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, 1997
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. [X]
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of November 24, 1997:
$187,229,580
Number of shares issued and outstanding of each of the registrant's
classes of common stock as of November 24, 1997:
Class A Common Stock, $.01 par value: 13,220,370 shares
Class B Common Stock, $.01 par value: 636,202 shares
PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED HEREIN BY REFERENCE:
Proxy Statement for 1998 annual meeting of shareholders scheduled to be
held January 7, 1998 (incorporated by reference into Part III, to the
extent indicated therein).
1997 Annual Report to Shareholders (incorporated by reference into Parts
II and IV, 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.
Item 1. Business.
General
Northland Cranberries, Inc. ("Company" or "Northland") is a
vertically integrated grower, processor and marketer of cranberries and
value-added consumer and industrial cranberry products. With 25 cranberry
producing marshes and 2,548 planted acres owned or operated in Wisconsin
and Massachusetts as of November 15, 1997, 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 has developed from
principally a cranberry grower and member of the Ocean Spray Cranberries,
Inc. ("Ocean Spray") marketing cooperative to a grower, purchaser,
processor and marketer of cranberries and cranberry products. The
Company's current product line includes Northland brand 100% juice
cranberry blends, Northland brand fresh cranberries, private label
cranberry products, cranberry concentrate, raw frozen cranberries and
single-strength cranberry juice.
The Company completed the national rollout of its Northland
brand 100% juice cranberry blends in fiscal 1997. As of August 31, 1997,
Northland's blended cranberry juice product line was available in 48
states and in approximately 18,000 supermarkets, or 60% of supermarkets
nationwide. According to data compiled by Information Resources, Inc.
("IRI"), for the 12-week period ended October 12, 1997, the Northland
branded juice product line increased its market share in the United States
supermarket shelf-stable cranberry beverage category to approximately 6.5%
as compared to 1.0% for the 12-week period ended October 6, 1996. For the
four-week period ended October 12, 1997, Northland's market share in this
category was approximately 8.0%.
In fiscal 1998, the Company expects to continue the growth and
distribution of its Northland branded juice product line by (i)
implementing a comprehensive national marketing plan, including a national
television advertising campaign, to continue to increase consumer
awareness about the Company's branded juice products; (ii) continuing its
trade and price promotion plan through seasonal merchandising and
couponing; (iii) introducing new juice flavors and bottle sizes; and (iv)
pursuing alternative sales channels, including membership clubs, mass
merchandisers, drug and discount stores, convenience stores and industrial
food service companies. The Company also plans to continue to pursue
sales opportunities for its cranberry juice concentrate and its private
label cranberry products, as well as maintaining is seasonal sales of
fresh cranberries.
Marketing and Sales
Marketing
The Company's marketing strategy and focus for its Northland
100% juice cranberry blend product line is to highlight the differences in
flavor and nutritional content between Northland brand 100% juice
cranberry blends and the competing products of Ocean Spray and others
containing lesser juice content, as well as the nutritional benefits of
cranberry-based beverages. To implement this strategy, in fiscal 1997,
the Company developed and coordinated media advertising programs, sales
promotion programs, market research and public relations for the Northland
100% juice cranberry blend product line. The Company expanded its
regional television campaign, which began in early fiscal 1997, by
developing a national television advertising campaign in connection with
the national rollout of its branded juice product line. The Company also
entered into a long-term licensing agreement with the Ladies Professional
Golf Association to become a corporate sponsor and the official juice of
the LPGA. The Company intends to continue aggressively promoting its
branded juice product line through increased television advertising in
fiscal 1998 and by continuing its trade and price promotion plan,
consisting of seasonal merchandising to increase in-store visibility of
Northland products and a coupon plan to provide strong trial incentives to
first-time buyers and repurchase incentives to established users.
Northland anticipates spending approximately $24 million on advertising,
promotion and slotting expenses in support of its brand in fiscal 1998,
compared to $9 million in fiscal 1997.
On June 2, 1997, the Company hired Jerold D. Kaminski to serve
as the Company's President and Chief Operating Officer, with principal
responsibilities for the continued implementation of the Company's "marsh
to market" strategy, and with particular emphasis on directing and
implementing marketing and sales strategies for the Northland brand. Mr.
Kaminski has extensive management experience in the food industry (and in
particular with the marketing and sale of branded grocery products) as the
former Director of Marketing for the Food Service Division of General
Mills Corporation, a position Mr. Kaminski held for four years. See
"Executive Officers of the Company."
The Company employs a Director of Marketing (with over 20 years
of marketing experience in the food and consumer products industries), a
marketing coordinator and support staff personnel to oversee marketing of
the Company's branded juice product line. The Company also internally
staffs a creative services department to assist in marketing and
promotional efforts.
Sales
Based on industry data, dollar sales of shelf-stable cranberry
beverages continued to increase in fiscal 1997, with Northland's entry into
certain individual markets appearing to stimulate total segment growth.
Northland anticipates that this category growth will continue in fiscal
1998. Northland believes this category growth may allow it to realize
increased sales of its branded juice products by expanding distribution and
increasing promotion of Northland brand 100% juice products, both within
its current markets as well as in new markets.
The Company's branded juice sales are coordinated by a Director
of Sales and a National Sales Manager - Branded Products (who together
have over 35 years of sales experience in the food and consumer products
industries), as well as six regional sales managers with extensive sales
experience working for companies such as Borden, Inc., Ralston Purina
Company and Oscar Mayer Foods Corp. The Company's sales staff directs
distribution and sale of its branded juice products through a network of
approximately 60 independent food brokers in the major geographic regions
of the United States.
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
seasons. Due in part to a cooler than average summer growing season, the
fiscal 1997 fresh cranberry crop consisted of smaller-than-average size
berries. The reduced average size of the fiscal 1997 fresh cranberry crop
resulted in the Company producing, packaging and selling less fresh fruit
in fiscal 1997 than in fiscal 1996. Fresh fruit sales in fiscal 1998 are
expected to be consistent with fiscal 1997 levels.
In addition to the national rollout of its branded juice product
line, important elements of the Company's marsh-to-market strategy in
fiscal 1997 were to develop initial sales of private label cranberry
products and to increase its sales of cranberry juice concentrate.
However, during early fiscal 1997, Northland was approached by, and
entered into negotiations and reached verbal agreement for the acquisition
of, a major private label supplier. In anticipation of closing this
planned acquisition, the Company redirected its internal efforts away from
attempting to generate sales of its private label products and concentrate
so that it could retain cranberries in inventory in order to internally
supply the raw materials necessary to meet the ongoing product sales of
the acquisition candidate. However, for unknown reasons not related to
the Company, the acquisition was suddenly terminated by the seller on the
anticipated execution date of the definitive acquisition agreement. As a
result, the Company's sales of private label products and cranberry
concentrate were adversely effected, and a larger than normal amount of
the Company's cranberry supply that was intended for use by the target
company and expected to generate revenue in fiscal 1997 remained in
inventory at the end of the year.
The Company has initiated plans to renew its efforts to
establish initital sales of its private label products. According to
industry data, approximately $150 million of private label cranberry juice
products were sold in supermarkets nationwide in 1997, representing
approximately 20% of the total supermarket shelf-stable cranberry juice
segment. The Company believes its position as the world's largest
cranberry grower would allow private label customers access to a reliable,
high quality supply of cranberry-based juice products. Private label
juice product sales, however, are very price competitive, and supermarket
chains, mass merchandisers and other producers of private label products
are often hesitant to change historical suppliers. The Company
anticipates that, in order to establish initial private label sales
success, it will need to aggressively compete based on product pricing in
fiscal 1998. There can be no assurance that the Company will be
successful in entering this market or that such sales will be on
satisfactory economic terms.
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 ingredients for the production of soft drinks and
other fruit beverages. The Company has a commitment to sell approximately
120,000 barrels of concentrate over the next two fiscal years to Wild.
The Company believes that its alliance with Wild, combined with its sales
of fresh cranberries in the United Kingdom, the Netherlands, Belgium and
other European countries, provides the Company with an initial foundation
for additional overseas sales and provides potential opportunities for
eventual expansion into other foreign markets.
In fiscal 1997, the Company had sales of approximately $5.8
million, or 12% of net sales, to one customer. The Company believes the
loss of this customer would not have a material adverse effect on the
Company since these sales were mostly in the form of cranberry
concentrate, and the raw cranberries used to produce such concentrate
could, if necessary, be redirected to other customers or into the
production of other consumer cranberry products.
The Company's wholly-owned subsidiary, Wildhawk, is in the
business of selling agricultural chemicals and fertilizer to cranberry
growers. The Company also sells cranberry vines to other cranberry
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.
Cranberry Supply
General
The Company believes an important 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. Northland is the world's
largest cranberry grower, with more planted acres of cranberries owned or
leased than any other grower. As of November 15, 1997, Northland owned or
operated approximately 2,548 planted acres in Wisconsin and Massachusetts.
The Company utilizes its significant internal harvest of raw cranberries
from its owned and operated acres for a substantial majority of its fruit
distribution needs. Because cranberries are currently in limited supply,
Northland believes it has a competitive advantage over other independent
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. 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.
Internally Grown and Purchased Supply
In the fall of 1996 (i.e., fiscal 1997), the Company harvested
293,000 barrels from 2,107 harvested acres on 24 marshes. While the
fiscal 1997 harvest was a record harvest for the Company, production from
the Company's northern Wisconsin properties was less than expected, due in
large part to small berry size caused by very cold spring and early summer
weather. Since the Company's growing costs are relatively fixed, the
small berry size resulted in increased cost of goods sold per barrel and
lower-than-expected profits per barrel in fiscal 1997.
The fall 1997 harvest of 417,000 barrels was a record harvest
for the Company. The large harvest was due in part to the maturation of
hybrid high-yield cranberry vines which the Company planted in its
internal expansion program in prior years, combined with favorable weather
and overall good growing conditions.
The Company also purchases raw cranberries from other growers to
supplement its own harvested crop. In fiscal 1997, Northland purchased
approximately 104,000 barrels of cranberries from other independent
growers. The Company has entered into multi-year crop purchase contracts
with 27 independent cranberry growers to purchase all of the cranberries
harvested from an aggregate of 1,557 planted acres. None of these
contracts expires in fiscal 1998. 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.
However, there can be no assurance that these existing contracts will be
renewed upon expiration.
The following table shows certain information regarding the
Company's cranberry marshes and production for the fiscal years indicated.
<TABLE>
<CAPTION>
Fiscal Year
1998 1997 1996 1995 1994
(25 Marshes) (1) (25 Marshes) (21 Marshes) (21 Marshes) (18 Marshes)
<S> <C> <C> <C> <C> <C>
Total planted acres 2,548 2,548 2,368 2,257 1,982
Total acres
harvested (2) 2,243 2,107 1,935 1,813 1,519
Total barrels of
production 417,000 293,000 287,000 254,000 192,000
_____________________________
(1) Includes data only through November 15, 1997.
(2) Includes only acres which are over 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>
As a result of existing domestic regulatory constraints on the
development of wetlands, the Company does not anticipate planting
significant additional domestic acreage in the near future. The Company
intends to continue attempting to increase its internal supply principally
through pursuing additional marsh property acquisitions and entering into
additional crop purchase agreements.
Increasing Internal Supply through Marsh Acquisitions
Since its inception, Northland has pursued a business strategy
of aggressively increasing its internal cranberry supply through marsh
acquisitions. For the period from immediately prior to its initial public
stock offering in August 1987 through November 15, 1997, the Company has
added, through acquisitions or leases, a total of 20 marsh properties.
During this period, total planted acreage has increased 656%, from 337
acres to 2,548 acres, through acquisitions and the Company's internal
planting program. In fiscal 1997, the Company acquired two separate marsh
properties in Wisconsin consisting of a total of 181 planted acres. These
acquisitions increased the Company's total planted acreage as of November
15, 1997 to approximately 2,548 acres on 25 properties, with over 23,000
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 both domestically and
internationally. The Company evaluates potential acquisition
opportunities and determines a range of potential purchase prices based on
several factors, including (i) historical and prospective productive
cranberry yield; (ii) existing and future production expansion potential;
(iii) the amount, type and condition of equipment being purchased; (iv)
the type of facilities associated with the operation; (v) existing bog
management; and (vi) potential synergies with Northland's existing marsh
locations.
International Initiatives
The Company is involved in certain international supply
initiatives and is exploring certain overseas supply opportunities,
including an agreement with an Irish state-owned enterprise to conduct
planting and testing of cranberry vines on marsh acreage in Ireland. The
Company has also entered into a multi-year contract with a cranberry
grower in Chile to purchase 20% of that grower's annual harvested crop;
however, as a result of difficult growing conditions, the number of
cranberries produced by this grower has been limited 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 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 1997 of
$60 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
$756,699, $737,721 and $1,078,000 of multi-peril crop insurance proceeds
in fiscal 1997, 1996 and 1995, respectively, and paid multi-peril
insurance premiums of $872,347, $563,789, and $421,094 in those years
respectively.
In fiscal 1997, the Company incorporated Northland Insurance
Center, Inc., which will assist the Company in procuring insurance against
certain crop losses.
Processing and Distribution
Another integral part of the Company's marsh to market strategy
is its capability to internally process its harvested and purchased
cranberries. Cranberries harvested from the Company's marshes or
purchased from independent suppliers are brought to the Company's 150,000
square foot receiving station and fresh fruit packaging facility in
Wisconsin Rapids, Wisconsin. 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 seasons 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 other
consumer cranberry products are cleaned, sorted and stored in the
Company's 65,000 square foot freezer facility until they are sent to the
Company's 16,000 square foot juice pressing and concentrating facility,
which was constructed in fiscal 1996. The concentrating facility, which
is capable of concentrating juice from up to 400,000 barrels of raw
cranberries annually, processes raw cranberries into concentrate or
single-strength juice. Concentrate and single-strength cranberry juice
are sold to various manufacturers of processed consumer cranberry
products. The Company also produces a pre-mixed product formulation (or
"pre-mix") by formulating single-strength cranberry juice with other fruit
juices, which is shipped to co-packers for bottling and packaging of
Northland branded juice products. The Company believes its capability to
internally process cranberries increases its ability to control the
distribution and sale of its branded juice products and other value-added
consumer and industrial cranberry products.
The Company maintains various co-packing agreements (including
agreements with two major food manufacturers, Seneca Foods Corporation and
Sunsweet Growers, Inc.) to formulate and bottle its processed cranberry
blends in six strategic locations nationwide. The Company delivers pre-mix
to these co-packers, who the re-formulate, bottle and package the Company's
branded juice products for delivery. The Company's transportation
department contracts with independent carriers to distribute the bottled
products to various grocery stores and retail outlets. The Company believes
that utilizing strategically located co-packers to establish its production/
distribution network lowers freight and production costs, as well as allows
for timely response to customer demands.
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 IRI data, for the 12-weeks ended October 12,
1997, Ocean Spray products represented approximately 62% of the
supermarket shelf-stable cranberry beverage market, down from
approximately 69% for the 12-weeks ended October 6, 1996. For the four-
week period ended October 12, 1997, Ocean Spray's market share in this
category was approximately 60%. Ocean Spray has significantly greater
brand name recognition, marketing and distribution resources than the
Company.
Branded Juice
The Company's 100% juice cranberry 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% juice cranberry blends are "premium" products competing
against other cranberry juice products, most of which are made up of much
less than 100% juice. For example, Ocean Spray's cranberry juice cocktail
contains only up to 27% cranberry juice and is otherwise supplemented by
fructose and water. Like Ocean Spray, most competitors' juices use sugar
or corn syrup additives as sweeteners. The Company believes that its
premium product formulation provides it with a competitive advantage in
the retail consumer market for juice products due to the improved quality
and taste between its 100% juice products and competitors' juices which do
not contain 100% juice. The Company fully anticipates that Ocean Spray
will continue to compete aggresively against Northland's 100% juice
cranberry blend products, 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 and distribution resources than the
Company. There can be no assurance that the Company will be successful in
competing against Ocean Spray.
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 seasons. The Company intends to continue to compete
in the fresh cranberry market by continuing to sell Northland brand fresh
cranberries, primarily in the United States, at competitive prices. Ocean
Spray has significantly more experience in the sale of branded fresh
cranberries, substantially greater brand name recognition and
substantially greater marketing and distribution 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
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. There can be no assurance that the Company
will be successful in competing directly or indirectly against certain
major independent processors. However, the Company believes that its
processing capabilities and 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. The Company intends to compete aggressively
based on product pricing to initiate sales of its private label products
in fiscal 1998. 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 other private label products of
existing suppliers, or the similar branded products of Ocean Spray or
others.
Raw Cranberries
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. Principal competitive factors in the purchase of raw
cranberries include price, organizational loyalty and tradition. 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. Additionally, in recent years, efforts have been made
to grow cranberries in locations outside of North America. There can be
no assurance that cranberry production outside of North America will not
become significant over the longer term.
Industrial Cranberry Products
The Company also competes for the sale of cranberry concentrate,
single-strength cranberry juice and frozen whole and sliced cranberries to
industrial customers, such as food processors and food service companies.
Cranberry concentrate is currently Northland's principal industrial
product in terms of sales volume and potential. The Company's industrial
customer base includes several major food processing firms. The Company
believes its position as the world's largest single cranberry grower and
its ability to internally process raw cranberries allows it to offer a
reliable supply of high quality, competitively priced cranberry products
to its industrial customers.
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 it is currently unlikely
that 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 1998.
One 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, 1997, 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.
Proposed regulations were recently approved by the Wisconsin
Department of Natural Resources ("DNR") to amend portions of the Wisconsin
Administrative Code to lessen the DNR's scrutiny associated with obtaining
DNR approval for the development of cranberry marshes in wetlands. The
proposed amendments to the regulations are currently pending before a
committee of the Wisconsin Legislature, and it is uncertain whether these
proposed regulations will ultimately take effect. The enactment of these
proposed regulations in their current form could relax the standards and
procedures for obtaining state water quality certification to conduct
activities in wetlands pursuant to a federal permit. However, as a result
of the continued federal restrictions on wetland development and the long
lead-time associated with the planting and maturation of cranberry vines,
the Company does not expect the proposed regulations, even if adopted in
their current form, to materially affect the supply of cranberries in
Wisconsin in the near term.
The Cranberry Marketing Committee of the United States
Department of Agriculture (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 CMC 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.
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 prior to fiscal 1997 had been extremely
seasonal because the Company's historical results of operations had been
significantly dependent upon the results of the Company's annual harvest.
The successful implementation of the Company's marsh to market strategy is
expected to help reduce the extreme seasonality of its business, although
the Company expects sales of its juice and fresh fruit to experience
seasonal increases during the traditional Thanksgiving and Christmas
holiday seasons.
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, including water
and sand, from resources 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% juice cranberry blends
continue to grow in market share and distribution.
Northland 100% juice cranberry blends utilize proprietary flavor
formulations. The Company attempts to ensure the confidentiality of these
formulations by shipping pre-mix to co-packers and by requiring its co-
packers to enter into confidentiality agreements.
Employees
As of August 31, 1997, the Company had 203 full-time employees,
as compared to 141 as of August 31, 1996. The Company also hired
approximately 109 additional seasonal workers during the 1997 crop
cultivation season. In addition to the seasonal employees hired for
cultivating cranberries, the Company hired approximately 335 seasonal
workers to harvest the Company's crop and approximately 142 seasonal
employees to operate the Company's cranberry processing and packaging
facility from September through December 1996. The Company also had 20
full-time employees in sales and marketing as of August 31, 1997,
compared to 11 as of August 31, 1996. 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 10,000 square foot building and recently
purchased a 40,000 square foot building, both in Wisconsin Rapids, which
are 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 owns a 16,000 square foot juice concentrating
facility adjacent to the Company's current plant site in Wisconsin Rapids.
The juice concentrating facility provides Northland with the capacity to
concentrate over 400,000 barrels of cranberries annually.
The Company owns a 49,000 square foot cranberry receiving
station located on a 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 25 cranberry marshes as of November 15, 1997. All of the
Company's marshes are owned in fee simple or leased as indicated below,
subject to mortgages (except for its Dandy Creek, Nantucket and Hills
Division Marshes and one of the two marshes in each of the Associate and
Crawford Creek Divisions). 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 on site or in close proximity to the site which serves
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.
November 15, 1997 Calendar
Year
Approximate Approximate Acquired
Marsh Division Name and Location Marsh Acres Planted Acres or Leased
Associates Division (two marshes),
Jackson County, Wisconsin . . . . . 4,198 159 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 . . . . . . . . . . . . . 473 212 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 . . . . . . . . . . . . . . 23,207 2,548
====== ======
Item 3. Legal Proceedings.
As of the date hereof, the Company is not 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 1997.
Executive Officers of the Company
As of November 15, 1997, 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 49 Chairman of the Board and
Chief Executive Officer
Jerold D. Kaminski 41 President and Chief Operating
Officer
Robert E. Hawk 42 Executive Vice President and
President of Wildhawk, Inc.
John A. Pazurek 48 Vice President - Finance,
Treasurer and
Chief Financial Officer
William J. Haddow 49 Vice President - Purchasing,
Transportation and Budget
Steven E. Klus 51 Vice President - Manufacturing
David J. Lukas 55 Vice President - Administration
and Corporate Secretary
John Stauner 35 Vice President - Agricultural
Operations
John S. Wilson 47 Vice President - East Coast
Mr. Swendrowski originally founded the Company in May 1987 and served
as President and Chief Executive Officer from May 1987 to June 1997. Mr.
Swendrowski continues to serve as Chairman of the Board and Chief
Executive Officer and allowed Mr. Kaminski to assume the position of
President in June 1997 upon Mr. Kaminski's joining the Company.
Mr. Kaminski joined the Company on June 2, 1997 as its President and
Chief Operating Officer in order to oversee the continued implementation
of the Company's marsh-to-market strategy, particularly marketing and
sales of the Northland brand. Prior to joining the Company, he served as
the Director of Marketing for the Food Service Division of General Mills
Corporation since September 1993. Prior thereto, Mr. Kaminski served as
Marketing Director of the Gold Medal Division of General Mills Corporation
from September 1991 to September 1993 and as Marketing Manager of the Gold
Medal Division of General Mills Corporation from February 1989 to
September 1991. Mr. Kaminski has been a director of the Company since
1994. Prior to appointment to his current positions with the Company, Mr.
Kaminski served as a member of both the Audit Committee and the
Compensation Committee of the Board of Directors.
Mr. Hawk was appointed Executive Vice President in October 1996.
Prior to that, Mr. Hawk served as the Company's Vice President - Sales,
Marketing and Special Projects since January 1993, and prior thereto he
served as Vice President - Operations since January 1989.
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. 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. 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. 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.
All share data appearing in the table below 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 its Class A
Common Stock.
Sale Price Range of Class A Common Stock (1)
First Second Third Fourth
Quarter Quarter Quarter Quarter
Fiscal Year Ended August 31, 1997
High $25.25 $27.50 $20.75 $19.25
Low $15.25 $17.00 $8.88 $12.69
Fiscal Year Ended August 31, 1996
High $10.00 $11.00 $14.63 $18.13
Low $7.25 $8.50 $9.88 $13.38
_______________
(1) The range of sale prices listed for each quarter includes intra-day
trading prices as reported on The Nasdaq Stock Market.
On November 25, 1997, there were approximately 9,181 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 25, 1997, the last sale price of shares
of Class A Common Stock was $14.1875 per share.
Item 6. Selected Financial Data.
Pursuant to Instruction G, the information required by this Item
is incorporated herein by reference from information included under the
caption entitled "Selected Financial Data" set forth in the Company's 1997
Annual Report to Shareholders (the "Annual Report").
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Pursuant to Instruction G, the information required by this item
is incorporated herein by reference from information included under the
caption entitled "Management's Discussion and Analysis of Results of
Operations and Financial Condition" set forth in the Annual Report.
Item 8. Financial Statements and Supplementary Data.
Pursuant to Instruction G, the Consolidated Balance Sheets of
the Company as of August 31, 1997 and 1996, the Consolidated Statements of
Operations, Cash Flows and Shareholders' Equity for the years ended August
31, 1997 and 1996, March 31, 1995 and five-month transition period ended
August 31, 1995, together with the related Notes to Consolidated Financial
Statements (including supplementary financial data), are incorporated
herein by reference from information included under the captions having
substantially the same titles as set forth in the Annual Report.
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 1998
annual meeting of shareholders filed with the Commission pursuant to
Regulation 14A on November 25, 1997 ("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 Transactions" in the Proxy Statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as part of this Form 10-K:
Page Reference
1997 Annual
Report
1. Financial Statements to Shareholders
Consolidated Balance Sheets as of August 31,
1997 and 1996 19
Consolidated Statements of Operations, Cash
Flows and Shareholders' Equity for the
fiscal years ended August 31, 1997 and 1996
and March 31, 1995 and the five month
transition period ended August 31, 1995 20-22
Notes to Consolidated Financial Statements 22-28
Independent Auditors' Report 18
All other schedules have been omitted as not required or not
applicable or the information required to be shown thereon is included in
the financial statements and related notes.
3. 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
1997.
___________
* Exhibits to this Form 10-K, including long-term debt instruments
disclosed in Exhibit 4.5, 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, Chief
Financial Officer, Northland Cranberries, Inc., 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 26, 1997 By: /s/ John Swendrowski
John Swendrowski
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed on November 26, 1997 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
Chairman of the Board, President, Chief Operating
Chief Executive Officer Officer and Director
and Director
By: /s/ John 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
By: /s/ Pat Richter
Pat Richter
Director
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
3.1 Articles of Incorporation, as amended, dated January 8,
1997. [Incorporated by reference to Exhibit 3.4 to the
Company's Form 10-K for the fiscal year ended August 31,
1996.]
3.2 Amendment to the By-Laws of the Company, dated October
21, 1997.
3.3 By-Laws of the Company, as amended and restated.
4.1 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.]
4.2 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.]
4.3 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.]
4.4 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.]
4.5 Amended and Restated Credit Agreement, dated October 3,
1997, between the Company and Harris Trust & Savings
Bank.
4.6 Revolving Credit Note, dated October 3, 1997, by the
Company in favor of Harris Trust & Savings Bank.
4.7 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.]
4.8 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.]
4.9 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.]
4.10 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.]
4.11 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.]
Other than as set forth in Exhibits 4.1 through 4.11,
the Company has numerous instruments which define the
rights of holders of long-term debt. These instruments,
primarily security agreements and mortgages, were
entered into in connection with debt financing provided
by Harris Trust & Savings Bank, and are disclosed in the
Amended and Restated Credit Agreement filed as Exhibit
4.5 to this Form 10-K. The Company will furnish a copy
of any of such instruments to the Commission upon
request.
*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.
[Incorporated by reference to Exhibit 10.3 to the
Company's Form 10- K for the fiscal year ended August
31, 1996.]
*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. [Incorporated by reference to
Exhibit 10.7 to the Company's Form 10-K for the fiscal
year ended August 31, 1996.]
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 Employment and Severance Agreement, dated as of June 2,
1997, between the Company and Jerold D. Kaminski.
*10.12 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. 1997 Incentive Bonus Plan.
*10.14 Northland Cranberries, Inc. 1998 Incentive Bonus Plan.
13 Portions of the 1997 Annual Report to Shareholders
expressly incorporated by reference into this Form 10-K.
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 1998 annual
meeting of shareholders scheduled to he held on January
7, 1998 (previously filed with the Commission under
Regulation 14A on November 25, 1997 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.
Amendment to the By-Laws of the Company
Pursuant to a resolution of the Board of Directors of the Company,
dated October 21, 1997, the By-Laws of the Company were amended by
changing the last sentence of Section 3.01 to read as follows:
The number of directors of the corporation shall be eight.
Amended Effective October 21, 1997
BYLAWS
OF
NORTHLAND CRANBERRIES, INC.
(a Wisconsin corporation)
<PAGE>
ARTICLE I. OFFICES
1.01. Principal and Business Offices. The corporation may
have such principal and other business offices, either within or without
the State of Wisconsin, as the Board of Directors may designate or as the
business of the corporation may require from time to time.
1.02. Registered Office. The registered office of the
corporation required by the Wisconsin Business Corporation Law to be
maintained in the State of Wisconsin may be, but need not be, identical
with the principal office in the State of Wisconsin, and the address of
the registered office may be changed from time to time by the Board of
Directors or by the registered agent. The business office of the
registered agent of the corporation shall be identical to such registered
office.
ARTICLE II. SHAREHOLDERS
2.01. Annual Meeting. The annual meeting of the
shareholders shall be held on the first Wednesday in January of each year
(beginning in 1997), or on such other date within thirty days before or
after such date as may be fixed by or under the authority of the Board of
Directors, for the purpose of electing directors and for the transaction
of such other business as may come before the meeting. If the day fixed
for the annual meeting shall be a legal holiday in the state of Wisconsin,
such meeting shall be held on the next succeeding business day. If the
election of directors shall not be held on the day designated herein, or
fixed as herein provided, for any annual meeting of the shareholders, or
at any adjournment thereof, the Board of Directors shall cause the
election to be held at a special meeting of the shareholders as soon
thereafter as is practicable.
2.02. Special Meetings. Special meetings of the
shareholders, for any purpose or purposes, unless otherwise prescribed by
the Wisconsin Business Corporation Law, may be called by the Board of
Directors or the President. The corporation shall call a special meeting
of shareholders in the event that the holders of at least 10% of all of
the votes entitled to be cast on any issue proposed to be considered at
the proposed special meeting sign, date and deliver to the corporation one
or more written demands for a special meeting describing one or more
purposes for which it is to be held. The corporation shall give notice of
such a special meeting within thirty days after the date that the demand
is delivered to the corporation.
2.03. Place of Meeting. The Board of Directors may
designate any place, either within or without the State of Wisconsin, as
the place of meeting for any annual or special meeting of shareholders.
If no designation is made, the place of meeting shall be the principal
office of the corporation. Any meeting may be adjourned to reconvene at
any place designated by vote of a majority of the votes represented
thereat.
2.04. Notice of Meeting. Written notice stating the date,
time and place of any meeting of shareholders and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten days nor more than sixty days before the date
of the meeting (unless a different time is provided by the Wisconsin
Business Corporation Law or the articles of incorporation), either
personally or by mail, by or at the direction of the President or the
Secretary, to each shareholder of record entitled to vote at such meeting
and to such other persons as required by the Wisconsin Business
Corporation Law. If mailed, such notice shall be deemed to be effective
when deposited in the United States mall, addressed to the shareholder at
his or her address as it appears on the stock record books of the
corporation, with postage thereon prepaid. If an annual or special
meeting of shareholders is adjourned to a different date, time or place,
the corporation shall not be required to give notice of the new date, time
or place if the new date, time or place is announced at the meeting before
adjournment; provided, however, that if a new record date for an adjourned
meeting is or must be fixed, the corporation shall give notice of the
adjourned meeting to persons who are shareholders as of the new record
date.
2.045. Proper Business or Purposes of Shareholder Meetings.
To be properly brought before a meeting of shareholders, business must be
(a) specified in the notice of the meeting (or any supplement thereto)
given by or at the discretion of the Board of Directors or otherwise as
provided in Section 2.04 hereof; (b) otherwise properly brought before the
meeting by or at the direction of the Board of Directors; or (c) otherwise
properly brought before the meeting by a shareholder. For business to be
properly brought before a meeting by a shareholder, the shareholder must
have given written notification thereof, either by personal delivery or by
United States mall, postage prepaid, to the Secretary of the corporation,
and, in the case of an annual meeting, such notification must be given not
later than thirty (30) days in advance of the Originally Scheduled Date of
such meeting; provided, however, that if the Originally Scheduled Date of
such annual meeting is earlier than the date specified in these by laws as
the date of the annual meeting and if the Board of Directors does not
determine otherwise, or in the case of a special meeting of shareholders,
such written notice may be so given and received not later than the close
of business on the 15th day following the date of the first public
disclosure, which may include any public filing with the Securities and
Exchange Commission, of the Originally Scheduled Date of such meeting.
Any such notification shall set forth as to each matter the shareholder
proposes to bring before the meeting (i) a brief description of the
business desired to be brought before the meeting and the reasons for
conducting such business at the meeting and, in the event that such
business includes a proposal to amend either the articles of incorporation
or bylaws of the corporation, the exact language of the proposed
amendment; (ii) the name and address of the shareholder proposing such
business; (iii) a representation that the shareholder is a holder of
record of stock of the corporation entitled to vote at such meeting and
intends to appear in person or by proxy at the meeting to propose such
business; and (iv) any material interest of the shareholder in such
business. No business shall be conducted at a meeting of shareholders
except in accordance with this Section 2.045, and the chairman of any
meeting of shareholders may refuse to permit any business to be brought
before such meeting without compliance with the foregoing procedures. For
purposes of these bylaws, the "Originally Scheduled Date" of any meeting
of shareholders shall be the date such meeting is scheduled to occur as
specified in the notice of such meeting first generally given to
shareholders regardless of whether any subsequent notice is given for such
meeting or the record date of such meeting is changed. Nothing contained
in this Section 2.045 shall be construed to limit the rights of a
shareholder to submit proposals to the corporation which comply with the
proxy rules of the Securities and Exchange Commission for inclusion in the
corporation's proxy statement for consideration at shareholder meetings.
2.05. Waiver of Notice. A shareholder may wave any notice
required by the Wisconsin Business Corporation Law, the articles of
incorporation or these bylaws before or after the date and time stated in
the notice. The waiver shall be in writing and signed by the shareholder
entitled to the notice, contain the same information that would have been
required in the notice under applicable provisions of the Wisconsin
Business Corporation Law (except that the time and place of meeting need
not be stated) and be delivered to the corporation for inclusion in the
corporate records. A shareholder's attendance at a meeting, in person or
by proxy, waives objection to all of the following: (a) lack of notice or
defective notice of the meeting, unless the shareholder at the beginning
of the meeting or promptly upon arrival objects to holding the meeting or
transacting business at the meeting; and (b) consideration of a particular
matter at the meeting that is not within the purpose described in the
meeting notice, unless the shareholder objects to considering the matter
when it is presented.
2.06. Fixing of Record Date. The Board of Directors may fix
in advance a date as the record date for the purpose of determining
shareholders entitled to notice of and to vote at any meeting of
shareholders, shareholders entitled to demand a special meeting as
contemplated by Section 2.02 hereof, shareholders entitled to take any
other action, or shareholders for any other purpose. Such record date
shall not be more than seventy days prior to the date on which the
particular action, requiring such determination of shareholders, is to be
taken. If no record date is fixed by the Board of Directors or by the
Wisconsin Business Corporation Law for the determination of shareholders
entitled to notice of and to vote at a meeting of shareholders, the record
date shall be the close of business on the day before the first notice is
given to shareholders. If no record date is fixed by the Board of
Directors or by the Wisconsin Business Corporation Law for the
determination of shareholders entitled to demand a special meeting as
contemplated in Section 2.02 hereof, the record date shall be the date
that the first shareholder signs the demand. Except as provided by the
Wisconsin Business Corporation Law for a court ordered adjournment, a
determination of shareholders entitled to notice of and to vote at a
meeting of shareholders is effective for any adjournment of such meeting
unless the Board of Directors fixes a new record date, which it shall do
if the meeting is adjourned to a date more than 120 days after the date
fixed for the original meeting. The record date for determining
shareholders entitled to a distribution (other than a distribution
involving a purchase, redemption or other acquisition of the corporation's
shares) or a share dividend is the date on which the Board of Directors
authorized the distribution or share dividend, as the case may be, unless
the Board of Directors fixes a different record date.
2.07. Shareholders' List for Meetings. After a record date
for a special or annual meeting of shareholders has been fixed, the
corporation shall prepare a list of the names of all of the shareholders
entitled to notice of the meeting. The list shall be arranged by class or
series of shares, if any, and show the address of and number of shares
held by each shareholder. Such list shall be available for inspection by
any shareholder, beginning two business days after notice of the meeting
is given for which the list was prepared and continuing to the date of the
meeting, at the corporation's principal office or at a place identified in
the meeting notice in the city where the meeting will be held. A
shareholder or his or her agent may, on written demand, inspect and,
subject to the limitations imposed by the Wisconsin Business Corporation
Law, copy the list, during regular business hours and at his or her
expense, during the period that it is available for inspection pursuant to
this Section 2.07. The corporation shall make the shareholders' list
available at the meeting and any shareholder or his or her agent or
attorney may inspect the list at any time during the meeting or any
adjournment thereof. Refusal or failure to prepare or make available the
shareholders' list shall not affect the validity of any action taken at a
meeting of shareholders.
2.08. Quorum and Voting Requirements. Shares entitled to
vote as a separate voting group may take action on a matter at a meeting
only if a quorum of those shares exists with respect to that matter.
Except as otherwise provided in the articles of incorporation or the
Wisconsin Business Corporation Law, a majority of the votes entitled to be
cast on the matter shall constitute a quorum of the voting group for
action on that matter. Once a share is represented for any purpose at a
meeting, other than for the purpose of objecting to holding the meeting or
transacting business at the meeting, it is considered present for purposes
of determining whether a quorum exists for the remainder of the meeting
and for any adjournment of that meeting unless a new record date is or
must be set for the adjourned meeting. If a quorum exists, except in the
case of the election of directors, action on a matter shall be approved if
the votes cast within the voting group favoring the action exceed the
votes cast opposing the action, unless the articles of incorporation or
the Wisconsin Business Corporation Law requires a greater number of
affirmative votes. Unless otherwise provided in the articles of
incorporation, each director shall be elected by a plurality of the votes
cast by the shares entitled to vote in the election of directors at a
meeting at which a quorum is present. Though less than a quorum of the
outstanding votes of a voting group are represented at a meeting, a
majority of the votes so represented may adjourn the meeting from time to
time without further notice. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified.
2.09. Conduct of Meeting. The President, and in his absence or
discretion, a Vice President in the order provided under Section 4.07
hereof or as chosen by the President, and in their absence, any person
chosen by the shareholders present shall call the meeting of the
shareholders to order and shall act as chairman of the meeting, and the
Secretary of the corporation shall act as secretary of all meetings of the
shareholders, but, in the absence or upon the request of the Secretary,
the presiding officer may appoint any other person to act as secretary of
the meeting.
2.10. Proxies. At all meetings of shareholders, a
shareholder may vote his or her shares in person or by proxy. A
shareholder may appoint a proxy to vote or otherwise act for the
shareholder by signing an appointment form, either personally or by his or
her attorney-in-fact. An appointment of a proxy is effective when
received by the Secretary or other officer or agent of the corporation
authorized to tabulate votes. An appointment is valid for eleven months
from the date of its signing unless a different period is expressly
provided in the appointment form.
2.11. Voting of Shares. Except as provided in the articles
of incorporation or in the Wisconsin Business Corporation Law, each
outstanding share of Class A Common Stock, is entitled to one vote on each
matter voted on at a meeting of shareholders and each outstanding share of
Class B Common Stock is entitled to three votes on each matter voted on at
a meeting of shareholders.
2.12. Action without Meeting. Any action required or
permitted by the articles of incorporation or these bylaws or any
provision of the Wisconsin Business Corporation Law to be taken at a
meeting of the shareholders may be taken without a meeting and without
action by the Board of Directors if a written consent or consents,
describing the action so taken, is signed by all of the shareholders
entitled to vote with respect to the subject matter thereof and delivered
to the corporation for inclusion in the corporate records.
2.13. Acceptance of Instruments Showing Shareholder Action.
If the name signed on a vote, consent, waiver or proxy appointment
corresponds to the name of a shareholder, the corporation, if acting in
good faith, may accept the vote, consent, waiver or proxy appointment and
give it effect as the act of a shareholder. If the name signed on a vote,
consent, waiver or proxy appointment does not correspond to the name of a
shareholder, the corporation, if acting in good faith, may accept the
vote, consent, waiver or proxy appointment and give it effect as the act
of the shareholder if any of the following apply:
(a) The shareholder is an entity and the name signed purports
to be that of a officer or agent of the entity.
(b) The name purports to be that of a personal representative,
administrator, executor, guardian or conservator representing the
shareholder and, if the corporation requests, evidence of fiduciary
status acceptable to the corporation is presented with respect to the
vote, consent, waver or proxy appointment.
(c) The name signed purports to be that of a receiver or
trustee in bankruptcy of the shareholder and, if the corporation
requests, evidence of this status acceptable to the corporation is
presented with respect to the vote, consent, waiver or proxy
appointment.
(d) The name signed purports to be that of a pledgee,
beneficial owner, or attorney-in-fact of the shareholder and, if the
corporation requests, evidence acceptable to the corporation of the
signatory's authority to sign for the shareholder is presented with
respect to the vote, consent, waiver or proxy appointment.
(e) Two or more persons are the shareholders as co-tenants or
fiduciaries and the name signed purports to be the name of at least
one of the co-owners and the person signing appears to be acting on
behalf of all co-owners.
The corporation may reject a vote, consent, waiver or proxy appointment if
the Secretary or other officer or agent of the corporation who is
authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
ARTICLE III. BOARD OF DIRECTORS
3.01. General Powers and Number. All corporate powers shall
be exercised by or under the authority of, and the business and affairs of
the corporation managed under the direction of, the Board of Directors.
The number of directors of the corporation shall be eight.
3.02. Tenor and Qualifications. Each director shall hold
office until the next annual meeting of shareholders and until his or her
successor shall have been elected and, if necessary, qualified, or until
there is a decrease in the number of directors which takes effect after
the expiration of his or her term, or until his or her prior death,
resignation or removal. A director may be removed by the shareholders
only at a meeting called for the purpose of removing the director, and the
meeting notice shall state that the purpose, or one of the purposes, of
the meeting is removal of the director. A director may be removed from
office with or without cause if the votes cast to remove the director
exceeds the number of votes cast not to remove such director. A director
may resign at any time by delivering written notice which complies with
the Wisconsin Business Corporation Law to the Board of Directors, to the
President (in his capacity as chairman of the Board of Directors) or to
the corporation. A director's resignation is effective when the notice is
delivered unless the notice specifies a later effective date. Directors
need not be residents of the State of Wisconsin or shareholders of the
corporation.
3.025. Shareholder Nomination Procedure. Nominations for the
election of directors may be made by the Board of Directors or a committee
appointed by the Board of Directors or by any shareholder entitled to vote
for the election of directors who complies fully with the requirements of
this Section 3.025. Any shareholder entitled to vote for the election of
directors at a meeting may nominate a person or persons for election as a
director or directors only if written notice of such shareholder's intent
to make any such nomination is given, either by personal delivery or by
United States mail, postage prepaid, to the Secretary of the corporation
not later than: (i) with respect to an election to be held at any annual
meeting of shareholders, 30 days in advance of the Originally Scheduled
Date of such meeting (provided, however, that if the Originally Scheduled
Date of such meeting is earlier than the date specified in these bylaws as
the date of the annual meeting and if the Board of Directors does not
determine otherwise, such written notice may be so given and received not
later than the close of business on the 15th day following the date of the
first public disclosure, which may include any public filing with the
Securities and Exchange Commission, of the Originally Scheduled Date of
such meeting); and (ii) with respect to an election to be held at a
special meeting of shareholders, the close of business on the 15th day
following the date of first public disclosure, which may include any
public filing with the Securities and Exchange Commission, of the
Originally Scheduled Date of such meeting. Each such notice shall set
forth: (a) the name and address of the shareholder who intends to make
the nomination and of the person or persons to be nominated; (b)a
representation that the shareholder is a holder of record of shares of the
corporation entitled to vote at such meeting and intends to appear in
person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or
understandings between the shareholder and each nominee and any other
person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the shareholder; (d) such
other information regarding each nominee proposed by such shareholder as
would have been required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had
each nominee been nominated, or intended to be nominated, by the Board of
Directors; and (e) the consent of each nominee to serve as a director of
the corporation if so elected. The chairman of any meeting of shareholders
to elect directors and the Board of Directors may refuse to acknowledge
the nomination by a shareholder of any person not made in compliance with
the foregoing procedure.
3.03. Regular Meetings. A regular meeting of the Board of
Directors shall be held without other notice than this bylaw immediately
after the annual meeting of shareholders and each adjourned session
thereof. The place of such regular meeting shall be the same as the place
of the meeting of shareholders which precedes it, or such other suitable
place as may be communicated to the directors at or prior to such meeting
of shareholders. To the extent practicable, the date, time and place,
either within or without the State of Wisconsin, for the holding of
additional regular meetings of the Board of Directors shall be
communicated amongst and generally agreed upon at any meeting of the Board
of Directors.
3.04. Special Meetings. Special meetings of the Board of
Directors may be called by or at the request of the President, Secretary
or any two directors. The President or Secretary may fix any place,
either within or without the State of Wisconsin, as the place for holding
any special meeting of the Board of Directors, and if no other place is
fixed the place of the meeting shall be the principal business office of
the corporation in the State of Wisconsin.
3.05. Notice: Waiver. Notice of each special meeting of
the Board of Directors shall be given by written notice delivered or
communicated in person, by telegraph, teletype, facsimile or other form of
wire or wireless communication, or by mail or private carrier, to each
director at his business address or at such other address as such director
shall have designated in writing filed with the Secretary, in each case
not less than forty-eight hours prior to the meeting. The notice need not
prescribe the purpose of the special meeting of the Board of Directors or
the business to be transacted at such meeting. If mailed, such notice
shall be deemed to be effective when deposited in the United States mail
so addressed, with postage thereon prepaid. If notice is given by
telegram, such notice shall be deemed to be effective when the telegram is
delivered to the telegraph company. If notice is given by private
carrier, such notice shall be deemed to be effective when delivered to the
private carrier. Whenever any notice whatever is required to be given to
any director of the corporation under the articles of incorporation or
these bylaws or any provision of the Wisconsin Business Corporation Law, a
waiver thereof in writing, signed at any time, whether before or after the
date and time of meeting, by the director entitled to such notice shall be
deemed equivalent to the giving of such notice. The corporation shall
retain any such waiver as part of the permanent corporate records. A
director's attendance at or participation in a meeting waives any required
notice to him or her of the meeting unless the director at the beginning
of the meeting or promptly upon his or her arrival objects to holding the
meeting or transacting business at the meeting and does not thereafter
vote for or assent to action taken at the meeting.
3.06. Quorum. Except as otherwise provided by the Wisconsin
Business Corporation Law or by the articles of incorporation or these
bylaws, a majority of the number of directors specified in Section 3.01 of
these bylaws shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors. Except as otherwise provided by
the Wisconsin Business Corporation Law or by the articles of incorporation
or by these bylaws, a quorum of any committee of the Board of Directors
created pursuant to Section 3.12 hereof shall consist of a majority of the
number of directors appointed to serve on the committee. A majority of
the directors present (though less than such quorum) may adjourn any
meeting of the Board of Directors or any committee thereof, as the case
may be, from time to time without further notice.
3.07. Manner of Acting. The affirmative vote of a majority
of the directors present at a meeting of the Board of Directors or a
committee thereof at which a quorum is present shall be the act of the
Board of Directors or such committee, as the case may be, unless the
Wisconsin Business Corporation Law, the articles of incorporation or these
bylaws require the vote of a greater number of directors.
3.08. Conduct of Meetings. The President, and in his
absence, a Vice President in the order provided under Section 4.07, and in
their absence, any director chosen by the directors present, shall call
meetings of the Board of Directors to order and shall act as chairman of
the meeting. The Secretary of the corporation shall act as secretary of
all meetings of the Board of Directors but in the absence of the
Secretary, the presiding officer may appoint any other person present to
act as secretary of the meeting. Minutes of any regular or special
meeting of the Board of Directors shall be prepared and distributed to
each director.
3.09. Vacancies. Except as provided below, any vacancy
occurring in the Board of Directors, including a vacancy resulting from an
increase in the number of directors, may be filled by any of the
following: (a) the shareholders; (b) the Board of Directors; or (c) if
the directors remaining in office constitute fewer than a quorum of the
Board of Directors, the directors, by the affirmative vote of a majority
of all directors remaining in office. If the vacant office was held by a
director elected by a voting group of shareholders, only the holders of
shares of that voting group may vote to fill the vacancy if it is filled
by the shareholders, and only the remaining directors elected by that
voting group may vote to fill the vacancy if it is filled by the
directors. A vacancy that will occur at a specific later date, because of
a resignation effective at a later date or otherwise, may be filled before
the vacancy occurs, but the new director may not take office until the
vacancy occurs.
3.10. Compensation. The Board of Directors, irrespective of
any personal interest of any of its members, may establish reasonable
compensation of all directors for services to the corporation as
directors, officers or otherwise, or may delegate such authority to an
appropriate committee. The Board of Directors also shall have authority
to provide for or delegate authority to an appropriate committee to
provide for reasonable pensions, disability or death benefits, and other
benefits or payments, to directors, officers and employees and to their
estates, families, dependents or beneficiaries on account of prior
services rendered by such directors, officers and employees to the
corporation.
3.11. Presumption of Assent. A director who is present and
is announced as present at a meeting of the Board of Directors or any
committee thereof created in accordance with Section 3.12 hereof, when
corporate action is taken, assents to the action taken unless any of the
following occurs: (a) the director objects at the beginning of the
meeting or promptly upon his or her arrival to holding the meeting or
transacting business at the meeting; (b) the director's dissent or
abstention from the action taken is entered in the minutes of the meeting;
or (c) the director delivers written notice that complies with the
Wisconsin Business Corporation Law of his or her dissent or abstention to
the presiding officer of the meeting before its adjournment or to the
corporation immediately after adjournment of the meeting. Such right of
dissent or abstention shall not apply to a director who votes in favor of
the action taken.
3.12. Committees. The Board of Directors by resolution
adopted by the affirmative vote of a majority of all of the directors then
in office may create one or more committees, appoint members of the Board
of Directors to serve on the committees and designate other members of the
Board of Directors to serve as alternates. Each committee shall have two
or more members who shall, unless otherwise provided by the Board of
Directors, serve at the discretion of the Board of Directors. A committee
may be authorized to exercise the authority of the Board of Directors,
except that a committee may not do any of the following: (a) authorize
distributions; (b)approve or propose to shareholders action that the
Wisconsin Business Corporation Law requires to be approved by
shareholders; (c) fill vacancies on the Board of Directors or, unless the
Board of Directors provides by resolution that vacancies on a committee
shall be filled by the affirmative vote of the remaining committee
members, on any Board committee; (d) amend the corporation's articles of
incorporation; (e) adopt, amend or repeal bylaws; (f) approve a plan of
merger not requiring shareholder approval; (g) authorize or approve
reacquisition of shares, except according to a formula or method
prescribed by the Board of Directors; and (h) authorize or approve the
issuance or sale or contract for sale of shares, or determine the
designation and relative rights, preferences and limitations of a class or
series of shares, except that the Board of Directors may authorize a
committee to do so within limits prescribed by the Board of Directors.
Unless otherwise provided by the Board of Directors in creating the
committee, a committee may employ counsel, accountants and other
consultants to assist it in the exercise of its authority.
3.13. Telephonic Meetings. Except as herein provided and
notwithstanding any place set forth in the notice of the meeting or these
bylaws, members of the Board of Directors (and any committees thereof
created pursuant to Section 3.12 hereof, may participate in regular or
special meetings by, or through the use of, any means of communication by
which all participants may simultaneously hear each other, such as by
conference telephone. If a meeting is conducted by such means, then at
the commencement of such meeting the presiding officer shall inform the
participating directors that a meeting is taking place at which official
business may be transacted. Any participant in a meeting by such means
shall be deemed present in person at such meeting. If action is to be
taken at any meeting held by such means on any of the following: (a) a
plan of merger or share exchange; (b) a sale, lease, exchange or other
disposition of substantial property or assets of the corporation; (c) a
voluntary dissolution or the revocation of voluntary dissolution
proceedings; or (d) a filing for bankruptcy, then the identity of each
director participating in such meeting must be verified by the disclosure
at such meeting by each such director of each such director's social
security number to the secretary of the meeting before a vote may be taken
on any of the foregoing matters. For purposes of the preceding clause
(b), the phrase "sale, lease, exchange or other disposition of substantial
property or assets" shall mean any sale, lease, exchange or other
disposition of property or assets of the corporation having a net book
value equal to 10% or more of the net book value of the total assets of
the corporation on and as of the close of the fiscal year last ended prior
to the date of such meeting and as to which financial statements of the
corporation have been prepared. Notwithstanding the foregoing, no action
may be taken at any meeting held by such means on any particular matter
which the presiding officer determines, in his or her sole discretion, to
be inappropriate under the circumstances for action at a meeting held by
such means. Such determination shall be made and announced in advance of
such meeting.
3.14. Action without Meeting. Any action required or
permitted by the Wisconsin Business Corporation Law to be taken at a
meeting of the Board of Directors or a committee thereof crated pursuant
to Section 3.12 hereof may be taken without a meeting if the action is
taken by all members of the Board or of the committee. The action shall
be evidenced by one or more written consents describing the action taken,
signed by each director or committee member and retained by the
corporation. Such action shall be effective when the last director or
committee member signs the consent, unless the consent specifies a
different effective date.
ARTICLE IV. OFFICERS
4.01. Number. The principal officers of the corporation
shall be a President, the number of Vice Presidents as authorized from
time to time by the Board of Directors, a Secretary, and a Treasurer, each
of whom shall be elected by the Board of Directors. Such other officers
and assistant officers as may be deemed necessary may be elected or
appointed by the Board of Directors or the President. The Board of
Directors may also authorize any duly authorized officer to appoint one or
more officers or assistant officers. Any two or more offices may be held
by the same person.
4.02. Election and Term of Office. The officers of the
corporation to be elected by the Board of Directors shall be elected
annually by the Board of Directors at the first meeting of the Board of
Directors held after each annual meeting of the shareholders. If the
election of officers shall not be held at such meeting, such election
shall be held as soon thereafter as is practicable. Each officer shall
hold office until his or her successor shall have been duly elected or
until his or her prior death, resignation or removal.
4.03. Removal. The Board of Directors may remove any
officer and, unless restricted by the Board of Directors or these bylaws,
an officer may remove any officer or assistant officer appointed by that
officer, at any time, with or without cause and notwithstanding the
contract rights, if any, of the officer removed. The appointment of an
officer does not of itself create contract rights.
4.04. Resignation. An officer may resign at any time by
delivering notice to the corporation that complies with the Wisconsin
Business Corporation Law. The resignation shall be effective when the
notice is delivered, unless the notice specifies a later effective date
and the corporation accepts the later effective date.
4.05. Vacancies. A vacancy in any principal office because
of death, resignation, removal, disqualification or otherwise, shall be
filled by the Board of Directors for the unexpired portion of the term.
If a resignation of an officer is effective at a later date as
contemplated by Section 4.04 hereof, the Board of Directors may fill the
pending vacancy before the effective date if the Board provides that the
successor may not take office until the effective date.
4.06 Chairman of the Board. The Chairman of the Board, if one
be chosen by the Board of Directors, shall preside at all meetings of the
Board of Directors and of the shareholders and shall perform all duties
incident to the office of the Chairman of the Board of the corporation and
such other duties as may be prescribed by the Board of Directors from time
to time.
4.07 Chief Executive Officer. The Board of Directors shall from
time to time designate the Chairman of the Board, if any, or the President
of the corporation as the Chief Executive Officer of the corporation. The
President shall be the Chief Executive Officer whenever the office of
Chairman of the Board of the corporation is vacant. Subject to the
control of the Board of Directors, the Chief Executive Officer shall in
general supervise and control all of the business and affairs of the
corporation. He or she shall have authority, subject to such rules as may
be prescribed by the Board of Directors, to appoint and remove such agents
and employees of the corporation as he or she shall deem necessary to
prescribe their powers, duties and compensation, and to delegate authority
to them. He or she shall have authority to sign, execute and acknowledge,
on behalf of the corporation, all deeds, mortgages, securities, contracts,
leases, reports, and all other documents or other instruments necessary or
proper to be executed in the course of the corporation's regular business,
or which shall be authorized by resolution of the Board of Directors; and,
except as otherwise provided by law or the Board of Directors, he or she
may authorize any elected President, Vice President or other officer or
agent of the corporation to sign, execute and acknowledge such documents
or instruments in his or her place and stead. In general, he or she shall
perform all duties incident to the office of Chief Executive Officer of
the corporation and such other duties as may be prescribed by the Board of
Directors from time to time.
4.08 President. Unless the Board of Directors otherwise
provides, in the absence of the Chairman of the Board or in the event of
his or her inability or refusal to act, or in the event of a vacancy in
the office of the Chairman of the Board, the President shall perform the
duties of the Chairman of the Board, and when so acting shall have all the
powers of and be subject to all the restrictions upon the Chairman of the
Board. Unless the Board of Directors otherwise provides, in the absence
of the Chief Executive Officer or in the event of his or her inability or
refusal to act, or in the event of a vacancy in the office of the Chief
Executive Officer, the President shall perform the duties of the Chief
Executive Officer, and when so acting shall have all the powers of and be
subject to all the restrictions upon the Chief Executive Officer. The
President shall have authority, subject to such rules as may be prescribed
by the Board of Directors, to appoint such agents and employees of the
corporation as he or she shall deem necessary, to prescribe their powers,
duties and compensation, and to delegate authority to them. He or she
shall have authority to sign, execute and acknowledge, on behalf of the
corporation, all deeds, mortgages, bonds, stock certificates, contracts,
leases, reports and all other documents or instruments necessary or proper
to be executed in the course of the corporation's regular business, or
which shall be authorized by resolution of the Board of Directors; and,
except as otherwise provided by law or the Board of Directors, he or she
may authorize any Vice President or other officer or agent of the
corporation to sign, execute and acknowledge such documents or instruments
in his or her place and stead. In general he or she shall perform all
duties incident to the office of the President and such other duties as
may be prescribed by the Board of Directors from time to time.
4.09 Chief Operating Officer. The Chief Operating Officer shall,
subject to the direction of the Board of Directors and the Chief Executive
Officer, in general supervise and control the day-to-day business
operations of the corporation. He or she shall have authority, subject to
such rules as may be prescribed by the Board of Directors, to sign,
execute and acknowledge, on behalf of the corporation, all deeds,
mortgages, bonds, stock certificates, contracts, leases, reports and all
other documents or instruments necessary or proper to be executed in the
course of the corporation's regular business, or which shall be authorized
by resolution of the Board of Directors; and, except as otherwise provided
by law or the Board of Directors, he or she may authorize any Vice
President or other officer or agent of the corporation to sign, execute
and acknowledge such documents or instruments in his or her place and
stead. In general he or she shall perform all duties incident to the
office of the Chief Operating Officer and such other duties as may be
prescribed by the Board of Directors from time to time.
4.10. The Vice Presidents. In the absence of the president
or in the event of the President's death, inability or refusal to act, or
in the event for any reason it shall be impracticable for the President to
act personally, the Executive Vice President (or in the event of his
absence or inability to act, any Vice President in the order designated by
the Board of Directors or President, or in the absence of any designation,
then in the order of their election) shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. Any Vice President may sign,
with the Secretary or Assistant Secretary, certificates for shares of the
corporation; and shall perform such other duties and have such authority
as from time to time may be delegated or assigned to him or her by the
President or by the Board of Directors. The execution of any instrument
of the corporation by any Vice President shall be conclusive evidence, as
to third parties, of his or her authority to act in the stead of the
President.
4.11. The Secretary. The Secretary shall: (a) keep minutes
of the meetings of the shareholders and of the Board of Directors (and of
committees thereof) in one or more books provided for that purpose
(including records of actions taken by the shareholders or the Board of
Directors (or committees thereof) without a meeting); (b) see that all
notices are duly given in accordance with the provisions of these bylaws
or as required by the Wisconsin Business Corporation Law; (c) be custodian
of the corporate records and of the seal of the corporation, if any, and
see that the seal of the corporation, if any, is affixed to all documents
the execution of which on behalf of the corporation under its seal is
required and duly authorized; (d) maintain a record of the shareholders of
the corporation, in a form that permits preparation of a list of the names
and addresses of all shareholders, by class or series of shares and
showing the number and class or series of shares held by each shareholder;
(e) sign with the President, or a Vice President, certificates for shares
of the corporation, the issuance of which shall have been authorized by
resolution of the Board of Directors; (f) have general charge of the stock
transfer books of the corporation; and (g) in general perform all duties
incident to the office of Secretary and have such other duties and
exercise such authority as from time to time may be delegated or assigned
by the President or by the Board of Directors.
4.12. The Treasurer. The Treasurer shall: (a) have charge
and custody of and be responsible for all funds and securities of the
corporation; (b) maintain appropriate accounting records; (c) receive and
give receipts for moneys due and payable to the corporation from any
source whatsoever, and deposit all such moneys in the name of the
corporation in such banks, trust companies or other depositaries as shall
be selected in accordance with the provisions of Section 5.04; and (d) in
general perform all of the duties incident to the office of Treasurer and
have such other duties and exercise such other authority as from time to
time may be delegated or assigned by the President or by the Board of
Directors. If required by the Board of Directors, the Treasurer shall
give a bond for the faithful discharge of his or her duties in such sum
and with such surety or sureties as the Board of Directors shall
determine.
4.13. Assistant Secretaries and Assistant Treasurers. There
shall be such number of Assistant Secretaries and Assistant Treasurers as
the Board of Directors or President may from time to time authorize. The
Assistant Secretaries may sign with the President or a Vice President
certificates for shares of the corporation the issuance of which shall
have been authorized by a resolution of the Board of Directors. The
Assistant Treasurers shall respectively, if required by the Board of
Directors, give bonds for the faithful discharge of their duties in such
sums and with such sureties as the Board of Directors shall determine.
The Assistant Secretaries and Assistant Treasurers, in general, shall
perform such duties and have such authority as shall from time to time be
delegated or assigned to them by the Secretary or the Treasurer,
respectively, or by the President or the Board of Directors.
4.14. Other Assistants and Acting Officers. The Board of
Directors and President shall have the power to appoint, or to authorize
any duly appointed officer of the corporation to appoint, any person to
act as assistant to any officer, or as agent for the corporation in his or
her stead, or to perform the duties of such officer whenever for any
reason it is impracticable for such officer to act personally, and such
assistant or acting officer or other agent so appointed by the Board of
Directors or an authorized officer shall have the power to perform all the
duties of the office to which he or she is so appointed to be an
assistant, or as to which he or she is so appointed to act, except as such
power may be otherwise defined or restricted by the Board of Directors,
the President or the appointing officer.
ARTICLE V. CONTRACTS, LOANS, CHECKS
AND DEPOSITS; SPECIAL CORPORATE ACTS
5.01. Contracts. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or
execute or deliver any instrument in the name of and on behalf of the
corporation, and such authorization may be general or confined to specific
instances. In the absence of other designation, all deeds, mortgages and
instruments of assignment or pledge made by the corporation shall be
executed in the name of the corporation by the President or one of the
Vice Presidents and by the Secretary, an Assistant Secretary, the
Treasurer or an Assistant Treasurer; the Secretary or an Assistant
Secretary, when necessary or required, shall affix the corporate seal, if
any, thereto; and when so executed no other party to such instrument or
any third party shall be required to make any inquiry into the authority
of the signing officer or officers.
5.02. Loans. The President, or any officer designated by
the President, shall have the power to contract on behalf of the
corporation, and issue evidences of indebtedness, for indebtedness for
borrowed money not exceeding Five Hundred Thousand Dollars ($500,000)
without further authorization or approval of the Board of Directors. No
indebtedness for borrowed money over such amount shall be contracted on
behalf of the corporation and no evidences of such indebtedness shall be
issued in its name unless authorized by or under the authority of a
resolution of the Board of Directors. Such authorization may be general
or confined to specific instances.
5.03. Checks, Drafts, etc. All checks, drafts or other
orders for the payment of money, notes or other evidences of indebtedness
issued in the name of the corporation, shall be signed by such officer or
officers, agent or agents of the corporation and in such manner as shall
from time to time be determined by or under the authority of a resolution
of the Board of Directors.
5.04. Deposits. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the
corporation in such banks, trust companies or other depositaries as may be
selected by or under the authority of a resolution of the Board of
Directors.
5.05. Voting of Securities Owned by this Corporation.
Subject to the specific directions of the Board of Directors, (a) any
shares or other securities issued by any other corporation and owned or
controlled by this corporation may be voted at any meeting of security
holders of such other corporation by the President of this corporation if
he be present, or in his absence by any Vice President of this corporation
who may be present, and (b) whenever, in the judgment of the President, or
in his absence, of any Vice President, it is desirable for this
corporation to execute a proxy or written consent in respect to any shares
or other securities issued by any other corporation and owned by this
corporation, such proxy or consent shall be executed in the name of this
corporation by the President or one of the Vice Presidents of this
corporation, without necessity of any authorization by the Board of
Directors, affixation of corporate seal, if any, or countersignature or
attestation by another officer. Any person or persons designated in the
manner above stated as the proxy or proxies of this corporation shall have
full right, power and authority to vote the shares or other securities
issued by such other corporation and owned by this corporation the same as
such shares or other securities might be voted by this corporation.
ARTICLE VI. CERTIFICATES FOR SHARES; TRANSFER OF SHARES
6.01. Certificates for Shares. Certificates representing
shares of the corporation shall be in such form, consistent with the
Wisconsin Business Corporation Law, as shall be determined by the Board of
Directors. Such certificates shall be signed by the President or a Vice
President and by the Secretary or an Assistant Secretary. All
certificates for shares shall be consecutively numbered or otherwise
identified. The name and address of the person to whom the shares
represented thereby are issued, with the number of shares and date of
issue, shall be entered on the stock transfer books of the corporation.
All certificates surrendered to the corporation for transfer shall be
canceled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
canceled, except as provided in Section 6.06.
6.02. Facsimile Signatures and Seal. The seal of the
corporation, if any, on any certificates for shares may be a facsimile.
The signature of the President or Vice President and the Secretary or
Assistant Secretary upon a certificate may be facsimiles if the
certificate is manually signed on behalf of a transfer agent, or a
registrar, other than the corporation itself or an employee of the
corporation.
6.03. Signature by Former Officers. The validity of a share
certificate is not affected if a person who signed the certificate (either
manually or in facsimile) no longer holds office when the certificate is
issued.
6.04. Transfer of Shares. Prior to due presentment of a
certificate for shares for registration of transfer the corporation may
treat the registered owner of such shares as the person exclusively
entitled to vote, to receive notifications and otherwise to have and
exercise all the rights and power of an owner. Where a certificate for
shares is presented to the corporation with a request to register for
transfer, the corporation shall not be liable to the owner or any other
person suffering loss as a result of such registration of transfer if (a)
there were on or with the certificate the necessary endorsements and (b)
the corporation had no duty to inquire into adverse claims or has
discharged any such duty. The corporation may require reasonable
assurance that such endorsements are genuine and effective and compliance
with such other regulations as may be prescribed by or under the authority
of the Board of Directors.
6.05. Restrictions on Transfer. The face or reverse side of
each certificate representing shares shall bear a conspicuous notation of
any restriction imposed by the corporation upon the transfer of such
shares.
6.06. Lost, Destroyed or Stolen Certificates. Where the
owner claims that certificates for shares have been lost, destroyed or
wrongfully taken, a new certificate shall be issued in place thereof if
the owner (a) so requests before the corporation has notice that such
shares have been acquired by a bona fide purchaser; (b) files with the
corporation a sufficient indemnity bond if required by the Board of
Directors or any principal officer; and (c) satisfies such other
reasonable requirements as may be prescribed by or under the authority of
the Board of Directors.
6.07. Consideration for Shares. The Board of Directors may
authorize shares to be issued for consideration consisting of any tangible
or intangible property or benefit to the corporation, including cash,
promissory notes, services performed, contracts for services to be
performed or other securities of the corporation. Before the corporation
issues shares, the Board of Directors shall determine that the
consideration received or to be received for the shares to be issued is
adequate. The determination of the Board of Directors is conclusive
insofar as the adequacy of consideration for the issuance of shares
relates to whether the shares are validly issued, fully paid and
nonassessable. The corporation may place in escrow shares issued in whole
or in part for a contract for future services or benefits, a promissory
note, or otherwise for property to be issued in the future, or make other
arrangements to restrict the transfer of the shares, and may credit
distributions in respect of the shares against their purchase price, until
the services are performed, the benefits or property are received or the
promissory note is paid. If the services are not performed, the benefits
or property are not received or the promissory note is not paid, the
corporation may cancel, in whole or in part, the shares escrowed or
restricted and the distributions credited.
6.08. Stock Regulations. The Board of Directors shall have
the power and authority to make all such further rules and regulations not
inconsistent with law as it may deem expedient concerning the issue,
transfer and registration of shares of the corporation.
ARTICLE VII. SEAL
7.01. The corporation shall have no corporate seal unless
otherwise determined by the Board of Directors.
ARTICLE VIII. INDEMNIFICATION
8.01. Certain Definitions. All capitalized terms used in
this Article VIII and not otherwise hereinafter defined in this Section
8.01 shall have the meaning set forth in Section 180.0850 of the Statute.
The following capitalized terms (including any plural forms thereof) used
in this Article VIII shall be defined as follows:
(a) "Affiliate" shall include, without limitation, any
corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise that directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control
with, the Corporation.
(b) "Authority" shall mean the entity selected by the Director
or Officer to determine his or her right to indemnification pursuant to
Section 8.04.
(c) "Board" shall mean the entire then elected and serving
Board of Directors of the Corporation, including all members thereof who
are Parties to the subject Proceeding or any related Proceeding.
(d) "Breach of Duty" shall mean the Director or Officer
breached or failed to perform his or her duties to the Corporation and his
or her breach of or failure to perform those duties is determined, in
accordance with Section 8.04, to constitute misconduct under Section
180.0851(2) (a) 1, 2,3 or 4 of the Statute.
(e) "Corporation," as used herein and as defined in the Statute
and incorporated by reference into the definitions of certain other
capitalized terms used herein, shall mean this Corporation, including,
without limitation, any successor corporation or entity to this
Corporation by way of merger, consolidation or acquisition of all or
substantially all of the capital stock or assets of this Corporation.
(f) "Director or Officer" shall have the meaning set forth in
the Statute; provided, that, for purposes of this Article VIII, it shall
be conclusively presumed that any Director or Officer serving as a
director, officer, partner, trustee, member of any governing or decision-
making committee, employee or agent of an Affiliate shall be so serving at
the request of the Corporation.
(g) "Disinterested Quorum" shall mean a quorum of the Board who
are not Parties to the subject Proceeding or any related Proceeding.
(h) "Party" shall have the meaning set forth in the Statute;
provided, that, for purposes of this Article VIII, the term "Party" shall
also include any Director or Officer or employee of the Corporation who is
or was a witness in a Proceeding at a time when he or she has not
otherwise been formally named a Party thereto.
(i) "Proceeding" shall have the meaning set forth in the
Statute; provided, that, in accordance with Section 180.0859 of the
Statute and for purposes of this Article VIII, the term "Ping" shall also
include all Proceedings (i) brought under (in whole or in part) the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934,
as amended, their respective state counterparts, and"or any rule or
regulation promulgated under any of the foregoing; (ii) brought before an
Authority or otherwise to enforce rights hereunder; (iii) any appeal from
a Proceeding; and (iv) any Proceeding in which the Director or Officer is
a plaintiff or petitioner because he or she is a Director or Officer;
provided, however, that any such Proceeding under this subsection (iv)
must be authorized by a majority vote of a Disinterested Quorum.
(j) "Statute" shall mean Sections 180.0850 through 180.0859,
inclusive, of the Wisconsin Business Corporation Law, Chapter 180 of the
Wisconsin Statutes, as the same shall then be in effect, including any
amendments thereto, but, in the case of any such amendment, only to the
extent such amendment permits or requires the Corporation to provide
broader indemnification rights than the Statute permitted or required the
Corporation to provide prior to such amendment.
8.02. Mandatory Indemnification of Directors and Officers.
To the fullest extent permitted or required by the Statute, the
Corporation shall indemnify a Director or Officer against all Liabilities
incurred by or on behalf of such Director or Officer in connection with a
Proceeding in which the Director or Officer is a Party because he or she
is a Director or Officer.
8.03. Procedural Requirements.
(a) A Director or Officer who seeks indemnification under
Section 8.02 shall make a written request therefor to the Corporation.
Subject to Section 8.03(b), within sixty days of the Corporation's receipt
of such request, the Corporation shall pay or reimburse the Director or
Officer for the entire amount of Liabilities incurred by the Director or
Officer in connection with the subject Proceeding (net of any Expenses
previously advanced pursuant to Section 8.05).
(b) No indemnification shall be required to be paid by the
Corporation pursuant to Section 8.02 if, within such sixty-day period, (i)
a Disinterested Quorum, by a majority vote thereof, determines that the
Director or Officer requesting indemnification engaged in misconduct
constituting a Breach of Duty or (ii) a Disinterested Quorum cannot be
obtained.
(c) In either case of nonpayment pursuant to Section 8.03(b),
the Board shall immediately authorize by resolution that an Authority, as
provided in Section 8.04, determine whether the Director's or Officer's
conduct constituted a Breach of Duty and, therefore, whether
indemnification should be denied hereunder.
(d) (i) If the Board does not authorize an Authority to
determine the Director's or Officer's right to indemnification hereunder
within such sixty-day period and"or (ii) if indemnification of the
requested amount of Liabilities is paid by the Corporation, then it shall
be conclusively presumed for all purposes that a Disinterested Quorum has
affirmatively determined that the Director or Officer did not engage in
misconduct constituting a Breach of Duty and, in the case of subsection
(i) above (but not subsection (ii)), indemnification by the Corporation of
the requested amount of Liabilities shall be paid to the Director or
Officer immediately.
8.04. Determination of Indemnification.
(a) If the Board authorizes an Authority to determine a
Director's or Officer's right to indemnification pursuant to Section 8.03,
then the Director or Officer requesting indemnification shall have the
absolute discretionary authority to select one of the following as such
Authority:
(i) An independent legal counsel; provided, that such
counsel shall be mutually selected by such Director or Officer
and by a majority vote of a Disinterested Quorum or, if a
Disinterested Quorum cannot be obtained, then by a majority vote
of the Board;
(ii) A panel of three arbitrators selected from the
panels of arbitrators of the American Arbitration Association in
Wisconsin; provided, that (A) one arbitrator shall be selected
by such Director or Officer, the second arbitrator shall be
selected by a majority vote of a Disinterested Quorum or, if a
Disinterested Quorum cannot be obtained, then by a majority vote
of the Board, and the third arbitrator shall be selected by the
two previously selected arbitrators, and (B) in all other
respects (other than this Article VIII), such panel shall be
governed by the American Arbitration Association's then existing
Commercial Arbitration Rules; or
(iii) A court pursuant to and in accordance with Section
180.0854 of the Statute.
(b) In any such determination by the selected Authority there
shall exist a rebuttable presumption that the Director's or Officer's
conduct did not constitute a Breach of Duty and that indemnification
against the requested amount of Liabilities is required. The burden of
rebutting such a presumption by clear and convincing evidence shall be on
the Corporation or such other party asserting that such indemnification
should not be allowed.
(c) The Authority shall make its determination within sixty
days of being selected and shall submit a written opinion of its
conclusion simultaneously to both the Corporation and the Director or
Officer.
(d) If the Authority determines that indemnification is
required hereunder, the Corporation shall pay the entire requested amount
of Liabilities (net of any Expenses previously advanced pursuant to
Section 8.05), including interest thereon at a reasonable rate, as
determined by the Authority, within ten days of receipt of the Authority's
opinion; provided, that, if it is determined by the Authority that a
Director or Officer is entitled to indemnification against Liabilities'
incurred in connection with some claims, issues or matters, but not as to
other claims, issues or matters, involved in the subject Proceeding, the
Corporation shall be required to pay (as set forth above) only the amount
of such requested Liabilities as the Authority shall deem appropriate in
light of all of the circumstances of such Proceeding.
(e) The determination by the Authority that indemnification is
required hereunder shall be binding upon the Corporation regardless of any
prior determination that the Director or Officer engaged in a Breach of
Duty.
(f) All Expenses incurred in the determination process under
this Section 8.04 by either the Corporation or the Director or Officer,
including, without limitation, all Expenses of the selected Authority,
shall be paid by the Corporation.
8.05. Mandatory Allowance of Expenses.
(a) The Corporation shall pay or reimburse from time to time or
at any time, within ten days after the receipt of the Director's or
Officer's written request therefor, the reasonable Expenses of the
Director or Officer as such Expenses are incurred; provided, the following
conditions are satisfied:
(i) The Director or Officer furnishes to the Corporation
an executed written certificate affirming his or her good faith
belief that he or she has not engaged in misconduct which
constitutes a Breach of Duty; and
(ii) The Director or Officer furnishes to the Corporation
an unsecured executed written agreement to repay any advances
made under this Section 8.05 if it is ultimately determined by
an Authority that he or she is not entitled to be indemnified by
the Corporation for such Expenses pursuant to Section 8.04.
(b) If the Director or Officer must repay any previously
advanced Expenses pursuant to this Section 8.05, such Director or Officer
shall not be required to pay interest on such amounts.
8.06 Indemnification and Allowance of Expenses of Certain
Others.
(a) The Board may, in its sole and absolute discretion a it
deems appropriate, pursuant to a majority vote thereof, indemnify a
director or officer of an Affiliate (who is not otherwise serving as a
Director or Officer) against all Liabilities, and shall advance the
reasonable Expenses, incurred by such director or officer in a Proceeding
to the same extent hereunder as if such director or officer incurred such
Liabilities because he or she was a Director or Officer, if such director
or officer is a Party thereto because he or she is or was a director or
officer of the Affiliate.
(b) The Corporation shall indemnify an employee who is not a
Director or Officer, to the extent he or she ha been successful on the
merits or otherwise in defense of a Proceeding, for all Expenses incurred
in the Proceeding if the employee was a Party because he or she was an
employee of the Corporation.
(c) The Board may, in its sole and absolute discretion as it
deems appropriate, pursuant to a majority vote thereof, indemnify (to the
extent not otherwise provided in Section 8.06(b) hereof, against
Liabilities incurred by, and/or provide for the allowance of reasonable
Expenses of, an employee or authorized agent of the Corporation acting
within the scope of his or her duties as such and who is not otherwise a
Director or Officer.
8.07. Insurance. The Corporation may purchase and maintain
insurance on behalf of a Director or Officer or any individual who is or
was an employee or authorized agent of the Corporation against any
Liability asserted against or incurred by such individual in his or her
capacity as such or arising from his or her status as such, regardless of
whether the Corporation is required or permitted to indemnify against any
such Liability under this Article VIII.
8.08. Notice to the Corporation. A Director, Officer or
employee shall promptly notify the Corporation in writing when he or she
has actual knowledge of a Proceeding which may result in a claim of
indemnification against Liabilities or allowance of Expenses hereunder,
but the failure to do so shall not relieve the Corporation of any
liability to the Director, Officer or employee hereunder unless the
Corporation shall have been irreparably prejudiced by such failure (as
determined, in the case of Directors or Officers only, by an Authority
selected pursuant to Section 8.04(a)).
8.09. Severability. If any provision of this Article VIII
shall be deemed invalid or inoperative, or if a court of competent
jurisdiction determines that any of the provisions of this Article VIII
contravene public policy, this Article VIII shall be construed so that the
remaining provisions shall not be affected, but shall remain in full force
and effect, and any such provisions which are invalid or inoperative or
which contravene public policy shall be deemed, without further action or
deed by or on behalf of the Corporation, to be modified, amended and/or
limited, but only to the extent n to render the same valid and
enforceable; it being understood that it is the Corporation's intention to
provide the Directors and Officers with the broadest possible protection
against personal liability allowable under the Statute.
8.10. Nonexclusivity of Article VIII. The rights of a
Director, Officer or employee (or any other person) granted under this
Article VIII shall not be deemed exclusive of any other rights to
indemnification against Liabilities or allowance of Expenses which the
Director, Officer or employee (or such other person) may be entitled to
under any written agreement, Board resolution, vote of shareholders of the
Corporation or otherwise, including, without limitation, under the
Statute. Nothing contained in this Article VIII shall be deemed to limit
the Corporation's obligations to indemnify against Liabilities or allow
Expenses to a Director, Officer or employee under the Statute.
8.11. Contractual Nature of Article VIII; Repeal or
Limitation of Rights. This Article VIII shall be deemed to be a contract
between the Corporation and each Director, Officer and employee of the
Corporation and any repeal or other limitation of this Article VIII or any
repeal or limitation of the Statute or any other applicable law shall not
limit any rights of indemnification against Liabilities or allowance of
Expenses then existing or arising out of events, acts or omissions
occurring prior to such repeal or limitation, including, without
limitation, the right to indemnification against Liabilities or allowance
of Expenses for Proceedings commenced after such repeal or limitation to
enforce this Article VIII with regard to acts, omissions or events arising
prior to such repeal or limitation.
ARTICLE IX. CONFLICTS OF INTEREST
9.01. Conflict of Interest Policy. No director, officer or
other employee of the corporation shall acquire a cranberry producing
property or a controlling interest in any entity which owns or operates
such a property without first offering the opportunity to purchase such
property or controlling interest to the corporation. This prohibition is
not applicable to such properties or interests owned by any director,
officer or employee of the corporation prior to the date of incorporation
of this corporation. This Section 9.01 may only be amended or deleted
pursuant to a vote of the corporation's shareholders.
ARTICLE X. AMENDMENTS
10.01. By Shareholders. These bylaws may be amended or
repealed and new bylaws may be adopted by the shareholders at any annual
or special meeting of the shareholders at which a quorum is in attendance.
10.02. By Directors. Except as otherwise provided by the
Wisconsin Business Corporation Law or the articles of incorporation, these
bylaws may also be amended or repealed and new bylaws may be adopted by
the Board of Directors; provided, however, that the shareholders in
adopting, amending or g a particular bylaw may provide therein that the
Board of Directors may not amend, repeal or readopt that bylaw.
10.03. Implied Amendments. Any action taken or authorized by
the shareholders or by the Board of Directors which would be inconsistent
with the bylaws then in effect but which is taken or authorized by native
vote of not less than the number of votes or the number of directors
required to amend the bylaws so that the bylaws would be consistent with
such action shall be given the same effect as though the bylaws had been
temporarily amended or suspended so far, but only so far, as is necessary
to permit the specific action so taken or authorized.
Amended and Restated Credit Agreement
Between
Northland Cranberries, Inc.
and
Harris Trust and Savings Bank
Dated as of October 3, 1997
<PAGE>
Table of Contents
Section Description Page
SECTION 1. THE CREDITS . . . . . . . . . . . . . . . . . . . . 1
Section 1.1. The Revolving Credit . . . . . . . . . . . . . . 1
Section 1.2. The Term Credit . . . . . . . . . . . . . . . . . 2
Section 1.3. Obligations Several and Not Joint . . . . . . . . 3
Section 1.4. Manner of Borrowing . . . . . . . . . . . . . . . 3
Section 1.5. Letters of Credit . . . . . . . . . . . . . . . . 4
Section 1.6. Reimbursement Obligation . . . . . . . . . . . . 5
SECTION 2. INTEREST . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.1. Options . . . . . . . . . . . . . . . . . . . . . 5
Section 2.2. Domestic Rate Portion . . . . . . . . . . . . . . 5
Section 2.3. LIBOR Portions . . . . . . . . . . . . . . . . . 6
Section 2.4. Offered Rate Portions . . . . . . . . . . . . . . 6
Section 2.5. Computation . . . . . . . . . . . . . . . . . . . 7
Section 2.6. Minimum Amounts . . . . . . . . . . . . . . . . . 7
Section 2.8. Change of Law . . . . . . . . . . . . . . . . . . 8
Section 2.9. Unavailability of Deposits or Inability to
Ascertain the Adjusted LIBOR Rate . . . . . . . . 8
Section 2.10. Taxes and Increased Costs . . . . . . . . . . . . 8
Section 2.11. Funding Indemnity . . . . . . . . . . . . . . . . 9
Section 2.12. Lending Branch . . . . . . . . . . . . . . . . . 10
Section 2.13. Discretion of Bank as to Manner of Funding . . . 10
SECTION 3. FEES, PAYMENTS, REDUCTIONS, APPLICATIONS AND
NOTATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 3.1. Commitment Fees . . . . . . . . . . . . . . . . . 10
Section 3.2. Voluntary Prepayments . . . . . . . . . . . . . . 10
Section 3.3. Mandatory Prepayments . . . . . . . . . . . . . . 11
Section 3.4. Terminations . . . . . . . . . . . . . . . . . . 11
Section 3.5. Place and Application . . . . . . . . . . . . . . 12
Section 3.6. Notations and Requests . . . . . . . . . . . . . 13
Section 3.7. Capital Adequacy . . . . . . . . . . . . . . . . 13
SECTION 4. THE COLLATERAL . . . . . . . . . . . . . . . . . . . 14
Section 4.1. Collateral . . . . . . . . . . . . . . . . . . . 14
Section 4.2. Further Assurances . . . . . . . . . . . . . . . 15
SECTION 5. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . 15
Section 5.1. Organization; Authority; Non-Contravention . . . 15
Section 5.2. Subsidiaries . . . . . . . . . . . . . . . . . . 15
Section 5.3. Financial Statements . . . . . . . . . . . . . . 15
Section 5.4. Litigation; Taxes; Consents . . . . . . . . . . . 16
Section 5.5. Regulation U . . . . . . . . . . . . . . . . . . 16
Section 5.6. No Default . . . . . . . . . . . . . . . . . . . 16
Section 5.7. ERISA . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.8. Security Interests and Debt . . . . . . . . . . . 16
Section 5.9. Accurate Information . . . . . . . . . . . . . . 16
Section 5.10. Enforceability . . . . . . . . . . . . . . . . . 17
Section 5.11. No Default Under Other Agreements . . . . . . . . 17
Section 5.12. Status Under Certain Laws . . . . . . . . . . . . 17
Section 5.13. Compliance with Laws . . . . . . . . . . . . . . 17
SECTION 6. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . 18
Section 6.1. All Advances . . . . . . . . . . . . . . . . . . 18
SECTION 7. COMPANY COVENANTS . . . . . . . . . . . . . . . . . 18
Section 7.1. Maintenance of Property . . . . . . . . . . . . . 18
Section 7.2. Taxes . . . . . . . . . . . . . . . . . . . . . . 18
Section 7.3. Maintenance of Insurance . . . . . . . . . . . . 19
Section 7.4. Financial Reports . . . . . . . . . . . . . . . . 19
Section 7.5. Inspection . . . . . . . . . . . . . . . . . . . 20
Section 7.6. Consolidation and Merger . . . . . . . . . . . . 20
Section 7.7. Transactions with Affiliates . . . . . . . . . . 20
Section 7.8. Minimum Net Worth . . . . . . . . . . . . . . . . 20
Section 7.9. Fixed Charge Coverage Ratio . . . . . . . . . . . 21
Section 7.10. Funded Debt to Net Worth Ratio . . . . . . . . . 21
Section 7.11. Net Income . . . . . . . . . . . . . . . . . . . 21
Section 7.12. Liens . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.13. Borrowings and Guaranties . . . . . . . . . . . . 22
Section 7.14. Investments, Loans, Advances and Acquisitions . . 23
Section 7.15. Sale of Property . . . . . . . . . . . . . . . . 24
Section 7.16. Distributions . . . . . . . . . . . . . . . . . . 24
Section 7.17. Notice of Suit or Adverse Change in Business . . 25
Section 7.18. ERISA . . . . . . . . . . . . . . . . . . . . . . 25
Section 7.19. Use of Proceeds . . . . . . . . . . . . . . . . . 25
Section 7.20. Subsidiaries . . . . . . . . . . . . . . . . . . 25
Section 7.21. Additional Capital . . . . . . . . . . . . . . . 25
Section 7.22. Capital Expenditures . . . . . . . . . . . . . . 26
SECTION 8. EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . 26
Section 8.1. Events of Default Defined . . . . . . . . . . . . 26
Section 8.2. Remedies for Non-Bankruptcy Defaults . . . . . . 27
Section 8.3. Remedies for Bankruptcy Defaults . . . . . . . . 28
Section 8.4. Collateral for Undrawn L/Cs . . . . . . . . . . . 28
SECTION 9. DEFINITIONS . . . . . . . . . . . . . . . . . . . . 28
SECTION 10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . 35
Section 10.1. Holidays . . . . . . . . . . . . . . . . . . . . 35
Section 10.2. No Waiver, Cumulative Remedies . . . . . . . . . 36
Section 10.3. Waivers, Modifications and Amendments . . . . . . 36
Section 10.4. Costs and Expenses . . . . . . . . . . . . . . . 36
Section 10.5. Stamp Taxes . . . . . . . . . . . . . . . . . . . 36
Section 10.6. Survival of Representations . . . . . . . . . . . 37
Section 10.7. Construction . . . . . . . . . . . . . . . . . . 37
Section 10.8. Accounting Principles . . . . . . . . . . . . . . 37
Section 10.9. Addresses for Notices . . . . . . . . . . . . . . 37
Section 10.10. Headings . . . . . . . . . . . . . . . . . . . . 37
Section 10.11. Severability of Provisions . . . . . . . . . . . 37
Section 10.12. Counterparts . . . . . . . . . . . . . . . . . . 37
Section 10.13. Binding Nature, Governing Law, Etc. . . . . . . . 38
Section 10.14. Rights of Participants . . . . . . . . . . . . . 38
Signature Page 39
Exhibit A Revolving Credit Note
Exhibit B-1 Term Credit Note One
Exhibit B-2 Term Credit Note Two
Exhibit B-3 Term Credit Note Three
Exhibit C L/C Agreement
Exhibit D Opinion of Counsel
Exhibit E Compliance Certificate
Schedule 7.12 - Permitted Liens
<PAGE>
Northland Cranberries, Inc. Amended and Restated Credit Agreement
Harris Trust and Savings Bank
Chicago, Illinois
Gentlemen:
The undersigned, Northland Cranberries, Inc., a Wisconsin
corporation (the "Company") refers to the Credit Agreement dated as of
August 31, 1994, as amended and currently in effect between the Company
and you (such secured credit agreement as so amended is hereinafter
referred to as the "Credit Agreement") pursuant to which you agreed to
make a revolving credit (the "Revolving Credit"), a Term Credit (the "Term
Credit") and an Acquisition Credit (the "Acquisition Credit") available to
the Company, all as more fully set forth therein. You are hereinafter
referred to as the "Bank". The Company requests you to make certain
further amendments to the Credit Agreement and, for the sake of
convenience and clarity, to restate the Credit Agreement in its entirety
as so amended. Accordingly, upon your acceptance hereof in the space
provided for that purpose below and upon satisfaction of the conditions
precedent to effectiveness hereinafter set forth, Sections 1 through 10 of
the Credit Agreement and Exhibits A, C, D and E thereto shall be amended
and as so amended shall be restated in their entirety to read as follows:
SECTION 1. THE CREDITS.
Section 1.1. The Revolving Credit. (a) Subject to all of
the terms and conditions hereof, the Bank agrees to extend a Revolving
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 Revolving Credit Termination
Date. The Revolving Credit may be utilized by the Company in the form of
loans (individually a "Revolving Credit Loan" and collectively the
"Revolving Credit Loans") and L/Cs (as hereinafter defined), provided that
the aggregate amount of the Revolving Credit Loans and Reimbursement
Obligations (as hereinafter defined) and the maximum amount available to
be drawn under all L/Cs outstanding at any one time shall not exceed
$75,000,000 (the "Revolving Credit Commitment").
Each Revolving Credit Loan shall be in a minimum amount of
$100,000 or any greater amount that is an integral multiple of $50,000.
All Revolving Credit Loans shall be evidenced by a Revolving Credit Note
of the Company (the "Revolving Credit Note") payable to the order of the
Bank in the amount of its Revolving Credit Commitment, such Revolving
Credit Note to be in the form attached hereto as Exhibit A. Without
regard to the face principal amount of the Revolving Credit Note, the
actual principal amount at any time outstanding and owing by the Company
on account thereof during the period ending on the Revolving Credit
Termination Date shall be the sum of all advances then or theretofore made
thereon less all principal payments actually received thereon during such
period.
(b) At any time not earlier than 16 months prior to, nor
later than 15 months prior to, the Revolving Credit Termination Date then
in effect, the Company may request that the Bank extend such Revolving
Credit Termination Date to the date one year from such Revolving Credit
Termination Date. At any time more than 30 days before such Revolving
Credit Termination Date the Bank may propose, by written notice to the
Company, an extension of this Agreement to such later date on such terms
and conditions as the Bank may then require. If the extension of this
Agreement to such later date is acceptable to the Company on the terms and
conditions proposed by the Bank, the Company shall notify the Bank of its
acceptance no sooner than 30 days and no later than 15 days before the
Revolving Credit Termination Date, and such later date will become the
Revolving Credit Termination Date hereunder and this Agreement shall
otherwise be amended in the manner described in the Bank's notice
proposing the extension of this Agreement upon the Bank's receipt of (i)
an amendment to this Agreement signed by the Company and the Bank, (ii)
resolutions of the Company's Board of Directors authorizing such extension
and (iii) an opinion of counsel to the Company equivalent in form and
substance to the form of opinion attached hereto as Exhibit D and
otherwise acceptable to the Banks. The Bank may further offer to extend
the Revolving Credit Termination Date before any such later scheduled
Revolving Credit Termination Date in the same manner as set forth above
for the initial Revolving Credit Termination Date.
Section 1.2. The Term Credit. Subject to all of the terms
and conditions hereof, the Bank agrees to make the Term Credit available
to the Company in three separate facilities - Term Loan One, Term Loan Two
and Term Loan Three.
(a) Term Loan One. Subject to all of the terms and
conditions hereof, the Bank agrees to make a loan (the "Term Loan One") to
the Company under the Term Credit in the amount of $4,600,000. The Term
Loan One shall be made in a single advance by no later than the close of
business in Chicago, Illinois on June 6, 1995, at which time the
commitment of the Bank to make the Term Loan One (the "Term One
Commitment") shall expire. The Term Loan One shall be evidenced by a Term
Credit Note One of the Company (the "Term Credit Note One") payable to the
order of the Bank in the amount of $4,600,000, such Term Credit Note One
to be in the form attached hereto as Exhibit B-1. The Term Credit Note
One shall be expressed to mature in semi-annual installments of principal,
commencing on November 30, 1995 and continuing on the last day of each
November and May occurring thereafter to and including May 31, 2000, with
each installment to be in the amount of $460,000.
(b) Term Loan Two. Subject to all of the terms and
conditions hereof, the Bank agrees to make a loan (the "Term Loan Two") to
the Company under the Term Credit in the amount of $4,000,000. The Term
Loan Two shall be made in four advances of $1,000,000 each by no later
than the close of business in Chicago, Illinois on June 5, 1996, at which
time the commitment of the Bank to make the Term Loan Two (the "Term Two
Commitment") shall expire. The Term Loan Two shall be evidenced by a Term
Credit Note Two of the Company (the "Term Credit Note Two") payable to the
order of the Bank in the amount of $4,000,000 such Term Credit Note Two to
be in the form attached hereto as Exhibit B-2. 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) Term Loan Three. Subject to all of the terms and
conditions hereof, the Bank agrees to make a loan (the "Term Loan Three")
to the Company under the Term Credit in the amount of $10,500,000. The
Term Loan Three shall be made in a single advance by no later than the
close of business in Chicago, Illinois on November 30, 1995, at which time
the commitment of the Bank to make the Term Loan Three (the "Term Three
Commitment") shall expire. The Term Loan Three shall be evidenced by a
Term Credit Note Three of the Company (the "Term Credit Note Three")
payable to the order of the Bank in the amount of $10,500,000 such Term
Credit Note Three to be in the form attached hereto as Exhibit B-3 with
all blanks appropriately completed. The Term Credit Note Three shall be
expressed to mature in semi-annual installments of principal, commencing
on December 31, 1995 and continuing on the last day of each and every June
and December thereafter with a final installment payable on June 30, 2000,
with the first nine (9) installments to be in the amount of $525,000 and
with the final installment to be in the amount of $5,775,000.
Section 1.3. Obligations Several and Not Joint. The failure
of one or more Participants to lend in accordance with its Participation
Percentage (as defined in the Participation Agreement) shall not relieve
the Bank or the other Participant(s) of their obligations to the Company
(including without limitation their obligation to lend), but neither the
Bank nor any Participant shall be obligated to lend in excess of its
Participation Percentage (as defined in the Participation Agreement). The
Participation Agreement shall not be modified, amended or restated without
the prior written consent of the Company.
Section 1.4. Manner of Borrowing. The Company shall notify
the Bank (which may be written or oral, but which must be given prior to
11:00 a.m. (Chicago time)) of the date (which may, subject to the
immediately preceding parenthetical, be the date on which such notice is
given) upon which it requests that any advance be made to it under the
Revolving Credit Commitment and of the date it requests any Term Loan be
made to it, specifying the amount of each such loan. Subject to all of
the terms and conditions hereof, the proceeds of each advance shall be
made available to the Company at the office of the Bank in Chicago and in
funds there current. Each loan shall initially constitute part of a
Domestic Rate Portion except to the extent the Company has otherwise
timely elected, all as provided in Section 2 hereof.
Section 1.5. Letters of Credit. (a) Generally. Subject to
all the terms and conditions hereof, at the Company's request the Bank may
in its discretion issue letters of credit (an "L/C" and collectively the
"L/Cs") for the account of the Company subject to availability under the
Revolving Credit. Each L/C shall be issued pursuant to an application and
agreement for letter of credit (the "L/C Agreement") in the form of
Exhibit C hereto. The L/Cs shall consist of standby and trade letters of
credit; provided that the aggregate undrawn face amount of the L/Cs plus
the amount of all unpaid Reimbursement Obligations shall not at any time
exceed $5,000,000. Each L/C shall have an expiry date not more than one
year from the date of issuance thereof (but in no event later than the
Revolving Credit Termination Date). The amount available to be drawn
under each L/C issued pursuant hereto shall be deducted from the credit
otherwise available under the Revolving Credit. In consideration of the
issuance of L/Cs the Company agrees to pay to the Bank (i) a fee (the "L/C
Issuance Fee") in the amount equal to one-eighth of one percent (0.125%)
of the face amount of each L/C issued hereunder, payable on the date of
issuance of each L/C hereunder and on the date of each extension, if any,
of the expiry date of each L/C, (ii) a participation fee (the "L/C
Participation Fee") in an amount per annum equal to the Applicable Margin
for LIBOR Portions of Revolving Credit Loans of the undrawn face amount of
each L/C issued hereunder, payable quarterly in arrears on the last day of
each February, May, August and November, and (iii) and such drawing,
negotiation, amendment and other administrative fees in connection with
each L/C as may be established by the Bank from time to time and
applicable generally to letters of credit issued by the Bank (the "L/C
Administrative Fee"), payable on the date of issuance of each L/C
hereunder and on the date required by the Bank. The Bank will use its
best efforts to provide the Company thirty days prior notice of any
changes to the L/C Administrative Fees, however, the Bank's failure to
provide such notice to the Company shall in no way relieve the Company of
its obligation to pay such Fees.
(b) Fees, Funding, Reimbursement, Etc. Notwithstanding
anything contained in any L/C Agreement to the contrary: (i) the Company
shall pay fees in connection with each L/C as set forth in Section 1.5(a)
hereof, (ii) except for the Collateral and as otherwise provided in
Section 3.4(a) hereof, in the absence of an Event of Default, the Bank
will not call for the funding by the Company of any amount under an L/C
issued for the Company's account, or for any other form of collateral
security for the Company's obligations in connection with such L/C, before
being presented with a drawing thereunder, and (iii) if the Bank is not
timely reimbursed for the amount of any drawing under an L/C on the date
such drawing is paid, the Company's obligation to reimburse the Bank for
the amount of such drawing shall bear interest at the default rate
specified in Section 2.2 hereof. If the Bank issues any L/C with an
expiration date that is automatically extended unless the Bank gives
notice that the expiration date will not so extend beyond its then
scheduled expiration date, the Bank will give such notice of non-renewal
before the time necessary to prevent such automatic extension if before
such required notice date (i) the expiration date of such L/C if so
extended would be after the Revolving Credit Termination Date, or (ii) the
Bank's Revolving Credit Commitment has been terminated.
Section 1.6. Reimbursement Obligation. The Company is
obligated, and hereby unconditionally agrees, to pay in immediately
available funds to the Bank each draft drawn and presented under an L/C
issued by the Bank hereunder not later than 11:00 a.m. (Chicago time) on
the date such draft is presented for payment to the Bank (the obligation
of the Company under this Section 1.6 with respect to any L/C is a
"Reimbursement Obligation"). The Bank's determination of whether a draft
or other request for payment under an L/C complies with the terms of such
L/C shall be made in a commercially reasonable manner. If at any time the
Company fails to pay any Reimbursement Obligation when due, the Company
shall be deemed to have automatically requested a Revolving Credit Loan
from the Bank hereunder, as of the maturity date of such Reimbursement
Obligation, the proceeds of which loan shall be used to repay such
Reimbursement Obligation. Such Loan shall only be made if no Default or
Event of Default shall exist and the other conditions set forth in Section
6.1 hereof are satisfied, and shall be subject to availability under the
Revolving Credit. If such Loan is not made by the Bank pursuant to this
Agreement, the unpaid amount of such Reimbursement Obligation shall be due
and payable to the Bank upon demand and shall bear interest at the default
rate of interest specified in Section 2.2 hereof.
SECTION 2. INTEREST.
Section 2.1. Options. Subject to all of the terms and
conditions of this Section 2, portions of the principal indebtedness
evidenced by the Notes (all of the indebtedness evidenced by a particular
Note bearing interest at the same rate for the same period of time being
hereinafter referred to as a "Portion") may, at the option of the Company,
bear interest with reference to the Domestic Rate (the "Domestic Rate
Portions"), with reference to an Offered Rate ("Offered Rate Portions") or
with reference to the Adjusted LIBOR Rate ("LIBOR Portions"), and Portions
may be converted from time to time from one basis to the other. All of
the indebtedness evidenced by each Note which is not part of an LIBOR
Portion or an Offered Rate Portion (collectively "Fixed Rate Portions" and
individually a "Fixed Rate Portion") shall constitute a single Domestic
Rate Portion. All of the indebtedness evidenced by each Note which bears
interest with reference to a particular Adjusted LIBOR Rate for a
particular Interest Period shall constitute a single LIBOR Portion and all
of the indebtedness evidenced by each Note which bears interest with
reference to a particular Offered Rate shall constitute a single Offered
Rate Portion. The Company promises to pay interest on each Portion at
the rates and times specified in this Section 2.
Section 2.2. Domestic Rate Portion. Each Domestic Rate
Portion shall bear interest (which the Company promises to pay at the
times herein provided), at the rate per annum equal to the Domestic Rate
as in effect from time to time plus the Applicable Margin, provided that
if a Domestic Rate Portion is not paid when due, after giving effect to
any grace periods, (whether by lapse of time, acceleration or otherwise),
such Portion shall bear interest (which the Company promises to pay at the
times hereinafter provided), whether before or after judgment, for the
period from the date such Portion became due and until payment in full
thereof, at the rate per annum determined by adding 3% to the interest
rate which would otherwise be applicable thereto from time to time.
Interest on the Domestic Rate Portions shall be payable on the last day of
each month in each year and at maturity of the applicable Notes and
interest after maturity shall be due and payable upon demand.
Section 2.3. LIBOR Portions. Each LIBOR Portion shall bear
interest (which the Company promises to pay at the times herein provided)
for each Interest Period selected therefor at a rate per annum equal to
the Adjusted LIBOR Rate for such Interest Period plus the Applicable
Margin, provided that if any LIBOR Portion is not paid when due, after
giving effect to any grace periods (whether by lapse of time, acceleration
or otherwise) such Portion shall bear interest (which the Company promises
to pay at the times hereinafter provided) whether before or after
judgment, for the period from the date such Portion became due and until
payment in full thereof, through the end of the Interest Period then
applicable thereto at the rate per annum determined by adding 3% to the
interest rate otherwise applicable thereto, and effective at the end of
such Interest Period such LIBOR Portion shall automatically be converted
into and added to the applicable Domestic Rate Portion and shall
thereafter bear interest at the interest rate applicable to the applicable
Domestic Rate Portion after Default. Interest on each LIBOR Portion shall
be due and payable on the last day of each Interest Period applicable
thereto and, if an Interest Period is longer than three months, then at
the end of each three month period and at the end of such Interest Period,
and interest after maturity shall be due and payable upon demand. The
Company shall notify the Bank on or before 11:00 a.m. (Chicago time) at
least three Business Day preceding the end of an Interest Period
applicable to an LIBOR Portion whether such LIBOR Portion is to continue
as an LIBOR Portion, in which event the Company shall notify the Bank of
the new Interest Period selected therefor, and in the event the Company
shall fail to so notify the Bank, such LIBOR Portion shall automatically
be converted into and added to the applicable Domestic Rate Portion as of
and on the last day of such Interest Period. Anything contained herein to
the contrary notwithstanding, the obligation of the Bank to create,
continue or effect by conversion any LIBOR Portion shall be conditioned
upon the fact that at the time no Default or Event of Default shall have
occurred and be continuing.
Section 2.4. Offered Rate Portions. Each Offered Rate
Portion shall bear interest for each Interest Period selected therefor at
the Offered Rate for such Interest Period, provided that if any Offered
Rate Portion is not paid when due, after giving effect to any grace
periods (whether by lapse of time, acceleration or otherwise) such Portion
shall bear interest, whether before or after judgment, until payment in
full thereof through the end of the Interest Period then applicable
thereto at the rate per annum determined by adding 3% to the interest rate
which would otherwise be applicable thereto, and effective at the end of
such Interest Period such Offered Rate Portion shall automatically be
converted into and added to the Domestic Rate Portion and shall thereafter
bear interest at the interest rate applicable to the Domestic Rate Portion
after Default. Interest on each Offered Rate Portion shall be due and
payable on the last day of each Interest Period applicable thereto and
interest after maturity (whether by lapse of time, acceleration or
otherwise) shall be due and payable upon demand. The Company shall notify
the Bank on or before 11:00 a.m. (Chicago time) at least one Business Day
preceding the end of an Interest Period applicable to an Offered Rate
Portion whether such Offered Rate Portion is to continue as an Offered
Rate Portion, in which event the Company shall notify the Bank of the new
Interest Period selected therefor, and in the event the Company shall fail
to so notify the Bank, such Offered Rate Portion shall automatically be
converted into and added to the Domestic Rate Portion as of and on the
last day of such Interest Period. The Company understands and agrees that
each Offered Rate shall be determined by the Bank in its sole discretion,
without reference to any particular index or source of funds, and may be
higher than the Domestic Rate or Adjusted LIBOR Rate.
Section 2.5. Computation. All interest on the Domestic Rate
Portions or the indebtedness evidenced by the Notes shall be computed on
the basis of a year of 365/366 days for the actual number of days elapsed
and all other interest on the Notes and all fees, charges and commissions
due hereunder shall be computed on the basis of a year of 360 days for the
actual number of days elapsed.
Section 2.6. Minimum Amounts. Each Fixed Rate Portion shall
be in a minimum amount of $500,000.00 or any greater amount that is an
integral multiple of $100,000.00.
Section 2.7. Manner of Rate Selection. The Company shall
notify the Bank by 11:00 a.m. Chicago time at least three Business Days
prior to the date upon which it requests that any LIBOR Portion be created
or that any part of a Domestic Rate Portion or an Offered Rate Portion be
converted into a LIBOR Portion, and by 11:00 a.m. (Chicago time) at least
one Business Day prior to the Date upon which it requests that any Offered
Rate Portion be created or that any part of a Domestic Rate Portion or any
part of a LIBOR Portion be converted into an Offered Rate Portion (each
such notice to specify in each instance the amount thereof and the
Interest Period selected therefor). If any request is made to convert a
Fixed Rate Portion into a Domestic Rate Portion, such conversion shall
only be made so as to become effective as of the last day of the Interest
Period applicable thereto. All requests for the creation, continuance or
conversion of Portions under this Agreement shall be irrevocable. Such
requests may be written or oral and the Bank is hereby authorized to honor
telephonic requests for creations, continuances and conversions received
by it from any person identifying themselves as a person who the Bank's
records reflect is authorized to act on behalf of the Company hereunder,
the Company hereby indemnifying the Bank from any liability or loss
ensuing from so acting.
Section 2.8. Change of Law. Notwithstanding any other
provisions of this Agreement or the Notes, if at any time the Bank shall
determine in good faith that any change in applicable laws, treaties or
regulations or in the interpretation thereof makes it unlawful for the
Bank to create or continue to maintain any Fixed Rate Portion, it shall
promptly so notify the Company and the obligation of the Bank to create,
continue or maintain such Fixed Rate Portion under this Agreement shall
terminate until it is no longer unlawful for the Bank to create, continue
or maintain such Fixed Rate Portions. The Company, on demand, shall, if
the continued maintenance of a Fixed Rate Portion is unlawful, thereupon
prepay the outstanding principal amount of the Fixed Rate Portions,
together with all interest accrued thereon and all other amounts payable
to the Bank with respect thereto under this Agreement, provided, however,
that the Company may instead elect to convert the principal amount of the
affected Portion into the applicable Domestic Rate Portion, subject to the
terms and conditions of this Agreement.
Section 2.9. Unavailability of Deposits or Inability to
Ascertain the Adjusted LIBOR Rate. Notwithstanding any other provision of
this Agreement or the Notes, if prior to the commencement of any Interest
Period, the Bank shall determine that United States dollar deposits in the
amount of any LIBOR Portion scheduled to be outstanding during such
Interest Period are not readily available to it in the offshore interbank
market, the Bank shall promptly give notice thereof to the Company and the
obligations of the Bank to create, continue or effect by conversion any
LIBOR Portion in such amount and for such Interest Period shall terminate
until United States dollar deposits in such amount and for the Interest
Period selected by the Company shall again be readily available in the
offshore interbank market.
Section 2.10. Taxes and Increased Costs. With respect to the
Fixed Rate Portions, if the Bank shall determine in good faith that any
change after the date hereof in any applicable law, treaty, regulation or
guideline (including, without limitation, Regulation D of the Board of
Governors of the Federal Reserve System) or any new law, treaty,
regulation or guideline, or any interpretation of any of the foregoing by
any governmental authority charged with the administration thereof or any
central bank or other fiscal, monetary or other authority having
jurisdiction over the Bank or its lending branch or the Portions
contemplated by this Agreement (whether or not having the force of law)
shall:
(a) impose, increase, or deem applicable any reserve,
special deposit or similar requirement against assets held by,
or deposits in or for the account of, or loans by, or any
other acquisition of funds or disbursements by, the Bank which
is not in any instance already accounted for in computing the
interest rate applicable to such Fixed Rate Portion;
(b) subject the Bank, any Fixed Rate Portion or a Note
to the extent it evidences such Portions, to any tax
(including, without limitation, any United States interest
equalization tax or similar tax however named applicable to
the acquisition or holding of debt obligations and any
interest or penalties with respect thereto), duty, charge,
stamp tax, fee, deduction or withholding in respect of this
Agreement, any Fixed Rate Portion or a Note to the extent it
evidences such a Portion, except such taxes as may be measured
by the overall net income or gross receipts of the Bank or its
lending branches and imposed by the jurisdiction, or any
political subdivision or taxing authority thereof, in which
the Bank's principal executive office or its lending branch is
located;
(c) change the basis of taxation of payments of
principal or interest due from the Company to the Bank
hereunder or under a Note to the extent it evidences any Fixed
Rate Portion (other than by a change in taxation of the
overall net income or gross receipts of the Bank); or
(d) impose on the Bank any penalty with respect to the
foregoing or any other condition regarding this Agreement, its
disbursement, any Fixed Rate Portion or a Note to the extent
it evidences any Fixed Rate Portion;
and the Bank shall determine that the result of any of the foregoing is to
increase the cost (whether by incurring a cost or adding to a cost) to the
Bank of creating or maintaining any Fixed Rate Portion hereunder or to
reduce the amount of principal or interest received or receivable by the
Bank (without benefit of, or credit for, any prorations, exemption,
credits or other offsets available under any such laws, treaties,
regulations, guidelines or interpretations thereof), then the Company
shall pay on demand to the Bank from time to time as specified by the Bank
such additional amounts as the Bank shall reasonably determine are
sufficient to compensate and indemnify it for such increased cost or
reduced amount; provided, however, that (i) the Bank shall promptly notify
the Company of an event which might cause it to seek compensation, and the
Company shall be obligated to pay only such compensation which is incurred
or which arises after the date 60 days prior to the date such notice is
given, and (ii) the Company shall have no obligation to pay any amount
that would otherwise be payable under this Section solely as a result of
the Bank being in a regulatory classification that is lower than the
Bank's regulatory classification on the date of this Agreement. If the
Bank makes such a claim for compensation, it shall provide to the Company
a written explanation of the circumstances giving rise to such claim and a
certificate setting forth the computation of the increased cost or reduced
amount as a result of any event mentioned herein in reasonable detail and
such certificate shall be conclusive if reasonably determined.
Section 2.11. Funding Indemnity. In the event the Bank shall
incur any loss, cost or expense (including, without limitation, any loss
(including loss of profit), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired or
contracted to be acquired by the Bank to fund or maintain its part of any
Fixed Rate Portion or the relending or reinvesting of such deposits or
other funds or amounts paid or prepaid to the Bank), as a result of:
(i) any payment of a Fixed Rate Portion on a date other
than the last day of the then applicable Interest Period for
any reason, whether before or after default, and whether or
not such payment is required by any provisions of the
Agreement; or
(ii) any failure by the Company to create, borrow,
continue or effect by conversion any Fixed Rate Portion on the
date specified in a notice given pursuant to this Agreement;
then upon the demand of the Bank, the Company shall pay to the Bank such
amount as will reimburse the Bank for such loss, cost or expense. If the
Bank requests such a reimbursement it shall provide the Company with a
certificate setting forth the computation of the loss, cost or expense
giving rise to the request for reimbursement in reasonable detail and such
certificate shall be conclusive if reasonably determined.
Section 2.12. Lending Branch. The Bank may, at its option,
elect to make, fund or maintain its loans hereunder at such of its
branches or offices as the Bank may from time to time elect.
Section 2.13. Discretion of Bank as to Manner of Funding.
Notwithstanding any provision of this Agreement to the contrary, the Bank
shall be entitled to fund and maintain its funding of all or any part of
its Notes in any manner it sees fit, it being understood, however, that
for the purposes of this Agreement all determinations hereunder (including
determinations under Sections 2.9, 2.10 and 2.11 hereof) shall be made as
if the Bank had actually funded and maintained each Fixed Rate Portion
during Interest Period applicable thereto through the purchase of deposits
in the offshore interbank market in the amount of its share of such Fixed
Rate Portion, having a maturity corresponding to such Interest Period and
bearing an interest rate equal to the interest rate applicable to such
Fixed Rate Portion for such Interest Period.
SECTION 3. FEES, PAYMENTS, REDUCTIONS, APPLICATIONS AND NOTATIONS.
Section 3.1. Commitment Fees. For the period from the date
hereof to and including the Revolving Credit Termination Date, the Company
shall pay to the Bank a commitment fee at the rate equal to the Applicable
Margin per annum on the average daily unused amount of the Revolving
Credit Commitment hereunder, such fee to be payable quarterly in arrears
on November 30, 1997, and on the last day of each November, February, May
and August thereafter to and including, and on, the Revolving Credit
Termination Date.
Section 3.2. Voluntary Prepayments. Subject to the further
provisions of this Section 3.2 the Company shall have the privilege of
prepaying the Notes in whole or in part (but if in part then in a minimum
amount of $50,000 as to any Note prepaid) at any time upon notice to the
Bank (such notices, if received subsequent to 11:00 a.m. (Chicago time) on
a given day, to be treated as though received at the opening of business
on the next Business Day), by paying to the Bank (i) the principal amount
to be prepaid, (ii) if such prepayment prepays a Note in full, accrued
interest thereon to the date fixed for prepayment, and (iii) any amount
due the Bank under Section 2.11 hereof.
Section 3.3. Mandatory Prepayments. (a) Deficiency. In
the event that the sum of the outstanding principal amount of the
Revolving Credit Note plus the unpaid Reimbursement Obligations plus the
amount available to be drawn under all outstanding L/Cs shall at any time
and for any reason exceed the Revolving Credit Commitment, the Company
shall immediately and without notice or demand pay over the amount of the
excess to the Bank as and for a mandatory prepayment on the Revolving
Credit Note and unpaid Reimbursement Obligations and, if necessary, as
cash collateral for then outstanding L/Cs.
(b) Asset Sales. Within five Business Days of the receipt
thereof by the Company or any Subsidiary, the Company shall pay over to
the Bank as and for a mandatory prepayment on the Term Credit Notes or, at
the Company's election, the Revolving Credit Note, any and all net
proceeds (i.e. gross proceeds net of reasonable out-of-pocket expenses
incurred in effecting the sale or other disposition) derived from any sale
or disposition (whether voluntary or involuntary) of assets by the Company
or any of its Subsidiaries (excluding (i) sale/leaseback transactions
pursuant to Section 7.21, (ii) sales of Permitted Property on which the
Equitable Life Assurance Society of the United States has a lien and (iii)
sales of inventory in the ordinary course of business); provided, however,
that no prepayment shall be required with respect to up to $2,000,000 of
net proceeds received from the sale or other disposition of equipment,
furniture and fixtures which, in the Company's reasonable judgment, are no
longer necessary to the efficient conduct of its business; provided
further, however, that if at the time of receipt no amount is outstanding
under the Term Credit Notes, then such payment shall be applied to the
Revolving Credit Note, the Unpaid Reimbursement Obligations and the
outstanding L/Cs. Any prepayment of the Revolving Credit Note pursuant to
this Section 3.3(b) shall (until the aggregate amount of all prepayments
made under Section 3.3(b), 3.4(b)(i) and 3.4(b)(ii) equals $15,000,000)
automatically reduce the Revolving Credit Commitment by a like amount.
Section 3.4. Terminations. (a) Voluntary. The Company may
at any time and from time to time upon notice to the Bank received on or
before 11:00 a.m. (Chicago time) at least three Business Days before the
Revolving Credit Termination Date terminate the Revolving Credit
Commitment in whole or in part (but if in part then in a minimum amount of
$500,000 or any greater amount that is an integral multiple of $100,000).
(b) Mandatory.
(i) Debt Offerings. Within five Business Days of
receipt by the Company of cash proceeds from the issuance or
private placement of debt securities pursuant to Section
7.21(i) of this Agreement, the Company shall reduce the
Revolving Credit Commitment by an amount equal to 100% of the
cash proceeds of such issuance or private placement (net of
underwriting discounts and commissions and any other costs and
expenses directly incurred and payable in connection
therewith); provided, however, that no such reduction shall be
required if the aggregate amount of all reductions made
pursuant to Sections 3.4(b)(i) and 3.4(b)(ii) is greater than
or equal to $15,000,000.
(ii) Sale/Leasebacks. Within five Business Days of
receipt by the Company of net proceeds from any sale/leaseback
transaction pursuant to Section 7.21(ii) of this Agreement,
the Company shall reduce the Revolving Credit Commitment by an
amount equal to 100% of the net proceeds of such
sale/leaseback transaction; provided, however, that no such
reduction shall be required if the aggregate amount of all
reductions made pursuant to Sections 3.4(b)(i) and 3.4(b)(ii)
is greater than or equal to $15,000,000. For purposes of this
Section 3.4(b)(ii), "net proceeds" means an amount equal to
the cash proceeds received by the Company in respect of such
sale less (x) any expenses reasonably incurred by the Company
in respect of such sale and (y) the amount of any Debt secured
by a lien on such Property and required to be discharged from,
and actually discharged from, the proceeds thereof and (z) any
taxes actually paid or payable by the Company in connection
with such sale. Nothing contained herein shall be interpreted
to permit any sale or other dispositions of assets not
otherwise permitted by Section 7.15 hereof.
(c) Generally. The Company shall, on the date the Revolving
Credit Commitment is terminated in whole or in part, prepay the Revolving
Credit Note, unpaid Reimbursement Obligations (if any) and the outstanding
L/Cs by the amount necessary to reduce the outstanding principal balance
of the Revolving Credit Note, the unpaid Reimbursement Obligations and the
outstanding L/Cs to the amount to which the Revolving Credit Commitment
has been reduced. No termination of the Revolving Credit Commitment
pursuant to this Section 3.4 may be reinstated.
Section 3.5. Place and Application. All payments of
principal, interest, fees and other amounts due hereunder shall be made to
the Bank at its office at 111 West Monroe Street, Chicago, Illinois (or at
such other place within the continental United States as the Bank may
specify) in immediately available and freely transferable funds at the
place of payment. All such payments shall be made without setoff or
counterclaim and without reduction for, and free from, any and all present
or future taxes, levies, imposts, duties, fees, charges, deductions,
withholdings, restrictions or conditions of any nature imposed by any
government or political subdivision or taxing authority thereof. Payments
received by the Bank after 11:00 a.m. (Chicago time) shall be deemed
received as of the opening of business on the next Business Day. Unless
the Company otherwise directs, payments applicable to the principal of the
Notes shall be deemed first applied to the applicable Domestic Rate
Portion until payment in full thereof, with any balance applied to the
applicable Fixed Rate Portions in the order in which their Interest
Periods expire. All prepayments (whether voluntary or required)
applicable to the Term Loans shall be applied to such Term Credit Note as
the Company directs or, if the Company fails to so direct, shall be
applied ratably among the Term Credit Notes, and in any event, such
payments shall be applied to such Note or Notes in the inverse order of
their maturities. All payments (whether voluntary or required) shall be
accompanied by any amount due the Bank under Section 2.11 hereof, but no
acceptance of such a payment without requiring payment of amounts due
under Section 2.11 shall preclude a later demand by the Bank for any
amount due them under Section 2.11 in respect of such payment.
Section 3.6. Notations and Requests. All advances made
against the Notes, the status of all amounts evidenced by the Notes as
constituting part of a Domestic Rate Portion, Offered Rate Portion or
LIBOR Portion and the rates of interest and Interest Periods applicable to
such Portions shall be recorded by the Bank its books or, at its option in
any instance, endorsed on the reverse side of the Notes and the unpaid
principal balances and status, rates and Interest Periods so recorded or
endorsed by the Bank shall be prima facie evidence in any court or other
proceeding brought to enforce the Notes of the principal amount remaining
unpaid thereon, the status of the borrowings evidenced thereby and the
interest rates and Interest Periods applicable thereto. Prior to any
negotiation of any Note the Bank shall endorse thereon the status of all
amounts evidenced thereby as constituting part of a Domestic Rate Portion,
Offered Rate Portion or LIBOR Portion and the rates of interest and
Interest Periods applicable thereto.
Section 3.7. Capital Adequacy. If the Bank shall determine
that the adoption after the date hereof of any applicable law, rule or
regulation regarding capital adequacy, or any change in any existing law,
rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof or compliance by
the Bank (or its lending office) with any request or directive regarding
capital adequacy (whether or not having the force of law) of any such
authority, central bank or comparable agency, has or would have the effect
of reducing the rate of return on the Bank's capital as a consequence of
its obligations hereunder or credit extended by it hereunder to a level
below that which the Bank could have achieved but for such adoption,
change or compliance (taking into consideration the Bank's policies with
respect to capital adequacy) by an amount deemed by the Bank to be
material, then from time to time as specified by the Bank the Company
shall pay such additional amount or amounts as will compensate the Bank
for such reduction; provided, however, that (i) the Bank shall promptly
notify the Company of an event which might cause it to seek compensation,
and the Company shall be obligated to pay only such compensation which is
incurred or which arises after the date 60 days prior to the date such
notice is given, and (ii) the Company shall have no obligation to pay any
amount that would otherwise be payable under this Section solely as a
result of the Bank being in a regulatory classification that is lower than
the Bank's regulatory classification on the date of this Agreement. A
certificate of the Bank claiming compensation under this Section 3.7 and
setting forth the additional amount or amounts to be paid to it hereunder
in reasonable detail shall be conclusive if reasonably determined. In
determining such amount, the Bank may use any reasonable averaging and
attribution methods.
SECTION 4. THE COLLATERAL.
Section 4.1. Collateral. The Revolving Credit Note, the
Term Notes, the Reimbursement Obligations 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 dated as of August 31, 1994
as amended or restated from time to time, (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 dated as of August 31, 1994 as amended or restated from time to
time, (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"), (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, (ix) valid and perfected first priority liens
on the fixtures and real properties of the Company located in Vilas
County, Wisconsin, consisting of approximately 183 acres (the "Manitowish
Waters Marsh"), (x) valid and perfected first priority liens on the
inventory, farm products and accounts of the Company pursuant to the terms
of the Security Agreement Re: Inventory, Farm Products and Receivables
dated as of October 3, 1997 as the same may from time to time be amended
or rested and (xi) valid and perfected first priority liens on the
cranberry bogs acquired by the Company pursuant to Section 7.14(f) hereof.
Section 4.2. Further Assurances. 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. To the extent necessary to
enable the Company to consummate the sale/leaseback transactions or debt
offerings pursuant to Section 7.21 hereof, the Bank agrees to release its
liens on the Property affected by such transactions and this provision
shall govern and control over any language to the contrary in any
Collateral Document and any amendments or supplements thereto.
SECTION 5. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Bank as follows:
Section 5.1. Organization; Authority; Non-Contravention.
The Company is a corporation duly organized and existing under the laws of
the State of Wisconsin, has full and adequate power to carry on its
business as now conducted, is duly licensed or qualified in all
jurisdictions wherein the nature of its activities requires such licensing
or qualifying and where the failure to be so licensed or qualified would
have a material adverse effect on the Properties, business or operations
of the Company, has full right and authority to enter into this Agreement
and the other Loan Documents, to make the borrowings herein provided for,
to issue the Note in evidence thereof, to encumber its assets as
collateral security therefor, and to perform each and all of the matters
and things herein and therein provided for; and this Agreement does not,
nor does the performance or observance by the Company of any of the
matters or things provided for in the Loan Documents, contravene any
provision of law or any charter or by-law provision or any indenture or
material agreement of or affecting the Company or any of its Properties.
Section 5.2. Subsidiaries. The Company has no Subsidiaries
except Wildhawk, Inc., a Wisconsin corporation, W.S.C. Water Management
Corp., a Wisconsin corporation, and Northland Cranberries Foreign Sales
Corp., a Virgin Islands corporation.
Section 5.3. Financial Statements. The Company has
heretofore delivered to the Bank a copy of the audit report as of August
31, 1996, of the Company and unaudited financial statements (including a
balance sheet and profit and loss statement) of the Company as of, and for
the period ending May 31, 1997. Such financial statements have been
prepared in accordance with generally accepted accounting principles on a
basis consistent, except as otherwise noted therein and except that the
interim financial statements are subject to audit and year-end adjustments
and for the absence of footnotes, with that of the previous fiscal year or
period and fairly reflect the financial position of the Company as of the
dates thereof, and the results of their operations for the periods covered
thereby. The Company has no significant contingent liabilities other than
as indicated on said financial statements and since said date of May 31,
1997, there has been no material adverse change in the condition,
financial or otherwise, of the Company.
Section 5.4. Litigation; Taxes; Consents. Except as
disclosed on Schedule 5.4, there is no litigation or governmental
proceeding pending, nor to the knowledge of the Company threatened,
against the Company or any Subsidiary which if adversely determined would
result in any material adverse change in the Properties, business or
operations of the Company and its Subsidiaries taken as a whole. All
United States federal income tax returns for the Company and its
Subsidiaries required to be filed have been filed on a timely basis (after
giving effect to any extensions), and all amounts required to be paid as
shown by said returns have been paid. There are no pending or threatened
objections to or controversies in respect of the United States federal
income tax returns of the Company for any fiscal year which, if adversely
determined, would have a material adverse effect on the Company's
condition, financial or otherwise. No authorization, consent, license,
exemption or filing or registration with any court or governmental
department, agency or instrumentality, is or will be necessary to the
valid execution, delivery or performance by the Company of the Loan
Documents, except for filings required to perfect the Bank's liens in the
Collateral.
Section 5.5. Regulation U. Neither the Company nor any
Subsidiary is engaged in the business of extending credit for the purpose
of purchasing or carrying margin stock (within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System) and no part of
the proceeds of any loan hereunder will be used to purchase or carry any
margin stock or to extend credit to others for such a purpose.
Section 5.6. No Default. No Event of Default is existing
under this Agreement.
Section 5.7. ERISA. The Company is in compliance in all
material respects with ERISA to the extent applicable to it and has
received no notice to the contrary from the PBGC or any other governmental
entity or agency.
Section 5.8. Security Interests and Debt. There are no
security interests, liens or encumbrances on any of the Property of the
Company or any Subsidiary except such as are permitted by Section 7.12 of
this Agreement, and the Company and its Subsidiaries have no Funded Debt
except such as is permitted by Section 7.13 of this Agreement.
Section 5.9. Accurate Information. No information, exhibit
or report furnished by the Company to the Bank in connection with the
negotiation of the Loan Documents contained any material misstatement of
fact or omitted to state a material fact or any fact necessary to make the
statements contained therein not misleading in light of the circumstances
in which made. The financial projections furnished by the Company to the
Bank contain to the Company's knowledge and belief, reasonable projections
as of the date hereof of future results of operations and financial
position of the Company.
Section 5.10. Enforceability. This Agreement and the other
Loan Documents are legal, valid and binding agreements of the Company,
enforceable against it in accordance with their terms, except as may be
limited by (a) bankruptcy, insolvency, reorganization, fraudulent
transfer, moratorium or other similar laws or judicial decisions for the
relief of debtors or the limitation of creditors' rights generally; and
(b) any equitable principles relating to or limiting the rights of
creditors generally.
Section 5.11. No Default Under Other Agreements. Neither the
Company nor any Subsidiary is in default with respect to any note,
indenture, loan agreement, mortgage, lease, deed, or other agreement to
which it is a party or by which it or its Property is bound, which default
might reasonably be expected to materially and adversely affect the
Collateral, the repayment of the indebtedness, obligations and liabilities
under the Loan Documents, the Bank's rights under the Loan Documents or
the Property, business, operations or condition (financial or otherwise)
of the Company and its Subsidiaries taken as a whole.
Section 5.12. Status Under Certain Laws. Neither the Company
nor any of its Subsidiaries is an "investment company" or a person
directly or indirectly controlled by or acting on behalf of an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended, or a "holding company," or a "subsidiary company" of a "holding
company," or an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
Section 5.13. Compliance with Laws. The Company and its
Subsidiaries each are in compliance with the requirements of all federal,
state and local laws, rules and regulations applicable to or pertaining to
their Properties or business operations (including, without limitation,
the Occupational Safety and Health Act of 1970, the Americans with
Disabilities Act of 1990, and laws and regulations establishing quality
criteria and standards for air, water, land and toxic or hazardous wastes
and substances), non-compliance with which could reasonably be expected to
have a material adverse effect on the financial condition, Properties,
business or operations of the Company and its Subsidiaries taken as a
whole. Neither the Company nor any Subsidiary has received notice to the
effect that its operations are not in compliance with any of the
requirements of applicable federal, state or local environmental, health
and safety statutes and regulations or are the subject of any governmental
investigation evaluating whether any remedial action is needed to respond
to a release of any toxic or hazardous waste or substance into the
environment, which non-compliance or remedial action would have a material
adverse effect on the financial condition, Properties, business or
operations of the Company and its Subsidiaries taken as a whole.
SECTION 6. CONDITIONS PRECEDENT.
Section 6.1. All Advances. The obligation of the Bank to
make any advance under the Revolving Credit (including the first advance)
or to issue any L/C or to make any Term Loan shall also be subject to the
conditions precedent that as of the time of the making of each advance
under the Revolving Credit or the issuance of any L/C or the funding of
any Term Loan:
(a) each of the representations and warranties set
forth herein or in the Collateral Documents shall be and
remain true and correct in all material respects as of said
time except that the representations and warranties made in
Section 5.3 hereof shall be deemed to refer to the most recent
financial statements delivered to the Bank pursuant to Section
7.4 hereof;
(b) no change in the financial condition or business
prospects of the Company shall have occurred which the is
materially adverse; and
(c) no Default or Event of Default shall have occurred
and be continuing.
Any request made by the Company to the Bank for any extension
of credit hereunder shall be deemed to constitute a representation and
warranty that the foregoing statements are true and correct in all
material respects.
SECTION 7. COMPANY COVENANTS.
The Company agrees that, so long as any credit is available to
or in use by the Company hereunder, except to the extent compliance in any
case or cases is waived in writing by the Bank:
Section 7.1. Maintenance of Property. The Company will keep
and maintain all of its Properties necessary or useful in its business in
good condition, and make all necessary renewals, replacements, additions,
betterments and improvements thereto; provided, however, that nothing in
this Section shall prevent the Company from discontinuing the operation
and maintenance of any of its Properties if such discontinuance is, in the
judgment of the Company, desirable in the conduct of its business and not
disadvantageous in any material respect to the Bank as holder of the
Notes.
Section 7.2. Taxes. The Company will duly pay and discharge
all taxes, rates, assessments, fees and governmental charges upon or
against the Company or against its Properties in each case before the same
becomes delinquent and before penalties accrue thereon unless and to the
extent that the same is being contested in good faith and by appropriate
proceedings.
Section 7.3. Maintenance of Insurance. The Company will
maintain insurance with insurers recognized as financially sound and
reputable by prudent business persons in such forms and amounts and
against such risks as is usually carried by companies engaged in similar
business and owning similar Properties in the same general areas in which
the Company operates. The Bank shall be named as loss payee under any
insurance policies which relate to the Collateral. The Company shall, at
the Bank's request, provide copies to the Bank of all insurance policies
and other material related thereto maintained by the Company from time to
time.
Section 7.4. Financial Reports. The Company will maintain a
standard and modern system of accounting in accordance with sound
accounting practice and will furnish with reasonable promptness to the
Bank and its duly authorized representatives such information respecting
the business and financial condition of the Company as may be reasonably
requested and, without any request, will furnish to the Bank:
(a) as soon as available, and in any event within 45
days after the close of each quarterly fiscal period of the
Company a copy of the form 10-Q quarterly report to the
Securities and Exchange Commission (the "SEC"); and
(b) as soon as available, and in any event within 90
days after the close of each fiscal year, a copy of the audit
report for such year and accompanying financial statements,
including balance sheet, reconciliation of change in
stockholders' equity, profit and loss statement and statement
of source and application of funds for the Company showing in
comparative form the figures for the previous fiscal year of
the Company, all in reasonable detail, prepared and certified
by Deloitte & Touche or other independent public accountants
of nationally recognized standing selected by the Company; and
(c) each of the financial statements furnished to the
Bank pursuant to paragraphs (a) and (b) above shall be
accompanied by a Compliance Certificate in the form of Exhibit
E attached hereto signed by its Vice President-Finance; and
(d) promptly upon their becoming available, copies of
all registration statements and regular periodic reports, if
any, which the Company shall have filed with the SEC or any
governmental agency substituted therefor, or any national
securities exchange, including copies of the Company's form
10-K annual report, including financial statements audited by
Deloitte & Touche or other independent public accountants of
nationally recognized standing selected by the Company;
(e) promptly upon the mailing thereof to the
shareholders of the Company generally, copies of all financial
statements, reports and proxy statements so mailed; and
(f) 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.
Section 7.5. Inspection. The Company shall permit the Bank,
by its representatives and agents (who may be accompanied by any of the
Participants), to inspect any of the Properties, corporate books and
financial records of the Company, to examine and make copies of the books
of accounts and other financial records of the Company, and to discuss the
affairs, finances and accounts of the Company with, and to be advised as
to the same by, its officers at such reasonable times and intervals as the
Bank may designate upon reasonable advance notice to the Company. So long
as no Event of Default shall have occurred and be continuing, the Bank
shall perform not more than one field audit of the Collateral per year.
The Company shall pay to the Bank from time to time upon demand a
reasonable amount, but not to exceed $2,000 per audit, to compensate the
Bank for its fees, charges and expenses in connection with the field
audits of the Collateral.
Section 7.6. Consolidation and Merger. The Company will not
consolidate with or merge into any Person, without the prior written
consent of the Bank, unless (a) the Company is the surviving entity, (b)
the other party to such transaction is in the same or a related line of
business as the Company, and (c) both before and after giving effect to
such merger or consolidation, no Default or Event of Default shall have
occurred and be continuing.
Section 7.7. Transactions with Affiliates. The Company will
not enter into any transaction, including without limitation, the
purchase, sale, lease or exchange of any Property, or the rendering of any
service, with any Affiliate of the Company except in the ordinary course
of and pursuant to the reasonable requirements of the Company's business
and upon fair and reasonable terms no less favorable to the Company than
would be obtained in a comparable arm's-length transaction with a Person
not an Affiliate of the Company.
Section 7.8. Minimum Net Worth. The Company will at all
times during the periods indicated below maintain Net Worth in an amount
not less than:
(a) $73,000,000 from August 31, 1997 through August 30,
1998;
(b) $78,000,000 on August 31, 1998; and
(c) during each fiscal quarter of the Company
thereafter, an amount equal to the sum of (i) the minimum
amount required to be maintained during the immediately
preceding fiscal quarter of the Company plus (ii) an amount
equal to 50% of the Company's Net Income for the fiscal
quarter of the Company then ended, plus (iii) an amount equal
to 75% of the net cash proceeds of the issuance of capital
stock or other equity securities of the Company that are not
applied as required by Section 3.4(a) of this Agreement.
Section 7.9. Fixed Charge Coverage Ratio. The Company will
not, as of the last day of each fiscal quarter indicated below, permit its
Fixed Charge Coverage Ratio to be less than 1.25 to 1 on the last day of
the fiscal quarters ending on May 31, 1998 and August 31, 1998, and 1.5 to
1 on the last day of each fiscal quarter ending thereafter.
Section 7.10. Funded Debt to Net Worth Ratio. The Company
will not permit the ratio of its Funded Debt to Net Worth to exceed 2.0 to
1 at any time.
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 fiscal
quarters of the Company ending on or before August 31, 1997, will not have
a net loss of more than $1,500,000 for each fiscal quarter ending during
the period from September 1, 1997 through and including February 28, 1998
and will not have a net loss of more than $1,000,000 for any fiscal
quarter ending thereafter.
Section 7.12. Liens. The Company will not pledge, mortgage
or otherwise encumber or subject to or permit to exist upon or be
subjected to any lien, charge or security interest of any kind (including
any conditional sale or other title retention agreement and any lease in
the nature thereof), on any of its Properties of any kind or character at
any time owned by the Company other than:
(a) liens, pledges or deposits for workmen's
compensation, unemployment insurance, old age benefits or
social security obligations, taxes, assessments, statutory
obligations or other similar charges, good faith deposits made
in connection with tenders, contracts or leases to which the
Company is a party or other deposits required to be made in
the ordinary course of business, provided in each case the
obligation secured is not overdue or, if overdue, is being
contested in good faith by appropriate proceedings and
adequate reserves have been provided therefor in accordance
with generally accepted accounting principles and that the
obligation is not for borrowed money, customer advances, trade
payables, or obligations to agricultural producers;
(b) the pledge of Property for the purpose of securing
an appeal or stay or discharge in the course of any legal
proceedings, provided that the aggregate amount of liabilities
of the Company so secured by a pledge of Property permitted
under this subsection (b) including interest and penalties
thereon, if any, shall not be in excess of $500,000 at any one
time outstanding;
(c) liens, pledges, mortgages, security interests, or
other charges granted to the Bank for the benefit of the Bank
and the Participants;
(d) liens, pledges, mortgages, security interests or
other charges existing on Permitted Property to the extent
they secure indebtedness incurred to finance the purchase or
construction of improvements;
(e) liens on property existing at the time of their
acquisition or liens to secure the payment of all or any part
of the purchase price of such property or to secure any
indebtedness incurred for the purpose of financing all or any
part of the purchase price thereof provided such liens
encumber only the property being acquired, purchased or
financed and do not extend to any other property or secure any
other obligations;
(f) liens on Permitted Property of a corporation
existing at the time such corporation is purchased by, merged
into or consolidated with the Company or at the time of a
sale, lease or other disposition of the land, buildings and/or
equipment of a corporation or firm as an entirety or
substantially as an entirety to the Company;
(g) mortgages, pledges, security interests or other
encumbrances existing on the date hereof and disclosed on the
financial statements referred to in Section 5.3 hereof or in
Schedule 7.12 attached hereto;
(h) liens for taxes, assessments or governmental
charges and liens incident to construction, which are either
not delinquent or are being contested in good faith by
appropriate proceedings which prevent foreclosure of such
liens and for which adequate reserves have been provided, and
easements, restrictions, minor title irregularities and
similar matters which have no adverse effect upon the
ownership and use of the affected Property by the Company;
(i) liens on Permitted Property securing indebtedness
permitted under Section 7.13 hereof; and
(j) liens on the Company's Wisconsin Rapids, Wisconsin
office building and land referred to in Section 7.22 hereof.
Section 7.13. Borrowings and Guaranties. The Company will
not issue, incur, assume, create or have outstanding any indebtedness for
borrowed money (including as such all indebtedness representing the
deferred purchase price of Property and all obligations of the Company
with respect to letters of credit and banker's acceptances) or customer
advances, nor be or remain liable, whether as endorser, surety, guarantor
or otherwise, for or in respect of any liability or indebtedness of any
other Person other than:
(a) indebtedness of the Company arising under or
pursuant to this Agreement or the other Loan Documents;
(b) the liability of the Company arising out of the
endorsement for deposit or collection of commercial paper
received in the ordinary course of business;
(c) indebtedness of the Company existing on the date
hereof and disclosed to the Bank in the August 31, 1996
financial statements referred to in Section 5.3 hereof;
(d) indebtedness not otherwise permitted by this
Section 7.13 which is incurred, directly or indirectly, to
finance the acquisition of Property;
(e) Funded Debt; and
(f) renewals, extensions and refinancings of and
amendments to each of the foregoing.
Section 7.14. Investments, Loans, Advances and Acquisitions.
The Company will not make or retain any investment (whether through the
purchase of stock, obligations or otherwise) in or make any loan or
advance to, any other Person or acquire substantially as an entirety the
Property or business of any other Person, other than:
(a) investments in certificates of deposit having a
maturity of one year or less issued by the Bank;
(b) investments, loans and advances in or to any
existing wholly-owned Subsidiary, provided that the respective
amounts thereof shall not exceed the amounts disclosed to the
Bank in the August 31, 1996 financial statements referred to
in Section 5.3 hereof;
(c) travel advances, entertainment and moving expenses
and directors fees to officers, directors and employees of the
Company in the ordinary course of business;
(d) receivables arising in the ordinary course of the
Company's business;
(e) full faith and credit obligations of the United
States and securities the payment of principal of and interest
on is unconditionally guaranteed by the United States;
provided that all such obligations and securities shall have a
maturity of one year or less;
(f) acquisition of Cranberry Businesses, provided, that
(i) such acquisition has the effective written consent or
prior approval of the board of directors (or equivalent
governing body) of the Person being acquired, (ii) the
aggregate cash consideration paid by the Company for the
acquisition of cranberry bogs after October 3, 1997 shall not
exceed $5,000,000 in each fiscal year without the prior
written consent of the Bank and the Participants and (iii) the
Company grants to the Bank a first priority lien on the
subject bogs;
(g) investments in entities engaged in the Cranberry
Business; and
(h) investments in an amount not to exceed $5,000,000
in a Subsidiary or joint venture engaged in developing
cranberry growing properties in the Republic of Ireland; and
(i) loans and advances to Wildhawk, Inc. in an
aggregate principal amount outstanding at any time not to
exceed $500,000.
Section 7.15. Sale of Property. The Company will not sell,
lease, assign, transfer or otherwise dispose of (whether in one
transaction or in a series of transactions) all or a material part of its
Property to any other Person; provided, however, that so long as no Event
of Default or Default has occurred and is continuing, this Section shall
not prohibit:
(a) sales of inventory (including crops and severed
vines) in the ordinary course of business;
(b) sales or leases of surplus, obsolete or worn-out
machinery and equipment; and
(c) the sale/leaseback transactions permitted by
Section 7.21(ii) hereof.
For purposes of this Section, "Material Part" shall mean 5% or
more of the lesser of the book or fair market value of the Property of the
Company.
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 $0.04 per share during each fiscal quarter of the
Company's fiscal years ending August 31, 1997 and August 31, 1998, and
(iii) during each fiscal quarter of the Company ending after August 31,
1998, pay dividends in an amount not to exceed 50% of the Company's Net
Income for the period beginning September 1, 1998 and ending on the last
day of the most recent fiscal quarter.
Section 7.17. Notice of Suit or Adverse Change in Business.
The Company shall, as soon as possible, and in any event within five
Business Days after the Company learns of the following, give written
notice to the Bank of (a) any material proceeding(s) being instituted or
threatened to be instituted by or against the Company in any federal,
state, local or foreign court or before any commission or other regulatory
body (federal, state, local or foreign), (b) any material adverse change
in the business, Property or condition, financial or otherwise,
(including, without limitation, any material loss or depreciation in the
value of the Collateral) of the Company and (c) the occurrence of any
Default or Event of Default hereunder.
Section 7.18. ERISA. The Company will promptly pay and
discharge all obligations and liabilities arising under ERISA of a
character which if unpaid or unperformed would result in the imposition of
a lien against any of its Property and will promptly notify the Bank of
(a) the occurrence of any reportable event (as defined in ERISA) which
might result in the termination by the PBGC of any Plan, (b) receipt of
any notice from PBGC of its intention to seek termination of any such Plan
or appointment of a trustee therefor, and (c) its intention to terminate
or withdraw from any Plan. The Company will not terminate any such Plan
or withdraw therefrom unless it shall be in compliance with all of the
terms and conditions of this Agreement after giving effect to any
liability to PBGC resulting from such termination or withdrawal.
Section 7.19. Use of Proceeds. The Company shall use the
proceeds of the Term Loan Two solely to finance the acquisition and
construction of fixed assets constituting the concentrating plant and
equipment located at the Company's facilities in Wisconsin Rapids,
Wisconsin, and to reimburse the Company for sums already expended by the
Company in connection therewith; the Company shall use the proceeds of the
Term Loan Three solely to finance the acquisition of the bog in Hanson,
Massachusetts; and the Company shall use the proceeds of the Term Loan One
and all Revolving Credit Loans made hereunder solely for lawful corporate
purposes.
Section 7.20. Subsidiaries. The Company will not, directly
or indirectly, create or acquire any Subsidiaries without prior approval
of the Bank, except for the Ireland operation.
Section 7.21. Additional Capital. No later than the date
that is one year after the date hereof the Company shall use its best
efforts (i) to issue or privately place debt securities maturing no less
than five years after the date of issuance and having scheduled principal
repayments of less than 50% of the original principal amount thereof
during the first five years after they are issued and/or (ii) to
consummate a sale/leaseback transaction, such that the gross cash
consideration to be received by the Company as a result of the
transactions identified in clauses (i) and (ii) above is not less than
$15,000,000. Notwithstanding the foregoing, the Company shall not be
obligated to enter into any transaction which the Company does not in good
faith believe to be in its best interest.
Section 7.22. Capital Expenditures. The Company will not
expend or become obligated for capital expenditures as determined in
accordance with generally accepted accounting principles (excluding
amounts spent on cranberry bog acquisitions to the extent permitted by
Section 7.14(f) hereof and excluding up to $1,500,000 of amounts actually
expended by the Company for the purchase and renovation of its Wisconsin
Rapids, Wisconsin office building) in an aggregate amount in excess of
$6,000,000 during any fiscal year of the Company.
SECTION 8. EVENTS OF DEFAULT AND REMEDIES.
Section 8.1. Events of Default Defined. Any one or more of
the following shall constitute an Event of Default:
(a) Default in the payment within three days when due
of any principal of or interest on any Note or Reimbursement
Obligation, or in the payment within five days when due of any
costs, expenses or fees under this Agreement or any of the
other Loan Documents, whether on demand or at the stated due
date thereof or as required by Section 2.3 hereof or at any
other time provided in this Agreement;
(b) Default in the observance or performance of any
covenant, condition, agreement or provision in Sections 7.3,
7.4, 7.6, 7.8, 7.9, 7.10, 7.11, 7.12, 7.13, 7.14, 7.15, 7.16,
7.17, 7.19, 7.20, 7.21 or 7.22 of this Agreement, or of any
provision of the Collateral Documents requiring the
maintenance of insurance on the Collateral subject thereto or
dealing with the use or remittance of proceeds of such
Collateral;
(c) Default in the observance or performance of any
covenant, condition, agreement or provision in this Agreement
or in any of the other Loan Documents and such default shall
continue for 30 days after written notice thereof to the
Company by the Bank;
(d) Default shall occur under any evidence of
indebtedness for borrowed money in an aggregate principal
amount in excess of $1,000,000 issued or assumed or guaranteed
by the Company or any Subsidiary or under any mortgage,
agreement or other similar instrument under which the same may
be issued or secured and such default shall continue for a
period of time sufficient to permit the acceleration of
maturity of any indebtedness evidenced thereby or outstanding
thereunder;
(e) Any representation or warranty made by the Company
herein or in any of the other Loan Documents or in any
statement or certificate furnished by it pursuant hereto or
thereto proves untrue in any material respect as of the date
of the issuance or making thereof;
(f) Any judgment or judgments, writ or writs, or
warrant or warrants of attachment, or any similar process or
processes in an aggregate amount in excess of $500,000 shall
be entered or filed against the Company, any Subsidiary or
against any of their respective Property or assets and remains
unpaid, unvacated, unbonded or unstayed for a period of 30
days from the date of its entry;
(g) The Company or any Subsidiary except Wildhawk, Inc.
and W.S.C. Water Management Corp. shall (i) have entered
involuntarily against it an order for relief under the
Bankruptcy Code of 1978, as amended, (ii) not pay, or admit in
writing its inability to pay, its debts generally as they
become due or suspend payment of its obligations, (iii) make
an assignment for the benefit of creditors, (iv) apply for,
seek, consent to, or acquiesce in, the appointment or a
receiver, custodian, trustee, conservator, liquidator or
similar official for it or any substantial part of its
Property, (v) institute any proceeding seeking to have entered
against it an order for relief under the Bankruptcy Code of
1978, as amended, to adjudicate it insolvent, or seeking
dissolution, winding up, liquidation, reorganization,
arrangement, marshalling of assets, adjustment or composition
of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors or fail to
file an answer or other pleading denying the material
allegations of any such proceeding filed against it, (vi) fail
to contest in good faith any appointment or proceeding
described in Section 8.1(h) hereof, or (vii) take any action
in furtherance of any of the foregoing purposes; or
(h) A custodian, receiver, trustee, conservator,
liquidator or similar official shall be appointed for the
Company, any Subsidiary except Wildhawk, Inc. and W.S.C. Water
Management Corp. or any substantial part of their respective
Property, or a proceeding described in Section 8.1(g)(v) shall
be instituted against the Company and such appointment
continues undischarged or any such proceeding continues
undismissed or unstayed for a period of 60 days.
Section 8.2. Remedies for Non-Bankruptcy Defaults. When any
Event of Default, other than an Event of Default described in subsections
(g) or (h) of Section 8.1 hereof, has occurred and is continuing, the Bank
may, by notice to the Company, take either or both of the following
actions: (i) terminate the commitments of the Bank hereunder on the date
(which may be the date thereof) stated in such notice, and (ii) declare
the principal of and the accrued interest on the Notes and Reimbursement
Obligations then outstanding to be forthwith due and payable and thereupon
said Notes and Reimbursement Obligations, including both principal and
interest, shall be and become immediately due and payable together with
all other amounts payable under this Agreement without further demand,
presentment, protest or notice of any kind.
Section 8.3. Remedies for Bankruptcy Defaults. When any
Event of Default described in subsections 8.1(g) or 8.1(h) has occurred
and is continuing, then the then unpaid balance of the Notes and
Reimbursement Obligations, including both principal and interest, and all
fees, charges and commissions payable hereunder, shall immediately become
due and payable without presentment, demand, protest or notice of any
kind, the obligation of the Bank to extend further credit pursuant to any
of the terms hereof shall immediately terminate and the Bank may exercise
all remedies available to it under the Collateral Documents.
Section 8.4. Collateral for Undrawn L/Cs. Promptly
following the acceleration of the maturity of the Notes pursuant to
Section 8.2 or 8.3 hereof, the Company shall immediately pay to the Bank
the full amount available to be drawn under all outstanding L/Cs. The
Bank shall hold all such funds and proceeds thereof as additional
collateral security for the obligations of the Company to the Bank under
the Loan Documents. The Company acknowledges and agrees that the Bank
would not have an adequate remedy at law for failure of the Company to
honor any of its obligations under this Section 8.4 and that the Bank
shall have the right to require the Company to specifically perform such
undertaking whether or not any draws have been made under any such L/Cs.
SECTION 9. DEFINITIONS.
The following terms when used herein shall have the following
meanings; such terms to be equally applicable to both the singular and
plural of the terms defined (capitalized terms defined elsewhere in this
Agreement to have the meanings so ascribed to them in all provisions of
this Agreement).
"Adjusted LIBOR Rate" shall mean a rate per annum determined
pursuant to the following formula:
Adjusted LIBOR Rate = ________LIBOR___________
100%-Reserve Percentage
"Affiliate" shall mean any person, firm, corporation or entity
(herein collectively called a "Person") directly or indirectly controlling
or controlled by, or under direct or indirect common control with, another
Person. A Person shall be deemed to control another Person for the
purposes of this definition if such first Person possesses, directly or
indirectly, the power to direct, or cause the direction of, the management
and policies of the second Person, whether through the ownership of voting
securities, common directors, trustees or officers, by contract or
otherwise.
"Agreement" shall mean this Amended and Restated Credit
Agreement, as the same may be supplemented and amended from time to time.
"Amortization" shall mean amortization expense determined in
accordance with generally accepted accounting principles consistently
applied.
"Applicable Margin" shall mean, with respect to the commitment
fee and each type of Portion described below, the rate of interest per
annum shown below for the range of Senior Funded Debt Ratio specified
below:
Level I Level II Level III Level IV
[greater than [greater than [greater than
Senior Funded or less than] or less than] or less than]
Debt Ratio <1.5X 1.5X and 2.5X 2.5X and 3X 3X
Revolving Credit
Domestic Rate
Margin 0% 0% 0% .25%
Revolving Credit
LIBOR Margin 1.25% 1.50% 2.00% 2.25%
Commitment Fee .25% .25% .385% .50%
Term Loan Domestic
Rate Margin 0% 0% .50% .75%
Term Loan LIBOR
Margin 1.75% 2.00% 2.5% 2.75%
Not later than five Business Days after receipt by the Bank of
financial statements called for by Section 7.4(a), (b) and (c) hereof for
each fiscal quarter of the Company (such date being referred to herein as
the "Test Date"), the Bank shall (i) determine the Senior Funded Debt
Ratio for the applicable period and (ii) promptly notify the Company and
the Participants of such determination and of any change in the Applicable
Margins resulting therefrom. Any such change in the Applicable Margins
shall be effective as of the date the Bank so notifies the Company and the
Participants with respect to all Portions outstanding on such date, and
such new Applicable Margins shall continue in effect until the effective
date of the next quarterly redetermination in accordance with the terms
hereof; provided, however, that if the Company is late in delivering such
financial statements, and upon receipt of such financial statements the
Bank determines that a higher pricing Level is applicable, then such new
Applicable Margins (at said higher Level) shall be retroactively effective
as of the related Test Date. Each determination of the Senior Funded Debt
Ratio and Applicable Margins by the Bank in accordance with the terms
hereof shall be conclusive and binding on the Company and the Participants
absent manifest error. The Applicable Margins shall first be adjusted
upon receipt of the financial statements for the fiscal quarter ending May
31, 1998. From the date hereof until the Applicable Margins are first
adjusted pursuant hereto, the Applicable Margins shall be those set forth
in Level III above.
"Business Day" shall mean any day (other than a Saturday or
Sunday) on which banks are generally open for business in Chicago,
Illinois and, when used with respect to LIBOR Portions, a day on which
banks generally are also dealing in United States Dollar deposits in
London, England and Nassau, Bahamas.
"Capital Expenditures" shall mean for any period, expenditures
for any fixed assets, or for improvements, replacements, substitutions or
additions therefor or thereto, which have a useful life of one year or
more, including (i) the direct or indirect acquisition of such assets by
way of increased product service charges, offset items or otherwise and
(ii) the acquisition of such assets pursuant to a lease, to the extent
such acquisition would be treated as a capital expenditure pursuant to
generally accepted accounting principles consistently applied, but shall
not include (a) funds actually expended by the Company for preproduction
costs, for the purchase and planting of cranberry vines or for the
purchase of additional cranberry marshes permitted by the terms hereof,
and (b) payments made under leases of real or personal property, whether
or not the acquisition of such real or personal property constituted a
Capital Expenditure when made.
"Collateral" shall mean all property and rights that may from
time to time secure the payment of any of the Company's indebtedness,
obligations and liabilities to the Bank under any of the Loan Documents.
"Collateral Documents" shall mean all mortgages, deeds of
trust, security agreements, assignments, financing statements and other
documents as shall from time to time secure any of the Notes and other
obligations of the Company to the Bank.
"Commitments" shall mean the Revolving Credit Commitment and
the Term Credit Commitments.
"Cranberry Businesses" shall mean the operation of cranberry
bogs (and the development thereof) and the production, distribution,
processing, marketing and brokering of cranberries, cranberry products and
other fresh fruit or juice products.
"Depreciation" shall mean depreciation expense, determined in
accordance with generally accepted accounting principles, consistently
applied.
"Domestic Rate" shall mean a fluctuating interest rate per
annum at all times equal to the rate of interest announced by Harris Trust
and Savings Bank ("Harris") from time to time as its prime commercial rate
with any change in such rate resulting from a change in said prime
commercial rate to be effective as of the date of the relevant change in
said prime commercial rate (the "Harris Prime Rate"), provided that if the
rate per annum determined by adding 1/2 of 1% to the rate at which Harris
would offer to sell federal funds in the interbank market on or about
10:00 A.M. (Chicago time) on any day (the "Adjusted Fed Funds Rate") shall
be higher than the Harris Prime Rate on such day, then the Domestic Rate
for such day and for any succeeding day which is not a Business Day shall
be such Adjusted Fed Funds Rate. The determination of the Adjusted Fed
Funds Rate by the Bank shall be final and conclusive provided it has acted
in good faith in connection therewith.
"EBITDA" shall mean, with reference to any period, Net Income
for such period plus all amounts deducted in arriving at such Net Income
amount in respect of (a) Interest Expense of such period, plus (b)
federal, state and local income taxes for such period, plus (c) all
amounts properly charged for Depreciation and Amortization during such
period.
"Event of Default" shall mean any event or condition specified
as such in Section 8.1 hereof and "Default" shall mean any event or
condition which with the lapse of time, the giving of notice or both would
constitute an Event of Default.
"Fixed Charge Coverage Ratio" shall mean 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,
Reimbursement Obligations and L/Cs outstanding under this Agreement) (the
"Current Maturities"); provided, however, that for the fiscal quarter
ending May 31, 1998, the Fixed Charge Coverage Ratio shall be determined
on the basis of the amounts specified above for the three fiscal quarters
then ended, and only 75% of the amount of the Current Maturities shall be
included in the calculation of the Fixed Charge Coverage Ratio as of the
last day of such fiscal quarter.
"Fixed Rate" shall mean an Adjusted LIBOR Rate or an Offered
Rate, as the context may require.
"Funded Debt" with respect to any Person shall mean all
indebtedness for borrowed money of such Person and with respect to the
Company all indebtedness for borrowed money of the Company, in each case
maturing by its terms more than one year after, or which is renewable or
extendible at the option of such Person for a period ending one year or
more after, the date of determination, and shall include indebtedness for
borrowed money of such maturity created, assume or guaranteed by such
Person either directly or indirectly, including obligations of such
maturity secured by liens upon Property of such Person and upon which such
entity customarily pays the interest, all current maturities of all such
indebtedness of such maturity and all rental payments under capitalized
leases of such maturity and all indebtedness outstanding under this
Agreement, and in any event including all amounts outstanding under this
Agreement.
"Interest Expense" shall mean for any period all interest
expense during such period, all determined in accordance with generally
accepted accounting principles consistently applied.
"Interest Period" means, (a) with respect to any LIBOR
Portion, the period commencing on, as the case may be, the creation,
continuation or conversion date with respect to such LIBOR Portion and
ending one (1), two (2), three (3) or six (6) months thereafter as
selected by the Company in its notice as provided herein, and (b) with
respect to any Offered Rate Portion, the period commencing on, as the case
may be, the creation, continuation or conversion date with respect to such
Offered Rate Portion and ending 1 to 60 days thereafter as selected by the
Company in its notice as provided herein; provided that, all of the
foregoing provisions relating to Interest Periods are subject to the
following:
(i) if any Interest Period would otherwise end on a day
which is not a Business Day, that Interest Period shall be
extended to the next succeeding Business Day, unless in the
case of an Interest Period for a LIBOR Portion the result of
such extension would be to carry such Interest Period into
another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the final
maturity date of the Note;
(iii) the interest rate to be applicable to each Fixed
Rate Portion for each Interest Period shall apply from and
including the first day of such Interest Period to but
excluding the last day thereof; and
(iv) no Interest Period may be selected if after giving
effect thereto the Company will be unable to make a principal
payment scheduled to be made during such Interest Period
without paying part of a Fixed Rate Portion on a date other
than the last day of the Interest Period applicable thereto.
For purposes of determining an Interest Period, a month means a period
starting on one day in a calendar month and ending on a numerically
corresponding day in the next calendar month, provided, however, if an
Interest Period begins on the last day of a month or if there is no
numerically corresponding day in the month in which an Interest Period is
to end, then such Interest Period shall end on the last Business Day of
such month.
"L/C" shall have the meaning specified in Section 1.5 hereof.
"L/C Administrative Fee" shall have the meaning specified in
Section 1.5 hereof.
"L/C Agreement" shall have the meaning specified in Section
1.5 hereof.
"L/C Issuance Fee" shall have the meaning specified in Section
1.5 hereof.
"L/C Participation Fee" shall have the meaning specified in
Section 1.5 hereof.
"LIBOR Index Rate" shall mean, for any Interest Period
applicable to a LIBOR Portion, the rate per annum (rounded upwards, if
necessary, to the next higher one hundred-thousandth of a percentage
point) for deposits in U.S. dollars for a period equal to such Interest
Period, which appears on the Telerate Page 3750 as of 11:00 a.m. 12
(London, England time) on the Business Day two (2) Business Days before
the commencement of such Interest Period.
"LIBOR Rate" shall mean for each Interest Period applicable to
a LIBOR Portion, (a) the LIBOR Index Rate for such Interest Period, if
such rate is available, and (b) if the LIBOR Index Rate cannot be
determined, the arithmetic average of the rate of interest per annum
(rounded upwards, if necessary, to nearest 1/100 of 1%) at which deposits
in U.S. dollars in immediately available funds are offered to the Bank at
11:00 a.m. (London, England time) on the Business Day two (2) Business
Days before the beginning of such Interest Period by major banks in the
interbank eurodollar market for a period equal to such Interest Period and
in an amount equal or comparable to the principal amount of the LIBOR
Portion scheduled to be made by the Bank during such Interest Period.
"Loan Documents" shall mean this Agreement, the L/C
Agreements, the Collateral Documents and the Notes.
"Net Income" shall mean net income determined in accordance
with generally accepted accounting principles, consistently applied.
"Net Worth" shall mean the sum of all capital stock, preferred
stock, capital in excess of par value and retained earnings of the
Company, determined in accordance with generally accepted accounting
principles, consistently applied.
"Notes" shall mean the Revolving Credit Note and the Term
Credit Notes and "Note" shall mean any of the Notes.
"Offered Rate" shall mean the rate per annum quoted to the
Company by the Bank for the applicable Interest Period, such Offered Rate
being subject at all times to the provisions of Section 2.4 hereof.
"Participants" shall mean, collectively, Mercantile, Norwest,
Firstar and any other party to the Participation Agreement (other than the
Bank) from time to time; and "Participant" shall mean any of the
Participants.
"Participation Agreement" shall mean that certain Second
Amended and Restated Participation Agreement dated as of October 3, 1997
by and among the Bank, Mercantile Bank National Association
("Mercantile"), Norwest Bank Minnesota, National Association ("Norwest"),
Firstar Bank Milwaukee, N.A. ("Firstar") and any other party thereto from
time to time, as the same may from time to time be modified, amended or
restated pursuant to the terms hereof and thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Permitted Property" shall mean all Property except
receivables, crops, inventory and the Collateral.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, entity, party or government
(whether national, federal, state, provincial, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division,
agency, body or department thereof).
"Plan" shall mean any employee benefit plan covering any
officers or employees of the Company, any benefits of which are, or are
required to be, guaranteed by PBGC.
"Property" shall mean any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"Reimbursement Obligation" shall have the meaning specified in
Section 1.6 hereof.
"Reserve Percentage" shall mean, for the purpose of computing
the Adjusted LIBOR Rate, the maximum rate of all reserve requirements
(including, without limitation, any marginal emergency, supplemental or
other special reserves) imposed by the Board of Governors of the Federal
Reserve System (or any successor) under Regulation D on Eurocurrency
liabilities (as such term is defined in Regulation D) for the applicable
Interest Period as of the first day of such Interest Period, but subject
to any amendments to such reserve requirement by such Board or its
successor, and taking into account any transitional adjustments thereto
becoming effective during such Interest Period. For purposes of this
definition, LIBOR Portions shall be deemed to be Eurocurrency liabilities
as defined in Regulation D without benefit of or credit for prorations,
exemptions or offsets under Regulation D.
"Revolving Credit Termination Date" shall mean December 31,
2000, 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.
"Senior Funded Debt Ratio" shall mean, as of any time the same
is to be determined, the ratio of the aggregate outstanding principal
amount of the Company's Funded Debt at such time to the Company's EBITDA
for the four fiscal quarters of the Company most recently ended (but for
the fiscal quarter ending May 31, 1998, such determination shall utilize
an annualized EBITDA derived from the Company's EBITDA for the three
fiscal quarters then ended).
"Subsidiary" shall mean collectively any corporation or other
entity at least a majority of the outstanding voting shares of which is at
the time owned directly or indirectly by the Company and/or its
Subsidiaries.
"Telerate Page 3750" shall mean the display designated as
"Page 3750" on the Telerate Service (or such other page as may replace
Page 3750 on that service or such other service as may be nominated by the
British Bankers' Association as the information vendor for the purpose of
displaying British Bankers' Association Interest Settlement Rates for U.S.
Dollar deposits).
"Term Credit Commitments" shall mean, collectively, the Term
One Commitment, the Term Two Commitment and the Term Three Commitment.
"Term Credit Notes" shall mean, collectively, Term Credit Note
One, Term Credit Note Two and Term Credit Note Three; and "Term Credit
Note" shall mean any of the Term Credit Notes.
"Term Credit Note One" shall have the meaning specified in
Section 1.2(a) hereof.
"Term Credit Note Two" shall have the meaning specified in
Section 1.2(b) hereof.
"Term Credit Note Three" shall have the meaning specified in
Section 1.2(c) hereof.
"Term Loans" shall mean, collectively, the Term Loan One, the
Term Loan Two and the Term Loan Three; and "Term Loan" shall mean any of
the Term Loans."
"Term Loan One" shall have the meaning specified in Section
1.2(a) hereof.
"Term Loan Two" shall have the meaning specified in Section
1.2(b) hereof.
"Term Loan Three" shall have the meaning specified in Section
1.2(ac hereof.
SECTION 10. MISCELLANEOUS.
Section 10.1. Holidays. If any principal of any of the Notes
shall fall due on a Saturday, Sunday or on another day which is a legal
holiday for lenders in the State of Illinois, interest at the rates such
Notes bear for the period prior to maturity shall continue to accrue on
such principal from the stated due date thereof to and including the next
succeeding Business Day on which the same is payable.
Section 10.2. No Waiver, Cumulative Remedies. No delay or
failure on the part of the Bank in the exercise of any power or right
shall operate as a waiver thereof, nor as an acquiescence in any Default
or Event of Default nor preclude any other or further exercise thereof, or
the exercise of any other power or right, and the rights and remedies
hereunder of the Bank are cumulative to, and not exclusive of, any rights
or remedies which any of them would otherwise have.
Section 10.3. Waivers, Modifications and Amendments. Any
provision hereof or of the Notes or Collateral Documents, may be amended,
modified, waived or released upon the written consent of the Company and
the Bank, and any Default or Event of Default and its consequences may be
rescinded and annulled upon the written consent of the Bank.
Section 10.4. Costs and Expenses. The Company agrees to pay
on demand all reasonable out-of-pocket costs and expenses of the Bank in
connection with the negotiation, preparation, execution, delivery,
recording and/or filing and/or release of this Agreement, the Notes and
the Collateral Documents and the other instruments and documents to be
delivered hereunder or thereunder or in connection with the transactions
contemplated hereby or thereby or in connection with any consents
hereunder or thereunder or waivers or amendments hereto or thereto,
including the fees and expenses of counsel for the Bank with respect to
all of the foregoing, and all recording, filing, title insurance or other
fees, costs and taxes incident to perfecting a lien upon the collateral
security for the Notes, and all reasonable costs and expenses (including
reasonable attorneys' fees), incurred by the Bank, any security trustee
for the Bank or any other holders of a Note in connection with a default
or the enforcement of this Agreement, the Notes or the Collateral
Documents and the other instruments and documents to be delivered
hereunder or thereunder. The Company agrees to indemnify and save the
Bank and any security trustee for the Bank harmless from any and all
liabilities, losses, costs and expenses incurred by the Bank in connection
with any action, suit or proceeding brought against the Bank or security
trustee by any person which arises out of the transactions contemplated or
financed hereby or by the Notes or Collateral Documents or out of any
action or inaction by the Bank or any security Trustee hereunder or
thereunder, except for such thereof as is caused by the gross negligence
or willful misconduct of the party indemnified. The provisions of this
Section 10.4 and the protective provisions of Section 2 hereof shall
survive payment of the Notes and the termination of the Commitments
hereunder, subject, in the case of the protective provisions contained in
Section 2 hereof, to the limitations set forth therein.
Section 10.5. Stamp Taxes. Although the Company is of the
opinion that no documentary or similar taxes are payable in respect to
this Agreement, the Collateral Documents, or the Notes, the Company agrees
that it will pay such taxes, including interest and penalties, in the
event any such taxes are assessed, irrespective of when such assessment is
made and whether or not any credit to it is then in use or available.
Section 10.6. Survival of Representations. All
representations and warranties made herein or in the Collateral Documents
or in certificates given pursuant hereto shall survive the execution and
delivery of this Agreement, the Collateral Documents and the Notes, and
shall continue in full force and effect with respect to the date as of
which they were made as long as any credit is in use or available
hereunder.
Section 10.7. Construction. The parties hereto acknowledge
and agree that this Agreement shall not be construed more favorably in
favor of one than the other based upon which party drafted the same, it
being acknowledged that all parties hereto contributed substantially to
the negotiation and preparation of this Agreement.
Section 10.8. Accounting Principles. All computations of
compliance with the terms hereof shall be made on the basis of generally
accepted principles of accounting applied in a manner consistent with
those used in the preparation of the audit report of the Company referred
to in the first sentence of Section 5.3 hereof.
Section 10.9. Addresses for Notices. All communications
provided for herein shall be in writing and shall be deemed to have been
given or made when served personally or three days after being deposited
in the United States mail addressed, if to the Company, at 800 First
Avenue South, Wisconsin Rapids, Wisconsin 54495-8020, Attention: John
Swendrowski, if to the Bank at 111 West Monroe Street, Chicago, Illinois
60690, Attention: Agribusiness Division, or at such other address as
shall be designated by any party hereto in a written notice given to each
party pursuant to this Section 10.9.
Section 10.10. Headings. Article and Section headings used in
this Agreement are for convenience of reference only and are not a part of
this Agreement for any other purpose.
Section 10.11. Severability of Provisions. Any provision of
this Agreement which is unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such unenforceability
without invalidating the remaining provisions hereof or affecting the
validity or enforceability of such provision in any other jurisdiction.
All rights, remedies and powers provided in this Agreement and the Notes
may be exercised only to the extent that the exercise thereof does not
violate any applicable mandatory provisions of law, and all the provisions
of this Agreement and the Notes are intended to be subject to all
applicable mandatory provisions of law which may be controlling and to be
limited to the extent necessary so that they will not render this
Agreement or the Notes invalid or unenforceable.
Section 10.12. Counterparts. This Agreement may be executed
in any number of counterparts, and by different parties hereto on separate
counterparts, and all such counterparts taken together shall be deemed to
constitute one and the same instrument.
Section 10.13. Binding Nature, Governing Law, Etc. This
Agreement shall be binding upon the Company and its successors and
assigns, and shall inure to the benefit of the Bank and the benefit of its
successors and assigns, including any subsequent holder of an interest in
the Notes. This Agreement and the Notes and the rights and duties of the
parties hereto shall be construed and determined in accordance with, and
shall be governed by the internal laws of the State of Illinois without
regard to principles of conflicts of law. This Agreement, together with
the Notes and Collateral Documents constitutes the entire understanding of
the parties with respect to the subject matter hereof and any prior
agreements, whether written or oral, with respect thereto are superseded
hereby except for prior understandings related to fees payable to the
Bank. The Company may not assign its rights hereunder without the written
consent of the Bank.
Section 10.14. Rights of Participants. (a) The Company
authorizes the Bank to disclose to any Participant any financial or other
information pertaining to the Company. Each Participant shall be entitled
to the full benefit of all indemnities and other provisions relative to
reimbursement of the Bank of amounts sufficient to protect the yield of
the Bank with respect to the loans hereunder, including, but not limited
to Sections 2.8, 2.9, 2.10, 2.11, 3.7 and 10.4 (but only after an Event of
Default) hereof; provided, however, if any Participant (each, a
"Replaceable Participant") requests compensation pursuant to Sections 2.8,
2.9, 2.10, 2.11 or 3.7 hereof at a rate materially in excess of that
requested by any other Participant, the Company may, with the consent of
the Bank, which consent shall not be unreasonably withheld, propose that
another lender (a "Replacement Participant") which lender may be an
existing Participant, be substituted for and replace the Replaceable
Participant for purposes of this Agreement. In the event a Replacement
Participant is so substituted for the Replaceable Participant, then such
substitution shall take place on a date acceptable to the Company, the
Replaceable Participant and the Replacement Participant, as the case may
be, but in no event later than the latest maturity date of any financial
accommodations then outstanding hereunder, and such substitution shall
take place through the execution of such instruments and documents as
shall, in the opinion of the Bank, be reasonably necessary or appropriate
for the Replacement Participant to assume in full the Participation
Percentage of the Replaceable Participant (including, without limitation,
the execution of any necessary amendment hereto or to the Participation
Agreement making any new Replacement Participant a party thereto and such
amendments to the Collateral Documents as may be necessary or appropriate
to assure the credit extended by such Replacement Participant will be
secured by the Collateral Documents as provided herein), providing that
such assignment is made without recourse and without any representation
or warranty with respect to the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement, the
Participation Agreement or any other instrument or document furnished
pursuant hereto or thereto or with respect to the financial condition of
the Company or the performance or observance by the Company of any of its
obligations under this Agreement, the Participation Agreement or any other
instrument or document furnished pursuant hereto or thereto. As a
condition to its execution of such instruments and documents, the
Replaceable Participant shall concurrently receive the full amount of its
share of the Loans, L/Cs, Reimbursement Obligations, interest thereon and
all accrued fees to which it is entitled under this Agreement or the
Participation Agreement. All expenses of the Bank incurred in connection
with the foregoing shall be paid by the Company.
(b) In the event the Bank or any Participant shall
receive and retain any payment, whether by set-off or
application of deposit balances or otherwise ("Set-off"), on
or in respect of any Loan or other obligation outstanding
under this Agreement or the other Loan Documents in excess of
its ratable share of payments on all such Loans and other
obligations then outstanding, then the Bank or such
Participant, as applicable, shall purchase for cash at face
value, but without recourse, ratably from each of the other
Participants or the Bank, as applicable, such amount of such
Loans and other obligations held by each such other party (or
interest therein) as shall be necessary to cause the Bank or
such Participant, as applicable, to share such excess payment
ratably with all the other Participants and the Bank;
provided, however, that if any such purchase is made by the
Bank or any Participant, and if such excess payment or part
thereof is thereafter recovered from such purchasing party,
the related purchases from the other Participants or the Bank,
as the case may be, shall be rescinded ratably and the
purchase price restored as to the portion of such excess
payment so recovered, but without interest. For purposes of
this Section 10.14(b), the Participants shall be treated as
parties to this Agreement."
Exhibits A, C, D and E and Schedule 7.12, inclusive of the
Credit Agreement shall each be amended, and as so amended shall be
restated in their entirety to read as set forth in Exhibits A, C, D and E
and Schedule 7.12, hereto, respectively.
The amendments reflected in the above and foregoing Amended
and Restated Credit Agreement shall not become effective unless and until
the following conditions precedent have been satisfied:
(a) The Company and the Bank shall have executed this
Amended and Restated Credit Agreement (such execution may be
in several counterparts and the several parties hereto may
execute on separate counterparts);
(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) the Revolving Credit Note;
(ii) a Security Agreement Re: Inventory, Farm
Products and Receivables,
(iii) a Second Amended and Restated
Participation Agreement;
(iv) 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;
(v) 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
as contemplated by this Amended and Restated Credit
Agreement, secure the various obligations of the Company
under the Credit Agreement as amended and restated
hereby;
(vi) a Mortgage and Security Agreement with
Assignment of Rents from the Company covering the
Manitowish Waters Marsh (the "New Wisconsin Mortgage");
(vii) such financing statements relating to the
New Wisconsin Mortgage and the Security Agreement Re:
Inventory, Farm Products and Receivables as the Bank may
require;
(viii) a mortgagee's policy of title insurance
(or a binding commitment therefor) in the amount of
$12,750,000, with a waiver of coinsurance insuring the
liens of the New Wisconsin Mortgage 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, a
letter of credit endorsement and doing business, usury
and zoning endorsements) as the Bank may require; and
(ix) copies (executed or certified, as may be
appropriate) of all legal documents or proceedings taken
in connection with the execution and delivery of this
Amended and Restated Credit Agreement and the other
instruments and documents contemplated hereby to the
extent the Bank or its counsel may reasonably request;
(c) 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;
(d) Each of the representations and warranties set
forth in Section 5 of the Credit Agreement shall be true and
correct;
(e) The Company shall be in full compliance with all of
the terms and conditions of the Credit Agreement and no Event
of Default or Default shall have occurred and be continuing
thereunder or shall result after giving effect to this Amended
and Restated Credit Agreement;
(f) The Company shall at the time all other conditions
precedent to the effectiveness of the above and foregoing
amendments have been satisfied be able to comply with the
conditions precedent to borrowing set forth in Section 6
hereof; and
(g) The Bank shall have received from the Company a
non-refundable closing fee in an amount agreed to by the Bank
and the Company.
The Company, by its execution of this Amended and Restated
Credit Agreement, hereby represents and warrants the following as of the
date hereof:
(a) each of the representations and warranties set
forth in Section 5 of the Amended and Restated Credit
Agreement is true and correct, except that the representations
and warranties made under Section 5.3 shall be deemed to refer
to the most recent financial statements furnished to the Bank
by the Company;
(b) the Company's Net Worth is at least $73,000,000;
and
(c) the Company is in full compliance with all of the
terms and conditions of the Amended and Restated Credit
Agreement and no Event of Default or Default has occurred and
is continuing thereunder.
Upon your acceptance hereof in the manner hereinafter set
forth, this Agreement shall be a contract between us for the purposes
hereinabove set forth.
Dated as of October 3, 1997.
Signature Page;
Northland Cranberries, Inc.
By /s/ John Swendrowski
John Swendrowski
Its Chief Executive Officer
Accepted and agreed to at Chicago, Illinois as of the day and
year last above written.
Harris Trust and Savings Bank
By /s/
Its Vice President
111 W. Monroe Street
Chicago, Illinois 60690
Attention: Agribusiness
Division
<PAGE>
Exhibit A
Northland Cranberries, Inc. Revolving Credit Note
Chicago, Illinois
$75,000,000 October 3, 1997
On the Revolving Credit Termination Date (as defined in the
Credit Agreement referred to below), 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 the Bank in Chicago, Illinois, the
principal sum of (i) Seventy-Five Million Dollars ($75,000,000), or (ii)
such lesser amount as may at the time of the maturity hereof, whether by
acceleration or otherwise, be the aggregate unpaid principal amount of all
loans owing from the Company to the Bank under the Revolving Credit
provided for in the Credit Agreement hereinafter mentioned.
This Note evidences indebtedness loans constituting part of a
"Domestic Rate Portion", Offered Rate Portions and "LIBOR Portions" as
such terms are defined in that certain Amended and Restated Credit
Agreement dated as of October 3, 1997 by and between the Company and
Harris Trust and Savings Bank (the "Credit Agreement") made and to be made
to the Company by the Bank under the Revolving Credit provided for under
the Credit Agreement and the Company hereby promises to pay interest at
the office specified above on each loan evidenced hereby at the rates and
times specified therefor in the Credit Agreement.
Each loan made under the Revolving Credit provided for in the
Credit Agreement by the Bank to the Company against this Note, any
repayment of principal hereon, the status of each such loan from time to
time as part of the Domestic Rate Portion, an Offered Rate Portion or an
LIBOR Portion and the interest rates and interest periods applicable
thereto shall be endorsed by the holder hereof on the reverse side of this
Note or recorded on the books and records of the holder hereof (provided
that such entries shall be endorsed on the reverse side hereof prior to
any negotiation hereof) and the Company agrees that in any action or
proceeding instituted to collect or enforce collection of this Note, the
entries so endorsed on the reverse side hereof or recorded on the books
and records of the Bank shall be prima facie evidence of the unpaid
balance of this Note and the status of each loan from time to time as part
of a Domestic Rate Portion, an Offered Rate Portion or an LIBOR Portion
and the interest rates and interest periods applicable thereto, absent
manifest error.
This Note is issued by the Company under the terms and
provisions of the Credit Agreement and is secured by the Collateral
Documents (as defined in the Credit Agreement), including without
limitation a Security Agreements Re: Crops, from the Company, and this
Note and the holder hereof are entitled to all of the benefits and
security provided for thereby or referred to therein, to which reference
is hereby made for a statement thereof. This Note may be declared to be,
or be and become, due prior to its expressed maturity upon the occurrence
of an Event of Default specified in the Credit Agreement, voluntary
prepayments may be made hereon, and certain prepayments are required to be
made hereon, all in the events, on the terms and with the effects provided
in the Credit Agreement.
This Note is issued in substitution and replacement for, and
evidences in part the indebtedness previously evidenced by, that certain
Revolving Credit Note of the Company dated June 6, 1995 payable to the
order of the Bank in the face principal amount of $21,000,000 and that
certain Acquisition Credit Note of the Company dated June 6, 1995 payable
to the order of the Bank in the face principal amount of $18,000,000.
This Note shall be construed in accordance with, and governed
by, the internal laws of the State of Illinois without regard to
principles of conflict of law.
The Company hereby waives presentment for payment and demand.
Northland Cranberries, Inc.
By /s/ John Swendrowski
John Swendrowski
Its Chief Executive Officer
<PAGE>
Exhibit C
Letter of Credit Agreement
<PAGE>
Exhibit D
(To Be Retyped On Letterhead Of Counsel
And Dated As Of Date Of Closing)
__________________, 1997
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Gentlemen:
We have served as counsel to Northland Cranberries, Inc., a
Wisconsin, corporation (the "Company"), in connection with a revolving,
term loan and acquisition credit facility being made available by you to
the Company. This opinion is delivered to you at the request of the
Company pursuant to the Amended and Restated Credit Agreement referred to
below.
As such counsel, we have supervised the taking of the
corporate proceedings necessary to authorize the execution and delivery
of, and have examined executed originals of, the following:
(a) Amended and Restated Credit Agreement by and
between the Company and Harris Trust and Savings Bank (herein,
the "Bank");
(b) Revolving Credit Note of the Company payable to the
order of the Bank in the principal sum of $75,000,000;
(c) Third Supplement to Mortgage and Security Agreement
with Assignment of Rents relating to the Gordon Division
property in Douglas County, Wisconsin;
(d) Third Supplement to Mortgage and Security Agreement
with Assignment of Rents relating to the Nekoosa and Biron
Divisions' property in Wood County, Wisconsin;
(e) Second Supplement to Mortgage and Security
Agreement with Assignment of Rents relating to property in
Juneau County, Wisconsin (Yellow River Marsh);
(f) Second Supplement to Mortgage and Security
Agreement with Assignment of Rents relating to property in
Wood County, Wisconsin (Wolfe Marsh);
(g) Second Supplement to Mortgage and Security
Agreement with Assignment of Rents relating to property in
Hanson, Massachusetts;
(h) First Supplement to Mortgage and Security Agreement
with Assignment of Rents relating to property in Juneau
County, Wisconsin (F Marsh);
(i) First Supplement to Mortgage and Security Agreement
with Assignment of Rents relating to property in Price County,
Wisconsin (Fifield);
(j) Mortgage and Security Agreement with Assignment of
Rents relating to property in ___________ County, Wisconsin
from the Company to the Bank (Manitowish Waters Marsh);
(k) Third Supplement to Security Agreement Re:
Equipment from the Company to the Bank;
(l) Third Supplement to Security Agreement Re: Crops
from the Company to the Bank;
(m) Security Agreement Re: Inventory, Farm Products and
Receivables from the Company to the Bank;
(n) three (3) UCC Financing Statements executed by
Company, as debtor, in favor of the Bank, as secured party,
with two to be filed in the office of the Wisconsin Secretary
of State and one to be recorded as a farm products filing in
the Recorder's Office of Wood County, Wisconsin.
The documents described above in subparagraphs (a) through (e) are
hereinafter collectively referred to as "Loan Documents". We have also
examined and are familiar with:
(i) A copy of the articles of incorporation of the
Company certified as of ______________, 19___ by the Secretary
of the State of Wisconsin;
(ii) Certificates dated _____________ from the Secretary
of the States of _____________ and ______________,
respectively, as to the good standing of the Company in those
states;
(iii) A copy of the by-laws of the Company certified by
the Secretary of the Company as being the by-laws of the
Company in effect at all times since ____________, 19___;
(iv) A copy certified by the Secretary of the Company of
certain resolutions adopted by the board of directors [and the
stockholders] of the Company; and
(v) [Identify any other matters or items pertaining to
organization, authority and good standing;]
Based upon the foregoing, we are of the opinion that:
1. The Company is a corporation duly organized and validly
existing and in good standing under the laws of the State of Wisconsin
with full and adequate corporate power and authority to carry on its
business as now conducted and is duly licensed or qualified and in good
standing in each jurisdiction wherein the conduct of its business or the
assets and properties owned or leased by it require such licensing or
qualification.
2. The Company has full right, power and authority to borrow
from you, to mortgage, pledge, assign and otherwise encumber its assets
and properties as collateral security for such borrowings, to execute and
deliver the Loan Documents executed by it and to observe and perform all
the matters and things therein provided for. The execution and delivery
of the Loan Documents executed by the Company does not, nor will the
observance or performance of any of the matters or things therein provided
for, contravene any provision of law or of the articles of incorporation,
charter or by-laws of the Company (there being no other agreements under
which the Company is organized) or, to the best of our knowledge after due
inquiry, of any covenant, indenture or agreement binding upon or affecting
the Company or any of its properties or assets.
3. The Loan Documents executed by the Company have been duly
authorized by all necessary corporate action (no stockholder approval
being required), have been executed and delivered by the proper officers
of the Company and constitute valid and binding agreements of the Company
enforceable against it in accordance with their respective terms, except
as such terms may be limited by bankruptcy, insolvency or similar laws and
legal or equitable principles affecting or limiting the enforcement of
creditors' rights generally.
4. No order, authorization, consent, license or exemption
of, or filing or registration with, any court or governmental department,
agency, instrumentality or regulatory body, whether local, state or
federal, is or will be required in connection with the lawful execution
and delivery of the Loan Documents or the observance and performance by
the Company of any of the terms thereof.
5. To the best of our knowledge after due inquiry, there is
no action, suit, proceeding or investigation at law or in equity before or
by any court or public body pending or threatened against or affecting the
Company or any of its assets and properties which, if adversely
determined, could result in any material adverse change in the properties,
business, operations or financial condition of the Company or in the value
of the collateral security for your loans and other credit accommodations
to the Company.
<PAGE>
Exhibit E
Compliance Certificate
This Compliance Certificate is furnished to Harris Trust and
Savings Bank (the "Bank") pursuant to that certain Amended and Restated
Credit Agreement dated as of October 3, 1997, by and between Northland
Cranberries, Inc. (the "Company") and the Bank (the "Credit Agreement").
Unless otherwise defined herein, the terms used in this Compliance
Certificate have the meanings ascribed thereto in the Credit Agreement.
The Undersigned hereby certifies that:
1. I am the duly elected ____________________________ of the
Company;
2. I have reviewed the terms of the Credit Agreement and I
have made, or have caused to be made under my supervision, a detailed
review of the transactions and conditions of the Company and its
Subsidiaries during the accounting period covered by the attached
financial statements;
3. The examinations described in paragraph 2 did not
disclose, and I have no knowledge of, the existence of any condition or
the occurrence of any event which constitutes a Default or Event of
Default during or at the end of the accounting period covered by the
attached financial statements or as of the date of this Certificate,
except as set forth below;
4. The financial statements required by Section 7.4 of the
Credit Agreement and being furnished to you concurrently with this
certificate are, to the best of my knowledge, true, correct and complete
as of the dates and for the periods covered thereby; and
5. The Attachment hereto sets forth financial data and
computations evidencing the Company's compliance with certain covenants of
the Credit Agreement, all of which data and computations are, to the best
of my knowledge, true, complete and correct and have been made in
accordance with the relevant Sections of the Credit Agreement.
Described below are the exceptions, if any, to paragraph 3 by
listing, in detail, the nature of the condition or event, the period
during which it has existed and the action which the Company has taken, is
taking, or proposes to take with respect to each such condition or event:
_______________________________________________
_______________________________________________
_______________________________________________
The foregoing certifications, together with the computations
set forth in the Attachment hereto and the financial statements delivered
with this Certificate in support hereof, are made and delivered this
_________ day of __________________ 19___.
,
(Type or Print Name) (Title)
<PAGE>
Attachment to Compliance Certificate
Northland Cranberries, Inc.
Compliance Calculations for Amended and Restated Credit Agreement
Dated as of October 3, 1997
Calculations as of _____________, 19___
A. Net Worth (Section 7.8)
1. Net Worth as defined $_________
=========
2. As listed in Section 7.8, for the date of this
Certificate, Net Worth must be in an amount not
less than $_________
=========
3. Company is in compliance?
(Circle yes or no) Yes/No
=========
B. Fixed Charge Coverage Ratio (Section 7.9)
1. Net Income _______
2. Sum of
a. Increase in Deferred Taxes ________
b. Depreciation expense ________
c. Amortization expense ________
d. Interest Expense ________
Sum of Lines 2a-2d ________
3. Sum of Lines 1 and 2 ________
4. Interest Expense ________
5. Scheduled payments of principal on long term debt ________
6. Sum of Lines 4 and 5 ________
7. Ratio of Line 3 to Line 6 ______:1
("Fixed Charge Coverage Ratio") ========
8. As listed in Section 7.9, for the date of
this Certificate, Fixed Charge Coverage Ratio must
be in an amount not less than ______:1
========
9. Company is in compliance? Yes/No
(Circle Yes or No)
C. Funded Debt to Net Worth Ratio (Section 7.10)
1. Funded Debt as defined ________
2. Net Worth ________
(Line A1)
3. Ratio of Line 1 to Line 2 ______:1
("Funded Debt to Net Worth Ratio") ========
4. As listed in Section 7.10, for the date of this
Certificate, Funded Debt to Net Worth must be in
an amount not greater than ______:1
========
5. Company is in compliance? Yes/No
(Circle Yes or No) ========
D. Net Income (Section 7.11)
1. Net Income (loss) as defined $________
========
2. Net loss must not exceed $( )
========
3. Company is in compliance? Yes/No
(Circle Yes or No) ========
E. Senior Funded Debt Ratio (commencing May 31, 1998)
1. Senior Funded Debt $________
2. EBITDA $________
========
3. Ratio of Line 1 to Line 2 ______:1
========
4. For purposes of determining the Applicable
Margins, the ratio set forth on Line 3 above
indicates pricing at Level ____
==========
<PAGE>
Schedule 7.12
Permitted Liens
Northland Cranberries, Inc. Revolving Credit Note
Chicago, Illinois
$75,000,000 October 3, 1997
On the Revolving Credit Termination Date (as defined in the
Credit Agreement referred to below), 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 the Bank in Chicago, Illinois, the
principal sum of (i) Seventy-Five Million Dollars ($75,000,000), or (ii)
such lesser amount as may at the time of the maturity hereof, whether by
acceleration or otherwise, be the aggregate unpaid principal amount of all
loans owing from the Company to the Bank under the Revolving Credit
provided for in the Credit Agreement hereinafter mentioned.
This Note evidences indebtedness loans constituting part of a
"Domestic Rate Portion", Offered Rate Portions and "LIBOR Portions" as
such terms are defined in that certain Amended and Restated Credit
Agreement dated as of October 3, 1997 by and between the Company and
Harris Trust and Savings Bank (the "Credit Agreement") made and to be made
to the Company by the Bank under the Revolving Credit provided for under
the Credit Agreement and the Company hereby promises to pay interest at
the office specified above on each loan evidenced hereby at the rates and
times specified therefor in the Credit Agreement.
Each loan made under the Revolving Credit provided for in the
Credit Agreement by the Bank to the Company against this Note, any
repayment of principal hereon, the status of each such loan from time to
time as part of the Domestic Rate Portion, an Offered Rate Portion or an
LIBOR Portion and the interest rates and interest periods applicable
thereto shall be endorsed by the holder hereof on the reverse side of this
Note or recorded on the books and records of the holder hereof (provided
that such entries shall be endorsed on the reverse side hereof prior to
any negotiation hereof) and the Company agrees that in any action or
proceeding instituted to collect or enforce collection of this Note, the
entries so endorsed on the reverse side hereof or recorded on the books
and records of the Bank shall be prima facie evidence of the unpaid
balance of this Note and the status of each loan from time to time as part
of a Domestic Rate Portion, an Offered Rate Portion or an LIBOR Portion
and the interest rates and interest periods applicable thereto, absent
manifest error.
This Note is issued by the Company under the terms and
provisions of the Credit Agreement and is secured by the Collateral
Documents (as defined in the Credit Agreement), including without
limitation a Security Agreements Re: Crops, from the Company, and this
Note and the holder hereof are entitled to all of the benefits and
security provided for thereby or referred to therein, to which reference
is hereby made for a statement thereof. This Note may be declared to be,
or be and become, due prior to its expressed maturity upon the occurrence
of an Event of Default specified in the Credit Agreement, voluntary
prepayments may be made hereon, and certain prepayments are required to be
made hereon, all in the events, on the terms and with the effects provided
in the Credit Agreement.
This Note is issued in substitution and replacement for, and
evidences in part the indebtedness previously evidenced by, that certain
Revolving Credit Note of the Company dated June 6, 1995 payable to the
order of the Bank in the face principal amount of $21,000,000 and that
certain Acquisition Credit Note of the Company dated June 6, 1995 payable
to the order of the Bank in the face principal amount of $18,000,000.
This Note shall be construed in accordance with, and governed
by, the internal laws of the State of Illinois without regard to
principles of conflict of law.
The Company hereby waives presentment for payment and demand.
Northland Cranberries, Inc.
By /s/ John Swendrowski
John Swendrowski
Its Chief Executive Officer
NORTHLAND CRANBERRIES, INC.
AMENDED 1995 STOCK OPTION PLAN
October 21, 1997
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) "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
(f) "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.
(g) "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).
(h) "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.
(i) "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.
(j) "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.
(k) "Option" shall mean an Incentive Stock Option or a Non-
Qualified Stock Option.
(l) "Option Agreement" shall mean any written agreement,
contract or other instrument or document evidencing any Option granted
under the Plan.
(m) "Participating Key Employee" shall mean a Key Employee
designated to be granted an Award under the Plan.
(n) "Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization or government or political subdivision thereof.
(o) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the
Commission under the Exchange Act, or any successor rule or regulation
thereto.
(p) "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) ten 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.
EMPLOYMENT AND SEVERANCE AGREEMENT
THIS AGREEMENT, made and entered into as of the 2nd day of June,
1997, by and between NORTHLAND CRANBERRIES, INC., a Wisconsin corporation
("Company"), and JEROLD D. KAMINSKI ("Executive").
RECITALS
A. The Executive has served as a director of the Company since
1994 and has extensive management experience in product marketing,
including holding the positions of Director of Marketing for the Food
Service Division of General Mills Corporation since September 1993,
Marketing Director of the Gold Medal Division of General Mills
Corporation, and Marketing Manager of the Gold Medal Division of General
Mills Corporation.
B. The Board of Directors of the Company (the "Board")
believes that the Executive's experience in marketing products within the
food industry, combined with his intimate knowledge of the business of the
Company, will allow him to provide valuable service to the Company and its
shareholders as an executive officer of the Company, and, in particular,
in directing, managing and overseeing the growth and expansion of the
Company's Northland brand 100% cranberry juice blend product line.
C. The Executive desires to be employed by the Company on the
terms and conditions hereinafter set forth.
D. It is the intention of the parties hereto that this
Agreement establish the terms of the Executive's employment by the Company
both prior to and subsequent to a Change in Control of the Company (as
hereinafter defined), if any such Change of Control of the Company were to
occur. Article I of this Agreement establishes the terms and conditions
of the Executive's employment prior to any Change in Control of the
Company. Articles II and III of this Agreement establish the terms and
conditions of the Executive's employment subsequent to any Change in
Control of the Company.
E. The Company recognizes that circumstances in which a Change
in Control of the Company occurs, through acquisition or otherwise, are
highly disruptive and will cause uncertainty about the Executive's future
employment with the Company without regard to the Executive's competence
or past contributions and that such uncertainty may materially adversely
affect the Company.
F. The Company and the Executive are desirous that any
proposal for a Change in Control of the Company will be considered by the
Executive objectively, with reference only to the best interests of the
Company and its shareholders and without undue regard for the Executive's
personal interests.
G. To promote continuity of management and attract and retain
the services of the Executive and to further align the economic interests
of the Executive with those of the Company's shareholders, the Board
believes it is in the Company's and its shareholders' best interests to
grant an equity interest in the Company to the Executive in the form of
12,000 shares of the Company's Class A Common Stock, $.01 par value
("Stock") (to be adjusted subsequent to the date of this Agreement to take
into account the effect of any subsequent stock dividends or stock splits)
("Stock"), which Stock is subject to certain restrictions on transfer by
Executive to encourage Executive's longevity of service to the Company.
H. To further align the Executive's economic interests with
those of the Company and its shareholders, the Board believes it is in the
Company's best interests to grant the Executive options to purchase 10,000
shares of Stock pursuant to the terms of the 1995 Stock Option Plan, which
options shall be fully vested and immediately exercisable upon grant.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
mutually covenant and agree as follows:
ARTICLE I
EMPLOYMENT PRIOR TO CHANGE IN CONTROL
1.1 First Employment Period. For purposes of this Agreement, the
term "First Employment Period" means the period commencing on the date of
this Agreement and ending on the first to occur of the following: (i) the
date of termination of the Executive's employment pursuant to the terms of
Article I of this Agreement; (ii) a Change in Control of the Company; or
(iii) on the first anniversary of the date of this Agreement; provided,
however, that the First Employment Period and the provisions of this
Agreement relating thereto shall automatically renew for one additional
year on the first anniversary of the date of this Agreement and on each
anniversary thereafter, unless (a) a Change in Control of the Company has
occurred; (b) the date of termination of the Executive's employment
pursuant to the terms of Article I of this Agreement has occurred; or (c)
at least ninety (90) days prior to such applicable annual anniversary of
the date of this Agreement, the Executive shall have delivered to the
Company, or the Company shall have delivered to the Executive, written
notice that the First Employment Period will not be extended.
1.2 Duties During the First Employment Period.
(a) Offices. The Executive shall initially serve as President
and Chief Operating Officer of the Company, or in such other offices as
determined by the Board, the Chief Executive Officer or the Chairman of
the Board, with such duties and responsibilities as are customarily
assigned to such positions, and such other duties and responsibilities as
may from time to time be assigned to him by the Board, the Chief Executive
Officer or the Chairman of the Board.
(b) Time. The Executive shall devote his full business time
and effort during normal business hours to the business and affairs of the
Company and, to the extent necessary to discharge the responsibilities
assigned to the Executive under this Agreement, use Executive's best
efforts to carry out such responsibilities faithfully and efficiently and
in the best interests of the Company and its shareholders. The Executive
shall also serve on such corporate, industry, civic or charitable boards
or committees as reasonably requested by the Board, the Chief Executive
Officer or the Chairman of the Board.
1.3 Compensation.
(a) Salary. During the First Employment Period, the Company
shall pay to the Executive an annual salary ("Annual Salary") of $220,000.
The Annual Salary shall be payable in accordance with the Company's
regular payroll practice for its senior executives, as in effect from time
to time. The Annual Salary will be initially reviewed in October, 1998
for adjustment by the Board based on the recommendations of the Company's
Chief Executive Officer or Chairman of the Board. Following any such
adjustment, the term "Annual Salary" as used in this Agreement shall mean
such adjusted salary.
(b) Additional Compensation. The Executive shall receive a
bonus of $50,000 cash payable upon execution of the Agreement. The
Company shall cause the Executive to be eligible to participate in all
applicable incentive, savings and retirement plans, practices, policies
and programs made available to executives of the Company (including,
without limitation, the 1997 Incentive Bonus Plan (at a level to be
determined by the Compensation Committee of the Board), the 1995 Stock
Option Plan and the 401(k) Plan) to the same extent and subject to the
same terms and conditions as other eligible and similarly situated
executives of the Company or as otherwise determined by the Board,
Chairman of the Board or Chief Executive Officer (such additional benefits
as described solely in this sentence are hereinafter referred to as
"Additional Compensation"). The Company shall cause the Executive and/or
the Executive's family, as the case may be, to be eligible for immediate
participation in, and to receive all benefits under, all applicable
welfare benefit plans, practices, policies and programs made available to
similarly situated executives of the Company, including, without
limitation, directors' and officers', medical, dental, group life
insurance and accidental death and travel accident insurance plans and
programs, to the same extent as other eligible executives of the Company
or as otherwise determined by the Board, Chairman of the Board or Chief
Executive Officer.
(c) Expense Reimbursement. The Company shall reimburse the
Executive for all reasonable and documented expenses incurred by the
Executive in the performance of the Executive's duties under this
Agreement in accordance with the policies and procedures established by
the Board for its senior executive officers.
(d) Automobile. The Executive shall be entitled to the
ordinary and reasonable use of a GMC Suburban or its equivalent in
accordance with the Company's existing policies and practices. The
Company shall reimburse the Executive for all applicable maintenance
expenses not otherwise covered by any manufacturer or dealer warranties.
(e) Vacation. The Executive shall be entitled to the number of
paid vacation days in each calendar year as determined by the Board or the
Chairman of the Board or Chief Executive Officer consistent with policies
and practices in effect from time to time for the Company's senior
executive officers. Unused vacation shall not accumulate. The Executive
shall also be entitled to all paid holidays given by the Company to its
senior executive officers.
(f) Grant of Options to Purchase Stock. The Company hereby
grants to the Executive an option to purchase 10,000 shares of Stock
pursuant to the terms of the 1995 Stock Option Plan at an exercise price
equal to the fair market value of the Stock on the date hereof. Such
option shall be fully vested and immediately exercisable upon grant. This
option will be evidenced by a separate stock option agreement.
1.4 Grant of Restricted Stock.
(a) Grant of Stock. In consideration of the acceptance of
employment and the continued employment of the Executive, and as a
critical inducement to Executive to enter this Agreement and to better
align the Executive's economic interests in the operations of the business
with those of the Company's shareholders, the Company grants to the
Executive 12,000 shares of Stock (to be adjusted subsequent to the date of
this Agreement to take into account the effect of any subsequent stock
dividends or stock splits) upon the terms and conditions set forth herein.
Such Stock is being issued on the date hereof represented by four (4)
stock certificates of equal share amounts (together aggregating 12,000
shares) to be held in trust by the Company until each respective portion
of such Stock is fully vested pursuant to Sections 1.4(b) or 1.4(c)
hereof.
(b) Vesting Schedule. The Stock granted to the Executive
pursuant to Section 1.4(a) hereof shall vest in the Executive ratably on
the first, second, third and fourth anniversaries of the date of this
Agreement (i.e., 3,000 shares on each such date), as long as the Executive
is still employed by the Company as its President and Chief Operating
Officer on each such respective anniversary with respect to the Stock then
vesting.
(c) Vesting Upon a Change of Control of the Company.
Notwithstanding the vesting schedule in Section 1.4(b) above, (i) all
shares of Stock granted to the Executive pursuant to Section 1.4(a) hereof
shall vest in the Executive immediately upon a Change in Control of the
Company if Executive is then employed by the Company on the date of such a
Change in Control of the Company; and (ii) in the event of the Executive's
death or disability prior to the fourth anniversary of the date of this
Agreement, a pro rata portion (based on the number of days elapsed from
the immediately preceding anniversary to the date of death or disability
divided by 365) of the Stock that would have vested on the next succeeding
anniversary shall vest as of the date of death or disability.
(d) Restrictions on Transferability. The Executive may not
sell, pledge, encumber, transfer by or pursuant to a gift or bequest or
otherwise transfer or dispose of, and the Company will not permit to be
sold, encumbered, attached, or otherwise disposed of or transferred in any
manner, either voluntarily or by operation of law (collectively referred
to as "Transfer"), any Stock granted to the Executive pursuant to this
Agreement (or any Stock at any time hereafter acquired by the Executive in
respect of such Stock) which has not yet vested pursuant to Section 1.4(b)
or 1.4(c) hereof.
(e) Termination of Employment. In the event of the Executive's
death, disability or termination from employment, any shares of Stock
granted to the Executive pursuant to Section 1.4(a) hereof but not yet
vested pursuant to Section 1.4(b) or 1.4(c) hereof shall automatically be
forfeited and cancelled by the Company and any dividends or other
distributions held in trust by the Company pursuant to Section 1.4(g)
hereof and applicable to such shares shall automatically be forfeited to
the Company.
(f) Voting Rights. The Executive shall have voting rights for
all Stock granted pursuant to Section 1.4(a) hereof regardless of whether
it has vested pursuant to Section 1.4(b) or 1.4(c) hereof; provided,
however, that with respect to all unvested shares of Stock, the Executive
shall vote all such unvested shares of Stock in accordance with the
recommendation of the Board.
(g) Dividends and Other Distributions. The Executive shall be
entitled to receive all cash dividends and other distributions paid from
the date of original issuance of the Stock when and after such shares of
Stock have vested pursuant to Section 1.4(b) or 1.4(c) hereof. For shares
of Stock granted to the Executive pursuant to this Agreement that have not
vested in the Executive in accordance with Section 1.4(b) or 1.4(c)
hereof, the Company will hold all cash dividends and other distributions
paid with respect to these shares of Stock in trust. Any shares of Stock
paid as dividends or distributions on any unvested Stock held in trust by
the Company pursuant to this Section 1.4(g) shall be subject to the same
restrictions on transferability as the shares of Stock with respect to
which they were paid. Dividends or distributions paid in cash on any
unvested shares of Stock held in trust by the Company pursuant to this
Section 1.4(g) shall be deposited in an interest-bearing money-market or
similar account by the Company with any bank or financial institution of
its choice, and distributed to Executive when and if the shares of Stock
with respect to which such cash dividends or distributions were paid vest
in accordance with Section 1.4(b) or 1.4(c) hereof. The Company shall not
be liable for any act taken or omitted by it with respect to the
investment of cash dividends held by it in trust under this Section 1.4(g)
if taken or omitted by it in good faith and in the exercise of its own
best judgment. The Executive agrees to indemnify the Company and hold it
harmless against any and all liabilities incurred by it under this Section
1.4(g) except for liabilities incurred by the Company from its own willful
misconduct or negligence.
(h) Endorsement on Stock Certificates. Conspicuously noted on
each certificate representing Stock issued to the Executive pursuant to
the terms of this Agreement (or hereafter acquired in respect of such
stock) shall be a legend reading substantially as follows:
"ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR ANY OTHER
DISPOSITION OF THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED BY, AND SUBJECT TO, THE TERMS AND
PROVISIONS OF AN EMPLOYMENT AND SEVERANCE AGREEMENT DATED AS OF
JUNE ___, 1997. A COPY OF SUCH AGREEMENT AND OF ALL AMENDMENTS
OR SUPPLEMENTS THERETO IS ON FILE IN THE OFFICE OF THE SECRETARY
OF THE COMPANY. BY ACCEPTANCE OF THIS CERTIFICATE, THE HOLDER
AGREES TO BE BOUND BY THE TERMS OF SAID AGREEMENT AND ALL
AMENDMENTS OR SUPPLEMENTS THERETO."
Upon the vesting of shares of Stock issued to the Executive pursuant to
Sections 1.4(b) or 1.4(c) hereof and upon request of the Executive, the
Company shall instruct its transfer agent to remove such legend from the
certificate(s) representing such fully vested shares of Stock, and such
Stock shall no longer be subject to the Transfer restrictions contained in
Section 1.4(d) hereof.
1.5 Termination of Employment During the First Employment Period.
(a) Death. The Executive's employment and the First Employment
Period shall terminate automatically upon the Executive's death during the
First Employment Period.
(b) Incapacity. The Company shall be entitled to terminate the
Executive's employment and the First Employment Period because of the
Executive's Incapacity during the First Employment Period. "Incapacity"
means that (i) the Executive has been substantially unable, for a period
of 30 consecutive days, to perform the Executive's duties under this
Agreement, as a result of physical or mental illness or injury, or (ii) a
physician selected by the Company or its insurers has determined that the
Executive's incapacity substantially prevents or limits Executive from
performing his duties hereunder for an extended or indefinite period. A
termination of the Executive's employment by the Company for Incapacity
shall be communicated to the Executive by delivery of written notice of
such termination, which shall be effective on receipt of such notice by
the Executive.
(c) By Company. The Company may terminate the Executive's
employment and the First Employment Period pursuant to (i) a Forced
Termination immediately upon notice to the Executive or (ii) for any other
reason upon 30 days written notice to the Executive.
For purposes of this Agreement, the term "Forced Termination"
shall mean a termination of the Executive's employment during the First
Employment Period for (i) the willful and continued failure (following
written notice thereof to the Executive and a reasonable opportunity to
cure) of the Executive substantially to perform the Executive's duties
under this Agreement (other than as a result of Incapacity) or (ii)
illegal conduct or gross misconduct by the Executive, in either case that
is willful and results in material and demonstrable damage to the business
or reputation of the Company.
(d) By Executive. The Executive may terminate the Executive's
employment and the First Employment Period at any time for any reason or
for no reason upon giving the Company written notice at least 90 days
prior to the date of termination specified in such notice.
1.6 Obligations of Company upon Termination During the First
Employment Period.
(a) Death and Incapacity. If Executive's employment is
terminated during the First Employment Period by reason of Executive's
death or Incapacity, Company shall pay to Executive or, in the case of
Executive's death, to Executive's designated beneficiaries (or, if there
is no such beneficiary, to Executive's estate or legal representative), in
a lump sum in cash within 30 days after the date of termination, the sum
of the following amounts (the "Accrued Obligations"): (i) any portion of
Executive's Annual Salary through the date of termination that has not yet
been paid; (ii) an amount representing the Additional Compensation (which
term does not include any shares of Stock granted to the Executive
pursuant to Section 1.4(a) hereof) for the period that includes the date
of termination, computed by assuming that the amount of all such
Additional Compensation would be equal to the maximum amount of such
Additional Compensation that Executive would have been eligible to earn
for such period, and multiplying that amount by a fraction, the numerator
of which is the number of days in such period through the date of
termination, and the denominator of which is the total number of days in
the relevant period; and (iii) any accrued but unpaid Additional
Compensation. All shares of Stock granted to the Executive pursuant to
Section 1.4(a) hereof which have not yet vested pursuant to Section 1.4(b)
or 1.4(c) hereof on the date of termination of the Executive's employment
hereunder shall be forfeited back to the Company and cancelled.
(b) Forced Termination By The Company; Termination By
Executive. If Executive's employment is terminated by Company pursuant to
a Forced Termination during the First Employment Period, or if Executive
voluntarily terminates employment during the First Employment Period, the
Company shall pay Executive the Annual Salary through the date of
termination to the extent not yet paid, and Company shall have no further
obligations under this Agreement. All shares of Stock granted to the
Executive pursuant to Section 1.4(a) hereof which have not yet vested
pursuant to Section 1.4(b) or 1.4(c) hereof on the date of termination of
the Executive's employment hereunder shall be forfeited back to the
Company and cancelled.
(c) By Company During the First Year of Employment Other Than
Pursuant to a Forced Termination. If Company shall terminate Executive's
employment prior to the first anniversary of the Executive's employment
hereunder for any reason other than pursuant to a Forced Termination,
Company shall pay to Executive the Annual Salary through the date of
termination to the extent not yet paid plus, in lieu of any further salary
payments to Executive for periods subsequent to the date of termination,
Company shall pay as liquidated damages or severance pay, or both, to
Executive on the fifth day following the date of termination, a lump-sum
amount equal to the Annual Salary in effect as of the date of termination.
All shares of Stock granted to the Executive pursuant to Section 1.4(a)
hereof which have not yet vested pursuant to Section 1.4(b) or 1.4(c)
hereof on the date of termination of the Executive's employment hereunder
shall be forfeited back to the Company and cancelled.
ARTICLE II
EMPLOYMENT AFTER AFTER A CHANGE IN CONTROL
2.1 Second Employment Period. If a Change in Control of the Company
occurs when the Executive is employed by the Company, the Company will
continue thereafter to employ the Executive during the Second Employment
Period, and the Executive will remain in the employ of the Company, in
accordance with and subject to the terms and provisions of this Agreement.
2.2 Duties During the Second Employment Period. During the Second
Employment Period, the Executive shall, in the same capacities and
positions held by the Executive at the time of the Change in Control of
the Company or in such other capacities and positions as may be agreed to
by the Company and the Executive in writing, devote the Executive's best
efforts and all of the Executive's business time, attention and skill to
the business and affairs of the Company, as such business and affairs now
exist and as they may hereafter be conducted. The services which are to
be performed by the Executive hereunder are to be rendered in the same
metropolitan area in which the Executive was employed at the time of such
Change in Control of the Company, or in such other place or places as
shall be mutually agreed upon in writing by the Executive and the Company
from time to time. Without the Executive's consent the Executive shall
not be required to be absent from such metropolitan area more than forty-
five (45) days in any twelve (12)-month period.
2.3 Compensation During the Second Employment Period. During the
Second Employment Period, the Executive shall be compensated as follows:
(a) Annual Base Salary. The Executive shall receive, at such
intervals and in accordance with such standard policies of the Company as
may be in effect immediately prior to the Change in Control of the
Company, an annual base salary in cash equivalent of not less that the
Annual Salary as in effect immediately prior to the Change in Control of
the Company (which base salary shall, unless otherwise agreed in writing
by the Executive, include the current receipt by the Executive of any
amounts which, prior to the Change in Control of the Company, the
Executive had elected to defer, whether such compensation is deferred
under Section 401(k) of the Code or otherwise), subject to adjustment as
hereinafter provided.
(b) Reimbursement. The Executive shall, at such intervals and
in accordance with such standard policies as may be in effect immediately
prior to the Change in Control of the Company, be reimbursed for any and
all monies advanced in connection with the Executive's employment for
reasonable and necessary expenses incurred by the Executive on behalf of
the Company, including travel expenses and expenses contemplated by
Section 1.3(d) hereof.
(c) Benefits. The Executive shall be included, to the extent
eligible thereunder (which eligibility shall not be conditioned on the
Executive's salary grade or on any other requirement which excludes
persons of comparable status to the Executive unless such exclusion was in
effect for such plan or an equivalent plan immediately prior to the Change
in Control of the Company), in any and all plans providing benefits for
the Company's salaried employees in general, including but not limited to
group life insurance, hospitalization, medical, dental, profit sharing and
stock bonus plans; provided, that, in no event shall the aggregate level
of benefits under such plans in which the Executive is included be less
than the aggregate level of benefits under plans of the Company of the
type referred to in this Section 2.3(c) which the Executive was
participating immediately prior to the Change in Control of the Company.
The Executive shall also be entitled to the use of the automobile pursuant
to Section 1.3(d) hereof through the term of the Second Employment Period.
(d) Vacation and Holidays. The Executive shall annually be
entitled to not less than the amount of paid vacation and not fewer than
the number of paid holidays to which the Executive was entitled annually
immediately prior to the Change in Control of the Company or such greater
amount of paid vacation and number of paid holidays as may be made
available annually to other executives of the Company of comparable status
and position to the Executive.
(e) Executive Benefits. The Executive shall be included in all
plans providing additional benefits to executives of the Company of
comparable status and position to the Executive, including but not limited
to deferred compensation, split-dollar life insurance, supplemental
retirement, stock option, stock appreciation, stock bonus, cash bonus and
similar or comparable plans; provided, that, in no event shall the
aggregate level of benefits under such plans be less than the aggregate
level of benefits under plans of the Company of the type referred to in
this Section 2.3(e) in which the Executive was participating immediately
prior to the Change in Control of the Company.
2.4 Annual Compensation Adjustments During the Second Employment
Period. During the Second Employment Period, the Board (or an appropriate
committee thereof) will consider and appraise, at least annually, the
contributions of the Executive to the Company's operating efficiency,
growth, cash flow from operations and operating profits, and, in
accordance with the Company's practice prior to the Change in Control of
the Company, due consideration shall be given to the upward adjustment of
the Executive's base compensation rate, at least annually, commensurate
with (i) increases generally given to other executives of the Company of
comparable status and position to the Executive, and (ii) as the scope of
the Company's operations or the Executive's duties expand.
2.5 Termination During the Second Employment Period For Cause or
Without Good Reason. It there is a Covered Termination for Cause or due
to the Executive's voluntarily terminating his employment other than for
Good Reason (any such terminations to be subject to the procedures set
forth in Section 2.11 hereof), then the Executive shall be entitled to
receive only Accrued Benefits pursuant to Section 2.7(a) hereof.
2.6 Termination During the Second Employment Period Giving Rise to a
Termination Payment.
(a) If there is a Covered Termination by the Executive for Good
Reason, or by the Company other than by reason of (i) death, (ii)
disability pursuant to Section 2.10 hereof, or (iii) Cause, then the
Executive shall be entitled to receive, and the Company shall promptly
pay, Accrued Benefits pursuant to Section 2.7(a) hereof and, in lieu of
further base salary for periods following the Termination Date, as
liquidated damages and severance pay, the Termination Payment pursuant to
Section 2.7(b) hereof.
(b) If there is a Covered Termination and the Executive is
entitled to Accrued Benefits and the Termination Payment, then the
Executive shall be entitled to the following additional benefits:
(i) The Executive shall receive, at the expense of the
Company, outplacement services on an individualized basis provided by
a nationally recognized executive placement firm selected by the
Company.
(ii) Until the earlier of the third anniversary of the
Termination Date or such time as the Executive has obtained new
employment and is covered by benefits which in the aggregate are at
least equal in value to the following benefits the Executive shall
continue to be covered, at the expense of the Company, by the same or
equivalent life insurance, hospitalization, medical and dental
coverage as was required hereunder with respect to the Executive
immediately prior to the date the Notice of Termination is given.
2.7 Payments.
(a) Accrued Benefits. For purposes of this Agreement, the
Executive's "Accrued Benefits" shall include the following amounts,
payable as described herein: (i) all base salary for the time period
commencing on the start of the Second Employment Period and ending with
the Termination Date to the extent not yet paid; (ii) reimbursement for
any and all monies advanced in connection with the Executive's employment
for reasonable and necessary expenses incurred by the Executive on behalf
of the Company through the Termination Date; (iii) any and all other cash
earned through the Termination Date and deferred at the election of the
Executive or pursuant to any deferred compensation plan then in effect;
(iv) a lump sum payment of the bonus or incentive compensation otherwise
payable to the Executive with respect to the year in which termination
occurs under all bonus or incentive compensation plan or plans of the
Company in which the Executive is a participant; and (v) all other
payments and benefits to which the Executive may be entitled as
compensatory fringe benefits, including a lump sum cash payment in an
amount equal to the total remaining lease payments due under the lease
pursuant to Section 1.3(d), or under the terms of any benefit plan of the
Company, including severance payments under the Company's severance
policies and practices as in effect immediately prior to the Change in
Control of the Company. Payment of Accrued Benefits shall be made
promptly in accordance with the Company's prevailing practice with respect
to Subsections (i) and (ii) hereof or, with respect to Subsections (iii),
(iv) and (v) hereof, pursuant to the terms of the benefit plan or practice
establishing such benefits.
(b) Termination Payment. The Termination Payment shall be an
amount equal to the average of the Executive's annual base salary over the
five (5) fiscal years of the Company (or such shorter period) immediately
prior to the Change in Control of the Company multiplied by two (2). The
Termination Payment shall be paid to the Executive in cash no later than
ten (10) business days after the Termination Date. The Executive shall
not be required to mitigate the amount of the Termination Payment by
securing other employment or otherwise, nor will such Payment be reduced
by reason of the Executive securing other employment or for any other
reason.
It is the intention of the Company and the Executive that no
portion of the Termination Payment, Accrued Benefits or any other payment
or benefit under this Agreement, or payment to or for the benefit of the
Executive under any other agreement or plan of the Company, regardless of
whether such payment or benefit was paid or provided for prior to the
termination of the Executive's employment hereunder (herein all
collectively referred to as the "Total Payments"), be deemed to be an
"excess parachute payment" as defined in Section 280G of the Code. It is
agreed that the present value of the Total Payments and any other payments
to or for the benefit of the Executive in the nature of compensation to
which Section 280G of the Code or any successor provision thereto applies
(in the aggregate "Total Benefits") shall not exceed an amount equal to
one dollar less than the maximum amount which the Executive may receive
without becoming subject to the tax imposed by Section 4999 of the Code or
any successor provision (the "Excise Tax") or which the Company may pay
without loss of deduction under Section 280G(a) of the Code or any
successor provision thereto. Present value for purposes of this Agreement
shall be calculated in accordance with Section 280G(d)(4) of the Code or
any successor provision thereto. Within forty-five (45) days following
the Termination Date or notice by either party to the other of its belief
that there is a payment or benefit due the Executive which will result in
an excess parachute payment, the Executive and the Company, at the
Company's expense, shall obtain the opinion of such legal counsel (the
opinion of legal counsel need not be unqualified), and certified public
accountants as the Executive may choose, which sets forth (a) the amount
of the Base Period Income of the Executive, (b) the present value of Total
Benefits, and (c) the amount and present value of any excess parachute
payments. In the event that such opinions determine that there would be
an excess parachute payment, the Termination Payment or any other payment
determined by such counsel to be includible in the Total Benefits, shall
be reduced or eliminated as specified by the Executive in writing
delivered to the Company within thirty (30) days of his receipt of such
opinions or, if the Executive fails to so notify the Company, then as the
Company shall reasonably determine, so that under the bases of calculation
set forth in such opinions the Total Benefits paid to the Executive shall
be an amount equal to one dollar less than the maximum amount which the
Executive may receive without becoming subject to the Excise Tax (the
"Reduced Amount"). For purposes of this Agreement, the term "Base Period
Income" shall be an amount equal to the Executive's "annualized includible
compensation" from the Company for the "base period" as defined in
Sections 280G(d)(1) and (2) of the Code or any successor provisions
thereto. In the event that the provisions of Sections 280G and 4999 of
the Code or any successor provisions are repealed without succession this
provision shall be of no further force or effect.
As a result of the uncertainty in the application of Section
280G of the Code at the time of the initial determination by legal counsel
and accountants as provided in this provision, it is possible that amounts
will have been paid or distributed by the Company to or for the benefit of
the Executive pursuant to this Agreement which should not have been so
paid or distributed ("Over-payment") or that additional amounts which will
have not been paid or distributed by the Company to or for the benefit of
the Executive pursuant to this Agreement could have been so paid or
distributed ("Underpayment"), in each case, consistent with the
calculation of the Reduced Amount hereunder. In the event that such legal
counsel, based upon the assertion of a deficiency by the Internal Revenue
Service against the Company or the Executive which such legal counsel
believes has a high probability of success or other controlling precedent
or substantial authority, determines that an Overpayment has been made,
any such Overpayment paid or distributed by the Company to or for the
benefit of the Executive shall be treated for all purposes as a loan to
the Executive which the Executive shall repay to the Company together with
interest at the applicable federal rate provided for in Section 7872(f)(2)
of the Code; provided, however, that no amount shall be payable by the
Executive to the Company if and to the extent such payment would not
reduce that amount which is subject to the excise tax under Section 4999
of the Code. In the event that such legal counsel, based upon controlling
precedent or other substantial authority, determines that an Underpayment
has occurred, any such Underpayment shall be promptly paid by the Company
to or for the benefit of the Executive together with interest at the
applicable federal rate provide for in Section 7872(f)(2) of the Code.
2.8 Death.
(a) Prior to Notice of Termination. Except as provided in
Section 2.8(b) hereof, in the event of a Covered Termination due to the
Executive's death, the Executive's estate, heirs and beneficiaries shall
receive all the Executive's Accrued Benefits through the Termination Date.
(b) Following Notice of Termination. In the event the
Executive dies after a Notice of Termination is given (i) by the Company,
other than by reason of disability, or (ii) by the Executive for Good
Reason, the Executive's estate, heirs and beneficiaries shall be entitled
to the benefits described in Section 2.8(a) hereof and, subject to the
provisions of Article III of this Agreement, to such Termination Payment
as the Executive would have been entitled to had the Executive lived. For
the purposes of this Subsection (b), the Termination Date shall be the
earlier of thirty (30) days following the giving of the Notice of
Termination or one day prior to the end of the Second Employment Period,
subject to delay pursuant to Section 3.1(j) hereof.
2.9 Retirement. If, during the Second Employment Period, the
Executive and the Company shall execute an agreement providing for the
early retirement of the Executive from the Company, or the Executive shall
otherwise give notice that he is voluntarily choosing to retire early from
the Company, the Executive shall receive Accrued Benefits through the
Termination Date; provided, that, if the Executive's employment is
terminated by the Executive for Good Reason or by the Company other than
by reason of death, disability or Cause and the Executive also, in
connection with such termination, elects voluntary early retirement, the
Executive shall also be entitled to receive a Termination Payment pursuant
to Section 2.7(b) hereof.
2.10 Termination for Disability during the Second Employment Period.
If, during the Second Employment Period, as a result of the Executive's
disability (regardless of whether such illness or injury is job-related),
the Executive shall have been absent from the Executive's duties hereunder
on a full-time basis for six (6) consecutive months and, within thirty
(30) days after the Company notifies the Executive in writing that it
intends to terminate the Executive's employment (which notice shall not
constitute the Notice of Termination contemplated below), the Executive
shall not have returned to the performance of the Executive's duties
hereunder on a full-time basis, the Company may terminate the Executive's
employment pursuant to a Notice of Termination given in accordance with
Section 2.11 hereof. In the event the Executive's employment is
terminated on account of the Executive's disability in accordance with
this Section 2.10, the Executive shall receive Accrued Benefits in
accordance with Section 2.7(a) hereof and shall remain eligible for all
benefits provided by any long term disability programs of the Company in
effect at the time of such termination.
2.11 Termination Notice and Procedure. Any Covered Termination by
the Company or the Executive shall be communicated by written Notice of
Termination to the Executive, if such Notice is given by the Company, or
to the Company, if such Notice is given by the Executive, all in
accordance with the following procedures and those set forth in Section
3.11 hereof:
(a) If such termination is for disability, Cause or Good
Reason, the Notice of Termination shall indicate in reasonable detail the
facts and circumstances alleged to provide a basis for such termination.
(b) Any Notice of Termination by the Company pursuant to a
Covered Termination shall have been approved, prior to the giving thereof
to the Executive, by a resolution duly adopted by a majority of the
directors of the Company (or any successor corporation) then in office.
(c) The Executive shall have thirty (30) days, or such longer
period as the Company may determine to be appropriate, to cure any conduct
or act, if curable, alleged to provide grounds for termination of the
Executive's employment for Cause under this Agreement.
(d) The recipient of the Notice of Termination shall personally
deliver, or mail in accordance with Section 3.11 hereof, written notice of
any dispute relating to such Notice of Termination to the party giving
such Notice within fifteen (15) days after receipt thereof. After the
expiration of such fifteen (15) days, the contents of the Notice of
Termination shall become final and not subject to dispute.
ARTICLE III
DEFINITIONS
3.1 Definitions.
(a) Cause. For purposes of this Agreement, the term "Cause"
means termination by the Company of the Executive's employment after a
Change of Control of the Company for any of the following, but only the
following, reasons: (i) the engaging by the Executive in intentional
conduct not taken in good faith which has caused demonstrable and serious
financial injury to the Company, as evidenced by a determination in a
binding and final judgement, order or decree of a court or administrative
agency of competent jurisdiction, in effect after exhaustion or lapse of
all rights of appeal, in an action, suit or proceeding, whether civil,
criminal, administrative or investigative; (ii) conviction of a felony (as
evidenced by binding and final judgment, order, or decree of a court of
competent jurisdiction, in effect after exhaustion or lapse of all rights
of appeal) which substantially impairs the Executive's ability to perform
his duties or responsibilities; and (iii) continuing willful and
unreasonable refusal by the Executive to perform the Executive's duties or
responsibilities (unless significantly changed without the Executive's
consent).
(b) Change in Control of the Company. For purposes of this
Agreement, a "Change in Control of the Company" shall mean a change in
control of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Act.
Without limiting the inclusiveness of the definition in the preceding
sentence, a Change in Control of the Company shall be deemed to have
occurred if:
(i) any Person (other than any employee benefit plan of
the Company or of any subsidiary of the Company or any Person
organized, appointed or established pursuant to the terms of any such
benefit plan) is or becomes the Beneficial Owner of securities of the
Company representing at least 30% of the combined voting power of the
Company's then outstanding securities or 30% of the Company's then
outstanding Class A Common Stock;
(ii) two or more of the members of the Board are not
Continuing Directors;
(iii) there shall be consummated (x) any consolidation
or merger of the Company in which the Company is not the continuing
or surviving corporation or pursuant to which shares of the Company's
capital stock would be converted into cash, securities or other
property, other than a merger of the Company in which the holders of
the Company's capital stock immediately prior to the merger have the
same proportionate ownership of capital stock of the surviving
corporation immediately after the merger, or (y) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, of the assets of the
Company; or
(iv) the shareholders' of the Company approve any plan or
proposal for the liquidation or dissolution of the Company.
(c) Continuing Director. For purposes of this Agreement, the
term "Continuing Director" means any member of the Board who was a member
of the Board on the date hereof and any successor of a Continuing Director
who is recommended to succeed a Continuing Director by a majority of the
Continuing Directors then on such Board.
(d) Code. For purposes of this Agreement, the term "Code"
means the Internal Revenue Code of 1986, including any amendments thereto
or successor tax codes thereof.
(e) Covered Termination. For purposes of this Agreement, the
term "Covered Termination" means any termination of the Executive's
employment where the Termination Date is any date during the Second
Employment Period.
(f) Good Reason. For purposes of this Agreement, the Executive
shall have a "Good Reason" for termination of employment after a Change in
Control of the Company in the event of:
(i) any breach of this Agreement by the Company, including
specifically any breach by the Company of its agreements contained in
Sections 3.1, 3.2, 3.3 or 3.4 hereof;
(ii) the removal of the Executive from, or any failure to
reelect the Executive to, any of the positions held with the Company
on the date of the Change in Control of the Company or any other
positions with the Company to which the Executive shall thereafter be
elected or assigned, except in the event that such removal or failure
to reelect relates to the termination by the Company of the
Executive's employment for Cause or by reason of disability pursuant
to Section 3.10 hereof;
(iii) a good faith determination by the Executive that
there has been a significant adverse change, without the Executive's
written consent, in the Executive's working conditions or status with
the Company from such working conditions or status in effect
immediately prior to the Change in Control of the Company, including
but not limited to (A) a significant change in the nature or scope
of the Executive's authority, powers, functions, duties or
responsibilities, or (B) a reduction in the level of support
services, staff, secretarial and other assistance, office space and
accoutrements; or
(iv) failure by the Company to obtain the Agreement
referred to in Section 4.4 hereof as provided therein.
(g) Notice of Termination. For purposes of this Agreement,
"Notice of Termination" shall mean a written notice given by the Executive
to the Company or by the Company to the Executive notifying the recipient
party of the Termination of the Executive's employment pursuant to the
terms of this Agreement.
(h) Person. For purposes of this Agreement, the term "Person"
shall mean any individual, firm, partnership, corporation or other entity,
including any successor (by merger or otherwise) of such entity, or a
group of any of the foregoing acting in consent.
(i) Second Employment Period. For purposes of this Agreement,
the term "Second Employment Period" means a period commencing on the date
of a Change in Control of the Company, and ending at 11:59 p.m. Milwaukee
time on the second anniversary of such date.
(j) Termination Date. For purposes of this Agreement, except
as otherwise provided in Section 2.8(b) and Section 4.4(a) hereof, the
term "Termination Date" means (i) if the Executive's employment is
terminated by the Executive's death, the date of death; (ii) if the
Executive's Employment is terminated by reason of voluntary early
retirement, as agreed in writing by the Company and the Executive, the
date of such early retirement which is set forth in such written
agreement; (iii) if the Executive's employment is terminated by reason of
disability pursuant to Section 2.10 hereof, the earlier of thirty (30)
days after the Notice of Termination is given or one day prior to the end
of the Employment Period; (iv) if the Executive's employment is terminated
by the Executive voluntarily (other than for Good Reason), the date the
Notice of Termination is given; and (v) if the Executive's employment is
terminated by the Company (other than by reason of disability pursuant to
Section 2.10 hereof) or by the Executive for Good Reason, the earlier of
thirty (30) days after the Notice of Termination is given or one day prior
to the end of the Employment Period. Notwithstanding the foregoing,
(A) If termination is by the Company for Cause pursuant to
Section 3.1(a) of this Agreement and if the Executive has cured the
conduct constituting such Cause as described by the Company in its Notice
of Termination within such thirty (30) day or shorter period, then the
Executive's employment hereunder shall continue as if the Company had not
delivered its Notice of Termination.
(B) If the Company shall give a Notice of Termination for Cause
or by reason of disability and the Executive in good faith notifies the
Company that a dispute exists concerning the termination within the
fifteen (15) day period following receipt thereof, then the Executive may
elect to continue his employment during such dispute and the Termination
Date shall be determined under this paragraph. If the Executive so elects
and it is thereafter determined that Cause or disability (as the case may
be) did exist, the Termination Date shall be the earlier of (1) the date
on which the dispute is finally determined, either (x) by mutual written
agreement of the parties or (y) in accordance with Section 4.9 hereof, (2)
the date of the Executive's death, or (3) one day prior to the end of the
Employment Period. If the Executive so elects and it is thereafter
determined that Cause or disability (as the case may be) did not exist,
then the employment of the Executive hereunder shall continue after such
determination as if the Company had not delivered its Notice of
Termination and there shall be no Termination Date arising out of such
Notice. In either case, this Agreement continues, until the Termination
Date, if any, as if the Company had not delivered the Notice of
Termination except that, if it is finally determined that the Company
properly terminated the Executive for the reason asserted in the Notice of
Termination, the Executive shall in no case be entitled to a Termination
Payment (as hereinafter defined) arising out of events occurring after the
Company delivered its Notice of Termination.
(C) If the Executive shall in good faith give a Notice of
Termination for Good Reason and the Company notifies the Executive that a
dispute exists concerning the termination within the fifteen (15) day
period following receipt thereof, then the Executive may elect to continue
his employment during such dispute and the Termination Date shall be
determined under this paragraph. If the Executive so elects and it is
thereafter determined that Good Reason did exist, the Termination Date
shall be the earlier of (1) the date on which the dispute is finally
determined, either (x) by mutual written agreement of the parties or (y)
in accordance with Section 4.9 hereof, (2) the date of the Executive's
death or (3) one day prior to the end of the Employment Period. If the
Executive so elects and it is thereafter determined that Good Reason did
not exist, then the employment of the Executive hereunder shall continue
after such determination as if the Executive had not delivered the Notice
of Termination asserting Good Reason and there shall be no Termination
Date arising out of such Notice. In either case, this Agreement
continues, until the Termination Date, if any, as if the Executive had not
delivered the Notice of Termination except that, if it finally determined
that Good Reason did exist, the Executive shall in no case be denied the
benefits described in Sections 2.6(b) and 2.7 hereof (including a
Termination Payment) based on events occurring after the Executive
delivered his Notice of Termination.
(D) If an opinion is required to be delivered pursuant to
Section 2.7(b) hereof and such opinion shall not have been delivered, the
Termination Date shall be the earlier of the date on which such opinion is
delivered or one day prior to the end of the Employment Period.
(E) Except as provided in Paragraphs (B) and (C) above, if the
party receiving the Notice of Termination notifies the other party that a
dispute exists concerning the termination within the fifteen (15) day
period following receipt thereof and it is finally determined that the
reason asserted in such Notice of Termination did not exist, then (1) if
such Notice was delivered by the Executive, the Executive will be deemed
to have voluntarily terminated his employment and (2) if delivered by the
Company, the Company will be deemed to have terminated the Executive other
than by reason of death, disability or Cause.
ARTICLE IV
MISCELLANEOUS
4.1 Confidentiality Obligations of the Executive; Noncompetition.
(a) Confidentiality. During and for a period of two years
following the First Employment Period and the Second Employment Period,
the Executive shall hold in confidence and not directly or indirectly
disclose or use or copy or make lists of any confidential information or
proprietary data of the Company, except to the extent authorized in
writing by the Board or the Chief Executive Officer or required by any
court or administrative agency, other than to an employee of the Company
or a person to whom disclosure is reasonably necessary or appropriate in
connection with the performance by the Executive of duties as an executive
of the Company. Confidential information shall not include any
information known generally to the public or any information of a type not
otherwise considered confidential by persons engaged in the same business
or a business similar to that of the Company. All records, files,
documents and materials, or copies thereof, relating to the business of
the Company which the Executive shall prepare, or use, or come into
contact with, shall be and remain the sole property of the Company and
shall be promptly returned to the Company upon termination of employment
with the Company.
(b) Non-Competition. The Executive agrees that, for a period
of one year after the termination of the Executive's employment hereunder,
the Executive shall not, within North America, expect as permitted by the
Company's prior written consent (which shall not be unreasonably
withheld), participate in the management of any business which is a direct
and substantial competitor of the Company. The ownership of less than
five percent of any class of securities of any corporation listed on a
national securities exchange or regularly traded over the counter even
though such corporation may be a competitor of the Company as specified
above, shall not be deemed as constituting a financial interest in such
competitor.
4.2 Expenses and Interest. If, after a Change in Control of the
Company, a good faith dispute arises with respect to the enforcement of
the Executive's rights under this Agreement or if any legal or arbitration
proceeding shall be brought in good faith to enforce or interpret any
provision contained herein, or to recover damages for breach hereof, the
Executive shall recover from the Company any reasonable attorneys' fees
and necessary costs and disbursements incurred as a result of such
dispute, legal or arbitration proceeding ("Expenses"), and prejudgment
interest on any money judgment or arbitration award obtained by the
Executive calculated at the rate of interest announced by Harris Trust and
Savings Bank, Chicago, Illinois from time to time as its prime or base
lending rate from the date that payments to him should have been made
under this Agreement. Within ten (10) days after the Executive's written
request therefor, the Company shall pay to the Executive, or such other
person or entity as the Executive may designate in writing to the Company,
the Executive's reasonable Expenses in advance of the final disposition or
conclusion of any such dispute, legal or arbitration proceeding.
4.3 Payment Obligations Absolute. The Company's obligation during
and after the First Employment Period and the Second Employment Period to
pay the Executive the amounts and to make the benefit and other
arrangements provided herein shall be absolute and unconditional and shall
not be affected by any circumstances, including, without limitation, any
setoff, counterclaim, recoupment, defense or other right which the Company
may have against him or anyone else. Except as provided in Section 4.2 of
this Agreement, all amounts payable by the Company hereunder shall be paid
without notice or demand. Except as provided in Section 3.7(b) of this
Agreement, each and every payment made hereunder by the Company shall be
final, and the Company will not seek to recover all or any part of such
payment from the Executive, or from whomsoever may be entitled thereto,
for any reason whatsoever.
4.4 Successors.
(a) If the Company sells, assigns or transfer all or
substantially all of its business and assets to any Person, or if the
Company merges into or consolidates or otherwise combines with any Person,
then the Company shall assign all of its right, title and interest in this
Agreement as of the date of such event to such Person, and the Company
shall cause such Person, by written agreement in form and substance
reasonably satisfactory to the Executive, to expressly assume and agree to
perform from and after the date of such assignment all of the terms,
conditions and provisions imposed by this Agreement upon the Company.
Failure of the Company to obtain such agreement shall be a breach of this
Agreement constituting "Good Reason" hereunder, except that for purposes
of implementing the foregoing, the date upon which such transfer or other
succession becomes effective shall be deemed the Termination Date. In
case of such assignment by the Company and of assumption and agreement by
such Person, as used in this Agreement, "Company" shall thereafter mean
such Person which executes and delivers the agreement provided for in this
Section 4.4 or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law, and this Agreement shall
inure to the benefit of and be enforceable by such Person. The Executive
shall, in his discretion, be entitled to proceed against any and all of
such Persons, any Person which theretofore was such a successor to the
company (as defined in the first paragraph of this Agreement) and the
Company (as so defined) in any action to enforce any rights of the
Executive hereunder. Except as provided in this Subsection, this
Agreement shall not be assignable by the Company. This Agreement shall
not be terminated by the voluntary or involuntary dissolution of the
Company.
(b) This Agreement and all rights of the Executive shall inure
to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All
amounts payable to the Executive under Sections 2.5, 2.6, 2.7, 2.8, 2.9
and 2.10 hereof if the Executive had lived shall be paid, in the event of
the Executive's death, to the Executive's estate, heirs and
representatives.
4.5 Severability. The provisions of this Agreement shall be
regarded as divisible, and if any of said provisions or any part hereof
are declared invalid or unenforceable by a court of competent
jurisdiction, the validity and enforceability of the remainder of such
provisions or parts hereof and the applicability thereof shall not be
affected thereby.
4.6 Amendment. This Agreement may not be amended or modified at any
time except by written instrument executed by the Company and the
Executive.
4.7 Withholding. The Company shall be entitled to withhold from
amounts to be paid to the Executive hereunder any federal, state or local
withholding or other taxes or charges which it is from time to time
required to withhold; provided, that the amount so withhold shall not
exceed the minimum amount required to be withheld by the law. The Company
shall be entitled to rely on an opinion of a nationally recognized tax
counsel if any question as to the amount or requirement of any such
withholding shall arise.
4.8 Certain Rules of Construction. No party shall be considered as
being responsible for the drafting of this Agreement for the purpose of
applying any rule construing ambiguities against the drafter or otherwise.
No draft of this Agreement shall be taken into account in construing this
Agreement. Any provision of this Agreement which requires an agreement in
writing shall be deemed to require that the writing in question be signed
by the Executive and an authorized representative of the Company.
4.9 Governing Law; Resolution of Disputes. This Agreement and the
rights and obligations hereunder shall be governed by and construed in
accordance with the laws of the State of Wisconsin. Any dispute arising
out of this Agreement shall, at the Executive's election, be determined by
arbitration under the rules of the American Arbitration Association then
in effect or by litigation. Whether the dispute is to be settled by
arbitration or litigation, the venue for the arbitration or litigation
shall be Wisconsin Rapids, Wisconsin, or, at the Executive's election, if
the Executive is no longer residing or working in the Wisconsin Rapids,
Wisconsin metropolitan area, in the judicial district encompassing the
city in which the Executive resides. The parties consent to personal
jurisdiction in each trial court in the selected venue having subject
matter jurisdiction notwithstanding their residence or situs, and each
party irrevocably consents to service of process in the manner provided
hereunder for the giving of notices.
4.10 Notice. Notices given pursuant to this Agreement shall be in
writing and, except as otherwise provided by Section 3.11(d) hereof, shall
be deemed given when actually received by the Executive or actually
received by the Company's Secretary or any officer of the Company other
than the Executive. If mailed, such notices shall be mailed by Unites
States registered or certified mail, return receipt requested, addressee
only, postage prepaid, if to the Company, to Northland Cranberries, Inc.,
Attention: Secretary, 800 First Avenue South, P.O. Box 8020, Wisconsin
Rapids, Wisconsin 54495-8020, or, if to the Executive, at the address set
forth below the Executive's signature to this Agreement, or to such other
address as the party to be notified shall have heretofore given to the
other party in writing.
4.11 No Waiver. No waiver by either party at any time of any breach
by the other party of, or compliance with, any condition or provision of
this Agreement to be performed by the other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same time or any
prior or subsequent time.
4.12 Headings. The heading herein contained are for reference only
and shall not affect the meaning or interpretation of any provisions of
this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
EXECUTIVE NORTHLAND CRANBERRIES, INC.
/s/ Jerold D. Kaminski By /s/ John Swendrowski
Jerold D. Kaminski John Swendrowski
Chairman of the Board and
Chief Executive Officer
NORTHLAND CRANBERRIES, INC.
1997 INCENTIVE BONUS PLAN
1. PURPOSE. The purpose of the Northland Cranberries, Inc.
1997 Incentive Bonus Plan (the "Plan") is to provide cash bonuses to
officers and employees of Northland Cranberries, Inc. or any current or
future subsidiaries thereof (collectively, unless the context indicates
otherwise, the "Company") if the Company attains certain objectives for
earnings per share and other corporate or department objectives and
personal goals during the Company's fiscal year ending August 31, 1997
(the "1997 Fiscal Year"). The Board of Directors of the Company (the
"Board") believes the Plan will further the interests of the Company and
its shareholders by increasing the incentives and personal interest in the
financial performance of the Company by those officers and employees who
contribute to the Company's continued growth and financial success.
2. ADMINISTRATION. The Plan shall be administered by the
Stock Option and Compensation Committee (the "Committee") of the Board.
In accordance with the provision of the Plan, the Committee shall have
complete authority to approve the employees of the Company who shall be
eligible to participate in the Plan for the fiscal year and the amounts of
bonuses paid thereto. The Committee shall also have the authority to
adopt such rules and regulations for carrying out the Plan, which are not
inconsistent with the terms hereof, as it may deem proper and in the best
interests of the Company and shall have complete authority and discretion
to resolve all questions regarding eligibility, interpretation,
administration and application of this Plan and any related agreements of
instruments. All such determinations by the Committee shall be final.
The existence of the plan or the grant of any bonuses hereunder shall not
restrict the ability of the Committee or the Board to grant any other
discretionary bonuses to any executive officers, employees or others
outside of the Plan.
A majority of the members of the Committee shall constitute a
quorum. All determinations of the Committee shall be made by at least a
majority of a quorum. Any decision or determination reduced to writing
and signed by all of the members of the Committee shall be fully as
effective as if it had been made by a unanimous vote at a meeting duly
called and held.
3. ELIGIBILITY. Each eligible employee of the company who is
selected by Management for participation in the Plan, subject to approval
by the Committee, shall be a Participant and shall be assigned to the
Bonus Level for his or her position according to the schedule attached as
Schedule A. A Participant shall have no rights to be selected for further
participation in the Plan or any renewal or replacement thereof in any
subsequent fiscal year. Written notice of selection for participation in
the Plan shall be given to each Participant as soon as practicable
following date of selection.
4. AWARDS TO PARTICIPANTS. Participants shall be entitled to
receive from the Company an annual incentive cash compensation award for
the 1997 Fiscal Year ("Cash Bonus Award") based on a calculated percentage
("Bonus Percentage") of such Participant's base salary earned during the
1997 Fiscal Year (excluding benefits and bonuses). Such Bonus Percentage
shall be determined pursuant to a formula based primarily on the
percentage that the "Net Income Per Common Share" of the Company for the
1997 Fiscal Year, bears to the "Target Earnings" for the 1997 Fiscal Year,
and other specified criteria. The formula and criteria for determining
the Bonus Percentage for each Bonus Level are set forth on Schedule B.
Management shall establish department and individual goals for Bonus
Levels II through VI and shall set the discretionary bonuses for Bonus
Level I seasonal employees, all subject to review by the Committee. The
Target Earnings for the 1997 Fiscal Year shall be Net Income Per Common
Share of $0.75.
5. PAYMENT OF CASH BONUSES. The Cash Bonus Awards, if any,
determined under Section 4 for the 1997 Fiscal Year shall be distributed
by the Company to such Participants in cash, or to his or her estate in
the event of death of the Participant, no later than November 15, 1997.
6. NET INCOME PER COMMON SHARE. For purposes of the Plan, the
Company's "Net Income Per Common Share" for the 1997 Fiscal Year shall be
equal to the Company's net income per common share reflected on the
Company's audited consolidated financial statement for such fiscal year
(excluding extraordinary items, but not the issuance of additional shares
of capital stock or rights with respect thereto, other than as set forth
in Section 10 below).
7. TERMINATION OF EMPLOYMENT. No Cash Bonus Award shall be
made under the Plan for a Participant whose employment with the Company
(or subsidiary) is terminated during the 1997 Fiscal Year for reasons
other than retirement due to age in accordance with the Company's
policies, total or permanent disability, or death, unless approved by the
Committee after considering the cause of termination.
8. NEW EMPLOYEES, TRANSFERS BETWEEN BONUS LEVELS.
(a) It is contemplated that employees may be approved for
participation during a portion of the 1997 Fiscal Year and may be eligible
to receive an award for the year based on the number of full months as a
Participant. A person newly hired or promoted on or before March 1, 1997,
into a position covered by a Bonus Level shall be eligible for
participation in the Plan and, if selected by Management, shall have his
or her participation in the Plan prorated for the fiscal year.
(b) Participants who are promoted or otherwise transfered to a
position covered by a different Bonus Level will receive Cash Bonus Awards
prorated to months served in each eligible position.
9. POWERS OF COMPANY NOT AFFECTED. The existence of the Plan
shall not affect in any way the right or power of the Company or its
shareholders to make or authorize any or all adjustments,
recapitalization, reorganizations or other changes in the Company's
capital structure or its business, or any merger or consolidation of the
Company, or any issuance of bonds, debentures, preferred, or prior
preference stock ahead of or affecting the Company's stock 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.
10. CAPITAL ADJUSTMENTS AFFECTING STOCK. 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 Committee may adjust the determination
of net income per common share as it deems appropriate in its sole
discretion. The determination of the Committee as to any adjustment shall
be final (including any determination that no adjustment is necessary).
11. AMENDMENT. The Board shall have the right to amend the
Plan at any time and for any reason; provided, however, that no amendment
of the Plan shall, without the consent of the Participants, alter or
impair any of the rights or obligations under any bonuses previously
earned and declared.
12. TAX WITHHOLDING. The Company may deduct and withhold from
any amounts payable to a Participant such amount as may be required for
the purpose of satisfying the Company's obligation to withhold federal,
state or local taxes.
13. EFFECTIVE DATE; FISCAL YEARS COVERED. The Effective Date
of this Plan is September 9, 1996 and the Plan shall apply to and cover
the Company's 1997 Fiscal Year. This Plan shall be renewable for
additional one-year periods upon action of the Board.
14. RIGHTS OF PARTICIPANTS.
(a) No Participant shall have any interest in any specific
asset or assets of the Company (or any subsidiary) by reason of any
account under the Plan. It is intended that the Company has merely a
contractual obligation to make payments when due hereunder.
(b) No Participant may assign, pledge, or encumber his or her
interest under the Plan, or any part thereof.
(c) Nothing contained in this Plan shall be construed to:
(i) Give any Participant any right to receive any award
other than in the sole discretion of the Committee;
(ii) Limit in any way the right of the Company or
subsidiary to terminate an Participant's employment at any time; or
(iii) Be evidence of any agreement or understanding,
express or implied, that a Participant will be retained in any
particular position, at any particular rate of remuneration or for
any length of time.
<PAGE>
NORTHLAND CRANBERRIES, INC.
1997 INCENTIVE BONUS PLAN
SCHEDULE A
MAXIMUM PERCENTAGE
BONUS LEVEL POSITIONS OF BASE SALARY
VII President and Chief Executive Officer 70%
VI Executive Vice-President 60%
Vice-President - Chief Financial Officer
Vice-President - Corporate Secretary
V Vice-President - Purchasing & Budget 50%
Vice-President - East Coast Operations
Vice-President - Agricultural Operations
Vice-President - Manufacturing
Department Directors
IV Managers 30%
III Assistant Managers 20%
II Other Full-Time Employees 10%
I Seasonal Employees 0%
<PAGE>
NORTHLAND CRANBERRIES, INC.
1997 INCENTIVE BONUS PLAN
SCHEDULE B
BONUS LEVEL CRITERIA BONUS PERCENTAGE
Sum of:
VII Company's Net Income Per Common
Share Equals--
90% or more of Target Earnings 30%
100% or more of Target Earnings 20%
More than 100% of Target Earnings 1% for Each
Percentage Point
over Target
Earnings up to 10%
Maximum
Criteria adopted by Committee Based Discretionary from
on Executive's contribution towards
enhancement of Company's long-term 0 to 10%
outlook __________________
Maximum Bonus 70% of Base Salary
VI Company's Net Income Per Common
Share Equals--
90% or more of Target Earnings 20%
100% or more of Target Earnings 20%
More than 100% of Target Earnings 1% for Each
Percentage Point
over Target
Earnings up to 10%
Maximum
Achievement of Department Goals 10%
__________________
Maximum Bonus 60% of Base Salary
V Company's Net Income Per Common
Share Equals--
90% or more of Target Earnings 10%
100% or more of Target Earnings 15%
More than 100% of Target Earnings 1% for Each
Percentage Point
over Target
Earnings up to 10%
Maximum
Achievement of Department Goals 15%
__________________
Maximum Bonus 50% of Base Salary
IV Company's Net Income Per Common
Share Equals--
100% or more of Target Earnings 10%
More than 100% of Target Earnings 1% for Each
Percentage Point
over Target
Earnings up to 10%
Maximum
Achievement of Individual Goals 10%
__________________
Maximum Bonus 30% of Base Salary
III Company's Net Income Per Common
Share Equals--
100% or more of Target Earnings 5%
More than 100% of Target Earnings 1% for Each
Percentage Point
over Target
Earnings up to 5%
Maximum
Achievement of Individual Goals 10%
__________________
Maximum Bonus 20% of Base Salary
II Company's Net Income Per Common
Share Equals--
100% or more of Target Earnings 5%
Achievement of Individual Goals 5%
__________________
Maximum Bonus 10% of Base Salary
I Discretionary Bonuses
NORTHLAND CRANBERRIES, INC.
1998 INCENTIVE BONUS PLAN
1. PURPOSE. The purpose of the Northland Cranberries, Inc.
1998 Incentive Bonus Plan (the "Plan") is to provide cash bonuses to
officers and employees of Northland Cranberries, Inc. or any current or
future subsidiaries thereof (collectively, unless the context indicates
otherwise, the "Company") if the Company attains certain objectives for
earnings per share and other corporate or department objectives and
personal goals during the Company's fiscal year ending August 31, 1998
(the "1998 Fiscal Year"). The Board of Directors of the Company (the
"Board") believes the Plan will further the interests of the Company and
its shareholders by increasing the incentives and personal interest in the
financial performance of the Company by those officers and employees who
contribute to the Company's continued growth and financial success.
2. ADMINISTRATION. The Plan shall be administered by the
Stock Option and Compensation Committee (the "Committee") of the Board.
In accordance with the provision of the Plan, the Committee shall have
complete authority to approve the employees of the Company who shall be
eligible to participate in the Plan for the fiscal year and the amounts of
bonuses paid thereto. The Committee shall also have the authority to
adopt such rules and regulations for carrying out the Plan, which are not
inconsistent with the terms hereof, as it may deem proper and in the best
interests of the Company and shall have complete authority and discretion
to resolve all questions regarding eligibility, interpretation,
administration and application of this Plan and any related agreements of
instruments. All such determinations by the Committee shall be final.
The existence of the plan or the grant of any bonuses hereunder shall not
restrict the ability of the Committee or the Board to grant any other
discretionary bonuses to any executive officers, employees or others
outside of the Plan.
A majority of the members of the Committee shall constitute a
quorum. All determinations of the Committee shall be made by at least a
majority of a quorum. Any decision or determination reduced to writing
and signed by all of the members of the Committee shall be fully as
effective as if it had been made by a unanimous vote at a meeting duly
called and held.
3. ELIGIBILITY. Each eligible employee of the company who is
selected by Management for participation in the Plan, subject to approval
by the Committee, shall be a Participant and shall be assigned to the
Bonus Level for his or her position according to the schedule attached as
Schedule A. A Participant shall have no rights to be selected for further
participation in the Plan or any renewal or replacement thereof in any
subsequent fiscal year. Written notice of selection for participation in
the Plan shall be given to each Participant as soon as practicable
following date of selection.
4. AWARDS TO PARTICIPANTS. Participants shall be entitled to
receive from the Company an annual incentive cash compensation award for
the 1998 Fiscal Year ("Cash Bonus Award") based on a calculated percentage
("Bonus Percentage") of such Participant's base salary earned during the
1998 Fiscal Year (excluding benefits and bonuses). Such Bonus Percentage
shall be determined pursuant to a formula based primarily on the
percentage that the "Net Income Per Common Share" of the Company for the
1998 Fiscal Year, bears to the "Target Earnings" for the 1998 Fiscal Year,
and other specified criteria. The formula and criteria for determining
the Bonus Percentage for each Bonus Level are set forth on Schedule B.
Management shall establish department and individual goals for Bonus
Levels II through VI and shall set the discretionary bonuses for Bonus
Level I seasonal employees, all subject to review by the Committee. The
Target Earnings for the 1998 Fiscal Year shall be Net Income Per Common
Share of $0.90.
5. PAYMENT OF CASH BONUSES. The Cash Bonus Awards, if any,
determined under Section 4 for the 1998 Fiscal Year shall be distributed
by the Company to such Participants in cash, or to his or her estate in
the event of death of the Participant, no later than November 15, 1998.
6. NET INCOME PER COMMON SHARE. For purposes of the Plan, the
Company's "Net Income Per Common Share" for the 1998 Fiscal Year shall be
equal to the Company's net income per common share reflected on the
Company's audited consolidated financial statement for such fiscal year
(excluding extraordinary items, but not the issuance of additional shares
of capital stock or rights with respect thereto, other than as set forth
in Section 10 below).
7. TERMINATION OF EMPLOYMENT. No Cash Bonus Award shall be
made under the Plan for a Participant whose employment with the Company
(or subsidiary) is terminated during the 1998 Fiscal Year for reasons
other than retirement due to age in accordance with the Company's
policies, total or permanent disability, or death, unless approved by the
Committee after considering the cause of termination.
8. NEW EMPLOYEES, TRANSFERS BETWEEN BONUS LEVELS.
(a) It is contemplated that employees may be approved for
participation during a portion of the 1998 Fiscal Year and may be eligible
to receive an award for the year based on the number of full months as a
Participant. A person newly hired or promoted on or before March 1, 1998,
into a position covered by a Bonus Level shall be eligible for
participation in the Plan and, if selected by Management, shall have his
or her participation in the Plan prorated for the fiscal year.
(b) Participants who are promoted or otherwise transfered to a
position covered by a different Bonus Level will receive Cash Bonus Awards
prorated to months served in each eligible position.
9. POWERS OF COMPANY NOT AFFECTED. The existence of the Plan
shall not affect in any way the right or power of the Company or its
shareholders to make or authorize any or all adjustments,
recapitalization, reorganizations or other changes in the Company's
capital structure or its business, or any merger or consolidation of the
Company, or any issuance of bonds, debentures, preferred, or prior
preference stock ahead of or affecting the Company's stock 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.
10. CAPITAL ADJUSTMENTS AFFECTING STOCK. 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 Committee may adjust the determination
of net income per common share as it deems appropriate in its sole
discretion. The determination of the Committee as to any adjustment shall
be final (including any determination that no adjustment is necessary).
11. AMENDMENT. The Board shall have the right to amend the
Plan at any time and for any reason; provided, however, that no amendment
of the Plan shall, without the consent of the Participants, alter or
impair any of the rights or obligations under any bonuses previously
earned and declared.
12. TAX WITHHOLDING. The Company may deduct and withhold from
any amounts payable to a Participant such amount as may be required for
the purpose of satisfying the Company's obligation to withhold federal,
state or local taxes.
13. EFFECTIVE DATE; FISCAL YEARS COVERED. The Effective Date
of this Plan is September 22, 1997 and the Plan shall apply to and cover
the Company's 1998 Fiscal Year. This Plan shall be renewable for
additional one-year periods upon action of the Board.
14. RIGHTS OF PARTICIPANTS.
(a) No Participant shall have any interest in any specific
asset or assets of the Company (or any subsidiary) by reason of any
account under the Plan. It is intended that the Company has merely a
contractual obligation to make payments when due hereunder.
(b) No Participant may assign, pledge, or encumber his or her
interest under the Plan, or any part thereof.
(c) Nothing contained in this Plan shall be construed to:
(i) Give any Participant any right to receive any award
other than in the sole discretion of the Committee;
(ii) Limit in any way the right of the Company or
subsidiary to terminate an Participant's employment at any time; or
(iii) Be evidence of any agreement or understanding,
express or implied, that a Participant will be retained in any
particular position, at any particular rate of remuneration or for
any length of time.
<PAGE>
NORTHLAND CRANBERRIES, INC.
1998 INCENTIVE BONUS PLAN
SCHEDULE A
MAXIMUM PERCENTAGE
BONUS LEVEL POSITIONS OF BASE SALARY
VII Chairman and Chief Executive Officer 70%
President and Chief Operating Officer
VI Executive Vice-President 60%
Vice-President - Chief Financial Officer
Vice-President - Corporate Secretary
V Vice-President - Purchasing & Budget 50%
Vice-President - East Coast Operations
Vice-President - Agricultural Operations
Vice-President - Manufacturing
Department Directors
IV Managers 30%
III Assistant Managers 20%
II Other Full-Time Employees 10%
I Seasonal Employees 0%
<PAGE>
NORTHLAND CRANBERRIES, INC.
1998 INCENTIVE BONUS PLAN
SCHEDULE B
BONUS CRITERIA BONUS PERCENTAGE
LEVEL
Sum of:
VII Company's Net Income Per Common
Share Equals--
90% or more of Target Earnings 30%
100% or more of Target Earnings 20%
More than 100% of Target 1% for Each Percentage
Earnings Point over Target
Earnings up to 10%
Maximum
Criteria adopted by Committee Discretionary from
Based on Executive's contribution 0 to 10%
towards enhancement of Company's _____________________
long-term outlook
Maximum Bonus 70% of Base Salary
VI Company's Net Income Per Common
Share Equals--
90% or more of Target Earnings 20%
100% or more of Target Earnings 20%
More than 100% of Target 1% for Each Percentage
Earnings Point over Target
Earnings up to 10%
Maximum
Achievement of Department Goals 10%
_____________________
Maximum Bonus 60% of Base Salary
V Company's Net Income Per Common
Share Equals--
90% or more of Target Earnings 10%
100% or more of Target Earnings 15%
More than 100% of Target 1% for Each Percentage
Earnings Point over Target
Earnings up to 10%
Maximum
Achievement of Department Goals 15%
_____________________
Maximum Bonus 50% of Base Salary
IV Company's Net Income Per Common
Share Equals--
100% or more of Target Earnings 10%
More than 100% of Target 1% for Each Percentage
Earnings Point over Target
Earnings up to 10%
Maximum
Achievement of Individual Goals 10%
_____________________
Maximum Bonus 30% of Base Salary
III Company's Net Income Per Common
Share Equals--
100% or more of Target Earnings 5%
More than 100% of Target 1% for Each Percentage
Earnings Point over Target
Earnings up to 5%
Maximum
Achievement of Individual Goals 10%
_____________________
Maximum Bonus 20% of Base Salary
II Company's Net Income Per Common
Share Equals--
100% or more of Target Earnings 5%
Achievement of Individual Goals 5%
_____________________
Maximum Bonus 10% of Base Salary
I Discretionary Bonuses
NORTHLAND CRANBERRIES, INC. AND SUBSIDIARY
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)
Five Months
Years Ended August 31, Ended Fiscal Years Ended March 31(1)
August 31,
STATEMENT OF 1997 1996 1995(1) 1995 1994 1993
OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C>
Revenues $47,375 $37,608 $ 891 $21,784 $18,051 $13,000
Cost of sales 23,171 16,517 1,401 13,057 8,751 6,345
------- ------- ------- -------- ------- -------
Gross profit (loss) 24,204 21,091 (510) 8,727 9,300 6,655
Costs and expenses:
Selling, general and
administrative 15,963 7,020 1,908 2,440 2,046 1,474
Interest 4,493 2,657 1,919 3,654 2,394 2,028
------- ------- ------- ------- ------- -------
Total costs and expenses 20,456 9,677 3,827 6,094 4,440 3,502
------- ------- ------- ------- ------- -------
Income (loss) before income taxes
and change in accounting method 3,748 11,414 (4,337) 2,633 4,860 3,153
Income taxes 1,516 4,509 (1,689) 1,051 1,917 1,210
Change in accounting method -- -- 1,249 -- -- --
-------- -------- --------- ------- ------- -------
Net income (loss) $ 2,232 $ 6,905 $(1,399) $ 1,582 $ 2,943 $ 1,943
========== ========== ========== ========== ========== ==========
Weighted average shares
outstanding(3) 14,308,845 13,927,820 9,393,656 8,890,850 8,834,774 7,636,712
Per share data:(3)
Net income (loss) $0.16 $0.50 $(0.15) $0.18 $0.33 $0.25
Cash dividends:(2)
Class A common $0.16 $0.145 $0.06 $0.14 $0.175 $0.08
Class B common $0.145 $0.132 $0.055 $0.127 $0.159 $0.073
<CAPTION>
August 31 March 31(1)
BALANCE SHEET DATA: 1997 1996 1995 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Current assets $ 39,691 $ 18,617 $ 11,740 $ 6,746 $ 5,598 $ 8,309
Current liabilities 11,545 12,067 10,583 10,169 4,485 4,949
Total assets 180,932 145,485 121,745 107,745 83,074 67,703
Long-term debt 83,131 56,978 45,538 55,793 38,945 25,098
Shareholders' equity 76,811 69,059 59,113 34,627 33,125 31,572
_______________
(1) The Company changed its fiscal year end from March 31 to August 31, beginning after a five-month interim transitional
period ending on August 31, 1995. See Note 3 to Notes to Consolidated Financial Statements.
(2) In August 1993, Northland changed its mode of dividend payment from annual to quarterly. As a result, the fiscal 1994
dividends stated above include the annual dividend of $0.20 per Class A share and $0.182 per Class B share, paid in
June 1993, plus three quarterly dividends of $0.05 per Class A share and $0.0455 per Class B share, paid in September
1993, December 1993 and March 1994.
(3) All share and per share data has been adjusted for the Company's September 3, 1996 stock split.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Results of Operations and Financial Condition
RESULTS OF OPERATIONS
General
Fiscal 1997 continued to be a year of transition for the Company as
it aggressively implemented its "from marsh to market" vertical
integration business strategy. Prior to fiscal 1997, the Company sold
substantially all of its crop under fixed price contracts to two large
manufacturers of private label cranberry beverages. With the nonrenewal
of those contracts in March 1996, the Company began aggressively selling
its own cranberry crop directly to customers, including manufacturing and
distributing its own Northland brand 100% juice cranberry beverages to
supermarkets. As a result of the Company's changing business nature
between fiscal 1996 and 1997, some comparisons between periods are not
particularly meaningful or informative. Additionally, 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 1997 Compared to Fiscal 1996
Revenues. Revenues in fiscal 1997 were $47.4 million, a
$9.8 million, or 26.0% increase, from $37.6 million in fiscal 1996. The
increase in fiscal 1997 revenues was primarily the result of increased
sales of the Company's Northland brand 100% juice products, as the Company
completed the national rollout of its branded juice line during its fourth
quarter. As of the end of fiscal 1997, the Company increased the
distribution of its branded juice products to approximately 60% of
supermarkets nationwide, compared to approximately 13% at the end of
fiscal 1996. The Company's market share of United States supermarket
shelf-stable cranberry beverages grew from 0.9% for the 12-week period
ending September 8, 1996, to 5.8% for the 12-week period ending
September 14, 1997. Despite the Company's successful rollout of its
branded juice line, revenues did not reach the level expected in fiscal
1997, due principally to the seller's unexpected and sudden termination of
the Company's planned acquisition of a major private label cranberry
juice processor and distributor that would have enabled the Company to
quickly establish a leadership role in the private label segment of the
cranberry juice industry. As a result, a significant amount of the
Company's cranberry supply that was intended for use by the target company
and expected to generate revenue in fiscal 1997 remained in inventory at
the end of the year.
The Company expects that its Northland brand juice sales will
continue to increase in fiscal 1998 as the Company expands its promotional
support and distribution of its juice products. The Company, however,
believes that sales of its concentrate and private label products will be
very price competitive in fiscal 1998. Fresh fruit sales are expected to
be consistent with fiscal 1997 levels and are expected to continue to
decrease as a percentage of aggregate revenue.
Cost of Sales. Cost of sales increased $6.7 million or 40.3%, to
$23.2 million in fiscal 1997, from $16.5 million in fiscal 1996. The
Company's gross margin in fiscal 1997 was 51.1%, compared to 56.1% in
fiscal 1996. The decrease in gross margin in fiscal 1997 was due to
higher inventory costs on a per barrel basis, the Company's changing
product mix and increased price competition for concentrate sales. The
Company's crop growing costs are relatively fixed on a per acre basis,
leaving the size of the crop harvested as the principal variable factor in
determining the Company's inventory carrying costs on a per barrel basis.
Due to the smaller than expected fiscal 1997 crop, the Company's inventory
carrying costs per barrel increased, resulting in increased cost of sales
and reduced gross margin percentages. The Company's fiscal 1998 crop
harvest is expected to be at record levels, which will favorably impact
fiscal 1998 gross margins. However, other factors such as concentrate and
private label pricing and the Company's product mix will likely offset
such favorable gross margin enhancements.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $16.0 million in fiscal 1997, compared to
$7.0 million in fiscal 1996. As a percent of revenues, selling, general
and administrative expenses increased to 33.7% in fiscal 1997 from 18.7%
in fiscal 1996. The increase was due primarily to the Company's national
rollout of its branded juice products. Fiscal 1997 advertising, promotion
and slotting expenses in support of the Company's branded juice rollout
totaled $9 million. The Company expects to significantly increase market
spending in support of its brand to approximately $24 million in fiscal
1998.
Interest Expense. Fiscal 1997 interest expense was $4.5 million, a
$1.8 million increase from fiscal 1996 interest expense of $2.7 million.
The increase in interest expense was due to increased debt levels as a
result of funding property and equipment additions and working capital
necessary to fund the full implementation of the Company's "from marsh to
market" business strategy.
Income Tax Expense. The Company recorded $1.5 million in income tax
expense in fiscal 1997, compared to $4.5 million in fiscal 1996. As of
August 31, 1997, the Company had net operating loss carry-forwards for
federal and state income tax purposes of $7.6 million remaining to offset
against future taxable income. See Note 13 of Notes to Consolidated
Financial Statements.
Net Income. Net income for fiscal 1997 was $2.2 million, compared to
fiscal 1996 net income of $6.9 million. Net income per common share was
$0.16 in fiscal 1997, compared to net income per common share of $0.50 in
fiscal 1996. Weighted average common shares outstanding for fiscal 1997
were 14,309,000, compared to 13,928,000 for fiscal 1996.
Fiscal 1996 Compared to Fiscal 1995
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
was 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 discussion
compares information relating to the Company's fiscal 1996 (ending
August 31, 1996) performance with fiscal 1995 (ending March 31, 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. Fiscal 1996 revenues
benefited 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.
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.
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.
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.
FINANCIAL CONDITION
Net cash used in operating activities in fiscal 1997 was
$10.6 million. Fiscal 1996 cash provided by operating activities was
$9.4 million. The $20.0 million change in net cash from operating
activities was directly related to the Company's change in business
strategy and the resulting increase in current assets. The Company's
current ratio was 3.4 to 1.0 at the end of fiscal 1997, compared to a
current ratio of 1.5 to 1.0 at the end of fiscal 1996. In prior years,
accounts receivable and inventory levels were minimal at year end as a
result of the Company selling its crop following harvest as fresh fruit
or in bulk. The bulk sales were to two private label bottlers under
fixed price supply agreements with resulting receivables collected within
six months after the harvest. Year-end trade accounts receivable and
inventory levels increased slightly in fiscal 1996 with the Company's
entry into the branded juice and cranberry concentrate markets. The
fiscal 1997 national rollout of the Company's branded juice line and
increased cranberry concentrate sales resulted in a $4.4 million increase
in accounts receivable to $7.0 million at August 31, 1997, from $2.6 million
at the end of fiscal 1996. Inventories increased by $14.1 million to $26.5
million at August 31, 1997, compared to inventories of $12.4 million at
August 31, 1996, principally due to the increased raw materials and
finished goods inventories necessary to support branded juice sales.
However, part of this increase was also due to a larger than normal
inventory carryover of cranberry supply as a result of the unexpected
terminated acquisition of a private label juice processor and distributor.
The Company expects trade accounts receivable and inventory levels to
continue to increase in the normal course of business in fiscal 1998 as it
continues to increase branded juice, private label and cranberry
concentrate sales.
Net cash used for investing activities decreased to $14.2 million in
fiscal 1997 from $20.6 million in fiscal 1996. The decrease was
principally the result of significantly reduced property and equipment
additions. Fiscal 1997 property and equipment additions were
$8.8 million, compared to $14.5 million in the prior year. Fiscal 1996
additions included $4.2 million to complete construction of the Company's
concentrate manufacturing facility and $2.9 million to improve the
Company's fruit handling facilities to support the Company's changing
business strategy. In September 1996, the Company completed the
acquisition of a 108-acre cranberry property located in Northern
Wisconsin. The Company paid for the acquisition with $4.85 million in
cash and 169,014 shares of the Company's Class A Common Stock. In
December 1996, the Company completed the acquisition of a 73-acre
cranberry property located in Central Wisconsin. The Company paid for the
acquisition with $2.18 million and 100,000 shares of the Company's Class A
Common Stock. The Company utilized its bank credit facilities to fund the
cash portion of the acquisitions. The Company expects its fiscal 1998
property and equipment additions to be comparable to fiscal 1997. The
Company's fiscal 1998 debt service and capital expenditure obligations
will be funded with cash generated from operations and by borrowings under
the Company's amended October 1997 credit facilities.
Net cash provided by financing activities increased in fiscal 1997 to
$24.8 million, from $11.1 million in fiscal 1996. The increase in cash
provided by financing activities was primarily the result of the Company's
increase in long-term debt used to fund property and equipment additions,
cranberry marsh acquisitions and working capital needs. The Company's
total equity increased to $76.8 million at August 31, 1997, compared to
$69.1 million at the end of fiscal 1996. The Company's total debt
(including current portion) at fiscal 1997 year end was $86.8 million, for
a total debt-to-equity ratio of 1.1 to 1, compared to total debt of
$60.5 million and debt-to-equity ratio of 0.88 to 1 at August 31, 1996.
On October 3, 1997, the Company amended its existing bank credit facility
to increase its revolving credit facility to $75 million, increasing its
revolving credit availability by $20 million. The new credit facility
matures on December 31, 2000. The amount of unused available borrowings
under the amended credit facility was $25.6 million at August 31, 1997.
See Note 10 of Notes to Consolidated Financial Statements.
Seasonality and Quarterly Results:
As shown in the table below, the Company's business prior to fiscal
1997 had been extremely seasonal because the Company's historical results
of operations had been significantly dependent upon the results of the
Company's annual harvest. The successful implementation of the Company's
marsh to market strategy is expected to help reduce the extreme
seasonality of its business, although the Company expects its juice sales
to experience seasonality during the traditional Thanksgiving and
Christmas holiday seasons.
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)
Aug. 31, May 31, Feb. 28, Nov. 30, Aug. 31, May 31, Feb. 29, Nov. 30,
1997 1997 1997 1996 1996 1996 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $12,565 $10,377 $13,513 $10,920 $ 5,246 $ 6,675 $ 3,984 $21,703
Income (loss) before
income taxes (1,662) 394 2,531 2,485 (1,091) 1,435 254 10,816
Net income (loss) (1,021) 225 1,526 1,502 (669) 855 149 6,570
Net income (loss) per
share (0.07) 0.02 0.11 0.11 (0.05) 0.06 0.01 0.48
Dividends per share:
Class A 0.04 0.04 0.04 0.04 0.04 0.035 0.035 0.035
Class B 0.036 0.036 0.036 0.036 0.036 0.032 0.032 0.032
</TABLE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters in this Management's Discussion and Analysis, as well as
other matters discussed in this annual report are "forward-looking
statements" intended to quality 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 will include such words as the
Company "believes," "anticipates," "expects" or words of similar import.
Similarly, statements that describe the Company's future plans, objectives
or goals are also forward-looking statements. 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 undo reliance on such forward-looking
statements. The forward-looking statements made herein are only made as
of the date of this annual report and the Company undertakes no obligation
to publicly update such forward-looking statements to reflect subsequent
events or circumstances.
<PAGE>
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, 1997 and 1996,
and the related consolidated statements of operations, shareholders'
equity and cash flows for the years ended August 31, 1997 and 1996,
March 31, 1995 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, 1997 and 1996, and the
results of their operations and their cash flows for the years ended
August 31, 1997 and 1996, March 31, 1995 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
October 9, 1997
<PAGE>
NORTHLAND CRANBERRIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
August 31, 1997 and 1996
ASSETS 1997 1996
Current assets:
Cash and cash equivalents $ 230,668 $ 266,467
Accounts and notes receivable 6,995,595 2,631,434
Investments 1,259,548 1,259,548
Inventories 26,454,087 12,414,426
Prepaid expenses 1,715,351 921,673
Deferred income taxes 3,035,486 1,123,949
---------- ----------
Total current assets 39,690,735 18,617,497
Property and equipment, net 138,273,041 122,489,101
Investments and other assets 2,968,634 4,378,021
----------- -----------
Total assets $180,932,410 $145,484,619
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,806,261 $ 2,592,765
Accrued liabilities 4,091,661 5,914,422
Current portion of long-term
obligations 3,647,000 3,560,000
---------- ----------
Total current liabilities 11,544,922 12,067,187
Long-term obligations 83,130,707 56,978,095
Deferred income taxes 9,445,856 7,380,556
Shareholders' equity:
Preferred stock, $.01 par value,
5,000,000 shares authorized,
none issued -- --
Common stock:
Class A, $.01 par value, 13,219,370
and 12,734,286 shares issued and
outstanding, respectively 132,074 127,343
Class B, $.01 par value, 636,202
shares issued and outstanding 6,362 6,362
Additional paid-in capital 67,888,801 60,183,370
Retained earnings 8,783,688 8,741,706
----------- -----------
76,810,925 69,058,781
----------- -----------
Total liabilities and
shareholders' equity $180,932,410 $145,484,619
=========== ===========
See notes to consolidated financial statements.
<PAGE>
NORTHLAND CRANBERRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended August 31, 1997 and 1996, March 31, 1995
and Five-Month Transition Period Ended August 31, 1995
<TABLE>
<CAPTION>
Years Ended Five Months
August 31, August 31, Ended Year Ended
1997 1996 August 31, 1995 March 31, 1995
<S> <C> <C> <C> <C>
Revenues $47,374,827 $37,607,845 $ 890,397 $21,783,966
Cost of sales 23,170,154 16,516,785 1,400,611 13,057,275
----------- ----------- ----------- -----------
Gross profit (loss) 24,204,673 21,091,060 (510,214) 8,726,691
Costs and expenses:
Selling, general and administrative 15,963,109 7,020,416 1,907,841 2,439,978
Interest 4,493,104 2,657,067 1,919,544 3,654,006
----------- ----------- ----------- -----------
Total costs and expenses 20,456,213 9,677,483 3,827,385 6,093,984
----------- ----------- ----------- ------------
Income (loss) before income taxes and
cumulative effect of change in
accounting method 3,748,460 11,413,577 (4,337,599) 2,632,707
Income taxes (benefit) 1,516,000 4,509,000 (1,689,000) 1,051,000
----------- ----------- ----------- -----------
Income (loss) before cumulative
effect of change in accounting
method 2,232,460 6,904,577 (2,648,599) 1,581,707
Cumulative effect of change in
accounting method (net of taxes of
$806,000) -- -- 1,249,469 --
---------- ---------- ---------- ----------
Net income (loss) $ 2,232,460 $ 6,904,577 $(1,399,130) $ 1,581,707
========== ========== ========== ==========
Net income (loss) per common and
common equivalent share
Income (loss) before cumulative
effect of change in accounting
method $ 0.16 $ 0.50 $ (0.28) $ 0.18
Cumulative effect of change in
accounting method -- -- 0.13 --
--------- -------- ---------- --------
Net income (loss) per common and
common equivalent share $ 0.16 $ 0.50 $ (0.15) $ 0.18
======== ======== ========== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended August 31, 1997 and 1996, March 31, 1995
and Five-Month Transition Period Ended August 31, 1995
<TABLE>
<CAPTION>
Years Ended Five Months
August 31, August 31, Ended Year Ended
1997 1996 August 31, 1995 March 31, 1995
<S> <C> <C> <C> <C>
Operating activities:
Net income (loss) $2,232,460 $6,904,577 $(1,399,130) $1,581,707
Cumulative effect of change in
accounting method -- -- (1,249,469) --
Adjustments to reconcile net
income (loss) to net cash (used
in) provided by operating
activities:
Depreciation and amortization 5,242,804 4,151,448 1,481,176 3,094,708
(Gain) loss on disposal of
property and equipment (5,059) (25,236) 4,839 (8,331)
Changes in assets and
liabilities:
Receivables, prepaid expenses
and other current assets (5,157,839) (2,256,715) 1,807,428 (1,350,827)
Inventories (14,039,660) (4,715,542) (5,178,107) (445,206)
Accounts payable and accrued
liabilities (423,990) 4,031,250 163,632 1,847,874
Deferred income taxes 1,516,000 1,289,000 (883,000) 910,000
----------- ---------- ----------- ----------
Net cash (used in) provided by
operating activities (10,635,284) 9,378,782 (5,252,631) 5,629,928
----------- ---------- ----------- ----------
Investing activities:
Property and equipment additions (8,812,293) (14,480,765) (5,827,245) (8,716,881)
Proceeds on disposals of property
and equipment 108,841 152,065 40,229 65,695
Acquisitions of cranberry
operations (6,765,513) (7,279,818) (4,485,112) (5,046,097)
Net decrease in investments 1,259,548 1,259,548 -- 1,259,548
Other (26,415) (214,018) (66,507) (145,412)
----------- ----------- ----------- ----------
Net cash used for investing
activities (14,235,832) (20,562,988) (10,338,635) (12,583,147)
----------- ----------- ----------- -----------
Financing activities:
Proceeds from long-term debt 31,850,000 15,000,000 14,800,000 14,350,000
Payments on long-term debt (5,610,388) (6,053,365) (24,803,303) (6,626,409)
Dividends paid (2,190,478) (1,923,429) (515,978) (1,193,248)
Net proceeds from common stock
offering -- 4,016,192 26,401,133 --
Exercise of stock options 987,650 76,400 -- 85,633
Other (201,467) (25,819) (153,265) (89,638)
----------- ----------- ----------- -----------
Net cash provided by financing
activities 24,835,317 11,089,979 15,728,587 6,526,338
----------- ----------- ----------- -----------
Net (decrease) increase in cash and
cash equivalents (35,799) (94,227) 137,321 (426,881)
Cash and cash equivalents, beginning
of period 266,467 360,694 223,373 650,254
----------- ----------- ----------- -----------
Cash and cash equivalents, end of
period $ 230,668 $ 266,467 $ 360,694 $ 223,373
=========== =========== =========== ===========
Supplemental disclosure of cash flow
information
Cash paid during the year for:
Interest (net of interest
capitalized) $4,499,870 $2,716,788 $2,445,138 $3,323,440
Income taxes 525,000 2,768,000 -- 268,000
Supplemental disclosures of noncash
investing and financing
activities (See Notes 5 and 7).
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NORTHLAND CRANBERRIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended August 31, 1997 and 1996, March 31, 1995
and Five-Month Transition Period Ended August 31, 1995
<TABLE>
<CAPTION>
Common Stock Additional
Paid-In Retained Treasury
Class A Class B Capital Earnings Stock
<S> <C> <C> <C> <C> <C>
Balances, April 1, 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 options -- -- 39,404 -- --
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 28,907,583 5,675,667 0
Net proceeds from common stock
offering (2,000,000 shares) 20,000 -- 26,381,133 -- --
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
offering (300,000 shares) 3,000 -- 4,013,192 -- --
Common stock issued for
acquisition of cranberry marsh
(16,807 shares) 168 -- 399,832 -- --
Common stock issued for
cranberries purchased (29,443
shares) 294 -- 417,796 -- --
Stock options exercised 103 -- 76,297 -- --
Tax benefit from exercise of
stock options -- -- 54,380 -- --
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
Common stock issues for
acquisition of cranberry marshes
(269,014 shares) 2,690 -- 5,166,930 -- --
Stock options exercised 2,041 -- 1,544,984 -- --
Tax benefit from exercise of
stock options -- -- 993,517 -- --
Cash dividends paid:
$.16 per Class A share -- -- -- (2,097,949) --
$.14544 per Class B share -- -- -- (92,529) --
Net income -- -- -- 2,232,460 --
--------- --------- ---------- ---------- --------
Balances, August 31, 1997 $132,074 $ 6,362 $67,888,801 $8,783,688 $ 0
========= ========= ========== ========== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended August 31, 1997 and 1996, March 31, 1995
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 fiscal 1996 and 1995, 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 sells its products 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 consist of those costs related to the growing of the crop which
will be harvested in the following fiscal year (see also Note 2).
Inventories are stated at lower of cost or market 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 using the straight-line method over
40 years. Accumulated amortization at August 31, 1997 and 1996 was
$220,668 and $196,968, respectively. The Company assesses the carrying
value of goodwill at each balance sheet date. Consistent with Statement
of Financial Accounting Standard ("SFAS") No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of," such assessments include, as appropriate, a comparison of the
estimated future nondiscounted cash flows anticipated to be generated
during the remaining amortization period of the goodwill to the net
carrying value of goodwill. The Company recognizes diminution in value of
goodwill, if any, on a current basis.
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.
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: sales of
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 (14,308,845, 13,927,820, 9,393,656 and
8,890,850 for the years ended August 31, 1997 and 1996, five-month
transition period ended August 31, 1995 and the year ended March 31, 1995,
respectively).
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.
Reclassifications -- Certain amounts previously reported have been
reclassified to conform with the current presentation.
Accounting Standards To Be Adopted -- In 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (SFAS)
No. 128, "Earnings Per Share;" SFAS No. 129, "Disclosure of Information
about Capital Structure;" SFAS No. 130, "Reporting Comprehensive Income;"
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information." The Company is currently in the process of evaluating the
accounting and disclosure effects of these Statements.
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 for $14,706,000. The purchase price was paid in 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 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.
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 paid through the delivery of
$4,850,000 cash and 169,014 shares of Class A Common Stock.
On December 30, 1996, the Company acquired the productive cranberry
bog and certain of the associated assets of Vanatta Cranberry Company LLC
for $4,350,000. The purchase price was paid through the delivery of
$2,175,000 cash and 100,000 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 1997 acquisitions
had occurred on September 1, 1995, were not significant.
6. INVENTORIES
Inventories at August 31, 1997 and 1996 were as follows:
1997 1996
Raw materials $ 6,274,305 $ 1,692,403
Finished goods 9,001,810 1,399,335
Deferred crop costs 11,177,972 9,322,688
---------- ----------
$26,454,087 $12,414,426
========== ==========
7. PROPERTY AND EQUIPMENT
Property and equipment at August 31, 1997 and 1996 were as follows:
1997 1996
Land $ 7,548,486 $ 7,351,596
Land improvements 14,709,554 12,346,400
Cranberry vines, bulkheads
and irrigation equipment 72,153,272 59,607,337
Buildings and improvements 17,627,758 12,986,763
Equipment and vehicles 33,428,680 23,727,102
Construction in progress 16,397,639 25,079,393
----------- -----------
161,865,389 141,098,591
Less accumulated depreciation
and amortization 23,592,348 18,609,490
----------- -----------
$138,273,041 $122,489,101
=========== ===========
The Company capitalized $1,398,092, $1,531,405, $557,065 and $1,065,164 of
interest for the years ended August 31, 1997 and 1996, five-month
transition period ended August 31, 1995, and the year ended March 31,
1995, respectively.
8. INVESTMENT AND OTHER ASSETS
Investments and other assets at August 31, 1997 and 1996 were as
follows:
1997 1996
Investments $ -- $1,259,548
Leasehold interests, net 1,039,395 1,197,277
Goodwill, net 734,010 757,710
Other 1,195,229 1,163,486
--------- ---------
$2,968,634 $4,378,021
========= =========
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 $1,259,548
will be received in fiscal 1998.
9. ACCRUED LIABILITIES
Accrued liabilities at August 31, 1997 and 1996 were as follows:
1997 1996
Compensation and other
employee benefits $1,038,134 $2,870,565
Property taxes 469,832 518,181
Interest 331,828 338,594
Commissions 320,733 59,678
Income taxes 181,976 338,332
Other 1,749,158 1,789,072
--------- ---------
$4,091,661 $5,914,422
========= =========
10 NOTES PAYABLE AND LONG-TERM OBLIGATIONS
Long-term debt at August 31, 1997 and 1996 was as follows:
1997 1996
Credit agreement with a bank:
Revolving credit facility $41,500,000 $10,050,000
Acquisition credit facility 7,950,000 9,600,000
Term loan 8,400,000 9,450,000
Term loan 2,760,000 3,680,000
Term loan 3,428,000 4,000,000
Term loan payable to insurance
company with interest at 8.69% 13,641,173 14,267,752
Term loan payable to insurance
company with interest at 7.85% 9,098,534 9,490,343
---------- ----------
86,777,707 60,538,095
Less current portion 3,647,000 3,560,000
---------- ----------
$83,130,707 $56,978,095
========== ==========
On August 31, 1994, the Company entered into a credit agreement with a
bank, which was subsequently amended on June 7, 1995, November 4, 1996 and
October 3, 1997, and provides for a secured revolving credit facility of
$75,000,000 and three secured term credit facilities in the amounts of
$4,600,000, $4,000,000 and $10,500,000. The revolving credit facility
terminates on December 31, 2000. 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.
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, 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 an applicable rate margin, 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 on the average daily
unused amount of the revolving credit facility.
The amount of unused available borrowings under the amended credit
facilities was $25,550,000 at August 31, 1997.
The 8.69% term loan with an insurance company is payable in
semi-annual installments of $926,562, 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 of $564,630, 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.
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
($73,000,000 at August 31, 1997), 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:
1998 $ 3,647,000
1999 3,742,000
2000 10,806,000
2001 50,864,000
2002 1,535,000
Thereafter 16,183,707
----------
$86,777,707
==========
11. SHAREHOLDER'S EQUITY
The Company is authorized to issue 5,000,000 shares of preferred
stock with a par value of $.01.
The authorized common stock of the Company consists of 60,000,000
shares of Class A Common Stock and 4,000,000 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. The Company issued an additional 300,000
shares of Class A Common Stock in September 1995 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, 1997, 2,822,720 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.
Weighted
Average
Number of Exercise
Price Range Shares Price
Outstanding at April 1,
1994 $2.63 - $9.38 680,284 $4.42
Granted 7.75 - 8.75 97,034 8.70
Exercised 2.63 - 7.38 (23,260) 3.68
Cancelled 2.63 - 8.63 (9,772) 4.75
Outstanding at March 31,
1995 2.63 - 9.38 744,286 4.99
Granted 7.25 - 7.25 85,000 7.25
Cancelled 3.13 - 8.63 (5,234) 5.97
Outstanding at August 31,
1995 2.63 - 9.38 824,052 5.22
Granted 10.88 - 17.75 273,662 10.95
Exercised 2.63 - 8.75 (20,560) 3.72
Cancelled 3.88 - 8.75 (8,000) 6.96
----- ------- --------- -------
Outstanding at August 31,
1996 2.63 - 17.75 1,069,154 6.70
Granted 12.94 - 18.50 61,500 17.48
Exercised 3.75 - 10.88 (204,070) 4.84
Cancelled 7.25 - 18.50 (10,800) 12.56
----- ------- --------- -------
Outstanding at August 31,
1997 $2.63 - $18.50 915,784 $7.77
===== ======= ========= =======
Shares exercisable at
August 31, 1997 $2.63 - $17.75 826,484 $7.12
===== ======= ========= =======
Available for grant after
August 31, 1997 489,748
=======
The following table summarizes information about stock options
outstanding at August 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Shares Weighted
Out- Average Weighted Shares Weighted
standing Remaining Average Exercisable Average
Range of Exercise at August Contractual Exercise at August Exercise
Prices 31, 1997 Life-Years Price 31, 1997 Price
<S> <C> <C> <C> <C> <C>
$ 2.63 - $ 6.00 398,150 3.2 $ 4.06 392,150 $ 4.04
6.01 - 10.00 194,472 6.3 8.09 169,472 8.12
10.01 - 18.50 323,162 8.2 12.15 264,862 11.02
----- ------ ------- ----- ------ -------- ------
$2.63 - $18.50 915,784 5.6 $ 7.77 826,484 $ 7.12
===== ====== ======= ===== ====== ======== ======
</TABLE>
In Fiscal 1997, the Company adopted the disclosure requirements of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" (SFAS 123). The Company has elected to continue
to follow the provisions of Accounting Principles Board No. 25,
"Accounting for Stock Issued to Employees" and its related
interpretations; accordingly, no compensation cost has been reflected in
the financial statements for its stock option plan. Had compensation cost
for the Company's stock option plan been determined based on the fair
value at the grant dates for awards under those plans consistent with the
method of SFAS 123, the Company's net income and net income per share
would have been reduced to the pro forma amounts indicated below (in
thousands, except per share amounts):
1997 1996
Net Income:
As reported $2,232,000 $6,905,000
Pro forma $2,124,000 $6,037,000
Net Income per share:
As reported $ 0.16 $ 0.50
Pro forma $ 0.15 $ 0.44
For the purpose of these disclosures, the fair value of each option
granted was estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions: expected
volatility of 34.2%; risk-free interest rate of 6.2%; 0.93% dividend rate
during the expected term; and an expected life of 9 years.
13. INCOME TAXES
The provisions for income taxes is as follows:
August 31, August 31, August 31, March 31,
1997 1996 1995 1995
Currently payable:
Federal $ -- $2,997,000 $ -- $ 141,000
State -- 223,00 -- --
--------- --------- --------- ---------
-- 3,220,000 -- 141,000
Deferred:
Federal 1,274,000 944,000 (1,368,000) 721,000
State 242,000 345,000 (321,000) 189,000
--------- --------- ---------- ---------
1,516,000 1,289,000 (1,689,000) 910,000
--------- --------- ---------- ---------
$1,516,000 $4,509,000 ($1,689,000) $1,051,000
========= ========= ========== =========
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities as of August 31, 1997 and
1996 consist of the following:
1997 1996
Deferred tax assets:
Tax loss carryforwards $ 2,979,000 $ 955,000
AMT tax credits and other
carryforwards 3,552,000 3,676,000
---------- ----------
6,531,000 4,631,000
Deferred tax liabilities:
Cranberry sales 299,000 459,000
Depreciation and
amortization 12,642,000 10,429,000
---------- ----------
12,941,000 10,888,000
---------- ----------
Net deferred tax liability $6,410,000 $6,257,000
========== ==========
At August 31, 1997, the Company has net operating loss carryforwards for
Federal income tax purposes of approximately $7,597,000, which expire at
various dates through 2012.
A reconciliation of the Federal statutory income tax rate to the effective
income tax rate is as follows:
August 31, August 31, August 31, March 31,
1997 1996 1995 1995
Statutory tax rate 34.0% 34.0% 34.0% 34.0%
State income taxes, net
of Federal tax benefit 5.2 5.2 5.2 5.3
Other, net 1.2 0.3 (0.3) 0.6
---- ---- ---- ----
Effective tax rate 40.4% 39.5% 38.9% 39.9%
==== ==== ==== ====
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, 1997 and 1996 was $1,167,726 and $1,009,843, 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 years ended
August 31, 1997 and 1996, five-month transition period ended August 31,
1995, and the year ended March 31, 1995 was $262,796 and $261,166, $0 and
$338,984, 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 CEO 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 of 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 1997 and 1996, the five-month transition
period ending August 31, 1995 and fiscal 1995 was $85,598, $64,079, $0 and
$8,973, respectively.
The future minimum annual payments on noncancellable operating lease
agreements for the next three fiscal years ending August 31 are as
follows:
1998 $ 376,000
1999 371,000
2000 401,000
---------
$1,148,000
=========
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 27 independent cranberry growers pursuant to which the Company has
contracted to purchase all of the cranberry crop produced on 1,557 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 1997 and 1996
was $126,867 and $63,182, respectively.
17. 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 fiscal years 1997 and 1996, the Company had sales of approximately
$5,797,000 and $4,700,000, or 12.2% and 12.5%, respectively, of net sales
to one customer.
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
October 9, 1997, (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, 1997.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
November 26, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF NORTHLAND CRANBERRIES, INC. AS OF AND FOR THE
TWELVE MONTHS ENDED AUGUST 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> AUG-31-1997
<CASH> 230,668
<SECURITIES> 1,259,548
<RECEIVABLES> 6,995,595
<ALLOWANCES> 0
<INVENTORY> 26,454,087
<CURRENT-ASSETS> 39,690,735
<PP&E> 161,865,389
<DEPRECIATION> 23,592,348
<TOTAL-ASSETS> 180,932,410
<CURRENT-LIABILITIES> 11,544,922
<BONDS> 83,130,707
0
0
<COMMON> 138,436
<OTHER-SE> 67,888,801
<TOTAL-LIABILITY-AND-EQUITY> 180,932,410
<SALES> 46,252,656
<TOTAL-REVENUES> 47,374,827
<CGS> 23,170,154
<TOTAL-COSTS> 15,963,109
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,493,104
<INCOME-PRETAX> 3,748,460
<INCOME-TAX> 1,516,000
<INCOME-CONTINUING> 2,232,460
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,232,460
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
