SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 0-16130
Northland Cranberries, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1583759
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
800 First Avenue South
P. O. Box 8020
Wisconsin Rapids, Wisconsin 54495-8020
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (715) 424-4444
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Class A
Common Stock, $.01 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of November 22, 1996:
$305,926,069
Number of shares issued and outstanding of each of the registrant's
classes of common stock as of November 22, 1996:
Class A Common Stock, $.01 par value: 13,055,300 shares
Class B Common Stock, $.01 par value: 636,202 shares
PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED HEREIN BY REFERENCE:
Proxy Statement for 1997 annual meeting of shareholders scheduled to be
held January 8, 1997 (Part III, to the extent indicated therein).
<PAGE>
PART I
Special Note Regarding Forward-Looking Statements
Certain matters discussed in this Annual Report on Form 10-K are
"forward-looking statements" intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of
1995. These forward-looking statements can generally be identified as
such because the context of the statement includes words such as the
Company "believes," "anticipates," "expects" or other words of similar
import. Similarly, statements that describe the Company's future plans,
objectives or goals are also forward-looking statements. All such
forward-looking statements are subject to certain risks and uncertainties
which are described in close proximity to such statements and which could
cause actual results to differ materially from those currently
anticipated. Shareholders, potential investors and other readers are
urged to consider these factors carefully in evaluating the forward-
looking statements and are cautioned not to place undue reliance on such
forward-looking statements. The forward-looking statements included
herein are only made as of the date of this Form 10-K and the Company
undertakes no obligation to publicly update such forward-looking
statements to reflect subsequent events or circumstances.
Except as set forth and described in Note 4 of Notes to
Consolidated Financial Statements, all share data appearing in this Form
10-K has been adjusted where necessary to reflect the Company's two-for-
one stock split effected in the form of a 100% stock dividend on September
3, 1996 on both its Class A and Class B Common Stock.
Item 1. Business.
General
Northland Cranberries, Inc. ("Company" or "Northland") is a
vertically integrated grower, processor and marketer of cranberries and
value-added consumer cranberry products. With 24 cranberry producing
marshes owned or operated in Wisconsin and Massachusetts as of September
30, 1996, Northland is also the world's largest cranberry grower.
Since 1993, when Northland first began implementing its "marsh
to market" vertical integration strategy by introducing its own Northland
brand fresh cranberries, this strategy has been and continues to be the
principal strategic focus of the Company. The Company's marsh to market
strategy involves maximizing its earnings potential by increasing its
direct control over all aspects of its supply and distribution of
cranberries and consumer cranberry products. Specifically, this strategy
includes growing its own cranberry crop (and buying cranberries from
others), processing its grown and purchased cranberries into single
strength cranberry juice or cranberry concentrate, and marketing and
selling fresh cranberries, frozen cranberries, cranberry concentrate and
consumer cranberry products.
In fiscal 1996, the Company extended its marsh to market
strategy by introducing Northland brand 100% cranberry juice blends on a
limited basis to selected markets. As of August 31, 1996, Northland's
blended cranberry juice product line was available in 18 major markets in
the Midwest and other selected cities nationwide. With the added
flexibility in fiscal 1997 of not having a substantial majority of its
crop contractually committed at fixed prices to other processors as in
prior years, the Company intends to direct its cranberry supply into the
most favorable available product mix, while continuing to expand its
marketing and sales efforts for Northland brand 100% cranberry juice
blends and explore other new products and markets. In fiscal 1997, the
Company intends to continue its national rollout of branded juice products
into a significant number of new major markets. The Company believes that
the imbalance which existed in fiscal 1996 between the limited supply and
increasing demand for cranberries and derivative consumer cranberry
products will likely continue in fiscal 1997. The Company expects that
this imbalance will likely allow it the opportunity to recognize increased
profits by selling cranberry juice, concentrate or frozen cranberries to
other marketers of cranberry-based consumer products at favorable prices.
The Company believes that the successful implementation of its marsh
to market strategy will help reduce its dependence upon the size of its
annual fall cranberry crop. The Company believes that its annual harvest
results, while still remaining an important element of its marsh to market
strategy, will become less critical as it supplements its supply through
crop purchase agreements and exercises greater direct control over the
sale of its cranberry supply.
Cranberry Supply
General
The Company believes that the first essential factor in
successfully implementing its marsh to market strategy is controlling a
significant and reliable supply of cranberries through its own growing
efforts and purchasing cranberries from other growers. Over the past
several years, the supply of cranberries has not been sufficient to meet
demand and, therefore, processors and marketers of cranberry-based
consumer products not having the benefits of a significant reliable supply
of cranberries have experienced increased competitive constraints.
According to the Cranberry Marketing Committee of the United States
Department of Agriculture (the "CMC"), the industry-wide fall 1996 harvest
was less than expected. Based on CMC data, existing industry-wide
cranberry inventories as of August 31, 1996 were at the lowest levels in
the past five years. The Company believes that the lower than expected
fall 1996 industry-wide crop harvest and the reduced industry levels of
existing raw cranberry inventories means that the supply of cranberries
will likely continue to be limited compared to demand in fiscal 1997.
Additionally, the combination of federal and state environmental
regulations which currently restrict the development of wetlands and the
long lead-time and significant capital costs required to develop new
marshes to full productivity have restricted the planting of significant
additional cranberry producing acreage in the United States. Northland
also believes that demand for cranberry products will continue to increase
based in part on perceived consumer trends towards buying more nutritious
and healthful foods and beverages as well as the effects of continued
heavy advertising expenditures (which include the Company's regional media
advertising efforts) and expanded new cranberry product offerings
introduced by well-recognized consumer food products and beverage
companies like Ocean Spray Cranberries, Inc. ("Ocean Spray"). Because
cranberries are in limited supply, Northland believes it has a competitive
advantage over other independent (i.e., non-Ocean Spray) cranberry juice
product processors and marketers since its position as the world's largest
single grower of cranberries gives it the capability to supply itself
internally with a significant and reliable source of raw cranberries
rather than having to rely on third party suppliers.
Internally Grown and Purchased Supply
Northland is the world's largest single cranberry grower, with
more planted acres of cranberries owned or leased than any other grower.
As of September 30, 1996, Northland owned or operated approximately 2,476
cranberry producing acres of land in Wisconsin and Massachusetts. The
Company utilizes its significant internal harvest of raw cranberries from
its owned and operated acres for substantially all of its fruit
distribution needs. In the fall of 1995 (i.e., fiscal 1996), the Company
harvested 287,000 barrels from 1,935 harvested acres on 21 marshes.
Similar to industry-wide results, the Company's fall 1996
harvest was less than expected. This lower than expected harvest was due
in large part to the small berry size and the nearly 30% reduction in
yields throughout northern Wisconsin caused by very cold spring and early
summer weather, combined with the carryover effects in Massachusetts from
the near drought conditions experienced in 1995. Despite being smaller
than expectations, the fall 1996 harvest of 293,000 barrels from 2,213
harvested acres was nevertheless a record harvest for the Company.
As a secondary source of supply, the Company also purchases raw
cranberries from other growers to supplement its own harvested crop. The
Company has entered into multi-year crop purchase contracts with 17
independent cranberry growers to purchase all of the cranberries harvested
from an aggregate of 805 productive acres. The Company expects the
quantity of cranberries purchased under its existing contracts to increase
in future years as the contracted marsh acreage matures and becomes more
productive. The Company plans to continue attempting to enter into
additional crop purchase contracts with independent growers as part of its
strategy to increase its available supply of cranberries.
The following table shows certain information regarding the
Company's cranberry marshes and production for the crop years indicated.
<TABLE>
<CAPTION>
Crop Year (1)
1996 1995 1994 1993 1992 1991
(24 Marshes) (21 Marshes) (21 Marshes) (18 Marshes) (15 Marshes) (15 Marshes)
<S> <C> <C> <C> <C> <C> <C>
Total planted acres . . . 2,476 2,264 2,257 1,982 1,500 1,433
Total acres
harvested(2) . . . . . . 2,213 1,935 1,813 1,519 1,114 958
Total barrels of
production . . . . . . . 293,000 287,000 254,000 192,000 130,266 166,531
_____________________________
(1) A crop year commences on November 1 of a given calendar year and
ends on October 31 of the following year and is designated by
the calendar year in which the crop year ends (i.e., the 1996
crop year begins on November 1, 1995 and ends on October 31,
1996).
(2) Includes only acres which are at least four years old and on which
vines have not otherwise been "mowed." Cranberry vines may be mowed
and then replanted on new or existing acreage to create new or
renovated cranberry bogs. Although mowing prevents the harvesting of
berries from such acres for that season, the mowed acres grow back
and typically produce a modest crop in the year after mowing and a
normal crop in the second year after mowing.
</TABLE>
In fiscal 1996, the Company delivered a substantial majority of
its cranberry crop to two independent private label fruit juice processors
at fixed prices under supply agreements which expired in March 1996.
Since the two agreements are no longer in effect, the Company believes it
will have the ability in fiscal 1997 to better react to prevailing market
conditions and thereby direct its cranberry crop to products and uses
which can better maximize its profitability. The Company also believes
this move away from supplying private label producers under fixed priced,
long-term contracts will allow the Company to better support its entry
into the branded cranberry juice market, as well as allow it to begin
reducing its historical earnings volatility caused by fluctuations in
harvest levels.
As a result of existing regulatory constraints on the
development of wetlands, the Company does not anticipate planting
significant additional domestic acreage in the near future. The Company
plans to increase its internal supply largely through pursuing additional
marsh property acquisitions and crop purchase agreements.
Increasing Internal Supply through Marsh Acquisitions
For the period from immediately prior to its initial public
stock offering in August 1987 through September 30, 1996, Northland has
pursued an aggressive business strategy of increasing its internal
cranberry supply through marsh acquisitions. Over this period, the
Company has added 19 marsh properties and 2,138 cranberry producing acres.
In fiscal 1996, the Company acquired two separate marsh properties in
Wisconsin consisting of a total of 129 cranberry-producing acres. Shortly
after the end of fiscal 1996, the Company completed the acquisition of
another Wisconsin marsh containing 108 cranberry-producing acres. These
acquisitions increased the Company's total planted acreage as of
September 30, 1996 to approximately 2,476 acres on 24 properties, with
over 22,000 total support acres.
The Company intends to continue pursuing the expansion of its
productive capacity through the cost-effective acquisition or lease of
additional cranberry marshes. To better facilitate this strategy, the
Company filed a shelf registration statement with the Securities and
Exchange Commission on July 22, 1996, allowing the Company to issue up to
1,000,000 shares of its Class A Common Stock from time to time in
connection with completing future marsh or property acquisitions. The
shelf registration statement should assist the Company in acquiring
additional marshes by allowing the Company to issue publicly-tradable
shares of Class A Common Stock as part of the purchase price for such
acquisitions. As of September 30, 1996, a total of 830,986 shares
remained available for issuance under the Company's shelf registration
statement to facilitate further marsh acquisitions.
International Initiatives
In further exploration of opportunities to increase its raw
cranberry supply, the Company is involved in certain international supply
initiatives and is exploring certain overseas supply opportunities. In
May 1993, Northland planted approximately 7.5 acres with various high-
yielding cranberry vine varieties on acidic peat bogs in Ireland. The
bogs are controlled by Bord na Mona, an Irish state-owned enterprise. If
the project is ultimately successful, Northland and Bord na Mona have the
option to enter into a joint venture to develop a minimum of 500
additional acres of cranberry beds, plus additional supporting acreage.
While current indications are that the planted vines may successfully
sustain limited cranberry growth, it still is too early in the maturation
process to judge definitively the potential yield capabilities of these
vines at maturity. Due to the length of time cranberry beds require to
mature, the Company anticipates that the project will not have any
material impact on the Company, if at all, until at least fiscal 1997 when
a determination may be made to develop additional acres. Even if a
determination is then made to develop additional acreage, it would be at
least four years from the date of planting before the Company could begin
realizing any benefits of additional cranberry supplies from this project.
The Company has also entered into a multi-year contract with the
largest cranberry grower in Chile to purchase 20% of that grower's annual
harvested crop. As a result of difficult growing conditions, the number
of cranberries produced by this grower has been inconsequential to date.
The Company also continues to explore potential opportunities to develop
cranberry-producing acres in several countries in Eastern Europe, as well
as in Russia. The Company does not anticipate that these opportunities
will produce any material financial benefit to the Company in the near
future.
Environmental Factors in Cranberry Production
The quality and quantity of cranberries produced in any given
year is dependent upon certain external environmental factors over which
the Company has little or no control. Extremes or significant variations
in temperature, excessive or inadequate precipitation levels, storms and
hail, or crop infestations can all adversely impact the production (as
well as the vine maturation process) in any crop year or years. While the
Company has attempted to mitigate the adverse effects that these factors
may have on its internal cranberry production, the Company's cranberry
production still remains very substantially subject to these agricultural
factors.
In addition to some geographical diversity in the location of
its marshes, the Company maintains federally-subsidized multi-peril crop
insurance coverage for all of its marshes as part of its efforts to
minimize the effects of adverse agricultural occurrences. The policies
insure against unavoidable loss of production resulting from adverse
agricultural conditions, including hail, fire, insects, plant disease,
wildlife, human tampering and malicious damage to the bogs and the failure
of an irrigation system water supply due to an unavoidable cause. Each of
these multi-peril policies insures up to 75%, the maximum coverage
currently available, of the previous 10 years' average crop yield on the
covered marsh's insured acreage at an effective rate for fiscal 1996 of
$52 per barrel of insured lost production (rather than the price which
could have been received by actually harvesting and delivering or selling
such barrel). These insurance policies do not cover destruction or
spoilage of the Company's crop after its harvest. The Company received
$737,721, $1,078,000 and $988,790 of multi-peril crop insurance proceeds
in fiscal 1996, 1995 and 1994, respectively, and paid multi-peril
insurance premiums of $563,789, $421,094 and $231,143 in those years
respectively.
Processing and Distribution
Another integral part of the Company's marsh to market strategy
is its new expanded capability to internally process its harvested and
purchased cranberries. In fiscal 1996, the Company constructed a 16,000
square foot cranberry juice concentrating and processing facility in
Wisconsin Rapids, Wisconsin to supplement the Company's existing principal
processing and storage facility in Wisconsin Rapids and its smaller
processing facility in Hanson, Massachusetts. The new concentrating plant
has the capacity to concentrate juice from up to 400,000 barrels of raw
cranberries annually. The Company believes this new capability will
greatly increase its ability to control the distribution and sale of its
branded juice products and other value-added consumer cranberry products
by eliminating the need for third party concentrators.
Cranberries harvested from the Company's marshes or purchased
from independent suppliers are brought to the Company's receiving
facilities in Wisconsin Rapids. Completed in 1993 and expanded in 1995,
the receiving station is capable of cleaning, drying and electronically
color sorting incoming fresh fruit. Raw cranberries which are to be sold
as fresh fruit during the Thanksgiving and Christmas holiday season are
stored in a temperature-controlled facility until they are hand-sorted,
packaged and distributed to food brokers, wholesalers or supermarkets for
sale as Northland brand fresh cranberries. Raw cranberries which are to
be used to make consumer cranberry products are cleaned, sorted and stored
in the Company's 65,000 square foot freezer facility until they are sent
to the newly-constructed concentrating facility. The concentrating
facility processes raw cranberries into concentrate or single-strength
juice. Concentrate is sold to various manufacturers of processed consumer
cranberry products. After pre-formulation with other natural ingredients,
single-strength juice is distributed to co-packers and independent juice
processors for bottling and packaging and eventual delivery to wholesalers
and retail grocery stores as Northland brand cranberry juice products or
various private label juices.
By allowing the Company to keep more raw cranberry supply on
hand to be utilized in whatever form provides the Company with the
greatest profit opportunity given the prevailing market conditions, the
new facility's processing capability provides the Company greater
flexibility to take advantage of favorable pricing conditions caused by
the imbalance between the limited available cranberry supply and increased
demand for consumer cranberry products.
The Company believes that current excess capacity in the
bottling industry makes it cost-efficient to contract with regional co-
packers for the processing of its branded juice and processed consumer
products. In fiscal 1996, Northland entered into five-year co-packing
agreements with two major food manufacturers, Seneca Foods Corporation
("Seneca") and Sunsweet Growers, Inc. ("Sunsweet") to formulate and bottle
its processed cranberry blends in five strategic locations nationwide.
The Company delivers juice processed in the new concentrating facility to
these manufacturers in the form of single-strength juice which Seneca and
Sunsweet then formulate, bottle and package for delivery. The Company's
transportation department contracts with independent carriers to
distribute the bottled products to various grocery stores and retail
outlets.
Marketing and Sales
Marketing
In fiscal 1996, the Company's marketing efforts associated with
the rollout of its branded juice product line resulted in Northland hiring
several new and experienced marketing and management personnel from other
food manufacturing companies, including a Director of Marketing, to
oversee marketing of the Company's branded juice product line. The
Company also hired support staff personnel to assist that effort. Several
regional sales managers as well as sales directors and marketing
coordinators were hired in fiscal 1996. The Company has used a mix of
consumer and trade promotions to introduce and market its products in
supermarkets, as well as to the general public through a regional media
campaign.
The Company has increased its marketing budget for fiscal 1997
to allow for expanded marketing efforts utilizing media, trade shows,
sales presentations and various promotions aimed at increasing market
penetration and the Company's name recognition. In fiscal 1997, the
Company expects to continue its regional media advertising campaign in
those markets where sales of its Northland brand cranberry juice blends
are sufficient to make such advertising cost-effective.
Sales
An important business strategy of the Company in fiscal 1997
will be to expand the geographic markets for its Northland brand 100%
juice products, as well as the sale of single strength juice, cranberry
concentrate, frozen cranberries and other consumer cranberry products.
The Company expects its juice sales to increase as a percentage of total
sales in fiscal 1997 as its juice products are introduced into more
markets nationally and the Company increases its marketing efforts. The
Company has also retained 52 commissioned independent food brokers as of
October 31, 1996 in most major geographic regions of the United States.
These food brokers are supervised by a National Sales Manager, a Branded
Products Sales Manager and five regional sales managers. The brokers
assist in the distribution and sale of the Company's juice products.
Since the Company is no longer contractually obligated to
deliver a substantial majority of its cranberry crop to independent juice
processors, it has additional flexibility to direct its supply into
products which the Company hopes will better enhance its profitability.
In fiscal 1996, reduced industry-wide cranberry supplies allowed the
Company to take advantage of the imbalance between limited cranberry
supply and increasing demand by selling fruit on the "spot" independent
market at advantageous prices. Since the Company believes that market
conditions in fiscal 1997 concerning the relationship between the limited
available supply and increasing demand for cranberries will be similar to
fiscal 1996, the Company plans to continue to pursue profitable spot sales
opportunities.
In addition to selling branded juice products, the Company sells
Northland brand fresh cranberries to wholesale produce distributors and
retail grocery companies during the Thanksgiving and Christmas holiday
season. Due in part to a cooler than average summer growing season, the
fall 1996 fresh cranberry crop consisted of smaller-than-average sized
berries. Northland anticipates that the reduced average size of the 1996
fall fresh cranberry crop will result in the Company producing, packaging
and selling less fresh fruit in fiscal 1997 than in fiscal 1996.
Northland also sells processed cranberries in the form of
concentrate to independent food and juice manufacturers for the production
of processed consumer cranberry products. In fiscal 1996, the Company
entered into an agreement with Rudolph Wild GmBH & Co. ("Wild") to supply
Wild with cranberry concentrate for Wild's production of fruit juice and
other beverages for distribution exclusively in international markets.
Wild is one of Europe's largest suppliers of natural compounds for the
production of soft drinks and other fruit beverages. Under the terms of
the agreement, the Company is obligated to deliver to Wild the equivalent
of 150,000 gallons of cranberry concentrate over the next two years at a
contractually fixed price. The Company believes that its alliance with
Wild, combined with its established presence in the fresh cranberry market
in the United Kingdom, the Netherlands, Belgium and other European
countries, provides the Company with a foundation for overseas sales and
provides potential opportunities for eventual expansion into other foreign
markets.
In fiscal 1996, the Company had sales of approximately
$4,700,000, or 12% of net sales, to one customer, the loss of which would
not have a material adverse effect on the Company.
As of August 31, 1996, the Company had firm orders to deliver
approximately 97,000 barrels of cranberries in fiscal 1997 in the form of
concentrate or single strength juice to certain independent processors and
food manufacturers at various prices.
The Company's wholly-owned subsidiary, Wildhawk, is in the
business of selling chemicals and fertilizer to cranberry growers. The
Company also sells cranberry vines to other independent growers. Neither
Wildhawk sales nor sales of cranberry vines have recently had, nor are
they expected to have, a material impact on the Company's revenues or net
income.
Competition
General
The markets for consumer cranberry products in which the Company
competes are large and very competitive. Substantially all of the major
markets for cranberry products in which the Company competes are dominated
by Ocean Spray. Ocean Spray, an agricultural marketing cooperative
entitled to limited protection under federal anti-trust laws, has over 700
member-growers, representing approximately 70% of all cranberry production
in North America. Based on industry data, Ocean Spray controls
approximately 60% of the branded cranberry products market and has
significantly greater brand name recognition and marketing, distribution
and financial resources than the Company.
Cranberry Juice
The Company's 100% cranberry juice blends compete principally
with Ocean Spray's branded cranberry juice products, as well as the
branded cranberry juice products of other distributors, private label
cranberry juice products and other juice and beverage products. The
Company's 100% cranberry juice blends are "premium" products competing
against other juices made up of less than 100% juice. Competitors' juices
use fructose and corn syrup additives as artificial sweeteners. The
Company believes that its premium product formulation may provide it with
a competitive advantage in the retail consumer market for juice products
due to the improved taste and quality between its 100% juice products and
competitors' juices which do not contain 100% juice. The Company fully
anticipates that Ocean Spray will continue to take competitive actions to
counter Northland's entries into the branded cranberry juice market,
possibly including reducing product pricing, increasing its advertising
expenditures, increasing its trade promotions and other actions. Ocean
Spray has significantly more experience in the fruit juice markets,
substantially greater brand name recognition and substantially greater
marketing, distribution and financial resources than the Company. There
can be no assurance that the Company will be successful in competing
against Ocean Spray even on a limited regional basis
Fresh Cranberries
The Company competes with Ocean Spray and other brand label
producers in the market for fresh cranberry sales during the Thanksgiving
and Christmas holiday season. The Company intends to continue to compete
in the fresh cranberry market depending upon market and competitive
conditions. Ocean Spray has significantly more experience in the sale of
branded fresh cranberries, substantially greater brand name recognition
and substantially greater marketing, distribution and financial resources
than the Company. There can be no assurance that the Company will be
successful in competing against Ocean Spray in the fresh cranberry market.
Private Label Cranberry Products Market
The market for private label cranberry juice, sauce and other
processed cranberry products has historically been supplied by a limited
number of independent raw cranberry brokers and private label juice
processors and marketers. Certain processors have significant experience
in the private label fruit juice and processed cranberry products markets
and have established co-packing and bottling operations, distributor
networks and customer bases. Although the Company has not yet directly
entered the private label market, it plans to further explore this market,
depending upon future market and competitive conditions. There can be no
assurance that the Company will be successful in ultimately entering this
market or competing directly or indirectly against certain major
independent processors. However, the Company believes that its new
processing capabilities and its internal supply of raw cranberries may
provide it with a competitive advantage over those independent processors
that must rely on other growers and prevailing market conditions to obtain
the raw cranberry supply necessary to compete in the private label market.
Moreover, private label cranberry products in general compete against
branded cranberry products and, in particular, the branded cranberry
products of Ocean Spray. There can be no assurance that any private label
processed cranberry products of the Company or its allied co-packers will
be able to compete successfully against the similar branded products of
Ocean Spray or others.
Raw Cranberry Market
Ocean Spray dominates the raw cranberry market, controlling
approximately 70% of the total raw cranberry supply. Northland competes
in the market for purchasing raw cranberries with other independent
cranberry product handlers and processors for the raw cranberries of other
independent growers. The Company has also competed with Ocean Spray in
the purchase of raw cranberries by, from time to time, acquiring the marsh
properties of Ocean Spray member-growers. The Company could experience
increased competition for the direct purchase of raw cranberries from
Ocean Spray if Ocean Spray were to begin accepting new member-growers.
The Company believes that competition for the purchase of raw cranberries
in the independent market has increased as a result of the Company's
pursuit of its marsh to market strategy and its willingness to pay
premium prices for the cranberry crops of other growers.
Regulation
Cranberry Products Regulation
The production, packaging, labeling, marketing and distribution
of the Company's fresh cranberries and consumer cranberry juice products
are subject to the rules and regulations of various federal, state and
local food and health agencies, including the United States Food and Drug
Administration, the United States Department of Agriculture, the Federal
Trade Commission and the Environmental Protection Agency. The Company
believes it has complied, and will be able to comply, in all material
respects with such rules, regulations and laws.
Environmental and Other Governmental Regulation
To obtain permits to create new cranberry marshes in the United
States, cranberry growers and other developers are generally required,
pursuant to a national "no net loss" of wetlands policy, to restore the
functional values of disturbed wetland acreage in an amount equal to at
least 100% of the acreage intended for the development of new cranberry
marshes, depending on the type of wetland impacted. Given this strict
regulatory requirement, as well as strict water quality legislation in
Wisconsin and Massachusetts, the Company believes that it is currently
unlikely the Company, or any other cranberry growers or other developers
in North America, will be able to cost-effectively secure additional
permits for further significant cranberry marsh development or expansion
of wetland properties (although the Company and other growers or
developers may renovate existing developed wetlands acreage from time to
time and replant older cranberry vine varieties with higher-yielding vine
varieties).
However, certain independent growers have undertaken efforts in
various states, including Maine, Minnesota, Michigan and Delaware (as well
as efforts in Quebec and British Columbia), to plant, cultivate, and
develop new cranberry-producing acreage. Given the aforementioned
environmental regulations, the particular soil and temperature conditions
necessary to effectively grow cranberries and the long lead-time required
for cranberry vines to mature to full production, the Company does not
expect these efforts to materially affect the supply of cranberries in
fiscal 1997.
Two of the Company's Wisconsin marshes and one in Massachusetts
are the subjects of various types of activities intended to remediate
ground and/or water contamination caused by previously removed underground
storage tanks used by the prior owners of such properties. All of such
circumstances have been reported to the appropriate state regulatory
agencies and are subject to state supervised remediation plans. Based on
information available as of August 31, 1996, the Company believes a
substantial portion of the aggregate costs of such remedial activities
will be covered by state reimbursement funds (except in the case of the
Massachusetts property), or indemnification claims against the properties'
prior owners. The Company believes that no material liabilities will be
incurred as a result of remediation activities at any of the affected
properties.
There is currently legislation passed by the United States House
of Representatives and pending before the Senate which, if enacted, could
materially ease restrictions on the development of cranberry marshes in
wetlands, leading to an increase in long-term cranberry supply which could
have a depressing effect on the proceeds per barrel recognized by the
Company. As of October 18, 1996, the bill has not been the subject of
further action in Congress. If the bill is not acted on by the end of the
104th Congress in December 1996, it will expire, and, in order for it to
again be considered for passage, it must be reintroduced in the next
session beginning in January 1997.
The CMC has the authority under the provisions of the Federal
Cranberry Marketing Order to recommend that the Secretary of the United
States Department of Agriculture impose harvest volume restrictions on
domestic cranberry growers if the Committee believes there will be an
anticipated substantial over-supply of cranberries for the forthcoming
crop year. Such volume restrictions have not been imposed since 1971, and
based on current market conditions, the Company does not anticipate any
such restrictions in the near future; however, there can be no assurance
that such volume restrictions will not be imposed on growers in the
future.
Additionally, the Company's workplace conditions and certain
workforce rules and policies are established and maintained pursuant to
the Occupational Safety and Health Act. The Company believes that it is
currently in material compliance with all material requirements under the
Occupational Safety and Health Act.
Other than as set forth above, the Company does not expect
existing federal, state or local environmental or other governmental
legislation or regulation to have a material effect on its capital
expenditures, results of operations or competitive position.
Seasonality
The Company's business historically has been extremely seasonal.
Similar to most other nondiversified agricultural crop growers, the
Company has recognized its crop sales revenues (which constituted 56% of
the Company's fiscal 1996 total revenues) at the time of annual harvest in
the fall of each year. As a result of this extreme seasonality, a large
percentage of the Company's revenues have historically been recognized in
the fiscal quarter in which the fall harvest took place, with interim
quarters typically registering net losses or only nominal profits.
Because the Company's results of operations have been significantly
dependent upon the size of the Company's annual harvest, its results for
interim fiscal periods have not been considered indicative of those to be
expected for a full year or for other interim periods. The Company
believes that successful implementation of its marsh to market strategy
will help reduce the extreme seasonality of its business and its
dependence upon the size of its annual fall cranberry crop. The Company
believes that its annual harvest results will become less critical than in
past years as it supplements its supply through crop purchase agreements
and it becomes better able to directly control the sale of its cranberry
supply. Additionally, because the Company recognized substantially all of
its net profits in fiscal 1996 during its first fiscal quarter as a result
of sales under its now-expired supply agreements, the Company expects to
recognize substantially lower earnings per share in the first quarter of
fiscal 1997 than in the first quarter of fiscal 1996.
In view of the Company's strategy to begin marketing and selling
value-added processed consumer cranberry products, the Company changed its
fiscal year end in 1995 from March 31 to August 31 in order to correspond
the Company's fiscal year with the new annual business cycle resulting
from the implementation of its strategy. The Company believes that the
change in fiscal year end should better match the cost and expenses
associated with growing each year's crop with the revenues to be generated
from the sales of Northland brand 100% cranberry juice blends and other
consumer products produced from such crop.
Materials and Supplies
The Company purchases bottles, caps, flavorings, juices and
packaging either from its co-packers or independent third parties. The
Company obtains a significant amount of its materials and supplies
necessary for its growing and cultivation of cranberries from resources,
including water and sand, located on its own marshes. The Company also
expects to continue purchasing substantially all of its fertilizer and
pesticides from Wildhawk. The remainder of the Company's raw materials and
supplies, including the materials used to package the Company's fresh
fruit, are purchased on the open market from various sources.
The Company believes it would, if necessary, be able to locate
additional and alternative sources for any raw materials and supplies
without a material delay or adverse effect on its business.
Trademarks and Formulae
The Company owns the Northland trademark, which is registered in
the United States Patent and Trademark Office. The Northland trademark is
important to the Company in the sale of its branded fresh cranberries and
cranberry juice products, and the Company expects it to become
increasingly more important as Northland brand 100% cranberry juice blends
enter more markets nationwide.
Northland 100% cranberry juice blends utilize proprietary flavor
formulations. The Company attempts to ensure the confidentiality of these
formulations by both pre-formulating key natural product ingredients prior
to delivery of its single strength juice to co-packers and by requiring
its co-packers to enter into confidentiality agreements.
Employees
As of August 31, 1996, the Company had 141 full-time employees.
The Company also hired approximately 103 additional seasonal workers
during the 1996 crop cultivation season, and an additional 264 seasonal
workers for the 1996 crop harvesting season. In addition to the seasonal
employees hired for cultivating and harvesting cranberries, the Company
hired 162 seasonal employees to operate the Company's cranberry processing
and packaging facility from September through December 1995. None of the
Company's employees are unionized and the Company believes its
relationship with its employees is very good.
Item 2. Properties.
The Company owns its corporate offices in Wisconsin Rapids,
Wisconsin consisting of 12,300 square feet of office space on five acres
of land. The Company also owns a 5,700 square foot building in Wisconsin
Rapids which is used by certain members of its administrative and
operational staff.
The Company owns a 150,000 square foot receiving station and
fresh fruit packaging facility on 40 acres in Wisconsin Rapids. The
facility is used to clean and store the Company's processed cranberries.
The facility is also used to clean, store, sort and package the Company's
fresh fruit. The facility includes a 40,000 square foot cranberry
receiving station and fresh fruit packaging operation, 65,000 square feet
of freezer warehousing and 45,000 square feet of refrigerated storage.
The Company is constructing a new office facility on its current plant
site in Wisconsin Rapids, Wisconsin to support additional operational and
administrative staff as a result of implementing its marsh to market
strategy.
In fiscal 1996, the Company completed the construction of a
16,300 square foot juice concentrating facility adjacent to the Company's
current plant site in Wisconsin Rapids. The juice concentrating facility,
will provide Northland with the capacity to concentrate over 400,000
barrels annually.
The Company owns a 49,000 square foot cranberry receiving
station located on an seven-acre parcel of land adjacent to the Hanson
Division bogs. This facility is used for the cleaning of the Company's
Massachusetts cranberry crop.
The following table sets forth specific information about each
of the Company's 24 cranberry marshes as of September 30, 1996. All of the
Company's marshes are owned in fee simple or leased as indicated below,
subject to mortgages (except for its Dandy Creek, Manitowish Waters,
Nantucket and Hills Division Marshes). All of the Company's marshes have
storage buildings and repair shops for machinery, trucks and harvest and
irrigation equipment maintained at the marshes. Each of the Company's
marshes has a house or houses on site or in close proximity to the site
which serve as the marsh manager's residence and most of the Company's
marshes also have residences for assistant marsh managers. All of the
Company's foregoing current facilities are suitable and adequate for the
Company's existing needs.
<TABLE>
<CAPTION>
September 30, 1996 Calendar Year
Approximate Approximate Acquired
Marsh Division Name and Location Marsh Acres Planted Acres or Leased
<S> <C> <C> <C>
Associates Division, Jackson County,
Wisconsin . . . . . . . . . . . . . . . 3,400 86 1983
Meadow Valley Division, Jackson County,
Wisconsin . . . . . . . . . . . . . . . 2,150 76 1984
Fifield Division, Price County, Wisconsin 2,460 196 1985
Three Lakes Division, Oneida County,
Wisconsin . . . . . . . . . . . . . . . 1,542 82 1985
Chittamo Division, Douglas and Washburn
Counties, Wisconsin . . . . . . . . . . 620 55 1985
Biron Division, Wood County, Wisconsin . 473 213 1987
Warrens Division, Monroe County, Wisconsin 160 63 1987
Trego Division, Washburn County, Wisconsin 1,715 96 1988
Gordon Division, Douglas County, Wisconsin 880 149 1988
Mather Division, Juneau County, Wisconsin 2,500 148 1989
Nekoosa Division (two marshes), Wood
County, Wisconsin . . . . . . . . . . . 569 85 1989
Nantucket Division (two marshes),
Nantucket County, Massachusetts . . . . 737 211 1990
Crawford Creek Division (two marshes),
Jackson County, Wisconsin . . . . . . . 304 135 1991
Hills Division, Jackson County, Wisconsin
(leased) . . . . . . . . . . . . . . . 465 70 1991
Hanson Division (two marshes), Plymouth
County, Massachusetts . . . . . . . . . 2,025 322 1993
Yellow River (two marshes), Juneau County,
Wisconsin . . . . . . . . . . . . . . . 1,714 252 1994
Dandy Creek, Monroe County, Wisconsin 350 55 1996
Manitowish Waters (two marshes), Vilas
County, Wisconsin . . . . . . . . . . . 345 182 1996
------ -----
Total . . . . . . . . . . . . . . . . 22,409 2,476
====== =====
</TABLE>
Item 3. Legal Proceedings.
In fiscal 1996, the Company acquired a marsh property in
northern Wisconsin from the Koller Cranberry Company, a member-grower of
the Ocean Spray cooperative subject to a pre-existing marketing contract
to deliver its fall 1996 cranberry crop to Ocean Spray. As a result of
the acquisition, the delivery of the fall 1996 crop harvested on the
Koller property to the Company was contested by Ocean Spray. Under the
terms of the mutual settlement of the action filed by Ocean Spray against
the Company, Northland paid Ocean Spray liquidated damages equal to the
amount provided for in the existing marketing agreement between Ocean
Spray and the Koller Cranberry Company and Northland was allowed to retain
the fall 1996 cranberry crop harvested from the Koller marsh.
As of the date hereof, the Company is not otherwise a party to
any legal proceedings, the adverse outcome of which individually or in the
aggregate, in the Company's opinion, would have a material adverse effect
on the Company's results of operations or financial condition.
Item 4. Submission of Matters to a Vote of Shareholders.
No matters were submitted to a vote of the Company's
shareholders during the fourth quarter of fiscal 1996.
Executive Officers of the Company
As of October 17, 1996, each of the Company's executive officers
is identified below together with information about each such officer's
age, current position with the Company and employment history for at least
the past five years:
Name Age Current Position
John Swendrowski 48 President and Chief Executive
Officer
Robert E. Hawk 41 Executive Vice President and
President of Wildhawk, Inc.
John A. Pazurek 47 Vice President - Finance,
Treasurer and Chief Financial
Officer
William J. Haddow 48 Vice President - Purchasing,
Transportation and Budget
David J. Lukas 54 Vice President - Administration
and Corporate Secretary
John Stauner 34 Vice President - Agricultural
Operations
Steven E. Klus 50 Vice President - Manufacturing
John S. Wilson 46 Vice President - East Coast
Mr. Swendrowski founded the Company and assumed his current
positions in May 1987. Prior to forming the Company, Mr. Swendrowski was
the organizer and syndicator of investment interests, and a general
partner, in each of the Company's predecessor limited partnerships.
Mr. Hawk was appointed Executive Vice President in October 1996.
Prior thereto, he served as Vice President-Sales, Marketing and Special
Projects for three years and as Vice President-Operations for four years.
Mr. Pazurek is a certified public accountant and joined the
Company as Controller and Principal Accounting Officer at its inception in
May 1987. In May 1990, Mr. Pazurek was promoted to Vice President-Finance
and in August 1993 he was promoted to Treasurer. In October 1996, Mr.
Pazurek was also appointed Chief Financial Officer.
Mr. Haddow was appointed Vice President-Purchasing,
Transportation and Budget in October 1996. Prior thereto, he served as
Vice President-Purchasing and Transportation from May 1993, and as
Assistant Vice President-Purchasing from 1989.
Mr. Lukas joined the Company in April 1992 as Vice President of
Human Resources and Corporate Counsel. In May 1995 he was promoted to
Secretary and in August 1996 to Vice President-Administration. Prior
thereto, he practiced law in Wisconsin Rapids, Wisconsin for over 20
years.
Mr. Stauner was promoted to Vice President-Agricultural
Operations in October 1996. Prior thereto, he served as Vice President-
Operations from May 1995, and as Assistant Vice President of Operations
since the Company's inception in 1987.
Mr. Klus joined the Company in April 1996 as the Director of
Strategic Product Planning. He was appointed Vice President-Manufacturing
in October 1996. Prior thereto he served as President-Eastern Division of
Seneca Foods Corporation in New York from May 1990.
Mr. Wilson joined the Company in October 1993 and was promoted
to Vice President - East Coast Operations in May 1994. In October 1996,
his title changed to Vice President-East Coast. Prior to joining the
Company, he served as Manager-Grower Services at Ocean Spray in Lakeville,
Massachusetts from 1988.
The executive officers of the Company are generally elected
annually by the Board of Directors after the annual meeting of
shareholders. Each executive officer holds office until his successor has
been duly qualified and elected or until his earlier death, resignation or
removal.
PART II
Item 5. Market for the Company's Common Equity and Related Shareholder
Matters.
Sale Price Range of Class A Common Stock (1)
First Second Third Fourth
Quarter Quarter Quarter Quarter
Fiscal Year Ended August 31, 1996
High $10.00 $11.00 $14.63 $18.13
Low $7.25 $8.50 $9.88 $13.38
Twelve Months Ended August 31, 1995(2)
High $10.25 $7.88 $8.38 $7.75
Low $5.50 $6.00 $7.13 $7.00
_______________
(1) The range of sale prices listed for each quarter includes intra-day
trading prices as reported on The Nasdaq Stock Market.
(2) In order to correspond the Company's fiscal year with the Company's
expected new annual business cycle from pursuing its current business
strategy, the Company changed its fiscal year end in 1995 from
March 31 to August 31. Fiscal 1995 ended on March 31, 1995, and was
followed by a five-month transition period ending August 31, 1995.
During the transition period, the range of sales prices for shares of
Class A Common Stock was between a high of $8.38 and a low of $7.00.
On November 25, 1996, there were approximately 4,650 beneficial
shareholders for the shares of Class A Common Stock and three shareholders
of record for the shares of Class B Common Stock. Shares of Class A
Common Stock trade on The Nasdaq Stock Market under the symbol CBRYA. No
public market exists for the shares of Class B Common Stock.
See Item 6 for information on the Company's cash dividends paid
on its Common Stock. On November 22, 1996, the last sale price of shares
of Class A Common Stock was $24.25 per share.
On July 8, 1996, the Company acquired a cranberry property in
Wisconsin from the Koller Cranberry Company for $4.4 million in cash and
33,614 shares of Class A Common Stock. The Class A shares were not
registered under the Securities Act of 1933 in reliance on Section 4(2)
thereunder relating to a sale by an issuer not involving a public offering
to a person who had access to information concerning the Company, was able
to bear the economic risk of loss of the investment and acquired the
shares for investment purposes and not with a view to distribution. The
shares issued in the transaction above were deemed to be restricted
securities for the purposes of the Securities Act and restrictive legends
were placed on the stock certificates, together with appropriate stop
transfer notations on the Company's stock transfer records.
Item 6. Selected Financial Data.
<TABLE>
<CAPTION>
Fiscal Year
Ended (1) Fiscal Year Ended March 31 (1)
August 31, Transition
1996 Period (1) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Results
(Dollars In Thousands,
except per share data)
Revenues $ 37,608 $ 890 $ 21,784 $ 18,051 $ 13,000 $ 12,624 $ 11,260
Net earnings (loss) $ 6,905 $ (1,399) $ 1,582 $ 2,943 $ 1,943 $ 1,164 $ 869
Common Stock Data
Net earnings (loss) per
Common Share before
cumulative effect of change
in accounting method $ 0.50 $ (0.28) $ 0.18 $ 0.33 $ 0.25 $ 0.20 $ 0.15
Cumulative effect of change
in accounting method (2) -- $ 0.13 -- -- -- -- --
Net earnings (loss) per share $ 0.50 $ (0.15) $ 0.18 $ 0.33 $ 0.25 $ 0.20 $ 0.15
Cash dividends per Class A
Share $ 0.145 $ 0.06 $ 0.14 $ 0.175 $ 0.08 $ 0.06 $ 0.06
Cash dividends per Class B
Share $ 0.132 $ 0.055 $ 0.127 $ 0.159 $ 0.073 $ 0.055 $ 0.055
Financial Position (Year End)
(In Thousands)
Total assets $145,485 $121,745 $107,745 $ 83,074 $ 67,703 $ 59,606 $ 53,934
Long-term debt $ 56,978 $ 45,538 $ 55,793 $ 38,945 $ 25,098 $ 37,294 $ 33,548
Shareholders' equity $ 69,059 $ 59,113 $ 34,627 $ 33,125 $ 31,572 $ 16,633 $ 15,631
Financial Ratios
Current ratio (year end) 1.5 1.1 0.7 1.3 1.7 2.5 2.2
Debt/equity ratio (year-end) 0.8 0.8 1.8 1.2 0.9 2.3 2.2
Return on revenues 18.4% N/A 7.3% 16.3% 14.9% 9.2% 7.7%
_________________
(1) In order to correspond the Company's fiscal year with the
Company's expected new annual business cycle from pursuing its
current business strategy, the Company changed its fiscal year
end in 1995 from March 31 to August 31. Fiscal 1995 ended on
March 31, 1995, and was followed by a five-month transition
period ending August 31, 1995.
(2) Effective April 1, 1995, the Company changed its method of
deferring crop growing costs to conform with the provisions of
Statement of Position 85-3 "Accounting by Agricultural Producers
and Agricultural Cooperatives" which had not been previously
adopted by the Company. This change was made to defer crop
growing costs based on a November 1 to October 31 crop year
which management believes is its natural crop year.
Historically, the Company had deferred certain crop costs based
on a crop year of April 1 through October 31. This change
resulted in an increase in net income for the five months ended
August 31, 1995 of $1,249,000 (net of income taxes of $806,000),
reflecting the cumulative effect of this change for periods
prior to April 1, 1995. The pro forma effects for the year
ended March 31, 1995 assuming the change had been in effect
throughout the year would have been to increase net income by
$195,000 or $0.02 per share.
</TABLE>
Item 7. Management's Discussion and Analysis of Results of Operations
and Financial Condition
RESULTS OF OPERATIONS
General
As a result of the Company's decision to begin marketing and selling
value-added processed consumer cranberry products, the Company changed its
fiscal year end from March 31 to August 31 in order to correspond the
Company's fiscal year with the new annual business cycle expected to
result from the continued implementation of its "from marsh to market"
vertical integration business strategy. This change in fiscal year end is
intended to better match the costs and expenses associated with growing
each year's crop with the expected revenues to be generated from the sales
of consumer products produced from such crop. This change resulted in a
five-month transition period ended August 31, 1995. This discussion
compares information relating to the Company's fiscal 1996 (ending
August 31, 1996) performance with fiscal 1995 (ending March 31, 1995),
along with a separate discussion of the transition period compared to the
prior year's comparable five-month period. As a result of the Company's
changing business nature and change in fiscal year, some comparisons
between periods are not particularly meaningful or informative. All per
share data has been adjusted for the Company's September 3, 1996 two-for-
one stock split effected in the form of a 100% stock dividend.
Fiscal 1996 Compared to Fiscal 1995
Revenues. Revenues in fiscal 1996 were $37.6 million, a
$15.8 million increase from $21.8 million in fiscal 1995. The increase in
fiscal 1996 revenues was due to increased sales of cranberries and
cranberry products. The majority of the Company's fiscal 1996 cranberry
crop was sold to independent fruit juice and sauce processors at fixed
pricing under three-year supply agreements, which expired in March 1996.
The Company was able to market the rest of its fruit at more favorable
pricing as a result of the growing demand for cranberry products and the
industry's short supply of available fruit. The industry's poor 1995 fall
cranberry harvest, as well as normal seasonal scarcity of supply,
contributed to this ongoing demand and supply imbalance. The Company
believes that these market conditions will likely continue in fiscal 1997
as a result of a less than anticipated fall 1996 industry harvest. Fiscal
1996 revenues benefitted from increased sales of Northland brand fresh
fruit, sales of bulk frozen cranberries and the introductory sales of the
Northland brand 100% juice product line. The Company believes that, with
the expiration of its two principal fixed price supply contracts, it will
be afforded significant additional flexibility in fiscal 1997 to sell its
cranberry supply in the most profitable manner then available.
Cost of Sales. Cost of sales increased $3.4 million to $16.5 million
in fiscal 1996 from $13.1 million in fiscal 1995. The increase in fiscal
1996 cost of sales was due to increases in the Company's productive acres,
barrels harvested, barrels purchased and the cost of sales for the
Company's entry into the branded juice market. The Company's gross margin
in fiscal 1996 was 56.1% compared to 40.1% in fiscal 1995.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $7.0 million in fiscal 1996, compared to
$2.4 million in fiscal 1995. The increase was due primarily to additional
costs associated with increased compensation and related expenses
partially attributable to the Company's growth in productive acreage and
the Company's initial rollout of its branded juice products. The
Company's continued entry into the branded consumer cranberry products
market is likely to result in substantial additional marketing, promotion,
distribution and selling expenses in fiscal 1997.
Interest Expense. Fiscal 1996 interest expense was $2.7 million, a
$1.0 million decrease from fiscal 1995 interest expense of $3.7 million.
The decrease was due to decreased debt levels which resulted from the
application of proceeds generated by the Company's August 1995 public
offering and sale of 2,300,000 Class A common shares.
Income Tax Expense. The Company recorded $4.5 million in income tax
expense in fiscal 1996, compared to $1.1 million in fiscal 1995. As a
result of alternative minimum tax liabilities, $2.8 million in income
taxes were paid in fiscal 1996 compared to $141,000 in fiscal 1995. As of
August 31, 1996, the Company had net operating loss carryforwards for
federal and state income tax purposes of $2.4 million remaining to offset
against future taxable income. See Note 13 of Notes to Consolidated
Financial Statements.
Net Income. Net income for fiscal 1996 was $6.9 million compared to
fiscal 1995 net income of $1.6 million. Net income per common share was
$0.50 in fiscal 1996 compared to net income per common share of $0.18 in
fiscal 1995. Weighted average common shares outstanding for fiscal 1996
were 13,928,000 compared to 8,891,000 for fiscal 1995.
Five Month Periods Ended August 31, 1995 and 1994
Revenues. Revenues for the five months ended August 31, 1995 were
$890,000 compared to $1.6 million during the same five month period in the
prior year. Revenues consisted of vine sales, fertilizer and chemical
sales and other income in each respective period. The decrease in
revenues for the five months ended August 31, 1995 was due to the
anticipated reduced volume in vine sales caused principally by current
regulatory restrictions on the further domestic development of wetlands
for cranberry cultivation.
Cost of Sales. For the five-month transitional period, the cost of
sales decreased $583,000 to $1.4 million from $2.0 million during the same
period in fiscal 1995. As a result of the Company's change an accounting
method for deferred crop costs, this comparison is not considered
particularly meaningful or informative by the Company. See Note 2 of
Notes to Consolidated Financial Statements.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $1.9 million in the five-month transitional
period compared to $1.3 million during the same period in the prior year.
The increase was due primarily to additional costs associated with the
Company's increased productive acreage and the Company's preparation to
enter the branded juice market.
Interest Expense. Interest expense was $1.9 million during the
five-month transitional period compared to $1.2 million during the same
period in fiscal 1995. The significant increase in interest expense was
due to increased debt levels which resulted primarily from financing the
Company's September 1994 cranberry marsh acquisitions and the June 1995
purchase of the previously leased Hanson marshes.
Net Loss. For the five-month period ended August 31, 1995, the
Company reported a net loss of $1.4 million, or $0.15 per share, after the
cumulative effect of the Company's change in accounting method for
deferred crop cost. See Note 2 of Notes to Consolidated Financial
Statements. Prior to the change in accounting method, the Company
reported a net loss for the period of $2.6 million, or $0.28 per share.
During the comparable period in the prior year, the Company reported a net
loss of $1.8 million, or $0.20 per share.
Fiscal 1995 Compared to Fiscal 1994
Revenues. Revenues in fiscal 1995 increased to $21.8 million from
$18.1 million in fiscal 1994. The increase was due to increased cranberry
sales as a result of an increase in barrels harvested. In fiscal 1995,
the Company harvested 254,000 barrels of cranberries compared to 192,000
barrels in fiscal 1994. Substantially all of the barrels harvested by the
Company for processing in fiscal 1995 were sold to two independent fruit
juice and sauce processors at fixed prices. Fiscal 1995 revenues and
sales of consumer-packaged fresh fruit were impacted adversely by an
abnormally high fresh fruit spoilage rate at the Company's Wisconsin
Rapids storage facility. The high spoilage rate was largely caused by
unusual weather conditions experienced late in the Wisconsin growing
season.
Cost of Sales. Cost of sales increased $4.3 million, or 49.2%, to
$13.1 million in fiscal 1995 from $8.8 million in fiscal 1994. The
Company's gross margin in fiscal 1995 was 40.1%, compared to 51.5% in
fiscal 1994. The increase in cost of sales in fiscal 1995 was primarily
due to costs associated with the increase in the Company's number of
productive acres and the increase in fresh fruit production.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $2.4 million in fiscal 1995 compared to
$2 million in fiscal 1994. The increase was primarily due to costs
associated with the Company's growth in productive acreage and expanded
fresh fruit marketing efforts.
Interest Expense. Fiscal 1995 interest expense was $3.7 million, a
52.6% increase over fiscal 1994 interest expense of $2.4 million. The
increase was due to financing costs associated with funding the Company's
September 1993 cranberry marsh lease and September 1994 cranberry marsh
acquisitions.
Income Tax Expense. The Company recorded $1.1 million in income tax
expense in fiscal 1995, compared to $1.9 million in fiscal 1994. As a
result of alternative minimum tax liabilities, $141,000 in income taxes
were paid in fiscal 1995 compared to $1.9 million in fiscal 1994.
Net Income. Net income for fiscal 1995 was $1.6 million, or $0.18
per share, a 46.3% decrease from fiscal 1994 net income of $2.9 million,
or $0.33 per share. Weighted average common shares outstanding for fiscal
1995 were 8,891,000 compared to 8,835,000 for fiscal 1994.
FINANCIAL CONDITION
Net cash provided by operating activities in fiscal 1996 increased
67.9% to $9.4 million from $5.6 million in fiscal 1995. The increase
principally was a result of changes in cash flows related to the increase
in net income between fiscal years reduced by increases in current assets
and current liabilities. The Company's current ratio was 1.5 to 1.0 at
the end of fiscal 1996 compared to a current ratio of 0.66 to 1.0 at the
end of fiscal 1995. This improvement was directly related to the
Company's change in business strategy and the change in fiscal year end.
Inventories increased to $12.4 million at August 31, 1996 compared to
inventories of $853,000 at March 31, 1995 principally due to the
$9.3 million increase in deferred crop costs. These deferred crop costs
are the inventory costs of the growing crop to be harvested in the fall of
fiscal 1997. The additional $2.1 million increase in inventories is due
to increases in finished goods and raw materials purchased to support the
Company's branded juice sales.
Net cash used for investing activities increased in fiscal 1996 by
63.5% to $20.6 million from $12.6 million in fiscal 1995. The increase
was principally the result of the acquisitions of cranberry operations and
other property and equipment additions. In March 1996, the Company
completed the $3.05 million acquisition of a 55-acre cranberry property
located in Central Wisconsin. In July 1996, the Company acquired a
74-acre cranberry property located in Northern Wisconsin. The total cost
of the acquisition was $4.4 million in cash and 16,807 shares (on a
pre-stock split basis) of the Company's Class A Common Stock. On
September 27, 1996, the Company completed the acquisition of a 108 acre
cranberry property located in Northern Wisconsin. The total cost of the
acquisition was $4.85 million in cash and 169,014 shares of the Company's
Class A Common Stock. The Company utilized its bank credit facilities to
fund the cash portion of the acquisition. Property and equipment
additions in fiscal 1996 included (i) $4.4 million for fixed asset
additions and upgrades; (ii) $4.2 million to complete the construction of
the Company's concentrate manufacturing facility; (iii) $3.0 million to
complete the construction and planting of 11 new cranberry producing acres
and to cultivate and maintain 320 preproductive expansion acres; and
(iv) $2.9 million to improve the Company's fruit handling facilities. The
Company's current capital budget for similar items in fiscal 1997 is
approximately $6.5 million. In addition, the Company anticipates that it
may require substantial additional capital expenditures to fund its
strategy of increasing its internal supply capabilities by acquiring
additional cranberry marshes. The Company's fiscal 1997 debt service and
capital expenditure obligations will be funded by borrowings under the
Company's amended November 1996 credit facilities and cash generated from
operations.
Net cash provided by financing activities increased in fiscal 1996 to
$11.1 million from $6.5 million in fiscal 1995. The Company's total
equity increased to $69.1 million at August 31, 1996 compared to
$34.6 million at the end of fiscal 1995. The Company's total debt
(including current portion) at fiscal 1996 year end was $60.5 million for
a total debt-to-equity ratio of 0.88 to 1, compared to total debt of
$61.6 million and a debt-to-equity ratio of 1.78 to 1 at March 31, 1995.
In August and September of 1995, the company completed the public sale of
2,300,000 Class A Common shares. Net proceeds of $30.4 million were used
to repay principal and accrued interest then outstanding under the
Company's credit facilities. On November 4, 1996, the Company amended its
existing bank credit facility to increase its revolving credit facility
from $21 million to $45 million, increasing its revolving credit
availability by $24 million. The new credit facilities mature on
September 1, 1999. The amount of unused available borrowings under the
amended credit facilities was $35.4 million at August 31, 1996. See
Note 10 of Notes to Consolidated Financial Statements.
Seasonality and Quarterly Results;
Dependence on Crop Results
As shown in the table below, the Company's business has been
extremely seasonal. Similar to most nondiversified agricultural crop
growers, the Company recognized its crop sales revenues at the time of the
harvest in the fall of each year. Crop sales revenues constituted
approximately 56% of total revenues in fiscal 1996 and 86% of total
revenues in fiscal 1995. Because the Company's historical results of
operations have been significantly dependent upon the results of the
Company's annual harvest, its results for interim fiscal periods have not
been considered indicative of those to be expected for a full year or for
other interim periods. The successful implementation of the Company's
marsh to market strategy is expected to help reduce the extreme
seasonality of its business and its dependence upon its annual fall
cranberry crop. However,the Company expects to recognize substantially
lower earnings per share in the first quarter of fiscal 1997 than the
first quarter of fiscal 1996 because in the past, the Company recognized
substantially all of its net profits in this quarter as a result of sales
of its crop under its now expired supply agreements. Due to the changing
nature of the company's business, it is likely that initial comparisons of
quarterly results during fiscal 1997 to the prior year's comparative
periods will not be particularly meaningful or informative. The Company
believes that its annual harvest results, while still remaining an
important element of the Company's potential results of operations for the
upcoming fiscal year will become less critical than in past years as it
supplements its supply through crop purchase agreements and it becomes
better able to directly control the sale of its cranberry supply and take
advantage of favorable market conditions.
The following table contains unaudited selected historical quarterly
information, which includes adjustments, consisting only of normal
recurring adjustments, that the Company considers necessary for a fair
presentation:
<TABLE>
<CAPTION>
Fiscal Quarters Ended
(Dollars in thousands, except per share data)
Unaudited
Aug. 31, May 31, Feb. 29, Nov. 30, Aug. 31, May 31, Feb. 29, Nov. 30,
1996 1996 1996 1995 1995 1995 1995 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 5,246 $6,675 $3,984 $21,703 $ 124 $ 652 $ 1,665 $18,417
Income (loss) before
income taxes (1,091) 1,435 254 10,816 (3,066) (2,343) (2,211) 8,836
Net income (loss) (669) 855 149 6,570 (1,868) (184) (1,348) 5,363
Net income (loss) per
share (0.05) 0.06 0.01 0.48 (0.19) (0.02) (0.15) 0.60
</TABLE>
Item 8. Financial Statements and Supplementary Data.
INDEPENDENT AUDITORS' REPORT
To the Shareholders
and Board of Directors of
Northland Cranberries, Inc.
We have audited the accompanying consolidated balance sheets of
Northland Cranberries, Inc. and subsidiary as of August 31, 1996 and March
31, 1995, and the related consolidated statements of operations,
shareholders' equity and cash flows for the years ended August 31, 1996,
March 31, 1995 and 1994, and for the five-month transition period ended
August 31, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, such consolidated financial statements present
fairly, in all material respects, the financial position of Northland
Cranberries, Inc. and subsidiary at August 31, 1996 and March 31, 1995,
and the results of their operations and their cash flows for the years
ended August 31, 1996, March 31, 1995 and 1994, and for the five-month
transition period ended August 31, 1995, in conformity with generally
accepted accounting principles.
As explained in Note 2 to the consolidated financial statements,
effective April 1, 1995, the Company changed its method of deferring crop
growing costs.
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
November 4, 1996
<PAGE>
NORTHLAND CRANBERRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1996 AND MARCH 31, 1995
ASSETS 1996 1995
CURRENT ASSETS:
Cash and cash equivalents $ 266,467 $ 223,373
Accounts and notes receivable 2,631,434 1,854,810
Investments 1,259,548 1,259,548
Inventories 12,414,426 853,216
Prepaid expenses 921,673 1,249,010
Deferred income taxes 1,123,949 1,305,802
---------- ---------
Total current assets 18,617,497 6,745,759
PROPERTY AND EQUIPMENT, NET 122,489,101 95,191,248
INVESTMENTS AND OTHER ASSETS 4,378,021 5,807,744
----------- -----------
TOTAL ASSETS $145,484,619 $107,744,751
=========== ===========
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 1996 AND MARCH 31, 1995 (continued)
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995
CURRENT LIABILITIES:
Accounts payable $ 2,592,765 $ 1,982,520
Accrued liabilities 5,914,422 2,384,165
Current portion of long-term
obligations 3,560,000 5,802,000
---------- ----------
Total current liabilities 12,067,187 10,168,685
LONG-TERM OBLIGATIONS 56,978,095 55,792,764
DEFERRED INCOME TAXES 7,380,556 7,156,755
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value,
5,000,000 shares authorized, none
issued -- --
Common stock:
Class A, $.01 par value,
12,734,286 and 4,010,613 shares
issued and outstanding,
respectively 127,343 40,106
Class B, $.01 par value, 636,202
and 318,101 shares issued and
outstanding, respectively 6,362 3,181
Additional paid-in capital 60,183,370 28,907,593
Retained earnings 8,741,706 5,675,667
----------- -----------
69,058,781 34,626,547
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $145,484,619 $107,744,751
=========== ===========
See notes to consolidated financial statements.
<PAGE>
<TABLE>
NORTHLAND CRANBERRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED AUGUST 31, 1996 AND MARCH 31, 1995 AND 1994
AND FIVE-MONTH TRANSITION PERIOD ENDED AUGUST 31, 1995
<CAPTION>
Five-Months Years Ended
Year Ended Ended
August 31, August 31, March 31, March 31,
1996 1995 1995 1994
<S> <C> <C> <C> <C>
REVENUES $37,607,845 $890,397 $21,783,966 $18,051,355
COST OF SALES 16,516,785 1,400,611 13,057,275 8,751,220
---------- ---------- ---------- ----------
GROSS PROFIT (LOSS) 21,091,060 (510,214) 8,726,691 9,300,135
COSTS AND EXPENSES:
Selling, general and
administrative 7,020,416 1,907,841 2,439,978 2,046,389
Interest 2,657,067 1,919,544 3,654,006 2,393,792
---------- --------- ---------- ----------
Total costs and expenses 9,677,483 3,827,385 6,093,984 4,440,181
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME
TAXES AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING METHOD 11,413,577 (4,337,599) 2,632,707 4,859,954
INCOME TAXES (BENEFIT) 4,509,000 (1,689,000) 1,051,000 1,917,000
---------- ---------- --------- ---------
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF CHANGE IN ACCOUNTING
METHOD $6,904,577 $(2,648,599) $1,581,707 $2,942,954
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING METHOD (NET OF
TAXES OF $806,000) -- 1,249,469 --
--
--------- ---------- --------- ----------
NET INCOME (LOSS) $6,904,577 $(1,399,130) $1,581,707 $2,942,954
========= ========== ========= =========
NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE:
Income (loss) before
cumulative effect of change
in accounting method $ 0.50 $ (0.28) $ 0.18 $ 0.33
Cumulative effect of change in
accounting method -- 0.13 -- --
---------- ---------- --------- ---------
NET INCOME (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE $ 0.50 $ (0.15) $ 0.18 $ 0.33
========== ========== ========= =========
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
NORTHLAND CRANBERRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED AUGUST 31, 1996 AND MARCH 31, 1995 AND 1994
AND FIVE-MONTH TRANSITION PERIOD ENDED AUGUST 31, 1995
<CAPTION>
Five-Months Years Ended
Year Ended Ended
August 31, August 31, March 31, March 31,
1996 1995 1995 1994
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 6,904,577 $(1,399,130) $1,581,707 $2,942,954
Cumulative effect of change in
accounting method -- (1,249,469) -- --
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 4,151,448 1,481,176 3,094,708 2,235,881
(Gain) loss on disposal of
property and equipment (25,236) 4,839 (8,331) (17,640)
Gain on investments -- -- -- (199,507)
Changes in assets and liabilities:
Receivables, prepaid expenses and
other current assets (2,256,715) 1,807,428 (1,350,824) 3,986,128
Inventories (4,715,542) (5,178,107) (445,206) (197,955)
Accounts payable and accrued
liabilities 4,031,250 163,632 1,847,874 986,426
Deferred income taxes 1,289,000 (883,000) 910,000 42,000
---------- ---------- ---------- ----------
Net cash provided by (used in)
operating activities 9,378,782 (5,252,631) 5,629,928 9,778,287
---------- ---------- ---------- ----------
INVESTING ACTIVITIES:
Property and equipment additions (14,480,765) (5,827,245) (8,716,881) (10,587,053)
Proceeds on disposals of property and
equipment 152,065 40,229 65,695 37,913
Acquisitions of cranberry operations (7,279,818) (4,485,112) (5,046,097) --
Net decrease in investments 1,259,548 -- 1,259,548 1,185,535
Other (214,018) (66,507) (145,412) (276,952)
----------- ---------- ---------- ----------
Net cash used for investing
activities (20,562,988) (10,338,635) (12,583,147) (9,640,557)
------------ ----------- ----------- ----------
FINANCING ACTIVITIES:
Proceeds from long-term debt 15,000,000 14,800,000 14,350,000 10,500,000
Payments on long-term debt (6,053,365) (24,803,303) (6,626,409) (8,538,179)
Dividends paid (1,923,429) (515,978) (1,193,248) (1,476,894)
Net proceeds from common stock
offering 4,016,192 26,401,133 -- --
Exercise of stock options 76,400 -- 85,633 56,601
Other (25,819) (153,265) (89,638) (223,786)
----------- ----------- ----------- ----------
Net cash provided by financing
activities 11,089,979 15,728,587 6,526,338 317,742
----------- ----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (94,227) 137,321 (426,881) 455,472
CASH AND CASH EQUIVALENTS, BEGINNING OF
YEAR 360,694 223,373 650,254 194,782
---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS, END OF YEAR $266,467 $360,694 $223,373 $650,254
========= ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest (net of interest
capitalized) $2,716,788 $2,445,138 $3,323,440 $2,297,007
Income taxes 2,768,000 -- 268,000 1,879,000
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES
(See Notes 5, 7, 10 and 14)
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
NORTHLAND CRANBERRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED AUGUST 31, 1996 AND MARCH 31, 1995 AND 1994 AND
FIVE-MONTH TRANSITION PERIOD ENDED AUGUST 31, 1995
<CAPTION>
Additional
Common Stock Paid-in Retained Treasury
Capital Earnings Stock
Class A Class B
<S> <C> <C> <C> <C> <C>
BALANCES, APRIL 1, 1993 $39,292 $3,181 $27,712,189 $3,821,148 $(3,438)
Stock options exercised 78 -- 56,523 -- --
Tax benefit from exercise of stock -- -- 30,519 -- --
options
Cash dividends paid:
$.175 per Class A share -- -- -- (1,375,579) --
$.15925 per Class B share -- -- -- (101,315) --
Net income -- -- -- 2,942,954 --
------- ------- ---------- ---------- --------
BALANCES, MARCH 31, 1994 39,370 3,181 27,799,231 5,287,208 (3,438)
Common stock issued for
acquisition of cranberry marshes
(62,500 shares) 625 -- 986,874 -- --
Stock options exercised 111 -- 82,084 -- 3,438
Tax benefit from exercise of stock -- -- 39,404 -- --
options
Cash dividends paid:
$.14 per Class A share -- -- -- (1,112,324) --
$.1272 per Class B share -- -- -- (80,924) --
Net income -- -- -- 1,581,707 --
-------- -------- ---------- ----------- --------
BALANCES, MARCH 31, 1995 40,106 3,181 28,907,593 5,675,667 0
Net proceeds from common stock 20,000 -- 26,381,133 -- --
offering (2,000,000 shares)
Cash dividends paid:
$.06 per Class A share -- -- -- (481,274) --
$.05455 per Class B share -- -- -- (34,705) --
Net loss -- -- -- (1,399,130) --
-------- -------- ---------- ---------- ---------
BALANCES, AUGUST 31, 1995 60,106 3,181 55,288,726 3,760,558 0
Net proceeds from common stock 3,000 -- 4,013,192 -- --
offering (300,000 shares)
Common stock issued for 168 -- 399,832 -- --
acquisition of cranberry marsh
(16,807 shares)
Common stock issued for 294 -- 417,796 -- --
cranberries purchased (29,443
shares)
Stock options exercised 103 -- 76,297 -- --
Tax benefit from exercise of stock -- -- 54,380 -- --
options
Effect of two-for-one stock split 63,672 3,181 (66,853) -- --
Cash dividends paid:
$.145 per Class A share -- -- -- (1,839,610) --
$.13175 per Class B share -- -- -- (83,819) --
Net income -- -- -- 6,904,577 --
---------- -------- ---------- ---------- ---------
BALANCES, AUGUST 31, 1996 $127,343 $6,362 $60,183,370 $8,741,706 $ 0
======== ======= =========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NORTHLAND CRANBERRIES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED AUGUST 31, 1996 AND MARCH 31, 1995 AND 1994
AND FIVE-MONTH TRANSITION PERIOD ENDED AUGUST 31, 1995
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations - The business of Northland Cranberries, Inc.
(the "Company") consists principally of growing and selling
cranberries and cranberry products. In each of the past three years,
the Company sold substantially all of its crop harvested for
processing to two independent fruit juice and sauce processors for
their packaging and resale as private label cranberry juice and sauce,
pursuant to contracts which expired on March 31, 1996. In 1993, the
Company first implemented its "from marsh to market" vertical
integration business strategy when it began selling its own Northland
brand fresh cranberries. In fiscal 1996, the Company continued to
further this business strategy with the introduction of its own
Northland brand 100% cranberry juice blends. The Company's vertical
integration business strategy includes marketing and selling frozen
fruit, cranberry concentrate and processed branded and private label
cranberry products. The Company's primary market is throughout the
United States, although it also sells fresh fruit and cranberry
concentrate in Europe.
Principles of Consolidation - The consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiary,
Wildhawk, Inc. ("Wildhawk"). Wildhawk provides chemicals, fertilizers
and crop management services to cranberry growers. All significant
intercompany accounts and transactions have been eliminated in
consolidation.
Cash Equivalents - Cash equivalents include amounts due from banks and
highly liquid debt instruments purchased with maturities of three
months or less.
Inventories - Inventories, which primarily consist of cranberries,
juice, concentrates, packaging supplies, fertilizer and chemical
products and deferred crop costs, are stated at the lower of cost or
market. Deferred crop costs consists of those costs related to the
growing of the crop which will be harvested in fiscal 1997 (see also
Note 2). Cost is determined using the first-in, first-out (FIFO)
method.
Property and Equipment - Property and equipment are stated at cost,
less depreciation and amortization computed on the straight-line
method over the estimated useful lives. The costs related to the
development of new productive cranberry beds are capitalized during
the development period until commercial production is achieved
(generally the fifth growing season after planting). Amounts included
in construction in progress include construction costs of beds, dikes
and ditches, irrigation systems and costs associated with vine
clippings planted. In addition, during the development period,
certain direct and indirect operating costs are capitalized in
construction in progress. The estimated useful lives are 30-40 years
for buildings, land improvements, cranberry vines, bulkheads and
irrigation equipment, and 5-10 years for other depreciable assets.
Goodwill - Goodwill is amortized on the straight-line method over 40
years. Accumulated amortization at August 31, 1996 and March 31, 1995
was $196,968 and $163,393, respectively.
Income Taxes - The Company accounts for income taxes in accordance
with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" which requires an asset and liability approach to
financial accounting and reporting for income taxes.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Fair Value of Financial Instruments - The Company believes the
carrying amount of its financial instruments (cash and cash
equivalents, accounts receivable, accounts payable, and notes payable)
is a reasonable estimate of the fair value of these instruments.
Revenues -The Company realizes revenues from six main sources: branded
juice, concentrate, fresh fruit, frozen fruit, vine clippings sold to
other growers and fertilizer and chemical sales from Wildhawk to other
growers. In addition, the Company carries insurance against crop
losses due to hail damage and other perils.
Net Income Per Common and Common Equivalent Share - Net income per
common and common equivalent share is computed based upon the weighted
average number of common shares and common equivalent shares (stock
options) outstanding during the year (13,927,820, 9,393,656, 8,890,850
and 8,834,774 for the year ended August 31, 1996, five month
transition period ended August 31, 1995, and the years ended March 31,
1995 and 1994, respectively).
Accounting Standards To Be Adopted - In 1995, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of." This statement
will be adopted by the Company in the fiscal year beginning September
1, 1996. The adoption of this statement is not expected to have a
material impact on the consolidated financial statements.
In 1995, the FASB also issued SFAS No. 123, "Accounting for Stock
Based Compensation." Under the accounting and disclosure requirements
promulgated in the statement, the Company must adopt the provisions in
its fiscal year beginning September 1, 1996. The Company is currently
evaluating the accounting and disclosure alternatives provided for
under the provisions of the statement.
2. CHANGE IN ACCOUNTING METHOD
Effective April 1, 1995, the Company changed its method of deferring
crop growing costs to conform with the provisions of Statement of
Position 85-3 "Accounting by Agricultural Producers and Agricultural
Cooperatives," which had not been previously adopted by the Company.
This change was made to defer crop growing costs based on a November 1
to October 31 crop year which management believes is its natural crop
year. Historically, the Company had deferred certain crop costs based
on a crop year of April 1 through October 31. This change resulted in
an increase in net income for the five months ended August 31, 1995 of
$1,249,000 (net of income taxes of $806,000), reflecting the
cumulative effect of this change for periods prior to April 1, 1995.
The pro forma effects for the year ended March 31, 1995, assuming the
change had been in effect throughout the year, would have been to
increase net income by $195,000 or $0.02 per share.
3. CHANGE IN FISCAL YEAR
The Company changed its fiscal year end from March 31 to August 31 in
order to correspond the Company's fiscal year with the new annual
business cycle resulting from the implementation of its strategy to
begin marketing and selling value-added processed consumer cranberry
products. This change in fiscal year end also better matches the
costs and expenses associated with growing each year's crop with the
expected revenues to be generated from the sales of the consumer
products produced from such crop.
4. STOCK SPLIT
On June 26, 1996, the Company's Board of Directors authorized a two-
for-one stock split effected in the form of a 100% stock dividend
distributed on September 3, 1996 to shareholders of record on August
15, 1996. Shareholders' equity has been adjusted by reclassifying
from additional paid-in capital to common stock the par value of the
additional shares arising from the split. In addition, all references
in the financial statements to per share amounts, stock option data
and market prices of the Company's stock have been restated.
5. ACQUISITIONS
On September 13, 1994, the Company acquired three productive cranberry
bogs and certain of the associated assets of Yellow River Cranberry
Company and Wolfe Cranberry Company for $18,000,000 plus 62,500 shares
of Class A Common Stock. The purchase price was paid through the
delivery of $5,000,000 cash and 62,500 shares of Class A Common Stock
upon closing and the issuance of $13,000,000 in promissory notes. The
promissory notes were fully paid as of August 31, 1996.
On June 6, 1995, the Company purchased two productive cranberry bogs
and certain of the associated assets of United Cape Cod Cranberry
Limited Partnership ("UCCC") for $14,706,000. The purchase price was
paid through the delivery of $14,706,000 cash. The Company had leased
this property from September 13, 1993 until the date of purchase.
On March 15, 1996, the Company acquired the productive cranberry bog
and certain of the associated assets of Mariposa II Cranberries for
$3,050,000. The purchase price was paid through the delivery of
$2,050,000 cash and the issuance of a $1,000,000 promissory note.
This promissory note was subsequently fully paid during June 1996.
On July 8, 1996, the Company acquired the productive cranberry bog and
certain of the associated assets of the Koller Cranberry Company for
$4,900,000. The purchase price was paid through the delivery of
$4,400,000 cash and 16,807 shares of Class A Common Stock.
The acquisitions were recorded using the purchase method of accounting
and, accordingly, the results of operations of the acquired businesses
are included in the statements of operations from the date of
acquisition. The pro forma effects, assuming the fiscal 1996
acquisitions had occurred on April 1, 1994, were not significant.
6. INVENTORIES
Inventory at August 31, 1996 and March 31, 1995 was as follows:
1996 1995
Raw materials $1,692,403 $463,159
Finished goods 1,399,335 390,057
Deferred crop costs 9,322,688 --
----------- --------
$12,414,426 $853,216
=========== ========
7. PROPERTY AND EQUIPMENT
Property and equipment at August 31, 1996 and March 31, 1995 were as
follows:
1996 1995
Land $7,351,596 $7,399,550
Land improvements 12,346,400 10,101,369
Cranberry vines, bulkheads and
irrigation equipment 59,607,337 47,052,318
Buildings and improvements 12,986,763 10,940,579
Equipment and vehicles 23,727,102 16,877,710
Construction in progress 25,079,393 16,277,779
----------- -----------
141,098,591 108,649,305
Less accumulated depreciation
and amortization 18,609,490 13,458,057
----------- ----------
$122,489,101 $95,191,248
=========== ==========
The Company capitalized $1,531,405, $557,065, $1,065,164 and
$1,130,248 of interest for the year ended August 31, 1996, five month
transition period ended August 31, 1995, and the years ended March 31,
1995 and 1994, respectively.
8. INVESTMENTS AND OTHER ASSETS
Investments and other assets at August 31, 1996 and March 31, 1995
were as follows:
1996 1995
Investments $1,259,548 $2,519,097
Leasehold interests, net 1,197,277 1,420,945
Goodwill, net 757,710 791,285
Other 1,163,486 1,076,417
---------- ----------
$4,378,021 $5,807,744
========== ==========
On August 31, 1993, the Company terminated its membership in the Ocean
Spray marketing cooperative. Upon termination, Ocean Spray common
stock held by the Company was converted into Ocean Spray 4% preferred
stock of equal value and both the preferred stock and notices of
allocation are being redeemed over a five-year period. Remaining
payments of $2,519,096 will be received in annual installments of
$1,259,548.
9. ACCRUED LIABILITIES
Accrued liabilities at August 31, 1996 and March 31, 1995 were as
follows:
1996 1995
Interest $338,594 $923,909
Property taxes 518,181 511,039
Compensation and other employee benefits 2,870,565 177,970
Lease payments 28,497 395,974
Income taxes 338,332 --
Other 1,820,253 375,273
---------- ----------
$5,914,422 $2,384,165
========== ==========
10. NOTES PAYABLE AND LONG-TERM OBLIGATIONS
Long-term debt at August 31, 1996 and March 31, 1995 was as follows:
1996 1995
Credit agreement with a bank:
Revolving credit facility $10,050,000 $4,350,000
Acquisition credit facility 9,600,000 5,000,000
Term loan 9,450,000 --
Term loan 3,680,000 4,642,857
Term loan 4,000,000 --
Term loan payable to insurance company with
interest at 8.69% 14,267,752 15,113,131
Term loan payable to insurance company with
interest at 7.85% 9,490,343 10,024,293
Capital lease obligation -- 9,265,800
Mortgage notes with interest at 6% -- 13,000,000
Other -- 198,683
------------ ------------
60,538,095 61,594,764
Less current portion 3,560,000 5,802,000
------------ ------------
$56,978,095 $55,792,764
=========== ===========
On August 31, 1994, the Company entered into a credit agreement with
a bank which was subsequently amended on June 7, 1995 and November 4,
1996, and provides for a secured revolving credit facility of
$45,000,000, three secured term credit facilities in the amounts of
$4,600,000, $4,000,000 and $10,500,000 and a secured acquisition
credit facility of $10,000,000. The revolving credit facility and
acquisition credit facility terminate on September 1, 1999. However,
the Company may request annual extensions. If the Company does not
extend the termination date of the revolving credit facility, all
amounts outstanding under the term loans become payable on the
revolving credit facility termination date. Loans under the
acquisition credit facility are due one year from the date of
issuance or on September 1, 1999, if earlier. Interest on amounts
outstanding under the revolving credit facility is payable at the
bank's domestic rate, the bank's offered rate, or an adjusted LIBOR
rate plus an applicable rate margin (1.25% on the first $25,000,000
of principal amounts outstanding and 2.00% on any principal amount in
excess of $25,000,000), at the option of the Company. Interest on
amounts outstanding under the secured term credit facilities and
secured acquisition credit facility is payable at the bank's domestic
rate, the bank's offered rate, or an adjusted LIBOR rate plus 2.00%
at the option of the Company. Amounts outstanding under the first
and third secured term credit facilities are due in nine semi-annual
payments of $460,000 and $525,000, respectively. Amounts outstanding
under the second secured term credit facility are due in seven semi-
annual payments of $286,000 and a final payment of $1,998,000. The
Company must pay a commitment fee of .125% per annum on the average
daily unused amount of the revolving credit facility and the
acquisition credit facility. The amount of unused available
borrowings under the amended credit facilities was $35,350,000 at
August 31, 1996.
The 8.69% term loan with an insurance company is payable in semi-
annual installments, including interest, through July 1, 2004. The
interest rate will be adjusted in fiscal year 1999, as determined by
the insurance company, but the adjusted rate will not exceed 2.25%
over the then five-year treasury bond yield.
The 7.85% term loan with an insurance company is payable in semi-
annual installments, including interest, through August 1, 2008. The
interest rate will be adjusted in fiscal years 1998 and 2003, as
determined by the insurance company, but the adjusted rate will not
exceed 2.25% over the then five-year treasury bond yield.
In September 1994, the Company issued $13,000,000 of mortgage notes
in connection with the acquisition of three cranberry bogs (see Note
5). These notes were fully paid as of August 31, 1996.
Substantially all assets of the Company are pledged as collateral for
its borrowings. The Company's loan agreements require, among other
things, that the Company maintain a certain level of shareholders'
equity, ($60,000,000 at August 31, 1996), debt-to-equity ratio and
"fixed charge coverage ratio", as defined. In addition, the
agreements place restrictions on the repurchase of stock and do not
allow total cash dividend payments or other distributions, as
defined, in any fiscal year to exceed 50% of the Company's net income
for such fiscal year.
The aggregate scheduled future maturities of long-term obligations
for the next five fiscal years ending August 31 are as follows:
1997 $3,560,000
1998 3,647,000
1999 3,742,000
2000 30,456,000
2001 1,414,000
Thereafter 17,719,095
----------
$60,538,095
==========
11. SHAREHOLDERS' EQUITY
The Company is authorized to issue 5,000,000 shares of preferred
stock with a par value of $0.01.
The authorized common stock of the Company consists of 20,000,000
shares of Class A Common Stock and 2,000,000 shares of Class B Common
Stock. Outstanding Class B shares are convertible into Class A
shares on a one-for-one basis at any time. The shares of Class A
Common Stock are entitled to one vote per share and the shares of
Class B Common Stock are entitled to three votes per share. Holders
of Class A Common Stock are entitled to receive cash dividends equal
to at least 110% of any cash dividends paid on the shares of Class B
Common Stock. However, cash dividends may be paid on Class A Common
Stock without a concurrent cash dividend being paid on the Class B
Common Stock. If at any time the outstanding shares of Class B
Common Stock fall below 2% of the outstanding shares of Class A
Common Stock, they will be automatically converted into Class A
Common Stock.
In August 1995, the Company issued 2,000,000 shares of Class A Common
Stock through a public offering resulting in net proceeds of
approximately $26,401,000.
In September 1995, the Company issued an additional 300,000 shares of
Class A Common Stock pursuant to the Underwriters exercise of its
over-allotment option granted in connection with the August public
stock offering, resulting in net proceeds of approximately
$4,016,000.
On July 22, 1996, the Company filed a Form S-4 Registration Statement
("shelf registration") with the Securities and Exchange Commission.
The Registration Statement covers up to 1,000,000 shares of Class A
Common Stock of the Company which may be issued from time to time in
connection with acquisitions by the Company of businesses or
properties, or interests therein.
At August 31, 1996, 3,245,804 shares of Class A Common Stock were
reserved for issuance under the Company's stock option plans,
conversion of Class B Common Stock to Class A Common Stock and the
shelf registration.
12. STOCK OPTIONS
In 1987, the Company adopted the 1987 Stock Option Plan (the "1987
Plan"), which provides for the issuance of 275,000 shares of Class A
Common Stock options to certain executive officers and key employees.
Stock options granted under the 1987 Plan are exercisable at a price
equal to market value on the date of grant for a period determined by
the Board of Directors, not to exceed 10 years.
In fiscal 1990, the Company adopted the 1989 Stock Option Plan (the
"1989 Plan"), which provides for the issuance of 600,000 shares of
Class A Common Stock options to key employees and directors of the
Company. Stock options granted under the 1989 Plan are exercisable
at a price established by the Board of Directors which shall not be
less than 85% of the market value on the date of grant for a period
determined by the Board of Directors, not to exceed 10 years.
During the five-month transition period ended August 31, 1995, the
Company adopted the 1995 Stock Option Plan (the "1995 Plan"), which
provides for the issuance of 800,000 shares of Class A Common Stock
to key employees and non-employee directors of the Company. Stock
options granted under the 1995 Plan are exercisable at a price
established by the Compensation and Stock Option Committee, which
shall not be less than 100% of the fair market value on the date of
grant for a period determined by the Compensation and Stock Option
Committee, not to exceed 10 years.
The status of the stock option plans was as follows:
Number of Price
Shares Range
Outstanding at April 1, 1993 687,998 $2.625 - $7.375
Granted 16,264 8.625 - 9.375
Exercised (15,578) 2.625 - 5.375
Cancelled (8,400) 2.625 - 5.375
------- ------ ------
Outstanding at March 31, 1994 680,284 2.625 - 9.375
Granted 97,034 7.750 - 8.750
Exercised (23,260) 2.625 - 7.375
Cancelled (9,772) 2.625 - 8.625
------- ------ ------
Outstanding at March 31, 1995 744,286 2.625 - 9.375
Granted 85,000 7.250 - 7.250
Cancelled (5,234) 3.125 - 8.625
------- ------ ------
Outstanding at August 31, 1995 824,052 2.625 - 9.375
Granted 273,662 10.875 - 17.750
Exercised (20,560) 2.625 - 8.750
Cancelled (8,000) 3.875 - 8.750
--------- ------ -------
Outstanding at August 31, 1996 1,069,154 $2.625 - $17.750
========= ====== =======
Shares exercisable at
August 31, 1996 988,692 $2.625 - $10.875
======= ====== =======
13. INCOME TAXES
The provision for income taxes is as follows:
August 31, August 31, March 31, March 31,
1996 1995 1995 1994
Currently payable:
Federal $2,997,000 -- $141,000 $1,875,000
State 223,000 -- -- --
--------- -------- ---------
3,220,000 -- 141,000 $1,875,000
Deferred: --------- ---------- -------- ---------
Federal 944,000 $(1,368,000) 721,000 (338,000)
State 345,000 (321,000) 189,000 380,000
--------- ---------- -------- ---------
1,289,000 (1,689,000) 910,000 42,000
--------- ---------- -------- ---------
$4,509,000 $(1,689,000) $1,051,000 $1,917,000
========= ========== ========= =========
The tax effects of temporary differences that give rise to
significant portions of deferred tax assets and liabilities as of
August 31, 1996 and March 31, 1995 consist of the following:
1996 1995
Deferred tax assets:
Tax loss carryforwards $955,000 $2,539,000
AMT tax credits and other
carryforwards 3,676,000 2,008,000
--------- ----------
4,631,000 4,547,000
Deferred tax liabilities: --------- ----------
Cranberry sales 459,000 986,000
Depreciation and amortization 10,429,000 9,411,000
---------- ----------
10,888,000 10,397,000
---------- ----------
Net deferred tax liability $6,257,000 $5,850,000
========== ==========
At August 31, 1996, the Company has net operating loss carryforwards
for Federal income tax purposes of approximately $2,438,000, expiring
in 2010.
A reconciliation of the Federal statutory income tax rate to the
effective income tax rate is as follows:
August 31, August 31, March 31, March 31,
1996 1995 1995 1994
Statutory tax rate 34.0% 34.0% 34.0% 34.0%
State income taxes, net of
Federal tax benefit 5.2 5.2 5.3 5.2
Other, net 0.3 (0.3) 0.6 0.2
---- ---- ---- ----
Effective tax rate 39.5% 38.9% 39.9% 39.4%
==== ==== ==== ====
14. LEASE COMMITMENTS
On April 10, 1990, the Company acquired leasehold interests in two
cranberry marshes in Nantucket, Massachusetts. On March 31, 1994,
the Company entered into an agreement which extended the original
lease term through November 30, 2003. The unamortized cost of the
leasehold interests are being amortized over the extended lease term
on a straight-line basis. Accumulated amortization of the leasehold
interests at August 31, 1996 and March 31, 1995 was $1,009,843 and
$786,176, respectively. Rental payments are based on 20 percent of
gross cash receipts from agricultural production, subject to certain
minimums which are dependent upon the state-wide average crop yield.
Rent expense for the year ended August 31, 1996, five-month
transition period ended August 31, 1995, and the years ended March
31, 1995 and 1994 was $261,166, $0, $338,984 and $240,514,
respectively.
On September 5, 1991, the Company entered into a net lease with
Equitable Life Assurance Society of the United States ("Equitable")
for Cranberry Hills cranberry marsh, which Equitable purchased on
May 3, 1991 from Cranberry Hills Partnership ("Cranberry Hills"), a
partnership controlled by the Company's president and two former
directors. The lease, which expires December 31, 2000, provides for
rent payments of $284,625 in year one and increasing to $380,875 in
year nine with a final payment of $214,906 on June 1, 2000. The
lease grants the Company a right of first refusal to purchase the
leased premises or to renew the lease on terms Equitable is prepared
to accept from a bona fide third party. The purchase agreement also
provides for payments to Cranberry Hills of 25% of the premises
income, if any, during the term of the lease with Equitable. The
amount expensed in fiscal 1996, the five-month transition period
ending August 31, 1995 and fiscal 1995 and 1994 was $64,079, $0,
$8,973 and $86,999, respectively.
The future minimum annual payments on noncancellable operating lease
agreements for the next four fiscal years ending August 31 are as
follows:
1997 $375,000
1998 376,000
1999 371,000
2000 401,000
----------
$1,523,000
==========
The above table does not include any amounts for potential minimum
payments under the Nantucket leasehold interest described above,
because such amounts, if any, are not presently determinable.
15. SUPPLY CONTRACTS
The Company has entered into multiple-year crop purchase contracts,
with seventeen independent cranberry growers pursuant to which the
Company has contracted to purchase all of the cranberry crop produced
on 805 planted acres owned by these growers.
16. 401(k) RETIREMENT PLAN
Effective January 1, 1996, the Company established a 401(k) savings
plan that covers substantially all full-time employees. The Company
contributes amounts based on employee contributions under this plan.
The cost of the Company's contributions to this plan for fiscal 1996
was $63,182.
17. SUBSEQUENT EVENT
On September 27, 1996, the Company acquired the productive cranberry
bog and certain of the associated assets of John E. McFarland & Sons,
Inc. for $7,850,000. The purchase price was for cash of $4,850,000
and the issuance of 169,014 shares of Class A Common Stock.
18. SIGNIFICANT CUSTOMERS
As discussed in Note 1, the Company had supply agreements to sell the
majority of its product to two independent fruit juice and sauce
processors. After delivery of the 1995 crop, these agreements
expired.
In 1996, the Company had sales of approximately $4,700,000 or 12.5%
of net sales to one customer.
* * * * * *
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Company.
Pursuant to Instruction G, the information required by this item with
respect to directors is hereby incorporated herein by reference to the
information pertaining thereto set forth under the caption entitled
"Election of Directors" in the definitive proxy statement for its 1997
annual meeting of shareholders filed with the Commission pursuant to
Regulation 14A on November 27, 1996 ("Proxy Statement"). The information
required by Item 405 of Regulation S-K is hereby incorporated by reference
to the information set forth under the caption entitled "Other Matters-
Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy
Statement. The required information with respect to executive officers
appears at the end of Part I of this Form 10-K.
Item 11. Executive Compensation.
Pursuant to Instruction G, the information required by this item is
hereby incorporated herein by reference to the information pertaining
thereto set forth under the caption entitled "Executive Compensation" in
the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Pursuant to Instruction G, the information required by this item is
hereby incorporated herein by reference to the information pertaining
thereto set forth under the caption entitled "Stock Ownership of
Management and Others" in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
Pursuant to Instruction G, the information required by this item is
hereby incorporated herein by reference to the information pertaining
thereto set forth under the captions entitled "Election of Directors-
Business Experience" and "Certain Transaction" in the Proxy Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
1. Financial Statement Schedules.
(a) All schedules are omitted because they are inapplicable, not
required under the instructions or the financial information is
included in the consolidated financial statements or notes
thereto.
2. Exhibits and Reports on Form 8-K.
(a) The exhibits filed herewith or incorporated by reference herein
are set forth on the attached Exhibit Index.*
(b) The Company did not file a Form 8-K with the Securities and
Exchange Commission during the fourth quarter of fiscal 1996.
* Exhibits to this Form 10-K will be furnished to shareholders upon
advance payment of a fee of $0.20 per page, plus mailing expenses.
Requests for copies should be addressed to John A. Pazurek, Vice
President-Finance, 800 First Avenue South, P.O. Box 8020, Wisconsin
Rapids, Wisconsin 54495-8020.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
NORTHLAND CRANBERRIES, INC.
Date: November 27, 1996 By: /s/ John Swendrowski
John Swendrowski
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this report has been signed on November 27, 1996 below by the
following persons on behalf of the Company and in the capacities and on
the dates indicated.
By: /s/ John Swendrowski By: /s/ Jerold D. Kaminski
John Swendrowski Jerold D. Kaminski
Chief Executive Officer and Director Director
By: /s/ John A. Pazurek By: /s/ John C. Seramur
John Pazurek John C. Seramur
Vice President-Finance, Treasurer, Director
Chief Accounting Officer and Chief
Financial Officer
By: /s/ Jeffrey J. Jones By: /s/ LeRoy J. Miles
Jeffrey J. Jones LeRoy J. Miles
Director Director
By: /s/ Patrick F. Brennan By: /s/ Robert E. Hawk
Patrick F. Brennan Robert E. Hawk
Director Executive Vice President and
Director
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3.1 Articles of Amendment of Articles of
Incorporation, dated as of August 18, 1995.
3.2 Articles of Incorporation, as amended, dated as
of August 18, 1995.
3.3 Form of Articles of Amendment of Articles of
Incorporation, as amended, to be filed with
the Wisconsin Department of Financial
Institutions, assuming shareholder approval
of a proposed amendment to increase the
authorized number of shares of both classes
of the Company's common stock, subject to
consideration by shareholders at the 1997
annual meeting of shareholders scheduled to
be held on January 8, 1997.
3.4 Articles of Incorporation, as amended,
assuming shareholder approval of a proposed
amendment to increase the authorized number
of shares of both classes of the Company's
common stock, subject to consideration by
shareholders at the 1997 annual meeting of
shareholders scheduled to be held on January
8, 1997.
3.5 By-Laws of the Company, as amended and
restated. [Incorporated by reference to
Exhibit 3.2 to the Company's Form 10-K for
the fiscal year ended March 31, 1994.]
4.3 Credit Agreement, dated August 31, 1994,
between the Company and Harris Trust &
Savings Bank. [Incorporated by reference to
Exhibit 4.2 to the Company's Form 10-K for
the fiscal year ended March 31, 1995.]
4.4 Security Agreement Re: Equipment, dated
August 31, 1994, between the Company and
Harris Trust & Savings Bank. [Incorporated
by reference to Exhibit 4.3 to the Company's
Form 10-K for the fiscal year ended March
31, 1995.]
4.5 Security Agreement Re: Crops, dated August
31, 1994, between the Company and Harris
Trust & Savings Bank. [Incorporated by
reference to Exhibit 4.4 to the Company's
Form 10-K for the fiscal year ended March
31, 1995.]
4.6 Mortgage and Security Agreement with
Assignment of Rents, dated August 31, 1994,
between the Company and Harris Trust &
Savings Bank. [Incorporated by reference to
Exhibit 4.5 to the Company's Form 10-K for
the fiscal year ended March 31, 1995.]
4.7 Mortgage and Security Agreement with
Assignment of Rents, dated August 31, 1994,
between the Company and Harris Trust &
Savings Bank. [Incorporated by reference to
Exhibit 4.6 to the Company's Form 10-K for
the fiscal year ended March 31, 1995.]
4.8 Secured Promissory Note, dated as of June
14, 1989, issued by the Company to The
Equitable Life Assurance Society of the
United States. [Incorporated by reference
to Exhibit 10.1 to the Company's Form 8-K
dated July 7, 1989.]
4.9 Mortgage and Security Agreement, dated as of
June 14, 1989, from the Company to The
Equitable Life Assurance Society of the
United States. [Incorporated by reference
to Exhibit 10.2 to the Company's Form 8-K
dated July 7, 1989.]
4.10 Mortgage and Security Agreement dated July
9, 1993, between the Company and The
Equitable Life Assurance Society of the
United States. [Incorporated by reference
to Exhibit 4.8 to the Company's Form 10-Q
dated November 12, 1993.]
4.11 Modification Agreement, dated as of July 9,
1993, between the Company and The Equitable
Life Assurance Society of the United States.
[Incorporated by reference to Exhibit 4.9 to
the Company's Form 10-Q dated November 12,
1993.]
4.12 First Amendment to Credit Agreement, dated
June 6, 1995, between the Company and Harris
Trust & Savings Bank. [Incorporated by
reference to Exhibit 4.11 to the Company's
Form 10-K for the fiscal year ended March
31, 1995.]
4.13 Third Amendment to Credit Agreement, dated
November 4, 1996, between the Company and
Harris Trust & Savings Bank.
4.14 Revolving Credit Note, dated June 6, 1995,
between the Company and Harris Trust &
Savings Bank. [Incorporated by reference to
Exhibit 4.12 to the Company's Form 10-K for
the fiscal year ended March 31, 1995.]
4.15 Term Credit Note One, dated June 6, 1995,
between the Company and Harris Trust &
Savings Bank. [Incorporated by reference to
Exhibit 4.13 to the Company's Form 10-K for
the fiscal year ended March 31, 1995.]
4.16 Term Credit Note Two, dated June 6, 1995,
between the Company and Harris Trust &
Savings Bank. [Incorporated by reference to
Exhibit 4.14 to the Company's Form 10-K for
the fiscal year ended March 31, 1995.]
4.17 Term Credit Note Three, dated June 6, 1995,
between the Company and Harris Trust &
Savings Bank. [Incorporated by reference to
Exhibit 4.15 to the Company's Form 10-K for
the fiscal year ended March 31, 1995.]
4.18 Acquisition Credit Note, dated June 6, 1995,
between the Company and Harris Trust &
Savings Bank. [Incorporated by reference to
Exhibit 4.16 to the Company's Form 10-K for
the fiscal year ended March 31, 1995.]
4.19 First Supplement to Security Agreement re:
Crops, dated June 6, 1995, between the
Company and Harris Trust & Savings Bank.
[Incorporated by reference to Exhibit 4.17
to the Company's Form 10-K for the fiscal
year ended March 31, 1995.]
4.20 First Supplement to Security Agreement,
dated June 6, 1995, between the Company and
Harris Trust & Savings Bank. [Incorporated
by reference to Exhibit 4.18 to the
Company's Form 10-K for the fiscal year
ended March 31, 1995.]
4.21 Mortgage and Security Agreement with
Assignment of Rents, dated June 6, 1995,
between the Company and Harris Trust &
Savings Bank. [Incorporated by reference to
Exhibit 4.19 to the Company's Form 10-K for
the fiscal year ended March 31, 1995.]
4.22 Mortgage and Security Agreement with
Assignment of Rents, dated June 6, 1995,
between the Company and Harris Trust &
Savings Bank. [Incorporated by reference to
Exhibit 4.20 to the Company's Form 10-K for
the fiscal year ended March 31, 1995.]
4.23 First Supplement to Mortgage and Security
Agreement with Assignment of Rents, dated
June 6, 1995, between the Company and Harris
Trust & Savings Bank. [Incorporated by
reference to Exhibit 4.21 to the Company's
Form 10-K for the fiscal year ended March
31, 1995.]
4.24 First Supplement to Mortgage and Security
Agreement with Assignment of Rents, dated
June 6, 1995, between the Company and Harris
Trust & Savings Bank. [Incorporated by
reference to Exhibit 4.22 to the Company's
Form 10-K for the fiscal year ended March
31, 1995.]
4.25 Secured Promissory Note, dated July 9, 1993,
between the Company and The Equitable Life
Assurance Society of the United States.
[Incorporated by reference to Exhibit 4.23
to the Company's Form 10-K for the fiscal
year ended March 31, 1995.]
4.26 Stock Pledge, dated July 9, 1993, between
the Company and The Equitable Life Assurance
Society of the United States. [Incorporated
by reference to Exhibit 4.24 to the
Company's Form 10-K for the fiscal year
ended March 31, 1995.]
9.1 Voting Trust Agreement, dated as of June 19,
1987 among John Swendrowski, LeRoy J. Miles,
Lawrence R. Kem, Cranberries Limited, Inc.
and Kem Cranberries, Inc. [Incorporated by
reference to Exhibit 9.1 to the Company's
Form S-1 Registration Statement (Reg. No.
33-15383).]
9.2 Amendment to Voting Trust Agreement, dated
October 30, 1992. [Incorporated by
reference to Exhibit 9.4 to the Company's
Form 10-K for the fiscal year ended March
31, 1993.]
*10.1 1987 Stock Option Plan, dated June 2, 1987,
as amended. [Incorporated by reference to
Exhibit 10.5 to the Company's Form 10-K for
the fiscal year ended December 31, 1987.]
*10.2 Forms of Stock Option Agreement, as amended,
under 1987 Stock Option Plan. [Incorporated
by reference to Exhibit 10.6 to the
Company's Form 10-K for the fiscal year
ended December 31, 1987.]
*10.3 Form of Modification Agreement, dated as of
April 16, 1996, between the Company and each
of John A. Pazurek, John B. Stauner, John
Swendrowski, William J. Haddow and Robert E.
Hawk, modifying Stock Option Agreements
previously entered into between the parties.
*10.4 1989 Stock Option Plan, as amended.
[Incorporated by reference to Exhibit 4.4 to
the Company's Form S-8 Registration
Statement (Reg. No. 33-32525).]
*10.5 Forms of Stock Option Agreements under the
1989 Stock Option Plan, as amended.
[Incorporated by reference to Exhibits 4.5-
4.8 to the Company's Form S-8 Registration
Statement (Reg. No. 33-32525).]
*10.6 1995 Stock Option Plan, as amended.
*10.7 Form of Stock Option Agreements under the
1995 Stock Option Plan, as amended.
10.8 Lease Agreement dated September 5, 1991
between The Equitable Life Assurance Society
of the United States and the Company.
[Incorporated by reference to Exhibit 10.13
to the Company's Form 10-K for the fiscal
year ended March 31, 1992.]
10.9 Agreement dated September 5, 1991 between
the Company and Cranberry Hills
Partnership. [Incorporated by reference to
Exhibit 10.14 to the Company's Form 10-K for
the fiscal year ended March 31, 1992.]
10.10 Lease, dated March 31, 1994 between
Nantucket Conservation Foundation, Inc. and
the Company. [Incorporation by reference to
Exhibit 10.11 to the Company's Form 10-K for
the fiscal year ended March 31, 1994.]
*10.11 Key Executive Employment and Severance
Agreement dated as of May 8, 1992 between
the Company and John Swendrowski.
[Incorporated by reference to Exhibit 10.25
to the Company's Form 10-K for the fiscal
year ended March 31, 1992.]
*10.13 Northland Cranberries, Inc. 1992 Executive
Incentive Bonus Plan, as amended.
[Incorporated by reference to Exhibit 10.13
to the Company's Form 10-K for the fiscal
year ended March 31, 1995.]
10.14 Agreement dated June 15, 1992 between the
Company and Board na Mona. [Incorporated by
reference to Exhibit 10.27 to the Company's
Form 10-K for the fiscal year ended March
31, 1992.]
18 Letter from Deloitte & Touche LLP, dated
November 26, 1996, regarding change in
accounting principles.
21 Subsidiary of the Company. [Incorporated by
reference to Exhibit 22 to the Company's
Form 10-K for the fiscal year ended March
31, 1992.]
23.1 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule.
99 Definitive Proxy Statement for the Company's
1997 annual meeting of shareholders
scheduled to he held on January 8, 1997
(previously filed with the Commission under
Regulation 14A on November 27, 1996 and
incorporated by reference herein to extent
indicated in this Form 10-K).
* This exhibit is a management contract or compensatory plan or
arrangement required to be filed as an exhibit to this Form 10-K pursuant
to Item 14(c) of Form 10-K.
Exhibit 3.1
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
NORTHLAND CRANBERRIES, INC.
August 18, 1995
1. The name of the corporation is Northland Cranberries, Inc.
2. The first sentence of Article 4 of the Articles of
Incorporation of the Corporation is amended in its entirety to read as
follows:
Article 4
The total number of shares of all classes of capital stock which
the Corporation shall have the authority to issue is Twenty-Seven
Million (27,000,000) shares, consisting of: (i) Twenty Million
(20,000,000) shares of a class designated as "Class A Common Stock,"
with a par value of one cent ($.01) per share; (ii) Two Million
(2,000,000) shares of a class designated as "Class B Common Stock,"
with a par value of one cent ($.01) per share; and (iii) Five Million
(5,000,000) shares of a class designated as "Preferred Stock," with a
par value of one cent ($.01) per share.
3. The foregoing amendment to the corporation's Articles of
Incorporation was submitted to the corporation's shareholders by the Board
of Directors of the corporation and was adopted by such shareholders on
August 18, 1995 in accordance with Section 180.1003 of the Wisconsin
Business Corporation Law.
Executed on behalf of the corporation this 18th day of August,
1995.
/s/ John A. Pazurek
John A. Pazurek
Vice President - Finance and Treasurer
This instrument was drafted by and should be returned to Thomas L.
Stricker, Jr. of the firm of Foley & Lardner, 777 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202.
Exhibit 3.2
ARTICLES OF INCORPORATION
OF
NORTHLAND CRANBERRIES, INC.
August 18, 1995
Article 1
The name of the corporation (hereinafter referred to as the
"Corporation") is NORTHLAND CRANBERRIES, INC.
Article 2
The period of existence of the Corporation shall be perpetual.
Article 3
The purpose or purposes for which the Corporation is organized
is to carry on and engage in any lawful activity within the purposes for
which corporations may be organized under the Wisconsin Business
Corporation Law, Chapter 180 of the Wisconsin Statutes.
Article 4
The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is Twenty-Seven Million
(27,000,000) shares, consisting of: (i) Twenty Million (20,000,000)
shares of a class designated as "Class A Common Stock," with a par value
of one cent ($.01) per share; (ii) Two Million (2,000,000) shares of a
class designated as "Class B Common Stock," with a par value of one cent
($.01) per share; and (iii) Five Million (5,000,000) shares of a class
designated as "Preferred Stock," with a par value of one cent ($.01) per
share.
Any and all such shares of Class A Common Stock and Class B
Common Stock (collectively, "Common Stock"), and all Preferred Stock, may
be issued for such consideration, not less than the par value thereof, as
shall be fixed from time to time by the Board of Directors. Any and all
of the shares so issued, the full consideration for which has been paid or
delivered, shall be deemed fully paid capital stock and shall not be
liable to any further call or assessment thereon, and the holders of such
shares shall not be liable for any further payments except as otherwise
provided by Section 180.0622 of the Wisconsin Business Corporation Law or
any successor provision thereto, if any.
The designation, relative rights, preferences and limitations of
the shares of each class and the authority of the Board of Directors of
the Corporation to establish and to designate series of the Preferred
Stock and to fix the variations in the relative rights, preferences and
limitations as between such series, shall be as set forth herein
A. Preferred Stock
(1) Series and Variations Between Series. The Board of
Directors of the Corporation is authorized, subject to limitations
prescribed by the Wisconsin Business Corporation Law and the provisions of
this paragraph A, to provide for the issuance of the Preferred Stock in
series, to establish or change the number of shares to be included in each
such series and to fix the designation, relative rights, preferences and
limitations of the shares of each such series. The authority of the Board
of Directors of the Corporation with respect to each series shall include,
but not be limited to, determination of the following:
(i) The number of shares constituting that series and the
distinctive designations of that series;
(ii) The dividend rate or rates on the shares of that
series and/or the method of determining such rate or rates and
the timing of dividend payments on the shares of such series;
(iii) Whether and to what extent the shares of that
series shall have voting rights in addition to the voting rights
provided by Wisconsin Business Corporation Law, which might
include the right to elect a specified number of directors in
any case or if dividends on such series were not paid for a
specified period of time;
(iv) Whether the shares of that series shall be convertible
into shares of stock of any other series, and, if so, the terms
and conditions of such conversion, including the price or prices
and the rate or rates of conversion and the terms of adjustment
thereof;
(v) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they
shall be redeemable and the amount per share payable in case of
redemption, which amount may vary under different conditions and
at different redemption dates;
(vi) The rights of the shares of that series in the event
of voluntary or involuntary liquidation, dissolution or winding
up of the Corporation;
(vii) The obligation, if any, of the Corporation to
retire shares of that series pursuant to a sinking fund; and
(viii) Any other relative rights, preferences and
limitations of that series.
Subject to the designations, relative rights, preferences and
limitations provided pursuant to this paragraph A, each share of Preferred
Stock shall be of equal rank with each other share of Preferred Stock.
(2) Dividends. Before any dividends shall be paid or set apart
for payment upon shares of Common Stock, the holders of each series of
Preferred Stock shall be entitled to receive dividends at the rate per
annum and at such times as specified in the particular series. Dividends
on shares of Preferred Stock shall be paid out of any funds legally
available for the payment of such dividends, when and if declared by the
Board of Directors. Such dividends shall accumulate on each share of
Preferred Stock from the date of issuance. All dividends on shares of
Preferred Stock shall be cumulative so that if the Corporation shall not
pay, on a timely basis, the specified dividend, or any part outstanding,
such deficiency shall thereafter be fully paid, but without interest,
before any dividend shall be paid or set apart for payment on the Common
Stock.
Any dividend paid upon the Preferred Stock at a time when any
accumulated dividends for any prior period are delinquent shall be
expressly declared as a dividend in whole or partial payment of the
accumulated dividend for the earliest dividend period for which dividends
are then delinquent, and shall be so designated to each shareholder to
whom payment is made. All shares of Preferred Stock shall rank equally
and shall share ratably, in proportion to the rate of dividend of the
series, in all dividends paid or set aside for payment for any dividend
period or part thereof upon any such shares.
Except to the limited extent hereinafter provided, so long as
any shares of Preferred Stock shall be outstanding, no dividend, whether
in cash, stock or otherwise, shall be paid or declared nor shall any
distribution be made on the Common Stock, nor shall any Common Stock be
purchased, redeemed or otherwise acquired for value by the Corporation,
nor shall any moneys be paid to or set aside or made available for a
sinking fund for the purchase or redemption of any Common Stock, unless:
(i) All dividends on the Preferred Stock of all series for
all past dividend periods shall have been paid or shall have
been declared and a sum sufficient for the payment thereof set
apart; and
(ii) The Corporation shall have set aside all amounts
theretofore required to be set aside as and for all sinking fund
accounts, if any, for the redemption or purchase of all series
of Preferred Stock for all past sinking fund payment periods or
dates.
The foregoing provisions shall not, however, apply to, or in any way
restrict (x) any acquisition of Common Stock in exchange solely for Common
Stock; (y) the acquisition of Common Stock through application of the
proceeds of the sale of Common Stock; or (z) stock dividends or
distributions payable only in shares of stock having rights and
preferences subordinate to the Preferred Stock.
(3) Liquidation, Dissolution or Winding Up. In case of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of shares of each series of Preferred Stock shall
be entitled to receive out of the assets of the Corporation in money or
money's worth the amount specified in the particular series for each share
at the time outstanding together with all accrued but unpaid dividends
thereon, before any of such assets shall be paid or distributed to holders
of Common Stock. In case of the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, if the assets of the
Corporation shall be insufficient to pay the holders of all shares of
Preferred Stock then outstanding the entire amounts to which they may be
entitled, the holders of shares of each outstanding series of Preferred
Stock shall share ratably in such assets in proportion to the respective
amounts payable in liquidation.
(4) Voting Rights. The holders of Preferred Stock shall have
only such voting rights as are fixed for shares of each series by the
Board of Directors pursuant to this paragraph A or are provided by the
Wisconsin Business Corporation Law.
B. Common Stock.
(1) Voting Rights and Powers.
(a) Except as otherwise provided by the Wisconsin Business
Corporation Law and except as may be determined by the Board of Directors
with respect to the Preferred Stock pursuant to paragraph A of this
Article 4, only the holders of Common Stock shall be entitled to vote for
the election of directors of the Corporation and for all other corporate
purposes. With respect to all matters upon which shareholders are
entitled to vote or to which shareholders are entitled to give consent,
the holders of the outstanding shares of Class A Common Stock and the
holders of the outstanding shares of Class B Common Stock shall vote
together as a single class, and every holder of any outstanding share of
Class A Common Stock shall be entitled to cast thereon one (1) vote in
person or by proxy for each share of Class A Common Stock standing in his
name on the stock transfer records of the Corporation, and every holder of
any outstanding shares of Class B Common Stock shall be entitled to cast
thereon three (3) votes in person or by proxy for each share of Class B
Common Stock standing in his name on the stock transfer records of the
Corporation; provided that, with respect to any proposed corporate action
which would require a separate class vote under the Wisconsin Business
Corporation Law, the approval of a majority of the votes entitled to be
cast by the holders of the class affected by the proposed action, voting
separately as a class, shall be obtained in addition to the approval of a
majority of the votes entitled to be cast by the holders of the Class A
Common Stock and the Class B Common Stock voting together as a single
class as hereinbefore provided.
(b) The voting power limitations and/or restrictions of
Section 180.1150 of the Wisconsin Business Corporation Law, or any
successor provision thereto, shall not apply to any shares of Class B
Common Stock held by any person.
(2) Dividends and Distributions.
(a) Subject to the provisions of this Article 4, the Board
of Directors may, in its discretion, out of funds legally available for
the payment of dividends and at such times and in such manner as
determined by the Board of Directors, declare and pay dividends on the
Common Stock.
(b) As and when cash dividends may be declared from time
to time by the Board of Directors out of funds legally available therefor,
the cash dividend payable with respect to each share of the Class A Common
Stock shall in all cases be in an amount equal to at least one hundred ten
percent (110%) of the amount of the cash dividend payable with respect to
each share of the Class B Common Stock. Cash dividends may be declared
and payable with respect to the Class A Common Stock without a concurrent
cash dividend declared and payable with respect to the Class B Common
Stock. Distributions declared by the Board of Directors to be in
connection with the partial or complete liquidation of the corporation or
any of its subsidiaries shall not be considered to be cash dividends for
the purposes of this Paragraph (2).
(c) Each share of Class A Common Stock and Class B Common
Stock shall be equal in respect to rights to dividends (other than those
payable in cash) and distributions (except distributions declared by the
Board of Directors to be in connection with the liquidation, dissolution
or winding up of the Corporation) when and as declared, in the form of
stock or other property of the Corporation, except that in the case of
dividends or other distributions payable in stock splitups or divisions,
which occur after the initial issuance of shares of the Class B Common
Stock by the Corporation, only shares of Class A Common Stock shall be
distributed with respect to the Class A Common Stock and only shares of
Class B Common Stock shall be distributed with respect to the Class B
Common Stock.
(3) Liquidation, Dissolution or Winding Up.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, after there
shall have been paid to or set aside for the holders of shares of
Preferred Stock the full preferential amounts to which they are entitled,
the holders of outstanding shares of Common Stock shall be entitled to
receive pro rata, according to the number of shares held by each, the
remaining assets of the Corporation available for distribution as set
forth herein.
(b) In case of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of Class A
Common Stock shall be entitled to receive out of the assets of the
Corporation in money or money's worth the sum of One Dollar ($1.00) per
share (the "Class A Payment"), subject to equitable adjustment in the
event of any subdivisions, combinations, stock splits or stock dividends
involving shares of the Class A Common Stock, before any of such assets
shall be paid or distributed to holders of Class B Common Stock. If the
assets of the Corporation shall be insufficient to pay the entire Class A
Payment to the holders of the then outstanding Class A Common Stock, then
the holders of the Class A Common Stock shall share ratably in such assets
in proportion to the amounts which would be payable with respect to
Class A Common Stock as if the Class A Payment was paid in full. After
payment in full of the Class A Payment, the holders of Class B Common
Stock shall be entitled to receive out of the remaining assets of the
Corporation in money or money's worth the sum of One Dollar ($1.00) per
share (the "Class B Payment"), subject to equitable adjustment in the
event of any subdivisions, combinations, stock splits or stock dividends
involving shares of the Class B Common Stock, before any of such remaining
assets shall be paid or distributed to holders of the Class A Common
Stock. If the remaining assets of the Corporation shall be insufficient
to pay the entire Class B Payment to the holders of the then outstanding
Class B Common Stock, then the holders of the Class B Common Stock shall
share ratably in such assets in proportion to the amounts which would be
payable with respect to Class B Common Stock as if the Class B Payment was
paid in full. After payment in full of the Class A Payment and the Class
B Payment, any further payments on the liquidation, dissolution or winding
up of the business of the Corporation shall be made on an equal basis as
to all of the shares of capital stock then outstanding.
(4) Conversion of the Class B Common Stock.
(a) Each share of Class B Common Stock may at any time or
from time to time, at the option of the respective holder thereof, be
converted into one fully paid and nonassessable (except to the extent of
any statutory liability imposed by Section 180.0622 of the Wisconsin
Business Corporation Law) share of Class A Common Stock. Such conversion
right shall be exercised by the surrender of the certificate representing
such share of Class B common Stock to be converted to the Corporation at
any time during normal business hours at the principal executive offices
of the Corporation in Wisconsin Rapids, Wisconsin (to the attention of the
Secretary of the Corporation), or if an agent for the registration or
transfer of shares of Class B Common Stock is then duly appointed and
acting (said agent being referred to in this Article 4 as the "Transfer
Agent") then at the office of the Transfer Agent, accompanied by a written
notice of the election by the holder thereof to convert and (if so
required by the Corporation or the Transfer Agent) by instruments of
transfer, in form satisfactory to the Corporation and to the Transfer
Agent, if any, duly executed by such holder or his duly authorized
attorney, and transfer tax stamps or funds therefor, if required pursuant
to Paragraph (4)(e) below.
(b) As promptly as practicable after the surrender for
conversion of a certificate representing shares of Class B Common Stock in
the manner provided in Paragraph (4)(a), above, and the payment in cash of
any amount required by the provisions of Paragraphs (4)(a) and (4)(e), the
Corporation will deliver, or will cause to be delivered at the office of
the Transfer Agent to, or upon the written order of, the holder of such
certificate, a certificate or certificates representing the number of full
shares of Class A Common Stock issuable upon such conversion, issued in
such name or names as such holder may direct. The Corporation shall not,
however, upon any such conversion, issue any fractional share of Class A
Common Stock, and any shareholder who would otherwise be entitled to
receive such fractional share if issued shall receive in lieu thereof a
full share of Class A Common Stock. Any such conversion shall be deemed
to have been made immediately prior to the close of business on the date
of the surrender of the certificate representing shares of Class B Common
Stock, and all rights of the holder of such shares as such holder shall
cease at such time and the person or persons in whose name or names the
certificate or certificates representing the shares of Class A Common
Stock are to be issued shall be treated for all purposes as having become
the record holder or holders of such shares of Class A Common Stock at
such time; provided, however, that any such surrender and payment on any
date when the stock transfer records of the Corporation shall be closed
shall constitute the person or persons in whose name or names the
certificate or certificates representing shares of Class A Common Stock
are to be issued as the record holder or holders thereof for all purposes
immediately prior to the close of business on the next succeeding day on
which such stock transfer records are open.
(c) No adjustment in respect of dividends shall be made
upon the conversion of any shares of Class B Common Stock; provided,
however, that if a share shall be converted subsequent to the record date
for the payment of a dividend or other distribution on shares of Class B
Common Stock but prior to such payment, the registered holder of such
share at the close of business on such record date shall be entitled to
receive the dividend or other distribution payable on such share on the
date set for payment of such dividend or other distribution
notwithstanding the conversion thereof or the Corporation's default in
payment of the dividend or distribution due on such date.
(d) The Corporation will at all times reserve and keep
available, solely for the purpose of issuance upon conversion of the
outstanding shares of Class B Common Stock, such number of shares of
Class A Common Stock as shall be issuable upon the conversion of all of
such outstanding shares; provided, however, that nothing contained herein
shall be construed to preclude the Corporation from satisfying its
obligations in respect of the conversion of the outstanding shares of
Class B Common Stock by delivery of purchased shares of Class A Common
Stock which are held in the treasury of the Corporation. If any shares of
Class A Common Stock required to be reserved for purposes of conversion
hereunder require registration with, or approval of, any governmental
authority under any Federal or state law before such shares of Class A
Common Stock may be issued upon conversion, the Corporation will use its
best efforts to cause such shares to be duly registered or approved, as
the case may be.
(e) The issuance of certificates for shares of Class A
Common Stock upon conversion of shares of Class B Common Stock shall be
made without charge for any stamp or other similar tax in respect of such
issuance. However, if any such certificate is to be issued in a name
other than that of the holder of the share or shares of Class B Common
Stock converted, the person or persons requesting the issuance thereof
shall pay to the Corporation the full amount of any tax which may be
payable in respect of any transfer involved in such issuance or shall
establish to the satisfaction of the Corporation that such tax has been
paid.
(f) When the number of outstanding shares of Class B
Common Stock falls below two percent (2%) of the aggregate number of
shares of Class A Common Stock and Class B Common Stock then outstanding
(or such higher number as results from adjustments for stock splits, stock
dividends or other events), the outstanding shares of Class B Common Stock
shall be deemed without further act on anyone's part to be immediately and
automatically converted into shares of Class A Common Stock, and stock
certificates formerly representing outstanding shares of Class B Common
Stock shall thereupon and thereafter be deemed to represent a like number
of full shares of Class A Common Stock. In the event that any shareholder
would otherwise be entitled to receive a fractional share of Class A
Common Stock upon any such conversion, such shareholder shall receive in
lieu thereof a full share of Class B Common Stock.
(5) No Subsequent Issuance of Class B Common Stock
Subsequent to the initial issuance of the shares of Class B
Common Stock, the Board of Directors may only issue such shares in the
form of a distribution or distributions pursuant to a stock dividend on or
split-up of the shares of the Class B Common Stock and only to the then
holders of the outstanding shares of the Class B Common Stock in
conjunction with and in the same ratio as a stock dividend on or split-up
of the shares of the Class A Common Stock. Except as provided in this
paragraph (5), the Corporation shall not issue additional shares of
Class B Common Stock after the initial issuance of such shares by the
Corporation, and all shares of Class B Common Stock surrendered for
conversion shall be retired, unless otherwise approved by the affirmative
vote of the holders of a majority of the outstanding shares of the Class A
Common Stock and Class B Common Stock entitled to vote, voting together as
a single class, as provided in Paragraph (B)(1) of this Article 4.
(6) No Preemptive Rights.
No holder of any issued and outstanding share of Class A Common
Stock, Class B Common Stock or Preferred Stock shall, as such holder, have
any preemptive right in or right to purchase or subscribe for, any new or
additional shares of Class A Common Stock, Class B Common Stock and/or
Preferred Stock, or any shares of any other class or series of capital
stock, or any obligations or other rights or options to subscribe for or
purchase, any capital stock of any class of series, whether now or
hereinafter authorized and whether issued by the corporation for cash or
other consideration or by way of dividends or other distribution.
Article 5
The number of directors constituting the Corporation's initial
Board of Directors shall be two (2), and thereafter the number of
directors shall be such number (one or more) as may be fixed from time to
time or at any time by, or in the manner provided in, the Corporation's
Bylaws. The names of the two (2) initial directors are as follows:
John Swendrowski
Leroy Miles
Article 6
The address of the initial registered office of the Corporation
is c/o Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin
53202, in Milwaukee County. The name of the Corporation's initial
registered agent at such address is Jeffrey J. Jones.
Article 7
These Articles of Incorporation may be amended pursuant to the
Bylaws of this Corporation and as authorized by law at the time of
amendment.
Article 8
The name and address of the sole incorporator of this
Corporation is Todd B. Pfister, c/o Foley & Lardner, 777 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202.
Exhibit 3.3
FORM OF
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
NORTHLAND CRANBERRIES, INC.
1. The name of the corporation is Northland Cranberries, Inc.
2. The first sentence of Article 4 of the Articles of
Incorporation of the corporation is amended in its entirety to read as
follows:
Article 4
The total number of shares of all classes of capital stock
which the Corporation shall have the authority to issue is
Sixty-Nine Million (69,000,000) shares, consisting of: (i)
Sixty Million (60,000,000) shares of a class designated as
"Class A Common Stock," with a par value of one cent ($.01) per
share; (ii) Four Million (4,000,000) shares of a class
designated as "Class B Common Stock," with a par value of one
cent ($.01) per shares; and (iii) Five Million (5,000,000)
shares of a class designated as "Preferred Stock," with a par
value of one cent ($.01) per share.
3. The foregoing amendment to the corporation's Articles of
Incorporation was submitted to the corporation's shareholders by the Board
of Directors of the corporation and was adopted by such shareholders on
January 8, 1997 in accordance with Section 180.1003 of the Wisconsin
Business Corporation Law.
Executed on behalf of the corporation this 8th day of January,
1997.
John A. Pazurek
Vice President - Finance and Treasurer
This instrument was drafted by and should be returned to Peter C.
Underwood of the firm of Foley & Lardner, 777 East Wisconsin Avenue,
Milwaukee, Wisconsin 53202.
Exhibit 3.4
ARTICLES OF INCORPORATION
OF
NORTHLAND CRANBERRIES, INC.
January 8, 1997
Article 1
The name of the corporation (hereinafter referred to as the
"Corporation") is NORTHLAND CRANBERRIES, INC.
Article 2
The period of existence of the Corporation shall be perpetual.
Article 3
The purpose or purposes for which the Corporation is organized
is to carry on and engage in any lawful activity within the purposes for
which corporations may be organized under the Wisconsin Business
Corporation Law, Chapter 180 of the Wisconsin Statutes.
Article 4
The total number of shares of all classes of capital stock which
the Corporation shall have authority to issue is Sixty-Nine Million
(69,000,000) shares, consisting of: (i) Sixty Million (60,000,000) shares
of a class designated as "Class A Common Stock," with a par value of one
cent ($.01) per share; (ii) Four Million (4,000,000) shares of a class
designated as "Class B Common Stock," with a par value of one cent ($.01)
per share; and (iii) Five Million (5,000,000) shares of a class designated
as "Preferred Stock," with a par value of one cent ($.01) per share.
Any and all such shares of Class A Common Stock and Class B
Common Stock (collectively, "Common Stock"), and all Preferred Stock, may
be issued for such consideration, not less than the par value thereof, as
shall be fixed from time to time by the Board of Directors. Any and all
of the shares so issued, the full consideration for which has been paid or
delivered, shall be deemed fully paid capital stock and shall not be
liable to any further call or assessment thereon, and the holders of such
shares shall not be liable for any further payments except as otherwise
provided by Section 180.0622 of the Wisconsin Business Corporation Law or
any successor provision thereto, if any.
The designation, relative rights, preferences and limitations of
the shares of each class and the authority of the Board of Directors of
the Corporation to establish and to designate series of the Preferred
Stock and to fix the variations in the relative rights, preferences and
limitations as between such series, shall be as set forth herein
A. Preferred Stock
(1) Series and Variations Between Series. The Board of
Directors of the Corporation is authorized, subject to limitations
prescribed by the Wisconsin Business Corporation Law and the provisions of
this paragraph A, to provide for the issuance of the Preferred Stock in
series, to establish or change the number of shares to be included in each
such series and to fix the designation, relative rights, preferences and
limitations of the shares of each such series. The authority of the Board
of Directors of the Corporation with respect to each series shall include,
but not be limited to, determination of the following:
(i) The number of shares constituting that series and the
distinctive designations of that series;
(ii) The dividend rate or rates on the shares of that
series and/or the method of determining such rate or rates and
the timing of dividend payments on the shares of such series;
(iii) Whether and to what extent the shares of that
series shall have voting rights in addition to the voting rights
provided by Wisconsin Business Corporation Law, which might
include the right to elect a specified number of directors in
any case or if dividends on such series were not paid for a
specified period of time;
(iv) Whether the shares of that series shall be convertible
into shares of stock of any other series, and, if so, the terms
and conditions of such conversion, including the price or prices
and the rate or rates of conversion and the terms of adjustment
thereof;
(v) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they
shall be redeemable and the amount per share payable in case of
redemption, which amount may vary under different conditions and
at different redemption dates;
(vi) The rights of the shares of that series in the event
of voluntary or involuntary liquidation, dissolution or winding
up of the Corporation;
(vii) The obligation, if any, of the Corporation to
retire shares of that series pursuant to a sinking fund; and
(viii) Any other relative rights, preferences and
limitations of that series.
Subject to the designations, relative rights, preferences and
limitations provided pursuant to this paragraph A, each share of Preferred
Stock shall be of equal rank with each other share of Preferred Stock.
(2) Dividends. Before any dividends shall be paid or set apart
for payment upon shares of Common Stock, the holders of each series of
Preferred Stock shall be entitled to receive dividends at the rate per
annum and at such times as specified in the particular series. Dividends
on shares of Preferred Stock shall be paid out of any funds legally
available for the payment of such dividends, when and if declared by the
Board of Directors. Such dividends shall accumulate on each share of
Preferred Stock from the date of issuance. All dividends on shares of
Preferred Stock shall be cumulative so that if the Corporation shall not
pay, on a timely basis, the specified dividend, or any part outstanding,
such deficiency shall thereafter be fully paid, but without interest,
before any dividend shall be paid or set apart for payment on the Common
Stock.
Any dividend paid upon the Preferred Stock at a time when any
accumulated dividends for any prior period are delinquent shall be
expressly declared as a dividend in whole or partial payment of the
accumulated dividend for the earliest dividend period for which dividends
are then delinquent, and shall be so designated to each shareholder to
whom payment is made. All shares of Preferred Stock shall rank equally
and shall share ratably, in proportion to the rate of dividend of the
series, in all dividends paid or set aside for payment for any dividend
period or part thereof upon any such shares.
Except to the limited extent hereinafter provided, so long as
any shares of Preferred Stock shall be outstanding, no dividend, whether
in cash, stock or otherwise, shall be paid or declared nor shall any
distribution be made on the Common Stock, nor shall any Common Stock be
purchased, redeemed or otherwise acquired for value by the Corporation,
nor shall any moneys be paid to or set aside or made available for a
sinking fund for the purchase or redemption of any Common Stock, unless:
(i) All dividends on the Preferred Stock of all series for
all past dividend periods shall have been paid or shall have
been declared and a sum sufficient for the payment thereof set
apart; and
(ii) The Corporation shall have set aside all amounts
theretofore required to be set aside as and for all sinking fund
accounts, if any, for the redemption or purchase of all series
of Preferred Stock for all past sinking fund payment periods or
dates.
The foregoing provisions shall not, however, apply to, or in any way
restrict (x) any acquisition of Common Stock in exchange solely for Common
Stock; (y) the acquisition of Common Stock through application of the
proceeds of the sale of Common Stock; or (z) stock dividends or
distributions payable only in shares of stock having rights and
preferences subordinate to the Preferred Stock.
(3) Liquidation, Dissolution or Winding Up. In case of
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of shares of each series of Preferred Stock shall
be entitled to receive out of the assets of the Corporation in money or
money's worth the amount specified in the particular series for each share
at the time outstanding together with all accrued but unpaid dividends
thereon, before any of such assets shall be paid or distributed to holders
of Common Stock. In case of the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, if the assets of the
Corporation shall be insufficient to pay the holders of all shares of
Preferred Stock then outstanding the entire amounts to which they may be
entitled, the holders of shares of each outstanding series of Preferred
Stock shall share ratably in such assets in proportion to the respective
amounts payable in liquidation.
(4) Voting Rights. The holders of Preferred Stock shall have
only such voting rights as are fixed for shares of each series by the
Board of Directors pursuant to this paragraph A or are provided by the
Wisconsin Business Corporation Law.
B. Common Stock.
(1) Voting Rights and Powers.
(a) Except as otherwise provided by the Wisconsin Business
Corporation Law and except as may be determined by the Board of Directors
with respect to the Preferred Stock pursuant to paragraph A of this
Article 4, only the holders of Common Stock shall be entitled to vote for
the election of directors of the Corporation and for all other corporate
purposes. With respect to all matters upon which shareholders are
entitled to vote or to which shareholders are entitled to give consent,
the holders of the outstanding shares of Class A Common Stock and the
holders of the outstanding shares of Class B Common Stock shall vote
together as a single class, and every holder of any outstanding share of
Class A Common Stock shall be entitled to cast thereon one (1) vote in
person or by proxy for each share of Class A Common Stock standing in his
name on the stock transfer records of the Corporation, and every holder of
any outstanding shares of Class B Common Stock shall be entitled to cast
thereon three (3) votes in person or by proxy for each share of Class B
Common Stock standing in his name on the stock transfer records of the
Corporation; provided that, with respect to any proposed corporate action
which would require a separate class vote under the Wisconsin Business
Corporation Law, the approval of a majority of the votes entitled to be
cast by the holders of the class affected by the proposed action, voting
separately as a class, shall be obtained in addition to the approval of a
majority of the votes entitled to be cast by the holders of the Class A
Common Stock and the Class B Common Stock voting together as a single
class as hereinbefore provided.
(b) The voting power limitations and/or restrictions of
Section 180.1150 of the Wisconsin Business Corporation Law, or any
successor provision thereto, shall not apply to any shares of Class B
Common Stock held by any person.
(2) Dividends and Distributions.
(a) Subject to the provisions of this Article 4, the Board
of Directors may, in its discretion, out of funds legally available for
the payment of dividends and at such times and in such manner as
determined by the Board of Directors, declare and pay dividends on the
Common Stock.
(b) As and when cash dividends may be declared from time
to time by the Board of Directors out of funds legally available therefor,
the cash dividend payable with respect to each share of the Class A Common
Stock shall in all cases be in an amount equal to at least one hundred ten
percent (110%) of the amount of the cash dividend payable with respect to
each share of the Class B Common Stock. Cash dividends may be declared
and payable with respect to the Class A Common Stock without a concurrent
cash dividend declared and payable with respect to the Class B Common
Stock. Distributions declared by the Board of Directors to be in
connection with the partial or complete liquidation of the corporation or
any of its subsidiaries shall not be considered to be cash dividends for
the purposes of this Paragraph (2).
(c) Each share of Class A Common Stock and Class B Common
Stock shall be equal in respect to rights to dividends (other than those
payable in cash) and distributions (except distributions declared by the
Board of Directors to be in connection with the liquidation, dissolution
or winding up of the Corporation) when and as declared, in the form of
stock or other property of the Corporation, except that in the case of
dividends or other distributions payable in stock splitups or divisions,
which occur after the initial issuance of shares of the Class B Common
Stock by the Corporation, only shares of Class A Common Stock shall be
distributed with respect to the Class A Common Stock and only shares of
Class B Common Stock shall be distributed with respect to the Class B
Common Stock.
(3) Liquidation, Dissolution or Winding Up.
(a) In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, after there
shall have been paid to or set aside for the holders of shares of
Preferred Stock the full preferential amounts to which they are entitled,
the holders of outstanding shares of Common Stock shall be entitled to
receive pro rata, according to the number of shares held by each, the
remaining assets of the Corporation available for distribution as set
forth herein.
(b) In case of voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of Class A
Common Stock shall be entitled to receive out of the assets of the
Corporation in money or money's worth the sum of One Dollar ($1.00) per
share (the "Class A Payment"), subject to equitable adjustment in the
event of any subdivisions, combinations, stock splits or stock dividends
involving shares of the Class A Common Stock, before any of such assets
shall be paid or distributed to holders of Class B Common Stock. If the
assets of the Corporation shall be insufficient to pay the entire Class A
Payment to the holders of the then outstanding Class A Common Stock, then
the holders of the Class A Common Stock shall share ratably in such assets
in proportion to the amounts which would be payable with respect to
Class A Common Stock as if the Class A Payment was paid in full. After
payment in full of the Class A Payment, the holders of Class B Common
Stock shall be entitled to receive out of the remaining assets of the
Corporation in money or money's worth the sum of One Dollar ($1.00) per
share (the "Class B Payment"), subject to equitable adjustment in the
event of any subdivisions, combinations, stock splits or stock dividends
involving shares of the Class B Common Stock, before any of such remaining
assets shall be paid or distributed to holders of the Class A Common
Stock. If the remaining assets of the Corporation shall be insufficient
to pay the entire Class B Payment to the holders of the then outstanding
Class B Common Stock, then the holders of the Class B Common Stock shall
share ratably in such assets in proportion to the amounts which would be
payable with respect to Class B Common Stock as if the Class B Payment was
paid in full. After payment in full of the Class A Payment and the Class
B Payment, any further payments on the liquidation, dissolution or winding
up of the business of the Corporation shall be made on an equal basis as
to all of the shares of capital stock then outstanding.
(4) Conversion of the Class B Common Stock.
(a) Each share of Class B Common Stock may at any time or
from time to time, at the option of the respective holder thereof, be
converted into one fully paid and nonassessable (except to the extent of
any statutory liability imposed by Section 180.0622 of the Wisconsin
Business Corporation Law) share of Class A Common Stock. Such conversion
right shall be exercised by the surrender of the certificate representing
such share of Class B common Stock to be converted to the Corporation at
any time during normal business hours at the principal executive offices
of the Corporation in Wisconsin Rapids, Wisconsin (to the attention of the
Secretary of the Corporation), or if an agent for the registration or
transfer of shares of Class B Common Stock is then duly appointed and
acting (said agent being referred to in this Article 4 as the "Transfer
Agent") then at the office of the Transfer Agent, accompanied by a written
notice of the election by the holder thereof to convert and (if so
required by the Corporation or the Transfer Agent) by instruments of
transfer, in form satisfactory to the Corporation and to the Transfer
Agent, if any, duly executed by such holder or his duly authorized
attorney, and transfer tax stamps or funds therefor, if required pursuant
to Paragraph (4)(e) below.
(b) As promptly as practicable after the surrender for
conversion of a certificate representing shares of Class B Common Stock in
the manner provided in Paragraph (4)(a), above, and the payment in cash of
any amount required by the provisions of Paragraphs (4)(a) and (4)(e), the
Corporation will deliver, or will cause to be delivered at the office of
the Transfer Agent to, or upon the written order of, the holder of such
certificate, a certificate or certificates representing the number of full
shares of Class A Common Stock issuable upon such conversion, issued in
such name or names as such holder may direct. The Corporation shall not,
however, upon any such conversion, issue any fractional share of Class A
Common Stock, and any shareholder who would otherwise be entitled to
receive such fractional share if issued shall receive in lieu thereof a
full share of Class A Common Stock. Any such conversion shall be deemed
to have been made immediately prior to the close of business on the date
of the surrender of the certificate representing shares of Class B Common
Stock, and all rights of the holder of such shares as such holder shall
cease at such time and the person or persons in whose name or names the
certificate or certificates representing the shares of Class A Common
Stock are to be issued shall be treated for all purposes as having become
the record holder or holders of such shares of Class A Common Stock at
such time; provided, however, that any such surrender and payment on any
date when the stock transfer records of the Corporation shall be closed
shall constitute the person or persons in whose name or names the
certificate or certificates representing shares of Class A Common Stock
are to be issued as the record holder or holders thereof for all purposes
immediately prior to the close of business on the next succeeding day on
which such stock transfer records are open.
(c) No adjustment in respect of dividends shall be made
upon the conversion of any shares of Class B Common Stock; provided,
however, that if a share shall be converted subsequent to the record date
for the payment of a dividend or other distribution on shares of Class B
Common Stock but prior to such payment, the registered holder of such
share at the close of business on such record date shall be entitled to
receive the dividend or other distribution payable on such share on the
date set for payment of such dividend or other distribution
notwithstanding the conversion thereof or the Corporation's default in
payment of the dividend or distribution due on such date.
(d) The Corporation will at all times reserve and keep
available, solely for the purpose of issuance upon conversion of the
outstanding shares of Class B Common Stock, such number of shares of
Class A Common Stock as shall be issuable upon the conversion of all of
such outstanding shares; provided, however, that nothing contained herein
shall be construed to preclude the Corporation from satisfying its
obligations in respect of the conversion of the outstanding shares of
Class B Common Stock by delivery of purchased shares of Class A Common
Stock which are held in the treasury of the Corporation. If any shares of
Class A Common Stock required to be reserved for purposes of conversion
hereunder require registration with, or approval of, any governmental
authority under any Federal or state law before such shares of Class A
Common Stock may be issued upon conversion, the Corporation will use its
best efforts to cause such shares to be duly registered or approved, as
the case may be.
(e) The issuance of certificates for shares of Class A
Common Stock upon conversion of shares of Class B Common Stock shall be
made without charge for any stamp or other similar tax in respect of such
issuance. However, if any such certificate is to be issued in a name
other than that of the holder of the share or shares of Class B Common
Stock converted, the person or persons requesting the issuance thereof
shall pay to the Corporation the full amount of any tax which may be
payable in respect of any transfer involved in such issuance or shall
establish to the satisfaction of the Corporation that such tax has been
paid.
(f) When the number of outstanding shares of Class B
Common Stock falls below two percent (2%) of the aggregate number of
shares of Class A Common Stock and Class B Common Stock then outstanding
(or such higher number as results from adjustments for stock splits, stock
dividends or other events), the outstanding shares of Class B Common Stock
shall be deemed without further act on anyone's part to be immediately and
automatically converted into shares of Class A Common Stock, and stock
certificates formerly representing outstanding shares of Class B Common
Stock shall thereupon and thereafter be deemed to represent a like number
of full shares of Class A Common Stock. In the event that any shareholder
would otherwise be entitled to receive a fractional share of Class A
Common Stock upon any such conversion, such shareholder shall receive in
lieu thereof a full share of Class B Common Stock.
(5) No Subsequent Issuance of Class B Common Stock
Subsequent to the initial issuance of the shares of Class B
Common Stock, the Board of Directors may only issue such shares in the
form of a distribution or distributions pursuant to a stock dividend on or
split-up of the shares of the Class B Common Stock and only to the then
holders of the outstanding shares of the Class B Common Stock in
conjunction with and in the same ratio as a stock dividend on or split-up
of the shares of the Class A Common Stock. Except as provided in this
paragraph (5), the Corporation shall not issue additional shares of
Class B Common Stock after the initial issuance of such shares by the
Corporation, and all shares of Class B Common Stock surrendered for
conversion shall be retired, unless otherwise approved by the affirmative
vote of the holders of a majority of the outstanding shares of the Class A
Common Stock and Class B Common Stock entitled to vote, voting together as
a single class, as provided in Paragraph (B)(1) of this Article 4.
(6) No Preemptive Rights.
No holder of any issued and outstanding share of Class A Common
Stock, Class B Common Stock or Preferred Stock shall, as such holder, have
any preemptive right in or right to purchase or subscribe for, any new or
additional shares of Class A Common Stock, Class B Common Stock and/or
Preferred Stock, or any shares of any other class or series of capital
stock, or any obligations or other rights or options to subscribe for or
purchase, any capital stock of any class of series, whether now or
hereinafter authorized and whether issued by the corporation for cash or
other consideration or by way of dividends or other distribution.
Article 5
The number of directors constituting the Corporation's initial
Board of Directors shall be two (2), and thereafter the number of
directors shall be such number (one or more) as may be fixed from time to
time or at any time by, or in the manner provided in, the Corporation's
Bylaws. The names of the two (2) initial directors are as follows:
John Swendrowski
Leroy Miles
Article 6
The address of the initial registered office of the Corporation
is c/o Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin
53202, in Milwaukee County. The name of the Corporation's initial
registered agent at such address is Jeffrey J. Jones.
Article 7
These Articles of Incorporation may be amended pursuant to the
Bylaws of this Corporation and as authorized by law at the time of
amendment.
Article 8
The name and address of the sole incorporator of this
Corporation is Todd B. Pfister, c/o Foley & Lardner, 777 East Wisconsin
Avenue, Milwaukee, Wisconsin 53202.
Northland Cranberries, Inc.
Third Amendment to Credit Agreement
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of
August 31, 1994, as heretofore amended (the "Credit Agreement"), between
Northland Cranberries, Inc., a Wisconsin corporation (the "Company"), and
you (the "Bank"). All capitalized terms used herein without definition
shall have the same meanings herein as such terms have in the Credit
Agreement.
The Company has requested that the Bank increase the amount of the
Revolving Credit and make certain other amendments to the Credit
Agreement, and the Bank is willing to do so under the terms and conditions
set forth in this Amendment.
1. Amendments.
Upon the satisfaction of the conditions precedent set forth in
Section 2 of this Amendment, the Credit Agreement shall be and hereby is
amended as follows:
(a) Section 1.1(a) of the Credit Agreement shall be amended by
striking the amount "$21,000,000" appearing therein and substituting
therefor the amount "$45,000,000".
(b) The last sentence of Section 1.2(b) of the Credit Agreement
shall be amended in its entirety to read as follows:
"The Term Credit Note Two shall be expressed to mature in eight
(8) semi-annual installments of principal, commencing on
November 30, 1996 and continuing on the last day of each May and
November occurring thereafter to and including May 31, 2000,
with the first seven (7) installments to be in the amount of
$286,000 and with the final installment to be in the amount of
$1,998,000."
(c) Section 1.3(a) of the Credit Agreement shall be amended in its
entirety to read as follows:
"Section 1.3. The Acquisition Credit. (a) Subject to all
of the terms and conditions hereof, the Bank agrees to extend an
Acquisition Credit to the Company which may be availed of by the
Company in its discretion from time to time, be repaid and used
again, during the period from the date hereof to and including
the Acquisition Credit Termination Date. The Acquisition Credit
may be utilized by the Company in the form of loans
(individually an "Acquisition Loan" and collectively the
"Acquisition Loans"), provided that the aggregate amount of the
Acquisition Loans outstanding at any one time shall not exceed
$10,000,000 (the "Acquisition Credit Commitment").
Notwithstanding any provision of this Agreement to the contrary,
each Acquisition Loan shall mature on the earlier of the date
that is one year after the date such Acquisition Loan is made or
September 1, 1999."
(d) Section 3.1(b) of the Credit Agreement shall be amended by
striking the phrase "1/4 of 1% per annum" appearing therein and
substituting therefor the phrase "1/8 of 1% per annum".
(e) Section 4 of the Credit Agreement shall be amended and restated
in its entirety to read as follows:
"Section 4. The Collateral.
The Revolving Credit Note, the Term Notes, the Acquisition
Credit Note and the other obligations of the Company hereunder
relating thereto shall be secured by (i) a valid and perfected
first priority liens on certain crops of the Company pursuant to
the terms of the Security Agreement Re: Crops, (ii) valid and
perfected first priority liens on the fixtures and real property
of the Company located in Juneau County, Wisconsin, consisting
of approximately 1,236.8 acres acquired by the Company from the
Yellow River Cranberry Company (the "Yellow River Marsh"), (iii)
valid and perfected first priority liens on the fixtures and
real property of the Company located in Price County, Wisconsin,
consisting of approximately 2,460 acres (the "Fifield Marsh"),
(iv) certain machinery and equipment of the Company located in
Wisconsin Rapids, Wisconsin pursuant to the terms of the
Security Agreement Re: Equipment, (v) valid and perfected first
priority liens on the fixtures and real property of the Company
located in Hanson, Massachusetts, consisting of approximately
1,904 acres acquired by the Company from United Cape Cod Limited
Partnership (the "Hanson Marsh"), (vi) valid and perfected first
priority liens on the fixtures and real property of the Company
located in Wood County, Wisconsin consisting of approximately
106 acres acquired from Lloyd A. Wolfe and Jeanne M. Wolfe (the
"Wolfe Marsh"), (vii) valid and perfected first priority liens
on the fixtures and real property of the Company located in the
Town of Armenia, Juneau County, Wisconsin, consisting of
approximately 469 acres acquired from the Yellow River Cranberry
Company (the "F Marsh") and (viii) valid and perfected first
priority liens on the fixtures and real properties of the
Gordon, Nekoosa and a portion of the Biron divisions of the
Company located in Wood and Douglas Counties, Wisconsin.
The Company agrees that it will from time to time at the
request of the Bank execute and deliver such documents and do
such acts and things as the Bank may reasonably request in order
to provide for or perfect such liens.
Notwithstanding anything herein to the contrary, (i) if the
Company reduces that amount of the Revolving Credit Commitment
to $25,000,000 pursuant to the terms of Section 3.5 hereof and
no Default or Event of Default then exists, the Bank shall
execute and deliver to the Company such releases and
satisfactions of mortgage as shall be necessary so that the
Yellow River Marsh and the Fifield Marsh are no longer subject
to any lien in favor of the Bank, (ii) if, after November 4,
1996, the Company either incurs long-term indebtedness or sells
equity securities issued by it, in each case, the net proceeds
of which are used to satisfy all indebtedness evidenced by Term
Note Three or if the Company satisfies such indebtedness out of
cash flow, the Bank shall execute and deliver to the Company
such releases and satisfactions of mortgage as shall be
necessary so that the Hanson Marsh, the Wolfe Marsh and the F
Marsh are no longer subject to any lien in favor of the Bank and
(iii) if, after November 4, 1996, the Company (a) either incurs
long-term indebtedness or sells equity securities issued by it,
in each case, the net proceeds of which are used to satisfy all
indebtedness evidenced by the Acquisition Credit Note or if the
Company satisfies such indebtedness out of cash flow, and (b)
terminates the Acquisition Credit Commitment in whole, the Bank
shall execute and deliver to the Company such releases and
satisfactions of mortgage as shall be necessary so that the real
properties of the Gordon, Nekoosa and a portion of the Biron
divisions of the Company located in Wood and Douglas Counties,
Wisconsin are no longer subject to any lien in favor of the
Bank. For purposes of the foregoing sentence, the phrase
"long-term indebtedness" shall mean indebtedness which matures
no earlier than five years after the date such indebtedness is
incurred and the phrase "net proceeds", when used in conjunction
with the issuance and sale of equity securities, shall mean
gross proceeds less reasonable costs directly incurred and
payable as a result thereof."
(f) Section 7.4 of the Credit Agreement shall be amended by (i)
deleting the period appearing after subsection (e) thereof and
substituting therefor a semicolon and (ii) adding the following new
subsections (f) and (g) immediately after subsection (e) as so amended:
"(f) as soon as available, and in any event within 30 days
after the close of each month, a copy of the consolidated
balance sheet of the Company and its Subsidiaries as of the last
day of such period and the consolidated statement of income for
the Company and its Subsidiaries for the month and the fiscal
year-to-date period then ended, each in reasonable detail,
prepared by the Company in accordance with generally accepted
accounting principles consistently applied and certified to by
its Vice President-Finance; and
(g) as soon as available, and in any event within 30 days
prior to the end of each fiscal year of the Company, a copy of
the Company's consolidated business plan and operating
projections for the following fiscal year, such plan to be in
reasonable detail prepared by the Company and in form reasonably
satisfactory to the Bank."
(g) Section 7.8 of the Credit Agreement shall be amended and
restated in its entirety to read as follows:
"Section 7.8. Shareholders' Equity. The Company will at all
times during the periods indicated below maintain Shareholders'
Equity in an amount not less than:
Shareholder's Equity
from and including to and including will not be less than
8/31/96 5/31/97 $60,000,000
6/01/97 5/31/98 $65,000,000
6/01/98 all times thereafter $70,000,000
(h) Section 7.9 of the Credit Agreement shall be amended and
restated in its entirety to read as follows:
"Section 7.9. Fixed Charge Coverage Ratio. The Company will
not, as of the last day of each fiscal quarter commencing with
the fiscal quarter ending August 31, 1997, permit the ratio of:
(a) the sum of Net Income plus the increase in Deferred Taxes
shown on the Company's audited balance sheet, if any, plus
Depreciation and Amortization expense, plus total Interest
Expense (in each case, for the four fiscal quarters then ended),
to (b) total Interest Expense (for the same four fiscal quarters
then ended) plus the scheduled payments of principal on long
term debt that will be payable in such period of four fiscal
quarters (not including the principal amount of the Loans
outstanding under this Agreement), to be less than 1.25 to 1 on
the last day of each fiscal quarter."
(i) Section 7.10 of the Credit Agreement shall be amended and
restated in its entirety to read as follows:
"Section 7.10. Funded Debt to Shareholders' Equity Ratio;. The
Company will not permit the ratio of its Funded Debt to
Shareholders' Equity to exceed 2.0 to 1 at any time."
(j) Section 7.11 of the Credit Agreement shall be amended and
restated in its entirety to read as follows:
"Section 7.11. Net Income;. The Company and its Subsidiaries
will not have a net loss of more than $2,000,000 for each of the
first three fiscal quarters of the Company's 1997 fiscal year
and will not have a net loss of more than $1,500,000 for any
fiscal quarter ending thereafter."
(k) Section 7.13(f) of the Credit Agreement shall be amended and
restated in its entirety to read as follows:
"(f) indebtedness incurred to refinance Term Loan Three and/or
the Acquisitions Loans made hereunder; and"
(l) Section 7.16 of the Credit Agreement shall be amended and
restated in its entirety to read as follows:
"Section 7.16. Distributions. The Company will not, directly
or indirectly, (a) declare, make or incur any liability to pay
any dividend on or make any other distribution in respect of any
class or series of its capital stock (other than dividends
payable solely in its capital stock) or (b) purchase, repurchase
or otherwise acquire or retire any of its capital stock;
provided, however, that so long as no Default or Event of
Default shall have occurred and be continuing the Company may
(i) repurchase its capital stock provided the aggregate amount
expended for such repurchases does not exceed $2,000,000, (ii)
pay dividends in an amount not to exceed $0.07 per share during
each of the first three fiscal quarters of the Company's 1996
fiscal year, and (iii) pay dividends in an amount not to exceed
$0.08 per share during the fourth fiscal quarter of the
Company's 1996 fiscal year and (iv) during each fiscal year of
the Company after the 1996 fiscal year, pay dividends in an
amount not to exceed 50% of the Company's Net Income for the
fiscal year immediately preceding the fiscal year in which such
dividend is to be paid."
(m) Section 7.21 of the Credit Agreement shall amended and restated
in its entirety to read as follows:
"Section 7.21. Intentionally Omitted."
(n) The definition of the terms "Acquisition Credit Termination
Date" and "Termination Date" appearing in Section 9 of the Credit
Agreement shall each be amended in their entirety to read, respectively,
as follows:
""Acquisition Credit Termination Date" shall mean September 1,
1999, any later date to which such date may be extended from
time to time pursuant to Section 1.3(b) hereof, or such earlier
date on which the Acquisition Credit Commitment is terminated in
whole pursuant to Sections 3.5, 8.2 or 8.3 hereof.
"Revolving Credit Termination Date" shall mean September 1,
1999, any later date to which such date may be extended from
time to time pursuant to Section 1.1(b) hereof, or such earlier
date on which the Revolving Credit Commitment is terminated in
whole pursuant to Sections 3.5, 8.2 or 8.3 hereof."
(o) The definition of the term "Applicable LIBOR Rate Margin"
appearing in Section 9 of the Credit Agreement shall be amended in its
entirety to read as follows:
""Applicable LIBOR Rate Margin" shall mean (a) with respect to
the Revolving Credit Loans and the Revolving Credit Note, 1.25%
per annum on the first $25,000,000 of principal amount
outstanding under the Revolving Credit and 2.00% on any
principal amount in excess of $25,000,000 outstanding under the
Revolving Credit, (b) with respect to the Acquisition Loans,
Term Loan One, Term Loan Two, the Acquisition Credit Note, Term
Credit Note One and Term Credit Note Two, 2% per annum, and (c)
with respect to Term Loan Three and Term Credit Note Three, 2.5%
per annum."
(p) Exhibit A-1 to the Credit Agreement and the Revolving Credit
Note shall each be amended by (i) replacing the amount "$21,000,000"
appearing in the upper left corner thereof with the amount "$45,000,000"
and (ii) replacing the phrase "Twenty-One Million Dollars ($21,000,000)"
appearing in the first paragraph thereof with the phrase "Forty-Five
Million Dollars ($45,000,000)".
(q) The first paragraph of Exhibit B-2 to the Credit Agreement and
of the Term Credit Note Two shall each be amended in their entirety to
read as follows:
"For value received, the undersigned, Northland Cranberries,
Inc., a Wisconsin corporation (the "Company"), promises to pay
to the order of Harris Trust and Savings Bank (the "Bank"), at
the principal office of Harris Trust and Savings Bank in
Chicago, Illinois, the principal sum of Four Million Dollars
($4,000,000), in eight (8) consecutive semi-annual installments,
commencing on November 30, 1996 and continuing on the last day
of each November and May occurring thereafter to and including
May 31, 2000, with the first seven (7) such installments to each
be in the amount of $286,000 and the final such installment to
be in the amount of $1,998,000."
(r) The Bank shall type the following legend on Revolving Credit
Note:
"This Note has been amended by a Third Amendment to Credit
Agreement dated as of November 4, 1996 between the Company and
the Bank, including a change in the principal amount hereof, to
which Amendment reference is hereby made for a statement of the
terms thereof."
(s) The Bank shall type the following legend on Term Credit Note
Two:
"This Note has been amended by a Third Amendment to Credit
Agreement dated as of November 4, 1996 between the Company and
the Bank, including a change in the amortization hereof, to
which Amendment reference is hereby made for a statement of the
terms thereof."
2. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of
all of the following conditions precedent:
(a) The Company and the Bank shall have executed and delivered this
Amendment.
(b) The Bank shall have received the following (each to be properly
executed and completed) and the same shall have been approved as to form
and substance by the Bank:
(i) supplements to the existing Collateral Documents to confirm
and assure that the same secure the various obligations of the
Company under the Credit Agreement as amended hereby;
(ii) endorsements (or binding commitments therefor) to each
existing policy of title insurance insuring the liens of those
existing Collateral Documents creating liens on real property to
confirm that such policy insures that such Collateral Documents, as
supplemented and contemplated by this Amendment, secure the various
obligations of the Company under the Credit Agreement as amended
hereby
(iii) a Mortgage and Security Agreement with Assignment of
Rents from the Company covering the Fifield Marsh and a Mortgage and
Security Agreement with Assignment of Rents from the Company covering
the F Marsh (the "New Wisconsin Mortgages");
(iv) such financing statements relating to the New Wisconsin
Mortgages as the Bank may require;
(v) a mortgagee's policy of title insurance (or a binding
commitment therefor) in the amount of $12,000,000, with a waiver of
coinsurance insuring the liens of the New Wisconsin Mortgages to be a
valid first liens subject to no defects or objections which are
unacceptable to the Bank, together with such direct access
reinsurance agreements and endorsements (including without limitation
a revolving credit endorsement and doing business, usury and zoning
endorsements) as the Bank may require;
(vi) copies (executed or certified, as may be appropriate) of
all legal documents or proceedings taken in connection with the
execution and delivery of this Amendment and the other instruments
and documents contemplated hereby to the extent the Bank or its
counsel may reasonably request.
(c) The Bank shall have received from the Company a non-refundable
closing fee in an amount agreed to by the Bank and the Company.
(d) Legal matters incident to the execution and delivery of this
Amendment and the other instruments and documents contemplated hereby
shall be satisfactory to the Bank and its counsel; and the Bank shall have
received the favorable written opinion of counsel for the Company in form
and substance satisfactory to the Bank and its counsel.
In the event that all of the foregoing conditions are satisfied
except for condition (b)(ii) with respect to the Hanson Marsh, then in
that event, this Amendment shall become effective but the Company shall,
not later than November 30, 1996, provide to the Bank the endorsement
which will satisfy such condition.
3. REPRESENTATIONS.
In order to induce the Bank to execute and deliver this Amendment,
the Company hereby represents to the Bank that as of the date hereof, the
representations and warranties set forth in Section 5 of the Credit
Agreement are and shall be and remain true and correct in all material
respects (except that the representations contained in Section 5.3 shall
be deemed to refer to the most recent financial statements of the Company
delivered to the Bank) and no Default or Event of Default has occurred and
is continuing under the Credit Agreement or shall result after giving
effect to this Amendment.
4. MISCELLANEOUS.
(a) Except as specifically amended herein, the Credit Agreement
shall continue in full force and effect in accordance with its original
terms. Reference to this specific Amendment need not be made in the
Credit Agreement, the Notes, or any other instrument or document executed
in connection therewith, or in any certificate, letter or communication
issued or made pursuant to or with respect to the Credit Agreement, any
reference in any of such items to the Credit Agreement being sufficient to
refer to the Credit Agreement as amended hereby.
(b) The Company agrees to pay on demand all costs and expenses of or
incurred by the Bank in connection with the negotiation, preparation,
execution and delivery of this Amendment, including the fees and expenses
of counsel for the Bank.
(c) This Amendment may be executed in any number of counterparts,
and by the different parties on different counterpart signature pages, all
of which taken together shall constitute one and the same agreement. Any
of the parties hereto may execute this Amendment by signing any such
counterpart and each of such counterparts shall for all purposes be deemed
to be an original. This Amendment shall be governed by the internal laws
of the State of Illinois.
Dated as of this 4th day of November, 1996.
Northland Cranberries, Inc.
By /s/ John Swendrowski
Its President
Accepted and agreed to in Chicago, Illinois as of the date and year
last above written.
Harris Trust and Savings Bank
By /s/
Its Vice President
Consented and agreed to as of the date and year last above written.
Mercantile bank of St. Louis,
National Association
By /s/
Its
Norwest Bank Minnesota,
National Association
By /s/
Its Vice President
Exhibit 10.3
MODIFICATION AGREEMENT
THIS AGREEMENT, made and entered into this _____ day of
____________________________, 1996, by and between Northland Cranberries,
Inc. (Company) and _________________________ (Optionee);
R E C I T A L S
A. On _______________________, 1996
______________________________ was granted a stock option under the
Company's 1987 Stock Option Plan to purchase _________________________
shares of the Company's Class A Common Stock at an exercise price of $
___________ per share, together with a tax offset bonus calculated for the
number of shares subject to said option granted (the "Option"), and
otherwise under the terms and conditions set forth in that certain Stock
Option Agreement (the "Option Agreement"). A copy of the Option Agreement
is attached hereto and incorporated herein by reference marked as Exhibit
A.
B. The Company desired to terminate the tax offset bonus
effective as of the beginning of its current fiscal year and to establish
its obligation for such bonus at a fixed and determinable amount.
Optionee was willing to agree to cap the maximum amount of the tax offset
bonus at the amount payable upon an exercise of the option in
consideration of the amount of such tax offset bonus begin fixed at such
amount, and other good and valuable consideration.
C. The closing price for the Class A Common Stock on
____________________, ___________________, 1995, was $ __________ per
share and the Company and Optionee have agreed to use that price to fix
the amount of the tax offset bonus payable to Optionee upon exercise of
the options granted pursuant to the Agreement.
The parties have agreed to modify that Option Agreement in the
following manner.
NOW, THEREFORE, in consideration of the above and other valuable
consideration and of the covenants and agreements herein set forth,
receipt and adequacy of which is hereby acknowledged, the parties agree as
follows:
1. Amendment of the first paragraph of Section 8. The first
paragraph of Section 8 of the Option Agreement shall be amended in its
entirety to read as follows:
8. Upon exercise of an option with respect
to which a tax offset bonus has been
granted, the Optionee shall be entitled to
receive from the Company an amount in cash
determined by multiplying the Bonus Factor
(as hereinafter defined) by the excess of
(i) an amount determined by multiplying $
_______ times the number of shares of Common
Stock for which the Option is exercised over
(ii) the option price for such shares.
2. Amendment of Section 9. Section 9 of the Option Agreement
shall be amended in its entirety to read as follows:
9. The tax offset bonus shall be payable to
the Optionee within 15 days following
exercise of an Option with respect to which
such bonus relates.
3. Definitions. Any and all initially capitalized terms used
herein shall have the meanings ascribed to them in the Option Agreement
unless specifically defined herein.
4. No Other Amendment. All other terms and conditions of the
Option Agreement shall remain with full force and effect except as
modified herein.
5. Binding Effect. This Modification Agreement shall be
binding on the heirs, personal representatives and successors of the
parties hereto.
OPTIONEE NORTHLAND CRANBERRIES, INC.
_______________________ ___________________________________
Title: ____________________________
<PAGE>
NORTHLAND CRANBERRIES, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into as of this lst day of
January, 1989 (the "Grant Date"), by and between NORTHLAND CRANBERRIES,
INC., a Wisconsin corporation (the "Company"), and John Pazurek (the
"Optionee").
W I T N E S S E T H:
WHEREAS, the Company has adopted the Northland Cranberries, Inc.
1987 Stock Option Plan, as amended, (the "Plan"), the terms of which, to
the extent not stated herein, are specifically incorporated by reference
in this Agreement, and
WHEREAS, the purpose of the Plan is to permit options to
purchase shares of the Company's Class A Common Stock, $.01 par value
("Common Stock"), to be granted to certain key employees of the Company,
and
WHEREAS, the Optionee is now employed by the Company in a key
capacity, and the Company desires him to remain in such employ, and to
secure or increase his stock ownership in the Company in order to increase
his incentive and personal interest in the welfare of the Company:
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements herein set forth, the parties hereby mutually
covenant and agree as follows:
1. Subject to the terms and conditions set forth herein, the
Company grants to the Optionee the option to purchase from the company all
or any part of the aggregate amount of ___________________ shares of
Common Stock of the Company (hereinafter referred to as the "Optioned
Shares"; the option to purchase the Optioned Shares is referred to as the
"Option").
2. The price to be paid for the Optioned Shares shall be $
________ per share, which has been determined by the Board of Directors of
the Company (the "Board") to be not less than 100% of the fair market
value of a share of Common Stock on the Grant Date.
3. The Option may be exercised by the Optionee while in the
employ of the Company, in whole, or in part from time to time, during the
period beginning on the Grant Date and ending January 1, 1999, but only in
accordance with the following schedule:
Elapsed Number of Cumulative Percentage of
Years After Shares Subject to Option
Grant Date Which May be Purchased
Less Than One Year 0%
One Year 20%
Two Years 40%
Three Years 60%
Four Years 80%
Five Years 100%
4. The Option may be exercised only by written notice to the
Company by the Optionee of the Optionee's intent to exercise the Option,
delivered to the Secretary of the Company at its office at Wisconsin
Rapids, Wisconsin, specifying the number of Optioned Shares in respect to
which the Option is being exercised, accompanied by payment for such
shares: (a) in cash or its equivalent; (b) by delivering previously
acquired shares of Common Stock valued at their fair market value at the
time of exercise as determined by the Board consistent with the method of
valuation set forth in Section 5 of the Plan; or (c) by any combination of
(a) and (b). For purposes of (b) and (c) above, the term "previously
acquired shares of Common Stock" shall only include Common Stock owned by
the Optionee prior to the exercise of the Option and shall not include
shares of Common Stock which are being acquired pursuant to the exercise
of said Option. Upon payment of the purchase price, the Optioned Shares
acquired pursuant to the exercise of the Option shall be fully paid and
nonassessable by the Company, except as provided in Section 180.40(6) of
the Wisconsin Statutes.
5. The Option shall not be transferable by the Optionee
otherwise than by will or the laws of descent and distributions, and may
be exercised during the life of the Optionee only by the Optionee.
6. (a) In the event that the Optionee's employment with the
Company is terminated for any reason, other than termination of the
Optionee's employment by the Company "for cause", the Option, to the
extent not theretofore exercised but then permitted under the percentage
limitations of Paragraph 3 hereof, may be exercised by the Optionee or by
his legal representative at any time within thirty (30) days after the
date such termination of employment, but in no event later than ten years
after the Grant Date.
(b) In the event the Optionee's employment is terminated by the
Company "for cause", the Option, to the extent not theretofore exercised,
shall terminate immediately and shall not be exercisable following such
termination of employment.
For purposes of this Paragraph 6, termination by the Company
"for cause" shall mean any termination of the Optionee by reason of any
action or omission on the part of the Optionee which is contrary to the
interests of the Company or not in the interests of the Company.
7. Subject to the terms and conditions of the Plan and this
Agreement, the Company grants to the Optionee a tax offset bonus with
respect to 2,000 of the Optioned Shares.
8. Upon exercise of an Option with respect to which a tax
offset bonus has been granted, the Optionee shall be entitled to receive
from the Company an amount in cash determined by multiplying the excess of
the fair market value of the shares of Common Stock for which the Option
is exercised over the option price of such shares by the Bonus Factor, as
hereinafter defined. The fair market value of such shares of Common Stock
shall be determined in the same manner as the fair market value of Common
Stock on the date of grant of an option is determined pursuant to Section
5 of the Plan and shall be determined as of the date of exercise;
provided, however, that if the Optionee is an officer, director or more
than 10% shareholder of the Company, such fair market value shall be
determined as of the date which is six months after the date of such
exercise. The day on which the Optionee exercises the Option pursuant to
Paragraph 4 shall be considered the date on which such Option was
exercised.
The "Bonus Factor" shall be the fraction calculated by dividing
the Applicable Tax Rate, as hereinafter described, by an amount equal to
one minus the Applicable Tax Rate. The Board shall determine the
Applicable Tax Rate to be used in determining the amount, if any, of tax
offset bonuses payable to the Optionee, taking into account such factors
as it may deem necessary, including without limitation, the maximum income
tax rates applicable to individuals and the salary rate and grade of the
Optionee; provided, however, that the Applicable Tax Rate shall not exceed
the maximum income tax rate imposed on corporations.
9. The tax offset bonus shall be payable to the Optionee
within 15 days following exercise of an Option with respect to which such
bonus relates; provided, however, that if the Optionee is an officer,
director or 10% or more shareholder of the Company, such bonus shall be
payable within 15 days following the date as of which the fair market
value of the Common Stock purchased upon exercise of the Option is
determined pursuant to Paragraph 8.
10. The Company may deduct and withhold from any cash otherwise
payable to the Optionee upon exercise of any part or all of an Option such
amount as may be required for the purpose of satisfying the Company's
liability to withhold federal, state or local taxes incurred by reason of
the exercise of the Option and payment of such cash. Further, in the
event the amount so withheld is insufficient for such purpose the Company
may require as a condition precedent to the issuance or transfer of any
shares of Stock upon exercise of the Option that the Optionee pay to the
Company, upon its demand, or otherwise make arrangements satisfactory to
the Company for payment of, such amount as may be requested by the Company
to withhold any federal, state or local taxes. If the amount so requested
is not so paid or if such arrangements are not made, the Company may
refuse to issue or transfer any shares upon exercise of the Option.
11. In the event of a capital adjustment resulting from a stock
dividend (other than a stock dividend in lieu of an ordinary cash
dividend), stock split, reorganization, recapitalization, merger,
consolidation, combination or exchange of shares or the like, the Optioned
Shares shall be adjusted in a manner consistent with such capital
adjustment; provided, however, that no such adjustment shall require the
Company to sell any fractional shares and the adjustment shall be limited
accordingly. The price of any shares under Option shall be adjusted so
that there will be no change in the aggregate purchase price payable upon
exercise of any such Option. The determination of the Board as to any
adjustment shall be final.
12. The Optioned Shares may not be sold or offered for sale
except pursuant to an effective registration statement under the
Securities Act of 1933 or in a transaction exempt from the registration
provisions of said Act.
13. The Optionee shall not be deemed for any purposes to be a
stockholder of the Company with respect to any of the Optioned Shares
except to the extent that the Option shall have been exercised, the shares
shall have been fully paid, and a stock certificate issued therefore.
14. The existence of the Option shall not affect in any way the
right or power of the Company or its shareholders to make or authorize any
or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business, or any merger or
consolidation of the Company, or any issue of bonds, debentures, preferred
or prior preference stock ahead of or affecting the Common Stock of the
Company or the rights thereof, or dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
15. It is understood that nothing herein contained shall be
deemed to confer upon the Optionee any right to continue in the employ of
the Company, nor to interfere in any way with the right of the Company to
terminate the employment of the Optionee at any time.
16. As a condition of the granting of the Option, the Optionee
agrees, for himself and his personal representatives, that this Agreement
shall be interpreted by the Committee and that any interpretation by the
Committee of the terms of this Agreement any determination made by the
Committee pursuant to this Agreement shall be final, binding and
conclusive.
IN WITNESS WHEREOF, the Company has cause this instrument to be
executed by its duly authorized officers and its corporate seal hereunto
affixed, and the Optionee has hereunto affixed his hand and seal as of the
day and year first above written.
NORTHLAND CRANBERRIES, INC.
By: ___________________________________
John Swendrowski, President
Attest: __________________________________
__________________________________________
Optionee
Exhibit 10.6
NORTHLAND CRANBERRIES, INC.
AMENDED 1995 STOCK OPTION PLAN
October 17, 1996
Section 1. Purpose
The purpose of Northland Cranberries, Inc. 1995 Stock Option
Plan (the "Plan") is to promote the best interests of Northland
Cranberries, Inc. (the "Company") and its shareholders by providing key
employees of the Company and its Affiliates (as defined below) and
directors of the Company who are not employees of the Company and its
Affiliates with an opportunity to acquire or increase their proprietary
interest in the Company. It is intended that the Plan will promote
continuity of management and increased incentive and personal interest in
the welfare of the Company by those who are primarily responsible for
shaping and carrying out the long-range plans of the Company and securing
the Company's continued growth and financial success.
Section 2. Definitions
As used in the Plan, the following terms shall have the
respective meanings set forth below:
(a) "Affiliate" shall mean any entity that, directly or through
one or more intermediaries, is controlled by, controls, or is under common
control with, the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
(c) "Commission" shall mean the Securities and Exchange
Commission.
(d) "Committee" shall mean the Compensation and Stock Option
Committee of the Board of Directors of the Company (or any other committee
thereof designated by such Board to administer the Plan); provided,
however, that the Committee is composed of not less than two directors,
each of whom is a "disinterested person" within the meaning of Rule 16b-3.
(e) "Directors Fees" shall mean the amount which a Non-Employee
Director (defined below) is paid for serving as a director of the Company
in the relevant year, including separate fees for serving on committees of
the Board of Directors and separate fees for attendance at meetings of the
Board of Directors or any committee of the Board of Directors, but shall
not include any separate fees for any other services provided for the
Company.
(f) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(g) "Fair Market Value" shall mean, with respect to any
property (including, without limitation, any Shares or other securities),
the fair market value of such property determined by such methods or
procedures as shall be established from time to time by the Committee.
(h) "Incentive Stock Option" shall mean an option granted under
Section 6(a) of the Plan that is intended to meet the requirements of
Section 422 of the Code (or any successor provision thereto).
(i) "Key Employee" shall mean any officer or other key employee
of the Company or of any Affiliate who is responsible for or contributes
to the management, growth or profitability of the business of the Company
or any Affiliate as determined by the Committee in its discretion.
(j) "Non-Qualified Stock Option" shall mean an option granted
under Section 6(a) of the Plan that is not intended to be an Incentive
Stock Option and shall mean any option granted to a Non-Employee Director
under Section 6(b) of the Plan.
(k) "Non-Employee Director" shall mean any member of the Board
of Directors of the Company who is not an employee of the Company and its
Affiliates.
(l) "Option" shall mean an Incentive Stock Option or a Non-
Qualified Stock Option.
(m) "Option Agreement" shall mean any written agreement,
contract or other instrument or document evidencing any Option granted
under the Plan.
(n) "Participating Key Employee" shall mean a Key Employee
designated to be granted an Award under the Plan.
(o) "Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization or government or political subdivision thereof.
(p) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the
Commission under the Exchange Act, or any successor rule or regulation
thereto.
(q) "Shares" shall mean shares of Class A common stock of the
Company, $0.01 par value, and such other securities or property as may
become subject to Options pursuant to an adjustment made under Section
4(b) of the Plan.
Section 3. Administration
The Plan shall be administered by the Committee; provided,
however, that if at any time the Committee shall not be in existence, the
functions of the Committee as specified in the Plan shall be exercised by
those members of the Board of Directors of the Company who qualify as
"disinterested persons" under Rule 16b-3. Subject to the terms of the
Plan and applicable laws and without limitation by reason of enumeration,
the Committee shall have full discretionary power and authority to:
(i) designate Participating Key Employees; (ii) determine the type of
Options to be granted to each Participating Key Employee under the Plan;
(iii) determine the number of Shares to be subject to each Option granted
to Participating Key Employees; (iv) determine the terms and conditions of
any Option granted to a Participating Key Employee; (v) determine whether,
to what extent and under what circumstances Options granted to
Participating Key Employees may be exercised in cash, Shares, other
securities or other property, and the method or methods by which Options
may be exercised, canceled, forfeited or suspended; (vi) determine
whether, to what extent and under what circumstances Shares with respect
to Options granted to Participating Key Employees under the Plan shall be
deferred either automatically or at the election of the holder thereof or
of the Committee; (vii) interpret and administer the Plan and any
instrument or agreement relating to, or Option made under, the Plan
(including, without limitation, any Option Agreement); (viii) establish,
amend, suspend or waive such rules and regulations and appoint such agents
as it shall deem appropriate for the proper administration of the Plan;
and (ix) make any other determination and take any other action that the
Committee deems necessary or desirable for the administration of the Plan.
Unless otherwise expressly provided in the Plan, all designations,
determinations, interpretations and other decisions under or with respect
to the Plan or any Option shall be within the sole discretion of the
Committee, may be made at any time or from time to time, and shall be
final, conclusive and binding upon all Persons, including the Company, any
Affiliate, any Participating Key Employee, any holder or beneficiary of
any Option, any shareholder and any employee of the Company or of any
Affiliate.
Section 4. Shares Available for Award
(a) Shares Available. Subject to adjustment as provided in
Section 4(b):
(i) Number of Shares Available. The number of Shares
with respect to which Options may be granted under the Plan
shall be 800,000 (on a post-September 3, 1996, two-for-one stock
split basis).
(ii) Accounting for Awards. The number of Shares
covered by an Option under the Plan, or to which such Option
relates, shall be counted on the date of grant of such Option
against the number of Shares available for granting Options
under the Plan.
(iii) Sources of Shares Deliverable Under Options.
Any Shares delivered pursuant to the exercise of an Option may
consist, in whole or in part, of authorized and unissued Shares
or of treasury Shares.
(b) Adjustments. In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of
cash, Shares, other securities or other property), recapitalization, stock
split, reverse stock split, reorganization, merger, consolidation, split-
up, spin-off, combination, repurchase or exchange of Shares or other
securities of the Company, issuance of warrants or other rights to
purchase Shares or other securities of the Company, or other similar
corporate transaction or event affects the Shares such that an adjustment
is determined by the Committee to be appropriate in order to prevent
dilution or enlargement of the benefits or potential benefits intended to
be made available under the Plan, then the Committee may, in such manner
as it may deem equitable, adjust any or all of (i) the number and type of
Shares subject to the Plan and which thereafter may be made the subject of
Options under the Plan; (ii) the number and type of Shares subject to
outstanding Options; and (iii) the grant, purchase or exercise price with
respect to any Option, or, if deemed appropriate, make provision for a
cash payment to the holder of an outstanding Option; provided, however, in
each case, that with respect to Incentive Stock Options no such adjustment
shall be authorized to the extent that such authority would cause the Plan
to violate Section 422(b) of the Code (or any successor provision
thereto); and provided further that the number of Shares subject to any
Option shall always be a whole number.
Section 5. Eligibility
Any Key Employee, including any executive officer or employee-
director of the Company or of any Affiliate, who is not a member of the
Committee shall be eligible to be designated a Participating Key Employee.
All Non-Employee Directors shall receive Non-Qualified Stock Options as
provided in Section 6(b).
Section 6. Grants of Options
(a) Option Awards to Key Employees. The Committee is hereby
authorized to grant Options to Key Employees with the terms and conditions
as set forth below and with such additional terms and conditions, in
either case not inconsistent with the provisions of the Plan, as the
Committee shall determine in its discretion.
(i) Exercise Price. The exercise price per Share of
an Option granted pursuant to this Section 6(a) shall be
determined by the Committee; provided, however, that such
exercise price shall not be less than 100% of the Fair Market
Value of a Share on the date of grant of such Option.
(ii) Option Term. The term of each Option shall be
fixed by the Committee; provided, however, that in no event
shall the term of any Option exceed a period of ten years from
the date of its grant.
(iii) Exercisability and Method of Exercise. An
Option shall become exercisable in such manner and within such
period or periods and in such installments or otherwise as shall
be determined by the Committee. The Committee also shall
determine the method or methods by which, and the form or forms,
including, without limitation, cash, Shares, other securities,
other property or any combination thereof, having a Fair Market
Value on the exercise date equal to the relevant exercise price,
in which payment of the exercise price with respect to any
Option may be made or deemed to have been made.
(iv) Incentive Stock Options. The terms of any
Incentive Stock Option granted under the Plan shall comply in
all respects with the provisions of Section 422 of the Code (or
any successor provision thereto) and any regulations promulgated
thereunder. Notwithstanding any provision in the Plan to the
contrary, no Incentive Stock Option may be granted hereunder
after the tenth anniversary of the adoption of the Plan by the
Board of Directors of the Company.
(b) Non-Qualified Stock Option Awards to Non-Employee
Directors. Each Non-Employee Director shall automatically be granted Non-
Qualified Stock Options under the Plan in the manner set forth in this
Section 6(b). A Non-Employee Director may hold more than one Non-
Qualified Stock Option, but only on the terms and subject to any
restrictions set forth herein.
(i) Exercise Price. The exercise price per Share
shall be equal to 100% of the Fair Market Value of a Share on
the date of grant of such Option. The "market value" of a Share
on the date of grant to the Non-Employee Director shall be the
last bid price per Share for the Shares in the Nasdaq National
Market on the trading date next preceding such grant date;
provided, however, that if the principal market for the Shares
is then a national securities exchange, the "market value" shall
be the closing bid price per Share for the Shares on the
principal securities exchange on which the Shares are traded on
the trading date next preceding the date of grant, or in either
case above, if no trading occurred on the trading date next
preceding the date on which the Non-Qualified Stock Option is
granted, then the "market price" per Share shall be determined
with reference to the next preceding date on which the Shares
were traded.
(ii) Grant of Options. On the last day of each fiscal
year of the Company during the existence of the Plan, each Non-
Employee Director shall be automatically granted an Option to
purchase 1,000 Shares. All Options granted to Non-Employee
Directors shall be Non-Qualified Stock Options.
(iii) Exercisability and Termination of Options.
Except as expressly provided herein, Non-Qualified Stock Options
granted to Non-Employee Directors under the Plan shall not be
exercisable until one (1) year from the date on which such Non-
Qualified Stock Option is granted and shall terminate on the
earlier of:
(A) five years after the date of grant;
(B) three months after the Non-Employee
Director ceases to be a director of the Company by
reason of death, disability or retirement after
attaining age 65; or
(C) immediately upon the Non-Employee
Director ceasing to be a director of the Company for
any reason other than by reason of death, disability
or retirement.
If a Non-Employee Director ceases to be a director of the
Company by reason of death, disability or retirement prior to
the date the Non-Statutory Stock Option becomes exercisable, the
Non-Statutory Stock Option shall become immediately exercisable
in full.
(iv) Exercise of Options. A Non-Qualified Stock
Option granted to a Non-Employee Director may be exercised,
subject to its terms and conditions and the terms and conditions
of the Plan, in full at any time or in part from time to time by
delivery to the Company at its principal office in Wisconsin
Rapids, Wisconsin, of a written notice of exercise specifying
the number of Shares with respect to which the Non-Qualified
Stock Option is being exercised. Any notice of exercise shall
be accompanied by full payment of the Option price of the Shares
being purchased (x) in cash or its equivalent; (y) by tendering
previously acquired shares (valued at their Fair Market Value as
of the date of exercise); or (z) by any combination of
subparagraphs (x) and (y). No Shares shall be issued until full
payment therefor has been made.
(c) General.
(i) No Consideration for Options. Options shall be
granted for no cash consideration unless otherwise determined by
the Committee.
(ii) Option Agreements. Each Option granted under the
Plan shall be evidenced by an Option Agreement in such form
(consistent with the terms of the Plan) as shall have been
approved by the Committee.
(iii) Awards May Be Granted Separately or
Together. Options to Participating Key Employees under the Plan
may be granted either alone or in addition to, in tandem with,
or in substitution for, any other award granted under any other
plan of the Company or any Affiliate. Options granted in
addition to, or in tandem with, other awards granted under any
other plan of the Company or any Affiliate, may be granted
either at the same time as or at a different time from the grant
of such other awards.
(iv) Limits on Transfer of Options. No Option shall
be assignable, alienable, saleable or transferable otherwise
than by will or by the laws of descent and distribution;
provided, however, that a Participating Key Employee at the
discretion of the Committee may, and a Non-Employee Director
shall, be entitled, in the manner established by the Committee,
to designate a beneficiary or beneficiaries to exercise his or
her rights, and to receive any property distributable, with
respect to any Option upon the death of the Participating Key
Employee or the Non-Employee Director, as the case may be. Each
Option shall be exercisable, during the lifetime of the
Participating Key Employee or the Non-Employee Director, only by
such individual or, if permissible under applicable law, by such
individual's guardian or legal representative. No Options may
be pledged, alienated, attached or otherwise encumbered, and any
purported pledge, alienation, attachment or encumbrance thereof
shall be void and unenforceable against the Company or any
Affiliate.
(v) Term of Options. Except as otherwise provided in
the Plan, the term of each Option shall be for such period as
may be determined by the Committee.
(vi) Share Certificates; Representation. All
certificates for Shares delivered under the Plan pursuant to the
exercise of any Option shall be subject to such stop transfer
orders and other restrictions as the Committee may deem
advisable under the Plan or the rules, regulations and other
requirements of the Commission, Nasdaq Stock Market or any stock
exchange or other market upon which such Shares are then listed
or traded, and any applicable federal or state securities laws,
and the Committee may cause a legend or legends to be put on any
such certificates to make appropriate reference to such
restrictions. The Committee may require each Participating Key
Employee, Non-Employee Director or other Person who acquires
Shares under the Plan by means of an Option originally granted
to a Participating Key Employee, Non-Employee Director or other
Person to represent to the Company in writing that such
Participating Key Employee, Non-Employee Director or other
Person is acquiring the Shares without a view to the
distribution thereof.
Section 7. Amendment and Termination of the Plan; Correction of
Defects and Omissions
(a) Amendments to and Termination of the Plan. The Board of
Directors of the Company may at any time amend, alter, suspend,
discontinue or terminate the Plan; provided, however, that shareholder
approval of any amendment of the Plan shall also be obtained if otherwise
required by: (i) the rules and/or regulations promulgated under Section 16
of the Exchange Act (in order for the Plan to remain qualified under Rule
16b-3); (ii) the Code or any rules promulgated thereunder (in order to
allow for Incentive Stock Options to be granted under the Plan); or
(iii) the quotation or listing requirements of the Nasdaq National Market
or any principal securities exchange or market on which the Shares are
then traded (in order to maintain the quotation or listing of the Shares
thereon). Termination of the Plan shall not affect the rights of
Participating Key Employees and Non-Employee Directors with respect to
Options previously granted to them, and all unexpired Options shall
continue in force and effect after termination of the Plan except as they
may lapse or be terminated by their own terms and conditions.
(b) Correction of Defects, Omissions and Inconsistencies. The
Committee may in its discretion correct any defect, supply any omission or
reconcile any inconsistency in any Option or Option Agreement in the
manner and to the extent it shall deem desirable to carry the Plan into
effect.
Section 8. General Provisions
(a) No Rights to Awards. No Key Employee, Participating Key
Employee or other Person (other than a Non-Employee Director to the extent
provided in Section 6(b) of the Plan) shall have any claim to be granted
any Option under the Plan, and there is no obligation for uniformity of
treatment of Key Employees, Participating Key Employees or holders or
beneficiaries of Options under the Plan. The terms and conditions of
Options need not be the same with respect to each Participating Key
Employee.
(b) Withholding. No later than the date as of which an amount
first becomes includable in the gross income of a Participating Key
Employee for federal income tax purposes with respect to any Option under
the Plan, the Participating Key Employee shall pay to the Company, or make
arrangements satisfactory to the Company regarding the payment of any
federal, state, local or foreign taxes of any kind required by law to be
withheld with respect to such amount. Unless otherwise determined by the
Committee, withholding obligations arising with respect to Options granted
to Participating Key Employees under the Plan may be settled with Shares
previously owned by the Participating Key Employee; provided, however,
that the Participating Key Employee may not settle such obligations with
Shares that are part of, or are received upon exercise of, the Option that
gives rise to the withholding requirement. The obligations of the Company
under the Plan shall be conditional on such payment or arrangements, and
the Company and any Affiliate shall, to the extent permitted by law, have
the right to deduct any such taxes from any payment otherwise due to the
Participating Key Employee. The Committee may establish such procedures
as it deems appropriate for the settling of withholding obligations with
Shares, including, without limitation, the establishment of such
procedures as may be necessary to satisfy the requirements of Rule 16b-3.
With the consent of the Committee, an Option holder may be
permitted to satisfy the Company's withholding tax requirements by
electing to have the Company withhold shares otherwise issuable to the
Option holder. The election shall be made in writing and shall be made
according to such rules and in such form as the Company may determine.
(c) No Limit on Other Compensation Arrangements. Nothing
contained in the Plan shall prevent the Company or any Affiliate from
adopting or continuing in effect other or additional compensation
arrangements, and such arrangements may be either generally applicable or
applicable only in specific cases.
(d) Rights and Status of Recipients of Options. The grant of
an Option shall not be construed as giving a Participating Key Employee
the right to be retained in the employ of the Company or any Affiliate.
Further, the Company or any Affiliate may at any time dismiss a
Participating Key Employee from employment, free from any liability, or
any claim under the Plan, unless otherwise expressly provided in the Plan
or in any Option Agreement. The grant of an Option to a Non-Employee
Director pursuant to Section 6(b) of the Plan shall confer no right on
such Non-Employee Director to continue as a director of the Company.
Except for rights accorded under the Plan and under any applicable Option
Agreement, Participating Key Employees and Non-Employee Directors shall
have no rights as holders of Shares as a result of the granting of Options
hereunder.
(e) Unfunded Status of the Plan. Unless otherwise determined
by the Committee, the Plan shall be unfunded and shall not create (or be
construed to create) a trust or a separate fund or funds. The Plan shall
not establish any fiduciary relationship between the Company or the
Committee and any Participating Key Employee, Non-Employee Director or
other Person. To the extent any Person holds any right by virtue of a
grant under the Plan, such right (unless otherwise determined by the
Committee) shall be no greater than the right of an unsecured general
creditor of the Company.
(f) Governing Law. The validity, construction and effect of
the Plan and any rules and regulations relating to the Plan shall be
determined in accordance with the internal laws of the State of Wisconsin
and applicable federal law.
(g) Severability. If any provision of the Plan or any Option
Agreement or any Option is or becomes or is deemed to be invalid, illegal
or unenforceable in any jurisdiction, or as to any Person or Option, or
would disqualify the Plan, any Option Agreement or any Option under any
law deemed applicable by the Committee, such provision shall be construed
or deemed amended to conform to applicable laws, or if it cannot be so
construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan, any Option
Agreement or the Option, such provision shall be stricken as to such
jurisdiction, Person or Option, and the remainder of the Plan, any such
Option Agreement and any such Option shall remain in full force and
effect.
(h) No Fractional Shares. No fractional Shares or other
securities shall be issued or delivered pursuant to the Plan or any Option
Agreement, and the Committee shall determine (except as otherwise provided
in the Plan) whether cash, other securities or other property shall be
paid or transferred in lieu of any fractional Shares or other securities,
or whether such fractional Shares or other securities or any rights
thereto shall be canceled, terminated or otherwise eliminated.
(i) Headings. Headings are given to the Sections and
subsections of the Plan solely as a convenience to facilitate reference.
Such headings shall not be deemed in any way material or relevant to the
construction or interpretation of the Plan or any provision thereof.
Section 9. Effective Date of the Plan
The Plan shall be effective as of May 17, 1995 subject to
shareholder approval of the Plan within 12 months following the date of
adoption of the Plan by the Board of Directors, and all Options granted
under the Plan prior to the date of shareholder approval shall be subject
to such approval and the effective date of such Option grants shall be
deemed to be the date of such shareholder approval.
Section 10. Term of the Plan
No Option shall be granted under the Plan following the seventh
anniversary of its effective date. However, unless otherwise expressly
provided in the Plan or in an applicable Option Agreement, any Option
theretofore granted may extend beyond such date and, to the extent set
forth in the Plan, the authority of the Committee to amend, alter, adjust,
suspend, discontinue or terminate any such Option, or to waive any
conditions or restrictions with respect to any such Option, and the
authority of the Board of Directors of the Company to amend the Plan,
shall extend beyond such date.
Exhibit 10.7
FORM OF
NORTHLAND CRANBERRIES, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, made and entered into as of this day of
19__ (the "Grant Date"), by and between NORTHLAND CRANBERRIES, INC., a
Wisconsin corporation (the "Company"), and (the
"Optionee").
W I T N E S S E T H :
WHEREAS, the terms of the Northland Cranberries, Inc. 1995
Amended Stock Option Plan (the "Plan"), to the extent not stated herein,
are specifically incorporated by reference in this Agreement and defined
terms used herein which are not otherwise defined shall have the meaning
set forth in the Plan;
WHEREAS, the purpose of the Plan is to permit the grant of
options to purchase shares of the Company's Class A Common Stock, $.01 par
value ("Common Stock"), to certain key employees of the Company;
WHEREAS, the Optionee is now employed by the Company in a key
capacity and has exhibited judgment, initiative and efforts which have
contributed materially to the successful performance of the Company; and
WHEREAS, the Company desires the Optionee to remain in the
Company's employ and wishes to provide the Optionee with the opportunity
to secure or increase his stock ownership in the Company in order to
develop even a stronger incentive to put forth maximum effort for the
continued success and growth of the Company.
NOW, THEREFORE, in consideration of the premises and of the
covenants and agreements herein set forth, the parties hereby mutually
covenant and agree as follows:
1. Grant of Options. Subject to the terms and conditions of
the Plan and this Agreement, the Company grants to the Optionee this
option (the "Option") to purchase from the Company all or any part of the
aggregate number of shares of Common Stock (the "Optioned
Shares"), subject to adjustment as provided in Paragraph 7. This Option
is intended to constitute a nonqualified stock option and shall not be
treated as an incentive stock option within the meaning of Section 422A of
the Internal Revenue Code of 1986, as amended.
2. Option Price. The option price to be paid for the Optioned
Shares shall be $ per share, subject to adjustment as provided in
Paragraph 7. The per share option price has been determined by the
Compensation and Stock Option Committee (the "Committee") of the Board of
Directors of the Company (the "Board") to be not less than 100% of the
fair market value of the Common Stock on the Grant Date (i.e., the last
bid price of the Common Stock on Nasdaq on the day prior to the Grant
Date).
3. Exercise of Option.
a. Subject to the terms and conditions of the Plan and
except as otherwise provided in this Agreement, this Option may be
exercised by the Optionee while in the employ of the Company, in whole or
in part, from time to time or at any time, beginning on the Grant Date and
ending on the tenth anniversary of the Grant Date (the "Termination
Date").
b. If the Optionee is discharged or leaves the employ of
the Company for any reason (other than termination by the Company for
"cause" or the death or disability of the Optionee), prior to the
Termination Date, this Option, to the extent not theretofore exercised,
may be exercised by the Optionee or by his legal representative at any
time within three months after the date of termination of employment upon
the tender to the Company in cash or its equivalent of the full purchase
price (and not by the tender of previously acquired Common Stock), but in
no event later than the Termination Date.
c. If the Optionee dies while he is in the employ of the
Company, or if his employment is terminated by reason of his disability
prior to the Termination Date, this Option, to the extent not theretofore
exercised, may be exercised in whole or in part as follows: (i) by the
legal representative of the Optionee at any time within six months after
the date of the Optionee's death or (ii) by the Optionee or his legal
representative at any time within three months after the termination of
the Optionee's employment by reason of disability, but in no event later
than the Termination Date.
d. If the Optionee's employment is terminated by the
Company "for cause," this Option to the extent not theretofore exercised
shall terminate immediately and shall not be exercisable following such
termination of employment. For purposes of this Paragraph 3, termination
by the Company "for cause" shall mean any termination of the Optionee by
reason of any action or omission on the part of the Optionee which is
deemed contrary to the interests of the Company or not in the interests of
the Company, as determined by the Board in its sole discretion.
e. This Option may be exercised during the life of the
Optionee only by the Optionee (or his legal representative as provided in
this Paragraph 3).
4. Manner of Exercise and Payment. This Option may be
exercised only by written notice to the Company by the Optionee (or his
legal representative as provided in Paragraph 3) of the Optionee's (or
such legal representative's) intent to exercise all or part of this
Option, served upon the Secretary of the Company at its office at
Wisconsin Rapids, Wisconsin, specifying the number of Optioned Shares in
respect to which this Option is being exercised, accompanied by payment of
the aggregate option price for such Optioned Shares, at the Optionee's (or
such legal representative's) election (except as limited in Paragraph 3):
(a) in cash or its equivalent; (b) by delivering previously acquired
shares of Common Stock, duly endorsed in blank or accompanied by stock
powers duly endorsed in blank, valued at their fair market value at the
time of exercise as determined by the Committee; or (c) by any combination
of (a) and (b). For purposes of (b) and (c) above, the term "previously
acquired shares of Common Stock" shall only include Common Stock owned by
the Optionee prior to the exercise of this Option and shall not include
shares of Common Stock which are being acquired pursuant to the exercise
of this Option. Upon receipt of the payment of the aggregate option price
for all of the Optioned Shares so purchased, certificates for such
Optioned Shares shall be issued by or on behalf of the Company to the
Optionee. The Optioned Shares so acquired, upon payment in full of the
aggregate option price, shall be fully paid and nonassessable, except as
provided by Section 180.0622(2) (b) of the Wisconsin Statutes.
5. Nontransferability of Option. This Option shall not be
transferable by the Optionee otherwise than by will or the laws of descent
and distribution.
6. Tax Withholding. (a) The Company may require as a
condition precedent to the issuance or transfer of any shares of Common
Stock upon exercise of this Option that the Optionee pay to the Company,
upon its demand, or otherwise make arrangements satisfactory to the
Company for payment of, such amount as may be requested by the Company for
the purpose of satisfying the Company's tax withholding requirement. If
the amount so requested is not so paid or if such arrangements are not
made, the Company may refuse to issue or transfer any Optioned Shares upon
exercise of this Option.
(b) The Optionee shall be permitted to satisfy the
Company's tax withholding requirements by delivering shares of previously
owned Common Stock having a fair market value (as determined by the
Committee) on the date income is recognized by the Optionee (the "Tax
Date") pursuant to the exercise of this Option equal to the minimum amount
required to be withheld. If the number of shares of Common Stock
determined pursuant to the preceding sentence shall include a fractional
share, the number of shares delivered shall be reduced to the next lower
whole number and the Optionee shall deliver to the Company cash in lieu of
such fractional share, in an amount equal to the Common Stock's then fair
market value as determined by the Committee, or otherwise make
arrangements satisfactory to the Company for payment of such amount
7. Adjustment to Optioned Shares and Option Price. In the
event of a capital adjustment resulting from a stock dividend (other than
a stock dividend in lieu of an ordinary cash dividend), stock split,
reorganization, spin-off, split-up or distribution of assets to
shareholders, recapitalization, merger, consolidation, combination or
exchange of shares or the like, the Optioned Shares and the per share
option price (but not the aggregate option price for all Optioned Shares,
as adjusted) shall be adjusted in a manner consistent with such capital
adjustment and in accordance with the Plan; provided, however, that no
such adjustment shall require the Company to issue any fractional shares
and the adjustment shall be limited accordingly as determined by the
Committee. The determination of the Committee as to any adjustment shall
be final.
8. Transfer Restrictions. The Optioned Shares to be acquired
upon exercise of this Option may not be sold or offered for sale except
pursuant to an effective registration statement under the Securities Act
of 1933, as amended ("Act"), or in a transaction which, in the opinion of
legal counsel for the Company, is exempt from the registration provisions
of the Act.
9. Status of Optionee. The Optionee shall not be deemed for
any purposes to be a shareholder of the Company with respect to any of the
Optioned Shares except to the extent that this Option shall have been
exercised, the aggregate option price for the Optioned Shares purchased
shall have been fully paid and a stock certificate shall have been issued
by or on behalf of the Company therefor.
10. Employment. It is fully understood that nothing contained
in this Agreement or the Plan shall be deemed to confer upon the Optionee
any right to continue in the employ of the Company, nor to interfere in
any way with the right of the Company to terminate the employment of the
Optionee at any time.
11. Interpretation by Committee. As a condition of the
granting of this Option, the Optionee agrees, for himself and his legal
representatives, that the Plan and this Agreement shall be subject to
discretionary interpretation by the Committee and that any interpretation
by the Committee of the terms of the Plan and this Agreement shall be
final, binding and conclusive on the Optionee and his legal
representatives in all respects and shall not be subject to challenge or
dispute by the Optionee or his legal representatives.
12. Modification. At any time and from time to time the
Committee may direct execution of an instrument providing for the
modification, extension or renewal of this Option; provided, however, that
no such modification, extension or renewal shall (a) confer on the
Optionee any right or benefit which could not be conferred on him by the
grant of a new option under the Plan at such time or (b) alter, impair or
adversely affect this Option or Agreement without the written consent of
the Optionee.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Optionee has hereunto
affixed his signature as of the day and year first above written.
NORTHLAND CRANBERRIES, INC.
By: ___________________________
John Swendrowski
President
_____________________________
, Optionee
Exhibit 18
Deloitte &
Touche LLP _________________________________________
411 East Wisconsin Avenue (414) 271-3000
Milwaukee, Wisconsin 53202-4496
November 4, 1996
Northland Cranberries, Inc.
800 First Avenue South
Wisconsin Rapids, WI 54494-8020
Dear Sirs:
We have audited the consolidated financial statements of Northland
Cranberries, Inc. as of August 31, 1996 and March 31, 1995, and for each
of the years ended August 31, 1996, March 31, 1995 and 1994, and for the
five-month period ended August 31, 1995 included in your Annual Report on
Form 10-K to the Securities and Exchange Commission and have issue our
report thereon dated November 4, 1996. Note 2 to such financial
statements contains a description of your adoption of a change in the
method of deferring crop growing costs. In our judgment, such change is
to an alternative accounting principle that is preferable under the
circumstances.
Yours truly,
/s/ Deloitte & Touche LLP
DELOITTE & TOUCH LLP
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-32525 of Northland Cranberries, Inc. on Form S-8 of our report dated
November 4, 1996, (which expresses an unqualified opinion and includes an
explanatory paragraph relating to a change in the method of deferring crop
growing costs) appearing in the Annual Report on Form 10-K of Northland
Cranberries, Inc. for the year ended August 31, 1996.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
November 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF NORTHLAND CRANBERRIES, INC. AS OF AND
FOR THE YEAR ENDED AUGUST 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-START> SEP-01-1995
<PERIOD-END> AUG-31-1996
<CASH> 266,467
<SECURITIES> 1,259,548
<RECEIVABLES> 2,631,434
<ALLOWANCES> 0
<INVENTORY> 12,414,426
<CURRENT-ASSETS> 18,617,497
<PP&E> 141,098,591
<DEPRECIATION> 18,609,490
<TOTAL-ASSETS> 145,484,619
<CURRENT-LIABILITIES> 12,067,187
<BONDS> 56,978,095
0
0
<COMMON> 133,705
<OTHER-SE> 60,183,370
<TOTAL-LIABILITY-AND-EQUITY> 145,484,619
<SALES> 36,390,156
<TOTAL-REVENUES> 37,607,845
<CGS> 16,516,785
<TOTAL-COSTS> 7,020,416
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,657,067
<INCOME-PRETAX> 11,413,577
<INCOME-TAX> 4,509,577
<INCOME-CONTINUING> 6,904,577
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,904,577
<EPS-PRIMARY> 0.50
<EPS-DILUTED> 0.50
</TABLE>
