-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Cdtp6L+q7J+EBJdkSXsrRLqPUydYmgAIY65rSCp/rzamu3YE2GHf7HrYiHa/Yg0H 5lV5AaMrTtpvs5do0OF6Sw== 0000950124-97-006166.txt : 19971124 0000950124-97-006166.hdr.sgml : 19971124 ACCESSION NUMBER: 0000950124-97-006166 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 19971121 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHIQUITA BRANDS INTERNATIONAL INC CENTRAL INDEX KEY: 0000101063 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - CROPS [0100] IRS NUMBER: 041923360 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-40709 FILM NUMBER: 97725603 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 S-4 1 S-4 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 21, 1997. REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION ------------------------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------------ CHIQUITA BRANDS INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) NEW JERSEY 0100 04-1923360 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification incorporation or organization) Classification Code Number) No.)
250 EAST FIFTH STREET CINCINNATI, OHIO 45202 (513) 784-8000 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ROBERT W. OLSON, ESQ. SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY CHIQUITA BRANDS INTERNATIONAL, INC. 250 EAST FIFTH STREET CINCINNATI, OHIO 45202 (513) 784-8804 (Name, address, including zip code, and telephone number, including area code, of agent for service) with copies to: TIMOTHY E. HOBERG, ESQ. FRANK J. PELISEK, ESQ. TAFT, STETTINIUS & HOLLISTER MICHAEL BEST & FRIEDRICH LLP 1800 STAR BANK CENTER SUITE 3300 425 WALNUT STREET 100 E. WISCONSIN AVENUE CINCINNATI, OHIO 45202-3957 MILWAUKEE, WISCONSIN 53202 (513) 381-2838 (414) 271-6560
------------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. ------------------------------ IF THE SECURITIES BEING REGISTERED ON THIS FORM ARE BEING OFFERED IN CONNECTION WITH THE FORMATION OF A HOLDING COMPANY AND THERE IS COMPLIANCE WITH GENERAL INSTRUCTION G, CHECK THE FOLLOWING BOX. [ ] CALCULATION OF REGISTRATION FEE ================================================================================================================= PROPOSED MAXIMUM AMOUNT OF TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE AGGREGATE REGISTRATION TO BE REGISTERED REGISTERED OFFERING PRICE FEE - ----------------------------------------------------------------------------------------------------------------- Capital Stock, par value $0.33 per share 813,634 shares $9,611,047(1) $2,912.44(1) - ----------------------------------------------------------------------------------------------------------------- 2,390,715 shares $33,470,000(2) $10,142.42 =================================================================================================================
(1) The proposed maximum aggregate offering price and the amount of the registration fee were calculated in accordance with Rule 457(f)(1) on the basis of the average of the high and low sale prices on October 8, 1997, as reported on The Nasdaq Stock Market, of the 11,390,871 shares of Common Stock of Stokely USA, Inc. ("Stokely")to be cancelled in the acquisition of Stokely by the Registrant; this portion of the registration fee was previously paid at the time of filing the preliminary Proxy Statement/Prospectus which is a part of this Registration Statement. (2) Calculated in accordance with Rule 457(f)(2) on the basis of the par value of certain debt of Stokely to be cancelled in connection with the acquisition of Stokely by the Registrant. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ================================================================================ 2 [STOKELY USA, INC. LETTERHEAD] DECEMBER , 1997 Dear Fellow Shareholder: The Annual Meeting of Shareholders of Stokely USA, Inc. ("Stokely") will be held at 10:00 a.m., Milwaukee time, at the Milwaukee Athletic Club, 758 North Broadway, Milwaukee, Wisconsin on Thursday, January 15, 1998. AT THE ANNUAL MEETING, YOU WILL BE ASKED TO CONSIDER AND APPROVE AN AGREEMENT AND PLAN OF REORGANIZATION FOR STOKELY, PROVIDING FOR THE MERGER OF STOKELY WITH A WHOLLY-OWNED SUBSIDIARY OF CHIQUITA BRANDS INTERNATIONAL, INC. ("CHIQUITA"). As described in the accompanying proxy statement, in the merger, each of your shares of Stokely common stock will be converted into the right to receive the equivalent of $1.00 per share in the form of shares of Chiquita common stock. STOKELY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER, BELIEVES THE MERGER IS IN YOUR BEST INTERESTS AND STRONGLY URGES YOU TO VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER BY SIGNING, DATING AND PROMPTLY RETURNING THE ENCLOSED WHITE PROXY CARD, USING THE POSTAGE-PAID ENVELOPE PROVIDED. ------------------------------ CAUTION ------------------------------ Stokely's financial condition, primarily as a result of economic, market and competitive pressures, combined with its high debt level, has deteriorated during the past few years. That deterioration has continued in the last several quarters to a point where Stokely's negative cash flow and working capital positions will likely become critical in the upcoming quarters. IF THE PROPOSED MERGER IS NOT APPROVED BY STOKELY'S SHAREHOLDERS OR IS NOT CONSUMMATED FOR ANY OTHER REASON, AND IF PROCESSED VEGETABLE MARKET CONDITIONS DO NOT SIGNIFICANTLY IMPROVE, WE BELIEVE THAT STOKELY ULTIMATELY MAY BE REQUIRED TO SEEK PROTECTION FROM CREDITORS UNDER THE BANKRUPTCY CODE. In that case, Stokely's Board of Directors believes it is unlikely you would receive anything close to the value offered to you by the proposed merger. THE PROPOSED MERGER HAS BEEN REVIEWED CAREFULLY BY STOKELY'S INDEPENDENT FINANCIAL ADVISOR, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, WHICH HAS CONCLUDED THAT THE PROPOSED MERGER IS FAIR TO STOKELY'S SHAREHOLDERS FROM A FINANCIAL POINT OF VIEW. Stokely's Board of Directors also has concluded that the proposed merger with Chiquita is in your best interests because it offers, among other things, the best immediate and long-term value available for Stokely's shareholders. DO WHAT'S BEST FOR YOU The accompanying materials contain important information which you should review carefully before deciding how you wish to vote on the proposed merger. An affirmative vote by owners of two-thirds of Stokely's outstanding shares of common stock is required to approve the merger. ACCORDINGLY, A FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE MERGER PROPOSAL. VOTE "FOR" ADOPTION OF THE MERGER PROPOSAL TODAY FOR THE REASONS DESCRIBED ABOVE AND IN THE ACCOMPANYING PROXY STATEMENT, STOKELY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR ADOPTION OF THE MERGER PROPOSAL BY SIGNING, DATING AND PROMPTLY RETURNING THE ENCLOSED WHITE PROXY CARD, USING THE POSTAGE-PAID ENVELOPE PROVIDED. You also will be voting on the election of three directors to hold office until the merger is consummated (or, if the merger is not consummated, for a term of three years expiring at Stokely's Annual Meeting of Shareholders in the year 2000 or until their successors are elected and qualified). 3 You should not send in certificates for your shares of Stokely common stock with your proxy card; if the Merger is consummated, you will be sent instructions regarding the exchange of your stock certificates at that time. If you need assistance in voting your shares, please call our proxy solicitor, D.F. King & Co., Inc., toll free at 1-800-549-6697. On behalf of the Board of Directors, [SIG] Stephen W. Theobald President and Chief Executive Officer IMPORTANT If your shares of Stokely Common Stock are held for you by a brokerage firm, only your brokerage firm can vote your shares and only after receiving your specific voting instruction. To ensure that your shares are voted, please promptly complete and mail the enclosed voting instruction form, using the postage-paid envelope provided. PLEASE ACT PROMPTLY 4 STOKELY USA, INC. 1230 CORPORATE CENTER DRIVE OCONOMOWOC, WISCONSIN 53066 ------------------------------ NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 15, 1998 ------------------------------ TO THE HOLDERS OF COMMON STOCK OF STOKELY USA, INC.: NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Annual Meeting") of Stokely USA, Inc. ("Stokely") will be held on January 15, 1998, at 10:00 a.m., Milwaukee time, at the Milwaukee Athletic Club, 758 North Broadway, Milwaukee, Wisconsin. The Annual Meeting is for the purpose of considering and voting upon the following matters, all of which are described more completely in the enclosed materials: 1. To consider and vote upon the approval and adoption of the Agreement and Plan of Reorganization, dated as of September 17, 1997, among Chiquita Brands International, Inc. ("Chiquita"), Chiquita Acquisition Corp. and Stokely, providing among other things for the merger of Chiquita Acquisition Corp. with and into Stokely, and for Stokely to be the surviving corporation and to become a wholly-owned subsidiary of Chiquita (the "Merger"). In the Merger, each outstanding share of Stokely common stock will be converted into the right to receive a fractional share of Chiquita common stock having a value of $1.00. The size of the fractional amount will be based on the average closing price of Chiquita's common stock on the New York Stock Exchange over the 15 trading days preceding the Merger. The number of whole shares of Chiquita common stock to be received by each Stokely shareholder will depend on the number of shares of Stokely common stock held by the shareholder. No fractional shares of Chiquita common stock will be issued and cash will be paid in lieu of fractional shares. 2. To elect three directors to serve until consummation of the Merger (or, if the Merger is not consummated, for a three-year term expiring at Stokely's 2000 annual meeting of shareholders, or until their successors have been elected and qualified). 3. To adjourn the Annual Meeting to solicit additional votes in favor of the Merger Agreement in the event that the required vote for approval and adoption of the Merger Agreement has not been obtained by the date of the Annual Meeting. 4. To consider and act upon such other matters as may properly come before the Annual Meeting or any adjournments or postponements thereof. The Board of Directors is not aware of any such other business. The Board of Directors has established November 20, 1997 as the record date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting. Only shareholders of record as of the close of business on that date will be entitled to vote at the Annual Meeting or any adjournments or postponements thereof. In the event there are not sufficient votes for a quorum or to approve any of the 5 foregoing proposals at the time of the Annual Meeting, the Annual Meeting may be adjourned or postponed in order to permit further solicitation of proxies by Stokely. BY ORDER OF THE BOARD OF DIRECTORS [SIG.] Robert M. Brill Secretary Oconomowoc, Wisconsin December , 1997 YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENVELOPE PROVIDED. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY. ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR TO THE EXERCISE THEREOF. DO NOT SEND IN YOUR SHARE CERTIFICATES FOR STOKELY COMMON STOCK WITH YOUR PROXY CARD. UPON APPROVAL OF THE MERGER, INSTRUCTIONS FOR EXCHANGING YOUR SHARE CERTIFICATES WILL BE SENT TO YOU SHORTLY THEREAFTER. 6 STOKELY USA, INC. PROXY STATEMENT ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 15, 1998 ------------------------ CHIQUITA BRANDS INTERNATIONAL, INC. PROSPECTUS UP TO 3,204,349 SHARES OF COMMON STOCK This combined Proxy Statement and Prospectus ("Proxy Statement/Prospectus") is being furnished to the holders of common stock, $0.05 par value per share ("Stokely Common Stock"), of Stokely USA, Inc., a Wisconsin corporation ("Stokely"), in connection with the solicitation of proxies by the Stokely Board of Directors for use at the Annual Meeting of Shareholders (the "Annual Meeting") to be held on January 15, 1998, at the Milwaukee Athletic Club, 758 North Broadway, Milwaukee, Wisconsin, commencing at 10:00 a.m., local time, and at any adjournment or postponement of the Annual Meeting. The primary purpose of the Annual Meeting is for shareholders to consider and vote upon the merger (the "Merger") as a result of which Stokely will become a direct, wholly-owned subsidiary of Chiquita Brands International, Inc., a New Jersey corporation ("Chiquita"). The Merger will be effected in accordance with an Agreement and Plan of Reorganization, dated as of September 17, 1997, by and among Chiquita, Chiquita Acquisition Corp., a Wisconsin corporation ("Acquisition Sub"), and Stokely (the "Merger Agreement"). At the Annual Meeting, shareholders of Stokely also will consider and vote upon the election of three directors and the possible adjournment of the Annual Meeting, if necessary, to solicit additional votes in favor of the Merger. In the Merger, each outstanding share of Stokely Common Stock will be converted into the right to receive a fractional share of Chiquita Common Stock having a value of $1.00. The size of the fractional amount will be based on the average closing price of Chiquita Common Stock on the New York Stock Exchange ("NYSE") over the 15 trading days preceding the Merger. The number of whole shares of Chiquita Common Stock to be received by each Stokely shareholder will depend on the number of shares of Stokely Common Stock held by the shareholder. No fractional shares of Chiquita Common Stock will be issued and cash will be paid in lieu of fractional shares. Additionally, in connection with the Merger, (i) holders of $31.8 million principal amount of Stokely debt have agreed to exchange that indebtedness for shares of Chiquita Common Stock and (ii) certain Stokely suppliers have agreed to forgive $1.0 million in accounts receivable. For a more detailed description of the terms of the Merger, see "PROPOSAL TO APPROVE THE MERGER." This Proxy Statement/Prospectus also constitutes a prospectus of Chiquita with respect to up to 3,204,349 shares of Chiquita Capital Stock, par value $.33 per share ("Chiquita Common Stock"), which may be issued in exchange for outstanding shares of Stokely Common Stock in the Merger and for certain outstanding indebtedness of Stokely in connection with the Merger. This Proxy Statement/Prospectus and accompanying appointment form of proxy ("Proxy") are first being mailed to shareholders of Stokely as of November 20, 1997 (the "Voting Record Date") on or about December , 1997. This Proxy Statement/Prospectus also is being furnished to the holders of the Stokely indebtedness to be exchanged in connection with the Merger. SEE "RISK FACTORS" BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS WHICH SHOULD BE CONSIDERED IN CONNECTION WITH THE ACQUISITION OF CHIQUITA COMMON STOCK. All information contained in this Proxy Statement/Prospectus relating to Stokely has been supplied by Stokely, and all information relating to Chiquita has been supplied by Chiquita. Neither Stokely nor Chiquita warrants the accuracy or completeness of information relating to the other. THE SECURITIES TO BE ISSUED PURSUANT TO THIS PROXY STATEMENT/PROSPECTUS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS DECEMBER , 1997. 7 NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY STOKELY, CHIQUITA OR ANY OTHER PERSON. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF STOKELY OR CHIQUITA SINCE THE DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. AVAILABLE INFORMATION Stokely and Chiquita are subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance therewith, file reports, proxy statements and other information with the Securities and Exchange Commission (the "SEC " or "Commission"). The reports, proxy statements and other information filed by Stokely and Chiquita with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's Regional Offices at 7 World Trade Center, Suite 1300, New York, New York 10048 and CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may be obtained from the Public Reference Section of the Commission, Washington, D.C. 20549 at prescribed rates. Reports, proxy and information statements and other information regarding Stokely and Chiquita also may be obtained through the Website maintained by the Commission at http://www.sec.gov. Chiquita Common Stock is listed on the New York, Boston and Pacific Stock Exchanges. Reports, proxy and information statements and other information concerning Chiquita may be inspected and copied at the Library of the New York Stock Exchange at 20 Broad Street, New York, New York 10005; at the Secretary's Offices of the Boston Stock Exchange at One Boston Place, Boston, Massachusetts; and at the Listing Department of the Pacific Exchange, Inc. at 301 Pine Street, San Francisco, California. Chiquita has filed with the Commission a Registration Statement on Form S-4 (together with any amendments thereto, the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act") with respect to the Chiquita Common Stock to be issued in connection with the Merger. This Proxy Statement/Prospectus does not contain all the information set forth in the Registration Statement. Such additional information may be obtained from the Commission's principal office in Washington, D.C. Statements contained in this Proxy Statement/Prospectus or in any document incorporated by reference in this Proxy Statement/Prospectus as to the contents of any contract or other document referred to herein or therein are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement or such other document, each such statement being qualified in all respects by such reference. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE This Proxy Statement/Prospectus incorporates documents by reference which are not presented herein or delivered herewith. Such documents (other than exhibits to such documents unless such exhibits are specifically incorporated by reference) are available to any person, including any beneficial owner to whom this Proxy Statement/Prospectus is delivered, on written or oral request, without charge, in the case of documents relating to Stokely, directed to Stokely USA, Inc., 1230 Corporate Center Drive, Oconomowoc, Wisconsin 53066 (telephone number (414) 569-1800), Attention: Robert M. Brill, or, in the case of documents relating to Chiquita, directed to Chiquita Brands International, Inc., 250 East Fifth Street, Cincinnati, Ohio 45202, Attention: Vice President, Corporate Affairs (telephone number (513) 784-6366). In order to ensure timely delivery of the documents, any requests should be made by January 8, 1998. ii 8 The following documents filed with the Commission by Chiquita (File No. 1-1550) pursuant to the Exchange Act are incorporated by reference in this Proxy Statement/Prospectus: 1) Chiquita's Annual Report on Form 10-K for the year ended December 31, 1996. 2) Chiquita's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997. 3) Chiquita's Current Reports on Form 8-K dated September 15, 1997 and November 20, 1997. Copies of Stokely's Form 10-K/A for the fiscal year ended March 31, 1997 and Form 10-Q for the quarter ended September 30, 1997 accompany this Proxy Statement/Prospectus. Stokely amended its Form 10-K by means of a Form 10-K/A filed on July 29, 1997 and a Form 10-K/A filed on October 14, 1997. The Form 10-K/A (filed on October 14, 1997) includes all of the information contained in the Form 10-K as originally filed, updated to reflect subsequent occurring events; however, since the information included in the Form 10-K/A (filed on July 29, 1997) is included in this Proxy Statement/Prospectus, the Form 10-K/A (filed on July 29, 1997) is not enclosed. The following documents filed with the Commission by Stokely (File No. 0-13943) pursuant to the Exchange Act are incorporated by reference in this Proxy Statement/Prospectus: 1) Stokely's Annual Report on Form 10-K and amendments thereto on Form 10-K/A (filed on July 29, 1997 and on October 14, 1997) for the fiscal year ended March 31, 1997. 2) Stokely's Quarterly Reports on Form 10-Q for the quarters ended June 30, 1997 (as amended by Form 10-Q/A filed on October 23, 1997) and September 30, 1997. 3) Stokely's Current Report on Form 8-K dated September 17, 1997. All documents and reports filed by Chiquita and Stokely pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Proxy Statement/Prospectus and prior to the date of the Annual Meeting shall be deemed to be incorporated by reference in this Proxy Statement/Prospectus and to be a part hereof from the date of filing of such documents or reports. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Proxy Statement/Prospectus to the extent that such a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statements. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Proxy Statement/Prospectus. The information relating to Chiquita and Stokely contained in this Proxy Statement/Prospectus does not purport to be complete and should be read together with the information in the documents that accompany this Proxy Statement/Prospectus and the additional information that is incorporated by reference herein. FORWARD-LOOKING STATEMENTS Cautionary Statement for Purposes of the Private Securities Litigation Reform Act of 1995 This Proxy Statement/Prospectus, including the information incorporated by reference herein, information included in, or incorporated by reference from, future filings by Chiquita or Stokely with the Commission and information contained in written material, press releases and oral statements issued by or on behalf of Chiquita or Stokely, contains, or may contain, certain statements that may be deemed to be "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements, other than statements of historical facts, included in this Proxy Statement/Prospectus that address activities, events or developments that Chiquita or Stokely expect, believe or anticipate will or may occur in the future are forward-looking statements. These statements are based on certain assumptions and analyses made by Chiquita or Stokely in light of their experience and perception of historical trends, current conditions, expected future developments and other factors they believe are appropriate under the circumstances. Such statements are subject to a number of assumptions, risks and uncertainties, such as (i) the prices at which Chiquita and Stokely can sell their products, (ii) the costs at which they can purchase (or grow) fresh produce and other raw materials and inventory, and (iii) the various market, competitive and agricultural factors which may impact those prices and costs, many of which are beyond the control of Chiquita or Stokely. In the case of Chiquita, some of these risks are described in more detail below under "Risk Factors." Investors are cautioned that any such statements are not guarantees of future performance and that actual results or developments may differ materially from the expectations expressed in the forward-looking statements. iii 9 TABLE OF CONTENTS
PAGE ---- AVAILABLE INFORMATION....................................... ii INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. ii FORWARD-LOOKING STATEMENTS.................................. iii SUMMARY..................................................... 1 The Companies............................................. 1 The Annual Meeting........................................ 2 The Merger................................................ 2 Chiquita Summary Historical Financial Information......... 9 Stokely Summary Historical Financial Information.......... 10 Summary Pro Forma Financial Information................... 11 Comparative Per Share Data................................ 12 Comparative Per Share Market Information.................. 13 RISK FACTORS................................................ 14 INTRODUCTION................................................ 17 General................................................... 17 Parties to the Merger..................................... 17 THE ANNUAL MEETING.......................................... 18 Place, Time and Date...................................... 18 Purpose................................................... 18 Voting Record Date; Shares Entitled to Vote............... 18 Vote Required............................................. 18 No Appraisal or Dissenters' Rights........................ 19 Proxies................................................... 19 PROPOSAL TO APPROVE THE MERGER (Proposal No. 1)............. 20 Background of and Reasons for the Merger.................. 20 Recommendation of the Stokely Board....................... 25 Opinion of Financial Advisor.............................. 27 Interests of Certain Persons in the Merger................ 30 The Merger Agreement...................................... 33 Voting on the Merger................................... 33 Effective Time and Date of the Merger.................. 33 Conversion of Stokely Common Stock in the Merger....... 33 Exchange of Certificates in the Merger................. 33 Representations and Warranties......................... 34 Business of Stokely Pending the Merger................. 34 Conditions; Waivers.................................... 35 Exchange of Stokely Debt............................... 36 Regulatory Approvals................................... 36 Amendment; Termination................................. 36 Termination Fee........................................ 37 Accounting Treatment................................... 37 Certain Federal Income Tax Consequences of the Merger................................................ 37 No Appraisal or Dissenters' Rights..................... 38 Resale of Chiquita Common Stock by Stokely Affiliates............................................ 38 PRO FORMA FINANCIAL INFORMATION............................. 39
iv 10
PAGE ---- INFORMATION CONCERNING CHIQUITA............................. 43 General................................................ 43 Chiquita's Reasons for the Merger...................... 43 DESCRIPTION OF CHIQUITA STOCK............................... 43 Description of Chiquita Common Stock...................... 44 Description of Chiquita Preferred Stock................... 44 Description of Chiquita Preference Stock.................. 45 COMPARISON OF SHAREHOLDERS' RIGHTS.......................... 46 Directors................................................. 46 Voting Rights Generally................................... 47 Special Meetings of Shareholders.......................... 47 Charter Amendments........................................ 48 Mergers, Consolidations and Sales of Assets............... 48 Appraisal Rights.......................................... 49 Transactions Involving Directors.......................... 49 Anti-Takeover Provisions; Transactions with Interested Shareholders........................................... 50 Liability and Indemnification............................. 51 LEGAL MATTERS............................................... 52 EXPERTS..................................................... 52 ELECTION OF DIRECTORS (Proposal No. 2)...................... 52 MEETINGS OF THE STOKELY BOARD OF DIRECTORS AND ITS COMMITTEES................................................ 54 COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS............ 56 Executive Compensation.................................... 56 Severance Agreement with Mr. Wiersma...................... 57 Employment Agreements..................................... 57 Deferred Compensation Plan for Key Executives............. 58 Deferred Compensation Agreement........................... 58 Benefits.................................................. 58 Stock Option Plans........................................ 59 Directors' Compensation................................... 60 COMPENSATION COMMITTEE REPORT............................... 61 COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN PERFORMANCE GRAPH FOR STOKELY USA, INC. .............................. 63 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS............. 64 INDEPENDENT AUDITORS........................................ 65 CERTAIN TRANSACTIONS........................................ 65 SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE..... 65 PROPOSAL TO ADJOURN THE ANNUAL MEETING (Proposal No. 3)..... 66 PROPOSALS BY STOKELY SHAREHOLDERS........................... 66 OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE ANNUAL MEETING................................................... 66 APPENDIX A: Agreement and Plan of Reorganization............ A-1 APPENDIX B: Opinion of Financial Advisor.................... B-1
v 11 SUMMARY The following is a summary of certain information contained elsewhere in this Proxy Statement/Prospectus. Reference is made to, and this summary is qualified in its entirety by, the more detailed information contained, or incorporated by reference, in this Proxy Statement/Prospectus and its Appendices. Unless otherwise defined herein, capitalized terms used in this summary have the meanings ascribed to them elsewhere in this Proxy Statement/Prospectus. Shareholders are urged to read this Proxy Statement/Prospectus and its Appendices in their entirety. As used in this Proxy Statement/Prospectus, the terms "Chiquita" and "Stokely" refer to such corporations, respectively, and where the context requires, such corporations and their subsidiaries on a consolidated basis. THE COMPANIES CHIQUITA................... Chiquita is a leading international marketer, producer and distributor of bananas and other quality fresh and processed food products sold under the Chiquita and other brand names. In addition to bananas, these products include other tropical fruit, such as mangoes, kiwi and citrus, and a wide variety of other fresh produce. Chiquita's products also include fruit and vegetable juices and beverages; processed bananas and other processed fruits and vegetables; fresh cut and ready-to-eat salads; and edible oil-based consumer products. Chiquita's Friday Canning Corporation, headquartered in New Richmond, Wisconsin, operates vegetable canning facilities in Wisconsin. In September 1997, Chiquita acquired the Owatonna Canning group of companies (the "Owatonna Companies") and signed a definitive agreement to acquire American Fine Foods, Inc. ("AFF"). These companies produce and sell processed vegetables in the private label, food service and branded segments, both domestically and for export. The principal executive offices of Chiquita are located at 250 East Fifth Street, Cincinnati, Ohio 45202 and the telephone number is (513) 784-8000. See "AVAILABLE INFORMATION" and "INFORMATION CONCERNING CHIQUITA." STOKELY.................... Stokely produces a broad range of canned vegetables in the United States under customer private labels and under the Stokely's Finest(R), Stokely's Gold(TM) and other brand labels. Stokely sells brand label vegetables through the retail, foodservice and industrial channels of distribution and sells private label canned vegetables to many supermarket chains and wholesalers. Stokely also exports canned vegetables to Europe and Asia. Prior to February 1996, Stokely also processed, marketed and sold frozen vegetables, primarily in bulk size quantities for the industrial market. In February 1996, Stokely announced it was exiting the frozen vegetable processing business and sold essentially all of the assets of this business during fiscal 1997. The principal executive offices of Stokely are located at 1230 Corporate Center Drive, Oconomowoc, Wisconsin 53066, and its telephone number is (414) 569-1800. See "AVAILABLE INFORMATION." 1 12 ACQUISITION SUB............ Acquisition Sub is a Wisconsin corporation and a direct wholly-owned subsidiary of Chiquita which was incorporated on August 27, 1997 in order to effectuate the Merger. Acquisition Sub has not transacted, and is not expected to transact, any business or take any actions other than in connection with the Merger. THE ANNUAL MEETING TIME, DATE AND PLACE....... The Annual Meeting will be held on January 15, 1998 at the Milwaukee Athletic Club, 758 North Broadway, Milwaukee, Wisconsin commencing at 10:00 a.m., local time, subject to any adjournments or postponements thereof. See "THE ANNUAL MEETING -- Place, Time and Date." PURPOSES OF THE ANNUAL MEETING.................. The purposes of the Annual Meeting are to consider and vote upon a proposal to approve the Merger and the Merger Agreement attached hereto as Appendix A and to elect three directors to serve until consummation of the Merger or, if the Merger is not consummated, for a three year term expiring at the 2000 annual meeting of shareholders or until their successors have been elected and qualified. The Stokely Board also is soliciting proxies for approval to adjourn the Annual Meeting for the purpose of soliciting additional votes in favor of the Merger Agreement in the event that the required vote for approval and adoption of the Merger Agreement has not been obtained by the date of the Annual Meeting. See "THE ANNUAL MEETING -- Purpose." RECORD DATE; SHARES ENTITLED TO VOTE........... Holders of record of shares of Stokely Common Stock as of the close of business on November 20, 1997, the Voting Record Date, are entitled to notice of and to vote at the Annual Meeting. On November 20, 1997, there were 11,390,871 shares of Stokely Common Stock outstanding, each of which is entitled to one vote on each matter to be acted upon or which may properly come before the Annual Meeting. Shareholders who execute proxies retain the right to revoke them at any time prior to being voted at the Annual Meeting or any postponements or adjournments thereof. See "THE ANNUAL MEETING -- Voting Record Date; Shares Entitled to Vote." THE MERGER VOTE REQUIRED.............. The approval of the Merger Agreement by Stokely shareholders will require the affirmative vote of the holders of two-thirds of the outstanding shares of Stokely Common Stock. Stokely's directors and executive officers and their affiliates beneficially own 3.45% of the outstanding shares of Stokely Common Stock and intend to vote in favor of the Merger. See "THE ANNUAL MEETING -- Vote Required." 2 13 THE REQUIRED VOTE OF STOKELY SHAREHOLDERS ON THE MERGER AGREEMENT IS BASED UPON THE TOTAL NUMBER OF OUTSTANDING SHARES OF STOKELY COMMON STOCK, AND NOT JUST THOSE REPRESENTED AT THE ANNUAL MEETING. ACCORDINGLY, THE FAILURE TO SUBMIT A PROXY CARD (OR, IF THE SHARES ARE HELD BY A BROKER, TO RETURN VOTING INSTRUCTIONS) OR TO VOTE IN PERSON AT THE ANNUAL MEETING, OR THE ABSTENTION FROM VOTING BY A STOKELY SHAREHOLDER, WILL HAVE THE SAME EFFECT AS A "NO" VOTE WITH RESPECT TO THE MERGER AGREEMENT. BROKER NON-VOTES WILL NOT BE COUNTED AS HAVING BEEN VOTED IN PERSON OR BY PROXY AT THE ANNUAL MEETING AND WILL HAVE THE SAME EFFECT AS A "NO" VOTE WITH RESPECT TO THE MERGER AGREEMENT. THE MERGER TRANSACTION..... In the Merger: (i) Acquisition Sub will be merged with and into Stokely, and Stokely will be the surviving corporation and become a direct, wholly- owned subsidiary of Chiquita, and (ii) outstanding shares of Stokely Common Stock will be converted into the right to receive shares of Chiquita Common Stock. Each outstanding share of Stokely Common Stock will be converted into a fractional share of Chiquita Common Stock having a value of $1.00. The size of the fractional amount will be based on the average closing price of Chiquita Common Stock on the NYSE over the 15 trading days preceding the Merger. The number of whole shares of Chiquita Common Stock to be received by each Stokely shareholder will depend on the number of shares of Stokely Common Stock held by the shareholder. No fractional shares of Chiquita Common Stock will be issued and cash will be paid in lieu of fractional shares. Additionally, in connection with the Merger: (i) holders of $31.8 million principal amount of Stokely debt have agreed to exchange that indebtedness for shares of Chiquita Common Stock; (ii) certain Stokely suppliers have agreed to forgive $1.0 million in accounts receivable; and (iii) it is a condition of closing that Stokely's revolving credit lender will agree to leave in place at least $20 million of outstanding revolving credit indebtedness. See "PROPOSAL TO APPROVE THE MERGER -- The Merger Agreement." OUTSTANDING CHIQUITA COMMON STOCK.................... As of December 1, 1997, there were outstanding shares of Chiquita Common Stock (not including up to approximately 2.2 million shares of Chiquita Common Stock to be issued in connection with the acquisition of AFF). In the Merger, approximately 800,000 shares of Chiquita Common Stock will be issued to holders of Stokely Common Stock and approximately 2,400,000 shares will be issued in exchange for certain debt of Stokely. When issued, the approximately 3.2 million total shares to be issued in the Merger will represent approximately 5% of the then outstanding Chiquita Common Stock (including the shares to be issued in the Merger and in the AFF acquisition). 3 14 STOKELY'S RECENT FINANCIAL RESULTS........ For the three and six months ended September 30, 1997, Stokely posted net losses of $3.9 million and $6.7 million, respectively, largely due to continued low selling prices. The low selling prices that prevailed during the first quarter of fiscal 1998 continued through the second quarter, and continue to be depressed. Current selling prices remain below year-ago levels, historical averages and levels anticipated at the beginning of the fiscal year by Stokely management based on industry planting intentions reported by the USDA in April 1997, which indicated significant reductions in planting from prior years. Furthermore, since May 1997, Stokely has been in violation of certain covenants applicable to its Senior Secured Notes due January 2000 (which constitutes an event of default) and certain of its Industrial Development Revenue Bonds ("IRBs"). Since July 1997, Stokely also has been in violation of certain covenants applicable to most of its other IRBs. Through November 28, 1997, Stokely has not been notified by any of these debt-holders that they intend to accelerate the maturity date of their obligations as a result of the events of default or the covenant violations. Stokely's deteriorating operating results and financial condition and anticipated liquidity problems are of sufficient severity and magnitude that it will be unable to continue normal operations or achieve profitability for an extended period absent a sale of Stokely. Furthermore, based upon these subsequent-occurring events, Deloitte & Touche, LLP, Stokely's independent auditors, issued a revised audit opinion for the fiscal year ended March 31, 1997, indicating that these events raise substantial doubt about Stokely's ability to continue as a going concern. BACKGROUND OF AND REASONS FOR MERGER................. The Stokely Board of Directors has explored multiple alternatives to the proposed Merger with the assistance of its outside financial advisor, Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), and has concluded that Stokely's deteriorating operating results and financial condition, and anticipated liquidity problems, are of sufficient severity and magnitude that it will be unable to continue normal or profitable operations for an extended period absent a sales transaction. Stokely's restructuring efforts over the past several years have been unsuccessful due to economic, market and competitive pressures, combined with Stokely's high debt level, and the Stokely Board has determined that there is no feasible financing alternative to the Merger. In addition, the alternative of a bankruptcy filing was considered with the assistance of an outside bankruptcy expert. The Stokely Board and management agreed with the outside bankruptcy expert that this option would not yield the maximum benefit to Stokely shareholders. In light of the foregoing, in early 1997, the Stokely Board authorized DLJ to conduct a formal auction of Stokely. The Chiquita proposal, as provided for in the Merger Agreement, was the best offer received and, the Stokely Board believes, is the best alternative available to Stokely and its shareholders. See "PROPOSAL TO APPROVE THE MERGER -- Background of and Reasons for the Merger." 4 15 RECOMMENDATION OF STOKELY'S BOARD OF DIRECTORS....... The Board of Directors of Stokely unanimously recommends that shareholders vote FOR the Merger Agreement. The Board believes that the terms of the Merger Agreement are in the best interests of holders of Stokely Common Stock and that the Merger affords shareholders of Stokely the opportunity to receive fair value for their shares. See "PROPOSAL TO APPROVE THE MERGER -- Recommendation of the Stokely Board." OPINION OF FINANCIAL ADVISOR.................... DLJ was retained by the Stokely Board to act as its financial advisor. DLJ has carefully reviewed the proposed Merger. DLJ has delivered to the Stokely Board its written opinion dated September 17, 1997, and confirmed December , 1997, to the effect that the consideration to be received in the Merger is fair from a financial point of view to the holders of Stokely Common Stock. Shareholders of Stokely should read DLJ's opinion, which sets forth the assumptions it made, matters it considered and limits of its review, and which is set forth in its entirety as Appendix B to this Proxy Statement/Prospectus. See "PROPOSAL TO APPROVE THE MERGER -- Opinion of Financial Advisor." STOKELY'S POSITION REGARDING FAIRNESS OF THE MERGER................... In arriving at its recommendation in favor of the Merger, the Stokely Board considered a number of factors, including without limitation: (i) the receipt of the fairness opinion from DLJ, and the bases upon which DLJ relied in order to render its opinion; (ii) Stokely's deteriorating operating results and financial condition; (iii) the absence of other alternatives to the Merger, including restructuring, financing or other strategic combination alternatives; (iv) the estimated impact of bankruptcy on Stokely's shareholders and creditors; (v) the historical market prices of shares of Stokely Common Stock; (vi) the terms of the Merger; and (vii) the status of Stokely should the Merger not be approved or consummated. See "PROPOSAL TO APPROVE THE MERGER -- Background of and Reasons for the Merger," "PROPOSAL TO APPROVE THE MERGER -- Recommendation of the Stokely Board" and "PROPOSAL TO APPROVE THE MERGER -- Opinion of Financial Advisor." 5 16 CONSIDERATION OF HISTORICAL MARKET PRICES OF STOKELY COMMON STOCK............. In the Merger, each outstanding share of Stokely Common Stock will be converted into the right to receive a fractional share of Chiquita Common Stock having a value of $1.00, which is less than the $1.56 per share closing price of Stokely Common Stock on September 17, 1997, the last full trading day immediately preceding the public announcement of the signing of the Merger Agreement. The market prices for the shares of Stokely Common Stock ranged from a high of $2.50 to a low of $0.625 between the period beginning January 1, 1997 and ending September 17, 1997. In evaluating the proposed terms of the Merger, the Stokely Board and DLJ reviewed the historical market price data and noted that one buyer, Exeter Ventures, UBOT ("Exeter"), an entity unrelated to the Company, its directors or executive officers, bought a large (8%) position in Stokely on June 27, 1997, a date upon which some of the trades of Stokely Common Stock were executed at $0.625 per share, and made a public announcement that it had done so. In the three weeks following that public announcement, the stock rose from $0.625 per share to $2.50 per share, on particularly strong volume, before falling off to approximately $1.50 per share shortly before the announcement of the Merger. For the reasons set forth above and in "PROPOSAL TO APPROVE THE MERGER -- Background of the Merger", the Stokely Board and DLJ felt that Stokely's stock price was not an accurate reflection of the equity value of the Company at the time of announcement of the Merger. See "PROPOSAL TO APPROVE THE MERGER -- Recommendation of the Stokely Board." SECURITY OWNERSHIP OF STOKELY COMMON STOCK....... On November 20, 1997, directors and executive officers of Stokely beneficially owned 393,422 shares of Stokely Common Stock, or 3.45% of the outstanding shares of Stokely Common Stock, not including 55,500 shares subject to options which were not exercised prior to the Voting Record Date and cannot be voted at the Annual Meeting. See "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS." EFFECTIVENESS OF THE MERGER..................... It is expected that the Merger will occur as promptly as practicable after the requisite shareholder approval has been obtained and all other conditions to the Merger have been satisfied or waived. See "PROPOSAL TO APPROVE THE MERGER -- The Merger Agreement: Conditions; Waivers." EXCHANGE OF CERTIFICATES; DELIVERY OF CHIQUITA COMMON STOCK............. Shortly after approval and completion of the Merger, Stokely shareholders will be sent a letter of transmittal (with instructions) to be used to exchange their Stokely Common Stock certificates for Chiquita Common Stock certificates. PLEASE DO NOT SEND IN YOUR CERTIFICATES FOR STOKELY COMMON STOCK UNTIL YOU RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS. See "PROPOSAL TO APPROVE THE MERGER -- The Merger Agreement: Conversion of Stokely Common Stock in the Merger." 6 17 CONDITIONS TO THE MERGER; TERMINATION OF THE MERGER AGREEMENT................ The obligations of Chiquita and/or Stokely to consummate the Merger are subject to the satisfaction, or in certain cases waiver, of certain conditions, including: (i) requisite shareholder approval having been obtained; (ii) no court or governmental or regulatory proceedings having been commenced or threatened seeking to prevent the Merger; (iii) all options and warrants to purchase Stokely Common Stock having been cancelled; (iv) holders of at least $31.8 million of Stokely debt having exchanged such indebtedness for Chiquita Common Stock and, with limited exceptions, there being no default as to the non-exchanging debt; (v) Stokely's suppliers having forgiven at least $1.0 million in accounts receivable; (vi) Stokely's net losses for the quarter ended December 31, 1997 being within certain limitations; and (vii) Stokely's revolving credit lender leaving in place at least $20 million of outstanding revolving credit indebtedness. See "PROPOSAL TO APPROVE THE MERGER -- The Merger Agreement: Conditions; Waivers." Notwithstanding the approval and adoption of the Merger Agreement by the shareholders of Stokely, the Merger Agreement is subject to termination at the option of either Chiquita or Stokely if the Merger is not consummated on or before January 31, 1998 (unless waived by mutual consent of the parties), and on or prior to such time upon the occurrence of certain other events. See "PROPOSAL TO APPROVE THE MERGER -- The Merger Agreement: Amendment; Termination." INTERESTS OF CERTAIN PERSONS IN THE MERGER...... Certain members of the Stokely Board and management may be deemed to have interests in the Merger in addition to their interests, if any, as holders of Stokely Common Stock. These interests include, among other things: (i) rights of certain executive officers to payments under Change in Control Contingent Employment Agreements if such officers are terminated for any reason other than for "cause", or they elect to terminate their employment for a permitted reason, at or following the Merger; (ii) rights of certain directors and executive officers to benefits under certain retirement benefit plans maintained by Stokely; (iii) rights of certain executive officers to continued participation following the Merger in Stokely's Split Dollar Life Insurance Plan; (iv) rights of certain executive officers to continued participation following the Merger under deferred compensation agreements previously entered into with Stokely; and (v) indemnification rights of the executive officers and directors of Stokely following the Merger. In addition, Mr. Stephen W. Theobald, Stokely's President and Chief Executive Officer, will receive a retention bonus equal to his current annual salary of $170,500 if the Merger is consummated and he remains in the employ of Stokely; the bonus would be paid as follows: (1) one-half (or $82,250) on the date of the Merger if he remains in the employ of Stokely up to such date, and (2) one-half (or $82,250) on June 30, 1998, if he remains in the employ of Stokely up to such date. See "PROPOSAL TO APPROVE THE MERGER -- Interests of Certain Persons in the Merger." 7 18 TERMINATION FEE............ If the Merger is not approved by the Stokely shareholders or is not completed for certain other reasons, Stokely is obligated to pay Chiquita a fee of $250,000 and to issue to Chiquita a number of shares of Preferred Stock of Stokely having a redemption value of $2,750,000 ("Stokely Preferred Stock"). Additionally, if within twelve months of the termination of the Merger Agreement, a person or entity other than Chiquita acquires Stokely or a majority interest in Stokely, or if Stokely agrees to such a transaction, Stokely is obligated to pay Chiquita $3,000,000. If a termination fee already has been paid, no additional fee will be owed, but the Stokely Preferred Stock will be required to be redeemed as provided in the Merger Agreement. See "PROPOSAL TO APPROVE THE MERGER -- The Merger Agreement: Termination Fee." NO APPRAISAL OR DISSENTERS' RIGHTS................... Under the Wisconsin Business Corporation Law (the "WBCL"), holders of shares of a Wisconsin corporation quoted on the Nasdaq National Market on the record date for a meeting at which shareholders are to vote on a merger are not entitled to appraisal or dissenters' rights. Shares of Stokely Common Stock were quoted on the Nasdaq National Market on the Voting Record Date. Therefore, holders of Stokely Common Stock are not entitled to dissenters' rights in connection with the Merger. See "PROPOSAL TO APPROVE THE MERGER -- The Merger Agreement: No Appraisal or Dissenters' Rights." ACCOUNTING TREATMENT....... The Merger will be accounted for as a purchase of Stokely by Chiquita for accounting and financial reporting purposes. CERTAIN FEDERAL INCOME TAX CONSEQUENCES............. The Merger is intended to be a tax-free reorganization so that no gain or loss would be recognized by any holder of Stokely Common Stock upon the receipt of Chiquita Common Stock in connection with the Merger (except upon the receipt of cash in lieu of any fractional share of Chiquita Common Stock). Stokely has received an opinion of counsel to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). See "PROPOSAL TO APPROVE THE MERGER -- The Merger Agreement: Certain Federal Income Tax Consequences of the Merger." 8 19 CHIQUITA SUMMARY HISTORICAL FINANCIAL INFORMATION The summary historical financial information of Chiquita set forth below for the years ended December 31, 1992 through December 31, 1996 was derived from Chiquita's audited consolidated financial statements. The information set forth below for interim periods was derived from Chiquita's unaudited consolidated financial statements and, in the opinion of management, includes all adjustments (which include only normal recurring adjustments) necessary to present fairly the results of operations for the interim periods. This information should be read in conjunction with the financial statements and other financial information which are incorporated into this Proxy Statement/Prospectus by reference. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." Results for interim periods are subject to significant seasonal variations and are not necessarily indicative of the results for a full fiscal year.
NINE MONTHS ENDED SEPTEMBER 30, YEAR ENDED DECEMBER 31, ----------------------- -------------------------------------------------------------- 1997 1996 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA: Net sales........................... $1,833,904 $1,880,085 $2,435,248 $2,565,992 $2,505,826 $2,532,925 $2,723,250 ---------- ---------- ---------- ---------- ---------- ---------- ---------- Operating income (loss)(1).......... 133,907 148,842 84,336 175,770 71,185 103,848 (96,588) Interest income..................... 12,481 21,976 28,276 28,157 22,902 20,377 43,301 Interest expense.................... (82,482) (100,742) (130,232) (163,513) (167,464) (169,789) (155,036) Other income (expense), net......... 656 656 892 1,455 2,566 6,483 (8,385) ---------- ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) from continuing operations before income taxes........................... 64,562 70,732 (16,728) 41,869 (70,811) (39,081) (216,708) Income taxes........................ (8,200) (11,000) (11,000) (13,900) (13,500) (12,000) (5,000) ---------- ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) from continuing operations...................... 56,362 59,732 (27,728) 27,969 (84,311) (51,081) (221,708) Discontinued operations(2).......... -- -- -- (11,197) 35,611 -- (62,332) ---------- ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) before extraordinary item............................ 56,362 59,732 (27,728) 16,772 (48,700) (51,081) (284,040) Extraordinary loss from debt refinancing....................... -- (22,838) (22,838) (7,560) (22,840) -- -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income (loss)............... $ 56,362 $ 36,894 $ (50,566) $ 9,212 $ (71,540) $ (51,081) $ (284,040) ========== ========== ========== ========== ========== ========== ========== Fully diluted earnings (loss) per common share: Continuing operations........... $ 0.77 $ 0.93 $ (0.72) $ 0.37 $ (1.76) $ (0.99) $ (4.28) Discontinued operations(2)...... -- -- -- (0.21) 0.69 -- (1.20) Extraordinary item.............. -- (0.41) (0.41) (0.14) (0.44) -- -- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Net income (loss)............... $ 0.77 $ 0.52 $ (1.13) $ 0.02 $ (1.51) $ (0.99) $ (5.48) ========== ========== ========== ========== ========== ========== ========== BALANCE SHEET DATA: Cash and marketable securities.................... $ 172,330 $ 286,615 $ 285,558 $ 271,418 $ 165,523 $ 151,226 $ 413,181 Working capital................. 359,232 425,988 379,977 366,893 230,434 266,793 482,338 Total assets.................... 2,415,198 2,544,441 2,466,934 2,623,533 2,774,239 2,722,824 2,873,699 Short-term debt................. 126,825 145,667 135,089 172,333 221,051 192,207 229,286 Long-term debt.................. 981,346 1,077,643 1,079,251 1,242,046 1,364,836 1,438,378 1,411,319 Shareholders' equity............ 812,676 816,045 724,253 672,207 644,809 584,069 667,962 OTHER DATA: Capital expenditures(3)......... $ 52,096 $ 57,637 $ 74,641 $ 64,640 $ 136,981 $ 196,554 $ 472,273 Dividends declared per common share......................... $ 0.15 $ 0.15 $ 0.20 $ 0.20 $ 0.20 $ 0.44 $ 0.66
- ------------------------- (1) Includes the following unusual items: - write-downs and costs of $70 million in 1996 resulting from industry-wide flooding in Costa Rica, Guatemala and Honduras, certain strategic undertakings designed to achieve further long-term reductions in the delivered product cost of bananas, and certain claims relating to prior European Union quota restructuring actions; $12 million of these charges, relating to flooding in Costa Rica, are included in the nine months ended September 30, 1996; - a net gain of $19 million in 1995 resulting primarily from divestitures of operations and sales of older ships; - charges and losses of $67 million in 1994 resulting primarily from farm closings and write-downs of banana cultivations following a strike in Honduras and the substantial reduction of the Company's Japanese "green" banana trading operations; and - restructuring and reorganization charges of $61 million in 1992. (2) Includes net operating results (and, in 1992, provision for loss on disposal) of the Company's Meat Division operations, which were sold in December 1995. See Note 2 to Chiquita's Consolidated Financial Statements for the year ended December 31, 1996. (3) Includes capital expenditures in connection with the acquisition of ships and containers of approximately $70 million in 1994, $120 million in 1993 and $280 million in 1992. 9 20 STOKELY SUMMARY HISTORICAL FINANCIAL INFORMATION The summary historical financial information of Stokely set forth below for the fiscal years ended March 31, 1993 through March 31, 1997 was derived from Stokely's audited consolidated financial statements. The information set forth below for interim periods was derived from Stokely's unaudited consolidated financial statements and, in the opinion of management, includes all adjustments (which include only normal recurring adjustments) necessary to present fairly the results of operations for the interim periods. This information should be read in conjunction with the financial statements and other financial information which are incorporated into this Proxy Statement/Prospectus by reference. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." Results for interim periods are subject to significant seasonal variations and are not necessarily indicative of the results for a full fiscal year.
SIX MONTHS ENDED SEPTEMBER 30, AT OR FOR THE YEAR ENDED MARCH 31, -------------------- ---------------------------------------------------------- 1997 1996 1997(A) 1996(A) 1995 1994 1993(B)(C) ---- ---- ------- ------- ---- ---- ---------- (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) INCOME STATEMENT DATA: Net sales................ $ 74,009 $ 93,973 $184,850 $206,251 $231,422 $256,145 $281,382 Net earnings (loss)...... (6,682) (19,175) (20,923) (28,821) 570 (2,215) (31,127) Net earnings (loss) per share.................. (0.59) (1.69) (1.84) (2.54) 0.06 (0.27) (3.75) BALANCE SHEET DATA: Total assets............. 148,797 177,992 $130,742 $175,721 $181,294 $158,535 $232,843 Short-term debt(d)....... 91,025 48,436 18,135 35,037 21,827 21,860 59,712 Long-term debt (less current maturities).... 2,100 55,951 68,041 77,230 78,497 80,438 82,854 Stockholders' equity..... 2,109 10,539 8,807 29,567 58,378 32,640 34,777 COMMON STOCK DATA: Stockholders' equity per share.................. $ 0.19 $ 0.93 $ 0.78 $ 2.61 $ 5.15 $ 3.92 $ 4.18 Dividends declared per share.................. -- -- -- -- -- -- -- Shares outstanding at period end............. 11,391 11,373 11,374 11,326 11,325 8,325 8,316
- ------------------------- (a) Stokely recorded nonrecurring charges of $13,529 and $12,500 in the first six months of fiscal 1997 and the fourth quarter of fiscal 1996, respectively. These charges accounted for $1.19 and $1.10 of the loss per share in fiscal 1997 and fiscal 1996, respectively. The non-recurring charge in fiscal 1997 relates primarily to the restructuring of Stokely's core canned vegetable business. The non-recurring charge in fiscal 1996 relates to Stokely's decision to exit its frozen vegetable business. For a further description of these charges, see Note J to Notes to Consolidated Financial Statements in Stokely's Form 10-K (as amended) for the fiscal year ended March 31, 1997. (b) In connection with a restructuring plan, Stokely sold, closed or downsized certain processing facilities, resulting in a nonrecurring charge during fiscal 1993 from the write-down of such processing facilities, equipment and inventories to their estimated net realizable value and from provisions for severance, consolidation costs and plant closing costs. This restructuring resulted in a pre-tax charge of $21,145 or a $2.54 loss per share. (c) Fiscal 1993 includes a charge of $1,650, or a $0.20 loss per share, due to a post-retirement benefits accounting method change. (d) Short-term debt includes Notes Payable, Current Maturities on Long-term Debt and Additional Long-term Debt Classified as Current. 10 21 SUMMARY PRO FORMA FINANCIAL INFORMATION The summary unaudited pro forma financial information set forth below gives effect to the Merger, as well as the acquisition by Chiquita of the Owatonna Companies and the proposed acquisition of AFF. For financial reporting purposes, each transaction has been or will be accounted for as a purchase. The unaudited pro forma income statement information for the year ended December 31, 1996 and for the nine months ended September 30, 1997 have been prepared assuming all of the acquisitions had occurred on January 1, 1996 and January 1, 1997, respectively. The unaudited pro forma balance sheet information at September 30, 1997 has been prepared assuming the pending acquisitions had occurred on September 30, 1997. This pro forma information is not necessarily indicative of the actual operating results or financial position that would have occurred if the Merger or the acquisitions of the Owatonna Companies and AFF had been consummated as of the assumed dates, nor is it necessarily indicative of future operating results or financial position. This information should be read in conjunction with the more detailed pro forma financial information appearing herein under "PRO FORMA FINANCIAL INFORMATION" and the separate historical consolidated financial statements of Chiquita and Stokely which are incorporated by reference in or delivered with this Proxy Statement/Prospectus. (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
NINE MONTHS ENDED YEAR ENDED SEPTEMBER 30, 1997 DECEMBER 31, 1996 ------------------ ----------------- INCOME STATEMENT DATA Net sales................................................... $2,041,792 $2,736,023 Operating income............................................ 137,683 85,115(a) Income (loss) before extraordinary item..................... 55,716 (32,874)(a) Income (loss) per share before extraordinary item (primary and fully diluted)........................................ .66 (.71)(a) BALANCE SHEET DATA Total assets................................................ $2,593,372 Long-term debt.............................................. 983,446 Shareholders' equity........................................ 885,328 Book value per share of Common Stock........................ 9.84 Common shares outstanding................................... 64,200
- ------------------------- (a) The unaudited pro forma income statement information for the year ended December 31, 1996 does not reflect any adjustment to eliminate $13.5 million ($.21 per share on a pro forma basis) of nonrecurring charges of Stokely which are principally associated with the closing and write-down of plant and office facilities. 11 22 COMPARATIVE PER SHARE DATA The following table presents (i) certain per share data derived from the historical financial statements of Chiquita (which have been adjusted to reflect the acquisition by Chiquita of the Owatonna Companies and the proposed acquisition by Chiquita of AFF) and of Stokely, and (ii) unaudited pro forma per share data adjusted to reflect consummation of the Merger. The pro forma book value per share data have been prepared assuming the Merger and the acquisition of AFF occurred on September 30, 1997. The pro forma income (loss) and cash dividends per share data for the year ended December 31, 1996 and nine months ended September 30, 1997 have been prepared assuming all of the acquisitions occurred on January 1, 1996 and January 1, 1997, respectively. The pro forma information is not necessarily indicative of the actual operating results or financial position that would have occurred if the Merger or the acquisitions of the Owatonna Companies and AFF had been consummated as of the assumed dates, nor is it necessarily indicative of future operating results or financial position.
HISTORICAL (ADJUSTED)(A) PRO FORMA PER SHARE OF CHIQUITA COMMON STOCK: ------------- --------- Nine months ended September 30, 1997 Net income (primary and fully diluted).................... $ .79 $ .66 Book value................................................ 9.60 9.84 Cash dividends............................................ .15 .15 Year ended December 31, 1996 Loss before extraordinary item (primary and fully diluted)............................................... $ (.46) $(.71) Book value................................................ (b) (b) Cash dividends............................................ .20 .20
EQUIVALENT HISTORICAL PRO FORMA PER SHARE OF STOKELY COMMON STOCK: ---------- ---------- Six months ended September 30, 1997 Net income (loss) (primary and fully diluted)............. $ (.59) $ .04(c) Book value................................................ .19 .66 Cash dividends............................................ -- .01 Year ended March 31, 1997 Net loss/Loss before extraordinary item on an equivalent pro forma basis (primary and fully diluted)............ $(1.84) $(.05)(c) Book value................................................ .78 (b) Cash dividends............................................ -- .01
- ------------------------- (a) The historical per share information of Chiquita has been adjusted to reflect the acquisition by Chiquita of the Owatonna Companies and the proposed acquisition by Chiquita of AFF. The historical book value per share data of Chiquita have been adjusted assuming the acquisition of AFF occurred on September 30, 1997. The historical income per share data of Chiquita for the nine months ended September 30, 1997 have been adjusted assuming these acquisitions occurred on January 1, 1997, while the historical loss per share data for the year ended December 31, 1996 assume the acquisitions occurred on January 1, 1996. See "CHIQUITA SUMMARY HISTORICAL FINANCIAL INFORMATION" for a summary of selected historical financial data that excludes these acquisitions. (b) Because the historical (adjusted) and pro forma book value per share data of Chiquita Common Stock have been prepared assuming all of the acquisitions occurred on September 30, 1997, the book value per share amounts for Chiquita Common Stock at December 31, 1996 and the equivalent pro forma book value per share amount for Stokely Common Stock at March 31, 1997 are not meaningful. (c) The equivalent pro forma income (loss) per share amounts for Stokely Common Stock have been determined by multiplying the Chiquita pro forma income (loss) per share amounts for the nine months ended September 30, 1997 and the year ended December 31, 1996 by an assumed exchange ratio of approximately .07 share of Chiquita Common Stock for each share of Stokely Common Stock. 12 23 COMPARATIVE PER SHARE MARKET INFORMATION Chiquita Common Stock and Stokely Common Stock are both publicly traded. Chiquita Common Stock is listed on the NYSE and on the Boston and Pacific Stock Exchanges and Stokely Common Stock is listed on the Nasdaq National Market ("Nasdaq"). The information presented in the table below represents the high and low sales prices per share reported for each security during the periods indicated on the NYSE and Nasdaq, respectively.
PRICE PER SHARE OF COMMON STOCK ---------------------------------- CHIQUITA STOKELY ---------------- -------------- HIGH LOW HIGH LOW ---- --- ---- --- QUARTER ENDED: 1995 March 31.................................................... $14.50 $12.25 $6.13 $5.13 June 30..................................................... 14.00 12.63 6.63 5.13 September 30................................................ 17.25 13.63 7.44 5.13 December 31................................................. 18.00 13.38 6.94 4.88 1996 March 31.................................................... 16.38 12.63 5.25 2.38 June 30..................................................... 15.50 13.00 3.81 2.38 September 30................................................ 13.50 11.50 3.63 2.13 December 31................................................. 13.88 11.50 2.88 1.25 1997 March 31.................................................... 16.00 12.75 2.00 1.25 June 30..................................................... 15.88 13.75 1.88 .63 September 30................................................ 16.13 13.75 2.50 .81 December 31................................................. 18.00 15.94 .97 .69 (through November 19, 1997)
On September 17, 1997, the last full day of trading immediately preceding the public announcement of the signing of the Merger Agreement, the closing prices of Chiquita Common Stock and Stokely Common Stock were $14.56 and $1.56, respectively. The equivalent market value of Stokely Common Stock at such date after giving effect to the Merger would be $1.00 per share based upon the issuance of approximately .07 share of Chiquita Common Stock for each share of Stokely Common Stock. On November 19, 1997, the closing prices per share of Chiquita Common Stock and Stokely Common Stock were $16.63 and $.75, respectively. 13 24 RISK FACTORS Prospective investors should carefully consider the following information before making a decision concerning the Merger and the acquisition of Chiquita Common Stock. This information should be read in conjunction with the other information set forth or incorporated by reference in this Proxy Statement/Prospectus. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." RECENT LOSSES. From 1984 to 1991, Chiquita reported a continuous record of growth in annual earnings. However, Chiquita reported losses from continuing operations for 1992, 1993, 1994 and 1996 of $222 million, $51 million, $84 million and $28 million, respectively, and earnings of $28 million in 1995. The 1994 loss included charges and losses totaling $67 million resulting primarily from farm closings and banana cultivation write-downs in Honduras following an unusually severe strike and the substantial reduction of Chiquita's Japanese "green" banana trading operations. The 1995 earnings included a net gain of $19 million primarily resulting from divestitures of operations, sales of older ships and other actions taken as part of Chiquita's ongoing program to improve shareholder value. The 1996 loss included write-downs and costs of $70 million resulting from industry-wide flooding in Costa Rica, Guatemala and Honduras; certain strategic undertakings designed to achieve further long-term reductions in the delivered product cost of Chiquita bananas through the modification of distribution logistics and the wind-down of particular production facilities; and certain claims relating to prior EU quota restructuring actions. For the first nine months of 1997, the Company reported net income from continuing operations of $56 million, after giving effect to a loss of $28 million in the third quarter. At September 30, 1997, Chiquita's accumulated deficit totaled $103 million. The Company's interim results are subject to significant seasonal variations; typically the first six months of the calendar year are the stronger period. See "-- Competition and Pricing." Operating income in the third quarter of 1997 compared to the third quarter of 1996 was adversely affected by (1) a stronger dollar, mitigated in part by the Company's foreign currency hedging program, and (2) increased banana production costs arising from weather-related effects and other influences on current productivity; the adverse impact of these items was partially offset by the benefit of higher local currency pricing for bananas in Europe. These trends, including higher production costs, have continued into the fourth quarter. EUROPEAN UNION BANANA REGULATION. On July 1, 1993, the European Union ("EU") implemented a new quota regulation effectively restricting the volume of Latin American bananas imported into the EU, which had the effect of decreasing Chiquita's volume and market share in Europe. The quota regulation is administered through a licensing system which grants preferred status to producers and importers within the EU and its former colonies. The regulation also imposes quotas and tariffs on bananas imported from other sources, including Latin America, Chiquita's primary source of fruit. Since imposition of the EU quota regime, prices within the EU have increased to a higher level than the levels prevailing prior to the quota. Banana prices in other worldwide markets, however, have been lower than in years prior to the EU quota, as the displaced EU volume has entered those markets. In two separate rulings, General Agreement on Tariffs and Trade ("GATT") panels found the EU banana policy to be illegal. In March 1994, four of the countries which had filed GATT actions against the EU banana policy (Costa Rica, Colombia, Nicaragua and Venezuela) reached a settlement with the EU by signing a "Framework Agreement." The Framework Agreement authorizes the imposition of additional restrictive and discriminatory quotas and export licenses on U.S. banana marketing firms, while leaving EU firms exempt. Costa Rica and Colombia implemented this agreement in 1995, significantly increasing Chiquita's cost to export bananas from these countries. In July 1996, the EU adopted an interim measure that increased its annual banana quota to adjust for the entry of Sweden, Finland and Austria into the EU and made its preferential licensing system applicable to the increase. Prior to their entry into the EU, these countries had had unregulated banana markets in which Chiquita supplied a significant portion of the bananas. Implementation of the quota and licensing regime continues to evolve, and there can be no assurance that the EU banana regulation will not change further. 14 25 In September 1994, Chiquita and the Hawaii Banana Industry Association made a joint filing with the Office of the U.S. Trade Representative ("USTR") under Section 301 of the U.S. Trade Act of 1974, charging that the EU quota and licensing regime and the Framework Agreement are unreasonable, discriminatory, and a burden and restriction on U.S. commerce. In response to this petition, the U.S. Government initiated formal investigations of the EU banana import policy and of the Colombian and Costa Rican Framework Agreement export policies. In January 1995, the U.S. Government announced a preliminary finding against the EU banana import policy and, in January 1996, the USTR announced it had found the banana Framework Agreement export policies of Costa Rica and Colombia to be unfair. In September 1995, based on information obtained in the USTR's investigation under Section 301, the United States, joined by Guatemala, Honduras and Mexico, commenced a new international trade challenge against the EU regime using the procedures of the World Trade Organization ("WTO"). In February 1996, Ecuador, the world's largest exporter of bananas, joined the United States, Guatemala, Honduras and Mexico in challenging the EU regime and Framework Agreement under the WTO. During the fourth quarter of 1996, a WTO arbitration panel heard the case against the EU quota and licensing regime and Framework Agreement. In May 1997, the WTO panel hearing the case issued its final report, finding that the licensing and quota systems under the EU regime and the Framework Agreement violate numerous international trade obligations to the detriment of Latin American supplying countries and U.S. marketing firms such as Chiquita. The report recommends that the WTO request the EU to bring its import regime for bananas into conformity with these obligations. In June 1997, the EU appealed the report and in September 1997 the WTO appellate body upheld the panel report. The full WTO body has adopted the panel and Appellate Body reports, which now require the EU to bring its import regime for bananas into conformity with these reports. In October 1997, the EU notified the WTO that it will honor its international obligations. The EU has a "reasonable" period of time (not to exceed 15 months) to implement the reports' recommendations. If the EU fails to comply within a reasonable period of time, the injured governments may engage in retaliatory trade measures against the EU. Both the WTO and Section 301 authorize retaliatory measures, such as tariffs or withdrawal of trade concessions, against the offending countries. However, there can be no assurance as to the ultimate outcome of the WTO and Section 301 proceedings, the nature and extent of actions that may be taken by the affected countries, or the impact on the EU quota regime or the Framework Agreement. LEVERAGE. As of September 30, 1997, Chiquita and its subsidiaries had short-term notes and loans payable of $36 million and long-term debt (including current maturities) of approximately $1.1 billion; the percentage of total debt to total capitalization for Chiquita was 58%. As of September 30, 1997, maturities for the remainder of 1997 and for the years 1998 through 2001 are $20 million, $88 million, $50 million, $41 million and $174 million, respectively. SUBSIDIARIES. Most of Chiquita's operations are conducted through its subsidiaries and Chiquita is therefore dependent on the cash flow of its subsidiaries to meet its obligations. The claims of holders of Chiquita Common Stock will be subordinate to any existing and future obligations of Chiquita and will be structurally subordinated to any existing and future obligations (whether or not for borrowed money) of its subsidiaries, many of which have direct obligations to lenders and other third-party creditors. As of September 30, 1997, the total debt of Chiquita's subsidiaries aggregated $411 million, of which $253 million represented non-recourse long-term debt of Chiquita's shipping subsidiaries secured by ships and related equipment and $36 million represented short-term notes and loans payable. COMPETITION AND PRICING. Approximately 60% of Chiquita's 1996 consolidated net sales were attributable to the sale of bananas. Banana marketing is highly competitive. While smaller companies, including growers' cooperatives, are a competitive factor, Chiquita's primary competitors are a limited number of other international banana importers and exporters. Chiquita has been able to obtain a premium price for its bananas due to its reputation for quality and its innovative marketing techniques. In order to compete successfully, Chiquita must be able to source bananas of uniformly high quality and, on a timely basis, transport and distribute them to worldwide markets. Bananas are highly perishable and must be brought to market and sold generally within 60 days after harvest. Therefore, the selling price which an importer receives 15 26 for bananas depends on several factors, including: availability of bananas and other fruit in each market; the relative quality of competing fruit; and wholesaler and retailer acceptance of bananas offered by competing importers. Excess supplies may result in increased price competition. Competition in the sale of bananas also comes from other fresh fruit, which may be seasonal in nature. The resulting seasonal variations in demand cause banana pricing to be seasonal, with the first six months of the calendar year being the stronger period. Chiquita's vegetable canning business competes with numerous producers of both branded and private-label vegetables, as well as with numerous marketers of frozen and fresh vegetable products. ADVERSE WEATHER CONDITIONS AND CROP DISEASE. Bananas are vulnerable to adverse local weather conditions, which are quite common but difficult to predict, and to crop disease. These factors may result in lower sales volume and increased costs, but may also restrict worldwide supplies and lead to increased prices for bananas. However, competitors may be affected differently, depending upon their ability to obtain adequate supplies from sources in other geographic areas. Chiquita has a greater number and geographic diversity of sources of bananas than any of its competitors. During 1996, approximately 30% of all bananas sold by Chiquita were sourced from Panama. Bananas are sourced from numerous other countries, including Colombia, Costa Rica, Ecuador, Guatemala and Honduras which comprised 5% to 21% (depending on the country) of bananas sold by Chiquita during 1996. The vegetable processing industry is also affected by the availability of produce, which can vary due to local weather conditions. LABOR RELATIONS. Chiquita employs approximately 36,000 employees. Approximately 32,000 of these employees are employed in Central and South America, including 23,000 workers covered by approximately 70 labor contracts. Approximately 25 contracts covering approximately 10,000 employees are currently being renegotiated or expire through September 30, 1998. Strikes or other labor-related actions are sometimes encountered upon expiration of labor contracts or during the term of the contracts. OTHER RISKS OF INTERNATIONAL OPERATIONS. Certain of Chiquita's operations are heavily dependent upon products grown and purchased in Central and South American countries; at the same time, Chiquita's operations are a significant factor in the economies of many of these countries. These activities are subject to risks that are inherent in operating in these countries, including government regulation, currency restrictions and other restraints, risks of expropriation and burdensome taxes. There is also a risk that legal or regulatory requirements will be changed or that administrative policies will change. Certain of the activities are substantially dependent upon leases and other agreements with the governments of these countries. Chiquita's overall risk from these factors, as well as from political changes, is reduced by the large number and geographic diversity of its sources of bananas. Chiquita's worldwide operations and products are subject to numerous governmental regulations and inspections by environmental, food safety and health authorities. Although Chiquita believes it is substantially in compliance with such regulations, actions by regulators have in the past required, and in the future may require, operational modifications or capital improvements at various locations or the payment of fines and penalties, or both. SHARES AVAILABLE FOR FUTURE SALE. No prediction can be made as to the effect, if any, that future sales of shares of Chiquita Common Stock, or the availability of such shares for future sales, will have on the market price prevailing from time to time of Chiquita Common Stock. Sales of substantial amounts of Chiquita Common Stock, or the perception that such sales could occur, could adversely affect prevailing market prices for Chiquita Common Stock. At December 1, 1997, there were outstanding shares of Chiquita Common Stock, including 23,996,295 shares held, directly or indirectly, by American Financial Group, Inc. ("AFG"). The outstanding shares include approximately 3 million shares of Chiquita Common Stock issued in a private transaction in connection with the recent acquisition of the Owatonna Companies, of which up to 500,000 shares may be registered for resale between September 24, 1997 and September 23, 1998. In addition, up to approximately 2.2 million shares of Chiquita Common Stock are expected to be issued in connection with the acquisition of AFF. 16 27 INTRODUCTION GENERAL This Proxy Statement/Prospectus is being furnished to the holders of Stokely Common Stock in connection with the solicitation of proxies by the Board of Directors of Stokely (the "Stokely Board"), for use at the Annual Meeting of Stokely to be held on January 15, 1998, at 10:00 a.m., Milwaukee, Wisconsin time, at the Milwaukee Athletic Club, 758 North Broadway, Milwaukee, Wisconsin, or at any adjournments or postponements thereof. This Proxy Statement/Prospectus also constitutes the Prospectus of Chiquita with respect to up to 3,204,349 shares of Chiquita Common Stock to be issued to holders of Stokely Common Stock pursuant to the Merger Agreement and to certain holders of Stokely indebtedness upon consummation of the Merger. At the Annual Meeting, holders of record of Stokely Common Stock as of the close of business on November 20, 1997, the Voting Record Date, will consider and vote upon a proposal to approve the Merger Agreement. Pursuant to the Merger Agreement, Acquisition Sub will be merged with and into Stokely and Stokely will be the surviving corporation and will become a direct, wholly-owned subsidiary of Chiquita. In the Merger, each outstanding share of Stokely Common Stock will be converted into the right to receive a fractional share of Chiquita Common Stock having a value of $1.00. The size of the fractional amount will be based on the average closing price of Chiquita Common Stock on the NYSE over the 15 trading days preceding the Merger. The number of whole shares of Chiquita Common Stock to be received by each Stokely shareholder will depend on the number of shares of Stokely Common Stock held by the shareholder. No fractional shares of Chiquita Common Stock will be issued and cash (without interest) will be paid in lieu of fractional shares. Additionally, in connection with the Merger: (i) holders of $31.8 million principal amount of Stokely debt have agreed to exchange that indebtedness for shares of Chiquita Common Stock; (ii) certain Stokely suppliers have agreed to forgive $1.0 million in accounts receivable; and (iii) it is a condition of closing that Stokely's revolving credit lender will agree to leave in place at least $20 million of outstanding revolving credit. The Stokely Board has unanimously approved the terms of the Merger Agreement and recommends that shareholders of Stokely vote FOR the proposal to approve and adopt the Merger Agreement. See "PROPOSAL TO APPROVE THE MERGER." PARTIES TO THE MERGER Chiquita is a leading international marketer, producer and distributor of bananas and other quality fresh and processed food products sold under the Chiquita and other brand names. In addition to bananas, these products include other tropical fruit, such as mangoes, kiwi and citrus, and a wide variety of other fresh produce. Chiquita's products also include fruit and vegetable juices and beverages; processed bananas and other processed fruits and vegetables; fresh cut and ready-to-eat salads; and edible oil-based consumer products. Chiquita's Friday Canning Corporation, headquartered in New Richmond, Wisconsin, operates eight vegetable canning facilities in Wisconsin and participates in a vegetable canning joint venture in China. In September 1997, Chiquita acquired the Owatonna Companies, a vegetable canner headquartered in Owatonna, Minnesota with six canning facilities in Minnesota and Illinois and entered into a definitive agreement to acquire AFF, a vegetable canning company headquartered in Payette, Idaho, with four canning facilities in the northwestern United States. These companies sell processed vegetables in the private label, food service and branded segments, both domestically and for export. The principal executive offices of Chiquita are located at 250 East Fifth Street, Cincinnati, Ohio 45202 and the telephone number is (513) 784-8000. AFG owns, either directly or indirectly through its subsidiaries, approximately 40% of the outstanding shares of Chiquita Common Stock. Approximately 46% of the outstanding common stock of AFG is beneficially owned by Carl H. Lindner, members of his family and trusts for their benefit. Stokely produces a broad range of canned vegetables in the United States under customer private labels and under the Stokely's Finest(R), Stokely's Gold(TM)and other brand labels. Stokely sells brand label vegetables through the retail, foodservice and industrial channels of distribution and sells private label canned vegetables to many supermarket chains and wholesalers. Stokely also exports canned vegetables to Europe and Asia. Prior to February 1996, Stokely also processed, marketed and sold frozen vegetables, primarily in bulk size quantities for the industrial market. In February 1996, Stokely announced it was exiting the frozen vegetable 17 28 processing business and sold essentially all of the assets of this business during fiscal 1997. The principal executive offices of Stokely are located at 1230 Corporate Center Drive, Oconomowoc, Wisconsin 53066, and its telephone number is (414) 569-1800. Copies of Stokely's Form 10-K/A for its fiscal year ended March 31, 1997 and Form 10-Q for the quarter ended September 30, 1997 accompany this Proxy Statement/Prospectus. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." THE ANNUAL MEETING PLACE, TIME AND DATE The Annual Meeting of Shareholders of Stokely will be held on January 15, 1998, at 10:00 a.m., Milwaukee, Wisconsin time, at the Milwaukee Athletic Club, 758 North Broadway, Milwaukee, Wisconsin. This Proxy Statement/Prospectus is being sent to holders of shares of Stokely Common Stock and is accompanied by a Proxy which is being solicited by the Stokely Board for use at the Annual Meeting or any adjournments or postponements thereof. PURPOSE The purpose of the Annual Meeting is: (i) to consider and vote upon the approval and adoption of the Merger Agreement described herein, providing for, among other things, the merger of Acquisition Sub with and into Stokely, and for Stokely to be the surviving corporation and to become a direct, wholly-owned subsidiary of Chiquita; (ii) to elect three directors to serve until consummation of the Merger (or, in the event the Merger is not consummated, for a three year term expiring at the 2000 annual meeting of shareholders, or until their successors have been elected and qualified); (iii) to obtain approval to adjourn the Annual Meeting for the purpose of soliciting additional votes in favor of the Merger Agreement in the event that the required vote for approval and adoption of the Merger Agreement has not been obtained by the date of the Annual Meeting, under the terms and conditions described herein; and (iv) to act upon such other matters, if any, as may properly come before the Annual Meeting or any adjournments or postponements thereof. VOTING RECORD DATE; SHARES ENTITLED TO VOTE The Stokely Board has fixed the close of business on November 20, 1997 as the Voting Record Date for the determination of shareholders entitled to notice of and to vote at the Annual Meeting. Only those holders of Stokely Common Stock of record on the Voting Record Date will be entitled to notice of and to vote at the Annual Meeting or any adjournments or postponements thereof. Each share of Stokely Common Stock will be entitled to one vote on each matter presented for action at the Annual Meeting. As of the Voting Record Date, 11,390,871 shares of Stokely Common Stock were issued and outstanding, and Stokely had no other class of securities issued and outstanding. STOKELY SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES FOR STOKELY COMMON STOCK WITH THEIR PROXY CARDS. AS DESCRIBED UNDER "PROPOSAL TO APPROVE THE MERGER-EXCHANGE OF CERTIFICATES IN THE MERGER," UPON APPROVAL OF THE MERGER EACH STOKELY SHAREHOLDER WILL BE PROVIDED WITH A LETTER OF TRANSMITTAL FOR EXCHANGING SHARES OF STOKELY COMMON STOCK, AND SHOULD FOLLOW THE INSTRUCTIONS SET FORTH THEREIN. VOTE REQUIRED A majority of the shares of Stokely Common Stock entitled to vote, represented in person or by proxy, will constitute a quorum for the transaction of business at the Annual Meeting. Abstentions and broker non-votes will be considered present for purposes of determining whether a quorum exists. The following votes are required for the various actions to be taken at the Annual Meeting: - The affirmative vote of the holders of two-thirds of the shares of Stokely Common Stock entitled to vote at the Annual Meeting is required for approval and adoption of the Merger Agreement. Abstentions and broker non-votes will have the same effect as votes cast against approval of the Merger Agreement. 18 29 - A plurality of the votes cast at the Annual Meeting by the holders of shares of Stokely Common Stock entitled to vote is required for the election of directors. A plurality vote means that the individuals who receive the largest number of votes, up to the maximum number of directors to be chosen at the Annual Meeting, will be elected as directors. Any shares not voted will have no effect on the election of directors provided that a quorum for the transaction of business is present at the Annual Meeting. - The affirmative vote of a majority of the total votes cast in person or by proxy is necessary to approve the proposal to adjourn the Annual Meeting to solicit additional votes in favor of the Merger proposal. Any shares not voted will have no effect on the proposal to adjourn the Annual Meeting provided that a quorum is present at the Meeting. Stokely's directors and executive officers and their affiliates own 3.45% of the outstanding shares of Stokely Common Stock and intend to vote in favor of the Merger. THE REQUIRED VOTE OF STOKELY SHAREHOLDERS ON THE MERGER AGREEMENT IS BASED UPON THE TOTAL NUMBER OF OUTSTANDING SHARES OF STOKELY COMMON STOCK, AND NOT JUST THOSE REPRESENTED AT THE ANNUAL MEETING. ACCORDINGLY, THE FAILURE TO SUBMIT A PROXY CARD (OR, IF THE SHARES ARE HELD BY A BROKER, TO RETURN VOTING INSTRUCTIONS) OR TO VOTE IN PERSON AT THE ANNUAL MEETING, OR THE ABSTENTION FROM VOTING BY A STOKELY SHAREHOLDER, WILL HAVE THE SAME EFFECT AS A "NO" VOTE WITH RESPECT TO THE MERGER AGREEMENT. BROKER NON-VOTES WILL NOT BE COUNTED AS HAVING BEEN VOTED IN PERSON OR BY PROXY AT THE ANNUAL MEETING AND WILL HAVE THE SAME EFFECT AS A "NO" VOTE WITH RESPECT TO THE MERGER AGREEMENT. NO APPRAISAL OR DISSENTERS' RIGHTS Holders of shares of Stokely Common Stock have no appraisal or dissenters' rights in connection with the Merger. See "PROPOSAL TO APPROVE THE MERGER -- The Merger Agreement: No Appraisal or Dissenters' Rights." PROXIES Holders of shares of Stokely Common Stock may vote either in person or by properly executed Proxy. Shares of Stokely Common Stock represented by a properly executed Proxy received prior to or at the Annual Meeting or any postponements or adjournments thereof will, unless such Proxy is revoked, be voted in accordance with the instructions indicated on such Proxy. If no instructions are indicated on a properly executed Proxy, the shares covered thereby will be voted FOR the proposal to approve the Merger Agreement, FOR the slate of directors nominated for election and FOR approval of the proposal to adjourn the Annual Meeting to permit further proxy solicitation in favor of the Merger Agreement. If any other matters are properly presented at the Annual Meeting for consideration, including, among other things, a motion to adjourn the Annual Meeting to another time and/or place (other than for the purpose of soliciting additional proxies), the persons named in the Proxy and acting thereunder will have discretion to vote on such matters in accordance with their best judgment. As of the date hereof, Stokely knows of no other such matters. Any Proxy given pursuant to this solicitation or otherwise may be revoked by the person giving it at any time before it is voted by (i) filing with the Secretary of Stokely written notice of revocation (Robert M. Brill, Secretary, Stokely USA, Inc., 1230 Corporate Center Drive, Oconomowoc, Wisconsin 53066); (ii) submitting a duly-executed Proxy bearing a later date; or (iii) appearing at the Annual Meeting and giving the Secretary notice of his or her intention to vote in person. If you are a shareholder whose shares are not registered in your own name, you will need additional documentation from your record holder to vote personally at the Annual Meeting. If a quorum is not obtained, or if fewer shares of Stokely Common Stock are voted in favor of the Merger Agreement than the number required for approval, it is expected that the Annual Meeting will be postponed or adjourned for the purpose of allowing additional time to solicit Proxies or votes in favor of the Merger Agreement. See "PROPOSAL TO ADJOURN THE ANNUAL MEETING." 19 30 PROPOSAL TO APPROVE THE MERGER (PROPOSAL NO. 1) BACKGROUND OF AND REASONS FOR THE MERGER The Stokely Board has explored multiple alternatives to the proposed Merger Agreement with the assistance of its outside financial advisor, DLJ, and has concluded Stokely's deteriorating operating results and financial condition and anticipated liquidity problems are of sufficient severity and magnitude that it will be unable to continue normal operations or achieve profitability for an extended period absent a sales transaction. The Stokely Board and management believe there are no presently available alternatives to the Merger Agreement that would permit Stokely to operate normally for an extended period or achieve profitability. Current and Historical Deteriorating Operating Results and Financial Condition of Stokely. Stokely has lost $82.5 million in its last five fiscal years and has incurred net losses in five of its last six fiscal years. Stokely has attempted to restructure its operations three times in the previous six-year period and, while the Board and management believe Stokely has attained significant benefits from these restructuring programs, Stokely has continued to record significant losses. Stokely posted a net loss of $2.8 million in its first fiscal quarter ended June 30, 1997, and a net loss of $3.9 million in its second fiscal quarter ended September 30, 1997. Abnormally low selling prices that prevailed during the first quarter did not abate during the second quarter. Current selling prices remain below year-ago levels, historical averages and levels anticipated at the beginning of the fiscal year by management based on industry planting intentions reported by the United States Department of Agriculture ("USDA") in April 1997, which indicated significant reductions in planting from prior years. As a result, Stokely incurred a net loss of $3.9 million in its second fiscal quarter ended September 30, 1997. Furthermore, if current market conditions prevail for the balance of the fiscal year, the Board and management believe Stokely will experience losses of similar magnitude in its third and fourth fiscal quarters. These losses are expected to continue to erode Stokely's liquidity position and net worth. Stokely discussed the implications of these liquidity issues in its Form 10-Q (as amended) for the quarter ended June 30, 1997 and its Form 10-Q for the quarter ended September 30, 1997. As noted in Stokely's Current Report on Form 8-K, dated September 17, 1997 and filed on September 29, 1997, Stokely's Form 10-Q/A for the three months ended June 30, 1997, filed on October 23, 1997, and Stokely's Form 10-Q for the three months ended September 30, 1997, filed on November 12, 1997, since May 1997, Stokely has been in violation of certain covenants applicable to Stokely's Senior Secured Notes due 2000 ("Senior Notes"), which constitutes an event of default, and certain of its Industrial Development Revenue Bonds ("IRBs"). Since July 1997, Stokely also has been in violation of certain covenants applicable to most of its other IRBs. Through November 28, 1997, Stokely had not been notified by any of these debt-holders that they intend to accelerate the maturity date of their obligations as a result of the events of default or the covenant violations. Furthermore, the holders of the Senior Notes and certain holders of the IRBs have signed a Debt- Holder Agreement dated September 16, 1997, whereby they agreed to exchange their outstanding debt for shares of Chiquita Common Stock in the proposed Merger. Should current market conditions continue, Stokely's anticipated negative cash flow and working capital positions will seriously affect Stokely's liquidity in the upcoming quarters. Stokely's deteriorating operating results and financial condition and anticipated liquidity problems are of sufficient severity and magnitude that it will be unable to continue normal operations or achieve profitability for an extended period absent a sale of Stokely. Furthermore, based upon these subsequent-occuring events, Deloitte & Touche, LLP, Stokely's independent auditors, have issued a revised audit opinion for the fiscal year ended March 31, 1997 indicating that these events raise substantial doubt about Stokely's ability to continue as a going concern. The book value of Stokely on its June 30, 1997 balance sheet was $6.1 million, and the book value of Stokely on September 30, 1997 was $2.1 million. Should current market conditions persist through Stokely's third fiscal quarter, the book value of Stokely effectively will be eliminated. When the Stokely Board met in August and September to consider the Merger Agreement, it considered the following issues related to Stokely's operating performance and financial condition: (1) the prospect of continuing operating losses particularly given current market conditions; (2) Stokely's high degree of leverage (i.e., debt) which, when coupled with current market conditions, reduces Stokely's borrowing availability and seriously affects its current liquidity; (3) the very limited sources of possible additional cash, whether from 20 31 asset sales or additional borrowing capacity; (4) the existing violations of financial covenants under its Senior Notes and IRBs; and (5) the longer-term viability of Stokely as an independent organization given the above factors, the fact that its existing revolving credit facility expires in May 1998, the fact that approximately $7.5 million of principal payments are due in fiscal 1999 under its existing long-term debt agreements and the fact that Stokely will be required to post security of approximately $5.0 million with the Wisconsin Department of Agriculture, Trade and Consumer Protection ("WDA") in calendar 1998 (versus security of $2.0 million required in calendar 1997). Longer-Term Liquidity Issues. Stokely has a $70 million revolving credit facility with Congress Financial Corporation (Central) ("Congress") which expires in May 1998. The Congress facility represents the third credit facility Stokely has operated under since 1992. The current revolving credit facility has fewer restrictive financial covenants, higher collateral advance rates and a larger total credit facility than Stokely's two previous credit facilities. Given Stokely's historical operating results and its more recent operating performance, it is uncertain whether Stokely could successfully negotiate an extension of its current facility or replace it with a facility which provides comparable credit terms. Scheduled principal payments on Stokely's long-term debt total approximately $2.0 million in its fiscal years 1997 and 1998. Scheduled principal payments on Stokely's long-term debt for its fiscal year 1999 are approximately $7.5 million. There is substantial doubt regarding Stokely's ability to meet these debt payments in fiscal 1999. As previously discussed in Stokely's Annual Report on Form 10-K (as amended) for its fiscal year ended March 31, 1997, Stokely is subject to various state regulations in order to operate as a vegetable contractor in those states. Effective July 11, 1996, the WDA amended its regulations governing when vegetable contractors are required to pay cash for raw products upon delivery, file security with the WDA, or file financial statements that meet minimum financial standards. Stokely was required to file security of approximately $2.0 million on April 2, 1997, as it did not meet the minimum financial standards in the amended regulations. Accordingly, Stokely posted a surety bond with the WDA to meet this security requirement. This security was required to be 25% of the estimated maximum liability expected to be owed to Wisconsin vegetable growers in the calendar year ended December 31, 1997. The security requirement increases to 50% for the calendar year ended December 31, 1998, and 75% thereafter for those companies not meeting the minimum financial standards. Stokely currently anticipates that it will not meet the minimum financial standards in calendar 1998 and will be required to either pay cash upon delivery of raw products or file security of approximately $5.0 million in calendar 1998. Stokely believes it would be extremely disadvantaged in obtaining grower contracts if it were to attempt to pay cash upon delivery of raw products and, as such, Stokely estimates it would need to post security of approximately $5.0 million in calendar 1998. Because of Stokely's operating performance, it is anticipated that the security to be posted in calendar 1998 would be in the form of a letter of credit or a surety bond which would be fully supported by a letter of credit. In either case, the letter of credit would further reduce Stokely's borrowing availability and thus adversely affect Stokely's liquidity. History of Restructuring Initiatives. Stokely has undertaken multiple initiatives since the early 1990s intended to make it a viable, value-creating entity in a changing market place. The market place changes began with the Del Monte Foods leveraged buyout in January 1990 which precipitated a market share battle in the brand label canned vegetable arena and ultimately resulted in brand pricing temporarily falling below private label pricing. Since Stokely's primary strategy up to that point had been to expand its brand business, this market event forced management and the Stokely Board to reevaluate Stokely's strategic direction. To assist in the evaluation, in January 1992, Stokely retained Bain & Co. ("Bain") to analyze the industry, Stokely's position and relative performance in the industry, and the potential value of various strategic alternatives going forward. The conclusions of the Bain analysis were twofold. First, on an operating basis, Bain believed Stokely was attempting to do too many things and was not cost-effective as a result. In the then existing declining price environment, Bain advised Stokely to narrow its focus to the areas in which it had the greatest expertise and cost effectiveness and, therefore, the greatest prospects for success. Consequently, Stokely shifted its strategic priority to the private label channel. For numerous reasons, including scale and experience, the private label channel had historically returned the highest margins for Stokely. Additionally, it was determined that to 21 32 continue to achieve historical returns in an intensely competitive environment, Stokely needed to discontinue certain non-core product lines (tomatoes, fruits, southern vegetables) and exit non-core channels of distribution (frozen retail and frozen foodservice). Second, Bain's evaluation questioned the long-term prospects for a company of Stokely's size in the vegetable processing industry. As a result, in October 1992 Stokely engaged Morgan Stanley & Co. Incorporated to actively explore the option of the sale of Stokely. The Stokely Board elected to pursue the sale alternative based upon the conclusions reached during the strategic analysis process that, given present and projected changes in the industry, Stokely did not have sufficient scale to maintain current returns or to achieve historical return levels. The Stokely Board believed the solution was to combine with another industry participant, with the resulting entity possessing the requisite size to achieve profitable results. As Stokely was not in a financial position to be a buyer, the Stokely Board and management believed a sale was the proper course of action. Unfortunately, the formal sale process, which involved approaching many potential buyers, was unsuccessful as no bids were received. Consequently, in May 1993, Stokely announced a restructuring of its operations (which included discontinuance of certain non-core product lines and exiting certain non-core distribution channels), resulting in a nonrecurring pretax charge of $21.1 million in the quarter ended March 31, 1993, and began to pursue diligently the private label strategy identified with the assistance of Bain, mindful that ultimately it likely would need to enter into some type of strategic combination. By June 1994, the combination of reduced costs due to the restructuring initiatives undertaken in 1993 and improved market conditions had resulted in substantial improvement in Stokely's performance. The Stokely Board determined that it would be appropriate to raise additional equity to pay down debt and reduce the risk inherent in Stokely's highly leveraged balance sheet. Further, the Stokely Board believed that this course of action would better position Stokely to evaluate and pursue a strategic combination. Accordingly, Stokely proceeded with a secondary equity offering in November 1994, raising $25.2 million. In June 1995, the Stokely Board concluded it would again be appropriate to attempt to identify a strategic combination and authorized management to engage an investment banking firm to assist in that process. DLJ was retained in July 1995, and from July 1995 to May 1996 discussions were held with industry participants, including Chiquita, as well as some non-industry companies. The results were a disappointment as no buyers could be identified who were willing to pay even an amount equal to Stokely's outstanding debt. Beginning in late 1994 and continuing into 1996, market conditions in the canned vegetable industry had again weakened and, given Stokely's leverage position, Stokely was in more serious trouble. Performance had deteriorated to the point that Stokely was in default under certain terms of its working capital facility and its Senior Notes. As a result, Stokely's banks were restricting its borrowings such that it faced a major liquidity crisis. At the same time, the Stokely Board concluded that prior restructuring efforts had been inadequate and that, given the realities of the marketplace, radical steps were needed to bring Stokely's costs in line with market conditions. The immediate priority was entering into a new working capital facility. In May 1996, Stokely entered into a new agreement with Congress which alleviated its immediate liquidity crisis and, because of higher advance rates, gave Stokely some additional liquidity going forward. Stokely also was able to accomplish a restructuring of the terms of its Senior Notes in a manner that acknowledged the reality of its highly leveraged situation. However, Stokely continued to have concerns regarding its liquidity. It needed either to sell its frozen business, which was unprofitable, or to close it down before losses generated by the frozen division consumed all of the additional liquidity in the new working capital facility. A buyer of the frozen business was identified and the sale was consummated in July 1996. Additionally, to help meet its urgent need to cut costs and conserve cash, Stokely also sold its corporate headquarters building in January 1997. While working on urgent liquidity priorities, Stokely also continued to assess what needed to be done to improve the performance of its core business. Previous efforts to improve Stokely's performance by eliminating non-core products and distribution channels and cutting costs were appropriate but, in an intensely competitive industry in which Stokely was hampered by its leverage, not sufficient. These efforts failed to address adequately the fundamental manner in which the core canned vegetable business was operated. A new analysis began, based on the premise that Stokely was targeting too high a sales volume in order to run its 22 33 plants at full capacity and achieve the lowest possible unit cost. If this was the case, achieving that sales level was likely to require excessive price discounting, resulting in margin compression. Stokely did a complete analysis of profitability by customer to test the hypothesis. The results confirmed the initial premise and Stokely redefined its sales volume to approximately 85% of existing levels, identified the most efficient production configuration to service the newly defined customer base, and undertook a complete analysis of the administrative support necessary to operate the reconfigured company. The resulting plan was presented to, and approved by, the Stokely Board in September 1996. In approving the operating plan, the Stokely Board recognized that a corporate finance solution was ultimately still necessary and directed management to continue to work with DLJ once the fundamental elements of the operating plan were in place. DLJ Sales Process and Stokely Board Consideration of the Merger Agreement. As noted above, Stokely has undertaken various restructuring initiatives to address the continuing margin compression and operating losses it has struggled with during the last six years, but the benefits of its efforts have been largely offset by persistent erosion of its selling prices. In approving its latest restructuring plan in September 1996, the Stokely Board also directed management to continue to explore corporate finance alternatives with the assistance of DLJ as a means of stabilizing Stokely's capital structure and operating performance. Given the continuing price deterioration in the processed vegetable markets and resulting deterioration in Stokely's balance sheet and liquidity position, the Stokely Board concluded in April 1997 that management and DLJ should aggressively pursue the sale of Stokely, as that alternative would likely provide the greatest value to the Stokely shareholders. On April 18, 1997, DLJ made a presentation to the Stokely Board relating to conducting a formal auction of Stokely, and the Stokely Board voted to pursue this course of action. The Stokely Board authorized DLJ to prepare a package of information about Stokely and explore a possible merger by contacting, on a confidential basis and subject to the execution of confidentiality agreements, those entities that were believed by the Stokely Board and DLJ to be the most likely merger candidates. Subsequently, as part of the auction process, DLJ approached seven likely strategic acquirors for Stokely: Chiquita, Del Monte USA (owned by Texas Pacific Group), Seneca Foods Corp., Tri Valley Growers, Dean Foods Company, Allen Canning Company and Del Monte, Mexico (owned by Hicks, Muse, Tate & Furst). DLJ offered to make formal presentations with Stokely management to each of these entities concerning the opportunity to acquire Stokely. During May 1997, Stokely's management made presentations to the three potential acquirors who expressed interest. Of that group, two parties, Del Monte USA and Chiquita, conducted a formal due diligence review of Stokely, including further meetings with management, plant and site visits, and extensive review of legal and other documents. This due diligence occurred during June and July 1997. On July 24, 1997, after completion of due diligence, the best offer received and the best alternative available was the offer from Chiquita. The Stokely Board met on July 29, 1997 to consider Chiquita's proposal, which was presented and analyzed by DLJ. This proposal attached an implied enterprise value to Stokely of between $91.2 million and $92.3 million and offered to exchange Stokely Common Stock for Chiquita Common Stock, with a range of value between $.44 and $.54 per share to the holders of Stokely Common Stock. Among other things, it included requirements that the holders of at least $37 million in principal amount of Stokely's approximately $45 million of Senior Notes and IRBs agree to exchange such indebtedness for Chiquita Common Stock having a value equal to the face amount of the notes and bonds exchanged, and that Congress continue to finance at least $20 million of the revolving credit balance owed by Stokely at the Effective Time of the Merger. DLJ recommended that negotiations continue with Chiquita to attempt to improve the financial terms of the proposal in order to make the proposal more acceptable to Stokely's shareholders, and its recommendation was accepted by the Stokely Board after thorough discussion. Accordingly, DLJ proposed to Chiquita an offer which would have resulted in a payment to Stokely's shareholders of $20.0 million (or $1.76 per share) and included a closing condition that $31.8 million, rather than $37 million, of Stokely's Senior Notes and IRBs be exchanged for Chiquita Common Stock. Chiquita accepted the $31.8 million minimum debt exchange requirement but rejected the proposed payment to Stokely shareholders and made a counterproposal, as its best and final offer, of $1.00 per share of Stokely Common Stock (payable in Chiquita Common Stock). 23 34 During August 1997, Stokely's management engaged in extensive negotiations with its debtholders in order to obtain their consent to Chiquita's stock-for-indebtedness exchange proposal, and DLJ and Stokely continued to negotiate with Chiquita on other terms of the draft Merger Agreement. The Stokely Board met again on September 4, 1997 to review the latest Chiquita proposal and the negotiations with Chiquita. At that time a draft Merger Agreement among Chiquita, Chiquita Acquisition Sub and Stokely was presented and discussed in detail. The draft agreement reflected the increase in the consideration offered to Stokely's shareholders to $1.00 per share of Stokely Common Stock, in the form of an exchange of Stokely Common Stock for Chiquita Common Stock. The Stokely Board was informed that the holders of $31.8 million in principal amount of Stokely's Senior Notes and IRBs had agreed to exchange such debt on the date of the Merger for Chiquita Common Stock of equal value. The Stokely Board was further informed that Chiquita had advised Stokely's management of concerns over new information, received subsequent to making its counterproposal, regarding Stokely's anticipated second and third quarter financial results, and as a result had indicated that it was not prepared to execute a definitive agreement at that time without a $4.0 million reduction in the total purchase price. The Stokely Board considered alternatives to the Merger but none was considered to be a viable alternative on the basis of shareholder value. Therefore, the Stokely Board directed management to continue negotiations with Chiquita to bring Chiquita and Stokely to final agreement and to initiate negotiations with Stokely's trade creditors with the objective of offsetting the impact of the proposed $4.0 million reduction in the total purchase price, as such reduction otherwise would have reduced the amount paid to Stokely's shareholders from $1.00 per share to $.65 per share. The Stokely Board met again on September 12, 1997 to receive an update from management on the status of negotiations with Chiquita and with Stokely's trade creditors. Management informed the Stokely Board that discussions with its trade creditors were continuing but no significant progress had been made. On September 17, 1997, the Stokely Board met to consider a revised Merger Agreement which represented the results of the final negotiations with Chiquita and Stokely's debt holders and trade creditors. Approval of this revised Merger Agreement was recommended by management and DLJ. It included the $31.8 million debt exchange for Chiquita Common Stock and a $1.0 million debt reduction in Stokely trade credit as conditions to closing, and provided for consideration to Stokely shareholders of $1.00 per share of Stokely Common Stock, in the form of an exchange of Stokely Common Stock for Chiquita Common Stock. Following extensive discussions concerning the revised Merger Agreement and the related transactions, other possible alternatives to the Merger (including bankruptcy and reorganization or liquidation), the estimated value to Stokely shareholders if Stokely remained independent, the operational, legal and regulatory issues relating to Chiquita's proposal, a presentation by DLJ regarding financial aspects of the proposed Merger, and receipt of an opinion from DLJ that the consideration to be received by Stokely shareholders pursuant to the proposed revised Merger Agreement would be fair to Stokely shareholders from a financial point of view, the Stokely Board unanimously approved the revised Merger Agreement. The Merger Agreement contains the following material provisions: 1. All outstanding shares of Stokely Common Stock will be converted into the right to receive in the aggregate shares of Chiquita Common Stock having a value of $11,390,871, or $1.00 per share of Stokely Common Stock. 2. It is a condition to closing that the holders of at least $31.8 million in principal amount of Stokely's approximately $45 million in principal amount of Senior Notes and IRBs will exchange such debt for Chiquita Common Stock having a value equal to the amount of the debt exchanged. Holders of the requisite $31.8 million in principal amount have agreed in writing to such exchange. They also have agreed to forego a $2.8 million prepayment penalty, to defer payment of scheduled principal and interest until closing and to accept Chiquita Common Stock in payment of the deferred principal and interest. 3. It is a condition to closing that Congress will continue to provide at least $20.0 million under the current revolving credit facility which shall thereafter remain available to Stokely until the end of the credit facility's current term. 24 35 4. It is a condition to closing that certain of Stokely's suppliers shall have forgiven, in the aggregate, at least $1.0 million of their accounts receivable from Stokely. Stokely has obtained a written agreement to forgive the requisite $1.0 million of accounts receivable. The Stokely Board and management believe there are presently no available alternatives to the Merger Agreement that would permit Stokely to continue to operate for an extended period absent a sales transaction. As an alternative to the Merger, the Stokely Board also considered the alternative of a bankruptcy proceeding. Following such consideration, the Stokely Board unanimously concluded that pursuing the Merger was preferable to the bankruptcy alternative because: (i) Stokely shareholders were likely to receive less in a bankruptcy scenario than they would receive in the Merger. This determination was based on the fact that potential acquirors who would propose a purchase of Stokely in a bankruptcy proceeding likely would base that proposal on the complete or substantial elimination of shareholder value; Stokely's assessment that in a liquidation of Stokely, the Stokely shareholders would receive little, if any, value; and the Stokely Board's belief that Stokely's business would deteriorate substantially in any type of bankruptcy proceeding or following any bankruptcy filing. (ii) Stokely's debtholders and creditors were likely to receive greater payments in a merger or acquisition than in a bankruptcy. Moreover, in a liquidation, Stokely's assessment was that creditors would receive less than the face value of the amounts owed to them. (iii) A bankruptcy filing would be likely to affect negatively Stokely's customer and supplier base and to jeopardize Stokely's ongoing operations. This analysis of the bankruptcy alternative underscores the importance of successfully concluding the proposed Merger. RECOMMENDATION OF THE STOKELY BOARD The terms of the Merger Agreement are the result of arms-length negotiations between representatives of Stokely and Chiquita. The Stokely Board believes that the Merger is in the best interests of the shareholders of Stokely. In arriving at its recommendation, the Stokely Board considered a number of factors, including, without limitation, the following: Fairness Opinion. The Stokely Board gave significant weight to the fairness opinion it received from DLJ, and the bases upon which DLJ relied in order to render its opinion. See "-- Opinion of Financial Advisor" for a further discussion of the financial analyses and methods applied by DLJ in rendering its fairness opinion. Financial Condition. Stokely's financial condition, primarily as a result of economic, market and competitive pressures, combined with its leverage, has deteriorated during the past few years. That deterioration has recently worsened substantially due to the unanticipated continuation of abnormally low selling prices. Current selling prices remain below year-ago levels, historical averages and levels anticipated at the beginning of the fiscal year by management based on industry planting intentions reported by the USDA in April 1997, which indicated significant reductions in planting from prior years. Should current market conditions continue, Stokely's anticipated negative cash flow and working capital positions are expected to seriously affect Stokely's liquidity in the upcoming quarters. The Stokely Board gave significant weight to the fact that Stokely continues to be unable to operate profitably under current market conditions, despite its restructuring efforts and the cost-cutting measures it has taken. See "-- Background of and Reasons for the Merger." Alternatives to the Merger. As discussed above, for the last several years Stokely has pursued a variety of alternatives to return to profitability, in light of the difficult market conditions which existed and continue to exist in the vegetable processing industry. Assuming the continuation of the current depressed market 25 36 conditions in the vegetable processing industry, the current and anticipated financial condition and cash position of Stokely is such that, without the infusion of additional equity or debt financing, there is doubt about Stokely's ability to continue to operate for an extended period absent a sale transaction, or to generate meaningful, if any, profits. Stokely has been unsuccessful in obtaining additional external financing from any third parties, and the Stokely Board and its financial advisor, DLJ, believe it is unlikely that any third parties are prepared to make capital investments in Stokely at this time which would provide greater short-term or long-term value for the Stokely shareholders than the proposed Merger. As discussed above, Stokely has undertaken multiple restructuring actions which have been unsuccessful and with the help of its financial advisor, DLJ, Stokely has evaluated various financing alternatives. See "-- Background of and Reasons for the Merger." On April 18, 1997, DLJ made a formal presentation to the Stokely Board relating to conducting a formal auction of Stokely. The Stokely Board voted to pursue this course of action during that meeting. As part of the auction process, DLJ approached seven likely strategic acquirors for Stokely: Chiquita, Del Monte USA (owned by Texas Pacific Group), Seneca Foods Corp., Tri Valley Growers, Dean Foods Company, Allen Canning Company and Del Monte, Mexico (owned by Hicks, Muse, Tate & Furst). DLJ offered to make formal presentations with Stokely management to each of these entities concerning the opportunity to acquire Stokely. During May 1997, Stokely's management made presentations to the three potential acquirors who expressed interest. Of that group, two parties, Del Monte USA and Chiquita, conducted formal due diligence of Stokely, including further meetings with management, plant and site visits, and extensive review of legal and other documents. This due diligence occurred during June and July 1997. Final bids were received for Stokely as of July 24, 1997. Subsequent to the final bid date, as noted herein, DLJ and Stokely conducted substantial further negotiations with Chiquita related to its bid. In light of this comprehensive process, the Stokely Board concluded that the Merger represented the best available alternative to enable Stokely shareholders to preserve, and possibly enhance, a portion or all of their capital investment. As an alternative to the Merger, the Stokely Board also considered the alternative of a bankruptcy proceeding. Following such consideration, the Stokely Board unanimously concluded that pursuing the Merger was preferable to the bankruptcy alternative because: (i) Stokely shareholders were likely to receive less in a bankruptcy scenario than they would receive in the Merger. This determination was based on the fact that potential acquirors who would propose a purchase of Stokely in a bankruptcy proceeding likely would base that proposal on the complete or substantial elimination of shareholder value; Stokely's assessment that in a liquidation of Stokely, the Stokely shareholders would receive little, if any, value; and the Stokely Board's belief that Stokely's business would deteriorate substantially in any type of bankruptcy proceeding or following any bankruptcy filing. (ii) Stokely's debtholders and creditors were likely to receive greater payments in a merger or acquisition than in a bankruptcy. Moreover, in a liquidation, Stokely's assessment was that creditors would receive less than the face value of the amounts owed to them. (iii) A bankruptcy filing would be likely to affect negatively Stokely's customer and supplier base and to jeopardize Stokely's ongoing operations. Historical Market Prices of Stokely Common Stock. The Stokely Board and DLJ reviewed the historical market prices for the shares of Stokely Common Stock, which ranged from a high of $2.50 to a low of $0.625 between the period beginning January 1, 1997 and ending September 17, 1997, the last trading day prior to the announcement that Stokely had entered into the Merger Agreement. In addition, the Stokely Board and DLJ noted that one buyer, Exeter Ventures UBOT ("Exeter"), an entity unrelated to Stokely, its directors or executive officers or Chiquita, bought a large (8%) position in Stokely on June 27, 1997, a date upon which some of the trades of Stokely Common Stock were executed at $0.625 per share, and made a public announcement that it had done so. In the three weeks following that public announcement, the stock rose from $0.625 per share to $2.50 per share, on particularly strong volume, before falling off to a range around $1.50 per share shortly before announcement of the Merger. Due to the preceding factors, the Stokely Board and 26 37 DLJ felt that Stokely's stock price was not an accurate reflection of the equity value of Stokely at the time of the announcement of the Merger. Terms of the Merger. The Stokely Board gave significant weight to the fact that the terms of the Merger Agreement were negotiated at arms-length and that, after long negotiations, the consideration to be paid to Stokely shareholders in the Merger was the highest price that Chiquita would be willing to pay. The Stokely Board also considered significant the requirement that the Merger must be approved by two-thirds of the outstanding shares of Stokely Common Stock. As noted herein, the terms of the Merger are the result of a thorough sales process developed by DLJ and implemented by Stokely with the assistance of DLJ. Ultimately, the proposed Merger Agreement was negotiated with Chiquita, which had submitted the most attractive purchase proposal, and Stokely's debt holders and trade creditors. Negotiation of the Merger Agreement was difficult due to Stokely's financial condition. Throughout the negotiation process, the value to be received by Stokely shareholders, in the form of an exchange of Stokely Common Stock for Chiquita Common Stock, fluctuated between the final value of $1.00 per share and significantly lower amounts. It was only through extensive negotiation with Stokely's debt holders and some of its major trade creditors, as well as with Chiquita, that the consideration to be paid to the Stokely shareholders rose to the level contained in the Merger Agreement. The Merger Agreement requires that holders of at least $31.8 million in principal amount of the Senior Notes and IRBs exchange their debt for Chiquita Common Stock. Additionally, such holders agreed to forego a $2.8 million prepayment penalty, to defer payment of scheduled principal and interest until closing and to accept Chiquita Common Stock in payment of the deferred principal and interest. After a thorough review, the Stokely Board concluded that the Merger represents the most attractive strategic alternative available to Stokely and will give Stokely shareholders a stake in a larger, more diversified food company. Status of Stokely Should the Merger Not Be Approved or Consummated. If the Merger is not approved by the Stokely shareholders, or if the Merger is not consummated for any other reason, and if, as expected, Stokely's financial condition and liquidity position continue to deteriorate, the Stokely Board believes Stokely ultimately may be required to seek protection from creditors under the bankruptcy laws. In addition, pursuant to the Merger Agreement, Stokely is required to pay Chiquita a fee of $250,000 and a number of shares of Stokely Preferred Stock having a redemption value of $2,750,000: (i) if the Merger Agreement is terminated solely as a result of the failure to receive approval of Stokely's shareholders; (ii) if the Stokely Board fails to continue to recommend the Merger Agreement; or (iii) if a competing offer is made to Stokely, the Stokely Board approves and recommends that offer to Stokely shareholders, the Merger is not consummated and the transaction underlying the competing offer also is not consummated. Additionally, if within twelve months of termination of the Merger Agreement a person or entity other than Chiquita acquires 50% or more of the Stokely Common Stock or all or substantially all of Stokely's assets or if Stokely is a party to a merger, consolidation or similar transaction, or if Stokely agrees to such a transaction, Stokely is obligated to pay Chiquita a fee of $3,000,000. If a fee already has been paid as provided above, no additional fee will be owed, but the Stokely Preferred Stock will be required to be redeemed in accordance with the terms set forth in the Merger Agreement. See "-- The Merger Agreement: Termination Fee." OPINION OF FINANCIAL ADVISOR In its role as financial advisor to Stokely, DLJ was asked by Stokely to render an opinion to the Stokely Board as to the fairness to the holders of Stokely Common Stock, from a financial point of view, of the Exchange Ratio pursuant to the terms of the Merger Agreement. For purposes of this section, the term "Exchange Ratio" means the amount of Chiquita Common Stock (plus any cash in lieu of fractional shares) to be received by Stokely shareholders in the Merger in exchange for Stokely Common Stock. A COPY OF THE DLJ OPINION IS ATTACHED HERETO AS APPENDIX B. STOKELY SHAREHOLDERS ARE URGED TO READ THE DLJ OPINION IN ITS ENTIRETY FOR ASSUMPTIONS MADE, PROCEDURES FOLLOWED, OTHER MATTERS CONSIDERED AND LIMITS OF THE REVIEW BY DLJ. On September 17, 1997, DLJ delivered to the Stokely Board its oral opinion to the effect that the Exchange Ratio was fair to the holders of Stokely Common Stock from a financial point of view, based on and 27 38 subject to the assumptions, factors and limitations set forth in its written opinion and as described below. This opinion was confirmed in a written opinion (the "DLJ Opinion"), dated September 17, 1997, to the Stokely Board to the effect that, as of September 16, 1997 and based upon and subject to the assumptions, limitations and qualifications set forth in such opinion, the Exchange Ratio is fair to the holders of Stokely Common Stock from a financial point of view. DLJ confirmed the DLJ Opinion on December , 1997. The DLJ Opinion was prepared for the Stokely Board and is directed only to the fairness of the Exchange Ratio to holders of Stokely Common Stock from a financial point of view and does not constitute a recommendation to any Stokely shareholder as to how such shareholder should vote at the Stokely Annual Meeting on the proposed Merger. The DLJ Opinion does not constitute an opinion as to the price at which Chiquita Common Stock will actually trade at any time. The type and amount of consideration was determined in arms-length negotiations between Stokely and Chiquita, in which negotiations DLJ advised Stokely. No restrictions or limitations were imposed by Stokely upon DLJ with respect to the investigations made or the procedure followed by DLJ in rendering its opinion. In arriving at its opinion, DLJ reviewed the Merger Agreement and financial and other information that was publicly available or furnished to it by Stokely, including information provided during discussions with Stokely's management. Included in the information provided during discussions with management was certain forward looking information relating to Stokely, prepared by Stokely's management. In addition, DLJ compared certain financial and securities data of Stokely with various other companies whose securities are traded in public markets, reviewed prices and premiums paid in certain other business combinations and conducted such other financial studies, analyses and investigations as DLJ deemed appropriate for purposes of its opinion. In rendering its opinion, DLJ relied upon and assumed the accuracy and completeness of all of the financial and other information that was available to it from public sources, that was provided to it by Stokely or its representatives, and that was otherwise reviewed. With respect to the forward looking information supplied to it, DLJ assumed that it had been reasonably prepared on the basis reflecting the best currently available estimates and judgments of Stokely's management. Stokely informed DLJ that there will be 11,390,871 shares of Stokely Common Stock outstanding immediately prior to consummation of the Merger. DLJ did not assume any responsibility for making an independent evaluation of Stokely's assets or liabilities or for making any independent verification of any of the information that it reviewed. The DLJ Opinion is necessarily based on economic, market, financial and other conditions as they existed on, and on the information made available to DLJ as of, the dates of the DLJ Opinion and its confirmation of its opinion. It should be understood that, although subsequent developments may affect its opinion, DLJ does not have any obligation to update, revise or reaffirm the DLJ Opinion. The following is a summary of the presentation made by DLJ to the Stokely Board at its September 17, 1997 Stokely Board meeting. Valuations for Stokely were calculated on an enterprise value basis (as defined below) and converted to a per share basis based upon $85.5 million of net debt (total debt less cash) and 11,390,871 million shares of Stokely Common Stock outstanding. The debt level used for analyzing the Chiquita bid was based upon an average revolver balance for Stokely of $45.0 million. DLJ believed that using the average revolver balance of the business in its analysis more accurately reflected the value of the Chiquita bid than using a higher balance which may be outstanding at the time the transaction closes. Analysis of Selected Publicly Traded Comparable Companies. DLJ compared certain financial and forward looking information for Stokely with four publicly traded companies that compete in its industry (the "Public Comparables"). The Public Comparables were: Seneca Foods Corp., Chiquita Brands International, Inc., Dean Foods Company and International Multifoods, Inc. Of these, DLJ was of the opinion that Seneca Foods Corp. was the most comparable to Stokely. DLJ analyzed, among other things, the enterprise value (defined to be the market value of the common stock plus total debt less cash, cash equivalents and other investments) of each Public Comparable, as of September 8, 1997, as a multiple of the latest twelve months' ("LTM") revenue, earnings before interest, taxes, depreciation and amortization ("EBITDA"), and earnings before interest and taxes ("EBIT "), of each company. DLJ did not perform valuations based upon 28 39 calculations of market price per share to earnings and anticipated earnings because the valuations based upon these calculations were not relevant due to Stokely's actual and anticipated net losses. DLJ applied a range of multiples (derived from the high and low multiples of the Public Comparable information analyzed by DLJ) of 0.3x to 0.7x to Stokely's LTM revenue, 6.8x to 10.7x to Stokely's LTM EBITDA, and 9.0x to 18.6x to Stokely's LTM EBIT. Based upon these multiple ranges, DLJ estimated the enterprise value and equity value to range between $53.6 million and $125.2 million and ($2.80) to $3.48 per share, respectively, based upon revenue multiples; between $70.7 million and $111.3 million and ($1.30) to $2.26 per share, respectively, based upon EBITDA multiples; and between $37.8 million and $78.1 million and ($4.19) to ($0.65) per share, respectively, based upon EBIT multiples. Applying the trading multiples of Seneca Foods Corp. of 0.6x LTM revenues, 6.8x LTM EBITDA and 12.7x LTM EBIT to Stokely's financial results returned enterprise values and equity values per share of $107.3 million, $70.7 million and $53.3 million and $1.91, ($1.30) and ($2.82) per share, respectively, based upon revenues, EBITDA and EBIT, respectively. DLJ believes that the EBITDA and EBIT valuations are more relevant than the revenue valuation due to the profit margins of Stokely. Selected Comparable Acquisitions Analysis. DLJ also reviewed certain information relating to four relevant business combination transactions: Texas Pacific Group's acquisition of Del Monte USA, Curtis Burns Foods, Inc.'s acquisition of Pro-Fac Cooperative, Inc., International Multifoods' acquisition of Doskocil and Dean Foods' acquisition of the Birds Eye division of Kraft Foods (collectively, the "Comparable Acquisitions"). Of these transactions, DLJ believes that the Texas Pacific Group's acquisition of Del Monte USA is the closest comparable acquisition to the acquisition of Stokely by Chiquita due to the product line similarity and the recent completion of the transaction. DLJ reviewed the offer value as a multiple of LTM revenues, LTM EBITDA and LTM EBIT of the target company for each of the transactions. DLJ applied a range of multiples (derived from the high and low multiples for the Comparable Acquisitions information analyzed by DLJ) of 0.6x to 0.8x to Stokely's LTM revenues, 5.7x to 6.9x to Stokely's LTM EBITDA, and 7.6x to 11.5x to Stokely's LTM EBIT. Based upon these multiple ranges, DLJ estimated the enterprise value and the equity value to range between $107.3 million and $143.0 million and $1.92 to $5.06 per share, respectively, based upon revenue multiples; between $59.3 million and $71.8 million and ($2.31) to ($1.21) per share, respectively, based upon EBITDA multiples; and between $31.9 million and $48.3 million and ($4.71) to ($3.27) per share, respectively, based upon EBIT multiples. As was the case in the comparable publicly traded company analysis, DLJ believes that the EBITDA and EBIT valuations are more relevant than the revenue valuation due to the profit margins of Stokely. Applying the multiples implied by the Texas Pacific Group's acquisition of Del Monte USA of 0.8x LTM revenues, 6.9x LTM EBITDA and 9.2x LTM EBIT to Stokely's financial results returned enterprise values and equity values of $143.0 million, $71.8 million and $38.6 million and $5.06, ($1.21) and ($4.12) per share, respectively, based upon revenues, EBITDA and EBIT, respectively. Discounted Cash Flow Analysis. DLJ performed a discounted cash flow analysis of Stokely based upon estimates of financial performance prepared by Stokely's management for the fiscal years 1998 to 2002. Utilizing these estimates, DLJ calculated a range of present values for Stokely based upon the discounted net present value of the sum of (i) the estimated stream of after-tax unlevered free cash flows of Stokely (defined as operating cash flow available after working capital, capital spending and tax requirements) to the year 2002; and (ii) the projected terminal value of Stokely at such year based upon a range of multiples of Stokely's estimated EBITDA in such year. Applying discount rates ranging from 10% to 12% and multiples of terminal EBITDA ranging from 6.0x to 8.0x, DLJ estimated the enterprise value and equity value per share for Stokely to range between $76.8 million and $99.3 million and ($0.76) and $1.21 per share, respectively. Leveraged Buyout Analysis. DLJ performed a leveraged buyout analysis of Stokely based upon the same estimates of financial performance used in preparing the discounted cash flow analysis. The leveraged buyout analysis is performed to determine the price which a financial buyer might be willing to pay for Stokely, assuming a range of expected equity returns of 25% and 30% and terminal EBITDA multiples of 6.0x to 8.0x. Based upon this analysis, DLJ estimated the enterprise value and equity value which could be paid by a financial buyer for Stokely to range between $50.0 million and $70.0 million and ($3.12) and ($1.36) per share, respectively. 29 40 The summary set forth above does not purport to be a complete description of the analyses by DLJ but describes, in summary form, the principal elements of the presentation made by DLJ to the Stokely Board on September 16, 1997. The preparation of a fairness opinion involves various determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances and, therefore, such an opinion is not readily susceptible to partial or summary description. Each of the analyses conducted by DLJ was carried out in order to provide a different perspective on the transaction and add to the total mix of information available. DLJ did not form a conclusion as to whether any individual analysis, considered in isolation, supported or failed to support an opinion as to the fairness from a financial point of view. Rather, in reaching its conclusion, DLJ considered the results of the analyses in light of each other and ultimately rendered its opinion based on the results of all the analyses taken as a whole. DLJ did not place particular reliance or weight on any individual analysis, but instead concluded that its analyses, taken as a whole, supported its determination. Accordingly, notwithstanding the separate factors summarized above, DLJ believes that its analyses must be considered as a whole and that selecting portions of its analyses and of the factors considered by it, without considering all such factors and analyses, could create a misleading view of the process underlying the analyses set forth in the DLJ Opinion. The analyses performed by DLJ are not necessarily indicative of actual, past or future results or value, which may be significantly more or less favorable than such estimates or those suggested by such analyses. Financial Advisor Fee. Pursuant to the terms of an engagement letter, dated March 1, 1996, Stokely agreed to pay DLJ a fee of 1.5% of the enterprise value of the price ultimately to be paid for Stokely (including $350,000 upon notification that DLJ was prepared to deliver the DLJ Opinion and the remainder upon closing of the transaction). Based upon the Merger Consideration, the aggregate fee to be paid to DLJ by Stokely is approximately $1,500,000. Stokely also agreed to reimburse DLJ promptly for all out-of-pocket expenses (including the reasonable fees and out-of-pocket expenses of counsel) incurred by DLJ in connection with its engagement, and to indemnify DLJ and certain related persons against certain liabilities in connection with its engagement, including liabilities under the federal securities laws. The terms of the fee arrangement with DLJ, which DLJ and Stokely believe are customary in transactions of this nature, were negotiated at arms-length between Stokely and DLJ and the Stokely Board was aware of such arrangement, including the fact that a significant portion of the aggregate fee payable to DLJ is contingent upon consummation of the Merger. The Stokely Board selected DLJ to render a fairness opinion because DLJ is an internationally recognized investment banking firm with substantial expertise in transactions similar to the Merger and because it is familiar with Stokely and its business. DLJ, as part of its investment banking services, is regularly engaged in the valuation of businesses and securities in connection with the mergers, acquisitions, underwritings, sales and distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. INTERESTS OF CERTAIN PERSONS IN THE MERGER In considering the recommendation of the Stokely Board, shareholders should be aware that certain members of the Stokely Board and management may be deemed to have interests in the Merger in addition to their interests, if any, as holders of Stokely Common Stock. If Stokely were to file for bankruptcy rather than proceed with the Merger, the executive officers' rights to certain payments under various employment agreements and benefit plans and the officers' and directors' indemnification rights could be subordinate to senior claims and, therefore, would be at risk of non-payment. Employment Agreements. Stokely is a party to Change In Control Contingent Employment Agreements (the "Contingent Employment Agreements") with many of its officers and employees, including executive officers Stephen W. Theobald, Peter P. Caputa, Robert M. Brill, Eddie W. Foster, John R. McCormick and Jack R. McDowell. Under the Contingent Employment Agreements, in the event of a change of control, Stokely (or the surviving corporation) shall continue, following the date of the change of control, to employ Mr. Theobald for three years, Messrs. Caputa and Brill for two years, and Messrs. Foster, McCormick and McDowell for one year. The Merger would constitute a "change of control" under the Contingent 30 41 Employment Agreements. In the event of a change in control, the employee will continue to be employed by Stokely (or the surviving corporation) for the applicable number of years and will receive a salary equal to his salary on the date of the change of control, subject to annual upward adjustments commensurate with increases awarded to other officers and employees. If, after a change of control, Stokely (or the surviving corporation) terminates the employee for any reason other than for "cause," or if the employee elects to terminate his employment for a permitted reason, he shall continue to be paid monthly an amount equal to his then current monthly base salary plus one-twelfth of the annual average of the executive incentive program payments and all bonuses paid to the employee in the preceding five years, and he shall continue to be entitled to receive all other employee benefits and perquisites made available to other employees of comparable status until the end of his employment term. If the employee is terminated for "cause," the employee is entitled to receive only his compensation through the date of termination. Assuming no increases in base salary are granted and no additional bonuses are paid prior to the Merger, if the executive officers are terminated for any reason other than cause, or any executive officer elects to terminate his employment for a permitted reason, on the date of the Merger the executive officers would be entitled to receive monthly payments under their Contingent Employment Agreements as follows: Mr. Theobald, $14,208; Mr. Caputa, $11,667; Mr. Brill, $8,575; Mr. Foster, $9,171; Mr. McCormick, $9,584; and Mr. McDowell, $9,583. Stokely also is a party to an Employment Agreement with Jack R. McDowell dated February 11, 1997. Under this Employment Agreement, Stokely agreed to employ Mr. McDowell as Vice President-Manufacturing for a period of one year ending February 10, 1998. This Employment Agreement is rendered null and void in the event of a "change in control" of Stokely and, if the Merger is consummated, will be superseded by Mr. McDowell's Contingent Employment Agreement. Deferred Compensation Agreement. In 1990, Stokely entered into a deferred compensation agreement with Thomas W. Mount, Stokely's former President and Chairman. Under this agreement, Stokely is obligated to pay Mr. Mount (or his designated beneficiaries, in the event of his death) deferred compensation in monthly installments of $7,500 for a period of 120 consecutive months (or at his election, in one lump sum based upon a present value calculation) following his death, disability or retirement. Mr. Mount retired in April 1993, and Stokely commenced the monthly installment payments at that time. Under the terms of the Merger Agreement, Stokely will continue to make the monthly payments (or pay the remaining portion in one lump sum). Supplemental Employee Retirement Plan. Stokely established the Supplemental Employee Retirement Plan (the "SERP") in 1995, in which Mr. Theobald and Mr. Brill participate. For Mr. Theobald, the SERP provides a maximum benefit at retirement (based on 25 years of service) of 120 equal monthly payments which will equal, on an annual basis, 40% of the salary (excluding bonus) earned by Mr. Theobald during the final twelve months of his employment with Stokely. For Mr. Brill, the SERP provides a maximum benefit at retirement (based on 25 years of service) of 120 equal monthly payments which will equal, on an annual basis, 20% of the salary (excluding bonus) earned by Mr. Brill during the final twelve months of his employment with Stokely. The monthly payments for Mr. Theobald and Mr. Brill are reduced on a percentage basis to the extent that years of service are less than 25 at the end of their respective employment periods. At the time of the Merger, Mr. Theobald will be vested in this benefit based on eleven years of service and Mr. Brill based on eight years of service. In the Merger Agreement, Chiquita has agreed to cause Stokely to honor the SERP following the Merger for the benefit of the current vested participants. Split Dollar Life Insurance Plan. In 1990, Stokely established the Split Dollar Life Insurance Plan (the "Split Dollar Plan"), in which Messrs. Theobald, Brill, Foster and McCormick, as well as other key employees, participate. The life insurance benefit is equal to four times the executive's salary. The executive pays a portion of the premium representing the economic value of the insurance and Stokely is responsible for the balance of the premium. Upon the executive's death, retirement or termination, Stokely will receive all premiums paid by it on behalf of the executive and the executive will receive the remainder of the death benefit or the cash surrender value. In the Merger Agreement, Chiquita has agreed to cause Stokely to honor the Split Dollar Plan following the Merger for the benefit of the current participants. 31 42 Deferred Compensation Plan For Key Executives. In 1995, Stokely entered into deferred compensation agreements with Messrs. Theobald, Brill and McCormick (as well as certain other key employees) pursuant to a Deferred Compensation Plan (the "Deferred Compensation Plan"). Under the Deferred Compensation Plan, participants may elect to defer compensation earned in any year subject to the limitation that the maximum amount that may be deferred in any calendar year is 20% of the participant's annual compensation less the maximum amount that may be deferred on an annual basis by such participant pursuant to the Stokely Retirement Savings Plan. In any year in which Stokely makes a matching contribution to a participant in the Stokely Retirement Savings Plan who is also a participant in the Deferred Compensation Plan, Stokely accrues a matching contribution for such participant in the Deferred Compensation Plan. Both matching contributions are based on a factor of 25% of the contribution up to an aggregate not to exceed 6% of the gross annual compensation of the participant in the applicable year. Chiquita has agreed to cause Stokely to honor the Deferred Compensation Plan following the Merger for the benefit of the current participants. Deferred Compensation Plan For Directors. Under the Deferred Compensation Plan for Directors, participants (directors who are not also employees of Stokely) are able to defer cash compensation earned from Stokely into a Deferred Compensation Account. On a quarterly basis, the cash in the Deferred Compensation Account is converted into shares of Stokely Common Stock at the closing price per share on the Nasdaq National Market on the last trading day preceding the last day of the quarter. These accounts are increased or changed to reflect the value of the shares as if owned by the participant. On or before the date of the Merger, all Deferred Compensation Accounts will be cashed out, using the $1.00 per share of Stokely Common Stock value in the Merger, and the Deferred Compensation Plan for Directors will be terminated. Directors Bradley, Britt, Fish, DeWees and Carey and former director Foster will receive $1,816, $17,106, $17,087, $348, $2,407 and $1,057, respectively, based upon the number of shares credited to their accounts as of December 1, 1997 and payment of the $1.00 per share of Stokely Common Stock value in the Merger. Board of Directors' Retirement Plan. Under the Board of Directors' Retirement Plan, directors who have served at least two three-year terms on the Stokely Board and are Stokely Board members upon attaining the age of 72 years become eligible to receive a benefit of $500 per month for life beginning the month following their retirement. Under the terms of the Merger Agreement, Chiquita has agreed to cause Stokely to honor this obligation as it relates to the directors eligible to receive this benefit (i.e., Messrs. Bradley, Fish and Carey). Stay Bonus. On July 29, 1997, the Stokely Board granted Mr. Theobald a retention or "stay" bonus equal to his current annual salary of $170,500 to be paid in installments if the Merger is consummated as follows: (1) one-half (or $85,250) on the date of the Merger if he remains in the employ of Stokely up to such date, and (2) one-half (or $85,250) on June 30, 1998, if he remains in the employ of Stokely or its successor up to such date. The Stokely Board granted this bonus to Mr. Theobald in recognition of both past services rendered to Stokely and the critical importance which his involvement had to the continued negotiation of the Merger Agreement and has to the consummation of the Merger. Indemnification; Directors' and Officers' Insurance. The Merger Agreement provides that, after the Merger, Stokely will indemnify and hold harmless, to the fullest extent required by law (or, if greater, to the fullest extent provided under Stokely's Articles of Incorporation and By-laws), any person who has, prior to the Merger, been a director, officer or employee of Stokely or its subsidiaries (each such person, an "Indemnified Party") against any losses, claims, damages, liabilities, costs, expenses, judgments, fines and amounts paid in settlement in connection with any threatened or actual claim, action, suit, proceeding or investigation (whether asserted or arising before or after the Merger) (collectively, the "Indemnified Claims"). In addition, in the event of any such Indemnified Claim, the Indemnified Parties may retain counsel satisfactory to them after consultation with Chiquita, provided that Chiquita has not assumed the defense thereof, and provided that certain other conditions are met. Stokely's obligations under these provisions will continue in full force and effect for a period of seven years after the Merger; provided, however, that all rights to indemnification in respect of a claim asserted or made within such period shall continue until the final disposition thereof. The Merger Agreement also provides that Stokely will, subject to the conditions set forth in the Merger Agreement, use its best efforts to maintain directors' and officers' liability insurance "tail" coverage with respect to wrongful acts and/or omissions committed or allegedly committed prior to the 32 43 Merger. At or prior to the Merger, Stokely intends to pay all of the necessary premium amounts for this insurance for the seven-year period after the Merger. THE MERGER AGREEMENT The following summary of certain aspects of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, which is attached as Appendix A to this Proxy Statement/Prospectus and is incorporated by reference herein. Please consult the text of the Merger Agreement for full information regarding any or all of its provisions. Voting on the Merger. Under the WBCL, the holders of two-thirds of the outstanding shares of Stokely Common Stock must vote in favor of the Merger for the Merger to be approved. THE REQUIRED VOTE OF STOKELY SHAREHOLDERS ON THE MERGER AGREEMENT IS BASED UPON THE TOTAL NUMBER OF OUTSTANDING SHARES OF STOKELY COMMON STOCK, AND NOT JUST THOSE REPRESENTED AT THE ANNUAL MEETING. ACCORDINGLY, THE FAILURE TO SUBMIT A PROXY CARD (OR, IF THE SHARES ARE HELD BY A BROKER, TO RETURN VOTING INSTRUCTIONS) OR TO VOTE IN PERSON AT THE ANNUAL MEETING, OR THE ABSTENTION FROM VOTING BY A STOKELY SHAREHOLDER, WILL HAVE THE SAME EFFECT AS A "NO" VOTE WITH RESPECT TO THE MERGER AGREEMENT. BROKER NON-VOTES WILL NOT BE COUNTED AS HAVING BEEN VOTED IN PERSON OR BY PROXY AT THE ANNUAL MEETING AND WILL HAVE THE SAME EFFECT AS A "NO" VOTE WITH RESPECT TO THE MERGER AGREEMENT. Effective Time and Date of the Merger. If the Merger is approved by the requisite vote of Stokely shareholders and the other conditions to the Merger are satisfied or waived (where permissible), the Merger will become effective at the close of business (the "Effective Time") on the date (the "Effective Date") on which the Articles of Merger are received by the Department of Financial Institutions of the State of Wisconsin. It is presently contemplated that the Effective Date and Time of the Merger will occur as promptly as practicable after satisfaction or waiver of the conditions set forth in the Merger Agreement. See "-- The Merger Agreement -- Conditions; Waivers." Conversion of Stokely Common Stock in the Merger. At the Effective Time, each outstanding share of Stokely Common Stock will be converted into and become the right to receive such fraction of a share of Chiquita Common Stock as is equal to $1.00 divided by the average of the last reported sales price per share of Chiquita Common Stock on the NYSE for the 15 consecutive trading days ending with the last trading day prior to the Effective Time, except that no fractional shares of Chiquita Common Stock will be issued. Any holder of Stokely Common Stock who otherwise would be entitled to a fractional share of Chiquita Common Stock instead will receive a cash payment in an amount equal to the product of such fraction multiplied by the average of the last reported sales price per share of Chiquita Common Stock on the NYSE for the 15 consecutive trading days ending with the last trading day prior to the Effective Time, without any interest thereon. For example, if you own 100 shares of Stokely Common Stock, and the average closing price of Chiquita Common Stock on the NYSE for the fifteen trading days prior to the Merger is $15, you would be entitled to receive six shares of Chiquita Common Stock and $10 in cash upon consummation of the Merger. Exchange of Certificates in the Merger. Within three business days after the Effective Time, (the "Exchange Agent"), will mail a letter of transmittal and instructions to each holder of record of Stokely Common Stock. The letter of transmittal (or a copy) should be used to forward a holder's certificates for Stokely Common Stock for surrender and exchange for certificates representing the number of shares of Chiquita Common Stock (and cash in lieu of any fractional share) which the holder has the right to receive pursuant to the Merger. Until exchanged as provided above, certificates for Stokely Common Stock will be deemed to represent solely the right to receive certificates representing the number of shares of Chiquita Common Stock (and cash in lieu of any fractional share) into which the shares of Stokely Common Stock represented by such certificates were converted in the Merger, and the holders of the Stokely certificates will not be entitled to receive dividends or any other distributions until such certificates are so exchanged. Upon surrender of a certificate, there will be paid to the person in whose name the Chiquita Common Stock is issued any dividends or other distributions which have a record date after the Effective Time and which became payable prior to surrender with respect to such shares of Chiquita Common Stock. Although the shares of Chiquita Common Stock issuable in the Merger will be deemed to be outstanding on Chiquita's stock records 33 44 after consummation of the Merger, former Stokely shareholders will not be able to vote such shares until they have surrendered their certificates as described above. Regardless of how long a former Stokely shareholder waits to exchange his or her certificates, no interest will be paid on the Chiquita Common Stock or cash in lieu of fractional shares issuable as a result of the Merger or on any dividend payments or other distributions on those shares of Chiquita Common Stock. STOKELY SHAREHOLDERS ARE REQUESTED NOT TO SURRENDER THEIR CERTIFICATES FOR EXCHANGE UNTIL THE LETTER OF TRANSMITTAL AND INSTRUCTIONS ARE RECEIVED. Representations and Warranties. The Merger Agreement includes representations and warranties by Stokely as to: (i) the corporate organization, status and power of Stokely and its subsidiaries; (ii) the capitalization of Stokely and its subsidiaries; (iii) the authorization of the Merger Agreement; (iv) except as specified, the Merger Agreement's noncontravention of any agreement, law or the Articles of Incorporation or By-laws of Stokely or any of its subsidiaries and the absence of the need (except as specified) for governmental or third party consents to the Merger; (v) the accuracy of Stokely's financial statements and filings with the Commission; (vi) matters relating to the real and personal property of Stokely and its subsidiaries; (vii) matters relating to the accounts receivable and inventory of Stokely and its subsidiaries; (viii) matters relating to the intellectual property of Stokely and its subsidiaries; (ix) insurance owned or held by Stokely or its subsidiaries; (x) compliance with laws and governmental authorizations; (xi) material contracts to which Stokely or any of its subsidiaries is a party; (xii) pending or threatened litigation; (xiii) environmental matters; (xiv) taxes and tax returns involving Stokely and its subsidiaries; (xv) labor relations; (xvi) employee benefits plans; (xvii) the conduct of business by Stokely and its subsidiaries in the ordinary course and the absence of any material adverse change in the financial condition, business or results of operations of Stokely and its subsidiaries; (xviii) matters relating to customers and suppliers of Stokely and its subsidiaries; (xix) the brokers and finders employed by Stokely; (xx) the accuracy of information supplied by Stokely and the accuracy of information to be supplied by Stokely for inclusion in filings with the Commission required by the transactions contemplated by the Merger Agreement; (xxi) Stokely and its subsidiaries being current with respect to obligations to their employees for services performed; and (xxii) effectiveness of and compliance with leases, governmental permits, licenses, approvals and other authorizations. The Merger Agreement also includes representations and warranties by Chiquita and Acquisition Sub as to: (i) the corporate organization, status and power of Chiquita and Acquisition Sub; (ii) the capitalization of Chiquita and Acquisition Sub; (iii) the authorization of the Merger Agreement and its non-contravention of any agreement, law or the articles of incorporation or bylaws of Chiquita or Acquisition Sub; (iv) the absence of the need (except as specified) for governmental or third party consents to the Merger; (v) the accuracy of Chiquita's financial statements and filings with the Commission; (vi) the conduct of Chiquita's and its consolidated subsidiaries' business in the ordinary course and the absence of any material adverse change in the financial condition, business or results of operations of Chiquita and its consolidated subsidiaries; (vii) neither Chiquita (nor any Chiquita subsidiary) being a "Significant Shareholder" (as defined in the WBCL), or an affiliate of a Significant Shareholder, of Stokely, except as a result of the Merger; and (viii) the accuracy of information supplied by Chiquita and Acquisition Sub and the accuracy of information to be supplied by Chiquita for inclusion in filings with the Commission required by the transactions contemplated by the Merger Agreement. Many of the representations and warranties contained in the Merger Agreement are qualified by materiality standards contained therein and/or by the disclosure schedules provided pursuant to the Merger Agreement. The respective representations and warranties of Stokely, Chiquita and Acquisition Sub will terminate at the Effective Time. Business of Stokely Pending the Merger. Stokely has agreed that, among other things, prior to the Effective Time or earlier termination of the Merger Agreement, it and its subsidiaries will each carry on its business in the ordinary course consistent with past practice and will use its best efforts to keep its business organization intact, including its present relationships with employees, customers and suppliers and others 34 45 having business relations with it. Stokely has agreed that, unless Chiquita grants its prior consent or except as otherwise permitted in the Merger Agreement, prior to the Effective Time neither Stokely nor any of its subsidiaries will: (i) increase compensation to any executive officer or director or provide for a general increase in the rate of compensation of its employees subject to limited exceptions; (ii) enter into or amend any employment contract or collective bargaining agreement; (iii) except when falling below certain dollar limitations, make any capital expenditures, enter into any lease of capital equipment or real estate, or enter into any other contract with any other entity or entities; (iv) enter into any transaction other than in the ordinary course of business; (v) create, assume, incur or guarantee any indebtedness other than pursuant to Stokely's revolving line of credit with Congress, trade debt and borrowings in the ordinary course of business; (vi) except in the ordinary course of business or consistent with past practices, discharge or satisfy any lien or encumbrance or pay or satisfy any obligation or liability; (vii) authorize or issue any shares of capital stock or declare or pay any dividend or make any sale of, or distribution with respect to, capital stock or directly or indirectly redeem or otherwise acquire any capital stock or carry out any stock split, reverse stock split, or other form of recapitalization of its capital stock; (viii) make any amendments to or changes in its Articles of Incorporation or By-laws; (ix) perform any act or attempt to do anything which will cause a breach of any obligation to which it is a party or to which it is bound and which would have a material adverse effect on Stokely and its subsidiaries; (x) acquire any other person or acquire a material amount of assets of any other person except pursuant to existing contracts or commitments or in the ordinary course or consistent with past practice; (xi) sell, lease, license or otherwise dispose of any material assets or property except pursuant to existing contracts or commitments or in the ordinary course or consistent with past practice; or (xii) except as specifically permitted in the Merger Agreement, take any action that is intended or may reasonably be expected to result in any of Stokely's representations or warranties set forth in the Merger Agreement being or becoming untrue in any material respect, any of the conditions to the Merger not being satisfied, or a violation of any covenant contained in the Merger Agreement. Conditions; Waivers. The respective obligations of Chiquita, Stokely and Acquisition Sub to effect the Merger are subject to the satisfaction of certain conditions at or prior to the Effective Time, including: (i) approval of the Merger by the holders of two-thirds of the outstanding shares of Stokely Common Stock; (ii) receipt of requisite regulatory approvals to consummate the transactions contemplated by the Merger Agreement; (iii) no court or governmental or regulatory authority having enacted, issued, promulgated or enforced any statute, rule, regulation, executive order, decree, injunction or other order which restricts, prevents or prohibits consummation of the transactions contemplated by the Merger Agreement; (iv) no proceeding having been commenced or threatened by any governmental or regulatory authority seeking to prevent consummation of the transactions contemplated by the Merger Agreement; (v) the Registration Statement for the shares of Chiquita Common Stock to be issued pursuant to the Merger Agreement having been declared effective; (vi) the absence of any stop order suspending the effectiveness of the Registration Statement; (vii) there being no action, suit, proceeding or investigation to suspend effectiveness of the Registration Statement; and (viii) all necessary approvals under state and Federal securities laws relating to the issuance and trading of the Chiquita Common Stock issuable in connection with the Merger having been obtained. The obligations of Stokely to effect the Merger are subject to certain normal and customary conditions, as well as to the receipt of an opinion from DLJ to the effect that consideration to be received by Stokely shareholders in the Merger is fair to the shareholders of Stokely from a financial point of view. See "PROPOSAL TO APPROVE THE MERGER -- Opinion of Financial Advisor." In addition to certain normal and customary conditions, the obligations of Chiquita and Acquisition Sub to effect the Merger are subject to the following conditions: (i) all options ("Stokely Stock Options") and warrants ("Stokely Warrants") to purchase Stokely Common Stock having been cancelled or cashed out at no value; (ii) holders of at least $31.8 million in principal amount (less any principal payments made thereon after the date of the execution of the Merger Agreement up to the Effective Time) of Stokely debt having exchanged such indebtedness for Chiquita Common Stock; (iii) at the Effective Time, no event of default having occurred or being continuing with respect to non-exchanging holders of Senior Notes or the IRBs unless the event of default has been waived or certain other exceptions are applicable; (iv) Congress having 35 46 agreed, on terms and conditions reasonably satisfactory to Chiquita, that its existing loan agreement with Stokely will remain in place, with at least $20 million in credit remaining available to Stokely until the end of its current term; (v) a total of at least $1.0 million in accounts receivable having been forgiven by Stokely's suppliers; (vi) the absence of any event that has had, or has a reasonable possibility of having, a material adverse effect on Stokely, including that Stokely's consolidated net loss (calculated in accordance with the terms specified in the Merger Agreement and amendments thereto) is not greater than $3.38 million for the quarter ended September 30, 1997 and is not (or, in Chiquita's reasonable judgment, is not likely to be) greater than $3.0 million for the quarter ending December 31, 1997; and (vii) holders of not more than 5% of the total issued and outstanding shares of Stokely Common Stock having exercised and perfected dissenters' rights pursuant to the WBCL. No appraisal or dissenters' rights exist in connection with the Merger. As of December 1, 1997, there are no non-exchanging holding of Senior Notes and there was no event of default that had occurred with respect to the Senior Notes and IRBs not being exchanged. Furthermore, for the quarter ended September 30, 1997, Stokely's net loss, calculated in accordance with the terms specified in the Merger Agreement and amendments thereto, was not greater than $3.38 million. Finally, provided the Merger is consummated on or before January 31, 1998, Stokely's suppliers have already agreed to forgive at least $1.0 million in accounts receivable. The Merger Agreement provides that any or all conditions to any party's obligations may, at any time prior to the Effective Time, be waived by such party in whole or in part, to the extent permitted by applicable law. However, after approval of the Merger Agreement by Stokely shareholders, the amount and form of consideration to be delivered to Stokely shareholders may not be reduced without resoliciting the Stokely shareholders. Exchange of Stokely Debt. It is a condition of Chiquita's obligation to effect the Merger that, at the Effective Time, certain outstanding debt of Stokely be exchanged for shares of Chiquita Common Stock. Holders of $19.6 million in outstanding principal amount (at September 30, 1997) of Stokely's Senior Notes have agreed to exchange the Senior Notes, at their par value, for Chiquita Common Stock, to surrender certain related warrants for no consideration and to accept Chiquita Common Stock in payment of interest accrued on the Senior Notes from June 30, 1997 until the closing of the Merger, provided the Merger is consummated on or before January 31, 1998. Similarly, the holder of $12.2 million of outstanding IRBs (together with the Senior Notes, the "Stokely Debt "), for which Stokely is obligated, has agreed to exchange the IRBs, at their par value, and to exchange accrued interest on the IRBs for shares of Chiquita Common Stock. In each case, the Chiquita Common Stock will be valued on the basis of the average closing price of Chiquita Common Stock on the NYSE for the 15 consecutive trading days immediately preceding the closing of the Merger. Based upon the $16.625 per share closing price of Chiquita Common Stock on November 19, 1997, it is estimated that approximately 2.0 shares of Chiquita Common Stock (representing approximately 3% of the Chiquita Common Stock to be outstanding after the Merger) will be issued in exchange for the Stokely Debt. These shares of Chiquita Common Stock have been registered on the Registration Statement of which this Proxy Statement/Prospectus is a part and, upon issuance, will be freely tradeable by the recipients. Sales of substantial amounts of Chiquita Common Stock, or the perception that such sales could occur, could adversely affect prevailing market prices for the Chiquita Common Stock. See "RISK FACTORS -- Shares Available for Future Sale." Regulatory Approvals. Pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended ("HSR Act"), the Merger may not be consummated until certain information has been submitted to the Antitrust Division of the Federal Trade Commission ("FTC ") and specified HSR Act waiting period requirements have been satisfied. On October 7, 1997, Stokely and Chiquita made their respective HSR Act filings by submitting the required information to the FTC. The FTC had the opportunity to commence litigation under the antitrust laws of the United States to enjoin the Merger during a 30-day waiting period (which could have been extended under certain circumstances). On October 29, 1997, the FTC granted Chiquita's request for early termination of the waiting period. Amendment; Termination. At any time prior to the Effective Time, the parties to the Merger Agreement may amend the Merger Agreement by action of their Boards of Directors; except that, after approval of the 36 47 Merger Agreement by the shareholders of Stokely, no amendment may be made which reduces the amount of the consideration to be delivered to Stokely shareholders, other than as contemplated by the Merger Agreement, without the further approval of the Stokely shareholders. The Merger Agreement may be terminated at any time prior to the Effective Time: (i) by mutual consent of the Boards of Directors of Stokely, Chiquita and Acquisition Sub; (ii) by either Stokely or Chiquita if the Merger has not been consummated by January 31, 1998 (provided that the right to terminate will not be available to any party whose failure to perform or observe any covenants or agreements under the Merger Agreement has been the cause of or resulted in the failure of the Merger to occur on or before such date); (iii) by Chiquita if any of the conditions to all parties' obligations or any of the conditions to Chiquita's obligations have not been fulfilled and have not been waived on or before January 31, 1998 or have become impossible of fulfillment; (iv) by Stokely if any of the conditions to all parties' obligations or any of the conditions to Stokely's obligations have not been fulfilled and have not been waived on or before January 31, 1998 or have become impossible of fulfillment; or (v) by either Stokely or Chiquita if the Merger Agreement has not been approved on or before January 31, 1998 (or such later date as may be mutually agreed upon) by the requisite vote of Stokely's shareholders. Termination Fee. Stokely is required to pay Chiquita a fee of $250,000 and a number of shares of Stokely Preferred Stock having a redemption value of $2,750,000: (i) if the Merger Agreement is terminated solely as a result of the failure to receive approval of Stokely's shareholders; (ii) if the Stokely Board fails to continue to recommend the Merger Agreement; or (iii) if a competing offer is made to Stokely, the Stokely Board approves and recommends that offer to Stokely shareholders, the Merger is not consummated and the transaction underlying the competing offer also is not consummated. The Stokely Preferred Stock would have priority over Stokely Common Stock in the event of any bankruptcy or liquidation of Stokely. The designation, rights and preferences of the Stokely Preferred Stock are set forth as Exhibit D to the Merger Agreement. Additionally, if within twelve months of termination of the Merger Agreement a person or entity other than Chiquita acquires 50% or more of the Stokely Common Stock or all or substantially all of Stokely's assets, or if Stokely is a party to a merger, consolidation or similar transaction, or if Stokely agrees to such a transaction, Stokely is obligated to pay Chiquita a fee of $3,000,000. If a fee already has been paid as provided above, no additional fee will be owed, but the Preferred Stock will be required to be redeemed in accordance with the terms set forth in the Merger Agreement. Except as provided in the foregoing paragraph, whether or not the Merger is consummated, each party to the Merger Agreement generally will pay its own expenses in connection with the Merger. Accounting Treatment. The Merger will be accounted for as a purchase of Stokely by Chiquita for accounting and financial reporting purposes. Certain Federal Income Tax Consequences of the Merger. Stokely has received an opinion of Michael Best & Friedrich LLP that the Merger will qualify as a reorganization under Section 368(a)(1)(A) and 368(a)(2)(E) of the Code and that, accordingly, no gain or loss will be recognized by any Stokely shareholder upon the exchange of Stokely Common Stock solely for Chiquita Common Stock in connection with the Merger (except upon the receipt of cash in lieu of fractional shares of Chiquita Common Stock). The Internal Revenue Service (the "Service") has not been asked to rule upon the tax consequences of the Merger to any person and no such request will be made. The opinion of Michael Best & Friedrich LLP is based upon the Code, regulations now in effect thereunder, current administrative rulings and practice, and judicial authority, all of which are subject to change, which change may be retroactive. Unlike a ruling from the Service, an opinion of counsel is not binding on the Service and there can be no assurance, and none is hereby given, that the Service will not take a position contrary to one or more positions reflected herein or that the opinion will be upheld by the courts if challenged by the Service. EACH STOKELY SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX AND FINANCIAL ADVISORS AS TO THE EFFECT OF THE FEDERAL INCOME TAX CONSEQUENCES ON HIS OR HER OWN PARTICULAR FACTS AND CIRCUMSTANCES AND ALSO AS TO ANY STATE, LOCAL, FOREIGN OR OTHER TAX CONSEQUENCES ARISING OUT OF THE MERGER. 37 48 Based upon the opinion of Michael Best & Friedrich LLP, which in turn is based upon various representations and is subject to various assumptions and qualifications, the following federal income tax consequences to Stokely shareholders will result from the Merger: 1. Provided that the Merger qualifies as a statutory merger under applicable law, the Merger will qualify as a reorganization within the meaning of Section 368(a)(1)(A) and 368(a)(2)(E) of the Code, and Chiquita, Acquisition Sub and Stokely will each be "a party to a reorganization" within the meaning of Section 368(b) of the Code. 2. No gain or loss will be recognized by a Stokely shareholder upon the exchange of Stokely Common Stock solely for Chiquita Common Stock pursuant to the Merger (except in respect of cash received in lieu of a fractional share of Chiquita Common Stock, as discussed below). 3. A Stokely shareholder who receives cash in lieu of a fractional share interest in Chiquita Common Stock in the Merger will be treated as if he or she actually received such fractional share interest and it was subsequently redeemed by Chiquita. Such cash will be treated as having been received as full payment in exchange for the stock redeemed as provided in Section 302(a) of the Code. Gain or loss will be recognized upon such exchange, and will be capital gain or loss, provided that the Stokely Common Stock was a capital asset in the hands of the holder on the date of the Merger. 4. A Stokely shareholder's initial aggregate adjusted tax basis in the shares of Chiquita Common Stock received in the exchange (including any fractional share to which he or she may be entitled) will be equal to the aggregate adjusted tax basis of the shares of Stokely Common Stock surrendered therefor. 5. The holding period of Chiquita Common Stock received by a Stokely shareholder pursuant to the Merger will include the holding period during which the Stokely Common Stock exchanged therefor was held, provided that the Stokely Common Stock surrendered was a capital asset on the date of the Merger. The foregoing is only a general description of certain anticipated federal income tax consequences of the Merger for shareholders who are U.S. persons (as defined in Section 7701(a)(30) of the Code) and who hold their shares as capital assets, without regard to the particular facts and circumstances of the tax situation of each shareholder. It may not apply to a holder subject to special treatment under the Code, such as a holder that is a bank, an insurance company, a dealer in securities or foreign securities or a tax-exempt organization, or to a holder that acquired his or her Stokely Common Stock pursuant to the exercise of an employee stock option or otherwise as compensation. The discussion does not purport to be a complete analysis of all potential tax effects of the Merger and related transactions, and does not, for example, address any tax consequences that may result from cancellation of Stokely options and warrants, the forgiveness by Stokely suppliers of any accounts receivable from Stokely, or the exchange by Stokely debt holders of debt for Chiquita Common Stock. The discussion does not address the state, local or foreign tax consequences of the Merger. Chiquita believes that no tax gain or loss will be recognized by Chiquita, Stokely or Acquisition Sub as a result of the Merger. No Appraisal or Dissenters' Rights. Under the WBCL, holders of shares of a Wisconsin corporation quoted on the Nasdaq National Market on the record date for a meeting at which shareholders are to vote on a merger are not entitled to appraisal or dissenters' rights. Shares of Stokely Common Stock were quoted on the Nasdaq National Market on the Voting Record Date. Therefore, holders of Stokely Common Stock are not entitled to appraisal or dissenters' rights in connection with the Merger. Resale of Chiquita Common Stock by Stokely Affiliates. All shares of Chiquita Common Stock received by Stokely shareholders in the Merger will be freely transferable, except that shares of Chiquita Common Stock received by persons who are deemed to be "affiliates" (as such term is defined under the Securities Act) of Stokely prior to the Merger or Chiquita after the Merger may be resold by them only in transactions permitted by the resale provisions of Rule 145 promulgated under the Securities Act (or Rule 144 in the case of persons who become affiliates of Chiquita) or as otherwise permitted under the Securities Act. Persons who may be deemed to be affiliates of Chiquita or Stokely generally include individuals or entities that control, are controlled by, or are under common control with, such party and may include certain officers and directors of such party as well as principal shareholders of such party. 38 49 PRO FORMA FINANCIAL INFORMATION The following unaudited pro forma combined financial statements give effect to the Merger based on the assumptions described in the accompanying notes. These financial statements have been prepared from the historical consolidated financial statements of Chiquita (which have been adjusted to reflect the acquisition by Chiquita of the Owatonna Companies and the proposed acquisition by Chiquita of AFF) and Stokely and should be read in conjunction therewith. The historical financial statements of Chiquita and Stokely are incorporated by reference in this Proxy Statement/Prospectus and summary historical financial information about Chiquita and Stokely is set forth in the Summary at the beginning of this Proxy Statement/Prospectus. In addition, historical financial statements of Owatonna Canning Company, the only significant Owatonna Company, are included in Chiquita's Current Report on Form 8-K dated September 15, 1997 and are incorporated herein by reference. See "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." This pro forma information is not necessarily indicative of actual or future operating results or financial position that would have occurred or will occur upon consummation of the Merger or the acquisition of AFF. The unaudited pro forma combined balance sheet is based on the balance sheets of Chiquita (including the Owatonna Companies which were acquired in September 1997), AFF and Stokely at September 30, 1997 and has been prepared to reflect the pending acquisition of AFF and the Merger assuming they had occurred on September 30, 1997. The unaudited pro forma income statements for the year ended December 31, 1996 and for the nine months ended September 30, 1997 give effect to all the acquisitions (including the Merger) as if they had occurred on January 1, 1996 and January 1, 1997, respectively. Each transaction has been or will be accounted for as a purchase. 39 50 CHIQUITA BRANDS INTERNATIONAL, INC. PRO FORMA COMBINED BALANCE SHEET (UNAUDITED) SEPTEMBER 30, 1997 (IN THOUSANDS)
CHIQUITA (INCLUDING OWATONNA PRO FORMA PRO FORMA PRO FORMA COMPANIES) AFF ADJUSTMENTS SUBTOTAL STOKELY ADJUSTMENTS COMBINED ---------- --- ----------- -------- ------- ----------- --------- ASSETS Current assets Cash and equivalents.......... $ 172,330 $ 179 $(23,252)(a) $ 149,257 $ 1,515 $(22,725)(A) $ 128,047 Trade receivables, net........ 203,788 5,776 -- 209,564 12,931 -- 222,495 Other receivables, net........ 65,726 317 -- 66,043 -- -- 66,043 Inventories................... 321,616 42,444 -- 364,060 91,469 -- 455,529 Other current assets.......... 39,595 3,377 (572)(b) 42,400 750 -- 43,150 ---------- ------- -------- ---------- -------- -------- ---------- Total current assets........ 803,055 52,093 (23,824) 831,324 106,665 (22,725) 915,264 Property, plant and equipment, net........................... 1,143,005 10,504 -- 1,153,509 39,625 -- 1,193,134 Investments and other assets... 312,574 922 -- 313,496 2,507 -- 316,003 Intangibles, net............... 156,564 -- 1,752(c) 158,316 -- 10,655(B) 168,971 ---------- ------- -------- ---------- -------- -------- ---------- Total assets................ $2,415,198 $63,519 $(22,072) $2,456,645 $148,797 $(12,070) $2,593,372 ========== ======= ======== ========== ======== ======== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes and loans payable....... $ 36,395 $20,998 $(20,998)(a) $ 36,395 $ 47,725 $(22,725)(A) $ 61,395 Long-term debt due within one year........................ 90,430 1,142 (1,142)(a) 90,430 43,300 (32,085)(A) 101,645 Accounts payable.............. 208,307 5,873 -- 214,180 45,017 -- 259,197 Accrued liabilities........... 108,691 6,664 500(d) 115,855 5,663 2,200(C) 123,718 ---------- ------- -------- ---------- -------- -------- ---------- Total current liabilities... 443,823 34,677 (21,640) 456,860 141,705 (52,610) 545,955 Long-term debt of parent company....................... 696,731 -- -- 696,731 -- -- 696,731 Long-term debt of subsidiaries.................. 284,615 1,112 (1,112)(a) 284,615 2,100 -- 286,715 Accrued pension and other employee benefits............. 87,107 521 712(e) 88,340 2,883 (826)(D) 90,397 Other liabilities.............. 90,246 1,193 (3,193)(b) 88,246 -- -- 88,246 ---------- ------- -------- ---------- -------- -------- ---------- Total liabilities........... 1,602,522 37,503 (25,233) 1,614,792 146,688 (53,436) 1,708,044 ---------- ------- -------- ---------- -------- -------- ---------- Shareholders' equity Preferred stock............... 253,239 -- 173(f) 253,412 -- -- 253,412 Capital stock................. 19,786 865 (217)(f)(g) 20,434 572 395(A)(E)(F) 21,401 Capital surplus............... 642,881 2,498 25,858(f)(g) 671,237 43,508 (1,000)(A)(E)(F) 713,745 Other shareholders' equity.... -- (526) 526(g) -- (296) 296(F) Accumulated deficit........... (103,230) 23,179 (23,179)(g) (103,230) (41,675) 41,675(F) (103,230) ---------- ------- -------- ---------- -------- -------- ---------- Total shareholders' equity.................... 812,676 26,016 3,161 841,853 2,109 41,366 885,328 ---------- ------- -------- ---------- -------- -------- ---------- Total liabilities and shareholders' equity...... $2,415,198 $63,519 $(22,072) $2,456,645 $148,797 $(12,070) $2,593,372 ========== ======= ======== ========== ======== ======== ==========
- ------------------------- NOTE: This Pro Forma Combined Balance Sheet has been prepared to reflect the acquisition by Chiquita of Stokely and AFF. For the AFF acquisition (and the acquisition of the Owatonna Companies in the case of note (f)), pro forma adjustments have been made to reflect: (a) Assumed repayment of $23.3 million of AFF debt with cash. (b) Elimination of deferred tax assets and liabilities. (c) Excess of acquisition cost (including transaction costs) over the fair value of AFF net assets acquired. (d) Estimated transaction costs for professional services incurred in connection with the acquisition. (e) Adjustment of the accumulated postretirement benefit liability of AFF. (f) Issuance of $27.2 million (1.8 million shares) of Chiquita Common Stock in exchange for 100% of the equity of AFF and estimated additional consideration of $1.8 million (.1 million shares) of Chiquita Common Stock and $.2 million (3,500 shares) of Chiquita Series C Preference Stock in connection with the acquisition of the Owatonna Companies. The historical Chiquita balance sheet includes preliminary consideration of $42 million (3.0 million shares) of Chiquita Common Stock and $4 million (.1 million shares) of Chiquita Series C Preference Stock issued in connection with the acquisition of the Owatonna Companies. (g) Elimination of the shareholders' equity accounts. For the Stokely Merger, pro forma adjustments have been made to reflect: (A) Assumed repayment of $32.1 million of Stokely long-term debt with approximately 2.1 million shares of Chiquita Common Stock and assumed reduction of Stokely working capital loans payable to $25 million using cash. (B) Excess of acquisition cost (including transaction costs) over the fair value of Stokely's net assets acquired. (C) Estimated transaction costs for professional services and related expenses incurred in connection with the acquisition. (D) Adjustment of the accumulated postretirement benefit liability of Stokely. (E) Issuance of Chiquita Common Stock with a value of approximately $11.4 million (.8 million shares) to the former shareholders of Stokely. (F) Elimination of the shareholders' equity accounts of Stokely. This Pro Forma Combined Balance Sheet is based on a preliminary allocation of purchase price to the net assets acquired. Furthermore, it is not necessarily indicative of the actual or future financial position that would have occurred or will occur upon consummation of the Merger or the acquisition of AFF. 40 51 CHIQUITA BRANDS INTERNATIONAL, INC. PRO FORMA COMBINED INCOME STATEMENT (UNAUDITED) YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS, EXCEPT PER SHARE DATA)
OWATONNA PRO FORMA PRO FORMA PRO FORMA CHIQUITA COMPANIES AFF ADJUSTMENTS SUBTOTAL STOKELY ADJUSTMENTS COMBINED -------- --------- --- ----------- -------- ------- ----------- --------- Net sales............ $2,435,248 $61,885 $81,111 -- $2,578,244 $198,108 $(40,329)(A) $2,736,023 ---------- ------- ------- ------- ---------- -------- -------- ---------- Operating expenses Cost of sales...... 1,947,888 32,346 69,178 -- 2,049,412 160,022 (38,900)(A) 2,170,534 Selling, general and administrative... 313,490 18,243 5,458 $ 44(a) 337,235 30,632 (1,044)(A)(B) 366,823 Depreciation....... 89,534 2,690 1,692 -- 93,916 6,675 (569)(A) 100,022 Nonrecurring charges.......... -- -- -- -- -- 26,029 (12,500)(A) 13,529 ---------- ------- ------- ------- ---------- -------- -------- ---------- Operating income (loss)........... 84,336 8,606 4,783 (44) 97,681 (25,250) 12,684 85,115 Interest income...... 28,276 573 12 (1,250)(b) 27,611 -- (500)(C) 27,111 Interest expense..... (130,232) (365) (1,645) 1,640(b) (130,602) (11,066) 6,760(A)(C) (134,908) Other income, net.... 892 163 53 -- 1,108 -- -- 1,108 ---------- ------- ------- ------- ---------- -------- -------- ---------- Income (loss) before income taxes....... (16,728) 8,977 3,203 346 (4,202) (36,316) 18,944 (21,574) Income taxes......... (11,000) (2,755) (1,339) 3,794(c) (11,300) -- -- (11,300) ---------- ------- ------- ------- ---------- -------- -------- ---------- Income (loss) before extraordinary item............... (27,728) 6,222 1,864 4,140 (15,502) (36,316) 18,944 (32,874) Less dividends on preferred stock.... (11,955) -- -- (208)(d) (12,163) -- -- (12,163) ---------- ------- ------- ------- ---------- -------- -------- ---------- Loss before extraordinary item attributable to common shares...... $ (39,683) $ 6,222 $ 1,864 $ 3,932 $ (27,665) $(36,316) $ 18,944 $ (45,037) ========== ======= ======= ======= ========== ======== ======== ========== Loss per common share before extraordinary item -- primary and fully diluted...... $ (0.72) $ (0.71) ========== ========== Shares used to calculate loss per common share before extraordinary item............... 55,167 63,338 ========== ==========
- ------------------------- NOTE: This Pro Forma Combined Income Statement gives effect to the acquisition of the Owatonna Companies and the proposed acquisitions of Stokely and AFF by Chiquita. For the Owatonna Companies and AFF acquisitions, pro forma adjustments have been made to reflect: (a) Amortization of goodwill arising from the acquisitions on a straight-line basis over 40 years. (b) Reductions of interest expense of $1.6 million due to the assumed repayment of all AFF debt with cash. Interest income is reduced by $1.3 million to reflect the use of cash equivalents for these debt repayments. (c) Elimination of tax expense of the Owatonna Companies and federal tax expense of AFF as a result of including these companies in the Chiquita consolidated tax returns. (d) Dividends on Chiquita Series C Preference Stock issued in connection with the acquisition of the Owatonna Companies. For the Stokely Merger, pro forma adjustments have been made to reflect: (A) Elimination of: revenues and direct operating expenses of Stokely's frozen vegetable business; interest expense ($1.6 million) from borrowings associated with frozen vegetable assets; and nonrecurring charges resulting from Stokely's sale of this business. The acquisition of Stokely by Chiquita does not include any assets or operating activity in the frozen vegetable business. (B) Amortization of goodwill ($.3 million) arising from the acquisition on a straight-line basis over 40 years. (C) Reductions of interest expense of $4.3 million due to the assumed repayment of $32.1 million of Stokely long-term debt with approximately 2.1 million shares of Chiquita Common Stock and $.9 million due to the assumed reduction of Stokely working capital loans payable remaining after giving effect to the disposition of the frozen vegetable business to an average balance of $25 million using cash. Interest income is reduced by $.5 million to reflect the use of cash equivalents for these debt repayments. The Pro Forma Combined Income Statement does not include any adjustment to eliminate $13.5 million ($.21 per share on a pro forma basis) of nonrecurring charges which are principally associated with the closing and write-down of plant and office facilities and are included in Stokely's historical operating income. The Pro Forma Combined Income Statement is based on a preliminary allocation of purchase price to the net assets acquired. Furthermore, it is not necessarily indicative of the actual operating results of the combined companies had the acquisitions occurred on January 1, 1996 or of future results of the combined companies. 41 52 CHIQUITA BRANDS INTERNATIONAL, INC. PRO FORMA COMBINED INCOME STATEMENT (UNAUDITED) NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO OWATONNA PRO FORMA PRO FORMA FORMA CHIQUITA COMPANIES AFF ADJUSTMENTS SUBTOTAL STOKELY ADJUSTMENTS COMBINED -------- --------- --- ----------- -------- ------- ----------- -------- Net sales............. $1,833,904 $44,714 $53,611 -- $1,932,229 $109,563 -- $2,041,792 ---------- ------- ------- ------- ---------- -------- ------ ---------- Operating expenses Cost of sales....... 1,412,100 25,930 43,772 -- 1,481,802 87,335 -- 1,569,137 Selling, general and administrative.... 223,479 17,255 4,163 (1,867)(a)(b) 243,030 20,384 $ 175(A)(B) 263,589 Depreciation........ 64,418 2,171 1,163 -- 67,752 3,631 -- 71,383 ---------- ------- ------- ------- ---------- -------- ------ ---------- Operating income (loss)............ 133,907 (642) 4,513 1,867 139,645 (1,787) (175) 137,683 Interest income....... 12,481 330 6 (500)(c) 12,317 -- (600)(C) 11,717 Interest expense...... (82,482) (177) (645) 645(c) (82,659) (7,334) 3,955(C) (86,038) Other income, net..... 656 164 34 -- 854 -- -- 854 ---------- ------- ------- ------- ---------- -------- ------ ---------- Income before income taxes............... 64,562 (325) 3,908 2,012 70,157 (9,121) 3,180 64,216 Income taxes.......... (8,200) 109 (1,264) 855(d) (8,500) -- -- (8,500) ---------- ------- ------- ------- ---------- -------- ------ ---------- Net income (loss)..... 56,362 (216) 2,644 2,867 61,657 (9,121) 3,180 55,716 Less dividends on preferred stock..... (12,672) -- -- (152)(e) (12,824) -- -- (12,824) ---------- ------- ------- ------- ---------- -------- ------ ---------- Net income (loss) attributed to common shares.............. $ 43,690 $ (216) $ 2,644 $ 2,715 $ 48,833 $ (9,121) $3,180 $ 42,892 ========== ======= ======= ======= ========== ======== ====== ========== Earnings per common share: -- Primary.......... $ 0.77 $ 0.66 -- Fully diluted.... $ 0.77 $ 0.66 Shares used to calculate earnings per common share: -- Primary.......... 56,869 64,733 -- Fully diluted.... 56,979 64,843
- ------------------------- NOTE: This Pro Forma Combined Income Statement gives effect to the acquisition of the Owatonna Companies and the proposed acquisitions of Stokely and AFF by Chiquita. For the Owatonna Companies and AFF acquisitions, pro forma adjustments have been made to reflect: (a) Amortization of goodwill arising from the acquisitions on a straight-line basis over 40 years. (b) Transaction costs for professional services incurred by the acquired companies totaling $1.9 million. (c) Reductions of interest expense of $.6 million due to the assumed repayment of all AFF debt with cash. Interest income is reduced by $.5 million to reflect the use of cash equivalents for these debt repayments. (d) Elimination of tax expense of the Owatonna Companies and federal tax expense of AFF as a result of including these companies in the Chiquita consolidated tax returns. (e) Dividends on Chiquita Series C Preference Stock issued in connection with the acquisition of the Owatonna Companies. For the Stokely Merger, pro forma adjustments have been made to reflect: (A) Amortization of goodwill ($.2 million) arising from the acquisition on a straight-line basis over 40 years. (B) Transaction costs for professional services incurred by Stokely. (C) Reductions of interest expense of $2.9 million due to the assumed repayment of $32.1 million of Stokely long-term debt with approximately 2.1 million shares of Chiquita Common Stock and $1.1 million due to the assumed reduction of Stokely working capital loans payable to an average balance of $25 million using cash. Interest income is reduced by $.6 million to reflect the use of cash equivalents for these debt repayments. The Pro Forma Combined Income Statement is based on a preliminary allocation of purchase price to the net assets acquired. Furthermore, it is not necessarily indicative of the actual operating results of the combined companies had the acquisitions occurred on January 1, 1997 or of future results of the combined companies. 42 53 INFORMATION CONCERNING CHIQUITA GENERAL Chiquita is a leading international marketer, producer and distributor of bananas and other quality fresh and processed food products sold under the Chiquita and other brand names. In addition to bananas, these products include other tropical fruit, such as mangoes, kiwi and citrus, and a wide variety of other fresh produce. Chiquita's products also include fruit and vegetable juices and beverages; processed bananas and other processed fruits and vegetables; fresh cut and ready-to-eat salads; and edible oil-based consumer products. The principal executive offices of Chiquita are located at 250 East Fifth Street, Cincinnati, Ohio 45202 and the telephone number is (513) 784-8000. AFG owns, either directly or indirectly through its subsidiaries, approximately 40% of the outstanding shares of Chiquita Common Stock. Approximately 46% of the outstanding common stock of AFG is beneficially owned by Carl H. Lindner, members of his family and trusts for their benefit. Other information with respect to Chiquita is contained in Chiquita's documents incorporated herein by reference. See "AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." CHIQUITA'S REASONS FOR THE MERGER Although Chiquita's primary business is the marketing, production and distribution of bananas and other fresh fruits and vegetables, Chiquita also owns Friday Canning Corporation ("Friday"), which is engaged in processing and canning vegetables. Headquartered in New Richmond, Wisconsin, Friday operates eight vegetable canning facilities in Wisconsin and participates in a vegetable canning joint venture in China. Chiquita acquired Friday in 1992 and has operated it as a stand-alone company since its acquisition. Since that time, Chiquita has sought opportunities to grow its canning business in ways that are appropriate for the business. In addition to the proposed Merger, in September 1997 Chiquita acquired the Owatonna Companies, a vegetable canner headquartered in Owatonna, Minnesota with six canning facilities in Minnesota and Illinois, and signed a definitive agreement to acquire AFF, a vegetable canning company headquartered in Payette, Idaho, with four canning facilities in the northwestern United States. It is expected that the AFF acquisition will be consummated in December 1997. These companies sell processed vegetables in the private label, food service and branded segments, both domestically and for export. Chiquita believes the Merger, along with the acquisition of the Owatonna Companies and the proposed acquisition of AFF, will accomplish Chiquita's objective of expanding its capacity, product lines and geographic coverage in the vegetable canning business, resulting in more efficient and cost-effective operations. DESCRIPTION OF CHIQUITA STOCK Chiquita has 150,000,000 authorized shares of Capital Stock, par value $.33 per share (the "Chiquita Common Stock"). Chiquita also has authorized 10,000,000 shares of Non-Voting Cumulative Preferred Stock, par value $1.00 per share (the "Preferred Stock") and 4,000,000 shares of Cumulative Preference Stock, without par value (the "Preference Stock"). The main difference between the Preferred Stock and the Preference Stock is that the Preference Stock has broad voting rights and the Preferred Stock has voting rights only in limited circumstances. Each of the Preferred Stock and the Preference Stock may be issued in one or more series having such designated preferences and rights, qualifications and limitations as the Board of Directors may from time to time determine without requiring any vote of the shareholders. The issuance of Preferred Stock or Preference Stock by the Board of Directors could be utilized, under certain circumstances, as a method of preventing a takeover of Chiquita. There are no other provisions in Chiquita's Second Restated Certificate of Incorporation, as amended (the "Certificate of Incorporation") or By-laws that would have an effect of delaying, deferring or preventing a change in control of Chiquita. However, there are provisions in some of Chiquita's debt agreements which might require Chiquita to pay off some or all of the related debt upon a change in control. 43 54 Various debt instruments of Chiquita restrict, among other things, dividends and other distributions on, and repurchases or redemptions of, Chiquita's capital stock. At September 30, 1997, these restrictions would have allowed the payment of approximately $335 million for dividends and other corporate distributions, redemptions or repurchases. The ability of Chiquita to pay dividends when, as and if declared by the Board of Directors, may be subject to restrictions contained in future debt agreements and to limitations contained in future series or classes of preferred or preference shares and is subject to the legal availability of funds. DESCRIPTION OF CHIQUITA COMMON STOCK Of the 150 million authorized shares of Chiquita Common Stock, on November 19, 1997, approximately 59.4 million shares were outstanding and approximately 45 million shares were reserved for issuance, including 16 million shares reserved for issuance under employee benefit plans, and 29 million shares reserved for issuance upon the conversion, if any, of the Series A and Series B Preferred Stock, the Series C Preference Stock and Chiquita's 7% Convertible Debentures due 2001. In connection with the Merger, it is expected that approximately 2.7 million to 3.2 million shares of Chiquita Common Stock will be issued. In connection with the acquisition of AFF, it is expected that up to 2.2 million shares will be issued. Holders of Chiquita Common Stock are entitled to one vote per share on the election of directors and all other matters submitted to a vote of shareholders. Shares of Chiquita Common Stock do not have cumulative voting rights. Holders of Chiquita Common Stock are entitled to receive dividends, when and as declared by Chiquita's Board of Directors, out of funds legally available therefor; provided, however, that all dividends on any outstanding Preferred and Preference Stock must be fully paid or declared and set apart before any dividends can be paid or declared and set apart with respect to the Chiquita Common Stock. Upon liquidation, dissolution or winding-up of Chiquita, the holders of Chiquita Common Stock are entitled to share ratably in the assets of Chiquita remaining after the payment of its obligations and liabilities and after payment due the holders of Chiquita's Preferred and Preference Stock. Holders of Chiquita Common Stock have no preemptive or other rights to subscribe for or purchase additional securities of Chiquita. All outstanding shares of Chiquita Common Stock are fully paid and nonassessable. DESCRIPTION OF CHIQUITA PREFERRED STOCK Chiquita has 10,000,000 authorized shares of Preferred Stock. The Preferred Stock may be issued in one or more series and the rights, preferences, privileges and restrictions, including dividend rights, conversion rights, terms of redemption and liquidation preferences on each series may be fixed or designated by the Board of Directors of Chiquita without any further vote or action by Chiquita's shareholders; except that no series of Preferred Stock may be given the right to vote unconditionally in the election of directors of Chiquita. There are currently 5,175,000 shares of Preferred Stock issued and outstanding in two series: 2,875,000 shares of $2.875 Non-Voting Cumulative Preferred Stock, Series A (the "Series A Preferred Stock"), and 2,300,000 shares of $3.75 Convertible Preferred Stock, Series B (the "Series B Preferred Stock"). Series A Preferred Stock. Dividends on the Series A Preferred Stock accrue at an annual rate of $2.875 per share, are cumulative and are payable quarterly in arrears. The shares of Series A Preferred Stock have a liquidation preference of $50.00 per share plus dividends in arrears, if any. The Series A Preferred Stock is listed on the NYSE. Until February 15, 2001, the Series A Preferred Stock is convertible, in whole or in part, at the option of Chiquita, for such number of shares of Chiquita Common Stock as are issuable at a conversion rate of 2.6316 shares of Chiquita Common Stock for each share of Series A Preferred Stock, subject to adjustment in certain circumstances. Chiquita may exercise this option only if for 20 trading days within any period of 30 consecutive trading days, including the last trading day of the 30 trading day period, the closing price of Chiquita Common Stock on the NYSE exceeds $24.70, subject to adjustment in certain circumstances. On and after February 15, 2001, the Series A Preferred Stock will be convertible, in whole or in part, at the option 44 55 of Chiquita, into that number of shares of Chiquita Common Stock which have a current market price (calculated by averaging the closing prices of the Chiquita Common Stock on the NYSE for the five trading days immediately preceding the conversion date) equal to $50.00 per share of Series A Preferred Stock. However, in no event may the number of shares of Chiquita Common Stock into which each share of Series A Preferred Stock is convertible exceed 10, subject to adjustment in certain circumstances. Each share of Series A Preferred Stock is convertible at any time, at the holder's option, into 2.6316 shares of Chiquita Common Stock, subject to adjustment in certain circumstances. Adjustment in the conversion rates referred to above will occur in connection with stock splits, stock dividends and certain other transactions affecting the Chiquita Common Stock. The Series A Preferred Stock is not redeemable for cash, and there is no redemption or sinking fund obligation with respect to the Series A Preferred Stock. Series B Preferred Stock. Dividends on the Series B Preferred Stock accrue at an annual rate of $3.75 per share, are cumulative and are payable quarterly in arrears. The shares of Series B Preferred Stock have a liquidation preference of $50.00 per share plus dividends in arrears, if any. The Series B Preferred Stock is listed on the NYSE. The Series B Preferred Stock is not convertible at the option of Chiquita prior to September 10, 1999. On and after September 10, 1999, each share of Series B Preferred Stock will be convertible (and the series will be convertible, in whole or in part), at Chiquita's option, into that number of shares of Chiquita Common Stock which have a current market price (calculated by averaging the closing prices of the Chiquita Common Stock on the NYSE for the fifteen consecutive trading days ending on the second trading day preceding the conversion date) equal to $51.50, if converted during the twelve-month period beginning September 10, 1999 (and of amounts decreasing thereafter to $50.00 if converted on or after September 10, 2001). However, in no event may the number of shares of Chiquita Common Stock into which each share of Series B Preferred Stock is convertible exceed 10, subject to adjustment in certain circumstances. Each share of Series B Preferred Stock is convertible at any time prior to and including the business day preceding a Chiquita conversion, at the holder's option, into 3.3333 shares of Chiquita Common Stock, subject to adjustment in certain circumstances. Adjustments in the conversion rates referred to above will occur in connection with stock splits, stock dividends and certain other transactions affecting the Chiquita Common Stock. The Series B Preferred Stock is not redeemable for cash, and there is no redemption or sinking fund obligation with respect to the Series B Preferred Stock. DESCRIPTION OF CHIQUITA PREFERENCE STOCK The Board of Directors of Chiquita may provide for the issuance of up to 4,000,000 shares of Preference Stock in one or more series. The rights, preferences, privileges and restrictions, including dividend rights, voting rights, conversion rights, terms of redemption and liquidation preferences of each series may be fixed or designated by the Board of Directors without any further vote or action by Chiquita's shareholders. Currently, there are 79,659 shares of Preference Stock issued and outstanding, all of one series designated $2.50 Convertible Preference Stock, Series C (the "Series C Preference Stock"). Series C Preference Stock. Dividends on the Series C Preference Stock accrue at an annual rate of $2.50 per share, are cumulative from June 30, 1997, and are payable quarterly in arrears commencing December 7, 1997. The shares of Series C Preference Stock have a liquidation preference of $50.00 per share, plus dividends in arrears, if any. The Series C Preference Stock is not listed or quoted on any securities exchange or other public trading market. The Series C Preference Stock is not convertible at the option of Chiquita prior to June 30, 2000. On and after June 30, 2000, each share of Series C Preference Stock will be convertible (and the series will be convertible, in whole or in part), at Chiquita's option, into that number of shares of Chiquita Common Stock 45 56 which shall have a current market price (calculated by averaging the closing prices of the Chiquita Common Stock on the NYSE for the fifteen consecutive trading days immediately preceding the second trading day prior to the conversion date) equal to (a) $51.50, if converted during the twelve-month period beginning June 30, 2000, (b) $50.75, if converted during the twelve-month period beginning June 30, 2001, and (c) $50.00, if converted on or after June 30, 2002. In no event, however, shall the number of shares of Chiquita Common Stock into which each share of Series C Preference Stock is converted exceed 10, subject to adjustment in certain circumstances. Each share of Series C Preference Stock is convertible at any time prior to and including the business day preceding a Chiquita conversion, at the holder's option, into 2.922 shares of Chiquita Common Stock, subject to adjustment in certain circumstances. Adjustments in the conversion rates referred to above will occur in connection with stock splits, stock dividends and certain other transactions affecting the Chiquita Common Stock. The Series C Preference Stock is not redeemable for cash, and there is no redemption or sinking fund obligation with respect to the Series C Preference Stock. Generally, holders of Series C Preference Stock are entitled to one vote per share on the election of directors and all other matters submitted to a vote of shareholders of Chiquita Common Stock. Also, generally, the Series C Preference Stock and the Chiquita Common Stock vote together as a single class. In certain limited circumstances, holders of Series C Preference Stock will have greater voting rights and the Series C Preference Stock will vote as a separate class. COMPARISON OF SHAREHOLDERS' RIGHTS Upon consummation of the Merger, the shareholders of Stokely, a Wisconsin corporation, will become holders of Chiquita Common Stock. Chiquita is a New Jersey corporation. The Chiquita Common Stock is described above under "DESCRIPTION OF CHIQUITA STOCK." Differences between provisions of the corporate laws of Wisconsin and New Jersey, as well as between the Articles of Incorporation and By-laws of Stokely and the Certificate of Incorporation and By-laws of Chiquita, will result in certain changes in the rights of shareholders of Stokely as holders of Chiquita Common Stock. The following summary discusses certain significant provisions relating to shareholders' rights but is not meant to be an exhaustive list or a detailed discussion of the provisions discussed and is qualified in its entirety by reference to the Articles of Incorporation and By-laws of Stokely, the Certificate of Incorporation and By-laws of Chiquita, and the corporate laws of Wisconsin and New Jersey. DIRECTORS Stokely. Stokely's Articles of Incorporation and By-laws currently provide that it shall have not less than nine nor more than 15 directors, as determined from time to time by resolution of the Stokely Board. The Stokely Board may amend the By-laws to increase or decrease the number of directors. Under the Articles of Incorporation of Stokely, the Stokely Board is divided into three classes. One class is elected each year for a three-year term. The classified Stokely Board is intended to provide for continuity of the Stokely Board and to make it more difficult and time consuming for a shareholder group to fully use its voting power to gain control of the Stokely Board without the consent of the incumbent Stokely Board. In addition, a director may be removed from office only for cause and only by the affirmative vote of at least 80% of the outstanding shares entitled to vote for the election of such director, and any vacancy so created may be filled only by the affirmative vote of at least 80% of such shares. The staggered board provisions and the provision regarding the 80% vote required for removal of a director by shareholders may only be amended by the affirmative vote of shareholders possessing at least 80% of the outstanding shares entitled to vote. Chiquita. Chiquita's By-laws currently provide that it shall have not less than five nor more than fifteen directors, as determined from time to time by resolution of the Chiquita Board of Directors (the "Chiquita 46 57 Board"). The Chiquita Board may amend the By-laws to increase or decrease the number of directors. New Jersey law permits a corporation to provide in its Certificate of Incorporation for the classification of its Board of Directors. Chiquita's Certificate of Incorporation does not provide for a classified Board. Chiquita's Certificate of Incorporation does provide that shareholders of certain classes or series of Preferred or Preference Stock have the right to elect directors upon the occurrence of stated events, primarily related to the failure of Chiquita to pay dividends on outstanding shares of that stock. Directors of Chiquita may be removed with or without cause by the affirmative vote of the majority of votes cast by shareholders entitled to vote for the election of directors. Additionally, the Chiquita Board, by the affirmative vote of a majority of the directors in office, may remove one or more directors for cause where, in the judgment of such majority, the continuation of such director or directors in office would be harmful to the corporation. Any vacancy on the Chiquita Board, however caused, including newly created directorships, may be filled by the affirmative vote of a majority of the remaining directors, even though less than a quorum of the Board, or by a sole remaining director. VOTING RIGHTS GENERALLY Stokely. Subject to Section 180.1150(2) of the WBCL (described below under "-- Anti-Takeover Provisions; Transactions with Interested Shareholders"), holders of Stokely Common Stock are entitled to one vote for each share of Stokely Common Stock held by them on all matters properly presented to shareholders. The outstanding shares of Stokely Common Stock are legally issued, fully paid and nonassessable, except for certain statutory liabilities which may be imposed by Section 180.0622 of the WBCL for unpaid employee wages. Under the WBCL, actions to be taken by vote of the shareholders of a Wisconsin corporation shall be authorized by a majority of the votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon (in person or proxy) unless a greater plurality is required by the Articles of Incorporation or other provisions of the WBCL. The WBCL provides that the affirmative vote of holders of at least two-thirds of the number of shares outstanding and entitled to vote is required for certain corporate actions, including mergers, for corporations organized under Wisconsin law prior to January 1, 1973 (such as Stokely). The Articles of Incorporation and By-laws of Stokely do not specify different requirements. Chiquita. Under New Jersey law, actions to be taken by vote of the shareholders of a New Jersey corporation shall be authorized by a majority of the votes cast at a meeting of shareholders by the holders of shares entitled to vote thereon (in person or by proxy) unless a greater plurality is required by the Certificate of Incorporation or other provision of New Jersey law. New Jersey law requires that the affirmative vote of holders of two-thirds of the votes cast by holders of shares outstanding and entitled to vote is required for certain actions for corporations organized prior to January 1, 1969 (such as Chiquita). Chiquita's Certificate of Incorporation and By-laws do not specify different requirements. In addition, if any class or series of shares is entitled to vote as a class, the affirmative vote of two-thirds of the votes cast in each class vote is required. SPECIAL MEETINGS OF SHAREHOLDERS Stokely. Under the WBCL and Stokely's By-laws, a special meeting of shareholders may be called by the Chairman of the Board, a majority of the Stokely Board or by the holders of at least ten percent of all the votes entitled to be cast on any issue to be considered at the proposed special meeting. In addition, Stokely's By-laws provide procedures by which shareholders may raise matters at annual meetings and may call special meetings. The affirmative vote of either (i) the holders of a majority of the voting power of shares entitled to vote in the election of directors, or (ii) a majority of the directors then in office, is required to amend, repeal or adopt any provision inconsistent with the foregoing By-law provisions. Chiquita. Under New Jersey law and Chiquita's By-laws, special meetings of shareholders may be called by Chiquita's Chairman of the Board, President or the Chiquita Board. In addition, the Superior Court of the State of New Jersey may, upon application of holders of not less than 10% of the shares entitled to vote at a meeting, for good cause shown, order a special meeting of shareholders. 47 58 CHARTER AMENDMENTS Stokely. Stokely's Articles of Incorporation may be amended upon approval of the Stokely Board and by the affirmative vote of the holders of at least two-thirds of the number of shares entitled to vote on the amendment. In addition, if any class or series of shares is entitled to vote thereon as a class, the affirmative vote of the holders of at least two-thirds of the number of shares in each class is required. Chiquita. Chiquita's Certificate of Incorporation may be amended upon approval of the Chiquita Board and of two-thirds of the votes cast by holders of shares entitled to vote on the amendment. In addition, if any class or series of shares is entitled to vote as a class, the affirmative vote of two-thirds of the votes cast in each class is required. Holders of any class or series of Chiquita Preferred or Preference Stock are entitled to vote as a class on any amendment that would, among other things, (i) limit their voting rights, (ii) cancel or otherwise adversely affect dividends that are accrued but not yet declared, (iii) change the designations, preferences, limitations or relative rights of the shares, or (iv) create a new class or series having rights or preferences with priority over such shares (but not including issuing series of Chiquita's authorized but unissued Preferred or Preference Stock). In certain circumstances, Chiquita's Certificate of Incorporation may be amended by action of its Board without shareholder approval, including in connection with the issuance of new classes or series of Preferred or Preference Stock and the determination of the relative rights, preferences, and limitations of such shares. MERGERS, CONSOLIDATIONS AND SALES OF ASSETS Stokely. As applicable to Stokely, the WBCL generally requires the approval of mergers, consolidations and sales of substantially all assets outside the ordinary course of business of a corporation by its Board of Directors and by the affirmative vote of the holders of at least two-thirds of the number of shares entitled to vote thereon. In addition, if any class or series is entitled to vote thereon as a class, the affirmative vote of two-thirds of the number of shares in each class is required. Notwithstanding the foregoing, if Stokely is to be the surviving corporation in a merger, no vote of its shareholders is required if all of the following conditions are satisfied: (a) the Articles of Incorporation of Stokely after the merger will not differ from the Articles of Incorporation prior to the merger (except for certain amendments outlined in the WBCL); (b) each shareholder of Stokely whose shares were outstanding immediately before the effective date of the merger will hold the same number of shares, with identical designations, preferences, limitations and relative rights, immediately after the merger; (c) the number of voting shares outstanding immediately after the merger, plus the number of voting shares issuable as a result of the merger, either by the conversion of securities issued pursuant to the merger or the exercise of rights and warrants issued pursuant to the merger, will not exceed by more than 20% the total number of voting shares of the Stokely outstanding immediately before the merger; and (d) the number of shares entitled to participate without limitation in distributions ("participating shares") which are outstanding immediately after the merger, plus the number of participating shares issuable as a result of the merger, either by the conversion of securities issued pursuant to the merger or the exercise of warrants or rights issued pursuant to the merger, will not exceed by more than 20% the total number of participating shares of Stokely outstanding immediately before the merger. There are no dissenters' rights or appraisal rights in such a merger. Chiquita. As applicable to Chiquita, New Jersey law generally requires the approval of mergers, consolidations and sales of substantially all assets outside of the ordinary course of business of a corporation by its Board of Directors and by the affirmative vote of two-thirds of the votes cast by holders of shares entitled to vote thereon. In addition, if any class or series is entitled to vote thereon as a class, the affirmative vote of two-thirds of the votes cast in each class vote is required. Under certain circumstances, New Jersey law and Chiquita's Certificate of Incorporation grant holders of shares of Chiquita's Preferred and Preference Stock the right to vote as a class. Notwithstanding the foregoing, if Chiquita is to be the surviving corporation in a merger, no vote of its shareholders is required, if all of the following conditions are satisfied: (a) the plan of merger does not amend Chiquita's Certificate of Incorporation in a manner that would require approval of shareholders; (b) each shareholder of Chiquita whose shares were outstanding immediately prior to the effective date of the merger 48 59 will hold the same number of shares, with identical designations, preferences, limitations and rights, immediately after the merger; (c) the number of voting shares outstanding immediately after the merger, plus the number of voting shares issuable upon conversion of other securities or in exercise of rights and warrants issued pursuant to the merger, will not exceed by more than 40% the total number of voting shares of Chiquita outstanding immediately before the merger; and (d) the number of shares entitled to participate without limitation in distributions outstanding immediately after the merger, plus the number of such shares issuable upon conversion of other securities or in exercise of rights and warrants issued pursuant to the merger, will not exceed by more than 40% the total number of such shares of Chiquita outstanding immediately before the merger. There are no dissenters' rights of appraisal in such a merger. APPRAISAL RIGHTS Stokely. For a description of appraisal rights provided by Wisconsin law in the event of a merger, see "PROPOSAL TO APPROVE THE MERGER -- The Merger Agreement: No Appraisal or Dissenters' Rights." Chiquita. New Jersey law confers rights of appraisal on dissenting shareholders of a corporation with respect to a merger, consolidation, or sale or other disposition of substantially all the assets of a corporation not in the usual course of business. However, unless the corporation's Certificate of Incorporation provides otherwise, no statutory right of appraisal exists (i) where the stock of the corporation is (a) listed on a national securities exchange or (b) held of record by not less than 1,000 holders, or (ii) where the consideration to be received pursuant to the merger, consolidation or sale consists of cash and/or securities or other obligations which, after the transaction, will be listed on a national securities exchange or held of record by not less than 1,000 holders. Chiquita's Certificate of Incorporation does not provide for appraisal rights in such cases. TRANSACTIONS INVOLVING DIRECTORS Stokely. Under the WBCL and Stokely's By-laws, a "conflict of interest" transaction with respect to a director means a transaction with Stokely in which a director has a direct or indirect interest. The circumstances in which a director of Stokely is deemed to have an indirect interest in a transaction include but are not limited to transactions under any of the following circumstances: (a) another entity in which the director has a material financial interest or in which the director is a general partner is a party to the transaction; or (b) another entity of which the director is a director, officer or trustee is a party to the transaction and the transaction is or, because of its significance to Stokely, should be considered by the Stokely Board. A conflict of interest transaction is not voidable by Stokely solely because of the director's interest in the transaction if (i) the material facts of the transaction and the director's interest were disclosed or known to the Stokely Board (or a committee of the Stokely Board) and the Stokely Board (or committee) authorized, approved or specifically ratified the transaction; (ii) the material facts of the transaction and the director's interest was disclosed or known to the shareholders of the corporation entitled to vote and they authorized, approved or specifically ratified the transaction; or (iii) the transaction was fair to the corporation. Chiquita. Under New Jersey law, no contract or other transaction between a corporation and one or more of its directors, or between a corporation and any entity in which one or more of its directors is otherwise interested, is void or voidable solely by reason of such common directorship or interest, or solely because such director or directors are present at the meeting of the Board or committee which authorizes or approves the contract or transaction, or solely because his or their votes are counted for such purpose, if any one of the following is true: (a) the contract or other transaction is fair and reasonable as to the corporation at the time it is authorized; or (b) the fact of common directorship or interest is disclosed or known to the Board or committee and the Board or committee authorizes, approves and ratifies the contract or transaction by unanimous written consent (provided at least one director so consenting is disinterested) or by affirmative vote of a majority of the disinterested directors (even though the disinterested directors shall be less than a quorum); or (c) the fact of the common directorship or interest is disclosed or known to the shareholders, and they authorize, approve or ratify the contract or transaction. 49 60 ANTI-TAKEOVER PROVISIONS; TRANSACTIONS WITH INTERESTED SHAREHOLDERS Stokely. Acquisitions of control of Stokely are subject to various restrictions under the WBCL. In addition to these restrictions, there are various provisions in Stokely's Articles of Incorporation and By-laws which may be deemed to restrict the ability of a person, firm or entity to acquire Stokely. These provisions provide for, among other things, staggered terms of office for members of the Stokely Board and limits on the calling of special meetings of shareholders. Such provisions render the replacement of the current Stokely Board more difficult. The issuance of Preferred Stock by Stokely also could have the effect of delaying or preventing a change of control of Stokely. All of these provisions could have the effect of discouraging a takeover attempt which was not approved by the Stokely Board but which shareholders of Stokely deemed to be in their best interests or in which shareholders received a substantial premium for their shares over the then-current market price. These provisions also could decrease the likelihood of temporary increases in the trading price of the Stokely Common Stock, which frequently result from non-negotiated takeover attempts, and could tend to perpetuate existing management. Additionally, certain of these statutory restrictions could have the effect of discouraging or making it more difficult for a person to acquire a substantial equity interest in Stokely and could otherwise restrict the market for the purchase or sale of a significant number of the shares of Stokely Common Stock. Section 180.1150(2) of the WBCL provides that the voting power of shares of an "issuing public corporation," such as Stokely, which are held by any persons holding in excess of 20% of the voting power of the issuing public corporation's shares, shall be limited to such 20% of the voting power plus 10% of the voting power of such excess shares. This statute is a "scaled voting rights/control share acquisition" statute and is designed to protect corporations against uninvited takeover bids. This statutory voting restriction is not applicable to shares of Stokely Common Stock acquired prior to April 22, 1986, shares acquired directly from Stokely and shares acquired in certain other circumstances more fully described in the WBCL. The WBCL also provides that certain business combinations not meeting specified adequacy-of-price standards set forth in the statute must be approved by the vote of at least (i) 80% of the votes entitled to be cast by shareholders, and (ii) two-thirds of the votes entitled to be cast by holders of voting shares other than voting shares beneficially owned by a "significant shareholder" or an affiliate or associate thereof who is a party to the transaction. The term "business combination" is defined to include, subject to certain exceptions, a merger or consolidation of an issuing public corporation, such as Stokely, with, or the sale or other disposition of substantially all assets of an issuing public corporation to, any significant shareholder or affiliate thereof. "Significant shareholder" is defined generally to include a person that is the beneficial owner of 10% or more of the voting power of the shares of the issuing public corporation. These provisions will not apply to the Merger. Additionally, the WBCL provides that a "resident domestic corporation," such as Stokely, may not engage in a "business combination" with an "interested stockholder" (a person beneficially owning 10% or more of the aggregate voting power of the stock of such corporation) for three years after the date (the "stock acquisition date") the interested stockholder acquired his or her 10% or greater interest, unless the business combination (or the acquisition of the 10% or greater interest) was approved before the stock acquisition date by such corporation's board of directors. After the three-year period, a business combination that was not so approved may be consummated only if it is approved by a majority of the outstanding voting shares not held by the interested stockholder or is made at a specified formula price intended to provide a fair price for the shares held by disinterested shareholders. These provisions will not apply to the Merger. Stokely's Articles of Incorporation provide that if any person or entity (the "Acquiring Person") is the beneficial owner of 50% or more of the outstanding shares of Stokely Common Stock and if any of such shares of Stokely's Common Stock were acquired pursuant to a tender offer not recommended by the Stokely Board, then all holders of Stokely Common Stock (and holders of rights, options, warrants and securities then exercisable or convertible into Stokely Common Stock), with the exception of the Acquiring Person, shall have the right to have their shares of Stokely Common Stock redeemed by Stokely for cash ("Repurchase Rights"). Stokely is required to provide shareholders with notice of their Repurchase Rights (the "Repurchase Notice") within 30 days of the date Stokely first receives notice that any person or entity has become an 50 61 Acquiring Person. The repurchase price shall be the highest of: (i) the highest price per share, including any commissions paid to brokers or dealers, at which shares held by an Acquiring Person were acquired at any time pursuant to a tender offer or in any market purchase within the 18-month period prior to the date shareholders received a Repurchase Notice from Stokely; (ii) the highest sales price per share of Stokely Common Stock for any trading day during the 18-month period prior to the date shareholders received a Repurchase Notice from Stokely; or (iii) shareholders' equity per share of Stokely Common Stock as reflected in any report published by Stokely as of the fiscal quarter prior to the date shareholders received a Repurchase Notice from Stokely. These provisions will not apply to the Merger. Chiquita. The New Jersey Shareholder Protection Act (the "NJSPA") prohibits certain transactions involving an "interested shareholder" and a "resident domestic corporation." An "interested shareholder" is one that is directly or indirectly a beneficial owner of 10% or more of the voting power of the outstanding voting stock of a resident domestic corporation. The NJSPA prohibits certain business combinations between an interested shareholder and a resident domestic corporation for a period of five years after the date the interested shareholder acquired its stock, unless the business combination was approved by the resident domestic corporation's Board of Directors prior to the stock acquisition date. After the five-year period expires, the prohibition continues unless the combination is approved by the affirmative vote of two-thirds of the voting stock not beneficially owned by the interested shareholder or certain fair price provisions are satisfied. LIABILITY AND INDEMNIFICATION Stokely. Under the WBCL, Stokely is required to indemnify a director or officer, to the extent such person is successful on the merits or otherwise in the defense of a proceeding, for all reasonable expenses incurred in the proceeding if such person was a party because he or she was a director or officer of Stokely. In all other cases, Stokely is required to indemnify a director or officer against liability incurred in a proceeding to which such a person was a party because he or she was a director or officer of Stokely, unless it is determined that he or she breached or failed to perform a duty owed to Stokely and the breach or failure to perform constitutes: (i) a willful failure to deal fairly with Stokely or its shareholders in connection with a matter in which the director or officer has a material conflict of interest; (ii) a violation of criminal law, unless the director or officer had reasonable cause to believe his or her conduct was unlawful; (iii) a transaction from which the director or officer derived an improper personal profit; or (iv) willful misconduct. Subject to certain limitations, the mandatory indemnification provisions do not preclude any additional right to indemnification or allowance of expenses that a director or officer may have under Stokely's Articles of Incorporation, By-laws, a written agreement or a resolution of the Stokely Board or shareholders. It is the public policy of the State of Wisconsin to require or permit indemnification, allowance of expenses and insurance, to the extent required to be permitted under the WBCL, for any liability incurred in connection with a proceeding involving a federal or state statute, rule or regulation regulating the offer, sale or purchase of securities. The WBCL also provides that, with certain exceptions, a director is not liable to a corporation, its shareholders, or any person asserting rights on behalf of the corporation or its shareholders, for damages, settlements, fees, fines, penalties or other monetary liabilities arising from a breach of, or failure to perform, any duty resulting solely from his or her status as a director, unless the person asserting liability proves that the breach or failure to perform constitutes any of the four exceptions to mandatory indemnification under the WBCL referred to above. Under Article VII of Stokely's By-laws, directors and officers are indemnified against liability, in both derivative and nonderivative suits, which they may incur in their capacities as such, subject to certain determinations by the Stokely Board, independent legal counsel or the shareholders that the applicable standards of conduct have been met. The scope of such indemnification is substantially the same as permitted and described in the WBCL. Chiquita. New Jersey law permits a corporation's Certificate of Incorporation to limit or eliminate a director's or officer's liability for damages for breach of any duty owed to the corporation or its shareholders 51 62 except for (a) a breach of the person's duty of loyalty, (b) acts not in good faith or involving a knowing violation of law or (c) acts resulting in receipt of an improper personal benefit. The Certificate of Incorporation of Chiquita includes a provision eliminating a director's or officer's liability to the fullest extent permitted by New Jersey law. New Jersey law permits a corporation to indemnify a corporate agent (defined to include directors, officers, employees and agents) against expenses and liabilities in connection with any proceeding involving the corporate agent by reason of the agent being or having been a corporate agent, other than a proceeding by or in the right of the corporation, if (a) the corporate agent acted in good faith and in a manner reasonably believed to be in or not opposed to the best interest of the corporation and (b) with respect to any criminal proceeding, the corporate agent had no reasonable cause to believe the conduct was unlawful. In the case of any action or proceeding by or in the right of the corporation, indemnification may only be made if the corporate agent acted in good faith and in a manner the agent reasonably believed to be in or not opposed to the best interest of the corporation; except that, if the corporate agent is adjudged to be liable to the corporation, indemnification may only be made if a court determines that the agent is entitled to indemnity. A New Jersey corporation must indemnify a corporate agent if the agent is successful on the merits in the defense of any action or proceeding of the nature described above. Chiquita's By-laws provide that Chiquita will indemnify any director, officer, employee or other authorized representative to the fullest extent not prohibited by New Jersey law. LEGAL MATTERS The legality of the shares of Chiquita Common Stock and certain other legal matters in connection with the Merger will be passed upon for Chiquita by Robert W. Olson, Senior Vice President, General Counsel and Secretary of Chiquita. Mr. Olson presently holds shares of Chiquita Common Stock and employee stock options to purchase shares of Chiquita Common Stock, as well as shares of AFG common stock and options to purchase shares of AFG common stock. EXPERTS The consolidated financial statements of Chiquita appearing (or incorporated by reference) in its Annual Report (Form 10-K) for the year ended December 31, 1996, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon included (or incorporated by reference) therein and incorporated herein by reference. The financial statements of Owatonna Canning Company for the years ended February 28, 1997, February 29, 1996 and February 28, 1995 appearing in Chiquita's Current Report on Form 8-K dated September 15, 1997 have been audited by Hutton, Nelson & McDonald LLP, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such Chiquita consolidated financial statements and Owatonna Canning Company financial statements are incorporated herein by reference in reliance upon such reports given upon the authority of such firms as experts in accounting and auditing. The consolidated financial statements and the related financial statement schedule incorporated in this prospectus by reference from Stokely's Annual Report on Form 10-K for the year ended March 31, 1997 (as amended) have been audited by Deloitte & Touche, LLP, independent auditors, as stated in their report, which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. ELECTION OF DIRECTORS (PROPOSAL NO. 2) The Stokely Board currently consists of nine directors divided into three classes with staggered terms of three years each. At the Annual Meeting, shareholders of Stokely will elect three directors to hold office until the Merger is consummated (or, if the Merger is not consummated, for a term of three years expiring at the 2000 annual meeting, or until their successors are elected and qualified). Directors of the remaining two 52 63 classes will continue to hold office until the Merger is consummated (or, if the Merger is not consummated, until the expiration of their respective terms and until their successors are elected and qualified). Upon Mr. Orren J. Bradley's retirement at the Annual Meeting, the number of directors will be reduced to eight. Unless otherwise directed, each proxy executed and returned by a shareholder will be voted FOR the election of the nominees for director listed below. If any person named as nominee should be unable or unwilling to stand for election at the time of the Annual Meeting (or any postponements or adjournments thereof), the proxies will nominate and vote for any replacement nominee or nominees recommended by the Stokely Board. At this time, the Stokely Board knows of no reason why any of the nominees listed below may not be able to serve as a director if elected. There are no family relationships among the executive officers and directors of Stokely, and there are no arrangements or understandings pursuant to which any of them were elected as executive officers and/or directors or are being nominated to serve as directors. The following tables present information concerning the nominees for director and each director serving an unexpired term.
POSITION WITH STOKELY DIRECTOR OF NAME AGE AND PRINCIPAL OCCUPATION STOKELY SINCE ---- --- ------------------------ ------------- Nominees for Director for Terms Expiring Upon Consummation of the Merger or, if the Merger is not Consummated, until 2000 James H. DeWees...................... 64 Retired; Chairman, President and Chief 1994 Executive Officer, Godfrey Company, a division of Fleming Companies, Inc., a wholesale food distributor, 1984-94; Vice President, Fleming Companies, Inc., 1987-94; Chairman, Village of Manor Park Foundation; Director, Village of Manor Park, Inc. and Green Bay Packer Hall of Fame; Member, First Bank Milwaukee Business Advisory Board and Marquette University Business Advisory Council. Carol Ward Knox...................... 46 Principal, Morgan & Myers, Inc., a public 1993 relations consulting company, since 1982; Former Chairperson, Wisconsin Department of Agriculture, Trade and Consumer Protection Board; Former Member, Board of Visitors, University of Wisconsin College of Agriculture and Life Science, and Wisconsin Rural Leadership Program Board. Thomas W. Mount...................... 66 Retired; Chairman of Stokely, 1992-93; 1966 President and Chief Operating Officer of Stokely, 1975-92; joined Stokely in 1957; Director, Fiduciary Capital Growth Fund, Inc., and Focus Fund, Inc.; Former Chairman, National Food Processors Association. Director Whose Term Expires at the Annual Meeting Orren J. Bradley..................... 72 Senior Vice President, Laub Groups, Inc., an 1985 insurance operations company, since 1985; Chairman, Boston Store Division of Federated Department Stores, Inc., 1967-85; Director, Hanger-Tight Company, Great Lakes Credit Corporation and Oshkosh B'Gosh, Inc., an apparel manufacturer.
53 64
POSITION WITH STOKELY DIRECTOR OF NAME AGE AND PRINCIPAL OCCUPATION STOKELY SINCE ---- --- ------------------------ ------------- Directors Whose Terms Expire in 1998 Russell W. Britt..................... 71 Retired; President, Chief Operating Officer 1985 and a Director of Wisconsin Energy Corp., a utility service company, 1987-91 and Vice President, 1981-87; Executive Officer and Director of Wisconsin Electric Power Co. and Wisconsin Natural Gas Co., subsidiaries of Wisconsin Energy Corp., 1982-91. Ody J. Fish.......................... 72 Private Investor; President, Pal-O-Pak 1985 Insulation Co., Inc., an insulation manufacturing company, 1951-86; Director, Quest Technologies, Inc., f/k/a La Belle Industries, Inc.; Director of all of the funds included in the Marshall Family of Mutual Funds; Former Member, University of Wisconsin Board of Regents; Chairman, Wisconsin Education Commission. Stephen W. Theobald.................. 51 President and Chief Executive Officer of 1980 Stokely since April 1996; Vice-Chairman and Treasurer of Stokely, 1992-96; Vice President-Administration and Treasurer of Stokely, 1990-92; Vice President- Administration of Stokely, 1985-90; joined Stokely in 1985. Directors Whose Terms Expire in 1999 Charles J. Carey..................... 72 Consultant since 1989; President and Chief 1989 Executive Officer, National Food Processors Association, a trade association, 1972-89. Frank J. Pelisek..................... 67 Chairman of the Stokely Board and Executive 1983 Committee of the Stokely Board since August 1993; Acting Chief Executive Officer and Chairman of the Executive Committee of the Stokely Board, June 1992-August 1993; Partner, Michael Best & Friedrich LLP, legal counsel to Stokely, since 1965; Director, various privately held companies.
THE AFFIRMATIVE VOTE OF A PLURALITY OF THE VOTES CAST IS REQUIRED FOR THE ELECTION OF THE NOMINEES. UNLESS OTHERWISE SPECIFIED, THE SHARES OF STOKELY COMMON STOCK REPRESENTED BY THE PROXIES SOLICITED HEREBY WILL BE VOTED IN FAVOR OF ELECTION OF THE ABOVE-DESCRIBED NOMINEES. THE STOKELY BOARD RECOMMENDS THAT YOU VOTE FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR. MEETINGS OF THE STOKELY BOARD OF DIRECTORS AND ITS COMMITTEES During the fiscal year ended March 31, 1997, the Stokely Board held four regular meetings and one special meeting. No incumbent director attended fewer than 75% of the aggregate total number of meetings of the Stokely Board held and the total number of committee meetings on which such director served during the fiscal year ended March 31, 1997. The Stokely Board has standing Executive, Audit, Compensation, Retirement Plan Advisory and Nominating Committees. The Executive Committee has the authority during the intervals between Stokely Board meetings to exercise the powers of the Stokely Board, except for certain powers reserved exclusively for the Stokely Board. 54 65 The Executive Committee consists of Messrs. Pelisek (Chairman), Britt, Fish, Mount and Theobald. The Executive Committee held two meetings during the fiscal year ended March 31, 1997. The Audit Committee reviews the scope and timing of the audit of Stokely's financial statements by Stokely's independent public accountants and reviews with the independent public accountants Stokely's management policies and procedures with respect to auditing and accounting controls. The Audit Committee also reviews and evaluates the independence of Stokely's accountants, approves services rendered by such accountants and recommends to the Stokely Board the engagement, continuation or discharge of Stokely's accountants. The Audit Committee consists of Messrs. Britt (Chairman), Bradley and DeWees. The Audit Committee held one meeting during the fiscal year ended March 31, 1997. The Compensation Committee is responsible for overseeing the management of human resources activities of Stokely, including compensation for directors and executive officers, and the establishment of employee pension plans and benefits. The Compensation Committee also is responsible for determining the recipients and terms of stock options granted under the Stokely USA, Inc. 1994 Executive Stock Option Plan. The Compensation Committee consists of Messrs. Fish (Chairman), Carey, Pelisek and Ms. Knox, and met one time during the fiscal year ended March 31, 1997. The Retirement Plan Advisory Committee is responsible for overseeing the management of Stokely's various 401(k), profit sharing and retirement plans. The Retirement Plan Advisory Committee consists of Messrs. DeWees (Chairman), Fish, Mount and Ms. Knox, and did not meet during the fiscal year ended March 31, 1997. The Nominating Committee selects nominees for directors to stand for election at Stokely's annual meetings, and consists of Messrs. Pelisek (Chairman), Britt, Fish and Theobald. The Nominating Committee did not meet during the fiscal year ended March 31, 1997. In June 1997, the entire Stokely Board acted as a Nominating Committee for the selection of the nominees for director to stand for election at the Annual Meeting. Stokely's By-Laws allow for shareholder nominations of directors and require such nominations to be made pursuant to timely notice to the Chief Executive Officer or President of Stokely. 55 66 COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS EXECUTIVE COMPENSATION The following table summarizes the total compensation earned by Stokely's President and Chief Executive Officer and the next three highest compensated executive officers whose compensation (salary and bonus) exceeded $100,000 during Stokely's fiscal years ended March 31, 1995, 1996 and 1997. On April 16, 1996, Mr. Vernon L. Wiersma resigned as President and Chief Executive Officer of Stokely and the Stokely Board appointed Mr. Stephen W. Theobald as President and Chief Executive Officer. In addition, on March 28, 1997, Mr. Russell J. Trunk retired as Senior Vice President, Operations. SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION AWARDS ----------------------- ANNUAL VALUE OF COMPENSATION(1) RESTRICTED NUMBER OF ------------------- STOCK OPTION ALL OTHER NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(2) AWARDS(3) COMPENSATION(4) --------------------------- ---- ------ ----- ---------- --------- --------------- Stephen W. Theobald.............. 1997 $170,500 -- -- 0 -- Current President and Chief 1996 170,500 -- -- 19,000 $ 12,636 Executive Officer; Vice 1995 160,400 -- -- 15,000 25,375 Chairman and Treasurer during fiscal 1996 Vernon L. Wiersma................ 1997 -- -- -- 0 $220,000(5) Former President and Chief 1996 $220,000 -- $61,750 0 13,160 Executive Officer 1995 205,000 -- -- 30,000 26,399 Russell J. Trunk................. 1997 $124,000 $78,600(6) -- 0 -- Former Senior Vice President, 1996 124,000 -- -- 10,000 $ 15,282 Operations 1995 118,000 -- -- 6,000 31,666 John McCormick................... 1997 $103,997 -- -- 3,000 -- Vice President, Sales and Marketing; Vice President, Retail Sales in 1996 and 1995
- ------------------------- (1) Perquisites provided to the named executive officers by Stokely did not exceed the lesser of $50,000 or 10% of each named executive officer's total annual salary during fiscal 1995, 1996 or 1997 and, accordingly, are not included. (2) Amount shown in this column represents the value of 25,000 shares of Stokely Common Stock issued to Mr. Wiersma on April 16, 1996, based on the value of Stokely Common Stock at March 31, 1996 ($2.47 per share). See "-- Severance Agreement with Mr. Wiersma." (3) Amounts shown represent the total number of options awarded under the 1985 Incentive Stock Option Plan, the 1994 Executive Stock Option Plan and outside such option plans during the fiscal years indicated. (4) Except as indicated, amounts shown represent contributions by Stokely for the benefit of the named individuals pursuant to the Stokely USA, Inc. Retirement Savings Profit Sharing Plan ("Retirement Savings Plan") and the Split Dollar Plan in the form of premium payments on behalf of the named executive officers during the fiscal years indicated. (5) During fiscal 1997, Mr. Wiersma received $220,000 pursuant to the terms of a severance agreement with Stokely. See "-- Severance Agreement with Mr. Wiersma." (6) Mr. Trunk's bonus payment was not made under Stokely's Annual Incentive Plan. See "--Compensation Committee Report." 56 67 SEVERANCE AGREEMENT WITH MR. WIERSMA On May 29, 1996, Stokely entered into a severance agreement (the "Severance Agreement") with Mr. Wiersma setting forth the terms and conditions of his resignation as President, Chief Executive Officer and Director of Stokely, effective April 16, 1996. Pursuant to the Severance Agreement, Mr. Wiersma will be paid $18,333 per month from April 16, 1996 through May 30, 1998, and in the event of Mr. Wiersma's death, such amounts shall be paid to his spouse, or if she is deceased, to the personal representative of his estate. In the event of a Change of Control of Stokely (as defined in the Contingent Employment Agreements which were in effect during fiscal 1997 and which are discussed herein), the Severance Agreement provides that Mr. Wiersma shall be paid the then present value of such monthly payments in a single sum. For the period commencing April 16, 1996 through May 30, 1998 or such earlier date as of the effective date of coverage for Mr. Wiersma under any other employer's health insurance program, Mr. Wiersma and his eligible dependents are entitled to participate in Stokely's group health and disability insurance programs at the same cost to Mr. Wiersma as of the date of his resignation. Pursuant to the Severance Agreement, Stokely will continue to pay the semi-annual premium of $14,523 under the split dollar life insurance contract covering Mr. Wiersma through May 30, 1998, and Mr. Wiersma shall have the option to purchase the contract from Stokely by paying to Stokely the aggregate value of the premiums paid by Stokely from the date the contract was entered into to the date Mr. Wiersma exercises such option to purchase. In addition, pursuant to the Severance Agreement, in recognition that a portion of the grant of 50,000 shares of restricted Stokely Common Stock to Mr. Wiersma on June 15, 1995 reflected compensation for prior services, vesting of 25,000 shares was accelerated and such shares were issued to Mr. Wiersma. Pursuant to the terms of the restricted stock grant, Stokely is obligated to pay an amount equal to the income tax payable by Mr. Wiersma as a result of the grant of such shares. All rights under agreements and/or plans which Mr. Wiersma had with respect to options granted to him prior to April 16, 1996 also remained in effect in accordance with the terms of such agreements and/or plans. Mr. Wiersma is entitled to all benefits accrued under the Supplemental Employee Retirement Plan ("SERP") payable pursuant to the terms of the SERP, upon Mr. Wiersma's attaining age 65, or, in the event of a Change of Control, Stokely shall pay to Mr. Wiersma the then present value of such benefits, discounted at the rate of 7% per annum, in a single sum. In addition, Mr. Wiersma received $2,530 as payment for the aggregate Stokely contributions accrued for his benefit under the Deferred Compensation Plan. In lieu of outplacement services, Stokely paid to Mr. Wiersma a lump sum of $20,000 and paid $5,000 to Mr. Wiersma's legal counsel for costs incurred in connection with negotiating the Severance Agreement. EMPLOYMENT AGREEMENTS In 1992, Stokely entered into Contingent Employment Agreements with Messrs. Theobald and McCormick. Under the Contingent Employment Agreements, if a change of control occurs, Stokely will continue to employ Mr. Theobald for three years, and Mr. McCormick for one year, following the date of the change of control. "Change of Control," as defined in the Contingent Employment Agreements, includes the acquisition of 20% or more of Stokely Common Stock, a merger, consolidation or reorganization, the sale of substantially all of Stokely's assets or a significant change in the composition of the Stokely Board. In the event of a Change of Control, the employee shall be employed by Stokely for the applicable number of years and shall receive a salary equal to his salary on the date of the Change of Control, subject to annual upward adjustments commensurate with increases awarded to other officers and employees. If, after a Change of Control, Stokely terminates the employee for any reason other than for cause or if the employee elects to terminate his employment for a permitted reason, he shall continue to be paid monthly an amount equal to his then current monthly base salary plus a certain amount of incentive payments and shall continue to be entitled to receive all other employee benefits and perquisites made available to other employees of comparable status until the end of his employment term. If Stokely terminates the employee for "cause" (as defined in the Contingent Employment Agreements), the employee is entitled to receive only his compensation through the date of termination. For purposes of the Contingent Employment Agreements, the current base salary for Mr. Theobald is $170,500, and for Mr. McCormick is $115,000. The amount of the base salary and any incentive payments are reviewed regularly by the Compensation Committee of the Stokely Board. Stokely also has entered into similar Contingent Employment Agreements with other key officers and employees of Stokely. 57 68 DEFERRED COMPENSATION PLAN FOR KEY EXECUTIVES On January 1, 1995, Stokely entered into deferred compensation agreements with Messrs. Theobald and McCormick pursuant to a Deferred Compensation Plan. In accordance with the terms of the Deferred Compensation Plan, Stokely accrues amounts equal to the contributions that would have been made by Stokely under the Retirement Savings Plan but for the maximum annual contribution and compensation limits under the Code. In addition, pursuant to the Deferred Compensation Plan, the executives may elect to defer compensation earned in any year. The maximum amount that may be deferred in any calendar year is 20% of the executives' annual compensation less the maximum amount that may be deferred on an annual basis by such executive pursuant to the Retirement Savings Plan. Interest is accrued on deferrals and Stokely contributions at the rate of interest equal to the average of the U.S. Treasury Bond rate as published in the Wall Street Journal on the last day of the calendar year and the last day of the previous three quarters of the calendar year. Executives may become eligible for receipt of deferred compensation and Stokely contributions under the Deferred Compensation Plan upon death, disability, retirement or termination. The deferred compensation agreements are nonqualified, unfunded contractual liabilities of Stokely. Stokely also has entered into similar deferred compensation agreements with other key officers and employees of Stokely. DEFERRED COMPENSATION AGREEMENT In 1990, Stokely entered into a deferred compensation agreement with Mr. Mount under which Stokely is obligated to pay Mr. Mount (or his designated beneficiaries in the event of his death) deferred compensation in monthly installments of $7,500 for a period of 120 consecutive months (or at his election in one lump sum based upon a present value calculation) following his death, disability or retirement. The agreement constitutes a non-tax qualified, unfunded deferred compensation plan. Mr. Mount retired in April 1993, and Stokely commenced the monthly installment payments at that date. BENEFITS Split Dollar Plan. Stokely established the Split Dollar Plan, effective February 1, 1990, in which Messrs. Mount, Theobald, Trunk and McCormick and other key officers and employees of Stokely participate. The life insurance benefit is equal to four times the executive's salary. The executive pays a portion of the premium representing the economic value of the insurance and Stokely is responsible for the balance of the premium. Stokely may use dividends paid pursuant to the terms of the insurance policies for payment of premium. Upon the executive's death or the retirement of the executive, Stokely will receive all premiums paid by it on behalf of the executive and the executive will receive the remainder of the death benefit or the cash surrender value. For the fiscal year ended March 31, 1997, Mr. Wiersma also participated in the Split Dollar Plan. For further information regarding the Split Dollar Plan arrangement with respect to Mr. Wiersma made in connection with his resignation, see "-- Severance Agreement with Mr. Wiersma." Supplemental Employee Retirement Plan. Stokely established the SERP, effective January 1, 1995, in which Messrs. Theobald and Trunk participate. For Mr. Theobald, the SERP provides a benefit at retirement (based on 25 years of service) of 120 equal monthly payments which equal, on an annual basis, 40% of the salary (excluding bonus) individually earned during the twelve months preceding retirement. For Mr. Trunk, the SERP provides a benefit at retirement (based on 25 years of service) of 120 equal monthly payments which equal, on an annual basis, 20% of the salary (excluding bonus) individually earned during the twelve months preceding retirement. The monthly payment is reduced on a percentage basis of years of service that are less than 25 at the time of retirement. For information relating to the SERP arrangements made with respect to Mr. Wiersma in connection with his resignation, see "-- Severance Agreement with Mr. Wiersma." Retirement Savings Plan. Stokely's Retirement Savings Plan covers all of its eligible employees. Employees are eligible to participate after completing a twelve-month period of 1,000 or more hours of employment. The Retirement Savings Plan involves a Company Profit Sharing Contribution account, a Voluntary Contribution account and a 401(k) Salary Deferral account. Subject to Stokely's operating results, Stokely may make contributions up to 8% of pre-tax profits to the Profit Sharing Contribution account which would be allocated to participants pro rata based upon their eligible compensation. Participants become 20% 58 69 vested in the profit sharing contributions credited to their accounts and the earnings thereon after three years of credited service, and 20% per year thereafter until 100% vested after seven years. Participants also become 100% vested upon death, disability or attainment of age 62. The Voluntary Contribution account permits participants to make voluntary after-tax savings contributions in amounts between 2% and 10% of their annual compensation. Participants in the Voluntary Contribution account are 100% vested in their contributions and the earnings thereon. Under the Retirement Savings Plan, through the 401(k) Salary Deferral account, participants are permitted, subject to the limitations imposed by Section 401(k) of the Internal Revenue Code to make voluntary tax-deferred contributions in amounts between 1% and 10% of their annual compensation. Stokely may make a matching contribution to the 401(k) Salary Deferral account in an amount up to 25% of the first 6% of compensation deferred by the participant for participants who meet all eligibility and participant requirements. Participants in the 401(k) Salary Deferral account are 100% vested in their contributions, Stokely's matching contribution and the earnings thereon. Under the Retirement Savings Plan, a separate account is maintained for each type of account and each participating employee. Participating employees direct the Retirement Savings Plan trustee with respect to the investment of assets held in their accounts among up to six investment options made available by the trustee, including shares of Stokely Common Stock. STOCK OPTION PLANS Incentive Stock Option Plan. Stokely established the 1985 Incentive Stock Option Plan (the "Incentive Stock Option Plan") in which key employees of Stokely and its subsidiaries, as determined by the Compensation Committee, are eligible to participate. As of March 31, 1997, there were 23 eligible employees. The Incentive Stock Option Plan authorizes the grant of options to purchase shares of Stokely Common Stock intended to qualify as incentive stock options under Section 422 of the Code. The Compensation Committee administers the Incentive Stock Option Plan. As of March 31, 1997, options to purchase 79,600 shares of Stokely Common Stock had been granted and were outstanding under the Incentive Stock Option Plan. No additional options will be granted under the Incentive Stock Option Plan, and all outstanding options will be cancelled in connection with the Merger. Executive Stock Option Plan. On June 3, 1994, the Board of Directors of Stokely adopted the Stokely USA, Inc. 1994 Executive Stock Option Plan (the "Executive Stock Option Plan"). The Executive Stock Option Plan was ratified by shareholders of Stokely at the Annual Meeting of Shareholders held on August 26, 1994. All key full-time employees of Stokely and its subsidiaries are eligible to participate in the Executive Stock Option Plan. At March 31, 1997, Stokely and its subsidiaries had 467 eligible employees. The Executive Stock Option Plan provides for the granting of (i) incentive stock options ("ISOs"), (ii) non-qualified stock options ("NSOs"), and (iii) stock appreciation rights ("SARs"). At March 31, 1997, options to purchase 249,817 shares had been granted and were outstanding under the Executive Stock Option Plan and options for a total of 150,183 shares of Stokely Common Stock were available for granting to eligible participants. Options for a total of 258,631 shares of Stokely Common Stock were granted under the Executive Stock Option Plan in fiscal 1997. The Compensation Committee of the Stokely Board, or such other committee appointed by the Stokely Board, administers the Executive Stock Option Plan. Under the Executive Stock Option Plan, the maximum number of shares for which grants may be made to any eligible employee may not exceed 50,000 shares. All outstanding options under the Executive Stock Option Plan will be cancelled or cashed out at no value in connection with the Merger. 59 70 The following table sets forth certain information concerning the grant of stock options to the current executive officers listed in the Summary Compensation Table during the fiscal year ended March 31, 1997. OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL REALIZABLE VALUE % OF TOTAL AT ASSUMED OPTIONS PER SHARE ANNUAL RATES OF GRANTED TO EXERCISE APPRECIATION(1) OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------- NAME GRANTED FISCAL YEAR ($/SH) DATE 5% 10% ---- ------- ------------ --------- ---------- -- --- John McCormick........................ 3,000 1.16% $ 2.8125 9/11/06 $8,859 $9,281
- ------------------------- (1) Amount shown represents the potential realizable value, net of the option exercise price, assuming that the underlying market price of the Stokely Common Stock appreciates in value from the date of the grant to the end of the option term at annualized rates of 5% and 10%. These amounts represent certain assumed rates of appreciation only. Actual gains, if any, on stock option exercises are dependent upon the future performance of the Stokely Common Stock and overall stock market conditions. There can be no assurance that amounts reflected in this table will be achieved. No options issued under the Incentive Stock Option Plan, the Executive Stock Option Plan or outside of either option plans were exercised by any of the named executive officers in the Summary Compensation Table during fiscal 1997. The number and total value of unexercised in-the-money options held by such individuals at March 31, 1997 are shown in the following table. AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
VALUE OF NUMBER OF UNEXERCISED UNEXERCISED IN-THE-MONEY NUMBER OF OPTIONS OPTIONS AT SHARES AT FISCAL YEAR-END FISCAL YEAR END(1) ACQUIRED VALUE ---------------------------- ---------------------------- NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE ---- ----------- -------- ----------- ------------- ----------- ------------- Stephen W. Theobald.......... 0 $0 30,000 -- -- -- Russell J. Trunk............. 0 0 10,000 -- -- -- John McCormick............... 0 0 8,000 -- -- --
- ------------------------- (1) The value of unexercised in-the-money options is based upon the difference between the fair market value of the securities underlying the options of $1.375 at March 31, 1997 and the exercise price of the options. No options held by the named executive officers were in-the-money at March 31, 1997. DIRECTORS' COMPENSATION Non-employee directors receive compensation of $6,000 per year for service on the Stokely Board plus $500 for each Stokely Board or Committee meeting attended. Directors may defer all or any portion of such compensation under a Directors' Deferred Compensation Plan adopted in 1985. Deferred compensation is credited to the account of a participating director in the form of "phantom stock" of Stokely based on the market price at the time of each quarterly credit. Shares credited to the accounts of directors electing to participate in the Directors' Deferred Compensation Plan during the fiscal year ended March 31, 1997, were as follows: Mr. Britt, 3,443 shares; and Mr. Fish, 3,589 shares. In addition, in fiscal 1995, each member of the Stokely Board was granted 5,000 shares of restricted Stokely Common Stock, which vest 25% per year commencing in 1996. Directors who have served two full terms (six years) and are Stokely Board members upon attaining the age 72 become eligible for retirement compensation of $500 per month upon completion of service. 60 71 COMPENSATION COMMITTEE REPORT Stokely shareholders should note that the following Compensation Committee Report was prepared during April 1997 in conjunction with the preparation of Stokely's annual report on Form 10-K (as amended) and, accordingly, does not reflect the decision to proceed with the Merger. Compensation Committee. The Compensation Committee of Stokely reviews and establishes compensation levels and benefits applicable to executive officers and employees of Stokely and makes recommendations with respect to all issues pertaining to executive compensation for ratification by the Stokely Board. Compensation Committee Interlocks and Insider Participation. For the fiscal year ended March 31, 1997, the Compensation Committee of the Stokely Board was composed of Messrs. Fish, Carey, Pelisek and Ms. Knox, each of whom are not officers or employees of Stokely. There are no interlocks, as defined under the rules and regulations of the Securities and Exchange Commission ("SEC"), between the Compensation Committee and corporate affiliates of members of the Compensation Committee. Compensation Committee Report. Under rules established by the SEC, Stokely is required to provide certain data and information regarding the compensation and benefits provided to executive officers of Stokely. The rules require a report of the Compensation Committee which explains the rationale and considerations that led to fundamental compensation decisions affecting such individuals. The Compensation Committee of Stokely has prepared the following report, at the direction of the Stokely Board, for inclusion in this Proxy Statement/Prospectus. It is the policy of Stokely to maintain a compensation program which will attract, motivate, retain and reward employees at all levels of the organization and provide appropriate incentives intended to generate long-term financial results which will benefit Stokely and the shareholders of Stokely. The executive compensation program of Stokely incorporates a pay-for-performance policy that compensates executives for both corporate and individual performance. The executive compensation program is designed to achieve the following objectives: - Provide Stokely with the ability to compete for and retain talented executives that are critical to Stokely's long-term success; - Provide incentives to achieve Stokely's financial performance objectives and strategic business initiatives with the objective of enhancing shareholder value; - Provide competitive compensation packages comparable to those offered by other peer group companies; and - Reward executives for individual performance in long-term strategic management. Stokely's executive compensation package consists of three major components: (i) cash compensation, including base salary and an annual incentive bonus; (ii) long-term incentive compensation in the form of stock options (including options awarded under the Incentive Stock Option Plan and the Executive Stock Option Plan); and (iii) executive benefits. In determining specific cash compensation for executive officers for the fiscal year ended March 31, 1997, the Compensation Committee considered the following factors: 1. Stokely performance relative to certain goals and objectives in effect during the prior year; 2. Individual performance relative to certain goals and objectives in effect during the prior year; 3. Stokely performance compared to broader based industry performance; and 4. Salary surveys for positions with similar responsibilities in similar sized companies. The annual incentive bonus is determined under Stokely's Annual Incentive Plan (the "Incentive Plan") which was developed to recognize and reward performance and provide a total annual cash bonus consistent with Stokely's executive compensation strategy. Under the Incentive Plan, executives earn incentive 61 72 compensation if Stokely achieves various targets set for profits (defined as income before taxes and before profit-sharing expense) as a percent of sales. Incentive compensation earned is established as a percentage of each officer's base salary, and the applicable percentage is dependent upon the individual's base salary amount. If the financial performance of Stokely falls below the threshold level, no awards will be earned. If threshold levels of the performance indicators are achieved, the Incentive Plan provides for payment of incentive compensation in amounts ranging between 10% to 25% of an individual's base salary. If target levels are achieved by Stokely, the Incentive Plan provides for payment of incentive compensation in amounts ranging from 20% to 50% of an individual's base salary. Incentive compensation may exceed 50% of an individual's base salary if Stokely surpasses target levels, but may not exceed 75% of an individual's base salary. Prior to payment of incentive compensation after completion of Stokely's financial audit, the Compensation Committee certifies the performance objectives of the Incentive Plan have been met. Based on the above noted factors and economic constraints facing Stokely, there were no increases in executive base salaries for the fiscal year ended March 31, 1997. No incentive bonus payments were made to executive officers for the fiscal year ended March 31, 1997 (with the exception of Mr. Trunk) because the targets set for profits under the above-described Incentive Plan were not achieved. Mr. Trunk was paid a lump-sum bonus of $78,600 on April 30, 1996 to compensate him for postponing his planned retirement for one year to assist Stokely in implementation of the core business restructuring. The base salary for the Chief Executive Officer is determined by the Compensation Committee in general accordance with the same criteria noted herein for determining compensation for all executive officers. Based on those factors, the Compensation Committee implemented no increase in Mr. Theobald's base salary for the fiscal year ended March 31, 1997. No incentive bonus payments were made to Mr. Theobald for the fiscal year ended March 31, 1997, because the targets set for profits under the above-described Incentive Plan were not achieved. The Committee did note that at Mr. Theobald's request, no compensation adjustment was made in his base salary at the time of his promotion to President and Chief Executive Officer and that appropriate adjustments would be made based on the Committee's assessment of his performance. The Compensation Committee believes aligning the financial interests of employees more closely with those of the shareholders influences the creation of shareholder value. To encourage stock ownership among executive and other employees, Stokely has two stock option plans which it administers, the Incentive Stock Option Plan and the Executive Stock Option Plan. The stock option plans are designed to encourage and create ownership and retention of Stokely Common Stock by key employees. Through the option grants, the objective of aligning key employees' long-range interests with those of shareholders may be met by providing key employees with the opportunity to build, through achievement of corporate goals, a meaningful stake in Stokely. In fiscal 1997, the Committee granted a total of 258,631 options under the Executive Stock Option Plan. The options were awarded as an incentive to help assure successful implementation of the core business restructuring undertaken in September, 1996. The Committee, in a departure from past practice, elected to grant options to all fulltime employees, with the exception of Messrs. Theobald and Trunk and certain other senior executives. Mr. McCormick received an option grant of 3,000 shares in fiscal 1997 prior to being promoted to his current position of Vice President of Sales and Marketing. The Committee believes this broad option grant approach should contribute to successful implementation of the restructure initiatives by acknowledging the importance of individual employee contributions to the organization's success and by providing an opportunity to, and an incentive for, employees to share in that success. For a discussion of the executive benefits made available to officers of Stokely during the fiscal year ended March 31, 1997, see "-- Compensation of Executive Officers and Directors -- Benefits." Executive benefits paid by Stokely to its executive officers were based upon each executive officer's contribution to the success of Stokely and reflected each executive officer's position, salary and specific responsibilities. 62 73 COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN PERFORMANCE GRAPH FOR STOKELY USA, INC. Set forth below is a line graph comparing the cumulative shareholder return on the shares of Stokely Common Stock, based on the market price of the Stokely Common Stock and assuming reinvestment of dividends, with the cumulative total return of companies included in the Center for Research on Security Prices Index for Nasdaq Stock Market companies and a peer group chosen by Stokely. The peer group includes Nasdaq-listed companies included in Standard Industrial Classification (SIC) codes 2030-2039 (Canned, Frozen and Preserved Fruits, Vegetables and Food Specialties) and AMEX and NYSE companies with 2030-2039 SIC codes. [graph to be inserted in definitive Proxy Statement] COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
STOKELY USA, INC. NASDAQ NYSE/AMEX/NASDAQ ----------------- ------ ---------------- 3/31/92 $100.0 $100.0 $100.0 3/31/93 95.4 115.0 113.0 3/31/94 98.5 124.1 105.4 3/31/95 67.7 138.0 131.8 3/29/96 30.4 187.4 163.5 3/31/97 16.2 208.3 209.8
The index level for all series was set to $100.0 on 3/31/92. 63 74 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS The following table sets forth certain information regarding the beneficial ownership of Stokely's Common Stock as of October 31, 1997 (except as noted below), (i) by each person who is known to Stokely to beneficially own more than 5% of the Stokely Common Stock, (ii) by each of the current and former executive officers of Stokely appearing in the Summary Compensation Table, (iii) by each director of Stokely, and (iv) by all current directors and executive officers as a group.
NUMBER OF PERCENT OF SHARES OF SHARES OF COMMON COMMON STOCK STOCK BENEFICIALLY NAME BENEFICIALLY OWNED(1) OWNED ---- --------------------- ------------------ Exeter Ventures, UBOT(2).................................. 916,700 8.05% Morgan Stanley/Miller Anderson & Sherrerd(3).............. 781,000 6.86 Heartland Advisors(4)..................................... 640,000 5.62 Dimensional Fund Advisors(5).............................. 591,000 5.19 Vernon L. Wiersma(6)...................................... 25,000 * Stephen W. Theobald(7).................................... 200,691 1.76 John R. McCormick(8)...................................... 13,175 * Frank J. Pelisek.......................................... 10,900 * Orren J. Bradley.......................................... 3,000 * Russell W. Britt.......................................... 2,700 * Charles J. Carey.......................................... 2,700 * James H. DeWees........................................... 3,500 * Ody J. Fish............................................... 3,500 * Carol Ward Knox........................................... 8,500 * Thomas W. Mount........................................... 181,756 1.60 All current directors and executive officers as a group (14 persons)............................................ 448,922 3.92%
- ------------------------- * Amount represents less than 1% of the total shares of Stokely Common Stock outstanding. (1) Unless otherwise indicated, includes shares of Stokely Common Stock held directly by the individuals as well as by members of such individual's immediate family who share the same household, shares held in trust and other indirect forms of ownership over which shares the individuals exercise sole or shared voting and/or dispositive power. (2) Based on a Schedule 13D, dated July 17, 1997, filed by Exeter Ventures, UBOT, located at P.O. Box 4226, Ormond Beach, FL 32175, which indicated sole voting power of 916,700 shares of Stokely Common Stock. (3) Based on a Schedule 13G, dated February 14, 1997, filed by Morgan Stanley Group, Inc. and Miller Anderson & Sherrerd LLP, located at 1585 Broadway, New York, New York 10036 and 1 Tower Bridge, Suite 1100, West Conshohocken, PA 19428, respectively, which indicated shared dispositive and voting power of 781,000 shares of Stokely Common Stock. (4) Based on a Schedule 13G, dated February 12, 1997, filed by Heartland Advisors, Inc., located at 790 North Milwaukee Street, Milwaukee, WI 53202, which indicated sole dispositive voting power of 640,000 shares of Stokely Common Stock. (5) Based on a Schedule 13G, dated February 5, 1997, filed by Dimensional Fund Advisors, located at 1299 Ocean Avenue, 11th Floor, Santa Monica, CA 90401, which indicated sole voting power of 409,400 shares of Stokely Common Stock and shared voting power of 181,600 shares of Stokely Common Stock. (6) On April 16, 1996, Mr. Wiersma resigned as President and Chief Executive Officer of Stokely. (7) Includes 162,191 shares of Stokely Common Stock held by Mr. Theobald as co-trustee for which he has shared dispositive and voting power with The First National Bank of Chicago, and 30,000 shares of Stokely Common Stock issuable pursuant to presently exercisable stock options. (8) Includes 8,000 shares of Stokely Common Stock issuable pursuant to presently exercisable stock options. 64 75 INDEPENDENT AUDITORS Deloitte & Touche, LLP served as Stokely's independent auditors for the fiscal year ended March 31, 1997 and are serving in such capacity for the current fiscal year. The appointment of independent auditors is made annually by the Stokely Board. The decision of the Stokely Board is based on the recommendation of the Audit Committee of the Stokely Board, which reviews both the audit scope and estimated audit fees. Representatives of Deloitte & Touche, LLP are expected to be present at the Annual Meeting and will have the opportunity to make a statement if they desire to do so and to respond to appropriate questions. CERTAIN TRANSACTIONS On March 21, 1996, the United States District Court for the Eastern District of Wisconsin dismissed a consolidated class action lawsuit brought against Stokely, all of the individual members of the Stokely Board (in both their capacity as individual members of the Board of Directors and as executive officers, as applicable), William Blair & Company and Dain Bosworth, Inc. This class action was a consolidated action, including the action filed by Philip D. Freeman in January 1995 and a second class action lawsuit filed by Daniel J. Sweeney in May 1995 which made similar claims against Stokely and certain officers arising from the same facts and events. In conjunction with dismissing the consolidated action, the court denied plaintiff's motion to certify the class as moot. The lawsuit raised claims under various provisions of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The plaintiffs alleged that they sustained losses in connection with the purchase of shares of Stokely Common Stock during the period from October 17, 1994 to December 19, 1994, as a result of Stokely's alleged misleading statements and alleged omissions to state material facts in the prospectus and other materials. The court dismissed the action after finding that the alleged misrepresentations were not actually made by Stokely and/or were not misrepresentations, and that the alleged omissions of material facts were in fact adequately disclosed to investors. Further, the court refused to permit the plaintiff to amend the complaint, stating that an amendment would be futile because the court's dismissal was based on the conclusion that the prospectus and other materials did not contain the misrepresentations or omissions alleged in the complaint. A judgment dismissing the case was entered March 22, 1996. On April 8, 1996, the plaintiff filed a Motion for Reconsideration requesting that the Court reconsider its decision refusing plaintiff leave to amend the complaint. On March 27, 1997, the court denied that motion and the judgment dismissing the case became final on April 28, 1997 as the appeal period expired without an appeal being filed. Stokely has adopted a policy governing related party transactions providing that any transaction by and between Stokely and officers, directors, principal shareholders or their affiliates will be for bona fide business purposes and on terms no less favorable to Stokely than those obtainable in arms-length transactions with unaffiliated parties, and will be subject to approval of a majority of Stokely's outside directors. SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act requires Stokely's officers and directors, and persons who own more than ten percent of the shares of Stokely Common Stock outstanding, to file reports of ownership and changes in ownership with the SEC by certain dates. Officers, directors and greater than ten percent shareholders are required by regulation to furnish Stokely with copies of all Section 16(a) forms they file. Based upon review of the information provided to Stokely, Stokely believes that during the fiscal year ended March 31, 1997, officers, directors and greater than ten percent shareholders complied with all Section 16(a) filing requirements. In July 1997, Stokely's non-employee directors, including Messrs. Charles J. Carey, Frank J. Pelisek, Orren J. Bradley, James H. DeWees, Thomas W. Mount, Russell W. Britt, Ody J. Fish and Ms. Carol Ward Knox reported grants of restricted stock awarded to each of them in May 1995 which inadvertently were not reported on a timely basis in fiscal 1996 as required by Section 16(a) of the Exchange Act. 65 76 PROPOSAL TO ADJOURN THE ANNUAL MEETING (PROPOSAL NO. 3) As described herein, the Stokely Board believes that shareholder approval of the Merger proposal is in the best interests of Stokely's shareholders. Also as noted herein, approval of the Merger proposal requires an affirmative vote by holders of two-thirds of the outstanding shares of Stokely Common Stock as of the Voting Record Date. In the event that the required vote for approval of the Merger proposal has not been obtained by the date of the Annual Meeting, including any adjournments thereof, the Stokely Board intends to sponsor a proposal (or proposals), at such times and as often as necessary, to adjourn the Annual Meeting to a later date for the purpose of soliciting additional votes on the Merger proposal, and the proxies named in the Stokely Board's proxy card will vote shares on a Stokely Board sponsored or recommended adjournment proposal as indicated on the card. The time, date and place at and to which the Annual Meeting would be reconvened will be announced at the Annual Meeting, and at any adjournments thereof. Chiquita or Stokely may terminate the Merger Agreement if the Merger is not consummated by January 31, 1998 (the "Termination Date"). Furthermore, certain other closing conditions depend upon the Merger being consummated on or before the Termination Date. Due to the January 15, 1998 date of the Annual Meeting, the Termination Date will occur before any adjourned meeting could be conveniently reconvened. If the Annual Meeting is adjourned to a later date, the Stokely Board would seek to obtain an extension of the Termination Date from Chiquita and would seek to ensure that the other closing conditions dependent upon the January 31, 1998 Termination Date were not adversely affected. No assurances can be made that Chiquita will agree to the extension, or that the other closing conditions would not be adversely affected. See "PROPOSAL TO APPROVE THE MERGER -- The Merger Agreement: Amendment; Termination." The fact of the possible extension of the Termination Date will not be deemed to invalidate proxies previously received, unless Stokely receives a later-dated proxy superseding a prior one. PROPOSALS BY STOKELY SHAREHOLDERS To be considered for inclusion in the proxy statement relating to the 1998 Annual Meeting of Shareholders of Stokely, in the event the Merger is not consummated, shareholder proposals must be received at the principal executive offices of Stokely located at 1230 Corporate Center Drive, Oconomowoc, Wisconsin 53066-0248, Attention: Robert M. Brill, Secretary, no later than August 7, 1998. If such proposal is in compliance with all of the requirements of 17 C.F.R. sec. 240.14a-8 ("Rule 14a-8") of the Rules and Regulations under the Exchange Act, it will be included in the proxy statement and set forth on the appointment form of proxy issued for such annual meeting of shareholders. OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE ANNUAL MEETING The Stokely Board knows of no business which will be presented for consideration at the Annual Meeting or any adjournments or postponements thereof other than as stated in the Notice of Annual Meeting of Shareholders. If, however, other matters are properly brought before the Annual Meeting, including, among other things, a motion to adjourn the Annual Meeting in order to permit further solicitation of proxies by Stokely, it is the intention of the persons named in the accompanying Proxy to vote the shares of Stokely Common Stock represented thereby on such matters in accordance with their best judgment; provided, however, that no Proxy which is voted against the proposals set forth in this Proxy Statement/Prospectus will be voted in favor of any adjournment. Copies of Stokely's Form 10-K, as amended (without exhibits), for the fiscal year ended March 31, 1997 and Form 10-Q for the quarter ended September 30, 1997, as filed with the SEC, are being furnished herewith; additional copies may be obtained by shareholders of record upon written request to Stokely USA, Inc., Robert M. Brill, Secretary, 1230 Corporate Center Drive, Oconomowoc, Wisconsin 53066-0248. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE REQUESTED TO SIGN AND PROMPTLY RETURN THE ACCOMPANYING PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE. 66 77 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Article VI of Chiquita's By-Laws provides directors and officers with the right to indemnification and advancement of expenses to the fullest extent not prohibited by the New Jersey Business Corporation Act. Directors and officers of Chiquita are indemnified generally against expenses and liabilities incurred in connection with any proceedings, including proceedings by or on behalf of Chiquita, relating to their service to or at the request of Chiquita. However, no indemnification may be made if a final adjudication establishes that a person's acts or omissions (a) breached the person's duty of loyalty to Chiquita or its shareholders, (b) were not in good faith or involved a knowing violation of law, or (c) resulted in receipt by the person of an improper personal benefit. Section VIII of Chiquita's Certificate of Incorporation (Restated) also limits the liability of Chiquita's directors and officers, to the fullest extent permitted by the New Jersey Business Corporation Act, to Chiquita or its shareholders for monetary damages for breach of any duty, except in the situations set forth in (a) through (c) above. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) See Index to Exhibits commencing on page II-4. The Registrant will furnish to the Commission upon request its long-term debt instruments not furnished pursuant to this Item. (b) Financial statement schedule Schedule II -- Allowance for Doubtful Accounts Receivable (filed as a part of the Registrant's Annual Report on Form 10-K for the year ended December 31, 1996 and incorporated herein by reference). (c) Opinion of Financial Advisor to Stokely USA, Inc. (included as Exhibit 99.2 and to be attached as Appendix B to the Proxy Statement/Prospectus forming a part of this Registration Statement) ITEM 22. UNDERTAKINGS. Regulation S-K, Item 512 Undertakings * (b) The undersigned Registrant hereby undertakes that for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the Registration Statement shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. * (h) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. * Paragraph references correspond to those of Item 512 of Regulation S-K. II-1 78 Form S-4 Undertakings (b) The undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the Registration Statement through the date of responding to the request. (c) The undersigned Registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the Registration Statement when it became effective. II-2 79 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Cincinnati, State of Ohio, as of the 21st day of November, 1997. 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 Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated as of the 21st day of November, 1997.
SIGNATURE TITLE --------- ----- /s/ CARL H. LINDNER Chairman of the Board and Chief Executive - ----------------------------------------------------- Officer Carl H. Lindner /s/ KEITH E. LINDNER Vice Chairman of the Board - ----------------------------------------------------- Keith E. Lindner /s/ STEVEN G. WARSHAW Director, President, Chief Operating Officer - ----------------------------------------------------- and Chief Financial Officer Steven G. Warshaw /s/ FRED J. RUNK Director - ----------------------------------------------------- Fred J. Runk Director - ----------------------------------------------------- Jean Head Sisco /s/ WILLIAM W. VERITY Director - ----------------------------------------------------- William W. Verity /s/ OLIVER W. WADDELL Director - ----------------------------------------------------- Oliver W. Waddell /s/ WILLIAM A. TSACALIS Vice President and Controller - ----------------------------------------------------- (Chief Accounting Officer) William A. Tsacalis
II-3 80 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- *2-a Agreement and Plan of Reorganization, dated September 17, 1997, among Chiquita Brands International, Inc., Chiquita Acquisition Corp. and Stokely USA, Inc. (to be included as Appendix A to the Proxy Statement/Prospectus forming a part of this Registration Statement) filed as Exhibit 2.1 to Stokely's Current Report on Form 8-K dated September 17, 1997 *2-b Letter agreement among Chiquita, Acquisition Sub and Stokely relating to the interpretation of certain terms set forth in the Merger Agreement, filed as Exhibit 2.1 to Stokely's Quarterly Report on Form 10-Q for the Quarter ended September 30, 1997 *3-a Second Restated Certificate of Incorporation, filed as Exhibit 3(a) to Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, as amended by the Certificate of Amendment establishing the terms of the Series B Preferred Stock, filed as Exhibit 3(a) to Quarterly Report on Form 10-Q for the quarter ended June 30, 1996 and by the Certificate of Amendment establishing the terms of the Series C Preference Stock, filed as Exhibit 3.1 to Current Report on Form 8-K dated September 15, 1997 *3-b By-Laws, filed as Exhibit 3-b to Annual Report on Form 10-K for the year ended December 31, 1992 *4 Indenture dated as of February 15, 1994 between Chiquita and The Fifth Third Bank, Trustee, with respect to Senior Debt Securities, under which Chiquita's 9 1/8% Senior Notes due 2004 and Chiquita's 10 1/4% Senior Notes due 2006 have been issued (incorporated by reference to Exhibit 4(c) of Registration Statement 333-00789), as supplemented by the First Supplemental Indenture dated as of June 15, 1994 (incorporated by reference to Exhibit 6(a)99(c) to Quarterly Report on Form 10-Q for the quarter ended June 30, 1994) and by the Second Supplemental Indenture dated as of July 15, 1996 (incorporated by reference to Exhibit 4 to Quarterly Report on Form 10-Q for the quarter ended June 30, 1996); and as further supplemented by the Certificate of the Vice President and Controller of Chiquita establishing the terms of the 9 1/8% Senior Notes (incorporated by reference to Exhibit 7(c)(3) to Current Report on Form 8-K dated February 8, 1994) and by the Terms of 10 1/4% Senior Notes approved by the Executive Committee of the Board of Directors of Chiquita (incorporated by reference to Exhibit 7(c)99.6 to Current Report on Form 8-K dated July 22, 1996) 5 Opinion of Counsel 8 Opinion of Michael Best & Fredrich LLP *10-a Lease of Lands and Operating Contract between United Brands Company, Chiriqui Land Company, Compania Procesadora de Frutas and the Republic of Panama, dated January 8, 1976, effective January 1, 1976, filed as Exhibit 10-a to Annual Report on Form 10-K for the year ended December 31, 1993 *10-b Agreement dated January 11, 1996 effective January 1, 1996 between Tela Railroad Company and the Honduran National Railroad, filed as Exhibit 10-b to Annual Report on Form 10-K for the year ended December 31, 1995 *10-c Stock Purchase Agreement dated December 20, 1995 between Smithfield Foods, Inc. ("Smithfield") and the Company filed as Exhibit 7.1 to Schedule 13D dated December 20, 1995 filed by the Company and certain other persons with respect to Smithfield common stock *10-d Credit Agreement dated December 31, 1996 among Chiquita Brands International, Inc., The First National Bank of Boston, as administrative agent, and the financial institutions which are lenders thereunder relating to the Company's $125 million revolving credit facility, filed as Exhibit 10-d to Annual Report on Form 10-K for the year ended December 31, 1996
II-4 81
EXHIBIT NUMBER DESCRIPTION - ------- ----------- Executive Compensation Plans *10-e 1986 Stock Option and Incentive Plan, as amended, filed as Exhibit 10-e to Annual Report on Form 10-K for the year ended December 31, 1996 *10-f Individual Stock Option Plan and Agreement, filed as Exhibit 4 to Registration Statement on Form S-8 No. 33-25950 dated December 7, 1988 *10-g Amended and Restated Deferred Compensation Plan, filed as Exhibit 10-g to Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 *10-h Deferred Compensation Plan for Board of Directors of Chiquita Brands International, Inc. dated January 1, 1997, filed as Exhibit 10-h to Annual Report on Form 10-K for the year ended December 31, 1996 *11 Computation of Earnings Per Common Share, filed as Exhibit 11 to Annual Report on Form 10-K for the year ended December 31, 1996 and to Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 *13 Chiquita Brands International, Inc. 1996 Annual Report to Shareholders (pages 25 through 50 and page 52), filed as Exhibit 13 to Annual Report on Form 10-K for the year ended December 31, 1996 *21 Subsidiaries of Registrant, filed as Exhibit 21 to Annual Report on Form 10-K for the year ended December 31, 1996 23-a Consent of Ernst & Young LLP 23-b Consent of Deloitte & Touche, LLP 23-c Consent of Hutton, Nelson & McDonald LLP 23-d Consent of Counsel (included in Exhibit 5) 23-e Consent of Donaldson, Lufkin & Jenrette Securities Corporation 23-f Consent of Michael Best & Fredrich LLP (included in Exhibit 8) 24 Powers of Attorney 99.1 Opinion of Financial Advisor (Donaldson, Lufkin & Jenrette Securities Corporation) 99.2 Form of Proxy
- ------------------------- *Incorporated by reference. II-5 EX-5 2 OPINION OF COUNSEL 1 EXHIBITS 5 and 23-d Robert W. Olson Senior Vice President, General Counsel and Secretary Chiquita Brands International, Inc. 250 East Fifth Street Cincinnati, Ohio 45202 November 21, 1997 Chiquita Brands International, Inc. 250 East Fifth Street Cincinnati, Ohio 45202 Dear Sirs: I have acted as counsel to Chiquita Brands International, Inc. ("Chiquita") in connection with a Registration Statement on Form S-4, filed with the Securities and Exchange Commission on November 21, 1997 (the "Registration Statement"), relating to 3,204,349 shares of Chiquita's Common Stock (the "Shares") which may be issued by Chiquita in connection with the acquisition of Stokely USA, Inc. (the "Acquisition"). The Acquisition will be carried out pursuant to the terms of an Agreement and Plan of Reorganization (the "Merger Agreement"). In connection with my opinion set forth below, I have examined such records and documents and have made such investigations of law and fact as I have deemed necessary. Based upon the foregoing, it is my opinion that the registration and issuance of the Shares covered by the Registration Statement have been duly authorized by all necessary corporate action of Chiquita and that, assuming compliance with the terms of the Merger Agreement, the Shares issued in connection with the Acquisition will be legally issued, fully paid and non-assessable. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to me under the caption "Legal Matters" in the prospectus forming a part of the Registration Statement. Very truly yours, /s/ Robert W. Olson EX-8 3 OPINION OF MICHAEL BEST AND FRIEDRICH LLP 1 EXHIBIT 8 FORM OF FEDERAL INCOME TAX OPINION TO BE DATED THE EFFECTIVE DATE OF THE PROXY STATEMENT-PROSPECTUS Board of Directors Stokely USA, Inc. P.O. Box 248 Oconomowoc, WI 53066 Dear Board Member: You have requested our opinion with respect to certain federal income tax consequences of the proposed merger (the "Merger") of Chiquita Acquisition Corp. ("Acquisition Sub"), a newly-formed, wholly-owned subsidiary of Chiquita Brands International, Inc. ("Chiquita"), with and into Stokely USA, Inc. ("Stokely"). In connection with this opinion, we have examined and relied upon the following: (i) the Agreement and Plan of Reorganization (the "Agreement") dated as of September 17, 1997, by and among Chiquita, Acquisition Sub and Stokely, (ii) (Chiquita's Registration Statement on Form S-4, including the Proxy Statement-Prospectus contained therein, filed with the Securities and Exchange Commission on November 21, 1997 ("Registration Statement"); (iii) the representations and undertakings of Chiquita, Acquisition Sub and Stokely, copies of which are attached hereto as Exhibits A and B; and (iv) certifications of certain shareholders of Stokely, copies of which are attached hereto as Exhibit C.(1) In our examination, we have assumed the genuineness of all signatures, the legal capacity of all natural persons, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed, faxed or photostatic copies and the authenticity of the originals of such copies. We have not attempted to verify independently the accuracy of any of the information contained in these documents. In addition, we have assumed that the transactions contemplated by the Agreement will be consummated in accordance with the Agreement and as described in the Proxy Statement-Prospectus and that the Merger will qualify as a statutory merger under the applicable laws of the State of Michigan. - --------------------- (1) All capitalized terms used herein and not otherwise defined shall have the same meaning as they have in the Agreement. 2 Stokely USA, Inc. To Be Dated the Effective Date of the Proxy Statement-Prospectus Page 2 Based upon and subject to the foregoing, and the conditions and limitations expressed elsewhere herein, we are of the opinion for federal income tax purposes that: 1. The Merger will qualify as a reorganization within the meaning of Section 368(a)(1)(A) and 368(a)(2)(E) of the Code, and Chiquita, Acquisition Sub and Stokely will each be "a party to a reorganization" within the meaning of Section 368(b) of the Code. 2. No gain or loss will be recognized by a Stokely stockholder upon the exchange of Stokely Common Stock solely for Chiquita Common Stock pursuant to the Merger (except in respect of cash received in lieu of a financial share of Chiquita Common Stock, as discussed below). 3. A Stokely stockholder who receives cash in lieu of a fractional share interest in Chiquita Common Stock in the Merger will be treated as if he or she actually received such fractional share interest which was subsequently redeemed by Chiquita. Such cash will be treated as having been received as full payment in exchange for the stock redeemed as provided in Section 302(a) of the Code. Gain or loss will be recognized upon such exchange, and will be capital gain or loss, provided that the Stokely Common Stock was a capital asset in the hands of the holder on the date of the Merger. 4. A Stokely stockholder's initial aggregate adjusted tax basis in the shares of Chiquita Common Stock received in the exchange (including any fractional share to which he or she may be entitled) will be equal to the aggregate adjusted tax basis of the shares of Stokely Common Stock surrendered therefor. 5. The holding period of Chiquita Common Stock received by a Stokely stockholder pursuant to the Merger (including any fractional share interest to which he or she may be entitled) will include holding period during which the Stokely Common Stock exchanged therefor was held, provided that the Stokely Common Stock surrendered was a capital asset on the date of the Merger. The foregoing is only a general description of certain anticipated federal income tax consequences of the Merger for Stockholders who are U.S. persons (as defined in Section 7701(a)(30) of the Code) and who hold their shares as capital assets, without regard to the particular facts and circumstances of the tax situation of each stockholder. It may not apply to a 3 Stokely USA, Inc. To Be Dated the Effective Date of the Proxy Statement-Prospectus Page 3 holder subject to special treatment under the Code, such as a holder that is a bank, an insurance company, a dealer in securities or foreign securities, a tax-exempt organization or that acquired its Stokely stock pursuant to the exercise of an employee stock option or otherwise as compensation. The discussion does not purport to be a complete analysis of all potential tax effects of the Merger and related transactions, and does not, for example, address any tax consequences that may result from cancellation of Stokely options and warrants, the forgiveness by Stokely suppliers of any accounts receivable from Stokely, or of the exchange by Stokely debt holders of debt for Chiquita Common Stock. The discussion does not address the state, local or foreign tax consequences of the Merger. Our opinion is based on the Code, Treasury Regulations thereunder, administrative rulings and practice and Court decisions as of the date hereof. All the foregoing are subject to change (which change could be retroactive), and any such change could affect the continuing validity of this opinion. This opinion is not binding on the Internal Revenue Service (the "Service") and there can be no assurance, and none is hereby give, that the Service will not take a position contrary to one or more opinions reflected herein or that any of the opinions set forth above will be upheld by the courts if challenged by the Service. We consent to the filing of this opinion as an exhibit to the Registration Statement and to the references to us under the captions "SUMMARY - - Certain Federal Income Tax Consequences" and "PROPOSAL TO APPROVE THE MERGER - The Merger Agreement - Certain Federal Income Tax Consequences." In giving this consent, however, we do not admit that we are within the category of persons whose consent is required by Section 7 of the Securities Act of 1933, as amended. Very truly yours, MICHAEL BEST & FRIEDRICH LLP EX-23.A 4 CONSENT OF ERNST & YOUNG LLP 1 Exhibit 23-a CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in the Registration Statement of Chiquita Brands International, Inc. ("Chiquita") on Form S-4 filed on November 21, 1997 and related Proxy Statement/Prospectus of Stokely USA, Inc. and Chiquita for the registration of shares of Chiquita's common stock and to the incorporation by reference therein of our report dated February 19, 1997, with respect to the consolidated financial statements and schedule of Chiquita included (or incorporated by reference) in its Annual Report (Form 10-K) for the year ended December 31, 1996, filed with the Securities and Exchange Commission. /S/ ERNST & YOUNG LLP Cincinnati, Ohio November 21, 1997 EX-23.B 5 CONSENT OF DELOITTE & TOUCHE, LLP 1 Exhibit 23-b CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in this Registration Statement of Chiquita Brands International, Inc. on Form S-4 of our report dated June 19, 1997 (October 10, 1997 as to Note L) appearing in the Annual Report on Form 10-K/A of Stokely USA, Inc. for the year ended March 31, 1997 and incorporated by reference in the Chiquita Brands International Inc. Current Report on Form 8-K dated November 20, 1997, and to the reference to our firm under the heading "Experts" in the Registration statement. /s/ DELOITTE & TOUCHE, LLP Milwaukee, Wisconsin November 21, 1997 EX-23.C 6 CONSENT OF HUTTON,NELSON, AND MCDONALD LLP 1 Exhibit 23-c CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in the Registration Statement of Chiquita Brands International, Inc. ("Chiquita") on Form S-4 filed on November 21, 1997 and related Proxy Statement/Prospectus of Stokely USA, Inc. and Chiquita for the registration of shares of Chiquita's common stock and to the incorporation by reference therein of our report dated March 26, 1997, with respect to the financial statements of Owatonna Canning Company for the years ended February 28, 1997, February 29, 1996 and February 28,1995 included in the Chiquita Current Report on Form 8-K dated September 15, 1997, filed with the Securities and Exchange Commission. /S/ HUTTON, NELSON & MCDONALD LLP Oakbrook Terrace, Illinois November 21, 1997 EX-23.E 7 CONSENT OF DONALDSON, LUFKIN,JENRETTE 1 Exhibit 23-e CONSENT OF FINANCIAL ADVISOR We consent to the inclusion in the Registration Statement of Chiquita Brands International, Inc. ("Chiquita") on Form S-4 filed on November 21, 1997 and related Proxy Statement/Prospectus of Stokely USA, Inc. ("Stokely") and Chiquita relating to the merger of Stokely into a wholly-owned subsidiary of Chiquita (the "Merger") of our report dated September 17, 1997, with respect to the fairness to the stockholders of Stokely from a financial point of view of the Merger. /s/ Eric M. Jensen DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION New York, New York November 20, 1997 EX-24 8 POWERS OF ATTORNEY 1 Exhibit 24 POWER OF ATTORNEY I appoint each of Robert W. Olson and William A. Tsacalis as my attorneys-in-fact to (a) sign a Form S-4 Registration Statement to be filed by Chiquita Brands International, Inc., registering shares of its Capital Stock to be issued in connection with the acquisition of Stokely USA, Inc., and any amendments (including post-effective amendments) to such Registration Statement and (b) file such Registration Statement and amendments (with all exhibits and related documents) with the Securities and Exchange Commission. Executed pursuant to the requirements of the Securities Act of 1933, on November 19, 1997 at Cincinnati, Ohio. /s/ Carl H. Lindner -------------------- Carl H. Lindner 2 POWER OF ATTORNEY I appoint each of Robert W. Olson and William A. Tsacalis as my attorneys-in-fact to (a) sign a Form S-4 Registration Statement to be filed by Chiquita Brands International, Inc., registering shares of its Capital Stock to be issued in connection with the acquisition of Stokely USA, Inc., and any amendments (including post-effective amendments) to such Registration Statement and (b) file such Registration Statement and amendments (with all exhibits and related documents) with the Securities and Exchange Commission. Executed pursuant to the requirements of the Securities Act of 1933, on November 19, 1997 at Cincinnati, Ohio. /s/ Keith E. Lindner -------------------- Keith E. Lindner 3 POWER OF ATTORNEY I appoint each of Robert W. Olson and William A. Tsacalis as my attorneys-in-fact to (a) sign a Form S-4 Registration Statement to be filed by Chiquita Brands International, Inc., registering shares of its Capital Stock to be issued in connection with the acquisition of Stokely USA, Inc., and any amendments (including post-effective amendments) to such Registration Statement and (b) file such Registration Statement and amendments (with all exhibits and related documents) with the Securities and Exchange Commission. Executed pursuant to the requirements of the Securities Act of 1933, on November 17, 1997 at Cincinnati, Ohio. /s/ Steven G. Warshaw --------------------- Steven G. Warshaw 4 POWER OF ATTORNEY I appoint each of Robert W. Olson and William A. Tsacalis as my attorneys-in-fact to (a) sign a Form S-4 Registration Statement to be filed by Chiquita Brands International, Inc., registering shares of its Capital Stock to be issued in connection with the acquisition of Stokely USA, Inc., and any amendments (including post-effective amendments) to such Registration Statement and (b) file such Registration Statement and amendments (with all exhibits and related documents) with the Securities and Exchange Commission. Executed pursuant to the requirements of the Securities Act of 1933, on November 19, 1997 at Cincinnati, Ohio. /s/ Fred J. Runk --------------------- Fred J. Runk 5 POWER OF ATTORNEY I appoint each of Robert W. Olson and William A. Tsacalis as my attorneys-in-fact to (a) sign a Form S-4 Registration Statement to be filed by Chiquita Brands International, Inc., registering shares of its Capital Stock to be issued in connection with the acquisition of Stokely USA, Inc., and any amendments (including post-effective amendments) to such Registration Statement and (b) file such Registration Statement and amendments (with all exhibits and related documents) with the Securities and Exchange Commission. Executed pursuant to the requirements of the Securities Act of 1933, on November 18, 1997 at Cincinnati, Ohio. /s/ William W. Verity --------------------- William W. Verity 6 POWER OF ATTORNEY I appoint each of Robert W. Olson and William A. Tsacalis as my attorneys-in-fact to (a) sign a Form S-4 Registration Statement to be filed by Chiquita Brands International, Inc., registering shares of its Capital Stock to be issued in connection with the acquisition of Stokely USA, Inc., and any amendments (including post-effective amendments) to such Registration Statement and (b) file such Registration Statement and amendments (with all exhibits and related documents) with the Securities and Exchange Commission. Executed pursuant to the requirements of the Securities Act of 1933, on November 19, 1997 at Cincinnati, Ohio. /s/ Oliver W. Waddell --------------------- Oliver W. Waddell EX-99.1 9 OPINION OF FINANCIAL ADVISOR 1 EXHIBIT 99.1 DONALDSON, LUFKIN & JENRETTE DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION 277 PARK AVENUE, NEW YORK, NEW YORK 10172 - (212) 892-3000 September 17, 1997 Board of Directors Stokely USA, Inc. 1055 Corporate Center Drive Oconomowoc, Wisconsin 53066 Dear Sirs: You have requested our opinion as to the fairness from a financial point of view to the holders of common stock, par value $0.05 per share ("Stokely Common Stock") of Stokely USA, Inc. ("Stokely" or the "Company"), of the consideration to be received by such stockholders pursuant to the terms of the Agreement and Plan of Reorganization, dated September 17, 1997 (the "Agreement"), by and among Chiquita Brands International, Inc. ("Chiquita"), Chiquita Acquisition Corp. ("Acquisition Sub"), a wholly owned subsidiary of Chiquita, and the Company, pursuant to which Acquisition Sub will be merged (the "Merger") with and into the Company. Pursuant to the Agreement, each share of Stokely Common Stock shall be converted into the right to receive, subject to certain exceptions, such number of shares of common stock, par value $0.33 per share ("Chiquita Common Stock") of Chiquita as shall equal $1.00 divided by the average of the last reported sales price per share of Chiquita Common Stock for the fifteen consecutive trading days ending with the last trading day prior to consummation of the Merger (the "Exchange Ratio"). In arriving at our opinion, we have reviewed the Agreement. We also have reviewed financial and other information that was publicly available or furnished to us by the Company, including information provided during discussions with the Company's management ("Management"). Included in the information provided during discussions with Management were certain financial projections of the Company prepared by Management for the period beginning March 31, 1997 and ending March 31, 2001. In addition, we have compared certain financial and securities data of the Company with various other companies whose securities are traded in public markets, reviewed prices and premiums paid in certain other business combinations and conducted such other financial studies, analyses and investigations as we deemed appropriate for purposes of this opinion. As reflected in the historical and projected financial information provided to us by the Company, the Company's financial performance has not met Management's prior expectations and its overall financial condition has deteriorated over the past nine months. For the quarter ended June 30, 1997, the Company reported an operating loss of $312,000 and a net loss of $2,800,000. In 2 addition, we reviewed a liquidity analysis prepared by the Company which projected that, under current pricing conditions for vegetable products, the Company will face a liquidity shortfall within the next six months. In rendering our opinion, we have relied upon and assumed the accuracy and completeness of all of the financial and other information that was available to us from public sources, that was provided to us by the Company or its representatives, or that was otherwise reviewed by us. With respect to the financial projections supplied to us, we have assumed that they have been reasonably prepared on the basis reflecting the best currently available estimates and judgments of Management as to the future operating and financial performance of the Company. You have informed us that there will be 11,390,871 shares of Stokely Common Stock outstanding on a fully-diluted basis immediately prior to the consummation of the Merger. We have not assumed any responsibility for making an independent evaluation of the Company's assets or liabilities or for making any independent verification of any of the information reviewed by us. We have relied as to certain legal matters on advice of counsel to the Company. Our opinion is necessarily based on economic, market, financial and other conditions as they exist on, and on the information made available to us as of, the date of this letter. It should be understood that, although subsequent developments may affect this opinion, we do not have any obligation to update, revise or reaffirm this opinion. We are expressing no opinion as to the prices at which the Chiquita Common Stock will actually trade at any time. Our opinion is being provided for the information of the Company's Board of Directors in their evaluation of the proposed Merger, and does not constitute a recommendation to any member of the Board of Directors or any stockholder as to how such member or stockholder should vote on the proposed Merger. Donaldson, Lufkin & Jenrette Securities Corporation, as part of its investment banking services, is regularly engaged in the valuation of businesses and securities in connection with mergers, acquisitions, underwritings, sales and distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. Based upon the foregoing and such other factors as we deem relevant, we are of the opinion that the Exchange Ratio is fair to the stockholders of the Company from a financial point of view. Very truly yours, DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By: /s/ Erik M. Jensen ---------------------------------- Erik M. Jensen Senior Vice President EX-99.2 10 FORM OF PROXY 1 EXHIBIT 99.2 STOKELY USA, INC. REVOCABLE PROXY 1230 Corporate Center Drive Oconomowoc, Wisconsin 53066 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF STOKELY USA, INC. FOR USE ONLY AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JANUARY 15, 1998 OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders (the "Annual Meeting") and the Proxy Statement/Prospectus and, revoking any proxy heretofore given, hereby constitutes and appoints Messrs. _________________________ and ____________________________, and any of the other directors of Stokely USA, Inc. ("Stokely") or any successors in their respective positions, to represent and to vote, as designated on the reverse side, all the shares of common stock, $0.05 par value per share of Stokely ("Stokely Common Stock") held of record by the undersigned on November 20, 1997, at the Annual Meeting which will be held on January 15, 1998, at 10:00 a.m. Milwaukee time, at the Milwaukee Athletic Club, 758 North Broadway, Milwaukee, Wisconsin, or at any adjournments or postponements thereof. THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED ON THE REVERSE SIDE, BUT IF NO INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR EACH OF THE MATTERS LISTED ON THE REVERSE SIDE. If any other business is presented at the Annual Meeting or at any adjournments thereof, this proxy will be voted by Stokely's Board of Directors in their best judgment. At the present time, Stokely's Board of Directors knows of no other business to be presented at the Annual Meeting. IMPORTANT: PLEASE MARK, DATE AND SIGN THE PROXY ON THE REVERSE SIDE AND RETURN IN THE ENCLOSED POSTAGE-PAID ENVELOPE. (continued on reverse side) 2 (Reverse side) Please mark your votes as in this example: /X/ 1. APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION BY AND BETWEEN CHIQUITA BRANDS INTERNATIONAL, INC., A NEW JERSEY CORPORATION ("CHIQUITA"), CHIQUITA ACQUISITION CORP., A WISCONSIN CORPORATION ("ACQUISITION SUB"), AND STOKELY, DATED SEPTEMBER 17, 1997 (THE "AGREEMENT"), PROVIDING FOR THE MERGER OF ACQUISITION SUB WITH AND INTO STOKELY, AND FOR STOKELY TO BE THE SURVIVING CORPORATION AND TO BECOME A WHOLLY-OWNED SUBSIDIARY OF CHIQUITA WHEREBY EACH OUTSTANDING SHARE OF STOKELY COMMON STOCK WILL BE CONVERTED INTO THE RIGHT TO RECEIVE SUCH FRACTION OF A SHARE OF COMMON STOCK OF CHIQUITA WHICH IS EQUAL TO $1.00 DIVIDED BY THE AVERAGE OF THE LAST REPORTED SALES PRICE PER SHARE OF CHIQUITA COMMON STOCK ON THE NEW YORK STOCK EXCHANGE COMPOSITE TAPE ON EACH OF THE FIFTEEN CONSECUTIVE TRADING DAYS ENDING ON THE LAST TRADING DAY PRECEDING THE MERGER. FOR AGAINST ABSTAIN / / / / / / 2. ELECTION OF DIRECTORS James H. DeWees, Carol Ward Knox, Thomas W. Mount / / FOR all nominees listed / / WITHHOLD AUTHORITY [INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE THE NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.] ________________________________________________________________________ 3. PROPOSAL TO ADJOURN THE ANNUAL MEETING TO A LATER DATE SPONSORED OR RECOMMENDED BY STOKELY'S BOARD OF DIRECTORS. FOR AGAINST ABSTAIN / / / / / / 4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING, OR AT ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF. The shares of Stokely Common Stock will be voted as directed. If no direction is specified, the share of Stokely Common Stock will be voted FOR matters 1, 2, 3 and 4. Signature: ________________ Date: ___________________ Signature: ________________ Date: ___________________ IMPORTANT: Please sign your name exactly as it appears hereon. When signing as an attorney, administrator, agent, corporation, officer, executor, trustee, guardian or similar position, please add your full title to your signature. If shares of Stokely Common Stock are held jointly, each holder may sign but only one signature is required. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE. -----END PRIVACY-ENHANCED MESSAGE-----