-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, ezeEOsHviI11IgJK1GmFJfByK3WPEiLTGOpqWkelrEBpmSVUAHWQrgLTavu/odiE /sfSvA7cXk/hURJKchfrWA== 0000101063-94-000015.txt : 19940404 0000101063-94-000015.hdr.sgml : 19940404 ACCESSION NUMBER: 0000101063-94-000015 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940331 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHIQUITA BRANDS INTERNATIONAL INC CENTRAL INDEX KEY: 0000101063 STANDARD INDUSTRIAL CLASSIFICATION: 2011 IRS NUMBER: 041923360 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-01550 FILM NUMBER: 94519621 BUSINESS ADDRESS: STREET 1: 250 E FIFTH ST CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5137848011 FORMER COMPANY: FORMER CONFORMED NAME: UNITED BRANDS CO DATE OF NAME CHANGE: 19900403 10-K 1 10-K 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, 1993 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) 784-8011 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class On Which Registered Capital Stock ($.33 par value) New York, Pacific, Boston $2.875 Non-Voting Cumulative Preferred Stock, Series ANew York $1.32 Depositary Shares, each representing one-fifth of a share of Series C Mandatorily Exchangeable Cumulative Preference StockNew York 9-1/8% Subordinated Debentures due February 1, 1998 New York 10-1/4% Subordinated Debentures due August 1, 2005 New York, Pacific 10-1/2% Subordinated Debentures due August 1, 2004 New York, Pacific 11-7/8% Subordinated Debentures due May 1, 2003 New York, Pacific 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 11-1/2% Subordinated Notes due June 1, 2001 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 1, 1994, there were 48,557,653 shares of Common Stock outstanding. The aggregate market value of Common Stock held by non-affiliates at March 1, 1994 was approximately $441 million. Documents Incorporated by Reference Portions of the Chiquita Brands International, Inc. 1993 Annual Report to Shareholders are incorporated by reference in Parts I and II. Portions of the Chiquita Brands International, Inc. Proxy Statement for the 1994 Annual Meeting of Shareholders are incorporated by reference in Part III. CHIQUITA BRANDS INTERNATIONAL, INC. TABLE OF CONTENTS Page Part I Item 1. Business . . . . . . . . . . . . . . . . . . . . . . 1 Item 2. Properties . . . . . . . . . . . . . . . . . . . . . 8 Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . 9 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . .10 Part II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. . . . . . . . . . . . . . . . . 10 Item 6. Selected Financial Data. . . . . . . . . . . . . . . 10 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. . . . . . . . . 10 Item 8. Financial Statements and Supplementary Data. . . . . 10 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. . . . . . . . . 10 Part III Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . .11 Item 11. Executive Compensation . . . . . . . . . . . . . . . 12 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . 12 Item 13. Certain Relationships and Related Transactions 12 Part IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . 12 Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . 14 PART I ITEM 1 - BUSINESS GENERAL Chiquita Brands International, Inc. ("Chiquita" or the "Company") is a leading international marketer, processor and producer of quality fresh and processed food products. In recent years, the Company has capitalized on its "Chiquita" and other premium brand names by building on its worldwide leadership position in the marketing, distribution and sourcing of bananas; by expanding its quality fresh fruit and vegetable operations; and by further developing its business in value-added processed foods. Chiquita's products include: - Bananas, citrus, grapes, kiwi, mangos, pears and pineapples sold under the "Chiquita" brand name; - Bananas, citrus and other quality fresh fruit including apples, grapes, papaya, peaches, pears, plums, strawberries and tomatoes sold under the "Consul," "Chico," "Amigo," "Frupac" and other brand names; - A wide variety of fresh vegetables including asparagus, beans, broccoli, carrots, celery, lettuce, onions and potatoes sold under the "Premium" and various other brand names; - Fruit and vegetable juices and other processed fruits and vegetables, including banana puree, marketed under the "Chiquita," "Friday" and other brands; - Wet and dry salads sold under the "Club Chef," "Chef Classic" and "Naked Foods" brands; and - Margarine, shortening and other consumer packaged foods sold under the "Numar," "Clover" and various regional brand names. No individual customer accounted for more than 10% of the Company's consolidated net sales during any of the last three years. See "Management's Analysis of Operations and Financial Condition," which is incorporated by reference in Item 7 herein from the Company's 1993 Annual Report to Shareholders, for a discussion of factors affecting results of the Company's operations for 1993, 1992 and 1991. Factors which may cause fluctuations in the results of operations are also discussed in the description of the Company's operations below. Fresh food products The Company markets an extensive line of fresh fruits and vegetables sold under the "Chiquita" and other brand names. The core of Chiquita's fresh foods operations is the marketing, distribution and sourcing of bananas. Sales of bananas, as a percent of consolidated net sales, were 67% in 1991, 62% in 1992 and 58% in 1993. Chiquita believes that it derives competitive benefits in the marketing, distribution and sourcing of fresh foods through its: - Recognized brand names and reputation for quality; 1 - Strong market position in Europe, North America and Japan, the world's principal markets for fresh fruit; - Modern, cost-efficient fresh fruit transportation system; and - Industry leading position in terms of number and geographic diversity of its sources of bananas, which enhances its ability to provide customers with premium quality products on a consistent basis. Chiquita has benefitted from its multi-year investment spending program and the ongoing effects of its restructuring and cost reduction efforts to adjust its fresh foods volume and cost infrastructure to significantly reduce production, distribution and overhead costs. (See "Distribution and Logistics" and "Sourcing" below and ITEM 2 - PROPERTIES.) The restructuring program also included measures to reorganize the Company's European banana operations to adjust to a new quota which effectively restricts the volume of Latin American bananas imported into the European Union. (See RISKS OF INTERNATIONAL OPERATIONS below.) Marketing. Chiquita markets bananas under trade names including "Chiquita," "Chiquita Jr.," "Consul," "Amigo," "Petite 150," "Chico" and "Bananos." Chiquita's sales of bananas in 1993 in its principal markets, as a percent of its total banana net sales, were: Europe, 45%; North America, 34%; and other (principally the Far East and Middle East), 21%. The Company has been able to obtain a premium price for its bananas due to its reputation for quality and its innovative marketing techniques, which include providing retail marketing support services to its customers. Chiquita sells bananas through its regional sales organizations and commissioned agents throughout the world directly to wholesalers and retail chains, which in turn ripen and resell or distribute the fruit. The Company also sells bananas ripened in its own facilities or under contractual ripening arrangements. Bananas are highly perishable and must be brought to market and sold generally within 60 days after harvest. Therefore, selling prices which importers receive for bananas depend on the available supplies of bananas and other fruit in each market, the relative quality, and wholesaler and retailer acceptance of bananas offered by competing importers. Excess supplies may result in increased price competition. Profit margins on sales may also be significantly affected by fluctuations in currency exchange rates. (See RISKS OF INTERNATIONAL OPERATIONS below.) Adverse weather such as major windstorms or floods in banana growing areas may restrict worldwide supplies and result in increased prices for bananas. However, competing importers may be affected differently, depending upon their ability to obtain adequate supplies from sources in other geographic areas. Banana marketing is highly competitive. In order to compete successfully, Chiquita must be able to source bananas of uniformly high quality and distribute them in worldwide markets on a timely basis. A limited number of competitors account for most of the banana imports throughout the world. The Company believes that it sells more bananas than any of its competitors, accounting for approximately one-fourth of all bananas imported into its principal markets throughout the world. While smaller companies, including growers' cooperatives, have also become a competitive factor, Chiquita's principal competitors continue to be a limited number of large international companies. Although production of bananas tends to be relatively stable throughout the year, competition in the sale of bananas comes not only from bananas sold by others, but also from other fresh fruit which may 2 be seasonal in nature. The resulting seasonal variations in demand cause banana pricing to be seasonal, with the first six months of the calendar year being the stronger period. Chiquita's interests in food-related businesses include a network of fresh fruit and vegetable operations in Europe, North America and the Pacific Rim. Through these affiliations, Chiquita sells and distributes a variety of quality fruit and vegetable products under other brand names. Certain of these affiliations involve both the production and marketing of fresh fruits and vegetables while others involve only marketing. These businesses compete against numerous other regional fresh fruit and vegetable producers and distributors. No single competitor has a dominant market share in this industry due to the regionalized nature of these businesses. Distribution and Logistics. Transportation expenses comprise approximately one-fourth of the total costs incurred by Chiquita in its sale of tropical fruit. Chiquita ships its tropical fruit in 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 that minimize damage to the product by eliminating the need to handle individual boxes. As a result of a multi-year investment program, now nearly completed, and the elimination of a substantial amount of chartered ship capacity under Chiquita's restructuring program, Chiquita now owns or controls under long-term lease approximately 60% of its aggregate shipping capacity. Most of the remaining capacity is operated under contractual arrangements having terms of three years or less. (See also ITEM 2 - PROPERTIES below and Notes 6 and 7 to the Consolidated Financial Statements.) Chiquita also operates loading and unloading facilities which it owns or leases in Central and South America and various ports of destination. Sourcing. Chiquita has a greater number and geographic diversity of sources of bananas than any of its competitors. During 1993, approximately 30% of all bananas sold by Chiquita were sourced from Panama. Bananas sourced from other countries, including Colombia, Costa Rica, Guatemala, Honduras, Mexico and the Philippines, comprised from 6% to 17% (depending on the country) of bananas sold by Chiquita during 1993. In 1993 approximately two-thirds of the bananas sourced by Chiquita were produced by subsidiaries and the remainder were purchased under purchase fruit arrangements from suppliers. Under certain of the purchase fruit arrangements, which require less initial capital investment by the Company than owned production facilities, Chiquita furnishes financial and technical assistance to its suppliers to support the production and preparation of bananas for shipment. Individual suppliers in Mexico and the Philippines provided approximately 6% and 10%, respectively, of the bananas sold by Chiquita in 1993. The producer in the Philippines has traditionally supplied substantially all of the bananas marketed by the Company in Japan. No other single supplier provided 5% or more of Chiquita's bananas. Bananas are vulnerable to adverse local weather conditions, which are quite common but difficult to predict, and to crop disease, the control of which entails significant expense. These factors may restrict worldwide supplies and result in increased prices for bananas. However, competitors may be affected differently depending upon their ability to obtain adequate supplies from sources in other geographic areas. Chiquita's overall risk from these factors, as well as from political changes in countries where bananas are grown, is reduced by the low concentration of its banana production in individual producing locations. Labor cost, which is a significant portion of the cost of producing bananas, varies depending on the country of origin. Since bananas are shipped in cardboard boxes, paper cost is also significant. 3 The geographically diverse sources of other fresh fruits and vegetables primarily involve formal and informal purchase arrangements with numerous unrelated producers and importers. None of these arrangements is individually significant to the Company's operations. Processed Food Products Chiquita's processed food products include fruit and vegetable juices sold primarily in the United States; processed fruit and vegetables, including processed bananas, sold worldwide under the "Chiquita," "Friday" and other brands; wet and dry salads sold under the "Club Chef," "Chef Classic" and "Naked Foods" brands; and other consumer packaged foods sold in Latin America by the Numar Division. Chiquita branded fruit juices include a full line of tropical blends sold refrigerated, frozen and in shelf stable individual servings. The refrigerated and frozen lines include six varieties: "Caribbean Splash," "Tropical Squeeze," "Raspberry Passion," "Orange Banana," "Calypso Breeze" and "Hawaiian Sunrise." Individual servings are sold in three of these varieties: "Caribbean Splash," "Orange Banana" and "Calypso Breeze." These all natural tropical blends are available throughout most of the United States and are manufactured by others from fruit juice concentrates and purees to the Company's specifications. The Company also produces and markets natural fresh fruit and vegetable juices sold under the "Ferraro's Fine Juices" and "Naked Juice" brands. Chiquita's processed banana products include banana puree, sliced bananas and other specialty products which are produced by the Company and 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. Friday Canning Corporation ("Friday") is one of the largest private-label vegetable processors in the United States. Friday markets a full line of over twenty-five types of processed vegetables to retail and food service customers throughout the U.S. and other countries. Friday competes 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. The vegetable processing industry is affected by the availability of produce, which can vary due to local weather conditions. The Numar Division is a vertically integrated marketer, refiner and producer of shortening, margarine and vegetable oil products primarily in Costa Rica and Honduras. These products are derived primarily from oil palm grown on the Company's plantations located in these countries. Numar is the leading marketer of such products in Costa Rica and Honduras and sells its products in these and other Central American countries under the "Numar," "Clover" and other brand names. Numar's competitors in Central America consist principally of a number of small local firms and subsidiaries of multinational corporations. RISKS OF INTERNATIONAL OPERATIONS Information about the Company's operations by geographic area is included in Note 14 to the Consolidated Financial Statements included in the Company's 1993 Annual Report to Shareholders and is incorporated herein by reference. The Company is subject to a variety of governmental regulations in certain countries where it sources and markets its products, including import quotas and tariffs, currency exchange controls and taxes. On July 1, 1993, the European Union ("EU") implemented a new quota effectively restricting the volume of Latin American bananas imported into the EU to approximately 80% of prior levels. The quota is administered through a licensing system and grants preferred status to producers and importers within 4 the EU and its former colonies, while imposing new quotas and tariffs on bananas imported from other sources, including Latin America, Chiquita's primary source of fruit. Challenges to the quota and many matters regarding implementation and administration of the quota remain to be resolved. Prior to its implementation, the principles underlying the new regulation were ruled illegal under the General Agreement on Tariffs and Trade ("GATT") by a GATT dispute settlement panel. In January 1994, a GATT dispute settlement panel ruled on a second lawsuit against the current EU regulation in favor of the Latin American countries. GATT rulings in favor of the Latin American countries could result in an increase in the total volume of Latin American bananas, including banana volume of the Company, which could be imported under the quota. However, there can be no assurance that the EU will comply, or of the manner in which it would comply, with such rulings. (See "Management's Analysis of Operations and Financial Condition" included in the Company's 1993 Annual Report to Shareholders for a discussion of the impact of the EU quota on current operations.) Certain of the Company's operations are heavily dependent upon products grown and purchased in Central and South America and, to a lesser extent, the Philippines. These activities, a significant factor in the economies of many of the countries where the Company produces and purchases bananas and other agricultural and consumer products, are subject to risks that are inherent in operating in such countries, including government regulation, currency restrictions and other restraints, risks of expropriation and burdensome taxes. There is also a risk that legal or regulatory requirements will be changed or that administrative policies will change. Certain of these activities are dependent upon leases and other agreements with the governments of these countries. The Company leases all the agricultural lands it uses in Panama from the Republic of Panama under lease and operating agreements which automatically renew each year unless canceled by either party on four years prior notice. In the event of termination of the agreements, the government of Panama, which previously purchased such agricultural lands from the Company, may purchase other Panamanian assets of the Company at specified values which approximate carrying value but may be less than market value. Certain facilities in Honduras previously owned by the Company were transferred in prior years to the government of Honduras with provision for their subsequent use by the Company. Such facilities include a railroad which the Company operates under a lease with the government of Honduras that expires January 1, 1995. The Company believes that the lease, if required in 1995, can be extended or renewed. As a result of certain governmental price and export controls in Costa Rica and Honduras, cost increases related to the Company's oil palm operations may not initially be recovered through selling prices in the markets in which these products are sold. The Company's operations worldwide and the products it sells are subject to numerous governmental regulations and inspections by environmental, food safety and health authorities. These regulations directly affect day-to-day operations. Although the Company believes it is substantially in compliance with such regulations, actions by regulators have in the past required, and in the future may require, operational modifications or capital improvements at various locations or the payment of fines and penalties, or both. The Company's operations are conducted in many areas of the world and involve transactions in a variety of currencies. Results of its operations may be significantly affected by fluctuations of currency exchange rates. Such fluctuations affect the Company's banana operations because many of its costs are incurred in currencies different from those that are received from the sale of bananas in non-U.S. markets, and there is normally a time lag between the incurrence of such costs and collection of the related sales 5 proceeds. The Company's policy is to exchange local currencies for dollars immediately upon receipt, thus reducing exchange risk. The Company also engages from time to time in various hedging activities to further minimize potential losses on cash flows originating in currencies other than the U.S. dollar. Fluctuations of currency exchange rates may also affect the Company's Numar Division. Since Numar's profits are generated in many of the same Central American countries where the Company incurs costs to produce bananas, exchange fluctuations with an adverse effect on Numar's profits would generally have a favorable impact on the Company's cost of producing bananas. See Note 1 to the Consolidated Financial Statements and "Management's Analysis of Operations and Financial Condition" included in the Company's 1993 Annual Report to Shareholders for information with respect to currency exchange. LABOR RELATIONS The Company employs a total of approximately 45,000 persons in its continuing operations. Approximately 39,000 of these associates are employed in Central and South America including 32,000 workers covered by labor contracts. The Company has approximately 75 labor contracts with terms expiring from 1994 to 1997. Contracts expiring in 1994 cover approximately 9,000 employees including approximately 6,500 under a contract expiring in July at one of Chiquita's Panamanian banana producing divisions. The Company has commenced negotiations for a new contract with these workers and does not expect any new terms of the contract to have a material effect on its operations. Strikes or other labor- related actions are often encountered upon expiration of labor contracts and also frequently occur during the term of the contracts. DISCONTINUED OPERATIONS During the fourth quarter of 1992, after evaluation of reorganization plans announced earlier that year and completion of other preparatory actions, the Company adopted a plan of disposal for its Meat Division operations. (See Note 3 to the Company's Consolidated Financial Statements included in the Company's 1993 Annual Report to Shareholders.) Pursuant to the plan, the Company immediately completed the sale of a major fresh pork processing facility in December 1992. During 1993 and early 1994, the Company engaged in extensive activity with respect to execution of the balance of its disposal plan. Numerous proposals for the sale of individual components of the Meat Division were received from a larger number of buyers than originally expected. Although progress under the plan has been slower than anticipated, partially as a result of the Company evaluating all these proposals in the interest of maximizing shareholder value, the Company has made significant progress in the implementation of its disposal plan. This progress includes: - successful ongoing cost reduction efforts that have contributed to the improvement in Meat Division operating results to approximately breakeven levels for 1993. - progress toward obtaining further substantial cost reductions for 1994 and beyond relating to retiree medical costs. In June 1993, the Company received a favorable court ruling on its previously filed litigation that confirms its right to unilaterally reduce medical benefits of retired hourly employees. This ruling is being appealed by the union and a hearing on the appeal was held in February 1994. A decision on the appeal is expected later in 1994. - receiving subsidies and concessions from the State of South Dakota and the City of Sioux Falls that will enhance the operating profitability of the Sioux Falls plant. These incentives were offered in September 1993 by newly installed state and city administration officials who took office in April 1993 after their predecessors, including the Governor of South Dakota, were 6 killed in a plane crash on their return from a meeting to discuss incentives with Company and Meat Division representatives. - obtaining a new stand-alone revolving credit facility in June 1993 to fund the Meat Division's working capital needs. - obtaining financial incentives and concessions in November 1993 from the City of Sioux City, Iowa and the local labor union to enhance the salability of the Sioux City pork processing plant as an operating facility. - completing the sale of the Division's specialty meat operations in February 1994 for approximately $50 million in cash. The Company also continues to be engaged in marketing efforts with respect to the remaining Meat Division operations and expects to complete the divestitures of these operations by the end of 1994. Marketing. The Meat Division is engaged in the processing and marketing primarily of fresh pork and processed meat products, including sausage, frankfurters, bacon, hams and luncheon meats. The Meat Division's products are sold principally in the United States, and for export to Japan, Mexico, Canada, and other Central American and Pacific Rim countries. In addition to operating its own meat-packing plants, the Company engages other meat packers to custom slaughter and process meat products. The Meat Division's products are marketed in the United States nationally under the "John Morrell" brand name and regionally under brands such as "Dinner Bell," "Kretschmar," "Rath Black Hawk" and "Tobin's First Prize," as well as under various private customer labels. Profit margins in the fresh meat business are low and competition among packers in the United States is strong. Price, quality and brand identification are major competitive factors. The Meat Division's major competitors in fresh and processed meats are large U.S. meat-packing corporations, as well as a large number of U.S. regional and local meat packers. Competition also comes from other high protein products, including beef, poultry, seafood and dairy products. The Meat Division's operations involve supplying a consistent quality product to a broad market, including large food chains. The Meat Division maintains an experienced sales force that sells its products principally in the United States and Japan. Some fresh and processed meats, including export sales, are also sold through independent food brokers or expedited through international trading companies. The availability of adequate supplies and cost of livestock are significant to the profitability of the Meat Division's fresh meat operations. Generally, results of operations are adversely affected when livestock is in short supply because competition among meat packers for available supplies is strong and prices for livestock may increase. The availability of livestock is determined primarily by decisions made independently by a large number of growers and feeders over a period of years and is beyond the control of the Meat Division and competing meat packers. Labor relations. The Meat Division employs approximately 4,600 domestic employees, nearly all of whom are covered under approximately 10 labor contracts with terms expiring from 1994 to 1998. In January 1984 certain workers who were affected by the closing and later reopening of one of the Meat Division's plants sued John Morrell & Co. ("Morrell"), Chiquita and the United Food and Commercial Workers Union in the U.S. District Court for the Western District of Tennessee. The workers claimed that Morrell breached its collective bargaining agreement with the union and that the 7 union breached its duty of fair representation. Morrell, Chiquita and the union settled with the workers in late 1988. However, the union also asserted cross-claims against Morrell and Chiquita. In December 1992, the Court dismissed all of the cross-claims. The union has appealed this decision and a hearing is scheduled for April 1994. In an unrelated action, in October 1988 approximately 650 employees from three Morrell plants filed suit in the U.S. District Court for the Northern District of Iowa claiming that Morrell violated wage and hours laws by not paying them for the time required to put on, take off and clean personal protective clothing. In February 1994, Morrell settled this suit with the employees for an immaterial amount. A strike at Sioux Falls in May 1987 led to three lawsuits by Morrell against the union. Following judgments in favor of Morrell in the first two lawsuits which resulted in payments to Morrell by the union totaling $29.3 million, the union demanded further arbitration of its claims that its contract had required Morrell to recall the striking employees. In the fall of 1991 in the third lawsuit, Morrell sued the union in the U.S. District Court for the District of South Dakota, seeking a ruling that the prior litigation disposed of the union's recall claims. In March 1992, the court ruled in Morrell's favor. On appeal, the Eighth Circuit Court of Appeals reversed the lower court's decision, ruling that the union is entitled to have its remaining arguments heard in a second round of arbitration, and the United States Supreme Court refused to grant certiorari. In February 1994, the union petitioned to re-commence arbitration. Properties. The Meat Division owns and operates its principal slaughtering plant and processed meat facility located in Sioux Falls, South Dakota. The Meat Division also owns or leases and operates meat-processing facilities in Iowa and Ohio and operates warehouses and distribution facilities in several states. Although much of the Sioux Falls plant is relatively old, the Company believes that it and other more modern plants and facilities now used are, in general, well maintained and suitable for its operations. Certain products are produced for the Meat Division by custom meat packers in plants located in Ohio and Kansas. Regulation. The Meat Division's operations are subject to numerous governmental regulations and regular inspections by the U.S. Department of Agriculture and other environmental and health authorities. Actions by regulators directly affect day-to-day operations and have in the past required, and in the future may require, plant improvements at various locations or the payment of fines and penalties, or both. While it is not possible to predict the cost of such future improvements with a high degree of certainty, management does not expect that such expenditures will have a material impact on the Company's financial results. In March 1993, Morrell brought to the attention of the United States Environmental Protection Agency ("USEPA") certain deficiencies relating to the wastewater treatment facility at one of its plants. The Company's internal investigation of this matter and discussions with the USEPA are continuing. The U.S. Department of Justice (DOJ) has proposed that Morrell consider entering into a judicial civil consent order requiring compliance with certain environmental laws, regulations and permits and other actions. The DOJ indicated that the amount of civil penalties, if any, to be imposed would be resolved later. In addition, the U.S. Attorney for South Dakota and the Environmental Crimes Section of the Environment and Natural Resources Division of the DOJ are reviewing the matter. Morrell is presently operating this wastewater treatment facility under an extension of its previous five-year permit which will remain in place until a permanent permit is issued. ITEM 2 - PROPERTIES The Company owns approximately 132,000 acres and leases approximately 46,000 acres of improved land, principally in Costa Rica, Panama and Honduras. Substantially all of this land is used for 8 the cultivation of bananas and oil palm and support activities, including the maintenance of floodways. The Company also owns power plants, packing stations, warehouses, irrigation systems and loading and unloading facilities used in connection with its banana and oil palm operations. The Company owns or controls under long-term bareboat leases 23 ocean-going refrigerated vessels, including 1 delivered in early 1994, and has 21 additional such vessels under time charters, primarily for transporting tropical fruit sold by the Company. From time to time, excess capacity may be chartered or subchartered to others. In addition, the Company enters into spot charters as necessary to supplement its transportation resources. The Company also owns or leases other related equipment, including refrigerated container units, used to transport fresh food. The majority of the ships owned and related container units are pledged as collateral for related financings. Properties used by the Company's processed foods operations include processing facilities in Costa Rica and Honduras, and vegetable canning facilities in Wisconsin. Other operating units of the Company own, lease and operate properties, principally in the United States and Central and South America. The Company leases the space for its executive offices in Cincinnati, Ohio. For further information with respect to the Company's physical properties, see the descriptions under ITEM 1 - BUSINESS - GENERAL and DISCONTINUED OPERATIONS, above, and Notes 6 and 7 to the Consolidated Financial Statements included in the Company's 1993 Annual Report to Shareholders. ITEM 3 - LEGAL PROCEEDINGS A number of legal actions are pending against the Company, including those described below and in ITEM 1 - BUSINESS - DISCONTINUED OPERATIONS affecting the Meat Division, which is reported as a discontinued operation. Based on evaluations of facts which have been ascertained and opinions of counsel, management does not believe such litigation will, individually or in the aggregate, have a material adverse effect on the consolidated financial condition or results of operations of the Company. The Company and other major banana producing companies have been added as defendants in two purported class actions, filed in state courts in Galveston and Brazoria counties, Texas, and in three other Texas state court cases. These cases were originally filed in early 1993 against the manufacturers of an agricultural chemical called DBCP by an aggregate of approximately 20,000 individuals. Most of the plaintiffs are foreign citizens who claim to have been employees of banana companies, including in some cases subsidiaries of the Company. The plaintiffs allege they were injured as a result of exposure to DBCP, which was used primarily in the 1970's. The damage claims have not been quantified. The suits are Franklin Rodriguez Delgado, et al. v. Shell Oil Company, et al., Cause No. 93-CV-0030 (Galveston County, Texas); Armando Ramos Bermudez, et al. v. Shell Oil Company, et al., Cause No. 93-C-2290 (Brazoria County, Texas); Narcisco Borja, et al. v. Dow Chemical Company, et al., Cause No. 93-320 (Dallas County, Texas); Juan Ramon Valdez, et al. v. Shell Oil Company, et al., Cause No. 17814 (Morris County, Texas); and Ramon Rodriguez Rodriguez, et al. v. Shell Oil Company, et al., Cause No. 3813 (Jim Hogg County, Texas). Similar suits have been filed in Costa Rica and Panama by approximately 800 individuals against subsidiaries of the Company, including Compania Palma Tica and Compania Bananera Atlantica Limitada. Similar suits have been filed in other countries against other defendants as well. The Company has answered all suits, believes it has substantial and meritorious defenses and is vigorously defending the actions. 9 ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. PART II ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information concerning the number of shareholders at March 1, 1994, and the market for the Company's capital stock is set forth on the inside back cover of the Company's 1993 Annual Report to Shareholders under "Investor Information." Information concerning the price ranges of the Company's capital stock and dividends declared thereon is set forth in Note 15 to the Consolidated Financial Statements included in the 1993 Annual Report to Shareholders. Information concerning restrictions on the Company's ability to declare and pay dividends is set forth in Note 8 to the Consolidated Financial Statements included in the 1993 Annual Report to Shareholders. All such information is incorporated herein by reference. ITEM 6 - SELECTED FINANCIAL DATA This information is included in the table entitled "Selected Financial Data" on page 6 of the Company's 1993 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 8 through 10 of the Company's 1993 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. and its subsidiaries included on pages 11 through 23 of the Company's 1993 Annual Report to Shareholders, and "Quarterly Financial Data" which is set forth in Note 15 to such 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 set forth in ITEM 10 below, 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 1994 Annual Meeting of Shareholders and is incorporated herein by reference. 10 ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company are: Carl H. Lindner (age 74) - Mr. Lindner has been Chairman of the Board of Directors and Chief Executive Officer of the Company since August 1984 and Chairman of the Board of Directors and Chief Executive Officer of AFC since AFC was founded over 30 years ago. AFC is a holding company which, through subsidiaries, is engaged in several financial businesses, including property and casualty insurance, annuities, and portfolio investing. In nonfinancial areas, AFC has substantial operations in the food products industry, through its ownership in Chiquita, in television and radio station operations, through its ownership of Great American Communications Company ("GACC"), and in industrial manufacturing. Keith E. Lindner (age 34) - Mr. Lindner has been President and Chief Operating Officer of the Company since June 1989 and President of its Chiquita Brands, Inc. subsidiary since December 1986. He was Senior Executive Vice President of the Company from March 1986 to June 1989. Fred J. Runk (age 51) - Mr. Runk has been a Vice President of the Company since September 1984. From September 1984 to March 1994 he served as the Company's Chief Financial Officer. From February 1985 until June 1988, he was also Treasurer of the Company. Mr. Runk has served as Vice President and Treasurer of AFC for more than five years. Steven G. Warshaw (age 40) - Mr. Warshaw was named Chief Financial Officer of the Company in March 1994. He has also served as the Company's Executive Vice President and Chief Administrative Officer since January 1990. Mr. Warshaw has been employed by the Company in various executive capacities since April 1986. Robert F. Kistinger (age 41) - Mr. Kistinger was named Senior Executive Vice President of the Company's Chiquita Banana Group in February 1994. From March 1989 until February 1994, he was Executive Vice President, Operations of the Company's Chiquita Tropical Products Division. Mr. Kistinger has been employed by the Company in various capacities since 1980. Thomas E. Mischell (age 46) - Mr. Mischell has served as a Vice President of the Company since July 1986 and has served as Vice President of AFC for more than five years. Charles R. Morgan (age 47) - Mr. Morgan has been Vice President, General Counsel and Secretary of the Company since January 1990. Mr. Morgan has also served as Vice President, General Counsel and Secretary of Chiquita Brands, Inc. since June 1988 and as Vice President and Secretary of Morrell since February 1989. From February 1989 to July 1993, he was also General Counsel of Morrell. Jos P. Stalenhoef (age 52) - Mr. Stalenhoef was named President, Chiquita Banana-North American Division in February 1994. From March 1989 until February 1994, he was Senior Vice President, North America, Chiquita Tropical Products Division. Prior to that time, Mr. Stalenhoef was Vice President, Marketing, Chiquita Tropical Products Division. William A. Tsacalis (age 50) - Mr. Tsacalis has served as Vice President and Controller of the Company since November 1987. In December 1993, GACC completed a comprehensive financial restructuring which included a prepackaged plan of reorganization filed in November of that year under Chapter 11 of the Bankruptcy Code. Carl H. Lindner and Fred J. Runk were executive officers of GACC within two years before GACC's bankruptcy reorganization. 11 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 1993 Annual Report to Shareholders and are incorporated by reference in Part II, Item 8: Page of Annual Report Report of Independent Auditors 7 Consolidated Statement of Income Years ended December 31, 1993, 1992 and 1991 11 Consolidated Balance Sheet December 31, 1993 and 1992 12 Consolidated Statement of Shareholders' Equity Years ended December 31, 1993, 1992 and 1991 13 Consolidated Statement of Cash Flow Years ended December 31, 1993, 1992 and 1991 14 Notes to Consolidated Financial Statements 15 2. Financial Statement Schedules The following consolidated financial statement schedules of the Company, which exclude amounts relating to its discontinued operations, are included in this Annual Report on Form 10-K: Page of Form 10-K II - Amounts Receivable from Related Parties, and Underwriters, Promoters, and Employees Other Than Related Parties 17 V - Property, Plant and Equipment 18 VI - Accumulated Depreciation of Property, Plant and Equipment 19 VIII - Allowance for Doubtful Accounts Receivable 20 IX - Short-term Borrowings 21 X - Supplementary Income Statement Information 22 All other schedules are not required under the related instructions or are inapplicable and, therefore, have been omitted. 12 3. Exhibits See Index of Exhibits (page 23) for a listing of all exhibits filed with 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, 1993. 13 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 30, 1994. 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 30, 1994: /s/ Carl H. Lindner Chairman of the Board and Carl H. Lindner Chief Executive Officer /s/ Keith E. Lindner Director; President and Keith E. Lindner Chief Operating Officer /s/ S. Craig Lindner Director S. Craig Lindner Hugh F. Culverhouse* Director Hugh F. Culverhouse /s/ Fred J. Runk Director and Vice President Fred J. Runk Jean H. Sisco* Director Jean H. Sisco /s/ Ronald F. Walker Director Ronald F. Walker 14 /s/ Steven G. Warshaw Executive Vice President, Chief Administrative Steven G. Warshaw Officer and 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. 15 (This page left blank intentionally.) 16
CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES, AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES Balance at Balance at Deductions December 31, 1993 January 1, Amounts Amounts Not Name of Debtor 1993 Additions Collected Written off Current Current Robert F. Kistinger, Senior Executive Vice President, Chiquita Banana Group(1) $ --$200,000 $ -- $ --$200,000$ - -- (1) Collateralized by a second mortgage on Mr. Kistinger's principal residence originally due on March 1, 1995 with interest at 7% compounded semi-annually. Repaid in full on January 25, 1994.
17
CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT (In thousands) Sales Other Balance Balance at Additions and Changes at Beginning at Retire- Add End of of Period Cost ments (Deduct) Period Year Ended December 31, 1993 Land $ 101,131 $ 1,969 $ (241) $ 1,128 $ 103,987 Buildings and Improvements 186,038 11,998 (2,358) 2,756 198,434 Machinery and Equipment 403,480 29,193 (23,298) 2,318 411,693 Ships and Containers 692,375 125,171 (27,931) 1,202 790,817 Cultivations 292,843 18,752 (15,068) 9,019 305,546 Other 85,106 9,471 (1,056) (14,188) 79,333 Total $ 1,760,973 $ 196,554 $ (69,952) $ 2,235 $ 1,889,810 Year Ended December 31, 1992 Land $ 90,407 $ 9,360 $ (300) $ 1,664 $ 101,131 Buildings and Improvements 137,054 42,697 (2,076) 8,363 186,038 Machinery and Equipment 333,151 56,398 (11,683) 25,614 403,480 Ships and Containers 412,243 281,919 (226) (1,561) 692,375 Cultivations 224,149 69,108 (397) (17) 292,843 Other 73,514 12,791 (2,134) 935 85,106 Total $ 1,270,518 $ 472,273 $ (16,816) $ 34,998* $ 1,760,973 Year Ended December 31, 1991 Land $ 53,279 $ 37,398 $ (1,348) $ 1,078 $ 90,407 Buildings and Improvements 104,250 37,140 (1,858) (2,478) 137,054 Machinery and Equipment 272,572 61,975 (11,146) 9,750 333,151 Ships and Containers 236,833 184,021 (11,832) 3,221 412,243 Cultivations 162,245 62,703 (863) 64 224,149 Other 58,784 12,404 (479) 2,805 73,514 Total $ 887,963 $ 395,641 $ (27,526) $ 14,440* $ 1,270,518 * Principally relates to acquisitions of businesses.
18
CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES SCHEDULE VI - ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT (In thousands) Sales Other Balance Balance at Additions and Changes at Beginning at Retire- Add End of of Period Cost ments (Deduct) Period Year Ended December 31, 1993 Buildings and Improvements $ 49,253 $ 7,828 $ (1,120) $ (987) $ 54,974 Machinery and Equipment 185,489 35,386 (12,769) 1,946 210,052 Ships and Containers 52,469 43,492 (5,661) (3) 90,297 Cultivations 70,087 10,166 (5,716) 1,265 75,802 Other 28,762 5,719 (486) (2,501) 31,494 Total $ 386,060 $ 102,591 $ (25,752) $ (280) $ 462,619 Year Ended December 31, 1992 Buildings and Improvements $ 37,103 $ 8,277 $ (1,168) $ 5,041 $ 49,253 Machinery and Equipment 146,710 30,208 (8,202) 16,773 185,489 Ships and Containers 20,346 32,147 (26) 2 52,469 Cultivations 61,937 8,147 (17) 20 70,087 Other 27,112 1,659 (123) 114 28,762 Total $ 293,208 $ 80,438 $ (9,536) $ 21,950* $ 386,060 Year Ended December 31, 1991 Buildings and Improvements $ 33,681 $ 5,711 $ (1,278) $ (1,011) $ 37,103 Machinery and Equipment 126,569 23,714 (2,766) (807) 146,710 Ships and Containers 15,825 16,457 (11,935) (1) 20,346 Cultivations 55,995 5,578 (425) 789 61,937 Other 22,074 2,941 (369) 2,466 27,112 Total $ 254,144 $ 54,401 $ (16,773) $ 1,436* $ 293,208 * Principally relates to acquisitions of businesses.
19
CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES SCHEDULE VIII - ALLOWANCE FOR DOUBTFUL ACCOUNTS RECEIVABLE (In thousands) Year Ended December 31, 1993 1992 1991 Balance at beginning of period $ 9,698 $ 7,196 $ 6,826 Additions: Charged to costs and expenses 4,797 6,300 2,261 Deductions: Write-offs 3,220 4,182 1,751 Other, net 224 (384) 140 3,444 3,798 1,891 Balance at end of period $ 11,051 $ 9,698 $ 7,196
20 CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES SCHEDULE IX - SHORT-TERM BORROWINGS (In thousands)
Maximum Weighted Aggregate Average Weighted Average Borrowings Out- Average Category Interest Out- standing Interest of Balance Rate at standing Borrowing Rate Year Borrow- at End End of at any During During Ended ing of Year Year Month End the Year the Year 12/31/93 Banks $112,796 10.9% $149,328 $125,090 12.4% 12/31/92 Banks $136,765 12.7% $167,365 $142,448 15.6% 12/31/91 Banks $146,756 18.1% $146,756 $75,460 17.2%
Short-term borrowings include borrowings in currencies other than the U.S. dollar carrying interest rates which generally are higher than interest rates on U.S. dollar debt. Average outstanding borrowings during each year were determined based on the amounts outstanding at the end of each month during the year. The weighted average interest rate during each year was computed by dividing actual interest expense on short-term borrowings in each year by average short-term borrowings in such year. 21 CHIQUITA BRANDS INTERNATIONAL, INC. AND SUBSIDIARY COMPANIES SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION (In thousands)
Charged to Costs and Expenses Year Ended December 31, 1993 1992 1991 Maintenance and repairs $64,340 $66,429 $54,961 Taxes, other than payroll and income taxes: Import 51,446 40,945 36,795 Export 25,765 25,602 33,020 Other 11,059 10,038 6,129 Advertising 44,302 71,699 60,095
22 CHIQUITA BRANDS INTERNATIONAL, INC. Index of Exhibits Exhibit Number Description 3-a The Company's Certificate of Incorporation *3-b The Company's By-Laws, filed as Exhibit 3-b to Annual Report on Form 10-K for the year ended December 31, 1992 4 Registrant has no outstanding debt issues exceeding 10% of the assets of Registrant and its consolidated subsidiaries. The Registrant 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 the assets of Registrant and its consolidated subsidiaries. 10-a Lease of Lands and Operating Contract between United Brands Company, Chiriqui Land Company, Compania Procesadora de Frutas and the Republic of Panama, dated January 8, 1976, effective January 1, 1976 10-b Agreement dated April 22, 1976 effective January 1, 1976 between Tela Railroad Company and the Government of Honduras Executive Compensation Plans *10-c 1986 Stock Option and Incentive Plan, filed as Exhibit A to the definitive Proxy Statement in connection with the Company's 1992 Annual Meeting of Shareholders *10-d Individual Stock Option Plan and Agreement, filed as Exhibit 4 to Registration Statement on Form S-8 No. 33- 25950 dated December 7, 1988 *10-e Deferred Compensation Plan, filed as Exhibit 10-e to Annual Report on Form 10-K for the year ended December 31, 1992 11 Computation of Earnings Per Common Share 12 Computation of Ratios of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Stock Dividends 13 Chiquita Brands International, Inc. 1993 Annual Report to Shareholders (pages 6 through 23 and inside back cover) 21 Subsidiaries of Registrant 23 Consent of Independent Auditors 24 Powers of Attorney 99 Annual Reports on Form 11-K for the Chiquita Savings and Investment Plan and the John Morrell & Co. Salaried Employees Incentive Savings Plan for 1993 will be filed by amendment on or before June 29, 1994. * Incorporated by reference. 23 EX-3.A 2 Exhibit 3-a CERTIFICATE OF INCORPORATION (Restated) OF UNITED BRANDS COMPANY UNITED BRANDS COMPANY, a corporation organized and existing under the laws of the State of New Jersey, restates and integrates its Certificate of Incorporation to read in full as herein set forth. SECTION I The name of the Corporation is UNITED BRANDS COMPANY. SECTION II The location of its registered office in the State of New Jersey is 15 Exchange Place, Jersey City, county of Hudson (07302), and the name of the registered agent therein and in charge thereof upon whom process against the Corporation may be served is The Corporation Trust Company. SECTION III The purposes for which the Corporation is organized are to engage in any activity within the purposes for which corporations now or at any time hereafter may be organized under the New Jersey Business Corporation Act and under all amendments and supplements thereto, or any act enacted to take the place thereof, including without limiting the generality of the foregoing: To engage in such activities directly or through a subsidiary or subsidiaries, and to take all acts deemed appropriate to promote the interest of such subsidiary or subsidiaries, including without limiting the generality of the foregoing, to make contracts and incur liabilities for the benefit of such subsidiary or subsidiaries; to transfer or cause to be transferred to any such subsidiary or subsidiaries assets of the Corporation; and to guarantee the bonds, debentures, notes or other evidences of indebtedness issued by or obligations incurred by such subsidiary or subsidiaries and secure the same by mortgage or security interest in the property of the Corporation; and to contract that said bonds, debentures, notes or other evidences of indebtedness issued by such subsidiary or subsidiaries may be convertible into stock of the Corporation upon such terms and conditions as may be approved by the Board of Directors; and to exercise as a purpose or purposes each power granted to corporations by the New Jersey Business Corporation Act and any amendment or supplement thereto or any corporation act enacted to take the place thereof, insofar as such powers authorize or may hereafter authorize corporations to engage in activities; and to guarantee the obligations of any corporation, partnership, limited partnership, joint venture, or other association in which the Corporation, pursuant to powers granted by any such act, has or hereafter may acquire a substantial interest. SECTION IV The aggregate number of shares which the Corporation is authorized to issue is 49,046,028 shares divided into (i) 45,000,000 shares of Capital Stock, par value $1 per share ("Capital Stock"), (ii) 46,028 shares of $3.00 Cumulative Preferred Stock (Convertible Prior to July 1, 1987), without nominal or par value ("$3.00 Convertible Preferred Stock"), having the designations, preferences, rights and restrictions set forth in Subsection A and (iii) 4,000,000 shares of Cumulative Preference Stock issuable in series, without nominal or par value ("Series Preference Stock"). The designations, preferences, rights and restrictions, to the extent that the same have been determined, and the manner of determining other designations, preferences, rights and restrictions of each series of Series Preference Stock are set forth in this Section IV. SUBSECTION A. PROVISIONS APPLICABLE TO $3.00 CONVERTIBLE PREFERRED STOCK (a) Dividends. The holders of $3.00 Convertible Preferred Stock, in preference to the holders of Series Preference Stock and of Capital Stock of the Corporation, shall be entitled to receive, as and when declared by the Board of Directors, dividends at the rate of $3.00 per share per annum and no more, payable quarterly on the last days of March, June, September and December in each year, commencing on the last day of the quarterly dividend period in which dividends on such shares commence to accrue. Such preferential dividends shall accrue, with respect to shares of $3.00 Convertible Preferred Stock issued in exchange for shares of $3.00 Convertible Preferred Stock of AMK Corporation ("AMK") pursuant to the Plan and Agreement of Merger between AMK and United Fruit Company ("United"), dated as of May 15, 1970 (the "Agreement of Merger") from the beginning of the quarterly dividend period which immediately precedes the day on which the merger provided for in the Agreement of Merger becomes effective (the "Effective Date"), and shall be cumulative so that if dividends in respect of any quarterly dividend period at the rate of $3.00 per share per annum shall not have been paid upon or declared and set apart for the $3.00 Convertible Preferred Stock, the deficiency shall be fully paid or declared and set apart before any dividend shall be paid upon or declared and set apart for the Series Preference Stock or for the Capital Stock. Preferential dividends on the $3.00 Convertible Preferred Stock shall be deemed to accrue from day to day. A quarterly dividend period shall begin on the day following each dividend payment date set forth above and end on the next succeeding dividend payment date. (b) Liquidation. The $3.00 Convertible Preferred Stock shall be preferred as to assets over the Series Preference Stock and over the Capital Stock, so that in the event of the liquidation, dissolution or winding up of the Corporation, the holders of $3.00 Convertible Preferred Stock shall be entitled to have set apart for them, or to be paid, out of the assets of the Corporation before any distribution is made to or set apart for the holders of Series Preference Stock or of Capital Stock, an amount in cash equal to and in no event more than (i) $65.00 per share plus a sum equal to accrued and unpaid dividends thereon, whether or not earned or declared, in the event of an involuntary liquidation, dissolution or winding up, or (ii) $68.00 per share plus a sum equal to accrued and unpaid dividends thereon, whether or not earned or declared, in the event of a voluntary liquidation, dissolution or winding up on or prior to June 30, 1972, or (iii) the then applicable redemption price per share, in the event of a voluntary liquidation, dissolution or winding up on or subsequent to July 1, 1972. (c) Redemption. At the option of the Corporation, by vote of the Board of Directors, the $3.00 Convertible Preferred Stock may be redeemed on or after, but not prior to, July 1, 1972, as a whole, or in part, at any time or from time to time, at a redemption price hereinafter specified. The redemption price of shares of $3.00 Convertible Preferred Stock redeemed during the twelve month period commencing July 1, 1972 shall be $68.00 per share plus an amount equal to accrued and unpaid dividends thereon to the date fixed for redemption, whether or not earned or declared, and for shares of such Stock redeemed thereafter shall be (i) the greater of (x) $68.00 per share minus the sum of forty three cents for each July 1 during the period after July 1, 1972 and up to and including the date fixed for redemption or (y) $65.00 per share, plus (ii) an amount equal to accrued and unpaid dividends thereon to the date fixed for redemption, whether or not earned or declared. If less than all of the outstanding shares of $3.00 Convertible Preferred Stock are to be redeemed, the shares to be redeemed shall be determined by lot in such usual manner and subject to such regulations as the Board of Directors in its sole discretion shall prescribe. At least 30 days prior to the date fixed for the redemption of shares of the $3.00 Convertible Preferred Stock a written notice shall be mailed to each holder of record of shares of $3.00 Convertible Preferred Stock to be redeemed in a postage prepaid envelope addressed to such holder at his post office address as shown on the records of the Corporation, notifying such holder of the election of the Corporation to redeem such shares, stating the date fixed for redemption thereof (hereinafter referred to as the redemption date), and calling upon such holder to surrender to the Corporation on the redemption date at the place designated in such notice his certificate or certificates representing the number of shares specified in such notice of redemption. On or after the redemption date each holder of shares of $3.00 Convertible Preferred Stock to be redeemed shall present and surrender his certificate or certificates for such shares to the Corporation at the place designated in such notice and thereupon the redemption price of such shares shall be paid to or on the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In case less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. From and after the redemption date (unless default shall be made by the Corporation in payment of the redemption price) all dividends on the shares of $3.00 Convertible Preferred Stock designated for redemption in such notice shall cease to accrue, and all rights of the holders thereof as stockholders of the Corporation, except the right to receive the redemption price thereof upon the surrender of certificates representing the same, shall cease and determine and such shares shall not thereafter be transferred (except with the consent of the Corporation) on the books of the Corporation, and such shares shall not be deemed to be outstanding for any purpose whatsoever. At its election the Corporation prior to the redemption date may deposit the redemption price of the shares of $3.00 Convertible Preferred Stock so called for redemption in trust for the holders thereof with a bank or trust company (having a capital and surplus of not less than $5,000,000) in the Borough of Manhattan, City and State of New York, or in any other city in which the Corporation at the time shall maintain a transfer agency with respect to such stock, in which case such redemption notice shall state the date of such deposit, shall specify the office of such bank or trust company as the place of payment of the redemption price, and shall call upon such holders to surrender the certificates representing such shares at such price on or after the date fixed in such redemption notice (which shall not be later than the redemption date) against payment of the redemption price. From and after the making of such deposit, the shares of $3.00 Convertible Preferred Stock so designated for redemption shall not be deemed to be outstanding for any purpose whatsoever, and the rights of the holders of such shares shall be limited to the right to receive the redemption price of such shares, without interest, upon surrender of the certificates representing the same to the Corporation at said office of such bank or trust company, and the right of conversion (on or before the tenth day prior to the date fixed for redemption) herein provided. Any funds so deposited which shall not be required for such redemption because of the exercise of such right of conversion after the date of such deposit shall be returned to the Corporation forthwith. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any moneys so deposited which shall remain unclaimed by the holders of such $3.00 Convertible Preferred Stock at the end of six years after the redemption date, shall be returned by such bank or trust company to the Corporation after which the holders of the $3.00 Convertible Preferred Stock shall have no further interest in such moneys. (d) Vote. Each holder of $3.00 Convertible Preferred Stock shall be entitled to one vote for each share held on each matter submitted to a vote of stockholders of the Corporation and, except as otherwise herein or by law provided, the $3.00 Convertible Preferred Stock, the Capital Stock of the Corporation, and any other capital stock of the Corporation at the time entitled thereto, shall vote together as one class, except that while the holders of $3.00 Convertible Preferred Stock, voting as a class, are entitled to elect two directors as hereinafter provided, they shall not be entitled to participate with the Capital Stock (or any other capital stock as aforesaid) in the election of any other directors. (e) Class Voting. In case at any time the equivalent of six or more full quarterly dividends (whether consecutive or not) on the $3.00 Convertible Preferred Stock shall be in arrears, then during the period (hereinafter in this subparagraph (e) called the Class Voting Period) commencing with such time and ending with the time when all arrears in dividends on the $3.00 Convertible Preferred Stock shall have been paid and the full dividend on the $3.00 Convertible Preferred Stock for the then current quarterly dividend period shall have been paid or declared and set apart for payment, at any meeting of the stockholders of the Corporation held for the election of directors during the Class Voting Period, the holders of $3.00 Convertible Preferred Stock represented in person or by proxy at said meeting shall be entitled, as a class, to the exclusion of the holders of all other classes of stock of the Corporation, to elect two directors of the Corporation, each share of $3.00 Convertible Preferred Stock entitling the holder thereof to one vote. Any director who shall have been elected by holders of $3.00 Convertible Preferred Stock or any director elected by the remaining director as provided in the next sentence, may be removed at any time during a Class Voting Period, either for or without cause, by, and only by, the affirmative votes of the holders of record of a majority of the outstanding shares of $3.00 Convertible Preferred Stock given at a special meeting of such stockholders called for the purpose and any vacancy thereby created may be filled during such Class Voting Period by the holders of $3.00 Convertible Preferred Stock, present in person or represented by proxy at such meeting. In the event that any director elected by the holders of the $3.00 Convertible Preferred Stock (or any director elected pursuant to the provisions of this sentence) dies, resigns or otherwise ceases to be a director, the remaining director may elect a successor; provided, however, that the foregoing shall not apply to a vacancy created by the removal of a director by the holders of $3.00 Convertible Preferred Stock as provided in the preceding sentence. At the end of the Class Voting Period the holders of $3.00 Convertible Preferred Stock shall be automatically divested of all voting power vested in them under this subparagraph (e) but subject always to the subsequent vesting hereunder of voting power in the holders of $3.00 Convertible Preferred Stock in the event of any similar default or defaults thereafter. The term of all directors elected pursuant to the provisions of this subparagraph (e) shall in all events expire at the end of the Class Voting Period. (f) Conversion. Each share of the $3.00 Convertible Preferred Stock may be converted, at the option of the holder thereof, at any time prior to July 1, 1987 (but in case the same shall be called for redemption, only until the close of business on the tenth day prior to the date fixed for the redemption thereof) into three and six-tenths (3.6) fully paid and non-assessable shares of Capital Stock of the Corporation, the respective number of shares of Capital Stock in any case being subject to adjustment, however, as hereinafter in subparagraph (g) provided. Upon any such conversion of shares of $3.00 Convertible Preferred Stock no allowance or adjustment shall be made with respect to dividends upon either class of stock. Such option to convert shares of $3.00 Convertible Preferred Stock into shares of Capital Stock may be exercised by, and only by, surrendering for such purpose to the Corporation at the office of any of its Transfer Agents for its Capital Stock for the time being, located in the City of New York or in any other city in which the Corporation at the time shall maintain a transfer agency with respect to such stock, certificates representing the shares to be converted, duly endorsed or accompanied by proper instruments of transfer, together with a written request for conversion. At the time of such surrender, the person exercising such option to convert shall be deemed to be the holder of the shares of Capital Stock issuable upon such conversion, notwithstanding that the stock transfer books of the Corporation may then be closed or that certificates representing such shares of Capital Stock shall not then be actually delivered to such person. The term "Capital Stock" as used in this Subdivision A shall be deemed to include stock of the Corporation of every class, except stock which shall be preferred as to dividends or assets over the Capital Stock of the Corporation or which shall not participate equally, share for share, with such Capital Stock in earnings or assets remaining after payment in full of the preferential amounts of dividends or assets to which such stock shall be entitled; provided, however, that the shares of Capital Stock into which shares of the $3.00 Convertible Preferred Stock shall be convertible, shall be shares of Capital Stock of the character authorized at the date of the initial issuance of the $3.00 Convertible Preferred Stock or, in case of a reclassification or exchange of such Capital Stock, shares of the stock into or for which such Capital Stock shall be reclassified or exchanged and all provisions of this Subdivision A shall be applied appropriately thereto and to any stock resulting from any subsequent reclassification or exchange thereof. (g) Anti-Dilution. The number of shares of Capital Stock into which each share of $3.00 Convertible Preferred Stock may be converted shall be subject to adjustment from time to time in certain instances as follows: (1) If at any time or from time to time the outstanding shares of Capital Stock of the Corporation shall be subdivided or combined into a greater or smaller number of shares (by way of reclassification or splitup of shares or in any other manner), then the number of shares of Capital Stock into which each share of $3.00 Convertible Preferred Stock may, after any such subdivision or combination becomes effective, be converted shall be increased or reduced in the same proportion. (2) If at any time or from time to time there is declared on the Capital Stock of the Corporation any dividend payable in Capital Stock of the Corporation, then the number of shares of Capital Stock into which each share of $3.00 Convertible Preferred Stock may be converted on or after the record date fixed for such dividend shall be increased in the same proportion as the aggregate number of shares of Capital Stock issued or to be issued on account of such dividend bears to the aggregate number of shares of Capital Stock on which such dividend is or is to be paid. (3) If the Corporation shall grant the holders of its Capital Stock, as such, rights to subscribe for shares of Capital Stock and/or securities convertible into, exchangeable for, or carrying rights of purchase of shares of Capital Stock and if (i) the conversion price (determined by dividing Sixty-Five Dollars ($65.00) by the number of shares of Capital Stock deliverable upon conversion of each share of $3.00 Convertible Preferred Stock, immediately before the time herein provided for such adjustment) and (ii) the "market value per share" of Capital Stock on the first full business day (excluding any Saturday) after the last date on which any of such rights to subscribe may be exercised, shall each exceed the amount payable for one share of Capital Stock on exercise of such rights to subscribe, then in each case said conversion price shall be reduced by "the value of the right to subscribe", as limited and defined herein, so granted to the holder of one share of Capital Stock, and the number of shares of Capital Stock deliverable thereafter upon conversion of each share of $3.00 Convertible Preferred Stock, shall be the quotient obtained by dividing Sixty-Five Dollars ($65.00) by the conversion price so reduced. The adjustment provided for herein shall be effective immediately after the close of business on the day as of which said market value per share of Capital Stock is taken. For the purpose of such adjustment, the "value of the right to subscribe" so granted to the holder of one share of Capital Stock shall be deemed to be an amount equal to the quotient obtained by dividing (x) the excess of said "market value per share" of Capital Stock or said conversion price immediately before such reduction, whichever is lower, over the amount payable for one share of Capital Stock on exercise of such rights to subscribe by (y) the number of shares of Capital Stock with respect to which is granted the right to subscribe for one full share of Capital Stock. For the purpose of such adjustment, the "market value per share" of Capital Stock shall be deemed to be the mean between the high and low sales prices per share of Capital Stock on the day as of which such market value is taken (or lacking any sales, the mean between the closing bid and asked prices on that day) or, if the New York Stock Exchange is not open on that day, then on the first full business day (excluding any Saturday) upon which the New York Stock Exchange is open immediately following such day. Such sales prices or such bid and asked prices, as the case may be, shall be those on the New York Stock Exchange if the Capital Stock be listed or dealt in thereon at the time, or, if not listed or dealt in thereon, then those on such exchange as shall have been selected from time to time by the Corporation for the purpose or, if not listed or dealt in on any exchange, then those furnished by the trading department of any New York Stock Exchange firm selected from time to time by the Corporation for the purpose and deemed by it to be reliable. For the purpose of such adjustment in case of such granting of rights to subscribe for securities convertible into, exchangeable for, or carrying rights of purchase of, shares of Capital Stock, (i) the holder of one share of Capital Stock shall be deemed to have been granted a right to subscribe for such number of shares of Capital Stock as shall be deliverable upon exercise of the rights of conversion, exchange or purchase of all of the securities for which such holder is granted rights to subscribe, (ii) the last date on which any rights to subscribe for shares of Capital Stock (so deemed to have been granted) may be exercised shall be deemed to be the last date on which any of the aforesaid rights may be exercised to subscribe for such securities convertible into, exchangeable for, or carrying rights of purchase of, shares of Capital Stock, and (iii) the amount payable for one share of Capital Stock on exercise of a right to subscribe for shares of Capital Stock (so deemed to have been granted) shall be deemed to be the sum of (x) the consideration payable to the Corporation for such number of such securities as are convertible into or exchangeable for one full share of Capital Stock, (y) in the case of securities carrying such rights, the amount (if any) by which the consideration payable to the Corporation for such number of such securities as carry rights to purchase one full share of Capital Stock shall exceed the distributive amount, if any (excluding any sums with respect to accrued dividends) payable on voluntary liquidation of the Corporation with respect to such securities, if stock, or, if not stock, the principal amount of such securities, and (z) any additional amount thereafter payable to the Corporation for one full share of Capital Stock upon the exercise of such rights of conversion, exchange or purchase. (4) No adjustment in the conversion prices resulting from the application of the foregoing provisions of clause (3) of subparagraph (g) is to be given effect unless, by making such adjustments, the conversion price in effect immediately prior to such adjustment would be changed by thirty cents or more, and such adjustments shall be made only in amounts of thirty cents or a multiple thereof, but any adjustment which would change the conversion price by less than thirty cents or a multiple thereof is to the extent of the difference between the next multiple thereof and such lesser multiple to be carried forward and given effect in making future adjustments. (h) Certificate as to Adjustment of the Conversion Price; Reservation of Shares. Whenever the amount of Capital Stock and/or other securities deliverable upon the conversion of the shares of $3.00 Convertible Preferred Stock shall be adjusted pursuant to the provisions hereof, the Corporation shall forthwith file at its principal office and with the transfer agent or agents for the $3.00 Convertible Preferred Stock and for such Capital Stock a statement, signed by the President or one of the Vice Presidents of the Corporation and by its Treasurer or one of its Assistant Treasurers, stating the adjusted amount of its Capital Stock and/or other securities deliverable per share of $3.00 Convertible Preferred Stock calculated to the nearest one hundredth (1/100th) and setting forth in reasonable detail the method of calculation and the facts requiring such adjustment and upon which such calculation is based. Each adjustment shall remain in effect until a subsequent adjustment hereunder is required. The Corporation shall at all times reserve and keep available out of its authorized but unissued Capital Stock, the full number of shares of Capital Stock deliverable upon the conversion of all outstanding shares of $3.00 Convertible Preferred Stock which are convertible into Capital Stock and upon exercise of any outstanding rights or options to purchase Capital Stock. (i) Fractional Shares. In connection with the conversion of shares of $3.00 Convertible Preferred Stock into Capital Stock, no fractions of shares of $3.00 Convertible Preferred Stock nor of Capital Stock shall be issued; and, in lieu thereof, non-dividend bearing non-voting scrip (exchangeable when combined for full shares) may be issued, or the Board of Directors may make such provisions for the stockholders in lieu of the issue of scrip as it may determine, including payment in cash or sale of stock to the extent of any fractions of shares and distribution of the net proceeds or otherwise. The Board of Directors may determine and fix the form of such scrip, whether bearer or otherwise, the denomination thereof, the expiration dates thereof, any provisions permitting sale of the full shares for which such scrip is exchangeable for the account of the holder of such scrip (or in lieu of sale of such full shares, provisions for the determination of the value thereof, based upon quotations therefor on the New York Stock Exchange on any specified date or dates or based upon any other method or methods of determination of value, and for payment of the value so determined to the holders of such scrip), and any other terms or provisions of such scrip as it may deem advisable. (j) No Reissuance. Converted or redeemed shares of $3.00 Convertible Preferred Stock shall become authorized and unissued shares and subject to the provisions of subsection (k) may be reissued by the Corporation. (k) Priority. All shares of $3.00 Convertible Preferred Stock shall be of senior rank in respect of the preference as to dividends and to payments upon the liquidation, distribution or sale of assets, dissolution or winding up of the Corporation to all shares of Series Preference Stock. (l) Issuance of Senior Stock. While any of the $3.00 Convertible Preferred Stock is outstanding, the Corporation shall not, without the affirmative consent (given in writing or at a meeting duly called for that purpose) of the holders of at least two-thirds (2/3rds) of the aggregate number of shares of $3.00 Convertible Preferred Stock then outstanding, (1) issue shares of any class or series of stock (hereinafter in this subparagraph (1) referred to as "Senior Stock") having any preference or priority over, or being of equal rank with, the $3.00 Convertible Preferred Stock as to dividends or upon liquidation; (2) reclassify any shares of stock of the Corporation into shares of Senior Stock; (3) issue any security exchangeable for, convertible into, or evidencing the right to purchase any shares of Senior Stock; (4) be a party to any merger or consolidation unless the surviving or resulting corporation will have after such merger or consolidation no stock either authorized or outstanding ranking prior or equal, as to dividends or upon liquidation, to the $3.00 Convertible Preferred Stock or to the stock of the surviving or resulting corporation issued in exchange therefor (except such prior or equal ranking stock of the Corporation as may have been authorized or outstanding immediately preceding such merger or consolidation or such stock of the surviving or resulting corporation as may be issued in exchange therefor); or (5) amend, alter or repeal the Certificate of Incorporation of the Corporation to alter or change the preferences, rights or powers of the $3.00 Convertible Preferred Stock so as to affect such stock adversely. (m) Merger. At the time any of the $3.00 Convertible Preferred Stock is outstanding, the Corporation will not, without the affirmative consent (given in writing or at a meeting duly called for that purpose) of the holders of at least two-thirds (2/3rds) of the aggregate number of shares of $3.00 Convertible Preferred Stock then outstanding, at any time during the conversion period, consolidate or merge with or into another corporation (whether or not the Corporation is the surviving corporation), or at any time when the $3.00 Convertible Preferred Stock is not redeemable at the option of the Corporation, sell all or substantially all of its assets to another corporation, unless in connection therewith lawful and adequate provision is made whereby the holders of $3.00 Convertible Preferred Stock shall receive the right to convert during the conversion period into the kind and amount of shares of stock and other securities to be received by holders of the number of shares of Capital Stock of the Corporation into which the $3.00 Convertible Preferred Stock might have been converted immediately prior to such consolidation, merger or sale, which right shall be subject to adjustment, as nearly equivalent as may be practicable to the adjustments provided for in this Subsection A. SUBSECTION B. PROVISIONS APPLICABLE TO ALL SERIES OF SERIES PREFERENCE STOCK (a) Issuance in Series. Shares of Series Preference Stock may be issued from time to time in one or more series. The shares of all series shall be without par value. The terms of Series A Preference Stock and Series B Preference Stock shall be as specified herein and in Subsections C and D of this Section. The preferences and relative, participating, optional and other special rights of each subsequent series and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series already outstanding; the terms of each subsequent series shall be as specified in this Subsection B and in an amendment or amendments hereof (including any amendment made by action of the Board of Directors without shareholder approval) and the Board of Directors of the Corporation is hereby expressly granted authority to fix, by resolution or resolutions adopted prior to the issuance of any shares of a particular subsequent series of Series Preference Stock, the number of authorized shares of any such series and the designations, preferences and relative, participating, optional and other special rights, or the qualifications, limitations or restrictions thereof, of such series, including but without limiting the generality of the foregoing, the following: (i) The rate and times at which, and the terms and conditions on which, dividends on the Series Preference Stock of such series shall be paid; (ii) The rights, if any, of holders of Series Preference Stock of such series to convert the same into, or exchange the same for, other classes of stock of the Corporation and the terms and conditions of such conversion or exchange; (iii) The redemption price or prices and the time at which, and the terms and conditions on which, Series Preference Stock of such series may be redeemed; (iv) The rights of the holders of Series Preference Stock of such series upon the voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding up of the Corporation; (v) The voting power, if any, of the Series Preference Stock of such series; and (vi) The terms of the sinking fund or redemption or purchase account, if any, to be provided for the Series Preference Stock of such series. (b) Equal Rank. All shares of each series shall be identical in all respects, and all shares of Series Preference Stock of all series shall be of equal rank in respect of the preference as to dividends and to payments upon the liquidation, distribution or sale of assets, dissolution and winding up of the Corporation. All shares of Series Preference Stock of all series shall be of junior rank in respect of the preference as to dividends and to payments upon the liquidation, distribution or sale of assets, dissolution or winding up of the Corporation to all shares of the $3.00 Convertible Preferred Stock. The rights of the Capital Stock of the Corporation shall be subject to the preferences and relative, participating, optional and other special rights of the Series Preference Stock of each series as fixed herein and from time to time by the Board of Directors as aforesaid. (c) Dividends On All Series. If dividends on the Series Preference Stock of any series are not paid in full or declared in full and sums set apart for the payment thereof, then no dividends shall be declared and paid on any such stock unless declared and paid ratably on all shares of each series of the Series Preference Stock then outstanding, including dividends accrued or in arrears, if any, in proportion to the respective amounts that would be payable per share if all such dividends were declared and paid in full. The term "dividends accrued or in arrears" whenever used herein with reference to the Series Preference Stock shall be deemed to mean an amount which shall be equal to dividends thereon at the annual dividend rates per share for the respective series from the date or dates on which such dividends commence to accrue to the end of the then current quarterly dividend period for such stock (or, in the case of redemption, to the date of redemption), less the amount of all dividends paid upon such stock. If upon any liquidation, dissolution or winding up of the Corporation the assets distributable among the holders of any series of Series Preference Stock shall be insufficient to permit the payment in full to the holders of all series of the Series Preference Stock, of all preferential amounts payable to all such holders, then the entire assets of the Corporation thus distributable shall be distributed ratably among the holders of all series of the Series Preference Stock in proportion to the respective amounts that would be payable per share if such assets were sufficient to permit payment in full. (d) Special Vote. While any Series Preference Stock is outstanding the Corporation shall not, without the affirmative consent (given in writing or at a meeting duly called for that purpose) of the holders of at least two-thirds (2/3rds) of the aggregate number of shares of Series Preference Stock then outstanding, (1) authorize or issue shares of any class or series of stock leaving any preference or priority as to dividends or upon liquidation (hereinafter in this subparagraph (d) referred to as "Senior Stock") over the Series Preference Stock; (2) reclassify any shares of stock of the Corporation into shares of Senior Stock; (3) issue any security exchangeable for, convertible into, or evidencing the right to purchase any shares of Senior Stock; (4) be a party to any merger or consolidation unless the surviving or resulting corporation will have after such merger or consolidation no stock either authorized or outstanding ranking prior as to dividends or upon liquidation to the Series Preference Stock or to the stock of the surviving or resulting corporation issued in exchange therefor (except such prior ranking stock of the Corporation as may have been authorized or outstanding immediately preceding such merger or consolidation or such stock of the surviving or resulting corporation as may be issued in exchange therefor); or (5) amend, alter or repeal the Certificate of Incorporation of the Corporation to alter or change the preferences, rights or powers of the Series Preference Stock so as to affect such stock adversely. SUBSECTION C. SPECIAL PROVISIONS APPLICABLE TO SERIES A PREFERENCE STOCK There is hereby established Series A Preference Stock which shall be designated "$1.20 Cumulative Convertible Preference Stock Series A" (herein referred to as "$1.20 Convertible Preference Stock") and shall consist of 2,568,096 shares, and no more. The relative, participating, optional and other special rights and the qualifications, limitations and restrictions, other than those specified for all series of Series Preference Stock in Subsection B of this Section IV, of the $1.20 Convertible Preference Stock, shall be as follows: (a) Dividends. The holders of $1.20 Convertible Preference Stock in preference to the holders of Capital Stock of the Corporation, shall be entitled to receive, as and when declared by the Board of Directors, dividends at the rate of $1.20 per share per annum and no more, payable quarterly on the first days of March, June, September and December in each year. Such preferential dividends shall accrue, (i) with respect to shares of $1.20 Convertible Preference Stock issued in exchange for shares of stock of United pursuant to the Agreement of Merger, from the record date for the payment of the regular quarterly dividend on the United Common Stock which immediately precedes the Effective Date and (ii) with respect to shares of $1.20 Convertible Preference Stock issued at a time when other shares of $1.20 Convertible Preference Stock are outstanding from such date as shall make the dividend rights per share of the shares being issued uniform with the dividend rights per share of the shares then outstanding, excluding rights to dividends declared and directed to be paid to shareholders of record as of a date preceding the date of issuance of the shares being issued, and shall be cumulative so that if dividends in respect of any quarterly dividend period at the rate of $1.20 per share per annum shall not have been paid upon or declared and set apart for the $1.20 Convertible Preference Stock, the deficiency shall be fully paid or declared and set apart before any dividend shall be paid upon or declared or set apart for the Capital Stock. Preferential dividends on the $1.20 Convertible Preference Stock shall be deemed to accrue from day to day. Except as otherwise provided in the preceding sentence, a quarterly dividend period shall begin on the day following each dividend payment date set forth above and end on the next succeeding dividend payment date. (b) Liquidation. The $1.20 Convertible Preference Stock shall be preferred as to assets over the Capital Stock, so that in the event of the liquidation, dissolution or winding up of the Corporation, the holders of $1.20 Convertible Preference Stock shall be entitled to have set apart for them, or to be paid, out of the assets of the Corporation before any distribution is made to or set apart for the holders of Capital Stock, an amount in cash equal to and in no event more than (i) $20.00 per share plus a sum equal to accrued and unpaid dividends thereon, whether or not earned or declared, in the event of an involuntary liquidation, dissolution or winding up, or (ii) $22.00 per share plus a sum equal to accrued and unpaid dividends thereon, whether or not earned or declared, in the event of a voluntary liquidation, dissolution or winding up on or prior to the date (the "Date") which is five years after the Effective Date, or (iii) the then applicable redemption price per share, in the event of a voluntary liquidation, dissolution or winding up on or subsequent to the Date. (c) Redemption. At the option of the Corporation, by vote of the Board of Directors, the $1.20 Convertible Preference Stock may be redeemed on or after, but not prior to, the Date, as a whole, or in part, at any time or from time to time, at a redemption price hereinafter specified. The redemption price of shares of $1.20 Convertible Preference Stock redeemed during the twelve month period commencing on the Date shall be $22.00 per share plus an amount equal to accrued and unpaid dividends thereon to the date fixed for redemption, whether or not earned or declared, and for shares of such stock redeemed thereafter shall be (i) the greater of (x) $22.00 per share minus the sum of twenty cents for each anniversary of the Date during the period after the Date and up to and including the date fixed for redemption or (y) $20.00 per share, plus (ii) an amount equal to accrued and unpaid dividends thereon to the date fixed for redemption, whether or not earned or declared. If less than all of the outstanding shares of $1.20 Convertible Preference Stock are to be redeemed the shares to be redeemed shall be determined by lot in such usual manner and subject to such regulations as the Board of Directors in its sole discretion shall prescribe. Not more than 90 days and not less than 30 days prior to the date fixed for the redemption of shares of the $1.20 Convertible Preference Stock a written notice shall be mailed to each holder of record of shares of $1.20 Convertible Preference Stock to be redeemed in a postage prepaid envelope addressed to such holder at his post office address as shown on the records of the Corporation, notifying such holder of the election of the Corporation to redeem such shares, stating the date fixed for redemption thereof (hereinafter referred to as the redemption date), and calling upon such holder to surrender to the Corporation on the redemption date at the place designated in such notice his certificate or certificates representing the number of shares specified in such notice of redemption. On or after the redemption date each holder of shares of $1.20 Convertible Preference Stock to be redeemed shall present and surrender his certificate or certificates for such shares to the Corporation at the place designated in such notice and thereupon the redemption price of such shares shall be paid to or on the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In case less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. From and after the redemption date (unless default shall be made by the Corporation in payment of the redemption price) all dividends on the shares of $1.20 Convertible Preference Stock designated for redemption in such notice shall cease to accrue, and all rights of the holders thereof as stockholders of the Corporation, except the right to receive the redemption price thereof upon the surrender of certificates representing the same, shall cease and determine and such shares shall not thereafter be transferred (except with the consent of the Corporation) on the books of the Corporation, and such shares shall not be deemed to be outstanding for any purpose whatsoever. At its election the Corporation prior to the redemption date may deposit the redemption price of the shares of $1.20 Convertible Preference Stock so called for redemption in trust for the holders thereof with a bank or trust company (having a capital and surplus of not less than $5,000,000) in the Borough of Manhattan, City and State of New York, or in any other city in which the Corporation at the time shall maintain a transfer agency with respect to such Stock, in which case such redemption notice shall state the date of such deposit, shall specify the office of such bank or trust company as the place of payment of the redemption price, and shall call upon such holders to surrender the certificates representing such shares at such price on or after the date fixed in such redemption notice (which shall not be later than the redemption date) against payment of the redemption price. From and after the making of such deposit, the shares of $1.20 Convertible Preference Stock so designated for redemption shall not be deemed to be outstanding for any purpose whatsoever, and the rights of the holders of such shares shall be limited to the right to receive the redemption price of such shares, without interest, upon surrender of the certificates representing the same to the Corporation at said office of such bank or trust company, and the right of conversion (on or before the fifth day prior to the date fixed for redemption) herein provided. Any funds so deposited which shall not be required for such redemption because of the exercise of such right of conversion after the date of such deposit shall be returned to the Corporation forthwith. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any moneys so deposited which shall remain unclaimed by the holders of such $1.20 Convertible Preference Stock at the end of six years after the redemption date, shall be returned by such bank or trust company to the Corporation after which the holders of the $1.20 Convertible Preference Stock shall have no further interest in such moneys. (d) Vote. Each holder of $1.20 Convertible Preference Stock shall be entitled to seven-tenths (0.7) of a share vote for each share held on each matter submitted to a vote of stockholders of the Corporation and, except as otherwise herein or by law provided, the $1.20 Convertible Preference Stock, the Capital Stock of the Corporation, and any other capital stock of the Corporation at the time entitled thereto, shall vote together as one class, except that while the holders of $1.20 Convertible Preference Stock, voting as a class, are entitled to elect two directors as hereinafter provided, they shall not be entitled to participate with the Capital Stock (or any other capital stock as aforesaid) in the election of any other directors. (e) Class Voting. In case at any time the equivalent of six or more full quarterly dividends (whether consecutive or not) on the $1.20 Convertible Preference Stock shall be in arrears, then during the period (hereinafter in this subparagraph (e) called the Class Voting Period) commencing with such time and ending with the time when all arrears in dividends on the $1.20 Convertible Preference Stock shall have been paid and the full dividend on the $1.20 Convertible Preference Stock for the then current quarterly dividend period shall have been paid or declared and set apart for payment, at any meeting of the stockholders of the Corporation held for the election of directors during the Class Voting Period, the holders of $1.20 Convertible Preference Stock represented in person or by proxy at said meeting shall be entitled, as a class, to the exclusion of the holders of all other classes of stock of the Corporation, to elect two directors of the Corporation, each share of $1.20 Convertible Preference Stock entitling the holder thereof to one vote. Any director who shall have been elected by holders of $1.20 Convertible Preference Stock or any director elected by the remaining director as provided in the next sentence, may be removed at any time during a Class Voting Period, either for or without cause, by, and only by, the affirmative votes of the holders of record of a majority of the outstanding shares of $1.20 Convertible Preference Stock given at a special meeting of such stockholders called for the purpose and any vacancy thereby created may be filled during such Class Voting Period by the holders of $1.20 Convertible Preference Stock, present in person or represented by proxy at such meeting. In the event that any director elected by the holders of the $1.20 Convertible Preference Stock (or any director elected pursuant to the provisions of this sentence) dies, resigns or otherwise ceases to be a director, the remaining director may elect a successor; provided, however, that the foregoing shall not apply to a vacancy created by the removal of a director by the holders of $1.20 Convertible Preference Stock as provided in the preceding sentence. At the end of the Class Voting Period the holders of $1.20 Convertible Preference Stock shall be automatically divested of all voting power vested in them under this subparagraph (e) but subject always to the subsequent vesting hereunder of voting power in the holders of $1.20 Convertible Preference Stock in the event of any similar default or defaults thereafter. The term of all directors elected pursuant to the provisions of this subparagraph (e) shall in all events expire at the end of the Class Voting Period. (f) Conversion. Each share of the $1.20 Convertible Preference Stock may be converted, at the option of the holder thereof, at any time (but in case the same shall be called for redemption, only until the close of business on the fifth business day prior to the date fixed for the redemption thereof) into seven-tenths (0.7) of a fully paid and non-assessable share of Capital Stock of the Corporation, the number of shares of Capital Stock in any case being subject to adjustment, however, as hereinafter in subparagraph (g) provided. Upon any such conversion of shares of $1.20 Convertible Preference Stock no allowance or adjustment shall be made with respect to dividends upon either class of stock. Such option to convert shares of $1.20 Convertible Preference Stock into shares of Capital Stock may be exercised by, and only by, surrendering for such purpose to the Corporation at the office of any of its Transfer Agents for its Capital Stock for the time being, located in the City of New York or in any other city in which the Corporation at the time shall maintain a transfer agency with respect to such Stock, certificates representing the shares to be converted, duly endorsed or accompanied by proper instruments of transfer, together with a written request for conversion. At the time of such surrender, the person exercising such option to convert shall be deemed to be the holder of the shares of Capital Stock issuable upon such conversion, notwithstanding that the stock transfer books of the Corporation may then be closed or that certificates representing such shares of Capital Stock shall not then be actually delivered to such person. The term "Capital Stock" as used in this Subsection C shall be deemed to include stock of the Corporation of every class, except stock which shall be preferred as to dividends or assets over the Capital Stock of the Corporation or which shall not participate equally, share for share, with such Capital Stock in earnings or assets remaining after payment in full of the preferential amounts of dividends or assets to which such stock shall be entitled; provided, however, that the shares of Capital Stock into which shares of the $1.20 Convertible Preference Stock shall be convertible, shall be shares of Capital Stock of the character authorized at the date of the initial issuance of the $1.20 Convertible Preference Stock or, in case of a reclassification or exchange of such Capital Stock, shares of tile stock into or for which such Capital Stock shall be reclassified or exchanged and all provisions of this Subsection C shall be applied appropriately thereto and to any stock resulting from any subsequent reclassification or exchange thereof. (g) Anti-Dilution. The number of shares of Capital Stock into which each share of $1.20 Convertible Preference Stock may be converted shall be subject to adjustment from time to time in certain instances as follows: (1) If at any time or from time to time the outstanding shares of Capital Stock of the Corporation shall be subdivided or combined into a greater or smaller number of shares (by way of reclassification or splitup of shares or in any other manner), then the number of shares of Capital Stock into which each share of $1.20 Convertible Preference Stock may, after any such subdivision or combination becomes effective, be converted shall be increased or reduced in the same proportion. (2) If at any time or from time to time there is declared on the Capital Stock of the Corporation any dividend payable in Capital Stock of the Corporation, then the number of shares of Capital Stock into which each share of $1.20 Convertible Preference Stock may be converted on or after the record date fixed for such dividend shall be increased in the same proportion as the aggregate number of shares of Capital Stock issued or to be issued on account of such dividend bears to the aggregate number of shares of Capital Stock on which such dividend is or is to be paid. (3) If the Corporation shall grant the holders of its Capital Stock, as such, rights to subscribe for shares of Capital Stock and/or securities convertible into, exchangeable for, or carrying rights of purchase of shares of Capital Stock and if the "market value per share" of Capital Stock on the first full business day (excluding any Saturday) after the last date on which any of such rights to subscribe may be exercised, shall exceed the amount payable for one share of Capital Stock on exercise of such rights to subscribe, then in each case the conversion price in effect immediately prior to such issuance shall be reduced by "the value of the right to subscribe", as limited and defined herein, so granted to the holder of one share of Capital Stock, and the number of shares of Capital Stock deliverable thereafter upon conversion of each share of $1.20 Convertible Preference Stock, shall be the quotient obtained by dividing Twenty Dollars ($20.00) by the conversion price so reduced. The adjustment provided for herein shall be effective immediately after the close of business on the day as of which said market value per share of Capital Stock is taken. For the purpose of such adjustment, the "value of the right to subscribe" so granted to the holder of one share of Capital Stock shall be deemed to be an amount equal to the quotient obtained by dividing (x) the excess of said "market value per share" of Capital Stock over the amount payable for one share of Capital Stock on exercise of such rights to subscribe by (y) the number of shares of Capital Stock with respect to which is granted the right to subscribe for one full share of Capital Stock. For the purpose of such adjustment and any adjustment pursuant to clause (4) of this subparagraph (g), the "market value per share" of Capital Stock shall be deemed to be the mean between the high and low sales prices per share of Capital Stock on the day as of which such market value is taken (or lacking any sales, the mean between the closing bid and asked prices on that day) or, if the New York Stock Exchange is not open on that day, then on the first full business day (excluding any Saturday) upon which the New York Stock Exchange is open immediately following such day. Such sales prices or such bid and asked prices, as the case may be, shall be those on the New York Stock Exchange if the Capital Stock be listed or dealt in thereon at the time, or, if not listed or dealt in thereon, then those on such exchange as shall have been selected from time to time by the Corporation for the purpose or, if not listed or dealt in on any exchange, then those furnished by the trading department of any New York Stock Exchange firm selected from time to time by the Corporation for the purpose and deemed by it to be reliable. For the purpose of such adjustment in case of such granting of rights to subscribe for securities convertible into, exchangeable for, or carrying rights of purchase of, shares of Capital Stock, (i) the holder of one share of Capital Stock shall be deemed to have been granted a right to subscribe for such number of shares of Capital Stock as shall be deliverable upon exercise of the rights of conversion, exchange or purchase of all of the securities for which such holder is granted rights to subscribe, (ii) the last date on which any rights to subscribe for shares of Capital Stock (so deemed to have been granted) may be exercised shall be deemed to be the last date on which any of the aforesaid rights may be exercised to subscribe for such securities convertible into, exchangeable for, or carrying rights of purchase of, shares of Capital Stock, and (iii) the amount payable for one share of Capital Stock on exercise of a right to subscribe for shares of Capital Stock (so deemed to have been granted) shall be deemed to be the sum of (x) the consideration payable to the Corporation for such number of such securities as are convertible into or exchangeable for one full share of Capital Stock, and (y) in the case of securities carrying such rights, the amount (if any) by which the consideration payable to the Corporation for such number of such securities as carry rights to purchase one full share of Capital Stock shall exceed the distributive amount, if any (excluding any sums with respect to accrued dividends) payable on voluntary liquidation of the Corporation with respect to such securities, if stock, or, if not stock, the principal amount of such securities, and (z) any additional amount thereafter payable to the Corporation for one full share of Capital Stock upon the exercise of such rights of conversion, exchange or purchase. (4) If the Corporation shall distribute to all holders of its Capital Stock evidences of its indebtedness or assets (excluding dividends or distributions referred to in subparagraph (a) or clause 2 of this subparagraph (g)) or rights to subscribe (other than those referred to in clause (3) of this subparagraph (g)), then in each such case the amount of Capital Stock into which each share of $1.20 Convertible Preference Stock shall thereafter be converted shall be determined by multiplying the amount of Capital Stock into which such $1.20 Convertible Preference Stock was theretofore convertible by a fraction, of which the numerator shall be the "market value per share" of Capital Stock (determined as provided in clause (3) of this subparagraph (g)) on the date of such distribution and of which the denominator shall be such market value per share of Capital Stock, less the then fair market value (as determined by the Board of Directors, whose determination shall be conclusive, and described in a statement filed with the transfer agent or agents for the $1.20 Convertible Preference Stock and the Capital Stock) of the portion of the assets or evidences of indebtedness so distributed and such subscription rights applicable to one share of Capital Stock. Such adjustment shall be made whenever such distribution is made, and shall become effective retroactively immediately after the record date for the determination of shareholders entitled to receive such distribution; provided, however, that if the Corporation shall, before the distribution to shareholders, legally abandon its plan to make such distribution, no adjustment of the amount of Capital Stock issuable upon conversion of the $1.20 Convertible Preference Stock shall be required by reason of the taking of such record. (5) No adjustment in the conversion prices resulting from the application of the foregoing provisions of clauses (3) and (4) of subparagraph (g) is to be given effect unless, by making such adjustments, the conversion price in effect immediately prior to such adjustment would be changed by twelve cents or more, and such adjustments shall be made only in amounts of twelve cents or a multiple thereof, but any adjustment which would change the conversion price by less than twelve cents or a multiple thereof is to the extent of the difference between the next multiple thereof and such lesser multiple to be carried forward and given effect in making future adjustments. (h) Certificate as to Adjustment of the Conversion Price; Reservation of Shares. Whenever the amount of Capital Stock and/or other securities deliverable upon the conversion of the shares of $1.20 Convertible Preference Stock shall be adjusted pursuant to the provisions hereof, the Corporation shall forthwith file at its principal office and with the transfer agent or agents for the $1.20 Convertible Preference Stock and for such Capital Stock a statement, signed by the President or one of the Vice Presidents of the Corporation and by its Treasurer or one of its Assistant Treasurers, stating the adjusted amount of its Capital Stock and/or other securities deliverable per share of $1.20 Convertible Preference Stock calculated to the nearest one hundredth (1/100th) and setting forth in reasonable detail the method of calculation and the facts requiring such adjustment and upon which such calculation is based. Each adjustment shall remain in effect until a subsequent adjustment hereunder is required. The Corporation shall at all times reserve and keep available out of its authorized but unissued Capital Stock, the full number of shares of Capital Stock deliverable upon the conversion of all outstanding shares of $1.20 Convertible Preference Stock which are convertible into Capital Stock and upon exercise of any outstanding rights or options to purchase Capital Stock. (i) Fractional Shares. In connection with the conversion of shares of $1.20 Convertible Preference Stock into Capital Stock, no fractions of shares of $1.20 Convertible Preference Stock nor of Capital Stock shall be issued; and, in lieu thereof, non-dividend bearing non-voting scrip (exchangeable when combined for full shares) may be issued, or the Board of Directors may make such provisions for the stockholders in lieu of the issue of scrip as it may determine, including payment in cash or sale of stock to the extent of any fractions of shares and distribution of the net proceeds or otherwise. The Board of Directors may determine and fix the form of such scrip, whether bearer or otherwise, the denomination thereof, the expiration dates thereof, any provisions permitting sale of the full shares for which such scrip is exchangeable for the account of the holder of such scrip (or in lieu of sale of such full shares, provisions for the determination of the value thereof, based upon quotations therefor on the New York Stock Exchange on any specified date or dates or based upon any other method or methods of determination of value, and for payment of the value so determined to the holders of such scrip), and any other terms or provisions of such scrip as it may deem advisable. (j) No Reissuance. Converted or redeemed shares of $1.20 Convertible Preference Stock shall become authorized and unissued shares and subject to the provisions of subsection (k) may be reissued by the Corporation. (k) Issuance of Additional $1.20 Convertible Stock. The Corporation shall not, without the affirmative consent (given in writing or at a meeting duly called for that purpose) of the holders of at least two-thirds (2/3rds) of the aggregate number of shares of $1.20 Convertible Preference Stock then outstanding, (i) issue additional shares of $1.20 Convertible Preference Stock, or (ii) amend, alter or repeal this subparagraph (k). (l) Merger. At the time any of the $1.20 Convertible Preference Stock is outstanding, the Corporation will not, without the affirmative consent (given in writing or at a meeting duly called for that purpose) of the holders of at least two- thirds (2/3rds) of the aggregate number of shares of $1.20 Convertible Preference Stock then outstanding, at any time during the conversion period, consolidate or merge with or into another corporation (whether or not the Corporation is the surviving corporation), or at any time when the $1.20 Convertible Preference Stock is not redeemable at the option of the Corporation, sell all or substantially all of its assets to another corporation, unless in connection therewith lawful and adequate provision is made whereby the holders of $1.20 Convertible Preference Stock shall receive the right to convert during the conversion period into the kind and amount of shares of stock and other securities to be received by holders of the number of shares of Capital Stock of the Corporation into which the $1.20 Convertible Preference Stock might have been converted immediately prior to such consolidation, merger or sale, which right shall be subject to adjustment, as nearly equivalent as may be practicable to the adjustments provided for in this Subsection C. SUBSECTION D. SPECIAL PROVISIONS APPLICABLE TO SERIES B PREFERENCE STOCK There is hereby established Series B Preference Stock which shall be designated "$3.20 Cumulative Convertible Preference Stock, Series B" ("$3.20 Convertible Preference Stock") and shall consist of 75,813 shares, and no more. The relative, participating, optional and other special rights and the qualifications, limitations and restrictions, other than those specified for all series of Series Preference Stock in Subsection B of this Section IV, of the $3.20 Convertible Preference Stock, shall be as follows: (a) Dividends. The holders of $3.20 Convertible Preference Stock in preference to the holders of Capital Stock of the Corporation, shall be entitled to receive, as and when declared by the Board of Directors, dividends at the rate of $3.20 per share per annum and no more, payable quarterly on the last days of March, June, September and December in each year, commencing on the last day of the quarterly dividend period in which dividends on such shares commence to accrue. Such preferential dividends shall accrue, with respect to shares of $3.20 Convertible Preference Stock issued in exchange for shares of $3.20 Cumulative Convertible Preference Stock of AMK pursuant to the Agreement of Merger, from the beginning of the quarterly dividend period which immediately precedes the Effective Date, and shall be cumulative so that if dividends in respect of any quarterly dividend period at the rate of $3.20 per share per annum shall not have been paid upon or declared and set apart for the $3.20 Convertible Preference Stock, the deficiency shall be fully paid or declared and set apart before any dividend shall be paid upon or declared or set apart for the Capital Stock. Preferential dividends on the $3.20 Convertible Preference Stock shall be deemed to accrue from day to day. A quarterly dividend period shall begin on the day following each dividend payment date set forth above and end on the next succeeding dividend payment date. (b) Liquidation. The $3.20 Convertible Preference Stock shall be preferred as to assets over the Capital Stock, so that in the event of the liquidation, dissolution or winding up of the Corporation, the holders of $3.20 Convertible Preference Stock shall be entitled to have set apart for them, or to be paid, out of the assets of the Corporation before any distribution is made to or set apart for the holders of Capital Stock, an amount in cash equal to and in no event more than (i) $100.00 per share plus a sum equal to accrued and unpaid dividends thereon, whether or not earned or declared, in the event of an involuntary liquidation, dissolution or winding up, or (ii) $103.20 per share plus a sum equal to accrued and unpaid dividends thereon, whether or not earned or declared, in the event of a voluntary liquidation, dissolution or winding up on or prior to December 29, 1972 (the "Date"), or (iii) the then applicable redemption price per share, in the event of a voluntary liquidation, dissolution or winding up on or subsequent to the Date. (c) Redemption. At the option of the Corporation, by vote of the Board of Directors, the $3.20 Convertible Preference Stock may be redeemed on or after, but not prior to, the Date, as a whole, or in part, at any time or from time to time, at a redemption price hereinafter specified. The redemption price of shares of $3.20 Convertible Preference Stock redeemed during the twelve month period commencing on the Date shall be $103.20 per share plus an amount equal to accrued and unpaid dividends thereon to the date fixed for redemption, whether or not earned or declared, and for shares of such Stock redeemed thereafter shall be (i) the greater of (x) $103.20 per share minus the sum of forty cents for each anniversary of the Date during the period after the Date and up to and including the date fixed for redemption or (y) $100.00 per share, plus (ii) an amount equal to accrued and unpaid dividends thereon to the date fixed for redemption, whether or not earned or declared. If less than all of the outstanding shares of $3.20 Convertible Preference Stock are to be redeemed, the shares to be redeemed shall be determined by lot in such usual manner and subject to such regulations as the Board of Directors in its sole discretion shall prescribe. At least 30 days prior to the date fixed for the redemption of shares of the $3.20 Convertible Preference Stock a written notice shall be mailed to each holder of record of shares of $3.20 Convertible Preference Stock to be redeemed in a postage prepaid envelope addressed to such holder at his post office address as shown on the records of the Corporation, notifying such holder of the election of the Corporation to redeem such shares, stating the date fixed for redemption thereof (hereinafter referred to as the redemption date), and calling upon such holder to surrender to the Corporation on the redemption date at the place designated in such notice his certificate or certificates representing the number of shares specified in such notice of redemption. On or after the redemption date each holder of shares of $3.20 Convertible Preference Stock to be redeemed shall present and surrender his certificate or certificates for such shares to the Corporation at the place designated in such notice and thereupon the redemption price of such shares shall be paid to or on the order of the person whose name appears on such certificate or certificates as the owner thereof and each surrendered certificate shall be canceled. In case less than all the shares represented by any such certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. From and after the redemption date (unless default shall be made by the Corporation in payment of the redemption price) all dividends on the shares of $3.20 Convertible Preference Stock designated for redemption in such notice shall cease to accrue, and all rights of the holders thereof as stockholders of the Corporation, except the right to receive the redemption price thereof upon the surrender of certificates representing the same, shall cease and determine and such shares shall not thereafter be transferred (except with the consent of the Corporation) on the books of the Corporation, and such shares shall not be deemed to be outstanding for any purpose whatsoever. At its election the Corporation prior to the redemption date may deposit the redemption price of the shares of $3.20 Convertible Preference Stock so called for redemption in trust for the holders thereof with a bank or trust company (having a capital and surplus of not less than $5,000,000) in the Borough of Manhattan, City and State of New York, or in any other city in which the Corporation at the time shall maintain a transfer agency with respect to such stock, in which case such redemption notice shall state the date of such deposit, shall specify the office of such bank or trust company as the place of payment of the redemption price, and shall call upon such holders to surrender the certificates representing such shares at such price on or after the date fixed in such redemption notice (which shall not be later than the redemption date) against payment of the redemption price. From and after the making of such deposit, the shares of $3.20 Convertible Preference Stock so designated for redemption shall not be deemed to be outstanding for any purpose whatsoever, and the rights of the holders of such shares shall be limited to the right to receive the redemption price of such shares, without interest, upon surrender of the certificates representing the same to the Corporation at said office of such bank or trust company, and the right of conversion (on or before the tenth day prior to the date fixed for redemption) herein provided. Any funds so deposited which shall not be required for such redemption because of the exercise of such right of conversion after the date of such deposit shall be returned to the Corporation forthwith. Any interest accrued on such funds shall be paid to the Corporation from time to time. Any moneys so deposited which shall remain unclaimed by the holders of such $3.20 Convertible Preference Stock at the end of six years after the redemption date, shall be returned by such bank or trust company to the Corporation after which the holders of the $3.20 Convertible Preference Stock shall have no further interest in such moneys. (d) Vote. Each holder of $3.20 Convertible Preference Stock shall be entitled to one vote for each share held on each matter submitted to a vote of stockholders of the Corporation and, except as otherwise herein or by law provided, the $3.20 Convertible Preference Stock, the Capital Stock of the Corporation, and any other capital stock of the Corporation at the time entitled thereto, shall vote together as one class, except that while the holders of $3.20 Convertible Preference Stock, voting as a class, are entitled to elect two directors as hereinafter provided, they shall not be entitled to participate with the Capital Stock (or any other capital stock as aforesaid) in the election of any other directors. (e) Class Voting. In case at any time the equivalent of six or more full quarterly dividends (whether consecutive or not) on the $3.20 Convertible Preference Stock shall be in arrears, then during the period (hereinafter in this subparagraph (e) called the Class Voting Period) commencing with such time and ending with the time when all arrears in dividends on the $3.20 Convertible Preference Stock shall have been paid and the full dividend on the $3.20 Convertible Preference Stock for the then current quarterly dividend period shall have been paid or declared and set apart for payment, at any meeting of the stockholders of the Corporation held for the election of directors during the Class Voting Period, the holders of $3.20 Convertible Preference Stock represented in person or by proxy at said meeting shall be entitled, as a class, to the exclusion of the holders of all other classes of stock of the Corporation, to elect two directors of the Corporation, each share of $3.20 Convertible Preference Stock entitling the holder thereof to one vote. Any director who shall have been elected by holders of $3.20 Convertible Preference Stock or any director elected by the remaining director as provided in the next sentence, may be removed at any time during a Class Voting Period, either for or without cause, by, and only by, the affirmative votes of the holders of record of a majority of the outstanding shares of $3.20 Convertible Preference Stock given at a special meeting of such stockholders called for the purpose and any vacancy thereby created may be filled during such Class Voting Period by the holders of $3.20 Convertible Preference Stock, present in person or represented by proxy at such meeting. In the event that any director elected by the holders of the $3.20 Convertible Preference Stock (or any director elected pursuant to the provisions of this sentence) dies, resigns or otherwise ceases to be a director, the remaining director may elect a successor; provided, however, that the foregoing shall not apply to a vacancy created by the removal of a director by the holders of $3.20 Convertible Preference Stock as provided in the preceding sentence. At the end of the Class Voting Period the holders of $3.20 Convertible Preference Stock shall be automatically divested of all voting power vested in them under this subparagraph (e) but subject always to the subsequent vesting hereunder of voting power in the holders of $3.20 Convertible Preference Stock in the event of any similar default or defaults thereafter. The term of all directors elected pursuant to the provisions of this subparagraph (e) shall in all events expire at the end of the Class Voting Period. (f) Conversion. Each share of the $3.20 Convertible Preference Stock may be converted, at the option of the holder thereof, at any time (but in case the same shall be called for redemption, only until the close of business on the tenth day prior to the date fixed for the redemption thereof) into three and six tenths (3.6) fully paid and non-assessable shares of Capital Stock of the Corporation, the respective number of shares of Capital Stock in any case being subject to adjustment, however, as hereinafter in subparagraph (g) provided. Upon any such conversion of shares of $3.20 Convertible Preference Stock no allowance or adjustment shall be made with respect to dividends upon either class of stock. Such option to convert shares of $3.20 Convertible Preference Stock into shares of Capital Stock may be exercised by, and only by, surrendering for such purpose to the Corporation at the office of any of its Transfer Agents for its Capital Stock for the time being, located in the City of New York or in any other city in which the Corporation at the time shall maintain a transfer agency with respect to such stock, certificates representing the shares to be converted, duly endorsed or accompanied by proper instruments of transfer, together with a written request for conversion. At the time of such surrender, the person exercising such option to convert shall be deemed to be the holder of the shares of Capital Stock issuable upon such conversion, notwithstanding that the stock transfer books of the Corporation may then be closed or that certificates representing such shares of Capital Stock shall not then be actually delivered to such person. The term "Capital Stock" as used in this Subsection D shall be deemed to include stock of the Corporation of every class, except stock which shall be preferred as to dividends or assets over the Capital Stock of the Corporation or which shall not participate equally, share for share, with such Capital Stock in earnings or assets remaining after payment in full of the preferential amounts of dividends or assets to which such stock shall be entitled; provided, however, that the shares of Capital Stock into which shares of the $3.20 Convertible Preference Stock shall be convertible, shall be shares of Capital Stock of the character authorized at the date of the initial issuance of the $3.20 Convertible Preference Stock or, in case of a reclassification or exchange of such Capital Stock, shares of the stock into or for which such Capital Stock shall be reclassified or exchanged and all provisions of this Subsection D shall be applied appropriately thereto and to any stock resulting from any subsequent reclassification or exchange thereof. (g) Anti-Dilution. The number of shares of Capital Stock into which each share of $3.20 Convertible Preference Stock may be converted shall be subject to adjustment from time to time in certain instances as follows: (1) If at any time or from time to time the outstanding shares of Capital Stock of the Corporation shall be subdivided or combined into a greater or smaller number of shares (by way of reclassification or splitup of shares or in any other manner), then the number of shares of Capital Stock into which each share of $3.20 Convertible Preference Stock may, after any such subdivision or combination becomes effective, be converted shall be increased or reduced in the same proportion. (2) If at any time or from time to time there is declared on the Capital Stock of the Corporation any dividend payable in Capital Stock of the Corporation, then the number of shares of Capital Stock into which each share of $3.20 Convertible Preference Stock may be converted on or after the record date fixed for such dividend shall be increased in the same proportion as the aggregate number of shares of Capital Stock issued or to be issued on account of such dividend bears to the aggregate number of shares of Capital Stock on which such dividend is or is to be paid. (3) If the Corporation shall grant the holders of its Capital Stock, as such, rights to subscribe for shares of Capital Stock and/or securities convertible into, exchangeable for, or carrying rights of purchase of shares of Capital Stock and if (i) the conversion price (determined by dividing One Hundred Dollars ($100.00) by the number of shares of Capital Stock deliverable upon conversion of each share of $3.20 Convertible Preference Stock, immediately before the time herein provided for such adjustment) and (ii) the "market value per share" of Capital Stock on the first full business day (excluding any Saturday) after the last date on which any of such rights to subscribe may be exercised, shall each exceed the amount payable for one share of Capital Stock on exercise of such rights to subscribe, then in each case said conversion price shall be reduced by "the value of the right to subscribe", as limited and defined herein, so granted to the holder of one share of Capital Stock, and the number of shares of Capital Stock deliverable thereafter upon conversion of each share of $3.20 Convertible Preference Stock, shall be the quotient obtained by dividing One Hundred Dollars ($100.00) by the conversion price so reduced. The adjustment provided for herein shall be effective immediately after the close of business on the day as of which said market value per share of Capital Stock is taken. For the purpose of such adjustment, the "value of the right to subscribe" so granted to the holder of one share of Capital Stock shall be deemed to be an amount equal to the quotient obtained by dividing (x) the excess of said "market value per share" of Capital Stock or said conversion price immediately before such reduction, whichever is lower, over the amount payable for one share of Capital Stock on exercise of such rights to subscribe by (y) the number of shares of Capital Stock with respect to which is granted the right to subscribe for one full share of Capital Stock. For the purpose of such adjustment, the "market value per share" of Capital Stock shall be deemed to be the mean between the high and low sales prices per share of Capital Stock on the day as of which such market value is taken (or lacking any sales, the mean between the closing bid and asked prices on that day) or, if the New York Stock Exchange is not open on that day, then on the first full business day (excluding any Saturday) upon which the New York Stock Exchange is open immediately following such day. Such sales prices or such bid and asked prices, as the case may be, shall be those on the New York Stock Exchange if the Capital Stock be listed or dealt in thereon at the time, or, if not listed or dealt in thereon, then those on such exchange as shall have been selected from time to time by the Corporation for the purpose or, if not listed or dealt in on any exchange, then those furnished by the trading department of any New York Stock Exchange firm selected from time to time by the Corporation for the purpose and deemed by it to be reliable. For the purpose of such adjustment in case of such granting of rights to subscribe for securities convertible into, exchangeable for, or carrying rights of purchase of, shares of Capital Stock, (i) the holder of one share of Capital Stock shall be deemed to have been granted a right to subscribe for such number of shares of Capital Stock as shall be deliverable upon exercise of the rights of conversion, exchange or purchase of all of the securities for which such holder is granted rights to subscribe, (ii) the last date on which any rights to subscribe for shares of Capital Stock (so deemed to have been granted) may be exercised shall be deemed to be the last date on which any of the aforesaid rights may be exercised to subscribe for such securities convertible into, exchangeable for, or carrying rights of purchase of, shares of Capital Stock, and (iii) the amount payable for one share of Capital Stock on exercise of a right to subscribe for shares of Capital Stock (so deemed to have been granted) shall be deemed to be the sum of (x) the consideration payable to the Corporation for such number of such securities as are convertible into or exchangeable for one full share of Capital Stock, (y) in the case of securities carrying such rights, the amount (if any) by which the consideration payable to the Corporation for such number of such securities as carry rights to purchase one full share of Capital Stock shall exceed the distributive amount, if any (excluding any sums with respect to accrued dividends) payable on voluntary liquidation of the Corporation with respect to such securities, if stock, or, if not stock, the principal amount of such securities, and (z) any additional amount thereafter payable to the Corporation for one full share of Capital Stock upon the exercise of such rights of conversion, exchange or purchase. (4) No adjustment in the conversion prices resulting from the application of the foregoing provisions of clause (3) of subparagraph (g) is to be given effect unless, by making such adjustments, the conversion price in effect immediately prior to such adjustment would be changed by thirty cents or more, and such adjustments shall be made only in amounts of thirty cents or a multiple thereof, but any adjustment which would change the conversion price by less than thirty cents or a multiple thereof is to the extent of the difference between the next multiple thereof and such lesser multiple to be carried forward and given effect in making future adjustments. (h) Certificate as to Adjustment of the Conversion Rate; Reservation of Shares. Whenever the amount of Capital Stock and/or other securities deliverable upon the conversion of the shares of $3.20 Convertible Preference Stock shall be adjusted pursuant to the provisions hereof, the Corporation shall forthwith file at its principal office and with the transfer agent or agents for the $3.20 Convertible Preference Stock and for such Capital Stock a statement, signed by the President or one of the Vice Presidents of the Corporation and by its Treasurer or one of its Assistant Treasurers, stating the adjusted amount of its Capital Stock and/or other securities deliverable per share of $3.20 Convertible Preference Stock calculated to the nearest one hundredth (1/100th) and setting forth in reasonable detail the method of calculation and the facts requiring such adjustment and upon which such calculation is based. Each adjustment shall remain in effect until a subsequent adjustment hereunder is required. The Corporation shall at all times reserve and keep available out of its authorized but unissued Capital Stock, the full number of shares of Capital Stock deliverable upon the conversion of all outstanding shares of $3.20 Convertible Preference Stock which are convertible into Capital Stock and upon exercise of any outstanding rights or options to purchase Capital Stock. (i) Fractional Shares. In connection with the conversion of shares of $3.20 Convertible Preference Stock into Capital Stock, no fractions of shares of $3.20 Convertible Preference Stock nor of Capital Stock shall be issued; and, in lieu thereof, non-dividend bearing non-voting scrip (exchangeable when combined for full shares) may be issued, or the Board of Directors may make such provisions for the stockholders in lieu of the issue of scrip as it may determine, including payment in cash or sale of stock to the extent of any fractions of shares and distribution of the net proceeds or otherwise. The Board of Directors may determine and fix the form of such scrip, whether bearer or otherwise, the denomination thereof, the expiration dates thereof, any provisions permitting sale of the full shares for which such scrip is exchangeable for the account of the holder of such scrip (or in lieu of sale of such full shares, provisions for the determination of the value thereof, based upon quotations therefor on the New York Stock Exchange on any specified date or dates or based upon any other method or methods of determination of value, and for payment of the value so determined to the holders of such scrip), and any other terms or provisions of such scrip as it may deem advisable. (j) No Reissuance. Converted and redeemed shares of $3.20 Convertible Preference Stock shall become authorized and unissued shares and subject to the provisions of subsection (k) may be reissued by the Corporation. (k) Merger. At the time any of the $3.20 Convertible Preference Stock is outstanding, the Corporation will not, without the affirmative consent (given in writing or at a meeting duly called for that purpose) of the holders of at least two-thirds (2/3rds) of the aggregate number of shares of $3.20 Convertible Preference Stock then outstanding, at any time during the conversion period, consolidate or merge with or into another corporation (whether or not the Corporation is the surviving corporation), or at any time when the $3.20 Convertible Preference Stock is not redeemable at the option of the Corporation, sell all or substantially all of its assets to another corporation, unless in connection therewith lawful and adequate provision is made whereby the holders of $3.20 Convertible Preference Stock shall receive the right to convert during the conversion period into the kind and amount of shares of stock and other securities to be received by holders of the number of shares of Capital Stock of the Corporation into which the $3.20 Convertible Preference Stock might have been converted immediately prior to such consolidation, merger or sale, which right shall be subject to adjustment, as nearly equivalent as may be practicable to the adjustments provided for in this Subsection D. SUBSECTION E. NO PRE-EMPTIVE RIGHTS No shareholder of the Corporation, by reason of his holding shares of any class of the capital stock of the Corporation, shall have any pre-emptive or preferential right to subscribe for or purchase any shares of (1) any class whatsoever which the Corporation may hereafter issue or sell, or (2) any obligations or securities which the Corporation may hereafter issue or sell, convertible into or exchangeable for or exchanged for, any shares of the Corporation of any class, or (3) any warrants or options which the corporation may hereafter issue or sell which shall confer upon the holder or owner thereof the right to subscribe for or purchase from the Corporation any of its shares of any class. SECTION V The number of directors constituting Corporation's current Board of Directors is fifteen (15). The names and business office addresses of the persons currently serving as said directors are set forth below:
Name Address E.M. Black 245 Park Avenue, New York, New York Morton H. Broffman 208 South LaSalle Street, Chicago, Illinois John M. Fox Prudential Center, Boston, Mass. M. Robert Gallop 330 Madison Avenue, New York, New York George P. Gardner, Jr. 24 Federal Street, Boston, Mass. Richard D. Hill 67 Milk Street, Boston, Mass. Maurice C. Kaplan 245 Park Avenue, New York, New York Samuel D. Lunt 120 Broadway, New York, New York Joseph M. McDaniel, Jr. 44 East 63rd Street, New York, New York William B. Mason Prudential Center, Boston, Mass. Richard M. Nichols 28 State Street, Boston, Mass. Norman I. Schafler Boston Post Road, Old Greenwich, Conn. David W. Wallace Greenwich Plaza, Greenwich, Conn. Thomas K. Warner 245 Park Avenue, New York, New York Jay Wells 200 Park Avenue, New York, New York
SECTION VI Any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative (whether or not by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, trustee, employee or agent of another corporation, partnership or joint venture, trust or other enterprise, shall be entitled to be indemnified by the Corporation to the full extent now or here- after permitted by law against reasonable costs, disbursements and counsel fees and amounts paid or incurred in satisfaction of settlements, judgments, fines and penalties incurred by him in connection with such action, suit or proceeding. Any such person who was a director of AMK Corporation prior to its merger with the Corporation shall be entitled to be indemnified by the Corporation on the same basis and subject to the same terms and conditions with respect to any such action, suit or proceeding by reason of the fact that he was a director, officer, employee or agent of AMK Corporation or was serving at the request of AMK Corporation as a director, officer, trustee, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. Such right of indemnification shall continue as to a person who has ceased to be a director, officer, employee, trustee or agent and shall inure to the benefit of the heirs, executor or administrator of such a person. The indemnification provided by this Section VI shall not exclude any other rights to which any such person may otherwise be entitled by agreement, vote of stockholders or otherwise. SECTION VII (1) The number of directors at any time may be increased or decreased by vote of the Board of Directors and in case of any such increase the Board of Directors shall have power to elect such additional directors to hold office until the next meeting of shareholders or until their successors shall be elected. (2) The Board of Directors from time to time shall determine whether and to what extent and at what time and places and under what conditions and regulations the accounts and books of the Corporation or any of them shall be open to the inspection of the shareholders and no shareholder shall have any right of inspecting any account or book or document of the Corporation except as conferred by statute or authorized by the Board of Directors or by a resolution of the shareholders. (3) Subject to provisions that may be included in the By-Laws of the Corporation, any action required or permitted by law, by this Certificate of Incorporation or the By-Laws of the Corporation to be taken at a meting of shareholders may, to the extent permitted by law, be taken without a meeting upon the written consent of shareholders who would be entitled to cast at least the minimum number of votes which would be required to take such action at a meeting at which all shareholders entitled to vote thereon are present. (4) The Board of Directors, by the affirmative vote of a majority of the directors in office, may remove a director or directors for cause where, in the judgment of such majority, the continuation of the director or directors in office would be harmful to the Corporation and may suspend the director or directors for a reasonable period pending final determination that cause exists for such removal. (5) The Board of Directors shall have power to loan money to, or guarantee an obligation of, or otherwise assist any officer or other employee of the Corporation or of any subsidiary, including an officer or employee who is also a director of the Corporation, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the Corporation. (6) Except as otherwise provided by statute, by this Certificate of Incorporation or by the By-Laws of the Corporation, all corporate powers may be exercised by the Board of Directors. Without limiting the foregoing, the Board of Directors shall have power, without shareholder action: (a) To authorize the Corporation to purchase, acquire, hold, lease, mortgage, pledge, sell and convey such property, real, personal and mixed, without as well as within the State of New Jersey, as the Board of Directors may from time to time determine, and in payment for any property to issue, or cause to be issued, shares of the Corporation, or bonds, debentures, notes or other obligations or evidences of indebtedness thereof secured by pledge, security interest or mortgage, or unsecured. (b) To authorize the borrowing of money; the issuance of bonds, debentures, notes and other obligations or evidences of indebtedness of the Corporation, secured or unsecured, and the inclusion of provisions as to redeemability and convertibility into shares of the Corporation or otherwise; and, as security for money borrowed or bonds, debentures, notes and other obligations or evidences of indebtedness issued by the Corporation, the mortgaging or pledging of any property, real, personal, or mixed, then owned, or thereafter acquired by the Corporation. IN WITNESS WHEREOF, UNITED BRANDS COMPANY has made this Certificate under the signature of its ________ President this 30th day of June, 1970. UNITED BRANDS COMPANY By /s/ John M. Fox -------------------------------- Name: John M. Fox ---------------------------- Capacity: President ------------------------ STATE OF NEW JERSEY DEPARTMENT OF STATE I, the Secretary of State of the State of New Jersey, DO HEREBY CERTIFY that the foregoing is a true copy of Certificate of Incorporation (Restated) of UNITED BRANDS COMPANY, as the same is taken from and compared with the original filed in my office on the 30th day of June A.D. 1970, and now remaining on file and of record therein. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my Official Seal at Trenton, this _____ day of _____________ A.D. 19__. ______________________________ Secretary of State UNITED BRANDS COMPANY CERTIFICATE OF RESTATEMENT OF CERTIFICATE OF INCORPORATION UNITED BRANDS COMPANY hereby certifies that: 1. The name of the corporation is UNITED BRANDS COMPANY. 2. Attached hereto is the restated Certificate of Incorporation of United Brands Company which restates and integrates in a single certificate the provisions of the Company's certificate of incorporation as amended at or prior to 11:59 P.M. Eastern Daylight Savings Time on June 30, 1970, without further amending the same. 3. Said restated Certificate of Incorporation was duly adopted by the Board of Directors at a meeting of said Board held on June 19, 1970, at which a quorum was present and acting throughout. 4. Said restated Certificate of Incorporation shall become effective at 12:01 A.M. Eastern Daylight Savings Time on July 1, 1970. IN WITNESS WHEREOF, United Brands Company has made this certificate under its seal and the signature of its President this 30th day of June, 1970. UNITED BRANDS COMPANY By /s/ John M. Fox --------------------------- Name: John M. Fox ------------------------ Capacity: President -------------------- CERTIFICATE OF MERGER OF c-N-k CORPORATION CAPE FARMS, INC. CHIPPER CORPORATION FARM PRODUCTION CORPORATION LANTANA FLOWER FARMS, INC. INTO UNITED BRANDS COMPANY To: The Secretary of State State of New Jersey Pursuant to the provisions of Title 14A of the Revised Statutes of New Jersey, the undersigned corporation hereby executes the following Certificate of Merger. 1. United Brands Company, a corporation organized and existing under the laws of the State of New Jersey, and owing all of the outstanding shares of each class and series of Lantana Flower Farms, Inc., Farm Production Corporation, c-N-k Corporation, Chipper Corporation and Cape Farms, Inc., its subsidiary corporations organized and existing under the laws of the State of Florida, the provisions of which permit the merger the merger of a corporation of another state and a corporation organized and existing under the laws of said state, hereby agrees to the merger of those subsidiary corporations into United Brands Company which is hereinafter designated as the surviving corporation. The total authorized capital stock of the surviving corporation shall be those shares, itemized by classes, par value of shares, shares without par value, and series, if any, within a class as follows: $3 Convertible Preferred Stock 46,028 shares without par value 1.20 Series A Cumulative Convertible Preference Stock 4,000,000 shares without par value 3.20 Series B Cumulative Convertible Preference Stock 75,813 shares without par value Capital Stock 45,000,000 shares, $1.00 par value The address of the surviving corporation's registered office is 15 Exchange Place, Jersey City, New Jersey 07302, and the name of its registered agent at such address is Corporation Trust Company. 2. The plan of merger, attached hereto, was approved by the board of directors of the undersigned corporation. 3. The number of outstanding shares of each class and series of the subsidiary corporations, parties to the merger and the number of such shares of each class and series owned by the parent corporation is as follows:
Number of Shares Number of Shares Name of Subsidiary Class Outstanding Owned by Parent - ----------------------------------------------------------------- c-N-k Corporation Common 787 787 Cape Farms, Inc. Common 5,000 5,000 Chipper Corporation Common 50 50 Farm Production Corporation Common 5,000 5,000 Lantana Flower Farms, Inc. Common 787 787
4. United Brands Company, the surviving corporation to this merger, agrees that: 1. It may be served with process in the State of New Jersey in any proceeding for the enforcement of any obligation of any corporation organized under the laws of the State of New Jersey or any foreign corporation, previously amenable to suit in New Jersey, which is a party to the merger and in any proceeding for the enforcement of the rights of a dissenting shareholder of any such corporation organized under the laws of the State of New Jersey against the surviving corporation; and, 2. The Secretary of State of the State of New Jersey shall be and hereby is irrevocably appointed as the agent of the surviving corporation to accept service of process in any such proceedings; the post office address to which the service of process in any such proceeding shall be mailed is Prudential Center, Boston, Massachusetts 02199. 5. The effective date of this Certificate shall be November 30, 1970. IN WITNESS WHEREOF the undersigned corporation has caused this Certificate of Merger to be executed in its name by its Vice President as of the 23rd day of October 1970. UNITED BRANDS COMPANY By /s/ W. B. Mason -------------------------------- William B. Mason, Vice President Subscribed and sworn to before me this 23 day of October, 1970 /s/ Richard E. Enright, Jr. - ------------------------------------- Richard E. Enright, Jr. Notary Public My commission expires May 21, 1976 AGREEMENT OF MERGER AGREEMENT OF MERGER made and entered into, this 1st day of November, 1970, by and between United Brands Company, a corporation organized and existing under the laws of the State of New Jersey, and a majority of the directors thereof, parties of the first part, c-N-k Corporation, a corporation organized and existing under the laws of the State of Florida and a majority of the directors thereof, parties of the second part, Cape Farms, Inc., a corporation organized and existing under the laws of the State of Florida and a majority of the directors thereof, parties of the third part, Chipper Corporation, a corporation organized and existing under the laws of the State of Florida and a majority of the directors thereof, parties of the fourth part, Farm Production Corporation, a corporation organized and existing under the laws of the State of Florida and a majority of the directors thereof, parties of the fifth part, and Lantana Flower Farms, Inc., a corporation organized and existing under the laws of the State of Florida and a majority of the directors thereof, parties of the sixth part. WHEREAS, said United Brands Company, party of the first part, has authorized, issued and outstanding stock itemized by class, par value of shares, shares without par value and series within the class is as follows:
Authorized Issued & Class of Stock Shares Outstanding and Series Par Value - ----------------------------------------------------------------- 46,028 44,438 $3 Convertible Preferred Without par Stock value 4,000,000 2,420,406 1.20 Series A Cumulative Without par Convertible Preference value Stock 75,813 74,604 3.20 Series B Cumulative Without par Convertible Preference value Stock 45,000,000 12,381,029 Capital Stock $1.00 par value
WHEREAS, said c-N-k Corporation, party of the second part, was incorporated and is existing under the laws of the State of Florida and has a maximum amount of capital stock, which it is authorized to have outstanding, of 1,000 shares of Common stock having a par value of Ten Dollars ($10.00) each, of which capital stock, 787 shares of said Common stock are now issued and outstanding; and WHEREAS, said Cape Farms, Inc., party of the third part, was incorporated and is existing under the laws of the State of Florida and has a maximum amount of capital stock, which it is authorized to have outstanding, of 5,000 shares of Common stock having a par value of One Dollar ($1.00) each, or which capital stock, 5,000 shares of said Common stock are now issued and outstanding; and WHEREAS, said Chipper Corporation, party of the fourth part, was incorporated and is existing under the laws of the State of Florida and has a maximum amount of capital stock, which it is authorized to have outstanding, of 50 shares of Common stock without nominal or par value of which capital stock, 50 shares of said Common stock are now issued and outstanding; and WHEREAS, said Farm Production Corporation, party of the fifth part, was incorporated and is existing under the laws of the State of Florida and has a maximum amount of capital stock, which it is authorized to have outstanding, of 5,000 shares of Common stock having a par value of One Dollar ($1.00) each, of which capital stock, 5,000 shares of said Common stock are now issued and outstanding; and WHEREAS, said Lantana Flower Farms, Inc., party of the sixth part, was incorporated and is existing under the laws of the State of Florida and has a maximum amount of capital stock, which it is authorized to have outstanding, of 1,000 shares of Common stock having a par value of Fifty Dollars ($50.00) each, of which capital stock, 787 shares of said Common stock are now issued and outstanding; and WHEREAS, the principal office in the State of Florida of United Brands Company, the party of the first part, is located at 1111 South Bayshore Drive, in the City of Miami, County of Dade, and the principal office of c-N-k Corporation, the party of the second part, is located at 7001 Lantana Road, in the City of Lantana, County of Palm Beach, State of Florida, and the principal office of Cape Farms, Inc., the party of the third part, is located at 255 University Drive, in the City of Coral Gables, County of Dade, State of Florida, and the principal office of Chipper Corporation, the party of the fourth part, is located at 255 University Drive, in the City of Coral Gables, County of Dade, State of Florida, and the principal office of Farm Production Corporation, the party of the fifth part, is located at 255 University Drive, in the City of Coral Gables, County of Dade, State of Florida, and the principal office of Lantana Flower Farms, Inc., the party of the sixth part, is located at 7001 Lantana Road, in the City of Lantana, County of Palm Beach, State of Florida; and WHEREAS, the Board of Directors of each of the corporations, parties hereto, to the end that greater efficiency and economy in the management of the business carried on by each corporation may be accomplished, deem it advisable and generally to the advantage and welfare of said corporations and their respective stockholders that such corporations merge into United Brands Company as the Surviving Corporation, under and pursuant to the provisions of the law of the State of Florida and the law of the State of New Jersey. NOW, THEREFORE, in consideration of the premises and of the mutual covenants, agreements, provisions and grants hereinafter contained the corporations, parties to this agreement, by and between their respective board of directors have agreed and do hereby agree each with the other that pursuant to the provisions of the law of the State of Florida and the law of the State of New Jersey, United Brands Company, the party of the first part, c-N-k Corporation, party of the second part, Cape Farms, Inc., the party of the third part, Chipper Corporation, the party of the fourth part, Farm Production Corporation, the party of the fifth part, and Lantana Flower Farms, Inc., the party of the sixth part, do hereby agree as follows: 1. United Brands Company, party of the first part, does hereby merge c-N-k Corporation, party of the second part, Cape Farms, Inc., party of the third part, Chipper Corporation, party of the fourth part, Farm Production Corporation, party of the fifth part, and Lantana Flower Farms, Inc., party of the sixth part, with and into itself, and c-N-k Corporation; party of the second part, Cape Farms, Inc., party of the third part, Chipper Corporation, party of the fourth part, Farm Production Corporation, party of the fifth part, and Lantana Flower Farms, Inc., party of the sixth part, shall be merged with and into United Brands Company, the party of the first part. 2. United Brands Company, the party of the first part, shall be the Surviving Corporation and shall continue to exist as a domestic corporation under the laws of New Jersey. The Articles of Incorporation as amended and By-Laws of United Brands Company, party of the first part, shall continue as the Articles of Incorporation and By-Laws of the Surviving Corporation. 3. The Directors of United Brands Company, party of the first part, shall continue as the Directors of the Surviving Corporation. 4. All shares of authorized and outstanding capital stock of c-N-k Corporation, party of the second part, Cape Farms, Inc., party of the third part, Chipper Corporation, party of the fourth part, Farm Production Corporation, party of the fifth part, and Lantana Flower Farms, Inc., party of the sixth part, such stock being owned in its entirety by United Brands Company, party of the first part, and all rights in respect thereof, shall be canceled forthwith on the effective date of the merger, and the certificates representing such shares shall be surrendered and canceled. 5. On or after the effective date of this contemplated merger c-N-k Corporation, party of the second part, Cape Farms, Inc., party of the third part, Chipper Corporation, party of the fourth part, Farm Production Corporation, party of the fifth part, and Lantana Flower Farms, Inc., party of the sixth part shall cease to exist. Their property shall become the property of United Brands Company, party of the first part, as the Surviving Corporation. The Surviving Corporation shall possess all the rights, privileges, powers and franchises as well of a public nature as of a private nature, and be subject to all the restrictions, disabilities and duties of each of said corporations so merged, and all and singular, the rights, privileges, powers and franchises of each of said corporations, and all property, real, personal and mixed, and all debts due to any of said corporations on whatever account, as well for stock subscriptions as all other things in action or belonging to each of said corporations shall be vested in the corporation; and all property, rights, privileges, powers and franchises, and all and every other interest shall be thereafter as effectually the property of the corporation as they were of the several and respective constituent corporations, and the title to any real estate, whether by deed or otherwise, under the laws of the State of Florida, vested in any of said corporations shall not revert or be in any way impaired by reason of said merger provided, that all rights of creditors and all liens upon the property of any of said corporations shall be preserved unimpaired, and all debts, liabilities and duties of said constituent corporations shall thenceforth attach to the corporation, and may be enforced against it to the same extent as if said debts, liabilities and duties had been incurred or contracted by it. 6. This Agreement shall be filed as required by the provisions of the Florida Statutes, and shall be effective November 30, 1970. IN WITNESS WHEREOF, a majority of the directors of United Brands Company, party of the first part, and a majority of the directors of c-N-k Corporation, party of the second part, a majority of the directors of Cape Farms, Inc., party of the third part, a majority of the directors of Chipper Corporation, party of the fourth part, a majority of the directors of Farm Production Corporation, party of the fifth part, and a majority of the directors of Lantana Flower Farms, Inc., party of the sixth part, being each of the parties to this Agreement, have, this 1st day of November, 1970, signed this Agreement of Merger under the corporate seals of said corporations. /s/ Eli M. Black ------------------------------ /s/ John M. Fox ------------------------------ /s/ W. B. Mason ------------------------------ /s/ G. P. Gardner, Jr. ------------------------------ /s/ Richard D. Hill ------------------------------ /s/ M.C. Kaplan ------------------------------ Signed, sealed and delivered in the presence of: /s/ M. Robert Gallop /s/ James A. MacKenzie ------------------------------ - ------------------------------ /s/ Thomas K. Warner ------------------------------ /s/ Samuel D. Lunt ------------------------------ A Majority of the Directors of UNITED BRANDS COMPANY Signed, sealed and delivered /s/ John M. Fox in the presence of: ------------------------------ /s/ James A. MacKenzie /s/ W. B. Mason - ------------------------------ ------------------------------ A Majority of the Directors of c-N-k CORPORATION CAPE FARMS, INC. CHIPPER CORPORATION FARM PRODUCTION CORPORATION LANTANA FLOWER FARMS, INC. I, James A. MacKenzie, Secretary of United Brands Company, a corporation of the State of New Jersey, DO HEREBY CERTIFY, in accordance with the provisions of the New Jersey Statutes, that the foregoing Agreement of Merger, as approved by vote of the Board of Directors of United Brands Company on behalf of United Brands Company, and by consent of the Board of Directors of United Brands Company in its capacity as sole shareholder of c-N-k Corporation, Cape Farms, Inc., Chipper Corporation, Farm Production Corporation and Lantana Flower Farms, Inc., corporations of the State of Florida. IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of said United Brands Company this 12 day of November, 1970. /s/ James A. MacKenzie ------------------------------ James A. MacKenzie, Secretary UNITED BRANDS COMPANY I, James A. Mackenzie, Secretary of c-N-k Corporation, Cape Farms, Inc., Chipper Corporation, Farm Production Corporation and Lantana Flower Farms, Inc., corporations of the State of Florida, DO HEREBY CERTIFY, in accordance with the provisions of the Florida Statutes, that the foregoing Agreement of Merger, as approved by vote of the Board of Directors of United Brands Company on behalf of United Brands Company, and by consent of the Board of Directors of United Brands Company in its capacity as sole shareholder of c-N-k Corporation, Cape Farms, Inc., Chipper Corporation, Farm Production Corporation and Lantana Flower Farms, Inc., corporations of the State of Florida. IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seals of said c-N-k Corporation, Cape Farms, Inc., Chipper Corporation, Farm Production Corporation and Lantana Flower Farms, Inc., this 12 day of November, 1970. /s/ James A. MacKenzie ------------------------------ James A. MacKenzie, Secretary c-N-k Corporation Cape Farms, Inc. Chipper Corporation Farm Production Corporation Lantana Flower Farms, Inc. THE ABOVE AGREEMENT OF MERGER, having been executed by a majority of the Board of Directors of each of the corporations, parties thereto, and having been adopted by the stockholders of each of said corporations, the President and Secretary of each corporate party hereto, do now hereby execute this Agreement of Merger under the corporate seals of their respective corporations, by authority of the directors and stockholders thereof, as the respective act, deed and agreement of each of said corporations, on this 11 day of November, 1970. UNITED BRANDS COMPANY By /s/ G. Burke Wright ---------------------------- Vice President By /s/ James A. MacKenzie ---------------------------- James A. MacKenzie Secretary c-N-k CORPORATION CAPE FARMS, INC. CHIPPER CORPORATION FARM PRODUCTION CORPORATION LANTANA FLOWER FARMS, INC. By /s/ William B. Mason ---------------------------- William B. Mason, President By /s/ James A. MacKenzie ---------------------------- James A. MacKenzie, Secretary CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION (RESTATED) OF UNITED BRANDS COMPANY United Brands Company, a corporation organized under the laws of the State of New Jersey (the "Corporation") hereby certifies: (1) That the name of the Corporation is United Brands Company. (2) That at a meeting of the Board of Directors of the Corporation, at which a quorum was present and acting throughout, the Board of Directors adopted the following resolutions proposing and declaring advisable certain amendments to the Certificate of Incorporation (Restated) of the Corporation: FIRST. That Section IV of the Certificate of Incorporation (Restated) of the Corporation be amended to authorize a new class of 10 million shares of $1.00 par value, Non-Voting Cumulative Preferred Stock, which may be issued in different series with the Board of Directors determining the specific terms of each series without further action by the shareholders. SECOND. That the Certificate of Incorporation (Restated) of the Corporation be amended to add a new Section VIII as follows: Section VIII To the fullest extent permitted by the New Jersey Business Corporation Act as the same exists or may hereafter be amended, an officer or a director of the Corporation shall not be liable to the Corporation or its shareholders for monetary damages for breach of any duty, except that nothing contained herein shall relieve an officer or a director from liability for breach of a duty based upon an act or omission (a) in breach of such person's duty of loyalty to the Corporation or its shareholders, (b) not in good faith involving a knowing violation of law, or (c) resulting in receipt by such person of an improper personal benefit. Any amendment or modification of the foregoing provisions of this Section shall not adversely affect any right or protection of an officer or a director of the Corporation existing at the time of such amendment or modification, and such right or protection shall continue as to a person who has ceased to be an officer or a director and shall inure to the benefit of the heirs, executors and administrators of such a person. (3) That the Amendments were adopted at the Annual Meeting of Shareholders held on May 28, 1987. (4) That the number of shares entitled to vote upon the amendments was 15,377,064 shares of Common Stock. (5) That the number of shares voted for the amendment of Section IV of the Certificate of Incorporation (Restated) was 13,927,527 and the number of shares voted against such amendment was 79,447. (6) That the number of shares voted for the amendment adding a new Section VIII to the Certificate of Incorporation (Restated) was 14,192,732 and the number of shares voted against such amendment was 50,910. IN WITNESS WHEREOF, United Brands Company has caused this Certificate of Amendment to be executed on behalf of the Corporation by its Chairman of the Board and its Secretary as of this 31st day of May, 1987. UNITED BRANDS COMPANY By /s/ Carl H. Lindner ---------------------------- Carl H. Lindner, Chairman of the Board and Chief Executive Officer ATTEST: /s/ Dennis M. Doyle - ------------------------------ Dennis M. Doyle, Secretary (T2-31) CERTIFICATE PURSUANT TO SECTION 14A:7-15.1 TO AMEND THE CERTIFICATE OF INCORPORATION OF UNITED BRANDS COMPANY Pursuant to Section 14A:7-15.1 of the New Jersey Business Corporation Act, the undersigned, Fred J. Runk, Vice President of United Brands Company (the "Company") hereby certifies the following: 1. The name of the corporation is United Brands Company. 2. A 3-for-1 stock split of the Company's shares of Capital Stock was adopted by an action by written consent by all of the members of the Executive Committee of the Board of Directors on April 27, 1988, attached hereto as Exhibit A. 3. The 3-for-1 stock split will not adversely affect the rights or preferences of the holders of outstanding shares of any class or series of the Company and will not increase the number of authorized but unissued shares. 4. The 12,792,157 outstanding shares of the Company's Capital Stock, $1.00 par value, will be divided 3 for 1 into 25,584,314 outstanding shares of Capital Stock, with $.33 par value. 5. Article IV of the Certificate of Incorporation of the Company is hereby amended in subparagraph (i) as follows: (i) 45,000,000 shares of Capital Stock, par value $.33 per share ("Capital Stock"), 6. The 3-for-1 stock division will become effective as of May 31, 1988. Signed at Cincinnati, Ohio, this 18th day of May, 1988. /s/ Fred J. Runk ------------------------------ Fred J. Runk Vice President Exhibit A OFFICER'S CERTIFICATE John J. Gerah, being the duly elected and acting Assistant Secretary of United Brands Company, certifies that the attached Exhibit A is a true and correct copy of resolutions adopted by the Executive Committee of the Board of Directors of the Company in an action taken in writing pursuant to the corporation laws of New Jersey signed by all the members of such Committee and dated as of April 27, 1988, which resolutions remain in full force and effect as of this date. Signed at Cincinnati, Ohio this 17th day of May, 1988 /s/ John J. Gerah ------------------------------ John J. Gerah EXHIBIT A UNITED BRANDS COMPANY EXECUTIVE COMMITTEE AN ACTION TAKEN IN WRITING BY THE MEMBERS OF THE EXECUTIVE COMMITTEE OF THE BOARD OF DIRECTORS OF UNITED BRANDS COMPANY RESOLVED: That this Corporation's Capital Stock, $1.00 par value, be split on the basis of three-for-one so that the par value be reduced to $.33 per share and two additional shares shall be issued for each share now outstanding to shareholders of record at the close of business on May 20, 1988 with such additional shares to be distributed on May 31, 1988. RESOLVED: That the number of Capital Stock subject to stock options as of the close of business on May 20, 1988 and the respective option prices be correspondingly adjusted to reflect the 3-for-1 stock split. RESOLVED: That the conversion right and the conversion price of the 5 1/2% Convertible Subordinated Debentures due February 1, 1994 outstanding on May 20, 1988 shall be adjusted to reflect the 3-for-1 stock split which will result in a conversion ratio of 1 share per $18.333 of the aggregate principal amount. RESOLVED: That the Transfer Agent and Registrar for the Corporation's Capital Stock be and hereby is authorized and directed to record, register, countersign and deliver certificates upon original issue representing the shares of Capital Stock, par value $.33, to be issued as a result of the 3-for-1 Stock Split, and that the authority of the Transfer Agent and Registrar is increased to include such additional shares. BE IT FURTHER RESOLVED: That the Corporation's officers are directed to take all steps necessary and incidental to the consummation of this stock split including, but not limited to, listing of the additional shares of Capital Stock on the New York, Boston and Pacific Stock Exchanges and filing a certificate with the Secretary of State of New Jersey. CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION (RESTATED) OF UNITED BRANDS COMPANY United Brands Company, a corporation organized under the laws of the State of New Jersey (the "Corporation") hereby certifies: (1) That the name of the Corporation is United Brands Company. (2) That at a meeting of the Board of Directors of the corporation, at which a quorum was present and acting throughout, the Board of Directors adopted the following resolution proposing and declaring advisable a certain amendment to the Certificate of Incorporation (Restated) of the Corporation: That Section IV of the Certificate of Incorporation (Restated) of the Corporation be amended to increase the authorized shares of Capital Stock, $1.00 par value, from 45,000,000 million shares to 100,000,000 shares. (3) That the Amendments were adopted at the Annual Meeting of Shareholders held on June 2, 1988. (4) That the number of shares entitled to vote upon the amendment was 12,788,457 shares of Common Stock. (5) That the number of shares voted for the amendment of Section IV of the Certificate of Incorporation (Restated) was 11,897,813 and the number of shares voted against such amendment was 78,821, with 7,429 shares abstaining. IN WITNESS WHEREOF, United Brands Company has caused this Certificate of Amendment to be executed on behalf of the Corporation by its Chairman of the Board and its Secretary as of this 5th day of June, 1988. UNITED BRANDS COMPANY By /s/ Carl H. Lindner ---------------------------- Carl H. Lindner, Chairman of the Board and Chief Executive Officer ATTEST: /s/ Robert A. Dearth, Jr. - -------------------------------- Robert A. Dearth, Jr., Secretary CERTIFICATE OF CORRECTION TO THE CERTIFICATE PURSUANT TO SECTION 14A:7-15.1 TO AMEND THE CERTIFICATE OF INCORPORATION OF UNITED BRANDS COMPANY The undersigned, Thomas E. Mischell, Vice President of United Brands Company (the "Company"), a New Jersey corporation, hereby certifies the following: 1. On May 19, 1988, United Brands Company filed a Certificate Pursuant to Section 14A:7-15.1 to Amend the Certificate of Incorporation of United Brands Company (a copy of which is attached hereto) to report a 3-for-1 stock split effective as of May 31, 1988. 2. Paragraph 4 of this Certificate should be corrected to read as follows: "4. The 12,792,157 outstanding shares of the Company's Capital Stock, $1.00 par value, will be divided 3 for 1 into 38,376,471 outstanding shares of Capital Stock, $.33 par value per share." Signed at Cincinnati, Ohio this 9th day of March, 1989. /s/ Thomas E. Mischell ------------------------------ Name: Thomas E. Mischell ------------------------- Title: Vice President ------------------------ United Brands Company Certificate of Amendment to the Certificate of Incorporation (Restated) United Brands Company, a corporation organized under the laws of the State of New Jersey (the "Corporation"), hereby certifies: (1) That the name of the Corporation is United Brands Company. (2) That the Board of Directors of the Corporation adopted the following resolutions proposing a certain amendment to the Certificate of Incorporation (Restated) of the Corporation: RESOLVED, that the Board of Directors approves the amendment of Section I of the Company's Certificate of Incorporation (Restated) to read: "The name of the Corporation is Chiquita Brands International, Inc."; RESOLVED, that the Board of Directors directs that the proposed amendment be submitted for approval by the written consent of the holders of a sufficient number of shares of the Company to take such action. (3) That pursuant to Section 14A:5-6 of the New Jersey Business Corporation Act, the Amendment was adopted by Written Consent dated February 22, 1990 and signed by the holders of shares being sufficient to take action at a meeting. (4) That the number of shares entitled to vote upon or express consent for the Amendment was 38,862,274 shares of Capital Stock $0.33 par value. (5) That the number of shares consenting in writing to the Amendment was 32,010,607. (6) That not less than ten days prior to the effectiveness of such action, notice of the adoption of such Amendment was communicated to all shareholders who did not consent thereto in writing. (7) That the Amendment shall become effective at 10:00 a.m. Eastern Standard Time on March 20, 1990. IN WITNESS WHEREOF, United Brands Company has caused this Certificate of Amendment to be executed on behalf of the Corporation by its Executive Vice President, Chief Administrative Officer as of this 15th day of March, 1990. UNITED BRANDS COMPANY By /s/ Steven G. Warshaw ---------------------------- Steven G. Warshaw, Executive Vice President, Chief Administrative Officer CERTIFICATE OF MERGER OF UB HOLDING COMPANY INTO CHIQUITA BRANDS INTERNATIONAL, INC. TO: The Secretary of State The Secretary of State State of Delaware State of New Jersey Pursuant to the provisions of Section 14A:10-7 Corporations, General, of the New Jersey Statutes (the "NJS") and the Delaware General Corporations Laws ("DGCL"), the undersigned corporations hereby execute the following Certificate of Merger. ARTICLE ONE The name of the corporations proposing to merge and the States under the laws of which such corporations are organized are as follows:
Name of Corporation State of Incorporation UB Holding Company Delaware Chiquita Brands International, Inc. New Jersey
ARTICLE TWO The surviving corporation shall be Chiquita Brands International, Inc. (hereinafter referred to as the "Surviving Corporation"). ARTICLE THREE The plan of merger is as set forth in the Agreement and Plan of Merger between Chiquita Brands International, Inc. and UB Holding Company attached hereto as Exhibit I (the "Agreement") and is by this reference made a part hereof as if fully set forth herein. The Certificate of Incorporation of Chiquita Brands International, Inc. shall be the Certificate of Incorporation of the Surviving Corporation. ARTICLE FOUR The plan of merger was approved by the Board of Directors of the Surviving Corporation by Unanimous Written Consent dated March __, 1990, and no vote of the shareholders of the Surviving Corporation was required because of the applicability of Section 14A:10-3(4) of the NJS. The Agreement was approved, adopted, certified, executed and acknowledged by the Surviving Corporation as provided by Section 252 of the DGCL. ARTICLE FIVE The Agreement was approved by the Board of Directors of UB Holding Company ("Holding") by unanimous written consent dated March __, 1990, duly adopted by the holders of all 179.611 shares of the issued and outstanding common stock of Holding by unanimous written consent dated March __, 1990, and approved, adopted, certified executed and acknowledged by Holding, all as provided by Sections 251 and 252 of the DGCL. The applicable provisions of the laws of Delaware have been, or upon compliance with filing and recording requirements will have been, complied with. ARTICLE SIX The Surviving Corporation agrees that it may be served with process in the State of Delaware in any proceeding for enforcement of any obligation of Holding, as well as for enforcement of any obligation of Chiquita arising from the merger, including any suit or other preceding to enforce the right of any stockholders as determined in the appraisal proceedings pursuant to the provisions of Section 262 of the DGCL. ARTICLE SEVEN The Surviving Corporation hereby makes an irrevocable appointment of the Secretary of State of Delaware as its agent to accept service of process in any proceeding mentioned in the foregoing paragraph. The Secretary of State is requested to mail a copy of any process in such proceeding to: Charles R. Morgan, Esq. Vice President, General Counsel & Secretary Chiquita Brands International, Inc. 250 East Fifth Street Cincinnati, Ohio 45202 ARTICLE EIGHT The Surviving Corporation further agrees that it will promptly pay the dissenting stockholders of Holding the amount, if any, to which they shall be entitled under the provisions under the DGCL with respect to the rights of dissenting stockholders. ARTICLE NINE The executed Agreement is on file at the principal place of business of Chiquita located at 250 East Fifth Street, Cincinnati, Ohio 45202, which Agreement will be furnished upon request and without cost to any stockholder of either constituent corporation to the merger. ARTICLE TEN IN WITNESS WHEREOF, each of the undersigned corporations has caused this Certificate of Merger to be executed in its name by its authorized officer as of the 28th day of March, 1990. Attest: CHIQUITA BRANDS INTERNATIONAL, INC. s/ John J. Gerah By: /s/ Steven G. Warshaw - ------------------------------ --------------------------- John J. Gerah Steven G. Warshaw Assistant Secretary Executive Vice President UB HOLDING COMPANY /s/ James C. Kennedy By: /s/ Thomas E. Mischell - ------------------------------ --------------------------- James C. Kennedy Thomas E. Mischell Secretary Vice President STATE OF OHIO ) : SS: COUNTY OF HAMILTON ) On this 28th day of March, 1990, before me personally appeared John J. Gerah, who acknowledged himself to be the Assistant Secretary of Chiquita Brands International, Inc., a corporation, and that he is such officer, being authorized to do so, has executed the foregoing instrument for the purposes therein contained on behalf of the corporation. /s/ L. Jennifer Holterhoff ------------------------------ Notary Public STATE OF OHIO ) : SS: COUNTY OF HAMILTON ) On this 28th day of March, 1990, before me personally appeared Steven G. Warshaw, who acknowledged himself to be the Executive Vice President of Chiquita Brands International, Inc., a corporation, and that he is such officer, being authorized to do so, has executed the foregoing instrument for the purposes therein contained on behalf of the corporation. /s/ L. Jennifer Holterhoff ------------------------------ Notary Public STATE OF OHIO ) : SS: COUNTY OF HAMILTON ) On this 28th day of March, 1990, before me personally appeared Thomas E. Mischell, who acknowledged himself to be the Vice President of UB Holding Company, a corporation, and that he is such officer, being authorized to do so, has executed the foregoing instrument for the purposes therein contained on behalf of the corporation. /s/ Leslie M. Conradi ------------------------------ Notary Public STATE OF OHIO ) : SS: COUNTY OF HAMILTON ) On this 28th day of March, 1990, before me personally appeared James C. Kennedy, who acknowledged himself to be the Secretary of UB Holding Company, a corporation, and that he is such officer, being authorized to do so, has executed the foregoing instrument for the purposes therein contained on behalf of the corporation. /s/ Leslie M. Conradi ------------------------------ Notary Public EXHIBIT I AGREEMENT AND PLAN OF MERGER BETWEEN CHIQUITA BRANDS INTERNATIONAL, INC. AND UB HOLDING COMPANY This Agreement and Plan of Merger ("Agreement") is entered into as of the 28th day of March, 1990 by and between Chiquita Brands International, Inc., a New Jersey corporation ("Chiquita"), UB Holding Company, a Delaware corporation ("Holding") (Chiquita and Holding are sometimes referred to herein as the "Constituent Corporations") American Financial Corporation, an Ohio corporation ("AFC"), Great American Insurance Company, an Ohio corporation ("GAI") and Great American Communications Company, a Florida corporation ("GACC"), under the following circumstances: 1. Chiquita is a corporation duly organized and validly existing under the laws of the state of New Jersey and has authorized Capital Stock consisting of 100,000,000 shares of Capital Stock, with a par value of $.33 per share ("Common Stock") of which 38,899,074 shares are issued and outstanding; 2. Holding is a corporation duly organized and validly existing under the laws of the state of Delaware and has authorized Capital Stock consisting of 1,000 shares of Common Stock, with a par value of $1.00 per share of which 179.611 shares are issued and outstanding; 3. AFC, GAI and GACC (collectively the "Holding Stockholders") own all of the issued and outstanding shares of Holding Common Stock, and join in this Agreement for the purposes set forth in Article V hereof; 4. Boards of Directors of the Constituent Corporations have by unanimous written consent approved this Agreement of Merger; 5. The Stockholders of Holding have by unanimous written consent adopted this Agreement of Merger; and 6. As Chiquita is to be the surviving corporation of the Merger, no vote of the shareholders of Chiquita is required because of the applicability of Section 14A:10-3(4) of the New Jersey Business Corporation Act. NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein and in accordance with the laws of the states of New Jersey and Delaware, the parties hereto agree that Holding shall be merged with and into Chiquita and that Chiquita shall be the surviving corporation, and that the terms and conditions of such merger shall be as follows: ARTICLE I 1.1 At the effective time of the merger, Holding shall be merged with and into Chiquita which shall be the Surviving Corporation and Chiquita shall continue its corporate existence under the laws of the State of New Jersey. 1.2 This Agreement and such supporting documents as are required shall be filed as promptly as possible with the Secretary of State of New Jersey and the Secretary of State of Delaware and the effective time of the merger shall be at the time of the filing of the necessary documents with such Secretaries of State. ARTICLE II 2.1 At the Effective Time, each one ten-thousandth of an outstanding share of Common Stock of Holding, by operation of the Merger, shall be converted into and become, without any action on the part of the holder thereof, one share of Common Stock of Chiquita. Chiquita warrants that when issued the Chiquita Common Stock will be duly authorized, fully paid and non-assessable and free and clear of all liens and encumbrances. 2.2 After the Effective Time, each holder of Certificates representing shares of Holding Common Stock which have been converted to Chiquita Common Stock pursuant to Section 2.1 hereof shall be entitled to receive upon the surrender of such Certificates a Certificate or Certificates representing the number of shares of Common Stock of Chiquita to which such shareholder is entitled. Until such time as such Holding Certificates are presented, surrendered and exchanged, each such Certificate of Holding Common Stock shall be deemed for all purposes to evidence ownership of the number of shares of Chiquita Common Stock into which they shall have been converted pursuant to the Merger. 2.3 At the Effective Time, the 17,961,100 shares of Chiquita Common Stock held by Holding shall, by virtue of the Merger and without any action on the part of the Surviving Corporation, cease to be outstanding, shall be canceled and retired without payment of any consideration therefor and shall cease to exist. ARTICLE III 3.1 The Certificate of Incorporation of Chiquita following the Merger shall be as presently recorded in the office of the Secretary of State of New Jersey. 3.2 The By-Laws of Chiquita in effect at the Effective Time shall be the By-Laws of the Surviving Corporation. ARTICLE IV Effects of the Merger From the Effective Time, the Merger shall have the effects provided by the laws of the States of New Jersey and Delaware. without limiting the generality of the foregoing, upon the Effective Time the separate existence of Holding shall cease, Holding shall be merged with and into Chiquita as the Surviving Corporation and the Surviving Corporation, without further deed or action shall possess all assets and property of every description, and every interest therein, wherever located; all rights, privileges, immunities, powers, franchises and authority (of a public as well as a private nature) of each of the Constituent Corporations and all obligations belonging to or due each of the Constituent Corporations. Title to real estate or any interest therein, invested in each Constituent Corporation, shall not revert or any way be impaired by reason of the Merger. The Surviving Corporation shall be liable for all the obligations of each Constituent Corporation, including liability to dissenting shareholders. Any claim existing, or action or proceeding pending by or against either Constituent Corporation may be prosecuted to judgment, with right of appeal, as if the Merger had not taken place, or the Surviving Corporation may be substituted in place of the Constituent Corporation. All rights of creditors of each Constituent Corporation shall be preserved unimpaired and all liens upon the property of either Constituent Corporation shall be preserved unimpaired but only on the property affected by such liens immediately before the Effective Time. Whenever conveyance, assignment, transfer, deed or other instrument or act is necessary to vest property or rights in the Surviving Corporation, the officers of the respective Constituent Corporations shall execute, acknowledge and deliver such instruments and do such acts. For such purposes, the existence of the Constituent Corporations and the authority of their respective officers and directors is continued, notwithstanding the Merger. ARTICLE V 5.1 The Holding Stockholders represent and warrant to Chiquita that as of the date hereof, and as of the Effective Time, Holding has no liabilities or obligations which, upon consummation of the Merger, would become obligations of the Surviving Corporation. 5.2 The Holding Stockholders represent and warrant to Chiquita that immediately prior to the Effective Time, the only assets of Holding will be 17,961,100 shares of Chiquita Common Stock. 5.3 Notwithstanding anything to the contrary contained herein, the Holding Stockholders hereby indemnify Chiquita against, hold it harmless from, and reimburse it for, any and all claims, expenses, losses, damages, costs, and/or fees arising from or related to: (i) any breach of the representations and warranties of the Holding stockholders contained in this Article V; and (ii) the Merger and related transactions contemplated herein. ARTICLE VI Miscellaneous 6.1 This Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time. 6.2 Any provision of this Agreement may be waived at any time by the party which is, or whose shareholders are, entitled to the benefits thereof and this Agreement may be amended and supplemented at any time. After approval hereof by the shareholders of Holding, no amendment shall be made which changes the provisions relating to rights of the shareholders of Holding on conversion of their Common Stock as provided in Section 2.1 hereof or which in any way materially adversely affects the rights of shareholders of Holding without the further approval of such shareholders. 6.3 This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which shall together constitute one and the same instrument. IN WITNESS WHEREOF, the parties have caused this Agreement to be executed as of the date first stated above by their duly authorized officers. WITNESS: CHIQUITA BRANDS INTERNATIONAL, INC. /s/ Jack Painter a New Jersey corporation - ------------------------------ /s/ John J. Gerah BY: /s/ Steven G. Warshaw - ------------------------------ --------------------------- Steven G. Warshaw Executive Vice President & Chief Administrative Officer UB HOLDING COMPANY /s/ Sandra J. Collins a Delaware corporation - ------------------------------ /s/ Barbara Grosser BY: /s/ Thomas E. Mischell - ------------------------------ --------------------------- Thomas E. Mischell Vice President AMERICAN FINANCIAL CORPORATION /s/ Barbara Grosser an Ohio corporation - ------------------------------ /s/ Sandra J. Collins BY: /s/ Thomas E. Mischell - ------------------------------ --------------------------- Thomas E. Mischell Vice President GREAT AMERICAN INSURANCE COMPANY /s/ Sandra J. Collins an Ohio corporation - ------------------------------ /s/ Barbara Grosser BY: /s/ Karen Holley Horrell - ------------------------------ --------------------------- Karen Holley Horrell Senior Vice President, General Counsel & Secretary GREAT AMERICAN COMMUNICATIONS COMPANY /s/ Sandra J. Collins a Florida corporation - ------------------------------ /s/ Barbara Grosser BY: /s/ Thomas E. Mischell - ------------------------------ --------------------------- Thomas E. Mischell Vice President STATE OF OHIO ) : SS: COUNTY OF HAMILTON ) On this 28th day of March, 1990, before me personally appeared Steven G. Warshaw, who acknowledged himself to be the Executive Vice President and Chief Administrative Officer of Chiquita Brands International, Inc., a corporation, and that he is such officer, being authorized to do so, has executed the foregoing instrument for the purposes therein contained on behalf of the corporation. /s/ Teresa M. Masur ------------------------------ Notary Public STATE OF OHIO ) : SS: COUNTY OF HAMILTON ) On this 26th day of March, 1990, before me personally appeared Thomas E. Mischell, who acknowledged himself to be the Vice President of UB Holding Company, a corporation, and that he is such officer, being authorized to do so, has executed the foregoing instrument for the purposes therein contained on behalf of the corporation. /s/ Leslie M. Conradi ------------------------------ Notary Public STATE OF OHIO ) : SS: COUNTY OF HAMILTON ) On this 26th day of March, 1990, before me personally appeared Thomas E. Mischell, who acknowledged himself to be the Vice President of American Financial Corporation, a corporation, and that he is such officer, being authorized to do so, has executed the foregoing instrument for the purposes therein contained on behalf of the corporation. /s/ Leslie M. Conradi ------------------------------ Notary Public STATE OF OHIO ) : SS: COUNTY OF HAMILTON ) On this 26th day of March, 1990, before me personally appeared Karen Holley Horrell, who acknowledged herself to be the Senior Vice President, General Counsel and Secretary of Great American Insurance Company, a corporation, and that she is such officer, being authorized to do so, has executed the foregoing instrument for the purposes therein contained on behalf of the corporation. /s/ Sandra J. Collins ------------------------------ Notary Public STATE OF OHIO ) : SS: COUNTY OF HAMILTON ) On this 26th day of March, 1990, before me personally appeared Thomas E. Mischell, who acknowledged himself to be the Vice President of Great American Communications Company, a corporation, and that he is such officer, being authorized to do so, has executed the foregoing instrument for the purposes therein contained on behalf of the corporation. /s/ Leslie M. Conradi ------------------------------ Notary Public CERTIFICATE OF CORRECTION TO THE "CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION (RESTATED) OF UNITED BRANDS COMPANY" The undersigned, Charles R. Morgan, Vice President, General Counsel and Secretary of Chiquita Brands International, Inc., formerly known as "United Brands Company" (the "Corporation"), a New Jersey corporation, hereby certifies the following: 1. On June 16, 1988, the Corporation, then known as United Brands Company, filed a "Certificate of Amendment to the Certificate of Incorporation (Restated) of United Brands Company" (the "Certificate"), a copy of which is attached hereto, for the purpose of increasing the authorized Capital Stock from 45,000,000 shares to 100,000,000 shares. The Certificate erroneously referred to the Capital Stock as having a par value of $1.00 per share rather than $0.33 per share. 2. Paragraph 2 of the Certificate is corrected to read in part as follows: That Section IV of the Certificate of Incorporation (Restated) of the Corporation be amended to increase the authorized shares of Capital Stock, $0.33 par value, from 45,000,000 shares to 100,000,000 shares. Signed at Cincinnati, Ohio this 14th day of May, 1990. /s/ Charles R. Morgan ------------------------------ Charles R. Morgan Vice President, General Counsel and Secretary CERTIFICATE OF AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION OF CHIQUITA BRANDS INTERNATIONAL, INC. TO: Secretary of State State of New Jersey Pursuant to the provisions of N.J.S. 14A:7-2(2), the undersigned corporation, Chiquita Brands International, Inc. (the "Corporation"), executes the following Certificate of Amendment to its Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"). 1. The name of the Corporation is Chiquita Brands International, Inc. 2. The following resolutions, establishing and designating a series of shares and fixing and determining the relative rights and preferences thereof, were duly adopted by the Executive Committee of the Board of Directors of the Corporation as of the thirtieth day of October, 1992, pursuant to the authority vested in the Board of Directors by the Certificate of Incorporation, exercised on behalf of the Board of Directors by the Executive Committee pursuant to resolutions of the Board of Directors so authorizing it to act: RESOLVED, that pursuant to the authority expressly vested in the Executive Committee of the Board of Directors of the Corporation by the Restated Certificate of Incorporation, as amended, and by resolutions of the Board of Directors, the Executive Committee of the Board of Directors hereby classifies One Million (1,000,000) shares of the Corporation's Series Preference Stock as a new series designated "Mandatorily Exchangeable Cumulative Preference Stock, Series C," without par value (the "Series C Preference Stock"). RESOLVED, that the terms and conditions of the Series C Preference Stock, including its rights, preferences, privileges, voting powers, restrictions, qualifications, limitations as to dividends, and terms and conditions for conversion shall be as set forth in Exhibit A attached hereto. RESOLVED, that the Corporation's Restated Certificate of Incorporation, as amended, is hereby further amended to add to Section IV of such certificate a new Subsection F entitled "Special Provisions Applicable to Series C Preference Stock," in the form attached hereto as Exhibit A, and the proper officers of the Corporation are authorized to execute and file, as necessary, any documents or certificates with the New Jersey Secretary of State to effect such amendment. 3. The resolutions were adopted by unanimous written consent by the Executive Committee of the Board of Directors as of October 30, 1992. 4. The Restated Certificate of Incorporation of the Corporation, as amended, is further amended so that the designation and number of shares of each class and series acted upon in the resolutions, and the relative rights, preferences and limitations of each such class and series are as stated in Exhibit A attached hereto, which is the same exhibit referred to in the foregoing resolutions. IN WITNESS WHEREOF, the undersigned has signed this Certificate of Amendment to the Restated Certificate of Incorporation this 30th day of October, 1992. CHIQUITA BRANDS INTERNATIONAL, INC. By: /S/ STEVEN G. WARSHAW -------------------------------- Steven G. Warshaw Executive Vice President and Chief Administrative Officer EXHIBIT A SUBSECTION F. SPECIAL PROVISIONS APPLICABLE TO SERIES C PREFERENCE STOCK There is hereby established Series C Preference Stock which shall be designated "Mandatorily Exchangeable Cumulative Preference Stock, Series C" ("Series C Preference Stock") and shall consist of One Million (1,000,000) shares, and no more. The relative, participating, optional and other special rights and the qualifications, limitations and restrictions of the Series C Preference Stock, other than those specified for all series of Series Preference Stock in Subsection B of this Section IV, shall be as follows: (a) Dividends. (i) In respect of the period beginning on the date of issuance of the Series C Preference Stock and ending on and including September 7, 1995 (the "Preferred Period"), the holders of outstanding shares of the Series C Preference Stock shall be entitled to receive (subject to the rights of holders of shares of $3.00 Cumulative Preferred Stock or any series of Series Preference Stock and/or any other class or series of preferred stock which the Corporation may in the future issue which ranks prior to or on a parity with the Series C Preference Stock with respect to dividends), when, as and if declared by the Board of Directors out of funds legally available therefor, cumulative preferential cash dividends at the per share rate of $1.65 per quarter and no more ("Preferential Dividends"), accruing and payable on the seventh day of March, June, September and December of each year during the Preferred Period (each such date being hereinafter referred to as a "Preferential Dividend Payment Date") commencing December 7, 1992; provided, however, that the Preferential Dividend payable on December 7, 1992 (the "Initial Preferential Dividend") shall be equal to the sum of (x) $0.85 times a fraction, the numerator of which is the number of days from September 8, 1992 to and including the date of issuance of the Series C Preference Stock and the denominator of which is 90, plus (y) $1.65 times a fraction, the numerator of which is the number of days from the date of issuance of the Series C Preference Stock to and including December 7, 1992 and the denominator of which is 90. If December 7, 1992 or any other Preferential Dividend Payment Date shall not be a business day, then the Preferential Dividend Payment Date shall be on the next succeeding business day. Each such dividend will be payable to holders of record as they appear on the stock books of the Corporation on such record date, not less than 10 nor more than 60 days preceding the Preferential Dividend Payment Date, as shall be fixed by the Board of Directors. Dividends on the Series C Preference Stock in respect of the Preferred Period shall accrue on a quarterly basis commencing from the date of issuance of the Series C Preference Stock, and dividends accruing on each Preferential Dividend Payment Date shall accumulate to the extent not paid on such date. Accumulated unpaid dividends shall not bear interest. (ii) So long as any shares of Series C Preference Stock are outstanding, no dividend (including, but not limited to, a dividend or distribution paid in shares of, or warrants or rights to subscribe for or purchase shares of, Capital Stock or in any other stock of the Corporation) shall be declared or paid or set aside for payment or other distribution declared or made upon the Capital Stock or upon any other stock of the Corporation ranking junior to or (except as provided in the following sentence) on a parity with Series C Preference Stock as to dividends or upon liquidation, nor shall any Capital Stock nor any other stock of the Corporation ranking junior to or on a parity with Series C Preference Stock as to dividends or upon liquidation be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to Series C Preference Stock as to dividends and upon liquidation) unless, in each case, the full Preferential Dividends, if any, accumulated on all outstanding shares of the Series C Preference Stock through the most recent Preferential Dividend Payment Date shall have been paid or deposited for payment or contemporaneously are declared and paid or deposited for payment through the most recent Preferential Dividend Payment Date. When dividends have not been paid in full upon the shares of Series C Preference Stock, all dividends and other distributions declared upon the Series C Preference Stock and any other shares of the Corporation ranking on a parity as to dividends and such other distributions with the shares of Series C Preference Stock shall be declared pro rata so that the amount of dividends and other distributions declared per share on the Series C Preference Stock and such other shares shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of Series C Preference Stock and such other shares bear to each other. Holders of the shares of Series C Preference Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided. (iii) Any dividend payment made on shares of Series C Preference Stock shall first be credited against the earliest accrued but unpaid dividend due with respect to shares of Series C Preference Stock. (iv) At the option of the Corporation, following the giving of notice to holders of record of Series C Preference Stock prior to the applicable record date, the Corporation may deliver on any Preferential Dividend Payment Date, in lieu of the cash dividends described in clause (i) above, a number of shares of Capital Stock equal to the amount of cash dividends described in such clause (i) divided by the Current Market Price (as hereinafter defined) of the Capital Stock determined as of the second Trading Date (as hereinafter defined) immediately preceding the relevant Notice Date (as hereinafter defined). Such option may be exercised by the Corporation in whole or in part. The notice required pursuant to this paragraph shall be provided by mailing notice of the Corporation's election, first class postage prepaid, to each holder of record of the Series C Preference Stock, at such holder's address as it appears on the stock register of the Corporation. Each such mailed notice shall state, as appropriate, the record date, the number of shares of Capital Stock to be delivered per share of Series C Preference Stock and the Current Market Price used to calculate such number of shares of Capital Stock. No fractional shares of Capital Stock shall be issued pursuant to this Subsection F(a)(iv) but, in lieu of any fraction of a share of Capital Stock which would otherwise be issuable in respect of the aggregate number of shares of the Series C Preference Stock held by the same holder, each such holder shall have the right to receive an amount in cash equal to the same fraction of the Current Market Price of the Capital Stock determined as of the second Trading Date immediately preceding the relevant Notice Date or a cash payment equal to such holder's proportionate interest in the net proceeds (following the deduction of applicable transaction costs) from the sale, promptly by an agent on behalf of all such holders, of shares of Capital Stock representing the aggregate of such fractional shares. (b) Liquidation. (i) Upon any dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary (collectively, a "Liquidation"), the holders of shares of Series C Preference Stock shall be entitled to receive out of the assets of the Corporation available for distribution to shareholders, after payment of all debts and other liabilities of the Corporation and all liquidation preferences of holders of shares of $3.00 Cumulative Preferred Stock and/or any other class or series of preferred stock which the Corporation may in the future issue which ranks prior to the Series C Preference Stock with respect to liquidation rights, but before any distribution or payment is made to holders of Capital Stock of the Corporation or on any other shares of the Corporation ranking junior to the shares of Series C Preference Stock upon liquidation, liquidating distributions in the amount of $90 per share, plus an amount equal to all Preferential Dividends accrued and unpaid thereon (including dividends accumulated and unpaid) to the date of Liquidation, and no more. If upon any Liquidation the amounts payable with respect to the Series C Preference Stock and any other shares of the Corporation ranking as to any such distribution on a parity with the Series C Preference Stock are not paid in full, the holders of shares of Series C Preference Stock and of such other shares will share ratably in any such distribution of assets of the Corporation in proportion to the full respective distributable amounts to which they are entitled. After payment of the full amount of the liquidating distribution to which they are entitled, the holders of shares of Series C Preference Stock will not be entitled to any further participation in any distribution or payments by the Corporation. (ii) Neither the merger nor consolidation of the Corporation into or with any other corporation, nor the merger or consolidation of any other corporation into or with the Corporation, nor a sale, transfer or lease of all or any part of the assets of the Corporation, shall be deemed to be a Liquidation for purposes of this Subsection F(b). (c) Conversions. (i) Automatic Conversion on Final Conversion Date. Unless earlier converted in accordance with the provisions hereof, on September 7, 1995 (the "Final Conversion Date"), each outstanding share of Series C Preference Stock shall automatically convert into: (A) that number of shares of Capital Stock as shall be equal to the product of (x) the Common Equivalent Rate (determined as provided in Subsection F(c)(iv)) determined as of the Final Conversion Date, and (y) the Appreciation Adjustment Factor (determined as provided in Subsection F(c)(v)) determined as of the second Trading Date preceding the Final Conversion Date; and (B) the right to receive an amount in cash equal to all accrued and unpaid dividends on such share to and including the Final Conversion Date, whether or not declared, out of funds legally available therefor; provided, however, that to the extent that on the Final Conversion Date the Corporation shall have failed to fulfill its obligation to pay or deposit (in accordance with Subsection F(c)(x)) the funds set forth in clause (B) above and shall not have previously notified holders of Series C Preference Stock of its exercise of its option, pursuant to the following paragraph, to deliver shares of Capital Stock in whole or partial fulfillment of its obligations pursuant to clause (B) above, then each outstanding share of Series C Preference Stock shall automatically convert into that number of shares of Capital Stock as shall equal the sum of (x) the number of shares determined in accordance with clause (A) above, plus (y) the number of shares determined by subtracting from the amount of cash described in clause (B) above, the amount of such cash actually paid or deposited (in accordance with Subsection F(c)(x)), and dividing the remainder by the Current Market Price of the Capital Stock determined as of the second Trading Date immediately preceding the Final Conversion Date. At the option of the Corporation, following the giving of notice thereof to holders of record of Series C Preference Stock in accordance with Subsection F(c)(x), it may deliver on the Final Conversion Date, in lieu of the cash described in clause (B) above, a number of shares of Capital Stock equal to the amount of cash described in such clause (B) divided by the Current Market Price of the Capital Stock determined as of the second Trading Date immediately preceding the Notice Date. Such option may be exercised by the Corporation for all or part of such cash consideration. (ii) Automatic Conversion Upon the Occurrence of Certain Events. Immediately prior to the effectiveness of a merger or consolidation of the Corporation that results in the conversion or exchange of the Capital Stock into or for, or that results in the holders of Capital Stock obtaining the right to receive, other securities or other property, whether of the Corporation or of any other entity (any such merger or consolidation is referred to herein as a "Merger or Consolidation"), other than a Merger or Consolidation in which the Series C Preference Stock remains outstanding and holders of Series C Preference Stock obtain the right to receive the same securities or other property that they would have received with respect to the number of shares of Capital Stock which such holders would have received pursuant to clause (A) (only) of this Subsection F(c)(ii) upon conversion of their shares of Series C Preference Stock immediately prior to the effectiveness of the Merger or Consolidation, each outstanding share of Series C Preference Stock shall automatically convert into: (A) that number of shares of Capital Stock as shall be equal to the product of (x) the Common Equivalent Rate determined as of the effective date of the Merger or Consolidation, and (y) the Appreciation Adjustment Factor determined as of the second Trading Date prior to the applicable Notice Date; plus (B) the right to receive an amount of cash equal to the accrued and unpaid dividends on such share of Series C Preference Stock to and including the Settlement Date (as hereinafter defined); plus (C) the right to receive an amount of cash (the "Remaining Dividend Premium"), equal on the date of issuance of the Series C Preference Stock to $8.80 plus the amount by which the Initial Preferential Dividend would have exceeded $0.85, declining on December 7, 1992 by the amount by which the Initial Preferential Dividend exceeded $0.85, and declining thereafter by $0.80 on each Preferential Dividend Payment Date from and including March 7, 1992 to zero on September 7, 1995, in each case determined as of the Settlement Date; plus (D) if the effective date of such Merger or Consolidation shall occur on a date which is prior to the payment date of a cash dividend which has been declared on shares of Capital Stock but after the record date for such dividend payment, the right to receive an amount of cash equal to $0.85; plus (E) if the effective date of such Merger or Consolidation shall occur on a Preferential Dividend Payment Date and no amount shall be payable pursuant to clause (D) immediately above, the right to receive an amount of cash equal to $0.85; provided, however, that to the extent that on the effective date the Corporation shall have failed to fulfill its obligation to pay or deposit (in accordance with Subsection F(c)(x) below) the funds set forth in clauses (B),(C), (D) and (E) above and shall not have previously notified holders of Series C Preference Stock of its exercise of its option, pursuant to the following paragraph, to deliver shares of Capital Stock in whole or partial fulfillment of its obligations pursuant to clauses (B),(C), (D) and (E) above, then each outstanding share of Series C Preference Stock shall automatically convert into that number of shares of Capital Stock as shall equal the sum of (x) the number of shares determined in accordance with clause (A) above, plus (y) a number of shares determined by subtracting from the amount of cash described in clauses (B), (C), (D) and (E) above the amount of such cash actually paid or deposited (in accordance with Subsection F(c)(x)), and dividing the remainder by the Current Market Price of the Capital Stock determined as of the second Trading Date immediately preceding the effective date of such Merger or Consolidation. At the option of the Corporation, following the giving of notice thereof to holders of record of Series C Preference Stock in accordance with Subsection F(c)(x), it may deliver on the effective date of such Merger or Consolidation, in lieu of the cash described in clauses (B), (C), (D) and (E) above, a number of shares of Capital Stock equal to the amount of cash described in such clauses (B),(C), (D) and (E) divided by the Current Market Price of the Capital Stock determined as of the second Trading Date immediately preceding the Notice Date. Such option may be exercised by the Corporation for all or part of such cash consideration. (iii) Conversion at the Option of the Corporation. At any time and from time to time prior to the Final Conversion Date, the Corporation shall have the right to convert, in whole or in part, the outstanding shares of Series C Preference Stock. Each outstanding share of Series C Preference Stock to be converted shall automatically convert into: (A) that number of shares of Capital Stock as shall be equal to the product of (x) the Common Equivalent Rate determined as of the effective date of the conversion, and (y) the Appreciation Adjustment Factor determined as of the second Trading Date prior to the applicable Notice Date; plus (B) the right to receive an amount of cash equal to the accrued and unpaid dividends on such share of Series C Preference Stock to and including the Settlement Date; plus (C) the right to receive an amount of cash equal to the Remaining Dividend Premium on such share of Series C Preference Stock, determined as of the Settlement Date; plus (D) if the effective date of such conversion shall occur on a date which is prior to the payment date of a cash dividend which has been declared on shares of Capital Stock but after the record date for such dividend payment, the right to receive an amount of cash equal to $0.85; plus (E) if the effective date of such conversion shall occur on a Preferential Dividend Payment Date and no amount shall be payable pursuant to clause (D) immediately above, the right to receive an amount of cash equal to $0.85; provided, however, that to the extent that on the effective date of any such conversion the Corporation shall have failed to fulfill its obligation to pay or deposit (in accordance with Subsection F(c)(x) below) the funds set forth in clauses (B),(C), (D) and (E) above and shall not have previously notified holders of Series C Preference Stock to be converted of its exercise of its option, pursuant to the following paragraph, to deliver shares of Capital Stock in whole or partial fulfillment of its obligations pursuant to clauses (B), (C), (D) and (E) above, then each outstanding share of Series C Preference Stock to be converted shall automatically convert into that number of shares of Capital Stock as shall equal the sum of (x) the number of shares determined in accordance with clause (A) above, plus (y) a number of shares determined by subtracting from the amount of cash described in clauses (B), (C), (D) and (E) above the amount of such cash actually paid or deposited (in accordance with Subsection F(c)(x)), and dividing the remainder by the Current Market Price of the Capital Stock determined as of the second Trading Date immediately preceding the effective date of any such conversion. At the option of the Corporation, it may deliver on the effective date of any such conversion, in lieu of the cash consideration described in clauses (B), (C), (D) and (E) above, a number of shares of Capital Stock equal to the amount of cash consideration described in such clauses (B), (C), (D) and (E) divided by the Current Market Price of the Capital Stock determined as of the second Trading Date immediately preceding the Notice Date. Such option may be exercised by the Corporation for all or part of such cash consideration. (iv) Common Equivalent Rate; Adjustments. The Common Equivalent Rate to be used to determine the number of shares of Capital Stock to be delivered on the conversion of the Series C Preference Stock into shares of Capital Stock pursuant to Subsection F(c)(i), (ii) and (iii) shall be initially five (5) shares of Capital Stock for each share of Series C Preference Stock; provided, however, that such Common Equivalent Rate shall be subject to adjustment from time to time as provided below in this Subsection F(c)(iv). All adjustments to the Common Equivalent Rate shall be calculated in 1/100ths of a share of Capital Stock. Such rate in effect at any time is herein called the "Common Equivalent Rate." (A) If the Corporation shall: (1) pay a dividend or make a distribution with respect to the Capital Stock in shares of Capital Stock (other than a dividend or distribution which is also paid to holders of Series C Preference Stock and in which such holders shall receive, with respect to each share of Series C Preference Stock, the same number of shares of Capital Stock as shall be distributed with respect to that number of shares of Capital Stock as shall be equal to the product of (x) the Common Equivalent Rate determined as of the applicable record date for the determination of shareholders entitled to receive such dividend or distribution and (y) the Appreciation Adjustment Factor determined as of the second Trading Date prior to the applicable Notice Date), (2) subdivide or split its outstanding shares of Capital Stock, (3) combine its outstanding shares of Capital Stock into a smaller number of shares, or (4) issue by reclassification of its shares of Capital Stock any shares of Capital Stock of the Corporation then, in any such event, the Common Equivalent Rate shall be adjusted by multiplying the Common Equivalent Rate in effect immediately prior to the date of such event by a fraction, of which the numerator shall be the number of outstanding shares of Capital Stock immediately following such event, and of which the denominator shall be the number of outstanding shares of Capital Stock immediately prior to such event. Such adjustment shall become effective at the opening of business on the business day next following the record date for determination of shareholders entitled to receive such dividend or distribution in the case of a dividend or distribution and shall become effective immediately after the effective date in case of a subdivision, split, combination, or reclassification. (B) If the Corporation shall pay a dividend or make a distribution to all holders of its Capital Stock of evidence of its indebtedness or other assets (including securities of the Corporation but excluding any cash dividends or distributions and dividends referred to in clause (A) above), or shall distribute to all holders of its Capital Stock rights or warrants to subscribe for or purchase securities of the Corporation or any of its subsidiaries, (in each case other than a dividend or distribution which is also paid or made to holders of Series C Preference Stock in which such holders shall receive, with respect to each share of Series C Preference Stock, the same evidence of indebtedness or other assets, or the same rights or warrants, as shall be paid or distributed with respect to that number of shares of Capital Stock as shall be equal to the product of (x) the Common Equivalent Rate determined as of the applicable record date for the determination of shareholders entitled to receive such dividend or distribution and (y) the Appreciation Adjustment Factor determined as of the second Trading Date prior to the applicable Notice Date), then in each such case the Common Equivalent Rate shall be adjusted by multiplying the Common Equivalent Rate in effect immediately prior to the date of such distribution by a fraction, of which the numerator shall be the Current Market Price per share of Capital Stock on the record date mentioned below, and of which the denominator shall be such Current Market Price per share of Capital Stock less the fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) as of such record date of the portion of the assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, applicable to one share of Capital Stock. Such adjustment shall become effective on the opening of business on the business day next following the record date for the determination of shareholders entitled to receive such distribution. (C) Anything in this Subsection F(c) notwithstanding, the Board of Directors shall be entitled to make such upward adjustments in the Common Equivalent Rate, in addition to those required by this Subsection F(c), (1) as the Board of Directors in its discretion shall determine to be advisable, in order that any stock dividends, subdivision of shares, distribution of rights to purchase stock or securities, or a distribution of securities convertible into or exchangeable for stock (or any transaction which could be treated as any of the foregoing transactions pursuant to Section 305 of the Internal Revenue Code of 1986, as amended) hereafter made by the Corporation to its shareholders shall not be taxable; and (2) as the Board of Directors in its discretion shall determine to be necessary or appropriate in order to preserve the relative rights of the holders of Capital Stock, on the one hand, and the holders of Series C Preference Stock, on the other hand, as such rights are set forth in this Certificate of Incorporation. (D) In any case in which this Subsection F(c)(iv) shall require that an adjustment as a result of any event become effective at the opening of business on the business day next following a record date, and the date fixed for conversion pursuant to Subsection F(c)(i), (ii) or (iii) occurs after such record date, but before the occurrence of such event, the Corporation may in its sole discretion elect to defer the following until after the occurrence of such event: (1) issuing to the holder of any shares of the Series C Preference Stock surrendered for conversion the additional shares of Capital Stock issuable upon such conversion over and above the shares of Capital Stock issuable upon such conversion on the basis of the Common Equivalent Rate prior to adjustment; and (2) paying to such holder any amount in cash in lieu of a fractional share of Capital Stock pursuant to Subsection F(c)(vii). (v) Appreciation Adjustment Factor; Adjustments. On any date, the "Appreciation Adjustment Factor" shall be determined as follows: (A) If, on such date, the Current Market Price per share of Capital Stock shall be less than or equal to the Appreciation Cap (as hereinafter defined), then the Appreciation Adjustment Factor shall be equal to one (1). (B) If, on such date, the Current Market Price per share of Capital Stock shall be greater than the Appreciation Cap, then the Appreciation Adjustment Factor shall be equal to a fraction, the numerator of which is the Appreciation Cap and the denominator of which is the Current Market Price per share of Capital Stock. (C) The Appreciation Cap shall be initially $24.00 per share of Capital Stock. If, as and when the Common Equivalent Rate is adjusted, the Appreciation Cap shall be adjusted, such that the ratio which the Appreciation Cap in effect immediately following such adjustment bears to the Appreciation Cap in effect immediately prior to such adjustment is the same ratio as that which the Common Equivalent Rate in effect immediately prior to such adjustment bears to the Common Equivalent Rate in effect immediately following such adjustment. The Appreciation Cap in effect at any time is herein called the "Appreciation Cap." (vi) Notice of Adjustments. Whenever the Common Equivalent Rate is adjusted as herein provided, the Corporation shall: (A) forthwith compute the adjusted Common Equivalent Rate and Appreciation Cap in accordance with this Subsection F(c)(vi) and prepare a certificate signed by the Chief Executive Officer, the Chairman, the President, any Vice President or the Treasurer of the Corporation setting forth the adjusted Common Equivalent Rate and Appreciation Cap, the method of calculation thereof in reasonable detail and the facts requiring such adjustment and upon which such adjustment is based, and file such certificate forthwith with the transfer agent or agents for the Series C Preference Stock and the Capital Stock; and (B) mail a notice stating that the Common Equivalent Rate and the Appreciation Cap have been adjusted, the facts requiring such adjustment and upon which such adjustment is based and setting forth the adjusted Common Equivalent Rate and Appreciation Cap to the holders of record of the outstanding shares of the Series C Preference Stock at or prior to the time the Corporation mails an interim statement to its shareholders covering the quarter-yearly period during which the facts requiring such adjustment occurred, but in any event within 45 days of the end of such quarter- yearly period. In addition to the foregoing, the Corporation will calculate and provide notice to the transfer agent or agents for the Series C Preference Stock and the Capital Stock within 30 days after (1) the date of initial issuance of the shares of Series C Preference Stock, (2) each Preferential Dividend Payment Date or (3) the occurrence of any event triggering an adjustment of the Common Equivalent Rate, of the number of shares of Capital Stock required to be reserved for issuance upon conversion of the issued and outstanding shares of Series C Preference Stock (calculated as if the Current Market Price of any shares of Capital Stock issuable in payment of Preferential Dividends or Remaining Dividend Premium were 30% of the lowest Current Market Price of Capital Stock applicable during the preceding 100 days); provided that no such notice need be sent if the number of shares of Capital Stock then reserved is in excess of the number of shares of Capital Stock required to be reserved as so calculated. (vii) No Fractional Shares. No fractional shares of Capital Stock shall be issued upon conversion of shares of the Series C Preference Stock but, in lieu of any fraction of a share of Capital Stock which would otherwise be issuable in respect of the aggregate number of shares of the Series C Preference Stock surrendered by the same holder for redemption or conversion on any redemption or conversion date or in payment of accrued and unpaid dividends, the Remaining Dividend Premium or any other amount, the holder shall have the right to receive an amount in cash equal to the same fraction of the Current Market Price of the Capital Stock determined as of the second Trading Date immediately preceding the relevant Notice Date or, with respect to conversions pursuant to Subsection F(c)(i), the Final Conversion Date, as the case may be, or a cash payment equal to such holder's proportionate interest in the net proceeds (following the deduction of applicable transaction costs) from the sale, promptly by an agent on behalf of all such holders, of shares of Capital Stock representing the aggregate of such fractional shares. (viii) Cancellation. All shares of Series C Preference Stock which shall have been converted into or redeemed for shares of Capital Stock or which shall have been purchased or otherwise acquired by the Corporation shall assume the status of authorized but unissued shares of Series Preference Stock undesignated as to series. (ix) Definitions. As used in this Subsection F, (A) the term "business day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the States of New York or Ohio are authorized or obligated by law or executive order to close; (B) the term "Market Price" for any day means (1) if the Capital Stock is listed or admitted for trading on the New York Stock Exchange (or any successor to such exchange) or, if not so listed or admitted, on any national or regional securities exchange, the last sale price, or the closing bid price if no sale occurred, of such class of stock on the principal securities exchange on which such class of stock is listed, or (2) if not listed or traded as described in clause (1), the last reported sales price of Capital Stock on the National Market System of the National Association of Securities Dealers Automated Quotations System, or any similar system of automated dissemination of quotations of securities prices then in common use, if so quoted, or (3) if not quoted as described in clause (2), the mean between the high bid and the low asked quotations for the Capital Stock as reported by the National Quotation Bureau Incorporated if at least two securities dealers have inserted both bid and asked quotations for such class of stock on at least five of the ten preceding days. If the Capital Stock is quoted on a national securities or central market system in lieu of a market or quotation system described above, then the closing price shall be determined in the manner set forth in clause (1) of the preceding sentence if actual transactions are reported and in the manner set forth in clause (3) of the preceding sentence if bid and asked quotations are reported but actual transactions are not. If none of the conditions set forth above is met, the closing price of Capital Stock on any day or the average of such closing prices for any period shall be the fair market value of such class of stock as determined by a member firm of the New York Stock Exchange, Inc. (or any successor to such exchange) selected by the Corporation. (C) the term "Current Market Price" per share of Capital Stock on any day shall be the average of the daily Market Prices for the ten consecutive Trading Dates ending on and including the date of determination of the Current Market Price (appropriately adjusted to take into account the occurrence during such ten-day period, or following such ten-day period and prior to the date on which shares of Series C Preference Stock are converted into Capital Stock, of any event that results in an adjustment of the Common Equivalent Rate). (D) the term "Notice Date" shall mean the following: with respect to any notice given by the Corporation in connection with a conversion (including any potential conversion upon the effectiveness of a Merger or Consolidation) of any of the Series C Preference Stock, the earlier of the commencement of the mailing of such notice to the holders of Series C Preference Stock or the date such notice is first published in accordance with Subsection F(c)(x); with respect to any notice given by the Corporation in connection with its exercise of its option to deliver shares of Capital Stock in lieu of cash in payment of dividends on the Series C Preference Stock, including a notice stating that the Corporation intends to exercise its option to deliver shares of Capital Stock in satisfaction of accrued and unpaid dividends on the Final Conversion Date, the commencement of the mailing of such notice to the holders of Series C Preference Stock; and with respect to any notice given by the Corporation in connection with a dividend or distribution referred to in Subsection F(c)(iv), the earlier of the commencement of the mailing of notice of such dividend or distribution to the holders of Capital Stock or the date such notice is first published in an Authorized Newspaper (as hereinafter defined). (E) the term "Settlement Date" shall mean the following: with respect to a Merger or Consolidation, the business day immediately prior to the effective date of the Merger or Consolidation; and with respect to a conversion of any of the Series C Preference Stock pursuant to Subsection F(c)(iii), the business day immediately prior to the effective date of the conversion as set forth in the notice given by the Corporation in connection therewith; and (F) the term "Trading Date" shall mean (1) a date on which the New York Stock Exchange (or any successor to such exchange) is open for the transaction of business, or (2) if the Capital Stock is not at such time listed or admitted for trading on the New York Stock Exchange (or any successor to such Exchange), a date upon which the principal national or regional securities exchange upon which the Capital Stock is listed or admitted to trading is open for the transaction of business, or (3) if not listed or admitted to trading as described in clauses (1) or (2), and if at such time the sales price of Capital Stock is quoted on the National Market System of the National Association of Securities Dealers Automated Quotations System, or any similar system of automated dissemination of quotations of securities prices then in common use, a date for which such system provides quotations with respect to securities upon which it reports, or (4) if not so quoted, and if at such time the bid and asked prices of Capital Stock are reported by the National Quotation Bureau Incorporated, a date for which the National Quotation Bureau Incorporated provides bid and asked prices with respect to securities upon which it reports, or (5) if not so quoted, any business day. (x) Notice of Conversion. The Corporation will provide notice of any conversion (including any potential conversion upon the effectiveness of a Merger or Consolidation, but not including any conversion on the Final Conversion Date) of shares of Series C Preference Stock to holders of record of the Series C Preference Stock to be converted not less than 15 nor more than 60 days prior to the date fixed for such conversion; provided, however, that if the timing of the effectiveness of a Merger or Consolidation makes it impracticable to provide at least 15 days notice, the Corporation shall provide such notice as soon as practicable prior to such effectiveness. Such notice shall be provided by mailing notice of such conversion first class postage prepaid, to each holder of record of the Series C Preference Stock to be converted, at such holder's address as it appears on the stock register of the Corporation, and by publishing notice thereof in The Wall Street Journal or The New York Times or, if neither such newspaper is then being published, any other daily newspaper of national circulation (each, an "Authorized Newspaper"). Each such mailed or published notice shall state, as appropriate, the following: (A) the conversion date; (B) the number of shares of Series C Preference Stock to be converted and, if less than all the shares held by such holder are to be converted, the number of such shares to be converted; (C) the number of shares of Capital Stock deliverable upon conversion; (D) whether the Corporation is exercising any option to deliver shares of Capital Stock in lieu of cash and the Current Market Price to be used to calculate the number of such shares of Capital Stock; (E) the place or places where certificates for such shares are to be surrendered for conversion; and (F) that dividends on the shares of Series C Preference Stock to be converted will cease to accrue on such conversion date. The Corporation's obligation to deliver shares of Capital Stock and provide cash in accordance with this Subsection F(c)(x) shall be deemed fulfilled if, on or before a conversion date, the Corporation shall deposit, with a bank or trust company having an office or agency in the Borough of Manhattan in New York City, or which has an affiliate or correspondent having an office or agency in the Borough of Manhattan in New York City, which depository has a capital and surplus of at least $50,000,000, such number of shares of Capital Stock as are required to be delivered by the Corporation pursuant to this Subsection F(c) upon the occurrence of the related conversion (including the payment of fractional share amounts), together with shares of Capital Stock and/or cash sufficient to pay all accrued and unpaid dividends and/or any applicable Remaining Dividend Premium on the shares to be converted as required by this Subsection F(c), in trust for the account of the holders of the shares to be converted (and so as to be and continue to be available therefor), with irrevocable instructions and authority to such bank or trust company that such shares and cash be delivered upon conversion of the shares of Series C Preference Stock so converted. Any interest accrued on such cash shall be paid to the Corporation from time to time. Any shares of Capital Stock or cash so deposited and unclaimed at the end of three years from such conversion date shall be repaid and released to the Corporation, after which the holder or holders of such shares of Series C Preference Stock so converted shall look, subject to applicable state escheat or unclaimed funds laws, only to the Corporation for delivery of shares of Capital Stock and cash, if applicable. Each holder of shares of Series C Preference Stock to be converted shall surrender the certificates evidencing such shares to the Corporation at the place designated in the notice of such conversion and shall thereupon be entitled to receive certificates evidencing shares of Capital Stock and cash, if applicable, following such surrender and following the date of such conversion. In case fewer than all the shares represented by any such surrendered certificate are converted, a new certificate shall be issued at the expense of the Corporation representing the unconverted shares. If such notice of conversion (if required) shall have been duly given, then, notwithstanding that the certificates evidencing any shares of Series C Preference Stock subject to conversion shall not have been surrendered, the shares represented thereby subject to conversion shall be deemed no longer outstanding, dividends with respect to the shares subject to conversion shall cease to accrue after the date fixed for conversion and all rights with respect to the shares subject to conversion shall forthwith after such date cease and terminate, except for the right of the holders to receive the shares of Capital Stock and/or any applicable cash amounts without interest upon surrender of their certificates therefor; provided that if on the date fixed for conversion shares of Capital Stock and cash, if applicable, necessary for the conversion shall have been deposited by the Corporation in trust for the account of the holders of the shares so to be converted (and so as to be and continue to be available therefor) as provided above, then the holder or holders of such shares of Series C Preference Stock so converted shall look only to such bank or trust company for delivery of shares of Capital Stock and cash, if applicable, unless and until such shares of Capital Stock and cash are repaid and released to the Corporation. If fewer than all the outstanding shares of Series C Preference Stock are to be converted at the option of the Corporation, shares to be converted shall be selected by the Corporation from outstanding shares of Series C Preference Stock by lot or pro rata (as nearly as may be) or by any other method determined by the Board of Directors of the Corporation in its sole discretion to be appropriate and fair to the holders of Series C Preference Stock. (d) Voting Rights. (i) In addition to any voting rights to which the holders of shares of Series C Preference Stock shall be entitled pursuant to any other provision of the Certificate of Incorporation or applicable law, each outstanding share of Series C Preference Stock is entitled to vote on all matters submitted to a vote of shareholders of the Corporation, each holder of shares of Series C Preference Stock to have the number of votes equal to the product of the number of shares of Series C Preference Stock owned by such holder multiplied by the Common Equivalent Rate in effect on the record date for determining the shareholders of the Corporation entitled to vote. The Series C Preference Stock and the Capital Stock shall vote as a single class on all matters submitted to a vote of shareholders of the Corporation. (ii) In addition to the voting rights set forth in Subsection F(d)(i), whenever, at any time, Preferential Dividends payable on the Series C Preference Stock shall be in arrears with respect to six (6) or more Preferential Dividend Payment Dates, whether or not consecutive, the holders of shares of Series C Preference Stock shall have the exclusive right, voting separately as a class with holders of shares of any one or more other series of Series Preference Stock and/or any other class or series of shares ranking on a parity with shares of Series C Preference Stock either as to dividends or on the distribution of assets upon Liquidation and upon which like voting rights have been conferred and are exercisable, to elect two directors of the Corporation at the Corporation's next annual meeting of shareholders and at each subsequent annual meeting of shareholders until such right is terminated as provided in this Subsection F(d)(ii). At elections for such directors, each holder of shares of Series C Preference Stock shall be entitled to the number of votes equal to the product of the number of shares of Series C Preference Stock owned by such holder multiplied by the Common Equivalent Rate in effect on the record date for determining the shareholders of the Corporation entitled to vote (the holders of shares of any other series of Series Preference Stock and/or other class or series of shares ranking on such a parity being entitled to such number of votes, if any, for each share of stock held as may be applicable to them). Upon the vesting of such voting right in the holders of shares of Series C Preference Stock, the maximum authorized number of members of the Board of Directors shall automatically be increased by two and the two vacancies so created shall be filled by vote of the holders of shares of Series C Preference Stock (with the holders of shares of any one or more other class or series of shares ranking on such a parity) as set forth herein. The right of the holders of shares of Series C Preference Stock, voting separately as a class with the holders of shares of any one or more other series of Series Preference Stock and/or other class or series of shares ranking on such a parity, to elect members of the Board of Directors of the Corporation as aforesaid shall continue until such time as all dividends accumulated on shares of Series C Preference Stock shall have been paid or deposited for payment in full, at which time such right shall terminate, except as by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned. Upon any termination of the right of the holders of Series C Preference Stock and, if applicable, the holders of shares of any one or more other series of Series Preference Stock and/or other class or series of shares ranking on such a parity to vote as a class for directors as herein provided, the term of office of all directors then in office elected by shares of Series C Preference Stock and such other series voting as a class shall terminate immediately. If the office of any director elected by the holders of shares of Series C Preference Stock and, if applicable, the holders of shares of any one or more other series of Series Preference Stock and/or other class or series of shares on such a parity, voting as a class, becomes vacant by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, the remaining director elected by the holders of shares of Series C Preference Stock and, if applicable, the holders of shares of any one or more other series of Series Preference Stock and/or other class or series of shares ranking on such a parity, voting as a class, may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred. Whenever the special voting powers vested in the holders of shares of Series C Preference Stock and the holders of shares of any one or more other series of Series Preference Stock and/or other class or series of shares ranking on such a parity to vote as a class for directors as provided in this Subsection F(d)(ii) shall have expired, the number of directors shall become such number as may be provided for in the By-Laws, or resolution of the Board of Directors thereunder, irrespective of any increase made pursuant to the provisions of this Subsection F(d)(ii). (e) Increase in Shares. The number of shares of Series C Preference Stock may, to the extent of the Corporation's authorized and unissued Series Preference Stock, be increased by further resolution duly adopted by the Board of Directors and the filing of an amendment to the Certificate of Incorporation of the Corporation. (f) Exclusive Rights. Each holder of shares of Series C Preference Stock shall hold such Series C Preference Stock subject to the right of the Corporation to effect a conversion in accordance with the provisions of Subsection F(c) hereof and, in the event of such a conversion shall have the right to receive, as full payment, discharge and satisfaction of the obligations of the Corporation with respect to such Series C Preference Stock, only those shares of Capital Stock and cash, if applicable, delivered as provided in accordance with Subsection F(c) hereof. CERTIFICATE OF AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION OF CHIQUITA BRANDS INTERNATIONAL, INC. TO: Secretary of State State of New Jersey Pursuant to the provisions of N.J.S. 14A:7-2(2), the undersigned corporation, Chiquita Brands International, Inc. (the "Corporation"), executes the following Certificate of Amendment to its Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation"). 1. The name of the corporation is Chiquita Brands International, Inc. 2. The following resolutions, establishing and designating a series of shares and fixing and determining the relative rights and preferences thereof, were duly adopted by the Executive Committee of the Board of Directors of the Corporation as of the 8th day of February, 1994, pursuant to the authority vested in the Board of Directors by the Certificate of Incorporation, exercised on behalf of the Board of Directors by the Executive Committee pursuant to resolutions of the Board of Directors so authorizing it to act: RESOLVED, that pursuant to the authority expressly vested in the Executive Committee of the Board of Directors of the Corporation by the Restated Certificate of Incorporation, as amended, and by resolutions of the Board of Directors, the Executive Committee of the Board of Directors hereby classifies Two Million, Eight Hundred Seventy-Five Thousand (2,875,000) shares of the Corporation's Non-Voting Cumulative Preferred Stock as a new series designated "$2.875 Non- Voting Cumulative Preferred Stock, Series A," $1.00 par value (the "Series A Preferred Stock"). RESOLVED, that the terms and conditions of the Series A Preferred Stock, including its rights, preferences, privileges, voting powers, restrictions, qualifications, limitations, and terms and conditions for conversion shall be as set forth in Exhibit A attached hereto. RESOLVED, that the Corporation's Restated Certificate of Incorporation, as amended, is hereby further amended to add to Section IV of such certificate a new Subsection G entitled "Special Provisions Applicable to Series A Preferred Stock," in the form attached hereto as Exhibit A, and the proper officers of the Corporation are authorized to execute and file, as necessary, any documents or certificates with the New Jersey Secretary of State to effect such amendment. 3. The resolutions were adopted by unanimous written consent by the Executive Committee of the Board of Directors as of February 8, 1994. 4. The Certificate of Incorporation is further amended so that the designation and number of shares of each class and series acted upon in the resolutions, and the relative rights, preferences and limitations of each such class and series are as stated in Exhibit A attached hereto, which is the same exhibit referred to in the foregoing resolutions. IN WITNESS WHEREOF, the undersigned has signed this Certificate of Amendment to the Certificate of Incorporation this 10th day of February, 1994. CHIQUITA BRANDS INTERNATIONAL, INC. By:/s/ William A. Tsacalis -------------------------------- William A. Tsacalis Vice President and Controller EXHIBIT A SUBSECTION G. SPECIAL PROVISIONS APPLICABLE TO SERIES A PREFERRED STOCK There is hereby established Series A Preferred Stock which shall be designated "$2.875 Non-Voting Cumulative Preferred Stock, Series A" $1.00 par value ("Series A Preferred Stock") and shall consist of Two Million, Eight Hundred Seventy-Five Thousand (2,875,000) shares, and no more. The relative, participating, optional and other special rights and the qualifications, limitations and restrictions of the Series A Preferred Stock shall be as follows: (a) Dividends. (i) The holders of outstanding shares of the Series A Preferred Stock shall be entitled to receive (subject to the rights of holders of shares of Mandatorily Exchangeable Cumulative Preference Stock, Series C, or any series of Non- Voting Cumulative Preferred Stock or Series Preference Stock and/or any other class or series of preferred or preference stock which the Corporation may in the future issue which ranks prior to or on a parity with the Series A Preferred Stock as to dividends), when, as and if declared by the Board of Directors out of funds legally available therefor, cumulative preferential cash dividends at the per share rate of $.71875 per quarter and no more ("Preferential Dividends"), payable on the seventh (7th) day of March, June, September and December of each year (each such date being hereinafter referred to as a "Preferential Dividend Payment Date") commencing June 7, 1994; provided, however, that the Preferential Dividend payable on June 7, 1994 (the "Initial Preferential Dividend") with respect to any share of Series A Preferred Stock outstanding on the record date for the Initial Preferential Dividend shall be computed in accordance with Subsection G(a)(iv). If June 7, 1994 or any other Preferential Dividend Payment Date shall not be a business day, then the Preferential Dividend Payment Date shall be on the next succeeding business day. Each such dividend will be payable to holders of record as they appear on the stock books of the Corporation on such record date, not less than 10 nor more than 60 days preceding the Preferential Dividend Payment Date, as shall be fixed by the Board of Directors. Dividends on the Series A Preferred Stock shall accrue from the date of issuance of the Series A Preferred Stock, and dividends accrued as of each Preferential Dividend Payment Date shall accumulate to the extent not paid on such date. Accumulated unpaid dividends shall not bear interest. All payments of Preferential Dividends to holders of Series A Preferred Stock shall be rounded up to the nearest whole cent. (ii) So long as any shares of Series A Preferred Stock are outstanding: (A) no dividend (other than a dividend or distribution paid in shares of, or warrants or rights to subscribe for or purchase shares of, Capital Stock or any other stock of the Corporation ranking junior to the Series A Preferred Stock as to dividends and upon liquidation) shall be declared or paid or set aside for payment or other distribution declared or made upon the Capital Stock or upon any other stock of the Corporation ranking junior to or (except as provided in the following sentence) on a parity with the Series A Preferred Stock as to dividends, (B) nor shall any Capital Stock nor any other stock of the Corporation ranking junior to or on a parity with the Series A Preferred Stock as to dividends be redeemed, purchased or otherwise acquired for any consideration (or any moneys be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for stock of the Corporation ranking junior to the Series A Preferred Stock as to dividends and upon liquidation), (C) nor shall the Corporation purchase or otherwise acquire (except pursuant to a purchase or exchange offer made on the same terms to all holders of shares of Series A Preferred Stock), or convert in part, but not in whole, into shares of Capital Stock at the option of the Corporation pursuant to Subsection G(c)(ii) outstanding shares of Series A Preferred Stock, unless, in each case, the full Preferential Dividends, if any, accumulated on all outstanding shares of the Series A Preferred Stock through the most recent Preferential Dividend Payment Date shall have been paid or deposited for payment or contemporaneously are declared and paid or deposited for payment. When dividends have not been paid in full upon the shares of Series A Preferred Stock, all dividends and other distributions declared upon the Series A Preferred Stock and any other shares of the Corporation ranking on a parity as to dividends and such other distributions with the shares of Series A Preferred Stock shall be declared pro rata so that the amount of dividends and other distributions declared per share on the Series A Preferred Stock and such other shares shall in all cases bear to each other the same ratio that accumulated unpaid dividends per share on the shares of Series A Preferred Stock and such other shares bear to each other. Holders of the shares of Series A Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided. (iii) Any dividend payment made on shares of Series A Preferred Stock shall first be credited against the earliest accumulated unpaid dividend due with respect to shares of Series A Preferred Stock. (iv) Any dividends payable for any period greater or less than a full quarterly dividend period shall be computed on the basis of a 360-day year consisting of twelve 30-day months. (b) Liquidation. (i) Upon any dissolution, liquidation or winding up of the affairs of the Corporation, whether voluntary or involuntary (collectively, a "Liquidation"), the holders of shares of Series A Preferred Stock shall be entitled to receive out of the assets of the Corporation available for distribution to shareholders, after payment of all debts and other liabilities of the Corporation and all liquidation preferences of holders of shares of any class or series of preferred or preference stock which the Corporation may in the future issue which ranks prior to the Series A Preferred Stock with respect to liquidation rights, but before any distribution or payment is made to holders of Capital Stock of the Corporation or on any other shares of the Corporation ranking junior to the shares of Series A Preferred Stock upon liquidation, liquidating distributions in the amount of $50 per share, plus an amount equal to all accumulated unpaid Preferential Dividends thereon to the date of Liquidation, and no more. If upon any Liquidation the amounts payable with respect to the Series A Preferred Stock and any other shares of the Corporation ranking as to any such distribution on a parity with the Series A Preferred Stock are not paid in full, the holders of shares of Series A Preferred Stock and of such other shares will share ratably in any such distribution of assets of the Corporation in proportion to the full respective distributable amounts to which they are entitled. After payment of the full amount of the liquidating distribution to which they are entitled, the holders of shares of Series A Preferred Stock will not be entitled to any further participation in any distribution or payments by the Corporation. (ii) Neither the merger nor consolidation of the Corporation into or with any other corporation or other entity, nor the merger or consolidation of any other corporation or other entity into or with the Corporation, nor a sale, transfer or lease of all or any part of the assets of the Corporation for cash, securities or other property, shall be deemed to be a Liquidation for purposes of this Subsection G(b). (c) Conversions. (i) Automatic Conversion Upon the Occurrence of Certain Events. Immediately prior to the effectiveness of a merger or consolidation of the Corporation that results in the conversion or exchange of the Capital Stock into or for, or that results in the holders of Capital Stock obtaining the right to receive, cash, securities or other assets, whether of the Corporation or of any other person or entity (any such merger or consolidation is referred to herein as a "Merger or Consolidation"), other than a Merger or Consolidation in which the Series A Preferred Stock remains outstanding and holders of Series A Preferred Stock obtain the right to receive upon conversion of their shares into Capital Stock or any other security the same cash, securities or other assets that they would have received with respect to the maximum number of shares of Capital Stock which such holders would have received (other than in payment of accumulated unpaid dividends) upon conversion of their shares of Series A Preferred Stock (at the option of the Corporation pursuant to clause (ii) of this Subsection G(c) or at the option of the holder pursuant to clause (iii) of this Subsection G(c), whichever is greater) immediately prior to the effectiveness of the Merger or Consolidation, each outstanding share of Series A Preferred Stock shall automatically convert into the maximum number of shares of Capital Stock which such holders would have received (other than in payment of accumulated unpaid dividends) upon conversion of their shares of Series A Preferred Stock (at the option of the Corporation pursuant to clause (ii) of this Subsection G(c) or at the option of the holder pursuant to clause (iii) of this Subsection G(c), whichever is greater), plus the right to receive an amount of cash equal to the accumulated unpaid dividends on such share of Series A Preferred Stock to and including the Settlement Date (as defined in Subsection G(c)(viii)). (ii) Conversion at the Option of the Corporation. (A) At any time and from time to time on and after February 15, 1997 and prior to February 15, 2001, and upon notice given as provided herein, the Corporation may convert, in whole or in part, the outstanding shares of Series A Preferred Stock; provided, however, that the Corporation may exercise its right to convert only if the Market Price (as defined in Subsection G(c)(viii)) of the Capital Stock for 20 Trading Dates (as defined in Subsection G(c)(viii)) within any period of 30 consecutive Trading Dates, including the last Trading Date of such 30 consecutive Trading Date period (the "Measuring Date"), shall have exceeded $24.70 per share, subject to adjustment as provided below (the "Strike Price"). On the date fixed for conversion, each outstanding share of Series A Preferred Stock to be converted pursuant to this Subsection G(c)(ii)(A) shall convert into that number of shares of Capital Stock as shall be determined in accordance with the Conversion Rate (as defined in Subsection G(c)(iv)) as in effect on the date of conversion, plus the right to receive an amount of cash equal to the accumulated unpaid dividends on such share of Series A Preferred Stock to and including the Settlement Date. The Strike Price shall be proportionately adjusted when, as and if the Conversion Rate shall be adjusted pursuant to Subsection G(c)(iv). (B) At any time and from time to time on and after February 15, 2001, and upon notice given as provided herein, the Corporation may convert, in whole or in part, the outstanding shares of Series A Preferred Stock. On the date fixed for conversion, each outstanding share of Series A Preferred Stock to be converted pursuant to this Subsection G(c)(ii)(B) shall convert into: (1) the lesser of (x) that number of shares of Capital Stock as shall equal $50 divided by the Current Market Price (as defined in Subsection G(c)(viii)) per share of Capital Stock on the date of conversion, or (y) 10 shares of Capital Stock, subject to adjustment as provided below (the "Maximum Conversion Rate"); plus (2) the right to receive an amount of cash equal to the accumulated unpaid dividends on such share of Series A Preferred Stock to and including the Settlement Date; plus (3) the right to receive an amount of cash equal to dividends accrued since the immediately preceding Preferential Dividend Payment Date, calculated in accordance with Subsection G(a)(iv); provided, however, that no amount shall be due and payable pursuant to this clause (3) if the conversion date follows a record date for the payment of a Preferential Dividend and precedes the next succeeding Preferential Dividend Payment Date. The Maximum Conversion Rate shall be proportionately adjusted when, as and if the Conversion Rate shall be adjusted pursuant to Subsection G(c)(iv). (iii) Conversion at the Option of the Holder. At any time and from time to time after the 60th day following the final closing of the initial public offering of Series A Preferred Stock, each holder of Series A Preferred Stock shall have the right to convert, in whole or in part, the outstanding shares of Series A Preferred Stock; provided, however, that if the shares of Series A Preferred Stock to be converted have been earlier called for conversion at the option of the Corporation, the right of the holder to convert such shares will terminate as of 5:00 P.M., New York City time, on the business day immediately preceding the date fixed for such conversion. Each outstanding share of Series A Preferred Stock to be converted at the option of the holder shall convert into that number of shares of Capital Stock as shall be determined in accordance with the Conversion Rate in effect on the Settlement Date, plus the right to receive an amount of cash equal to the accumulated unpaid dividends on such share of Series A Preferred Stock to be converted to and including the Settlement Date. In order to convert shares of Series A Preferred Stock into Capital Stock the holder thereof shall surrender, at the office in the United States designated by the Corporation in writing from time to time for registration of transfers and conversion, the certificate or certificates therefor, duly endorsed to the Corporation or in blank, and give written notice to the Corporation at said office that such holder elects to convert such shares and shall state in writing therein the name or names (with addresses) in which such holder wishes the certificate or certificates for Capital Stock to be issued. Shares of Series A Preferred Stock surrendered for conversion after the close of business on a record date for payment of Preferential Dividends and before 9:00 A.M., New York time, on the next succeeding Preferential Dividend Payment Date must be accompanied by payment of an amount equal to the Preferential Dividend thereon which is to be paid on such Preferential Dividend Payment Date. Shares of Series A Preferred Stock shall be deemed to have been converted on the date of the surrender of such certificate or certificates for shares for conversion as provided above, and the person or persons entitled to receive the Capital Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such Capital Stock on such date. As soon as practicable on or after the date of conversion as aforesaid, the Corporation will issue and deliver a certificate or certificates for the number of full shares of Capital Stock issuable upon such conversion, together with cash for any fraction of a share, as provided in Subsection G(c)(vi), to the person or persons entitled to receive the same. (iv) Conversion Rate; Adjustments. The Conversion Rate to be used to determine the number of shares of Capital Stock to be delivered on the conversion of the Series A Preferred Stock into shares of Capital Stock pursuant to Subsections G(c)(i), (ii) and (iii) shall be initially 2.6316 shares of Capital Stock for each share of Series A Preferred Stock; provided, however, that such Conversion Rate shall be subject to adjustment from time to time as provided below in this Subsection G(c)(iv). All adjustments to the Conversion Rate shall be calculated in 1/100ths of a share of Capital Stock. No adjustment of less than one percent (1%) of the Conversion Rate shall be required; however, any such adjustment not made due to such limitation shall be carried forward and shall be taken into account in any subsequent adjustment. Such rate in effect at any time is herein called the "Conversion Rate." (A) If the Corporation shall: (1) pay a dividend or make a distribution with respect to the Capital Stock in shares of Capital Stock (other than a dividend or distribution which is also paid to holders of Series A Preferred Stock and in which such holders shall receive, with respect to each share of Series A Preferred Stock, the same number of shares of Capital Stock as shall be distributed with respect to the maximum number of shares of Capital Stock into which such share of Preferred Stock shall then be convertible at the option of the Corporation pursuant to Subsection G(c)(ii) or at the option of the holder pursuant to Subsection G(c)(iii), whichever is greater), (2) subdivide or split its outstanding shares of Capital Stock, (3) combine its outstanding shares of Capital Stock into a smaller number of shares, or (4) issue by reclassification of its shares of Capital Stock any shares of Capital Stock of the Corporation, then, in any such event, the Conversion Rate shall be adjusted by multiplying the Conversion Rate in effect immediately prior to the date of such event by a fraction, of which the numerator shall be the number of outstanding shares of Capital Stock immediately following such event, and of which the denominator shall be the number of outstanding shares of Capital Stock immediately prior to such event. Such adjustment shall become effective at the opening of business on the business day next following the record date for determination of shareholders entitled to receive such dividend or distribution in the case of a dividend or distribution and shall become effective immediately after the effective date in case of a subdivision, split, combination, or reclassification. (B) If the Corporation shall pay a dividend or make a distribution to all holders of its Capital Stock of evidence of its indebtedness or other assets (including securities of the Corporation but excluding any regular quarterly dividends payable solely in cash out of funds legally available therefor at a rate fixed from time to time by the Board of Directors or distributions and dividends referred to in clause (A) above), or shall distribute to all holders of its Capital Stock rights or warrants to subscribe for or purchase securities of the Corporation or any of its subsidiaries (in each case other than a dividend or distribution which is also paid or made to holders of Series A Preferred Stock in which such holders shall receive, with respect to each share of Series A Preferred Stock, the same evidence of indebtedness or other assets, or the same rights or warrants, as shall be paid or distributed with respect to the maximum number of shares of Capital Stock into which each share of Preferred Stock shall then be convertible at the option of the Corporation pursuant to Subsection G(c)(ii) or at the option of the holder pursuant to Subsection(G)(c)(iii), whichever is greater), then in each such case the Conversion Rate shall be adjusted by multiplying the Conversion Rate in effect immediately prior to the date of such distribution by a fraction, of which the numerator shall be the Current Market Price per share of Capital Stock on the record date mentioned below, and of which the denominator shall be such Current Market Price per share of Capital Stock less the fair market value (as determined by the Board of Directors of the Corporation, whose determination shall be conclusive) as of such record date of the portion of the assets or evidences of indebtedness so distributed, or of such subscription rights or warrants, applicable to one share of Capital Stock. Such adjustment shall become effective on the opening of business on the business day next following the record date for the determination of shareholders entitled to receive such distribution. (C) Anything in this Subsection G(c)(iv) notwithstanding, the Board of Directors shall be entitled to make such upward adjustments in the Conversion Rate, in addition to those required by this Subsection G(c)(iv), (1) as the Board of Directors in its discretion shall determine to be advisable, in order that any stock dividends, subdivision of shares, distribution of rights to purchase stock or securities, or a distribution of securities convertible into or exchangeable for stock (or any transaction which could be treated as any of the foregoing transactions pursuant to Section 305 of the Internal Revenue Code of 1986, as amended, or any successor section thereto) hereafter made by the Corporation to its shareholders shall not be taxable; and (2) as the Board of Directors in its discretion shall determine to be necessary or appropriate in order to preserve the relative rights of the holders of Capital Stock, on the one hand, and the holders of Series A Preferred Stock, on the other hand, as such rights are set forth in this Certificate of Incorporation. (D) In any case in which this Subsection G(c)(iv) shall require that an adjustment as a result of any event become effective at the opening of business on the business day next following a record date, and the date fixed for conversion pursuant to Subsection G(c)(i), (ii) or (iii) occurs after such record date, but before the occurrence of such event, the Corporation may in its sole discretion elect to defer the following until after the occurrence of such event: (1) issuing to the holder of any shares of the Series A Preferred Stock surrendered for conversion the additional shares of Capital Stock issuable upon such conversion over and above the shares of Capital Stock issuable upon such conversion on the basis of the Conversion Rate prior to adjustment; and (2) paying to such holder any amount in cash in lieu of a fractional share of Capital Stock pursuant to Subsection G(c)(vi). (v) Notice of Adjustments. Whenever the Conversion Rate is adjusted as herein provided, the Corporation shall: (A) forthwith compute the adjusted Conversion Rate in accordance with Subsection G(c)(iv) and prepare a certificate signed by the Chief Executive Officer, the Chairman, the President, any Vice President or the Treasurer of the Corporation setting forth the adjusted Conversion Rate, Maximum Conversion Rate and, if applicable, Strike Price, the method of calculation thereof in reasonable detail and the facts requiring such adjustment and upon which such adjustment is based, and file such certificate forthwith with the transfer agent or agents for the Series A Preferred Stock and the Capital Stock; and (B) mail a notice stating that the Conversion Rate, Maximum Conversion Rate and, if applicable, Strike Price, have been adjusted, the facts requiring such adjustment and upon which such adjustment is based and setting forth the adjusted Conversion Rate, Maximum Conversion Rate and, if applicable, Strike Price, to the holders of record of the outstanding shares of the Series A Preferred Stock at or prior to the time the Corporation mails an interim financial statement to its shareholders covering the quarter-yearly fiscal period during which the facts requiring such adjustment occurred, but in any event within 45 days of the end of such quarter-yearly fiscal period. In addition to the foregoing, the Corporation will calculate and provide notice to the transfer agent or agents for the Series A Preferred Stock and the Capital Stock within 30 days after (1) the date of initial issuance of the shares of Series A Preferred Stock, or (2) the occurrence of any event triggering an adjustment of the Maximum Conversion Rate, of the number of shares of Capital Stock required to be reserved for issuance upon conversion of the issued and outstanding shares of Series A Preferred Stock; provided that no such notice need be sent if the number of shares of Capital Stock then reserved is in excess of the number of shares of Capital Stock required to be reserved as so calculated. (vi) No Fractional Shares. No fractional shares of Capital Stock shall be issued upon conversion of shares of Series A Preferred Stock but, in lieu of any fraction of a share of Capital Stock which would otherwise be issuable in respect of the aggregate number of shares of the Series A Preferred Stock surrendered by the same holder for conversion on any conversion date, the holder shall have the right to receive an amount in cash equal to the same fraction of the Current Market Price of the Capital Stock on the date of conversion. (vii) Cancellation. All shares of Series A Preferred Stock which shall have been converted into shares of Capital Stock or which shall have been purchased or otherwise acquired by the Corporation shall assume the status of authorized but unissued shares of Non-Voting Cumulative Preferred Stock undesignated as to series. (viii) Definitions. As used in this Subsection G: (A) The term "business day" shall mean any day other than a Saturday, Sunday, or a day on which banking institutions in the States of New York or Ohio are authorized or obligated by law or executive order to close. (B) The term "Current Market Price" per share of Capital Stock on any day shall be the average of the daily Market Prices for the five consecutive Trading Dates ending on the Trading Date immediately preceding the date of determination of the Current Market Price (appropriately adjusted to take into account the occurrence during such five-day period, or following such five-day period and prior to the date on which shares of Series A Preferred Stock are converted into Capital Stock, of any event that results in an adjustment of the Conversion Rate). (C) The term "Market Price" for any day means (1) if the Capital Stock is listed or admitted for trading on the New York Stock Exchange (or any successor to such exchange) or, if not so listed or admitted, on any national or regional securities exchange, the last sale price, or the closing bid price if no sale occurred, of the Capital Stock on the principal securities exchange on which the Capital Stock is listed, or (2) if not listed or traded as described in clause (1), the last reported sales price of the Capital Stock on the National Market System of the National Association of Securities Dealers Automated Quotations System, or any similar system of automated dissemination of quotations of securities prices then in common use, if so quoted, or (3) if not quoted as described in clause (2), the mean between the high bid and the low asked quotations for the Capital Stock as reported by the National Quotation Bureau Incorporated if at least two securities dealers have inserted both bid and asked quotations for the Capital Stock on at least five of the ten preceding days. If the Capital Stock is quoted on a national securities or central market system in lieu of a market or quotation system described above, then the closing price shall be determined in the manner set forth in clause (1) of the preceding sentence if actual transactions are reported and in the manner set forth in clause (3) of the preceding sentence if bid and asked quotations are reported but actual transactions are not. If none of the conditions set forth above is met, the closing price of Capital Stock on any day or the average of such closing prices for any period shall be the fair market value of the Capital Stock as determined by a member firm of the New York Stock Exchange, Inc. (or any successor to such exchange) selected by the Corporation. (D) The term "Notice Date" shall mean the following: with respect to any notice given by the Corporation in connection with a conversion (including any potential conversion upon the effectiveness of a Merger or Consolidation) of any of the Series A Preferred Stock, the date of mailing of such notice to the holders of Series A Preferred Stock. (E) The term "Settlement Date" shall mean the following: with respect to a Merger or Consolidation, the business day immediately prior to the effective date of the Merger or Consolidation; with respect to a conversion of any of the Series A Preferred Stock at the option of the Corporation pursuant to Subsection G(c)(ii), the business day immediately prior to the effective date of the conversion as set forth in the notice given by the Corporation in connection therewith; and with respect to a conversion of any of the Series A Preferred Stock at the option of the holder pursuant to Subsection G(c)(iii), the date upon which the certificates representing shares of Series A Preferred Stock are surrendered for conversion. (F) The term "Trading Date" shall mean (1) a date on which the New York Stock Exchange (or any successor to such exchange) is open for the transaction of business, or (2) if the Capital Stock is not at such time listed or admitted for trading on the New York Stock Exchange (or any successor to such Exchange), a date upon which the principal national or regional securities exchange upon which the Capital Stock is listed or admitted to trading is open for the transaction of business, or (3) if not listed or admitted to trading as described in clauses (1) or (2), and if at such time the sales price of Capital Stock is quoted on the National Market System of the National Association of Securities Dealers Automated Quotations System, or any similar system of automated dissemination of quotations of securities prices then in common use, a date for which such system provides quotations with respect to securities upon which it reports, or (4) if not so quoted, and if at such time the bid and asked prices of the Capital Stock are reported by the National Quotation Bureau Incorporated, a date for which the National Quotation Bureau Incorporated provides bid and asked prices with respect to securities upon which it reports, or (5) if not so quoted, any business day. (ix) Notice of Conversion. The Corporation shall provide notice of any exercise of its right to convert shares of Series A Preferred Stock to holders of record of the Series A Preferred Stock to be converted by mailing a notice of conversion (within five business days after the Measuring Date, in the case of any Notice Date with respect to a conversion date prior to February 15, 2001) to such holders, which notice will specify an effective date of conversion that is not less than 15 nor more than 60 days after the date of such notice. The Corporation will provide notice of any potential conversion upon the effectiveness of a Merger or Consolidation not less than 15 nor more than 60 days prior to the effective date thereof; provided, however, that if the timing of the effectiveness of a Merger or Consolidation makes it impracticable to provide at least 15 days' notice, the Corporation shall provide such notice as soon as practicable prior to such effectiveness. Each such notice shall be provided by mailing notice of such conversion first class postage prepaid, to each holder of record of the Series A Preferred Stock to be converted, at such holder's address as it appears on the stock register of the Corporation. Each such notice shall state, as appropriate, the following: (A) the conversion date; (B) the number of shares of Series A Preferred Stock to be converted and, if less than all the shares held by such holder are to be converted, the number of such shares to be converted; (C) the number of shares of Capital Stock deliverable upon conversion, or a description of the formula pursuant to which such number shall be determined; (D) the place or places where certificates for such shares are to be surrendered for conversion; and (E) that dividends on the shares of Series A Preferred Stock to be converted will cease to accrue on the effective date of conversion. The Corporation's obligation to deliver shares of Capital Stock and provide cash in accordance with this Subsection G(c)(ix) shall be deemed fulfilled if, on or before an effective date of conversion, the Corporation shall deposit, with a bank or trust company having an office or agency in the Borough of Manhattan in New York City, or which has an affiliate or correspondent having an office or agency in the Borough of Manhattan in New York City, which depository has a capital and surplus of at least $50,000,000, such number of shares of Capital Stock as are required to be delivered by the Corporation pursuant to this Subsection G(c) upon the occurrence of the related conversion, together with cash sufficient to pay all accumulated unpaid dividends, cash in lieu of fractional share amounts and/or any additional payment pursuant to Subsection G(c)(ii)(B)(3), if applicable, on the shares to be converted as required by this Subsection G(c), in trust for the account of the holders of the shares to be converted, with irrevocable instructions and authority to such bank or trust company that such shares and cash be delivered upon conversion of the shares of Series A Preferred Stock so converted. Any interest accrued on such cash shall be paid to the Corporation from time to time. Any shares of Capital Stock or cash so deposited and unclaimed at the end of three years from such conversion date shall be repaid and released to the Corporation, after which the holder or holders of such shares of Series A Preferred Stock so converted shall look, subject to applicable state escheat or unclaimed funds laws, only to the Corporation for delivery of shares of Capital Stock and cash, if applicable. Each holder of shares of Series A Preferred Stock to be converted shall surrender the certificates evidencing such shares to the Corporation at the place designated in the notice of such conversion and shall thereupon be entitled to receive certificates evidencing shares of Capital Stock and cash, if applicable, following such surrender and following the date of such conversion. In case fewer than all the shares of Series A Preferred Stock represented by any such surrendered certificate are converted, a new certificate shall be issued at the expense of the Corporation representing the unconverted shares. If such notice of conversion (if required) shall have been duly given, then, notwithstanding that the certificates evidencing any shares of Series A Preferred Stock subject to conversion shall not have been surrendered, the shares represented thereby subject to conversion shall be deemed no longer outstanding, dividends with respect to the shares of Series A Preferred Stock subject to conversion shall cease to accrue after the date fixed for conversion and all rights with respect to such shares subject to conversion shall forthwith after such date cease and terminate, except for the right of the holders to receive the shares of Capital Stock and/or any applicable cash amounts without interest upon surrender of their certificates therefor; provided that if on the date fixed for conversion shares of Capital Stock and cash, if applicable, necessary for the conversion shall have been deposited by the Corporation in trust for the account of the holders of the shares of Series A Preferred Stock so to be converted as provided above, then the holder or holders of such shares of Series A Preferred Stock so converted shall look only to such bank or trust company for delivery of shares of Capital Stock and cash, if applicable, unless and until such shares of Capital Stock and cash are repaid and released to the Corporation. No holder of a certificate of shares of Series A Preferred Stock shall be, or have any rights as, a holder of the shares of Capital Stock issuable in connection with the conversion thereof, including, without limitation, voting rights or the right to receive any dividend from the Corporation with respect to such shares of Capital Stock, until surrender of such certificate for a certificate representing such Capital Stock. Upon such surrender, there shall be paid to the holder the amount of any dividend or other distribution (without interest) which became payable in respect of the number of whole shares of Capital Stock issuable upon such surrender on or after the conversion date, but which was not paid by reason of any earlier failure to surrender certificates that represented shares of Series A Preferred Stock. If fewer than all the outstanding shares of Series A Preferred Stock are to be converted at the option of the Corporation, shares to be converted shall be selected by the Corporation from outstanding shares of Series A Preferred Stock by lot or pro rata (as nearly as may be) or by any other method reasonably determined by the Board of Directors of the Corporation to be appropriate and fair to the holders of Series A Preferred Stock. (x) Corporation's Option to Pay Accumulated Unpaid Dividends in Common Stock Upon Conversion on or after February 15, 2001. Notwithstanding anything to the contrary contained herein, if the effective date of any conversion is on or after February 15, 2001 and if on such date there are accumulated unpaid dividends with respect to the Series A Preferred Stock to be so converted, then on such effective date the Corporation may deliver, in lieu of any cash payment in respect of accumulated unpaid dividends and, if applicable, any additional payment pursuant to Subsection G(c)(ii)(B)(3), that number of shares of Capital Stock the aggregate Current Market Price of which on such date shall equal the amount of such cash payment. Such option may be exercised by the Corporation for all or part of such cash payment. (xi) No Interest on Accumulated Unpaid Dividends. Any payment with respect to accumulated unpaid dividends upon conversion of shares of Series A Preferred Stock, whether such payment is made in cash or, pursuant to Subsection G(c)(x), in shares of Capital Stock, shall not provide for any interest on such accumulated unpaid dividends. (d) Voting Rights. (i) Holders of Series A Preferred Stock shall have no right to vote on any matter submitted to a vote of shareholders of the Corporation, except as otherwise provided by applicable law and this Subsection G(d). In addition to any voting rights to which the holders of shares of Series A Preferred Stock shall be entitled pursuant to applicable law, whenever, at any time, Preferential Dividends payable on the Series A Preferred Stock shall be in arrears with respect to six (6) or more Preferential Dividend Payment Dates, whether or not consecutive, the holders of shares of Series A Preferred Stock shall have the right, voting separately as a class with holders of shares of any one or more series of Non-Voting Cumulative Preferred Stock, Series Preference Stock and/or any other class or series of shares ranking on a parity with shares of Series A Preferred Stock as to dividends and upon which like voting rights have been conferred and are exercisable, to elect two directors of the Corporation at the Corporation's next meeting of shareholders at which directors are to be elected and at each subsequent meeting of shareholders at which directors are to be elected until such right is terminated as provided in this Subsection G(d). Upon the vesting of such voting right in the holders of shares of Series A Preferred Stock, the maximum authorized number of members of the Board of Directors shall automatically be increased by two and the two vacancies so created shall be filled by vote of the holders of shares of Series A Preferred Stock (voting as a class with the holders of shares of any one or more other class or series of shares ranking on such a parity) as set forth herein. The right of the holders of shares of Series A Preferred Stock to elect members of the Board of Directors of the Corporation as aforesaid shall continue until such time as all dividends accumulated on shares of Series A Preferred Stock shall have been paid or deposited for payment in full, at which time such right shall terminate, except as by law expressly provided, subject to revesting in the event of each and every subsequent default of the character above mentioned. (ii) Upon any termination of the right of the holders of Series A Preferred Stock and, if applicable, the holders of shares of any one or more other series of Non-Voting Cumulative Preferred Stock, Series Preference Stock and/or other class or series of shares ranking on such a parity to vote as a class for directors as herein provided, the term of office of all directors then in office elected by shares of Series A Preferred Stock and such other series voting as a class shall terminate immediately. If the office of any director elected by the holders of shares of Series A Preferred Stock and, if applicable, the holders of shares of one or more other series of Non-Voting Cumulative Preferred Stock, Series Preference Stock and/or other class or series of shares on such a parity, voting as a class, becomes vacant by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, the remaining director elected by the holders of shares of Series A Preferred Stock and, if applicable, the holders of shares of any one or more other series of Non-Voting Cumulative Preferred Stock, Series Preference Stock and/or other class or series of shares ranking on such a parity, voting as a class, may choose a successor who shall hold office for the unexpired term in respect of which such vacancy occurred. Whenever the special voting powers vested in the holders of shares of Series A Preferred Stock and the holders of shares of any one or more other series of Non-Voting Cumulative Preferred Stock, Series Preference Stock and/or other class or series of shares ranking on such a parity to vote as a class for directors as provided in this Subsection G(d)(ii) shall have expired, the number of directors shall become such number as may be provided for in the By-Laws, or resolution of the Board of Directors thereunder, irrespective of any increase made pursuant to the provisions of this Subsection G(d)(ii). (iii) While any Series A Preferred Stock is outstanding, the Corporation shall not, without the affirmative consent (given in writing or at a meeting duly called for that purpose) of the holders of at least two-thirds (2/3rds) of the aggregate number of votes entitled to be exercised by holders of all affected series of Non-Voting Cumulative Preferred Stock then outstanding (provided that each other series shall have voting rights similar or identical to the voting rights set forth in this Subsection G(d)(iii)): (A) amend the Certificate of Incorporation of the Corporation to authorize the creation of any class or series of stock having a preference as to dividends or upon liquidation senior to or on a parity with the Series A Preferred Stock (hereinafter in this Subsection (G)(d)(iii) referred to as "Senior Stock"); provided, however, that no such approval of holders of Series A Preferred Stock (or other affected series of Non-Voting Cumulative Preferred Stock having similar voting rights) shall be required to amend the Certificate of Incorporation of the Corporation to authorize the creation of any series of Senior Stock that may be authorized out of the Non- Voting Cumulative Preferred Stock or the Series Preference Stock, the terms of which may be established by any amendment to the Certificate of Incorporation of the Corporation which may be adopted by the Board of Directors of the Corporation without shareholder approval, or (B) amend, alter or repeal the Certificate of Incorporation of the Corporation in a manner that would materially adversely affect the terms of Series A Preferred Stock. (iv) With respect to any matter upon which holders of shares of Series A Preferred Stock shall be entitled to vote pursuant to this Subsection G(d), each such holder shall be entitled to exercise the number of votes equal to the maximum number of shares of Capital Stock into which the shares of Series A Preferred Stock held by such holder shall then be convertible at the option of the Corporation pursuant to Subsection G(c)(ii) or at the option of the holder pursuant to Subsection (G)(c)(iii), whichever is greater, on the record date for determining the shareholders of the Corporation entitled to vote. (e) Increase in Shares. The number of shares of Series A Preferred Stock may, to the extent of the Corporation's authorized and unissued Non-Voting Cumulative Preferred Stock, be increased by further resolution duly adopted by the Board of Directors and the filing of an amendment to the Certificate of Incorporation of the Corporation. (f) Exclusive Rights. Each holder of shares of Series A Preferred Stock shall hold such Series A Preferred Stock subject to the right of the Corporation to effect a conversion in accordance with the provisions of Subsection G(c) hereof and, in the event of such a conversion, shall have the right to receive, as full payment, discharge and satisfaction of the obligations of the Corporation with respect to such Series A Preferred Stock, only those shares of Capital Stock and cash, if applicable, delivered as provided in accordance with Subsection G(c) hereof. (g) Equal Rank. All shares of Series A Preferred Stock shall be identical in all respects, and all shares of Series A Preferred Stock shall be of equal rank with shares of Mandatorily Exchangeable Cumulative Preference Stock, Series C, in respect of the preference as to dividends and to payments upon the Liquidation of the Corporation. EX-10.A 3 EXHIBIT 10-A EXHIBIT 10-a Exhibit D TRANSLATION PUBLIC DOCUMENT NUMBER ONE HUNDRED THIRTY FOUR 134 WHEREBY THE NATION, and UNITED BRANDS COMPANY, CHIRIQUI LAND COMPANY and COMPANIA PROCESADORA DE FRUTAS, S.A., execute a Lease of Lands Contract. Panama, January 8, 1976 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - In Panama City, Capital of the Republic and Seat of the Notarial Circuit of the same name, on the eighth -8- of January of the year one thousand nine hundred and seventy six -1976- before me, CECILIO MORENO, Notary Public Second of the Circuit of Panama, with personal identity card number eight-fifty two-nine hundred and fifty eight (8-52-958) appeared personally before me the following persons whom I know: Lieutenant Colonel RUBEN DARIO PAREDES, male, adult, married, Panamanian and resident of this city, with personal identity card number eight-seventy three-one hundred and seventy three (8-73-173), Minister of Cattle and Agricultural Development, acting in the name and on behalf of THE NATION, duly authorized for this act pursuant to Law number five (5) of January the seventh (7) year one thousand nine hundred and seventy six (1976), as the party of the first part, hereinafter referred to as THE NATION, and the other party hereto, Mr. WALLACE WRAY BOOTH, male, adult, married, American, in transit through this city, with U.S. Passport number E-one million six hundred seventy seven thousand nine hundred and eighty seven (E-1677987), who declared he did not desire an interpreter as he understood Spanish, who is duly empowered for the purposes of this Contract, acting in the name of and representing the companies UNITED BRANDS COMPANY, a corporation organized in accordance with the laws of the State of New Jersey, United States of America, and duly authorized to operate in the Republic of Panama, in accordance with Volume seven hundred and thirty seven (737), Page four hundred and ninety two (492), Entry one hundred thirty five thousand nine hundred and thirty nine (135,939), of the Public Registry, Commercial Companies Section, authorized for this act as appears on page two hundred and twenty (220) of Volume one thousand two hundred and nineteen (1219), Entry one hundred twenty eight thousand eight hundred and forty six "C", CHIRIQUI LAND COMPANY, a corporation organized in accordance with the laws of the State of Delaware, United States of America and duly authorized to operate in the Republic of Panama, in accordance with Volume thirty nine (39), Page four hundred and sixty six (466), Entry five thousand three hundred and forty five Bis (5345 Bis) of the Public Registry, Commercial Companies Section, authorized for this act in accordance with Page five hundred and thirty two (532), of Volume one thousand two hundred and two (1202), Entry one hundred twenty seven thousand three hundred and sixty four "A" (127,364 "A"), and COMPANIA PROCESADORA DE FRUTAS, corporation organized in accordance with the laws of the State of Delaware, United States of America and duly authorized to operate in the Republic of Panama, in accordance with Volume six hundred and eighty eight (688), Page three hundred and fifty five (355), Entry one hundred thirty one thousand two hundred and twenty four (131.224), of the Public Registry, Commercial Companies Section, authorized for this act, as per Page number two hundred and seventy seven (277) of Volume one thousand two hundred and eight (1208), Entry one hundred eighteen thousand and twenty one "C" (118,021 "C"), and who hereinafter shall be referred to jointly as THE COMPANY, agree to this Land Lease Contract in accordance with the following clauses: - - - - - - - - - - - - - - - - - - - - - - - FIRST CLAUSE: - From all the lands that THE NATION has purchased from THE COMPANY by virtue of the Purchase-Sale Agreement executed on this same date, THE NATION leases to THE COMPANY an area of approximately fifteen thousand and seven hundred (15,700) hectares of which approximately twelve thousand and seven hundred (12,700) hectares are comprised of agricultural lands and three thousand (3,000) hectares of lands to be utilized for installations, buildings, stores, storage and other uses.- - - - SECOND CLAUSE: - The lands that THE NATION leases to THE COMPANY are described in the maps identified as annexes I, II, III, IV and V, which are part of this Agreement. Copies of these maps have been signed by the parties and the signatures authenticated by a Notary Public. - - - - - - - - - - - - - - - - - - THIRD CLAUSE: - THE COMPANY accepts the lands leased in their present conditions and shall use them in its activities which entail in addition to production, packing, transportation, exportation of bananas and their derivatives, use of equipment and machinery, other accessory activities which are performed for the benefit of the banana industry and its workers, including among others the following activities: agricultural, livestock, milk producing, recreational, commercial and services. - - - - - FOURTH CLAUSE: - During the duration of this Contract, THE COMPANY shall use the leased lands with the efficiency and good care which it has used previously during the normal periods of operation, exclusive of the force majeure contingencies or inevitable accident. THE NATION guarantees THE COMPANY the pacific use of the lands for the purposes for which they were leased. - - - - - - - - - - - - - - FIFTH CLAUSE: - The lands leased shall be returned by THE COMPANY to THE NATION upon the termination of this Contract in the state that they then may be, without any responsibility whatsoever for suitable uses which they might have been put to with respect to the normal activities of THE COMPANY, and without any responsibility for damages due to force majeure or inevitable accident. In addition, THE NATION grants THE COMPANY the rights to draw water to aqueducts, to right of way, to passage and the like with respect to national lands in which the structures related to the activities of THE COMPANY are situated, such as pipelines, irrigation, drainage, aqueducts sewage, railroads, communications lines, telephones and telegraphs. In exercising these rights for new structures or installations, THE COMPANY shall make prior compensation for the resulting damages which it may have created. THE COMPANY shall be able to construct new structures or alter existing ones, in which case THE NATION shall make available to it, free access and right of way to national lands in accordance with the plans proved by THE NATION through the Ministry of Cattle and Agricultural Development. - - - - - - It is understood the lease rent agreed upon under the present Contract, includes the payment for the rights described in this Clause. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - SIXTH CLAUSE: - The rental payment for the lands referred to in this Contract amounts to ONE MILLION BALBOAS (B/. 1.000.000.00) a year, payable in four (4) equal installments at the end of each quarter on the due dates of March thirty first (31), June thirtieth (30), September thirtieth (30) and December thirty first (31) of each year. - - - - - - - - - - - - - - - - - - - - - SEVENTH CLAUSE: - THE COMPANY shall be able to return to THE NATION, in the conditions which are delineated in the Fifth Clause of this Contract, those lands which is (SIC) deemed unnecessary for its operations, in which case the rental payment shall be reduced proportionally. Likewise, in the event of expansion of the activities of THE COMPANY, or should it need the use of other lands, THE NATION, within the availabilities anticipated for these purposes shall lease them to THE COMPANY and the rental payment shall be adjusted proportionally. THE COMPANY shall formulate a written request and THE NATION shall make available said lands to THE COMPANY within a period not exceeding eight (8) months. Within a sixty (60) day period following the execution of this Contract, the parties shall agree on the location and area of the lands which shall be maintained readily available for these purposes. In any event, THE NATION will not be obliged to maintain lands in reserve whose total area exceeds two thousand (2,000) hectares. - - - - - - - - - - - - - EIGHTH CLAUSE: - The initial leasehold term shall consist of a period of five (5) years, commencing on January first (1) one thousand nine hundred and seventy six (1976). Said term shall be extendible yearly, by mutual agreement, on the anniversaries of same, that is, the first day of January of each year for consecutive periods of one year each. That is to say that on the first anniversary date or January first (1) one thousand nine hundred and seventy seven (1977), with only four (4) years remaining of the initial period in force, the term shall be extendible for an additional year so as to have new period consisting of another 5-year term commencing on that date and subsequently each year on each anniversary date. Said extensions of one year shall be deemed to be automatically agreed upon by the parties if within a ninety (90) day period prior to the anniversary date of each term neither party has notified the other in writing of its decision not to extend. - - - - - - - - In the event that one of the parties notifies the other of its decision to not extend the term, this notification shall take effect without the necessity of further confirmation during the subsequent four (4) years. - - - - - NINTH CLAUSE: - THE COMPANY, that is, the companies United Brands Company, Chiriqui Land Company and Compania Procesadora de Frutas, S. A., execute the present Contract and jointly and severally assume all the rights and obligations arising from the same. - - - - - - - - - - - - - - - - - - - - - - - - - TENTH CLAUSE: - This Contract shall take effect commencing on January first (1) one thousand nine hundred and seventy six (1976). - - - - - - - - - - - - - - - - - - - - - - - - - - - - - This instrument was read to the persons appearing herein in the presence of witnesses Mr. Fernando Manfredo, with personal identity card number eight-forty nine-two hundred and thirty nine, Mr. Ruben Darlo Herrera, with personal identity card number three-twenty one-eight hundred and ninety-three (3-21-893), and the formal witnesses Mr. Artemio Saavedra, with personal identity card number seven- thirty eight-four hundred and forty four (7-38-444), and Angiolina Varcasia, with personal identity card number eight-forty nine-two hundred and ninety-four (8-49-294) adults, residents of this city, whom I know and who have the necessary capacity, they found this instrument to be in order and extended their approval to the same by signing all before my presence which I certify. This instrument bears the number one hundred and thirty four 134. Executed by Lieutenant Colonel RUBEN DARIO PAREDES. - - - WALLACE W. BOOTH. - - - Fernando Manfredo. - - - Ruben D. Herrera. - - - Artemio Saavedra. - - - Angiolina Varcasia. - - - C. MORENO, Notary Public Second. - - - This copy is as its original which I provide, sign and seal, in Panama City, Republic of Panama, on January eight (8), of the year one thousand nine hundred and seventy six (1976). /s/ C. Moreno Notary Public Second TRANSEXD.POL TRANSLATION EXHIBIT E PUBLIC DOCUMENT NUMBER ONE HUNDRED AND THIRTY-FIVE- - - - - - 135 whereby THE NATION, UNITED BRANDS COMPANY, CHIRIQUI LAND COMPANY and COMPANIA PROCESADORA DE FRUTAS, execute this Operations Contract. Panama, January 8, 1976 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - In Panama City, the capital of this Republic, and the seat of the Notary Circuit of the same, on January 8, 1976, CECILIO MORENO, Second Notary Public of the Panama Circuit, with personal identity number eight-fifty-two-nine hundred-fifty-eight (8-52-958), personally appeared Lt. Colonel RUBEN DARIO PAREDES, male, adult, married, Panamanian, and resident of this city, with personal identity number eight-seventy-three-one hundred seventy-three (8-73-173), Minister of Cattle and Agricultural Development, representing and acting on behalf of THE NATION, duly authorized pursuant to Law Number Five (5) of the seventh (7th) of January, one thousand nine hundred and seventy-six (1976), on the one hand, and on the other, WALLACE WRAY BOOTH, male, adult, American, married, in transit, with American passport number E - one million six hundred seventy-seven thousand nine hundred eighty-seven (E-1677987), who declared he did not wish an interpreter as he could understand and speak Spanish, acting on behalf of UNITED BRANDS COMPANY, a company incorporated according to the laws of the State of New Jersey, United States of America, and duly authorized to operate in the Republic of Panama, as recorded in Volume seven hundred thirty-seven (737), folio number four hundred ninety-two (492), entry number one hundred thirty-five thousand nine hundred thirty-nine (135,939) of the Public Registry, Section of Commercial Companies, duly authorized for this act, as shown at folio two hundred twenty (220), - - - volume one thousand two hundred and nineteen (SIC 219), entry number one hundred twenty-eight thousand eight hundred forty-six "C" (128,846 "C") CHIRIQUI LAND COMPANY, company organized according to the laws of the State of Delaware, United States of America, and duly authorized to act in the Republic of Panama, as recorded in volume thirty-nine (39), folio four hundred and sixty-six (466), entry five thousand three hundred and forty-five (5345) Bis of the Public Registry, Commercial Companies Section, duly authorized by this act, as shown at folio five hundred and thirty-two (532), - - - - volume one thousand two hundred and two (1202), - - - - - - entry one hundred twenty-seven thousand three hundred and sixty-four ("A") and COMPANIA PROCESADORA DE FRUTAS, company organized in accordance with the laws of the State of Delaware, United States of America, and duly qualified to act in the Republic of Panama, as recorded in volume six hundred and eighty-eight (688), folio three hundred and fifty-five (355), entry number one hundred thirty-one thousand two hundred and twenty-four (131,224), of the Public Registry, Commercial Companies Section, duly authorized for this act, pursuant to folio number two hundred and seventy-seven (277), - - - - - - volume one thousand two hundred and eight (1208),- - - - entry number one hundred eighteen thousand and twenty-one "C" (118,021 "C") - - - - - - whom hereinafter shall all be referred to as THE COMPANY, agree to this Operations Contract in accordance with the following clauses: FIRST CLAUSE: The activities of THE COMPANY in the Republic of Panama shall be governed by the stipulations of this Contract, of the Purchase-Sale Agreement and that of the Land-Lease Agreement, executed on this same date, and also by the Panamanian statutory provisions of general application which are not contrary to the stipulations of these Contracts. - - - - - SECOND CLAUSE: By virtue of the request of THE COMPANY and prior approval of THE NATION, by means of the Ministry of Cattle and Agricultural Development, THE COMPANY may partially substitute banana farming for that of other cattle and agricultural activities or industrial-agricultural activities. THIRD CLAUSE: THE COMPANY shall have the right to export without being subject to licenses or permits, the bananas or related products which it may produce or acquire in this country. - - - - - - - - - FOURTH CLAUSE: With the exception of contingency of force majeure or caso fortuito, THE COMPANY agrees to maintain an annual minimum production suitable for export of twenty-two (22) million forty/forty-two (40/42) pound boxes and to export said production. Likewise, THE COMPANY obligates itself to purchase all bananas, up to a limit which does not exceed thirty percent (30%) of the total actually exported, produced by national producers in the Districts of Baru, Alanje in Chiriqui and Changuinola, Bocas del Toro, which may be offered for sale to THE COMPANY subject to the varieties, classifications and specifications established by THE COMPANY and at the prices which may be agreed to with said producers. - - - - - - - - - - - - - - - FIFTH CLAUSE: So that THE NATION may be able to establish sales in the international markets, THE COMPANY, at the request of THE NATION, authorizes the producers which may have contracts with THE COMPANY, in which they are bound to sell fruit to THE COMPANY, to sell to THE NATION or to any of its branches, in terms satisfactory to these producers, bananas they produce, on prior written notice to THE COMPANY of at least ninety (90) days. In this event, the limit of thirty percent (30%) referred to in the previous clause shall be adjusted in the corresponding amount. - - - - - - - SIXTH CLAUSE: It is understood that the approval by THE COMPANY referred to in the foregoing clause, shall be given without diminishing compliance by the said producers of their monetary obligations to THE COMPANY and banking entities, including price differentials due to services rendered by THE COMPANY to said producers and the investments made by THE COMPANY in producers' farms, the corresponding amount and proportion pursuant to the terms and conditions agreed upon, unless THE NATION expressly assumes totally or partially such obligations. In due time, THE NATION, through the Ministry of Industry and Commerce, and THE COMPANY shall agree to the mechanisms and procedures which may be deemed adequate before proceeding to comply with the stipulations of this clause and of the foregoing clause. - - - - - - - - - - - - - - - - - - - - - - - - - - - - SEVENTH CLAUSE: THE COMPANY agrees to supply THE NATION, through the state company named Corporacion Bananera del Pacifico (COPABA), banana boxes (F.O.B.) in accordance with the following: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - One (1). Corporacion Bananera del Pacifico shall make the written request to THE COMPANY with at least ninety (90) days notice prior to each shipment, and shall present semiannual estimates on a monthly basis regarding future shipments. - - - - - - - - - - - Two (2). THE COMPANY shall assist in the handling of shipments of Corporacion Bananera del Pacifico in the same manner that it has up to now, and the latter shall reimburse THE COMPANY with a number of banana boxes from its production equivalent to the number actually supplied by THE COMPANY. - - - - - - - Three (3). THE COMPANY does not assume the obligation to supply to Corporacion Bananera del Pacifico annual quantities of banana in excess of that which may be delivered by it to THE COMPANY each calendar year. - - - - - - - Four (4). THE COMPANY shall provide Corporacion Bananera del Pacifico with reports concerning the availability of additional banana for export at the prices and subject to the terms deemed to be mutually satisfactory. - - - EIGHTH CLAUSE: THE NATION grants THE COMPANY the right of the use of the piers of Puerto Armuelles and Almirante, their related equipment and appurtenances, and acknowledges the priority of the banana industry. For such right, THE COMPANY shall pay the National Port Authority representing THE NATION the sum of FIFTY THOUSAND BALBOAS (B/.5O,OOO.OO) annually for each pier, payable quarterly in four equal installments, no later than the last working day of each quarter. - - - - - - - - THE COMPANY shall perform the maintenance and repair of said piers. The expenses for these tasks shall be prorated between THE COMPANY and THE NATION, based upon the relative degree of use made of said installations by THE COMPANY, with THE COMPANY carrying the expenses connected with their use and THE NATION assuming all other expenses. For this purpose, within an eighteen (18) month period following the execution of this Contract, THE NATION, through the National Port Authority, by mutual agreement with THE COMPANY, shall establish the procedure for determining the allocation expenses based on the degree of use of these piers. Nevertheless, it is understood that during the first two years that this Contract is in force, the maintenance and repair expenses shall be carried exclusively by THE COMPANY. - - - - - - - - - - - - - - - - - - - - - - - - - The parties shall agree with respect to the requirement of new capital investments for the replacement, remodeling or enlargement of the above-mentioned piers, and with respect to the financing and implementation of said investments. - - - - - - - - NINTH CLAUSE: THE COMPANY shall pay to THE NATION during the duration of this Contract, an annual fee of FIVE HUNDRED THOUSAND BALBOAS (B/.5OO,OOO) for the right to operate, transport its products, and load and use, with priority, the railroads in the banana divisions of Bocas del Toro and Puerto Armuelles. The payment shall be made in four equal quarterly installments, no later than the last working day of each quarter. - - - - - - - - THE COMPANY shall perform the maintenance and repairs of the railroad lines it uses in the Bocas del Toro and Puerto Armuelles Divisions and the resulting expenditures for this shall be totally carried by THE COMPANY. THE COMPANY shall control the railroad traffic in the Bocas del Toro Division and shall continue coordinating the traffic in the banana operations area of Puerto Armuelles with the National Railways of Chiriqui. The parties shall come to an agreement with respect to the requirement of new capital investments for the purpose of restoring the railroad lines used by THE COMPANY in that segment of the principal way between Progresso and Puerto Armuelles and with regard to the financing and implementation of said investments. - - - - - - - - - - - - - - - - - - - - - - - - - TENTH CLAUSE: THE COMPANY shall continue to provide to the public passenger and freight service, in the same manner that it has been doing to date, subject to the schedule of charges approved by THE NATION, which shall not exceed cost plus a reasonable increment. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - THE COMPANY shall be obligated to transport gratuitously on the respective regularly scheduled trains the mail of the Republic:, and provide free service to uniformed member, of the National Guard. Likewise, it shall grant free permits to public servants of the respective provinces that may travel regularly in the exercise of their duties. Any property of THE NATION shall be transported on these trains at cost which may be determined by the parties. - - - - - - - - - - - - - - - ELEVENTH CLAUSE: THE COMPANY shall be able to operate any electrical installations which it may need for the activities covered by this Contract in the Divisions of Bocas del Toro and Puerto Armuelles, making available to THE NATION and to the public whatever electricity is not utilized by THE COMPANY. THE COMPANY shall be able to continue to operate its own plant for its own use, even though THE NATION may commence to provide the aforesaid public service in these areas. The tariffs for the sale to THE NATION and to the public will be approved by THE NATION and shall not be less than cost. THE COMPANY shall cooperate with the IRHE for the increase of electricity for public service within the operations area of THE COMPANY according to the conditions which may be agreed upon in each instance. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Likewise, THE COMPANY shall be able to operate communications systems and installations which may be necessary for its operations including the ship-to-shore, shore-to-ship communications. This authorization includes the power to continue operating those which presently exist between Puerto Armuelles and Golfito and vice versa will continue to be processed by the Ministry of Government and Justice. - - - - - - - - - - - - - The establishment of new installations and communications systems shall require the prior approval of THE NATION through the Ministry of Government and Justice. - - - - TWELFTH CLAUSE: THE NATION grants THE COMPANY the right to continue operating those installations and works, which it actually uses to supply water, including free consumption of the necessary water for its activities. - - - - - - - - - - - - - - - - - - - In the event new installations or other works of THE COMPANY should be necessary, THE COMPANY shall submit the respective plans to THE NATION, through the IDAAN for its prior approval. - - - - - - - - The water not utilized by THE COMPANY in its works shall be made available to THE NATION or to third parties according to rates based upon actual expenses and regulated by IDAAN. The investments in installations, and works and other expenditures, including additional operation expenses to provide water for irrigation, shall be borne by the users. THE COMPANY, under the supervision of IDAAN, shall take the necessary steps to assure at all times the suitability of drinking water for human consumption and shall work together with that Institute in the expansion of the notable water supply within the banana operation areas of THE COMPANY. - - - - - - - - - - - - - - - - - - - - - - THIRTEENTH CLAUSE: THE NATION grants to THE COMPANY authorization to extract at no cost, sand, stone and gravel from national lands for use in the activities covered by this Contract, provided the pertinent formalities are fulfilled. - - - FOURTEENTH CLAUSE: THE COMPANY, at all times, with the exception of commitments entered into before the date of this Contract, shall give preference to the utilization of Panamanian goods and services unless their prices, quality, quantities, regularities and economic supply conditions are not adequate or satisfactory for the development of its activities. The right to select the goods and services shall pertain exclusively to THE COMPANY, but such authority shall be exercised in a reasonable manner to comply with the criteria established in this clause. - FIFTEENTH CLAUSE: In addition to the reports that THE COMPANY presently submits to THE NATION concerning purchases of bananas within the country, exportation and conditions of the international market, THE COMPANY shall present annually to THE NATION, no later than January 10 of each year, reports regarding the general plans for operation in Panama, for each respective year, in connection with production and exportation and the operations investment budget. THE COMPANY shall also submit semiannual reports pertaining to the sanitary conditions of the plantations and changes with respect to production and exportation programs and any significant budgetary changes. - - - SIXTEENTH CLAUSE: In its employer-labor relations with respect to the operations conducted in the country, THE COMPANY shall abide by labor legislation in effect in the Republic of Panama and by the collective agreements or individual labor contracts with its workers in accordance with the requirements of such legislation. Upon the expiration of the present Operations Contract and that of the Land-Lease Agreement entered into on this date, THE COMPANY shall deliver to THE NATION the total sum of their labor obligations which THE COMPANY is obligated to comply with on behalf of its employees, it being understood that for this reason THE NATION subrogates itself to all the rights and obligations of THE COMPANY and exempts THE COMPANY from any liability for the same. THE NATION shall immediately pay for services and benefits to employees. - - - - - - - - - - - - - - - SEVENTEENTH CLAUSE: With respect to the operations that THE NATION authorizes through this Contract, THE COMPANY shall be able to bring into the country the foreign personnel that it requires, who are either specialized or in training for specialization, provided the general immigration requirements are fulfilled. The foreigner thus employed shall commence work after having presented his request to the Ministry of Labor and Social Welfare. - - - - - - - - THE COMPANY shall submit quarterly to the Ministry of Labor and Social Welfare a report that facilitates verification of the percentage of foreigners actually hired. Once an application has been decided upon, or subsequently thereto, said Ministry shall instruct THE COMPANY to withdraw from the country that percentage of its employees which exceeds the percentage authorized by law. - - - - - - - - - - - - EIGHTEENTH CLAUSE: THE COMPANY shall be exempt from taxes and other assessments which are stipulated below: - - - - - - - - - - - - One (1) - Taxes and assessments on the importation of machinery, equipment, spare parts, fuel, paper and other items which are necessary for the development of the banana operations at any stage or place of operation. The goods exempt from import taxes may be re-exported tax free and without being subject to licenses or permits but shall not be sold nor, without the prior approval of THE NATION, leased within the country, nor be destined for other purposes than those for which they were acquired, unless the applicable import taxes are first paid. THE COMPANY shall offer THE NATION first option to purchase those goods which THE COMPANY decides to sell. These exemptions shall be processed in the usual manner through the Ministry of Treasury and Finance. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Two (2) - Any kind of assessment on banana operations in any of its phases except those which are stipulated in this Contract. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Three (3) - Taxes and any other assessments issued or levied upon cargo loaded or unloaded by any ship whose principal cargo is comprised of products of THE COMPANY, or equipment, machinery, spare parts, paper, fuel and other imports for its activities. The rates and expenses generally applicable for immigration services, sanitation, customs and wharfage shall be excepted. - - - - - - - - - - - - - - - - - - - - - - - - - - Four (4) - Taxes which may be assessed on payments of dividends to or received by the shareholders of THE COMPANY or the sums which it may remit outside the country. - - - - - - - - - - - - - - - - Five (5) - Taxes or any assessments related to pier facilities, mooring, tonnage or which may be ascribed to ships activities or to the use of the ports of Almirante or Puerto Armuelles or their replacements, with the exception of that established in the Eighth Clause of this Contract. - - - - - - - - - - - - - - - Six (6) - Import taxes over a three-year period on the fruits harvested in new growing areas or those replaced in accordance with the plans or programs previously approved by the Ministry of Cattle and Agricultural Development. The three-year period shall commence on the date or shipment on which the exportation in commercial quantities of the said fruit commences. The Ministry of Cattle and Agricultural Development shall verify the information submitted by THE COMPANY concerning the tax-exempt portion and can only object to it within a period of thirty days following the date this information is received. - - - - - - - - - Seven (7) - Any type of taxes and assessments levied upon the sale to THE NATION of the properties of THE COMPANY. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Eight (8) - Revenue stamps or any other assessment resulting from the execution and registration of this Contract and from the Purchase-Sale and Land-Lease Contracts executed on this same date. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Nine (9) - Any type of assessment on capital, except taxes levied on patents or licenses of general application. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Ten (10) - Consular fees. - - - - - - - - - - - - - - - - - - - - Eleven (11) - Property taxes on improvements to edifices constructed on lands used for the banana business, such as: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - a) with respect to railroads: main tracks and spurs, fixed and rolling stock, stations, repair shops and warehouses for merchandise and materials; b) with respect to aqueducts and sewer systems, of irrigation, pipe lines and electrical plants: works, buildings, plants and other installations, and c) with respect to communication systems: telegraph, telephone lines, offices and other installations. Commercial and residential buildings are excluded. - - - - - - - - - - - - Twelve (12) - (Transitory) - - - - - - - - - - - - - - - - - The amount of banana export tax in excess of that which may result from application of the rate established by Law Number Four (4) of January seven (7), one thousand nine hundred and seventy-six (1976), from October twenty-first (21st), one thousand nine hundred and seventy-four (1974) until the effective date of said law, which exemption is granted as a result of prior agreements between THE NATION and THE COMPANY, by which THE COMPANY gave THE NATION the right to occupy its reserve lands, plus the obligation assumed by THE NATION to immediately enact a new banana export tax law based on competitive conditions of the market and by virtue of which it was determined that THE COMPANY shall pay to the Treasury as said tax the sum of thirty-five cents of a Balboa (B/.0.35) for each box of bananas exported. - NINETEENTH CLAUSE: THE COMPANY shall be subject to payment of income taxes on the basis of a fixed rate of fifty percent (50%) on the taxable income from Panamanian sources. - - - - - - - - - - The determination of taxable income from Panamanian sources shall be made pursuant to criteria which has been previously applied. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The sums paid in accordance with the Eighth, Ninth, Twentieth, Twenty-First and Twenty-Second Clauses shall be deemed deductible expenses during the applicable fiscal period in addition to other expenses accepted as such under Panamanian fiscal legislation. Payment of income taxes shall be made quarterly and in advance, according to the following procedure: No later than March thirty-first (31st) of each year, and together with a sworn declaration of its income which it may have obtained during the previous taxable year, THE COMPANY shall present a declaration of estimated net taxable income in that year and the amount of estimated income tax shall be paid in four equal quarterly installments, on April fifteenth (15th), July fifteenth (15th), October fifteenth (15th), and no later than December twentieth (20th). The total of the estimated tax shall be subject to quarterly review by THE COMPANY, and should there be changes in the estimated sum, the sums payable in the subsequent quarters shall be computed by deducting the income computed on the basis of the new estimated payment made in prior quarters, and dividing the remaining sum by the number of quarters remaining for that year, thereby determining the sums payable for each subsequent quarter. - - - - - - - - - - - - - - - - - - - - - - If in accordance with the sworn declaration submitted during the first quarter of the following year it is confirmed that the total of the sums paid exceeds the sum total of the tax, the difference shall be reimbursed to THE COMPANY by means of the corresponding credit applicable to the first subsequent payment, and if this were not sufficient, it shall be applied to the balance of the subsequent payments until such sums amount to the total overpayment. If the balance is in favor of THE NATION, THE COMPANY shall pay the difference when presenting its sworn declaration. If on the date of termination of this Contract there remains any balance payable to either of the parties, it shall be discharged immediately by the corresponding party upon presentation and correction of the final income declaration. - - - - - - - - If the payments accrued commencing with the first semester are less than the proportional part of the final tax by an amount greater than twenty-five percent (25%), the difference will be subject to the payment of interest, by April fifteenth (15th) at the latest, at an annual rate of seven percent (7%). The computation for these purposes shall be made in the following manner: - - - - - - - - a) The difference between the first two quarterly payments and half of the total amount of the final tax. - - - - - - - - - - - - - b) The difference between the first three quarterly payments and three quarters of the total amount of the final tax. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - c) The difference between the four quarterly payments and the final tax total. - - - - - - - - - - - - - - - - - - - Should any of these differences be a minus figure and exceed twenty-five percent (25%) of the half, three-quarters, and the total of the final income tax, respectively, then they shall earn seven percent (7%) interest computed at nine, six and three months, in the same order. - - - - - - - - - - - - - - - - - TWENTIETH CLAUSE: The exportation of bananas shall be subject to a tax, as provided by law. The tax rate shall be subject to modification by law in keeping with changes in the international market and other economic conditions of THE COMPANY. Prior to the enactment of the respective legislation, THE NATION shall grant THE COMPANY a reasonable period of time during which to present its position. The tax payments shall be made monthly within the first twenty days of the following month. TWENTY-FIRST CLAUSE: THE COMPANY shall pay as municipal taxes levied upon the banana business an annual sum of TWO HUNDRED THOUSAND BALBOAS (B/.200,000.00) to each one of the Municipalities of Baru and Changuinola. Payment shall be made in twelve equal monthly installments, no later than the last working day of each month. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - THE COMPANY shall also pay the remaining municipal taxes in effect on the date this Contract becomes effective, in the same amount and manner in which it is presently paying. If after said date THE COMPANY were liable for a larger sum of said taxes, or were subject to levies upon the banana related activities, these additional obligations in each instance would be assumed by THE NATION. - - - - TWENTY-SECOND CLAUSE: THE COMPANY shall be subject to the rest of the taxes, assessments, tariffs and other national contributions which are not of the kind specified in this Contract, provided that in each instance the assessments are of general application. For this purpose, those assessments which are only applicable to one type of economic activity or which specifically apply to banana operations shall not be considered to be of general application. - - - - - - - - - - - -- - - - - - TWENTY-THIRD CLAUSE: Even if THE NATION were to establish in Panama foreign exchange controls, THE NATION shall make available to THE COMPANY foreign exchange readily convertible for a sum not less than that which it may need for the following, irrespective of the source or nature of THE COMPANY funds: - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - One (1) - Payment for goods and services obtained from abroad for its Panamanian operations. - - - - - - - - Two (2) - The payment of capital and interest on debts payable in foreign currency contracted for its investments or operations in Panama.- - - - - - - - - - - - - - - - - - - - - - - - - - - - Three (3) - Remittances of profits and distribution of capital. - - - - - - - - - - - - - - - - - - - - - - TWENTY-FOURTH CLAUSE: Upon the expiration of the Lease Agreement, THE COMPANY accepts the obligation to sell to THE NATION and THE NATION agrees to buy from THE COMPANY, all capital assets and other property, including growing crops and inventories on hand which may be property of THE COMPANY, located in the Provinces of Chiriqui and Bocas del Toro and which are directly or indirectly used in the banana industry which THE COMPANY operates in the Republic of Panama. The purchase price at the purchase date shall be determined in accordance with the following terms: - - - - - - - - - - - - - - a) For fixed assets, the value on the books in Panama, that is, the original cost plus the cost of improvements which extend its useful life or increase the commercial value, less the accrued depreciation; - - - - - - - - - - - - - - - - - - - - - - - - - - b) for inventories, the value on the books in Panama, that is, the total original cost; and- - - - - - - - - - - - - - - - - - c) for growing crops, the value determined by application of the guidelines described in Annex "A" which is part of this Contract.- - - - - - - - - - - - - - - - - - - - - - - - - - - - - There is excluded from the sale mentioned in these clauses, cash on hand, bank deposits, accounts receivable, negotiable instruments and intangible assets such as patents, industrial and agricultural trademarks, trade names, commercial notices and signs, and goodwill and any other deferred payments which have not been expressly assumed by THE NATION.- - - - - - - - - - - - - It is agreed that THE NATION shall not assume any obligations or liabilities of THE COMPANY, with the exception of the obligations arising from subsidiary guarantees granted in favor of banking entities in connection with the Contracts with associate producers which are enumerated in Annex "A", or subsidiary guarantees which may be granted in future with the approval of THE NATION through the Ministry of Cattle and Agricultural Development.- - - - - - - - - - - - - - - - - - - - - - - - - - -Payment of the price shall be made in the following manner:- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -a) On the date of execution of the Purchase-Sale Contract, a payment in cash equivalent to thirty-five percent (35%) of said price or an amount equal to the total labor obligations of THE COMPANY on that date, whichever of the two is greater.- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - b) The remainder is interest calculated at an annual rate of seven percent (7%) on pending balances, in ten equal annual installments, the first of which shall be made on the expiration date of the first year commencing from the date of the sale, and the remaining nine payments to be made on each subsequent anniversary.- - - - - - - - - - - - - - - - - - - - - - - - - - - -In the event this Contract is terminated by an administrative dissolution of same, as provided for in this Contract, the payments shall be made as described in the paragraphs a) and b) above, but all terms shall be delayed for one year. In this case, THE COMPANY shall not be obligated to make payments on its labor obligations until such date that THE COMPANY receives the first cash payment from THE NATION.- - - - - - - - - - -Irrespective of the provisions of this Clause, it is expressly agreed between the parties that should the termination of the Operation Contract and, consequently, the termination of the Lease Agreement, be due to non-renewal of the term by THE COMPANY or due to an administrative dissolution of the contracts for reasons provided in these clauses and, further, if THE NATION is not able to continue in the banana business, THE NATION shall not be obligated to purchase but will have the option of burying the assets and properties of THE COMPANY directly or indirectly related to the banana business is of a partial nature, the option to buy herein agreed upon shall be applicable to the assets and other properties which are not to be operable and the commitment to purchase shall exist with regard to the assets and other properties with which it will continue to operate. If THE NATION elects not to buy capital assets and property in accordance with the rules outlined above, in this event the parties shall be free to negotiate and contract by mutual agreement so that THE NATION may acquire them at their residual or commercial value. In the event that the parties are unable to arrive at an agreement on this matter within a period of one hundred and eighty (180) days, THE COMPANY shall then be able to dispose of such properties as it sees fit and without being subject to taxes or levies of any kind.- - - - - - - - - - - - - - - - - - -The payments mentioned in this clause shall be made in dollars, United States currency, with the banking entity of that country indicated by Seller.- - - - - - - - - - - - - - - - - - - TWENTY-FIFTH CLAUSE: THE COMPANY shall be able to withdraw at any time those goods belonging to it situated on land which THE NATION has not leased to it, unless THE NATION decides to purchase them pursuant to terms and conditions to which the parties may then agree. The goods not withdrawn shall be subject to the Purchase Agreement as stipulated in the Twenty-fourth Clause of this Contract.- - - - - - - - - - - - - - - - - - - - TWENTY-SIXTH CLAUSE: During the period that this Contract is in effect, THE COMPANY shall continue to service and maintain its assets situated in the Republic of Panama with the same efficiency and good care which has been customary during normal periods of operation and THE NATION guarantees it the undisturbed use thereof.- - - - - - - - - - - - - - - - - - - - - - - - -Furthermore, in the event that the term of the Land-Lease Agreement is not extended pursuant to the provisions of the Eighth Clause of the Land-Lease Agreement, during the remaining period until its expiration THE NATION shall exercise adequate supervision of the activities of THE COMPANY and shall have the right to participate in THE COMPANY's management policies and therefore:- - - - - - - - - - - - - - - -a) In those instances in which it considers it necessary, THE NATION shall designate, at its own expense and without limitation as to numbers, the personnel which it may deem convenient in line with the personnel structure of THE COMPANY and on any level order that the personnel designated by THE NATION can be prepared to supervise the management of the banana business of THE COMPANY and its relations with their central or regional offices, with respect to Panamanian banana production and other agricultural products. The personnel designated by THE NATION shall work along side and in harmony and cooperation from the corresponding personnel of THE COMPANY which will supply the personnel of THE NATION with the necessary explanations and information suitable for their training.- - - - - - - - - - - - - - - -b) THE COMPANY shall keep THE NATION informed of its plans, measures, policies, activities and other decisions which may impinge upon the Panamanian production of bananas and other agricultural products. THE NATION shall participate in the formulation, of the aforementioned decisions and shall be able to object to any of these whenever they affect or tend to reduce or discriminate, in any manner whatsoever, against the production of bananas in Panama. It is understood that this clause does not refer to decisions which may be of a purely routine nature. - - - - - - - - -c) In the event that THE NATION believes that the necessary measures to adequately maintain the value of the assets and other properties used by THE COMPANY are not being taken, THE NATION shall be able to request the appointment of a joint commission composed of a representative of each of the parties hereto, and a third party chosen by mutual agreement of the first two. Said commission shall develop a program for the maintenance and repair of the fixed assets and the care of the cultivations similarly to what may have been customary during the normal periods of operation of THE COMPANY and according to whatever other measures are adequate so that the assets and other properties used by THE COMPANY do not depreciate in value. If THE COMPANY should not effect such programs at its own expense, THE NATION shall be able to do it for its own account, and the expense thus incurred plus interest thereon at an annual rate of seven percent (7%) shall be deducted from the first cash payment of the selling price of said assets and other properties.- - - - TWENTY-SEVENTH CLAUSE: THE COMPANY shall be free of all responsibility with respect to any default or breach under this Contract which may be due to causes of force majeure or caso fortui to, within or without the country while they are in force. THE COMPANY shall inform THE NATION in writing as soon as it may be possible of the occurrence of any contingency due to force majeure or caso fortuito. For the purpose of the present Contract, force majeure shall include wars, revolutions, insurrections, civil disturbances, blockades, embargoes, strikes and other labor conflicts, riots, epidemics, viruses, fungi, and other maladies and plagues, earthquakes, landslides, storms, floods, and other adverse meteorological conditions, explosions, fires, thunders, orders or instructions of any government or any entity or division of same, chance incidents or those caused by anti-social groups, any failure of installations or machinery wherever they may occur and any other reason, whether or not they fall within the categories previously mentioned, and with respect to which the affected party could not exercise reasonable control and of such nature as to delay, restrain or impede timely action by the party affected.- - - - - - - TWENTY-EIGHTH CLAUSE: The present Operation Contract and the Land-Lease Agreement which constitute a single transaction, shall enter into effect simultaneously, consequently, if for any reason one of the Agreements should expire, the other shall then also expire. The two contracts shall be interpreted and be applicable as if the two were considered to be one instrument.- - TWENTY-NINTH CLAUSE: With the execution of the present Contract, both parties shall deem terminated and definitively concluded any claim or other difference which exists or could exist with respect to the execution and compliance of the Contracts which up to this time were in force between THE NATION and THE COMPANY, or with regard to payment or failure to collect any kind of tax or any other amount which may arise from the operations of THE COMPANY up to December 31, 1975, excluding that which THE COMPANY may have previously agreed to cover. Each party shall take the necessary measures to terminate any existing actions pending before any judicial tribunal or administrative body of the Republic of Panama.- - - - - - - - - - - - - - - - - - THIRTIETH CLAUSE: THE NATION shall be able to declare administratively the dissolution of this contract in the event of default on the part of THE COMPANY, except in cases of force majeure and caso fortuito with respect to any of the following obligations:- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -One (1) - Default in payment of any of the pecuniary obligations owed to THE NATION in accordance with the provisions of this Contract or the Land-Lease Agreement. With respect to tax debts, default shall not be considered to exist as long as the obligations are pending final decision from any judicial tribunals. - - - - - -Two (2) - The minimum annual production and exportation described in the Fourth Clause of the present Contract.- - - - - - - - - - -In such instances, before proceeding to obtain an administrative dissolution, THE NATION shall notify THE COMPANY in writing of the default and THE COMPANY shall have a period of thirty (30) days in which to initiate measures intended to correct the default within a reasonable period. In addition, a cause for administrative dissolution shall be bankruptcy of THE COMPANY.- - - - - - - - - - - - - - - - - - - - THIRTY-FIRST CLAUSE: THE COMPANY, that is, UNITED BRANDS COMPANY, CHIRIQUI LAND COMPANY and COMPANIA PROCESADORA DE FRUTAS, S.A. , execute the present Contract and thus jointly assume all of the rights and obligations emanating from this Contract.- - - - - - - - - - - - - - - - - - - - - - - - - - - - THIRTY-SECOND CLAUSE: The present Contract shall be deemed in effect from January 1, 1976 and, consequently, thereafter the contractual relations between THE COMPANY and THE NATION shall be governed solely by the stipulations of this Contract. The duration of this Contract shall be the same as that of the Land-Lease Agreement executed on the same day.- - - EXHIBITE.pol EX-10.B 4 EXHIBIT 10-B EXHIBIT 10-b TRANSLATION Instrument Number Fifty-five (55) -- In the City Of Tegucigalpa, Central District, on the twenty-second day of April, 1976. -- Before me, Cesar Augusto Mendez, Notary Public of San Pedro Sula, in transit in this city, incorporated under number seven hundred twenty-seven (727) there appears on the one hand Wallace W. Booth, of age, married, Corporate Executive, North American, domiciled in the City of Los Angeles, State of California, United States of America, in transit in this city, as special representative of the Tela Railroad Company, a corporation organized and existing in accordance with the laws of the State of Delaware, United States of America, located in the City of Wilmington, of said State, which was recognized as a juridic person and authorized to engage in commerce in the Republic of Honduras pursuant to resolution issued by the Executive Powers through the Ministry of Government, Justice and Sanitation, the 20th of February, 1913, which certificate I, the Notary, acknowledge having before me. Hereinafter Tela Railroad Company shall be called "The Company". Mr. Wallace W. Booth proves his authority with a Special Power which I, the Notary, acknowledge having before me and which was issued in the City of Boston, United States of America at 11:30 of the morning of the fourteenth of April of this year before Notary Public, Celia H. Dick, by the Tela Railroad Company and which contains sufficient powers for the execution of this act and signature of this document and is duly legalized by the Ministry of Foreign Affairs, Ministry of Government and Justice and the Supreme Court of Justice of Honduras; and on the other hand there appears Doctor Herman Pasais Leiva, of age, married, Doctor of Medicine and Surgery, Honduran, domiciled in San Pedro Sula, in transit in this city, who appears as General Manager and as such administrative Legal and Extrajudicial representative of the National Railroad of Honduras, an autonomous entity of the State of Honduras, with legal personality, own patrimony and of indefinite duration, created by Decree Number forty eight issued by the National Congress the thirtieth of April nineteen hundred and fifty-eight, which contains in Article thirty-three the representation of said Institution in its General Manager with sufficient power for this type of act, I the Notary acknowledge of having before me the certification of the minutes of the meeting of the Board of Directors of the said autonomous entity setting forth the election of Doctor Herman Pasais Leiva as General Manager of the National Railroad of Honduras for a period of six years which expires the sixteenth of September of this year; I also acknowledge having before me the original Minutes of the meetings of the Board of Directors of the National Railroad of Honduras which approved the bases of the present contract and authorized the manager to sign. Hereinafter in this document the National Railroad of Honduras shall be called the National Railroad. Also present is Mr. George M. Skelly, Jr., of age, married, attorney, of North American nationality, in transit in this city, who is present as interpreter of Spanish to English and vice versa, because Mr. Wallace W. Booth does not know Spanish. I the Notary acknowledge that Mr. George M. Skelly, knows the Spanish and English languages because I am personally aware thereof and I also acknowledge that he undertook before me the under signed Notary to faithfully fulfill his commitment, and being assured by Mr. Wallace W. Booth and Doctor Herman Pasais Leiva to have full right and exercise of their civil liberties they spontaneously state: First: The Company declares: That it is the legal owner of the railroad which unites and passes through the following places: From the City of Port of Tela to the City of Progreso, a length of ONE HUNDRED SIXTY-FOUR AND EIGHT HUNDRED SIXTY-SEVEN THOUSANDTHS (164.867) kilometers including its branchlines, spurs and bridges; from the Village of La Lima to Karaco, a length of ONE HUNDRED FORTY-ONE AND FIVE HUNDRED AND ELEVEN THOUSANDTHS (141.511) kilometers including the branchlines, spurs and bridges, for a total of THREE HUNDRED SIX AND THREE HUNDRED SEVENTY-EIGHT THOUSANDTHS kilometers (306.378 kms.), including the spurs in Puerto Cortes. That both lines, their branches and spurs are on their respective ties, roadbeds and bridges which also belong to the Company and for their use are serviced by telephone lines. That the said railroad lines, their branchlines and spurs are described on a map marked #1, a signed copy of which will be kept by the parties and which forms part of the present contract, as does the inventory hereinafter to be mentioned. Second: The Company further states that it transfers its property and dominion in the said railroad lines, to the National Railroad for L.l.00 which it acknowledges receiving to its entire satisfaction, which transfer includes everything mentioned in the previous clause. That with the said railroad it transfers as "right of way" a strip of land twenty meters wide on both sides of the main railroad lines for their entire length; a strip of land ten meters wide on both sides of the branch lines, and a strip of land five meters wide on both sides of the spurs. Notwithstanding the foregoing, if in the future any of the railroad spurs is lifted, the strip of land containing the "right of way" shall cease to belong to the National Railroad and its rights thereto shall revert to the Company. The width of the right of way previously specified is applicable in rural areas in which the Company is owner of the respective lands. It also hereby transfers to the National Railroad, on urban lands belonging to the Company, the strips of land which now constitute the right of way for normal railroad operations. In order to precisely determine the last right of way herein in this clause mentioned, the parties within a period not greater than TWO (2) years from this date shall jointly prepare a map which will identify and quantify the aforementioned right of way. Third: The National Railroad states that it accepts the transfer hereby made to it and acknowledges receipt of the aforesaid railroad lines, of the right of way, and everything included in the foregoing clauses under the terms and conditions stated. Fourth: The National Railroad, taking into consideration that the railroad lines acquired by this document have been used up to the present time by the Company in its railroad transportation, by this means and by this document leases to the Company for its use under the following conditions: A) The Company shall use in all its railroad transportation operations, the lines acquired by the National Railroad under this document and the branchlines Lima-Bufalo and La Mesa, and the stretch of railroad lines Baracoa-Puerto Cortes owned by the National Railroad. Wherever mention is made herein of railroad lines there shall be included therein everything described in the FIRST and SECOND clauses of this document, which has been transferred to the National Railroad, and the branchlines and the stretch of railroad lines mentioned in this Section A which are also property of the National Railroad. It shall mean the same when used in the plural. B) The Company shall pay the National Railroad as rental for the lease set forth in this clause and for the use of the branchlines Lima-Bufalo and La Mesa and the stretch of railroad line Baracoa-Puerto Cortes, the annual sum of FIVE HUNDRED THOUSAND LEMPIRAS (L.500,000.00) which shall be paid monthly in advance at the offices of the National Railroad in the City of San Pedro Sula without the need to make demand or collection. C) This lease is for a period of EIGHT (8) years commencing January 1, 1976 and can be extended by agreement of both parties. Notwithstanding the foregoing this lease shall be extended automatically if one of the parties does not notify the other in writing of its desire not to extend the lease at least two years prior to the date of expiration. In this case the lease shall continue in effect but either of the parties during the years subsequent to January 1, 1982 can notify the other in writing of its desire to terminate in which case the lease shall terminate two years after the subsequent anniversary of the contract. D) There shall be no right to request nor obtain a decrease in the rental agreed on, because of temporary or permanent non use of all or part of the railroad, whether or not the non use is the result of the sole decision of the Company, of causes imputable to it, or of agreements of the Company with the National Railroad or with third persons, or because of force majeure or caso fortuito due to nature; E) During the term of the agreed lease, the Company shall carry out for its account the maintenance of the railroad leased and the branchlines, spurs, and stretch of railroad lines, the use of which has been given to it, so that they shall be kept in a normal state of service; similarly, it shall carry out the rehabilitation and reconstruction of the railroad, its branchlines and the stretch of railroad mentioned, in case of their destruction or if they suffer damages which places them fully or partially out of normal service. The National Railroad can present proposals for improving such maintenance, rehabilitation and reconstruction and the Company shall adhere to such proposals if they are, technically and economically reasonable; F) At the end of the period of the lease or any extensions as provided for in FOURTH (4) clause of this instrument, the Company must return to the National Railroad the railway lines, branchlines and stretch of railway in good condition or be it in a state of normal service. Otherwise, it will pay the National Railroad the value of the repairs which may be necessary so that the railway will be in a state of normal service. The determination of the good condition of the railway lines returned to the National Railroad and its cost of repair shall be made by the National Railroad and in case of a dispute, it will be decided by two experts one named by each of the parties, and in case of a disagreement, it will be resolved by a third expert named by the two experts and if they do not agree on naming the third, the parties shall be free to resort to competent judicial authorities to enforce their rights. Between the start of the disagreement and the final opinion of the experts not more than sixty (60) days shall pass. G) If the Company desires in the future, while the lease is in effect, to change the present system of railroad transportation of bananas, it must act jointly with the National Railroad. It is understood and agreed that the present system of banana transportation in Honduras consists of the transportation of bananas by railroad cars and containers on platforms hauled on the railroad; H) The employer-employee relations now existing between the Company and its workers cannot be lessened as a result of or because of the present contract; specifically, there shall be no direct or indirect discharge of railroad workers except in those cases provided for by law. I) It is agreed and accepted that the Company will ship through the Port of Tela during the next FIVE (5) years not less than one-third of its export of bananas. All of the obligations of the Company agreed to in this contract shall continue in effect even after the aforementioned FIVE years, including payment of the rental, the maintenance, rehabilitation and reconstruction, as the case may be, including that of the Progreso-Tela stretch of railroad; J) The National Railroad as owner of the railroad line acquired through this document, of the branchlines Lima-Bufalo and La Mesa, and the stretch of railroad Baracoa-Puerto Cortes shall have free transit thereon for its equipment; so that no interruptions shall occur in the railroad operations; the parties within THIRTY (30) days from this date shall prepare a traffic schedule and shall establish the bases for operating and any revision thereof, which bases shall provide for preferential right of use of the railroad, branchlines, spurs and stretches to banana trains, as at present. Fifth: The Company states that it accepts the lease of the railroad and the use of the branchlines, spurs, and the stretch of railroad granted by the National Railroad under the terms and conditions set forth in the foregoing clauses. Sixth: The National Railroad further states: that it grants the Company the right to easements so that it can maintain on and use by crossing or paralleling and in the right of way of the railroad, which is the subject matter of thin contract, with roads, canals, drains, telephone and electric lines, water or petroleum pipelines, drainage and irrigation systems, cable systems for transportation of bananas to the packing stations and similar works, and the Company shall do everything necessary so that the aforesaid works do not damage the lines crossed and do not block the service thereon. The National Railroad acknowledges that the Company has constructed and presently maintains at various locations on the right of way which the Company by this document has transferred together with the railroad to the National Railroad, installations such as telephone and electric lines, packing stations, irrigation pumps, roads, cultivations, canals, drains, water or petroleum pipe systems, irrigation and drainage and fruit transportation by cable systems, buildings and other similar works relating to its agricultural and cattle activities. Therefore, it grants the right for so long as the installations and cultivations are maintained in service to continue occupying the right of way in the same area which up to now they have used. These cultivations and works shall be marked and specified jointly by the National Railroad and the Company on a map which they will prepare within ONE (1) year from this date; both parties shall have a signed copy of this map. The Company, subject to prior agreement with the National Railroad, can make new cultivations and installations of that type, related to its agricultural and cattle activities within the already mentioned right of way. Similarly, the National Railroad grants the Company the right to continue the use, by land vehicles, for so long as they are maintained in service, the following bridges which presently have a wooden roadbed, Tacamiche, Copen, Mico, Corozal, Ceibita, Tibombo, Ticamaya, Ulua and Puente, Kilometer 48, Boqueron de Mezapa, Boqueron de El Progreso, two on Farm Three. The maintenance or, if required, the rehabilitation and reconstruction of the wooden roadbeds shall be for the account of the Company. All of the easements and rights granted by the National Railroad to the Company in this SIXTH clause are without cost and at the end of the lease or its extension will renew them under the same conditions contained in this SIXTH clause provided they directly serve the banana and African Palm industry and other agricultural and cattle activities operated by the Company. Seventh: The Company declares that it accepts the easements and rights granted to it by the National Railroad in the foregoing SIXTH clause. Eighth: The Company further states that at the end of the EIGHTH (8) year previously mentioned, or if extended as provided in FOURTH (4) clause of this instrument, the National Railroad can acquire without cost, in whole or in part, the fixed and rolling equipment, shops, stations, warehouses, and other property related to the railroad operations, the betterments made thereto and new equipment, as well as existing spare parts and accessories shall be acquired at the value on the books of the Company in Honduras. For purposes of this clause, it is understood that the rules governing depreciation of the equipment to be acquired shall be those set forth in letters Numbers AB-99/76-D and AB-l37/76-D attached of the 12 and 21 April 1976, respectively. By separate document the parties have prepared an inventory of the present assets of the Company which are directly and indirectly related to the railroad complex, such inventory forms part of this contract and is signed in duplicate by the Company and the National Railroad, who will keep their respective copies for purposes agreed on. It is understood and agreed that the present fixed and rolling equipment is sufficient for the normal operations of the Company in Honduras, therefore, it shall only make new investments for its improvements when they are reasonably necessary. Similarly, the Company must abstain from decreasing the railroad equipment shown on the aforementioned inventory with the exception of decreases due to normal wear and tear and railroad accidents. Notwithstanding, if the National Railroad decides, during the term of this contract, to purchase fixed or rolling equipment from the Company, the latter if it can make the sale, shall make it at the value on the books in Honduras. If the Company decides to increase its equipment it can do so provided the National Railroad is unable to supply for sale at book value, or lease the equipment required or is unable to supply the respective service. For these purposes, the parties must advise three (3) months in advance. Ninth: The National Railroad states that it accepts the option granted in the foregoing clause as well as the other stipulations contained therein. Tenth: Finally, both parties make known: A) That the present terms and conditions presently governing the commercial relations between the National Railroad and the Company, especially with respect to the lease of equipment rates shall continue without change. Similarly, continuing unchanged shall be the terms and conditions in effect for the supply of reciprocal services between the parties. Not later than SIXTY (60) days after the date of this document, both parties will sign a document embodying the customs, verbal and written agreements and all contractual, legal and regulatory dispositions presently existing with respect to these relations and the interchange of services. Notwithstanding the foregoing, commencing on this date, the rental which the Company has been paying for the use of the so-called nationalized railroad lines and the Baracoa-Puerto Cortes stretch shall no longer be in effect since payments for such is included in the FIVE HUNDRED THOUSAND LEMPIRAS (L.500,000.00) agreed to in this document; B) This contract shall be governed by the laws of Honduras and the competent tribunals with jurisdiction thereof over compliance or noncompliance therewith shall be the authorities of the judicial section of San Pedro Sula as Courts of First Instance; C) This contract obligates the Company even though it changes its present corporate name or its capital or commercial purposes or merges or transforms itself and its successors; in any of these cases the new commercial company or companies shall be jointly and severally liable for the obligations undertaken by the Company with the National Railroad through this document; D) Noncompliance of any of the clauses of this contract by one of the parties shall make it liable for the payment of damages caused to the other, without prejudicing such other actions as might exist at law for the non-compliance; and E) The parties can agree to amendments, extensions or clarifications to this contract. If agreement to do so is made it shall not be necessary to make them by public document, but the extension, amendment or clarification can be accomplished by a simple exchange of notes. EX-11 5 EXHIBIT 11
CHIQUITA BRANDS INTERNATIONAL, INC. EXHIBIT 11 COMPUTATION OF EARNINGS PER COMMON SHARE (In thousands, except per share amounts) Year Ended December 31, 1993 1992 1991 1990 1989 A. Computation of primary earnings (loss) per common share: Income (loss) from continuing operations $ (51,081) $ (221,708) $ 110,909 $ 95,831 $ 83,840 Income (loss) from discontinued operations -- (62,332) 17,586 (1,913) (16,073) Net income (loss) used to calculate primary earnings per share $ (51,081) $ (284,040) $ 128,495 $ 93,918 $ 67,767 Shares used in calculation of per share data: Weighted average common and equivalent Series C preference shares outstanding 51,427 51,804 47,834 40,100 38,751 Dilutive effect of assumed exercise of certain stock options and warrants -- -- 2,548 1,989 1,037 Weighted average common shares used to calculate primary earnings (loss) per share 51,427 51,804 50,382 42,089 39,788 Primary earnings (loss) per common share: - - Continuing operations $ (.99) $ (4.28) $ 2.20 $ 2.28 $ 2.10 - - Discontinued operations -- (1.20) .35 (.05) (.40) - - Net income (loss) $ (.99) $ (5.48) $ 2.55 $ 2.23 $ 1.70
CHIQUITA BRANDS INTERNATIONAL, INC. EXHIBIT 11 (cont.) COMPUTATION OF EARNINGS PER COMMON SHARE (In thousands, except per share amounts)
Year Ended December 31, 1993 1992 1991 1990 1989 B. Computation of fully diluted earnings (loss) per common share: Income (loss) from continuing operations $ (51,081) $ (221,708) $ 110,909 $ 95,831 $ 83,840 Additional income as a result of assumed conversion of convertible debentures -- -- 4,836 1,175 2,064 Income (loss) from continuing operations used to calculate fully diluted earnings per share (51,081) (221,708) 115,745 97,006 85,904 Income (loss) from discontinued operations -- (62,332) 17,586 (1,913) (16,073) Net income (loss) used to calculate fully diluted earnings per share $ (51,081) $ (284,040) $ 133,331 $ 95,093 $ 69,831 Shares used in calculation of per share data: Weighted average common shares used to calculate primary earnings (loss) per share 51,427 51,804 50,382 42,089 39,788 Additional shares resulting from assumed exercise of options and assumed conversions of convertible subordinated debentures -- -- 2,530 1,201 2,124 Weighted average common shares used to calculate fully diluted earnings (loss) per share 51,427 51,804 52,912 43,290 41,912 Fully diluted earnings (loss) per common share: - - Continuing operations $ (.99) $ (4.28) $ 2.19 $ 2.24 $ 2.05 - - Discontinued operations -- (1.20) .33 (.04) (.38) - - Net income (loss) $ (.99) $ (5.48) $ 2.52 $ 2.20 $ 1.67
EX-12 6 EXHIBIT-12
CHIQUITA BRANDS INTERNATIONAL, INC. EXHIBIT 12 STATEMENT OF COMPUTATION OF RATIOS OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (In thousands, except ratio amounts) Year Ended December 31, 1993 1992 1991 1990 1989 Earnings: Income (loss) from continuing operations before income taxes $ (39,081) $ (216,708) $ 160,009 $ 153,531 $ 135,040 Interest expense 169,789 155,036 88,406 55,361 53,952 Portion of rentals representing interest cost 58,499 85,810 74,070 66,247 53,324 Amortization of capitalized interest 3,745 3,010 1,900 1,125 870 Undistributed earnings of less-than- fifty-percent owned investees (1,429) (3,588) (4,352) (116) (2,866) $ 191,523 $ 23,560 $ 320,033 $ 276,148 $ 240,320 Fixed Charges: Interest expense $ 169,789 $ 155,036 $ 88,406 $ 55,361 $ 53,952 Capitalized interest 8,000 21,400 23,000 8,000 2,200 Portion of rentals representing interest cost 58,499 85,810 74,070 66,247 53,324 $ 236,288 $ 262,246 $ 185,476 $ 129,608 $ 109,476 Ratio of earnings to fixed charges (a) (a) 1.73 2.13 2.20 Earnings $ 191,523 $ 23,560 $ 320,033 $ 276,148 $ 240,320 Fixed charges $ 236,288 $ 262,246 $ 185,476 $ 129,608 $ 109,476 Preferred stock dividends 4,278 778 -- -- -- $ 240,566 $ 263,024 $ 185,476 $ 129,608 $ 109,476 Ratio of earnings to combined fixed charges and preferred stock dividends (b) (b) 1.73 2.13 2.20 (a) Fixed charges exceeded earnings by $44,765 in 1993 and $238,686 in 1992. (b) Combined fixed charges and preferred stock dividends exceeded earnings by $49,043 in 1993 and $239,464 in 1992.
EX-13 7 EXHIBIT-13
Selected Financial Data EXHIBIT 13 Chiquita Brands International, Inc. and Subsidiary Companies (In thousands, except per share amounts) 1993 1992 1991 1990 1989 FINANCIAL CONDITION Working capital $ 266,793 $ 482,338 $ 960,093 $ 433,424 $ 394,640 Capital expendi- tures 196,554 472,273 395,641 312,698 117,425 Total assets 2,740,753 2,880,624 2,937,344 1,913,674 1,373,480 Capital- ization Short-term debt 192,207 229,286 187,821 106,698 58,540 Long-term debt 1,438,378 1,411,319 1,202,839 494,182 385,250 Share- holders' equity 601,998 674,887 967,925 687,709 463,954 OPERATIONS Net sales $ 2,532,925 $ 2,723,250 $ 2,604,128 $ 2,186,452 $ 1,892,657 Operating income (loss) 103,848 (96,588)* 197,818 166,180 157,746 Income (loss) from continuing operations before income taxes (39,081) (216,708)* 160,009 153,531 135,040 Income (loss) from continuing operations (51,081) (221,708) 110,909 95,831 83,840 Discontinued operations -- (62,332) 17,586 (1,913) (16,073) Net income (loss) (51,081) (284,040) 128,495 93,918 67,767 SHARE DATA Average number of common shares outstanding 51,427 51,804 50,382 42,089 39,788 Earnings (loss) per common share: Primary - - Continuing operations $(0.99) $(4.28) $2.20 $2.28 $2.10 - - Discontinued operations -- (1.20) .35 (.05) (.40) - - Net income (loss) (0.99) (5.48) 2.55 2.23 1.70 Fully diluted - - Continuing operations (0.99) (4.28) 2.19 2.24 2.05 - - Discontinued operations -- (1.20) .33 (.04) (.38) - - Net income (loss) (0.99) (5.48) 2.52 2.20 1.67 Dividends declared per common share .44 .66 .55 .35 .20 Market price per common share: High 17.50 40.13 50.63 32.00 17.63 Low 10.13 15.75 29.63 16.13 12.88 End of year 11.50 17.25 40.00 32.00 17.38 Book value per common share at end of year 11.33 12.93 19.39 15.21 11.94 * Includes restructuring and reorganization charges of $61.3 million (see Note 2).
6 Statement of Management Responsibility The financial information presented in this Annual Report is the responsibility of Chiquita Brands International, Inc. management, who believes that it presents fairly its 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 with the independent auditors, management and internal auditors periodically to discuss these matters. The Company engages Ernst & Young, an independent auditing firm, to audit its financial statements and express an opinion thereon. The scope of the audit is set by Ernst & Young who have full and free access to all Company records and personnel in conducting their audits. Representatives of Ernst & Young 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, 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. and subsidiary companies as of December 31, 1993 and 1992, and the related consolidated statements of income, shareholders' equity and cash flow for each of the three years in the period ended December 31, 1993. These financial statements, appearing on pages 11 through 23, 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. and subsidiary companies at December 31, 1993 and 1992 and the consolidated results of their operations and their cash flow for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. Ernst & Young Cincinnati, Ohio February 28, 1994 7 Management's Analysis of Operations and Financial Condition Chiquita Brands International, Inc. and Subsidiary Companies Operations 1993 Continuing Operations Compared to 1992 Sales decreased 7% to $2.5 billion in 1993 primarily as a result of lower banana volumes. Nevertheless, operating income for 1993 was $103.8 million compared to an operating loss for 1992 of $96.6 million, which included restructuring and reorganization charges of $61.3 million. This improvement is attributable to the continuing benefits of Chiquita's multi-year investment spending program and the ongoing effects of its restructuring and cost reduction efforts. These programs address all aspects of the banana business including a decreased reliance on high-cost purchased fruit, enhanced production practices, shipping fleet realignment, reorganization and consolidation of marketing organizations, and overhead reductions. Since imposition of a new quota system on July 1, 1993 (see "International Operations" below) which in effect restricts the volume of Latin American bananas imported into the European Union ("EU"), 1993 prices within the EU increased to a higher level than in prior years. This trend has continued into early 1994. Banana prices outside the EU in 1993 following implementation of the quota were lower than in previous years, as displaced EU volume entered those markets. In early 1994, average price levels for markets outside the EU have exceeded price levels for comparable pre-quota periods as normal occasional supply limitations mitigated the impact of displaced EU volume in these markets. Future pricing in these non-EU markets may be affected by their ability to continue to absorb the displaced EU volume and the continuing growth in per capita consumption of bananas outside the EU. Although total costs were substantially lower in 1993, the depreciation and interest components of those costs are higher (depreciation grew 28% to $102.6 million and net interest expense increased 34% to $149.4 million) principally as a result of increased reliance on owned production and shipping capacity, a majority of which has been financed. These increased costs of ownership were more than offset by lower costs resulting from the reduction of purchased fruit and ship leases. The Company expects to continue to benefit from its improved cost structure in 1994 and in future years. In early 1994, Chiquita began refinancing certain of its outstanding debt, which will result in future interest savings (see "Financial Condition" below). The effective tax rate is affected by the level and mix of income between various U.S. and foreign jurisdictions in which the Company operates. Income taxes for 1993 consisted principally of foreign income taxes currently paid or payable. No tax benefit was recorded in the 1993 operating results for U.S. net operating loss carryforwards. In August 1993, the U.S. government enacted new tax legislation which, among other things, increased the U.S. statutory federal income tax rate from 34% to 35%. The new law did not have a material impact on Chiquita's financial statements. 1992 Continuing Operations Compared to 1991 Sales increased 5% to $2.7 billion in 1992 principally due to acquisitions in early 1992 and late 1991 and increased processed foods volume partially offset by lower selling prices for bananas. For 1992, Chiquita incurred an operating loss of $96.6 million which included $61.3 million of restructuring and reorganization charges discussed below. The operating loss of $35.3 million before restructuring and reorganization charges resulted principally from sharply increased banana costs and expenses. These costs were significantly impacted by a widespread decline in product quality early in 1992 caused by the extraordinary outbreak of disease and unusual weather patterns (El Nino) affecting banana industry cultivations. In response to these quality issues, Chiquita reduced the volume of fruit it marketed during the second half of the year, resulting in a significant amount of unrecovered costs. These unusual quality issues were addressed by extraordinary control measures and a reduction in the volume of lower quality purchased fruit. As a result, the Company's product quality returned to standard during the second half of 1992. During the fourth quarter of 1992, the Company undertook a program to adjust its fresh foods volume and cost infrastructure to significantly reduce production, distribution and overhead costs. This 8 program, which included consolidation of operations, asset disposals and workforce reductions, resulted in the above-mentioned restructuring and reorganization charges of $61.3 million. The decline in product quality in early 1992 also adversely affected banana pricing during the first half of 1992, principally in Europe and to a lesser extent in North America. Upon the restoration of standard product quality, banana pricing returned to normal seasonal levels during the second half of 1992. The loss from continuing operations includes higher net interest expense, arising principally from increased 1992 average borrowings outstanding, and a third quarter non-recurring charge of approximately $10 million for the settlement of shareholder litigation. Income taxes for 1992 included a $5 million charge for foreign income taxes; however, no tax benefit was recorded in the 1992 operating results for U.S. net operating losses. International Operations Chiquita's products are distributed in more than 40 countries and its international sales are usually made in U.S. dollars and major European and Asian currencies. The Company manages currency risks from sales originating in currencies other than the dollar generally by exchanging local currencies for dollars immediately upon receipt, and by engaging from time to time in various hedging activities. Debt denominated in currencies other than the U.S. dollar serves as a hedge of the net investment in those respective countries. In addition, various hedging activities are used to offset currency exchange movements on firm commitments and other transactions where the potential for loss exists. On July 1, 1993, the EU implemented a new quota effectively restricting the volume of Latin American bananas imported into the EU to approximately 80% of prior levels. The quota is administered through a licensing system and grants preferred status to producers and importers within the EU and its former colonies, while imposing new quotas and tariffs on bananas imported from other sources, including Latin America, Chiquita's primary source of fruit. Challenges to the quota and many matters regarding implementation and administration of the quota remain to be resolved. Prior to its implementation, the principles underlying the new regulation were ruled illegal under the General Agreement on Tariffs and Trade ("GATT") by a GATT dispute settlement panel. In early 1994, a second GATT dispute settlement panel ruled against the current EU regulation in favor of certain Latin American countries. GATT rulings in favor of the Latin American countries could result in an increase in the total volume of Latin American bananas, including banana volume of the Company, which could be imported under the quota. However, there can be no assurance that the EU will comply, or the manner in which it would comply, with such rulings. Facing these changes and uncertainties, the Company has undertaken extensive measures to reorganize, consolidate and integrate its European banana operations. Discontinued Operations During the fourth quarter of 1992, after evaluation of previously announced reorganization plans and completion of other preparatory actions, Chiquita adopted a plan of disposal for its Meat Division operations. Pursuant to the plan, the Company completed the sale of a major fresh pork processing facility in December 1992. During 1993, the Company evaluated numerous proposals for the sale of various components of the Meat Division and engaged in extensive activity in the execution of the balance of its disposal plan. These activities resulted in significant cost reductions contributing to improved Meat Division operating results, progress toward further substantial cost reductions relating to retiree medical costs, receipt of government and union subsidies, concessions and financial incentives, and establishment of a new stand-alone credit facility to fund the Meat Division's working capital needs. In addition, during the second quarter of 1993, Chiquita purchased $16.7 million of secured Meat Division debt held by a third-party lender. In February 1994, the Division's specialty meat operations were sold for approximately $50 million in cash. The Company is continuing its marketing efforts and expects to complete the divestiture of the remaining Meat Division operations by the end of 1994. 9 Net sales of discontinued operations have decreased to $1.5 billion from $1.8 billion in 1992 and $2.0 billion in 1991 due primarily to the closing of fresh beef operations in 1991 and 1992, and the sale of the fresh pork processing facility in December 1992. However, successful ongoing cost reduction efforts have contributed to the improvement in Meat Division operating results to approximately breakeven levels in 1993, as compared to a loss from operations of $27.2 million in 1992. The developments during 1993 regarding the Meat Division have not had and are not expected to have a material adverse effect on Chiquita's liquidity, financial condition or results of operations. See Note 3 to the Consolidated Financial Statements for more information on discontinued operations. Financial Condition Cash provided by continuing operations was $47.2 million in 1993 in contrast to the $29.2 million negative operating cash flow for 1992 as a result of the Company's improved operating performance. In 1992, the decline in operating cash flow from 1991 levels was limited to $51 million as a result of working capital management efforts and because non-cash charges were a major component of 1992's substantial loss. At December 31, 1993, Chiquita had $151 million of cash and equivalents, not including $51 million of restricted cash on deposit with banks as collateral for subsidiary borrowings. The Company believes that this cash position, combined with increased cash flow as a result of restructuring and cost reduction efforts, reduced future capital spending discussed below and lower financing costs, provide for the liquidity necessary to meet foreseeable needs. Capital expenditures, most of which relate to transportation system improvements and the purchase and development of fresh fruit production capacity under a multi-year investment program, were reduced to $197 million for 1993 from $410 million in 1992 and $340 million in 1991. This investment program is nearly complete and the Company expects to reduce 1994 capital expenditures to approximately $125 million, including $65 million for remaining ship construction commitments. External financing during the last three years relating to Chiquita's investment spending program and for general corporate purposes includes: - long-term subsidiary borrowings aggregating approximately $500 million; - three 1991 public debt offerings of approximately $600 million; and - a 1991 public sale of 5 million new capital shares for $208 million. In addition, the Company has arranged financing for approximately three-fourths of its 1994 shipping-related capital expenditures. Acquisitions during the last three years have not required significant cash outlays. In 1992, Chiquita issued 2.7 million shares of capital stock in exchange for all outstanding common shares of Friday Canning Corporation, a private-label vegetable processor. Chiquita repurchased 1.7 million shares of capital stock during 1992 for approximately $35 million and 1.3 million shares in 1991 for approximately $48 million. Also in 1992 Chiquita issued preference stock in exchange for 3.2 million shares of its capital stock. The preference shares, which provide dividends at a rate higher than the dividend on capital stock, will be exchanged back into capital stock no later than September 1995. (See Note 11 to the Consolidated Financial Statements.) The annual dividend rate on Chiquita capital stock increased from $.60 per share in 1991 to $.68 per share in 1992. In connection with efforts to strengthen its balance sheet, in mid-1993 the Company reduced the annual dividend rate on its capital stock to $.20 per share and began to pay preference stock dividends in the form of shares of capital stock, as permitted by the terms of the preference stock. In early 1994, Chiquita received approximately $310 million from public sales of 9 1/8% senior notes and preferred stock. In early March 1994, the Company called for redemption its 9 1/8% Subordinated Debentures due 1998 (effective interest rate of 13.2%) and its 11 7/8% Subordinated Debentures due 2003. The Company also plans to redeem other subordinated debt and/or repay portions of its outstanding subsidiary debt with the proceeds of these offerings. 10
Consolidated Statement of Income Chiquita Brands International, Inc. and Subsidiary Companies Year Ended December 31, (In thousands, except per share amounts)1993 1992 1991 Net sales $2,532,925 $2,723,250 $2,604,128 Operating expenses Cost of sales 1,993,552 2,309,425 2,027,669 Selling, general and administrative expenses 332,934 368,675 324,240 Depreciation 102,591 80,438 54,401 Restructuring and reorganization -- 61,300 -- 2,429,077 2,819,838 2,406,310 Operating income (loss) 103,848 (96,588) 197,818 Interest income 20,377 43,301 47,319 Interest expense (169,789) (155,036) (88,406) Other income (expense), net 6,483 (8,385) 3,278 Income (loss) from continuing operations before income taxes (39,081) (216,708) 160,009 Income taxes (12,000) (5,000) (49,100) Income (loss) from continuing operations (51,081) (221,708) 110,909 Discontinued operations -- (62,332) 17,586 Net income (loss) $(51,081) $(284,040) $128,495 Earnings (loss) per common share Primary - Continuing operations $(.99) $(4.28) $2.20 - Discontinued operations - - - (1.20) .35 - Net income (loss) (.99) (5.48) 2.55 Fully diluted -Continuing operations(.99) (4.28) 2.19 - Discontinued operations - - - (1.20) .33 - Net income (loss) (.99) (5.48) 2.52 Weighted average number of common shares outstanding Primary 51,427 51,804 50,382 Fully diluted 51,427 51,804 52,912 See Notes to Consolidated Financial Statements.
11
Consolidated Balance Sheet Chiquita Brands International, Inc. and Subsidiary Companies December 31, (In thousands, except share amounts) 1993 1992 ASSETS Current assets Cash and equivalents $ 151,226 $ 387,969 Marketable securities -- 25,212 Trade receivables, less allowances of $11,051 and $9,698, respectively 187,936 199,684 Other receivables, net 85,170 72,709 Inventories 307,073 350,578 Other current assets 39,054 34,571 Total current assets 770,459 1,070,723 Restricted cash 51,020 -- Net assets of discontinued operations 42,410 25,675 Property, plant and equipment, net 1,427,191 1,374,913 Investments and other assets 282,914 226,764 Intangibles, net 166,759 182,549 Total assets $2,740,753 $2,880,624 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes and loans payable $ 112,796 $ 136,765 Long-term debt due within one year 79,411 92,521 Accounts payable 202,923 226,860 Accrued liabilities 108,536 132,239 Total current liabilities 503,666 588,385 Long-term debt of parent company 881,124 883,936 Long-term debt of subsidiaries 557,254 527,383 Accrued pension and other employee benefits 74,588 74,162 Other liabilities 122,123 131,871 Total liabilities 2,138,755 2,205,737 Shareholders' equity Preferred and preference stock (648,310 shares outstanding) 52,270 52,270 Capital stock, $.33 par value (48,510,353 and 48,163,560 shares outstanding, respectively) 16,170 16,055 Capital surplus 494,240 490,369 Retained earnings 39,318 116,193 Total shareholders' equity 601,998 674,887 Total liabilities and shareholders' equity $ 2,740,753 $ 2,880,624 See Notes to Consolidated Financial Statements.
12
Consolidated Statement of Shareholders' Equity Chiquita Brands International, Inc. and Subsidiary Companies Prefer- red and Total Prefer- Share- ence Capital Retained holders' Stock Capital Stock Surplus Earnings Equity (In thousands, except share amounts) Shares Par Value Balance at December 31, 1990 $ -- 45,219,312 $15,073 $323,640 $348,996 $687,709 Capital stock repurchased --(1,293,701) (431) (13,809) (34,012) (48,252) Stock options exercised -- 758,846 253 14,530 -- 14,783 Shares sold to public, net of offering costs -- 4,967,806 1,656 206,658 -- 208,314 Other shares issued -- 273,514 91 2,608 806 3,505 Net income -- -- -- -- 128,495 128,495 Dividends on capital stock -- -- -- -- (26,629) (26,629) Balance at December 31, 1991 -- 49,925,777 16,642 533,627 417,656 967,925 Capital stock repurchased --(1,699,100) (566) (17,395) (16,542) (34,503) Stock options exercised -- 297,573 99 4,549 -- 4,648 Preference stock issued in exchange for capital stock 52,270 (3,241,546) (1,081) (32,909) (18,795) (515) Shares issued in an acquisition -- 2,694,136 898 (751) 52,258 52,405 Other shares issued -- 186,720 63 3,248 -- 3,311 Net loss -- -- -- -- (284,040) (284,040) Dividends Capital stock -- -- -- -- (33,566) (33,566) Preference stock -- -- -- -- (778) (778) Balance at December 31, 1992 52,270 48,163,560 16,055 490,369 116,193 674,887 Capital stock repurchased -- (30,000) (10) (102) (325) (437) Stock options exercised -- 17,120 6 168 -- 174 Other shares issued -- 168,000 55 1,738 -- 1,793 Net loss -- -- -- -- (51,081) (51,081) Dividends Capital stock -- -- -- -- (21,191) (21,191) Preference stock -- 191,673 64 2,067 (4,278) (2,147) Balance at December 31, 1993 $52,27048,510,353 $16,170 $494,240 $ 39,318 $601,998 See Notes to Consolidated Financial Statements.
13
Consolidated Statement of Cash Flow Chiquita Brands International, Inc. and Subsidiary Companies Year Ended December 31, (In thousands) 1993 1992 1991 Cash provided (used) by: Operations Income (loss) from continuing operations $(51,081) $(221,708)$110,909 Depreciation and amortization 109,711 87,509 60,258 Restructuring and reorganization -- 45,600 -- Deferred income taxes (3,191) -- 9,173 Changes in current assets and liabilities Receivables (7,571) 30,675 (41,840) Inventories 40,535 24,910 (34,476) Accounts payable and accrued liabilities (41,027) (39,502)(32,299) Other current assets and liabilities (4,249) 33,904 (6,695) Other 4,086 9,447 (43,314) Cash flow from operations 47,213 (29,165) 21,716 Investing Capital expenditures (196,554) (409,770) (340,149) Deposits of restricted cash (51,020) -- -- Acquisitions and long-term investments(49,466) (35,217) (43,741) Decrease (increase) in marketable securities 25,212 87,113 (90,942) Proceeds from sale of ships and equipment 22,000 --- - - Other 11,828 (8,126) 7,776 Cash flow from investing (238,000) (366,000) (467,056) Financing Debt transactions Issuances of long-term debt 151,160 254,820 712,520 Repayments of long-term debt (132,839) (63,907) (63,953) Increase (decrease) in notes and loans payable (25,621) (30,898)64,686 Stock transactions Issuances of capital stock 1,854 6,101 218,753 Repurchases of capital stock (437) (34,503) (48,252) Dividends (23,338) (34,344) (26,629) Cash flow from financing (29,221) 97,269 857,125 Discontinued operations (16,735) (26,140) 4,474 Increase (decrease) in cash and equivalents (236,743) (324,036)416,259 Balance at beginning of year 387,969 712,005 295,746 Balance at end of year $151,226 $387,969 $712,005 See Notes to Consolidated Financial Statements.
14 Notes to Consolidated Financial Statements Chiquita Brands International, Inc. and Subsidiary Companies Note 1 -- Summary of Significant Accounting Policies American Financial Corporation and its subsidiaries ("AFC") owned approximately 46% of the voting stock of Chiquita Brands International, Inc. ("Chiquita" or the "Company") as of December 31, 1993. Consolidation The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. Intercompany balances and transactions have been eliminated. Discontinued operations are not consolidated (see Note 3). 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. At December 31, 1993 and 1992, investments in food-related companies of $54 million and $43 million, respectively, were accounted for using the equity method. The excess ($15 million at December 31, 1993) of the carrying value over Chiquita's share of the fair value of the investees' net assets at the date of acquisition is being amortized over 40 years. Cash and Equivalents Cash and equivalents includes all unrestricted 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 banana inventories is determined principally on the "last-in, first-out" (LIFO) basis. Cost for other inventory categories is determined principally on the "first-in, first-out" (FIFO) or average cost basis. Intangibles Intangibles consist of goodwill and trademarks which are being amortized over 40 years. Accumulated amortization was $30.5 million and $25.2 million at December 31, 1993 and 1992, respectively. Income Taxes Deferred income taxes are recognized at current 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. Translation of Foreign Currencies Chiquita utilizes the U.S. dollar as its functional currency. Net foreign exchange gains, which amounted to approximately $7.5 million, $4.8 million and $2.8 million in 1993, 1992 and 1991, respectively, are included in income. The Company periodically enters into foreign exchange forward contracts to hedge transactions denominated in foreign currencies. Gains and losses on contracts used to hedge firm commitments are deferred and included in the measurement of the transaction underlying the commitment. Gains and losses on contracts used to hedge other transactions are included in income on a current basis. At December 31, 1993 the Company had foreign exchange forward contracts aggregating approximately $74 million. The fair value of these contracts, determined based on quoted market prices, was not significant. Earnings Per Share Primary earnings per share is calculated on the basis of the weighted average number of shares of common stock and equivalent Series C preference stock outstanding during the year and the dilutive effect, if any, of assumed conversion of other common stock equivalents (stock options and warrants). Fully diluted earnings per share includes the dilutive effect, if any, of assumed conversion of convertible subordinated debentures. Note 2 -- Restructuring and Reorganization During the fourth quarter of 1992, the Company undertook a program to adjust its fresh foods volume and cost infrastructure to significantly reduce production, distribution and overhead costs. This program, which included consolidation of operations, asset disposals and workforce reductions, resulted in restructuring and reorganization charges of $61.3 million. 15 Note 3 -- Discontinued Operations During the fourth quarter of 1992, after evaluation of reorganization plans announced earlier that year and completion of other preparatory actions, Chiquita adopted a plan of disposal for all remaining Meat Division operations. Pursuant to the plan, the Company immediately completed the sale of a major fresh pork processing facility in December 1992. In February 1994, the Division's specialty meat operations were sold for approximately $50 million in cash. The Company continues to be engaged in vigorous marketing efforts with respect to the remaining Meat Division operations and expects to complete the divestitures of these operations by the end of 1994. Meat Division operating results included in Chiquita's Consolidated Statement of Income as "Discontinued operations" are as follows:
(In thousands) 1992 1991 Net sales $1,767,564 $2,023,269 Income (loss) from operations, net of income taxes of $5,800 in 1991 (27,232) 17,586 Estimated loss on disposal (35,100) -- Discontinued operations $ (62,332) $ 17,586
Meat Division operating results were approximately breakeven for 1993 on net sales of approximately $1.5 billion. Results for 1991 included the receipt of $29.3 million in a settlement with a labor union, reduced by $9 million in charges for the restructuring of certain production and distribution facilities. The estimated loss on disposal includes the effects of postretirement medical benefit obligations. Chiquita has reevaluated the provision for loss on discontinued operations recorded in 1992 and believes it is adequate to provide for any losses on disposition. The net assets of discontinued operations consist principally of property, plant and equipment and trademarks, and at December 31, 1993 include $26.1 million of short-term borrowings under an $80 million credit facility secured by Meat Division working capital. These net assets also include liabilities under Meat Division defined benefit pension plans. The fair value of plan assets, the total benefit obligation and the net liability recorded for these plans at December 31, 1993 were $113 million, $162 million and $49 million, respectively. Note 4 - Acquisitions The Company paid $10.5 million, $9.8 million and $38.6 million in 1993, 1992 and 1991, respectively, for the purchase of majority and minority interests in several food-related businesses. The results of operations from these acquisitions are included in the Consolidated Statement of Income from the dates of acquisition and did not materially affect consolidated results of operations in the years acquired. In March 1992, the Company exchanged 2,694,136 shares of its capital stock for all of the outstanding common shares of Friday Canning Corporation ("Friday"), one of the largest U.S. private-label vegetable processors. The net assets of Friday at the time of the merger were $52 million and included inventories (primarily "Other food products") of approximately $67 million and notes and loans payable of approximately $19 million. In November 1991, the Company exchanged 197,531 shares of its capital stock for all of the outstanding common shares of a manufacturer and distributor of fresh fruit and vegetable juices. Both of these transactions have been accounted for as poolings of interests. Prior years' financial statements have not been restated because the effects of these transactions were not material. 16
Note 5 -- Inventories Inventories consist of the following: December 31, (In thousands) 1993 1992 Bananas and other fresh produce $42,918 $40,348 Other food products 56,043 84,982 Growing crops 117,839 112,124 Materials and supplies 75,206 95,465 Other 15,067 17,659 $307,073 $350,578
The carrying value of inventories valued by the LIFO method was $129.1 million at December 31, 1993 and $119.6 million at December 31, 1992. If inventories were stated at current costs, total inventory values would not be materially different. The Company periodically enters into futures contracts to hedge the cost of anticipated purchases of oil for its shipping operations. These futures contracts are accounted for as hedges and, accordingly, gains and losses are deferred until the corresponding oil purchases are used in operations.
Note 6 -- Property, Plant and Equipment, Net Property, plant and equipment consist of the following: December 31, (In thousands) 1993 1992 Land $103,987 $101,131 Buildings and improvements 198,434 186,038 Machinery and equipment 411,693 403,480 Ships and containers 790,817 692,375 Cultivations 305,546 292,843 Other 79,333 85,106 1,889,810 1,760,973 Less accumulated depreciation (462,619) (386,060) Property, plant and equipment, net $1,427,191 $1,374,913
Property, plant and equipment are stated at cost and, except for land and certain improvements, are depreciated on a straight-line basis over their estimated useful lives. The Company capitalized interest costs of $8 million in 1993, $21 million in 1992 and $23 million in 1991 as part of the cost of major production and shipping asset construction projects. At December 31, 1993, the Company had commitments for shipping- related capital expenditures of approximately $65 million and has secured financing for approximately three-fourths of these commitments. Capital expenditures presented in the Consolidated Statement of Cash Flow for 1992 and 1991 exclude $62.5 million and $55.5 million, respectively, of purchases which were directly financed.
Note 7 -- Leases Total rental expense consists of the following: (In thousands) 1993 1992 1991 Gross rentals - ships $ 142,969 $222,916 $177,829 - other 32,528 34,513 44,382 175,497 257,429 222,211 Less sublease rentals (7,189) (20,775) (5,864) $168,308 $236,654 $216,347
Future minimum rental payments required under operating leases having initial or remaining non-cancelable lease terms in excess of one year at December 31, 1993 are as follows:
(In thousands) Gross Rentals Ships Other Total 1994 $ 81,494 $ 20,464 $101,958 1995 65,669 15,083 80,752 1996 11,688 14,931 26,619 1997 6,722 12,600 19,322 1998 8,517 7,966 16,483 Later years 63,139 7,644 70,783
Portions of the minimum rental payments for ships constitute reimbursement for ship operating costs paid for by the lessor. Future minimum rental payments to be received from non-cancelable subleases at December 31, 1993, principally for office space, are $38.7 million. 17
Note 8 -- Debt Long-term debt consists of the following: (In thousands) December 31, Parent Company 1993 1992 9 5/8% senior notes, due 2004, less unamortized discount of $2,805 and $2,963 (imputed interest rate of 9.8%) $247,195$ 247,037 7% subordinated debentures, due 2001, convertible into capital stock at $43 per share 138,000 138,000 9 1/8% subordinated debentures, due 1998, less unamortized discount of $1,776 and $2,335 (imputed interest rate of 13.2%) 15,900 15,341 10 1/4% subordinated debentures, due 2005, less unamortized discount of $7,538 and $7,831 (imputed interest rate of 13.7%) 34,554 34,261 10 1/2% subordinated debentures, due 2004, less unamortized discount of $10,391 and $10,887 (imputed interest rate of 12.1%) 100,429 99,933 11 1/2% subordinated notes, due 2001 220,000 220,000 11 7/8% subordinated debentures, due 2003 125,000 125,000 Other notes and loans 62 4,780 Less current maturities (16) (416) Long-term debt of parent company $881,124 $883,936 Subsidiary Companies Loans payable secured by ships and containers, due in installments from 1994 to 2005, bearing interest at effective rates averaging 8.1% $376,492 $367,784 Carribbean Basin Projects Financing Authority (CBI Industrial Revenue Bonds 1993 Series A) loan, due 1998, bearing interest at a variable rate (2.7% at December 31, 1993) 38,000 -- Overseas Private Investment Corporation loans, due in installments from 1994 through 2002, bearing interest at rates averaging 9% 25,275 32,411 Note payable, due in installments from 1994 through 1998, bearing interest at 1% below prime 19,200 19,700 Loans and notes payable in foreign currencies maturing 1994 to 2006, bearing interest at rates averaging 23% 81,902 97,556 Other loans and notes payable maturing 1994 to 2012, bearing interest at rates averaging 8% 95,780 102,037 Less current maturities (79,395) (92,105) Long-term debt of subsidiaries $557,254 $527,383
Certain of the subordinated debentures have sinking fund requirements and are callable at the Company's option at prices ranging from par to premiums of 1% to 5.7% over par at various dates through 1998. At December 31, 1993, $81.8 million of the carrying amount of loans secured by ships bear interest at fixed rates averaging approximately 7% and the remaining ship and container loans carry variable interest rates ranging from LIBOR plus .75% to LIBOR plus 1.5%. All of the ship and container loans outstanding at December 31, 1992 had similar variable interest rate terms. Of the variable interest rate obligations, $67 million have been converted to U.S. dollar loans pursuant to foreign currency swap agreements. Chiquita has interest rate swap agreements with aggregate contract amounts of $122 million at December 31, 1993 ($142 million at December 31, 1992) that fix the rate of interest on certain of the variable rate ship and container loans at an average rate of 9.1%. The overall effective interest rate on ship and container loans includes the amortization of deferred hedging gains and losses from interest rate futures contracts. No such contracts were outstanding at December 31, 1993. The estimated fair value of the Company's total outstanding debt and associated interest rate swap agreements at December 31, 1993 exceeded carrying value by approximately $70 million and, at December 31, 1992, approximated carrying value. Fair value for publicly traded debt is 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 swap agreements are estimated based on the cost to terminate the agreements. In February 1994, the Company issued $175 million principal amount of 9 1/8% senior notes due 2004. The unsecured notes rank equally with existing and future senior unsecured indebtedness of the Company. The proceeds from this issuance, together with the proceeds from Chiquita's sale of preferred stock in February 1994 (see Note 11), are expected to be used to redeem the Company's 11 7/8% Subordinated Debentures, other subordinated debt and/or to repay portions of the outstanding debt of the Company's subsidiaries. 18 Maturities and sinking fund requirements on long-term debt during the next five years, after application of reacquired debentures to meet sinking fund requirements, are:
Parent Subsidiary (In thousands) Company Companies Total 1994 $ 16 $79,395 $79,411 1995 4,209 103,668 107,877 1996 4,515 83,940 88,455 1997 4,504 86,701 91,205 1998 4,495 116,588 121,083
Cash payments relating to interest expense were $159.4 million, $139.3 million and $71.7 million in 1993, 1992 and 1991, respectively. Certain of the Company's debt agreements contain restrictions on the payment of cash dividends. At December 31, 1993, approximately $25 million was available for dividend payments under the most restrictive of these agreements. In early 1994, the Company called the debt outstanding under this agreement for redemption. Under the next most restrictive agreement, approximately $50 million was available for dividends at December 31, 1993, and an additional $139 million is available after giving effect to the February 1994 preferred stock proceeds. The Company maintains lines of credit with various domestic and foreign banks for borrowing funds on a short-term basis and has short-term working capital loans with domestic and foreign banks. Note 9 -- Pension and Severance Benefits The Company and its subsidiaries have several defined benefit and contribution pension plans covering approximately 7,000 domestic and foreign employees. Approximately 39,000 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. The following table presents a summary of pension and severance expense:
(In thousands) 1993 1992 1991 Defined benefit and severance plans: Service cost -- benefits earned during the period $5,885 $5,126$4,932 Interest cost on projected benefit obligation 8,423 7,784 7,692 Actual return on plan assets (2,215) (1,868) (2,226) Net amortization and deferral (521) (566) 1,649 11,572 10,476 12,047 Defined contribution plans 3,669 4,304 3,064 Total pension and severance expense $15,241 $14,780 $15,111
Pensions are funded in accordance with the requirements of the Employee Retirement Income Security Act or equivalent foreign regulations. Essentially all of the balance sheet liability presented in the table below relates to Central and South American pension and severance benefits which are generally not required to be funded until benefits are paid.
Plans for which Plans for which Assets Exceed Accumulated Benefits Accumulated Benefits Exceed Assets at at December 31, December 31, (In thousands) 1993 1992 1993 1992 Plan assets at fair market value $ 29,195 $24,049 $9,400 $ 12,254 Present value of benefit obligations: Vested 26,504 21,597 54,523 48,945 Nonvested 392 49 3,353 3,249 Accumulated benefit obligation26,896 21,646 57,876 52,194 Additional amounts related to projected pay increases 3,980 3,411 17,227 14,714 Projected benefit obligation 30,876 25,057 75,103 66,908 Projected benefit obligation in excess of plan assets (1,681) (1,008) (65,703) (54,654) Unrecognized net (gain) loss (7) (1,921) 7,363 (4,342) Unrecognized prior service cost (490) (426) 3,174 3,803 Unrecognized obligation at transition, net of amortization 982 1,069 6,771 6,568 Net balance sheet liability $(1,196) $(2,286) $(48,395) $(48,625)
19 The projected benefit obligations were determined using assumed discount rates of approximately 9% for unfunded Central and South American pension and severance benefits and approximately 7% for all other plan benefits. The assumed long-term rate of compensation increase was between 5% and 6% and the assumed long-term rate of return on plan assets was approximately 9% (10% in 1992). Plan assets consist primarily of corporate debt, U.S. government and agency obligations and collective trust funds. Note 10 -- Stock Options Under a non-qualified stock option plan, the Company may grant options to purchase up to an aggregate of 10,000,000 shares of capital stock. Under this plan and other formal stock option and incentive plans, options have been granted to directors, officers and other key employees to purchase shares of the Company's capital stock at the fair market value at the date of grant. The options may be exercised over a period not in excess of 20 years.
1993 1992 Option Option Shares Price Shares Price Under option at beginning of year 5,969,996 $5.75 - 49.635,007,310 $5.75 - 49.63 Options granted 3,282,76510.19 - 14.25 1,448,52515.75 - 39.56 Options exercised (17,120)8.67 - 16.13 (297,573)5.75 - 34.44 Options canceled or expired(3,783,873)8.67 - 49.63 (188,266)13.00 - 47.75 Under option at end of year5,451,768 $ 5.75 - 47.755,969,996 $5.75 - 49.63 Options exercisable at end of year1,517,236 1,799,975 Shares available for future grant2,852,598 2,348,490
In December 1993, in connection with a voluntary exchange offer, the Company canceled options for 2,298,186 shares at prices ranging from $15.81 to $49.63 issued in 1988 through 1992 and, in exchange, reissued options for 1,451,430 shares at a price equal to the exchange date market value. Existing options were canceled at rates ranging from 1.5 to 2.0 outstanding option shares for each new option share granted pursuant to the offer. The new options vest over periods of up to nine years. Stock options for 758,846 shares were exercised during 1991 at prices ranging from $4.00 to $30.00 per share. Note 11 -- Shareholders' Equity At December 31, 1993, there were 100,000,000 authorized shares of capital stock. Of the shares authorized but unissued at December 31, 1993, approximately 22,000,000 shares were reserved for conversion of subordinated debentures and preference stock, exercise of stock options and warrants, dividend reinvestments and issuances under employee benefit plans. In February 1994, the Company sold 2,875,000 shares of $2.875 Non- Voting Cumulative Preferred Stock, Series A, par value $1.00 per share (the "Series A Shares") for aggregate net proceeds of $139 million. The Series A Shares have a liquidation preference of $50.00 per share; pay an annual cash dividend of $2.875 per share; and are convertible into 2.6316 shares of capital stock at each holder's option at any time after April 16, 1994. The Company may convert the Series A Shares at its option, under certain circumstances, after February 14, 1997. In October 1992, Chiquita issued 648,310 shares of Mandatorily Exchangeable Cumulative Preference Stock, Series C (the "Series C Shares"), represented by 3,241,546 $1.32 depositary shares (the "Depositary Shares"), in exchange for 3,241,546 shares of the Company's capital stock. The Depositary Shares have one vote per share, voting with the capital stock; have a liquidation preference of $18.00 per share; pay annual dividends in cash or capital stock at the Company's option of $1.32 per share and will convert back into capital stock on September 7, 1995, or earlier at the Company's option or upon the occurrence of certain events at a rate of one-for- one (except that the rate will be proportionately less than one-for- one if the market value of the capital stock exceeds $24.00 per share at the time of the conversion). In the third quarter of 1993, the Company began paying Series C dividends in capital stock. 20 Holders of Series A and Depositary Shares have the right to elect additional directors in addition to the directors ordinarily elected by holders of capital stock and Depositary Shares in certain circumstances where the Company fails to pay quarterly dividends on the preferred and preference stock. At December 31, 1993, 46,028 shares of $3.00 Cumulative Preferred Stock, 2,568,096 shares of $1.20 Series A Cumulative Preference Stock, 75,813 shares of $3.20 Series B Cumulative Preference Stock and 1,000,000 Series C Shares were authorized. The Board of Directors also has the authority to fix the terms of 356,091 additional shares of authorized but unissued Cumulative Preference Stock and 7,125,000 shares of Non-Voting Cumulative Preferred Stock. Note 12 - Income Taxes Effective January 1, 1992, the Company adopted a new standard for income tax accounting, the effect of which was not material. Income taxes consist of the following:
United States (In thousands) Federal State Foreign Total 1993 Current tax expense $ -- $1,944 $13,247 $15,191 Deferred tax benefit -- -- (3,191) (3,191) $ -- $1,944 $10,056 $12,000 1992 Current tax expense $ -- $ 468 $4,532 $5,000 Deferred tax expense -- -- -- -- $ -- $ 468 $4,532 $5,000 1991 Current tax expense $2,609 $3,206 $34,112 $39,927 Deferred tax expense (benefit) (40) -- 9,213 9,173 $2,569 $3,206 $43,325 $49,100
Income (loss) from continuing operations before income taxes consists of the following:
(In thousands) Subject to tax in: 1993 1992 1991 United States $(71,173) $(95,569) $ 2,555 Foreign jurisdictions 32,092 (121,139) 157,454 $(39,081) $(216,708) $160,009
Income tax expense differs from income taxes computed at the U.S. federal statutory rate for the following reasons:
(In thousands) 1993 1992 1991 Income taxes (benefit) computed at U.S. federal statutory rate $(13,678) $(73,681) $54,403 State income taxes, net of federal benefit 1,264 309 2,116 U.S. losses for which no tax benefit has been recognized 19,694 34,310 -- Foreign losses for which no tax benefit has been recognized 13,166 44,347 6,642 Taxes on foreign operations at other than U.S. rates (12,005) (1,482) (14,080) Other 3,559 1,197 19 Income tax expense $12,000 $5,000 $49,100
The components of deferred income taxes included on the balance sheet at December 31, 1993 and 1992 are as follows (in thousands):
1993 1992 Deferred tax benefits Employee benefits $45,114 $41,123 Accrued expenses 27,043 37,298 Other 22,464 24,891 94,621 103,312 Valuation allowance (9,631) (18,854) 84,990 84,458 Deferred tax liabilities Depreciation and amortization (28,936) (17,788) Growing crops (22,454) (21,812) Long-term debt (19,281) (17,461) Other (16,318) (32,349) (86,989) (89,410) Net deferred tax liability $ (1,999) $(4,952)
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 $107 million, alternative minimum tax credits of $5 million and foreign tax credit carryforwards of $73 million. The loss carryforwards expire in 2008 and the foreign tax credit carryforwards expire between now and 1998. The 1992 net operating loss was carried back, resulting in a refund due for prior years' taxes and $40 million of the $73 million of foreign tax credit carryforwards. 21 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. Deferred tax expense for 1991 resulted principally from accrued expenses and deferred charges. Cash payments for income taxes, net of refunds, were $17.0 million in 1993, $3.6 million in 1992 and $51.3 million in 1991. Note 13 - Litigation A number of legal actions are pending against the Company. Based on evaluation of facts which have been ascertained, and on opinions 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. Note 14 -- Geographic Area Information The Company is one of the world's leading marketers, producers and processors of quality fresh and processed food products. The Company's products are sold throughout the world and its principal production and processing operations are conducted in North, Central and South America. With the decision to sell its remaining Meat Division operations, the Company's continuing operations constitute a single business segment. The Company'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 other agricultural and consumer 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 governmental regulations in certain countries where it markets bananas, including import quotas and tariffs, currency exchange controls and taxes. Financial information with respect to the Company's operations by geographic area is shown below:
Year Ended December 31, (In thousands) 1993 1992 1991 Net sales to unaffiliated customers North America $1,238,678 $1,192,613 $1,072,343 Central and South America 184,060 187,753 182,673 Europe and other international 1,110,187 1,342,884 1,349,112 Consolidated net sales $2,532,925 $2,723,250 $2,604,128 Operating income (loss) * North America $ 20,469 $(47,584) $20,340 Central and South America 17,607 16,906 18,495 Europe and other international 78,691 (52,541) 172,070 Unallocated expenses (12,919) (13,369) (13,087) Consolidated operating income (loss) $ 103,848 $(96,588)$ 197,818 Identifiable assets North America $509,760 $538,165 $421,615 Central and South America 912,321 918,230 806,400 Europe and other international 339,374 306,131 316,082 Shipping operations 656,816 586,960 383,982 Corporate assets 322,482 531,138 1,009,265 Consolidated assets $2,740,753 $2,880,624 $2,937,344 * Amounts for 1992 include $61.3 million of restructuring and reorganization charges reflected in the geographic areas as follows: North America, $6.8 million; Europe and other international, $54.5 million.
Net sales exclude intercompany sales of bananas from Central and South America to different geographic areas. These sales, which are eliminated in consolidation and are measured at cost under the method used for internal management financial reporting purposes, were $493 million in 1993, $494 million in 1992 and $413 million in 1991. There are no banana sales to unaffiliated customers in Central and South America. Other intergeographic sales are not significant. Cash and equivalents, marketable securities, trademarks and the net assets of discontinued operations are included in corporate assets. Minority equity investments are included in the geographic area where their operations are located. 22 Note 15 -- 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.
1993 (In thousands, except per share amounts) March 31 June 30 Sept.30 Dec. 31 Net sales $731,109 $682,352 $552,329 $567,135 Cost of sales (547,061) (535,555) (438,102) (472,834) Operating income (loss) 70,342 41,985 11,139 (19,618) Net income (loss) 27,530 7,673 (25,868) (60,416) Fully diluted earnings (loss) per share .53 .15 (.50) (1.17) Dividends per common share .17 .17 .05 .05 Capital stock market price High 17.50 15.63 14.00 11.88 Low 13.25 10.50 10.25 10.13
1992
(In thousands, except per share amounts) March 31 June 30 Sept. 30 Dec. 31 Net sales $708,053 $781,785 $612,451 $620,961 Cost of sales (569,175) (642,189 ) (525,604 ) (572,457) Operating income (loss) 33,663 23,381 (28,334) (125,298) Income (loss) from continuing operations 9,316 (6,730)(71,854)(152,440) Discontinued operations (3,811) (10,006 ) (7,538 ) (40,977) Net income (loss) 5,505 (16,736 ) (79,392)(193,417) Fully diluted earnings (loss) per share - Continuing operations .17 (.13 ) (1.40)(2.97) - Discontinued operations (.07) (.19 ) (.15 ) (.80) - Net income (loss) .10 (.32 ) (1.55)(3.77) Dividends per common share .15 .17 .17 .17 Capital stock market price High 40.13 29.13 18.50 18.00 Low 29.13 16.63 15.75 15.75
The operating loss for the quarter ended December 31, 1992 includes restructuring and reorganization charges of $61.3 million (see Note 2). A separate computation of earnings per share is made for each quarter presented. The dilutive effect on earnings per share resulting from the assumed conversion of convertible debt and exercise of stock options and warrants is included in each quarter in which dilution occurs. The earnings per share computation for the year is a separate annual calculation. Accordingly, the sum of the quarterly earnings per share amounts will not necessarily equal the earnings per share for the year. 23 Investor Information Chiquita Brands International, Inc. Stock Exchange Listings New York, Boston & Pacific Stock Symbol CQB Shareholders of Record At March 1, 1994, there were 7,684 common shareholders of record Transfer Agent and Registrar - Capital Stock, $2.875 Non- Voting Cumulative Preferred Stock, Series A and Mandatorily Exchangeable Cumulative Preference Stock, Series C ($1.32 Depositary Shares) 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 Corporate Affairs or the Transfer Agent. Annual Meeting May 11, 1994 10 a.m. Eastern Daylight Time Omni Netherland Plaza 35 West Fifth Street Cincinnati, Ohio 45202 Investor Inquiries For other questions concerning your investment in Chiquita, contact Vice President, Corporate Affairs at (513) 784-6366 Trustees and Transfer Agents - Debentures/Notes 7% Convertible Subordinated Debentures due March 28, 2001 Trustee- Chemical Bank 450 West 33rd Street New York, New York 10001 Transfer, Paying and Conversion Agents Chemical Bank - London, England Banque Paribas Luxembourg- Luxembourg Banque Bruxelles Lambert S.A.- Brussels, Belgium Bank Leu, Ltd.-Zurich, Switzerland 9 1/8% Subordinated Debentures due February 1, 1998 Trustee and Transfer Agent- The Bank of New York 101 Barclay Street New York, New York 10286 9 1/8% Senior Notes due March 1, 2004 * 9 5/8% Senior Notes due January 15, 2004 * Trustee- The Fifth Third Bank 38 Fountain Square Plaza Cincinnati, Ohio 45263 10 1/4% Subordinated Debentures due August 1, 2005* 10 1/2% Subordinated Debentures due August 1, 2004* 11 1/2% Subordinated Notes due June 1, 2001* 11 7/8% Subordinated Debentures due May 1, 2003* Trustee- Star Bank, N.A. 425 Walnut Street Cincinnati, Ohio 45202 * Chiquita Brands International, Inc., c/o Securities Transfer Company is transfer agent for these Notes and Debentures EX-21 8 EXHIBIT 21 EXHIBIT 21 CHIQUITA BRANDS INTERNATIONAL, INC. SUBSIDIARIES As of March 1, 1994, 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: Percent of Voting Securities Organized Owned by Under Laws of Immediate Parent Chiquita Brands, Inc. Delaware 100% American Produce Company Delaware 100% Banana Supply Co., Inc. Florida 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% CKQ, Ltd. Cayman Islands 100% CRH Shipping, Ltd. Bermuda 100% Danfund Ltd. Bermuda 100% Danop, Ltd. Bermuda 100% DSF, Ltd. Bermuda 100% Elke Shipping Limited Bermuda 100% GPH, Ltd. Bermuda 100% NCV, Ltd. Bermuda 100% Norvel, Ltd. Bermuda 100% Surrey Shipping Company, Ltd. Bermuda 100% Telegraph Shipping Company, 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 Europe, B.V. Netherlands 100% Chiquita Banana Company, B.V. Netherlands 100% Chiquita Packaged Foods, B.V. Netherlands 100% Chiquita Processed Foods, B.V. Netherlands 100% Chiquita Tropical Fruit Company, B.V. Netherlands 100% Chiquita Frupac, Inc. Delaware 100% EXHIBIT 21 (Cont.) Percent of Voting Securities Organized Owned by Under Laws of Immediate Parent Chiquita Holding Company, Inc. Delaware 100% Chiquita Italia, S.p.A. Italy 100% Chiquita International Trading Company Delaware 100% Chiquita International Limited Bermuda 100% Chiquita Brands (South Pacific) Pty Ltd. Australia 100% Exportadora Frupac Limitada Chile 100% Chiquita Tropical Products Company Delaware 100% Chiquita Gulf Citrus, Inc. Delaware 100% Chiquita Ventures, Inc. Delaware 100% Chiriqui Land Company Delaware 100% Compania Agricola del Guayas Delaware 100% Compania Agricola de Rio Tinto Delaware 100% Compania Frutera de Sevilla Delaware 100% Compania Procesadora de Frutas Delaware 100% Corpofinanzas, S.A. Costa Rica 100% Friday Canning Corporation Wisconsin 100% Frutas Dominicanas, CpA Dominican Republic 100% Maritrop Trading Corporation Delaware 100% Polymer United, Inc. Delaware 100% Progressive Produce Corporation Ohio 100% T&P Custom Marketing, Inc. Delaware 100% Tela Railroad Company Delaware 100% United Brands Japan, Ltd. Japan 95% Compania Palma Tica Delaware 100% Compania Bananera Atlantica Limitada Costa Rica 100% Compania Mundimar, S.A. Costa Rica 100% Compania Mundimar Delaware 100% Compania Numar, S.A. Costa Rica 100% Compania Numar de Honduras Delaware 100% United Marketing, S.A. Delaware 100% Polymer United G.C., Inc. Delaware 100% John Morrell & Co. Delaware 100% United Brands Food Ventures, Ltd. Delaware 100% Solar Aquafarms, Inc. California 75% The names of approximately 500 wholly-owned subsidiaries have been omitted. In the aggregate these subsidiaries, after excluding approximately 170 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. EX-23 9 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Chiquita Brands International, Inc. and subsidiary companies of our report dated February 28, 1994, included in the 1993 Annual Report of Chiquita Brands International, Inc. and subsidiary companies. Our audits also included the financial statement schedules of Chiquita Brands International, Inc. and subsidiary companies listed in Item 14(a). These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present 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. and subsidiary companies of our report dated February 28, 1994, with respect to the consolidated financial statements and schedules of Chiquita Brands International, Inc. and subsidiary companies incorporated by reference in the Annual Report (Form 10-K) for year ended December 31, 1993. Registration Form No. Description S-3 33-43333 Dividend Reinvestment Plan 33-58424 S-3 33-41057 Common Stock issuable upon conversion of Convertible Subordinated Debentures S-3 33-51995 Debt Securities, Preferred Stock and Common Stock S-3 33-51229 Secondary Sale of Common Stock by Certain Shareholders S-8 33-2241 Chiquita Savings and Investment Plan 33-16801 33-42733 33-56572 S-8 33-14254 1986 Stock Option and Incentive Plan 33-38284 33-41069 S-8 33-25950 Individual Stock Option Plan S-8 33-29147 John Morrell & Co. Salaried 33-56570 Employees Incentive Savings Plan S-8 33-38147 Associate Stock Purchase Plan Cincinnati, Ohio ERNST & YOUNG March 30, 1994 EX-24 10 EXHIBIT 24 POWER OF ATTORNEY We, the undersigned officers and directors of Chiquita Brands International, Inc. (the Company) hereby severally constitute and appoint Fred J. Runk and William A. Tsacalis, 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, 1993 (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 in response thereof, including specifically, but without limiting the generality of the foregoing, the power and authority to sign the name of the Company and the names of the undersigned directors and officers in the capacities indicated below to the Report, and 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. Signature Title Date Director, Chairman of the March , 1994 (Carl H. Lindner) Board of Directors, Chief Executive Officer and Chairman of the Executive Committee (Principal Executive Officer) Director, President and March , 1994 (Keith E. Lindner) Chief Operating Officer Director March , 1994 (S. Craig Lindner) /s/ Hugh F. Culverhouse Director March 28, 1994 (Hugh F. Culverhouse) Director March , 1994 (Fred J. Runk) /s/ Jean H. Sisco Director March 28, 1994 (Jean H. Sisco) Director March , 1994 (Ronald F. Walker) -----END PRIVACY-ENHANCED MESSAGE-----