signed stock power, endorsed in blank, relating to the Restricted Stock
covered by such an Award. The Committee may also require that the stock
certificates evidencing such Shares be held in custody by the Company until the
restrictions on them shall have lapsed.
(c) SHAREHOLDER RIGHTS. Unless otherwise determined by the Committee at
the time of grant, Participants receiving Restricted Stock Awards shall not be
entitled to dividend or voting rights for the Restricted Shares until they are
fully vested.
9.3 UNRESTRICTED STOCK AWARDS. The Committee may make Awards of
unrestricted Common Stock to key Eligible Persons in recognition of outstanding
achievements or contributions by such persons. Unrestricted Shares issued on a
bonus basis under this Section 9.3 may be issued for no cash consideration.
Each certificate for unrestricted Common Stock shall be registered in the name
of the Participant and delivered immediately to the Participant.
SECTION X.
PERFORMANCE AWARDS
10.1 PERFORMANCE AWARDS. The Committee may, in its discretion, grant
Performance Awards to Eligible Persons in accordance with the following terms
and conditions:
(a) GRANT. A Performance Award shall consist of the right to receive
either (i) Common Stock or cash of an equivalent value, or a combination of
both, at the end of a specified Performance Period (defined below) or (ii) a
fixed-dollar amount payable in cash or Shares, or a combination of both, at the
end of a specified Performance Period. The Committee shall determine the
Eligible Persons to whom and the time or times at which Performance Awards shall
be granted, the number of Shares or the amount of cash to be awarded to any
person, the duration of the period (the "Performance Period") during which, and
the conditions under which, a Participant's Performance Award will vest, and the
other terms and conditions of the Performance Award in addition to those set
forth in Section 10.2.
(b) CRITERIA FOR AWARDS. The Committee may condition the grant or
vesting of a Performance Award upon the attainment of specified performance
goals, including, but not limited to, appreciation in the Fair Market Value,
book value or other measure of value of the Common Stock, the performance of the
Company based on earnings or cash flow, or such other factors or criteria as the
Committee shall determine.
10.2 TERMS AND CONDITIONS OF PERFORMANCE AWARDS. Performance Awards
granted pursuant to this Section X shall be subject to the following terms and
conditions:
(a) DIVIDENDS. Unless otherwise determined by the Committee at the time
of the grant of the Award, amounts equal to any dividends declared during the
Performance Period with respect to any Shares covered by a Performance Award
will not be paid to the Participant.
(b) PAYMENT. Subject to the provisions of the Award Agreement and this
Plan, at the expiration of the Performance Period, share certificates, cash or
both (as the Committee may determine) shall be delivered to the Participant, or
his or her legal representative or guardian, in a number or an amount equal to
the vested portion of the Performance Award.
(c) NON-TRANSFERABILITY. Performance Awards shall not be Transferable
except in accordance with the provisions of Section 13.3 of this Plan.
(d) TERMINATION OF EMPLOYMENT. Subject to the applicable provisions of
the Award Agreement and this Plan, upon termination of a Participant's
employment with the Company or a Subsidiary for any reason during the
Performance Period for a given Award, the Performance Award in question will
vest or be forfeited in accordance with the terms and conditions established by
the Committee.
SECTION XI.
TERMINATION OF AWARDS
11.1 TERMINATION OF AWARDS TO EMPLOYEES AND DIRECTORS. All Awards issued
to Employees and Directors under this Plan shall terminate as follows:
(a) TERMINATION BY DEATH, DISABILITY OR RETIREMENT. If an Employee's
employment by, or a Director's service on the board of, the Company or a
Subsidiary terminates by reason of death, Disability or Retirement, any Awards
held by such Participant, unless otherwise determined by the Committee at grant,
shall become fully Vested and, in the case of Stock Options and SAR's, may
thereafter be exercised by the Participant or by the Participant's beneficiary
or legal representative, for a period of one (1) year (or such longer period as
the Committee or the President of the Company may specify at or after grant)
after the date of such death, Disability or Retirement or until the expiration
of the stated term of such Award, whichever period is shorter.
(b) OTHER TERMINATION. Unless otherwise determined by the Committee at
or after grant, if an Employee's employment by, or a Director's service on the
board of, the Company or a Subsidiary terminates for any reason other than
death, Disability or Retirement, all of such Participant's Vested or otherwise
exercisable Stock Options and SAR's will terminate on the earlier to occur of
the stated expiration date of the Awards or ninety (90) calendar days after
termination of such employment or directorship. If a Participant dies during
the ninety (90) day period following the termination of the employment or
directorship, any unexercised Award held by the Participant shall be
exercisable, to the full extent that such Award was exercisable at the time of
death, for a period of one (1) year from the date of death or until the
expiration of the stated term of the Award, whichever occurs first.
11.2 ACCELERATION OF VESTING AND EXTENSION OF EXERCISE PERIOD UPON
TERMINATION. Notwithstanding anything contained in this Section XI, upon the
termination of a Participant's employment or directorship with the Company or
any of the Company's Subsidiaries, excluding, however, any Participant who is
either an Officer or a Director of the Company at the time of termination,
either the Committee or the President, in its or his sole discretion:
(a) ACCELERATE THE VESTING of, or otherwise cause to be exercisable or
free of restrictions, all or part of any Awards held by such terminated
Participant so that such Awards will be fully or partially exercisable as of the
date of termination of employment or such other date as the Committee or
President may choose; and
(b) EXTEND THE EXERCISE PERIOD of all or part of any Stock Options or
SAR's held by such terminated Participant for up to five years from the date of
termination (whether such termination was because of death, Disability,
Retirement or otherwise) but in no event longer than the original expiration
date of such Award.
(c) OFFICERS. No person or entity shall have the authority or discretion
to accelerate the Vesting of, otherwise cause to be exercisable or free of
restrictions, or extend the exercise period of, any Award granted to an Officer
of the Company other than the Committee.
(d) DIRECTORS OF THE COMPANY. No person or entity shall have the
authority to accelerate the Vesting of, or otherwise cause to be exercisable or
free of restrictions, or extend the exercise period of, any Award granted to a
Director of the Company.
11.3 BUYOUT AND SETTLEMENT OF AWARDS. The Committee may at any time offer
to buy out an Award (of any type or kind) previously granted, based on such
terms and conditions as the Committee shall establish. The Committee may also
substitute new Awards for previously granted Awards with the new Awards
containing different terms and conditions, including different exercise prices,
than those contained in the Awards being replaced.
SECTION XII.
TERMINATION OR AMENDMENT OF THIS PLAN
12.1 TERMINATION OR AMENDMENT. The Board may at any time, amend, in whole
or in part, any or all of the provisions of this Plan, or suspend or terminate
it entirely; provided, however, that, unless otherwise required by law, the
rights of a Participant with respect to any Awards granted prior to such
amendment, suspension or termination may not be impaired without the consent of
such Participant. In addition, no amendment may be made without first obtaining
shareholder approval if such amendment would increase the maximum number of
Shares which may be granted to any individual Participant, or increase the
total number of Shares available for issuance under this Plan.
SECTION XIII.
GENERAL PROVISIONS
13.1 NO RIGHT TO CONTINUED EMPLOYMENT . The adoption of this Plan and the
granting of Awards hereunder shall not confer upon any Employee the right to
continued employment nor shall it interfere in any way with the right of the
Company or any Subsidiary to terminate the employment or directorship,
respectively, of any Employee at any time.
13.2 AWARDS TO PERSONS OUTSIDE THE UNITED STATES. To the extent necessary
or appropriate to comply with foreign law or practice, the Committee may,
without amending this Plan: (i) establish special rules applicable to Awards
granted to Eligible Persons who are either or both foreign nationals or employed
outside the United States, including rules that differ from those set forth in
this Plan, and (ii) grant Awards to such Eligible Persons in accordance with
those rules.
13.3 NON-TRANSFERABILITY OF AWARDS. Except as otherwise provided by the
Committee at or after grant, no Award or benefit payable under this Plan shall
be Transferable by the Participant during his or her lifetime, nor may it be
assigned, exchanged, pledged, transferred or otherwise encumbered or disposed of
except by a domestic relations order pursuant to Section 414(p)(1)(B) of the
Code, or by will or the laws of descent and distribution; and no Award shall be
exercisable by anyone other than the Participant or the Participant's guardian
or legal representative during such Participant's lifetime. The Committee may
in its sole discretion permit a Participant to transfer a Non-Qualified Stock
Option or SAR for no consideration to or for the benefit of the Participant's
Immediate Family (including, without limitation, to a trust for the benefit of
the Participant's Immediate Family or to a partnership or limited liability
company for one or more members of the Participant's Immediate Family), subject
to such limits as the Committee may establish, and the transferee shall remain
subject to all the terms and conditions applicable to such Award.
13.4 OTHER PLANS. In no event shall the value of, or income arising from,
any Awards issued under this Plan be treated as compensation for purposes of any
pension, profit sharing, life insurance, disability or other retirement or
welfare benefit plan now maintained or hereafter adopted by the Company or any
Subsidiary, unless such plan specifically provides to the contrary.
13.5 UNFUNDED PLAN. This Plan is not a "Retirement Plan" or "Welfare
Plan" under the Employee Retirement Income Security Act of 1974, as amended.
This Plan shall be unfunded and shall not create (or be construed to create) a
trust or a separate fund or funds. This Plan shall not establish any fiduciary
relationship between the Company and any Participant or any other person. To
the extent any person holds any rights by virtue of an Award granted under this
Plan, such rights shall be no greater than the rights of an unsecured general
creditor of the Company.
13.6 WITHHOLDING OF TAXES. The Company shall have the right to deduct
from any payment to be made pursuant to this Plan, or to otherwise require,
prior to the issuance or delivery of any Shares or the payment of any cash to a
Participant, payment by the Participant of any Federal, state, local or foreign
taxes which the Company reasonably believes are required by law to be withheld.
The Committee may permit any such withholding obligation to be satisfied by
reducing the number of Shares otherwise deliverable or by accepting the delivery
of Shares previously owned by the Participant, which Shares shall be valued at
the Fair Market Value of the Common Stock on the exercise date. Any fraction of
a Share required to satisfy such tax obligations shall be disregarded and the
amount due shall be paid instead in cash by the Participant. The Company may
also withhold from any future earnings of salary, bonus or any other payment due
to the Participant the amount necessary to satisfy any outstanding tax
obligations related to the grant or exercise of any Award granted pursuant to
this Plan.
13.7 REIMBURSEMENT OF TAXES. The Committee may provide in its discretion
that the Company may reimburse a Participant for Federal, state, local and
foreign tax obligations incurred as a result of the grant or exercise of an
Award issued under this Plan.
13.8 GOVERNING LAW. This Plan and all actions taken in connection with it
shall be governed by the laws of the State of Ohio, without regard to the
principles of conflict of laws.
13.9 LIABILITY. No employee of the Company nor member of the Committee or
the Board shall be liable for any action or determination taken or made in good
faith with respect to the Plan or any Award granted hereunder and, to the
fullest extent permitted by law, all employees and members of the Committee and
the Board shall be indemnified by the Company for any liability and expenses
which they may incur through any claim or cause of action arising under or in
connection with this Plan or any Awards granted under this Plan.
13.10 SUCCESSORS. All obligations of the Company under this Plan shall
be binding upon and inure to the benefit of any successor to the Company,
whether the existence of such successor is the result of a direct or indirect
purchase, merger, consolidation, or otherwise, of all or substantially all of
the business, stock, and/or assets of the Company.
EXHIBIT 10F
-----------
1997 AMENDED AND RESTATED
CHIQUITA BRANDS INTERNATIONAL, INC.
DEFERRED COMPENSATION PLAN
(Conformed to include amendments effective January 1, 1998)
1. ESTABLISHMENT AND PURPOSE
1.1 Effective January 1, 1997, Chiquita Brands International, Inc., a New
Jersey corporation, adopts this 1997 Amended and Restated Chiquita
Brands International, Inc. Deferred Compensation Plan to enable
eligible Associates of the Company and certain of its subsidiaries and
affiliates to elect deferral of payment of their compensation.
1.2 A Participant's deferral shall be governed by the Plan that was in
effect at the time the deferral is made, provided that the
Administrator may make certain administrative changes including the
timing of payments pursuant to Article 10 and any other amendments
permitted by Section 15.4.
2. PLAN OBJECTIVES
2.1 The purpose of this Plan is to allow Participants to achieve the
following objectives:
(a) Accumulate income for retirement; and
(b) Provide opportunity for financial growth.
3. DEFINITIONS
When used in this Plan, the following words and phrases shall have the
following meanings:
3.1 ACCOUNT means the record maintained for each Participant to which all
deferrals, investment indices and distributions are credited and
debited for each Plan Year.
3.2 ADMINISTRATOR means the Employee Benefits Committee appointed by the
Company's Board of Directors.
3.3 ANNUAL BONUS means the annual lump-sum Total Compensation Review Bonus
Award made in addition to a Participant's Base Salary.
3.4 ASSOCIATE means an employee of the Company.
3.5 BASE SALARY means base pay, excluding any bonuses, commissions and
other extraordinary payments.
3.6 COMPANY means Chiquita Brands International, Inc. and (unless the
context indicates otherwise) its subsidiaries and affiliates which
have not adopted a separate deferred compensation plan.
3.7 COMPENSATION means the Base Salary earned for services rendered during
a given Plan Year and the Annual Bonus earned but not determinable or
paid until the following Plan Year.
3.8 DISABLED AND DISABILITY mean that a Participant, as a result of
accident or illness, is physically, mentally or emotionally unable to
perform the duties for which the Participant is employed, and in the
Administrator's opinion is likely to remain so Disabled for at least
one year. The Administrator shall make all determinations as to
whether a Participant is Disabled and shall use such evidence,
including independent medical reports and data, as the Administrator
deems necessary and desirable.
3.9 EXCESS 401(K) DEFERRAL means the excess, if any, of (i) the amount a
Qualified Participant elects to defer under the Savings Plan, over
(ii) the limitations (as adjusted) on deferrals contained in Sections
401(a)(17) and 402(g) of the Internal Revenue Code of 1986, as
amended.
3.10 EXPIRATION DATE means, with respect to each annual deferral under
Section 7.1, the earlier of (i) the last day of the year to which a
Participant elects to defer Compensation pursuant to Section 8.1, or
(ii) the last day of the year during which a Participant dies, becomes
Disabled or terminates employment with the Company.
3.11 MATCHING CONTRIBUTIONS means, with respect to each Qualified
Participant in a Plan Year, Company contributions to the Plan, in
respect of the Participant's contributions under Section 7.1, equal to
the difference, if any, between the following two amounts: (i) the
total of the Basic Matching Contribution and Discretionary Matching
Contribution (the "Contributions") such Participant would have
received for such Plan Year under the Savings Plan, up to the 6% limit
imposed by the Savings Plan, if such Contributions were determined
without respect to cumulative annual Base Salary without applying the
limitations on compensation and contributions in Sections 401(a)(17)
and 402(g) of the Internal Revenue Code of 1986, as amended, and (ii)
the actual Contributions on behalf of such Participant under the
Savings Plan for that Plan Year.
3.12 PARTICIPANT means an officer or other highly compensated Associate who
is selected or entitled to participate and participates in the Plan
for a designated Plan Year.
3.13 PLAN means this 1997 Amended and Restated Chiquita Brands
International, Inc. Deferred Compensation Plan, as it may be amended
from time to time.
3.14 PLAN YEAR means the calendar year, January 1 through December 31.
3.15 SAVINGS PLAN means the Chiquita Savings and Investment Plan.
3.16 QUALIFIED PARTICIPANT means a Participant whose Base Salary exceeds
the limitation on compensation in Section 401(a)(17) of the Internal
Revenue Code of 1986, as amended, who elects to defer Excess 401(k)
Deferrals under this Plan, and participates in the Savings Plan for
the entire year and does not change his or her percentage of
compensation contributed to the Savings Plan for the entire Plan Year.
4. ELIGIBILITY
4.1 Officers and other highly compensated Associates of the Company will
be eligible to become Participants in the Plan either through annual
invitation by the President of the Company or through an employment
agreement approved by the President.
5. PARTICIPATION
5.1 A Participant elects to participate in the Plan by delivering to the
Administrator, before the beginning of each Plan Year, a properly
completed enrollment form.
5.2 The enrollment form shall conform to the terms and conditions of the
Plan.
6. DEFERRED COMPENSATION ACCOUNT
6.1 Each Plan Year a deferred compensation Account will be established for
each Participant.
6.2 All Compensation deferred by the Participant (including all Excess
401(k) Deferrals), all increases in the value of the Account resulting
from the application of the appropriate Interest Index, all other
amounts credited to the Account pursuant to this Plan and all
distributions from the Account to the Participant or the Participant's
beneficiary(ies) or estate shall be reflected in the Account.
6.3 All Accounts shall be maintained by the Administrator.
7. DEFERRAL SOURCES AND MATCHING CONTRIBUTIONS
7.1 At the time of enrollment as provided in Section 5.1, a Participant
may elect to defer a percentage of Base Salary and, if the Participant
is a Qualified Participant, Excess 401(k) Deferrals, for services
rendered in the next Plan Year. In the fourth quarter of each Plan
Year, a Participant also may elect to defer a percentage or flat
dollar amount of his Annual Bonus that is not yet determined, but that
is scheduled to be paid in the following Plan Year.
7.2 Any Base Salary deferral must be at least 10% of Base Salary. Any
Annual Bonus deferral must be at least 20% of each Annual Bonus or
$10,000, whichever is less. The maximum Base Salary deferral must not
exceed 80% of Base Salary and the maximum Annual Bonus deferral must
not exceed 85% of Annual Bonus.
7.3 Compensation and Excess 401(k) Deferrals deferred under this Plan
shall be credited to the Participant's Account on the date such
amounts would have otherwise been paid.
7.4 The deferral sources and amounts elected for a given Plan Year are
irrevocable.
7.5 If a Qualified Participant in this Plan has elected to participate in
the Savings Plan and has Excess 401(k) Deferrals, the Company will
make Matching Contributions for that Participant in accordance with
Section 3.11 provided the Participant does not change such
Participant's 401(k) contribution rate during the Plan Year. All such
Matching Contributions shall be credited to the Participant's Account
on the earliest of the last pay day of the respective Plan Year or the
Expiration Date.
8. DEFERRAL TERM
8.1 At the time a Participant elects to defer Compensation, the
Participant must also elect the term for which such deferral is made
(the "Deferral Term"). The Deferral Term for Base Salary or Annual
Bonus deferrals must be either five years or ten years or the date on
which the Participant dies, becomes Disabled or terminates employment
with the Company for any reason. The Deferral Term for all Excess
401(k) Deferrals and Matching Contributions shall always end upon
death, Disability or termination of employment for any reason.
8.2 The Deferral Term for deferrals of Base Salary and Annual Bonus are
not required to be the same.
8.3 A Deferral Term, once elected, is irrevocable.
8.4 Should a Participant die, become Disabled or the Participant's
employment with the Company be terminated for any reason before the
end of a Deferral Term of five or ten years, the date of death,
Disability or termination of employment will trigger the end of the
Deferral Term.
9. INTEREST INDICES
9.1 Amounts deferred under this Plan shall accrue interest from the date
which is the midpoint of the calendar quarter in which the deferrals
are credited to the Participant's Account until the Expiration Date.
Such interest shall be credited to the Account quarterly, at the
interest rate specified in the Interest Rate Schedule for the
respective Plan Year and Deferral Term elected by the Participant.
10. PAYMENT FORM AND METHOD
10.1 All payments from the Plan shall be made in the form of cash.
10.2 At the time of enrollment for a given Plan Year, a Participant
shall elect the method of payment desired upon the Expiration Date of
the Deferral Term elected.
10.3 A Participant may choose either a lump sum or an equal annual
installment payment method for any deferrals of Compensation earned
during any Plan Year prior to 1996. Only lump sum payments will be
available (and installment payments will not be available) for any
deferrals of Compensation earned on or after January 1, 1996 and
before January 1, 1998. A Participant again may choose either a lump
sum or an equal annual installment payment method for any deferrals of
Compensation and Annual Bonus earned during any Plan Year beginning on
or after January 1, 1998.
10.4 The payment method elected may be separate for each Deferral Term and
from the various deferral sources, for the respective Plan Years.
10.5 Should a Participant elect annual installments, the Participant
must select at the time of enrollment the length of time over which
installments are to be received in accordance with Article 12 below.
10.6 The payment method and the installment period elected for
deferrals in a given Plan Year are irrevocable.
11. ACCOUNT STATEMENT
11.1 Account statements will be sent periodically (at least annually) to
each Participant until the Participant's Account has been completely
distributed.
11.2 The appropriate Interest Rate Schedules will be used for crediting the
deferrals accrued pursuant to Section 9.
12. ACCOUNT DISTRIBUTION
12.1 Payment will begin on the first payroll period in February
following the Expiration Date. Prior to the commencement of payments
from the Participant's Account, the Account will continue to accrue
interest and dividends in accordance with the Participant's investment
index election through the Expiration Date. For lump sum payments, no
interest or credits will accrue after the Expiration Date. For
installment payments, interest will accrue at the prime rate after the
Expiration Date.
12.2 Applicable federal, state, local and foreign taxes will be deducted
from the gross amount of the payment.
12.3 Equal annual installments shall be at least $2,000 per deferral
type per year. Installment payments will be made annually over a
period not to exceed ten years. The Administrator shall have the
right to reduce the length of the installment period to that which
provides an equal installment of at least $2,000.
12.4 The ongoing process of an equal installment distribution shall be
as follows:
12.4.1 The Participant's account shall no longer be valued
based on the Graduated Interest Index or the Stock Index.
12.4.2 Interest shall be credited quarterly throughout the
distribution period, based on the Prime Rate as announced by
the Federal Reserve Bank of Cleveland as of the first day of
each calendar quarter, for both Graduated Interest Index and
Stock Index balances.
12.4.3 The Administrator may accelerate payment of any
amount remaining in the Account to the extent that the amounts
being paid are not sufficiently large enough to warrant the
administrative expense being incurred.
13. HARDSHIP DISTRIBUTIONS
13.1 Distribution of payments from a Participant's Account prior to the
dates set forth in Section 12.1 shall be made only if the
Administrator, after consideration of a written application by the
Participant, determines that the Participant has sustained financial
hardship. For purposes of Section 13, Participant shall also include
a terminated Associate receiving severance payments from the Company.
13.2 Any hardship distribution shall be withdrawn from the Participant's
Account, starting with the most current Plan Year, continuing in
reverse chronological order.
13.3 Applicable federal, state, local and foreign taxes will be deducted
from the gross amount of the payment.
14. BENEFICIARY DESIGNATION
14.1 A Participant shall have the right to designate one or more
beneficiaries and to change any beneficiary previously designated.
14.2 A Participant shall submit his or her beneficiary designation in
writing using the beneficiary designation form. The Participant shall
deliver the completed form to the Administrator.
14.3 The most recently dated and filed beneficiary designation shall cancel
all prior designations.
14.4 In the event of the Participant's death before or after the
commencement of payments from the Account, the amount otherwise
payable to the Participant shall be paid to the designated
beneficiary(ies) or, if no beneficiary, to the estate, according to
the provisions of Section 12, as applicable.
15. GENERAL PROVISIONS
15.1 PARTICIPANT'S RIGHTS UNSECURED. The right of any Participant to
receive payments under the provisions of this Plan shall be an
unsecured claim against the general assets of the Company. It is not
required or intended that the amounts credited to the Participant's
Account be segregated on the books of the Company or be held by the
Company in trust for a Participant and a Participant shall not have
any claim to or against a specific asset or assets of the Company.
All credits to an Account are for bookkeeping purposes only.
15.2 NON-ASSIGNABILITY. The right to receive payments shall not be
transferrable or assignable by a Participant. Any attempted
assignment or alienation of payments shall be void and of no force or
effect.
15.3 ADMINISTRATION. The Administrator shall have the authority to adopt
rules, regulations and procedures for carrying out this Plan, and
shall interpret, construe and implement the provisions of the Plan
according to the laws of the State of Ohio. Any such interpretation
by the Administrator shall be final, binding and conclusive.
15.4 AMENDMENT AND TERMINATION. The Company expressly reserves the sole
and exclusive right to amend, modify, or terminate this Plan at any
time by action of the Board of Directors of the Company or, to the
extent it has delegated such authority, by action of the Employee
Benefits Committee. Any amendment, modification, or termination shall
be in writing authorized by the Board of Directors or the Employee
Benefits Committee, as the case may be, and signed by an officer of
the Company. The Company's right of amendment, modification, or
termination shall not require the assent, concurrence, or any other
action by any subsidiary or affiliate of the Company even though
actions by the Company may relate to persons employed by a subsidiary
or affiliate. However, no amendment, modification, or termination of
this Plan shall adversely affect any Participant's accrued rights
arising from any election to defer Compensation made prior to such
amendment, modification or termination of the Plan.
15.5 CONSTRUCTION. The singular shall also include the plural where
appropriate.
15.6 EMPLOYMENT RIGHTS. This Plan does not constitute a contract of
employment and participation in the Plan will not give any Participant
the right to be retained in the employ of the Company.
15.7 ANNUAL BONUS RIGHTS. This Plan does not confer the right for a
Participant to receive an Annual Bonus.
15.8 COMPLETE DOCUMENT. This document and the Participant enrollment and
designation of beneficiary forms contain all the terms of this Plan
and supersede any prior understandings, agreements or representations,
written or oral, which may have related to the subject matter hereof
in any way.
EXHIBIT 10G
-----------
1997 DEFERRED COMPENSATION PLAN
FOR THE
BOARD OF DIRECTORS
OF
CHIQUITA BRANDS INTERNATIONAL, INC.
(Conformed to include amendments effective January 1, 1998)
1. ESTABLISHMENT AND PURPOSE
1.1 Effective January 1, 1997, Chiquita Brands International, Inc., a New
Jersey corporation, adopts this Chiquita Brands International, Inc.
Deferred Compensation Plan to enable eligible members of the Board of
Directors of the Company to elect deferral of payment of their
Compensation.
1.2 A Director's deferral shall be governed by the Plan that was in effect
at the time the deferral is made, provided that the Administrator may
make certain administrative changes including the timing of payments
pursuant to Article 10 and any other amendments permitted by Section
15.4.
2. PLAN OBJECTIVES
2.1 The purpose of this Plan is to allow participants to achieve the
following objectives:
(a) Accumulate income for retirement; and
(b) Provide opportunity for financial growth.
3. DEFINITIONS
When used in this Plan, the following words and phrases shall have the
following meanings:
3.1 ACCOUNT means the record maintained for each Participant to which all
deferrals, investment indices and distributions are credited and
debited for each Plan Year.
3.2 ADMINISTRATOR means the Employee Benefits Committee appointed by the
Company's Board of Directors.
3.3 COMPANY means Chiquita Brands International, Inc.
3.4 COMPENSATION means fees earned for services rendered as a member of
the Board of Directors during a given Plan Year.
3.5 DIRECTOR means a member of the Board of Directors of the Company.
3.6 DISABLED AND DISABILITY mean that a Participant, as a result of
accident or illness, is physically, mentally or emotionally unable to
perform the duties as a member of the Board of Directors, and in the
Administrator's opinion is likely to remain so Disabled for at least
one year. The Administrator shall make all determinations as to
whether a Director is Disabled and shall use such evidence, including
independent medical reports and data, as the Administrator deems
necessary and desirable.
3.7 EXPIRATION DATE means, with respect to each annual deferral under
Section 7.1, the earlier of (i) the last day of the year to which a
Participant elects to defer Compensation pursuant to Section 8.1, or
(ii) the last day of the year during which a Director dies, becomes
Disabled or retires or is otherwise no longer a member of the Board of
Directors of the Company.
3.8 PARTICIPANT means a member of the Board of Directors who is entitled
to participate and participates in the Plan for a designated Plan
Year.
3.9 PLAN means this 1998 Amended and Restated Deferred Compensation Plan
for the Board of Directors of Chiquita Brands International, Inc.
3.10 PLAN YEAR means the calendar year, January 1 through December 31.
4. ELIGIBILITY
4.1 Members of the Board of Directors of the Company who are not also
employees of the Company are eligible to participate in the Plan.
5. PARTICIPATION
5.1 A Participant elects to participate in the Plan by delivering to the
Administrator, before the beginning of each Plan Year, a properly
completed enrollment form.
5.2 The enrollment form shall conform to the terms and conditions of the
Plan.
6. DEFERRED COMPENSATION ACCOUNT
6.1 Each Plan Year a deferred compensation Account will be established for
each Participant.
6.2 All Compensation deferred by the Participant, all increases in the
value of the Account resulting from the application of the appropriate
Interest Index, all other amounts credited to the Account pursuant to
this Plan and all distributions from the Account to the Participant or
the Participant's beneficiary(ies) or estate shall be reflected in the
Account.
6.3 All Accounts shall be maintained by the Administrator.
7. DEFERRAL
7.1 At the time of enrollment, a Participant must elect to defer at least
10% of such Participant's Compensation for services rendered in the
next Plan Year.
7.2 Compensation deferred under this Plan shall be credited to the
Participant's Account on the date such amounts would have otherwise
been paid.
7.3 The deferral sources and amounts elected for a given Plan Year are
irrevocable.
8. DEFERRAL TERM
8.1 At the time a Participant elects to defer Compensation, the
Participant must also elect the term for which such deferral is made
(the "Deferral Term"). The Deferral Term must be either a fixed
number of years or the date on which the Participant dies, becomes
Disabled, or retires or is otherwise no longer a member of the Board
of Directors of the Company.
8.2 A Deferral Term that is for a fixed number of years must be in full
year increments.
8.3 A Deferral Term, once elected, is irrevocable.
8.4 Should a Participant die, become Disabled or if the Participant
retires or otherwise is no longer a member of the Board of Directors
of the Company before the end of a Deferral Term that is for a fixed
number of years, the date of the death, Disability or retirement or
other event will trigger the end of the Deferral Term.
9. INTEREST INDICES
9.1 Amounts deferred under this Plan shall accrue interest from the date
which is the midpoint of the calendar quarter in which the deferrals
are credited to the Participant's Account until the Expiration Date.
Such interest shall be credited to the Account quarterly, at the
interest rate specified in the Interest Rate Schedule for the
respective Plan Year and Deferral Term elected by the Participant.
10. PAYMENT FORM AND METHOD
10.1 All payments from the Plan shall be made in the form of cash.
10.2 At the time of enrollment for a given Plan Year, a Participant
shall elect the method of payment desired upon the Expiration Date of
the Deferral Term elected.
10.3 Only lump sum payments will be available (and installment payments
will not be available) for any deferrals of Compensation earned on or
after January 1, 1997 and before January 1, 1998. A Participant may
choose either a lump sum or an equal annual installment payment method
for any deferrals of Compensation earned during any Plan Year
beginning on or after January 1, 1998.
10.4 The payment method elected may be separate for each Deferral Term for
the respective Plan Years.
10.5 Should a Participant elect annual installments, the Participant must
select at the time of enrollment the length of time over which
installments are to be received in accordance with Article 12 below.
10.6 The payment method and the installment period elected for deferrals in
a given Plan Year are irrevocable.
11. ACCOUNT STATEMENT
11.1 Account statements will be sent periodically (at least annually) to
each Participant until the Participant's Account has been completely
distributed.
11.2 The appropriate Interest Rate Schedules will be used for crediting the
deferrals accrued pursuant to Section 9.
12. ACCOUNT DISTRIBUTION
12.1 Payment will begin on the first payroll period in February following
the Expiration Date. Prior to the commencement of payments from the
Participant's Account, the Account will continue to accrue interest
and dividends in accordance with the Participant's investment index
election through the Expiration Date. For lump sum payments, no
interest or credits will accrue after the Expiration Date. For
installment payments, interest will accrue at the prime rate after the
Expiration Date.
12.2 Equal annual installments shall be at least $2,000 per deferral type
per year. Installment payments will be made annually over a period
not to exceed ten years. The Administrator shall have the right to
reduce the length of the installment period to that which provides an
equal annual installment of at least $2,000.
12.3 The ongoing process of an equal installment distribution shall be as
follows:
12.3.1 The Participant's account shall no longer be valued
based on the Graduated Interest Index or the Stock Index.
12.3.2 Interest shall be credited quarterly throughout the
distribution period, based on the Prime Rate as announced by
the Federal Reserve Bank of Cleveland as of the first day of
each calendar quarter, for both Graduated Interest Index and
Stock Index balances.
12.3.3 The Administrator may accelerate payment of any
amount remaining in the Account to the extent that the amounts
being paid are not sufficiently large enough to warrant the
administrative expense being incurred.
13. HARDSHIP DISTRIBUTIONS
13.1 Distribution of payments from a Participant's Account prior to the
Expiration Date shall be made only if the Administrator, after
consideration of a written application by the Participant, determines
that the Participant has sustained financial hardship.
13.2 Any hardship distribution shall be withdrawn from the Participant's
Account starting with the most current Plan Year, continuing in
reverse chronological order.
14. BENEFICIARY DESIGNATION
14.1 A Participant shall have the right to designate one or more
beneficiaries and to change any beneficiary previously designated.
14.2 A Participant shall submit his or her beneficiary designation in
writing using the beneficiary designation form. The Participant shall
deliver the completed form to the Administrator.
14.3 The most recently dated and filed beneficiary designation shall cancel
all prior designations.
14.4 In the event of the Participant's death before payment from the
Account, the amount otherwise payable to the Participant shall be paid
to the designated beneficiary(ies) or, if no beneficiary, to the
estate, according to the provisions of Section 12, as applicable.
15. GENERAL PROVISIONS
15.1 PARTICIPANT'S RIGHTS UNSECURED. The right of any Participant to
receive payments under the provisions of this Plan shall be an
unsecured claim against the general assets of the Company. It is not
required or intended that the amounts credited to the Participant's
Account be segregated on the books of the Company or be held by the
Company in trust for a Participant and a Participant shall not have
any claim to or against a specific asset or assets of the Company.
All credits to an Account are for bookkeeping purposes only.
15.2 NON-ASSIGNABILITY. The right to receive payments shall not be
transferrable or assignable by a Participant. Any attempted
assignment or alienation of payments shall be void and of no force or
effect.
15.3 ADMINISTRATION. The Administrator shall have the authority to adopt
rules, regulations and procedures for carrying out this Plan, and
shall interpret, construe and implement the provisions of the Plan
according to the laws of the State of Ohio. Any such interpretation
by the Administrator shall be final, binding and conclusive.
15.4 AMENDMENT AND TERMINATION. The Company expressly reserves the sole
and exclusive right to amend, modify, or terminate this Plan at any
time by action of the Board of Directors of the Company or, to the
extent it has delegated such authority, by action of the Employee
Benefits Committee. Any amendment, modification, or termination shall
be in writing authorized by the Board of Directors or the Employee
Benefits Committee, as the case may be, and signed by an officer of
the Company. However, no amendment, modification, or termination of
this Plan shall adversely affect any Participant's accrued rights
arising from any election to defer Compensation made prior to such
amendment, modification or termination of the Plan.
15.5 CONSTRUCTION. The singular shall also include the plural where
appropriate.
15.6 CONTRACT RIGHTS. This Plan does not give any Participant the right to
be retained as a member of the Board of Directors of the Company.
Statement of Management Responsibility
- --------------------------------------
The financial information presented in this Annual Report is the responsibility
of Chiquita Brands International, Inc. management, which believes that it
presents fairly the Company's consolidated financial position and results of
operations in accordance with generally accepted accounting principles.
The Company's system of internal accounting controls, which is supported by
formal financial and administrative policies, is designed to provide reasonable
assurance that the financial records are reliable for preparation of financial
statements and that assets are safeguarded against losses from unauthorized use
or disposition. Management reviews, modifies and improves these systems and
controls as changes occur in business conditions and operations. The Company's
worldwide internal audit function reviews the adequacy and effectiveness of
controls and compliance with policies.
The Audit Committee of the Board of Directors reviews the Company's financial
statements, accounting policies and internal controls. In performing its
reviews, the Committee meets periodically with the independent auditors,
management and internal auditors to discuss these matters.
The Company engages Ernst & Young LLP, an independent auditing firm, to audit
its financial statements and express an opinion thereon. The scope of the audit
is set by Ernst & Young LLP, which has full and free access to all Company
records and personnel in conducting its audits. Representatives of Ernst &
Young LLP are free to meet with the Audit Committee, with or without members of
management present, to discuss their audit work and any other matters they
believe should be brought to the attention of the Committee.
Report of Ernst & Young LLP, Independent Auditors
- -------------------------------------------------
The Board of Directors and Shareholders of Chiquita Brands International, Inc.
We have audited the accompanying consolidated balance sheets of Chiquita Brands
International, Inc. as of December 31, 1998 and 1997, and the related
consolidated statements of income, shareholders' equity and cash flow for each
of the three years in the period ended December 31, 1998. These financial
statements, appearing on pages 37 through 57, are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Chiquita Brands
International, Inc. at December 31, 1998 and 1997, and the consolidated results
of its operations and its cash flow for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles.
/s/ Ernst & Young LLP
Cincinnati, Ohio
February 9, 1999
-30-
MANAGEMENT'S ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION
OPERATIONS
- ----------
This analysis of operations addresses Chiquita's operating results shown in the
Consolidated Statement of Income. The following analysis should be read in
conjunction with the segment information presented in Note 13 to the
Consolidated Financial Statements.
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
- --------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
Fresh Produce $2,243,284 $2,198,939 $2,233,902
Processed Foods 477,077 234,787 201,346
---------- ---------- ----------
$2,720,361 $2,433,726 $2,435,248
========== ========== ==========
Operating income
Fresh Produce $53,085 $82,562 $66,491
Processed Foods 25,524 17,604 17,845
---------- ---------- ----------
$78,609 $100,166 $84,336
========== ========== ==========
</TABLE>
Net sales in 1998 increased 12% over the prior two years' amounts primarily
as a result of the expansion of Chiquita's Processed Foods business through
acquisitions of vegetable canning operations in late 1997 and early 1998. (See
Note 15 to the Consolidated Financial Statements for additional discussion of
these acquisitions.)
Operating income in 1998 was $79 million compared to $100 million in 1997 and
$84 million in 1996. Operating income includes:
* In 1998, write-downs and costs of $74 million, net of minimum expected
insurance recoveries, as a result of significant flood damage to
operations in Honduras and Guatemala caused by Hurricane Mitch. This
includes write-downs of banana cultivations and farm infrastructure
assets, and costs for employee benefits and humanitarian aid.
* In 1996, write-downs and costs of $70 million from flooding in Costa Rica,
Guatemala and Honduras; modification of distribution logistics and the
wind-down of particular banana production facilities; and certain claims
relating to prior European Union ("EU") quota restructuring actions.
Excluding the effect of the items described above, operating income for Fresh
Produce improved in 1998 primarily as a result of lower delivered product costs
for bananas as the Company realized increased farm productivity and
transportation cost reductions on higher worldwide banana volume. The benefit
of lower delivered product costs more than offset the effects of lower dollar
price realizations in Europe and North America and unrecovered fixed costs
incurred as a result of a strike in the Company's western Panama division early
in the year. Increased volume of other fresh produce, especially tomatoes,
mushrooms and blueberries, also contributed to the Fresh Produce earnings
improvement. The increase in Processed Foods 1998 operating income over the
prior year amount resulted from acquisitions of vegetable canning operations in
late 1997 and early 1998.
-31-
The 1998 results also include write-offs of a non-operating investment and
of impaired banana cultivations in Chiquita's western Panama division, which
were damaged during a two-month strike. Full production at this division
resumed in December 1998. These write-offs were offset by a gain from a cash
settlement in excess of $10 million for claims against a newspaper concerning a
series of false and misleading articles about the Company. The write-off of the
investment and the settlement gain are included in Other income and the write-
off of banana cultivations is included in Cost of sales.
In 1997, Fresh Produce operating results were adversely affected by a
stronger dollar in relation to major European currencies (mitigated in part by
the Company's foreign currency hedging program) and by increased banana
production costs resulting primarily from industry-wide flooding in 1996.
Net interest expense decreased from $102 million in 1996 to $92 million in
1997 as a result of refinancing and debt reduction activities. The net loss in
1996 includes extraordinary charges of $23 million resulting from these
activities.
Income taxes consist principally of foreign income taxes currently paid or
payable. No tax benefit was recorded for unrealized U.S. net operating loss
carryforwards or other available tax credits.
HURRICANE MITCH
- --------------------
In late October and early November of 1998, the Company sustained significant
damage to its operations in Honduras and Guatemala as a result of widespread
flooding caused by Hurricane Mitch. Nearly all of the banana plantings on the
Company's 17,000 acres of cultivations in Honduras were destroyed; approximately
two-thirds of the plantings on the Company's 8,000 acres of cultivations in
Guatemala were destroyed or severely damaged. Nevertheless, the Company expects
it will be able to meet its banana volume requirements through improved
productivity in its other farm divisions, including the western Panama division
which returned to full production in December 1998, and through purchases of
fruit from associate producers. As a result of Hurricane Mitch, the Company
will incur some unrecovered fixed costs in 1999.
Industry-wide, the damage caused by Hurricane Mitch will significantly
reduce 1999 banana volume from Honduras and Guatemala. This lost banana
production may be offset by increased industry exports from Ecuador, whose 1998
banana exports were negatively affected by El Nino.
EUROPEAN UNION REGULATORY DEVELOPMENTS
- --------------------------------------
On July 1, 1993, the EU implemented a quota system effectively restricting the
volume of Latin American bananas imported into the EU, which had the effect of
decreasing the Company's overall volume and market share in Europe. The quota
regime is administered through a licensing system and grants preferred status to
producers and importers within the EU and its former colonies, while imposing
restrictive 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 increased and have remained at a higher level
than the levels prevailing prior to the quota. Banana prices in other worldwide
markets, however, declined as the displaced EU volume entered those markets and
have remained lower than in years prior to the EU quota.
In two separate rulings, General Agreement on Tariffs and Trade ("GATT")
panels found the EU banana policies to be illegal. In March 1994, four of the
five countries which had initiated GATT complaints, Costa Rica, Colombia,
Nicaragua and Venezuela, settled their GATT actions against the EU by entering
into a "Framework Agreement" which guaranteed them preferential EU market access
for bananas. The Framework
-32-
Agreement was implemented in 1995 and imposed additional restrictive and
discriminatory quotas and export licenses on U.S. banana marketing firms, while
leaving EU firms exempt. This significantly increased the Company's cost to
export bananas.
Since implementation of the quota system:
* 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 September 1995, the United States, Guatemala, Honduras and Mexico
commenced a challenge against the EU quota regime using the procedures of
the World Trade Organization ("WTO"). Ecuador, the world's largest
exporter of bananas, joined these countries in filing a new WTO action in
February 1996.
* In May 1997, a WTO arbitration panel issued a report ruling that the
licensing and quota systems under the EU quota 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.
* In September 1997, the WTO Appellate Body upheld the panel's report and
the full WTO body later adopted both the panel and Appellate Body reports.
* In January 1998, a WTO arbitrator ruled that the EU must fully implement
banana policies consistent with the WTO report findings not later than
December 31, 1998.
* In July 1998, the EU adopted a revised quota and license regime which was
implemented in January 1999. The five governments that filed the WTO
complaint, joined by Panama which became a WTO member after the initial
complaint was filed, have all indicated that they do not believe the
revised EU regime complies with the WTO rulings.
* In January 1999, the United states requested WTO authorization to impose
prohibitive (100% of value) duties on selected EU products accounting for
annual exports to the United States of $520 million, which the United
States calculates as the amount of harm to the United States caused by the
continuing failure of the revised EU banana regime to be WTO consistent.
* On March 2, 1999, a WTO arbitration panel hearing the EU's objections to
the proposed sanctions announced that it would rule on whether the revised
EU banana regime is WTO consistent as well as the level of permissible
sanctions if it finds the revised regime to be WTO inconsistent. The
panel indicated that its ruling will be issued soon after March 15, 1999
and will not be subject to appeal.
* Effective March 3, 1999, the United States conditionally imposed the
prohibitive duties for which it is seeking WTO authorization, but
announced that it would refrain from collecting the higher duties until
the WTO panel has ruled in the pending arbitration.
There can be no assurance as to the results of the WTO proceedings, including
the pending arbitration, the nature and extent of actions that may be taken by
the affected countries, the impact on the EU quota regime or the Framework
Agreement or the impact on the Company's business.
-33-
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash flow from operations was $91 million in 1998, $67 million in 1997 and $123
million in 1996. The increase in 1998 operating cash flow compared to 1997 was
due to cost reductions in the Company's Fresh Produce business. Operating cash
flow in 1997 was less than in 1996 primarily as a result of the use of cash to
fund a short-term increase in working capital and the payment in 1997 of prior
year claims relating to earlier EU quota restructuring actions.
Capital expenditures were $118 million in 1998, $76 million in 1997 and $75
million in 1996. The 1998 capital expenditures include $40 million of spending
associated with rehabilitation of banana cultivations in the Company's western
Panama division following a two-month strike and the reconfiguration of
Chiquita's expanded vegetable canning operations. The 1997 and 1996 capital
expenditures include $19 million and $15 million, respectively, to rehabilitate
banana farms and other assets damaged by storms in 1996.
The Company plans during 1999 and 2000 to incur capital expenditures
aggregating in excess of $110 million to replant banana cultivations and to
rehabilitate farm infrastructure, such as levees, drainage and irrigation
systems, which were destroyed or damaged by Hurricane Mitch. The Company
expects to be able to finance the flood rehabilitation and its other 1999
capital expenditures with cash flow from operations and insurance proceeds, but
may choose to finance some of the spending with long-term borrowings. Insurance
recoveries are expected to be in the range of $60 million to $75 million.
At February 28, 1999, $85 million of borrowings were available to Chiquita or
its subsidiaries under committed lines of credit.
In accordance with its strategy to build upon its existing businesses, the
Company completed the following acquisitions:
* In late 1997 and early 1998, Chiquita issued $120 million of common and
preference stock and paid approximately $37 million of cash to acquire the
common stock and retire a portion of the outstanding debt of three
vegetable canning companies. These acquisitions expanded the capacity,
product line and geographic coverage of the Company's existing vegetable
canning business.
* In mid-1998, the Company expanded its fresh foods business in Australia by
acquiring the Australian mushroom business of Campbell Soup for $12 million
of Chiquita common stock and $5 million of cash.
In 1996, Chiquita raised a total of $255 million from public offerings of
preferred shares and senior notes and used the proceeds to prepay subordinated
debt, which carried effective interest rates of 11.5% to 12.1%, and to prepay
high cost subsidiary debt.
EU COMMON CURRENCY
- ------------------
On January 1, 1999, eleven European countries began implementation of the EU
common currency (the "Euro") by accepting the Euro in addition to their
respective national currencies as legal tender. After July 1, 2002, the Euro
will be the sole legal tender for these eleven countries. The Company's
affected customers have initially preferred to be invoiced in their
traditionally invoiced currencies. The Company is currently addressing Euro-
related issues and their impact on information systems, currency exchange rate
risk and other areas. Although the Company is not able to predict the full
implications of the Euro implementation on its European operations, the
implementation has not had, and the Company does not believe it will have, a
material adverse effect on it financial statements.
-34-
YEAR 2000 PROJECT
- -----------------
Chiquita's company-wide Year 2000 Project ("Project") is proceeding according to
schedule. The Project addresses the inability of computer and micro-processor
systems to distinguish between the year 1900 and the year 2000. When Chiquita
began the Project in the early 1990's, the primary goal was to make each Company
system Year 2000 compliant in the normal course of replacing and upgrading the
Company's systems. Many Company systems have been replaced or upgraded in the
normal course.
In 1996, the Project was expanded to include development of a company-wide
Year 2000 policy which outlined the scope and responsibility for resolution of
Year 2000 readiness issues. This policy covers computer hardware and operating
software, applications software, telephone hardware and software, networking
hardware and software, manufacturing equipment, vessel navigation and control
equipment and other embedded technology issues.
The Project has included the following phases: (1) inventorying the Company's
hardware, software and equipment; (2) assessing which items have Year 2000
issues; (3) determining critical versus non-critical items; (4) replacing or
repairing items that have Year 2000 issues; (5) testing material items; (6)
assessing the Year 2000 readiness of the Company's material customers and
suppliers; and (7) developing contingency plans. Critical items are defined as
those believed by the Company to have a risk involving the safety of
individuals, material damage to property or a material adverse effect on the
Company's financial statements.
As of December 31, 1998, the first five phases of the Project have been
substantially completed. The Company is assessing the Year 2000 readiness of
material customers and suppliers, including financial institutions,
telecommunications companies, public utility companies and commercial vendors.
Assessment has included obtaining written certifications of Year 2000 readiness
from the third parties, review of their Year 2000 readiness plan and site
visits. This assessment is substantially complete for those third parties whose
functions are most critical to the operations of the Company, such as financial
institutions. Assessment of risk regarding remaining material customers and
suppliers and development of necessary contingency plans for these customers and
suppliers and critical internal systems are expected to be completed before the
end of 1999.
The estimated total cost of the Project for systems that have not been
replaced or upgraded in the normal course is less than $10 million. Most of
this cost has already been incurred by the Company.
Due to widespread uncertainties inherent in the Year 2000 problem, resulting
primarily from the widely reported uncertainty of the Year 2000 readiness of
suppliers, customers and other third parties, including U.S. and foreign
governmental entities, the Company is unable to determine at this time whether
the consequences of Year 2000 failures will have a material impact on the
Company's financial statements. However, the Company believes the most
reasonably likely worst case scenario is that there could be some localized,
temporary disruptions to portions of business activities, such as shipping,
ripening and data processing, rather than systemic or long-term problems
affecting its business operations as a whole. Chiquita's contingency planning
is focusing on minimizing these disruptions, should they occur, by having
sufficient personnel and other resources in place to permit an appropriate
response to specific problems. The Project is expected to significantly reduce
the level of risk that the Year 2000 issue will cause significant interruptions
to the Company's operations.
-35-
MARKET RISK MANAGEMENT
- ----------------------
Chiquita uses derivatives to reduce its exposure to fluctuations in foreign
currency exchange rates, interest rates and, to a lesser extent, fuel oil
prices. The Company does not use derivatives for speculative purposes. Because
these derivatives are highly correlated with the underlying hedged exposures,
changes in the fair value of the derivatives are substantially offset by
reciprocal changes in the fair value of the underlying exposures. (See Note 7
to the Consolidated Financial Statements for additional discussion of the
Company's hedging activities.)
The Company's exposure to financial market risks was measured using a value
at risk ("VAR") model. The VAR model estimates the potential loss Chiquita
could incur as a result of adverse changes in foreign currency exchange and
interest rates, given a specified confidence level, over a given period of time.
The VAR calculations do not consider the potential effect of favorable changes
in these rates or the offsetting increase in the dollar realization of an
underlying foreign currency sale. The VAR calculations are not intended to
represent actual losses the Company expects to incur.
FOREIGN CURRENCY EXCHANGE RATES Chiquita's products are distributed in more
than 60 countries. Its international sales are made primarily in U.S. dollars
and major European currencies (see "EU Common Currency"). The Company reduces
currency exchange risk from sales originating in currencies other than the
dollar by exchanging local currencies for dollars promptly upon receipt. Debt
denominated in currencies of countries other than the U.S. serves as a hedge of
the net investments in those countries.
The Company further reduces its exposure to exchange rate fluctuations by
purchasing foreign currency option contracts (principally European currencies)
to hedge sales denominated in foreign currencies. At December 31, 1998, based
on a 95% confidence level, the Company estimates that the fair value of these
contracts would decline by less than $2 million over a one-day period due to an
adverse change in foreign currency exchange rates. However, the Company expects
that any decline in the fair value of these contracts would typically be offset
by an increase in the dollar realization of the underlying foreign currency
sale.
INTEREST RATES Chiquita's interest rate risk arises primarily from its debt.
The Company reduces its exposure to interest rate fluctuations on its long-term
variable rate debt by entering into interest rate swap agreements. At December
31, 1998, based on a 95% confidence level, the Company estimates that the
combined adverse change in fair value of its debt and interest rate swaps would
be less than $3 million over a one-day period due to an unfavorable change in
interest rates.
***************
This Annual Report contains certain information that may be deemed to be
"forward-looking statements" within the meaning of the Private Securities
Litigation Act of 1995. These statements reflect management's current views and
estimates of future economic circumstances, industry conditions and Company
performance. They are subject to a number of assumptions, risks and
uncertainties, many of which are beyond the control of Chiquita. The
assumptions, risks and uncertainties include product pricing, cost to purchase
or grow (and availability of) fresh produce and other raw materials, currency
exchange rate fluctuations, natural disasters and unusual weather conditions,
operating efficiencies, labor relations, access to capital, actions of
governmental bodies, actions or failures to act of customers, suppliers and
other third parties with respect to the Year 2000 readiness issues, and other
market and competitive conditions. Actual results or developments may differ
materially from the expectations expressed or implied in the forward-looking
statements.
-36-
<TABLE>
<CAPTION>
Chiquita Brands International, Inc.
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except
per share amounts) 1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $2,720,361 $2,433,726 $2,435,248
---------- ---------- ----------
Operating expenses
Cost of sales 2,206,047 1,935,870 1,947,888
Selling, general and
administrative 343,227 311,568 313,490
Depreciation 92,478 86,122 89,534
---------- ---------- ----------
2,641,752 2,333,560 2,350,912
---------- ---------- ----------
Operating income 78,609 100,166 84,336
Interest income 12,866 16,540 28,276
Interest expense (108,757) (108,913) (130,232)
Other income, net 7,370 750 892
---------- ---------- ----------
Income (loss) from
operations before
income taxes (9,912) 8,543 (16,728)
Income taxes (8,500) (8,200) (11,000)
---------- ---------- ----------
Income (loss) before
extraordinary item (18,412) 343 (27,728)
Extraordinary loss from
debt refinancing -- -- (22,838)
---------- ---------- ----------
Net income (loss) $(18,412) $343 $(50,566)
Less dividends on
preferred and
preference stock (17,102) (16,949) (11,955)
---------- ---------- ----------
Net loss attributed
to common shares $(35,514) $(16,606) $(62,521)
========== ========== ==========
Per common share -
basic and diluted
- Income (loss) before
extraordinary item $(.55) $(.29) $(.72)
- Extraordinary item -- -- (.41)
---------- ---------- ----------
- Net income (loss) $(.55) $(.29) $(1.13)
========== ========== ==========
See Notes to Consolidated Financial Statements.
</TABLE>
-37-
<TABLE>
<CAPTION>
Chiquita Brands International, Inc.
CONSOLIDATED BALANCE SHEET
December 31,
(In thousands, except share amounts) 1998 1997
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and equivalents $88,906 $125,702
Trade receivables, less allowances of
$10,603 and $10,683, respectively 201,574 184,913
Other receivables, net 128,293 87,301
Inventories 387,293 349,948
Other current assets 34,168 35,602
--------- ---------
Total current assets 840,234 783,466
Property, plant and equipment, net 1,122,847 1,151,396
Investments and other assets 356,228 301,173
Intangibles, net 189,824 165,578
---------- ----------
Total assets $2,509,133 $2,401,613
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Notes and loans payable $131,768 $59,659
Long-term debt due within one year 37,511 92,905
Accounts payable 217,266 205,323
Accrued liabilities 144,884 125,231
---------- ----------
Total current liabilities 531,429 483,118
Long-term debt of parent company 683,294 689,080
Long-term debt of subsidiaries 319,312 272,892
Accrued pension and other
employee benefits 90,382 86,676
Other liabilities 90,736 89,761
---------- ----------
Total liabilities 1,715,153 1,621,527
---------- ----------
Shareholders' equity
Preferred and preference stock 253,475 253,239
Common stock - 65,447,875 shares,
$.01 par value in 1998; 61,167,990
shares, $.33 par value in 1997 654 20,389
Capital surplus 755,660 676,352
Accumulated deficit (214,967) (166,486)
Accumulated other comprehensive loss (842) (3,408)
---------- ----------
Total shareholders' equity 793,980 780,086
---------- ----------
Total liabilities and
shareholders' equity $2,509,133 $2,401,613
========== ==========
See Notes to Consolidated Financial Statements.
</TABLE>
-38-
<TABLE>
<CAPTION>
Chiquita Brands International, Inc.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Accumulated
Preferred other comp- Total
and rehensive share-
preference CommonCapital Accumulated incomeholders'
(In thousands) stock stock surplus deficit (loss) equity
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1995 $138,369 $18,256 $577,799$(65,437) $3,220$672,207
--------
Net loss - - - (50,566) - (50,566)
Unrealized translation
loss - - - - (2) (2)
--------
Comprehensive loss - - - - - (50,568)
--------
Share issuances
Option exercises - 182 5,097 - - 5,279
Preferred stock 110,887 - - - - 110,887
Other - 176 8,771 - - 8,947
Dividends
Common stock - - - (11,094) - (11,094)
Preferred stock - - - (11,405) - (11,405)
------------------------------------------------------
DECEMBER 31, 1996 249,256 18,614 591,667 (138,502) 3,218 724,253
--------
Net income - - - 343 - 343
Unrealized translation
loss (6,626) (6,626)
--------
Comprehensive loss - (6,283)
--------
Share issuances
Option exercises - 170 6,045 - - 6,215
Acquisitions of
businesses 3,983 1,528 67,258 - - 72,769
Other - 77 11,382 - - 11,459
Dividends
Common stock - - - (11,395) - (11,395)
Preferred and preference
stock - - - (16,932) - (16,932)
------------------------------------------------------
DECEMBER 31, 1997 253,239 20,389 676,352 (166,486) (3,408)780,086
---------
Net loss - - - (18,412) - (18,412)
Unrealized translation gain - - - - 2,566 2,566
--------
Comprehensive loss - - - - - (15,846)
--------
Reduction in par value of
common stock - (19,777) 19,777 - - -
Share issuances
Option exercises - 1 1,482 - - 1,483
Acquisitions of
businesses 236 41 58,049 - - 58,326
Dividends
Common stock - - - (12,970) - (12,970)
Preferred and preference
stock - - - (17,099) - (17,099)
------------------------------------------------------
DECEMBER 31, 1998 $253,475 $654 $755,660$(214,967) $(842)$793,980
======================================================
See Notes to Consolidated Financial Statements.
</TABLE>
-39-
<TABLE>
<CAPTION>
Chiquita Brands International, Inc.
CONSOLIDATED STATEMENT OF CASH FLOW
(In thousands) 1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH PROVIDED (USED) BY:
OPERATIONS
Income (loss) before
extraordinary item $(18,412) $343 $(27,728)
Depreciation and amortization 99,138 91,588 96,455
Write-downs of banana
production assets, net of
expected insurance
recoveries 43,400 - 28,300
Changes in current assets
and liabilities
Trade receivables (19,089) (10,796) 22,626
Other receivables (23,052) (2,020) (11,982)
Inventories 3,556 4,062 12,402
Other current assets 10,408 (3,776) 7,943
Accounts payable and accrued
liabilities (15,359) (22,613) (6,375)
Other 10,620 10,155 1,694
---------------------------
CASH FLOW FROM OPERATIONS 91,210 66,943 123,335
---------------------------
INVESTING
Capital expenditures (118,250) (76,248) (74,641)
Acquisitions of businesses (26,199) (14,819) -
Long-term investments (4,563) (8,475) (1,831)
Proceeds from sales of
non-core businesses 18,249 - 81,504
Restricted cash deposits - - 39,520
Other (278) (1,480) 10,321
---------------------------
CASH FLOW FROM INVESTING (131,041) (101,022) 54,873
---------------------------
FINANCING
Debt transactions
Issuances of long-term debt 78,858 12,234 191,174
Repayments of long-term debt (108,627) (98,034) (377,349)
Increase (decrease) in notes
and loans payable 61,390 (17,865) (36,817)
Stock transactions
Issuances of preferred stock - - 110,887
Issuances of common stock 1,483 6,215 5,279
Dividends (30,069) (28,327) (22,499)
---------------------------
CASH FLOW FROM FINANCING 3,035 (125,777) (129,325)
---------------------------
Increase (decrease) in cash
and equivalents (36,796) (159,856) 48,883
Balance at beginning of year 125,702 285,558 236,675
---------------------------
Balance at end of year $88,906 $125,702 $285,558
===========================
See Notes to Consolidated Financial Statements.
</TABLE>
-40-
Chiquita Brands International, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies
- ------------------------------------------------------------------------
American Financial Group, Inc. and its subsidiaries owned approximately 37% of
the outstanding common stock of Chiquita Brands International, Inc. ("Chiquita"
or the "Company") as of December 31, 1998.
CONSOLIDATION - The consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries. Intercompany balances and
transactions have been eliminated. Investments representing minority interests
are accounted for by the equity method when Chiquita has the ability to exercise
significant influence in the investees' operations; otherwise, they are
accounted for at cost.
USE OF ESTIMATES - The financial statements have been prepared in conformity
with generally accepted accounting principles, which require management to make
estimates and assumptions that affect the amounts and disclosures reported in
the financial statements and accompanying notes.
CASH AND EQUIVALENTS - Cash and equivalents include cash and highly liquid
investments with a maturity when purchased of three months or less.
INVENTORIES - Inventories are valued at the lower of cost or market. Cost for
growing crops and certain fresh produce inventories is determined principally on
the "last-in, first-out" (LIFO) basis. Cost for other inventory categories is
determined on the "first-in, first-out" (FIFO) or average cost basis.
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at cost
and, except for land, are depreciated on a straight-line basis over their
estimated useful lives.
INTANGIBLES - Intangibles consist primarily of goodwill and trademarks which are
amortized over not more than 40 years. Accumulated amortization was $54 million
and $50 million at December 31, 1998 and 1997, respectively. The carrying value
of intangibles is evaluated periodically in relation to the operating
performance and future undiscounted cash flows of the underlying businesses.
REVENUE RECOGNITION - Revenue is recognized on sales of products when the
customer receives title to the goods, generally upon delivery.
INCOME TAXES - Deferred income taxes are recognized at currently enacted tax
rates for temporary differences between the financial reporting and income tax
bases of assets and liabilities. Deferred taxes are not provided on the
undistributed earnings of subsidiaries operating outside the U.S. that have been
or are intended to be permanently reinvested.
FOREIGN EXCHANGE - Chiquita generally utilizes the U.S. dollar as its functional
currency. Net foreign exchange gains (losses) of $6 million in 1998, $(7)
million in 1997 and $1 million in 1996 are included in income.
The Company enters into foreign currency option contracts and foreign
exchange forward contracts to hedge transactions denominated in foreign
currencies. These options and forward contracts are specifically designated as
hedges and offset the losses or gains from currency risk associated with the
hedged transactions. The Company does not enter into options or forward
contracts for speculative purposes. Amounts paid for options and any gains
realized thereon, as well as any gains or losses on forward contracts used to
hedge firm commitments, are deferred until the hedged transaction occurs. Gains
and losses on forward contracts used to hedge transactions where a firm
commitment does not exist are included in income on a current basis.
-41-
EARNINGS PER SHARE - Basic earnings per share is calculated on the basis of the
weighted average number of shares of common stock outstanding during the year
reduced by nonvested restricted stock. Diluted earnings per share also includes
the dilutive effect, if any, of assumed conversion of preferred and preference
stock and convertible debentures and of assumed exercise of stock options.
NEW ACCOUNTING PRONOUNCEMENTS - In 1998, Chiquita adopted Statement of Financial
Accounting Standards ("SFAS") No. 130 "Comprehensive Income" and applied this
standard to all periods presented in these financial statements. The adoption
of this Statement had no impact on the Company's net income or shareholders'
equity. Comprehensive income (loss) for all periods presented consists solely
of net income (loss) and unrealized foreign currency translation gains (losses).
In 1998, Chiquita also adopted SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information" and SFAS No. 132 "Employers' Disclosures
about Pensions and Other Postretirement Benefits" and applied these standards to
all periods presented.
In 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities." This standard
requires the recognition of all derivatives on the balance sheet at fair value.
Adoption of SFAS No. 133 is required by January 1, 2000 and is presently under
review by the Company.
<TABLE>
<CAPTION>
Note 2 - Earnings Per Share
- ------------------------------------------------------------------------------
Basic and diluted earnings per share are calculated as follows:
(In thousands, except per
share amounts) 1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income (loss) before
extraordinary item $(18,412) $343 $(27,728)
Dividends on preferred
and preference stock (17,102) (16,949) (11,955)
---------------------------
Loss before extraordinary item
attributed to common shares $(35,514) $(16,606) $(39,683)
===========================
Weighted average common
shares outstanding 64,734 57,185 55,450
Nonvested restricted shares (71) (160) (255)
---------------------------
Shares used to calculate
basic and diluted
earnings per share 64,663 57,025 55,195
===========================
Basic and diluted loss
before extraordinary
item per share $(.55) $(.29) $(.72)
===========================
</TABLE>
The assumed conversions to common stock of preferred stock, preference stock
and 7% convertible subordinated debentures and the assumed exercise of
outstanding stock options would have an anti-dilutive effect on diluted earnings
per share and, therefore, have not been included in the calculations. For
additional information regarding the 7% convertible subordinated debentures,
stock options and preferred and preference stock, see Notes 8, 10 and 11.
-42-
<TABLE>
<CAPTION>
Note 3 - Inventories
- ------------------------------------------------------------------------
Inventories consist of the following:
December 31,
(In thousands) 1998 1997
- ------------------------------------------------------------------------
<S> <C> <C>
Fresh produce $43,052 $36,035
Processed food products 184,438 137,485
Growing crops 109,891 115,007
Materials, supplies and other 49,912 61,421
-------- --------
$387,293 $349,948
======== ========
</TABLE>
The carrying value of inventories valued by the LIFO method was $115 million
at December 31, 1998 and $124 million at December 31, 1997. If these
inventories were stated at current costs, total inventories would have been
approximately $33 million and $45 million higher than reported at December 31,
1998 and 1997, respectively.
<TABLE>
<CAPTION>
Note 4 - Property, Plant and Equipment
- ------------------------------------------------------------------------------
Property, plant and equipment consist of the following:
Weighted
average
December 31,depreciable
(In thousands) 1998 1997 lives
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Land $104,212 $91,718
Buildings and improvements 240,016 226,331 25 years
Machinery and equipment 439,600 436,761 10 years
Ships and containers 678,861 673,605 24 years
Cultivations 235,500 293,942 29 years
Other 70,672 78,94618 years
---------- ----------
1,768,861 1,801,303
Accumulated depreciation (646,014) (649,907)
---------- ----------
$1,122,847 $1,151,396
========== ==========
</TABLE>
-43-
<TABLE>
<CAPTION>
Note 5 - Leases
- ------------------------------------------------------------------------------
Total rental expense consists of the following:
(In thousands) 1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Gross rentals
Ships and containers $94,047 $79,746 $60,911
Other 36,854 35,509 35,893
--------- --------- ---------
130,901 115,255 96,804
Less sublease rentals (21,269) (14,359) (11,094)
--------- --------- ---------
$109,632 $100,896 $85,710
========= ========= =========
</TABLE>
Future minimum rental payments required under operating leases having initial
or remaining non-cancelable lease terms in excess of one year at December 31,
1998 are as follows:
<TABLE>
<CAPTION>
Ships and
(In thousands) containers Other Total
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
1999 $39,399 $22,495 $61,894
2000 35,207 19,718 54,925
2001 20,817 15,245 36,062
2002 20,980 12,929 33,909
2003 16,266 6,846 23,112
Later years 37,145 13,874 51,019
</TABLE>
Portions of the minimum rental payments for ships constitute reimbursement
for ship operating costs paid by the lessor.
Note 6 - Equity Method Investments
- --------------------------------------------------------------------------------
The Company has investments in a number of affiliates which are accounted for by
the equity method. These affiliates are primarily engaged in the distribution
of fresh produce. Chiquita's share of the earnings of these affiliates was $8
million in 1998, $1 million in 1997 and $1 million in 1996, and its investment
in these companies totaled $112 million and $75 million at December 31, 1998 and
1997, respectively. The excess of the carrying value of Chiquita's investment
over its share of the fair value of the investees' net assets at the date of
acquisition is being amortized over periods ranging from 10 to 40 years ($25
million and $16 million, net of accumulated amortization, at December 31, 1998
and 1997, respectively).
-44-
Summarized unaudited financial information of these affiliates follows:
<TABLE>
<CAPTION>
(In thousands): 1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenue $707,358 $510,282 $399,114
Gross profit 104,836 78,225 70,831
Net earnings 22,289 6,909 6,694
Current assets 174,110 91,748
Total assets 345,119 217,634
Current liabilities 116,773 80,350
Total liabilities 175,061 99,824
</TABLE>
Note 7 - Hedging Transactions
- ------------------------------------------------------------------------
Chiquita has interest rate swap agreements maturing between 1999 and 2001 to fix
the rate of interest on approximately $24 million of its variable rate ship
loans. At December 31, 1998, the Company had option contracts which ensure
conversion of approximately $325 million of foreign sales in 1999 at a rate not
higher than 1.76 Deutsche marks per U.S. dollar or lower than 1.59 Deutsche
marks per U.S. dollar.
The carrying values and estimated fair values of the Company's debt,
associated interest rate and foreign currency swap agreements and foreign
currency option contracts are summarized below:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
----------------------------------------------
Carrying Estimated Carrying Estimated
(In thousands) value fair value value fair value
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt $(1,171,885) $(1,186,000) $(1,114,536) $(1,160,200)
Interest rate swap
agreements - (800) - (900)
Foreign currency swap
agreements - - - 6,200
Foreign currency option
contracts 5,890 (800) 7,014 20,600
</TABLE>
Fair values for the Company's publicly traded debt and foreign currency option
contracts are based on quoted market prices. Fair value for other debt is
estimated based on the current rates offered to the Company for debt of similar
maturities. The fair values of interest rate and foreign currency swap
agreements are estimated based on the cost to terminate the agreements.
The Company is exposed to credit risk in the event of nonperformance by
counterparties on interest rate swap agreements. However, because the Company's
hedging activities are transacted only with highly rated institutions, Chiquita
does not anticipate nonperformance by any of these counterparties. The amount
of any credit exposure is limited to unrealized gains on these agreements.
-45-
<TABLE>
<CAPTION
Note 8 - Debt
- -----------------------------------------------------------------------
Long-term debt consists of the following:
December 31,
(In thousands) 1998 1997
- -----------------------------------------------------------------------
<S> <C> <C>
PARENT COMPANY
9 1/8% senior notes, due 2004 $175,000 $175,000
9 5/8% senior notes, due 2004 247,341 248,004
10 1/4% senior notes, due 2006 148,943 148,861
7% subordinated debentures, due 2001 112,010 117,215
----------------
Long-term debt of parent company $683,294 $689,080
================
SUBSIDIARIES
Loans secured by ships and containers,
due in installments from 1999 to 2009
- average effective interest rate of
8.5% (8.6% in 1997) $221,546 $242,463
Loan secured by Costa Rican farm
assets, due in 2000 - variable
interest rate of 7.8% 55,000 -
Foreign currency loans maturing
through 2008 - average interest rate
of 7% (8% in 1997) 18,666 10,478
Caribbean Basin Projects Financing
Authority loan - variable interest
rate of 4.6% in 1997 - 38,000
Overseas Private Investment
Corporation loan - variable interest
rate of 8.0% in 1997 - 11,126
Other loans maturing through 2012
- average interest rate of 9% 61,611 63,730
Less current maturities (37,511) (92,905)
----------------
Long-term debt of subsidiaries $319,312 $272,892
================
</TABLE>
The 7% subordinated debentures are callable at face value and convertible
into common stock at $43 per share. The 10 1/4% senior notes are callable
beginning in 2001 at a price of 105 1/8% of face value declining to face value
in 2004. Certain of the covenants under the Company's senior note agreements
contain restrictions on the payment of cash dividends. At December 31, 1998,
approximately $382 million was available for dividend payments under the most
restrictive convenants.
At December 31, 1998, $96 million of loans secured by ships, including $42
million of fixed rate ship debt denominated in pounds sterling, had interest
rates fixed at an average of 8.3% by the terms of the loans or by the operation
of interest rate swap agreements (see Note 7).
-46-
In 1996, proceeds from the issuance of $150 million of 10 1/4% senior notes
and from the sale of Series B preferred stock (see Note 11) were used to redeem
$220 million of 11 1/2% subordinated notes at a redemption premium of 5.7% of
the outstanding principal. The Company also redeemed $66 million of 10 1/2%
subordinated debentures at par. These prepayments resulted in extraordinary
losses totaling $23 million, including a $5 million non-cash write-off of
unamortized discount.
Maturities on long-term debt during the next five years are:
<TABLE>
<CAPTION>
Parent
(In thousands) Company Subsidiaries Total
- -----------------------------------------------------------------------
<S> <C> <C> <C>
1999 $- $37,511 $37,511
2000 - 119,679 119,679
2001 112,010 48,789 160,799
2002 - 36,286 36,286
2003 - 24,286 24,286
</TABLE>
The Company has a $125 million senior unsecured revolving credit facility
available through January 2001. Interest on borrowings under the facility is
based on, at the Company's option, the bank corporate base rate, the federal
funds effective rate or prevailing interbank Eurodollar offering rates. An
annual fee of up to 1/2% is payable on the unused portion of the facility. The
credit facility contains covenants which require the Company to satisfy certain
ratios related to net worth, debt-to-equity and interest coverage.
Chiquita's vegetable canning subsidiary has a secured revolving credit
agreement which, as of December 31, 1998, provided for borrowings of up to $70
million through August 1999. The credit agreement restricts borrowings based on
accounts receivable and inventory balances of the subsidiary. At December 31,
1998, outstanding borrowings under this facility were $37 million, which were
included in Notes and loans payable. The agreement was amended in February 1999
to increase the amount of permitted borrowings to $85 million. Interest on
borrowings under the facility is based on, at the Company's option, either the
bank corporate base rate or prevailing interbank Eurodollar offering rates. An
annual fee of 1/4% per year is payable on the unused portion of the commitment.
This facility contains covenants that place limitations on the payment of
dividends by the subsidiary and require the subsidiary to maintain a minimum
tangible net worth.
The Company maintains various other lines of credit with domestic and foreign
banks for borrowing funds on a short-term basis. The average interest rate for
all short-term notes and loans payable outstanding was 7.9% at December 31, 1998
and 1997.
Certain of Chiquita's borrowing agreements restrict the payment of cash
dividends. At December 31, 1998, approximately $380 million was available for
dividend payments under the most restrictive convenants of the Company's long-
term debt agreements. Under Chiquita's revolving credit facility, which had $49
million of short-term borrowing included in Notes and loans payable at December
31, 1998, $144 million was available for dividend payments.
Cash payments relating to interest expense were $105 million in 1998, $104
million in 1997 and $126 million in 1996.
-47-
Note 9 - Pension and Severance Benefits
- ------------------------------------------------------------------------
The Company and its subsidiaries have several defined benefit and contribution
pension plans covering approximately 5,500 domestic and foreign employees.
Approximately 25,000 employees are covered by Central and South American
severance plans. Pension plans covering eligible salaried employees and Central
and South American severance plans for all employees call for benefits to be
based upon years of service and compensation rates.
Pension and severance expense consists of the following:
<TABLE>
<CAPTION>
Foreign Plans
----------------------------------
(In thousands) 1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Defined benefit and
severance plans:
Service cost $5,070 $4,795 $5,014
Interest on projected
benefit obligation 6,070 5,835 5,886
Expected return on plan assets (136) (89) (65)
Recognized actuarial loss 757 299 407
Amortization of prior service
costs and transition
obligation 1,556 1,239 1,239
------- ------- -------
13,317 12,079 12,481
Curtailment loss 14,061 - -
Settlement loss 4,666 - -
------- ------- -------
32,044 12,079 12,481
Defined contribution plans 768 654 554
------- ------- -------
Total pension and severance
expense $32,812 $12,733 $13,035
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Domestic Plans
----------------------------------
(In thousands) 1998 1997 1996
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Defined benefit and
severance plans:
Service cost $1,057 $593 $636
Interest on projected benefit
obligation 2,838 2,561 2,129
Expected return on plan assets (2,697) (2,441) (2,224)
Recognized actuarial loss 365 501 28
Amortization of prior service costs
and transition obligation 91 62 97
------- ------- -------
1,654 1,276 666
Curtailment loss - - -
Settlement loss - - -
------- ------- -------
1,654 1,276 666
Defined contribution plans 3,726 3,234 2,870
------- ------- -------
Total pension and severance
expense $5,380 $4,510 $3,536
======= ======= =======
</TABLE>
As a result of Hurricane Mitch, the Company recognized curtailment and
settlement losses in 1998 related to Central American employee benefit plans.
The Company's pension and severance benefit obligations relate primarily to
Central and South American benefits which, in accordance with local government
regulations, are generally not funded until benefits are paid. Domestic pension
plans are funded in accordance with the requirements of the Employee Retirement
Income Security Act. Plan assets consist primarily of corporate debt
securities, U.S. Government and agency obligations and collective trust funds.
-48-
Financial information with respect to the Company's foreign and domestic defined
benefit pension and severance plans is as follows:
<TABLE>
<CAPTION>
Foreign Plans Domestic Plans
-----------------------------------
(In thousands) 1998 1997 1998 1997
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fair value of plan assets at
beginning of year $2,803 $1,427 $35,912 $26,031
Actual return on plan assets 40 75 5,650 2,101
Acquisitions of businesses - - - 7,946
Employer contributions 28,080 13,711 2,374 1,742
Benefits paid (27,895)(12,410) (2,451) (2,091)
Other - - 168 183
--------------------------------
Fair value of plan assets at
end of year $3,028 $2,803 $41,653 $35,912
================================
Projected benefit obligation at
beginning of year $67,188 $68,613 $39,904 31,881
Service and interest cost 11,140 10,630 3,895 3,154
Acquisitions of businesses - - - 4,749
Actuarial loss 409 355 1,456 2,144
Benefits paid (27,895)(12,410) (2,451) (2,091)
Curtailment 12,515 - - -
Settlement 1,499 - - -
Other - - 610 67
--------------------------------
Projected benefit obligation
at end of year $64,856 $67,188 $43,414 $39,904
================================
Excess of projected benefit
obligation over plan
assets $(61,828)$(64,385)$(1,761)$(3,992)
Unrecognized actuarial loss10,401 13,070 5,682 7,046
Unrecognized prior
service cost 1,229 2,287 494 60
Unrecognized transition
obligation 543 3,404 518 601
Adjustment required to recognize
minimum pension liability - (3,151) (3,099) (5,657)
--------------------------------
$(49,655)$(48,775) 1,834 (1,942)
Prepaid pension asset - - 5,064 3,917
--------------------------------
Accrued pension liability$(49,655)$(48,775)$(3,230)$(5,859)
================================
</TABLE>
Included in the table above are plans whose benefit obligation exceeds plan
assets. These plans are primarily foreign pension and severance plans that are
generally not required to be funded until benefits are paid. The accumulated
benefit obligation, projected benefit obligation and fair value of assets of
plans for which benefits exceed assets were $72 million, $88 million and $19
million, respectively, as of December 31, 1998 and $80 million, $98 million and
$27 million, respectively, as of December 31, 1997.
The projected benefit obligations of Central and South American pension and
severance plans in 1998 and 1997 were determined using discount rates of
approximately 9 1/4%. The assumed long-term rate of compensation increase was
6% for both years. The projected benefit obligations of the Company's domestic
pension plans were determined using a discount rate of approximately 7 1/4%.
The assumed long-term rate of compensation increase was 5 1/2% in 1998 and 5
3/4% in 1997 and the assumed long-term rates of return on plan assets were
approximately 8% in 1998 and 8 1/2% in 1997.
-49-
Note 10 - Stock Options
- ------------------------------------------------------------------------
Under its non-qualified Stock Option and Incentive Plans, the Company may grant
up to an aggregate of 25 million shares of common stock, including 10 million
additional shares approved by shareholders in 1998, in the form of stock
options, stock appreciation rights and stock awards. Under these plans, options
have been granted to directors, officers and other key employees to purchase
shares of the Company's common stock at the fair market value at the date of
grant. The options generally vest over ten years and may be exercised over a
period not in excess of 20 years.
A summary of the Company's stock option activity and related information
follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
1998 1997 1996
-----------------------------------------------
Weighted Weighted Weighted
average average average
(In thousands, except exercise exercise exercise
per share amounts) Shares price Shares priceShares price
- ------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Under option at
beginning of year 8,403 $13.44 6,893 $13.09 5,993$12.71
Options granted 1,858 12.92 2,539 14.08 1,953 13.40
Options exercised (123) 12.06 (509) 12.21 (546) 9.68
Options canceled or expired (659) 13.86 (520) 13.15 (507)13.41
------ ------ ------ ------------------
Under option at end of year 9,479 $13.32 8,403 $13.44 6,893$13.09
====== ====== ====== ==================
Options exercisable at
end of year 3,705 $13.30 2,943 $13.45 2,381$13.20
====== ====== ====== ==================
Shares available for
future grants 11,041 2,536 4,811
====== ====== ======
</TABLE>
Options outstanding as of December 31, 1998 have exercise prices ranging from
$9.44 to $34.44 and a weighted average remaining contractual life of 16 years.
More than 95% of these options have exercise prices in the range of $9.44 to
$15.69.
Under Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued
to Employees," because the exercise price of the Company's stock options equals
the market price of the underlying stock on the date of grant, no compensation
expense is recognized. SFAS No. 123 "Accounting for Stock-Based Compensation"
requires disclosure of the estimated fair value of stock options granted after
1994 and pro forma financial information assuming compensation expense was
recorded using these fair values.
The estimated weighted average fair value per option share granted is $5.24
for 1998, $6.34 for 1997 and $5.93 for 1996 using a Black-Scholes option pricing
model with the following assumptions: weighted average risk-free interest rates
of 5.6% for 1998, 6.5% for 1997 and 5.8% for 1996; dividend yield of 1.5%;
volatility factor for the Company's common stock price of approximately 37%; and
a weighted average expected life of eight years for options not forfeited. The
estimated pro forma compensation expense based on these option fair values would
be approximately $4 million ($.06 per share) in 1998, $3 million ($.05 per
share) in 1997 and $2 million ($.04 per share) in 1996. Because SFAS No. 123
applies only to options granted after 1994, the effect of applying this standard
to current year pro forma information is not necessarily indicative of the
effect in future years.
-50-
Note 11 - Shareholders' Equity
- ------------------------------------------------------------------------
In 1998, the Company's shareholders approved a change of title and par value
of the Company's Capital Stock, $.33 par value, to Common Stock, $.01 par value.
Also, the shareholders approved an increase in the number of authorized common
shares from 150 million to 200 million. At December 31, 1998, unissued common
shares were reserved for the following purposes:
<TABLE>
<CAPTION>
<S> <C>
Issuance under stock option and employee
benefit plans 23 million
Conversion of 7% subordinated debentures 3 million
Conversion of preferred and preference stock 26 million
</TABLE>
In 1997, Chiquita issued 4,585,210 shares of common stock and 79,659 shares
of $2.50 Convertible Preference Stock, Series C to the former owners of acquired
canning companies. In 1998, Chiquita issued 182,735 shares of common stock and
4,712 shares of Series C preference stock as final payment for the 1997
acquisitions and issued 2,966,533 common shares in connection with the 1998
acquisition of another canning company. In 1998, Chiquita also issued 873,710
shares to acquire a fresh mushroom business. (See Note 15.)
At December 31, 1998, three series of preferred and preference stock are
outstanding, each share of which has a liquidation preference of $50.00, and has
an annual dividend rate and is convertible at the holder's option into a number
of shares of Chiquita common stock as follows:
<TABLE>
<CAPTION>
Annual Holders'
Shares dividendconversion
outstanding rate rate
- ---------------------------------------------------------------------
<S> <C> <C> <C>
$2.875 Non-Voting Cumulative
Preferred Stock, Series A 2,875,000 $2.875 2.6316
$3.75 Convertible Preferred
Stock, Series B 2,300,000 3.750 3.3333
$2.50 Convertible Preference
Stock, Series C 84,371 2.500 2.9220
- ---------------------------------------------------------------------
</TABLE>
Each Series A share is convertible at the Company's option (provided the
market value of Chiquita common stock exceeds $24.70 per share) into 2.6316
shares of common stock through February 2001 and thereafter into a number of
shares of common stock (not exceeding 10 shares) having a total market value of
$50.00.
Series B shares were issued in 1996 for aggregate net proceeds of $111
million. Each of these shares is convertible at the Company's option beginning
in September 1999 into a number of shares of common stock (not exceeding 10
shares) having a total market value of $51.50 (decreasing thereafter to $50.00
if converted in or after September 2001).
Each Series C share is convertible at the Company's option beginning in July
2000 into a number of shares of common stock (not exceeding 10 shares) having a
total market value of $51.50 (decreasing thereafter to $50.00 if converted after
June 2002).
The Series A and Series B shares are non-voting. The Series C shares have
one vote per share, voting with the common stock. In certain circumstances if
the Company fails to pay quarterly dividends on Series A, B and C shares, the
holders of such shares, voting as a class, have the right to elect two directors
in addition to the regular directors. The Board of Directors has the authority
to fix the terms of 4,825,000 additional shares of Non-Voting Cumulative
Preferred Stock and 3,915,629 additional shares of Cumulative Preference Stock.
-51-
<TABLE>
<CAPTION>
Note 12 - Income Taxes
Income taxes consist of the following:
- ----------------------------------------------------------------------
(In thousands) U.S. FederalU.S. State Foreign Total
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
1998
Current tax expense $369 $1,100 $8,006 $9,475
Deferred tax benefit - - (975) (975)
----- ------ ------ -------
$369 $1,100 $7,031 $8,500
===== ====== ====== =======
1997
Current tax expense $375 $1,125 $6,076 $7,576
Deferred tax expense - - 624 624
----- ------ ------ -------
$375 $1,125 $6,700 $8,200
===== ====== ====== =======
1996
Current tax expense $181 $1,210 $9,026 $10,417
Deferred tax expense - - 583 583
----- ------ ------ -------
$181 $1,210 $9,609 $11,000
===== ====== ====== =======
</TABLE>
Income tax expense differs from income taxes computed at the U.S. federal
statutory rate for the following reasons:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Income tax expense (benefit)
computed at U.S. federal
statutory rate $(3,469) $2,990 $(5,855)
State income taxes, net of
federal benefit 715 731 787
U.S. losses for which no tax
benefit has been recognized 20,734 13,723 18,819
Foreign tax differential (8,816) (12,728) (4,954)
Goodwill amortization 1,850 1,148 1,154
Other (2,514) 2,336 1,049
------- ------- -------
Income tax expense $8,500 $8,200 $11,000
======= ======= =======
</TABLE>
-52-
Income (loss) from operations before income taxes consists of the following:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Subject to tax in:
United States $(51,326) $(39,211) $(54,575)
Foreign jurisdictions 41,414 47,754 37,847
--------- --------- ---------
$(9,912) $8,543 $(16,728)
========= ========= =========
</TABLE>
The components of deferred income taxes included on the balance sheet are as
follows:
<TABLE>
<CAPTION>
December 31,
------------------
(In thousands) 1998 1997
- ---------------------------------------------------------------------
<S> <C> <C>
Deferred tax benefits
Employee benefits $31,726 $28,311
Accrued expenses 25,143 17,140
Other 24,631 31,424
--------- ---------
81,500 76,875
Valuation allowance (23,795) (10,658)
--------- ---------
57,705 66,217
--------- ---------
Deferred tax liabilities
Depreciation and amortization (25,452) (29,338)
Growing crops (19,601) (20,968)
Long-term debt (6,167) (8,284)
Other (7,227) (9,344)
--------- ---------
(58,447) (67,934)
--------- ---------
Net deferred tax liability $(742) $(1,717)
========= =========
</TABLE>
Net deferred taxes do not reflect the benefit that would be available to the
Company from the use of its U.S. operating loss carryforwards of $291 million,
capital loss carryforwards of $38 million and alternative minimum tax credits of
$6 million. The operating loss carryforwards expire from 2007 through 2013 and
the capital loss carryforwards expire in 2000. Undistributed earnings of
foreign subsidiaries which have been, or are intended to be, permanently
reinvested in operating assets, if remitted, are expected to result in little or
no tax by operation of relevant statutes and the carryforward attributes
described above. Cash payments for income taxes, net of refunds, were $7
million in 1998, $5 million in 1997 and $10 million in 1996.
-53-
Note 13 - Segment Information
- ------------------------------------------------------------------------
The Company conducts business in two business segments, organized primarily on a
product line basis, with each segment offering a variety of different but
related products. The Fresh Produce segment includes the production,
transportation, distribution and marketing of Chiquita bananas and a wide
variety of other fresh fruit and vegetables. The Processed Foods segment
consists of the Company's private-label and branded canned vegetables, branded
fruit and vegetable juices and beverages, processed bananas and edible oil based
consumer products. The Company evaluates the performance of its business
segments based on operating income before unusual items. Intercompany
transactions between segments are eliminated. Financial information for each
segment follows:
<TABLE>
<CAPTION>
Fresh Processed
Produce Foods Consolidated
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
1998
Net sales $2,243,284 $477,077 $2,720,361
Operating income before
unusual items (1) 126,685 25,524 152,209
Depreciation and amortization 82,722 16,416 99,138
Income from equity investments 6,515 1,221 7,736
Total assets 2,055,854 453,279 2,509,133
Net operating assets (2) 1,512,185 364,774 1,876,959
Investment in equity affiliates 91,170 20,947 112,117
Expenditures for long-lived
assets 116,042 36,018 152,060
1997
Net sales $2,198,939 $234,787 $2,433,726
Operating income 82,562 17,604 100,166
Depreciation and amortization 84,562 7,026 91,588
Income from equity investments (245) 1,263 1,018
Total assets 2,083,080 318,533 2,401,613
Net operating assets (2) 1,517,076 251,844 1,768,920
Investment in equity affiliates 57,135 17,716 74,851
Expenditures for long-lived
assets 88,000 29,224 117,224
1996
Net sales $2,233,902 $201,346 $2,435,248
Operating income before
unusual items (1) 136,791 17,845 154,636
Depreciation and amortization 90,518 5,937 96,455
Income from equity investments 338 228 566
Expenditures for long-lived
assets 65,835 13,053 78,888
</TABLE>
(1)Fresh Produce operating income before unusual items excludes the following:
in 1998, write-downs and costs totaling $74 million, net of minimum of the
range of expected insurance recoveries of $60 million to $75 million,
resulting from widespread flooding in Honduras and Guatemala caused by
Hurricane Mitch; in 1996, write-downs and costs totaling $70 million
primarily from flooding in Central America; certain strategic undertakings
designed to achieve further long-term reductions in the delivered product
cost of bananas; and certain claims relating to prior EU quota restructuring
actions.
(2)Net operating assets consist of total assets less (i) cash and equivalents
and (ii) total liabilities other than debt.
-54-
Financial information by geographic area is as follows:
<TABLE>
<CAPTION>
(In thousands) 1998 1997 1996
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Net sales
North America $1,602,557 $1,327,168 $1,286,096
Central and South America 47,336 54,946 67,228
Europe and other
international 1,070,468 1,051,612 1,081,924
------------------------------
$2,720,361 $2,433,726 $2,435,248
==============================
Long-lived assets
North America $410,232 $341,993 $313,167
Central and South America 507,641 534,836 527,985
Europe and other
international 278,363 242,976 254,569
Shipping operations 472,663 498,342 526,902
------------------------------
$1,668,899 $1,618,147 $1,622,623
==============================
</TABLE>
The Company's products are sold throughout the world and its principal
production and processing operations are conducted in Central, South and North
America. Chiquita's earnings are heavily dependent upon products grown and
purchased in Central and South America. These activities, a significant factor
in the economies of the countries where Chiquita produces bananas and related
products, are subject to the risks that are inherent in operating in such
foreign countries, including government regulation, currency restrictions and
other restraints, risk of expropriation and burdensome taxes. Certain of these
operations are substantially dependent upon leases and other agreements with
these governments.
The Company is also subject to a variety of government regulations in certain
countries where it markets bananas and other products, including import quotas
and tariffs, currency exchange controls and taxes.
Note 14 - Litigation
- ------------------------------------------------------------------------
A number of legal actions are pending against the Company. Based on information
currently available to the Company and advice of counsel, management does not
believe such litigation will, individually or in the aggregate, have a material
adverse effect on the financial statements of the Company.
-55-
Note 15 - Acquisitions and Divestitures
- ------------------------------------------------------------------------
In January 1998, Chiquita acquired Stokely USA, Inc. previously a publicly-owned
vegetable canning business with annual net sales of approximately $150 million.
In connection with the acquisition, Chiquita issued $11 million of common stock
(.8 million shares) in exchange for all outstanding Stokely shares, and issued
$33 million of common stock (2.2 million shares) and paid $18 million of cash to
retire corresponding amounts of Stokely debt.
During 1997, the Company acquired separately the Owatonna Canning group of
companies and American Fine Foods, Inc., privately-owned companies engaged
primarily in the vegetable canning business. Chiquita issued $72 million (4.8
million shares) of common stock, including $3 million (.2 million shares) issued
in 1998, and preference stock valued at $4 million (.1 million shares) to
acquire these companies, and paid $19 million to retire debt of the acquired
businesses.
The following unaudited pro forma information presents a summary of the
Company's 1997 and 1996 consolidated results of operations as if the
acquisitions of Stokely, Owatonna and AFF had occurred on January 1, 1996:
<TABLE>
<CAPTION>
(In thousands, except per share amounts)
(Unaudited) 1997 1996
- ---------------------------------------------------------------------
<S> <C> <C>
Net sales $2,707,000 $2,736,000
Loss before extraordinary item (700) (33,000)
Net loss (700) (56,000)
Net loss per common share (.28) (1.07)
</TABLE>
In June 1998, the Company acquired Campbell Soup Company's Australian fresh
mushroom business, which had annual net sales of approximately $30 million. In
connection with this acquisition, Chiquita issued $12 million (.9 million
shares) of common stock and paid $5 million of cash in exchange for all of the
outstanding capital stock of this business.
Each of these transactions was accounted for as a purchase. The assets
acquired and liabilities assumed in the 1998 acquisitions of Stokely and the
Australian fresh mushroom business and the 1997 acquisitions of Owatonna and AFF
are summarized below:
<TABLE>
<CAPTION>
(In thousands) 1998 1997
- ---------------------------------------------------------------------
<S) <C> <C>
Trade receivables $13,728 $11,978
Inventories 62,020 77,221
Property, plant and equipment 49,936 27,135
Intangibles 44,479 9,775
Accounts payable and accrued
liabilities (48,101) (35,297)
Debt (36,414) (2,719)
Other, net (2,351) 5,334
---------- ----------
Net assets acquired $83,297 $93,427
========== ==========
</TABLE>
In December 1998, the Company sold its Central American plastic products
operations for $18 million in cash, which approximated carrying value. In 1996,
Chiquita sold 1.1 million shares of Smithfield Foods, Inc. common stock for $32
million and collected approximately $50 million of cash as repayment of secured
notes. These shares and notes were received in 1995 as part of the proceeds
from the sales of the Company's former Meat Division and the Costa Rican
operations of the Numar edible oils group, respectively.
-56-
Note 16 - Quarterly Financial Data (Unaudited)
- ------------------------------------------------------------------------
The following quarterly financial data are unaudited, but in the opinion of
management include all necessary adjustments for a fair presentation of the
interim results, which are subject to significant seasonal variations.
<TABLE>
<CAPTION>
1998
(In thousands, except per
share amounts) March 31 June 30 Sep. 30 Dec. 31
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $717,217 $744,191 $632,126 $626,827
Cost of sales (540,587) (561,900) (509,973) (593,587)
Operating income (loss) 69,770 74,216 12,548 (77,925)
Net income (loss) 41,078 52,842 (10,756) (101,576)
Basic earnings (loss)
per share .58 .75 (.23) (1.62)
Diluted earnings (loss)
per share .52 .66 (.23) (1.62)
Dividends per common share .05 .05 .05 .05
Common stock market price
High 16.00 14.44 14.25 12.44
Low 12.63 13.06 10.25 9.50
</TABLE>
<TABLE>
<CAPTION>
1997
(In thousands, except per
share amounts) March 31 June 30 Sep. 30 Dec. 31
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $631,410 $646,233 $556,261 $599,822
Cost of sales (464,071) (484,036) (463,993) (523,770)
Operating income (loss) 71,386 67,897 (5,376) (33,741)
Net income (loss) 43,294 41,083 (28,015) (56,019)
Basic earnings (loss)
per share .70 .66 (.57) (1.01)
Diluted earnings (loss)
per share .60 .57 (.57) (1.01)
Dividends per common share .05 .05 .05 .05
Common stock market price
High 16.00 15.88 16.13 18.00
Low 12.75 13.75 13.94 15.50
</TABLE>
The 1998 Cost of sales includes $74 million of fourth quarter write-downs and
costs, net of minimum expected insurance recoveries, resulting from widespread
flooding in Honduras and Guatemala caused by Hurricane Mitch.
Per share results include the dilutive effect of assumed conversion of preferred
and preference stock, convertible debentures and options into common stock
during the period presented. The effects of assumed conversions are determined
independently for each respective quarter and year and may not be dilutive
during every period due to variations in operating results. Therefore, the sum
of quarterly per share results will not necessarily equal the per share results
for the full year.
-57-
<TABLE>
<CAPTION>
Chiquita Brands International, Inc.
SELECTED FINANCIAL INFORMATION
(In thousands, except
per share amounts) 1998 1997 1996 1995 1994
- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
FINANCIAL CONDITION
Working capital $308,805 $300,348 $379,977 $366,893 $230,434
Capital expenditures 118,250 76,248 74,641 64,640 136,981
Total assets 2,509,133 2,401,613 2,466,934 2,623,533 2,774,239
Capitalization
Short-term debt 169,279 152,564 135,089 172,333 221,051
Long-term debt 1,002,606 961,972 1,079,251 1,242,046 1,364,836
Shareholders' equity 793,980 780,086 724,253 672,207 644,809
OPERATIONS
Net sales $2,720,361 $2,433,726 $2,435,248 $2,565,992 $2,505,826
Operating income 78,609 100,166 84,336 175,770 71,185
Income (loss) from
continuing operations (18,412) 343 (27,728) 27,969 (84,311)
Discontinued operations - - - (11,197) 35,611
Extraordinary loss from
debt refinancing - - (22,838) (7,560) (22,840)
Net income (loss) (18,412) 343 (50,566) 9,212 (71,540)
SHARE DATA
Shares used to calculate
diluted earnings (loss)
per common share 64,663 57,025 55,195 53,650 52,033
Diluted earnings (loss)
per common share:
- Continuing operations $(.55) $(.29) $(.72) $.37 $(1.76)
- Discontinued operations - - - (.21) .69
- Extraordinary items - - (.41) (.14) (.44)
- Net income (loss) (.55) (.29) (1.13) .02 (1.51)
Dividends per common share .20 .20 .20 .20 .20
Market price per common share:
High 16.00 18.00 16.38 18.00 19.25
Low 9.50 12.75 11.50 12.25 11.25
End of year 9.56 16.31 12.75 13.75 13.63
</TABLE>
-58-
DIRECTORS, OFFICERS and SENIOR OPERATING MANAGEMENT
<TABLE>
<CAPTION>
SENIOR OPERATING
BOARD OF DIRECTORS OFFICERS MANAGEMENT
- ----------------- ------------------- --------------
<S> <C> <C>
CARL H. LINDNER 1* CARL H. LINDNER 1* ROBERT F. KISTINGER
Chairman of the Board Chairman of the Board, President and Chief
Chief Executive Officer Chief Executive Officer Operating Officer
and Chairman of the and Chairman of the Chiquita Banana
Executive Committee Executive Committee Group
KEITH E. LINDNER 1* KEITH E. LINDNER 1* PETER A. HOREKENS
Vice Chairman of the Vice Chairman of the President and Chief
Board Board Operating Officer
Chiquita Banana
STEVEN G. WARSHAW 1 STEVEN G. WARSHAW 1 Group - Europe
President and Chief President and Chief
Operating Officer Operating Officer BENJAMIN PAZ
President and Chief
FRED J. RUNK * CARLA A. BYRON Operating Officer
Senior Vice President Vice President, Chiquita Banana
and Treasurer, Corporate Planning Group - North
American Financial America
Group, Inc. JOSEPH W. HAGIN II
Vice President, DENNIS M. DOYLE
JEAN HEAD SISCO 2,3 Corporate Affairs President - Far and
Partner in Sisco Middle East,
Associates JEFFREY T. KLARE Austral/Asia Region
(management Vice President,
consultants) Information Systems ANTHONY D. BATTAGLIA
President
WILLIAM W. VERITY 2,3 GERALD R. KONDRITZER Diversified Foods
Chairman and Chief Vice President and Group
Executive Officer, Treasurer
ENCOR Holdings, Inc.
(developer and manu- WARREN J. LIGAN
facturer of plastic Senior Vice President
molded components) and Chief Financial
Officer
OLIVER W. WADDELL 2,3
Retired Chairman, ROBERT W. OLSON
President and Chief Senior Vice President,
Executive Officer, General Counsel and
Star Banc Corporation Secretary
MICHAEL B. SIMS
1 Member of Executive Vice President,
Committee Investor Relations
2 Member of Audit
Committee WILLIAM A. TSACALIS
3 Member of Vice President and
Compensation Controller
Committee
STEVEN A. TUCKER
* Associated as a Vice President,
director or officer Internal Audit
of American Financial
Group, Inc. (engaged in
property and casualty
insurance and the sale
of annuities) which owns
approximately 37% of the
voting stock of Chiquita
Brands International,
Inc. as of February 26,
1999.
</TABLE>
-59-
INVESTOR INFORMATION
- ----------------------------
STOCK EXCHANGE LISTINGS
- ----------------------------
New York, Boston and Pacific
STOCK SYMBOL
- ------------
CQB
SHAREHOLDERS OF RECORD
- -------------------------------------------------------------------
At February 26, 1999 there were 5,580 common shareholders of record.
TRANSFER AGENT AND REGISTRAR -
PREFERRED, PREFERENCE AND COMMON STOCK
- --------------------------------------
Chiquita Brands International, Inc.
c/o Securities Transfer Company
One East Fourth Street
Cincinnati, Ohio 45202
(513) 579-2414
(800) 368-3417
DIVIDEND REINVESTMENT
- -------------------------------------------------------------------
Shareholders who hold at least 100 common shares may increase their investment
in Chiquita shares through the Dividend Reinvestment Plan without payment of any
brokerage commission or service charge. Full details concerning the Plan may be
obtained from Investor Relations or the Transfer Agent.
ANNUAL MEETING
- ------------------------------
May 12, 1999
10 a.m. Eastern Daylight Time
Omni Netherland Plaza Hotel
35 West Fifth Street
Cincinnati, Ohio 45202
INVESTOR INQUIRIES
- -------------------------------------------------------------------
For other questions concerning your investment in Chiquita, contact Investor
Relations at (513) 784-6366
TRUSTEES AND TRANSFER AGENTS -
DEBENTURES/NOTES
- ------------------------------------------
7% Convertible Subordinated Debentures due
March 28, 2001
Trustee-
The Chase Manhattan Bank
450 West 33rd Street
New York, New York 10001
Transfer, Paying and Conversion Agents -
The Chase Manhattan Bank -
New York, New York
The Chase Manhattan Bank -
London, England
Banque Paribas Luxembourg S.A. -
Luxembourg
Banque Bruxelles Lambert S.A. -
Brussels, Belgium
Bank Leu, Ltd. -
Zurich, Switzerland
9 1/8% Senior Notes due March 1, 2004*
9 5/8% Senior Notes due January 15, 2004*
10 1/4% Senior Notes due November 1, 2006*
Trustee
The Fifth Third Bank
38 Fountain Square Plaza
Cincinnati, Ohio 45263
* Chiquita Brands International, Inc., c/o Securities Transfer Company, is
transfer agent for these Notes.
-60-
EXHIBIT 21
----------
CHIQUITA BRANDS INTERNATIONAL, INC.
SUBSIDIARIES
As of March 29, 1999, the major subsidiaries of the Company, the jurisdiction
in which organized and the percent of voting securities owned by the immediate
parent corporation were as follows:
<TABLE>
<CAPTION>
Percent of
Voting Securities
Organized Owned by
Under Laws of Immediate Parent
------------- ------------------
<S> <C> <C>
Chiquita Brands, Inc. Delaware 100%
American Produce Company Delaware 100%
California Day-Fresh Foods, Inc. California 100%
Caribbean Enterprises, Inc. Delaware 100%
Great White Fleet Ltd. Bermuda 100%
BVS Ltd. Bermuda 100%
CDV Ltd. Bermuda 100%
CDY Ltd. Bermuda 100%
CRH Shipping Ltd. Bermuda 100%
Danfund Ltd. Bermuda 100%
Danop Ltd. Bermuda 100%
DSF Ltd. Bermuda 100%
GPH Ltd. Bermuda 100%
Great White Fleet (US) Ltd. Bermuda 100%
NCV Ltd. Bermuda 100%
Norvel Ltd. Bermuda 100%
Chiquita Brands Company,
North America Delaware 100%
CB Containers, Inc. Delaware 100%
OV Containers, Inc. Delaware 100%
Chiquita Citrus Packers, Inc. Delaware 80%
Chiquita Banana Company B.V. Netherlands 100%
Chiquita Italia, S.p.A. Italy 100%
Chiquita Finland Oy Finland 100%
Chiquita Norge AS Norway 100%
Chiquita Tropical Fruit
Company B.V. Netherlands 100%
Chiquita Frupac Inc. Delaware 100%
Chiquita Gulf Citrus, Inc. Delaware 100%
Chiquita International Trading
Company Delaware 100%
Chiquita Far East Holdings B.V. Netherlands 100%
Chiquita Brands South Pacific
Limited Australia 77%
CBSP Pty. Ltd. Australia 100%
Chiquita Mushrooms
Holdings Pty Ltd Australia 100%
Chiquita International Limited Bermuda 100%
M.M. Holding Ltd. Bermuda 100%
Chiquita Tropical Products Company Delaware 100%
Chiriqui Land Company Delaware 100%
Compania Agricola del Guayas Delaware 100%
Compania Agricola de Rio Tinto Delaware 100%
Compania Bananera Atlantica
Limitada Costa Rica 100%
Dunand et Compagnie des Bananes,
S.A. France 100%
</TABLE>
EXHIBIT 21 (cont.)
------------------
CHIQUITA BRANDS INTERNATIONAL, INC.
SUBSIDIARIES
<TABLE>
<CAPTION>
Percent of
Voting Securities
Organized Owned by
Under Laws of Immediate Parent
------------- -----------------
<S> <C> <C>
Friday Holdings, L.L.C. Delaware 100%
Chiquita Processed Foods, L.L.C. Delaware 100%
Maritrop Trading Corporation Delaware 100%
Progressive Produce Corporation Ohio 100%
Theodoredis and Sons Banana CompanyDelaware 100%
Tela Railroad Company Delaware 100%
Compania Mundimar, S.A. Costa Rica 100%
</TABLE>
The names of approximately 300 wholly-owned subsidiaries have been omitted.
In the aggregate these subsidiaries, after excluding approximately 100 foreign
subsidiaries whose immediate parents are listed above and which are involved in
fresh foods operations, do not constitute a significant subsidiary. The
consolidated financial statements include the accounts of the Company and all
majority-owned subsidiaries.
EXHIBIT 23
---------
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report on Form
10-K of Chiquita Brands International, Inc. of our report dated February 9,
1999, included in the 1998 Annual Report to Shareholders of Chiquita Brands
International, Inc.
Our audits also included the financial statement schedule of Chiquita Brands
International, Inc. listed in Item 14(a). This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion based
on our audits. In our opinion, the financial statement schedule referred to
above, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.
We also consent to the incorporation by reference in the following
Registration Statements and related prospectuses of Chiquita Brands
International, Inc. of our report dated February 9, 1999, with respect to the
consolidated financial statements and schedule of Chiquita Brands International,
Inc. incorporated by reference in the Annual Report on Form 10-K for the year
ended December 31, 1998.
<TABLE>
<CAPTION>
Registration
Form No. Description
----- ------------ -----------
<S> <C> <C>
S-3 33-58424 Dividend Reinvestment Plan
S-3 33-41057 Common Stock issuable upon conversion of Convertible
Subordinated Debentures
S-3 333-00789 Debt Securities, Preferred Stock, Preference Stock,
Depositary Shares, Common Stock and Securities
Warrants
S-8 33-2241 Chiquita Savings and Investment Plan
33-16801
33-42733
33-56572
333-39671
S-8 33-14254 1986 Stock Option and Incentive Plan
33-38284
33-41069
33-53993
S-8 333-59085 1998 Stock Option and Incentive Plan
S-8 33-38147 Associate Stock Purchase Plan
S-8 333-59063 1997 Amended and Restated Deferred Compensation Plan
</TABLE>
Cincinnati, Ohio
/s/ERNST & YOUNG LLP
March 29, 1999
EXHIBIT 24
-----------
POWER OF ATTORNEY
We, the undersigned officers and directors of Chiquita Brands
International, Inc. (the Company) hereby severally constitute and appoint
William A. Tsacalis and Robert W. Olson, and each of them singly, our true and
lawful attorneys and agents with full power to them and each of them to do any
and all acts and things in connection with the preparation and filing of the
Company's Annual Report on Form 10-K for the year ended December 31, 1998 (the
Report) pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934,
as amended, and any rules, regulations and requirements of the Securities and
Exchange Commission thereunder including specifically, but without limiting the
generality of the foregoing, the power and authority to sign in the name of the
Company and the names of the undersigned directors and officers in the
capacities indicated below the Report, any and all amendments and supplements
thereto and any and all other instruments and documents which said attorneys and
agents or any of them may deem necessary or advisable in connection therewith.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------- ------------------------- --------------
<S> <C> <C>
/s/ Carl H. Lindner Chairman of the Board and March 29, 1999
(Carl H. Lindner) Chief Executive Officer
/s/ Keith E. Lindner Director, Vice Chairman of March 29, 1999
(Keith E. Lindner) the Board
/s/ Steven G. Warshaw Director, President and March 29, 1999
(Steven G. Warshaw) Chief Operating Officer
/s/ Fred J. Runk Director March 29, 1999
(Fred J. Runk)
/s/ Jean Head Sisco Director March 29, 1999
(Jean Head Sisco)
/s/ William W. Verity Director March 29, 1999
(William W. Verity)
/s/ Oliver W. Waddell Director March 29, 1999
(Oliver W. Waddell)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Chiquita
Brands International, Inc. Form 10-K for the year ended December 31, 1998 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 88,906
<SECURITIES> 0
<RECEIVABLES> 212,177
<ALLOWANCES> 10,603
<INVENTORY> 387,293
<CURRENT-ASSETS> 840,234
<PP&E> 1,768,861
<DEPRECIATION> 646,014
<TOTAL-ASSETS> 2,509,133
<CURRENT-LIABILITIES> 531,429
<BONDS> 1,002,606
0
253,475
<COMMON> 654
<OTHER-SE> 539,851
<TOTAL-LIABILITY-AND-EQUITY> 2,509,133
<SALES> 2,720,361
<TOTAL-REVENUES> 2,720,361
<CGS> 2,206,047
<TOTAL-COSTS> 2,206,047
<OTHER-EXPENSES> 92,478
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 108,757
<INCOME-PRETAX> (9,912)
<INCOME-TAX> 8,500
<INCOME-CONTINUING> (18,412)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,412)
<EPS-PRIMARY> (.55)
<EPS-DILUTED> (.55)
</TABLE>
