-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GCpICvYtYiWhavC0F3/t+P5dqbH2fI3vEOweIuR6WJfz0lzl39g98l/Oilb2HZML XQte9hpiwvICjXOAAhUFGg== 0000897069-02-000303.txt : 20020416 0000897069-02-000303.hdr.sgml : 20020416 ACCESSION NUMBER: 0000897069-02-000303 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20020228 FILED AS OF DATE: 20020415 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHLAND CRANBERRIES INC /WI/ CENTRAL INDEX KEY: 0000818010 STANDARD INDUSTRIAL CLASSIFICATION: AGRICULTURE PRODUCTION - CROPS [0100] IRS NUMBER: 391583759 STATE OF INCORPORATION: WI FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16130 FILM NUMBER: 02610841 BUSINESS ADDRESS: STREET 1: 800 FIRST AVE SO STREET 2: P O BOX 8020 CITY: WISCONSIN RAPIDS STATE: WI ZIP: 54494 BUSINESS PHONE: 7154244444 10-Q 1 pdm300a.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended February 28, 2002 ----------------- OR TRANSITION REPORT PURSUANT TO SECTION 13 AND 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 or other jurisdiction of (I.R.S. Employer Identification No.) Incorporation or organization) 2930 Industrial Street P.O. Box 8020 Wisconsin Rapids, Wisconsin 54495-8020 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) Registrant's telephone number, including area code (715) 424-4444 -------------- 800 First Avenue South, Wisconsin Rapids, Wisconsin 54495-8020 - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes____No____ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: Class A Common Stock April 12, 2002 91,548,580 1 NORTHLAND CRANBERRIES, INC. FORM 10-Q INDEX PART I. FINANCIAL INFORMATION PAGE Item 1. Financial Statements......................................... 3 Condensed Consolidated Balance Sheets........................ 3 Condensed Consolidated Statements of Operations.............. 4 Condensed Consolidated Statements of Cash Flows.............. 5 Condensed Consolidated Statement of Shareholders' Equity..... 6 Notes to Condensed Consolidated Financial Statements......... 7-20 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................21-27 Item 3. Quantitative and Qualitative Disclosure About Market Risk......................................... 28 PART II. OTHER INFORMATION Item 1. Legal Proceedings............................................ 29 Item 2. Changes in Securities and Use of Proceeds.................... 29 Item 4. Submissions of Matters to Vote of Security Holders...........29-30 Item 5. Other Information............................................ 30 Item 6. Exhibits and Reports on Form 8-K............................. 30 SIGNATURE.................................................... 31 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - ------------------------------------------------------------------------------------------------------------ NORTHLAND CRANBERRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (Unaudited)
February 28, August 31, 2002 2001 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 367 $ 1,487 Accounts receivable 8,172 10,630 Current portion of note receivable and accounts receivable - other 9,422 8,530 Inventories 21,326 24,382 Prepaid expenses and other current assets 898 879 Deferred income taxes - 32,800 Assets held for sale 5,165 5,830 --------- --------- Total current assets 45,350 84,538 Note receivable, less current portion 21,000 23,000 Property and equipment, net 68,586 71,907 Other assets 970 970 Debt issuance costs, net 4,612 - --------- --------- Total assets $140,518 $180,415 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS) Current liabilities: Revolving line of credit facility $ 5,361 $ - Accounts payable 7,796 6,929 Accrued liabilities 10,747 12,589 Current maturities of long-term debt 17,767 33,375 --------- --------- Total current liabilities 41,671 52,893 Long-term debt, less current maturities 61,456 64,589 Obligations subsequently forgiven or exchanged for common stock - 84,087 Redeemable preferred stock - Series B, 100 and 0 shares issued and outstanding, respectively - - --------- --------- Total liabilities 103,127 201,569 --------- --------- Shareholders' equity: Common stock - Class A, $.01 par value, 91,548,580 and 4,925,555 shares issued and outstanding, respectively 915 49 Common stock - Class B, $.01 par value, 0 and 159,051 shares issued and outstanding, respectively - 2 Additional paid-in capital 154,902 149,129 Accumulated deficit (118,426) (170,334) --------- --------- Total shareholders' equity (deficiency in assets) 37,391 (21,154) --------- --------- Total liabilities and shareholders' equity (deficiency in assets) $ 140,518 $ 180,415 ========= =========
See notes to condensed consolidated financial statements. 3 NORTHLAND CRANBERRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) (Unaudited)
For the Three Months For the Six Months Ended February 28, Ended February 28, 2002 2001 2002 2001 --------- --------- --------- --------- Net revenues $ 23,975 $ 29,405 $ 54,291 $ 71,115 Cost of sales 16,676 22,078 37,409 53,942 --------- --------- --------- --------- Gross profit 7,299 7,327 16,882 17,173 Selling, general & administrative expenses (6,551) (6,638) (12,472) (12,715) Gain on disposal of property & equipment - 2 - 412 --------- --------- --------- --------- Income from operations 748 691 4,410 4,870 Interest expense (1,190) (4,818) (4,280) (9,503) Interest income 629 682 1,279 1,376 --------- --------- --------- --------- Income (loss) before income taxes and extraordinary item 187 (3,445) 1,409 (3,257) Income tax benefit - 2,092 - 2,092 --------- --------- --------- --------- Income (loss) before extraordinary item 187 (1,353) 1,409 (1,165) Extraordinary gain on forgiveness of indebtedness, net of $32,800 in income taxes - - 50,499 - --------- --------- --------- --------- Net income (loss) $ 187 $ (1,353) $ 51,908 $ (1,165) ========= ========= ========= ========= Net income (loss) per common share: Basic: Income (loss) before extraordinary gain $ 0.00 $ (0.27) $ 0.04 $ (0.23) Extraordinary gain - - 1.30 - --------- --------- --------- --------- Net income (loss) $ 0.00 $ (0.27) $ 1.34 $ (0.23) ========= ========= ========= ========= Diluted: Income (loss) before extraordinary gain $ 0.00 $ (0.27) $ 0.02 $ (0.23) Extraordinary gain - - 0.77 - --------- --------- --------- --------- Net income (loss) $ 0.00 $ (0.27) $ 0.79 $ (0.23) ========= ========= ========= ========= Shares used in computing net income (loss) per common share: Basic 60,952,355 5,084,773 38,796,832 5,084,773 Diluted 100,988,773 5,084,773 65,618,885 5,084,773
See notes to condensed consolidated financial statements. 4 NORTHLAND CRANBERRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS) (Unaudited)
For the six months ended February 28, February 28, 2002 2001 --------- -------- Operating activities: Net income (loss) $ 51,908 $ (1,165) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization of property and equipment 2,046 4,745 Amortization of intangible assets - 417 Amortization of debt issuance costs and debt discount 658 - Provision for deferred income taxes - 1,101 Gain on disposals of property and equipment - (412) Extraordinary gain on forgiveness of indebtedness (50,499) - Changes in assets and liabilities: Receivables, prepaid expenses and other current assets 3,132 9,680 Inventories 3,056 722 Accounts payable and accrued liabilities 604 (14,264) --------- --------- Net cash provided by operating activities 10,905 824 --------- --------- Investing activities: Collections on note receivable 1,000 500 Property and equipment purchases (116) (238) Proceeds from disposals of assets held for sale and of property and equipment 1,470 459 Net decrease in other assets - 34 --------- --------- Net cash provided by investing activities 2,354 755 --------- --------- Financing activities: Net increase (decrease) in borrowings under revolving line of credit facilities 5,361 (47) Proceeds from issuance of long-term debt 20,000 - Payments on long-term debt and other obligations (4,268) (892) Net payments in settlement of revolving credit facility (39,773) - Payments for debt issuance costs (1,259) - Proceeds from issuance of preferred stock 2,942 - Proceeds from issuance of common stock 2,618 - --------- --------- Net cash used in financing activities (14,379) (939) --------- --------- Net (decrease) increase in cash and cash equivalents (1,120) 640 Cash and cash equivalents, beginning of period 1,487 164 --------- --------- Cash and cash equivalents, end of period $ 367 $ 804 ========= =========
See notes to condensed consolidated financial statements. 5 NORTHLAND CRANBERRIES, INC. CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY SIX MONTHS ENDED FEBRUARY 28, 2002 (DOLLARS IN THOUSANDS) (Unaudited)
Total Convertible Retained Shareholders' Preferred Common Common Additional Earnings Equity Stock- Stock- Stock- Paid-in (Accumulated (Deficiency Series A Class A Class B Capital Deficit) in Assets) BALANCE, AUGUST 31, 2001 $ - $ 49 $ 2 $149,129 $ (170,334) $ (21,154) Conversion of Class B common stock to Class A common stock (159,051 shares) - 2 (2) - - - Issuance of Class A common stock for fractional shares due to reverse stock split (167 shares) - - - - - - Exchange of debt for Class A common stock (7,618,987 shares) - 76 - 600 - 676 Issuance of Class A common stock (37,122,695 shares) - 371 - 2,247 - 2,618 Issuance of warrants to purchase 5,086,106 shares of Class A common stock - - - 401 - 401 Issuance of convertible preferred stock - Series A (1,668,885 shares) 17 - - 2,925 - 2,942 Conversion of convertible preferred stock - Series A (1,668,885 shares) to Class A common stock (41,722,125 shares) (17) 417 - (400) - - Net income - - - - 51,908 51,908 -------- -------- -------- -------- ---------- --------- BALANCE, FEBRUARY 28, 2002 $ - $ 915 $ - $154,902 $ (118,426) $ 37,391 ======== ======== ======== ======== ========== =========
See notes to condensed consolidated financial statements. 6 NORTHLAND CRANBERRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements have been prepared by Northland Cranberries, Inc. (collectively with its subsidiaries, the "Company") pursuant to the rules and regulations of the Securities and Exchange Commission and reflect normal and recurring adjustments, which are, in the opinion of the Company, considered necessary to present fairly the financial position of the Company as of February 28, 2002 and August 31, 2001 and its related results of operations for the three month and six month periods ended February 28, 2002 and 2001, respectively, and cash flows for the six months ended February 28, 2002 and 2001, respectively. As permitted by these regulations, these condensed consolidated financial statements do not include all information required by accounting principles generally accepted in the United States of America to be included in an annual set of financial statements, however, the Company believes that the disclosures are adequate to make the information presented not misleading. The Company's condensed consolidated balance sheet as of August 31, 2001 was derived from the Company's latest audited consolidated financial statements. It is suggested that the accompanying condensed consolidated financial statements be read in conjunction with the latest audited consolidated financial statements and the notes thereto included in the Company's latest Annual Report on Form 10-K, and as amended by Form 10-K/A Amendment No. 1. Business Risks - The cranberry industry experienced three consecutive nationwide bumper crops culminating with the 1999 harvest. This resulted in excess cranberry inventories held by industry participants and depressed cranberry prices. Based on United States Department of Agriculture data and due in part to volume regulations implemented by the Department in 2000 and 2001, there has been some reduction in inventory levels and moderate increases in cranberry prices. However, uncertainty remains as to whether a volume regulation will be implemented in 2002 and what impact the 2002 harvest will have on cranberry inventory levels and prices. The Company continues to operate in a marketplace that has experienced significant levels of price discounting and selling activity as the industry reduces cranberry supply levels. The Company did not make its scheduled principal and interest payments on a revolving credit facility with various banks and certain term loans payable to an insurance company during the year ended August 31, 2001, and the Company was not in compliance with several provisions of such debt agreements as of and for the years ended August 31, 2001 and 2000. Under the terms of the Company's debt agreements, the lenders had the ability to call all outstanding principal and interest thereunder immediately due and payable. Throughout fiscal 2001, management explored various alternatives with respect to obtaining additional equity and debt financing, and continued efforts to restructure and/or refinance its debt facilities, reduce costs and to explore various strategic alternatives related to the sale of all or a portion of the Company's assets or common stock. On November 6, 2001, as 7 described in Notes 2 and 7, the Company completed a debt and equity restructuring. Management believes, as a result of the restructuring, the Company's debt facilities and expected cash flows from operations will be sufficient to support the Company's liquidity requirements for the remainder of fiscal year 2002. Debt Issuance Costs - Costs related to obtaining a revolving credit facility and certain term loans have been deferred and are being amortized over the terms of the related debt agreements and charged to interest expense. Accumulated amortization was approximately $575,000 as of February 28, 2002. Net Income(Loss) Per Common Share - Net income per common share is calculated in accordance with Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings Per Share." Basic net income (loss) per common share and diluted net (loss) per common share are computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted net income per common 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. Previously reported share and per share information has been restated to give effect to a reverse stock split described in Note 8. The weighted average shares outstanding used in calculating net income (loss) per common share for the three months and six month periods ended February 28, 2002 and 2001 consisted of the following:
Three Months Ended Six Months Ended February 28, February 28, 2002 2001 2002 2001 ---- ---- ---- ---- Basic: Shares outstanding at beginning of period 49,826,455 5,084,773 5,084,606 5,084,606 Issuance of fractional shares due to reverse stock split - - 167 167 Issuance of new shares 11,125,900 - 33,712,059 - ---------- ------------ ---------- ----------- Total 60,952,355 5,084,773 38,796,832 5,084,773 Effect of dilution: Convertible preferred stock 30,596,225 - 20,799,931 - Warrants 5,018,430 - 3,176,848 - Options 4,421,763 - 2,845,274 - ---------- ------------ ---------- ----------- Diluted 100,988,773 5,084,773 65,618,885 5,084,773 =========== ========= ========== =========
New Accounting Standards - Effective in the fourth quarter of the year ended August 31, 2001, the Company adopted Emerging Issues Task Force ("EITF") Issue No. 00-14 "Accounting for Certain Sales Incentives" and Issue No. 00-25, "Accounting for 8 Consideration from a Vendor to a Retailer in Connection with the Purchase or Promotion of the Vendor's Products." EITF Issue No. 00-14 provides guidance on the financial reporting of the cost of consumer coupons, among other items, in the consolidated statements of operations. EITF Issue No. 00-25 provides guidance on the financial reporting of the costs associated with sales incentives provided to customers in the consolidated statements of operations. Under the new accounting standards, the cost of consumer coupons and sales incentives provided to retailers are reported as a reduction in net revenues. The Company previously reported the cost of consumer coupons and sales incentives provided to retailers as selling, general and administrative expenses. Prior year condensed consolidated financial statements have been reclassified to conform to the new requirements, and as a result, approximately $3,042,000 and $6,094,000 of amounts previously reported as selling, general and administrative expenses during the three and six month periods ended February 28, 2001, respectively, have been reclassified and reported as a reduction of net revenues. In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses the financial accounting for and the reporting of the impairment of long-lived assets and long-lived assets to be disposed of among other items. The Company is required to adopt SFAS No. 144 effective September 1, 2002. The Company does not believe the adoption of SFAS No. 144 will have a material impact on its consolidated financial statements. Reclassifications - Certain amounts previously reported have been reclassified to conform to the current presentation. 2. DEBT AND EQUITY RESTRUCTURING On November 6, 2001 (during the first quarter of fiscal 2002), the Company completed a debt and equity restructuring. The debt restructuring (see Note 7) was accomplished through the exchange by the participants of the Company's then current bank group of approximately $153,754,000 of total outstanding revolving credit agreement indebtedness for an aggregate cash payment of $38,388,000, as well as by the Company's issuance of revised debt obligations with an aggregate stated principal amount of $25,714,000 and 7,618,987 shares of newly-issued Class A Common Stock representing approximately 7.5% of the Company's fully-diluted common shares to certain bank group members which decided to continue as lenders to the Company. The debt restructuring occurred pursuant to an agreement for the assignment and assumption by Sun Northland, LLC ("Sun Northland"), an affiliate of Sun Capital Partners Inc., of the Company's bank group indebtedness. Sun Northland then invested approximately $7,000,000 of equity capital into the Company together with the assignment of Sun Northland's rights to the Company's bank debt (of which approximately $81,219,000 was forgiven for financial reporting purposes) in exchange for 37,122,695 shares of newly-issued Class A Common Stock, 1,668,885 shares of newly-created, convertible Series A Preferred Stock (see Note 8), and 100 shares of newly created Series B Preferred Stock, which together represent approximately 77.5% of the Company's fully-diluted common shares. The 100 shares of Series B Preferred Stock were subsequently transferred by Sun Northland, LLC for nominal 9 consideration to a limited liability company whose managing member is the Company's Chief Executive Officer and whose other members are officers of the Company. In addition, on November 6, 2001, the Company restructured and modified the terms of approximately $20,680,000 in outstanding borrowings under two term loans with an insurance company (see Note 7). The Company paid an affiliate of Sun Northland a fee of $700,000 as consideration for certain services performed in connection with structuring and negotiating the restructuring transaction. Additionally, as part of the restructuring, the Company entered into a management services agreement with Sun Capital Partners Management, LLC, an affiliate of Sun Capital Partners, Inc., pursuant to which Sun Capital Partners Management, LLC will provide various financial and management consulting services to the Company in exchange for an annual fee (which is to be paid in quarterly installments) equal to the greater of $400,000 or 6% of EBITDA (as defined therein), provided that the fee may not exceed $1,000,000 per year unless approved by a majority of the Company's directors who are not affiliates of Sun Capital Partners Management, LLC. This agreement terminates on the earlier of November 6, 2008 or the date on which Sun Northland and its affiliates no longer own at least 50% of the Company's voting power. Financing for the debt restructuring, and for additional working capital, was provided by Foothill Capital Corporation ("Foothill") and Ableco Finance LLC ("Ableco"). Foothill and Ableco provided the Company with $20 million in term loan financing and a new $30 million revolving credit facility (see Note 7). As part of the consideration to Foothill and Ableco to provide the new credit facilities to the Company, Foothill and Ableco received warrants to purchase a total of 5,086,106 shares of Class A Common Stock, or approximately 5% of the Company's fully-diluted common shares, at an exercise price of $0.01 per share. The warrants expire on November 6, 2011. The Company also issued non-interest bearing fee notes to Foothill and Ableco in the aggregate amount of $5,000,000, which are payable in full on November 6, 2006. The fee notes have been discounted for financial reporting purposes and interest expense is recognized over the terms of the related debt. 3. DISPOSITION OF PRIVATE LABEL JUICE BUSINESS AND RELATED LEGAL PROCEEDINGS On March 8, 2000, the Company sold the net assets of its private label juice business to Cliffstar Corporation ("Cliffstar"), pursuant to an asset purchase agreement ("Asset Purchase Agreement"), dated January 4, 2000. The private label juice business assets sold consisted primarily of finished goods and work-in-process inventories, raw materials inventories consisting of labels and ingredients that relate to customers of the private label juice business (other than cranberry juice and cranberry juice concentrates), certain trademarks and goodwill, contracts relating to the purchase of raw materials inventory and the sale of products, and 135,000 gallons of cranberry juice concentrate. No plants or equipment were included in the sale. Cliffstar also assumed certain obligations under 10 purchased contracts. In connection with the sale, the Company received from Cliffstar an unsecured, subordinated promissory note for $28,000,000 which is to be collected over six years and which bears interest at a rate of 10% per annum, as well as approximately $6,800,000 in cash (subject to potential post-closing adjustments) related to inventory transferred to Cliffstar on the closing date. Additionally, Cliffstar is contractually obligated to make certain annual earn-out payments to the Company for a period of six years from the closing date based generally on operating profit from Cliffstar's sale of cranberry juice products. To date, Cliffstar has not provided the Company with earn-out calculations in accordance with the Asset Purchase Agreement and the Company has not recognized any income under the earn-out requirements. The Company also entered into certain related agreements with Cliffstar, including among them, a co-packing agreement pursuant to which Cliffstar contracted for specified quantities of Cliffstar juice products to be packed by the Company. On July 7, 2000, Cliffstar filed suit against the Company in the United States District Court, Western District of New York, alleging, among other things, that the Company breached certain representations and warranties in the Asset Purchase Agreement. That lawsuit was subsequently dismissed, and on July 31, 2000, the Company filed a lawsuit against Cliffstar in the Northern District of Illinois, which was later amended on October 10, 2000 and January 16, 2001. The lawsuit arises out of the sale of the net assets of the Company's private label juice business to Cliffstar in the transaction that closed on March 8, 2000. The Company claims that (1) Cliffstar breached the Asset Purchase Agreement by failing to make required payments under the Asset Purchase Agreement and by failing to negotiate in good faith concerning a cranberry sauce purchase agreement between the parties; (2) Cliffstar breached an interim cranberry sauce purchase agreement between the two companies by failing to adequately perform and to pay the Company the required amounts due under it; (3) Cliffstar breached its fiduciary duty to the Company based on the same (or similar) conduct; (4) Cliffstar breached the promissory note issued by it in the transaction by failing to make its payments in a timely manner and failing to pay all of the interest due; (5) Cliffstar breached a co-packing agreement entered into in connection with the sale by failing to make required payments thereunder and other misconduct; and (6) Cliffstar breached the Asset Purchase Agreement's arbitration provision, which provides that any disagreements over the valuation of finished goods, work-in-process and raw material inventory purchased by Cliffstar shall be submitted to arbitration for resolution. On April 10, 2001, the Court granted the Company's Petition to Compel Arbitration. Accordingly, the price dispute over finished goods, work-in-process and raw material inventory is currently in arbitration. The Company seeks compensatory damages in an amount in excess of $5,000,000, plus punitive damages for Cliffstar's breaches of its fiduciary duties and attorneys' fees. Cliffstar has asserted counterclaims against the Company, alleging that (1) the Company fraudulently induced Cliffstar to enter into the Asset Purchase Agreement; (2) the Company has breached the Asset Purchase Agreement by failing to negotiate in good faith a cranberry sauce purchase agreement, by failing to provide Cliffstar with sufficient quantities of cranberry concentrate meeting Cliffstar's "specifications," by selling inventory that did not 11 have a commercial value at least equal to the Company's carrying value, by failing to notify Cliffstar that the Company intended to write-down its cranberry inventory, by not providing Cliffstar its selling prices, by decreasing its level of service to customers after the parties signed the Asset Purchase Agreement, and by refusing to turn over certain labels, films and plates relating to the private label juice business to Cliffstar; (3) the Company breached the co-packing agreement by prematurely terminating that agreement; (4) the Company converted the labels, films and plates relating to the private label juice business; (5) the Company intentionally interfered with Cliffstar's contractual relations, or reasonable expectations of entering into business relations, with the printers who hold the labels, films and plates; and (6) the Company breached the Transition Agreement by failing to remit to Cliffstar the excess of Cliffstar's interim payment for work-in-process and raw material inventory, by withholding a portion of the work-in-process and raw material inventory from Cliffstar, and by artificially building up its work-in-process and raw material inventory before and after the sale of the private label juice business to Cliffstar. Cliffstar seeks compensatory damages in an amount not stated in the counterclaims, punitive damages for the alleged fraudulent inducement and intentional interference claims, and attorneys' fees. The complaint does not seek rescission of the agreement, although Cliffstar reserves the right to seek recovery of rescission-type damages (among other damages) without seeking to unwind the transaction. The Company has denied the allegations of Cliffstar's counterclaims in all material respects. As of February 28, 2002, the note receivable from Cliffstar had an outstanding balance of $25,000,000 and the Company had other outstanding accounts receivable due from Cliffstar aggregating approximately $5,411,000. The action is in the final stages of discovery. On March 15, 2002, the Company filed a motion for summary judgment with the court seeking dismissal of Cliffstar's fraud claim. A decision on the motion is anticipated in early June, 2002. It is the opinion of the Company's management, after consulting with outside legal counsel, that (1) the Company has strong claims for the required payments for cranberry concentrate, co-packing services and cranberry sauce sales and other alleged breaches of the agreements and these amounts owed the Company are valid and collectible; (2) the Company has strong factual and legal defenses in all material respects to Cliffstar's counterclaims; and (3) the note and accounts receivable due from Cliffstar as of February 28, 2002 are collectible. However, the resolution of the legal proceedings cannot be predicted with certainty at this time. In addition, management intends to vigorously defend the counterclaims and to pursue any claims the Company may have against Cliffstar, including any actions to collect the amounts outstanding. Cliffstar made the required $250,000 principal and related accrued interest payment on the note receivable that was due on May 31, 2000 on June 13, 2000, and the Company, after consulting with its outside legal counsel, concluded that the payment was received late and, thus, the note is in default with future interest accruing at the default rate of 12%. The Company has received all scheduled principal payments, together with accrued interest at 10%. The Company has recognized interest income on the note receivable at a rate of 10% for financial reporting purposes, pending the resolution of this matter. 12 Although the note is in default, the Company has classified the balance outstanding in the accompanying condensed consolidated balance sheets in accordance with the scheduled payment dates provided for in the note, as this is how the Company anticipates payments will be received, unless the court rules otherwise. 4. DISPOSITION OF PRIVATE LABEL CRANBERRY SAUCE BUSINESS AND RELATED MANUFACTURING FACILITY On June 8, 2001, the Company sold the net assets of its private label cranberry sauce business and a related manufacturing facility in Mountain Home, North Carolina. The Company had net revenues of approximately $2,160,000 and $7,003,000 during the three and six month periods ended February 28, 2001, respectively, related to the private label sauce business and the activities related to producing and packing juice beverages for other customers at the Mountain Home facility. Other information with respect to gross profit and selling, general and administrative expenses is not available, as the Company's accounting system does not segregate such items by type of product. 5. INVENTORIES Inventories as of February 28, 2002 and August 31, 2001 consisted of the following (in thousands): February 28, 2002 August 31, 2001 Raw materials $15,675 $18,677 Finished goods 3,689 3,281 Deferred crop costs 1,962 2,424 ------- ------- Total inventories $21,326 $24,382 ======= ======= 6. RESTRUCTURING CHARGES During the year ended August 31, 2000, the Company recorded an $8,250,000 pre-tax restructuring charge, consisting primarily of a $6,000,000 impairment writedown of a manufacturing facility in Bridgeton, New Jersey that discontinued production and closed on November 22, 2000, and $2,250,000 of plant closing costs and employee termination benefits. Approximately 130 employees received notification of their termination during the year ended August 31, 2000 as a result of the restructuring plan, primarily at the closed manufacturing facility and in the Company's sales department. All of the plant closing costs and employee termination benefits provided for at the time of the restructuring were paid during the year ended August 31, 2001, with the exception of approximately $456,000 of estimated obligations under a defined benefit pension plan which covered certain former Bridgeton employees, of which approximately $49,000 was paid during the six months ended February 28, 2002. 13 7. REVOLVING LINE OF CREDIT FACILITY, LONG-TERM DEBT AND OBLIGATIONS SUBSEQUENTLY FORGIVEN OR EXCHANGED FOR COMMON STOCK Long-term debt as of February 28, 2002 and long-term debt and obligations subsequently forgiven or exchanged for common stock as of August 31, 2001 consisted of the following (in thousands): February 28, August 31, 2002 2001 Term loans payable $17,488 $ - Fee notes payable 3,610 - Restructured bank notes 32,873 - Restructured insurance company note 20,341 - Revolving credit facility with banks - 139,305 Term loans payable to insurance company - 19,096 Other obligations 4,911 9,469 Accrued interest on restructured obligations - 14,181 ------- -------- Total 79,223 182,051 Less obligations subsequently forgiven or exchanged for common stock - 84,087 ------- -------- Amounts to be paid 79,223 97,964 Less current maturities of long-term debt 17,767 33,375 ------- -------- Long-term debt $61,456 $ 64,589 ======= ======== As of August 31, 2001, the Company was not in compliance with various financial covenants contained in the agreements covering the revolving credit facility and the term loans payable to an insurance company and, accordingly, the borrowings thereunder were due on demand. However, as described below, these obligations were subsequently restructured on November 6, 2001 (see Note 2). Accordingly, the Company classified its long-term debt as of August 31, 2001, based on the terms of the subsequent restructuring. Under the terms of the amended revolving credit facility, interest was accrued and recorded at the banks' domestic rate (which approximated prime, as defined), plus 3.25%, while the loan was in default. The outstanding accrued interest due the banks aggregated approximately $12,891,000 as of August 31, 2001 and approximately $14,450,000 as of the November 6, 2001 restructuring date. Prior to the Restructuring, the Company had a term loan with an insurance company payable in semi-annual installments, including interest at 8.08%, through July 1, 2004. In addition, the Company had a term loan with the same insurance company payable in semi-annual installments, including interest at 7.86%, through August 1, 2008. The outstanding principal balances on the 8.08% term loan and the 7.86% term loan were $11,376,865 and $7,718,808, respectively as of August 31, 2001. The insurance company term loans provided for an additional 5% default interest to be paid on any unpaid scheduled principal 14 and interest payments, which aggregated approximately $2,234,000 as of August 31, 2001. Interest on the remaining principal balances, which aggregated approximately $17,679,000 as of August 31, 2001, continued to accrue at the contracted rates. The outstanding accrued interest, including the additional default interest due, on the insurance company term loans aggregated approximately $1,279,000 as of August 31, 2001 and approximately $1,584,000 as of the November 6, 2001 restructuring date. Certain banks participating in the revolving credit facility agreed to accept aggregate cash payments of approximately $25,959,000 on November 6, 2001, as the final settlement for approximately $79,291,000 of outstanding principal and interest due them as of such date. The difference (approximately $53,332,000), net of legal fees, other direct costs and income taxes, was recognized in accordance with SFAS No. 15, "Accounting for Debtors and Creditors for Troubled Debt Restructurings," as an extraordinary gain during the six months ended February 28, 2002. Certain other banks participating in the revolving credit facility agreed to accept an aggregate cash payment of approximately $12,429,000, 7,618,987 shares of the Company's newly issued Class A Common Stock and new notes (the "Restructured Bank Notes") with a stated principal balance aggregating approximately $25,714,000, as the final settlement for approximately $74,463,000 of outstanding aggregate principal and interest due them as of the restructuring date. The total scheduled aggregate cash payments (principal and interest) required under the terms of the Restructured Bank Notes will be less than the aggregate amounts owed such participating banks under the former note, after deducting the cash payment made as of the date of the restructuring and the estimated fair value of the shares of common stock issued. The difference between the sum of the cash paid, the estimated fair value of the common stock issued and the scheduled estimated maximum future payments (principal and interest) required under the Restructured Bank Notes and the approximately $74,463,000 of outstanding principal and interest owed such banks as of the restructuring date of approximately $27,887,000 was recognized as an extraordinary gain, net of legal fees, other direct costs and income taxes, during the six months ended February 28, 2002. The future cash payments required under the Restructured Bank Notes are to be applied against the Company's adjusted carrying value of the Restructured Bank Notes, with generally no interest expense recognized for financial reporting purposes, in accordance with SFAS No. 15, as long as the Company makes the scheduled payments in accordance with the Restructured Bank Notes and there are no changes to the interest rate. Payments are due monthly under the Restructured Bank Notes based on the prime interest rate, as defined, plus 1% (5.75% as of February 28, 2002), applied against the outstanding stated principal balance of the Restructured Bank Notes, with an additional $1,700,000 payable on November 6, 2002 and additional monthly payments of approximately $133,000 due commencing on December 1, 2003 and continuing through October 1, 2006, with a final payment of approximately $19,345,000 due on November 1, 2006. In addition, the Company is required to pay the agent bank an annual agency fee of 0.25% of the outstanding stated principal balance due on such notes as of the date of the restructuring and on each anniversary date thereof during the term of the notes. The Restructured Bank Notes 15 are collateralized by specific assets of the Company and the Company is required to make certain mandatory prepayments to the extent of any net proceeds received from the sale of such collateralized assets or to the extent that a note received in connection with the sale of such assets, or assets previously sold, is collected. The applicable prepayments are to be applied in inverse order against the stated additional payments due under the Restructured Bank Notes, commencing with the November 1, 2006 scheduled payment. On November 6, 2001, the Company and the insurance company holding the two term loans entered into a new loan agreement which restructured and modified the terms of the two original loan agreements (with an aggregate outstanding principal and interest balance of approximately $20,680,000 as of the restructuring date) under which the Company issued a new note to the insurance company (the "Restructured Insurance Company Note") with a stated principal amount of approximately $19,096,000 and a stated interest rate of 5% for the first two years of the note, increasing by 1% annually thereafter, with a maximum interest rate of 9% in the sixth and final year of the Restructured Insurance Company Note. The Restructured Insurance Company Note is payable in monthly installments of approximately $186,000 commencing December 1, 2001, adjusted periodically as the stated interest rate increases, with a final payment of approximately $11,650,000 due November 1, 2007. The Restructured Insurance Company Note may require an acceleration of principal payments of approximately $17,000 per month, should the Company's required per barrel price paid to contract growers exceed $32 per barrel, as defined, and continue for the remaining term of the Restructured Insurance Company Note, as long as the price equals or exceeds $32 per barrel. The Restructured Insurance Company Note is collateralized by specific assets of the Company. Under SFAS No. 15, no gain was recognized on the restructuring and modification of the term loans, as the total scheduled principal and interest payments due under the Restructured Insurance Company Note are in excess of the amounts owed the insurance company as of the date of the restructuring, with the excess (approximately $4,406,000) recognized as interest expense over the term of the Restructured Insurance Company Note, using the interest method. The effective interest rate recognized for financial reporting purposes approximates 4.5%. In addition, in connection with the restructuring, the Company restructured certain obligations owed to other creditors that resulted in approximately $3,465,000 of forgiveness of indebtedness that was recognized as an extraordinary gain, net of legal fees, other direct costs and income taxes, during the six months ended February 28, 2002. The extraordinary gain on the forgiveness of indebtedness recognized during the six months ended February 28, 2002, is summarized as follows (in thousands): Forgiveness of indebtedness: Revolving credit facility with banks $ 81,219 Other obligations 3,465 ----- Total 84,684 Less legal fees and other direct costs 1,385 ----- Extraordinary gain 83,299 Less income taxes 32,800 ------ Net extraordinary gain $ 50,499 ======== 16 The other obligations consist of various term loans and vendor obligations, which as of August 31, 2001, included approximately $3,465,000 of restructured obligations subsequently forgiven. Principal and interest on the obligations remaining after the restructuring are due in various amounts through November 2005, with interest ranging from 0% to 12%. The obligations are generally collateralized by specific assets of the Company. On November 6, 2001, the Company entered into a Loan and Security Agreement (the "Agreement") with Foothill and Ableco that provides for a revolving credit facility and two term loans. The Company has the ability to borrow, subject to certain terms and conditions, up to $30,000,000 in accordance with a revolving credit facility, which expires on November 6, 2006. Interest on the revolving credit facility is payable monthly at the greater of prime, as defined, plus 1%, or 7% (7% as of February 28, 2002). As of February 28, 2002, there was approximately $5,361,000 of outstanding borrowings under this facility. Approximately $6,400,000 of additional borrowings were available to the Company under the facility as of February 28, 2002. The Agreement provides for two term loans in the amount of $10,000,000 each, Term Loans A and B. Interest on the term loans is payable monthly at the greater of prime, as defined, plus 1%, or 7%. Principal payments of approximately $167,000 per month are required under Term Loan A commencing December 1, 2001 and continuing through November 1, 2006. Minimum principal payments of $625,000 per quarter are required under Term Loan B, commencing November 30, 2001 and continuing through August 31, 2005. Accelerated principal payments may be required based on collection of related collateral. As part of the consideration to Foothill and Ableco to provide the new credit facilities to the Company, the Company issued non-interest bearing fee notes to Foothill and Ableco in the aggregate amount of $5,000,000, which are payable in full on November 6, 2006. The fee notes have been discounted for financial reporting purposes and interest expense is recognized over the terms of the related debt. The revolving credit facility, the term loans and the fee notes are collateralized by substantially all the Company's assets that are not otherwise collateralized, as defined in the Agreement. The debt agreements contain various covenants which include prohibitions on dividends and other distributions to shareholders, as well as repurchases of stock. Further, property and equipment expenditures are restricted and the Company is required to maintain and meet certain operating performance levels, as defined. For financial reporting purposes, the outstanding accrued interest on the restructured obligations of approximately $14,181,000 as of August 31, 2001 was included with long- 17 term debt. The obligations subsequently forgiven and the portion of the revolving credit facility with various banks that was exchanged for common stock, aggregating approximately $83,411,000 and $676,000, respectfully, was classified as a noncurrent liability for financial reporting purposes, as such amounts were not to be paid as part of the restructuring. 8. SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS) AND REDEEMABLE PREFERRED STOCK The authorized common stock of the Company as of August 31, 2001 consisted of 60,000,000 shares of Class A Common Stock and 4,000,000 shares of Class B Common Stock. On November 5, 2001, the Class B Common Stock shareholders voluntarily converted their shares, pursuant to the terms of the Company's Articles of Incorporation, into shares of Class A Common Stock on a one-for-one basis. The shares of Class A Common Stock are entitled to one vote per share and the shares of Class B Common Stock were entitled to three votes per share. Effective November 5, 2001, the Company's Articles of Incorporation were amended (i) effecting a one-for-four reverse stock split of the Class A Common Stock and Class B Common Stock (with fractional shares resulting from such reverse stock split being rounded up to the next whole share); (ii) creating and authorizing the issuance of up to 2,000,000 shares of preferred stock, $.01 par value per share, designated as Series A Preferred Stock; and (iii) creating and authorizing the issuance of 100 shares of preferred stock, $.01 par value per share, designated as Series B Preferred Stock. All previously reported share and per share information included in the condensed consolidated financial statements has been restated to give effect to the reverse stock split. The Company was previously authorized to issue 5,000,000 shares of preferred stock with a par value of $.01, and no such shares were issued. An amendment to the Company's Articles of Incorporation increasing the authorized Class A Common Stock from 60,000,000 shares to 150,000,000 shares was approved by the shareholders of the Company at the 2002 Annual Meeting of Shareholders and became effective on February 4, 2002. Immediately upon the effectiveness of this amendment, each of the then outstanding Series A Preferred shares was automatically converted into 25 shares of Class A Common Stock. As a result of the amendment, 1,668,885 Series A Preferred shares were converted into 41,722,125 Class A Common Stock of the Company on February 4, 2002. There are currently no Series A Preferred Stock of the Company outstanding. Stock Options - On November 6, 2001, the Company adopted the 2001 Stock Option Plan (the "2001 Plan"), which provided for the issuance of options to purchase up to 5,014,081 shares of Class A Common Stock to certain officers, key employees and consultants in connection with the debt and equity restructuring described in Note 2. Stock options granted under the 2001 Plan are exercisable at a price of $.08878 per share, which is equivalent to the per share price paid by Sun Northland, LLC for the Company's shares of 18 Class A Common Stock. The options generally vest one-fourth annually beginning on November 6, 2002 and expire on November 6, 2011. The 2001 Plan has a change in control clause, which provides that all options under the 2001 Plan which have been granted which are not exercisable as of the effective date of the change in control will automatically accelerate and become exercisable upon the effective date of a subsequent change in control. Warrants to Purchase Common Stock - As part of the consideration to Foothill and Ableco to provide credit facilities to the Company, Foothill and Ableco received warrants to purchase up to a total of 5,086,106 shares of Class A Common Stock, or approximately 5% of the Company's fully-diluted common shares, at an exercise price of $.01 per share. The warrants expire on November 6, 2011 (see Note 2). Redeemable Preferred Stock - The Series B Preferred Stock has no voting rights and no dividend preference. In the event of liquidation, the shares of Series B Preferred Stock have a preference in liquidation after any outstanding shares of Series A Preferred Stock equal to the par value of each share of Series B Preferred Stock. The Series B Preferred Stock is subject to mandatory redemption upon (i) the consummation of a transaction following which neither Sun Northland, LLC, nor its affiliates owns or controls securities possessing at least 10% of the voting power of the Company, or (ii) the distribution of assets to holders of the Company's capital stock upon the sale of substantially all the Company's assets. The redemption price in such a circumstance varies depending upon the number of shares of Series B Preferred Stock then outstanding and the internal rate of return (as defined in the Articles of Incorporation) recognized by Sun Northland, LLC in connection with the event triggering such redemption. Generally, the redemption price in such circumstances is zero if Sun Northland, LLC's internal rate of return is less than or equal to 40%, and increases as Sun Northland, LLC's internal rate of return increases. The 100 shares of Series B Preferred Stock that the Company sold to Sun Northland, LLC in the debt and equity restructuring were subsequently transferred by Sun Northland, LLC for nominal consideration to a limited liability company whose managing member is the Company's Chief Executive Officer and whose other members are officers of the Company. 9. INCOME TAXES The Company accounts for income taxes using an asset and liability approach which generally requires the recognition of deferred income tax assets and liabilities based on the expected future income tax consequences of events that have previously been recognized in the Company's financial statements or tax returns. In addition, a valuation allowance is recognized if it is more likely than not that some or all of the deferred income tax assets will not be realized. There was no income tax expense recognized for financial reporting purposes on income before extraordinary gain for either the three or six month periods ended February 28, 2002 due to the utilization of certain net operating loss carryforwards for which no benefit had been previously provided. A tax benefit of approximately $2,100,000 was recognized in the 19 three months ended February 28, 2001 for certain refunds related to farm loss carry backs which were received in that period. As described in Notes 2 and 7, the Company completed a debt and equity restructuring on November 6, 2001. This restructuring resulted in a gain on the forgiveness of indebtedness of differing amounts for financial and income tax reporting purposes that will reduce the available net operating loss carryforwards. The estimated income tax effect of this gain resulted in the recognition of an income tax benefit of $32,800,000 for financial reporting purposes as of August 31, 2001 and a charge to the extraordinary gain for income taxes of a like amount for the six month period ended February 28, 2002. The "change of ownership" provisions of the Tax Reform Act of 1986 significantly restrict the utilization for income tax reporting purposes of all net operating losses and tax credit carryforwards remaining after the debt and equity restructuring. 20 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL - ---------------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- GENERAL In fiscal 2001 and the first two months of the first quarter of fiscal 2002, we continued to experience substantial difficulty generating sufficient cash flow to meet our obligations on a timely basis. We failed to make certain scheduled monthly interest payments under our revolving credit facility, and were not in compliance with several provisions of our former revolving credit agreement and other long-term debt agreements through November 5, 2001. We were often delinquent on various payments to third party trade creditors and others. The industry-wide cranberry oversupply continued to negatively affect cranberry prices. Continued heavy price and promotional discounting by Ocean Spray and other regional branded competitors, combined with our inability to fund a meaningful marketing campaign, resulted in lost distribution and decreased market share of our products in various markets. We had reached the maximum on our then existing line of credit. Although we were successful in retaining distribution in many markets, the lack of sufficient working capital limited our ability to promote our products. We reached the point where we felt it was imperative to reach an agreement with our then-current bank group and to refinance our bank debt, or else we believed we were faced with liquidating or reorganizing the company in a bankruptcy proceeding in which our creditors would have likely received substantially less value than we felt they could receive in a restructuring transaction and our shareholders would have likely been left holding shares with no value. On November 6, 2001, we consummated a series of transactions with Sun Northland, LLC (an affiliate of Sun Capital Partners, Inc., a private equity investment firm headquartered in Boca Raton, Florida), which we refer to as "Sun Northland", and with members of our then-current bank group and our new secured lenders, Foothill Capital Corporation and Ableco Finance LLC, that resulted in the restructuring of our debt and equity capital structure and a change of control of the company. We refer to these transactions collectively as the "Restructuring." Generally speaking, in the Restructuring, Sun Northland entered into certain Assignment, Assumption and Release Agreements with members of our then-current bank group which gave Sun Northland, or its assignee, the right to acquire our indebtedness held by members of our then-current bank group in exchange for a total of approximately $38.4 million in cash, as well as our issuance of a promissory note in the principal amount of approximately $25.7 million and 7,618,987 Class A Common shares to certain bank group members which decided to continue as our lenders after the Restructuring. Sun Northland did not provide the foregoing consideration to our former bank group; instead, Sun Northland entered into a Stock Purchase Agreement with us, pursuant to which Sun Northland assigned its rights to the Assignment, Assumption and Release Agreements to us and gave us $7.0 million in cash, in exchange for (i) 37,122,695 Class A Common shares, (ii) 1,668,885 Series A Preferred shares (each of which converted into 25 Class A Common shares, or a total of 41,722,125 Class A Common shares, on February 4, 2002), and (iii) 100 shares of our newly created Series B Preferred Stock (which were subsequently transferred to a limited liability company controlled by our Chief Executive Officer). Using funding provided by our new secured lenders and Sun Northland, we 21 acquired a substantial portion of our outstanding indebtedness from the members of our then-current bank group (under the terms of the Assignment, Assumption and Release Agreements that were assigned to us by Sun Northland) in exchange for the consideration noted above, which resulted in the forgiveness of approximately $81.2 million (for financial reporting purposes) of our outstanding indebtedness (or approximately $89.0 million of the aggregate principal and interest due the then-current bank group as of the date of the Restructuring). We also issued warrants to acquire an aggregate of 5,086,106 Class A Common shares to Foothill Capital Corporation and Ableco Finance LLC, which warrants are immediately exercisable and have an exercise price of $.01 per share. In addition to the Restructuring, we also restructured and modified the terms of approximately $20.7 million in outstanding borrowings under two term loans with an insurance company, consolidating those two term loans into one new note with a stated principal amount of approximately $19.1 million and a stated interest rate of 5% for the first two years of the note, increasing by 1% annually thereafter, with a maximum interest rate of 9% in the sixth and final year. We also renegotiated the terms of our unsecured debt arrangements with certain of our larger unsecured creditors, resulting in the forgiveness of approximately $3.5 million of additional indebtedness previously owing to those creditors. As a result of the Restructuring, Sun Northland controls approximately 94.4% of our total voting power through (i) the Class A Common shares, including the Series A Preferred shares subsequently converted into Class A Common shares, issued to Sun Northland, and (ii) the additional 7,618,987 Class A Common shares over which Sun Northland exercises voting control pursuant to a Stockholders' Agreement that we entered into with Sun Northland and other shareholders in connection with the Restructuring. Assuming full vesting over time of the options to acquire Class A Common shares that we issued to key employees in the Restructuring, Sun Northland owns approximately 77.5% of our fully-diluted Class A Common shares. See Notes 2 and 7 of Notes to Condensed Financial Statements for a further discussion of the Restructuring. In December 2001, we entered into an agreement terminating our lease of two cranberry marshes in Nantucket, Massachusetts. Under the terms of the agreement, we transferred certain equipment used in the operation of the marshes to the lessor in exchange for the early termination of the lease (the original term of which continued through December, 2003) and a full release of all of our past and future obligations under the lease. The cranberry industry experienced three consecutive nationwide bumper crops culminating with the 1999 harvest. This was followed by what we believe were inadequate volume regulations under United States Department of Agriculture cranberry marketing orders for the 2000 and 2001 crop years, resulting in large levels of excess cranberry inventories held by industry participants and depressed cranberry prices. To date in fiscal 2002, we have observed moderately increasing prices. In February 2002, the Cranberry Marketing Committee met to consider whether to implement a marketing order for the 2002 crop year. No consensus was reached and, to date, the Committee has not recommended that the United States Department of Agriculture adopt a volume regulation. It is 22 unknown at this time whether a volume regulation will be adopted for the 2002 crop year and what impact any or no regulation will have on our results of operations or financial condition. We prepare our financial statements in accordance with generally accepted accounting principles which, through the application of certain critical accounting policies, require management to make judgments, estimates and assumptions regarding matters which are inherently uncertain. We have stated our inventory carrying value at the lower of cost (using the first-in, first-out costing method) or estimated market values, based upon management's best estimates of future product selling prices and costs for the periods during which the cranberries are grown and the cranberries and cranberry related products are expected to be sold. The market estimates are dependent upon several factors including, but not limited to, price, product mix, demand, costs and the period of time it takes to sell the inventory. Such factors are all subject to significant fluctuations. We also use 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 net revenues and expenses during the reporting period. On an ongoing basis management reviews these estimates, including those related to allowances for doubtful accounts, product returns, and trade discounts and incentives, valuation of inventories, future cash flows associated with assets held for sale and long-lived assets, useful lives for depreciation and amortization, valuation allowances for deferred income tax assets, litigation, environmental liabilities and contracts based on currently available information. Changes in facts and circumstances or the use of different assumptions may result in revised estimates and actual results could differ from those estimates. We believe that as a result of the Restructuring, we have sufficient working capital and borrowing capacity to once again aggressively market and support the sale of our Northland and Seneca brand juice products in fiscal 2002. We adopted Emerging Issues Task Force ("EITF") Issue No. 00-14, "Accounting for Certain Sales Incentives" and Issue No. 00-25, "Accounting for Consideration from a Vendor to a Retailer in Connection with the Purchase or Promotion of the Vendor's Products," effective in the fourth quarter of fiscal 2001. Under these new accounting standards, the cost of sales incentives provided to retailers (which we refer to as "trade spending and slotting") and consumer coupons are reported as a reduction in net revenues. We previously reported these costs as selling, general and administrative expenses. We reclassified the condensed consolidated statements of operations for the three month and six month periods ended February 28, 2001 to conform to the new requirements, and as a result, approximately $3.0 million and $6.1 million, respectively, of amounts previously reported as selling, general and administrative expenses have been reclassified and reported as a reduction of net revenues. With our new debt and equity capital structure following the Restructuring, we believe we are in a position to build on the operational improvements we put in place in fiscal 2001. Our focus for fiscal 2002 is on improving our operations and reducing debt through a balanced marketing approach with an emphasis on profitable growth. 23 RESULTS OF OPERATIONS Total net revenues for the three months ended February 28, 2002 were $24.0 million, a decrease of 18.4% from net revenues of $29.4 in the prior year's second quarter. Net revenues for the six months ended February 28, 2002 were $54.3 million, a decrease of 23.6% from net revenues of $71.1 million in the prior year's second quarter. The decrease resulted primarily from (i) reduced sales of Northland and Seneca branded products; and (ii) the sale of our cranberry sauce business and a manufacturing facility in June 2001, which reduced co-packing revenue and revenue from cranberry sauce sales and which accounted for approximately $2.2 million and $7.0 million of net revenues, respectively, for the three month and six month periods ended February 28, 2001. These net revenue decreases were offset by (i) increased sales of cranberry concentrate; and (ii) reduced trade spending and consumer coupons (which are reported as a reduction of gross revenues). Trade industry data for the 12-week period ended February 24, 2002 showed that our Northland brand 100% juice products achieved a 5.1% market share of the supermarket shelf-stable cranberry beverage category on a national basis, down from a 7.9% market share for the 12-week period ended February 25, 2001. The total combined market share of supermarket shelf-stable cranberry beverages for our Northland and Seneca branded product lines was 5.2% for the 12-week period ended February 24, 2002 compared to a 9.0% market share for the 12-week period ended February 25, 2001. On January 25, 2002, we were notified by Nestle USA ("Nestle"), a customer for whom we produce and package juice beverages, of its intention to transfer production and packing of bottled beverages to our principal competitor, Ocean Spray Cranberries, Inc., over the next six to nine months. Nestle has notified us that it does not intend to transfer production of canned juice beverages, so we anticipate that we will continue to produce and package canned juice beverages for Nestle. We had net revenues from production and packing of bottled beverages for Nestle of approximately $1.5 million and $3.1 million in the three and six month periods ended February 28, 2002, respectively. We are currently considering various alternatives with respect to the utilization of our manufacturing facilities and replacing the Nestle business. In fiscal year 2001, due to our general lack of available cash, we were unable to fund a meaningful advertising campaign. In fiscal year 2002, following our Restructuring, we were able to once again resume media advertising of our Northland brand 100% juice cranberry blends. We believe the resumption of media advertising, combined with our trade promotion spending, will provide a more balanced marketing approach which we expect will result in net revenues in the second half of fiscal year 2002 exceeding net revenues during the first half of fiscal year 2002. Cost of sales for the three months ended February 28, 2002 was $16.7 million compared to $22.1 million for the second quarter of fiscal 2001, resulting in gross margins of 30.4% and 24.8% in each respective period. Cost of sales for the six months ended February 28, 2002 was $37.4 million compared to $53.9 million for the second quarter of fiscal 2001, resulting in gross margins of 31.1% and 24.2% in each respective period. The increase in gross margins in the second quarter and the first six months of fiscal 2002 was primarily the result of reduced manufacturing costs which were impacted by improved cost controls, improved utilization of manufacturing capacity and lower cranberry costs. 24 Selling, general and administrative expenses were $6.6 million, or 27.5% of net revenues, for the three months ended February 28, 2002, compared to $6.6 million, or 22.4% of net revenues, in the prior year's second fiscal quarter. During the three months ended February 28, 2002, we increased media advertising expense significantly while decreasing wages, consulting, legal and depreciation expenses, which resulted in similar levels of selling, general and administrative expenses compared to the second quarter of 2001. For the six months ended February 28, 2002, selling, general and administrative expenses were $12.5 million compared to $12.7 million in fiscal 2001. Included in the fiscal 2002 amount were approximately $1.3 million of charges relating to the Restructuring. After these restructuring charges, the recurring expenses were approximately $11.2 million, or 20.6% of net revenues. The reduction in expense (after the restructuring charges) between fiscal years resulted primarily from reduced wages, consulting expenses, legal expenses and depreciation, offset by increased media advertising. During the three months ended February 28, 2002, we sold an office facility in Wisconsin Rapids for its carrying value. The gain on disposal of property and equipment in the six-month period ending February 28, 2001 of $0.4 million resulted primarily from the sale of certain other real estate and other assets. Interest expense was $1.2 million and $4.3 million for the three and six-month periods ended February 28, 2002, compared to $4.8 million and $9.5 million during the same periods of fiscal 2001. The decrease resulted primarily from reduced debt levels following our Restructuring. Interest expense in the remaining quarters of fiscal 2002 will be lower than comparable quarters in the prior year because of these reduced debt levels. See "Financial Condition" below. Interest income of $0.6 million and $1.3 million for the three and six month periods ended February 28, 2002 and $0.7 million and $1.4 million in the comparable periods of fiscal 2001 is associated with an unsecured, subordinated promissory note receivable from Cliffstar Corporation. In the three and six month periods ended February 28, 2002 there were no income taxes on operating income due to the utilization of certain net operating loss carryforwards for which no benefit had been previously provided. The income tax benefit recognized in the second quarter of fiscal 2001 related to a refund from a farm loss carry back received in that period. In the first quarter of fiscal 2002, we realized an extraordinary gain on forgiveness of indebtedness in connection with the Restructuring of approximately $83.3 million, net of legal fees and other direct costs incurred and the estimated fair value of the shares of Class A Common Stock issued to the participating banks. The extraordinary gain was further reduced by $32.8 million of income taxes resulting in a net extraordinary gain of $50.5 million. FINANCIAL CONDITION Net cash provided by operating activities was $10.9 million in the first six months of fiscal 2002 compared to $0.8 million in the same period of fiscal 2001. Income before extraordinary item plus depreciation and amortization was $4.1 million in the first six months of fiscal 2002 compared to $4.0 million in the comparable period of fiscal 2001. Decrease in receivables, prepaid expenses and other current assets provided $3.1 million of cash in the first six months of fiscal 2002 compared to $9.7 million in the first six months of fiscal 2001. Accounts payable and accrued liabilities provided 25 cash of $0.6 million in the first six months of fiscal 2002 compared to a use of cash of $14.3 million in the first six months of fiscal 2001. The decrease in payables and accrued liabilities in the first six months of fiscal 2002 primarily resulted from a reduction in operating costs. Inventories decreased $3.1 million in the first six months of fiscal 2002 compared to $0.7 million in the first six months of fiscal 2001. This year's decrease resulted from lower growing and harvesting costs, as well as continued improvement in our management of raw material inventory levels. Working capital was $3.7 million at February 28, 2002 compared to $31.6 million at August 31, 2001. However, at August 31, 2001, working capital included a $32.8 million deferred income tax asset which was realized during the first quarter of fiscal 2002. The current ratio exclusive of the current deferred income tax asset was 1.1 to 1.0 at February 28, 2002, compared to 1.0 to 1.0 at August 31, 2001. Net cash provided by investing activities was $2.4 million in the first six months of fiscal 2002 compared to $0.8 million in the similar period of fiscal 2001. Collections on the note receivable from Cliffstar Corporation contributed toward the positive cash flow in both fiscal periods. Proceeds from the disposal of assets in the first six months of fiscal 2002 were primarily the result of the sale of an office facility in Wisconsin Rapids for $1.3 million. Other proceeds from disposals of property and equipment provided $0.2 million, offset by property and equipment purchases of $0.1 million. In fiscal 2001, proceeds from disposals of property and equipment provided $0.5 million, offset by property and equipment purchases of $0.2 million. Net cash used in financing activities was $14.4 million in the first six months of fiscal 2002 compared to $0.9 million in the same period of the prior year. To accomplish the Restructuring, we obtained proceeds from our new revolving credit facility and two term loans, along with proceeds, net of legal and other costs, from the issuance of Class A Common Stock and Class A Preferred Stock. These proceeds were used to pay various banks in settlement of our previous revolving credit facility (see "General" and Notes 2 and 7 of Notes to Condensed Consolidated Financial Statements) and to pay various debt issuance costs. Also, payments were made on long-term debt and other obligations of $4.3 million in the first six months of fiscal 2002 and $0.9 million in the same period of fiscal 2001. The following schedule sets forth our contractual long-term debt obligations as of February 28, 2002 (in thousands): Payments Due by Period ---------------------- --------------------------------------------------------------------------- Total Less than 2-3 years 4-5 years After 5 years 1 year --------------------------------------------------------------------------- Long-Term Debt $79,223 $17,767 $12,981 $13,686 $34,780 ======= ------- ------- ------- ------- --------------------------------------------------------------------------- We have multiple-year crop purchase contracts with 45 independent cranberry growers pursuant to which the Company has contracted to purchase all of the cranberries harvested from up to 1,948 contracted acres owned by these growers, subject to federal marketing order limitations. These 26 contracts last for five years, starting with the 1999 calendar year crop, and automatically renew after every harvest, unless cancelled, and pay the growers at a market rate, as defined, for all raw cranberries delivered (plus $3 per barrel in certain circumstances) and certain incentives for premium cranberries. As of February 28, 2002, we had outstanding borrowings of $5.4 million under our $30.0 million revolving credit facility with Foothill and Ableco. As of February 28, 2002, we had approximately $6.4 million of unused borrowing availability under the facility. We believe that we will be able to fund our ongoing operational needs for the remainder of fiscal 2002 through (i) cash generated from operations; (ii) financing available under our revolving credit facility with Foothill and Ableco; (iii) intended actions to reduce our near-term working capital requirements; and (iv) additional measures to reduce costs and improve cash flow from operations. As of February 28, 2002, we were in compliance with all of our debt arrangements. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS ------------------------------------------------- We make certain "forward-looking statements" in this Form 10-Q, 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. Forward-looking statements include, among others, statements about actions by our competitors, sufficiency of our working capital, potential operational improvements and our efforts to return to profitability, sales and marketing strategies, expected levels of trade and marketing spending, anticipated market share of our branded products, expected levels of interest expense and net revenues, and disposition of significant litigation. These forward-looking statements involve risks and uncertainties and the actual results could differ materially from those discussed in the forward-looking statements. These risks and uncertainties include, without limitation, risks associated with (i) our ability to reinvigorate our Northland and Seneca brand names, regain lost distribution capabilities and branded products market share and generate increased levels of branded product sales; (ii) the level of cranberry inventory held by industry participants; (iii) the development, market share growth and continued consumer acceptance of our branded juice products, including consumer acceptance of our "27% Solution"; (iv) the disposition of certain litigation related to the sale of the net assets of our private label juice business; (v) the impact of a marketing order or lack of a marketing order of the United States Department of Agriculture relative to the 2002 crop year, as well as any potential cranberry purchase program adopted by the United States Congress; (vi) agricultural factors affecting our crop and the crop of other North American growers; and (vii) our ability to comply with the terms and conditions of, and to satisfy our responsibilities under, our credit facilities and other debt agreements. 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-Q. We disclaim any duty to update these statements or other information in this Form 10-Q based on future events or circumstances. Please 27 read this entire Form 10-Q to better understand our business and the risks associated with our operations. Specifically, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a discussion of our current financial condition and recent debt and equity restructuring. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK - ------------------------------------------------------------------ We do not enter into any material futures, forwards, swaps, options or other derivative financial instruments for trading or other purposes. Our primary exposure to market risk is related to changes in interest rates and the effects those changes may have on our earnings as a result of our long-term financing arrangements. We manage our exposure to this market risk by monitoring interest rates and possible alternative means of financing. Our earnings may be affected by changes in short-term interest rates under our revolving line of credit facility and certain term loans, pursuant to which our borrowings bear interest at a variable rate, subject to minimum interest rates payable on certain loans. Based upon the debt outstanding under our revolving line of credit facility and certain term loans as of February 28, 2002, an increase of 1.0% in market interest rates would increase annual interest expense by approximately $0.3 million. 28 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. - --------------------------- There was no material change in our litigation with Cliffstar during the second quarter of fiscal 2002. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS. - --------------------------------------------------- On November 6, 2001, in connection with the Restructuring and pursuant to the terms of a Stock Purchase Agreement, we issued (i) 37,122,695 Class A Common shares, (ii) 1,668,885 Series A Preferred shares, and (iii) 100 shares of our Series B Preferred Stock to Sun Northland. Each Series A Preferred share was automatically convertible into 25 Class A Common shares (subject to adjustment upon the happening of certain dilutive events) immediately upon the effectiveness of an amendment to our Articles of Incorporation having the effect of increasing the number of authorized Class A Common shares to a number sufficient to provide for the issuance of Class A Common shares upon conversion of all of the Series A Preferred shares at the conversion rate then in effect. An amendment to the Company's Articles of Incorporation increasing the authorized Class A Common from 60,000,000 shares to 150,000,000 shares was approved by the shareholders of the Company at the 2002 Annual Meeting of Shareholders and became effective on February 4, 2002. Immediately upon the effectiveness of this amendment, each of the then outstanding Series A Preferred shares was automatically converted into 25 shares of Class A Common Stock. As a result of the amendment, 1,668,885 Series A Preferred shares were converted into 41,722,125 Class A Common shares of the Company on February 4, 2002. There are currently no Series A Preferred shares of the Company outstanding. ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS. - -------------------------------------------------------------- The following matters were submitted to a vote of our shareholders at the Annual Meeting of Shareholders held on January 30, 2002: A. Election of Directors --------------------- The following six individuals were elected by the shareholders to serve as directors of the Company to hold office until the next annual meeting of our shareholders and until their successors are duly qualified and elected: By Class A Common Stock: Total Votes Votes Withholding Voted "For" Authority ----------- --------- John Swendrowski 41,549,613 264,851 Marc J. Leder 41,566,279 248,185 Rodger R. Krouse 41,567,528 246,936 David Kreilein 41,566,872 247,592 Clarence E. Terry 41,567,193 247,271 Kevin J. Calhoun 41,567,302 247,162 By Series A Preferred Stock (1,668,885 shares, each with 25 votes): Total Votes Votes Withholding Voted "For" Authority ----------- ---------- John Swendrowski 41,722,125 0 Marc J. Leder 41,722,125 0 Rodger R. Krouse 41,722,125 0 David Kreilein 41,722,125 0 Clarence E. Terry 41,722,125 0 Kevin J. Calhoun 41,722,125 0 29 B. Amendment to Increase Authorized Shares --------------------------------------- A proposal to approve an amendment to our Articles of Incorporation to increase the number of authorized shares of Class A Common Stock, $.01 par value, from 60,000,000 to 150,000,000. By Class A Common Stock: Votes Votes Votes Broker ----- ----- ----- ------ For Against Abstaining Non-Votes --- ------- ---------- --------- 39,211,579 299,449 33,857 2,269,579 By Series A Preferred Stock (1,668,885 shares, each with 25 votes): Votes Votes Votes Broker ----- ----- ----- ------ For Against Abstaining Non-Votes --- ------- ---------- --------- 41,722,125 0 0 N/A C. Consent Amendment ----------------- A proposal to approve an amendment to our Articles of Incorporation which would, generally speaking, allow for certain actions to be taken by written consent of less than all of our shareholders. By Class A Common Stock: Votes Votes Votes Broker ----- ----- ----- ------ For Against Abstaining Non-Votes --- ------- ---------- --------- 39,164,801 330,581 49,503 2,269,579 By Series A Preferred Stock (1,668,885 shares, each with 25 votes): Votes Votes Votes Broker ----- ----- ----- ------ For Against Abstaining Non-Votes --- ------- ---------- --------- 41,722,125 0 0 N/A ITEM 5. OTHER INFORMATION. - ------------------------- At the regular meeting of the Board of Directors of the Company held on January 30, 2002, the Board unanimously voted to create standing Audit and Compensation Committees. Kevin J. Calhoun and David L. Kreilein were appointed to serve as members of the Audit Committee, with Mr. Kreilein serving as Chairman of the Committee. Rodger R. Krouse, Clarence E. Terry and David L. Kreilein were appointed to serve as members of the Compensation Committee, with Mr. Krouse serving as Chairman of the Committee. At the regular meeting of the Board of Directors of the Company held on January 30, 2002, the Board also unanimously voted to increase the size of the Board of Directors from six to eight members. Pursuant to a Unanimous Consent Action of the Board of Directors effective February 20, 2002, Patrick J. Sullivan and George R. Rae were appointed to serve as members of the Board until the next annual meeting of the shareholders of the Company and the election and qualification of their successors. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. - ------------------------------------------ A. Exhibits Exhibits filed with this Form 10-Q report are incorporated herein by reference to the Exhibit Index accompanying this report. B. Form 8-K No Current Reports on Form 8-K were filed during the second quarter of fiscal 2002. 30 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. NORTHLAND CRANBERRIES, INC. DATE: April 12, 2002 By:/s/ Richard P. Teske ------------------------------------- Richard P. Teske Vice President and Chief Financial Officer 31 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION - ----------- ----------- 3.1 Amendments to the Company's Articles of Incorporation. 3.2 Articles of Incorporation, as amended, effective February 4, 2002. 3.3 Amendments to the By-Laws of the Company, effective January 30, 2002. 3.4 By-Laws of the Company, as amended, effective January 30, 2002. 10.1 Stock Option Agreement dated as of November 6, 2001 by and between the Company and John Swendrowksi. 10.2 Form of Stock Option Agreement dated as of November 6, 2001 by and between the Company and certain executive officers. 32 EX-3.1 3 pdm300b.txt AMENDMENTS Exhibit 3.1 Amendments to the Articles of Incorporation of Northland Cranberries, Inc. Pursuant to the affirmative vote of the shareholders of the Company on January 30, 2002, and effective on February 4, 2002, the Company's Articles of Incorporation were amended as described below. 1. The first sentence of Article 4 of the Company's Articles of Incorporation was amended to read in its entirety as follows: "The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is One Hundred Fifty-Nine Million (159,000,000) shares, consisting of: (i) One Hundred Fifty Million (150,000,000) shares of a class designated as "Class A Common Stock," with a par value of one cent ($.01) per share; (ii) Four Million (4,000,000) shares of a class designated as "Class B Common Stock," with a par value of one cent ($.0l) per share; and (iii) Five Million (5,000,000) shares of a class designated as "Preferred Stock," with a par value of one cent ($.0l) per share." 2. A new Article 9 was added to the Company's Articles of Incorporation which reads in its entirety as follows: "Action required or permitted by the Wisconsin Business Corporation Law to be taken at a shareholders' meeting may be taken without a meeting if a written consent or consents, describing the action so taken, is signed by shareholders who would be entitled to vote at a meeting those shares with voting power to cast not less than the minimum number or, in the case of voting by voting groups, numbers of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote were present and voted." EX-3.2 4 pdm300c.txt ARTICLES Exhibit 3.2 ARTICLES OF INCORPORATION OF NORTHLAND CRANBERRIES, INC. EFFECTIVE FEBRUARY 4, 2002 ARTICLE 1 The name of the corporation (hereinafter referred to as the "Corporation") is NORTHLAND CRANBERRIES, INC. ARTICLE 2 The period of existence of the Corporation shall be perpetual. ARTICLE 3 The purpose or purposes for which the Corporation is organized is to carry on and engage in any lawful activity within the purposes for which corporations may be organized under the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin Statutes. ARTICLE 4 The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is One Hundred Fifty-Nine Million (159,000,000) shares, consisting of: (i) One Hundred Fifty Million (150,000,000) shares of a class designated as "Class A Common Stock," with a par value of one cent ($.01) per share; (ii) Four Million (4,000,000) shares of a class designated as "Class B Common Stock," with a par value of one cent ($.0l) per share; and (iii) Five Million (5,000,000) shares of a class designated as "Preferred Stock," with a par value of one cent ($.0l) per share. Any and all such shares of Class A Common Stock and Class B Common Stock (collectively, "Common Stock"), and all Preferred Stock, may be issued for such consideration, not less than the par value thereof, as shall be fixed from time to time by the Board of Directors. Any and all of the shares so issued, the full consideration for which has been paid or delivered, shall be deemed fully paid capital stock and shall not be liable to any further call or assessment thereon, and the holders of such shares shall not be liable for any further payments except as otherwise provided by Section 180.0622 of the Wisconsin Business Corporation Law or any successor provision thereto, if any. The designation, relative rights, preferences and limitations of the shares of each class and the authority of the Board of Directors of the Corporation to establish and to designate series of the Preferred Stock and to fix the variations in the relative rights, preferences and limitations as between such series, shall be as set forth herein. A. Preferred Stock (1) Series and Variations Between Series. The Board of Directors of the Corporation is authorized, subject to limitations prescribed by the Wisconsin Business Corporation Law and the provisions of this paragraph A, to provide for the issuance of the Preferred Stock in series, to establish or change the number of shares to be included in each such series and to fix the designation, relative rights, preferences and limitations of the shares of each such series. The authority of the Board of Directors of the Corporation with respect to each series shall include, but not be limited to, determination of the following: (i) The number of shares constituting that series and the distinctive designations of that series; (ii) The dividend rate or rates on the shares of that series and/or the method of determining such rate or rates and the timing of dividend payments on the shares of such series; (iii) Whether and to what extent the shares of that series shall have voting rights in addition to the voting rights provided by Wisconsin Business Corporation Law, which might include the right to elect a specified number of directors in any case or if dividends on such series were not paid for a specified period of time; (iv) Whether the shares of that series shall be convertible into shares of stock of any other series, and, if so, the terms and conditions of such conversion, including the price or prices and the rate or rates of conversion and the terms of adjustment thereof; (v) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (vi) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation; (vii) The obligation, if any, of the Corporation to retire shares of that series pursuant to a sinking fund; and (viii) Any other relative rights, preferences and limitations of that series. Subject to the designations, relative rights, preferences and limitations provided pursuant to this paragraph A, each share of Preferred Stock shall be of equal rank with each other share of Preferred Stock. (2) Dividends. Before any dividends shall be paid or set apart for payment upon shares of Common Stock, the holders of each series of Preferred Stock shall be -2- entitled to receive dividends at the rate per annum and at such times as specified in the particular series. Dividends on shares of Preferred Stock shall be paid out of any funds legally available for the payment of such dividends, when and if declared by the Board of Directors. Such dividends shall accumulate on each share of Preferred Stock from the date of issuance. All dividends on shares of Preferred Stock shall be cumulative so that if the Corporation shall not pay, on a timely basis, the specified dividend, or any part outstanding, such deficiency shall thereafter be fully paid, but without interest, before any dividend shall be paid or set apart for payment on the Common Stock. Any dividend paid upon the Preferred Stock at a time when any accumulated dividends for any prior period are delinquent shall be expressly declared as a dividend in whole or partial payment of the accumulated dividend for the earliest dividend period for which dividends are then delinquent, and shall be so designated to each shareholder to whom payment is made. All shares of Preferred Stock shall rank equally and shall share ratably, in proportion to the rate of dividend of the series, in all dividends paid or set aside for payment for any dividend period or part thereof upon any such shares. Except to the limited extent hereinafter provided, so long as any shares of Preferred Stock shall be outstanding, no dividend, whether in cash, stock or otherwise, shall be paid or declared nor shall any distribution be made on the Common Stock, nor shall any Common Stock be purchased, redeemed or otherwise acquired for value by the Corporation, nor shall any moneys be paid to or set aside or made available for a sinking fund for the purchase or redemption of any Common Stock, unless: (i) All dividends on the Preferred Stock of all series for all past dividend periods shall have been paid or shall have been declared and a sum sufficient for the payment thereof set apart; and (ii) The Corporation shall have set aside all amounts theretofore required to be set aside as and for all sinking fund accounts, if any, for the redemption or purchase of all series of Preferred Stock for all past sinking fund payment periods or dates. The foregoing provisions shall not, however, apply to, or in any way restrict (x) any acquisition of Common Stock in exchange solely for Common Stock; (y) the acquisition of Common Stock through application of the proceeds of the sale of Common Stock; or (z) stock dividends or distributions payable only in shares of stock having rights and preferences subordinate to the Preferred Stock. (3) Liquidation, Dissolution or Winding Up. In case of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of each series of Preferred Stock shall be entitled to receive out of the assets of the Corporation in money or money's worth the amount specified in the particular series for each share at the time outstanding together with all accrued but unpaid dividends thereon, before any of such assets shall be paid or distributed to holders of Common Stock. In case of the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, if the assets of the Corporation shall be insufficient to pay the holders of all shares of Preferred Stock then outstanding the entire -3- amounts to which they may be entitled, the holders of shares of each outstanding series of Preferred Stock shall share ratably in such assets in proportion to the respective amounts payable in liquidation. (4) Voting Rights. The holders of Preferred Stock shall have only such voting rights as are fixed for shares of each series by the Board of Directors pursuant to this paragraph A or are provided by the Wisconsin Business Corporation Law. B. Common Stock. (1) Voting Rights and Powers. (a) Except as otherwise provided by the Wisconsin Business Corporation Law and except as may be determined by the Board of Directors with respect to the Preferred Stock pursuant to paragraph A of this Article 4, only the holders of Common Stock shall be entitled to vote for the election of directors of the Corporation and for all other corporate purposes. With respect to all matters upon which shareholders are entitled to vote or to which shareholders are entitled to give consent, the holders of the outstanding shares of Class A Common Stock and the holders of the outstanding shares of Class B Common Stock shall vote together as a single class, and every holder of any outstanding share of Class A Common Stock shall be entitled to cast thereon one (1) vote in person or by proxy for each share of Class A Common Stock standing in his name on the stock transfer records of the Corporation, and every holder of any outstanding shares of Class B Common Stock shall be entitled to cast thereon three (3) votes in person or by proxy for each share of Class B Common Stock standing in his name on the stock transfer records of the Corporation; provided that, with respect to any proposed corporate action which would require a separate class vote under the Wisconsin Business Corporation Law, the approval of a majority of the votes entitled to be cast by the holders of the class affected by the proposed action, voting separately as a class, shall be obtained in addition to the approval of a majority of the votes entitled to be cast by the holders of the Class A Common Stock and the Class B Common Stock voting together as a single class as hereinbefore provided. (b) The voting power limitations and/or restrictions of Section 180.1150 of the Wisconsin Business Corporation Law, or any successor provision thereto, shall not apply to any shares of Class B Common Stock held by any person. (2) Dividends and Distributions. (a) Subject to the provisions of this Article 4, the Board of Directors may, in its discretion, out of funds legally available for the payment of dividends and at such times and in such manner as determined by the Board of Directors, declare and pay dividends on the Common Stock. (b) As and when cash dividends may be declared from time to time by the Board of Directors out of funds legally available therefor, the cash dividend payable with respect to each share of the Class A Common Stock shall in all cases be in an amount equal to at least one hundred ten percent (110%) of the amount of the cash -4- dividend payable with respect to each share of the Class B Common Stock. Cash dividends may be declared and payable with respect to the Class A Common Stock without a concurrent cash dividend declared and payable with respect to the Class B Common Stock. Distributions declared by the Board of Directors to be in connection with the partial or complete liquidation of the corporation or any of its subsidiaries shall not be considered to be cash dividends for the purposes of this Paragraph (2). (c) Each share of Class A Common Stock and Class B Common Stock shall be equal in respect to rights to dividends (other than those payable in cash) and distributions (except distributions declared by the Board of Directors to be in connection with the liquidation, dissolution or winding up of the Corporation) when and as declared, in the form of stock or other property of the Corporation, except that in the case of dividends or other distributions payable in stock split-ups or divisions, which occur after the initial issuance of shares of the Class B Common Stock by the Corporation, only shares of Class A Common Stock shall be distributed with respect to the Class A Common Stock and only shares of Class B Common Stock shall be distributed with respect to the Class B Common Stock. (3) Liquidation, Dissolution or Winding Up. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after there shall have been paid to or set aside for the holders of shares of Preferred Stock the full preferential amounts to which they are entitled, the holders of outstanding shares of Common Stock shall be entitled to receive pro rata, according to the number of shares held by each, the remaining assets of the Corporation available for distribution as set forth herein. (b) In case of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of Class A Common Stock shall be entitled to receive out of the assets of the Corporation in money or money's worth the sum of One Dollar ($1.00) per share (the "Class A Payment"), subject to equitable adjustment in the event of any subdivisions, combinations, stock splits or stock dividends involving shares of the Class A Common Stock, before any of such assets shall be paid or distributed to holders of Class B Common Stock. If the assets of the Corporation shall be insufficient to pay the entire Class A Payment to the holders of the then outstanding Class A Common Stock, then the holders of the Class A Common Stock shall share ratably in such assets in proportion to the amounts which would be payable with respect to Class A Common Stock as if the Class A Payment was paid in full. After payment in full of the Class A Payment, the holders of Class B Common Stock shall be entitled to receive out of the remaining assets of the Corporation in money or money's worth the sum of One Dollar ($1.00) per share (the "Class B Payment"), subject to equitable adjustment in the event of any subdivisions, combinations, stock splits or stock dividends involving shares of the Class B Common Stock, before any of such remaining assets shall be paid or distributed to holders of the Class A Common Stock. If the remaining assets of the Corporation shall be insufficient to pay the entire Class B Payment to the holders of the then outstanding Class B Common Stock, then the holders of the Class B Common Stock shall share ratably in such assets in proportion to the amounts which would be payable -5- with respect to Class B Common Stock as if the Class B Payment was paid in full. After payment in full of the Class A Payment and the Class B Payment, any further payments on the liquidation, dissolution or winding up of the business of the Corporation shall be made on an equal basis as to all of the shares of capital stock then outstanding. (4) Conversion of the Class B Common Stock. (a) Each share of Class B Common Stock may at any time or from time to time, at the option of the respective holder thereof, be converted into one fully paid and nonassessable (except to the extent of any statutory liability imposed by Section 180.0622 of the Wisconsin Business Corporation Law) share of Class A Common Stock. Such conversion right shall be exercised by the surrender of the certificate representing such share of Class B Common Stock to be converted to the Corporation at any time during normal business hours at the principal executive offices of the Corporation in Wisconsin Rapids, Wisconsin (to the attention of the Secretary of the Corporation), or if an agent for the registration or transfer of shares of Class B Common Stock is then duly appointed and acting (said agent being referred to in this Article 4 as the "Transfer Agent") then at the office of the Transfer Agent, accompanied by a written notice of the election by the holder thereof to convert and (if so required by the Corporation or the Transfer Agent) by instruments of transfer, in form satisfactory to the Corporation and to the Transfer Agent, if any, duly executed by such holder or his duly authorized attorney, and transfer tax stamps or funds therefor, if required pursuant to Paragraph (4) (e) below. (b) As promptly as practicable after the surrender for conversion of a certificate representing shares of Class B Common Stock in the manner provided in Paragraph (4) (a), above, and the payment in cash of any amount required by the provisions of Paragraphs (4) (a) and (4) (e), the Corporation will deliver, or will cause to be delivered at the office of the Transfer Agent to, or upon the written order of, the holder of such certificate, a certificate or certificates representing the number of full shares of Class A Common Stock issuable upon such conversion, issued in such name or names as such holder may direct. The Corporation shall not, however, upon any such conversion, issue any fractional share of Class A Common Stock, and any shareholder who would otherwise be entitled to receive such fractional share if issued shall receive in lieu thereof a full share of Class A Common Stock. Any such conversion shall be deemed to have been made immediately prior to the close of business on the date of the surrender of the certificate representing shares of Class B Common Stock, and all rights of the holder of such shares as such holder shall cease at such time and the person or persons in whose name or names the certificate or certificates representing the shares of Class A Common Stock are to be issued shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock at such time; provided, however, that any such surrender and payment on any date when the stock transfer records of the Corporation shall be closed shall constitute the person or persons in whose name or names the certificate or certificates representing shares of Class A Common Stock are to be issued as the record holder or holders thereof for all purposes immediately prior to the close of business on the next succeeding day on which such stock transfer records are open. -6- (c) No adjustment in respect of dividends shall be made upon the conversion of any shares of Class B Common Stock; provided, however, that if a share shall be converted subsequent to the record date for the payment of a dividend or other distribution on shares of Class B Common Stock but prior to such payment, the registered holder of such share at the close of business on such record date shall be entitled to receive the dividend or other distribution payable on such share on the date set for payment of such dividend or other distribution notwithstanding the conversion thereof or the Corporation's default in payment of the dividend or distribution due on such date. (d) The Corporation will at all times reserve and keep available, solely for the purpose of issuance upon conversion of the outstanding shares of Class B Common Stock, such number of shares of Class A Common Stock as shall be issuable upon the conversion of all of such outstanding shares; provided, however, that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the outstanding shares of Class B Common Stock by delivery of purchased shares of Class A Common Stock which are held in the treasury of the Corporation. If any shares of Class A Common Stock required to be reserved for purposes of conversion hereunder require registration with, or approval of, any governmental authority under any Federal or state law before such shares of Class A Common Stock may be issued upon conversion, the Corporation will use its best efforts to cause such shares to be duly registered or approved, as the case may be. (e) The issuance of certificates for shares of Class A Common Stock upon conversion of shares of Class B Common Stock shall be made without charge for any stamp or other similar tax in respect of such issuance. However, if any such certificate is to be issued in a name other than that of the holder of the share or shares of Class B Common Stock converted, the person or persons requesting the issuance thereof shall pay to the Corporation the full amount of any tax which may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of the Corporation that such tax has been paid. (f) When the number of outstanding shares of Class B Common Stock falls below two percent (2%) of the aggregate number of shares of Class A Common Stock and Class B Common Stock then outstanding (or such higher number as results from adjustments for stock splits, stock dividends or other events), the outstanding shares of Class B Common Stock shall be deemed without further act on anyone's part to be immediately and automatically converted into shares of Class A Common Stock, and stock certificates formerly representing outstanding shares of Class B Common Stock shall thereupon and thereafter be deemed to represent a like number of full shares of Class A Common Stock. In the event that any shareholder would otherwise be entitled to receive a fractional share of Class A Common Stock upon any such conversion, such shareholder shall receive in lieu thereof a full share of Class B Common Stock. -7- (5) No Subsequent Issuance of Class B Common Stock Subsequent to the initial issuance of the shares of Class B Common Stock, the Board of Directors may only issue such shares in the form of a distribution or distributions pursuant to a stock dividend on or split-up of the shares of the Class B Common Stock and only to the then holders of the outstanding shares of the Class B Common Stock in conjunction with and in the same ratio as a stock dividend on or split-up of the shares of the Class A Common Stock. Except as provided in this paragraph (5), the Corporation shall not issue additional shares of Class B Common Stock after the initial issuance of such shares by the Corporation, and all shares of Class B Common Stock surrendered for conversion shall be retired, unless otherwise approved by the affirmative vote of the holders of a majority of the outstanding shares of the Class A Common Stock and Class B Common Stock entitled to vote, voting together as a single class, as provided in Paragraph (B) (1) of this Article 4. (6) No Preemptive Rights. No holder of any issued and outstanding share of Class A Common Stock, Class B Common Stock or Preferred Stock shall, as such holder, have any preemptive right in or right to purchase or subscribe for, any new or additional shares of Class A Common Stock, Class B Common Stock and/or Preferred Stock, or any shares of any other class or series of capital stock, or any obligations or other rights or options to subscribe for or purchase, any capital stock of any class of series, whether now or hereinafter authorized and whether issued by the corporation for cash or other consideration or by way of dividends or other distribution. (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 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 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. ARTICLE 5 The number of directors constituting the Corporation's initial Board of Directors shall be two (2), and thereafter the number of directors shall be such number (one or more) as -8- may be fixed from time to time or at any time by, or in the manner provided in, the Corporation's Bylaws. The names of the two (2) initial directors are as follows: John Swendrowski Leroy Miles ARTICLE 6 The address of the initial registered office of the Corporation is c/o Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, in Milwaukee County. The name of the Corporation's initial registered agent at such address is Jeffrey J. Jones. ARTICLE 7 These Articles of Incorporation may be amended pursuant to the Bylaws of this Corporation and as authorized by law at the time of amendment. ARTICLE 8 The name and address of the sole incorporator of this Corporation is Todd B. Pfister, c/o Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. ARTICLE 9 Action required or permitted by the Wisconsin Business Corporation Law to be taken at a shareholders' meeting may be taken without a meeting if a written consent or consents, describing the action so taken, is signed by shareholders who would be entitled to vote at a meeting those shares with voting power to cast not less than the minimum number or, in the case of voting by voting groups, numbers of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote were present and voted. -9- ARTICLES OF AMENDMENT relating to SERIES A PREFERRED STOCK of NORTHLAND CRANBERRIES, INC. --------------------------------------------------------- Pursuant to Sections 180.0602 and 180.1002 of the Wisconsin Business Corporation Law --------------------------------------------------------- I, John Swendrowski, Chairman of the Board and Chief Executive Officer of Northland Cranberries, Inc., a corporation organized and existing under the Wisconsin Business Corporation Law (the "Corporation"), in accordance with the provisions of Sections 180.0602 and 180.1002 thereof, DO HEREBY CERTIFY THAT: A. Pursuant to the authority conferred upon the Board of Directors of the Corporation by its Articles of Incorporation, as amended, and in accordance with Sections 180.0602 and 180.1002 of the Wisconsin Business Corporation Law, said Board of Directors adopted resolutions on November 1, 2001, creating a series of Preferred Stock, $.01 par value per share, of the Corporation, designated as Series A Preferred Stock. B. Said resolutions of the Board of Directors of the Corporation creating the series designated as Series A Preferred Stock provide that said series shall have such designation and number of shares and such preferences, limitations and relative rights as are set forth in the paragraphs below: Series A Preferred Stock 1. Designation and Amount. The Corporation is authorized to issue a series of Preferred Stock, which is hereby designated as "Series A Preferred Stock." The number of shares of Series A Preferred Stock shall be limited to Two Million (2,000,000). The par value of the Series A Preferred Stock shall be $.01 per share. 2. Dividends. If and when the Board of Directors declares a cash dividend on the shares of Class A Common Stock, then the holders of Series A Preferred Stock shall be entitled to receive, out of funds legally available therefor, a cash dividend per share equal to the amount such holders would have received had such holder converted his or its Series A Preferred Stock into Class A Common Stock immediately prior to such distribution. 3. Liquidation, Dissolution or Winding Up. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to receive out of the assets of the Corporation available for distribution to its shareholders, in money or money's worth, after and subject to the payment in full of all amounts required to be distributed to the holders of any other Preferred Stock of the Corporation ranking on liquidation prior and in preference to the Series A Preferred Stock (such Preferred Stock being referred to hereinafter as "Senior Preferred Stock"; provided that the Series B Preferred Stock ranks junior to the Series A Preferred Stock and is therefore not Senior Preferred Stock) upon such liquidation, dissolution or winding up, an amount equal to the amount such holder would have received had such holder converted its Series A Preferred Stock into Class A Common Stock immediately prior to such distribution. The merger or consolidation of the Corporation into or with another corporation, the merger or consolidation of any other corporation into or with the Corporation, or the sale of all or substantially all the assets of the Corporation shall not be deemed to be a liquidation, dissolution or winding up of the Corporation for purposes of this Section 3. 4. Voting. Each issued and outstanding share of Series A Preferred Stock shall be entitled to the number of votes equal to the number of shares of Class A Common Stock into which each such share of Series A Preferred Stock is convertible (as adjusted from time to time pursuant to Section 5 and Section 6 hereof), at each meeting of shareholders of the Corporation (or pursuant to any action by written consent) with respect to any and all matters presented to the shareholders of the Corporation for their action or consideration. Except as provided by law or by the provisions establishing any other series of Preferred Stock, holders of Series A Preferred Stock shall vote together with the holders of Common Stock as a single class. 5. Mandatory Conversion. Immediately upon the effectiveness of an amendment to the Corporation's Articles of Incorporation which has the effect of increasing the number of shares of Class A Common Stock that the Corporation is authorized to issue to a number sufficient to provide for the issuance of shares of Class A Common Stock upon conversion of all of the then issued and outstanding shares of Series A Preferred Stock in accordance with the terms hereof, each share of Series A Preferred Stock shall be automatically converted into fully-paid and nonassessable (except as provided by Section 180.0622(2)(b) of the Wisconsin Business Corporation Law) shares of Class A Common Stock. The number of shares of Class A Common Stock into which each share of Series A Preferred Stock is convertible shall equal the Conversion Rate in effect at such time. The initial Conversion Rate shall be twenty-five (25), subject to adjustment as provided in Section 6 hereof. Upon such automatic conversion, all shares of Series A Preferred Stock which shall have been converted as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall forthwith cease and terminate. 6. Anti-Dilution Provisions. (a) The Conversion Rate shall be subject to adjustment from time to time in accordance with this Section 6. (b) In case the Corporation shall at any time (i) subdivide the outstanding Class A Common Stock or (ii) issue a dividend on its outstanding Class A Common Stock payable in shares of Class A Common Stock, the Conversion Rate in effect immediately prior to such dividend or combination shall be proportionately increased by the same ratio as the subdivision or dividend. In case the Corporation shall at any time combine its outstanding Class -2- A Common Stock, the Conversion Rate in effect immediately prior to such combination shall be proportionately decreased by the same ratio as the combination. (c) If any capital reorganization or reclassification of the capital stock of the Corporation, or consolidation or merger of the Corporation with another corporation, or the sale of all or substantially all of its assets to another corporation, shall be effected in such a way that holders of Class A Common Stock shall be entitled to receive stock, securities, cash or other property with respect to or in exchange for Class A Common Stock, then, as a condition of such reorganization, reclassification, consolidation, merger or sale, lawful and adequate provision shall be made whereby the holders of the Series A Preferred Stock shall have the right to acquire and receive upon conversion of the Series A Preferred Stock such shares of stock, securities, cash or other property issuable or payable (as part of the reorganization, reclassification, consolidation, merger or sale) with respect to or in exchange for such number of outstanding shares of Class A Common Stock as would have been received upon conversion of the Series A Preferred Stock at the Conversion Rate then in effect. 7. No Sinking Fund. Shares of Series A Preferred Stock shall not be entitled to any sinking fund. 8. Other Terms. Shares of Series A Preferred Stock shall be subject to the other terms, provisions and restrictions set forth in the Articles of Incorporation with respect to the shares of Preferred Stock of the Corporation. C. No shares of Series A Preferred Stock have been issued as of the date hereof. D. The amendment creating the Series A Preferred Stock was adopted by the Board of Directors of the Corporation in accordance with Section 180.1002 of the Wisconsin Business Corporation Law and shareholder action was not required. E. These Articles of Amendment shall be effective as of 9:01 a.m. on November 5, 2001. IN WITNESS WHEREOF, the undersigned has executed and subscribed these Articles of Amendment on behalf of the Corporation and does affirm the foregoing as true this 2nd day of November, 2001. NORTHLAND CRANBERRIES, INC. By: /s/John Swendrowski ------------------------------------- John Swendrowski Chairman of the Board and Chief Executive Officer - ------------------- This instrument was drafted by and should be returned to Peter C. Underwood of the firm of Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. -3- ARTICLES OF AMENDMENT relating to SERIES B PREFERRED STOCK of NORTHLAND CRANBERRIES, INC. --------------------------------------------------------- Pursuant to Sections 180.0602 and 180.1002 of the Wisconsin Business Corporation Law --------------------------------------------------------- I, John Swendrowski, Chairman of the Board and Chief Executive Officer of Northland Cranberries, Inc., a corporation organized and existing under the Wisconsin Business Corporation Law (the "Corporation"), in accordance with the provisions of Sections 180.0602 and 180.1002 thereof, DO HEREBY CERTIFY THAT: A. Pursuant to the authority conferred upon the Board of Directors of the Corporation by its Articles of Incorporation, as amended, and in accordance with Sections 180.0602 and 180.1002 of the Wisconsin Business Corporation Law, said Board of Directors adopted resolutions on November 1, 2001, creating a series of Preferred Stock, $.01 par value per share, of the Corporation, designated as Series B Preferred Stock. B. Said resolutions of the Board of Directors of the Corporation creating the series designated as Series B Preferred Stock provide that said series shall have such designation and number of shares and such preferences, limitations and relative rights as are set forth in the paragraphs below: Series B Preferred Stock 1. Designation and Amount. The Corporation is authorized to issue a series of Preferred Stock, which is hereby designated as "Series B Preferred Stock". The number of shares of Series B Preferred Stock shall be limited to 100 shares. The par value of the Series B Preferred Stock shall be $.01 per share. 2. Dividends. The corporation will not pay dividends to the holders of the Series B Preferred Stock. 3. Liquidation, Dissolution or Winding Up. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series B Preferred Stock then outstanding shall be entitled to receive out of the assets of the Corporation available for distribution to its shareholders, in money or money's worth, after and subject to the payment in full of all amounts required to be distributed to the holders of any other Preferred Stock of the Corporation ranking on liquidation prior and in preference to the Series B Preferred Stock (including, without limitation, the Series A Preferred Stock), upon such liquidation, dissolution or winding up, an amount equal to the Liquidation Value of each such Series B Preferred Stock. 4. Voting. Except as otherwise provided herein and as otherwise required by applicable law, the Series B Preferred Stock shall have no voting rights; provided that each holder of Series B Preferred Stock shall be entitled to notice of all stockholders meetings at the same time and in the same manner as notice is given to all stockholders entitled to vote at such meetings. 5. Redemptions. (a) Redemption in Connection With Sun Exit Event. If a Sun Exit Event has occurred, the Corporation will redeem each issued and outstanding share of Series B Preferred Stock from each holder of the Series B Preferred Stock at a price per share equal to a fraction, the numerator of which is the Formula Amount and the denominator of which is one hundred (100). (b) Redemption Payments. For each share of Series B Preferred Stock which is to be redeemed hereunder, the Corporation shall be obligated within five days of the Redemption Date to pay to the holders thereof (upon surrender by such holders at the Corporation's principal office of the certificate representing such share of Series B Preferred Stock) an amount in immediately available funds equal to the amount calculated in accordance with Section 5(a). If the funds of the Corporation legally available for redemption of Series B Preferred Stock on the Redemption Date are insufficient to redeem the Series B Preferred Stock, those funds which are legally available shall be used to redeem the Series B Preferred Stock, unless such use would result in a breach by Corporation of any of its financing agreements. At any time thereafter when additional funds of the Corporation are legally available for the redemption of the Series B Preferred Stock, and such use would not result in a breach by the Corporation of any of its financing agreements, such funds shall immediately be used to redeem the balance of the Series B Preferred Stock which the Corporation has become obligated to redeem on the Redemption Date but which it has not redeemed and, until such balance has been so redeemed in full, no Junior Securities of the Corporation shall be redeemed and no dividends shall be paid thereon. If within 30 days of the Redemption Date the Corporation has not paid the holders of Series B Preferred Stock the full amount calculated in accordance with Section 5(a), the amount not paid within 30 day period shall accrue simple interest at the rate of the lesser of 12% per annum or the prime rate (as announced within Wells Fargo at its principal office in San Francisco as its "prime rate") plus 4% per annum. 6. No Sinking Fund. Shares of Series B Preferred Stock shall not be entitled to any sinking fund. 7. Other Terms. Shares of Series B Preferred Stock shall be subject to the other terms, provisions and restrictions set forth in the Articles of Incorporation with respect to the shares of Preferred Stock of the Corporation. 8. Definitions. The following terms shall have the meanings specified: "Formula Amount" means: (a) if Sun's IRR is less than or equal to forty percent (40%), zero. -2- (b) If Sun's IRR is greater than forty percent (40%) but less than or equal to fifty percent (50%), ten percent (10%) of the difference between the aggregate amount of Sun Proceeds minus what the aggregate amount of Sun Proceeds would have been had Sun's IRR been forty percent (40%); (c) If Sun's IRR is greater than fifty percent (50%) but less than or equal to sixty percent (60%), the sum of (i) fifteen percent (15%) of the difference between the aggregate amount of Sun Proceeds minus what the aggregate amount of Sun Proceeds would have been had Sun's IRR been fifty percent (50%), plus (ii) ten percent (10%) of the difference between what the aggregate amount of Sun Proceeds would have been had Sun's IRR been fifty percent (50%) minus what the aggregate amount of Sun Proceeds would have been had Sun's IRR been forty percent (40%); (d) If Sun's IRR is greater than sixty percent (60%) but less than or equal to seventy percent (70%), the sum of (i) twenty percent (20%) of the difference between the aggregate amount of Sun Proceeds minus what the aggregate amount of Sun Proceeds would have been had Sun's IRR been sixty percent (60%), plus (ii) fifteen percent (15%) of the difference between what the aggregate amount of Sun Proceeds would have been had Sun's IRR been sixty percent (60%) minus what the aggregate amount of Sun Proceeds would have been had Sun's IRR been fifty percent (50%), plus (iii) ten percent (10%) of the difference between what the aggregate amount of Sun Proceeds would have been had Sun's IRR been fifty percent (50%) minus what the aggregate amount of Sun Proceeds would have been had Sun's IRR been forty percent (40%); (e) If Sun's IRR is greater than seventy percent (70%) but less than or equal to eighty percent (80%), the sum of (i) twenty five percent (25%) of the difference between the aggregate amount of Sun Proceeds minus what the aggregate amount of Sun Proceeds would have been had Sun's IRR been seventy percent (70%), plus (ii) twenty percent (20%) of the difference between what the aggregate amount of Sun Proceeds would have been had Sun's IRR been seventy percent (70%) minus what the aggregate amount of Sun Proceeds would have been had Sun's IRR been sixty percent (60%), plus (iii) fifteen percent (15%) of the difference between what the aggregate amount of Sun Proceeds would have been had Sun's IRR been sixty percent (60%) minus what the aggregate amount of Sun Proceeds would have been had Sun's IRR been fifty percent (50%), plus (iv) ten percent (10%) of the difference between what the aggregate amount of Sun Proceeds would have been had Sun's IRR been fifty percent (50%) minus what the aggregate amount of Sun Proceeds would have been had Sun's IRR been forty percent (40%); and (f) If Sun's IRR is greater than eighty percent (80%), the sum of (i) thirty percent (30%) of the difference between the aggregate amount of Sun Proceeds minus what the aggregate amount of Sun Proceeds would have -3- been had Sun's IRR been eighty percent (80%), plus (ii) twenty five percent (25%) of the difference between what the aggregate amount of Sun Proceeds would have been had Sun's IRR been eighty percent (80%) minus what the aggregate amount of Sun Proceeds would have been had Sun's IRR been seventy percent (70%), plus (iii) twenty percent (20%) of the difference between what the aggregate amount of Sun Proceeds would have been had Sun's IRR been seventy percent (70%) minus what the aggregate amount of Sun Proceeds would have been had Sun's IRR been sixty percent (60%), plus (iv) fifteen percent (15%) of the difference between what the aggregate amount of Sun Proceeds would have been had Sun's IRR been sixty percent (60%) minus what the aggregate amount of Sun Proceeds would have been had Sun's IRR been fifty percent (50%), plus (v) ten percent (10%) of the difference between what the aggregate amount of Sun Proceeds would have been had Sun's IRR been fifty percent (50%) minus what the aggregate amount of Sun Proceeds would have been had Sun's IRR been forty percent (40%). "Junior Securities" means, collectively, the Corporation's Class A Common Stock, par value $.01 per share, and any capital stock of any class of the Corporation hereafter authorized which is not limited to a fixed sum or percentage of par or stated value in respect to the rights of the holders thereof to participate in dividends or in the distribution of assets upon any liquidation, dissolution or winding up of the Corporation; the Corporation's Series A Preferred Stock are not Junior Securities, and rank senior in preference to the Series B Preferred Stock. "Liquidation Value" means the par value. "Person" means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "Redemption Date" means the date of the Sun Exit Event. "Sun" means Sun Northland, LLC. "Sun Exit Event" means the consummation of a transaction the result of which is (a) that immediately following such transaction neither Sun nor its affiliates owns or controls securities possessing at least 10% of the voting power of the Corporation or (b) the distribution of assets to holders of the Corporation's capital stock upon the sale of all or substantially all of the assets of the Corporation. "Sun's IRR" means, as of any measurement date, the interest rate (compounded annually) which, when used as the discount rate to calculate the net present value as of the date hereof of the sum of (i) the aggregate amount of all Sun Proceeds and (ii) the aggregate amount of all Sun Investments, causes such net present value to equal zero. For purposes of the net present value calculation, (A) Sun Proceeds shall be positive numbers, (B) Sun Investments shall -4- be negative numbers, (C) the Sun Proceeds and Sun Investments shall be deemed to have been received or made on the first day of the month nearest to the actual date of such receipt or payment, and (D) "the aggregate amount of all Sun Proceeds" shall be net of all fees and expenses of any kind whatsoever, including without limitation investment banking fees or management service fees paid or payable to, or reimbursement of expenses of, Sun or any of its affiliates. "Sun Investments" means, as of any measurement date, the total amount of cash, cash equivalents, promissory obligations, or the fair market value of any other property (as determined by the Board of Directors of the Corporation in the exercise of their good faith judgement) invested by Sun or its affiliates in the securities of the Corporation; provided that the amount of the Sun Investment on the date hereof is $7,000,000. "Sun Proceeds" means, as of any measurement date, total amount of cash received by Sun or its affiliates in connection with a sale of securities of the Corporation or dividend, interest or other distribution made by the Corporation with respect to securities of the Corporation; provided that in the event Sun or its affiliates receives property other than cash in connection with any of the foregoing, such property shall become Sun Proceeds on the date that it is sold, exchanged, transferred or otherwise converted into cash. C. No shares of Series B Preferred Stock have been issued as of the date hereof. D. The amendment creating the Series B Preferred Stock was adopted by the Board of Directors of the Corporation in accordance with Section 180.1002 of the Wisconsin Business Corporation Law and shareholder action was not required. IN WITNESS WHEREOF, the undersigned has executed and subscribed these Articles of Amendment on behalf of the Corporation and does affirm the foregoing as true this 2nd day of November, 2001. NORTHLAND CRANBERRIES, INC. By: /s/John Swendrowski ------------------------------------- John Swendrowski Chairman of the Board and Chief Executive Officer - ------------------- This instrument was drafted by and should be returned to Peter C. Underwood of the firm of Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. -5- EX-3.3 5 pdm300d.txt AMENDMENTS Exhibit 3.3 Amendment to the Bylaws of Northland Cranberries, Inc. Section 3.04 of the Bylaws of Northland Cranberries, Inc. was amended by the Board of Directors of the Company, effective as of January 30, 2002, to read in its entirety as follows: "3.04. Regular Meetings. The date, time and place, either within or without the State of Wisconsin, for the holding of any regular meetings of the Board of Directors shall be as communicated and generally agreed upon by the Board of Directors." EX-3.4 6 pdm300e.txt BY-LAWS Exhibit 3.4 ============================================= Amended Effective January 30, 2002 ============================================= BYLAWS OF NORTHLAND CRANBERRIES, INC. (a Wisconsin corporation) ARTICLE I. OFFICES 1.01. Principal and Business Offices. The corporation may have such principal and other business offices, either within or without the State of Wisconsin, as the Board of Directors may designate or as the business of the corporation may require from time to time. 1.02. Registered Office. The registered office of the corporation required by the Wisconsin Business Corporation Law to be maintained in the State of Wisconsin may be, but need not be, identical with the principal office in the State of Wisconsin, and the address of the registered office may be changed from time to time by the Board of Directors or by the registered agent. The business office of the registered agent of the corporation shall be identical to such registered office. ARTICLE II. SHAREHOLDERS 2.01. Annual Meeting. The annual meeting of the shareholders shall be held on the first Wednesday in January of each year (beginning in 1997), or on such other date within thirty days before or after such date as may be fixed by or under the authority of the Board of Directors, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the state of Wisconsin, such meeting shall be held on the next succeeding business day. If the election of directors shall not be held on the day designated herein, or fixed as herein provided, for any annual meeting of the shareholders, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as is practicable. 2.02. Special Meetings. Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by the Wisconsin Business Corporation Law, may be called by the Board of Directors or the President. The corporation shall call a special meeting of shareholders in the event that the holders of at least 10% of all of the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting sign, date and deliver to the corporation one or more written demands for a special meeting describing one or more purposes for which it is to be held. The corporation shall give notice of such a special meeting within thirty days after the date that the demand is delivered to the corporation. 2.03. Place of Meeting. The Board of Directors may designate any place, either within or without the State of Wisconsin, as the place of meeting for any annual or special meeting of shareholders. If no designation is made, the place of meeting shall be the principal office of the corporation. Any meeting may be adjourned to reconvene at any place designated by vote of a majority of the votes represented thereat. 2.04. Notice of Meeting. Written notice stating the date, time and place of any meeting of shareholders and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten days nor more than sixty days before the date of the meeting (unless a different time is provided by the Wisconsin Business Corporation Law or the articles of incorporation), either personally or by mail, by or at the direction of the President or the Secretary, to each shareholder of record entitled to vote at such meeting and to 2 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. 2.05. 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 bylaws 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 2.05, and the chairman of any meeting of shareholders may refuse to permit any business to be brought before such meeting without compliance with the foregoing procedures. For purposes of these bylaws, the "Originally Scheduled Date" of any meeting of shareholders shall be the date such meeting is scheduled to occur as specified in the notice of such meeting first generally given to shareholders regardless of whether any subsequent notice is given for such meeting or the record date of such meeting is changed. Nothing contained in this Section 2.05 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. 2.06. Waiver of Notice. A shareholder may waive any notice required by the Wisconsin Business Corporation Law, the articles of incorporation or these bylaws before or 3 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. 2.07. Fixing of Record Date. The Board of Directors may fix in advance a date as the record date for the purpose of determining shareholders entitled to notice of and to vote at any meeting of shareholders, shareholders entitled to demand a special meeting as contemplated by Section 2.02 hereof, shareholders entitled to take any other action, or shareholders for any other purpose. Such record date shall not be more than seventy days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If no record date is fixed by the Board of Directors or by the Wisconsin Business Corporation Law for the determination of shareholders entitled to notice of and to vote at a meeting of shareholders, the record date shall be the close of business on the day before the first notice is given to shareholders. If no record date is fixed by the Board of Directors or by the Wisconsin Business Corporation Law for the determination of shareholders entitled to demand a special meeting as contemplated in Section 2.02 hereof, the record date shall be the date that the first shareholder signs the demand. Except as provided by the Wisconsin Business Corporation Law for a court ordered adjournment, a determination of shareholders entitled to notice of and to vote at a meeting of shareholders is effective for any adjournment of such meeting unless the Board of Directors fixes a new record date, which it shall do if the meeting is adjourned to a date more than 120 days after the date fixed for the original meeting. The record date for determining shareholders entitled to a distribution (other than a distribution involving a purchase, redemption or other acquisition of the corporation's shares) or a share dividend is the date on which the Board of Directors authorized the distribution or share dividend, as the case may be, unless the Board of Directors fixes a different record date. 2.08. 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 2.08. 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 4 prepare or make available the shareholders' list shall not affect the validity of any action taken at a meeting of shareholders. 2.09. 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. 2.10. Conduct of Meeting. The Chairman, if any, and in his absence or discretion, a Vice-Chairman, if any, and in their absence, the President, and in his absence or discretion, a Vice President in the order provided under Section 4.11 hereof or as chosen by the Chairman, and in their absence, any person chosen by the shareholders present shall call the meeting of the shareholders to order and shall act as chairman of the meeting, and the Secretary of the corporation shall act as secretary of all meetings of the shareholders, but, in the absence or upon the request of the Secretary, the presiding officer may appoint any other person to act as secretary of the meeting. 2.11. 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. 2.12. 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. 5 2.13. 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 if a written consent or consents, describing the action so taken, is or are signed by shareholders who would be entitled to vote at a meeting those shares with voting power to cast not less than the minimum number or, in the case of voting by voting groups, numbers of votes that would be necessary to authorize or take the action at a meeting at which all shares entitled to vote were present and voted. 2.14. Acceptance of Instruments Showing Shareholder Action. If the name signed on a vote, consent, waiver or proxy appointment corresponds to the name of a shareholder, the corporation, if acting in good faith, may accept the vote, consent, waiver or proxy appointment and give it effect as the act of a shareholder. If the name signed on a vote, consent, waiver or proxy appointment does not correspond to the name of a shareholder, the corporation, if acting in good faith, may accept the vote, consent, waiver or proxy appointment and give it effect as the act of the shareholder if any of the following apply: (a) The shareholder is an entity and the name signed purports to be that of a officer or agent of the entity. (b) The name purports to be that of a personal representative, administrator, executor, guardian or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation is presented with respect to the vote, consent, waver or proxy appointment. (c) The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation is presented with respect to the vote, consent, waiver or proxy appointment. (d) The name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the shareholder is presented with respect to the vote, consent, waiver or proxy appointment. (e) Two or more persons are the shareholders as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all co-owners. The corporation may reject a vote, consent, waiver or proxy appointment if the Secretary or other officer or agent of the corporation who is authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder. ARTICLE III. BOARD OF DIRECTORS 3.01. General Powers and Number. All corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation managed under the direction of, the Board of Directors. The board of directors of the corporation shall consist of 6 that number of directors as determined from time to time by the board of directors, but shall in no event exceed ten. 3.02. Tenure 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. 3.03. Shareholder Nomination Procedure. Nominations for the election of directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any shareholder entitled to vote for the election of directors who complies fully with the requirements of this Section 3.03. 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 7 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. 3.04. Regular Meetings. The date, time and place, either within or without the State of Wisconsin, for the holding of any regular meetings of the Board of Directors shall be as communicated and generally agreed upon by the Board of Directors. 3.05. Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the President, Secretary or any two directors. The President or Secretary may fix any place, either within or without the State of Wisconsin, as the place for holding any special meeting of the Board of Directors, and if no other place is fixed the place of the meeting shall be the principal business office of the corporation in the State of Wisconsin. 3.06. 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 twenty-four 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. 3.07. 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 3.13 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. 3.08. 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 8 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. 3.09. Conduct of Meetings. The Chairman, if any, and in his absence, a Vice-Chairman, if any, and in their absence, the President, and in his absence, a Vice President in the order provided under Section 4.11, 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. 3.10. 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. 3.11. 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. 3.12. 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 3.13 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. 3.13. 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 9 committees, appoint members of the Board of Directors to serve on the committees and designate other members of the Board of Directors to serve as alternates. Each committee shall have two or more members who shall, unless otherwise provided by the Board of Directors, serve at the discretion of the Board of Directors. A committee may be authorized to exercise the authority of the Board of Directors, except that a committee may not do any of the following: (a) authorize distributions; (b) approve or propose to shareholders action that the Wisconsin Business Corporation Law requires to be approved by shareholders; (c) fill vacancies on the Board of Directors or, unless the Board of Directors provides by resolution that vacancies on a committee shall be filled by the affirmative vote of the remaining committee members, on any Board committee; (d) amend the corporation's articles of incorporation; (e) adopt, amend or repeal bylaws; (f) approve a plan of merger not requiring shareholder approval; (g) authorize or approve reacquisition of shares, except according to a formula or method prescribed by the Board of Directors; and (h) authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences and limitations of a class or series of shares, except that the Board of Directors may authorize a committee to do so within limits prescribed by the Board of Directors. Unless otherwise provided by the Board of Directors in creating the committee, a committee may employ counsel, accountants and other consultants to assist it in the exercise of its authority. 3.14. 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 3.13 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 to be inappropriate under the circumstances for action at a meeting held by such means. Such determination shall be made and announced in advance of such meeting. 3.15. 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 3.13 hereof may be taken without a meeting if the 10 action is taken by all members of the Board or of the committee. The action shall be evidenced by one or more written consents describing the action taken, signed by each director or committee member and retained by the corporation. Such action shall be effective when the last director or committee member signs the consent, unless the consent specifies a different effective date. ARTICLE IV. OFFICERS 4.01. Number. The principal officers of the corporation shall be a President, the number of Vice Presidents as authorized from time to time by the Board of Directors, a Secretary, and a Treasurer, each of whom shall be elected by the Board of Directors. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors or the President. The Board of Directors may also authorize any duly authorized officer to appoint one or more officers or assistant officers. Any two or more offices may be held by the same person. 4.02. Election and Term of Office. The officers of the corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as is practicable. Each officer shall hold office until his or her successor shall have been duly elected or until his or her prior death, resignation or removal. 4.03. Removal. The Board of Directors may remove any officer and, unless restricted by the Board of Directors or these bylaws, an officer may remove any officer or assistant officer appointed by that officer, at any time, with or without cause and notwithstanding the contract rights, if any, of the officer removed. The appointment of an officer does not of itself create contract rights. 4.04. Resignation. An officer may resign at any time by delivering notice to the corporation that complies with the Wisconsin Business Corporation Law. The resignation shall be effective when the notice is delivered, unless the notice specifies a later effective date and the corporation accepts the later effective date. 4.05. Vacancies. A vacancy in any principal office because of death, resignation, removal, disqualification or otherwise, shall be filled by the Board of Directors for the unexpired portion of the term. If a resignation of an officer is effective at a later date as contemplated by Section 4.04 hereof, the Board of Directors may fill the pending vacancy before the effective date if the Board provides that the successor may not take office until the effective date. 4.06. Chairman of the Board. The Chairman of the Board, if one be chosen by the Board of Directors, shall preside at all meetings of the Board of Directors and of the shareholders and shall perform all duties incident to the office of the Chairman of the Board of the corporation and such other duties as may be prescribed by the Board of Directors from time to time. 11 4.07. The Vice-Chairmen of the Board. The Vice-Chairmen of the Board, if any be chosen by the Board of Directors, shall possess all the powers of the Chairman of the Board. In the event a Vice-Chairman of the Board disagrees with the manner in which the Chairman of the Board is discharging the duties incident to the office of the Chairman of the Board, the Vice-Chairman of the Board shall have the right to call a vote of the Chairman of the Board and all Vice-Chairmen of the Board, the vote of a majority of whom shall prevail. In the event no majority is obtained, the disagreement shall be submitted to the vote of the Board of Directors, the vote of a majority of whom shall prevail. 4.08. Chief Executive Officer. The Board of Directors shall from time to time designate the Chairman of the Board, if any, or any of the Vice-Chairmen 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 offices of Chairman of the Board of the corporation and Vice-Chairman of the Board of the corporation are 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. 4.09. President. Unless the Board of Directors otherwise provides, in the absence of the Chairman of the Board and all Vice-Chairmen of the Board, in the event of their inability or refusal to act, or in the event of a vacancy in the offices of the Chairman of the Board and Vice-Chairman of the Board, the President shall perform the duties of the Chairman of the Board, and when so acting shall have all the powers of and be subject to all the restrictions upon the Chairman of the Board. Unless the Board of Directors otherwise provides, in the absence of the Chief Executive Officer or in the event of his or her inability or refusal to act, or in the event of a vacancy in the office of the Chief Executive Officer, the President shall perform the duties of the Chief Executive Officer, and when so acting shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. The President shall have authority, subject to such rules as may be prescribed by the Board of Directors, to appoint such agents and employees of the corporation as he or she shall deem necessary, to prescribe their powers, duties and compensation, and to delegate authority to them. He or she shall have authority to sign, execute and acknowledge, on behalf of the corporation, all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and all other documents or instruments necessary or proper to be executed in the course of the corporation's regular business, or which shall be authorized by resolution of the Board of Directors; and, except as otherwise provided by law or the Board of Directors, he or she may authorize any Vice President or other officer or agent of the corporation 12 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. 4.10. 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. 4.11. 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. 4.12. The Secretary. The Secretary shall: (a) keep minutes of the meetings of the shareholders and of the Board of Directors (and of committees thereof) in one or more books provided for that purpose (including records of actions taken by the shareholders or the Board of Directors (or committees thereof) without a meeting); (b) see that all notices are duly given in accordance with the provisions of these bylaws or as required by the Wisconsin Business Corporation Law; (c) be custodian of the corporate records and of the seal of the corporation, if any, and see that the seal of the corporation, if any, is affixed to all documents the execution of which on behalf of the corporation under its seal is required and duly authorized; (d) maintain a record of the shareholders of the corporation, in a form that permits preparation of a list of the names and addresses of all shareholders, by class or series of shares and showing the number and class or series of shares held by each shareholder; (e) sign with the President, or a Vice President, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the corporation; and (g) in general perform all duties incident to the office of Secretary and have such other duties and exercise such authority as from time to time may be delegated or assigned by the President or by the Board of Directors. 13 4.13. 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. 4.14. 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. 4.15. Other Assistants and Acting Officers. The Board of Directors and President shall have the power to appoint, or to authorize any duly appointed officer of the corporation to appoint, any person to act as assistant to any officer, or as agent for the corporation in his or her stead, or to perform the duties of such officer whenever for any reason it is impracticable for such officer to act personally, and such assistant or acting officer or other agent so appointed by the Board of Directors or an authorized officer shall have the power to perform all the duties of the office to which he or she is so appointed to be an assistant, or as to which he or she is so appointed to act, except as such power may be otherwise defined or restricted by the Board of Directors, the President or the appointing officer. ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS; SPECIAL CORPORATE ACTS 5.01. Contracts. The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute or deliver any instrument in the name of and on behalf of the corporation, and such authorization may be general or confined to specific instances. In the absence of other designation, all deeds, mortgages and instruments of assignment or pledge made by the corporation shall be executed in the name of the corporation by the President or one of the Vice Presidents and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer; the Secretary or an Assistant Secretary, when necessary or required, shall affix the corporate seal, if any, thereto; and when so executed no other party to such instrument or any third party shall be required to make any inquiry into the authority of the signing officer or officers. 14 5.02. Loans. No indebtedness for borrowed money shall be contracted on behalf of the corporation and no evidences of such indebtedness shall be issued in its name unless authorized by or under the authority of a resolution of the Board of Directors. Such authorization may be general or confined to specific instances. 5.03. Checks, Drafts, etc. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by or under the authority of a resolution of the Board of Directors. 5.04. Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositaries as may be selected by or under the authority of a resolution of the Board of Directors. 5.05. Voting of Securities Owned by this Corporation. Subject to the specific directions of the Board of Directors, (a) any shares or other securities issued by any other corporation and owned or controlled by this corporation may be voted at any meeting of security holders of such other corporation by the President of this corporation if he be present, or in his absence by any Vice President of this corporation who may be present, and (b) whenever, in the judgment of the President, or in his absence, of any Vice President, it is desirable for this corporation to execute a proxy or written consent in respect to any shares or other securities issued by any other corporation and owned by this corporation, such proxy or consent shall be executed in the name of this corporation by the President or one of the Vice Presidents of this corporation, without necessity of any authorization by the Board of Directors, affixation of corporate seal, if any, or countersignature or attestation by another officer. Any person or persons designated in the manner above stated as the proxy or proxies of this corporation shall have full right, power and authority to vote the shares or other securities issued by such other corporation and owned by this corporation the same as such shares or other securities might be voted by this corporation. ARTICLE VI. CERTIFICATES FOR SHARES; TRANSFER OF SHARES 6.01. Certificates for Shares. Certificates representing shares of the corporation shall be in such form, consistent with the Wisconsin Business Corporation Law, as shall be determined by the Board of Directors. Such certificates shall be signed by the President or a Vice President and by the Secretary or an Assistant Secretary. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be canceled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and canceled, except as provided in Section 6.06. 6.02. Facsimile Signatures and Seal. The seal of the corporation, if any, on any certificates for shares may be a facsimile. The signature of the President or Vice President and 15 the Secretary or Assistant Secretary upon a certificate may be facsimiles if the certificate is manually signed on behalf of a transfer agent, or a registrar, other than the corporation itself or an employee of the corporation. 6.03. Signature by Former Officers. The validity of a share certificate is not affected if a person who signed the certificate (either manually or in facsimile) no longer holds office when the certificate is issued. 6.04. Transfer of Shares. Prior to due presentment of a certificate for shares for registration of transfer the corporation may treat the registered owner of such shares as the person exclusively entitled to vote, to receive notifications and otherwise to have and exercise all the rights and power of an owner. Where a certificate for shares is presented to the corporation with a request to register for transfer, the corporation shall not be liable to the owner or any other person suffering loss as a result of such registration of transfer if (a) there were on or with the certificate the necessary endorsements and (b) the corporation had no duty to inquire into adverse claims or has discharged any such duty. The corporation may require reasonable assurance that such endorsements are genuine and effective and compliance with such other regulations as may be prescribed by or under the authority of the Board of Directors. 6.05. Restrictions on Transfer. The face or reverse side of each certificate representing shares shall bear a conspicuous notation of any restriction imposed by the corporation upon the transfer of such shares. 6.06. Lost, Destroyed or Stolen Certificates. Where the owner claims that certificates for shares have been lost, destroyed or wrongfully taken, a new certificate shall be issued in place thereof if the owner (a) so requests before the corporation has notice that such shares have been acquired by a bona fide purchaser; (b) files with the corporation a sufficient indemnity bond if required by the Board of Directors or any principal officer; and (c) satisfies such other reasonable requirements as may be prescribed by or under the authority of the Board of Directors. 6.07. Consideration for Shares. The Board of Directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts for services to be performed or other securities of the corporation. Before the corporation issues shares, the Board of Directors shall determine that the consideration received or to be received for the shares to be issued is adequate. The determination of the Board of Directors is conclusive insofar as the adequacy of consideration for the issuance of shares relates to whether the shares are validly issued, fully paid and nonassessable. The corporation may place in escrow shares issued in whole or in part for a contract for future services or benefits, a promissory note, or otherwise for property to be issued in the future, or make other arrangements to restrict the transfer of the shares, and may credit distributions in respect of the shares against their purchase price, until the services are performed, the benefits or property are received or the promissory note is paid. If the services are not performed, the benefits or property are not received or the promissory note is not paid, the corporation may cancel, in whole or in part, the shares escrowed or restricted and the distributions credited. 16 6.08. Stock Regulations. The Board of Directors shall have the power and authority to make all such further rules and regulations not inconsistent with law as it may deem expedient concerning the issue, transfer and registration of shares of the corporation. ARTICLE VII. SEAL 7.01. The corporation shall have no corporate seal unless otherwise determined by the Board of Directors. ARTICLE VIII. INDEMNIFICATION 8.01. Certain Definitions. All capitalized terms used in this Article VIII and not otherwise hereinafter defined in this Section 8.01 shall have the meaning set forth in Section 180.0850 of the Statute. The following capitalized terms (including any plural forms thereof) used in this Article VIII shall be defined as follows: (a) "Affiliate" shall include, without limitation, any corporation, partnership, joint venture, employee benefit plan, trust or other enterprise that directly or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the Corporation. (b) "Authority" shall mean the entity selected by the Director or Officer to determine his or her right to indemnification pursuant to Section 8.04. (c) "Board" shall mean the entire then elected and serving Board of Directors of the Corporation, including all members thereof who are Parties to the subject Proceeding or any related Proceeding. (d) "Breach of Duty" shall mean the Director or Officer breached or failed to perform his or her duties to the Corporation and his or her breach of or failure to perform those duties is determined, in accordance with Section 8.04, to constitute misconduct under Section 180.0851(2) (a) 1, 2,3 or 4 of the Statute. (e) "Corporation," as used herein and as defined in the Statute and incorporated by reference into the definitions of certain other capitalized terms used herein, shall mean this Corporation, including, without limitation, any successor corporation or entity to this Corporation by way of merger, consolidation or acquisition of all or substantially all of the capital stock or assets of this Corporation. (f) "Director or Officer" shall have the meaning set forth in the Statute; provided, that, for purposes of this Article VIII, it shall be conclusively presumed that any Director or Officer serving as a director, officer, partner, trustee, member of any governing or decision-making committee, employee or agent of an Affiliate shall be so serving at the request of the Corporation. (g) "Disinterested Quorum" shall mean a quorum of the Board who are not Parties to the subject Proceeding or any related Proceeding. 17 (h) "Party" shall have the meaning set forth in the Statute; provided, that, for purposes of this Article VIII, the term "Party" shall also include any Director or Officer or employee of the Corporation who is or was a witness in a Proceeding at a time when he or she has not otherwise been formally named a Party thereto. (i) "Proceeding" shall have the meaning set forth in the Statute; provided, that, in accordance with Section 180.0859 of the Statute and for purposes of this Article VIII, the term "Ping" shall also include all Proceedings (i) brought under (in whole or in part) the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, their respective state counterparts, and/or any rule or regulation promulgated under any of the foregoing; (ii) brought before an Authority or otherwise to enforce rights hereunder; (iii) any appeal from a Proceeding; and (iv) any Proceeding in which the Director or Officer is a plaintiff or petitioner because he or she is a Director or Officer; provided, however, that any such Proceeding under this subsection (iv) must be authorized by a majority vote of a Disinterested Quorum. (j) "Statute" shall mean Sections 180.0850 through 180.0859, inclusive, of the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin Statutes, as the same shall then be in effect, including any amendments thereto, but, in the case of any such amendment, only to the extent such amendment permits or requires the Corporation to provide broader indemnification rights than the Statute permitted or required the Corporation to provide prior to such amendment. 8.02. Mandatory Indemnification of Directors and Officers. To the fullest extent permitted or required by the Statute, the Corporation shall indemnify a Director or Officer against all Liabilities incurred by or on behalf of such Director or Officer in connection with a Proceeding in which the Director or Officer is a Party because he or she is a Director or Officer. 8.03. Procedural Requirements. (a) A Director or Officer who seeks indemnification under Section 8.02 shall make a written request therefor to the Corporation. Subject to Section 8.03(b), within sixty days of the Corporation's receipt of such request, the Corporation shall pay or reimburse the Director or Officer for the entire amount of Liabilities incurred by the Director or Officer in connection with the subject Proceeding (net of any Expenses previously advanced pursuant to Section 8.05). (b) No indemnification shall be required to be paid by the Corporation pursuant to Section 8.02 if, within such sixty-day period, a Disinterested Quorum, by a majority vote thereof, determines that the Director or Officer requesting indemnification engaged in misconduct constituting a Breach of Duty. In the event a Disinterested Quorum makes such a determination, the decision of the Disinterested Quorum shall be final, and the Director or Officer shall have no right to appeal. (c) If the Board does not obtain a final determination of a Disinterested Quorum or, if a Disinterested Quorum cannot be obtained, within such sixty-day period, an Authority, as provided in Section 8.04, shall determine whether the Director's or Officer's conduct constituted a Breach of Duty and, therefore, whether indemnification should be denied hereunder. 18 (d) 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. 8.04. Determination of Indemnification. (a) If an Authority is required to determine a Director's or Officer's right to indemnification pursuant to Section 8.03, then the Director or Officer requesting indemnification shall have the absolute discretionary authority to select one of the following as such Authority: (i) An independent legal counsel; provided, that such counsel shall be mutually selected by such Director or Officer and by a majority vote of a Disinterested Quorum or, if a Disinterested Quorum cannot be obtained, then by a majority vote of the Board; (ii) A panel of three arbitrators selected from the panels of arbitrators of the American Arbitration Association in Wisconsin; provided, that (A) one arbitrator shall be selected by such Director or Officer, the second arbitrator shall be selected by a majority vote of a Disinterested Quorum or, if a Disinterested Quorum cannot be obtained, then by a majority vote of the Board, and the third arbitrator shall be selected by the two previously selected arbitrators, and (B) in all other respects (other than this Article VIII), such panel shall be governed by the American Arbitration Association's then existing Commercial Arbitration Rules; or (iii) A court pursuant to and in accordance with Section 180.0854 of the Statute. (b) In any such determination by the selected Authority there shall exist a rebuttable presumption that the Director's or Officer's conduct did not constitute a Breach of Duty and that indemnification against the requested amount of Liabilities is required. The burden of rebutting such a presumption by clear and convincing evidence shall be on the Corporation or such other party asserting that such indemnification should not be allowed. (c) The Authority shall make its determination within sixty days of being selected and shall submit a written opinion of its conclusion simultaneously to both the Corporation and the Director or Officer. (d) If the Authority determines that indemnification is required hereunder, the Corporation shall pay the entire requested amount of Liabilities (net of any Expenses previously advanced pursuant to Section 8.05), including interest thereon at a reasonable rate, as determined by the Authority, within ten days of receipt of the Authority's opinion; provided, that, if it is determined by the Authority that a Director or Officer is entitled to indemnification against Liabilities' incurred in connection with some claims, issues or matters, but not as to other claims, issues or matters, involved in the subject Proceeding, the Corporation shall be required to pay (as set forth above) only the amount of such requested Liabilities as the Authority shall deem appropriate in light of all of the circumstances of such Proceeding. 19 (e) The determination by the Authority that indemnification is required hereunder shall be binding upon the Corporation regardless of any prior determination that the Director or Officer engaged in a Breach of Duty. (f) All Expenses incurred in the determination process under this Section 8.04 by either the Corporation or the Director or Officer, including, without limitation, all Expenses of the selected Authority, shall be paid by the Corporation. 8.05. Mandatory Allowance of Expenses. (a) The Corporation shall pay or reimburse from time to time or at any time, within ten days after the receipt of the Director's or Officer's written request therefor, the reasonable Expenses of the Director or Officer as such Expenses are incurred; provided, the following conditions are satisfied: (i) The Director or Officer furnishes to the Corporation an executed written certificate affirming his or her good faith belief that he or she has not engaged in misconduct which constitutes a Breach of Duty; and (ii) The Director or Officer furnishes to the Corporation an unsecured executed written agreement to repay any advances made under this Section 8.05 if it is ultimately determined by an Authority that he or she is not entitled to be indemnified by the Corporation for such Expenses pursuant to Section 8.04. (b) If the Director or Officer must repay any previously advanced Expenses pursuant to this Section 8.05, such Director or Officer shall not be required to pay interest on such amounts. 8.06. Indemnification and Allowance of Expenses of Certain Others. (a) The Board may, in its sole and absolute discretion a it deems appropriate, pursuant to a majority vote thereof, indemnify a director or officer of an Affiliate (who is not otherwise serving as a Director or Officer) against all Liabilities, and shall advance the reasonable Expenses, incurred by such director or officer in a Proceeding to the same extent hereunder as if such director or officer incurred such Liabilities because he or she was a Director or Officer, if such director or officer is a Party thereto because he or she is or was a director or officer of the Affiliate. (b) The Corporation shall indemnify an employee who is not a Director or Officer, to the extent he or she ha been successful on the merits or otherwise in defense of a Proceeding, for all Expenses incurred in the Proceeding if the employee was a Party because he or she was an employee of the Corporation. (c) The Board may, in its sole and absolute discretion as it deems appropriate, pursuant to a majority vote thereof, indemnify (to the extent not otherwise provided in Section 8.06(b) hereof, against Liabilities incurred by, and/or provide for the allowance of reasonable Expenses of, an employee or authorized agent of the Corporation acting within the scope of his or her duties as such and who is not otherwise a Director or Officer. 20 8.07. Insurance. The Corporation may purchase and maintain insurance on behalf of a Director or Officer or any individual who is or was an employee or authorized agent of the Corporation against any Liability asserted against or incurred by such individual in his or her capacity as such or arising from his or her status as such, regardless of whether the Corporation is required or permitted to indemnify against any such Liability under this Article VIII. 8.08. Notice to the Corporation. A Director, Officer or employee shall promptly notify the Corporation in writing when he or she has actual knowledge of a Proceeding which may result in a claim of indemnification against Liabilities or allowance of Expenses hereunder, but the failure to do so shall not relieve the Corporation of any liability to the Director, Officer or employee hereunder unless the Corporation shall have been irreparably prejudiced by such failure (as determined, in the case of Directors or Officers only, by an Authority selected pursuant to Section 8.04(a)). 8.09. Severability. If any provision of this Article VIII shall be deemed invalid or inoperative, or if a court of competent jurisdiction determines that any of the provisions of this Article VIII contravene public policy, this Article VIII shall be construed so that the remaining provisions shall not be affected, but shall remain in full force and effect, and any such provisions which are invalid or inoperative or which contravene public policy shall be deemed, without further action or deed by or on behalf of the Corporation, to be modified, amended and/or limited, but only to the extent n to render the same valid and enforceable; it being understood that it is the Corporation's intention to provide the Directors and Officers with the broadest possible protection against personal liability allowable under the Statute. 8.10. Nonexclusivity of Article VIII. The rights of a Director, Officer or employee (or any other person) granted under this Article VIII shall not be deemed exclusive of any other rights to indemnification against Liabilities or allowance of Expenses which the Director, Officer or employee (or such other person) may be entitled to under any written agreement, Board resolution, vote of shareholders of the Corporation or otherwise, including, without limitation, under the Statute. Nothing contained in this Article VIII shall be deemed to limit the Corporation's obligations to indemnify against Liabilities or allow Expenses to a Director, Officer or employee under the Statute. 8.11. Contractual Nature of Article VIII; Repeal or Limitation of Rights. This Article VIII shall be deemed to be a contract between the Corporation and each Director, Officer and employee of the Corporation and any repeal or other limitation of this Article VIII or any repeal or limitation of the Statute or any other applicable law shall not limit any rights of indemnification against Liabilities or allowance of Expenses then existing or arising out of events, acts or omissions occurring prior to such repeal or limitation, including, without limitation, the right to indemnification against Liabilities or allowance of Expenses for Proceedings commenced after such repeal or limitation to enforce this Article VIII with regard to acts, omissions or events arising prior to such repeal or limitation. 21 ARTICLE IX. CONFLICTS OF INTEREST 9.01. Conflict of Interest Policy. No director, officer or other employee of the corporation shall acquire a cranberry producing property or a controlling interest in any entity which owns or operates such a property without first offering the opportunity to purchase such property or controlling interest to the corporation. This prohibition is not applicable to such properties or interests owned by any director, officer or employee of the corporation prior to the date of incorporation of this corporation. This Section 9.01 may only be amended or deleted pursuant to a vote of the corporation's shareholders. ARTICLE X. AMENDMENTS 10.01. By Shareholders. These bylaws may be amended or repealed and new bylaws may be adopted by the shareholders at any annual or special meeting of the shareholders at which a quorum is in attendance. 10.02. By Directors. Except as otherwise provided by the Wisconsin Business Corporation Law or the articles of incorporation, these bylaws may also be amended or repealed and new bylaws may be adopted by the Board of Directors; provided, however, that the shareholders in adopting, amending or repealing 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. 22 EX-10.1 7 pdm300f.txt STOCK OPTION AGREEMENT Exhibit 10.1 Northland Cranberries, Inc. 800 First Avenue South Wisconsin Rapids, Wisconsin 54494 November 6, 2001 John Swendrowski Northland Cranberries, Inc. 800 First Avenue South Wisconsin Rapids, Wisconsin 54494 Re: Northland Cranberries, Inc. (the "Company") Grant of Nonqualified Stock Option ------------------------------------------- Dear John: The Company is pleased to advise you that its Board of Directors has granted to you a stock option (an "Option"), as provided below, under the Northland Cranberries, Inc. 2001 Stock Option Plan (the "Plan"), a copy of which is attached hereto and incorporated herein by reference. 1. Definitions. For the purposes of this Agreement, the following terms shall have the meanings set forth below: "Board" shall mean the Board of Directors of the Company. "Breach Date" shall mean the date on which you breach any of the provisions of the Severance Agreement. "Cause" means any of (i) your conviction of a felony, (ii) acts by you of moral turpitude, (iii) willful action taken by you for the purpose of harming the Company, (iv) your engaging in an act or acts of substantial dishonesty or unethical business conduct, in any case materially harming the Company, (v) your gross negligence or reckless activity in the conduct of the business of the Company (including, without limitation, a material breach by you of any Company employee manual now existing or hereinafter instituted), (vi) your failure to abide by any directive of the Board, or (vii) material abandonment of your duties with respect to the Company; provided, no termination shall be "for Cause" unless the Company has (i) notified you of your act (or failure to act) constituting Cause and provided you with 10 days to cure such act (or failure to act) to the reasonable satisfaction of the Board and (ii) provided you an opportunity, together with your counsel, to be heard before the Board upon the Company's receipt of a written request from you within 5 days after the end of the foregoing cure period, and such hearing shall take place within 5 days of the Company's receipt of such notice. Any meeting of the Board or hearing for purposes of this definition may be telephonic. Notwithstanding the foregoing, in the event you object to a termination based on any of sections (iii) through (vii) of the definition of "Cause", you and the Company shall arbitrate such dispute in Chicago, Illinois, with such arbitration to be completed within 60 days of your written request for such arbitration, and the decision of the arbitrator with respect to the issue of whether or not the definition of "Cause" was met shall be final and nonappealable. "Change of Control" shall mean the occurrence of any of the following events: (a) the acquisition, other than solely from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended), other than the Company or an employee benefit plan of the Company, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of more than 50% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Voting Securities"); or (b) a reorganization, merger, consolidation or recapitalization of the Company (a "Business Combination"), other than a Business Combination in which more than 50% of the combined voting power of the outstanding voting securities of the surviving or resulting entity immediately following the Business Combination is held by the persons who, immediately prior to the Business Combination, were the holders of the Voting Securities; or (c) a complete liquidation or dissolution of the Company, or a sale of all or substantially all of the Company's assets. "Code" shall mean the Internal Revenue Code of 1986, as amended, and any successor statute. "Committee" shall mean the Stock Option Committee, or such other committee of the Board which may be designated by the Board to administer the Plan. The Committee shall be composed of two or more directors as appointed from time to time to serve by the Board. "Common Stock" shall mean the Company's Class A Common Stock, par value $.01 per share, or, in the event that the outstanding Class A Common Stock is hereafter changed into or exchanged for different stock or securities of the Company, such other stock or securities. "Company" shall mean Northland Cranberries, Inc., a Wisconsin corporation, and (except to the extent the context requires otherwise) any subsidiary corporation of Northland Cranberries, Inc. as such term is defined in Section 425(f) of the Code. "Disability" shall mean your inability, due to illness, accident, injury, physical or mental incapacity or other disability, to carry out effectively your duties and obligations to the Company or to participate effectively and actively in the management of the Company for a period of at least 90 consecutive days or for shorter periods aggregating at least 120 days (whether or not consecutive) during any twelve-month period, as determined in the reasonable judgment of the Board. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and any successor statute. 2 "Fair Market Value" shall mean, as of any applicable date: (i) if the principal securities market on which the Common Stock is traded is a national securities exchange or The Nasdaq National Market ("NNM"), the closing price of the Common Stock on such exchange or NNM, as the case may be, or if no sale of the Common Stock shall have occurred on such date, on the next preceding date on which there was a reported sale; (ii) if the Common Stock is not traded on a national securities exchange or NNM, the closing price on such date as reported by The Nasdaq SmallCap Market, or if no sale of the Common Stock shall have occurred on such date, on the next preceding date on which there was a reported sale; (iii) if the principal securities market on which the Common Stock is traded is not a national securities exchange, NNM or The Nasdaq SmallCap Market, the average of the bid and asked prices reported by the National Quotation Bureau, Inc.; (iv) if not reported by the National Quotation Board, the closing price of a share of Common Stock on the date of grant as reported on the OTC Bulletin Board; or (v) if the price of the Common Stock is not so reported, the Fair Market Value of the Common Stock as determined in good faith by the Committee or the Board. "Option Shares" shall mean (i) all shares of Common Stock issued or issuable upon the exercise of the Option and (ii) all shares of Common Stock issued with respect to the Common Stock referred to in clause (i) above by way of stock dividend or stock split or in connection with any conversion, merger, consolidation or recapitalization or other reorganization affecting the Common Stock. Option Shares shall continue to be Option Shares in the hands of any holder other than you (except for the Company and, to the extent that you are permitted to transfer Option Shares pursuant to paragraph 15 or 17 hereof, purchasers pursuant to a public offering under the Securities Act), and each such transferee thereof shall succeed to the rights and obligations of a holder of Option Shares hereunder. "Public Sale" shall mean any sale of Option Shares to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker pursuant to the provisions of Rule 144 adopted under the Securities Act. "Repurchase Option" shall mean the occurrence of any event described in paragraph 13(a). "Securities Act" shall mean the Securities Act of 1933, as amended, and any successor statute. "Severance and Non-Competition Agreement" shall mean that certain Severance and Non-Competition Agreement, dated November 6, 2001, by and between the Company and you. "Termination Date" shall mean the date on which your employment with the Company is terminated. 2. Option. (a) Terms. Your Option is for the purchase of up to 852,394 shares of Common Stock (the "Option Shares") at a price per share of $0.08878 (the "Exercise Price"), payable upon exercise as set forth in paragraph 2(b) below. Your Option shall expire at the close of business on November 6, 2011 (the "Expiration Date"), subject to earlier expiration as 3 provided in paragraph 3(c) below or upon termination of your employment as provided in paragraph 4(b) below. Your Option is not intended to be an "incentive stock option" within the meaning of Section 422A of the Code. (b) Payment of Option Price. Subject to paragraph 3 below, your Option may be exercised in whole or in part upon payment of an amount (the "Option Price") equal to the product of (i) the Exercise Price multiplied by (ii) the number of Option Shares to be acquired. Payment shall be made in cash (including check, bank draft or money order) or, in the discretion of the Committee, by delivery of a promissory note (if in accordance with policies approved by the Board). 3. Exercisability/Vesting. Your Option may be exercised only to the extent it has become vested. Subject to acceleration under paragraph 12 below, your Option shall vest cumulatively and become exercisable with respect to 25% of your Option Shares (rounded to the nearest whole share) on each of the first anniversary of the date of this Agreement, the second anniversary of the date of this Agreement, the third anniversary of the date of this Agreement and the fourth anniversary of the date of this Agreement. Unless otherwise determined by the Committee, if your employment with the Company ceases for any reason, your Option shall be vested and fully exercisable with respect to that portion of your Option that was vested and exercisable on the date your employment with the Company ceased and any portion of your Option that was not vested and exercisable on such date shall expire and be forfeited. 4. Expiration of Option. (a) Normal Expiration. In no event shall any part of your Option be exercisable after the Expiration Date set forth in paragraph 2(a) above. (b) Early Expiration Upon Termination of Employment. Any portion of your Option that was not vested and exercisable on the date your employment with the Company terminated shall expire and be forfeited on such date, and any portion of your Option that was vested and exercisable on the date your employment with the Company terminated shall also expire and be forfeited; provided that: (i) if you die or become subject to any Disability, the portion of your Option that is vested and exercisable shall expire 180 days from the date of your death or Disability, but in no event after the Expiration Date and (ii) if you resign or are discharged other than for Cause, the portion of your Option that is vested and exercisable shall expire 45 days from the date of your discharge, but in no event after the Expiration Date. 5. Procedure for Exercise. You may exercise all or any portion of your Option, to the extent it has vested and is outstanding, at any time and from time to time prior to its expiration, by delivering written notice to the Company (to the attention of the Company's Secretary) and your written acknowledgement that you have read and have been afforded an opportunity to ask questions of management of the Company regarding all financial and other information provided to you regarding the Company, together with payment of the Option Price in accordance with the provisions of paragraph 2(b) above. As a condition to any exercise of your Option, you shall permit the Company to deliver to you all financial and other information regarding the Company it believes necessary to enable you to make an informed investment 4 decision, and you shall make all customary investment representations which the Company requires. 6. Securities Laws Restrictions and Other Restrictions on Transfer of Option Shares. You represent that when you exercise your Option you shall be purchasing Option Shares for your own account and not on behalf of others. You understand and acknowledge that federal and state securities laws govern and restrict your right to offer, sell or otherwise dispose of any Option Shares unless your offer, sale or other disposition thereof is registered under the Securities Act and state securities laws, or in the opinion of the Company's counsel, such offer, sale or other disposition is exempt from registration or qualification thereunder. You agree that you shall not offer, sell or otherwise dispose of any Option Shares in any manner which would: (i) require the Company to file any registration statement with the Securities and Exchange Commission (or any similar filing under state law) or to amend or supplement any such filing or (ii) violate or cause the Company to violate the Securities Act, the rules and regulations promulgated thereunder or any other state or federal law. You further understand that the certificates for any Option Shares you purchase shall bear such legends as the Company deems necessary or desirable in connection with the Securities Act or other rules, regulations or laws. 7. Non-Transferability of Option. Your Option is personal to you and is not transferable by you other than by will or the laws of descent and distribution. During your lifetime only you (or your guardian or legal representative) may exercise your Option. In the event of your death, your Option may be exercised only (i) by the executor or administrator of your estate or the person or persons to whom your rights under the Option shall pass by will or the laws of descent and distribution and (ii) to the extent that you were entitled hereunder at the date of your death. 8. Conformity with Plan. Your Option is intended to conform in all respects with, and is subject to all applicable provisions of, the Plan (which is incorporated herein by reference). Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan. By executing and returning the enclosed copy of this Agreement, you acknowledge your receipt of this Agreement and the Plan and agree to be bound by all of the terms of this Agreement and the Plan. 9. Rights of Participants. Nothing in this Agreement shall interfere with or limit in any way the right of the Company to terminate your employment at any time (with or without Cause), nor confer upon you any right to continue in the employ of the Company for any period of time or to continue your present (or any other) rate of compensation, and in the event of your termination of employment (including, but not limited to, termination by the Company without Cause) any portion of your Option that was not previously vested and exercisable shall be forfeited. Nothing in this Agreement shall confer upon you any right to be selected again as a Plan participant, and nothing in the Plan or this Agreement shall provide for any adjustment to the number of Option Shares subject to your Option upon the occurrence of subsequent events except as provided in paragraph 11 below. 10. Withholding of Taxes. The Company shall be entitled, if necessary or desirable, to withhold from you from any amounts due and payable by the Company to you (or secure payment from you in lieu of withholding) the amount of any withholding or other tax due 5 from the Company with respect to any Option Shares issuable under this Plan, and the Company may defer such issuance unless indemnified by you to its satisfaction. 11. Adjustments. In the event of a reorganization, recapitalization, stock dividend or stock split, or combination or other change in the shares of Common Stock, the Board or the Committee may, in order to prevent the dilution or enlargement of rights under your Option, make such adjustments in the number and type of shares authorized by the Plan, the number and type of shares covered by your Option and the Exercise Price specified herein as may be determined to be appropriate and equitable. 12. Consequences of Change of Control. Immediately prior to a Change of Control, your Option shall become exercisable with respect to all of your Option Shares which have been granted pursuant to the Plan upon the effective date of the Change of Control; provided, that any exercise of your Option shall be contingent upon the actual consummation of the Change of Control. 13. Right to Purchase Option Shares. (a) Repurchase of Option Shares. (1) If the Company is not a reporting company under the Exchange Act and your employment with the Company shall terminate, including upon your death, Disability, resignation or termination with or without Cause, then the Company shall have the option to repurchase all or any part of the Option Shares issued or issuable upon exercise of your Option, whether held by you or by one or more of your transferees, at the price determined in accordance with the provisions of paragraph 14 hereof. (2) If you breach any of the provisions of the Severance and Non-Competition Agreement, then the Company shall have the option to repurchase all or any part of the Option Shares issued or issuable upon exercise of your Option, whether held by you or by one or more of your transferees, at the price determined in accordance with the provisions of paragraph 14 hereof. (b) Repurchase Procedure. The Company may elect to purchase all or any portion of the Option Shares pursuant to its Repurchase Option by delivery of written notice (the "Repurchase Notice") to you or any other holders of the Option Shares within 120 days after the Termination Date or the Breach Date, as the case may be. The Repurchase Notice shall set forth the number of Option Shares to be acquired from you and such other holder(s), the aggregate consideration to be paid for such shares and the time and place for the closing of the transaction. The number of Option Shares to be repurchased by the Company shall first be satisfied to the extent possible from the Option Shares held by you at the time of delivery of the Repurchase Notice. If the number of Option Shares then held by you is less than the total number of Option Shares the Company has elected to purchase, then the Company shall purchase the remaining shares elected to be purchased from the other holders thereof, pro rata according to the number of shares held by each such holder at the time of delivery of such Repurchase Notice (determined as close as practical to the nearest whole shares). 6 (c) Closing of Repurchase of Option Shares. The purchase of Option Shares pursuant to this paragraph 13 shall be closed at the Company's executive offices within 20 days after the expiration of the 120-day period referred to in paragraph 13(b). At the closing, the purchaser or purchasers shall pay the purchase price in the manner specified in paragraph 14(b) and you and any other holders of Option Shares being purchased shall deliver the certificate or certificates representing such shares to the purchaser or purchasers or their nominees, accompanied by duly executed stock powers. Any purchaser of Option Shares under this paragraph 13 shall be entitled to receive customary representations and warranties from you and any other selling holders of Option Shares regarding the sale of such shares (including representations and warranties regarding good title to such shares, free and clear of any liens or encumbrances) and to require all sellers' signatures to be guaranteed by a national bank or reputable securities broker. 14. Purchase Price for Option Shares. (a) Purchase Price. If you were terminated without Cause, the purchase price per share to be paid for the Option Shares purchased by the Company pursuant to paragraph 13 shall be equal to the Fair Market Value of such Option Shares as of the Termination Date or the Breach Date, as the case may be; otherwise, the purchase price per share to be paid for the Option Shares purchased by the Company pursuant to paragraph 13 shall be their Exercise Price. (b) Manner of Payment. If the Company elects to purchase all or any part of the Option Shares, including Option Shares held by one or more transferees, the Company shall pay for such shares: (i) first, by certified check or wire transfer of funds to the extent such payment would not cause the Company to violate the Wisconsin Business Corporation Law and would not cause the Company to breach any agreement to which it is a party relating to the indebtedness for borrowed money or other material agreement; and (ii) thereafter, with a subordinated promissory note of the Company. Such subordinated promissory note shall bear interest at the rate of 8% per annum (which shall be payable annually in cash unless otherwise prohibited), shall have all principal payment due on the fifth anniversary of the date of issuance and shall be subordinated on terms and conditions satisfactory to the holders of the Company's indebtedness for borrowed money. In addition, the Company may pay the purchase price for such shares by offsetting amounts outstanding under any indebtedness or obligations owed by you to the Company. 15. Restrictions on Transfer. (a) Transfer of Option Shares. You shall not sell, pledge or otherwise transfer any interest in any Option Shares except pursuant to a Public Sale or the provisions of paragraph 13 or 17 hereof ("Exempt Transfers") and except pursuant to the provisions of this paragraph 15. At least 30 days prior to making any transfer other than an Exempt Transfer, you shall deliver a written notice (the "Sale Notice") to the Company. The Sale Notice shall disclose in reasonable detail the identity of the prospective transferee(s) and the terms and conditions of the proposed transfer. You agree not to consummate any such transfer until 30 days after the Sale Notice has been delivered to the Company, unless the parties to the transfer have been finally determined pursuant to this paragraph 15 prior to the expiration of such 30-day period. (The date of the first to occur of such events is referred to herein as the "Authorization Date"). 7 (b) First Refusal Rights. The Company may elect pursuant to this paragraph 15 to purchase all (but not less than all) of the Option Shares to be transferred by you upon the same terms and conditions as those set forth in the Sale Notice by delivering a written notice of such election to you within 20 days after the receipt of the Sale Notice by the Company. The Company shall be given up to 30 days (after delivery of such written notice) to consummate the purchase and sale of Option Shares. If the Company has not elected to purchase all of the Option Shares specified in the Sale Notice, you may transfer the Option Shares specified in the Sale Notice at a price and on terms no more favorable to the transferee(s) thereof than specified in the Sale Notice during the 60-day period immediately following the Authorization Date. Any Option Shares not transferred within such 60-day period shall be subject to the provisions of this paragraph 15(b) upon subsequent transfer. (c) Certain Permitted Transfers. The restrictions contained in this paragraph 15 shall not apply with respect to transfers of Option Shares (i) pursuant to applicable laws of descent and distribution or (ii) among your family group; provided that the restrictions contained in this paragraph shall continue to be applicable to the Option Shares after any such transfer and the transferees of such Option Shares have agreed in writing to be bound by the provisions of this Agreement. Your "family group" means your spouse and descendants. (d) Termination of Restrictions. The restrictions on the transfer of Option Shares set forth in this paragraph 15 shall continue with respect to each Option Share until the date on which such Option Share has been transferred in a transaction permitted by this paragraph (except in a transaction contemplated by paragraph 15(c)). 16. Additional Restrictions on Transfer. (a) Restrictive Legend. The certificates representing the Option Shares shall bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON ________, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN OPTION AGREEMENT BETWEEN THE COMPANY AND JOHN SWENDROWSKI DATED AS OF NOVEMBER 6, 2001, A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." (b) Opinion of Counsel. You may not sell, transfer or dispose of any Option Shares (except pursuant to an effective registration statement under the Securities Act) without first delivering to the Company an opinion of counsel reasonably acceptable in form and 8 substance to the Company that registration under the Securities Act or any applicable state securities law is not required in connection with such transfer. (c) Holdback. You agree not to effect any public sale or distribution of any equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and the 180 days after the effectiveness of any underwritten Demand Registration or any underwritten Piggyback Registration (as such terms are defined in the Registration Agreement), except as part of such underwritten registration if otherwise permitted. 17. Sale of the Company. (a) Consent to Sale of Company. If the Board approves a sale of the Company which constitutes a Change of Control to an independent third party (whether by merger, consolidation, sale of all or substantially all of its assets or sale of all of the outstanding Common Stock) (the "Approved Sale"), you shall consent to and raise no objections against the Approved Sale, and if the Approved Sale is structured as a sale of stock, you shall agree to sell all of your Option Shares and rights to acquire Option Shares on the terms and conditions approved by the Board and the holders of a majority of the Common Stock then outstanding. You shall take all necessary and desirable actions in connection with the consummation of the Approved Sale. For purposes of this paragraph 17, an "independent third party" is any person who does not own in excess of 5% of the Company's Common Stock on a fully-diluted basis, who is not controlling, controlled by or under common control with any such 5% owner of the Company's Common Stock and who is not the spouse, ancestor or descendant (by birth or adoption) of any such 5% owner of the Company's Common Stock. (b) Purchaser Representative. If the Company or the holders of the Company's securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities Exchange Commission may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), you shall, at the request of the Company, appoint a purchaser representative (as such term is defined in Rule 501) reasonably acceptable to the Company. If you appoint the purchaser representative designated by the Company, the Company shall pay the fees of such purchaser representative, but if you decline to appoint the purchaser representative designated by the Company you shall appoint another purchaser representative (reasonably acceptable to the Company), and you shall be responsible for the fees of the purchaser representative so appointed. 18. Remedies. The parties hereto shall be entitled to enforce their rights under this Agreement specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto acknowledge and agree that money damages would not be an adequate remedy for any breach of the provisions of this Agreement and that any party hereto may, in its sole discretion, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief (without posting bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement. 9 19. Amendment. Except as otherwise provided herein, any provision of this Agreement may be amended or waived only with the prior written consent of you and the Company. 20. Successors and Assigns. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and permitted assigns of the parties hereto whether so expressed or not. 21. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 22. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same Agreement. 23. Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 24. Governing Law. The corporate law of Wisconsin shall govern all questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement shall be governed by the internal law, and not the law of conflicts, of Wisconsin. 25. Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally or mailed by certified or registered mail, return receipt requested and postage prepaid, to the recipient. Such notices, demands and other communications shall be sent to you and to the Company at the addresses indicated below: (a) If to the Optionee: John Swendrowski 800 First Avenue South Wisconsin Rapids, Wisconsin 54494 (b) If to the Company: Northland Cranberries, Inc. 800 First Avenue South P.O. Box 8020 Wisconsin Rapids, WI 54495 Attention: Chief Executive Officer Telecopy No.: (715) 422-6897 10 with a copy to: Sun Northland, LLC c/o Sun Capital Advisors II, L. P. 5200 Town Center Circle, Suite 470 Boca Raton, Florida 33486 Attention: Marc J. Leder Rodger R. Krouse C. Deryl Couch, Esq. Telecopy No.: (561) 394-0540 or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. 26. Submission to Jurisdiction. You hereby agree to submit to the jurisdiction of any state or federal court sitting in Milwaukee, Wisconsin, in any action or proceeding arising out of or relating to this Agreement and agree that all claims in respect of the action or proceeding may be heard and determined in any such court. You also agree not to bring any action or proceeding arising out of or relating to this Agreement in any other court. You hereby waive any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other party with respect thereto. The Company may make service on you by sending or delivering a copy of the process to you to be served at your address listed above. Nothing in this paragraph, however, shall affect the right of any party to bring any action or proceeding arising out of or relating to this Agreement in any other court or to serve legal process in any other manner permitted by law or at equity. You agree that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law or at equity. 27. Entire Agreement. This Agreement constitutes the entire understanding between you and the Company, and supersedes all other agreements, whether written or oral, with respect to the acquisition by you of Common Stock of the Company. * * * * 11 Please execute the extra copy of this Agreement in the space below and return it to the Company's Secretary at its executive offices to confirm your understanding and acceptance of the agreements contained in this Agreement. Very truly yours, NORTHLAND CRANBERRIES, INC. By -------------------------------------- Name Ricke A. Kress Title President Enclosures: 1. Extra copy of this Agreement 2. Copy of the Plan The undersigned hereby acknowledges having read this Agreement and the Plan and hereby agrees to be bound by all provisions set forth herein and in the Plan. Dated as of November 6, 2001 OPTIONEE -------------------------------------- Name John Swendrowski 12 EX-10.2 8 pdm300g.txt FORM OF STOCK OPTION AGREEMENT Exhibit 10.2 Northland Cranberries, Inc. 800 First Avenue South P.O. Box 8020 Wisconsin Rapids, Wisconsin 54495 November 6, 2001 [Name] Northland Cranberries, Inc. 800 First Avenue South P.O. Box 8020 Wisconsin Rapids, Wisconsin 54495 Re: Northland Cranberries, Inc. (the "Company") Grant of Nonqualified Stock Option ---------------------------------- Dear [Name]: The Company is pleased to advise you that its Board of Directors has granted to you a stock option (an "Option"), as provided below, under the Northland Cranberries, Inc. 2001 Stock Option Plan (the "Plan"), a copy of which is attached hereto and incorporated herein by reference. 1. Definitions. For the purposes of this Agreement, the following terms shall have the meanings set forth below: "Board" shall mean the Board of Directors of the Company. "Breach Date" shall mean the date on which you breach any of the provisions in paragraphs 18 and 19. "Cause" means any of (i) your conviction of a felony, (ii) acts by you of moral turpitude, (iii) willful action taken by you for the purpose of harming the Company, (iv) your engaging in an act or acts of substantial dishonesty or unethical business conduct, in any case materially harming the Company, (v) your gross negligence or reckless activity in the conduct of the business of the Company (including, without limitation, a material breach by you of any Company employee manual now existing or hereinafter instituted), (vi) your failure to abide by any directive of the Board, or (vii) material abandonment of your duties with respect to the Company; provided, no termination shall be "for Cause" unless the Company has (i) notified you of your act (or failure to act) constituting Cause and provided you with 10 days to cure such act (or failure to act) to the reasonable satisfaction of the Board and (ii) provided, if you submit a written request to the Board for the opportunity to be heard within 5 days of your termination, you have an opportunity, together with your counsel, to be heard before the 13 Board within 10 days of your written request. Any meeting of the Board or hearing before the Board may be telephonic. "Change of Control" shall mean the occurrence of any of the following events: (a) the acquisition, other than solely from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended), other than the Company or an employee benefit plan of the Company, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of more than 50% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Voting Securities"); or (b) a reorganization, merger, consolidation or recapitalization of the Company (a "Business Combination"), other than a Business Combination in which more than 50% of the combined voting power of the outstanding voting securities of the surviving or resulting entity immediately following the Business Combination is held by the persons who, immediately prior to the Business Combination, were the holders of the Voting Securities; or (c) a complete liquidation or dissolution of the Company, or a sale of all or substantially all of the Company's assets. "Code" shall mean the Internal Revenue Code of 1986, as amended, and any successor statute. "Committee" shall mean the Stock Option Committee, or such other committee of the Board which may be designated by the Board to administer the Plan. The Committee shall be composed of two or more directors as appointed from time to time to serve by the Board. "Common Stock" shall mean the Company's Class A Common Stock, par value $.01 per share, or, in the event that the outstanding Class A Common Stock is hereafter changed into or exchanged for different stock or securities of the Company, such other stock or securities. "Company" shall mean Northland Cranberries, Inc., a Wisconsin corporation, and (except to the extent the context requires otherwise) any subsidiary corporation of Northland Cranberries, Inc. as such term is defined in Section 425(f) of the Code. "Disability" shall mean your inability, due to illness, accident, injury, physical or mental incapacity or other disability, to carry out effectively your duties and obligations to the Company or to participate effectively and actively in the management of the Company for a period of at least 90 consecutive days or for shorter periods 2 aggregating at least 120 days (whether or not consecutive) during any twelve-month period, as determined in the reasonable judgment of the Board. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and any successor statute. "Fair Market Value" shall mean, as of any applicable date: (i) if the principal securities market on which the Common Stock is traded is a national securities exchange or The Nasdaq National Market ("NNM"), the closing price of the Common Stock on such exchange or NNM, as the case may be, or if no sale of the Common Stock shall have occurred on such date, on the next preceding date on which there was a reported sale; (ii) if the Common Stock is not traded on a national securities exchange or NNM, the closing price on such date as reported by The Nasdaq SmallCap Market, or if no sale of the Common Stock shall have occurred on such date, on the next preceding date on which there was a reported sale; (iii) if the principal securities market on which the Common Stock is traded is not a national securities exchange, NNM or The Nasdaq SmallCap Market, the average of the bid and asked prices reported by the National Quotation Bureau, Inc.; (iv) if not reported by the National Quotation Board, the closing price of a share of Common Stock on the date of grant as reported on the OTC Bulletin Board; or (v) if the price of the Common Stock is not so reported, the Fair Market Value of the Common Stock as determined in good faith by the Committee or the Board. "Option Shares" shall mean (i) all shares of Common Stock issued or issuable upon the exercise of the Option and (ii) all shares of Common Stock issued with respect to the Common Stock referred to in clause (i) above by way of stock dividend or stock split or in connection with any conversion, merger, consolidation or recapitalization or other reorganization affecting the Common Stock. Option Shares shall continue to be Option Shares in the hands of any holder other than you (except for the Company and, to the extent that you are permitted to transfer Option Shares pursuant to paragraph 15 or 17 hereof, purchasers pursuant to a public offering under the Securities Act), and each such transferee thereof shall succeed to the rights and obligations of a holder of Option Shares hereunder. "Public Sale" shall mean any sale of Option Shares to the public pursuant to an offering registered under the Securities Act or to the public through a broker, dealer or market maker pursuant to the provisions of Rule 144 adopted under the Securities Act. "Repurchase Option" shall mean the occurrence of any event described in paragraph 13(a). "Securities Act" shall mean the Securities Act of 1933, as amended, and any successor statute. "Termination Date" shall mean the date on which your employment with the Company is terminated. "Trade Secret" shall means information, including without limitation a formula, pattern, compilation, program, device, method, technique or process that: (1) 3 derives independent economic value, actual or potential, from not being generally known to, and not being easily ascertainable by proper means, by other persons who can obtain economic value from its disclosure or use, and (2) is the subject of efforts that are reasonable under circumstances to maintain its secrecy. 2. Option. (a) Terms. Your Option is for the purchase of up to _________ shares of Common Stock (the "Option Shares") at a price per share of $0.08878 (the "Exercise Price"), payable upon exercise as set forth in paragraph 2(b) below. Your Option shall expire at the close of business on November 6, 2011 (the "Expiration Date"), subject to earlier expiration as provided in paragraph 3(c) below or upon termination of your employment as provided in paragraph 4(b) below. Your Option is not intended to be an "incentive stock option" within the meaning of Section 422A of the Code. (b) Payment of Option Price. Subject to paragraph 3 below, your Option may be exercised in whole or in part upon payment of an amount (the "Option Price") equal to the product of (i) the Exercise Price multiplied by (ii) the number of Option Shares to be acquired. Payment shall be made in cash (including check, bank draft or money order) or, in the discretion of the Committee, by delivery of a promissory note (if in accordance with policies approved by the Board). 3. Exercisability/Vesting. Your Option may be exercised only to the extent it has become vested. Subject to acceleration under paragraph 12 below, your Option shall vest cumulatively and become exercisable with respect to 25% of your Option Shares (rounded to the nearest whole share) on each of the first anniversary of the date of this Agreement, the second anniversary of the date of this Agreement, the third anniversary of the date of this Agreement and the fourth anniversary of the date of this Agreement. Unless otherwise determined by the Committee, if your employment with the Company ceases for any reason, your Option shall be vested and fully exercisable with respect to that portion of your Option that was vested and exercisable on the date your employment with the Company ceased and any portion of your Option that was not vested and exercisable on such date shall expire and be forfeited. 4. Expiration of Option. (a) Normal Expiration. In no event shall any part of your Option be exercisable after the Expiration Date set forth in paragraph 2(a) above. (b) Early Expiration Upon Termination of Employment. Any portion of your Option that was not vested and exercisable on the date your employment with the Company terminated shall expire and be forfeited on such date, and any portion of your Option that was vested and exercisable on the date your employment with the Company terminated shall also expire and be forfeited; provided that: (i) if you die or become subject to any Disability, the portion of your Option that is vested and exercisable shall expire 180 days from the date of your death or Disability, but in no event after the Expiration Date and (ii) if you resign or are discharged other than for Cause, the portion 4 of your Option that is vested and exercisable shall expire 45 days from the date of your discharge, but in no event after the Expiration Date. 5. Procedure for Exercise. You may exercise all or any portion of your Option, to the extent it has vested and is outstanding, at any time and from time to time prior to its expiration, by delivering written notice to the Company (to the attention of the Company's Secretary) and your written acknowledgement that you have read and have been afforded an opportunity to ask questions of management of the Company regarding all financial and other information provided to you regarding the Company, together with payment of the Option Price in accordance with the provisions of paragraph 2(b) above. As a condition to any exercise of your Option, you shall permit the Company to deliver to you all financial and other information regarding the Company it believes necessary to enable you to make an informed investment decision, and you shall make all customary investment representations which the Company requires. 6. Securities Laws Restrictions and Other Restrictions on Transfer of Option Shares. You represent that when you exercise your Option you shall be purchasing Option Shares for your own account and not on behalf of others. You understand and acknowledge that federal and state securities laws govern and restrict your right to offer, sell or otherwise dispose of any Option Shares unless your offer, sale or other disposition thereof is registered under the Securities Act and state securities laws, or in the opinion of the Company's counsel, such offer, sale or other disposition is exempt from registration or qualification thereunder. You agree that you shall not offer, sell or otherwise dispose of any Option Shares in any manner which would: (i) require the Company to file any registration statement with the Securities and Exchange Commission (or any similar filing under state law) or to amend or supplement any such filing or (ii) violate or cause the Company to violate the Securities Act, the rules and regulations promulgated thereunder or any other state or federal law. You further understand that the certificates for any Option Shares you purchase shall bear such legends as the Company deems necessary or desirable in connection with the Securities Act or other rules, regulations or laws. 7. Non-Transferability of Option. Your Option is personal to you and is not transferable by you other than by will or the laws of descent and distribution. During your lifetime only you (or your guardian or legal representative) may exercise your Option. In the event of your death, your Option may be exercised only (i) by the executor or administrator of your estate or the person or persons to whom your rights under the Option shall pass by will or the laws of descent and distribution and (ii) to the extent that you were entitled hereunder at the date of your death. 8. Conformity with Plan. Your Option is intended to conform in all respects with, and is subject to all applicable provisions of, the Plan (which is incorporated herein by reference). Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan. By executing and returning the enclosed copy of this Agreement, you acknowledge your receipt of this Agreement and the Plan and agree to be bound by all of the terms of this Agreement and the Plan. 5 9. Rights of Participants. Nothing in this Agreement shall interfere with or limit in any way the right of the Company to terminate your employment at any time (with or without Cause), nor confer upon you any right to continue in the employ of the Company for any period of time or to continue your present (or any other) rate of compensation, and in the event of your termination of employment (including, but not limited to, termination by the Company without Cause) any portion of your Option that was not previously vested and exercisable shall be forfeited. Nothing in this Agreement shall confer upon you any right to be selected again as a Plan participant, and nothing in the Plan or this Agreement shall provide for any adjustment to the number of Option Shares subject to your Option upon the occurrence of subsequent events except as provided in paragraph 11 below. 10. Withholding of Taxes. The Company shall be entitled, if necessary or desirable, to withhold from you from any amounts due and payable by the Company to you (or secure payment from you in lieu of withholding) the amount of any withholding or other tax due from the Company with respect to any Option Shares issuable under this Plan, and the Company may defer such issuance unless indemnified by you to its satisfaction. 11. Adjustments. In the event of a reorganization, recapitalization, stock dividend or stock split, or combination or other change in the shares of Common Stock, the Board or the Committee may, in order to prevent the dilution or enlargement of rights under your Option, make such adjustments in the number and type of shares authorized by the Plan, the number and type of shares covered by your Option and the Exercise Price specified herein as may be determined to be appropriate and equitable. 12. Consequences of Change of Control. Immediately prior to a Change of Control, your Option shall become exercisable with respect to all of your Option Shares which have been granted pursuant to the Plan upon the effective date of the Change of Control; provided, that any exercise of your Option shall be contingent upon the actual consummation of the Change of Control. 13. Right to Purchase Option Shares. (a) Repurchase of Option Shares. (1) If the Company is not a reporting company under the Exchange Act and your employment with the Company shall terminate, including upon your death, Disability, resignation or termination with or without Cause, then the Company shall have the option to repurchase all or any part of the Option Shares issued or issuable upon exercise of your Option, whether held by you or by one or more of your transferees, at the price determined in accordance with the provisions of paragraph 14 hereof. (2) If you breach any of the provisions of paragraphs 18 and 19, then the Company shall have the option to repurchase all or any part of the Option Shares issued or issuable upon exercise of your Option, whether held by you or by 6 one or more of your transferees, at the price determined in accordance with the provisions of paragraph 14 hereof. (b) Repurchase Procedure. The Company may elect to purchase all or any portion of the Option Shares pursuant to its Repurchase Option by delivery of written notice (the "Repurchase Notice") to you or any other holders of the Option Shares within 120 days after the Termination Date or the Breach Date, as the case may be. The Repurchase Notice shall set forth the number of Option Shares to be acquired from you and such other holder(s), the aggregate consideration to be paid for such shares and the time and place for the closing of the transaction. The number of Option Shares to be repurchased by the Company shall first be satisfied to the extent possible from the Option Shares held by you at the time of delivery of the Repurchase Notice. If the number of Option Shares then held by you is less than the total number of Option Shares the Company has elected to purchase, then the Company shall purchase the remaining shares elected to be purchased from the other holders thereof, pro rata according to the number of shares held by each such holder at the time of delivery of such Repurchase Notice (determined as close as practical to the nearest whole shares). (c) Closing of Repurchase of Option Shares. The purchase of Option Shares pursuant to this paragraph 13 shall be closed at the Company's executive offices within 20 days after the expiration of the 120-day period referred to in paragraph 13(b). At the closing, the purchaser or purchasers shall pay the purchase price in the manner specified in paragraph 14(b) and you and any other holders of Option Shares being purchased shall deliver the certificate or certificates representing such shares to the purchaser or purchasers or their nominees, accompanied by duly executed stock powers. Any purchaser of Option Shares under this paragraph 13 shall be entitled to receive customary representations and warranties from you and any other selling holders of Option Shares regarding the sale of such shares (including representations and warranties regarding good title to such shares, free and clear of any liens or encumbrances) and to require all sellers' signatures to be guaranteed by a national bank or reputable securities broker. 14. Purchase Price for Option Shares. (a) Purchase Price. If you were terminated without Cause, the purchase price per share to be paid for the Option Shares purchased by the Company pursuant to paragraph 13 shall be equal to the Fair Market Value of such Option Shares as of the Termination Date or the Breach Date, as the case may be; otherwise, the purchase price per share to be paid for the Option Shares purchased by the Company pursuant to paragraph 13 shall be their Exercise Price. (b) Manner of Payment. If the Company elects to purchase all or any part of the Option Shares, including Option Shares held by one or more transferees, the Company shall pay for such shares: (i) first, by certified check or wire transfer of funds to the extent such payment would not cause the Company to violate the Wisconsin Business Corporation Law and would not cause the Company to breach any agreement to which it is a party relating to the indebtedness for borrowed money or other 7 material agreement; and (ii) thereafter, with a subordinated promissory note of the Company. Such subordinated promissory note shall bear interest at the rate of 8% per annum (which shall be payable annually in cash unless otherwise prohibited), shall have all principal payment due on the fifth anniversary of the date of issuance and shall be subordinated on terms and conditions satisfactory to the holders of the Company's indebtedness for borrowed money. In addition, the Company may pay the purchase price for such shares by offsetting amounts outstanding under any indebtedness or obligations owed by you to the Company. 15. Restrictions on Transfer. (a) Transfer of Option Shares. You shall not sell, pledge or otherwise transfer any interest in any Option Shares except pursuant to a Public Sale or the provisions of paragraph 13 or 17 hereof ("Exempt Transfers") and except pursuant to the provisions of this paragraph 15. At least 30 days prior to making any transfer other than an Exempt Transfer, you shall deliver a written notice (the "Sale Notice") to the Company. The Sale Notice shall disclose in reasonable detail the identity of the prospective transferee(s) and the terms and conditions of the proposed transfer. You agree not to consummate any such transfer until 30 days after the Sale Notice has been delivered to the Company, unless the parties to the transfer have been finally determined pursuant to this paragraph 15 prior to the expiration of such 30-day period. (The date of the first to occur of such events is referred to herein as the "Authorization Date"). (b) First Refusal Rights. The Company may elect pursuant to this paragraph 15 to purchase all (but not less than all) of the Option Shares to be transferred by you upon the same terms and conditions as those set forth in the Sale Notice by delivering a written notice of such election to you within 20 days after the receipt of the Sale Notice by the Company. The Company shall be given up to 30 days (after delivery of such written notice) to consummate the purchase and sale of Option Shares. If the Company has not elected to purchase all of the Option Shares specified in the Sale Notice, you may transfer the Option Shares specified in the Sale Notice at a price and on terms no more favorable to the transferee(s) thereof than specified in the Sale Notice during the 60-day period immediately following the Authorization Date. Any Option Shares not transferred within such 60-day period shall be subject to the provisions of this paragraph 15(b) upon subsequent transfer. (c) Certain Permitted Transfers. The restrictions contained in this paragraph 15 shall not apply with respect to transfers of Option Shares (i) pursuant to applicable laws of descent and distribution or (ii) among your family group; provided that the restrictions contained in this paragraph shall continue to be applicable to the Option Shares after any such transfer and the transferees of such Option Shares have agreed in writing to be bound by the provisions of this Agreement. Your "family group" means your spouse and descendants. (d) Termination of Restrictions. The restrictions on the transfer of Option Shares set forth in this paragraph 15 shall continue with respect to each Option Share until the date on which such Option Share has been transferred in a 8 transaction permitted by this paragraph (except in a transaction contemplated by paragraph 15(c)). 16. Additional Restrictions on Transfer. (a) Restrictive Legend. The certificates representing the Option Shares shall bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED ON ________, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN OPTION AGREEMENT BETWEEN THE COMPANY AND _________________ DATED AS OF NOVEMBER 6, 2001, A COPY OF WHICH MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." (b) Opinion of Counsel. You may not sell, transfer or dispose of any Option Shares (except pursuant to an effective registration statement under the Securities Act) without first delivering to the Company an opinion of counsel reasonably acceptable in form and substance to the Company that registration under the Securities Act or any applicable state securities law is not required in connection with such transfer. (c) Holdback. You agree not to effect any public sale or distribution of any equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and the 180 days after the effectiveness of any underwritten Demand Registration or any underwritten Piggyback Registration (as such terms are defined in the Registration Agreement), except as part of such underwritten registration if otherwise permitted. 17. Sale of the Company. (a) Consent to Sale of Company. If the Board approves a sale of the Company which constitutes a Change of Control to an independent third party (whether by merger, consolidation, sale of all or substantially all of its assets or sale of all of the outstanding Common Stock) (the "Approved Sale"), you shall consent to and raise no objections against the Approved Sale, and if the Approved Sale is structured as a sale of stock, you shall agree to sell all of your Option Shares and rights to acquire Option Shares on the terms and conditions approved by the Board and the holders of a majority 9 of the Common Stock then outstanding. You shall take all necessary and desirable actions in connection with the consummation of the Approved Sale. For purposes of this paragraph 17, an "independent third party" is any person who does not own in excess of 5% of the Company's Common Stock on a fully-diluted basis, who is not controlling, controlled by or under common control with any such 5% owner of the Company's Common Stock and who is not the spouse, ancestor or descendant (by birth or adoption) of any such 5% owner of the Company's Common Stock. (b) Purchaser Representative. If the Company or the holders of the Company's securities enter into any negotiation or transaction for which Rule 506 (or any similar rule then in effect) promulgated by the Securities Exchange Commission may be available with respect to such negotiation or transaction (including a merger, consolidation or other reorganization), you shall, at the request of the Company, appoint a purchaser representative (as such term is defined in Rule 501) reasonably acceptable to the Company. If you appoint the purchaser representative designated by the Company, the Company shall pay the fees of such purchaser representative, but if you decline to appoint the purchaser representative designated by the Company you shall appoint another purchaser representative (reasonably acceptable to the Company), and you shall be responsible for the fees of the purchaser representative so appointed. 18. Nonsolicitation Agreement (a) Nonsolicitation of Employees. You agree that during your employment with the Company and for the period beginning on the date you cease to be employed by the Company for any reason and ending on the 18 (eighteen) month anniversary of such date, you shall not induce or attempt to induce any employee of the Company or any of its Subsidiaries to leave their employ or in any way interfere with the relationship between the Company or any of its Subsidiaries and any of their employees. (b) Nonsolicitation of Former Employees. You agree that during your employment with the Company and for the period beginning on the date you cease to be employed by the Company for any reason and ending on the 18 (eighteen) month anniversary of such date, you shall not, directly or indirectly, hire any person who was an employee of the Company or any Subsidiary at any time during your employment with the Company. (c) Nonsolicitation of Customers. You agree that during your employment with the Company and for the period beginning on the date you cease to be employed by the Company for any reason and ending on the 18 (eighteen) month anniversary of such date, you shall not induce or attempt to induce any customer of the Company from ceasing to do business with the Company or decreasing the amount of business such customer does with the Company including, without limitation, customers such as supermarkets, convenience stores, and other markets which sell the Company's products. (d) Nonsolicitation of Company Relationships. You agree that during your employment with the Company and for the period beginning on the date you 10 cease to be employed by the Company for any reason and ending on the 18 (eighteen) month anniversary of such date, you shall not induce or attempt to induce any supplier, vendor, licensee, licensor, franchisee or other business relation of the Company or any of its Subsidiaries to cease doing business with them or in any way interfere with the relationship between the Company or any of its Subsidiaries and any such person or business relation (including, without limitation, making any negative statements or communications about the Company or its Subsidiaries). (e) Other Restrictions. You agree that for the period beginning on the date you cease to be employed by the Company for any reason and ending on the 18 (eighteen) month anniversary of such date, you shall not directly or indirectly, engage in, or serve as a principal, partner, joint venturer, member, creditor, manager, trustee, agent, stockholder, director, officer, employee or consultant of, or advisor to, or in any other capacity, or in any manner, own, control, finance, manage, operate, or otherwise participate, invest, or have any interest in, or be connected with (i) Ocean Spray Cranberries, Inc., Apple & Eve, Inc. or Langers Juice Company, Inc. or any of their respective successors or assigns or (ii) any corporation, partnership, limited liability company or any other business entity, or any division of any of the foregoing, which: (x) is primarily engaged in the production, manufacture, sale, marketing and/or distribution of cranberry juice, cranberry concentrate and/or cranberries and (y) generates annual revenues in excess of $40 million from the production, manufacture, sale, marketing and/or distribution of cranberry juice, cranberry concentrate and/or cranberries. Notwithstanding the foregoing, the passive ownership by you, of not more than one percent (1%) of the shares of capital stock of any corporation having a class of equity securities actively traded on a national securities exchange or in the over-the-counter market shall not be deemed, in and of itself, to violate the prohibitions of this paragraph. (f) Right to Relief. You agree that the Company would suffer irreparable harm from a breach of any of the covenants or agreements contained in this paragraph 18. In the event of an alleged or threatened breach by you of any of the provisions of this paragraph 18, the Company or their successors or assigns may, in addition to all other rights and remedies existing in its favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce or prevent any violations of the provisions hereof (including the extension of the 18 (eighteen) month periods provided for above (the "Period")) by a period equal to the length of the violation of this paragraph 18. In the event of an alleged breach or violation by you of any of the provisions of this paragraph 18, the Period described above shall be tolled until such alleged breach or violation has been duly cured. You agree that these restrictions are reasonable. 19. Confidential Information. (a) Third Party Information. You understand that the Company and its affiliates will receive from third parties confidential or proprietary information ("Third Party Information") subject to a duty on the Company's and its affiliates' part to maintain the confidentiality of such information and to use it only for certain limited purposes. During your employment with the Company and thereafter, you will hold 11 Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel of the Company or its affiliates who need to know such information in connection with their work for the Company or its affiliates) or use, except in connection with his work for the Company or its affiliates, Third Party Information unless expressly authorized by the Board in writing or to the extent that the aforementioned matters become generally known to and available for use by the public as a result of the Company's disclosure of such information in its public filings. (b) Confidential Information. You acknowledge that the information, observations and data relating to the business of the Company and its Subsidiaries which you obtained as an employee, officer, director and stockholder of the Company are the property of the Company. You agree that, to the extent such confidential information does not constitute a Trade Secret, during your employment with the Company and for the period beginning on the date you cease to be employed by the Company for any reason and ending on the 18 (eighteen) month anniversary of such date, you shall not use for his own purposes or disclose to any third party any of such information, observations or data without the prior written consent of the Board, unless and to the extent that the aforementioned matters become generally known to and available for use by the public other than as a result of your acts or omissions. You agree that, to the extent such confidential information does constitute a Trade Secret, during your employment with the Company and thereafter until such information is no longer a Trade Secret, you shall not use for your own purposes or disclose to any third party any of such information, observations or data without the prior written consent of the Board. You shall either destroy (and deliver to the Company a written certification that you destroyed) or deliver to the Company immediately upon termination of employment with the Company for any reason (whether by resignation, death, disability or termination with or without Cause), or at any other time, the Board may request, all memoranda, notes, plans, records, reports, computer tapes, printouts and software and other documentation (and copies thereof) relating to the business of the Company and its Subsidiaries which you may then possess or have under your control. (c) Inventions and Patents. You acknowledge that all inventions, innovations, improvements, developments, methods, designs, analyses, drawings, reports and all similar or related information (whether patentable or not) which relate to the actual or anticipated business, research and development or existing or future products or services of the Company and its Subsidiaries and which are conceived, developed or made by you at any time you are an employee of the Company ("Work Product") are "Works Made for Hire" and belong to the Company. To the extend any Work Product is not a "Work Made for Hire", you hereby assign and agree to assign to the Company all rights in and to such Work Product. You shall promptly disclose all Work Product to the Board and perform all actions reasonably requested by the Board (whether during or after your employment with the Company) to establish and confirm such ownership (including, without limitation, assignments, powers of attorney and other instruments). 20. Additional Acknowledgments. You acknowledge that the provisions of this Agreement are in consideration of your continued employment with the 12 Company, the grant of the Option hereunder, and other good and valuable consideration as set forth in this Agreement. In addition, you agree and acknowledge that the restrictions contained in paragraphs 18 and 19 do not preclude you from earning a livelihood. In addition, you agree and acknowledge that the potential harm to the Company of the non-enforcement of paragraphs 18 and 19 outweighs any potential harm to you of its enforcement by injunction or otherwise. You acknowledge that you have carefully read this Agreement and have given careful consideration to the restraints imposed upon you by this Agreement, and are in full accord as to their necessity for the reasonable and proper protection of confidential and proprietary information of the Company now existing or to be developed in the future. 21. Remedies. The parties hereto shall be entitled to enforce their rights under this Agreement specifically, to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto acknowledge and agree that money damages would not be an adequate remedy for any breach of the provisions of this Agreement and that any party hereto may, in its sole discretion, apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief (without posting bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement. 22. Amendment. Except as otherwise provided herein, any provision of this Agreement may be amended or waived only with the prior written consent of you and the Company. 23. Successors and Assigns. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement by or on behalf of any of the parties hereto shall bind and inure to the benefit of the respective successors and permitted assigns of the parties hereto whether so expressed or not. 24. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 25. Counterparts. This Agreement may be executed simultaneously in two or more counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same Agreement. 26. Descriptive Headings. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. 27. Governing Law. The corporate law of Wisconsin shall govern all questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement shall be governed by the internal law, and not the law of conflicts, of Wisconsin. 13 28. Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally or mailed by certified or registered mail, return receipt requested and postage prepaid, to the recipient. Such notices, demands and other communications shall be sent to you and to the Company at the addresses indicated below: (a) If to the Optionee: [Name] Northland Cranberries, Inc. 800 First Avenue South Wisconsin Rapids, Wisconsin 54495 (b) If to the Company: Northland Cranberries, Inc. 800 First Avenue South P.O. Box 8020 Wisconsin Rapids, WI 54495 Attention: Chief Executive Officer Telecopy No.: (715) 422-6844 with a copy to: Sun Northland, LLC c/o Sun Capital Advisors II, L. P. 5200 Town Center Circle, Suite 470 Boca Raton, Florida 33486 Attention: Marc J. Leder Rodger R. Krouse C. Deryl Couch, Esq. Telecopy No.: (561) 394-0540 or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. 29. Submission to Jurisdiction. You hereby agree to submit to the jurisdiction of any state or federal court sitting in Milwaukee, Wisconsin, in any action or proceeding arising out of or relating to this Agreement and agree that all claims in respect of the action or proceeding may be heard and determined in any such court. You also agree not to bring any action or proceeding arising out of or relating to this Agreement in any other court. You hereby waive any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other party with respect thereto. The Company may make service on you by sending or delivering a copy of the process to you to be served at your address listed above. Nothing in this paragraph, however, shall affect the right of any party to bring any action or proceeding arising out of or relating to 14 this Agreement in any other court or to serve legal process in any other manner permitted by law or at equity. You agree that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law or at equity. 30. Entire Agreement. This Agreement constitutes the entire understanding between you and the Company, and supersedes all other agreements, whether written or oral, with respect to the acquisition by you of Common Stock of the Company. * * * * 15 Please execute the extra copy of this Agreement in the space below and return it to the Company's Secretary at its executive offices to confirm your understanding and acceptance of the agreements contained in this Agreement. Very truly yours, NORTHLAND CRANBERRIES, INC. By_____________________________________ Name John Swendrowski Title Chairman and CEO Enclosures: 1. Extra copy of this Agreement 2. Copy of the Plan The undersigned hereby acknowledges having read this Agreement and the Plan and hereby agrees to be bound by all provisions set forth herein and in the Plan. Dated as of November 6, 2001 OPTIONEE ----------------------------------- Name -----END PRIVACY-ENHANCED MESSAGE-----