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, 1998
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 offices) (Zip Code)
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 No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Aggregate market value of the voting stock held by non-affiliates of the
registrant as of November 25, 1998:
$231,804,790
Number of shares issued and outstanding of each of the registrant's classes of
common stock as of November 25, 1998:
Class A Common Stock, $.01 par value: 19,115,484 shares
Class B Common Stock, $.01 par value: 636,202 shares
PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED HEREIN BY REFERENCE:
Proxy Statement for 1999 annual meeting of shareholders scheduled to be held
January 6, 1999 (incorporated by reference into Part III, to the extent
indicated therein).
1998 Annual Report to Shareholders (incorporated by reference into Parts II and
IV, to the extent indicated therein).
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PART I
Special Note Regarding Forward-Looking Statements
We make certain "forward-looking statements" in this Form 10-K, such as
statements about our future plans, goals and other events which have not yet
occurred. We intend that these statements will qualify for the safe harbors from
liability provided by the Private Securities Litigation Reform Act of 1995. You
can generally identify these forward-looking statements because we use words
such as we "believe," "anticipate," "expect" or similar words when we make them.
Whether or not these forward-looking statements will be accurate in the future
will depend on certain risks and factors including risks associated with (i) the
development, market share growth and continued consumer acceptance of our
branded juice products; (ii) the level of expenditures to build the brand name
equity and consumer awareness of our Northland product line; (iii) the
integration of the operations of Minot Food Packers, Inc., which we acquired in
fiscal 1998; (iv) the consummation of the potential acquisition of the juice
division of Seneca Foods Corporation; (v) strategic actions of our competitors
in pricing, marketing and advertising; and (vi) agricultural factors affecting
our crop. You should consider these risks and factors and the impact they may
have when you evaluate our forward-looking statements. We make these statements
based only on our knowledge and expectations on the date of this Form 10-K. We
will not necessarily update these statements or other information in this Form
10-K based on future events or circumstances. Please read this entire Form 10-K
to better understand our business and the risks associated with our operations.
Item 1. Business.
General
We are a grower, processor and marketer of cranberries and cranberry
products. Our products include:
o Northland brand 100% juice cranberry blends, which we sell mostly
through supermarkets and, to a smaller degree, through mass merchandisers and
other retail channels;
o private label cranberry drinks and other fruit products, which we
sell to retail and wholesale customers for sale under their own labels;
o Northland brand fresh cranberries, which we sell to retail and
wholesale customers; and
o cranberry juice concentrate, single-strength cranberry juice and
frozen and whole sliced cranberries, which we sell to industrial and ingredient
customers.
We began our business in 1987 as a cranberry grower and member of the
Ocean Spray Cranberries, Inc. marketing cooperative. In 1993, we left Ocean
Spray and began implementing our marsh to market strategy by introducing
Northland brand fresh cranberries. In October 1995, we introduced our family of
Northland 100% juice cranberry blends. By June 1997, we had successfully
achieved national distribution. In July 1998, we acquired Minot Food Packers,
Inc., a manufacturer of private label cranberry and other fruit products. Also
in 1998, we reached an agreement in principle with Seneca Foods Corporation to
acquire Seneca's juice division. Please see "Potential Seneca Acquisition,"
below, for more details. As of September 13, 1998, our branded juice products
were available in all 50 states and in approximately 84% of supermarkets
nationwide according to data compiled by Information Resources, Inc.
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We had several important achievements in fiscal 1998. Included among
them:
o we topped $100 million in revenues for the first time in our history;
o we achieved an 11.9% dollar market share in the shelf-stable
cranberry beverage market according to IRI data for the 12 weeks ending
September 13, 1998, and were as high as 14.2% for the 12 weeks ending March 29,
1998;
o we acquired Minot, a Bridgeton, New Jersey company with about $41
million in revenues in its 1997 fiscal year, which produces and sells private
label cranberry and other fruit products; and
o we completed a public sale of our common stock which provided us with
$74.5 million, allowing us to pay the cash portion of the purchase price for
Minot and pay down debt, which in turn improved our financial condition.
In addition to providing us with a base of private label customers, the
Minot acquisition gave us more processing and storage facilities and our first
bottling facility. As a result, we now have the ability to bottle and can our
own products (including beverage and sauce products), and to perform those
operations for other producers of bottled and canned beverages (an arrangement
called "co-packing"). Please see the discussion below under the headings
"Non-Branded Products--Products" and "Manufacturing" for further information
about Minot.
We achieved significant revenue and asset growth in fiscal 1998 through
increased sales of our Northland 100% juice cranberry blends and the acquisition
of Minot. We intend to continue growing our business in the next fiscal year by
focusing our strategic efforts on:
o increasing spending on our national marketing efforts, including
introducing new national television advertising, to heighten consumer awareness
of our branded products and how they are different from our competitors'
products;
o expanding our product selection by adding sizes in retail outlets
across the country and by adding branded products currently produced by Seneca;
o continuing our sales and trade promotion plan;
o continuing to pursue alternative sales channels for our products,
such as mass merchandisers, club stores and foodservice providers like
restaurants, hospitals and schools;
o strengthening and expanding our national food broker network;
o continuing the integration of Minot's operations; and
o completing the acquisition of the juice division of Seneca (which we
discuss below) and integrating Seneca's operations into ours.
In addition to producing and selling cranberry and other fruit
products, we are the world's largest cranberry grower, with 25 cranberry
producing marshes and 2,549 planted acres owned or operated in Wisconsin and
Massachusetts as of November 25, 1998.
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Potential Seneca Acquisition
In August 1998 we reached an agreement in principle with Seneca Foods
Corporation to purchase most of the assets of Seneca's juice division. The
assets we will obtain in the acquisition, if it is completed, will include
Seneca's TreeSweet and Awake brand names, as well as three processing plants, a
distribution center and a receiving station. We will also purchase the right to
sell Seneca brand fruit beverages. In Seneca's last completed fiscal year, its
juice division accounted for about $105 million in revenues. We believe this
acquisition, if completed, will give us a strong presence in the apple and grape
juice segments and will allow us to enter both the retail frozen juice
concentrate category and the retail canned beverage category. If we complete the
acquisition of Seneca's juice division, our selection of branded products will
include, in addition to our current branded products:
o Seneca and TreeSweet bottled and canned fruit beverages, including
apple, grape and orange juice products;
o Seneca and TreeSweet frozen juice concentrate products, including
apple, grape, cranberry and orange juice products; and
o Awake frozen orange-flavored concentrate.
We also expect the Seneca acquisition to make our bottling and
distribution network more efficient and to further our ability to perform
co-packing operations for other bottled and canned beverage producers. This is
mainly because we will add, as part of the Seneca acquisition:
o a processing plant in Mountain Home, North Carolina;
o a processing plant in Dundee, New York;
o a processing plant in Jackson, Wisconsin;
o a distribution center in Eau Claire, Michigan; and
o a grape receiving station in Portland, New York.
In addition to helping reduce our transportation and distribution
costs, these new facilities would continue to produce the Seneca, TreeSweet and
Awake branded products currently offered by Seneca.
We intend to complete the Seneca acquisition during the second quarter
of fiscal 1999. We have not yet entered into a definitive purchase agreement
with Seneca regarding the acquisition, and, if and when we do, its closing will
still be subject to certain conditions. As a result, we cannot guarantee that we
will complete the acquisition. We have spent considerable time and attention
developing strategies to take advantage of the anticipated benefits that the
Seneca acquisition would provide. If we do not complete the acquisition, our
results of operations and our future strategic plans could be adversely
affected. Even if we complete the acquisition, we may experience difficulties
integrating Seneca's operations with our own. Also, we can't be certain that
current Seneca customers will remain our customers following the acquisition.
Should these things happen, or should we incur costs or experience problems
which we did not expect as a result of the acquisition, our results of
operations could be adversely affected.
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Branded Products
Products
Our family of Northland 100% juice cranberry blends is our primary
branded product. We introduced Northland 100% juice cranberry blends in late
1995 and achieved national distribution in the summer of 1997. As of September
13, 1998, our Northland 100% juice cranberry blends were available in all 50
states and in about 84% of supermarkets nationwide. We currently produce and
sell eight flavors, including traditional cranberry, cranberry apple, cranberry
raspberry, cranberry grape, cranberry peach, cranberry cherry, cranberry
blackberry and cranberry strawberry. Only one bottle size, 64-ounce, has been
generally available in supermarkets nationwide. However, we recently introduced
new bottle sizes, including a 46-ounce plastic bottle in supermarkets and a
128-ounce plastic bottle and 16-ounce plastic bottle multi-packs in warehouse
clubs.
In addition to Northland 100% juice cranberry blends, we also grow and
package Northland brand fresh cranberries and sell them in 12-ounce plastic bags
mainly to food retailers and wholesalers during the fall.
In November 1998, we announced that we hired Scott Corriveau to be our
President - Branded Division. Mr. Corriveau, who will assume his duties with us
in December 1998, has over 16 years experience in the beverage industry, most
recently as the Vice President, Sales and Customer Marketing for the Dr.
Pepper/7Up Premier Beverages Division of Cadbury Beverages. Mr. Corriveau will
be responsible for overseeing the continued development of our family of 100%
juice blends as well as the marketing and sale of Seneca branded products if we
complete the Seneca acquisition.
Marketing
Our principal consumer marketing strategy for our family of Northland
100% juice cranberry blends is to highlight the differences in flavor and health
benefits between Northland brand 100% juice cranberry blends and many of the
competing products of Ocean Spray and others which have less than 100% juice.
Our marketing strategy includes:
o media advertising
- we used a national television advertising campaign in fiscal
1998 designed to appeal to and be seen by our target audience and to
promote their awareness of our product, its 100% juice content, and the
lesser juice content of many of our competitors' products. We will
continue advertising on television in fiscal 1999 by again buying
advertising time on daytime network shows, cable networks, and
syndicated programming, and by adding primetime broadcast network
advertising. We also anticipate additional brand-building media efforts
in fiscal 1999, including a new national magazine advertising campaign
which will begin in November 1998. We spent approximately $7.8 million
on these types of media advertising in fiscal 1998 and intend to spend
approximately $10-12 million on these types of media advertising in
fiscal 1999; and
o sales promotion
- we offer coupons to attract first-time buyers and give
people who already drink Northland 100% juice cranberry blends
incentive to purchase more of our products. We anticipate that our
fiscal 1999 sales promotions will be consistent with fiscal 1998
levels.
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In addition to media advertising and sales promotions, we are currently
in the process of redesigning the Northland 100% juice label with the intention
of making the Northland name more visible on the bottle and making the 100%
juice content of the product more prominently shown. We also hope the new label
will be more appealing to consumers and easier to read.
In addition to our new President-Branded Division, our branded juice
marketing efforts are coordinated by our Vice President-Marketing (who has over
20 years of marketing experience in the food and consumer products industries),
a marketing manager, an assistant product manager, and support staff personnel.
We also employ our own creative services department, including a manager and two
graphic designers, to help in marketing and promotional efforts, and use the
services of an advertising agency to help us develop our marketing strategies.
Sales
Dollar sales of shelf-stable cranberry beverages continued to increase
in fiscal 1998, and we anticipate they will continue to increase in fiscal 1999.
We hope to realize increased sales of our branded juice products by:
o continuing our trade promotion plan
- on a periodic basis, we offer discounts on our products to
retailers and wholesalers to temporarily reduce the price of our
products to consumers and to obtain store display features and retail
advertisements. These efforts help to increase our product visibility
and offer the consumer savings on our products. We anticipate that
we'll increase these trade promotion activities in fiscal 1999;
o expanding our product selection by introducing more Northland sizes
and adding Seneca products;
o continuing to increase distribution of our branded products into
certain regional supermarkets where our products are not yet available; and
o establishing or increasing our presence in other sales channels such
as supercenters, mass merchandisers, club stores and drug stores.
With the planned increase in consumer marketing spending discussed in
"Marketing," above, we expect to spend approximately $35 million (which does not
include possible spending related to products added through the potential Seneca
acquisition) on advertising, promotion and slotting expenses in support of our
brand in fiscal 1999. We use the term "slotting" to refer to fees that we pay to
retailers in order to secure space on their shelves for our products. In fiscal
1998, we spent approximately $27 million on advertising, promotion and slotting.
Our branded juice sales are coordinated by our Vice President-Sales and
our Director of Sales (who together have over 40 years of sales experience in
the food and consumer products industries), as well as a sales coordinator and
eight regional sales managers. In addition to their experience with our branded
products to date, many of our sales staff personnel have prior sales experience
working for companies such as ConAgra, Inc., H.J. Heinz Company, Campbell's Soup
Company, RJR Nabisco and Welch's. Our sales staff directs distribution and sale
of our branded juice products through a network of over 70 independent food
brokers throughout the United States. If we complete the Seneca acquisition, we
will add an additional regional sales manager. Seneca also has a food broker
network of about the same size, which we anticipate combining to some degree
with our own food broker network to make our sales operations more efficient.
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Competition
The consumer cranberry product market is large and very competitive.
Based on industry data, retail supermarket bottled shelf-stable cranberry
beverage sales were approximately $735 million for the 52-weeks ended September
13, 1998. The shelf-stable cranberry beverage market is significantly larger if
you include all sales channels as opposed to just supermarkets. Most of the
markets in which we compete are dominated by Ocean Spray. Ocean Spray is an
agricultural marketing cooperative which has certain protections under federal
anti-trust laws. Ocean Spray has over 700 member-growers, accounting for
approximately 70% of all cranberries grown in North America. Based on IRI data,
for the 12-weeks ended September 13, 1998, Ocean Spray products represented
approximately 58.8% of the supermarket shelf-stable cranberry beverage market,
down from approximately 62.8% for the 12-weeks ended September 14, 1997. We had
the second largest market share for the 12-weeks ended September 13, 1998 with
11.9%.
Northland 100% juice cranberry blends compete with:
o Ocean Spray's branded cranberry juice products;
o branded cranberry juice products of other producers;
o private label cranberry juice products; and
o other juice and beverage products.
Our Northland branded juice products are 100% juice cranberry blends.
Most of our competitors' products are made up of much less than 100% juice. For
example, Ocean Spray's Cranberry Juice Cocktail contains only up to 27%
cranberry juice with the remainder being water and high fructose corn syrup.
Like Ocean Spray, many other competitors' juices use sugar or corn syrup
additives as sweeteners. We believe that we have an advantage over many of our
competitors due to the perceived benefits of our 100% juice products. We also
believe that the continued success of our branded juice products will depend on
whether consumers will continue to think highly of its quality and taste
compared to that of our competitors' products.
Northland 100% juice cranberry blends are premium-priced products. Our
products compete mainly with other premium-priced branded cranberry beverages,
but also with private label products which are usually lower priced.
During fiscal 1998, Ocean Spray introduced a product line of 100% juice
cranberry blends which compete directly with Northland 100% juice cranberry
blends. We expect that Ocean Spray will continue to compete aggressively against
our 100% juice cranberry blend products, possibly by increasing advertising of
its 100% juice product line, reducing product pricing, increasing its trade
promotions or other actions. Ocean Spray has significantly more experience in
the fruit juice markets than we do, as well as greater brand name recognition
and greater marketing and distribution resources. We cannot be certain that we
will be successful in competing against Ocean Spray.
We also compete with Ocean Spray and other brand label producers in the
market for fresh cranberry sales during the fall. We expect to continue to
compete in the fresh cranberry market by selling Northland brand fresh
cranberries at competitive prices. Ocean Spray has significantly more experience
in the sale of branded fresh cranberries than we do, as well as greater brand
name recognition and greater marketing and distribution resources. We cannot be
certain that we will be successful in competing against Ocean Spray in the fresh
cranberry market.
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If we complete the Seneca acquisition, we will also sell the Seneca
products mentioned above under the heading "Potential Seneca Acquisition." The
addition of these products should allow us to compete for the first time in the
markets for frozen juice concentrate and shelf-stable canned fruit juices and
drinks. If we enter these markets, we would compete against several established
brand names including Welch's, TreeTop, Tropicana, Mott's and Minute Maid. Many
of these competitors have greater brand name recognition and greater marketing
and distribution resources than we do. Ocean Spray does not compete in either
the frozen juice concentrate market or the shelf-stable canned fruit juice
market.
Non-Branded Products
Products
Our major non-branded products are private label cranberry and other
fruit juices. We use the term "private label" to refer to products which we
manufacture and sell to customers who sell those products to consumers under
their own labels. Before we acquired Minot, we had a very small presence in the
private label fruit juice market. Our acquisition of Minot gives us an
established base of private label customers and expertise in private label
processing and bottling. Combined with our existing network of contract
co-packers, Minot's bottling operations will also allow us to provide quicker
and lower-cost service to our private label customers than we could before.
We now offer private label cranberry juice and cranberry juice
cocktail, as well as private label apple, orange, pineapple, grape, grapefruit
and lemon juice. In addition to fruit drinks, we offer other non-branded
products including:
o industrial cranberry concentrate;
o jellied and whole cranberry sauce;
o frozen and whole sliced cranberries;
o single-strength cranberry juice;
o sports drinks; and
o ready-to-drink teas.
We also offer other non-branded products and services. For example, we
co-pack for several customers. We also own Wildhawk Inc., which sells
agricultural chemicals and fertilizer to cranberry growers.
Marketing and Sales
Our marketing and sales efforts for our non-branded products are
different from our efforts for our branded products. This is mainly because we
market our branded products directly to the consumer, while we sell non-branded
products to retail and other customers who then either market those products
under their own labels or use those products to make other consumer products. As
a result, our non-branded marketing efforts do not include media advertising or
other traditional branded product marketing support. Rather, we market our
private label products three primary ways:
o we compete on the basis of strong historical supplier relationships
and quality assurance. Many sellers of private label products maintain
relationships with their historical suppliers. The Minot acquisition provided us
with a longstanding private label customer base. Because we are able to perform
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our own bottling operations, we can also provide better quality assurance to our
private label customers and reduce bottling costs by relying less on co-packers;
o we offer product variety to retail customers. Since we work with
retail buyers on an ongoing basis, we are able to supply some of their private
label fruit juice needs as well. We believe that the acquisition of Seneca, if
completed, will further our ability to provide category management opportunities
to retailers by further expanding our product selection; and
o we compete on the basis of price. Many private label juice products
are low-cost national brand name alternatives that appeal to consumers who
typically buy lower-priced products. As a result, private label suppliers must
be low cost providers. We believe we may have a competitive advantage in private
label markets over many of our competitors because we grow most of our own
cranberries. As a result, we typically have a lower cost for our cranberries.
In addition, we are currently in the process of expanding our sales
efforts into new sales channels such as mass merchandisers, foodservice
providers and club stores. To better manage this process, we have recently
undergone a divisional restructuring, creating separate divisions for Minot,
club stores/mass merchandisers, foodservice and contract packing relations, all
of which report to our non-branded group president. We have also added several
personnel, including a Private Label Division President, a director of
foodservice, and former employees of Minot with experience in private label
sales. We intend to market our non-branded products to alternative channels by
offering low prices and category management opportunities.
Most of our non-branded revenues were realized from sales of cranberry
concentrate in fiscal 1998. Fiscal 1998 revenues from private label sales were
minimal, largely because we acquired Minot with only two months remaining in the
fiscal year. Sales of other non-branded products, such as single-strength
cranberry juice and Wildhawk's products, did not have a material impact on our
revenues in fiscal 1998. We intend to continue to pursue sales opportunities for
our non-branded products, primarily in mass merchandisers and club stores as
well as in the foodservice and industrial/ingredient markets, in fiscal 1999.
Competition
According to industry data, private label products represented over 19%
of all fruit beverages and over 18% of all cranberry drinks sold in supermarkets
nationally in 1998. As mentioned, competition in private label is based mainly
on price. Also, the private label markets are characterized by longstanding
relationships between retailers and private label manufacturers, and by
retailers who are reluctant to approve new manufacturers and vendors. As a
result, before we acquired Minot, we were largely unsuccessful in our attempts
to compete in private label. The acquisition of Minot provided us with an
established base of private label customers, and we now compete in the market
for private label cranberry juice, sauce and other processed cranberry products
with a small number of other private label manufacturers, including primarily
Clement Pappas & Co. and Cliffstar Corporation. These and other private label
processors have significant experience in the private label fruit juice and
processed cranberry products markets and have established co-packing and
bottling operations and customer bases. We may not be successful in competing
against certain major independent processors.
Private label cranberry products also compete against branded cranberry
products. Our private label products may not be able to compete successfully
against private label products of other suppliers, or the branded products of
Ocean Spray or others.
We also compete for the sale of cranberry concentrate, single-strength
cranberry juice and frozen whole and sliced cranberries to industrial customers,
such as food processors and foodservice
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companies. Cranberry concentrate is currently our principal industrial product
in terms of sales volume and potential. Our industrial customer base includes
several major food processing firms. We believe our own ability to grow and
internally process cranberries allows us to offer a reliable supply of high
quality, competitively priced cranberry products to our industrial customers.
Manufacturing
Processing and Bottling
An important part of our marsh to market strategy is our ability to
process our grown and purchased cranberries, as well as our ability to bottle
our own branded and private label products. We utilize different types of
facilities at different stages in the processing and bottling of cranberries and
cranberry-based products:
o raw cranberries are brought to our receiving stations. We
own a 150,000 square foot receiving station and fresh fruit packaging
facility in Wisconsin Rapids, Wisconsin and a 49,000 square foot
receiving station in Massachusetts. These receiving stations clean and
sort raw cranberries;
o after sorting, the cranberries we sell as fresh fruit during
the fall are stored in temperature-controlled facilities until they are
packaged and distributed for sale. Cranberries we use to make our juice
and other cranberry products are cleaned, sorted and stored in our
65,000 square foot freezer facility in Wisconsin Rapids, our freezer
facilities in Bridgeton, or independent freezer facilities, until they
are sent to one of our processing plants or to one of our co-packers;
o we have a 16,000 square foot processing plant in Wisconsin
Rapids and a 10,000 square foot processing plant in Bridgeton, New
Jersey. Our Wisconsin Rapids plant processes cranberries into cranberry
concentrate, which is used to make Northland branded juice, private
label products, or is sold to other manufacturers of cranberry
products. Our Bridgeton plant processes cranberries into
single-strength juice, used to manufacture private label products.
The Bridgeton plant also produces other juice products such as the
private label apple, orange, grape and other fruit juice products which we now
manufacture and sell following the Minot acquisition.
We acquired the Bridgeton facilities when we bought Minot. These
facilities are still fairly new to our business operations, so we have not yet
taken full advantage of the efficiencies we expect they will provide. We expect
these new facilities will help reduce our transportation, handling and storage
costs by allowing us to ship cranberries grown on our Massachusetts properties
to Minot's facilities for processing and storage. We also anticipate Northland
brand production at the Bridgeton facility will help reduce our distribution
costs and lead-times to our customers in the eastern United States.
While we are now able to perform some of our own bottling operations,
we still maintain agreements to formulate and bottle our processed cranberry
blends with three co-packers in strategic locations around the country.
Distribution Network
We have an internal transportation department which contracts with
independent carriers to distribute our bottled products to various grocery
stores and retail outlets. We currently have 11 distribution centers owned or
under contract, including a current co-packing arrangement to utilize Seneca's
distribution center in Eau Claire, Michigan, as well its three processing plants
which also act as distribution
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centers. We believe that our distribution centers, combined with the strategic
locations of our current co-packers, lowers our freight and production costs, as
well as allows for timely response to customer demands.
Agricultural Operations
An important factor in successfully implementing our marsh to market
strategy, and one of the major differences between us and many of our
competitors, is our ability to grow a significant and reliable supply of
cranberries on our owned or leased properties. We are the world's largest
cranberry grower, with 25 owned or operated properties and approximately 2,549
planted acres in Wisconsin and Massachusetts as of November 25, 1998. In the
fall of 1997 (i.e., fiscal 1998), we harvested a record 417,000 barrels from
2,243 acres. The large harvest was due in part to the maturation of hybrid
high-yield cranberry vines which we planted in our expansion program in prior
years. On our hybrid acres in 1997, we achieved an average of 259 barrels
harvested per acre, compared to around 170 barrels on our non-hybrid acreage.
To supplement our own internal supply of cranberries, we also contract
with other cranberry growers in Wisconsin and Oregon to purchase their crop. In
fiscal 1998, we bought approximately 104,000 barrels of cranberries from other
growers. As of November 25, 1998, we maintain 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 1999. The ability to harvest our own fruit in both Wisconsin
and Massachusetts, combined with the contracted acreage, provides us with
geographical diversity in our crop and spreads our agricultural risk. We expect
the quantity of cranberries purchased under these contracts to increase in
future years as the contracted marsh acreage matures and becomes more
productive. However, we cannot be certain that these contracts will be renewed
when they expire.
We have increased our planted acreage over time mainly through marsh
acquisitions and our own internal planting program. From August 1987 through
November 15, 1998, we added, through acquisitions or leases, a total of 20 marsh
properties. During this period, our total planted acreage has increased 656%,
from 337 acres to 2,549 acres.
The quality and quantity of cranberries produced in any given year is
dependent upon certain factors which we have little control over. For example,
extremes in temperature, rainfall levels, storms and hail, or crop infestations
can all adversely impact the production in any crop year. While we make efforts
to reduce the potential adverse effects that these factors may have on our
internal crop, our cranberry production remains subject to these agricultural
factors.
We also have crop insurance coverage for all of our marshes which is
subsidized by the federal government. These policies help insure against bad
weather and other contingencies which may affect our crop. They generally insure
us for up to 75% of the average crop yield on each marsh over the past 10 years.
Regulation
Cranberry Products Regulation
The production, packaging, labeling, marketing and distribution of our
fresh cranberries and 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. We
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believe we have complied, and will be able to comply, in all material respects
with such rules, regulations and laws.
Environmental and Other Governmental Regulation
It can be difficult under federal laws for cranberry growers and other
developers to obtain permits to create new cranberry marshes in wetlands in the
United States. To do so, such growers must generally observe a "no net loss" of
wetlands policy. That is, they must show that the proposed development activity
will not result in a loss of wetland acreage, or they must restore the
functional value of acreage they propose to disturb. Given this strict
requirement, as well as strict water quality legislation in Wisconsin and
Massachusetts, we believe it is currently unlikely that we, or other cranberry
growers or developers in North America, will be able to secure permits for
cranberry marsh development or expansion in wetland acreage. However, we and
other growers or developers may renovate existing wetland acreage from time to
time and replant older cranberry vine varieties with higher-yielding vine
varieties. Also, certain developers have begun to create upland cranberry
marshes, which are marshes that are not on wetland acreage. We do not know
whether upland marshes, if successful, will increase the available supply of
cranberries in the future.
Certain growers have also begun to plant, cultivate, and develop new
cranberry-producing acreage in several states and abroad. Because of
environmental regulations, the soil and temperature conditions necessary to grow
cranberries and the long lead-time required for cranberry vines to mature, we do
not expect these efforts to materially affect the supply of cranberries in
fiscal 2000.
We are currently taking steps to clean up certain contamination caused
by underground storage tanks at one of our marshes in Wisconsin and one in
Massachusetts. We have removed the tanks and reported this to the appropriate
state regulatory agencies. Our clean-up activities are subject to state
supervision. Based on information available as of August 31, 1998, we believe
most of the costs of such activities will be covered by state reimbursement
funds (except in the case of the Massachusetts property), or claims against the
prior owners of the properties. We do not expect to incur material liabilities
as a result of these activities.
The Wisconsin Department of Natural Resources approved regulations
which became effective in May 1998 and which amended parts of the Wisconsin
Administrative Code to make it easier to obtain the DNR's approval to maintain
existing cranberry marshes and to obtain state water quality certification to
conduct activities in wetlands under 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, we do not expect
the regulations to materially affect the supply of cranberries in Wisconsin in
the near term.
The Cranberry Marketing Committee of the United States Department of
Agriculture has the authority to recommend that the Secretary of the USDA impose
harvest restrictions on cranberry growers if the CMC believes there will be an
over-supply of cranberries for the coming crop year. The USDA has not imposed
such restrictions since 1971. While we do not anticipate any such restrictions
in the near future, we can't be certain that such restrictions will not be
imposed.
We don't expect environmental or other governmental legislation or
regulation to have a material effect on our capital expenditures, results of
operations or competitive position, other than as we have described above.
-12-
<PAGE>
Seasonality
Before fiscal 1997, our business was very seasonal because we sold most
of our crop to cranberry processors. Now that we have changed from a cranberry
grower to a consumer products company, we expect to reduce the seasonality of
our business because we will offer branded and private label products for sale
throughout the entire year. We do expect, however, that our results of
operations will continue to fluctuate from quarter to quarter depending mainly
upon the level of media advertising and other promotional expenditures in any
given quarter.
Materials and Supplies
We buy bottles, caps, flavorings, juices and packaging either from our
co-packers or independent third parties. We get most of the materials and
supplies necessary for growing and cultivating cranberries, including water and
sand, from our own marshes. We purchase and expect to continue purchasing most
of our fertilizer and pesticides from Wildhawk. We purchase the rest of the raw
materials and supplies, including the materials used to package our fresh fruit,
from various sources.
If necessary, we believe we would be able to find other sources for raw
materials and supplies without a material delay or adverse effect on our
business.
Trademarks and Formulae
We own the Northland and Minot trademarks, which are registered in the
United States Patent and Trademark Office. The Northland trademark is important
in the sale of our branded fresh cranberries and cranberry juice products. We
expect it will become more important as Northland brand 100% juice cranberry
blends continue to grow in market share and distribution.
If we complete the Seneca acquisition, we will also own the TreeSweet
and Awake trademarks. These trademarks are also registered in the United States
Patent and Trademark Office. Additionally, we expect to enter into a license
agreement with Seneca in connection with the acquisition which will allow us to
market and sell Seneca brand juice and concentrate.
We use proprietary flavor formulations to make our cranberry blends. We
protect the confidentiality of these formulations by requiring co-packers to
enter into confidentiality agreements with us.
Employees
As of August 31, 1998, we had 212 full-time employees, as compared to
203 as of August 31, 1997. In addition to our full time employees, we hired:
o approximately 90 seasonal workers during the 1998 crop cultivation
season;
o approximately 264 seasonal workers to harvest our crop; and
o approximately 117 seasonal employees to operate the cranberry
processing facility in Wisconsin Rapids from September through December 1997.
We also had 34 full-time employees in sales and marketing as of August
31, 1998, compared to 20 as of August 31, 1997.
Seneca's juice division currently has over 350 employees.
-13-
<PAGE>
We have entered into collective bargaining agreements with unions
representing the former Minot employees in New Jersey. Those agreements cover
about 160 employees and expire on May 14, 2001. We believe our current
relationships with our employees, both union and non-union, is good.
Item 2. Properties
In Wisconsin Rapids, Wisconsin we own three office buildings, including
our corporate headquarters, an office building near our processing plant and the
Northland Conference Center. We also own a 150,000 square foot receiving station
and fresh fruit packaging facility located on 40 acres which we use to clean and
store processed and fresh cranberries. Also in Wisconsin Rapids, we own a 16,000
square foot juice concentrating facility which gives us the capacity to
concentrate over 400,000 barrels of cranberries every year.
In Bridgeton, New Jersey, we own a dry warehousing, receiving and
shipping facility; a processing plant; four cold storage facilities; a
manufacturing and bottling facility; and an office building.
We also own a 49,000 square foot receiving station located on a
seven-acre parcel of land adjacent to the Hanson Division bogs in Massachusetts.
In addition to our facilities, we own 22 cranberry marshes and lease
another three. We have set forth in the following table information about each
of our 25 cranberry marshes as of November 25, 1998. We own all of these marshes
in fee simple (or we lease them, in either case as indicated below), subject to
mortgages (except for the Dandy Creek, Nantucket and Hills Division Marshes and
one of the two marshes in each of the Associate and Crawford Creek Divisions).
All of our marshes have storage buildings and repair shops for machinery, trucks
and harvest and irrigation equipment. Each also has a house on site or close to
the site which serves as the marsh manager's residence. Many of our marshes also
have residences for assistant marsh managers. We believe that all of our
facilities are suitable and adequate for our existing needs.
-14-
<PAGE>
<TABLE>
Marsh Division Name and Location November 25, 1998 Calendar Year
- -------------------------------- ---------------------------
Approximate Approximate Acquired
Marsh Acres Planted Acres or Leased
<S> <C> <C> <C> <C>
Associates Division (two marshes), Jackson County, Wisconsin..... 4,198 159 1983/1996
Meadow Valley Division, Jackson County, Wisconsin................ 2,150 77 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 2,549
====== =====
</TABLE>
Item 3. Legal Proceedings.
As of the date hereof, we are not a party to any legal proceedings
which, in our opinion, would have a material adverse effect on our results of
operations or financial condition if they were determined unfavorably to us.
Item 4. Submission of Matters to a Vote of Shareholders.
We did not submit any matters to a vote of our shareholders during the
fourth quarter of fiscal 1998.
-15-
<PAGE>
Executive Officers
As of November 25, 1998, each of our executive officers is identified
below together with information about each officer's age, current position with
us and employment history for at least the past five years:
Name Age Current Position
John Swendrowski 50 Chairman of the Board and
Chief Executive Officer
Robert E. Hawk 43 Group President - Non-Branded Divisions
John A. Pazurek 49 Vice President - Finance, Treasurer and
Chief Financial Officer
William J. Haddow 50 Vice President - Purchasing and
Transportation
Steven E. Klus 52 Manufacturing Division President
David J. Lukas 56 Senior Vice President - Administration/
Secretary and Corporate Counsel
Scott Corriveau 40 President - Branded Division
John Stauner 36 Agricultural Operations Division President
John S. Wilson 48 East Coast Division Vice President
John Swendrowski originally founded Northland in 1987 and has served as
our Chief Executive Officer since that time.
As part of our recent divisional restructuring, in August 1998 Robert
E. Hawk was appointed Group President-Non-Branded Divisions. Before that, he
served as our Executive Vice President since October 1996; Vice President -
Sales, Marketing and Special Projects since January 1993; and Vice President -
Operations since January 1989.
John Pazurek is a certified public accountant who joined us as
Controller and Principal Accounting Officer in May 1987. In May 1990, he 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.
Bill Haddow was named Vice President - Purchasing and Transportation in
September 1998. Before that, he served as Vice President-Purchasing,
Transportation and Budget since October 1996; Vice President-Purchasing and
Transportation from May 1993; and Assistant Vice President-Purchasing from 1989.
We named Steve Klus our Manufacturing Division President in September
1998. He joined us in April 1996 as the Director of Strategic Product Planning.
He was appointed Vice President-Manufacturing in October 1996. Before that, he
served as President-Eastern Division of Seneca Foods Corporation in New York
from May 1990.
Dave Lukas has been with us since April 1992 when he joined us 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. In September
1998, he was promoted to Senior Vice President-Administration, Secretary and
Corporate Counsel. Before joining us, he practiced law in Wisconsin Rapids for
over 20 years.
-16-
<PAGE>
Scott Corriveau was named our new President-Branded Division in
November 1998 and will assume his duties with us in December 1998. Before that,
Mr. Corriveau held sales and marketing positions with Cadbury Beverages PLC,
based in London, England, since 1989. His positions with Cadbury Beverages
included Vice President, Sales and Customer Marketing of the Dr. Pepper/7Up
Premier Beverages Division since 1997 and Vice President, Customer Marketing of
the Mott's U.S.A. Division since 1995. Mr. Corriveau has over 16 years of
experience in the beverage industry, including nearly eight years with Cadbury
Beverages and seven years with Brown Forman Beverage Company.
John Stauner became our Agricultural Division President in September
1998. Before that, he was our Vice President-Agricultural Operations since
October 1996; Vice President-Operations from May 1995; and Assistant Vice
President of Operations since we were formed in 1987.
John Wilson joined us 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. He became our East Coast Division Vice
President in connection with our divisional restructuring in September 1998.
Before joining us, he served as Manager-Grower Services at Ocean Spray in
Lakeville, Massachusetts from 1988.
Our executive officers 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.
-17-
<PAGE>
PART II
Item 5. Market for the Company's Common Equity and Related Shareholder Matters.
We have adjusted all share data appearing in the table below where
necessary to reflect our two-for-one stock split effected in the form of a 100%
stock dividend on September 3, 1996 on our Class A Common Stock.
<TABLE>
Sale Price Range of Class A Common Stock (1)
- --------------------------------------------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
- --------------------------------------------------------------------------------------------------------------------
Fiscal Year Ended August 31, 1998
<S> <C> <C> <C> <C>
High $21.25 $16.50 $19.13 $16.13
Low $13.00 $12.63 $12.75 $9.63
Fiscal Year Ended August 31, 1997
High $25.25 $27.50 $20.75 $19.25
Low $15.25 $17.00 $8.88 $12.69
- ---------------
</TABLE>
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, 1998, there were approximately 9,200 beneficial
shareholders for the shares of our Class A Common Stock and three shareholders
of record for the shares of our Class B Common Stock. Shares of our Class A
Common Stock trade on The Nasdaq Stock Market under the symbol CBRYA. No public
market exists for the shares of our Class B Common Stock.
See Item 6 for information on cash dividends paid on our Common Stock.
On November 25, 1998, the last sale price of shares of our Class A Common Stock
was $12.5625 per share.
Item 6. Selected Financial Data.
Pursuant to Instruction G, we have incorporated the information
required by this Item by reference from information under the caption "Selected
Financial Data" in our 1998 Annual Report to Shareholders.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Pursuant to Instruction G, we have incorporated the information
required by this Item by reference from information under the caption
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" in our Annual Report.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
This item is not applicable.
-18-
<PAGE>
Item 8. Financial Statements and Supplementary Data.
Pursuant to Instruction G, we have incorporated by reference our
Consolidated Balance Sheets as of August 31, 1998 and 1997, our Consolidated
Statements of Earnings, Cash Flows and Shareholders' Equity for the years ended
August 31, 1998, 1997 and 1996, together with the related Notes to Consolidated
Financial Statements (including supplementary financial data) from information
under the captions having substantially the same titles in the Annual Report.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
-19-
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Company.
Pursuant to Instruction G, we have incorporated the information
required by this Item with respect to directors by reference to the information
set forth under the caption "Election of Directors" in our definitive proxy
statement for our 1999 annual meeting of shareholders filed with the Commission
pursuant to Regulation 14A on November 24, 1998. The information required by
Item 405 of Regulation S-K is also incorporated by reference to the information
set forth under the caption "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, we have incorporated the information
required by this Item by reference to the information set forth under the
caption "Executive Compensation" in the Proxy Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Pursuant to Instruction G, we have incorporated the information
required by this Item by reference to the information set forth under the
caption "Stock Ownership of Management and Others" in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
None.
-20-
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) We have filed the following documents as part of this Form 10-K:
1. Financial Statements
Consolidated Balance Sheets as of August 31, 1998 and 1997
Consolidated Statements of Earnings, Cash Flows and Shareholders'
Equity for the fiscal years ended August 31, 1998, 1997 and 1996
Notes to Consolidated Financial Statements
Independent Auditors' Report
We have omitted other schedules because they are not required or not
applicable, or the information required to be shown is included in our 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) We filed the following Current Reports on Form 8-K with the
Securities and Exchange Commission during the fourth quarter of
fiscal 1998 and the first quarter of fiscal 1999 through the date
of this Form 10-K:
DATE FILED DATE OF REPORT ITEM
September 14, 1998 July 1, 1998 Item 7 - Financial Statements
related to the Acquisition of Minot
Food Packers, Inc.
July 15, 1998 July 1, 1998 Item 2 - Acquisition of Minot Food
Packers, Inc.
- -------------------
* We will furnish to shareholders the Exhibits to this Form 10-K,
including long-term debt instruments disclosed in Exhibit 4.5, on
request and 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.
-21-
<PAGE>
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 25, 1998 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 25, 1998 below by the following
persons on behalf of the Company and in the capacities indicated.
By:/s/ John Swendrowki By:/s/ John C. Seramur
John Swendrowski John C. Seramur
Chairman of the Board, Director
Chief Executive Officer and Director
By:/s/ John A. Pazurek By:/s/ LeRoy J. Miles
John A. Pazurek LeRoy J. Miles
Vice President-Finance, Treasurer, Chief Director
Accounting Officer and Chief Financial Officer
By:/s/ Jeffrey J. Jones By:/s/ Robert E. Hawk
Jeffrey J. Jones Robert E. Hawk
Director Group President - Non-Branded
Divisions and Director
By:/s/ Patrick F. Brennan By:/s/ Jerold D. Kaminski
Patrick F. Brennan Jerold D. Kaminski
Director Director
By:/s/ Pat Richter
Pat Richter
Director
-22-
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
2 Asset Purchase Agreement, dated as of July 1, 1998, by and among the
Company, Minot Food Packers, Inc. and Michael A. Morello.
[Incorporated by reference to Exhibit 2.0 to the Company's
Registration Statement on Form S-3 (Reg. No. 333-53173).]
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, 1998.
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. [Incorporated
by reference to Exhibit 4.5 to the Company's Form 10-K for the
fiscal year ended August 31, 1997.]
4.6 First Amendment to Amended and Restated Credit Agreement, dated as
of September 30, 1998, between the Company and Harris Trust &
Savings Bank.
4.7 Second Amendment to Amended and Restated Credit Agreement and
Amendment to Revolving Credit Note, dated as of November 20, 1998,
between the Company and Harris Trust & Savings Bank.
4.8 Revolving Credit Note, dated October 3, 1997, by the Company in
favor of Harris Trust & Savings Bank. [Incorporated by reference to
Exhibit 4.6 to the Company's Form 10-K for the fiscal year ended
August 31, 1997.]
-23-
<PAGE>
EXHIBIT NO. DESCRIPTION
4.9 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.]
4.10 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.]
4.11 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.]
4.12 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.]
4.13 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 4.13, 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.]
-24-
<PAGE>
EXHIBIT NO. DESCRIPTION
*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. [Incorporated by reference to
Exhibit 10.6 to the Company's Form 10-K for the fiscal year ended
August 31, 1997.]
*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.]
*10.12 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. 1998 Incentive Bonus Plan. [Incorporated
by reference to Exhibit 10.14 to the Company's Form 10-K for the
fiscal year ended August 31, 1997.]
*10.14 Northland Cranberries, Inc. 1999 Incentive Bonus Plan.
13 Portions of the 1998 Annual Report to Shareholders expressly
incorporated by reference into this Form 10-K.
21 Subsidiaries of the Company.
23 Consent of Deloitte & Touche LLP.
27 Financial Data Schedule.
99 Definitive Proxy Statement for the Company's 1999 annual meeting of
shareholders scheduled to he held on January 6, 1999 previously
filed with the Commission under Regulation 14A on November 24, 1998
and
-25-
<PAGE>
EXHIBIT NO. DESCRIPTION
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, 1998, the By-Laws of the Company were amended by changing the
last sentence of Section 3.01 to read as follows:
"The board of directors of the corporation shall consist of that number
of directors as determined from time to time by the board of directors, but
shall in no event exceed ten."
=============================================
Amended Effective October 21, 1998
=============================================
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.
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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
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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
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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
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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
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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 board of
directors of the corporation shall consist of that number of directors as
determined from time to time by the board of directors, but shall in no event
exceed ten.
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
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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
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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
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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
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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.
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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
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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
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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
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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.
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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
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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.
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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.
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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
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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
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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.
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(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.
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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
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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
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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.
24
NORTHLAND CRANBERRIES, INC.
FIRST AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Ladies and Gentlemen:
Reference is hereby made to that certain Amended and Restated Credit
Agreement dated as of October 3, 1997 (the "Credit Agreement"), between
Northland Cranberries, Inc., a Wisconsin corporation (the "Company"), and you
(the "Bank"). All capitalized terms used herein without definition shall have
the same meanings herein as such terms have in the Credit Agreement. Reference
is also made to that certain letter dated as of May 20, 1998 from the Bank to
the Company (and consented and agreed to by the Participants) pursuant to which
the Bank and the Participants consented to the formation of a wholly-owned
Subsidiary of the Company to acquire substantially all of the assets of Minot
Food Packers, Inc. on the terms and conditions set forth therein (such letter,
as the same has been amended, being referred to as the "Consent Letter").
In connection with the Consent Letter, the Company has requested that the
Bank make certain amendments to the Credit Agreement and the Bank is willing to
do so under the terms and conditions set forth in this agreement (herein, this
"Amendment"). Upon the effectiveness of this Amendment, this Amendment shall
constitute the New Amendment referred to in the Consent Letter.
<PAGE>
1. AMENDMENTS TO CREDIT AGREEMENT.
Upon the satisfaction of the conditions precedent set forth in Section 2
of this Amendment, the Credit Agreement shall be and hereby is further amended
as follows:
(a) The definition of the term "Senior Funded Debt Ratio" appearing in
Section 9 of the Credit Agreement shall be amended in its entirety to read as
follows:
""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). For
purposes of this definition, the "Company's Funded Debt" and the
"Company's EBITDA" shall, as of any time the same is to be
determined, include (without duplication) the Funded Debt at such
time and EBITDA for the four fiscal quarters most recently ended,
respectively, of any Person acquired by the Company in accordance
with the terms of this Agreement at any time during the Company's
most recently ended four fiscal quarter period."
(b) Section 9 of the Credit Agreement shall be amended by inserting the
following new definition in the appropriate alphabetical order:
""Material Subsidiary" means Minot Food Packers,
Inc., a New Jersey corporation ("Minot")."
(c) Section 7 of the Credit Agreement shall be amended and restated in its
entirety to read as follows:
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<PAGE>
"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, and
will cause each Material Subsidiary to, 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 or any Material
Subsidiary from discontinuing the operation and maintenance of any
of its Properties if such discontinuance is, in its judgment,
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, and will cause each
Material Subsidiary to, duly pay and discharge all taxes, rates,
assessments, fees and governmental charges upon or against the
Company, such Material Subsidiary or against their respective
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, and
will cause each Material Subsidiary to, 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 it
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
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<PAGE>
and other material related thereto maintained by the Company and the
Material Subsidiaries from time to time.
Section 7.4. Financial Reports. The Company will, and will
cause each Material Subsidiary to, 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 and its Material Subsidiaries
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
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<PAGE>
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, and shall cause
each Material Subsidiary to, 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 and each Material Subsidiary, to examine and make
copies of the books of accounts and other financial records of the
Company and each Material Subsidiary, and to discuss the affairs,
finances and accounts of the Company and each Material Subsidiary
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 and such Material
Subsidiary, as the case
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<PAGE>
may be. 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,
and will not permit any Material Subsidiary to, 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, and will not permit any Material Subsidiary to, 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, or such
Material Subsidiary's, business and upon fair and reasonable terms
no less favorable to the Company, or such Material Subsidiary as the
case may be, 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;
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<PAGE>
(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 Net Income of the
Company and the Material Subsidiaries 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, nor will it permit
any Material Subsidiary to, pledge, mortgage or otherwise encumber
or subject to or permit to exist upon or be subjected to any lien,
charge or
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<PAGE>
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 or such Material Subsidiary, as the case
may be, 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 or any Material
Subsidiary 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 or
any Material Subsidiary 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;
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<PAGE>
(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 or any Material Subsidiary;
(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 or any
Material Subsidiary;
(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.
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<PAGE>
Section 7.13. Borrowings and Guaranties. The Company will not,
nor will it permit any Material Subsidiary to, 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 or any
Material Subsidiary 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 and any Material
Subsidiary's guarantee of such indebtedness;
(b) the liability of the Company or any Material Subsidiary
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;
(f) indebtedness of Minot owing to the
Company; and
(g) renewals, extensions and refinancings of and amendments to
each of the foregoing.
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<PAGE>
Section 7.14. Investments, Loans, Advances and Acquisitions.
The Company will not, nor will it permit any Material Subsidiary to,
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 or a Material Subsidiary'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 by the Company,
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
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<PAGE>
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;
(i) loans and advances to Wildhawk, Inc. in an aggregate
principal amount outstanding at any time not to exceed $500,000; and
(j) the Company's investment in Minot.
Section 7.15. Sale of Property. The Company will not, nor will
it permit any Material Subsidiary to, 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 and the Material Subsidiaries taken as a whole.
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<PAGE>
Section 7.16. Distributions. The Company will not, nor will it
permit any Material Subsidiary to, 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, and shall cause each Material Subsidiary to, as
soon as possible, and in any event within five Business Days after
the Company or such Material Subsdiary 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
or any Material Subsidiary 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 or any Material Subsidiary and (c)
the occurrence of any Default or Event of Default hereunder.
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<PAGE>
Section 7.18. ERISA. The Company will, and will cause each
Material Subsidiary to, 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. Neither the
Company nor any Material Subsidiary will 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, nor will it permit any Material Subsidiary
to, directly or indirectly, create or acquire any
Subsidiaries without prior approval of the Bank,
except for the Ireland operation.
Section 7.21. Intentionally Omitted.
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<PAGE>
Section 7.22. Capital Expenditures. The Company will not, nor
will it permit any Material Subsidiary to, 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."
2. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of all
of the following conditions precedent:
(a) The Company and the Bank shall have executed and delivered this
Amendment and the Participants shall have consented to this Amendment in
the space provided for that purpose below.
(b) Minot Food Packers, Inc. ("Minot") shall have executed and
delivered to the Bank a Guaranty of the Company's obligations under the
Credit Agreement which Guaranty shall be in form and substance
satisfactory to the Bank.
(c) The Bank shall have received copies (executed or certified, as
may be appropriate) of all legal documents or proceedings taken in
connection with the execution and delivery of this Amendment and the other
instruments and documents contemplated hereby to the extent the Bank or
its counsel may reasonably request, including without limitation, copies
of resolutions adopted by the board of directors of Minot (certified by
the secretary or assistant secretary of Minot) authorizing the execution
and delivery of its Guaranty.
(d) Legal matters incident to the execution and delivery of this
Amendment and the other instruments and documents contemplated hereby
shall be satisfactory to the Bank and its counsel and the Bank shall have
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<PAGE>
received the favorable written opinion of counsel for Minot in form and
substance satisfactory to the Bank.
3. EXISTING DEFAULT AND WAIVER.
The Company acknowledges that it is in default of its obligations under
Section 7.22 of the Credit Agreement by reason of its exceeding the maximum
permitted amount of capital expenditures for its fiscal year ending on or about
August 31, 1998 (the "Existing Default"). Upon the effectiveness of this
Amendment as set forth in Section 2 hereof, the Bank hereby waives the Existing
Default. The foregoing waiver is limited to the matter specifically described
herein.
4. REPRESENTATIONS.
In order to induce the Bank to execute and deliver this Amendment, the
Company hereby represents to the Bank that as of the date hereof, the
representations and warranties set forth in Section 5 of the Credit Agreement
are and shall be and remain true and correct in all material respects (except
that the representations contained in Section 5.3 shall be deemed to refer to
the most recent financial statements of the Company delivered to the Bank) and
no Default (other than the Existing Default) or Event of Default has occurred
and is continuing under the Credit Agreement or shall result after giving effect
to this Amendment.
5. MISCELLANEOUS.
(a) Except as specifically amended herein, the Credit Agreement shall
continue in full force and effect in accordance with its original terms.
Reference to this specific Amendment need not be made in the Credit Agreement,
the Notes, or any other instrument or document executed in connection therewith,
or in any certificate, letter or communication issued or made pursuant to or
with respect to the Credit Agreement, any reference in any of such items to the
Credit Agreement being sufficient to refer to the Credit Agreement as amended
hereby.
(b) The Company agrees to pay on demand all costs and expenses of or
incurred by the Bank in connection with the negotiation, preparation, execution
and delivery of this Amendment, including the fees and expenses of counsel for
the Bank.
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<PAGE>
(c) This Amendment may be executed in any number of counterparts, and by
the different parties on different counterpart signature pages, all of which
taken together shall constitute one and the same agreement. Any of the parties
hereto may execute this Amendment by signing any such counterpart and each of
such counterparts shall for all purposes be deemed to be an original. This
Amendment shall be governed by the internal laws of the State of Illinois.
[Signature Pages Follow]
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<PAGE>
Dated as of this 30th day of September, 1998.
NORTHLAND CRANBERRIES, INC.
By
Its
Accepted and agreed to in Chicago, Illinois as of the date and year last
above written.
HARRIS TRUST AND SAVINGS BANK
By
Its Vice President
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<PAGE>
Consented and agreed to as of the date and year last above written.
MERCANTILE BANK NATIONAL ASSOCIATION
By
Its
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
By
Its
FIRSTAR BANK MILWAUKEE, N.A.
By
Its
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By
Its
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NORTHLAND CRANBERRIES, INC.
SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT AND AMENDMENT TO
REVOLVING CREDIT NOTE
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois 60690
Ladies and Gentlemen:
Reference is hereby made to that certain Amended and Restated Credit
Agreement dated as of October 3, 1997 as previously amended and currently in
effect (the "Credit Agreement"), between Northland Cranberries, Inc., a
Wisconsin corporation (the "Company"), and you (the "Bank"). All capitalized
terms used herein without definition shall have the same meanings herein as such
terms have in the Credit Agreement.
The Company has requested that the Bank increase the amount of the
Revolving Credit Commitment from $75,000,000 to $95,000,000 and make certain
other amendments to the Credit Agreement and the Bank is willing to do so under
the terms and conditions set forth in this agreement (herein, this "Amendment").
1. AMENDMENTS TO CREDIT AGREEMENT.
Upon the satisfaction of the conditions precedent set forth in Section 3
of this Amendment, the Credit Agreement shall be and hereby is further amended
as follows:
(a) Section 1.1(a) of the Credit Agreement shall be amended by striking
the amount "$75,000,000" appearing therein and substituting therefor the amount
"$95,000,000".
(b) Section 7.16 of the Credit Agreement shall be amended and restated in
its entirety to read as follows:
"Section 7.16. Distributions. The Company will not, nor will it
permit any Material Subsidiary to, 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) declare and pay dividends in an amount not to
<PAGE>
exceed $0.04 per share with respect to the Company's earnings during
each fiscal quarter of the Company's fiscal years ending August 31,
1997 and August 31, 1998 and during the first fiscal quarter of the
Company's 1999 fiscal year (it being understood that such dividend
may be declared and paid in the second fiscal quarter of the
Company's 1999 fiscal year), and (iii) during each fiscal quarter of
the Company ending after November 30, 1998, declare and 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."
(c) Exhibit A to the Credit Agreement and the Revolving Credit Note shall
each be amended by (i) replacing the amount "$75,000,000" appearing in the upper
left corner thereof with the amount "$95,000,000" and (ii) replacing the phrase
"Seventy-Five Million Dollars ($75,000,000)" appearing in the first paragraph
thereof with the phrase "Ninety-Five Million Dollars ($95,000,000)".
(d) The Bank shall type the following legend on Revolving Credit Note:
"This Note has been amended by a Second Amendment to Amended and
Restated Credit Agreement and Amendment to Revolving Credit Note
dated as of November 20, 1998 between the Company and the Bank,
including a change in the principal amount hereof, to which
Amendment reference is hereby made for a statement of the terms
thereof."
2. SENECA JUICE ACQUISITION AND WAIVER.
The Company has informed the Bank that it intends to acquire substantially
all of the assets of the juice division of Seneca Foods Corporation and has
requested that the Bank consent to such acquisition. Section 7.22 of the Credit
Agreement prohibits the Company from expending more than $6,000,000 for capital
expenditures in any fiscal year. Upon the execution of this Agreement by the
Bank, the Participants and the Company in the space provided for that purpose
below, the Bank hereby (i) consents to the Company's acquisition of
substantially all of the assets of the juice division of Seneca Foods
Corporation for approximately $35,000,000 (the "Acquisition") with the Company
financing the Acquisition with the proceeds of Revolving Credit Loans and with
the Acquisition otherwise occurring on terms and conditions substantially
identical to those heretofore disclosed to the Bank and (ii) waives Section 7.22
to the extent necessary to permit the Acquisition.
3. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of all
of the following conditions precedent:
-2-
<PAGE>
(a) The Company and the Bank shall have executed and delivered this
Amendment and the Participants shall have consented to this Amendment in
the space provided for that purpose below.
(b) The Bank shall have received the following (each to be properly
executed and completed) and the same shall have been approved as to form
and substance by the Bank:
(i) supplements to the existing Collateral Documents to
confirm and assure that the same secure the various obligations of
the Company under the Credit Agreement as amended hereby;
(ii) endorsements (or binding commitments therefor) to each
existing policy of title insurance insuring the liens of those
existing Collateral Documents creating liens on real property to
confirm that such policy insures that such Collateral Documents, as
supplemented and contemplated by this Amendment, secure the various
obligations of the Company under the Credit Agreement as amended
hereby.
(c) Minot Food Packers, Inc. ("Minot") shall have executed and
delivered to the Bank a Security Agreement Re: Inventory, Farm Products
and Receivables in form and substance satisfactory to the Bank, along with
such Uniform Commercial Code financing statements as the Bank may require.
(d) The Bank shall have received copies (executed or certified, as
may be appropriate) of all legal documents or proceedings taken in
connection with the execution and delivery of this Amendment and the other
instruments and documents contemplated hereby to the extent the Bank or
its counsel may reasonably request, including without limitation, copies
of resolutions adopted by the board of directors of the Company and of
Minot (certified by the secretary or assistant secretary of each such
corporation) authorizing the execution and delivery of the instruments and
documents contemplated hereby.
(e) 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 and
Minot in form and substance satisfactory to the Bank.
(f) The Participants and the Bank shall have executed and delivered
a First Amendment to Second Amended and Restated Participation Agreement
and the Company shall have consented thereto.
In the event that all of the foregoing conditions are satisfied except for
condition (b)(i) with respect to Collateral Documents creating liens on real
property and condition (b)(ii), then in that event, this Amendment shall become
effective but the Company shall, not later than
-3-
<PAGE>
January 29, 1999, provide to the Bank the supplements to Collateral Documents
creating liens on real property and the endorsements which will satisfy such
conditions.
4. REPRESENTATIONS.
In order to induce the Bank to execute and deliver this Amendment, the
Company hereby represents to the Bank that as of the date hereof, the
representations and warranties set forth in Section 5 of the Credit Agreement
are and shall be and remain true and correct in all material respects (except
that the representations contained in Section 5.3 shall be deemed to refer to
the most recent financial statements of the Company delivered to the Bank) and
no Default or Event of Default has occurred and is continuing under the Credit
Agreement or shall result after giving effect to this Amendment.
5. MISCELLANEOUS.
(a) Except as specifically amended herein, the Credit Agreement shall
continue in full force and effect in accordance with its original terms.
Reference to this specific Amendment need not be made in the Credit Agreement,
the Notes, or any other instrument or document executed in connection therewith,
or in any certificate, letter or communication issued or made pursuant to or
with respect to the Credit Agreement, any reference in any of such items to the
Credit Agreement being sufficient to refer to the Credit Agreement as amended
hereby.
(b) The Company agrees to pay on demand all costs and expenses of or
incurred by the Bank in connection with the negotiation, preparation, execution
and delivery of this Amendment, including the fees and expenses of counsel for
the Bank.
(c) This Amendment may be executed in any number of counterparts, and by
the different parties on different counterpart signature pages, all of which
taken together shall constitute one and the same agreement. Any of the parties
hereto may execute this Amendment by signing any such counterpart and each of
such counterparts shall for all purposes be deemed to be an original. This
Amendment shall be governed by the internal laws of the State of Illinois.
[Signature Pages Follow]
-4-
<PAGE>
Dated as of this 20th day of November, 1998.
NORTHLAND CRANBERRIES, INC.
By
Its
Accepted and agreed to in Chicago, Illinois as of the date and year last
above written.
HARRIS TRUST AND SAVINGS BANK
By
Its Vice President
-5-
<PAGE>
Consented and agreed to as of the date and year last above written.
MERCANTILE BANK NATIONAL ASSOCIATION
By
Its
NORWEST BANK MINNESOTA, NATIONAL
ASSOCIATION
By
Its
FIRSTAR BANK MILWAUKEE, N.A.
By
Its
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By
Its
-6-
NORTHLAND CRANBERRIES, INC.
1999 INCENTIVE BONUS PLAN
1. PURPOSE. The purpose of the Northland Cranberries, Inc. 1999
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, 1999 (the "1999 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 1999 Fiscal
Year ("Cash Bonus Award") based on a calculated percentage ("Bonus Percentage")
of such Participant's base salary earned during the 1999 Fiscal Year (excluding
benefits and bonuses).
-1-
<PAGE>
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
1999 Fiscal Year, bears to the "Target Earnings" for the 1999 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 1999 Fiscal Year
shall be Net Income Per Common Share of $0.77.
5. PAYMENT OF CASH BONUSES. The Cash Bonus Awards, if any, determined
under Section 4 for the 1999 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, 1999.
6. NET INCOME PER COMMON SHARE. For purposes of the Plan, the Company's
"Net Income Per Common Share" for the 1999 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 1999 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 1999 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, 1999, 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 transferred 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
-2-
<PAGE>
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 24, 1998 and the Plan shall apply to and cover the Company's
1999 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.
-3-
<PAGE>
NORTHLAND CRANBERRIES, INC.
1999 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 0 to 10%
enhancement Of Company's long-term
outlook
-------------------
Maximum Bonus 70% of Base Salary
- --------------------------------------------------------------------------------
VI Company's Net Income Per Common
Share Equals--
90% of 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
- --------------------------------------------------------------------------------
-4-
<PAGE>
- --------------------------------------------------------------------------------
BONUS LEVEL CRITERIA BONUS PERCENTAGE
Sum of:
- --------------------------------------------------------------------------------
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 arnings 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
- --------------------------------------------------------------------------------
-5-
<PAGE>
- --------------------------------------------------------------------------------
BONUS LEVEL CRITERIA BONUS PERCENTAGE
Sum of:
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
-6-
<TABLE>
Selected Financial Data
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share data)
----------------------------------------------------------------------------------------
Five Months
Year Ended August 31 Ended Fiscal Years Ended March 31(1)
Statement of Operations Data: August 31,
------------------------- ------------------------------
1998 1997 1996 1995(1) 1995 1994
- ---------------------------------------- --------------- ---------------- ---------------- ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 112,828 $ 47,375 $ 37,608 $ 891 $ 21,784 $ 18,051
Cost of sales 62,475 23,171 16,517 1,401 13,057 8,751
- ---------------------------------------- --------------- --------------- -------------- --------------- -------------- -------------
Gross profit (loss) 50,353 24,204 21,091 (510) 8,727 9,300
Costs and expenses:
Selling, general and administrative 38,752 15,963 7,020 1,908 2,440 2,046
Interest 6,826 4,493 2,657 1,919 3,654 2,394
- ---------------------------------------- --------------- --------------- -------------- --------------- -------------- -------------
Total costs and expenses 45,578 20,456 9,677 3,827 6,094 4,440
- ---------------------------------------- --------------- --------------- -------------- --------------- -------------- -------------
Income (loss) before income taxes
and change in accounting method 4,775 3,748 11,414 (4,337) 2,633 4,860
Income taxes 1,920 1,516 4,509 (1,689) 1,051 1,917
Change in accounting method -- -- -- 1,249 -- --
- ---------------------------------------- --------------- --------------- -------------- --------------- -------------- -------------
Net income (loss) $ 2,855 $ 2,232 $ 6,905 $ (1,399) $ 1,582 $ 2,943
- ---------------------------------------- --------------- --------------- -------------- --------------- -------------- -------------
Weighted average shares
outstanding(3) - diluted 15,266,162 14,308,845 13,927,820 9,393,656 8,890,850 8,834,774
Per share data:(3)
Net income (loss) - diluted $ 0.19 $ 0.16 $ 0.50 $ (0.15) $ 0.18 $ 0.33
Cash dividends:(2)
Class A common $ 0.16 $ 0.16 $ 0.145 $ 0.06 $ 0.14 $ 0.175
Class B common $ 0.145 $ 0.145 $ 0.132 $ 0.055 $ 0.127 $ 0.159
- ---------------------------------------- --------------- --------------- -------------- --------------- -------------- -------------
- ---------------------------------------- ------------------------------- -------------- ----------- -- -------------- --------------
August 31 March 31(1)
---------------------------------------------------------- -- -----------------------------
Balance Sheet Data: 1998 1997 1996 1995 1995 1994
- ---------------------------------------- ---------------- -------------- -------------- ----------- -- -------------- --------------
Current assets $ 71,298 $ 39,691 $ 18,617 $ 11,740 $ 6,746 $ 5,598
Current liabilities 21,811 11,545 12,067 10,583 10,169 4,485
Total assets 250,872 180,932 145,485 121,745 107,745 83,074
Long-term debt 64,276 83,131 56,978 45,538 55,793 38,945
Shareholders' equity 153,870 76,811 69,059 59,113 34,627 33,125
- ---------------------------------------- ---------------- -------------- -------------- ----------- -- -------------- --------------
</TABLE>
(1) We changed our fiscal year end from March 31 to August 31, beginning
after a five-month interim transitional period ending on August 31,
1995.
(2) In August 1993, we changed our 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 our September 3,
1996 stock split. See Note 2 of Notes to Consolidated Financial
Statements.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
of Results of Operations and Financial Condition
- --------------------------------------------------------------------------------
Results of Operations
General
We started our marsh to market vertical integration strategy in 1993 by
selling our Northland brand fresh cranberries to supermarkets; and in fiscal
1996, we started manufacturing and distributing our own Northland brand 100%
Juice Cranberry Blends. We introduced our Northland brand 100% Juice Cranberry
Blends into selected Midwestern markets and by the end of fiscal 1997, we had
achieved national supermarket distribution for our product line. This strategy
has changed us from being strictly a cranberry grower who basically sold all of
our harvested raw cranberries once every year, into a grower, processor and
marketer of a broad variety of cranberry juice products, other cranberry
products and non-cranberry juices and drinks.
Sales of our Northland 100% juice cranberry blends began increasing
substantially in fiscal 1998. We think this was mostly the result of our
marketing and promotional campaign and our increased shelf presence in more
supermarkets nationwide. By the end of fiscal 1998, our Northland 100% juice
cranberry blends were on the shelves of approximately 84% of supermarkets
nationwide, compared to about 60% at the end of fiscal 1997. The growth of our
brand during fiscal 1998, coupled with intense price competition for our sale of
cranberry concentrate and other industrial cranberry products, resulted in the
majority of our revenues during fiscal 1998 being generated from branded juice
sales. In order to better balance our product mix between branded and private
label sales, on July 1, 1998, we acquired Minot Food Packers, Inc. Located in
Bridgeton, New Jersey, Minot produces, markets, sells and distributes primarily
private label cranberry products, including cranberry sauce, as well as a wide
variety of non-cranberry private label products. For its fiscal year ended June
30, 1997, Minot reported sales of approximately $41 million. The acquisition
should also reduce the adverse impact on our results of operations which we have
experienced from difficult market conditions for the sale of cranberry
concentrate and other industrial cranberry products.
During the first quarter of fiscal 1999, we entered into an agreement
with Seneca Foods Corporation to purchase most of the assets of Seneca's juice
division for between $30 to $35 million, dependent upon the division's level of
working capital at closing. Although the proposed acquisition is subject to
various conditions, if completed, we will buy Seneca's TreeSweet and Awake brand
names, as well as three processing plants, a distribution center and a receiving
station. We will also purchase the right to sell Seneca brand fruit juice
beverages. For its year ended March 31, 1998, net revenues from the Seneca
beverage lines we plan to buy totaled approximately $105 million. If completed,
we believe this acquisition will give us a presence in the shelf-stable apple
and grape juice segments and will allow us to enter the retail frozen juice
concentrate category. We also expect the Seneca acquisition to make our bottling
and distribution network more efficient and to further our ability to perform
co-packing operations for other bottled beverage producers.
As is customary in our industry, we have spent and expect to continue
to spend substantial amounts on marketing and promotion in order to make our
products available in
<PAGE>
more supermarkets, increase our market share and build brand name recognition
for our Northland brand 100% juice cranberry blend products. In fiscal 1997 and
1998, these expenses totaled about $9.0 million and $26.7 million, respectively.
We expect to spend more in fiscal 1999 on marketing and promotion than in fiscal
1998. We believe in taking a long-term aggressive approach to building brand
name equity for our Northland brand products. This means that we may decide to
spend even more money this coming year than currently anticipated to build our
brand name awareness, add qualified personnel to grow our company and integrate
our new acquisitions if we believe such increased spending levels will
ultimately benefit our product sales and profitability. These increased levels
of spending will likely adversely affect, and may result in substantial
volatility for, our quarterly earnings. Moreover, the Minot acquisition and the
potential Seneca acquisition will likely also result in difficulties, added
costs and delays in integrating, transitioning and managing these acquisitions.
Also, we may not fully realize expected synergies and cost savings from these
acquisitions in fiscal 1999. These costs and difficulties may also reduce our
reported quarterly earnings during fiscal 1999. For these reasons, the
predictability of our quarterly earnings in fiscal 1999 will be difficult, and
comparisons with prior comparative quarters, may not be meaningful. See
"Quarterly Results."
With the exception of our accounting and distribution/order tracking
functions, our operations are not heavily dependent on internal computer
software or embedded systems. Our internal accounting and distribution hardware
and software system was replaced in fiscal 1997 at a cost of approximately
$350,000. That system has been fully tested and we believe it to be Year 2000
compliant in all material respects. We have spent approximately $40,000 to date
in implementing and testing that same system at the Minot facilities, and expect
that process to be completed in early 1999 without additional material
expenditures. If we complete the Seneca acquisition, we will implement our
accounting and distribution hardware and software system at Seneca's facilities.
We are in the process of ascertaining the costs of such implementation, and
currently anticipate those costs will be approximately $250,000.
We do not rely heavily on third party vendors whose potential Year 2000
noncompliance would have a material adverse effect on our results of operations.
As a result, we are not conducting compliance audits of third party vendors for
Year 2000 readiness. While we currently use co-packers to perform bottling
operations, we believe their potential failure to be Year 2000 compliant would
not be material to our operations because of availability of other vendors who
can perform similar functions, as well as our ability to perform our own
bottling operations using Minot facilities and, if the Seneca acquisition is
completed, Seneca facilities. We also rely on third party vendors to supply us
with plastic bottles, caps and cartons. Failure of these vendors to be Year 2000
compliant could result in temporary decreases in inventory until new vendors are
located. However, we do not believe this would have a material adverse effect on
our results of operations.
Fiscal 1998 Compared to Fiscal 1997
Revenues. Our total revenues for fiscal 1998 increased 138% to $112.8
million from $47.4 million during fiscal 1997. Our increased fiscal 1998
revenues were due to substantially
<PAGE>
increased sales of our Northland brand 100% juice products. Industry data for
the 12-week period ended September 13, 1998 indicated that our Northland juice
products were available in approximately 84% of the nation's 30,000 supermarkets
and held an 11.9% national market share of supermarket bottled shelf-stable
cranberry beverage dollar sales, up from 5.8% for the 12-week period ended
September 14, 1997. In response to trade promotion and marketing support, our
market share reached as high as 14.2% for the 12-week period ended March 29,
1998. We believe our increased branded juice sales and increased market share
over the last year were primarily due to our aggressive branded product
marketing campaign. As anticipated, as a result of the Minot acquisition, during
the last two months of fiscal 1998, our sales of private label products
increased as we were able to continue Minot's historical level of private label
product sales. Closing the Seneca acquisition should also result in our
recognizing substantial additional revenue in fiscal 1999. During fiscal 1998,
we continued to experience intense price competition in our efforts to sell
concentrate and bulk frozen fruit. As a result, sales of these products were
substantially below our initially budgeted expectations. We expect this intense
price competition to continue in fiscal 1999.
Cost of Sales. Our cost of sales for fiscal 1998 was $62.5 million
compared to $23.2 million in fiscal 1997, with gross margins of 44.6% and 51.1%.
The decrease in our gross margin for fiscal 1998 was primarily due to our heavy
branded sales product mix during fiscal 1998. Our 1997 revenues were more
heavily weighted toward higher margin fresh fruit and concentrate sales at
substantially higher pricing levels. We expect our gross margins to continue to
decrease in fiscal 1999 as a result of our increased sales of private label
products. It is also likely that our sales of Seneca's products in fiscal 1999
will further reduce margins.
Selling, General and Administrative Expenses. Our selling, general and
administrative expenses were $38.8 million, or 34.3%, of total revenues for
fiscal 1998, compared to $16.0 million, or 33.7% of total revenues, during the
prior fiscal year. This planned increase in our selling, general and
administrative expenses was primarily attributable to our ongoing aggressive
marketing campaign to support the development and growth of our Northland brand
100% juice products. Fiscal 1998 advertising, promotion and slotting expenses in
support of our branded products totaled $26.7 million. We plan to continue to
aggressively market our branded juice products in fiscal 1999. We also expect
our selling, general and administrative expenses to increase in fiscal 1999
because of our acquisition of the Minot and Seneca businesses and our continued
hiring of additional qualified personnel to manage our growth. However, because
we anticipate revenues to substantially increase, our selling, general and
administrative expenses as a percentage of revenues should be lower in fiscal
1999 than in fiscal 1998.
Interest Expense. Interest expense was $6.8 million for fiscal 1998
compared to $4.5 million during fiscal 1997. The increase in our interest
expense was due to increased debt levels during most of the year, which resulted
from funding increasing levels of inventory and accounts receivable to support
our growing consumer cranberry product business, as well as seasonal operating
activities. We expect our debt level to increase during fiscal 1999 from its
1998 fiscal year end level as we fund the potential Seneca acquisition and our
anticipated increased working capital requirements. See "Financial Condition"
below.
<PAGE>
Income Tax Expense. We recorded $1.9 million in income tax expense in
fiscal 1998 compared to $1.5 million in fiscal 1997. See Note 11 of Notes to
Consolidated Financial Statements.
Net Income. Net income and per share earnings for fiscal 1998 were $2.9
million and $0.19 per diluted share, up from fiscal 1997 net income and per
share earnings of $2.2 million and $0.16 per diluted share. Weighted average
shares outstanding for fiscal 1998 were 15.3 million compared to 14.3 million
for fiscal 1997. Weighted shares increased in fiscal 1998 because of our June
1998 public sale of 5.72 million Class A shares.
Fiscal 1997 compared to Fiscal 1996
Revenues. Our 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
our fiscal 1997 revenues was primarily the result of increased sales of our
Northland brand 100% juice products due to the national rollout of our branded
juice line. By the end of fiscal 1997, we had increased the distribution of our
branded juice products to approximately 60% of supermarkets nationwide, compared
to approximately 13% at the end of fiscal 1996. Our 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.
Cost of Sales. Our cost of sales increased $6.7 million, or 40.3%, to
$23.2 million in fiscal 1997, from $16.5 million in fiscal 1996. Our 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, our changing product mix and increased price competition for concentrate
sales. Our 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
our inventory carrying costs on a per barrel basis. Due to our smaller than
expected fiscal 1997 crop, our inventory carrying costs per barrel increased,
resulting in increased cost of sales and a reduced gross margin percentage.
Selling, General and Administrative Expenses. Our 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 our national rollout of our branded
juice products. Fiscal 1997 advertising, promotion and slotting expenses in
support of our branded juice rollout totaled $9.0 million.
Interest Expense. Our 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 our 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 our marsh to market business strategy.
<PAGE>
Income Tax Expense. We recorded $1.5 million in income tax expense in
fiscal 1997 compared to $4.5 million in fiscal 1996. See Note 11 of Notes to
Consolidated Financial Statements.
Net Income. Our net income for fiscal 1997 was $2.2 million, compared
to fiscal 1996 net income of $6.9 million. Net income per diluted common share
was $0.16 in fiscal 1997, compared to net income per diluted common share of
$0.50 in fiscal 1996. Weighted average common shares outstanding for fiscal 1997
were 14.3 million compared to 13.9 million for fiscal 1996.
Financial Condition
Our net cash used for operating activities in fiscal 1998 was $11.1
million compared to $10.6 million in fiscal 1997. The increased net cash used
for our operating activities during fiscal 1998 was the result of working
capital increases to support our growing juice business and the continuing
evolving nature of our business into a consumer products company. Our accounts
receivable increased $15.4 million, primarily due to increased branded juice
sales, fourth quarter concentrate sales and the addition of Minot accounts
receivable. Our inventories increased $17.4 million due to the carryover of
significant inventory because of lower than expected concentrate and industrial
product sales during fiscal 1998, as well as the addition of Minot's inventory.
Accounts payable increased $6.2 million in fiscal 1998 primarily due to
purchases of raw materials inventory to support our growing branded product
sales as well as the addition of Minot accounts payable. Also, our depreciation
and amortization (a noncash expense), increased by $1.4 million, or 27.6%, due
to property and equipment additions.
Our net cash used for investing activities increased during fiscal 1998
to $41 .9 million from $14.2 million during the prior fiscal year. This increase
was due to the $35.2 million purchase price of the Minot acquisition. Fiscal
1998 property and equipment additions were $7.9 million compared to total
property and equipment additions of $8.8 million in the prior year. The
potential Seneca division acquisition is expected to cost between $30 and $35
million, depending upon the division's level of working capital at closing, and
should be closed during the second quarter of fiscal 1999. We plan to pay for
the acquisition by borrowing on our revolving line of credit and by issuing
Seneca $3.0 million of our Class A common stock. Northland's capital expenditure
budget for fiscal 1999 (exclusive of the potential Seneca acquisition) is $7.0
million and will be funded from cash generated from operations and borrowings
under our credit line.
Our net cash provided by financing activities in fiscal 1998 was $53.4
million compared to $24.8 million during the prior fiscal year. The increase was
the result of our receiving $74.5 million of net proceeds from our June public
stock sale, less the repayment of $20.1 million of long-term debt out of such
proceeds. Working capital was $49.5 million at August 31, 1998 compared to
working capital of $28.1 million at August 31, 1997. Our total debt (including
current portion) was $68.2 million at August 31, 1998 for a total debt-to-equity
<PAGE>
ratio of 0.44 to 1 compared to total debt of $86.8 million and a total
debt-to-equity ratio of 1.13 to 1 at August 31, 1997. Depending upon our future
sales levels and relative sales mix of our products during fiscal 1999 and the
addition of Seneca and Minot business, our working capital requirements and our
debt levels are expected to materially increase during fiscal 1999. To help
ensure we have adequate liquidity to fund these anticipated increased
requirements, we have negotiated a $15 million increase in our revolving credit
facility. This increase in our credit availability coupled with expected cash to
be generated from product sales, should allow us to finance our operational
needs as we continue to grow our brand name and integrate the Minot acquisition
and the potential Seneca division acquisition. As of August 31, 1998, the
principal amount outstanding under our revolving credit facility was $33.1
million, with an additional $41.9 million available under our credit facility
with a syndicate of regional banks until December 2000. As described above,
about $30 to $35 million of such availability will be used to fund the potential
Seneca division purchase.
Quarterly Results
During fiscal 1998 and 1997, we continued our heavy spending on media
advertising and trade and consumer promotion to build the Northland brand. We
plan to continue our aggressive marketing and promotional campaign to build a
strong presence in the branded juice market and to further accelerate the growth
of our Northland brand 100% juice blends. Our levels of promotional spending
during future quarterly periods will vary based on then current market and
competitive conditions and company-specific factors. These and other factors
will likely cause our quarterly results to continue to fluctuate in fiscal 1999
and will likely cause comparisons with prior quarters to be unmeaningful.
The following table contains unaudited selected historical quarterly
information, which includes adjustments, consisting only of normal recurring
adjustments, that we consider necessary for a fair presentation:
<TABLE>
Fiscal Quarters Ended
(In thousands, except per share data)
Fiscal 1998 Fiscal 1997
--------------------------------------------------- --------------------------------------------------
Aug. 31, May 31, Feb. 28, Nov. 30, Aug. 31, May 31, Feb. 29, Nov. 30,
1998 1998 1998 1997 1997 1997 1997 1996
----------- ------------ ------------ ------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $ 37,684 $ 26,417 $ 30,296 $ 18,431 $ 12,565 $ 10,377 $ 13,513 $ 10,920
Income (loss) before
income taxes 3,707 675 212 181 (1,662) 394 2,531 2,485
Net income (loss) $ 2,239 $ 399 $ 115 $ 102 $ (1,021) $ 225 $ 1,526 $ 1,502
Net income (loss) per
share-diluted:
Weighted average shares
outstanding 18,041 14,311 14,288 14,358 14,350 14,282 14,402 14,196
Net income (loss) per share $ 0.12 $ 0.03 $ 0.01 $ 0.01 $ (0.07) $ 0.02 $ 0.11 $ 0.11
Cash dividends per share:
Per Class A share 0.040 0.040 0.040 0.040 0.040 0.040 0.040 0.040
Per Class B share 0.036 0.036 0.036 0.036 0.036 0.036 0.036 0.036
</TABLE>
<PAGE>
Special Note Regarding Forward-Looking Statements
We make certain "forward-looking statements" in this Annual Report,
such as statements about our future plans, goals and other events which have not
yet occurred. We intend that these statements will qualify for the safe harbors
from liability provided by the Private Securities Litigation Reform Act of 1995.
You can generally identify these forward-looking statements because we use words
such as we "believe," "anticipate," "expect" or similar words when we make them.
Whether or not these forward-looking statements will be accurate in the future
will depend on certain risks and factors including risks associated with (i)
development, market share growth and continued consumer acceptance of our
branded juice products; (ii) integration of the operations of Minot Food
Packers, Inc., which we acquired in fiscal 1998; (iii) the consummation of the
pending acquisition of the juice division of Seneca Foods Corporation; (iv)
strategic actions of our competitors in pricing, marketing and advertising; and
(v) agricultural factors affecting our crop. You should consider these risks and
factors and the impact they may have when you evaluate our forward-looking
statements. We make these statements based only on our knowledge and
expectations on the date of this Annual Report. We will not necessarily update
these statements or other information in this Annual Report based an future
events or circumstances. Please read this entire Annual Report to better
understand our business and the risks associated with our operations.
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
To Our Shareholders:
The management of Northland Cranberries, Inc. is responsible for
ensuring that the financial statements and other statistical and financial
information in this report about the Company give a fair and accurate financial
picture of the Company in all material respects. In preparing this material, we
make judgments and estimates that conform with generally accepted accounting
principles.
The Company has internal accounting systems of control that are
designed to provide reasonable assurances that our assets are safeguarded and
that transactions are handled as authorized and are accurately recorded in our
books, enabling us to prepare reliable financial statements. Although no
cost-effective internal control system can preclude all errors or
irregularities, we believe Northland's established program provides the
reasonable assurance noted.
An audit committee of Northland's directors, none of whom are Company
employees, meets periodically with and reviews reports of Northland's
independent public accountants, and recommends such action as it deems
appropriate. The audit committee and our independent accountants have
unrestricted access to each other, with or without the presence of operating
management representatives.
/s/ John Swendrowski /s/ John Pazurek
John Swendrowski John Pazurek
Chairman of the Board Treasurer and
And Chief Executive Officer Chief Financial Officer
Wisconsin Rapids, Wisconsin
October 15, 1998
<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 subsidiaries as of August 31, 1998 and 1997, and
the related consolidated statements of earnings, shareholders' equity and cash
flows for each of the three years in the period ended August 31, 1998. 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 subsidiaries as of August 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
August 31, 1998 in conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
Milwaukee, Wisconsin
October 15, 1998
<PAGE>
CONSOLIDATED STATEMENTS OF EARNINGS
Years Ended August 31, 1998, 1997 and 1996
<TABLE>
Consolidated Balance Sheets
August 31, 1998 and 1997
<CAPTION>
Assets 1998 1997
- ----------------------------------------------------------------------- --------------------- ----------------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 633,426 $ 230,668
Accounts and notes receivable 22,422,072 6,995,595
Investments -- 1,259,548
Inventories 43,810,813 26,454,087
Prepaid expenses 1,941,643 1,715,351
Deferred income taxes 2,489,628 3,035,486
- ----------------------------------------------------------------------- --------------------- ----------------------
Total current assets 71,297,582 39,690,735
Property and equipment, net 152,199,477 138,273,041
Investments and other assets 2,151,147 2,234,624
Goodwill, net 25,223,568 734,010
- ----------------------------------------------------------------------- --------------------- ----------------------
Total assets $ 250,871,774 $ 180,932,410
- ----------------------------------------------------------------------- --------------------- ----------------------
Liabilities and Shareholders' Equity
- ----------------------------------------------------------------------- --------------------- ----------------------
Current liabilities:
Accounts payable $ 9,994,595 $ 3,806,261
Accrued liabilities 7,924,250 4,091,661
Current portion of long-term obligations 3,892,000 3,647,000
- ----------------------------------------------------------------------- --------------------- ----------------------
Total current liabilities 21,810,845 11,544,922
Long-term obligations 64,275,826 83,130,707
Deferred income taxes 10,915,378 9,445,856
Shareholders' equity:
Preferred stock, $.01 par value, 5,000,000 shares
authorized, none issued -- --
Common stock:
Class A, $.01 par value, 19,085,484 and 13,219,370
shares issued and outstanding, respectively 190,730 132,074
Class B, $.01 par value, 636,202 shares
issued and outstanding 6,362 6,362
Additional paid-in capital 144,477,226 67,888,801
Retained earnings 9,195,407 8,783,688
- ----------------------------------------------------------------------- --------------------- ----------------------
153,869,725 76,810,925
- ----------------------------------------------------------------------- --------------------- ----------------------
Total liabilities and shareholders' equity $ 250,871,774 $ 180,932,410
- ----------------------------------------------------------------------- --------------------- ----------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
Consolidated Statements of Earnings
Years Ended August 31, 1998, 1997 and 1996
<CAPTION>
1998 1997 1996
- ----------------------------------------------------- ---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Revenues $ 112,828,336 $ 47,374,827 $ 37,607,845
Cost of sales 62,474,847 23,170,154 16,516,785
- ----------------------------------------------------- ---------------------- ---------------------- ----------------------
Gross profit 50,353,489 24,204,673 21,091,060
Costs and expenses:
Selling, general and administrative 38,752,157 15,963,109 7,020,416
Interest 6,826,525 4,493,104 2,657,067
- ----------------------------------------------------- ---------------------- ---------------------- ----------------------
Total costs and expenses 45,578,682 20,456,213 9,677,483
- ----------------------------------------------------- ---------------------- ---------------------- ----------------------
Income before income taxes 4,774,807 3,748,460 11,413,577
Income taxes 1,920,000 1,516,000 4,509,000
- ----------------------------------------------------- ---------------------- ---------------------- ----------------------
Net income $ 2,854,807 $ 2,232,460 $ 6,904,577
- ----------------------------------------------------- ---------------------- ---------------------- ----------------------
Net income per share:
Basic $ 0.19 $ 0.16 $ 0.52
Diluted $ 0.19 $ 0.16 $ 0.50
Shares used in computing net income per share:
Basic 14,813,757 13,736,906 13,311,004
Diluted 15,266,162 14,308,845 13,927,820
- ----------------------------------------------------- ---------------------- ---------------------- ----------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
Years Ended August 31, 1998, 1997 and 1996
<CAPTION>
1998 1997 1996
- -------------------------------------------------------------------------- ------------------ ------------------ -------------------
Operating activities:
<S> <C> <C> <C>
Net income $ 2,854,807 $ 2,232,460 $ 6,904,577
Adjustments to reconcile net income to net
cash (used in) provided by operating activities:
Depreciation and amortization 6,690,675 5,242,804 4,151,448
Loss (gain) on disposal of property and
equipment 10,913 (5,059) (25,236)
Changes in assets and liabilities (net of effects of business
acquisition):
Receivables, prepaid expenses and
other current assets (13,749,395) (5,157,839) (2,256,715)
Inventories (12,328,714) (14,039,660) (4,715,542)
Accounts payable and accrued liabilities 4,001,637 (423,990) 4,031,250
Deferred income taxes 1,416,000 1,516,000 1,289,000
- -------------------------------------------------------------------------- ------------------ ------------------ -------------------
Net cash (used in) provided by
operating activities (11,104,077) (10,635,284) 9,378,782
- -------------------------------------------------------------------------- ------------------ ------------------ -------------------
Investing activities:
Property and equipment purchases (7,945,506) (8,812,293) (14,480,765)
Proceeds from disposals of property and equipment 103,960 108,841 152,065
Acquisition of business (35,203,177) -- --
Acquisitions of cranberry operations -- (6,765,513) (7,279,818)
Net decrease in investments 1,259,548 1,259,548 1,259,548
Other (132,551) (26,415) (214,018)
- -------------------------------------------------------------------------- ------------------ ------------------ -------------------
Net cash (used for) investing activities (41,917,726) (14,235,832) (20,562,988)
- -------------------------------------------------------------------------- ------------------ ------------------ -------------------
Financing activities:
Proceeds from long-term debt 1,500,000 31,850,000 15,000,000
Payments on long-term debt (20,109,881) (5,610,388) (6,053,365)
Dividends paid (2,443,088) (2,190,478) (1,923,429)
Net proceeds from common stock offering 74,481,730 -- 4,016,192
Exercise of stock options 169,118 987,650 76,400
Other (173,318) (201,467) (25,819)
- -------------------------------------------------------------------------- ------------------ ------------------ -------------------
Net cash provided by financing activities 53,424,561 24,835,317 11,089,979
- -------------------------------------------------------------------------- ------------------ ------------------ -------------------
Net increase (decrease) in cash and cash equivalents 402,758 (35,799) (94,227)
Cash and cash equivalents, beginning of year 230,668 266,467 360,694
- -------------------------------------------------------------------------- ------------------ ------------------ -------------------
Cash and cash equivalents, end of year $ 633,426 $ 230,668 $ 266,467
- -------------------------------------------------------------------------- ------------------ ------------------ -------------------
Supplemental disclosure of cash flow information
Cash paid during the year for:
Interest (net of interest capitalized) $ 6,862,888 $ 4,499,870 $ 2,716,788
Income taxes (refund), net (858,466) 525,076 2,768,000
Supplemental disclosures of noncash investing
and financing activities (See Notes 3 and 5.)
- -------------------------------------------------------------------------- ------------------ ------------------ -------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended August 31, 1998, 1997 and 1996
<CAPTION>
Common Stock
---------------------------------- Additional
Paid-in Retained
Class A Class B Capital Earnings
- ------------------------------------------------------- ---------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Balances, August 31, 1995 $ 60,106 $ 3,181 $ 55,288,726 $ 3,760,558
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
Common stock issued 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
Net proceeds from common stock
offering (5,715,000 shares) 57,150 -- 74,424,580 --
Common stock issued for acquisition of
business (136,986 shares) 1,370 -- 1,994,863 --
Stock options exercised 136 -- 144,899 --
Tax benefit from exercise of stock options -- -- 24,083 --
Cash dividends paid:
$.l6 per Class A share -- -- -- (2,350,559)
$.14544 per Class B share -- -- -- (92,529)
Net income -- -- -- 2,854,807
- ------------------------------------------------------- ---------------- ----------------- ------------------ ------------------
Balances, August 31, 1998 $ 190,730 $ 6,362 $ 144,477,226 $ 9,195,407
- ------------------------------------------------------- ---------------- ----------------- ------------------ ------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended August 31, 1998, 1997 and 1996
- --------------------------------------------------------------------------------
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, 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 "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% juice cranberry 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 primarily 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 subsidiaries. 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 using the
first-in, first-out (FIFO) method. Deferred crop costs consist of those costs
related to the growing of the crop which will be harvested in the following
fiscal year.
Property and Equipment -- Property and equipment are stated at cost,
less depreciation and amortization using 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 company
depreciates buildings, land improvements, cranberry vines, bulkheads and
irrigation equipment over 30-40 years, and other depreciable assets over 5-10
years.
Goodwill -- Goodwill is amortized using the straight-line method over
40 years. Accumulated amortization was approximately $338,000 and $221,000 at
August 31, 1998 and 1997, respectively. The Company assesses the carrying value
of goodwill at each balance
<PAGE>
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.
Revenue Recognition -- The Company recognizes revenue when product is
shipped.
Net Income Per Share -- Basic net income per share is computed by
dividing net income by the weighted average number of common shares outstanding.
Diluted net income per share is computed by dividing net income by the weighted
average number of common shares outstanding increased by the number of dilutive
potential common shares based on the treasury stock method. During fiscal 1998,
the Company adopted SFAS No. 128, "Earnings Per Share," and accordingly all net
income per share amounts for all periods presented have been restated.
Accounting Standards To Be Adopted -- In 1997, the Financial Accounting
Standards Board ("FASB") issued SFAS No. 130, "Reporting Comprehensive Income,"
and SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information." These statements are required to be adopted in fiscal 1999. In
1998, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and
Other Postretirement Benefits," and SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." These statements are required to be adopted
in fiscal 1999 and 2000, respectively. The Company is currently in the process
of evaluating the accounting and disclosure effects of these Statements.
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.
<PAGE>
2. Stock Split
On June 26, 1996, the Company's Board of Directors authorized a
two-for-one stock split 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 number of shares, per
share amounts, stock option data and market prices of the Company's stock have
been restated.
3. Acquisitions
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.
On July 1, 1998, the Company completed its acquisition of Minot Food
Packers, Inc. ("Minot") for $35.4 million in cash and $2.0 million in Class A
Common Stock. Minot, located in Bridgeton, New Jersey, produces, markets, sells
and distributes a wide variety of private label cranberry products.
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 earnings from the date of acquisition. The
purchase price of Minot has been allocated to the assets acquired and
liabilities assumed based upon preliminary estimates of fair values. The Company
does not believe that the final purchase price allocation will differ
significantly from the preliminary purchase price allocation. The pro forma
effects of the fiscal 1996 and 1997 acquisitions were not significant. The
unaudited pro forma results of operations, assuming the Minot acquisition had
been consummated as of September 1, 1996, are as follows:
<PAGE>
1998 1997
-------------------- -----------------
Net sales $ 147,312,310 $ 89,026,866
Net income 3,776,674 3,340,333
Net income per share - basic $ 0.22 $ 0.20
Net income per share - diluted 0.21 0.19
-------------------- -----------------
The unaudited pro forma results are not necessarily indicative of the
actual results of operations that would have occurred had the acquisition
actually been made at the beginning of fiscal 1997.
4. Inventories
Inventories at August 31, 1998 and 1997 were as follows:
1998 1997
------------------- -------------------
Raw materials $ 18,554,557 $ 6,274,305
Finished goods 13,208,150 9,001,810
Deferred crop costs 12,048,106 11,177,972
------------------- -------------------
$ 43,810,813 $ 26,454,087
=================== ===================
5. Property And Equipment
Property and equipment at August 31, 1998 and 1997 were as follows:
1998 1997
------------------- ------------------
Land $ 7,972,373 $ 7,548,486
Land improvements 17,521,757 14,709,554
Cranberry vines, bulkheads
and irrigation equipment 80,242,337 72,153,272
Buildings and improvements 26,035,047 17,627,758
Equipment and vehicles 41,098,270 33,428,680
Construction in progress 9,124,637 16,397,639
------------------- ------------------
181,994,421 161,865,389
Less accumulated depreciation
and amortization 29,794,944 23,592,348
------------------- ------------------
$ 152,199,477 $ 138,273,041
=================== ==================
<PAGE>
The Company capitalized $736,106, $1,398,092 and $1,531,405 of interest
for the years ended August 31, 1998, 1997, 1996, respectively.
6. Investments And Other Assets
Investments and other assets at August 31, 1998 and 1997 were as
follows:
1998 1997
-------------------- -------------------
Leasehold interests, net $ 881,512 $ 1,039,395
Other 1,269,635 1,195,229
-------------------- -------------------
$ 2,151,147 $ 2,234,624
==================== ===================
7. Accrued Liabilities
Accrued liabilities at August 31, 1998 and 1997 were as follows:
1998 1997
------------------- -----------------
Compensation and other $ 1,196,427 $ 1,038,134
employee benefits
Property taxes 545,876 469,832
Interest 295,465 331,828
Commissions 967,643 320,733
Income taxes 617,532 181,976
Other 4,301,307 1,749,158
------------------- -----------------
$ 7,924,250 $ 4,091,661
=================== =================
8. Notes Payable And Long-Term Obligations Long-term debt at August 31,
1998 and 1997 was as follows:
<PAGE>
1998 1997
-------------------- ------------------
Credit agreement with a bank:
Revolving credit facility $ 33,100,000 $ 41,500,000
Acquisition credit facility -- 7,950,000
Secured term credit facility(1) 1,840,000 2,760,000
Secured term credit facility(2) 2,856,000 3,428,000
Secured term credit facility(3) 7,350,000 8,400,000
Term loan payable to insurance
company with interest at 8.69% 12,958,962 13,641,173
Term loan payable to insurance
company with interest at 7.86% 8,675,364 9,098,534
Term loan with a bank 1,387,500 --
-------------------- ------------------
68,167,826 86,777,707
Less current portion 3,892,000 3,647,000
-------------------- ------------------
$ 64,275,826 $ 83,130,707
==================== ==================
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. 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 plus an applicable
rate margin, at the option of the Company. The first secured term credit
facility is payable in semiannual installments of $460,000 plus interest (at
LIBOR plus 2.5%, 8.152% at August 31, 1998) and matures in May 2000. The second
secured term credit facility is payable in semiannual installments of $286,000
plus interest (at LIBOR plus 2.50%, 8.152% at August 31, 1998) with a final
payment of $1,998,000 at maturity in May 2000. The third secured term credit
facility is payable in semiannual installments of $525,000 plus interest (at
LIBOR plus 2.5%, 8.152% at August 31, 1998) with a final payment of $5,250,000
at maturity in June 2000. The Company must pay a commitment fee of .125% per
annum on the average daily unused amount of the revolving credit facility and
the acquisition credit facility. The amount of unused available borrowings under
the amended credit facilities was $41,900,000 at August 31, 1998.
The 8.69% term loan with an insurance company is payable in semiannual
installments, including interest, through July 1, 2004. The interest rate will
be adjusted again 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.
<PAGE>
The 7.86% term loan with an insurance company is payable in semiannual
installments, including interest, through August 1, 2008. The interest rate will
be adjusted in fiscal year 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 ($78,000,000 at
August 31, 1998), 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:
1999 $ 3,892,000
2000 10,956,000
2001 34,664,000
2002 1,685,000
2003 1,816,000
Thereafter 15,154,826
----------------------------
$68,167,826
============================
9. Shareholders' 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 anytime. 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
<PAGE>
pursuant to the underwriters exercise of their 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.
In June and July 1998, the Company issued 5,715,000 shares of Class A
Common Stock through a public offering resulting in the net proceeds of
approximately $74,482,000.
At August 31, 1998, 2,809,092 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.
10. Stock Options
In 1987, the Company adopted the 1987 Stock Option Plan (the "1987
Plan"), which provided 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 non-employee 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 1995, the Company adopted the 1995 Stock Option Plan (the "1995
Plan"), which provides for the issuance of 800,000 shares of Class A Common
Stock to key employees and non-employee directors of the Company. Stock options
granted under the 1995 Plan are exercisable at a price established by the
Compensation and Stock Option Committee, which shall not be less than 100% of
the fair market value on the date of grant for a period determined by the
Compensation and Stock Option Committee, not to exceed 10 years.
The status of the stock option plans was as follows:
<PAGE>
<TABLE>
Weighted
Average
Price Number Exercise
Range of Shares Price
---------------------------------- --------------------------- ----------------
<S> <C> <C> <C> <C>
Outstanding at September 1,1995 $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
Granted 9.75 -- 19.75 187,000 17.98
Exercised 2.63 -- 8.75 (13,628) 4.34
Cancelled 7.25 -- 19.75 (5,500) 16.18
------------- ------ ------------- --------------------------- ----------------
Outstanding at August 31, 1998 $2.63 -- $19.75 1,083,656 $ 9.57
============= ====== ============= =========================== ================
Shares exercisable at August 31, 1998 $2.63 -- $19.75 949,636 $ 8.49
============= ====== ============= =========================== ================
308,248
Available for grant after August 31, 1998 ===========================
</TABLE>
The following table summarizes information about stock options
outstanding at August 31, 1998:
<TABLE>
Options Outstanding Options Exercisable
-------------------------------------- -----------------------------------
Weighted
Shares Average Weighted Shares Weighted
Outstanding at Remaining Average Exercisable at Average
Range of August 31, 1998 Contractual Exercise August 31, 1998 Exercise
Exercise Prices Life - Years Price Price
- ------------------------- ------------------- -------------------- ----------------- ------------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
$2.63 - $ 6.00 387,150 2.3 $ 4.08 387,150 $ 4.08
6.01 - 10.00 194,844 5.5 8.13 176,124 8.12
10.01 - 19.75 501,662 7.8 14.36 386,362 13.08
- -------------- ---------- ------------------- -------------------- ----------------- ------------------- ---------------
$2.63 - $19.75 1,083,656 5.4 $ 9.57 949,636 $ 8.49
============== ========== =================== ==================== ================= =================== ===============
</TABLE>
In fiscal 1997, the Company adopted the disclosure requirements of SFAS
No. 123, "Accounting for Stock-Based Compensation". 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 plans. Had compensation cost for the Company's stock option
plans been determined on the fair value at the grant dates for awards
<PAGE>
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:
1998 1997
-------------------- -----------------
Net Income:
As reported $2,855,000 $2,232,000
Pro forma $2,343,000 $2,124,000
Net Income per share - diluted:
As reported $ 0.19 $ 0.16
Pro forma $ 0.16 $ 0.15
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 20.4%; risk-free interest rate of 5.5%; 1.641% dividend rate
during the expected term; and an expected life of 9 years.
11. Income Taxes
The provision for income taxes is as follows:
August 31, August 31, August 31,
1998 1997 1996
---------------------------------------------------------
Currently payable:
Federal $ 452,000 $ -- $2,997,000
State 52,000 -- 223,000
---------------------------------------------------------
504,000 -- 3,220,000
---------------------------------------------------------
Deferred:
Federal 1,081,000 1,274,000 944,00
State 335,000 242,000 345,000
---------------------------------------------------------
1,416,000 1,516,000 1,289,000
---------------------------------------------------------
$1,920,000 $1,516,000 $4,509,000
=========================================================
<PAGE>
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities as of August 31, 1998 and 1997
consist of the following:
1998 1997
------------------- ----------------
Deferred tax assets:
Tax loss carryforwards $ 893,000 $ 2,979,000
AMT tax credits and other
carryforwards 6,206,000 3,552,000
Other 396,000 --
------------------- ----------------
7,495,000 6,531,000
------------------- ----------------
Deferred tax liabilities:
Cranberry sales 13,000 299,000
Depreciation and amortization 15,908,000 12,642,000
------------------- ----------------
15,921,000 12,941,000
------------------- ----------------
Net deferred tax liability $ 8,426,000 $ 6,410,000
=================== ================
At August 31, 1998, the Company has net operating loss carryforwards
for Federal income tax purposes of approximately $2,277,000 which expire at
various dates through 2013.
A reconciliation of the Federal statutory income tax rate to the
effective income tax rate is as follows:
<TABLE>
August 31, 1998 August 31, 1997 August 31, 1996
-----------------------------------------------------------------
<S> <C> <C> <C>
Statutory tax rate 34.0% 34.0% 34.0%
State income taxes, net
of Federal tax benefit 5.2 5.2 5.2
Other, net 1.0 1.2 0.3
-----------------------------------------------------------------
Effective tax rate 40.2% 40.4% 39.5%
=================================================================
</TABLE>
12. Related Party
In November 1997, the Company purchased a 40,000 square foot office
building for $1,150,000 from a company whose majority owner is also the
Company's Chairman of the Board and Chief Executive Officer.
13. 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, 1998 and 1997 was
<PAGE>
approximately $1,326,000 and $1,168,000, respectively. Rental payments are based
on 20 percent of gross cash receipts from agricultural production, subject to
certain minimums which are dependent upon the statewide average crop yield. Rent
expense for the years ended August 31, 1998, 1997 and 1996 was approximately
$268,000, $263,000 and $261,000, 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 $285,000 in year one and increasing to
$381,000 in year nine with a final payment of $215,000 on June 1, 2000. The
lease grants the Company a right of first refusal to purchase the leased
premises or to renew the lease on terms Equitable is prepared to accept from a
bona fide third party. The purchase agreement also provides for payments to
Cranberry Hills of 25% of the premises income, if any, during the term lease
with Equitable. The amount expensed in fiscal 1998, 1997 and 1996 was
approximately $0, $86,000 and $64,000, respectively.
The future minimum annual payments on noncancelable operating lease
agreements for the next two fiscal years ending August 31 are as follows:
1999 $371,000
2000 401,000
---------------------------
$772,000
===========================
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.
14. 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.
15. 401(k) Retirement Plans
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 Company contributed
approximately $182,000, $127,000 and $63,000, to this plan in fiscal 1998, 1997
and 1996, respectively.
The Company also has a 401(k) profit sharing plan that covers
substantially all nonunion employees of Minot. In accordance with plan
provisions, the Company may make discretionary contributions. No amounts were
contributed to the plan in fiscal 1998.
<PAGE>
16. Significant Customers
As discussed in Note 1, the Company had supply agreements to sell the
majority of its products to two independent fruit juice and sauce processors.
After delivery of the 1995 crop, these agreements expired.
In fiscal 1997, the Company had sales to one customer of approximately
$5,797,000, or 12%, of net sales. In fiscal year 1998, the Company did not have
sales to any one customer exceeding 10% of net sales.
17. Subsequent Event
In August 1998, the Company entered into a letter of intent agreement
to purchase the juice division of Seneca Foods Corporation. The purchase will
include bottling and packaging facilities located in New York, North Carolina
and Wisconsin; warehousing in Michigan; and a grape receiving station in New
York. The final purchase price is expected to be between $30 and $35 million.
Total revenues of the business to be acquired for the fiscal year ended March
31, 1998 were approximately $105 million.
Subsidiaries of Northland Cranberries, Inc.
Minot Food Packers, Inc., a New Jersey corporation
Wildhawk, Inc., a Wisconsin corporation
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-32525, 33-62723 and 333-01557 on Form S-8 and Registration Statement No.
333-08563 on Form S-4 of our report dated October 15, 1998, incorporated by
reference in the Annual Report on Form 10-K of Northland Cranberries, Inc. for
the year ended August 31, 1998.
/S/ DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Milwaukee, Wisconsin
November 30, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-START> SEP-01-1997
<PERIOD-END> AUG-31-1998
<CASH> 633,426
<SECURITIES> 0
<RECEIVABLES> 22,422,072
<ALLOWANCES> 0
<INVENTORY> 43,810,813
<CURRENT-ASSETS> 71,297,582
<PP&E> 181,994,421
<DEPRECIATION> 29,794,944
<TOTAL-ASSETS> 250,871,774
<CURRENT-LIABILITIES> 21,810,845
<BONDS> 64,275,826
0
0
<COMMON> 197,092
<OTHER-SE> 144,477,226
<TOTAL-LIABILITY-AND-EQUITY> 250,871,774
<SALES> 112,336,324
<TOTAL-REVENUES> 112,828,336
<CGS> 62,474,847
<TOTAL-COSTS> 38,752,157
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,826,525
<INCOME-PRETAX> 4,774,807
<INCOME-TAX> 1,920,000
<INCOME-CONTINUING> 2,854,807
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,854,807
<EPS-PRIMARY> 0.19
<EPS-DILUTED> 0.19
</TABLE>
