SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-12
Northland Cranberries, Inc.
---------------------------
(Name of Registrant as Specified in its Charter)
------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
PRELIMINARY COPY
[PRINTER TO INSERT LOGO]
NORTHLAND CRANBERRIES, INC.
800 First Avenue South, P.O. Box 8020
Wisconsin Rapids, Wisconsin 54495-8020
--------------------
NOTICE OF 2001 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 30, 2001
--------------------
TO OUR SHAREHOLDERS:
We would like to invite you to attend our 2001 annual meeting
of shareholders on Wednesday, January 30, 2001 at 3:00 p.m. at the Northland
Conference Center, located at 2321 West Grand Avenue, Wisconsin Rapids,
Wisconsin. As we describe in the accompanying Proxy Statement, we will be voting
on the following matters:
1. election of seven directors;
2. a proposal to approve an amendment to our Articles of
Incorporation allowing our Board of Directors at any time prior
to January 30, 2002 to choose to implement a reverse stock split
of our then outstanding Class A shares and Class B shares in a
ratio of one-for-two, one-for-three or one-for-four; and
3. any other business that may properly come before the annual
meeting.
We have enclosed a proxy card along with this proxy statement. Your
vote is important, no matter how many shares you own. Even if you plan to attend
the annual meeting, please complete, date and sign the proxy card and mail it as
soon as you can in the envelope we have provided. If you attend the annual
meeting, you can revoke your proxy and vote your shares in person if you would
like.
Thank you for your continued support. We look forward to seeing you at
the annual meeting.
NORTHLAND CRANBERRIES, INC.
[PRINTER TO INSERT SIGNATURE]
David J. Lukas
Senior Vice President-Administration,
Secretary and Corporate Counsel
Wisconsin Rapids, Wisconsin
December 21, 2000
<PAGE>
PRELIMINARY COPY
FREQUENTLY ASKED QUESTIONS
Q: Why have I received this proxy statement?
Our Board of Directors has sent you this proxy statement, starting around
December 21, 2000, to ask for your vote as a Northland shareholder on
certain matters to be voted on at the upcoming annual shareholders'
meeting.
Q: What am I voting on?
You will vote on re-electing seven directors. You will also vote on a
proposal to approve an amendment to our Articles of Incorporation to
effect, at the discretion of our Board of Directors, a reverse stock split
in one of three ratios at any time prior to January 30, 2002. Our Board of
Directors is not aware of any other matter which will be presented for your
vote at the annual meeting.
Q: Do I need to attend the annual meeting in order to vote?
No. You can vote either in person by ballot at the annual meeting or by
completing and mailing the enclosed proxy card.
Q: Who is entitled to vote?
If you owned shares as of the close of business on December 13, 2000 (the
Record Date), you are entitled to vote. You will be entitled to one vote
per share for each share of our Class A common stock you owned on the
Record Date.
Q: How many shares of Northland's stock are entitled to vote?
As of the Record Date, [19,702,221] Class A shares and 636,202 Class B
shares were entitled to vote at the annual meeting. Since Class B shares
are entitled to three votes per share, there were [21,610,827] votes
represented by all shares entitled to vote as of the Record Date. All
shares vote together as one group for the election of directors and
separately, by classes, for the approval of the amendment to the Articles
of Incorporation.
Q: What constitutes a quorum?
A "quorum" refers to the number of shares that must be in attendance at a
meeting to lawfully conduct business. A majority of the combined votes of
the Class A shares and Class B shares entitled to be cast, or shares
representing at least [10,805,414] votes, will represent a quorum for the
purpose of electing directors. Since approval of the amendment to the
Articles of Incorporation requires a separate class vote of each of the
Class A shares and Class B shares, a majority of each of the Class A shares
and Class B shares separately (or at least [9,851,111] Class A shares and
at least 318,101 Class B shares), must be present at the annual meeting to
represent a quorum for the purpose of approving the amendment to the
Articles of Incorporation.
Q: What happens if I sign and return my proxy card but do not mark my vote?
John Swendrowski, as proxy, will vote your shares to elect the Board's
nominees for director and for the approval of the amendment to the Articles
of Incorporation.
Q: Who will count the votes?
Computershare Investor Services, L.L.C., our transfer agent and registrar,
will count the votes and act as inspector of elections.
Q: What percentage of Northland's votes do directors and officers own?
Our directors and officers together own shares representing approximately
15.2% of our voting power as of the Record Date. See page 5 for more
details.
Q: Who are the largest shareholders?
The State of Wisconsin Investment Board owned 3,749,400 Class A shares as
of February 2, 2000, or approximately 19.0% of our Class A shares and
approximately 17.4% of our voting power based on shares outstanding as of
the Record Date. Gilder Gagnon Howe & Co. LLC owned 2,590,050 Class A
shares as of February 14, 2000, or approximately 13.2% of our Class A
shares and 12.0% of our voting power based on shares outstanding as of the
Record Date.
2
<PAGE>
PROPOSAL ONE: ELECTION OF DIRECTORS
Director Nominees
At the annual meeting, you will elect seven directors to hold office
until our next annual meeting and until their successors are duly qualified and
elected. Our Board of Directors, which we refer to as the "Board," has nominated
seven people for election. John Swendrowski, as proxy, intends to vote all
proxies received for the election of all of the Board's nominees. He will also
vote for another person that the Board may recommend in place of a nominee if
that nominee becomes unable to serve as a director before the annual meeting.
All of the Board's nominees are currently serving as shareholder-elected Board
members.
Under Wisconsin law, shareholders elect directors by a plurality of
the votes cast by shares which are entitled to vote in the election, assuming a
quorum is present. For this purpose, "plurality" means that the nominees
receiving the largest number of votes will be elected as directors. Any shares
which do not vote, whether by abstention, broker non-vote or otherwise, will not
affect the election of directors.
The Board's nominees to serve as our directors, and certain important
information regarding each nominee, are as follows:
John Swendrowski
John Swendrowski, 52, is the Chairman of the Board and originally
founded Northland in 1987. He has been a director since that time. He has also
served as our Chief Executive Officer since our inception in 1987. Since our
Chief Financial Officer fell seriously ill in fiscal 2000, Mr. Swendrowski is
also currently acting as our interim Chief Financial Officer.
Leroy J. Miles
Leroy J. Miles, 65, retired as our Corporate Secretary in August 1995
and as Executive Vice President at the end of 1994. Before retiring, Mr. Miles
held such executive positions since May 1987, and has also been one of our
directors since that time.
Robert E. Hawk
Robert E. Hawk, 45, was appointed President and Chief Operating
Officer in August 2000. Before that, he served as Group President-Non-Branded
Divisions since August 1998. 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.
Mr. Hawk has been a director of Northland since 1989.
Patrick F. Brennan
Patrick F. Brennan, 69, has been a Northland director since 1989. He
retired as President and Chief Executive Officer of Consolidated Papers, Inc., a
Wisconsin Rapids, Wisconsin manufacturer of paper products, as of December 31,
1996, a position he had held since October 1993. Before that, he served as
Consolidated's President and Chief Operating Officer for five years, Executive
Vice President for over one year and Corporate Vice President for three years.
He has served as a director of Consolidated Papers, Inc. since February 1987.
Mr. Brennan is also a director of Valassis Communications Inc., Livonia,
Michigan, a supplier of newspaper inserts.
Jeffrey J. Jones
Jeffrey J. Jones, 47, is a partner in the law firm of Foley & Lardner
in Milwaukee, Wisconsin. Foley & Lardner has been Northland's general outside
legal counsel, and Mr. Jones has served as one of our directors, since our
formation in 1987.
3
<PAGE>
Pat Richter
Pat Richter, 59, has been a director of Northland since 1997. Mr.
Richter became the Director of Athletics at the University of Wisconsin-Madison
in February 1990. Before that, he served as Vice President-Personnel of Oscar
Mayer Foods Co. since 1988. Mr. Richter is also a director of the Green Bay
Packers, Inc., Anchor Bancorp Wisconsin Inc., Madison, Wisconsin, a financial
institution, and Outlook Group Corp., Neenah, Wisconsin, a printing company.
John C. Seramur
John C. Seramur, retired, 58, has served as Vice Chairman of Associated
Banc-Corp since October 1997. For over 25 years before that, Mr. Seramur served
as President of First Financial Bank and its parent corporation, First Financial
Corporation, a thrift holding company that merged with Associated Banc-Corp in
October 1997. Mr. Seramur has been a director of Northland since 1987. Since
1999, Mr. Seramur has served as a director of Vita Food Products, Inc., a
company engaged in the sale of specialty food products.
Board Meetings and Committees
The following table lists the Board committees on which our directors
serve (with the asterisk indicating the chairman of such committee), as well as
how many times the Board and each committee met in fiscal 2000. During fiscal
2000, each director attended at least 75% of the aggregate of (a) the total
number of meetings of the Board and (b) the total number of meetings held by all
committees of the Board on which such director served during the year.
Board Member Board Audit Executive Compensation
------------ ----- ----- --------- ------------
J. Swendrowski x* x*
L. Miles x x
R. Hawk x x
P. Brennan x x* x
J. Seramur x x x*
J. Jones x x
P. Richter x x x
Meetings Held in Fiscal 2000 8 7 0 1
Executive Committee. The Executive Committee acts on behalf of the
Board between Board meetings, except with respect to matters upon which
Wisconsin law does not allow a committee to act.
Audit Committee. The Audit Committee's principal functions include:
o recommending a firm of independent public accountants to
serve as our independent auditors for the next fiscal year;
o meeting with and reviewing reports of our independent
auditors;
o overseeing our quarterly and annual financial reporting
process; and
o conducting a post-audit review of our annual financial
reporting and audit process.
The Board has adopted a written charter for the Audit Committee, which
is attached as Appendix B to this Proxy Statement. All of the members of the
Audit Committee satisfy the requirements for independence set forth in Section
4200(a)(15) of the listing standards of the National Association of Securities
Dealers, Inc.
Compensation and Stock Option Committee. The Compensation and Stock
Option Committee administers our stock option plans, including granting options
to our key employees, and approves the compensation, bonuses and benefits of our
officers and key employees.
4
<PAGE>
We do not have a nominating committee. Our Board as a whole performs
the functions that such a committee would otherwise perform. If you would like
to propose director nominees for consideration at the annual meeting, you can do
so under our by-laws only by giving our Secretary written notice of your intent
to make a nomination not less than 30 days before the annual meeting. You must
tell us in your notice, among other things, the nominee's name, biographical
data and qualifications.
STOCK OWNERSHIP OF MANAGEMENT AND OTHERS
Stock Ownership
We describe in the following table certain information regarding the
beneficial ownership of Class A shares and Class B shares as of the Record Date
held by (i) each of our directors and those of our executive officers who are
named in the Summary Compensation Table below under "Executive
Compensation--Summary Compensation Information"; (ii) all of our directors and
executive officers as a group; and (iii) each person or entity that we know
beneficially owns more than 5% of the Class A shares or Class B shares. We
believe that all of the people listed below have sole voting and investment
power over the listed shares, except as we have indicated otherwise in the
footnotes.
<TABLE>
<CAPTION>
Class A Shares Class B Shares
Beneficially Beneficially Percentage of
Owned and Owned and Aggregate
Name of Individual or Entity Percentage of Percentage of Voting
or Number in Group Class(1) Class(1) Power
------------------------------------------------- ----------------------- -------------------- ---------------
Directors and Executive Officers
<S> <C> <C> <C>
John Swendrowski(2) 389,341(3) 636,202(4) 10.5%
(2.0%) (100.0%)
Leroy J. Miles 108,437(5) 287,998(6) 4.5%
* (45.3%)
Robert E. Hawk 434,183(7) -- 2.0%
(2.2%)
Scott R. Corriveau(8) -- -- --
Ricke A. Kress 3,000(9) -- *
*
Steven E. Klus 9,100(10) -- *
*
Patrick F. Brennan 10,396(11) -- *
*
Jeffrey J. Jones 26,638(12) -- *
*
Pat Richter 6,400(13) -- *
*
John C. Seramur 85,770(14) -- *
*
All directors and executive officers 1,484,900 636,202 15.2%
as a group (14 persons)(15) (7.3%) (100.0%)
<CAPTION>
Other Five Percent Holders
<S> <C> <C> <C>
State of Wisconsin Investment Board 3,749,400 -- 17.4%
("SWIB")(16) (19.0%)
Gilder Gagnon Howe & Co. LLC 2,590,050 -- 12.0%
("Gilder")(17) (13.2%)
--------------------------------
*Denotes less than 1%.
</TABLE>
5
<PAGE>
(1) Class B shares can be converted on a share-for-share basis into Class
A shares at any time. As a result, a holder of Class B shares is
deemed to beneficially own an equal number of Class A shares. However,
so that we do not overstate aggregate beneficial ownership, the Class
A shares we listed do not include Class A shares which the holder can
acquire by converting Class B shares into Class A shares. Similarly,
when we determined the percentages of outstanding Class A shares that
we listed in the table, we did not include Class A shares which the
holder can acquire by converting Class B shares into Class A shares.
(2) Mr. Swendrowski's address is 800 First Avenue South, P.O. Box 8020,
Wisconsin Rapids, Wisconsin 54495-8020.
(3) The Class A shares listed include (i) 73,275 shares which Mr.
Swendrowski owns directly; (ii) 19,000 shares owned by a charitable
foundation with respect to which he shares voting and investment
power; (iii) 14,733 shares which are owned by members of Mr.
Swendrowki's family and with respect to which he shares voting and
investment power; and (iv) 282,333 shares which Mr. Swendrowski can
acquire by exercising vested stock options.
(4) The Class B shares listed include (i) 348,204 shares which Mr.
Swendrowski owns directly and (ii) 287,998 shares held by Cranberries
Limited, Inc. ("CLI"), a corporation which Messrs. Swendrowski and
Miles own and which Mr. Swendrowski controls, with respect to which he
shares voting and investment power.
(5) The Class A shares listed include (i) 86,923 shares which Mr. Miles
owns directly; (ii) 18,000 shares which Mr. Miles can acquire by
exercising vested stock options; and (iii) 3,514 shares held for the
account of Mr. Miles' wife, with respect to which he shares voting and
investment power.
(6) The Class B shares listed include the 287,998 shares which Mr. Miles
is deemed to beneficially own as an officer and shareholder of CLI and
with respect to which he shares voting and investment power. Those
shares are also included under the number of Class B shares which Mr.
Swendrowski is deemed to beneficially own. See note (4) above.
(7) The Class A shares listed include (i) 298,200 shares which Mr. Hawk
owns directly; (ii) 11,064 shares which Mr. Hawk's wife owns or which
are held in his wife's IRA account, with respect to which he shares
voting and investment power; (iii) 20,786 shares held in his IRA
account; and (iv) 104,133 shares which Mr. Hawk can acquire by
exercising vested stock options.
(8) Mr. Corriveau's employment with us terminated effective as of
September 1, 2000.
(9) Includes 3,000 shares which Mr. Kress can acquire by exercising vested
stock options.
(10) Includes 9,100 shares which Mr. Klus can acquire by exercising vested
stock options.
(11) The Class A shares listed include (i) 5,646 shares which Mr. Brennan
owns directly; and (ii) 4,750 shares which Mr. Brennan can acquire by
exercising vested stock options.
(12) The Class A shares listed include (i) 21,288 shares which Mr. Jones
owns directly; (ii) 4,750 Class A shares which Mr. Jones can acquire
by exercising vested stock options; and (iii) 600 shares which are
owned by members of Mr. Jones' family and with respect to which he
shares voting and investment power.
(13) The Class A shares listed include (i) 3,400 shares which Mr. Richter
owns directly; and (ii) 3,000 shares which Mr. Richter can acquire by
exercising vested stock options.
(14) The Class A shares listed include (i) 82,080 shares held by the John
C. Seramur FLITE Trust with respect to which he has no voting or
investment power; and (ii) 3,690 shares which Mr. Seramur can acquire
by exercising vested stock options.
(15) When we determined the aggregate beneficial ownership of Class A
shares and Class B shares for all of our directors and executive
officers as a group, we counted shares which are deemed to be
beneficially owned by more than one person only once to avoid
overstatement. The number of Class A shares listed includes 670,757
shares which certain of our executive officers and directors can
acquire by exercising vested stock options.
(16) The information given is as of or about February 2, 2000, as reported
by SWIB in its Schedule 13G filed with the Securities and Exchange
Commission ("SEC"). SWIB's address is P.O. Box 7842, Madison,
Wisconsin 53707.
(17) The information given is as of or about February 14, 2000, as reported
by Gilder in its Schedule 13G filed with the SEC. Gilder's address is
1775 Broadway, 26th Floor, New York, New York 10019. Gilder does not
have the power to vote these shares and shares investment power with
respect to these shares.
6
<PAGE>
EXECUTIVE COMPENSATION
Report on Executive Compensation
Compensation Philosophy. As the Compensation and Stock Option
Committee of the Board, we evaluate and approve the compensation of our
executive officers. We intend our compensation policies and practices to:
o attract, motivate and retain qualified executive officers;
o provide a total compensation package which is based on
corporate and personal performance and which is competitive
in the fruit juice/beverage industry; and
o motivate our executive officers to achieve positive results
by giving them the chance to buy our stock through stock
options in order to make their interests more like our
shareholders' interests.
Compensation Components. Compensation for our executive officers
consists of:
o base salary;
o potential annual bonuses;
o potential annual stock option grants; and
o the opportunity to participate in our 401(k) plan.
Additionally, in fiscal 2000, we announced that we were undertaking
the process of exploring strategic alternatives for Northland, including a
possible strategic alliance with an industry partner or the sale of all or a
portion of the company. In order to provide our key executives and employees
with appropriate incentives to continue with Northland through the conclusion of
the exploration process, and to provide executives and employees with additional
job security in the event the process resulted in a change of control, we
adopted the Northland Cranberries, Inc. Severance and Stay Bonus Plan in fiscal
2000. The plan provides generally for:
o discretionary "stay" bonuses, in varying maximum amounts,
payable to certain key officers and employees who remain
employed by Northland upon consummation of a change of
control (as that term is used in the plan); and
o severance payments in varying amounts to those key officers
and employees in the event they are terminated following a
change of control.
The plan provides that no payments will be made thereunder prior to a
change of control of Northland. As a result, no payments have been made to
officers or employees under the plan as of the end of fiscal 2000.
Base Salary. We establish each executive officer's base salary at the
start of each fiscal year. We consider several factors in determining the base
salary of our executive officers, including:
o the Chief Executive Officer's recommendations (except with
respect to his own base salary);
o our performance during the most recent fiscal year, with
special emphasis on our revenues, revenue growth, earnings
per share, cost and expense levels and balance sheet
strength;
o how our performance compares to our historical results and
our expectations for that fiscal year;
o whether and to what extent we reached our strategic goals
for the fiscal year; and
o the individual achievements of our executive officers,
including contributions to our financial results for the
past year, and relationships with other Northland personnel.
7
<PAGE>
For fiscal 2000 we also considered:
o salaries of comparable executive officers of certain of our
competitors;
o the conversion of our internal information systems and
management's efforts in dealing with associated
unanticipated difficulties;
o the efforts of our officers in planning and implementing a
cost reduction and internal reorganization plan, including
(i) the outsourcing of certain sales functions to, and
further consolidation of our food broker network with,
Crossmark, Inc.; (ii) the closing of our Bridgeton, New
Jersey facility, the sale of our grape business and our
grape receiving station in Portland, New York, and other
efficiency measures associated with increasing capacity at
our remaining facilities and reducing overhead; and (iii)
the elimination of certain outsourced warehousing facilities
and services;
o the efforts of our officers in working with our lenders
under the terms of our outstanding debt arrangements and in
seeking alternative financing;
o the completion of the sale of our private label juice
business; and
o the efforts of our officers in managing and participating in
the process of exploring strategic alternatives.
Despite the positive contributions of our officers described above,
Northland's earnings and financial performance suffered in fiscal 2000 due
largely to continued competitive industry pricing pressures and the large
industry-wide cranberry oversupply. While we feel it is crucial to Northland's
success to offer our executive officers compensation packages competitive within
the industry, in light of Northland's current cash position, we believe it
prudent to provide only modest cost of living increases in our executive
officers' base salaries for the upcoming fiscal year. As a result, we increased
the base salaries of our executive officers by an average of 6.0%, and,
exclusive of two of our executive officers who were given substantial promotions
for the upcoming fiscal year as a result of our internal restructuring (and
received increases in base salary commensurate with their new positions) and one
executive officer who retained his current position but took on added
administrative responsibility, we increased the base salaries of our executive
officers by an average of only 2.9%.
We also review the factors discussed above in making a determination
of the base salary of our Chief Executive Officer. We also reviewed additional
criteria for the upcoming fiscal year, including the efforts of our Chief
Executive Officer in pursuing strategic alternatives for the company, acting as
our interim Chief Financial Officer due to the serious illness of our Chief
Financial Officer, and managing our trade payables and other debt relationships
during the period. Despite these positive contributions, we did not increase the
base salary of our Chief Executive Officer for the upcoming fiscal year.
Although we review objective performance criteria, we still consider
certain subjective factors which aren't related directly to our financial
results in making these compensation decisions.
Bonuses. Our 2000 Incentive Bonus Plan provides incentive bonus
opportunities to our employees. The Bonus Plan bases incentive cash bonuses on
achieving specified objective and subjective goals, including certain earnings
goals and various departmental and individual goals. The Bonus Plan, which
applies to all of our employees, provides the chance to receive a bonus of up to
a specified percentage of base salary which varies by the employee's position.
In fiscal 2000, Northland's earnings were below the goals we set at
the end of last year. Additionally, Northland continues to operate in an
increasingly competitive industry environment with a surplus industry supply of
cranberries, which has resulted in current operational difficulties with respect
to Northland's cash position. As a result, we paid a bonus to only one of our
executive officers for fiscal 2000.
Stock Options. We generally make regular annual stock option grants to
our executive officers under our stock option plans after the end of each fiscal
year. We base our option grants mainly on:
o each executive officer's relative position with Northland;
8
<PAGE>
o the officer's individual initiatives and achievements and
their impact on Northland's performance;
o many of the salary and bonus factors discussed above;
o the officer's historical level of option grants; and
o the size of option grants to other similar executives.
For fiscal 2000, we decided to award regular annual option grants to
purchase a total of 40,000 Class A shares to our executive officers.
Our stock option grants are intended to motivate key employees to
achieve the best results for the company by giving them the chance to acquire or
increase their current stock ownership in Northland. Since options are only
valuable if our stock price goes up, we believe that stock option grants help
make the financial interests of our management the same as our shareholders. We
grant options with an exercise price equal to the value of the Class A shares on
the date of grant. The options usually expire in 10 years and either become
exercisable in increments of 20% on each of the first, second, third, fourth and
fifth anniversaries of the grant date, 33% on each of the first, second and
third anniversaries of the grant date, or, as has sometimes been the case with
grants to our senior executive officers, are exercisable immediately upon grant.
We believe our stock option plans, and the way in which we administer
them, comply with Internal Revenue Code Section 162(m).
By the Compensation and Stock Option Committee:
John C. Seramur, Chairman
Patrick F. Brennan
Pat Richter
9
<PAGE>
Audit Committee Report
On January 5, 2000, the Board adopted the Audit Committee Charter, a
copy of which is attached to this Proxy Statement as Appendix B. Management is
responsible for our internal controls and financial reporting process. Our
independent auditors are responsible for performing an independent audit of our
consolidated financial statements in accordance with generally accepted auditing
standards and for issuing a report thereon. As the Audit Committee of the Board,
we are responsible for monitoring and overseeing these processes. This report
discusses certain actions we took during fiscal 2000 in connection with those
responsibilities.
Our Audit Committee Charter requires that we attempt to meet at least
twice annually. In fiscal 2000, we held seven meetings, several of which were
attended by management and our independent auditors, primarily because of
certain extraordinary circumstances facing Northland during the fiscal year,
including:
o management's determination to explore strategic alternatives for the
company, including the potential alliance with an industry partner or sale of
all or part of the company;
o the conversion of our internal information systems to assist
management in obtaining more complete financial information in a quicker and
more efficient manner, and significant unanticipated difficulties encountered in
such conversion;
o the lower of cost or market inventory adjustment taken by Northland
in the fiscal year as required by generally accepted accounting principles due
to (i) the rapid decline in per-barrel prices of cranberries caused by three
straight industry record cranberry crops; and (ii) our historical fixed price
cranberry crop purchase contracts with other growers that locked in these higher
prices to growers who delivered their cranberries to us, as well as other
adjustments as a result of the closing of our Bridgeton, New Jersey
manufacturing facility and other steps associated with our internal
reorganization; and
o our operating performance in fiscal 2000 which, combined with the
inventory and other adjustments, resulted in defaults under our debt
arrangements and required us to carefully review and, in certain cases, amend
the terms of our debt arrangements and seek alternative financing.
Management has represented to us that Northland's consolidated
financial statements were prepared in accordance with generally accepted
accounting principles. We have reviewed and discussed the audited consolidated
financial statements with management and our independent auditors. We also
discussed with the independent auditors matters required to be discussed by
Statement on Auditing Standards No. 61 (Communication with Audit Committees).
The independent auditors also provided us with written disclosures and
the letter required by Independence Standards Board Standard No. 1 (Independence
Discussions with Audit Committees), and we discussed with the independent
auditors their independence.
Based on our discussions with management and the independent auditors,
as well as our review of the representations of management and the report of the
independent auditors to us, we recommended to the Board of Directors that the
audited consolidated financial statements be included in Northland's Annual
Report on Form 10-K for the fiscal year ended August 31, 2000 filed with the
Securities and Exchange Commission.
This report shall not be deemed to be incorporated by reference by any
general statement incorporating by reference this Proxy Statement into any
filing under the Securities Act of 1933, as amended, or the Securities Exchange
Act of 1934, as amended, and shall not otherwise be deemed filed under such
Acts.
By the Audit Committee:
Patrick F. Brennan, Chairman
John C. Seramur
Pat Richter
Jeffrey J. Jones
10
<PAGE>
Summary Compensation Information
In the table below, we describe the compensation we paid for the last
three fiscal years to our Chief Executive Officer and certain of our other
executive officers whose salary and bonuses were more than $100,000 in fiscal
2000. We sometimes refer to the people in the table below as our "named
executive officers."
<TABLE>
Summary Compensation Table
<CAPTION>
Annual Stock
Name and Fiscal Compensation Option Grants Other Annual All Other
Principal Positions Year Salary Bonus (shares) Compensation(1) Compensation(2)
--------------------------- ---- ------ ----- ------ -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
John Swendrowski 2000 $420,000 $ 0 10,000 $ 0 $ 5,167(3)
Chairman of the Board 1999 $400,000 $115,000 15,000 $ 0 $ 4,999
and Chief Executive Officer 1998 $350,000 $ 40,000 40,000 $ 0 $ 4,917
Robert E. Hawk 2000 $190,000 $ 0 4,000 $ 0 $ 5,167
President and 1999 $170,000 $ 35,000 2,000 $ 59,080 $ 4,999
Chief Operating Officer 1998 $140,000 $ 20,000 10,000 $ 0 $ 4,913
Scott R. Corriveau (4) 2000 $256,667 $ 0 4,000 $ 0 $ 123,500(5)
President-Branded Division 1999 $144,000 $ 30,000 10,000 $ 0 $ 4,999
1998 --- --- --- --- ---
Ricke A. Kress (6) 2000 $160,000 $ 0 3,000 $ 0 $ 3,500
Non-Branded Group President 1999 $123,333 $ 0 5,000 $ 0 $ 0
1998 --- --- --- --- ---
Steven E. Klus 2000 $150,800 $ 0 3,000 $ 0 $ 4,312
Manufacturing Division 1999 $125,500 $ 19,500 2,000 $ 0 $ 4,858
President 1998 $ 94,000 $ 12,000 2,500 $ 0 $ 5,305
--------------------------------
(1) Mr. Hawk received this amount to reimburse him in part for taxes he paid after exercising stock options.
(2) Includes matching contributions we made under our 401(k) plan to each person.
(3) We paid $48,272, $48,555 and $49,066 of premiums on a split-dollar insurance policy on the life of Mr.
Swendrowski in fiscal 2000, 1999 and 1998, respectively. We did not include this data in the table
because when the policy is surrendered to us or when Mr. Swendrowski dies, we will be reimbursed for
these premium payments.
(4) Mr. Corriveau's employment with us began effective December 7, 1998 and terminated effective September 1,
2000.
(5) Includes (i) $3,500 in matching contributions we made under our 401(k) plan and (ii) $120,000 in
severance payments due Mr. Corriveau through March 1, 2001 following Mr. Corriveau's termination of
employment.
(6) Mr. Kress' employment with us began effective November 1, 1998.
</TABLE>
11
<PAGE>
Stock Options
We have three stock option plans currently in place: the 1987, 1989
and 1995 Stock Option Plans. There are no shares remaining available under the
1987 Plan and, as of November 7, 1999, no shares remaining available under the
1989 Plan. The following table lists the option grants under the 1989 Plan and
the 1995 Plan which we made during fiscal 2000, as well as certain other
information relating to those grants.
<TABLE>
Fiscal 2000 Option Grants
<CAPTION>
Potential Realizable Value
Shares Percentage of At Assumed Annual Rates of
Underlying Total Options Exercise Stock Price Appreciation
Options Granted to all Price (per Expiration For Option Term(4)
Name Granted(1) Employees share)(3) Date 5% 10%
---------------------- ---------- -------------- ----------- ---------- -------------------------------
<S> <C> <C> <C> <C> <C> <C>
John Swendrowski 10,000 10.0% $ 5.063 10/21/09 $ 31,841 $ 80,691
Robert E. Hawk 4,000 4.0% $ 5.063 10/21/09 $ 12,736 $ 32,276
Scott R. Corriveau 4,000 4.0% $ 5.063 10/21/09 $ 12,736 $ 32,276
Ricke A. Kress 3,000 3.0% $ 5.063 10/21/09 $ 9,552 $ 24,207
Steven E. Klus 3,000 3.0% $ 5.063 10/21/09 $ 9,552 $ 24,207
All Optionees 100,500(2) 100.0% $ (2) (2) $ 320,001 $ 810,946
All Shareholders(5) N/A N/A N/A N/A $ 62,585,335 $158,603,527
---------------------
(1) These options are nonqualified stock options under the Internal Revenue Code.
(2) The Compensation and Stock Option Committee, which we refer to as the "Committee," granted 93,000 options on
October 21, 1999 with an exercise price of $5.063 and an expiration date of October 21, 2009. As the result of
certain optionees' terminations of employment, 18,000 of these options were cancelled in fiscal 2000. The
Committee granted 3,500 options on January 5, 2000 with an exercise price of $5.50 and an expiration date of
January 5, 2010. As the result of certain optionees' terminations of employment, all of these options were
cancelled in fiscal 2000. The Committee granted 4,000 options on August 31, 2000 with an exercise price of
$1.563 and an expiration date of August 31, 2005.
(3) A holder can pay the exercise price of options in cash, by delivering previously issued Class A shares, or a
combination of both.
(4) These values represent the difference between the exercise price of the options and the value of the Class A
shares on the date that the options will be exercised, assuming certain rates of appreciation in the value of
Class A shares and assuming the options will be exercised on their respective expiration dates. We have not
taken into account taxes or other payments which the holders of options may have to pay upon exercise. The
actual values of the options will depend on the value of the Class A shares on the date the options are
exercised. The 5% and 10% rates we used in these calculations are not our estimates of our future performance
or the future price of Class A shares. Rather, we are required to use these rates by the rules of the SEC. We
cannot guarantee that these rates of appreciation will actually be achieved. As of the fiscal year-end, the
per share exercise prices of all outstanding exercisable and unexercisable options exceeded the fair market
value of a Class A share.
(5) These values represent the gain to all shareholders as a group, calculated in the same way as we calculated
the values referred to in footnote (4) to the table. Again, we cannot guarantee that these rates of
appreciation will actually be achieved.
</TABLE>
12
<PAGE>
We have set forth below certain information about the options
exercised in fiscal 2000 by our named executive officers and by all of our
option holders, as well as the number and value of unexercised stock options
held by our named executive officers and by all other option holders as of the
end of fiscal 2000.
Number of Shares
Number of Underlying Options
Shares at End of Fiscal 1999(2)
Acquired Value
Name Upon Exercise Realized(1) Exercisable Unexercisable
---- ------------- ----------- ----------- -------------
John Swendrowski 20,000 $ 37,500 282,333 6,667
Robert E. Hawk 10,000 $ 18,438 104,133 3,867
Scott Corriveau 0 $ 0 3,333 10,667
Ricke A. Kress 0 $ 0 3,000 5,000
Steven E. Klus 0 $ 0 9,100 4,400
All Optionees 46,600 $ 83,722 815,086 155,500
--------------------------
(1) This reflects the dollar value difference between the closing sale
price of the Class A shares on The Nasdaq Stock Market on the date of
exercise, less the stock option's exercise price, multiplied by the
number of Class A shares acquired upon exercise.
(2) These options are nonqualified stock options under the Internal Revenue
Code. Each option has an exercise price equal to the fair market value
(last bid price) of the Class A shares on the date of grant. As of the
fiscal year-end, the per share exercise prices of all outstanding
exercisable and unexercisable options exceeded the fair market value of
a Class A share.
Director Compensation
Directors of Northland who are also our employees receive no
additional compensation for serving on the Board. We compensate our non-employee
directors for their service on the Board by providing:
o an annual retainer fee of $15,000;
o $500 for each Board and committee meeting attended, plus an
additional $250 for each committee chairman per committee
meeting attended;
o reimbursement for directors' transportation, lodging and
meal expenses incurred in attending meetings; and
o annual automatic grants of stock options under the 1995 Plan
which
- are exercisable for 1,000 Class A shares;
- occur automatically (i) upon a director's appointment
or election to the Board and (ii) on each August 31;
- are granted at an exercise price equal to the fair
market value of the Class A shares on the date of
grant;
- have a term of ten years; and
- vest in full either one year after the date they are
granted or immediately upon the happening of certain
events.
13
<PAGE>
Employment and Severance Agreements
We have entered into separate severance agreements with John
Swendrowski and Robert E. Hawk which provide that, following a "change in
control" of the company (as defined in the severance agreements), we will employ
Mr. Swendrowski and Mr. Hawk for three years in the same positions, to perform
similar duties, and at the same locations as was the case just before the change
of control. During the employment period, Mr. Swendrowski and Mr. Hawk will be
entitled to receive salaries based upon their compensation rates in effect at
the date of change of control, and will also be entitled to be included in our
benefit plans. Furthermore, from the date of the change of control until they
reach the age of 85 (regardless of whether they are still employed by
Northland), Mr. Swendrowski and Mr. Hawk, as well as their wives and each of
their children (until they reach the age of 21) will be entitled to full health
and medical, dental and vision benefits. Upon a change of control, all of Mr.
Swendrowski's and Mr. Hawk's options will also vest and immediately become
exercisable. If during the employment period (i) we terminate Mr. Swendrowski's
or Mr. Hawk's employment, other than for "cause" (as defined in the severance
agreements), or either of them becomes disabled, or (ii) we change Mr.
Swendrowski's or Mr. Hawk's duties substantially without their respective
written consent and they terminate employment as a result, then, in addition to
other benefits due under the severance agreements, they would be entitled to
receive severance payments equal to (i) in the case of Mr. Swendrowski, three
times the sum of his annual base salary then in effect, plus 50% of the maximum
bonus that would have otherwise been available to him for such year and (ii) in
the case of Mr. Hawk, two times the sum of his annual base salary then in
effect, plus 50% of the maximum bonus that would have otherwise been available
to him for such year.
Additionally, in fiscal 2000, we entered into an agreement with Mr.
Scott Corriveau, who served as our President-Branded Division, in connection
with Mr. Corriveau's termination of employment, which was effective September 1,
2000. Pursuant to that agreement, we will pay Mr. Corriveau, through March 1,
2001, the amount he would have received as his salary for such period (at the
rate in effect on August 15, 2000) had he continued his employment.
Additionally, during such period, we will continue to provide Mr. Corriveau with
health insurance (not including disability and other benefits) in the same
manner and to the same extent as we provide such benefits to our senior
management. We expect the total cash payments to Mr. Corriveau pursuant to this
arrangement will aggregate approximately $120,000.
In fiscal 2000, we announced that we were undertaking the process of
exploring strategic alternatives for Northland, including a possible strategic
alliance with an industry partner or the sale of all or a portion of the
company. In order to provide our key executives and employees with appropriate
incentives to continue with Northland through the conclusion of the exploration
process, and to provide executives and employees with additional job security in
the event the process resulted in a change of control, we adopted the Northland
Cranberries, Inc. Severance and Stay Bonus Plan in fiscal 2000. The plan
provides generally for:
o discretionary "stay" bonuses, in varying maximum amounts,
payable to certain key officers and employees who remain
employed by Northland upon consummation of a change of
control (as that term is used in the plan); and
o severance payments in varying amounts to those key officers
and employees in the event they are terminated following a
change of control.
Pursuant to this plan, in the event of a change of control,
discretionary stay bonuses may be paid to Mr. Swendrowski in the maximum amount
of $252,000; Mr. Hawk in the maximum amount of $95,000; Mr. Kress in the maximum
amount of $56,000; and Mr. Klus in the maximum amount of $52,500. Payments to
our named executive officers in the event of a termination of employment
following a change of control vary depending upon the nature of the termination.
The maximum amount payable in such a circumstance to Mr. Kress is $64,000 and to
Mr. Klus is $60,000. No such payments would be made to Mr. Swendrowski or Mr.
Hawk other than those provided pursuant to the severance agreements described
above.
The plan provides that no payments will be made thereunder prior to a
change of control of Northland. As a result, no payments have been made to our
named executive officers under the plan as of the end of fiscal 2000.
14
<PAGE>
PROPOSAL TWO: REVERSE STOCK SPLIT
The Board has determined that it would be advisable to obtain the
approval of our shareholders for a reverse stock split of our outstanding shares
of Class A common stock and Class B common stock that would reduce the number of
outstanding shares of each class in order to increase the trading price of our
Class A shares on The Nasdaq National Market. The Board took this action because
the trading price of Class A shares has recently declined below $1.00, and a
failure to maintain a minimum bid price above $1.00 for thirty consecutive
business days may result in the delisting of our Class A shares from The Nasdaq
National Market, a result that could harm our shareholders by reducing the
marketability and the liquidity of their shares. If a reverse stock split were
to be implemented, the number of Class A shares and Class B shares owned by each
shareholder would be reduced in approximately the same proportion as the
reduction in the total number of shares outstanding, so that percentage of the
outstanding shares owned by each shareholder would remain virtually unchanged.
By obtaining shareholder approval of a reverse stock split at the
annual meeting, the Board will be able to determine the most appropriate time to
effectuate the reverse stock split, based on such factors as prevailing market
conditions, prevailing trading prices of our Class A shares and the amount of
time Nasdaq is prepared to give us to achieve compliance with the trading price
requirements of its listing regulations should our Class A shares continue to
trade below $1.00. The Board also believes that, because it is not possible to
predict market conditions at the time the reverse stock split is to be
effectuated, it would be in the best interests of our shareholders if the Board
were to be able to determine, within specified limits approved in advance by the
shareholders, the appropriate reverse stock split ratio as well as the
appropriate time, if ever, to effectuate the reverse stock split.
Accordingly, the Board is asking that shareholders approve three
alternative reverse stock splits: a 1-for-2 reverse stock split, a 1-for-3
reverse stock split and a 1-for-4 reverse stock split, with the Board authorized
to determine which one of these reverse stock splits to implement and when, at
any time subsequent to the annual meeting but before January 30, 2002, to
implement such a reverse stock split, based on market and other relevant
conditions at the time the Board decides that the reverse stock split needs to
be implemented. A vote in favor of Proposal Two (the "Reverse Stock Split
Proposal") will be a vote for approval of each of those reverse split ratios and
for granting authority to the Board to effectuate one of those three reverse
stock splits. If our Board does not effect a reverse stock split by January 30,
2002, then the Board would again need to seek shareholder approval if it desired
to effect a reverse stock split subsequent to such date.
The Board also would have the discretion to abandon the reverse stock
split, if the trading price of our Class A shares increases above Nasdaq's
minimum trading price requirements prior to its implementation or market or
other conditions make implementation of the reverse stock split inadvisable.
Applicable law requires that the Class A shareholders and the Class B
shareholders vote separately as individual classes on the Reverse Stock Split
Proposal. Assuming a quorum of the Class A shares is present at the annual
meeting, the Reverse Stock Split Proposal will be approved by the Class A
shareholders voting as a single voting group if the votes cast at the annual
meeting (including those votes cast by proxy) within the voting group favoring
the proposal exceed the votes cast opposing it. Again assuming that a quorum of
the Class A shares is present at the annual meeting, any Class A shares which do
not vote, whether by abstention, broker non-vote or otherwise, will not affect
the approval of the Reverse Stock Split Proposal. Our Chairman and Chief
Executive Officer, John Swendrowski, beneficially owns all of the Class B shares
and has indicated that he intends to vote the Class B shares (as well as his
Class A shares) for the approval of the Reverse Stock Split Proposal, ensuring
that the Reverse Stock Split Proposal will be approved by the Class B
shareholders voting as an individual class.
The Board has determined that the Reverse Stock Split Proposal is
advisable and in the best interests of the shareholders and recommends that the
shareholders vote "for" approval of the Reverse Stock Split Proposal.
15
<PAGE>
Overview of Reverse Stock Split
Effects of Reverse Stock Split. A reverse stock split is a reduction
in the number of a corporation's outstanding shares of common stock, which is
accomplished by the corporation calling in all of the outstanding shares and
reissuing a proportionately fewer number of shares. This also results in an
increase in the number of authorized but unissued shares of common stock.
However, each shareholder's proportionate ownership would remain the same,
except as may result from the provisions for rounding fractional shares up to
the nearest whole share as described below. For example, if our Board implements
a one-to-three reverse stock split, then someone holding 300 shares of Class A
common stock would receive 100 shares of Class A common stock in exchange.
The primary purpose of the reverse stock split is to combine our
outstanding shares into a smaller number of shares so that our Class A shares
will trade at a higher price per share than its recent trading prices. During
the period from May 31, 2000 to October 31, 2000, the closing price of our Class
A shares on The Nasdaq National Market ranged from a high of $4.31 to a low of
$0.469 per share and on December __, 2000, the reported closing price was $___
per share. We believe that such a low quoted market price per share may
discourage potential new investors and decrease the liquidity of our Class A
common stock. Most importantly, pursuant to Nasdaq National Market listing
requirements, the minimum bid price of our Class A shares cannot be below $1.00
per share for more than thirty consecutive business days or the Class A shares
may be delisted from The Nasdaq National Market. We believe that the reverse
stock split will result in an increase in the stock price corresponding to the
number of shares exchanged for each new share issued, thus helping enable the
Class A common stock to trade above that $1.00 minimum bid price and helping
enable our Class A shares to continue to trade on The Nasdaq National Market.
To illustrate, using the above example involving a one-to-three
reverse stock split, if the current price per share of Class A common stock
prior to the reverse split was $1.00, then after the reverse stock split, the
Board believes that the price per share of Class A common stock should be
approximately $3.00. There can be no assurance, however, as to what the market
price of the Class A common stock will be after implementation of a reverse
stock split or at any other time.
In addition to increasing the market price of our Class A common
stock, a reverse stock split will also affect the presentation of shareholders'
equity in our balance sheet. Because the par values of the shares of Class A and
Class B common stock are not changing as a result of the reverse stock split,
our stated capital, which consists of the par value per share of our common
stock multiplied by the number of shares of common stock issued and outstanding,
will be reduced proportionately on the date of the reverse stock split.
Correspondingly, our additional paid-in capital, which consists of the
difference between our stated capital and the aggregate amount paid to us upon
our issuance of all currently outstanding common stock, will be increased by a
number equal to the decrease in stated capital.
Despite the above changes resulting from the reverse stock split, the
relative rights and preferences of the Class A and Class B common stock after
the reverse stock split will be identical to the relative rights and preferences
of the Class A and Class B common stock, respectively, before the reverse stock
split.
Finally, the reverse stock split will affect the outstanding stock
options of Northland and certain other agreements containing antidilution
provisions. All of our stock option plans include provisions by appropriate
action of the Compensation and Stock Option Committee for adjustments in the
number of shares covered by, the number of shares subject to and the exercise
price of outstanding options granted under said plans, in the event of a reverse
stock split. For example, in a one-to-three reverse stock split, each of the
outstanding options would thereafter evidence the right to purchase that number
of shares of Class A common stock following the reverse stock split equal to 33
1/3% of the shares of Class A common stock previously covered by the options
(with fractional shares rounded up to the nearest whole share) and the exercise
price per share would be three times the previous exercise price.
No Fractional Shares. In order that we may avoid the expense and
inconvenience of issuing and transferring fractional shares of Class A or Class
B common stock as a result of the reverse stock split, we will round any
fractional shares resulting from the reverse stock split up to the nearest whole
share such that shareholders who would otherwise be entitled to receive a
fractional share of either Class A or Class B common stock following the reverse
stock split will receive an extra whole share in lieu thereof. For example, if
any shareholder owns, in total, 100 Class A shares, that shareholder's shares
would be converted into 50 Class A
16
<PAGE>
shares (in the case of the 1-for-2 reverse stock split), 34 Class A shares (in
the case of the 1-for-3 reverse stock split), or 25 Class A shares (in the case
of the 1-for-4 reverse stock split).
Implementation of Reverse Stock Split. If the shareholders approve the
Reverse Stock Split Proposal and the Board determines it is necessary to
effectuate a reverse stock split, the Board would:
o determine which of the three reverse stock splits specified
above is advisable (1-for-2, 1-for-3, or 1-for-4), based on
market and other relevant conditions and the trading prices
of our Class A shares at that time; and
o direct management to file an Amendment of the Articles of
Incorporation with the Department of Financial Institutions
of the State of Wisconsin (the "Reverse Split Amendment")
that would specify that, on the filing of the Amendment,
each of our outstanding shares of Class A common stock and
Class B common stock would automatically be combined and
converted into (i) one-half of a share, if the Board had
determined to proceed with a 1-for-2 reverse stock split, or
(ii) one-third of a share if it had determined to proceed
with a 1-for-3 reverse stock split, or (iii) one-fourth of a
share if it had determined to proceed with a 1-or-4 reverse
stock split.
Reasons for Reverse Stock Split: Advantages
Our Board believes that a reverse stock split is desirable for the
following reasons:
o If our shares of Class A common stock continue to trade
below $1.00 per share, we risk having our common stock
delisted from The Nasdaq National Market. Delisting could
decrease the marketability, liquidity and transparency of
our Class A common stock (which could, in turn, further
depress our stock price). Additionally, delisting from
Nasdaq would likely result in the continued decline in
analyst coverage of our stock. However, our Board believes
that the anticipated increase in the market price per share
resulting from a reverse stock split will lift the price of
our Class A common stock above the $1.00 threshold that
currently threatens our continued listing on Nasdaq.
o The anticipated increase in the per share market price of
our Class A common stock should also enhance the
acceptability of the common stock by the financial community
and the investing public.
o A reverse stock split may result in a broader market for our
Class A common stock than that which currently exists. The
expected increased price level may encourage interest and
trading in our Class A common stock and possibly promote
greater liquidity for our shareholders.
o Additionally, a variety of brokerage house policies and
practices tend to discourage individual brokers within those
firms from dealing with lower priced stocks. Some of the
policies and practices pertain to the payment of broker's
commissions and to time consuming procedures that function
to make the handling of lower priced stock economically
unattractive to brokers. The expected increase in the per
share price of our Class A common stock should help
alleviate some of such problems.
o In addition, the structure of trading commissions also tends
to have an adverse impact upon holders of lower priced stock
because the brokerage commission on a sale of lower priced
stock generally represents a higher percentage of the sales
price than the commission on a relatively higher priced
issue. A reverse stock split could result in a price level
for the Class A common stock that may reduce, to some
extent, the effect of these policies and practices of
brokerage firms and diminish the adverse impact of trading
commissions on the market for our Class A common stock.
o The increase in the portion of authorized shares that would
be unissued after the reverse stock split could be used for
any proper corporate purpose approved by our Board. The
increased number of authorized but unissued shares will
provide us with
17
<PAGE>
additional flexibility to issue additional shares in
connection with future financings. However, our Board does
not currently have any plans to utilize the authorized but
unissued shares that would result from a reverse stock
split. The following table sets forth the approximate
effects of the reverse stock split on the authorized and
outstanding number of our Class A shares and the number of
shares that will be available for issuance after a reverse
stock split (without considering any additional increase
that may result from rounding up fractional shares):
<TABLE>
<CAPTION>
Prior to After 1-For-2 After 1-For-3 After 1-For-4
Reverse Reverse Reverse Reverse
Stock Split Stock Split Stock Split Stock Split
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Authorized Shares 60,000,000 60,000,000 60,000,000 60,000,000
Outstanding Shares 19,702,221 9,851,110 6,567,407 4,925,555
Shares Available for Issuance 40,297,779 50,148,890 53,432,593 55,074,445
</TABLE>
Reasons Against Reverse Stock Split: Disadvantages
Even though our Board believes that the potential advantages from a
reverse stock split outweigh any disadvantages that might result, the following
are the possible disadvantages of a reverse stock split:
o Despite the potential increase in liquidity discussed above,
the reduced number of shares resulting from a reverse stock
split could adversely affect the liquidity of our Class A
common stock.
o A reverse stock split may leave certain shareholders with
one or more "odd lots" of Class A common stock (stock in
amounts of less than 100 shares). These odd lots may be more
difficult to sell than shares in even multiples of 100.
Additionally, any reduction in brokerage commissions
resulting from the reverse stock split, as discussed above,
may be offset, in whole or in part, by increased brokerage
commissions required to be paid by shareholders selling odd
lots created by the reverse stock split.
o Because a reverse stock split would result in an increased
number of authorized but unissued shares of common stock, it
may be construed as having an anti-takeover effect, although
neither our Board nor our management views this proposal in
that perspective. However, our Board could use this
increased number of authorized but unissued shares to
frustrate persons seeking to take over or otherwise gain
control of Northland by, for example, privately placing
shares with purchasers who might side with our Board in
opposing a hostile takeover bid. Shares of our common stock
could also be issued to a holder that would thereafter have
sufficient voting power to assure that any proposal to amend
or repeal our by-laws or certain provisions of our Articles
of Incorporation would not receive the requisite vote. Such
uses of our common stock could render more difficult, or
discourage, an attempt to acquire control of Northland, if
such transaction were opposed by our Board.
o Further, the increased number of authorized but unissued
shares of common stock not otherwise required to meet our
obligations under our Articles of Incorporation could be
issued by our Board without further shareholder approval,
which could result in further dilution to the holders of
common stock.
Exchange of Stock Certificates. If the reverse stock split is
effected, our shareholders will be required to exchange their stock certificates
for new certificates representing the new shares of common stock. Shareholders
of record at the effective time of the reverse stock split will be furnished the
necessary materials and instructions for the surrender and exchange of share
certificates at the appropriate time by our transfer agent.
18
<PAGE>
Shareholders will not have to pay a transfer fee or other fee in connection with
the exchange of certificates. Shareholders should not submit any certificates
until requested to do so.
As soon as practicable after the effective time of the reverse stock
split, the transfer agent will send a letter of transmittal to each shareholder
advising such holder of the procedure for surrendering stock certificates in
exchange for new certificates representing the ownership of the new shares of
common stock. No certificates representing fractional shares will be issued.
Instead, any fractional shares resulting from a reverse stock split will be
rounded up to the nearest whole share.
Until they have surrendered their stock certificates for exchange,
shareholders will not be entitled to receive any dividends or other
distributions that may be declared and payable to holders of record of the new
shares of common stock. Upon the surrender of certificates representing common
stock prior to the reverse stock split, certificates representing new shares of
common stock together with any such withheld dividends or other distributions,
without interest, will be delivered.
Any shareholder whose certificate for common stock has been lost,
destroyed or stolen will be entitled to issuance of a certificate representing
the new shares of common stock into which such shares will have been converted
upon compliance with such requirements as we and our transfer agent customarily
apply in connection with lost, stolen or destroyed certificates.
Form of Amendment to Articles of Incorporation
The form of the Reverse Stock Split Amendment to the Articles of
Incorporation is included as Appendix A to this Proxy Statement.
Federal Income Tax Consequences
The following summary of the federal income tax consequences of a
reverse stock split is based on current law, including the Internal Revenue Code
of 1986, as amended, and is for general information only. The tax treatment of a
shareholder may vary depending upon the particular facts and circumstances of
such shareholder and the discussion below may not address all the tax
consequences for a particular shareholder. Certain shareholders, including
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, non-resident aliens, foreign corporations and persons who do not
hold our common stock as a capital asset, may be subject to special rules not
discussed below. Furthermore, no foreign, state or local tax consequences are
discussed below.
Accordingly, each shareholder should consult his or her tax advisor to
determine the particular tax consequences to him or her of a reverse stock
split, including the application and effect of federal, state, local or foreign
income tax and other laws.
Generally, a reverse stock split should not result in the recognition
of gain or loss for federal income tax purposes. The holding period of the new
shares of common stock resulting from a reverse stock split would include the
shareholder's respective holding periods for the pre-split shares of common
stock exchanged for such new shares, provided that the shares of common stock
were held as a capital asset. The adjusted basis of the new shares of common
stock would be the same as the adjusted basis of the common stock exchanged for
such new shares. The above treatment should also apply with respect to
additional shares received for fractional shares. However, it is possible that
the receipt of additional shares could be wholly or partly taxable.
No Dissenters' Rights
The holders of Class A or Class B shares of common stock have no
dissenters' rights of appraisal under Wisconsin law, our Articles of
Incorporation or our by-laws with respect to the reverse stock split.
19
<PAGE>
STOCK PERFORMANCE INFORMATION
The line graph below compares the percentage change during the last
five fiscal years in the total return on our Class A shares with the total
return of companies in the Nasdaq Total Return Index and companies in a peer
group we selected (including American Italian Pasta Co., Beringer Wine Estates,
Celestial Seasonings, J.M. Smucker Company, Robert Mondavi Corp., Triarc
Companies, Chalone Wine Group, LTD, Orange Co., Inc., Seneca Foods Corp. and
Todhunter International, Inc.).
Comparison of Five-Year Total Shareholder Returns
(on a dividend reinvested basis)
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
08/31/95 08/31/96 08/31/97 08/31/98 08/31/99 08/31/00
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Northland Cranberries, Inc. $100.00 250 240 138 97 24
Nasdaq Stock Market (US Companies) $100.00 113 157 149 276 421
Peer Group Index $100.00 92 141 120 146 163
</TABLE>
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires certain
of our executive officers, directors and persons who beneficially own more than
10% of our common stock to file reports of changes in ownership of our common
stock with the SEC. Those people are required by SEC regulations to furnish us
with copies of all Section 16(a) forms which they file. To our knowledge, all of
those people complied with all Section 16(a) filing requirements in fiscal 2000.
Northland's Independent Auditors
The Board has reappointed Deloitte & Touche LLP to serve as our
independent auditors for fiscal 2001. We expect that representatives of Deloitte
& Touche LLP will be at the annual meeting and will have a chance to make a
statement if they would like to do so. They will also be available to respond to
your questions.
20
<PAGE>
Miscellaneous
We will bear the cost of soliciting proxies. We expect to solicit
proxies mainly by mail. Some of our employees may also solicit proxies
personally and by telephone. We do not anticipate that we will retain anyone to
solicit proxies or that we will pay compensation to anyone for that purpose. We
will, however, reimburse brokers and other nominees for their reasonable
expenses in communicating with the persons for whom they hold Class A shares.
If you wish to include a proposal in our proxy statement for the 2002
annual meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934,
you should forward the proposal to our Secretary by August 23, 2001. If you
submit a proposal other than pursuant to Rule 14a-8 less than 30 days in advance
of the 2002 annual meeting, your proposal will be considered untimely under our
by-laws and we will not be required to present your proposal at the 2002 annual
meeting. If the Board chooses to present your proposal despite its untimeliness,
the people named in the proxies solicited by the Board for the 2002 annual
meeting will have the right to exercise discretionary voting power with respect
to your proposal.
If you would like to receive a copy of our fiscal 2000 annual report
on Form 10-K (without exhibits), please write to our Secretary at 800 First
Avenue South, P.O. Box 8020, Wisconsin Rapids, Wisconsin 54495-8020, and we will
provide you with a copy free of charge.
NORTHLAND CRANBERRIES, INC.
[PRINTER TO INSERT SIGNATURE]
David J. Lukas
Senior Vice President-Administration,
Secretary and Corporate Counsel
Wisconsin Rapids, Wisconsin
December 21, 2000
21
<PAGE>
APPENDIX A
FORM OF ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
NORTHLAND CRANBERRIES, INC.
---------------------------
1. The name of the Corporation is Northland Cranberries, Inc.
2. Article 4 of the Articles of Incorporation is hereby amended to
include the following text after the last paragraph thereof:
"(7) Reverse Stock Split
Effective as of the close of business on the date of filing of this
Amendment to the Articles of Incorporation (the "Effective Time"), provided that
such date is on or prior to January 30, 2002, the filing of this Amendment shall
effect a reverse stock split pursuant to which (a) each [two (2)] [three (3)]
[four (4)] shares of Class A Common Stock issued and outstanding shall be
combined into one (1) validly issued, fully paid and nonassessable share of
Class A Common Stock, and (b) each [two (2)] [three (3)] [four (4)] shares of
Class B Common Stock issued and outstanding shall be combined into one (1)
validly issued, fully paid and nonassessable share of Class B Common Stock. The
number of authorized shares and the par value of the Class A Common Stock and
the Class B Common Stock shall not be affected by the reverse stock split. The
Corporation shall not issue fractional shares or scrip of either Class A or
Class B Common Stock as a result of the reverse stock split. Instead, fractional
shares of Class A and Class B Common Stock resulting from such reverse stock
split shall be rounded up to the next whole number. The Corporation shall
require each holder of record of issued and outstanding shares of Class A or
Class B Common Stock at the Effective Time (the "Pre-Split Shares") to surrender
for cancellation the certificate representing such shares and receive
certificates that the Corporation shall issue representing the shares into which
such Pre-Split Shares have been converted."
3. The foregoing amendment to the Corporation's Articles of Incorporation
was submitted to the Corporation's shareholders by the Board of
Directors of the Corporation and was adopted by such shareholders on
January 30, 2001 in accordance with Section 180.1003 of the Wisconsin
Business Corporation Law.
Executed on behalf of the Corporation on this __ day of _____, 200_.
NORTHLAND CRANBERRIES, INC.
By: ___________________________________
John Swendrowski
Chairman and Chief Executive Officer
22
<PAGE>
APPENDIX B
NORTHLAND CRANBERRIES, INC.
Audit Committee Charter
January 5, 2000
In order to assist the Audit Committee ("Committee") of the Board of
Directors (the "Board") of Northland Cranberries, Inc. (the "Company") in
carrying out its duties and responsibilities, the following is the Audit
Committee Charter. This Charter, however, is not intended to, and does not,
create any legal or fiduciary duties or responsibilities or form the basis for a
breach of fiduciary duty or potential liability if not complied with.
1. The Committee shall consist entirely of non-employee directors.
2. Absent unusual circumstances, the Committee shall attempt to meet at
least twice annually. Special meetings shall be held as circumstances
require as determined by the Chairman of the Audit Committee or by any
two other members of the Committee.
3. The Committee's responsibilities shall include the following:
a. To recommend annually to the Board a firm of independent
certified public accountants to serve as the Company's
independent auditing firm for the forthcoming year, which firm is
ultimately accountable to the Committee and the Board. See Item
8.
b. To be well-informed about the Company's quarterly and annual
financial reports by receiving copies of all such reports.
c. To review with the Company's chief executive officer, chief
financial officer and/or its principal accounting officer and the
Company's independent auditing firm the areas of financial risk
that could have a material adverse effect on the Company's
results of operation or financial condition.
d. To review with the Company's chief executive officer, chief
financial officer and/or its principal accounting officer the
Company's annual audit plans.
e. To review with the Company's chief executive officer, chief
financial officer and/or its principal accounting officer the
Company's in-house policies and procedures for regular review of
officers' conflicts of interest.
f. To review management's plans for engaging the Company's
independent public accountant to perform management advisory
services during the coming year; provided, that to the extent the
Company's independent public accountant's independence from the
Company is not compromised, management may engage the Company's
independent public accountant to perform such services and report
the extent and outcome of such services to the Committee at its
next meeting.
g. To periodically review and analyze with the Company's chief
executive officer, chief financial officer and/or its principal
accounting officer and the Company's independent auditing firm
comparable public company financial reporting and accounting
policies and practices that differ from those of the Company.
h. To evaluate the performance of the independent auditing firm and,
if so determined by the Committee, to recommend that the Board
replace the independent auditing firm.
i. To receive written confirmation from the Company's independent
auditing firm that it is independent from the Company within the
meaning of the Securities Act of 1933, as amended, as
administered by the Securities and Exchange Commission, and
within the
23
<PAGE>
requirements of the Independence Standards Board, as well as to
review periodic reports from the Company's independent auditing
firm delineating all relationships between the independent
auditing firm and the Company and otherwise regarding the
independence of the independent auditing firm, to discuss such
reports with the independent auditing firm and to recommend, if
so determined, that the Board take appropriate action to oversee
the independence of the independent auditing firm.
4. The Committee shall have unrestricted lines of communication with the
chief executive officer, chief financial officer and/or principal
accounting officer of the Company, as well as the Company's
independent auditors, at all times.
5. The Committee shall advise the Company's chief executive officer,
chief financial officer and/or chief accounting officer that it
expects to be consulted before the Company seeks a second opinion on
any significant accounting issue from an auditing firm other than the
Company's auditing firm.
6. The Committee, through its Chairman, shall report its activities to
the full Board after each committee meeting so that the Board is kept
informed of its activities on a current basis.
7. The Committee shall meet with the Company's outside counsel, when
appropriate, to discuss legal matters that may have a significant
impact on the Company's financial statements.
8. Factors to be considered in selecting or retaining an independent
public accountant to serve as the Company's independent auditing firm
shall include, without limitation, the following:
a. Opinions by appropriate management personnel on the capabilities,
resources and performance of the public accounting firm;
b. The firm's proposed audit fee and explanations for any material
fee changes from prior years;
c. The expected level of participation by the firm's partner
designated to the Company's account and other management
personnel in the audit examination and the mix of skills and
experience of the firm's staff and its staff rotation policy with
respect to the Company;
d. If a new public accounting firm is being considered, the steps
planned to ensure a smooth and effective transition;
e. If a new public accounting firm is being considered, the report
of the firm's latest peer review conducted pursuant to a
professional quality control program and any significant
litigation problems or disciplinary actions by the SEC or others;
f. If a new public accounting firm is being considered, the proposed
firm's credentials, capabilities and reputation and a list of
clients in the same geographical area and in the same industry;
and
g. The auditing firm's independence from the Company.
9. The following are general post-audit review considerations and
guidelines:
a. The Committee should attempt to obtain from the Company's chief
financial officer and/or chief accounting officer explanations
for all significant variances in the financial statements between
years.
24
<PAGE>
b. The Committee should attempt to request an explanation from
management and the independent public accountant of changes in
accounting standards or rules promulgated by the FASB, SEC or
other regulatory bodies that have or will have a material effect
on the Company's financial statements or accounting policies or
practices.
c. The Committee should attempt to inquire about the existence and
substance of any significant accounting accruals, reserves or
estimates made by management that had or will have a material
impact on the financial statements.
d. The Committee should attempt to meet privately with the
independent public accountant to request its opinion on various
matters, including the quality of financial and accounting
personnel.
e. The Committee should attempt to ask the independent public
accountant what its greatest concerns were in the course of the
audit and if it believes anything else should be discussed with
the Committee while not in the presence of management or the
Company's chief financial officer and/or principal accounting
officer.
f. The Committee should attempt to review the letter of management
representations given to the independent public accountant and
inquire whether it encountered any difficulties in obtaining the
letter or any specific representations therein.
g. The Committee should attempt to discuss with management and the
independent public accountant the substance of any significant
issues raised by outside counsel concerning litigation,
contingencies, claims or assessments. The Committee should
attempt to understand how such matters are reflected in the
Company's financial statements.
h. The Committee should attempt to inquire with the Company's chief
executive officer, chief financial officer and chief accounting
officer whether there are any significant tax matters that have
been or might be reasonably disputed by the IRS or state
agencies, and inquire as to the status of the related tax
reserves.
i. The Committee, at least through its Chairman, should attempt to
review with management the MD&A section of the Company's annual
report and ask the extent to which the independent public
accountant reviewed the MD&A section. Similar efforts should be
attempted, at least on a post-filing basis, with respect to the
Company's quarterly reports. The Committee should ask the
independent public accountant whether the other sections of the
annual report to shareholders are consistent with the information
reflected in the financial statements.
10. The Committee should attempt to review this Charter not less than
annually and should seek the input of the Company's independent
auditing firm and the Company's chief executive officer, chief
financial officer and/or chief accounting officer with regard to the
adequacy of the Charter and the desirability of amendments hereto.
25
<PAGE>
<TABLE>
APPENDIX C
NORTHLAND CRANBERRIES, INC. __
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY /#/
<CAPTION>
<S> <C> <C> <C> <C> <C>
FOR ALL
EXCEPT
NOMINEES
WRITTEN
1. Election of Directors - ON THE
Nominees: Patrick F. Brennan, Robert E. SPACE
Hawk, Jeffrey J. Jones, LeRoy J. Miles, PROVIDED
Pat Richter, John C. Seramur and John FOR WITHHOLD TO THE
Swendrowski ALL ALL RIGHT
__ __ __
/_/ /_/ /_/ ______________________________________________
2. Reverse Stock Split Proposal -
The proposal to approve an amendment to
Northland Cranberries, Inc.'s Articles of
Incorporation allowing the Board of
Directors at any time prior to January
30, 2002 to choose to implement a reverse
stock split of the then outstanding
shares of Class A Common Stock and Class
B Common Stock in a ratio of one-for-two,
one-for-three or one-for-four FOR AGAINST ABSTAIN
__ __ __
/_/ /_/ /_/
3. In their discretion, upon such other
business as may properly come before the
meeting and at any adjournment thereof
Dated:_____________, 200_
Signature(s)
When properly executed, this proxy will be
voted as you have directed herein. If no PLEASE SIGN EXACTLY AS YOUR NAME APPEARS ON THIS
direction is made, this proxy will be voted FOR PROXY CARD. When shares are held by joint
the seven director nominees indicated above and tenants, both should sign. When signing as
FOR the reverse stock split proposal. It will attorney, executor, administrator, trustee or
also be voted in accordance with the best guardian, please give your full title as such.
judgment of the proxies named herein on any If you are a corporation, please sign in full
other business that may properly come before corporate name by the president or other
the meeting. authorized officers. If you are a partnership,
please sign in partnership name by an authorized
person.
------------------------------------------------------------------------------------------------------------------------------------
(DELTA) FOLD AND DETACH HERE (DELTA)
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD IMMEDIATELY
USING THE ENCLOSED ENVELOPE.
</TABLE>
<PAGE>
NORTHLAND CRANBERRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS - JANUARY 30, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I hereby appoint John Swendrowski as my proxy, and hereby authorize
him to represent and to vote, as I have indicated below, all my shares of Class
A Common Stock of Northland Cranberries, Inc., which I held of record on
December 13, 2000, at the annual meeting of shareholders scheduled to be held on
January 30, 2001, and at any adjournment thereof. I also authorize him to
appoint his substitute.
I further acknowledge receipt of the 2000 Annual Report to
Shareholders, including the Notice of the Annual Meeting and the Proxy
Statement, and I hereby revoke any other proxy I may have executed previously
for the 2001 annual meeting of shareholders.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD IMMEDIATELY
USING THE ENCLOSED ENVELOPE.
Please do not fold (Continued and to be signed on reverse side.)
--------------------------------------------------------------------------------
