-----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, FUJUrkxssdotf2ZuEtKMO3m0dvY9JrPPyHTYyHTFHqpnZ/U4Tvlz6AlxQ5gT0six jSXybVOl7kibxnazHmmn5g== 0000897069-96-000419.txt : 19961211 0000897069-96-000419.hdr.sgml : 19961211 ACCESSION NUMBER: 0000897069-96-000419 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961127 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHLAND CRANBERRIES INC /WI/ CENTRAL INDEX KEY: 0000818010 STANDARD INDUSTRIAL CLASSIFICATION: 0100 IRS NUMBER: 391583759 STATE OF INCORPORATION: WI FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-16130 FILM NUMBER: 96673875 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-K405 1 FORM 10-K NORTHLAND CRANBERRIES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended August 31, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ___________ Commission file number 0-16130 Northland Cranberries, Inc. (Exact name of registrant as specified in its charter) Wisconsin 39-1583759 (State of other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 800 First Avenue South P. O. Box 8020 Wisconsin Rapids, Wisconsin 54495-8020 (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code: (715) 424-4444 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Class A Common Stock, $.01 par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Aggregate market value of the voting stock held by non-affiliates of the registrant as of November 22, 1996: $305,926,069 Number of shares issued and outstanding of each of the registrant's classes of common stock as of November 22, 1996: Class A Common Stock, $.01 par value: 13,055,300 shares Class B Common Stock, $.01 par value: 636,202 shares PORTIONS OF THE FOLLOWING DOCUMENTS ARE INCORPORATED HEREIN BY REFERENCE: Proxy Statement for 1997 annual meeting of shareholders scheduled to be held January 8, 1997 (Part III, to the extent indicated therein). PART I Special Note Regarding Forward-Looking Statements Certain matters discussed in this Annual Report on Form 10-K are "forward-looking statements" intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified as such because the context of the statement includes words such as the Company "believes," "anticipates," "expects" or other words of similar import. Similarly, statements that describe the Company's future plans, objectives or goals are also forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties which are described in close proximity to such statements and which could cause actual results to differ materially from those currently anticipated. Shareholders, potential investors and other readers are urged to consider these factors carefully in evaluating the forward- looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included herein are only made as of the date of this Form 10-K and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. Except as set forth and described in Note 4 of Notes to Consolidated Financial Statements, all share data appearing in this Form 10-K has been adjusted where necessary to reflect the Company's two-for- one stock split effected in the form of a 100% stock dividend on September 3, 1996 on both its Class A and Class B Common Stock. Item 1. Business. General Northland Cranberries, Inc. ("Company" or "Northland") is a vertically integrated grower, processor and marketer of cranberries and value-added consumer cranberry products. With 24 cranberry producing marshes owned or operated in Wisconsin and Massachusetts as of September 30, 1996, Northland is also the world's largest cranberry grower. Since 1993, when Northland first began implementing its "marsh to market" vertical integration strategy by introducing its own Northland brand fresh cranberries, this strategy has been and continues to be the principal strategic focus of the Company. The Company's marsh to market strategy involves maximizing its earnings potential by increasing its direct control over all aspects of its supply and distribution of cranberries and consumer cranberry products. Specifically, this strategy includes growing its own cranberry crop (and buying cranberries from others), processing its grown and purchased cranberries into single strength cranberry juice or cranberry concentrate, and marketing and selling fresh cranberries, frozen cranberries, cranberry concentrate and consumer cranberry products. In fiscal 1996, the Company extended its marsh to market strategy by introducing Northland brand 100% cranberry juice blends on a limited basis to selected markets. As of August 31, 1996, Northland's blended cranberry juice product line was available in 18 major markets in the Midwest and other selected cities nationwide. With the added flexibility in fiscal 1997 of not having a substantial majority of its crop contractually committed at fixed prices to other processors as in prior years, the Company intends to direct its cranberry supply into the most favorable available product mix, while continuing to expand its marketing and sales efforts for Northland brand 100% cranberry juice blends and explore other new products and markets. In fiscal 1997, the Company intends to continue its national rollout of branded juice products into a significant number of new major markets. The Company believes that the imbalance which existed in fiscal 1996 between the limited supply and increasing demand for cranberries and derivative consumer cranberry products will likely continue in fiscal 1997. The Company expects that this imbalance will likely allow it the opportunity to recognize increased profits by selling cranberry juice, concentrate or frozen cranberries to other marketers of cranberry-based consumer products at favorable prices. The Company believes that the successful implementation of its marsh to market strategy will help reduce its dependence upon the size of its annual fall cranberry crop. The Company believes that its annual harvest results, while still remaining an important element of its marsh to market strategy, will become less critical as it supplements its supply through crop purchase agreements and exercises greater direct control over the sale of its cranberry supply. Cranberry Supply General The Company believes that the first essential factor in successfully implementing its marsh to market strategy is controlling a significant and reliable supply of cranberries through its own growing efforts and purchasing cranberries from other growers. Over the past several years, the supply of cranberries has not been sufficient to meet demand and, therefore, processors and marketers of cranberry-based consumer products not having the benefits of a significant reliable supply of cranberries have experienced increased competitive constraints. According to the Cranberry Marketing Committee of the United States Department of Agriculture (the "CMC"), the industry-wide fall 1996 harvest was less than expected. Based on CMC data, existing industry-wide cranberry inventories as of August 31, 1996 were at the lowest levels in the past five years. The Company believes that the lower than expected fall 1996 industry-wide crop harvest and the reduced industry levels of existing raw cranberry inventories means that the supply of cranberries will likely continue to be limited compared to demand in fiscal 1997. Additionally, the combination of federal and state environmental regulations which currently restrict the development of wetlands and the long lead-time and significant capital costs required to develop new marshes to full productivity have restricted the planting of significant additional cranberry producing acreage in the United States. Northland also believes that demand for cranberry products will continue to increase based in part on perceived consumer trends towards buying more nutritious and healthful foods and beverages as well as the effects of continued heavy advertising expenditures (which include the Company's regional media advertising efforts) and expanded new cranberry product offerings introduced by well-recognized consumer food products and beverage companies like Ocean Spray Cranberries, Inc. ("Ocean Spray"). Because cranberries are in limited supply, Northland believes it has a competitive advantage over other independent (i.e., non-Ocean Spray) cranberry juice product processors and marketers since its position as the world's largest single grower of cranberries gives it the capability to supply itself internally with a significant and reliable source of raw cranberries rather than having to rely on third party suppliers. Internally Grown and Purchased Supply Northland is the world's largest single cranberry grower, with more planted acres of cranberries owned or leased than any other grower. As of September 30, 1996, Northland owned or operated approximately 2,476 cranberry producing acres of land in Wisconsin and Massachusetts. The Company utilizes its significant internal harvest of raw cranberries from its owned and operated acres for substantially all of its fruit distribution needs. In the fall of 1995 (i.e., fiscal 1996), the Company harvested 287,000 barrels from 1,935 harvested acres on 21 marshes. Similar to industry-wide results, the Company's fall 1996 harvest was less than expected. This lower than expected harvest was due in large part to the small berry size and the nearly 30% reduction in yields throughout northern Wisconsin caused by very cold spring and early summer weather, combined with the carryover effects in Massachusetts from the near drought conditions experienced in 1995. Despite being smaller than expectations, the fall 1996 harvest of 293,000 barrels from 2,213 harvested acres was nevertheless a record harvest for the Company. As a secondary source of supply, the Company also purchases raw cranberries from other growers to supplement its own harvested crop. The Company has entered into multi-year crop purchase contracts with 17 independent cranberry growers to purchase all of the cranberries harvested from an aggregate of 805 productive acres. The Company expects the quantity of cranberries purchased under its existing contracts to increase in future years as the contracted marsh acreage matures and becomes more productive. The Company plans to continue attempting to enter into additional crop purchase contracts with independent growers as part of its strategy to increase its available supply of cranberries. The following table shows certain information regarding the Company's cranberry marshes and production for the crop years indicated.
Crop Year (1) 1996 1995 1994 1993 1992 1991 (24 Marshes) (21 Marshes) (21 Marshes) (18 Marshes) (15 Marshes) (15 Marshes) Total planted acres . . . 2,476 2,264 2,257 1,982 1,500 1,433 Total acres harvested(2) . . . . . . 2,213 1,935 1,813 1,519 1,114 958 Total barrels of production . . . . . . . 293,000 287,000 254,000 192,000 130,266 166,531 _____________________________ (1) A crop year commences on November 1 of a given calendar year and ends on October 31 of the following year and is designated by the calendar year in which the crop year ends (i.e., the 1996 crop year begins on November 1, 1995 and ends on October 31, 1996). (2) Includes only acres which are at least four years old and on which vines have not otherwise been "mowed." Cranberry vines may be mowed and then replanted on new or existing acreage to create new or renovated cranberry bogs. Although mowing prevents the harvesting of berries from such acres for that season, the mowed acres grow back and typically produce a modest crop in the year after mowing and a normal crop in the second year after mowing.
In fiscal 1996, the Company delivered a substantial majority of its cranberry crop to two independent private label fruit juice processors at fixed prices under supply agreements which expired in March 1996. Since the two agreements are no longer in effect, the Company believes it will have the ability in fiscal 1997 to better react to prevailing market conditions and thereby direct its cranberry crop to products and uses which can better maximize its profitability. The Company also believes this move away from supplying private label producers under fixed priced, long-term contracts will allow the Company to better support its entry into the branded cranberry juice market, as well as allow it to begin reducing its historical earnings volatility caused by fluctuations in harvest levels. As a result of existing regulatory constraints on the development of wetlands, the Company does not anticipate planting significant additional domestic acreage in the near future. The Company plans to increase its internal supply largely through pursuing additional marsh property acquisitions and crop purchase agreements. Increasing Internal Supply through Marsh Acquisitions For the period from immediately prior to its initial public stock offering in August 1987 through September 30, 1996, Northland has pursued an aggressive business strategy of increasing its internal cranberry supply through marsh acquisitions. Over this period, the Company has added 19 marsh properties and 2,138 cranberry producing acres. In fiscal 1996, the Company acquired two separate marsh properties in Wisconsin consisting of a total of 129 cranberry-producing acres. Shortly after the end of fiscal 1996, the Company completed the acquisition of another Wisconsin marsh containing 108 cranberry-producing acres. These acquisitions increased the Company's total planted acreage as of September 30, 1996 to approximately 2,476 acres on 24 properties, with over 22,000 total support acres. The Company intends to continue pursuing the expansion of its productive capacity through the cost-effective acquisition or lease of additional cranberry marshes. To better facilitate this strategy, the Company filed a shelf registration statement with the Securities and Exchange Commission on July 22, 1996, allowing the Company to issue up to 1,000,000 shares of its Class A Common Stock from time to time in connection with completing future marsh or property acquisitions. The shelf registration statement should assist the Company in acquiring additional marshes by allowing the Company to issue publicly-tradable shares of Class A Common Stock as part of the purchase price for such acquisitions. As of September 30, 1996, a total of 830,986 shares remained available for issuance under the Company's shelf registration statement to facilitate further marsh acquisitions. International Initiatives In further exploration of opportunities to increase its raw cranberry supply, the Company is involved in certain international supply initiatives and is exploring certain overseas supply opportunities. In May 1993, Northland planted approximately 7.5 acres with various high- yielding cranberry vine varieties on acidic peat bogs in Ireland. The bogs are controlled by Bord na Mona, an Irish state-owned enterprise. If the project is ultimately successful, Northland and Bord na Mona have the option to enter into a joint venture to develop a minimum of 500 additional acres of cranberry beds, plus additional supporting acreage. While current indications are that the planted vines may successfully sustain limited cranberry growth, it still is too early in the maturation process to judge definitively the potential yield capabilities of these vines at maturity. Due to the length of time cranberry beds require to mature, the Company anticipates that the project will not have any material impact on the Company, if at all, until at least fiscal 1997 when a determination may be made to develop additional acres. Even if a determination is then made to develop additional acreage, it would be at least four years from the date of planting before the Company could begin realizing any benefits of additional cranberry supplies from this project. The Company has also entered into a multi-year contract with the largest cranberry grower in Chile to purchase 20% of that grower's annual harvested crop. As a result of difficult growing conditions, the number of cranberries produced by this grower has been inconsequential to date. The Company also continues to explore potential opportunities to develop cranberry-producing acres in several countries in Eastern Europe, as well as in Russia. The Company does not anticipate that these opportunities will produce any material financial benefit to the Company in the near future. Environmental Factors in Cranberry Production The quality and quantity of cranberries produced in any given year is dependent upon certain external environmental factors over which the Company has little or no control. Extremes or significant variations in temperature, excessive or inadequate precipitation levels, storms and hail, or crop infestations can all adversely impact the production (as well as the vine maturation process) in any crop year or years. While the Company has attempted to mitigate the adverse effects that these factors may have on its internal cranberry production, the Company's cranberry production still remains very substantially subject to these agricultural factors. In addition to some geographical diversity in the location of its marshes, the Company maintains federally-subsidized multi-peril crop insurance coverage for all of its marshes as part of its efforts to minimize the effects of adverse agricultural occurrences. The policies insure against unavoidable loss of production resulting from adverse agricultural conditions, including hail, fire, insects, plant disease, wildlife, human tampering and malicious damage to the bogs and the failure of an irrigation system water supply due to an unavoidable cause. Each of these multi-peril policies insures up to 75%, the maximum coverage currently available, of the previous 10 years' average crop yield on the covered marsh's insured acreage at an effective rate for fiscal 1996 of $52 per barrel of insured lost production (rather than the price which could have been received by actually harvesting and delivering or selling such barrel). These insurance policies do not cover destruction or spoilage of the Company's crop after its harvest. The Company received $737,721, $1,078,000 and $988,790 of multi-peril crop insurance proceeds in fiscal 1996, 1995 and 1994, respectively, and paid multi-peril insurance premiums of $563,789, $421,094 and $231,143 in those years respectively. Processing and Distribution Another integral part of the Company's marsh to market strategy is its new expanded capability to internally process its harvested and purchased cranberries. In fiscal 1996, the Company constructed a 16,000 square foot cranberry juice concentrating and processing facility in Wisconsin Rapids, Wisconsin to supplement the Company's existing principal processing and storage facility in Wisconsin Rapids and its smaller processing facility in Hanson, Massachusetts. The new concentrating plant has the capacity to concentrate juice from up to 400,000 barrels of raw cranberries annually. The Company believes this new capability will greatly increase its ability to control the distribution and sale of its branded juice products and other value-added consumer cranberry products by eliminating the need for third party concentrators. Cranberries harvested from the Company's marshes or purchased from independent suppliers are brought to the Company's receiving facilities in Wisconsin Rapids. Completed in 1993 and expanded in 1995, the receiving station is capable of cleaning, drying and electronically color sorting incoming fresh fruit. Raw cranberries which are to be sold as fresh fruit during the Thanksgiving and Christmas holiday season are stored in a temperature-controlled facility until they are hand-sorted, packaged and distributed to food brokers, wholesalers or supermarkets for sale as Northland brand fresh cranberries. Raw cranberries which are to be used to make consumer cranberry products are cleaned, sorted and stored in the Company's 65,000 square foot freezer facility until they are sent to the newly-constructed concentrating facility. The concentrating facility processes raw cranberries into concentrate or single-strength juice. Concentrate is sold to various manufacturers of processed consumer cranberry products. After pre-formulation with other natural ingredients, single-strength juice is distributed to co-packers and independent juice processors for bottling and packaging and eventual delivery to wholesalers and retail grocery stores as Northland brand cranberry juice products or various private label juices. By allowing the Company to keep more raw cranberry supply on hand to be utilized in whatever form provides the Company with the greatest profit opportunity given the prevailing market conditions, the new facility's processing capability provides the Company greater flexibility to take advantage of favorable pricing conditions caused by the imbalance between the limited available cranberry supply and increased demand for consumer cranberry products. The Company believes that current excess capacity in the bottling industry makes it cost-efficient to contract with regional co- packers for the processing of its branded juice and processed consumer products. In fiscal 1996, Northland entered into five-year co-packing agreements with two major food manufacturers, Seneca Foods Corporation ("Seneca") and Sunsweet Growers, Inc. ("Sunsweet") to formulate and bottle its processed cranberry blends in five strategic locations nationwide. The Company delivers juice processed in the new concentrating facility to these manufacturers in the form of single-strength juice which Seneca and Sunsweet then formulate, bottle and package for delivery. The Company's transportation department contracts with independent carriers to distribute the bottled products to various grocery stores and retail outlets. Marketing and Sales Marketing In fiscal 1996, the Company's marketing efforts associated with the rollout of its branded juice product line resulted in Northland hiring several new and experienced marketing and management personnel from other food manufacturing companies, including a Director of Marketing, to oversee marketing of the Company's branded juice product line. The Company also hired support staff personnel to assist that effort. Several regional sales managers as well as sales directors and marketing coordinators were hired in fiscal 1996. The Company has used a mix of consumer and trade promotions to introduce and market its products in supermarkets, as well as to the general public through a regional media campaign. The Company has increased its marketing budget for fiscal 1997 to allow for expanded marketing efforts utilizing media, trade shows, sales presentations and various promotions aimed at increasing market penetration and the Company's name recognition. In fiscal 1997, the Company expects to continue its regional media advertising campaign in those markets where sales of its Northland brand cranberry juice blends are sufficient to make such advertising cost-effective. Sales An important business strategy of the Company in fiscal 1997 will be to expand the geographic markets for its Northland brand 100% juice products, as well as the sale of single strength juice, cranberry concentrate, frozen cranberries and other consumer cranberry products. The Company expects its juice sales to increase as a percentage of total sales in fiscal 1997 as its juice products are introduced into more markets nationally and the Company increases its marketing efforts. The Company has also retained 52 commissioned independent food brokers as of October 31, 1996 in most major geographic regions of the United States. These food brokers are supervised by a National Sales Manager, a Branded Products Sales Manager and five regional sales managers. The brokers assist in the distribution and sale of the Company's juice products. Since the Company is no longer contractually obligated to deliver a substantial majority of its cranberry crop to independent juice processors, it has additional flexibility to direct its supply into products which the Company hopes will better enhance its profitability. In fiscal 1996, reduced industry-wide cranberry supplies allowed the Company to take advantage of the imbalance between limited cranberry supply and increasing demand by selling fruit on the "spot" independent market at advantageous prices. Since the Company believes that market conditions in fiscal 1997 concerning the relationship between the limited available supply and increasing demand for cranberries will be similar to fiscal 1996, the Company plans to continue to pursue profitable spot sales opportunities. In addition to selling branded juice products, the Company sells Northland brand fresh cranberries to wholesale produce distributors and retail grocery companies during the Thanksgiving and Christmas holiday season. Due in part to a cooler than average summer growing season, the fall 1996 fresh cranberry crop consisted of smaller-than-average sized berries. Northland anticipates that the reduced average size of the 1996 fall fresh cranberry crop will result in the Company producing, packaging and selling less fresh fruit in fiscal 1997 than in fiscal 1996. Northland also sells processed cranberries in the form of concentrate to independent food and juice manufacturers for the production of processed consumer cranberry products. In fiscal 1996, the Company entered into an agreement with Rudolph Wild GmBH & Co. ("Wild") to supply Wild with cranberry concentrate for Wild's production of fruit juice and other beverages for distribution exclusively in international markets. Wild is one of Europe's largest suppliers of natural compounds for the production of soft drinks and other fruit beverages. Under the terms of the agreement, the Company is obligated to deliver to Wild the equivalent of 150,000 gallons of cranberry concentrate over the next two years at a contractually fixed price. The Company believes that its alliance with Wild, combined with its established presence in the fresh cranberry market in the United Kingdom, the Netherlands, Belgium and other European countries, provides the Company with a foundation for overseas sales and provides potential opportunities for eventual expansion into other foreign markets. In fiscal 1996, the Company had sales of approximately $4,700,000, or 12% of net sales, to one customer, the loss of which would not have a material adverse effect on the Company. As of August 31, 1996, the Company had firm orders to deliver approximately 97,000 barrels of cranberries in fiscal 1997 in the form of concentrate or single strength juice to certain independent processors and food manufacturers at various prices. The Company's wholly-owned subsidiary, Wildhawk, is in the business of selling chemicals and fertilizer to cranberry growers. The Company also sells cranberry vines to other independent growers. Neither Wildhawk sales nor sales of cranberry vines have recently had, nor are they expected to have, a material impact on the Company's revenues or net income. Competition General The markets for consumer cranberry products in which the Company competes are large and very competitive. Substantially all of the major markets for cranberry products in which the Company competes are dominated by Ocean Spray. Ocean Spray, an agricultural marketing cooperative entitled to limited protection under federal anti-trust laws, has over 700 member-growers, representing approximately 70% of all cranberry production in North America. Based on industry data, Ocean Spray controls approximately 60% of the branded cranberry products market and has significantly greater brand name recognition and marketing, distribution and financial resources than the Company. Cranberry Juice The Company's 100% cranberry juice blends compete principally with Ocean Spray's branded cranberry juice products, as well as the branded cranberry juice products of other distributors, private label cranberry juice products and other juice and beverage products. The Company's 100% cranberry juice blends are "premium" products competing against other juices made up of less than 100% juice. Competitors' juices use fructose and corn syrup additives as artificial sweeteners. The Company believes that its premium product formulation may provide it with a competitive advantage in the retail consumer market for juice products due to the improved taste and quality between its 100% juice products and competitors' juices which do not contain 100% juice. The Company fully anticipates that Ocean Spray will continue to take competitive actions to counter Northland's entries into the branded cranberry juice market, possibly including reducing product pricing, increasing its advertising expenditures, increasing its trade promotions and other actions. Ocean Spray has significantly more experience in the fruit juice markets, substantially greater brand name recognition and substantially greater marketing, distribution and financial resources than the Company. There can be no assurance that the Company will be successful in competing against Ocean Spray even on a limited regional basis Fresh Cranberries The Company competes with Ocean Spray and other brand label producers in the market for fresh cranberry sales during the Thanksgiving and Christmas holiday season. The Company intends to continue to compete in the fresh cranberry market depending upon market and competitive conditions. Ocean Spray has significantly more experience in the sale of branded fresh cranberries, substantially greater brand name recognition and substantially greater marketing, distribution and financial resources than the Company. There can be no assurance that the Company will be successful in competing against Ocean Spray in the fresh cranberry market. Private Label Cranberry Products Market The market for private label cranberry juice, sauce and other processed cranberry products has historically been supplied by a limited number of independent raw cranberry brokers and private label juice processors and marketers. Certain processors have significant experience in the private label fruit juice and processed cranberry products markets and have established co-packing and bottling operations, distributor networks and customer bases. Although the Company has not yet directly entered the private label market, it plans to further explore this market, depending upon future market and competitive conditions. There can be no assurance that the Company will be successful in ultimately entering this market or competing directly or indirectly against certain major independent processors. However, the Company believes that its new processing capabilities and its internal supply of raw cranberries may provide it with a competitive advantage over those independent processors that must rely on other growers and prevailing market conditions to obtain the raw cranberry supply necessary to compete in the private label market. Moreover, private label cranberry products in general compete against branded cranberry products and, in particular, the branded cranberry products of Ocean Spray. There can be no assurance that any private label processed cranberry products of the Company or its allied co-packers will be able to compete successfully against the similar branded products of Ocean Spray or others. Raw Cranberry Market Ocean Spray dominates the raw cranberry market, controlling approximately 70% of the total raw cranberry supply. Northland competes in the market for purchasing raw cranberries with other independent cranberry product handlers and processors for the raw cranberries of other independent growers. The Company has also competed with Ocean Spray in the purchase of raw cranberries by, from time to time, acquiring the marsh properties of Ocean Spray member-growers. The Company could experience increased competition for the direct purchase of raw cranberries from Ocean Spray if Ocean Spray were to begin accepting new member-growers. The Company believes that competition for the purchase of raw cranberries in the independent market has increased as a result of the Company's pursuit of its marsh to market strategy and its willingness to pay premium prices for the cranberry crops of other growers. Regulation Cranberry Products Regulation The production, packaging, labeling, marketing and distribution of the Company's fresh cranberries and consumer cranberry juice products are subject to the rules and regulations of various federal, state and local food and health agencies, including the United States Food and Drug Administration, the United States Department of Agriculture, the Federal Trade Commission and the Environmental Protection Agency. The Company believes it has complied, and will be able to comply, in all material respects with such rules, regulations and laws. Environmental and Other Governmental Regulation To obtain permits to create new cranberry marshes in the United States, cranberry growers and other developers are generally required, pursuant to a national "no net loss" of wetlands policy, to restore the functional values of disturbed wetland acreage in an amount equal to at least 100% of the acreage intended for the development of new cranberry marshes, depending on the type of wetland impacted. Given this strict regulatory requirement, as well as strict water quality legislation in Wisconsin and Massachusetts, the Company believes that it is currently unlikely the Company, or any other cranberry growers or other developers in North America, will be able to cost-effectively secure additional permits for further significant cranberry marsh development or expansion of wetland properties (although the Company and other growers or developers may renovate existing developed wetlands acreage from time to time and replant older cranberry vine varieties with higher-yielding vine varieties). However, certain independent growers have undertaken efforts in various states, including Maine, Minnesota, Michigan and Delaware (as well as efforts in Quebec and British Columbia), to plant, cultivate, and develop new cranberry-producing acreage. Given the aforementioned environmental regulations, the particular soil and temperature conditions necessary to effectively grow cranberries and the long lead-time required for cranberry vines to mature to full production, the Company does not expect these efforts to materially affect the supply of cranberries in fiscal 1997. Two of the Company's Wisconsin marshes and one in Massachusetts are the subjects of various types of activities intended to remediate ground and/or water contamination caused by previously removed underground storage tanks used by the prior owners of such properties. All of such circumstances have been reported to the appropriate state regulatory agencies and are subject to state supervised remediation plans. Based on information available as of August 31, 1996, the Company believes a substantial portion of the aggregate costs of such remedial activities will be covered by state reimbursement funds (except in the case of the Massachusetts property), or indemnification claims against the properties' prior owners. The Company believes that no material liabilities will be incurred as a result of remediation activities at any of the affected properties. There is currently legislation passed by the United States House of Representatives and pending before the Senate which, if enacted, could materially ease restrictions on the development of cranberry marshes in wetlands, leading to an increase in long-term cranberry supply which could have a depressing effect on the proceeds per barrel recognized by the Company. As of October 18, 1996, the bill has not been the subject of further action in Congress. If the bill is not acted on by the end of the 104th Congress in December 1996, it will expire, and, in order for it to again be considered for passage, it must be reintroduced in the next session beginning in January 1997. The CMC has the authority under the provisions of the Federal Cranberry Marketing Order to recommend that the Secretary of the United States Department of Agriculture impose harvest volume restrictions on domestic cranberry growers if the Committee believes there will be an anticipated substantial over-supply of cranberries for the forthcoming crop year. Such volume restrictions have not been imposed since 1971, and based on current market conditions, the Company does not anticipate any such restrictions in the near future; however, there can be no assurance that such volume restrictions will not be imposed on growers in the future. Additionally, the Company's workplace conditions and certain workforce rules and policies are established and maintained pursuant to the Occupational Safety and Health Act. The Company believes that it is currently in material compliance with all material requirements under the Occupational Safety and Health Act. Other than as set forth above, the Company does not expect existing federal, state or local environmental or other governmental legislation or regulation to have a material effect on its capital expenditures, results of operations or competitive position. Seasonality The Company's business historically has been extremely seasonal. Similar to most other nondiversified agricultural crop growers, the Company has recognized its crop sales revenues (which constituted 56% of the Company's fiscal 1996 total revenues) at the time of annual harvest in the fall of each year. As a result of this extreme seasonality, a large percentage of the Company's revenues have historically been recognized in the fiscal quarter in which the fall harvest took place, with interim quarters typically registering net losses or only nominal profits. Because the Company's results of operations have been significantly dependent upon the size of the Company's annual harvest, its results for interim fiscal periods have not been considered indicative of those to be expected for a full year or for other interim periods. The Company believes that successful implementation of its marsh to market strategy will help reduce the extreme seasonality of its business and its dependence upon the size of its annual fall cranberry crop. The Company believes that its annual harvest results will become less critical than in past years as it supplements its supply through crop purchase agreements and it becomes better able to directly control the sale of its cranberry supply. Additionally, because the Company recognized substantially all of its net profits in fiscal 1996 during its first fiscal quarter as a result of sales under its now-expired supply agreements, the Company expects to recognize substantially lower earnings per share in the first quarter of fiscal 1997 than in the first quarter of fiscal 1996. In view of the Company's strategy to begin marketing and selling value-added processed consumer cranberry products, the Company changed its fiscal year end in 1995 from March 31 to August 31 in order to correspond the Company's fiscal year with the new annual business cycle resulting from the implementation of its strategy. The Company believes that the change in fiscal year end should better match the cost and expenses associated with growing each year's crop with the revenues to be generated from the sales of Northland brand 100% cranberry juice blends and other consumer products produced from such crop. Materials and Supplies The Company purchases bottles, caps, flavorings, juices and packaging either from its co-packers or independent third parties. The Company obtains a significant amount of its materials and supplies necessary for its growing and cultivation of cranberries from resources, including water and sand, located on its own marshes. The Company also expects to continue purchasing substantially all of its fertilizer and pesticides from Wildhawk. The remainder of the Company's raw materials and supplies, including the materials used to package the Company's fresh fruit, are purchased on the open market from various sources. The Company believes it would, if necessary, be able to locate additional and alternative sources for any raw materials and supplies without a material delay or adverse effect on its business. Trademarks and Formulae The Company owns the Northland trademark, which is registered in the United States Patent and Trademark Office. The Northland trademark is important to the Company in the sale of its branded fresh cranberries and cranberry juice products, and the Company expects it to become increasingly more important as Northland brand 100% cranberry juice blends enter more markets nationwide. Northland 100% cranberry juice blends utilize proprietary flavor formulations. The Company attempts to ensure the confidentiality of these formulations by both pre-formulating key natural product ingredients prior to delivery of its single strength juice to co-packers and by requiring its co-packers to enter into confidentiality agreements. Employees As of August 31, 1996, the Company had 141 full-time employees. The Company also hired approximately 103 additional seasonal workers during the 1996 crop cultivation season, and an additional 264 seasonal workers for the 1996 crop harvesting season. In addition to the seasonal employees hired for cultivating and harvesting cranberries, the Company hired 162 seasonal employees to operate the Company's cranberry processing and packaging facility from September through December 1995. None of the Company's employees are unionized and the Company believes its relationship with its employees is very good. Item 2. Properties. The Company owns its corporate offices in Wisconsin Rapids, Wisconsin consisting of 12,300 square feet of office space on five acres of land. The Company also owns a 5,700 square foot building in Wisconsin Rapids which is used by certain members of its administrative and operational staff. The Company owns a 150,000 square foot receiving station and fresh fruit packaging facility on 40 acres in Wisconsin Rapids. The facility is used to clean and store the Company's processed cranberries. The facility is also used to clean, store, sort and package the Company's fresh fruit. The facility includes a 40,000 square foot cranberry receiving station and fresh fruit packaging operation, 65,000 square feet of freezer warehousing and 45,000 square feet of refrigerated storage. The Company is constructing a new office facility on its current plant site in Wisconsin Rapids, Wisconsin to support additional operational and administrative staff as a result of implementing its marsh to market strategy. In fiscal 1996, the Company completed the construction of a 16,300 square foot juice concentrating facility adjacent to the Company's current plant site in Wisconsin Rapids. The juice concentrating facility, will provide Northland with the capacity to concentrate over 400,000 barrels annually. The Company owns a 49,000 square foot cranberry receiving station located on an seven-acre parcel of land adjacent to the Hanson Division bogs. This facility is used for the cleaning of the Company's Massachusetts cranberry crop. The following table sets forth specific information about each of the Company's 24 cranberry marshes as of September 30, 1996. All of the Company's marshes are owned in fee simple or leased as indicated below, subject to mortgages (except for its Dandy Creek, Manitowish Waters, Nantucket and Hills Division Marshes). All of the Company's marshes have storage buildings and repair shops for machinery, trucks and harvest and irrigation equipment maintained at the marshes. Each of the Company's marshes has a house or houses on site or in close proximity to the site which serve as the marsh manager's residence and most of the Company's marshes also have residences for assistant marsh managers. All of the Company's foregoing current facilities are suitable and adequate for the Company's existing needs.
September 30, 1996 Calendar Year Approximate Approximate Acquired Marsh Division Name and Location Marsh Acres Planted Acres or Leased Associates Division, Jackson County, Wisconsin . . . . . . . . . . . . . . . 3,400 86 1983 Meadow Valley Division, Jackson County, Wisconsin . . . . . . . . . . . . . . . 2,150 76 1984 Fifield Division, Price County, Wisconsin 2,460 196 1985 Three Lakes Division, Oneida County, Wisconsin . . . . . . . . . . . . . . . 1,542 82 1985 Chittamo Division, Douglas and Washburn Counties, Wisconsin . . . . . . . . . . 620 55 1985 Biron Division, Wood County, Wisconsin . 473 213 1987 Warrens Division, Monroe County, Wisconsin 160 63 1987 Trego Division, Washburn County, Wisconsin 1,715 96 1988 Gordon Division, Douglas County, Wisconsin 880 149 1988 Mather Division, Juneau County, Wisconsin 2,500 148 1989 Nekoosa Division (two marshes), Wood County, Wisconsin . . . . . . . . . . . 569 85 1989 Nantucket Division (two marshes), Nantucket County, Massachusetts . . . . 737 211 1990 Crawford Creek Division (two marshes), Jackson County, Wisconsin . . . . . . . 304 135 1991 Hills Division, Jackson County, Wisconsin (leased) . . . . . . . . . . . . . . . 465 70 1991 Hanson Division (two marshes), Plymouth County, Massachusetts . . . . . . . . . 2,025 322 1993 Yellow River (two marshes), Juneau County, Wisconsin . . . . . . . . . . . . . . . 1,714 252 1994 Dandy Creek, Monroe County, Wisconsin 350 55 1996 Manitowish Waters (two marshes), Vilas County, Wisconsin . . . . . . . . . . . 345 182 1996 ------ ----- Total . . . . . . . . . . . . . . . . 22,409 2,476 ====== =====
Item 3. Legal Proceedings. In fiscal 1996, the Company acquired a marsh property in northern Wisconsin from the Koller Cranberry Company, a member-grower of the Ocean Spray cooperative subject to a pre-existing marketing contract to deliver its fall 1996 cranberry crop to Ocean Spray. As a result of the acquisition, the delivery of the fall 1996 crop harvested on the Koller property to the Company was contested by Ocean Spray. Under the terms of the mutual settlement of the action filed by Ocean Spray against the Company, Northland paid Ocean Spray liquidated damages equal to the amount provided for in the existing marketing agreement between Ocean Spray and the Koller Cranberry Company and Northland was allowed to retain the fall 1996 cranberry crop harvested from the Koller marsh. As of the date hereof, the Company is not otherwise a party to any legal proceedings, the adverse outcome of which individually or in the aggregate, in the Company's opinion, would have a material adverse effect on the Company's results of operations or financial condition. Item 4. Submission of Matters to a Vote of Shareholders. No matters were submitted to a vote of the Company's shareholders during the fourth quarter of fiscal 1996. Executive Officers of the Company As of October 17, 1996, each of the Company's executive officers is identified below together with information about each such officer's age, current position with the Company and employment history for at least the past five years: Name Age Current Position John Swendrowski 48 President and Chief Executive Officer Robert E. Hawk 41 Executive Vice President and President of Wildhawk, Inc. John A. Pazurek 47 Vice President - Finance, Treasurer and Chief Financial Officer William J. Haddow 48 Vice President - Purchasing, Transportation and Budget David J. Lukas 54 Vice President - Administration and Corporate Secretary John Stauner 34 Vice President - Agricultural Operations Steven E. Klus 50 Vice President - Manufacturing John S. Wilson 46 Vice President - East Coast Mr. Swendrowski founded the Company and assumed his current positions in May 1987. Prior to forming the Company, Mr. Swendrowski was the organizer and syndicator of investment interests, and a general partner, in each of the Company's predecessor limited partnerships. Mr. Hawk was appointed Executive Vice President in October 1996. Prior thereto, he served as Vice President-Sales, Marketing and Special Projects for three years and as Vice President-Operations for four years. Mr. Pazurek is a certified public accountant and joined the Company as Controller and Principal Accounting Officer at its inception in May 1987. In May 1990, Mr. Pazurek was promoted to Vice President-Finance and in August 1993 he was promoted to Treasurer. In October 1996, Mr. Pazurek was also appointed Chief Financial Officer. Mr. Haddow was appointed Vice President-Purchasing, Transportation and Budget in October 1996. Prior thereto, he served as Vice President-Purchasing and Transportation from May 1993, and as Assistant Vice President-Purchasing from 1989. Mr. Lukas joined the Company in April 1992 as Vice President of Human Resources and Corporate Counsel. In May 1995 he was promoted to Secretary and in August 1996 to Vice President-Administration. Prior thereto, he practiced law in Wisconsin Rapids, Wisconsin for over 20 years. Mr. Stauner was promoted to Vice President-Agricultural Operations in October 1996. Prior thereto, he served as Vice President- Operations from May 1995, and as Assistant Vice President of Operations since the Company's inception in 1987. Mr. Klus joined the Company in April 1996 as the Director of Strategic Product Planning. He was appointed Vice President-Manufacturing in October 1996. Prior thereto he served as President-Eastern Division of Seneca Foods Corporation in New York from May 1990. Mr. Wilson joined the Company in October 1993 and was promoted to Vice President - East Coast Operations in May 1994. In October 1996, his title changed to Vice President-East Coast. Prior to joining the Company, he served as Manager-Grower Services at Ocean Spray in Lakeville, Massachusetts from 1988. The executive officers of the Company are generally elected annually by the Board of Directors after the annual meeting of shareholders. Each executive officer holds office until his successor has been duly qualified and elected or until his earlier death, resignation or removal. PART II Item 5. Market for the Company's Common Equity and Related Shareholder Matters. Sale Price Range of Class A Common Stock (1) First Second Third Fourth Quarter Quarter Quarter Quarter Fiscal Year Ended August 31, 1996 High $10.00 $11.00 $14.63 $18.13 Low $7.25 $8.50 $9.88 $13.38 Twelve Months Ended August 31, 1995(2) High $10.25 $7.88 $8.38 $7.75 Low $5.50 $6.00 $7.13 $7.00 _______________ (1) The range of sale prices listed for each quarter includes intra-day trading prices as reported on The Nasdaq Stock Market. (2) In order to correspond the Company's fiscal year with the Company's expected new annual business cycle from pursuing its current business strategy, the Company changed its fiscal year end in 1995 from March 31 to August 31. Fiscal 1995 ended on March 31, 1995, and was followed by a five-month transition period ending August 31, 1995. During the transition period, the range of sales prices for shares of Class A Common Stock was between a high of $8.38 and a low of $7.00. On November 25, 1996, there were approximately 4,650 beneficial shareholders for the shares of Class A Common Stock and three shareholders of record for the shares of Class B Common Stock. Shares of Class A Common Stock trade on The Nasdaq Stock Market under the symbol CBRYA. No public market exists for the shares of Class B Common Stock. See Item 6 for information on the Company's cash dividends paid on its Common Stock. On November 22, 1996, the last sale price of shares of Class A Common Stock was $24.25 per share. On July 8, 1996, the Company acquired a cranberry property in Wisconsin from the Koller Cranberry Company for $4.4 million in cash and 33,614 shares of Class A Common Stock. The Class A shares were not registered under the Securities Act of 1933 in reliance on Section 4(2) thereunder relating to a sale by an issuer not involving a public offering to a person who had access to information concerning the Company, was able to bear the economic risk of loss of the investment and acquired the shares for investment purposes and not with a view to distribution. The shares issued in the transaction above were deemed to be restricted securities for the purposes of the Securities Act and restrictive legends were placed on the stock certificates, together with appropriate stop transfer notations on the Company's stock transfer records. Item 6. Selected Financial Data.
Fiscal Year Ended (1) Fiscal Year Ended March 31 (1) August 31, Transition 1996 Period (1) 1995 1994 1993 1992 1991 Operating Results (Dollars In Thousands, except per share data) Revenues $ 37,608 $ 890 $ 21,784 $ 18,051 $ 13,000 $ 12,624 $ 11,260 Net earnings (loss) $ 6,905 $ (1,399) $ 1,582 $ 2,943 $ 1,943 $ 1,164 $ 869 Common Stock Data Net earnings (loss) per Common Share before cumulative effect of change in accounting method $ 0.50 $ (0.28) $ 0.18 $ 0.33 $ 0.25 $ 0.20 $ 0.15 Cumulative effect of change in accounting method (2) -- $ 0.13 -- -- -- -- -- Net earnings (loss) per share $ 0.50 $ (0.15) $ 0.18 $ 0.33 $ 0.25 $ 0.20 $ 0.15 Cash dividends per Class A Share $ 0.145 $ 0.06 $ 0.14 $ 0.175 $ 0.08 $ 0.06 $ 0.06 Cash dividends per Class B Share $ 0.132 $ 0.055 $ 0.127 $ 0.159 $ 0.073 $ 0.055 $ 0.055 Financial Position (Year End) (In Thousands) Total assets $145,485 $121,745 $107,745 $ 83,074 $ 67,703 $ 59,606 $ 53,934 Long-term debt $ 56,978 $ 45,538 $ 55,793 $ 38,945 $ 25,098 $ 37,294 $ 33,548 Shareholders' equity $ 69,059 $ 59,113 $ 34,627 $ 33,125 $ 31,572 $ 16,633 $ 15,631 Financial Ratios Current ratio (year end) 1.5 1.1 0.7 1.3 1.7 2.5 2.2 Debt/equity ratio (year-end) 0.8 0.8 1.8 1.2 0.9 2.3 2.2 Return on revenues 18.4% N/A 7.3% 16.3% 14.9% 9.2% 7.7% _________________ (1) In order to correspond the Company's fiscal year with the Company's expected new annual business cycle from pursuing its current business strategy, the Company changed its fiscal year end in 1995 from March 31 to August 31. Fiscal 1995 ended on March 31, 1995, and was followed by a five-month transition period ending August 31, 1995. (2) Effective April 1, 1995, the Company changed its method of deferring crop growing costs to conform with the provisions of Statement of Position 85-3 "Accounting by Agricultural Producers and Agricultural Cooperatives" which had not been previously adopted by the Company. This change was made to defer crop growing costs based on a November 1 to October 31 crop year which management believes is its natural crop year. Historically, the Company had deferred certain crop costs based on a crop year of April 1 through October 31. This change resulted in an increase in net income for the five months ended August 31, 1995 of $1,249,000 (net of income taxes of $806,000), reflecting the cumulative effect of this change for periods prior to April 1, 1995. The pro forma effects for the year ended March 31, 1995 assuming the change had been in effect throughout the year would have been to increase net income by $195,000 or $0.02 per share.
Item 7. Management's Discussion and Analysis of Results of Operations and Financial Condition RESULTS OF OPERATIONS General As a result of the Company's decision to begin marketing and selling value-added processed consumer cranberry products, the Company changed its fiscal year end from March 31 to August 31 in order to correspond the Company's fiscal year with the new annual business cycle expected to result from the continued implementation of its "from marsh to market" vertical integration business strategy. This change in fiscal year end is intended to better match the costs and expenses associated with growing each year's crop with the expected revenues to be generated from the sales of consumer products produced from such crop. This change resulted in a five-month transition period ended August 31, 1995. This discussion compares information relating to the Company's fiscal 1996 (ending August 31, 1996) performance with fiscal 1995 (ending March 31, 1995), along with a separate discussion of the transition period compared to the prior year's comparable five-month period. As a result of the Company's changing business nature and change in fiscal year, some comparisons between periods are not particularly meaningful or informative. All per share data has been adjusted for the Company's September 3, 1996 two-for- one stock split effected in the form of a 100% stock dividend. Fiscal 1996 Compared to Fiscal 1995 Revenues. Revenues in fiscal 1996 were $37.6 million, a $15.8 million increase from $21.8 million in fiscal 1995. The increase in fiscal 1996 revenues was due to increased sales of cranberries and cranberry products. The majority of the Company's fiscal 1996 cranberry crop was sold to independent fruit juice and sauce processors at fixed pricing under three-year supply agreements, which expired in March 1996. The Company was able to market the rest of its fruit at more favorable pricing as a result of the growing demand for cranberry products and the industry's short supply of available fruit. The industry's poor 1995 fall cranberry harvest, as well as normal seasonal scarcity of supply, contributed to this ongoing demand and supply imbalance. The Company believes that these market conditions will likely continue in fiscal 1997 as a result of a less than anticipated fall 1996 industry harvest. Fiscal 1996 revenues benefitted from increased sales of Northland brand fresh fruit, sales of bulk frozen cranberries and the introductory sales of the Northland brand 100% juice product line. The Company believes that, with the expiration of its two principal fixed price supply contracts, it will be afforded significant additional flexibility in fiscal 1997 to sell its cranberry supply in the most profitable manner then available. Cost of Sales. Cost of sales increased $3.4 million to $16.5 million in fiscal 1996 from $13.1 million in fiscal 1995. The increase in fiscal 1996 cost of sales was due to increases in the Company's productive acres, barrels harvested, barrels purchased and the cost of sales for the Company's entry into the branded juice market. The Company's gross margin in fiscal 1996 was 56.1% compared to 40.1% in fiscal 1995. Selling, General and Administrative Expenses. Selling, general and administrative expenses were $7.0 million in fiscal 1996, compared to $2.4 million in fiscal 1995. The increase was due primarily to additional costs associated with increased compensation and related expenses partially attributable to the Company's growth in productive acreage and the Company's initial rollout of its branded juice products. The Company's continued entry into the branded consumer cranberry products market is likely to result in substantial additional marketing, promotion, distribution and selling expenses in fiscal 1997. Interest Expense. Fiscal 1996 interest expense was $2.7 million, a $1.0 million decrease from fiscal 1995 interest expense of $3.7 million. The decrease was due to decreased debt levels which resulted from the application of proceeds generated by the Company's August 1995 public offering and sale of 2,300,000 Class A common shares. Income Tax Expense. The Company recorded $4.5 million in income tax expense in fiscal 1996, compared to $1.1 million in fiscal 1995. As a result of alternative minimum tax liabilities, $2.8 million in income taxes were paid in fiscal 1996 compared to $141,000 in fiscal 1995. As of August 31, 1996, the Company had net operating loss carryforwards for federal and state income tax purposes of $2.4 million remaining to offset against future taxable income. See Note 13 of Notes to Consolidated Financial Statements. Net Income. Net income for fiscal 1996 was $6.9 million compared to fiscal 1995 net income of $1.6 million. Net income per common share was $0.50 in fiscal 1996 compared to net income per common share of $0.18 in fiscal 1995. Weighted average common shares outstanding for fiscal 1996 were 13,928,000 compared to 8,891,000 for fiscal 1995. Five Month Periods Ended August 31, 1995 and 1994 Revenues. Revenues for the five months ended August 31, 1995 were $890,000 compared to $1.6 million during the same five month period in the prior year. Revenues consisted of vine sales, fertilizer and chemical sales and other income in each respective period. The decrease in revenues for the five months ended August 31, 1995 was due to the anticipated reduced volume in vine sales caused principally by current regulatory restrictions on the further domestic development of wetlands for cranberry cultivation. Cost of Sales. For the five-month transitional period, the cost of sales decreased $583,000 to $1.4 million from $2.0 million during the same period in fiscal 1995. As a result of the Company's change an accounting method for deferred crop costs, this comparison is not considered particularly meaningful or informative by the Company. See Note 2 of Notes to Consolidated Financial Statements. Selling, General and Administrative Expenses. Selling, general and administrative expenses were $1.9 million in the five-month transitional period compared to $1.3 million during the same period in the prior year. The increase was due primarily to additional costs associated with the Company's increased productive acreage and the Company's preparation to enter the branded juice market. Interest Expense. Interest expense was $1.9 million during the five-month transitional period compared to $1.2 million during the same period in fiscal 1995. The significant increase in interest expense was due to increased debt levels which resulted primarily from financing the Company's September 1994 cranberry marsh acquisitions and the June 1995 purchase of the previously leased Hanson marshes. Net Loss. For the five-month period ended August 31, 1995, the Company reported a net loss of $1.4 million, or $0.15 per share, after the cumulative effect of the Company's change in accounting method for deferred crop cost. See Note 2 of Notes to Consolidated Financial Statements. Prior to the change in accounting method, the Company reported a net loss for the period of $2.6 million, or $0.28 per share. During the comparable period in the prior year, the Company reported a net loss of $1.8 million, or $0.20 per share. Fiscal 1995 Compared to Fiscal 1994 Revenues. Revenues in fiscal 1995 increased to $21.8 million from $18.1 million in fiscal 1994. The increase was due to increased cranberry sales as a result of an increase in barrels harvested. In fiscal 1995, the Company harvested 254,000 barrels of cranberries compared to 192,000 barrels in fiscal 1994. Substantially all of the barrels harvested by the Company for processing in fiscal 1995 were sold to two independent fruit juice and sauce processors at fixed prices. Fiscal 1995 revenues and sales of consumer-packaged fresh fruit were impacted adversely by an abnormally high fresh fruit spoilage rate at the Company's Wisconsin Rapids storage facility. The high spoilage rate was largely caused by unusual weather conditions experienced late in the Wisconsin growing season. Cost of Sales. Cost of sales increased $4.3 million, or 49.2%, to $13.1 million in fiscal 1995 from $8.8 million in fiscal 1994. The Company's gross margin in fiscal 1995 was 40.1%, compared to 51.5% in fiscal 1994. The increase in cost of sales in fiscal 1995 was primarily due to costs associated with the increase in the Company's number of productive acres and the increase in fresh fruit production. Selling, General and Administrative Expenses. Selling, general and administrative expenses were $2.4 million in fiscal 1995 compared to $2 million in fiscal 1994. The increase was primarily due to costs associated with the Company's growth in productive acreage and expanded fresh fruit marketing efforts. Interest Expense. Fiscal 1995 interest expense was $3.7 million, a 52.6% increase over fiscal 1994 interest expense of $2.4 million. The increase was due to financing costs associated with funding the Company's September 1993 cranberry marsh lease and September 1994 cranberry marsh acquisitions. Income Tax Expense. The Company recorded $1.1 million in income tax expense in fiscal 1995, compared to $1.9 million in fiscal 1994. As a result of alternative minimum tax liabilities, $141,000 in income taxes were paid in fiscal 1995 compared to $1.9 million in fiscal 1994. Net Income. Net income for fiscal 1995 was $1.6 million, or $0.18 per share, a 46.3% decrease from fiscal 1994 net income of $2.9 million, or $0.33 per share. Weighted average common shares outstanding for fiscal 1995 were 8,891,000 compared to 8,835,000 for fiscal 1994. FINANCIAL CONDITION Net cash provided by operating activities in fiscal 1996 increased 67.9% to $9.4 million from $5.6 million in fiscal 1995. The increase principally was a result of changes in cash flows related to the increase in net income between fiscal years reduced by increases in current assets and current liabilities. The Company's current ratio was 1.5 to 1.0 at the end of fiscal 1996 compared to a current ratio of 0.66 to 1.0 at the end of fiscal 1995. This improvement was directly related to the Company's change in business strategy and the change in fiscal year end. Inventories increased to $12.4 million at August 31, 1996 compared to inventories of $853,000 at March 31, 1995 principally due to the $9.3 million increase in deferred crop costs. These deferred crop costs are the inventory costs of the growing crop to be harvested in the fall of fiscal 1997. The additional $2.1 million increase in inventories is due to increases in finished goods and raw materials purchased to support the Company's branded juice sales. Net cash used for investing activities increased in fiscal 1996 by 63.5% to $20.6 million from $12.6 million in fiscal 1995. The increase was principally the result of the acquisitions of cranberry operations and other property and equipment additions. In March 1996, the Company completed the $3.05 million acquisition of a 55-acre cranberry property located in Central Wisconsin. In July 1996, the Company acquired a 74-acre cranberry property located in Northern Wisconsin. The total cost of the acquisition was $4.4 million in cash and 16,807 shares (on a pre-stock split basis) of the Company's Class A Common Stock. On September 27, 1996, the Company completed the acquisition of a 108 acre cranberry property located in Northern Wisconsin. The total cost of the acquisition was $4.85 million in cash and 169,014 shares of the Company's Class A Common Stock. The Company utilized its bank credit facilities to fund the cash portion of the acquisition. Property and equipment additions in fiscal 1996 included (i) $4.4 million for fixed asset additions and upgrades; (ii) $4.2 million to complete the construction of the Company's concentrate manufacturing facility; (iii) $3.0 million to complete the construction and planting of 11 new cranberry producing acres and to cultivate and maintain 320 preproductive expansion acres; and (iv) $2.9 million to improve the Company's fruit handling facilities. The Company's current capital budget for similar items in fiscal 1997 is approximately $6.5 million. In addition, the Company anticipates that it may require substantial additional capital expenditures to fund its strategy of increasing its internal supply capabilities by acquiring additional cranberry marshes. The Company's fiscal 1997 debt service and capital expenditure obligations will be funded by borrowings under the Company's amended November 1996 credit facilities and cash generated from operations. Net cash provided by financing activities increased in fiscal 1996 to $11.1 million from $6.5 million in fiscal 1995. The Company's total equity increased to $69.1 million at August 31, 1996 compared to $34.6 million at the end of fiscal 1995. The Company's total debt (including current portion) at fiscal 1996 year end was $60.5 million for a total debt-to-equity ratio of 0.88 to 1, compared to total debt of $61.6 million and a debt-to-equity ratio of 1.78 to 1 at March 31, 1995. In August and September of 1995, the company completed the public sale of 2,300,000 Class A Common shares. Net proceeds of $30.4 million were used to repay principal and accrued interest then outstanding under the Company's credit facilities. On November 4, 1996, the Company amended its existing bank credit facility to increase its revolving credit facility from $21 million to $45 million, increasing its revolving credit availability by $24 million. The new credit facilities mature on September 1, 1999. The amount of unused available borrowings under the amended credit facilities was $35.4 million at August 31, 1996. See Note 10 of Notes to Consolidated Financial Statements. Seasonality and Quarterly Results; Dependence on Crop Results As shown in the table below, the Company's business has been extremely seasonal. Similar to most nondiversified agricultural crop growers, the Company recognized its crop sales revenues at the time of the harvest in the fall of each year. Crop sales revenues constituted approximately 56% of total revenues in fiscal 1996 and 86% of total revenues in fiscal 1995. Because the Company's historical results of operations have been significantly dependent upon the results of the Company's annual harvest, its results for interim fiscal periods have not been considered indicative of those to be expected for a full year or for other interim periods. The successful implementation of the Company's marsh to market strategy is expected to help reduce the extreme seasonality of its business and its dependence upon its annual fall cranberry crop. However,the Company expects to recognize substantially lower earnings per share in the first quarter of fiscal 1997 than the first quarter of fiscal 1996 because in the past, the Company recognized substantially all of its net profits in this quarter as a result of sales of its crop under its now expired supply agreements. Due to the changing nature of the company's business, it is likely that initial comparisons of quarterly results during fiscal 1997 to the prior year's comparative periods will not be particularly meaningful or informative. The Company believes that its annual harvest results, while still remaining an important element of the Company's potential results of operations for the upcoming fiscal year will become less critical than in past years as it supplements its supply through crop purchase agreements and it becomes better able to directly control the sale of its cranberry supply and take advantage of favorable market conditions. The following table contains unaudited selected historical quarterly information, which includes adjustments, consisting only of normal recurring adjustments, that the Company considers necessary for a fair presentation:
Fiscal Quarters Ended (Dollars in thousands, except per share data) Unaudited Aug. 31, May 31, Feb. 29, Nov. 30, Aug. 31, May 31, Feb. 29, Nov. 30, 1996 1996 1996 1995 1995 1995 1995 1994 Revenues $ 5,246 $6,675 $3,984 $21,703 $ 124 $ 652 $ 1,665 $18,417 Income (loss) before income taxes (1,091) 1,435 254 10,816 (3,066) (2,343) (2,211) 8,836 Net income (loss) (669) 855 149 6,570 (1,868) (184) (1,348) 5,363 Net income (loss) per share (0.05) 0.06 0.01 0.48 (0.19) (0.02) (0.15) 0.60
Item 8. Financial Statements and Supplementary Data. INDEPENDENT AUDITORS' REPORT To the Shareholders and Board of Directors of Northland Cranberries, Inc. We have audited the accompanying consolidated balance sheets of Northland Cranberries, Inc. and subsidiary as of August 31, 1996 and March 31, 1995, and the related consolidated statements of operations, shareholders' equity and cash flows for the years ended August 31, 1996, March 31, 1995 and 1994, and for the five-month transition period ended August 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Northland Cranberries, Inc. and subsidiary at August 31, 1996 and March 31, 1995, and the results of their operations and their cash flows for the years ended August 31, 1996, March 31, 1995 and 1994, and for the five-month transition period ended August 31, 1995, in conformity with generally accepted accounting principles. As explained in Note 2 to the consolidated financial statements, effective April 1, 1995, the Company changed its method of deferring crop growing costs. DELOITTE & TOUCHE LLP Milwaukee, Wisconsin November 4, 1996 NORTHLAND CRANBERRIES, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS AUGUST 31, 1996 AND MARCH 31, 1995 ASSETS 1996 1995 CURRENT ASSETS: Cash and cash equivalents $ 266,467 $ 223,373 Accounts and notes receivable 2,631,434 1,854,810 Investments 1,259,548 1,259,548 Inventories 12,414,426 853,216 Prepaid expenses 921,673 1,249,010 Deferred income taxes 1,123,949 1,305,802 ---------- --------- Total current assets 18,617,497 6,745,759 PROPERTY AND EQUIPMENT, NET 122,489,101 95,191,248 INVESTMENTS AND OTHER ASSETS 4,378,021 5,807,744 ----------- ----------- TOTAL ASSETS $145,484,619 $107,744,751 =========== =========== See notes to consolidated financial statements. CONSOLIDATED BALANCE SHEETS AUGUST 31, 1996 AND MARCH 31, 1995 (continued) LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995 CURRENT LIABILITIES: Accounts payable $ 2,592,765 $ 1,982,520 Accrued liabilities 5,914,422 2,384,165 Current portion of long-term obligations 3,560,000 5,802,000 ---------- ---------- Total current liabilities 12,067,187 10,168,685 LONG-TERM OBLIGATIONS 56,978,095 55,792,764 DEFERRED INCOME TAXES 7,380,556 7,156,755 SHAREHOLDERS' EQUITY: Preferred stock, $.01 par value, 5,000,000 shares authorized, none issued -- -- Common stock: Class A, $.01 par value, 12,734,286 and 4,010,613 shares issued and outstanding, respectively 127,343 40,106 Class B, $.01 par value, 636,202 and 318,101 shares issued and outstanding, respectively 6,362 3,181 Additional paid-in capital 60,183,370 28,907,593 Retained earnings 8,741,706 5,675,667 ----------- ----------- 69,058,781 34,626,547 ----------- ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $145,484,619 $107,744,751 =========== =========== See notes to consolidated financial statements. NORTHLAND CRANBERRIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED AUGUST 31, 1996 AND MARCH 31, 1995 AND 1994 AND FIVE-MONTH TRANSITION PERIOD ENDED AUGUST 31, 1995
Five-Months Years Ended Year Ended Ended August 31, August 31, March 31, March 31, 1996 1995 1995 1994 REVENUES $37,607,845 $890,397 $21,783,966 $18,051,355 COST OF SALES 16,516,785 1,400,611 13,057,275 8,751,220 ---------- ---------- ---------- ---------- GROSS PROFIT (LOSS) 21,091,060 (510,214) 8,726,691 9,300,135 COSTS AND EXPENSES: Selling, general and administrative 7,020,416 1,907,841 2,439,978 2,046,389 Interest 2,657,067 1,919,544 3,654,006 2,393,792 ---------- --------- ---------- ---------- Total costs and expenses 9,677,483 3,827,385 6,093,984 4,440,181 ---------- ---------- ---------- ---------- INCOME (LOSS) BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHOD 11,413,577 (4,337,599) 2,632,707 4,859,954 INCOME TAXES (BENEFIT) 4,509,000 (1,689,000) 1,051,000 1,917,000 ---------- ---------- --------- --------- INCOME (LOSS) BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHOD $6,904,577 $(2,648,599) $1,581,707 $2,942,954 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING METHOD (NET OF TAXES OF $806,000) -- 1,249,469 -- -- --------- ---------- --------- ---------- NET INCOME (LOSS) $6,904,577 $(1,399,130) $1,581,707 $2,942,954 ========= ========== ========= ========= NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE: Income (loss) before cumulative effect of change in accounting method $ 0.50 $ (0.28) $ 0.18 $ 0.33 Cumulative effect of change in accounting method -- 0.13 -- -- ---------- ---------- --------- --------- NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE $ 0.50 $ (0.15) $ 0.18 $ 0.33 ========== ========== ========= ========= See notes to consolidated financial statements.
NORTHLAND CRANBERRIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED AUGUST 31, 1996 AND MARCH 31, 1995 AND 1994 AND FIVE-MONTH TRANSITION PERIOD ENDED AUGUST 31, 1995
Five-Months Years Ended Year Ended Ended August 31, August 31, March 31, March 31, 1996 1995 1995 1994 OPERATING ACTIVITIES: Net income (loss) $ 6,904,577 $(1,399,130) $1,581,707 $2,942,954 Cumulative effect of change in accounting method -- (1,249,469) -- -- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,151,448 1,481,176 3,094,708 2,235,881 (Gain) loss on disposal of property and equipment (25,236) 4,839 (8,331) (17,640) Gain on investments -- -- -- (199,507) Changes in assets and liabilities: Receivables, prepaid expenses and other current assets (2,256,715) 1,807,428 (1,350,824) 3,986,128 Inventories (4,715,542) (5,178,107) (445,206) (197,955) Accounts payable and accrued liabilities 4,031,250 163,632 1,847,874 986,426 Deferred income taxes 1,289,000 (883,000) 910,000 42,000 ---------- ---------- ---------- ---------- Net cash provided by (used in) operating activities 9,378,782 (5,252,631) 5,629,928 9,778,287 ---------- ---------- ---------- ---------- INVESTING ACTIVITIES: Property and equipment additions (14,480,765) (5,827,245) (8,716,881) (10,587,053) Proceeds on disposals of property and equipment 152,065 40,229 65,695 37,913 Acquisitions of cranberry operations (7,279,818) (4,485,112) (5,046,097) -- Net decrease in investments 1,259,548 -- 1,259,548 1,185,535 Other (214,018) (66,507) (145,412) (276,952) ----------- ---------- ---------- ---------- Net cash used for investing activities (20,562,988) (10,338,635) (12,583,147) (9,640,557) ------------ ----------- ----------- ---------- FINANCING ACTIVITIES: Proceeds from long-term debt 15,000,000 14,800,000 14,350,000 10,500,000 Payments on long-term debt (6,053,365) (24,803,303) (6,626,409) (8,538,179) Dividends paid (1,923,429) (515,978) (1,193,248) (1,476,894) Net proceeds from common stock offering 4,016,192 26,401,133 -- -- Exercise of stock options 76,400 -- 85,633 56,601 Other (25,819) (153,265) (89,638) (223,786) ----------- ----------- ----------- ---------- Net cash provided by financing activities 11,089,979 15,728,587 6,526,338 317,742 ----------- ----------- ----------- ----------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (94,227) 137,321 (426,881) 455,472 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 360,694 223,373 650,254 194,782 ---------- ---------- ---------- ---------- CASH AND CASH EQUIVALENTS, END OF YEAR $266,467 $360,694 $223,373 $650,254 ========= ======== ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for: Interest (net of interest capitalized) $2,716,788 $2,445,138 $3,323,440 $2,297,007 Income taxes 2,768,000 -- 268,000 1,879,000 SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES (See Notes 5, 7, 10 and 14)
See notes to consolidated financial statements. NORTHLAND CRANBERRIES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY YEARS ENDED AUGUST 31, 1996 AND MARCH 31, 1995 AND 1994 AND FIVE-MONTH TRANSITION PERIOD ENDED AUGUST 31, 1995
Additional Common Stock Paid-in Retained Treasury Capital Earnings Stock Class A Class B BALANCES, APRIL 1, 1993 $39,292 $3,181 $27,712,189 $3,821,148 $(3,438) Stock options exercised 78 -- 56,523 -- -- Tax benefit from exercise of stock -- -- 30,519 -- -- options Cash dividends paid: $.175 per Class A share -- -- -- (1,375,579) -- $.15925 per Class B share -- -- -- (101,315) -- Net income -- -- -- 2,942,954 -- ------- ------- ---------- ---------- -------- BALANCES, MARCH 31, 1994 39,370 3,181 27,799,231 5,287,208 (3,438) Common stock issued for acquisition of cranberry marshes (62,500 shares) 625 -- 986,874 -- -- Stock options exercised 111 -- 82,084 -- 3,438 Tax benefit from exercise of stock -- -- 39,404 -- -- options Cash dividends paid: $.14 per Class A share -- -- -- (1,112,324) -- $.1272 per Class B share -- -- -- (80,924) -- Net income -- -- -- 1,581,707 -- -------- -------- ---------- ----------- -------- BALANCES, MARCH 31, 1995 40,106 3,181 28,907,593 5,675,667 0 Net proceeds from common stock 20,000 -- 26,381,133 -- -- offering (2,000,000 shares) Cash dividends paid: $.06 per Class A share -- -- -- (481,274) -- $.05455 per Class B share -- -- -- (34,705) -- Net loss -- -- -- (1,399,130) -- -------- -------- ---------- ---------- --------- BALANCES, AUGUST 31, 1995 60,106 3,181 55,288,726 3,760,558 0 Net proceeds from common stock 3,000 -- 4,013,192 -- -- offering (300,000 shares) Common stock issued for 168 -- 399,832 -- -- acquisition of cranberry marsh (16,807 shares) Common stock issued for 294 -- 417,796 -- -- cranberries purchased (29,443 shares) Stock options exercised 103 -- 76,297 -- -- Tax benefit from exercise of stock -- -- 54,380 -- -- options Effect of two-for-one stock split 63,672 3,181 (66,853) -- -- Cash dividends paid: $.145 per Class A share -- -- -- (1,839,610) -- $.13175 per Class B share -- -- -- (83,819) -- Net income -- -- -- 6,904,577 -- ---------- -------- ---------- ---------- --------- BALANCES, AUGUST 31, 1996 $127,343 $6,362 $60,183,370 $8,741,706 $ 0 ======== ======= =========== ========== ==========
See notes to consolidated financial statements. NORTHLAND CRANBERRIES, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED AUGUST 31, 1996 AND MARCH 31, 1995 AND 1994 AND FIVE-MONTH TRANSITION PERIOD ENDED AUGUST 31, 1995 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations - The business of Northland Cranberries, Inc. (the "Company") consists principally of growing and selling cranberries and cranberry products. In each of the past three years, the Company sold substantially all of its crop harvested for processing to two independent fruit juice and sauce processors for their packaging and resale as private label cranberry juice and sauce, pursuant to contracts which expired on March 31, 1996. In 1993, the Company first implemented its "from marsh to market" vertical integration business strategy when it began selling its own Northland brand fresh cranberries. In fiscal 1996, the Company continued to further this business strategy with the introduction of its own Northland brand 100% cranberry juice blends. The Company's vertical integration business strategy includes marketing and selling frozen fruit, cranberry concentrate and processed branded and private label cranberry products. The Company's primary market is throughout the United States, although it also sells fresh fruit and cranberry concentrate in Europe. Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Wildhawk, Inc. ("Wildhawk"). Wildhawk provides chemicals, fertilizers and crop management services to cranberry growers. All significant intercompany accounts and transactions have been eliminated in consolidation. Cash Equivalents - Cash equivalents include amounts due from banks and highly liquid debt instruments purchased with maturities of three months or less. Inventories - Inventories, which primarily consist of cranberries, juice, concentrates, packaging supplies, fertilizer and chemical products and deferred crop costs, are stated at the lower of cost or market. Deferred crop costs consists of those costs related to the growing of the crop which will be harvested in fiscal 1997 (see also Note 2). Cost is determined using the first-in, first-out (FIFO) method. Property and Equipment - Property and equipment are stated at cost, less depreciation and amortization computed on the straight-line method over the estimated useful lives. The costs related to the development of new productive cranberry beds are capitalized during the development period until commercial production is achieved (generally the fifth growing season after planting). Amounts included in construction in progress include construction costs of beds, dikes and ditches, irrigation systems and costs associated with vine clippings planted. In addition, during the development period, certain direct and indirect operating costs are capitalized in construction in progress. The estimated useful lives are 30-40 years for buildings, land improvements, cranberry vines, bulkheads and irrigation equipment, and 5-10 years for other depreciable assets. Goodwill - Goodwill is amortized on the straight-line method over 40 years. Accumulated amortization at August 31, 1996 and March 31, 1995 was $196,968 and $163,393, respectively. Income Taxes - The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" which requires an asset and liability approach to financial accounting and reporting for income taxes. Estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Instruments - The Company believes the carrying amount of its financial instruments (cash and cash equivalents, accounts receivable, accounts payable, and notes payable) is a reasonable estimate of the fair value of these instruments. Revenues -The Company realizes revenues from six main sources: branded juice, concentrate, fresh fruit, frozen fruit, vine clippings sold to other growers and fertilizer and chemical sales from Wildhawk to other growers. In addition, the Company carries insurance against crop losses due to hail damage and other perils. Net Income Per Common and Common Equivalent Share - Net income per common and common equivalent share is computed based upon the weighted average number of common shares and common equivalent shares (stock options) outstanding during the year (13,927,820, 9,393,656, 8,890,850 and 8,834,774 for the year ended August 31, 1996, five month transition period ended August 31, 1995, and the years ended March 31, 1995 and 1994, respectively). Accounting Standards To Be Adopted - In 1995, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This statement will be adopted by the Company in the fiscal year beginning September 1, 1996. The adoption of this statement is not expected to have a material impact on the consolidated financial statements. In 1995, the FASB also issued SFAS No. 123, "Accounting for Stock Based Compensation." Under the accounting and disclosure requirements promulgated in the statement, the Company must adopt the provisions in its fiscal year beginning September 1, 1996. The Company is currently evaluating the accounting and disclosure alternatives provided for under the provisions of the statement. 2. CHANGE IN ACCOUNTING METHOD Effective April 1, 1995, the Company changed its method of deferring crop growing costs to conform with the provisions of Statement of Position 85-3 "Accounting by Agricultural Producers and Agricultural Cooperatives," which had not been previously adopted by the Company. This change was made to defer crop growing costs based on a November 1 to October 31 crop year which management believes is its natural crop year. Historically, the Company had deferred certain crop costs based on a crop year of April 1 through October 31. This change resulted in an increase in net income for the five months ended August 31, 1995 of $1,249,000 (net of income taxes of $806,000), reflecting the cumulative effect of this change for periods prior to April 1, 1995. The pro forma effects for the year ended March 31, 1995, assuming the change had been in effect throughout the year, would have been to increase net income by $195,000 or $0.02 per share. 3. CHANGE IN FISCAL YEAR The Company changed its fiscal year end from March 31 to August 31 in order to correspond the Company's fiscal year with the new annual business cycle resulting from the implementation of its strategy to begin marketing and selling value-added processed consumer cranberry products. This change in fiscal year end also better matches the costs and expenses associated with growing each year's crop with the expected revenues to be generated from the sales of the consumer products produced from such crop. 4. STOCK SPLIT On June 26, 1996, the Company's Board of Directors authorized a two- for-one stock split effected in the form of a 100% stock dividend distributed on September 3, 1996 to shareholders of record on August 15, 1996. Shareholders' equity has been adjusted by reclassifying from additional paid-in capital to common stock the par value of the additional shares arising from the split. In addition, all references in the financial statements to per share amounts, stock option data and market prices of the Company's stock have been restated. 5. ACQUISITIONS On September 13, 1994, the Company acquired three productive cranberry bogs and certain of the associated assets of Yellow River Cranberry Company and Wolfe Cranberry Company for $18,000,000 plus 62,500 shares of Class A Common Stock. The purchase price was paid through the delivery of $5,000,000 cash and 62,500 shares of Class A Common Stock upon closing and the issuance of $13,000,000 in promissory notes. The promissory notes were fully paid as of August 31, 1996. On June 6, 1995, the Company purchased two productive cranberry bogs and certain of the associated assets of United Cape Cod Cranberry Limited Partnership ("UCCC") for $14,706,000. The purchase price was paid through the delivery of $14,706,000 cash. The Company had leased this property from September 13, 1993 until the date of purchase. On March 15, 1996, the Company acquired the productive cranberry bog and certain of the associated assets of Mariposa II Cranberries for $3,050,000. The purchase price was paid through the delivery of $2,050,000 cash and the issuance of a $1,000,000 promissory note. This promissory note was subsequently fully paid during June 1996. On July 8, 1996, the Company acquired the productive cranberry bog and certain of the associated assets of the Koller Cranberry Company for $4,900,000. The purchase price was paid through the delivery of $4,400,000 cash and 16,807 shares of Class A Common Stock. The acquisitions were recorded using the purchase method of accounting and, accordingly, the results of operations of the acquired businesses are included in the statements of operations from the date of acquisition. The pro forma effects, assuming the fiscal 1996 acquisitions had occurred on April 1, 1994, were not significant. 6. INVENTORIES Inventory at August 31, 1996 and March 31, 1995 was as follows: 1996 1995 Raw materials $1,692,403 $463,159 Finished goods 1,399,335 390,057 Deferred crop costs 9,322,688 -- ----------- -------- $12,414,426 $853,216 =========== ======== 7. PROPERTY AND EQUIPMENT Property and equipment at August 31, 1996 and March 31, 1995 were as follows: 1996 1995 Land $7,351,596 $7,399,550 Land improvements 12,346,400 10,101,369 Cranberry vines, bulkheads and irrigation equipment 59,607,337 47,052,318 Buildings and improvements 12,986,763 10,940,579 Equipment and vehicles 23,727,102 16,877,710 Construction in progress 25,079,393 16,277,779 ----------- ----------- 141,098,591 108,649,305 Less accumulated depreciation and amortization 18,609,490 13,458,057 ----------- ---------- $122,489,101 $95,191,248 =========== ========== The Company capitalized $1,531,405, $557,065, $1,065,164 and $1,130,248 of interest for the year ended August 31, 1996, five month transition period ended August 31, 1995, and the years ended March 31, 1995 and 1994, respectively. 8. INVESTMENTS AND OTHER ASSETS Investments and other assets at August 31, 1996 and March 31, 1995 were as follows: 1996 1995 Investments $1,259,548 $2,519,097 Leasehold interests, net 1,197,277 1,420,945 Goodwill, net 757,710 791,285 Other 1,163,486 1,076,417 ---------- ---------- $4,378,021 $5,807,744 ========== ========== On August 31, 1993, the Company terminated its membership in the Ocean Spray marketing cooperative. Upon termination, Ocean Spray common stock held by the Company was converted into Ocean Spray 4% preferred stock of equal value and both the preferred stock and notices of allocation are being redeemed over a five-year period. Remaining payments of $2,519,096 will be received in annual installments of $1,259,548. 9. ACCRUED LIABILITIES Accrued liabilities at August 31, 1996 and March 31, 1995 were as follows: 1996 1995 Interest $338,594 $923,909 Property taxes 518,181 511,039 Compensation and other employee benefits 2,870,565 177,970 Lease payments 28,497 395,974 Income taxes 338,332 -- Other 1,820,253 375,273 ---------- ---------- $5,914,422 $2,384,165 ========== ========== 10. NOTES PAYABLE AND LONG-TERM OBLIGATIONS Long-term debt at August 31, 1996 and March 31, 1995 was as follows: 1996 1995 Credit agreement with a bank: Revolving credit facility $10,050,000 $4,350,000 Acquisition credit facility 9,600,000 5,000,000 Term loan 9,450,000 -- Term loan 3,680,000 4,642,857 Term loan 4,000,000 -- Term loan payable to insurance company with interest at 8.69% 14,267,752 15,113,131 Term loan payable to insurance company with interest at 7.85% 9,490,343 10,024,293 Capital lease obligation -- 9,265,800 Mortgage notes with interest at 6% -- 13,000,000 Other -- 198,683 ------------ ------------ 60,538,095 61,594,764 Less current portion 3,560,000 5,802,000 ------------ ------------ $56,978,095 $55,792,764 =========== =========== On August 31, 1994, the Company entered into a credit agreement with a bank which was subsequently amended on June 7, 1995 and November 4, 1996, and provides for a secured revolving credit facility of $45,000,000, three secured term credit facilities in the amounts of $4,600,000, $4,000,000 and $10,500,000 and a secured acquisition credit facility of $10,000,000. The revolving credit facility and acquisition credit facility terminate on September 1, 1999. However, the Company may request annual extensions. If the Company does not extend the termination date of the revolving credit facility, all amounts outstanding under the term loans become payable on the revolving credit facility termination date. Loans under the acquisition credit facility are due one year from the date of issuance or on September 1, 1999, if earlier. Interest on amounts outstanding under the revolving credit facility is payable at the bank's domestic rate, the bank's offered rate, or an adjusted LIBOR rate plus an applicable rate margin (1.25% on the first $25,000,000 of principal amounts outstanding and 2.00% on any principal amount in excess of $25,000,000), at the option of the Company. Interest on amounts outstanding under the secured term credit facilities and secured acquisition credit facility is payable at the bank's domestic rate, the bank's offered rate, or an adjusted LIBOR rate plus 2.00% at the option of the Company. Amounts outstanding under the first and third secured term credit facilities are due in nine semi-annual payments of $460,000 and $525,000, respectively. Amounts outstanding under the second secured term credit facility are due in seven semi- annual payments of $286,000 and a final payment of $1,998,000. The Company must pay a commitment fee of .125% per annum on the average daily unused amount of the revolving credit facility and the acquisition credit facility. The amount of unused available borrowings under the amended credit facilities was $35,350,000 at August 31, 1996. The 8.69% term loan with an insurance company is payable in semi- annual installments, including interest, through July 1, 2004. The interest rate will be adjusted in fiscal year 1999, as determined by the insurance company, but the adjusted rate will not exceed 2.25% over the then five-year treasury bond yield. The 7.85% term loan with an insurance company is payable in semi- annual installments, including interest, through August 1, 2008. The interest rate will be adjusted in fiscal years 1998 and 2003, as determined by the insurance company, but the adjusted rate will not exceed 2.25% over the then five-year treasury bond yield. In September 1994, the Company issued $13,000,000 of mortgage notes in connection with the acquisition of three cranberry bogs (see Note 5). These notes were fully paid as of August 31, 1996. Substantially all assets of the Company are pledged as collateral for its borrowings. The Company's loan agreements require, among other things, that the Company maintain a certain level of shareholders' equity, ($60,000,000 at August 31, 1996), debt-to-equity ratio and "fixed charge coverage ratio", as defined. In addition, the agreements place restrictions on the repurchase of stock and do not allow total cash dividend payments or other distributions, as defined, in any fiscal year to exceed 50% of the Company's net income for such fiscal year. The aggregate scheduled future maturities of long-term obligations for the next five fiscal years ending August 31 are as follows: 1997 $3,560,000 1998 3,647,000 1999 3,742,000 2000 30,456,000 2001 1,414,000 Thereafter 17,719,095 ---------- $60,538,095 ========== 11. SHAREHOLDERS' EQUITY The Company is authorized to issue 5,000,000 shares of preferred stock with a par value of $0.01. The authorized common stock of the Company consists of 20,000,000 shares of Class A Common Stock and 2,000,000 shares of Class B Common Stock. Outstanding Class B shares are convertible into Class A shares on a one-for-one basis at any time. The shares of Class A Common Stock are entitled to one vote per share and the shares of Class B Common Stock are entitled to three votes per share. Holders of Class A Common Stock are entitled to receive cash dividends equal to at least 110% of any cash dividends paid on the shares of Class B Common Stock. However, cash dividends may be paid on Class A Common Stock without a concurrent cash dividend being paid on the Class B Common Stock. If at any time the outstanding shares of Class B Common Stock fall below 2% of the outstanding shares of Class A Common Stock, they will be automatically converted into Class A Common Stock. In August 1995, the Company issued 2,000,000 shares of Class A Common Stock through a public offering resulting in net proceeds of approximately $26,401,000. In September 1995, the Company issued an additional 300,000 shares of Class A Common Stock pursuant to the Underwriters exercise of its over-allotment option granted in connection with the August public stock offering, resulting in net proceeds of approximately $4,016,000. On July 22, 1996, the Company filed a Form S-4 Registration Statement ("shelf registration") with the Securities and Exchange Commission. The Registration Statement covers up to 1,000,000 shares of Class A Common Stock of the Company which may be issued from time to time in connection with acquisitions by the Company of businesses or properties, or interests therein. At August 31, 1996, 3,245,804 shares of Class A Common Stock were reserved for issuance under the Company's stock option plans, conversion of Class B Common Stock to Class A Common Stock and the shelf registration. 12. STOCK OPTIONS In 1987, the Company adopted the 1987 Stock Option Plan (the "1987 Plan"), which provides for the issuance of 275,000 shares of Class A Common Stock options to certain executive officers and key employees. Stock options granted under the 1987 Plan are exercisable at a price equal to market value on the date of grant for a period determined by the Board of Directors, not to exceed 10 years. In fiscal 1990, the Company adopted the 1989 Stock Option Plan (the "1989 Plan"), which provides for the issuance of 600,000 shares of Class A Common Stock options to key employees and directors of the Company. Stock options granted under the 1989 Plan are exercisable at a price established by the Board of Directors which shall not be less than 85% of the market value on the date of grant for a period determined by the Board of Directors, not to exceed 10 years. During the five-month transition period ended August 31, 1995, the Company adopted the 1995 Stock Option Plan (the "1995 Plan"), which provides for the issuance of 800,000 shares of Class A Common Stock to key employees and non-employee directors of the Company. Stock options granted under the 1995 Plan are exercisable at a price established by the Compensation and Stock Option Committee, which shall not be less than 100% of the fair market value on the date of grant for a period determined by the Compensation and Stock Option Committee, not to exceed 10 years. The status of the stock option plans was as follows: Number of Price Shares Range Outstanding at April 1, 1993 687,998 $2.625 - $7.375 Granted 16,264 8.625 - 9.375 Exercised (15,578) 2.625 - 5.375 Cancelled (8,400) 2.625 - 5.375 ------- ------ ------ Outstanding at March 31, 1994 680,284 2.625 - 9.375 Granted 97,034 7.750 - 8.750 Exercised (23,260) 2.625 - 7.375 Cancelled (9,772) 2.625 - 8.625 ------- ------ ------ Outstanding at March 31, 1995 744,286 2.625 - 9.375 Granted 85,000 7.250 - 7.250 Cancelled (5,234) 3.125 - 8.625 ------- ------ ------ Outstanding at August 31, 1995 824,052 2.625 - 9.375 Granted 273,662 10.875 - 17.750 Exercised (20,560) 2.625 - 8.750 Cancelled (8,000) 3.875 - 8.750 --------- ------ ------- Outstanding at August 31, 1996 1,069,154 $2.625 - $17.750 ========= ====== ======= Shares exercisable at August 31, 1996 988,692 $2.625 - $10.875 ======= ====== ======= 13. INCOME TAXES The provision for income taxes is as follows: August 31, August 31, March 31, March 31, 1996 1995 1995 1994 Currently payable: Federal $2,997,000 -- $141,000 $1,875,000 State 223,000 -- -- -- --------- -------- --------- 3,220,000 -- 141,000 $1,875,000 Deferred: --------- ---------- -------- --------- Federal 944,000 $(1,368,000) 721,000 (338,000) State 345,000 (321,000) 189,000 380,000 --------- ---------- -------- --------- 1,289,000 (1,689,000) 910,000 42,000 --------- ---------- -------- --------- $4,509,000 $(1,689,000) $1,051,000 $1,917,000 ========= ========== ========= ========= The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities as of August 31, 1996 and March 31, 1995 consist of the following: 1996 1995 Deferred tax assets: Tax loss carryforwards $955,000 $2,539,000 AMT tax credits and other carryforwards 3,676,000 2,008,000 --------- ---------- 4,631,000 4,547,000 Deferred tax liabilities: --------- ---------- Cranberry sales 459,000 986,000 Depreciation and amortization 10,429,000 9,411,000 ---------- ---------- 10,888,000 10,397,000 ---------- ---------- Net deferred tax liability $6,257,000 $5,850,000 ========== ========== At August 31, 1996, the Company has net operating loss carryforwards for Federal income tax purposes of approximately $2,438,000, expiring in 2010. A reconciliation of the Federal statutory income tax rate to the effective income tax rate is as follows: August 31, August 31, March 31, March 31, 1996 1995 1995 1994 Statutory tax rate 34.0% 34.0% 34.0% 34.0% State income taxes, net of Federal tax benefit 5.2 5.2 5.3 5.2 Other, net 0.3 (0.3) 0.6 0.2 ---- ---- ---- ---- Effective tax rate 39.5% 38.9% 39.9% 39.4% ==== ==== ==== ==== 14. LEASE COMMITMENTS On April 10, 1990, the Company acquired leasehold interests in two cranberry marshes in Nantucket, Massachusetts. On March 31, 1994, the Company entered into an agreement which extended the original lease term through November 30, 2003. The unamortized cost of the leasehold interests are being amortized over the extended lease term on a straight-line basis. Accumulated amortization of the leasehold interests at August 31, 1996 and March 31, 1995 was $1,009,843 and $786,176, respectively. Rental payments are based on 20 percent of gross cash receipts from agricultural production, subject to certain minimums which are dependent upon the state-wide average crop yield. Rent expense for the year ended August 31, 1996, five-month transition period ended August 31, 1995, and the years ended March 31, 1995 and 1994 was $261,166, $0, $338,984 and $240,514, respectively. On September 5, 1991, the Company entered into a net lease with Equitable Life Assurance Society of the United States ("Equitable") for Cranberry Hills cranberry marsh, which Equitable purchased on May 3, 1991 from Cranberry Hills Partnership ("Cranberry Hills"), a partnership controlled by the Company's president and two former directors. The lease, which expires December 31, 2000, provides for rent payments of $284,625 in year one and increasing to $380,875 in year nine with a final payment of $214,906 on June 1, 2000. The lease grants the Company a right of first refusal to purchase the leased premises or to renew the lease on terms Equitable is prepared to accept from a bona fide third party. The purchase agreement also provides for payments to Cranberry Hills of 25% of the premises income, if any, during the term of the lease with Equitable. The amount expensed in fiscal 1996, the five-month transition period ending August 31, 1995 and fiscal 1995 and 1994 was $64,079, $0, $8,973 and $86,999, respectively. The future minimum annual payments on noncancellable operating lease agreements for the next four fiscal years ending August 31 are as follows: 1997 $375,000 1998 376,000 1999 371,000 2000 401,000 ---------- $1,523,000 ========== The above table does not include any amounts for potential minimum payments under the Nantucket leasehold interest described above, because such amounts, if any, are not presently determinable. 15. SUPPLY CONTRACTS The Company has entered into multiple-year crop purchase contracts, with seventeen independent cranberry growers pursuant to which the Company has contracted to purchase all of the cranberry crop produced on 805 planted acres owned by these growers. 16. 401(k) RETIREMENT PLAN Effective January 1, 1996, the Company established a 401(k) savings plan that covers substantially all full-time employees. The Company contributes amounts based on employee contributions under this plan. The cost of the Company's contributions to this plan for fiscal 1996 was $63,182. 17. SUBSEQUENT EVENT On September 27, 1996, the Company acquired the productive cranberry bog and certain of the associated assets of John E. McFarland & Sons, Inc. for $7,850,000. The purchase price was for cash of $4,850,000 and the issuance of 169,014 shares of Class A Common Stock. 18. SIGNIFICANT CUSTOMERS As discussed in Note 1, the Company had supply agreements to sell the majority of its product to two independent fruit juice and sauce processors. After delivery of the 1995 crop, these agreements expired. In 1996, the Company had sales of approximately $4,700,000 or 12.5% of net sales to one customer. * * * * * * Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Company. Pursuant to Instruction G, the information required by this item with respect to directors is hereby incorporated herein by reference to the information pertaining thereto set forth under the caption entitled "Election of Directors" in the definitive proxy statement for its 1997 annual meeting of shareholders filed with the Commission pursuant to Regulation 14A on November 27, 1996 ("Proxy Statement"). The information required by Item 405 of Regulation S-K is hereby incorporated by reference to the information set forth under the caption entitled "Other Matters- Section 16(a) Beneficial Ownership Reporting Compliance" in the Proxy Statement. The required information with respect to executive officers appears at the end of Part I of this Form 10-K. Item 11. Executive Compensation. Pursuant to Instruction G, the information required by this item is hereby incorporated herein by reference to the information pertaining thereto set forth under the caption entitled "Executive Compensation" in the Proxy Statement. Item 12. Security Ownership of Certain Beneficial Owners and Management. Pursuant to Instruction G, the information required by this item is hereby incorporated herein by reference to the information pertaining thereto set forth under the caption entitled "Stock Ownership of Management and Others" in the Proxy Statement. Item 13. Certain Relationships and Related Transactions. Pursuant to Instruction G, the information required by this item is hereby incorporated herein by reference to the information pertaining thereto set forth under the captions entitled "Election of Directors- Business Experience" and "Certain Transaction" in the Proxy Statement. PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. 1. Financial Statement Schedules. (a) All schedules are omitted because they are inapplicable, not required under the instructions or the financial information is included in the consolidated financial statements or notes thereto. 2. Exhibits and Reports on Form 8-K. (a) The exhibits filed herewith or incorporated by reference herein are set forth on the attached Exhibit Index.* (b) The Company did not file a Form 8-K with the Securities and Exchange Commission during the fourth quarter of fiscal 1996. * Exhibits to this Form 10-K will be furnished to shareholders upon advance payment of a fee of $0.20 per page, plus mailing expenses. Requests for copies should be addressed to John A. Pazurek, Vice President-Finance, 800 First Avenue South, P.O. Box 8020, Wisconsin Rapids, Wisconsin 54495-8020. Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. NORTHLAND CRANBERRIES, INC. Date: November 27, 1996 By: /s/ John Swendrowski John Swendrowski President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed on November 27, 1996 below by the following persons on behalf of the Company and in the capacities and on the dates indicated. By: /s/ John Swendrowski By: /s/ Jerold D. Kaminski John Swendrowski Jerold D. Kaminski Chief Executive Officer and Director Director By: /s/ John A. Pazurek By: /s/ John C. Seramur John Pazurek John C. Seramur Vice President-Finance, Treasurer, Director Chief Accounting Officer and Chief Financial Officer By: /s/ Jeffrey J. Jones By: /s/ LeRoy J. Miles Jeffrey J. Jones LeRoy J. Miles Director Director By: /s/ Patrick F. Brennan By: /s/ Robert E. Hawk Patrick F. Brennan Robert E. Hawk Director Executive Vice President and Director EXHIBIT INDEX EXHIBIT NO. DESCRIPTION 3.1 Articles of Amendment of Articles of Incorporation, dated as of August 18, 1995. 3.2 Articles of Incorporation, as amended, dated as of August 18, 1995. 3.3 Form of Articles of Amendment of Articles of Incorporation, as amended, to be filed with the Wisconsin Department of Financial Institutions, assuming shareholder approval of a proposed amendment to increase the authorized number of shares of both classes of the Company's common stock, subject to consideration by shareholders at the 1997 annual meeting of shareholders scheduled to be held on January 8, 1997. 3.4 Articles of Incorporation, as amended, assuming shareholder approval of a proposed amendment to increase the authorized number of shares of both classes of the Company's common stock, subject to consideration by shareholders at the 1997 annual meeting of shareholders scheduled to be held on January 8, 1997. 3.5 By-Laws of the Company, as amended and restated. [Incorporated by reference to Exhibit 3.2 to the Company's Form 10-K for the fiscal year ended March 31, 1994.] 4.3 Credit Agreement, dated August 31, 1994, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.2 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.4 Security Agreement Re: Equipment, dated August 31, 1994, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.3 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.5 Security Agreement Re: Crops, dated August 31, 1994, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.4 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.6 Mortgage and Security Agreement with Assignment of Rents, dated August 31, 1994, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.5 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.7 Mortgage and Security Agreement with Assignment of Rents, dated August 31, 1994, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.6 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.8 Secured Promissory Note, dated as of June 14, 1989, issued by the Company to The Equitable Life Assurance Society of the United States. [Incorporated by reference to Exhibit 10.1 to the Company's Form 8-K dated July 7, 1989.] 4.9 Mortgage and Security Agreement, dated as of June 14, 1989, from the Company to The Equitable Life Assurance Society of the United States. [Incorporated by reference to Exhibit 10.2 to the Company's Form 8-K dated July 7, 1989.] 4.10 Mortgage and Security Agreement dated July 9, 1993, between the Company and The Equitable Life Assurance Society of the United States. [Incorporated by reference to Exhibit 4.8 to the Company's Form 10-Q dated November 12, 1993.] 4.11 Modification Agreement, dated as of July 9, 1993, between the Company and The Equitable Life Assurance Society of the United States. [Incorporated by reference to Exhibit 4.9 to the Company's Form 10-Q dated November 12, 1993.] 4.12 First Amendment to Credit Agreement, dated June 6, 1995, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.11 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.13 Third Amendment to Credit Agreement, dated November 4, 1996, between the Company and Harris Trust & Savings Bank. 4.14 Revolving Credit Note, dated June 6, 1995, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.12 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.15 Term Credit Note One, dated June 6, 1995, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.13 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.16 Term Credit Note Two, dated June 6, 1995, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.14 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.17 Term Credit Note Three, dated June 6, 1995, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.15 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.18 Acquisition Credit Note, dated June 6, 1995, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.16 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.19 First Supplement to Security Agreement re: Crops, dated June 6, 1995, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.17 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.20 First Supplement to Security Agreement, dated June 6, 1995, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.18 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.21 Mortgage and Security Agreement with Assignment of Rents, dated June 6, 1995, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.19 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.22 Mortgage and Security Agreement with Assignment of Rents, dated June 6, 1995, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.20 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.23 First Supplement to Mortgage and Security Agreement with Assignment of Rents, dated June 6, 1995, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.21 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.24 First Supplement to Mortgage and Security Agreement with Assignment of Rents, dated June 6, 1995, between the Company and Harris Trust & Savings Bank. [Incorporated by reference to Exhibit 4.22 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.25 Secured Promissory Note, dated July 9, 1993, between the Company and The Equitable Life Assurance Society of the United States. [Incorporated by reference to Exhibit 4.23 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 4.26 Stock Pledge, dated July 9, 1993, between the Company and The Equitable Life Assurance Society of the United States. [Incorporated by reference to Exhibit 4.24 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 9.1 Voting Trust Agreement, dated as of June 19, 1987 among John Swendrowski, LeRoy J. Miles, Lawrence R. Kem, Cranberries Limited, Inc. and Kem Cranberries, Inc. [Incorporated by reference to Exhibit 9.1 to the Company's Form S-1 Registration Statement (Reg. No. 33-15383).] 9.2 Amendment to Voting Trust Agreement, dated October 30, 1992. [Incorporated by reference to Exhibit 9.4 to the Company's Form 10-K for the fiscal year ended March 31, 1993.] *10.1 1987 Stock Option Plan, dated June 2, 1987, as amended. [Incorporated by reference to Exhibit 10.5 to the Company's Form 10-K for the fiscal year ended December 31, 1987.] *10.2 Forms of Stock Option Agreement, as amended, under 1987 Stock Option Plan. [Incorporated by reference to Exhibit 10.6 to the Company's Form 10-K for the fiscal year ended December 31, 1987.] *10.3 Form of Modification Agreement, dated as of April 16, 1996, between the Company and each of John A. Pazurek, John B. Stauner, John Swendrowski, William J. Haddow and Robert E. Hawk, modifying Stock Option Agreements previously entered into between the parties. *10.4 1989 Stock Option Plan, as amended. [Incorporated by reference to Exhibit 4.4 to the Company's Form S-8 Registration Statement (Reg. No. 33-32525).] *10.5 Forms of Stock Option Agreements under the 1989 Stock Option Plan, as amended. [Incorporated by reference to Exhibits 4.5- 4.8 to the Company's Form S-8 Registration Statement (Reg. No. 33-32525).] *10.6 1995 Stock Option Plan, as amended. *10.7 Form of Stock Option Agreements under the 1995 Stock Option Plan, as amended. 10.8 Lease Agreement dated September 5, 1991 between The Equitable Life Assurance Society of the United States and the Company. [Incorporated by reference to Exhibit 10.13 to the Company's Form 10-K for the fiscal year ended March 31, 1992.] 10.9 Agreement dated September 5, 1991 between the Company and Cranberry Hills Partnership. [Incorporated by reference to Exhibit 10.14 to the Company's Form 10-K for the fiscal year ended March 31, 1992.] 10.10 Lease, dated March 31, 1994 between Nantucket Conservation Foundation, Inc. and the Company. [Incorporation by reference to Exhibit 10.11 to the Company's Form 10-K for the fiscal year ended March 31, 1994.] *10.11 Key Executive Employment and Severance Agreement dated as of May 8, 1992 between the Company and John Swendrowski. [Incorporated by reference to Exhibit 10.25 to the Company's Form 10-K for the fiscal year ended March 31, 1992.] *10.13 Northland Cranberries, Inc. 1992 Executive Incentive Bonus Plan, as amended. [Incorporated by reference to Exhibit 10.13 to the Company's Form 10-K for the fiscal year ended March 31, 1995.] 10.14 Agreement dated June 15, 1992 between the Company and Board na Mona. [Incorporated by reference to Exhibit 10.27 to the Company's Form 10-K for the fiscal year ended March 31, 1992.] 18 Letter from Deloitte & Touche LLP, dated November 26, 1996, regarding change in accounting principles. 21 Subsidiary of the Company. [Incorporated by reference to Exhibit 22 to the Company's Form 10-K for the fiscal year ended March 31, 1992.] 23.1 Consent of Deloitte & Touche LLP. 27 Financial Data Schedule. 99 Definitive Proxy Statement for the Company's 1997 annual meeting of shareholders scheduled to he held on January 8, 1997 (previously filed with the Commission under Regulation 14A on November 27, 1996 and incorporated by reference herein to extent indicated in this Form 10-K). * This exhibit is a management contract or compensatory plan or arrangement required to be filed as an exhibit to this Form 10-K pursuant to Item 14(c) of Form 10-K. EX-3.1 2 EXHIBIT 3.1 ARTICLES OF AMENDMENT Exhibit 3.1 ARTICLES OF AMENDMENT OF ARTICLES OF INCORPORATION OF NORTHLAND CRANBERRIES, INC. August 18, 1995 1. The name of the corporation is Northland Cranberries, Inc. 2. The first sentence of Article 4 of the Articles of Incorporation of the Corporation is amended in its entirety to read as follows: Article 4 The total number of shares of all classes of capital stock which the Corporation shall have the authority to issue is Twenty-Seven Million (27,000,000) shares, consisting of: (i) Twenty Million (20,000,000) shares of a class designated as "Class A Common Stock," with a par value of one cent ($.01) per share; (ii) Two Million (2,000,000) shares of a class designated as "Class B Common Stock," with a par value of one cent ($.01) per share; and (iii) Five Million (5,000,000) shares of a class designated as "Preferred Stock," with a par value of one cent ($.01) per share. 3. The foregoing amendment to the corporation's Articles of Incorporation was submitted to the corporation's shareholders by the Board of Directors of the corporation and was adopted by such shareholders on August 18, 1995 in accordance with Section 180.1003 of the Wisconsin Business Corporation Law. Executed on behalf of the corporation this 18th day of August, 1995. /s/ John A. Pazurek John A. Pazurek Vice President - Finance and Treasurer This instrument was drafted by and should be returned to Thomas L. Stricker, Jr. of the firm of Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. EX-3.2 3 EXHIBIT 3.2 ARTICLES OF INCORPORATION Exhibit 3.2 ARTICLES OF INCORPORATION OF NORTHLAND CRANBERRIES, INC. August 18, 1995 Article 1 The name of the corporation (hereinafter referred to as the "Corporation") is NORTHLAND CRANBERRIES, INC. Article 2 The period of existence of the Corporation shall be perpetual. Article 3 The purpose or purposes for which the Corporation is organized is to carry on and engage in any lawful activity within the purposes for which corporations may be organized under the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin Statutes. Article 4 The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is Twenty-Seven Million (27,000,000) shares, consisting of: (i) Twenty Million (20,000,000) shares of a class designated as "Class A Common Stock," with a par value of one cent ($.01) per share; (ii) Two Million (2,000,000) shares of a class designated as "Class B Common Stock," with a par value of one cent ($.01) per share; and (iii) Five Million (5,000,000) shares of a class designated as "Preferred Stock," with a par value of one cent ($.01) per share. Any and all such shares of Class A Common Stock and Class B Common Stock (collectively, "Common Stock"), and all Preferred Stock, may be issued for such consideration, not less than the par value thereof, as shall be fixed from time to time by the Board of Directors. Any and all of the shares so issued, the full consideration for which has been paid or delivered, shall be deemed fully paid capital stock and shall not be liable to any further call or assessment thereon, and the holders of such shares shall not be liable for any further payments except as otherwise provided by Section 180.0622 of the Wisconsin Business Corporation Law or any successor provision thereto, if any. The designation, relative rights, preferences and limitations of the shares of each class and the authority of the Board of Directors of the Corporation to establish and to designate series of the Preferred Stock and to fix the variations in the relative rights, preferences and limitations as between such series, shall be as set forth herein A. Preferred Stock (1) Series and Variations Between Series. The Board of Directors of the Corporation is authorized, subject to limitations prescribed by the Wisconsin Business Corporation Law and the provisions of this paragraph A, to provide for the issuance of the Preferred Stock in series, to establish or change the number of shares to be included in each such series and to fix the designation, relative rights, preferences and limitations of the shares of each such series. The authority of the Board of Directors of the Corporation with respect to each series shall include, but not be limited to, determination of the following: (i) The number of shares constituting that series and the distinctive designations of that series; (ii) The dividend rate or rates on the shares of that series and/or the method of determining such rate or rates and the timing of dividend payments on the shares of such series; (iii) Whether and to what extent the shares of that series shall have voting rights in addition to the voting rights provided by Wisconsin Business Corporation Law, which might include the right to elect a specified number of directors in any case or if dividends on such series were not paid for a specified period of time; (iv) Whether the shares of that series shall be convertible into shares of stock of any other series, and, if so, the terms and conditions of such conversion, including the price or prices and the rate or rates of conversion and the terms of adjustment thereof; (v) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (vi) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation; (vii) The obligation, if any, of the Corporation to retire shares of that series pursuant to a sinking fund; and (viii) Any other relative rights, preferences and limitations of that series. Subject to the designations, relative rights, preferences and limitations provided pursuant to this paragraph A, each share of Preferred Stock shall be of equal rank with each other share of Preferred Stock. (2) Dividends. Before any dividends shall be paid or set apart for payment upon shares of Common Stock, the holders of each series of Preferred Stock shall be entitled to receive dividends at the rate per annum and at such times as specified in the particular series. Dividends on shares of Preferred Stock shall be paid out of any funds legally available for the payment of such dividends, when and if declared by the Board of Directors. Such dividends shall accumulate on each share of Preferred Stock from the date of issuance. All dividends on shares of Preferred Stock shall be cumulative so that if the Corporation shall not pay, on a timely basis, the specified dividend, or any part outstanding, such deficiency shall thereafter be fully paid, but without interest, before any dividend shall be paid or set apart for payment on the Common Stock. Any dividend paid upon the Preferred Stock at a time when any accumulated dividends for any prior period are delinquent shall be expressly declared as a dividend in whole or partial payment of the accumulated dividend for the earliest dividend period for which dividends are then delinquent, and shall be so designated to each shareholder to whom payment is made. All shares of Preferred Stock shall rank equally and shall share ratably, in proportion to the rate of dividend of the series, in all dividends paid or set aside for payment for any dividend period or part thereof upon any such shares. Except to the limited extent hereinafter provided, so long as any shares of Preferred Stock shall be outstanding, no dividend, whether in cash, stock or otherwise, shall be paid or declared nor shall any distribution be made on the Common Stock, nor shall any Common Stock be purchased, redeemed or otherwise acquired for value by the Corporation, nor shall any moneys be paid to or set aside or made available for a sinking fund for the purchase or redemption of any Common Stock, unless: (i) All dividends on the Preferred Stock of all series for all past dividend periods shall have been paid or shall have been declared and a sum sufficient for the payment thereof set apart; and (ii) The Corporation shall have set aside all amounts theretofore required to be set aside as and for all sinking fund accounts, if any, for the redemption or purchase of all series of Preferred Stock for all past sinking fund payment periods or dates. The foregoing provisions shall not, however, apply to, or in any way restrict (x) any acquisition of Common Stock in exchange solely for Common Stock; (y) the acquisition of Common Stock through application of the proceeds of the sale of Common Stock; or (z) stock dividends or distributions payable only in shares of stock having rights and preferences subordinate to the Preferred Stock. (3) Liquidation, Dissolution or Winding Up. In case of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of each series of Preferred Stock shall be entitled to receive out of the assets of the Corporation in money or money's worth the amount specified in the particular series for each share at the time outstanding together with all accrued but unpaid dividends thereon, before any of such assets shall be paid or distributed to holders of Common Stock. In case of the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, if the assets of the Corporation shall be insufficient to pay the holders of all shares of Preferred Stock then outstanding the entire amounts to which they may be entitled, the holders of shares of each outstanding series of Preferred Stock shall share ratably in such assets in proportion to the respective amounts payable in liquidation. (4) Voting Rights. The holders of Preferred Stock shall have only such voting rights as are fixed for shares of each series by the Board of Directors pursuant to this paragraph A or are provided by the Wisconsin Business Corporation Law. B. Common Stock. (1) Voting Rights and Powers. (a) Except as otherwise provided by the Wisconsin Business Corporation Law and except as may be determined by the Board of Directors with respect to the Preferred Stock pursuant to paragraph A of this Article 4, only the holders of Common Stock shall be entitled to vote for the election of directors of the Corporation and for all other corporate purposes. With respect to all matters upon which shareholders are entitled to vote or to which shareholders are entitled to give consent, the holders of the outstanding shares of Class A Common Stock and the holders of the outstanding shares of Class B Common Stock shall vote together as a single class, and every holder of any outstanding share of Class A Common Stock shall be entitled to cast thereon one (1) vote in person or by proxy for each share of Class A Common Stock standing in his name on the stock transfer records of the Corporation, and every holder of any outstanding shares of Class B Common Stock shall be entitled to cast thereon three (3) votes in person or by proxy for each share of Class B Common Stock standing in his name on the stock transfer records of the Corporation; provided that, with respect to any proposed corporate action which would require a separate class vote under the Wisconsin Business Corporation Law, the approval of a majority of the votes entitled to be cast by the holders of the class affected by the proposed action, voting separately as a class, shall be obtained in addition to the approval of a majority of the votes entitled to be cast by the holders of the Class A Common Stock and the Class B Common Stock voting together as a single class as hereinbefore provided. (b) The voting power limitations and/or restrictions of Section 180.1150 of the Wisconsin Business Corporation Law, or any successor provision thereto, shall not apply to any shares of Class B Common Stock held by any person. (2) Dividends and Distributions. (a) Subject to the provisions of this Article 4, the Board of Directors may, in its discretion, out of funds legally available for the payment of dividends and at such times and in such manner as determined by the Board of Directors, declare and pay dividends on the Common Stock. (b) As and when cash dividends may be declared from time to time by the Board of Directors out of funds legally available therefor, the cash dividend payable with respect to each share of the Class A Common Stock shall in all cases be in an amount equal to at least one hundred ten percent (110%) of the amount of the cash dividend payable with respect to each share of the Class B Common Stock. Cash dividends may be declared and payable with respect to the Class A Common Stock without a concurrent cash dividend declared and payable with respect to the Class B Common Stock. Distributions declared by the Board of Directors to be in connection with the partial or complete liquidation of the corporation or any of its subsidiaries shall not be considered to be cash dividends for the purposes of this Paragraph (2). (c) Each share of Class A Common Stock and Class B Common Stock shall be equal in respect to rights to dividends (other than those payable in cash) and distributions (except distributions declared by the Board of Directors to be in connection with the liquidation, dissolution or winding up of the Corporation) when and as declared, in the form of stock or other property of the Corporation, except that in the case of dividends or other distributions payable in stock splitups or divisions, which occur after the initial issuance of shares of the Class B Common Stock by the Corporation, only shares of Class A Common Stock shall be distributed with respect to the Class A Common Stock and only shares of Class B Common Stock shall be distributed with respect to the Class B Common Stock. (3) Liquidation, Dissolution or Winding Up. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after there shall have been paid to or set aside for the holders of shares of Preferred Stock the full preferential amounts to which they are entitled, the holders of outstanding shares of Common Stock shall be entitled to receive pro rata, according to the number of shares held by each, the remaining assets of the Corporation available for distribution as set forth herein. (b) In case of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of Class A Common Stock shall be entitled to receive out of the assets of the Corporation in money or money's worth the sum of One Dollar ($1.00) per share (the "Class A Payment"), subject to equitable adjustment in the event of any subdivisions, combinations, stock splits or stock dividends involving shares of the Class A Common Stock, before any of such assets shall be paid or distributed to holders of Class B Common Stock. If the assets of the Corporation shall be insufficient to pay the entire Class A Payment to the holders of the then outstanding Class A Common Stock, then the holders of the Class A Common Stock shall share ratably in such assets in proportion to the amounts which would be payable with respect to Class A Common Stock as if the Class A Payment was paid in full. After payment in full of the Class A Payment, the holders of Class B Common Stock shall be entitled to receive out of the remaining assets of the Corporation in money or money's worth the sum of One Dollar ($1.00) per share (the "Class B Payment"), subject to equitable adjustment in the event of any subdivisions, combinations, stock splits or stock dividends involving shares of the Class B Common Stock, before any of such remaining assets shall be paid or distributed to holders of the Class A Common Stock. If the remaining assets of the Corporation shall be insufficient to pay the entire Class B Payment to the holders of the then outstanding Class B Common Stock, then the holders of the Class B Common Stock shall share ratably in such assets in proportion to the amounts which would be payable with respect to Class B Common Stock as if the Class B Payment was paid in full. After payment in full of the Class A Payment and the Class B Payment, any further payments on the liquidation, dissolution or winding up of the business of the Corporation shall be made on an equal basis as to all of the shares of capital stock then outstanding. (4) Conversion of the Class B Common Stock. (a) Each share of Class B Common Stock may at any time or from time to time, at the option of the respective holder thereof, be converted into one fully paid and nonassessable (except to the extent of any statutory liability imposed by Section 180.0622 of the Wisconsin Business Corporation Law) share of Class A Common Stock. Such conversion right shall be exercised by the surrender of the certificate representing such share of Class B common Stock to be converted to the Corporation at any time during normal business hours at the principal executive offices of the Corporation in Wisconsin Rapids, Wisconsin (to the attention of the Secretary of the Corporation), or if an agent for the registration or transfer of shares of Class B Common Stock is then duly appointed and acting (said agent being referred to in this Article 4 as the "Transfer Agent") then at the office of the Transfer Agent, accompanied by a written notice of the election by the holder thereof to convert and (if so required by the Corporation or the Transfer Agent) by instruments of transfer, in form satisfactory to the Corporation and to the Transfer Agent, if any, duly executed by such holder or his duly authorized attorney, and transfer tax stamps or funds therefor, if required pursuant to Paragraph (4)(e) below. (b) As promptly as practicable after the surrender for conversion of a certificate representing shares of Class B Common Stock in the manner provided in Paragraph (4)(a), above, and the payment in cash of any amount required by the provisions of Paragraphs (4)(a) and (4)(e), the Corporation will deliver, or will cause to be delivered at the office of the Transfer Agent to, or upon the written order of, the holder of such certificate, a certificate or certificates representing the number of full shares of Class A Common Stock issuable upon such conversion, issued in such name or names as such holder may direct. The Corporation shall not, however, upon any such conversion, issue any fractional share of Class A Common Stock, and any shareholder who would otherwise be entitled to receive such fractional share if issued shall receive in lieu thereof a full share of Class A Common Stock. Any such conversion shall be deemed to have been made immediately prior to the close of business on the date of the surrender of the certificate representing shares of Class B Common Stock, and all rights of the holder of such shares as such holder shall cease at such time and the person or persons in whose name or names the certificate or certificates representing the shares of Class A Common Stock are to be issued shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock at such time; provided, however, that any such surrender and payment on any date when the stock transfer records of the Corporation shall be closed shall constitute the person or persons in whose name or names the certificate or certificates representing shares of Class A Common Stock are to be issued as the record holder or holders thereof for all purposes immediately prior to the close of business on the next succeeding day on which such stock transfer records are open. (c) No adjustment in respect of dividends shall be made upon the conversion of any shares of Class B Common Stock; provided, however, that if a share shall be converted subsequent to the record date for the payment of a dividend or other distribution on shares of Class B Common Stock but prior to such payment, the registered holder of such share at the close of business on such record date shall be entitled to receive the dividend or other distribution payable on such share on the date set for payment of such dividend or other distribution notwithstanding the conversion thereof or the Corporation's default in payment of the dividend or distribution due on such date. (d) The Corporation will at all times reserve and keep available, solely for the purpose of issuance upon conversion of the outstanding shares of Class B Common Stock, such number of shares of Class A Common Stock as shall be issuable upon the conversion of all of such outstanding shares; provided, however, that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the outstanding shares of Class B Common Stock by delivery of purchased shares of Class A Common Stock which are held in the treasury of the Corporation. If any shares of Class A Common Stock required to be reserved for purposes of conversion hereunder require registration with, or approval of, any governmental authority under any Federal or state law before such shares of Class A Common Stock may be issued upon conversion, the Corporation will use its best efforts to cause such shares to be duly registered or approved, as the case may be. (e) The issuance of certificates for shares of Class A Common Stock upon conversion of shares of Class B Common Stock shall be made without charge for any stamp or other similar tax in respect of such issuance. However, if any such certificate is to be issued in a name other than that of the holder of the share or shares of Class B Common Stock converted, the person or persons requesting the issuance thereof shall pay to the Corporation the full amount of any tax which may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of the Corporation that such tax has been paid. (f) When the number of outstanding shares of Class B Common Stock falls below two percent (2%) of the aggregate number of shares of Class A Common Stock and Class B Common Stock then outstanding (or such higher number as results from adjustments for stock splits, stock dividends or other events), the outstanding shares of Class B Common Stock shall be deemed without further act on anyone's part to be immediately and automatically converted into shares of Class A Common Stock, and stock certificates formerly representing outstanding shares of Class B Common Stock shall thereupon and thereafter be deemed to represent a like number of full shares of Class A Common Stock. In the event that any shareholder would otherwise be entitled to receive a fractional share of Class A Common Stock upon any such conversion, such shareholder shall receive in lieu thereof a full share of Class B Common Stock. (5) No Subsequent Issuance of Class B Common Stock Subsequent to the initial issuance of the shares of Class B Common Stock, the Board of Directors may only issue such shares in the form of a distribution or distributions pursuant to a stock dividend on or split-up of the shares of the Class B Common Stock and only to the then holders of the outstanding shares of the Class B Common Stock in conjunction with and in the same ratio as a stock dividend on or split-up of the shares of the Class A Common Stock. Except as provided in this paragraph (5), the Corporation shall not issue additional shares of Class B Common Stock after the initial issuance of such shares by the Corporation, and all shares of Class B Common Stock surrendered for conversion shall be retired, unless otherwise approved by the affirmative vote of the holders of a majority of the outstanding shares of the Class A Common Stock and Class B Common Stock entitled to vote, voting together as a single class, as provided in Paragraph (B)(1) of this Article 4. (6) No Preemptive Rights. No holder of any issued and outstanding share of Class A Common Stock, Class B Common Stock or Preferred Stock shall, as such holder, have any preemptive right in or right to purchase or subscribe for, any new or additional shares of Class A Common Stock, Class B Common Stock and/or Preferred Stock, or any shares of any other class or series of capital stock, or any obligations or other rights or options to subscribe for or purchase, any capital stock of any class of series, whether now or hereinafter authorized and whether issued by the corporation for cash or other consideration or by way of dividends or other distribution. Article 5 The number of directors constituting the Corporation's initial Board of Directors shall be two (2), and thereafter the number of directors shall be such number (one or more) as may be fixed from time to time or at any time by, or in the manner provided in, the Corporation's Bylaws. The names of the two (2) initial directors are as follows: John Swendrowski Leroy Miles Article 6 The address of the initial registered office of the Corporation is c/o Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, in Milwaukee County. The name of the Corporation's initial registered agent at such address is Jeffrey J. Jones. Article 7 These Articles of Incorporation may be amended pursuant to the Bylaws of this Corporation and as authorized by law at the time of amendment. Article 8 The name and address of the sole incorporator of this Corporation is Todd B. Pfister, c/o Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. EX-3.3 4 EXHIBIT 3.3 FORM OF ARTICLES OF AMENDMENT Exhibit 3.3 FORM OF ARTICLES OF AMENDMENT OF ARTICLES OF INCORPORATION OF NORTHLAND CRANBERRIES, INC. 1. The name of the corporation is Northland Cranberries, Inc. 2. The first sentence of Article 4 of the Articles of Incorporation of the corporation is amended in its entirety to read as follows: Article 4 The total number of shares of all classes of capital stock which the Corporation shall have the authority to issue is Sixty-Nine Million (69,000,000) shares, consisting of: (i) Sixty Million (60,000,000) shares of a class designated as "Class A Common Stock," with a par value of one cent ($.01) per share; (ii) Four Million (4,000,000) shares of a class designated as "Class B Common Stock," with a par value of one cent ($.01) per shares; and (iii) Five Million (5,000,000) shares of a class designated as "Preferred Stock," with a par value of one cent ($.01) per share. 3. The foregoing amendment to the corporation's Articles of Incorporation was submitted to the corporation's shareholders by the Board of Directors of the corporation and was adopted by such shareholders on January 8, 1997 in accordance with Section 180.1003 of the Wisconsin Business Corporation Law. Executed on behalf of the corporation this 8th day of January, 1997. John A. Pazurek Vice President - Finance and Treasurer This instrument was drafted by and should be returned to Peter C. Underwood of the firm of Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. EX-3.4 5 EXHIBIT 3.4 ARTICLES OF INCORPORATION Exhibit 3.4 ARTICLES OF INCORPORATION OF NORTHLAND CRANBERRIES, INC. January 8, 1997 Article 1 The name of the corporation (hereinafter referred to as the "Corporation") is NORTHLAND CRANBERRIES, INC. Article 2 The period of existence of the Corporation shall be perpetual. Article 3 The purpose or purposes for which the Corporation is organized is to carry on and engage in any lawful activity within the purposes for which corporations may be organized under the Wisconsin Business Corporation Law, Chapter 180 of the Wisconsin Statutes. Article 4 The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is Sixty-Nine Million (69,000,000) shares, consisting of: (i) Sixty Million (60,000,000) shares of a class designated as "Class A Common Stock," with a par value of one cent ($.01) per share; (ii) Four Million (4,000,000) shares of a class designated as "Class B Common Stock," with a par value of one cent ($.01) per share; and (iii) Five Million (5,000,000) shares of a class designated as "Preferred Stock," with a par value of one cent ($.01) per share. Any and all such shares of Class A Common Stock and Class B Common Stock (collectively, "Common Stock"), and all Preferred Stock, may be issued for such consideration, not less than the par value thereof, as shall be fixed from time to time by the Board of Directors. Any and all of the shares so issued, the full consideration for which has been paid or delivered, shall be deemed fully paid capital stock and shall not be liable to any further call or assessment thereon, and the holders of such shares shall not be liable for any further payments except as otherwise provided by Section 180.0622 of the Wisconsin Business Corporation Law or any successor provision thereto, if any. The designation, relative rights, preferences and limitations of the shares of each class and the authority of the Board of Directors of the Corporation to establish and to designate series of the Preferred Stock and to fix the variations in the relative rights, preferences and limitations as between such series, shall be as set forth herein A. Preferred Stock (1) Series and Variations Between Series. The Board of Directors of the Corporation is authorized, subject to limitations prescribed by the Wisconsin Business Corporation Law and the provisions of this paragraph A, to provide for the issuance of the Preferred Stock in series, to establish or change the number of shares to be included in each such series and to fix the designation, relative rights, preferences and limitations of the shares of each such series. The authority of the Board of Directors of the Corporation with respect to each series shall include, but not be limited to, determination of the following: (i) The number of shares constituting that series and the distinctive designations of that series; (ii) The dividend rate or rates on the shares of that series and/or the method of determining such rate or rates and the timing of dividend payments on the shares of such series; (iii) Whether and to what extent the shares of that series shall have voting rights in addition to the voting rights provided by Wisconsin Business Corporation Law, which might include the right to elect a specified number of directors in any case or if dividends on such series were not paid for a specified period of time; (iv) Whether the shares of that series shall be convertible into shares of stock of any other series, and, if so, the terms and conditions of such conversion, including the price or prices and the rate or rates of conversion and the terms of adjustment thereof; (v) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (vi) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation; (vii) The obligation, if any, of the Corporation to retire shares of that series pursuant to a sinking fund; and (viii) Any other relative rights, preferences and limitations of that series. Subject to the designations, relative rights, preferences and limitations provided pursuant to this paragraph A, each share of Preferred Stock shall be of equal rank with each other share of Preferred Stock. (2) Dividends. Before any dividends shall be paid or set apart for payment upon shares of Common Stock, the holders of each series of Preferred Stock shall be entitled to receive dividends at the rate per annum and at such times as specified in the particular series. Dividends on shares of Preferred Stock shall be paid out of any funds legally available for the payment of such dividends, when and if declared by the Board of Directors. Such dividends shall accumulate on each share of Preferred Stock from the date of issuance. All dividends on shares of Preferred Stock shall be cumulative so that if the Corporation shall not pay, on a timely basis, the specified dividend, or any part outstanding, such deficiency shall thereafter be fully paid, but without interest, before any dividend shall be paid or set apart for payment on the Common Stock. Any dividend paid upon the Preferred Stock at a time when any accumulated dividends for any prior period are delinquent shall be expressly declared as a dividend in whole or partial payment of the accumulated dividend for the earliest dividend period for which dividends are then delinquent, and shall be so designated to each shareholder to whom payment is made. All shares of Preferred Stock shall rank equally and shall share ratably, in proportion to the rate of dividend of the series, in all dividends paid or set aside for payment for any dividend period or part thereof upon any such shares. Except to the limited extent hereinafter provided, so long as any shares of Preferred Stock shall be outstanding, no dividend, whether in cash, stock or otherwise, shall be paid or declared nor shall any distribution be made on the Common Stock, nor shall any Common Stock be purchased, redeemed or otherwise acquired for value by the Corporation, nor shall any moneys be paid to or set aside or made available for a sinking fund for the purchase or redemption of any Common Stock, unless: (i) All dividends on the Preferred Stock of all series for all past dividend periods shall have been paid or shall have been declared and a sum sufficient for the payment thereof set apart; and (ii) The Corporation shall have set aside all amounts theretofore required to be set aside as and for all sinking fund accounts, if any, for the redemption or purchase of all series of Preferred Stock for all past sinking fund payment periods or dates. The foregoing provisions shall not, however, apply to, or in any way restrict (x) any acquisition of Common Stock in exchange solely for Common Stock; (y) the acquisition of Common Stock through application of the proceeds of the sale of Common Stock; or (z) stock dividends or distributions payable only in shares of stock having rights and preferences subordinate to the Preferred Stock. (3) Liquidation, Dissolution or Winding Up. In case of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of each series of Preferred Stock shall be entitled to receive out of the assets of the Corporation in money or money's worth the amount specified in the particular series for each share at the time outstanding together with all accrued but unpaid dividends thereon, before any of such assets shall be paid or distributed to holders of Common Stock. In case of the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, if the assets of the Corporation shall be insufficient to pay the holders of all shares of Preferred Stock then outstanding the entire amounts to which they may be entitled, the holders of shares of each outstanding series of Preferred Stock shall share ratably in such assets in proportion to the respective amounts payable in liquidation. (4) Voting Rights. The holders of Preferred Stock shall have only such voting rights as are fixed for shares of each series by the Board of Directors pursuant to this paragraph A or are provided by the Wisconsin Business Corporation Law. B. Common Stock. (1) Voting Rights and Powers. (a) Except as otherwise provided by the Wisconsin Business Corporation Law and except as may be determined by the Board of Directors with respect to the Preferred Stock pursuant to paragraph A of this Article 4, only the holders of Common Stock shall be entitled to vote for the election of directors of the Corporation and for all other corporate purposes. With respect to all matters upon which shareholders are entitled to vote or to which shareholders are entitled to give consent, the holders of the outstanding shares of Class A Common Stock and the holders of the outstanding shares of Class B Common Stock shall vote together as a single class, and every holder of any outstanding share of Class A Common Stock shall be entitled to cast thereon one (1) vote in person or by proxy for each share of Class A Common Stock standing in his name on the stock transfer records of the Corporation, and every holder of any outstanding shares of Class B Common Stock shall be entitled to cast thereon three (3) votes in person or by proxy for each share of Class B Common Stock standing in his name on the stock transfer records of the Corporation; provided that, with respect to any proposed corporate action which would require a separate class vote under the Wisconsin Business Corporation Law, the approval of a majority of the votes entitled to be cast by the holders of the class affected by the proposed action, voting separately as a class, shall be obtained in addition to the approval of a majority of the votes entitled to be cast by the holders of the Class A Common Stock and the Class B Common Stock voting together as a single class as hereinbefore provided. (b) The voting power limitations and/or restrictions of Section 180.1150 of the Wisconsin Business Corporation Law, or any successor provision thereto, shall not apply to any shares of Class B Common Stock held by any person. (2) Dividends and Distributions. (a) Subject to the provisions of this Article 4, the Board of Directors may, in its discretion, out of funds legally available for the payment of dividends and at such times and in such manner as determined by the Board of Directors, declare and pay dividends on the Common Stock. (b) As and when cash dividends may be declared from time to time by the Board of Directors out of funds legally available therefor, the cash dividend payable with respect to each share of the Class A Common Stock shall in all cases be in an amount equal to at least one hundred ten percent (110%) of the amount of the cash dividend payable with respect to each share of the Class B Common Stock. Cash dividends may be declared and payable with respect to the Class A Common Stock without a concurrent cash dividend declared and payable with respect to the Class B Common Stock. Distributions declared by the Board of Directors to be in connection with the partial or complete liquidation of the corporation or any of its subsidiaries shall not be considered to be cash dividends for the purposes of this Paragraph (2). (c) Each share of Class A Common Stock and Class B Common Stock shall be equal in respect to rights to dividends (other than those payable in cash) and distributions (except distributions declared by the Board of Directors to be in connection with the liquidation, dissolution or winding up of the Corporation) when and as declared, in the form of stock or other property of the Corporation, except that in the case of dividends or other distributions payable in stock splitups or divisions, which occur after the initial issuance of shares of the Class B Common Stock by the Corporation, only shares of Class A Common Stock shall be distributed with respect to the Class A Common Stock and only shares of Class B Common Stock shall be distributed with respect to the Class B Common Stock. (3) Liquidation, Dissolution or Winding Up. (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, after there shall have been paid to or set aside for the holders of shares of Preferred Stock the full preferential amounts to which they are entitled, the holders of outstanding shares of Common Stock shall be entitled to receive pro rata, according to the number of shares held by each, the remaining assets of the Corporation available for distribution as set forth herein. (b) In case of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of Class A Common Stock shall be entitled to receive out of the assets of the Corporation in money or money's worth the sum of One Dollar ($1.00) per share (the "Class A Payment"), subject to equitable adjustment in the event of any subdivisions, combinations, stock splits or stock dividends involving shares of the Class A Common Stock, before any of such assets shall be paid or distributed to holders of Class B Common Stock. If the assets of the Corporation shall be insufficient to pay the entire Class A Payment to the holders of the then outstanding Class A Common Stock, then the holders of the Class A Common Stock shall share ratably in such assets in proportion to the amounts which would be payable with respect to Class A Common Stock as if the Class A Payment was paid in full. After payment in full of the Class A Payment, the holders of Class B Common Stock shall be entitled to receive out of the remaining assets of the Corporation in money or money's worth the sum of One Dollar ($1.00) per share (the "Class B Payment"), subject to equitable adjustment in the event of any subdivisions, combinations, stock splits or stock dividends involving shares of the Class B Common Stock, before any of such remaining assets shall be paid or distributed to holders of the Class A Common Stock. If the remaining assets of the Corporation shall be insufficient to pay the entire Class B Payment to the holders of the then outstanding Class B Common Stock, then the holders of the Class B Common Stock shall share ratably in such assets in proportion to the amounts which would be payable with respect to Class B Common Stock as if the Class B Payment was paid in full. After payment in full of the Class A Payment and the Class B Payment, any further payments on the liquidation, dissolution or winding up of the business of the Corporation shall be made on an equal basis as to all of the shares of capital stock then outstanding. (4) Conversion of the Class B Common Stock. (a) Each share of Class B Common Stock may at any time or from time to time, at the option of the respective holder thereof, be converted into one fully paid and nonassessable (except to the extent of any statutory liability imposed by Section 180.0622 of the Wisconsin Business Corporation Law) share of Class A Common Stock. Such conversion right shall be exercised by the surrender of the certificate representing such share of Class B common Stock to be converted to the Corporation at any time during normal business hours at the principal executive offices of the Corporation in Wisconsin Rapids, Wisconsin (to the attention of the Secretary of the Corporation), or if an agent for the registration or transfer of shares of Class B Common Stock is then duly appointed and acting (said agent being referred to in this Article 4 as the "Transfer Agent") then at the office of the Transfer Agent, accompanied by a written notice of the election by the holder thereof to convert and (if so required by the Corporation or the Transfer Agent) by instruments of transfer, in form satisfactory to the Corporation and to the Transfer Agent, if any, duly executed by such holder or his duly authorized attorney, and transfer tax stamps or funds therefor, if required pursuant to Paragraph (4)(e) below. (b) As promptly as practicable after the surrender for conversion of a certificate representing shares of Class B Common Stock in the manner provided in Paragraph (4)(a), above, and the payment in cash of any amount required by the provisions of Paragraphs (4)(a) and (4)(e), the Corporation will deliver, or will cause to be delivered at the office of the Transfer Agent to, or upon the written order of, the holder of such certificate, a certificate or certificates representing the number of full shares of Class A Common Stock issuable upon such conversion, issued in such name or names as such holder may direct. The Corporation shall not, however, upon any such conversion, issue any fractional share of Class A Common Stock, and any shareholder who would otherwise be entitled to receive such fractional share if issued shall receive in lieu thereof a full share of Class A Common Stock. Any such conversion shall be deemed to have been made immediately prior to the close of business on the date of the surrender of the certificate representing shares of Class B Common Stock, and all rights of the holder of such shares as such holder shall cease at such time and the person or persons in whose name or names the certificate or certificates representing the shares of Class A Common Stock are to be issued shall be treated for all purposes as having become the record holder or holders of such shares of Class A Common Stock at such time; provided, however, that any such surrender and payment on any date when the stock transfer records of the Corporation shall be closed shall constitute the person or persons in whose name or names the certificate or certificates representing shares of Class A Common Stock are to be issued as the record holder or holders thereof for all purposes immediately prior to the close of business on the next succeeding day on which such stock transfer records are open. (c) No adjustment in respect of dividends shall be made upon the conversion of any shares of Class B Common Stock; provided, however, that if a share shall be converted subsequent to the record date for the payment of a dividend or other distribution on shares of Class B Common Stock but prior to such payment, the registered holder of such share at the close of business on such record date shall be entitled to receive the dividend or other distribution payable on such share on the date set for payment of such dividend or other distribution notwithstanding the conversion thereof or the Corporation's default in payment of the dividend or distribution due on such date. (d) The Corporation will at all times reserve and keep available, solely for the purpose of issuance upon conversion of the outstanding shares of Class B Common Stock, such number of shares of Class A Common Stock as shall be issuable upon the conversion of all of such outstanding shares; provided, however, that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of the conversion of the outstanding shares of Class B Common Stock by delivery of purchased shares of Class A Common Stock which are held in the treasury of the Corporation. If any shares of Class A Common Stock required to be reserved for purposes of conversion hereunder require registration with, or approval of, any governmental authority under any Federal or state law before such shares of Class A Common Stock may be issued upon conversion, the Corporation will use its best efforts to cause such shares to be duly registered or approved, as the case may be. (e) The issuance of certificates for shares of Class A Common Stock upon conversion of shares of Class B Common Stock shall be made without charge for any stamp or other similar tax in respect of such issuance. However, if any such certificate is to be issued in a name other than that of the holder of the share or shares of Class B Common Stock converted, the person or persons requesting the issuance thereof shall pay to the Corporation the full amount of any tax which may be payable in respect of any transfer involved in such issuance or shall establish to the satisfaction of the Corporation that such tax has been paid. (f) When the number of outstanding shares of Class B Common Stock falls below two percent (2%) of the aggregate number of shares of Class A Common Stock and Class B Common Stock then outstanding (or such higher number as results from adjustments for stock splits, stock dividends or other events), the outstanding shares of Class B Common Stock shall be deemed without further act on anyone's part to be immediately and automatically converted into shares of Class A Common Stock, and stock certificates formerly representing outstanding shares of Class B Common Stock shall thereupon and thereafter be deemed to represent a like number of full shares of Class A Common Stock. In the event that any shareholder would otherwise be entitled to receive a fractional share of Class A Common Stock upon any such conversion, such shareholder shall receive in lieu thereof a full share of Class B Common Stock. (5) No Subsequent Issuance of Class B Common Stock Subsequent to the initial issuance of the shares of Class B Common Stock, the Board of Directors may only issue such shares in the form of a distribution or distributions pursuant to a stock dividend on or split-up of the shares of the Class B Common Stock and only to the then holders of the outstanding shares of the Class B Common Stock in conjunction with and in the same ratio as a stock dividend on or split-up of the shares of the Class A Common Stock. Except as provided in this paragraph (5), the Corporation shall not issue additional shares of Class B Common Stock after the initial issuance of such shares by the Corporation, and all shares of Class B Common Stock surrendered for conversion shall be retired, unless otherwise approved by the affirmative vote of the holders of a majority of the outstanding shares of the Class A Common Stock and Class B Common Stock entitled to vote, voting together as a single class, as provided in Paragraph (B)(1) of this Article 4. (6) No Preemptive Rights. No holder of any issued and outstanding share of Class A Common Stock, Class B Common Stock or Preferred Stock shall, as such holder, have any preemptive right in or right to purchase or subscribe for, any new or additional shares of Class A Common Stock, Class B Common Stock and/or Preferred Stock, or any shares of any other class or series of capital stock, or any obligations or other rights or options to subscribe for or purchase, any capital stock of any class of series, whether now or hereinafter authorized and whether issued by the corporation for cash or other consideration or by way of dividends or other distribution. Article 5 The number of directors constituting the Corporation's initial Board of Directors shall be two (2), and thereafter the number of directors shall be such number (one or more) as may be fixed from time to time or at any time by, or in the manner provided in, the Corporation's Bylaws. The names of the two (2) initial directors are as follows: John Swendrowski Leroy Miles Article 6 The address of the initial registered office of the Corporation is c/o Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, in Milwaukee County. The name of the Corporation's initial registered agent at such address is Jeffrey J. Jones. Article 7 These Articles of Incorporation may be amended pursuant to the Bylaws of this Corporation and as authorized by law at the time of amendment. Article 8 The name and address of the sole incorporator of this Corporation is Todd B. Pfister, c/o Foley & Lardner, 777 East Wisconsin Avenue, Milwaukee, Wisconsin 53202. EX-4.13 6 EXHIBIT 4.13 THIRD AMNDT. TO CREDIT AGMT. Northland Cranberries, Inc. Third Amendment to Credit Agreement Harris Trust and Savings Bank 111 West Monroe Street Chicago, Illinois 60690 Ladies and Gentlemen: Reference is hereby made to that certain Credit Agreement dated as of August 31, 1994, as heretofore amended (the "Credit Agreement"), between Northland Cranberries, Inc., a Wisconsin corporation (the "Company"), and you (the "Bank"). All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Credit Agreement. The Company has requested that the Bank increase the amount of the Revolving Credit and make certain other amendments to the Credit Agreement, and the Bank is willing to do so under the terms and conditions set forth in this Amendment. 1. Amendments. Upon the satisfaction of the conditions precedent set forth in Section 2 of this Amendment, the Credit Agreement shall be and hereby is amended as follows: (a) Section 1.1(a) of the Credit Agreement shall be amended by striking the amount "$21,000,000" appearing therein and substituting therefor the amount "$45,000,000". (b) The last sentence of Section 1.2(b) of the Credit Agreement shall be amended in its entirety to read as follows: "The Term Credit Note Two shall be expressed to mature in eight (8) semi-annual installments of principal, commencing on November 30, 1996 and continuing on the last day of each May and November occurring thereafter to and including May 31, 2000, with the first seven (7) installments to be in the amount of $286,000 and with the final installment to be in the amount of $1,998,000." (c) Section 1.3(a) of the Credit Agreement shall be amended in its entirety to read as follows: "Section 1.3. The Acquisition Credit. (a) Subject to all of the terms and conditions hereof, the Bank agrees to extend an Acquisition Credit to the Company which may be availed of by the Company in its discretion from time to time, be repaid and used again, during the period from the date hereof to and including the Acquisition Credit Termination Date. The Acquisition Credit may be utilized by the Company in the form of loans (individually an "Acquisition Loan" and collectively the "Acquisition Loans"), provided that the aggregate amount of the Acquisition Loans outstanding at any one time shall not exceed $10,000,000 (the "Acquisition Credit Commitment"). Notwithstanding any provision of this Agreement to the contrary, each Acquisition Loan shall mature on the earlier of the date that is one year after the date such Acquisition Loan is made or September 1, 1999." (d) Section 3.1(b) of the Credit Agreement shall be amended by striking the phrase "1/4 of 1% per annum" appearing therein and substituting therefor the phrase "1/8 of 1% per annum". (e) Section 4 of the Credit Agreement shall be amended and restated in its entirety to read as follows: "Section 4. The Collateral. The Revolving Credit Note, the Term Notes, the Acquisition Credit Note and the other obligations of the Company hereunder relating thereto shall be secured by (i) a valid and perfected first priority liens on certain crops of the Company pursuant to the terms of the Security Agreement Re: Crops, (ii) valid and perfected first priority liens on the fixtures and real property of the Company located in Juneau County, Wisconsin, consisting of approximately 1,236.8 acres acquired by the Company from the Yellow River Cranberry Company (the "Yellow River Marsh"), (iii) valid and perfected first priority liens on the fixtures and real property of the Company located in Price County, Wisconsin, consisting of approximately 2,460 acres (the "Fifield Marsh"), (iv) certain machinery and equipment of the Company located in Wisconsin Rapids, Wisconsin pursuant to the terms of the Security Agreement Re: Equipment, (v) valid and perfected first priority liens on the fixtures and real property of the Company located in Hanson, Massachusetts, consisting of approximately 1,904 acres acquired by the Company from United Cape Cod Limited Partnership (the "Hanson Marsh"), (vi) valid and perfected first priority liens on the fixtures and real property of the Company located in Wood County, Wisconsin consisting of approximately 106 acres acquired from Lloyd A. Wolfe and Jeanne M. Wolfe (the "Wolfe Marsh"), (vii) valid and perfected first priority liens on the fixtures and real property of the Company located in the Town of Armenia, Juneau County, Wisconsin, consisting of approximately 469 acres acquired from the Yellow River Cranberry Company (the "F Marsh") and (viii) valid and perfected first priority liens on the fixtures and real properties of the Gordon, Nekoosa and a portion of the Biron divisions of the Company located in Wood and Douglas Counties, Wisconsin. The Company agrees that it will from time to time at the request of the Bank execute and deliver such documents and do such acts and things as the Bank may reasonably request in order to provide for or perfect such liens. Notwithstanding anything herein to the contrary, (i) if the Company reduces that amount of the Revolving Credit Commitment to $25,000,000 pursuant to the terms of Section 3.5 hereof and no Default or Event of Default then exists, the Bank shall execute and deliver to the Company such releases and satisfactions of mortgage as shall be necessary so that the Yellow River Marsh and the Fifield Marsh are no longer subject to any lien in favor of the Bank, (ii) if, after November 4, 1996, the Company either incurs long-term indebtedness or sells equity securities issued by it, in each case, the net proceeds of which are used to satisfy all indebtedness evidenced by Term Note Three or if the Company satisfies such indebtedness out of cash flow, the Bank shall execute and deliver to the Company such releases and satisfactions of mortgage as shall be necessary so that the Hanson Marsh, the Wolfe Marsh and the F Marsh are no longer subject to any lien in favor of the Bank and (iii) if, after November 4, 1996, the Company (a) either incurs long-term indebtedness or sells equity securities issued by it, in each case, the net proceeds of which are used to satisfy all indebtedness evidenced by the Acquisition Credit Note or if the Company satisfies such indebtedness out of cash flow, and (b) terminates the Acquisition Credit Commitment in whole, the Bank shall execute and deliver to the Company such releases and satisfactions of mortgage as shall be necessary so that the real properties of the Gordon, Nekoosa and a portion of the Biron divisions of the Company located in Wood and Douglas Counties, Wisconsin are no longer subject to any lien in favor of the Bank. For purposes of the foregoing sentence, the phrase "long-term indebtedness" shall mean indebtedness which matures no earlier than five years after the date such indebtedness is incurred and the phrase "net proceeds", when used in conjunction with the issuance and sale of equity securities, shall mean gross proceeds less reasonable costs directly incurred and payable as a result thereof." (f) Section 7.4 of the Credit Agreement shall be amended by (i) deleting the period appearing after subsection (e) thereof and substituting therefor a semicolon and (ii) adding the following new subsections (f) and (g) immediately after subsection (e) as so amended: "(f) as soon as available, and in any event within 30 days after the close of each month, a copy of the consolidated balance sheet of the Company and its Subsidiaries as of the last day of such period and the consolidated statement of income for the Company and its Subsidiaries for the month and the fiscal year-to-date period then ended, each in reasonable detail, prepared by the Company in accordance with generally accepted accounting principles consistently applied and certified to by its Vice President-Finance; and (g) as soon as available, and in any event within 30 days prior to the end of each fiscal year of the Company, a copy of the Company's consolidated business plan and operating projections for the following fiscal year, such plan to be in reasonable detail prepared by the Company and in form reasonably satisfactory to the Bank." (g) Section 7.8 of the Credit Agreement shall be amended and restated in its entirety to read as follows: "Section 7.8. Shareholders' Equity. The Company will at all times during the periods indicated below maintain Shareholders' Equity in an amount not less than: Shareholder's Equity from and including to and including will not be less than 8/31/96 5/31/97 $60,000,000 6/01/97 5/31/98 $65,000,000 6/01/98 all times thereafter $70,000,000 (h) Section 7.9 of the Credit Agreement shall be amended and restated in its entirety to read as follows: "Section 7.9. Fixed Charge Coverage Ratio. The Company will not, as of the last day of each fiscal quarter commencing with the fiscal quarter ending August 31, 1997, permit the ratio of: (a) the sum of Net Income plus the increase in Deferred Taxes shown on the Company's audited balance sheet, if any, plus Depreciation and Amortization expense, plus total Interest Expense (in each case, for the four fiscal quarters then ended), to (b) total Interest Expense (for the same four fiscal quarters then ended) plus the scheduled payments of principal on long term debt that will be payable in such period of four fiscal quarters (not including the principal amount of the Loans outstanding under this Agreement), to be less than 1.25 to 1 on the last day of each fiscal quarter." (i) Section 7.10 of the Credit Agreement shall be amended and restated in its entirety to read as follows: "Section 7.10. Funded Debt to Shareholders' Equity Ratio;. The Company will not permit the ratio of its Funded Debt to Shareholders' Equity to exceed 2.0 to 1 at any time." (j) Section 7.11 of the Credit Agreement shall be amended and restated in its entirety to read as follows: "Section 7.11. Net Income;. The Company and its Subsidiaries will not have a net loss of more than $2,000,000 for each of the first three fiscal quarters of the Company's 1997 fiscal year and will not have a net loss of more than $1,500,000 for any fiscal quarter ending thereafter." (k) Section 7.13(f) of the Credit Agreement shall be amended and restated in its entirety to read as follows: "(f) indebtedness incurred to refinance Term Loan Three and/or the Acquisitions Loans made hereunder; and" (l) Section 7.16 of the Credit Agreement shall be amended and restated in its entirety to read as follows: "Section 7.16. Distributions. The Company will not, directly or indirectly, (a) declare, make or incur any liability to pay any dividend on or make any other distribution in respect of any class or series of its capital stock (other than dividends payable solely in its capital stock) or (b) purchase, repurchase or otherwise acquire or retire any of its capital stock; provided, however, that so long as no Default or Event of Default shall have occurred and be continuing the Company may (i) repurchase its capital stock provided the aggregate amount expended for such repurchases does not exceed $2,000,000, (ii) pay dividends in an amount not to exceed $0.07 per share during each of the first three fiscal quarters of the Company's 1996 fiscal year, and (iii) pay dividends in an amount not to exceed $0.08 per share during the fourth fiscal quarter of the Company's 1996 fiscal year and (iv) during each fiscal year of the Company after the 1996 fiscal year, pay dividends in an amount not to exceed 50% of the Company's Net Income for the fiscal year immediately preceding the fiscal year in which such dividend is to be paid." (m) Section 7.21 of the Credit Agreement shall amended and restated in its entirety to read as follows: "Section 7.21. Intentionally Omitted." (n) The definition of the terms "Acquisition Credit Termination Date" and "Termination Date" appearing in Section 9 of the Credit Agreement shall each be amended in their entirety to read, respectively, as follows: ""Acquisition Credit Termination Date" shall mean September 1, 1999, any later date to which such date may be extended from time to time pursuant to Section 1.3(b) hereof, or such earlier date on which the Acquisition Credit Commitment is terminated in whole pursuant to Sections 3.5, 8.2 or 8.3 hereof. "Revolving Credit Termination Date" shall mean September 1, 1999, any later date to which such date may be extended from time to time pursuant to Section 1.1(b) hereof, or such earlier date on which the Revolving Credit Commitment is terminated in whole pursuant to Sections 3.5, 8.2 or 8.3 hereof." (o) The definition of the term "Applicable LIBOR Rate Margin" appearing in Section 9 of the Credit Agreement shall be amended in its entirety to read as follows: ""Applicable LIBOR Rate Margin" shall mean (a) with respect to the Revolving Credit Loans and the Revolving Credit Note, 1.25% per annum on the first $25,000,000 of principal amount outstanding under the Revolving Credit and 2.00% on any principal amount in excess of $25,000,000 outstanding under the Revolving Credit, (b) with respect to the Acquisition Loans, Term Loan One, Term Loan Two, the Acquisition Credit Note, Term Credit Note One and Term Credit Note Two, 2% per annum, and (c) with respect to Term Loan Three and Term Credit Note Three, 2.5% per annum." (p) Exhibit A-1 to the Credit Agreement and the Revolving Credit Note shall each be amended by (i) replacing the amount "$21,000,000" appearing in the upper left corner thereof with the amount "$45,000,000" and (ii) replacing the phrase "Twenty-One Million Dollars ($21,000,000)" appearing in the first paragraph thereof with the phrase "Forty-Five Million Dollars ($45,000,000)". (q) The first paragraph of Exhibit B-2 to the Credit Agreement and of the Term Credit Note Two shall each be amended in their entirety to read as follows: "For value received, the undersigned, Northland Cranberries, Inc., a Wisconsin corporation (the "Company"), promises to pay to the order of Harris Trust and Savings Bank (the "Bank"), at the principal office of Harris Trust and Savings Bank in Chicago, Illinois, the principal sum of Four Million Dollars ($4,000,000), in eight (8) consecutive semi-annual installments, commencing on November 30, 1996 and continuing on the last day of each November and May occurring thereafter to and including May 31, 2000, with the first seven (7) such installments to each be in the amount of $286,000 and the final such installment to be in the amount of $1,998,000." (r) The Bank shall type the following legend on Revolving Credit Note: "This Note has been amended by a Third Amendment to Credit Agreement dated as of November 4, 1996 between the Company and the Bank, including a change in the principal amount hereof, to which Amendment reference is hereby made for a statement of the terms thereof." (s) The Bank shall type the following legend on Term Credit Note Two: "This Note has been amended by a Third Amendment to Credit Agreement dated as of November 4, 1996 between the Company and the Bank, including a change in the amortization hereof, to which Amendment reference is hereby made for a statement of the terms thereof." 2. CONDITIONS PRECEDENT. The effectiveness of this Amendment is subject to the satisfaction of all of the following conditions precedent: (a) The Company and the Bank shall have executed and delivered this Amendment. (b) The Bank shall have received the following (each to be properly executed and completed) and the same shall have been approved as to form and substance by the Bank: (i) supplements to the existing Collateral Documents to confirm and assure that the same secure the various obligations of the Company under the Credit Agreement as amended hereby; (ii) endorsements (or binding commitments therefor) to each existing policy of title insurance insuring the liens of those existing Collateral Documents creating liens on real property to confirm that such policy insures that such Collateral Documents, as supplemented and contemplated by this Amendment, secure the various obligations of the Company under the Credit Agreement as amended hereby (iii) a Mortgage and Security Agreement with Assignment of Rents from the Company covering the Fifield Marsh and a Mortgage and Security Agreement with Assignment of Rents from the Company covering the F Marsh (the "New Wisconsin Mortgages"); (iv) such financing statements relating to the New Wisconsin Mortgages as the Bank may require; (v) a mortgagee's policy of title insurance (or a binding commitment therefor) in the amount of $12,000,000, with a waiver of coinsurance insuring the liens of the New Wisconsin Mortgages to be a valid first liens subject to no defects or objections which are unacceptable to the Bank, together with such direct access reinsurance agreements and endorsements (including without limitation a revolving credit endorsement and doing business, usury and zoning endorsements) as the Bank may require; (vi) copies (executed or certified, as may be appropriate) of all legal documents or proceedings taken in connection with the execution and delivery of this Amendment and the other instruments and documents contemplated hereby to the extent the Bank or its counsel may reasonably request. (c) The Bank shall have received from the Company a non-refundable closing fee in an amount agreed to by the Bank and the Company. (d) Legal matters incident to the execution and delivery of this Amendment and the other instruments and documents contemplated hereby shall be satisfactory to the Bank and its counsel; and the Bank shall have received the favorable written opinion of counsel for the Company in form and substance satisfactory to the Bank and its counsel. In the event that all of the foregoing conditions are satisfied except for condition (b)(ii) with respect to the Hanson Marsh, then in that event, this Amendment shall become effective but the Company shall, not later than November 30, 1996, provide to the Bank the endorsement which will satisfy such condition. 3. REPRESENTATIONS. In order to induce the Bank to execute and deliver this Amendment, the Company hereby represents to the Bank that as of the date hereof, the representations and warranties set forth in Section 5 of the Credit Agreement are and shall be and remain true and correct in all material respects (except that the representations contained in Section 5.3 shall be deemed to refer to the most recent financial statements of the Company delivered to the Bank) and no Default or Event of Default has occurred and is continuing under the Credit Agreement or shall result after giving effect to this Amendment. 4. MISCELLANEOUS. (a) Except as specifically amended herein, the Credit Agreement shall continue in full force and effect in accordance with its original terms. Reference to this specific Amendment need not be made in the Credit Agreement, the Notes, or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to or with respect to the Credit Agreement, any reference in any of such items to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby. (b) The Company agrees to pay on demand all costs and expenses of or incurred by the Bank in connection with the negotiation, preparation, execution and delivery of this Amendment, including the fees and expenses of counsel for the Bank. (c) This Amendment may be executed in any number of counterparts, and by the different parties on different counterpart signature pages, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This Amendment shall be governed by the internal laws of the State of Illinois. Dated as of this 4th day of November, 1996. Northland Cranberries, Inc. By /s/ John Swendrowski Its President Accepted and agreed to in Chicago, Illinois as of the date and year last above written. Harris Trust and Savings Bank By /s/ Its Vice President Consented and agreed to as of the date and year last above written. Mercantile bank of St. Louis, National Association By /s/ Its Norwest Bank Minnesota, National Association By /s/ Its Vice President EX-10.3 7 EXHIBIT 10.3 FORM OF MODIFICATION AGMT. Exhibit 10.3 MODIFICATION AGREEMENT THIS AGREEMENT, made and entered into this _____ day of ____________________________, 1996, by and between Northland Cranberries, Inc. (Company) and _________________________ (Optionee); R E C I T A L S A. On _______________________, 1996 ______________________________ was granted a stock option under the Company's 1987 Stock Option Plan to purchase _________________________ shares of the Company's Class A Common Stock at an exercise price of $ ___________ per share, together with a tax offset bonus calculated for the number of shares subject to said option granted (the "Option"), and otherwise under the terms and conditions set forth in that certain Stock Option Agreement (the "Option Agreement"). A copy of the Option Agreement is attached hereto and incorporated herein by reference marked as Exhibit A. B. The Company desired to terminate the tax offset bonus effective as of the beginning of its current fiscal year and to establish its obligation for such bonus at a fixed and determinable amount. Optionee was willing to agree to cap the maximum amount of the tax offset bonus at the amount payable upon an exercise of the option in consideration of the amount of such tax offset bonus begin fixed at such amount, and other good and valuable consideration. C. The closing price for the Class A Common Stock on ____________________, ___________________, 1995, was $ __________ per share and the Company and Optionee have agreed to use that price to fix the amount of the tax offset bonus payable to Optionee upon exercise of the options granted pursuant to the Agreement. The parties have agreed to modify that Option Agreement in the following manner. NOW, THEREFORE, in consideration of the above and other valuable consideration and of the covenants and agreements herein set forth, receipt and adequacy of which is hereby acknowledged, the parties agree as follows: 1. Amendment of the first paragraph of Section 8. The first paragraph of Section 8 of the Option Agreement shall be amended in its entirety to read as follows: 8. Upon exercise of an option with respect to which a tax offset bonus has been granted, the Optionee shall be entitled to receive from the Company an amount in cash determined by multiplying the Bonus Factor (as hereinafter defined) by the excess of (i) an amount determined by multiplying $ _______ times the number of shares of Common Stock for which the Option is exercised over (ii) the option price for such shares. 2. Amendment of Section 9. Section 9 of the Option Agreement shall be amended in its entirety to read as follows: 9. The tax offset bonus shall be payable to the Optionee within 15 days following exercise of an Option with respect to which such bonus relates. 3. Definitions. Any and all initially capitalized terms used herein shall have the meanings ascribed to them in the Option Agreement unless specifically defined herein. 4. No Other Amendment. All other terms and conditions of the Option Agreement shall remain with full force and effect except as modified herein. 5. Binding Effect. This Modification Agreement shall be binding on the heirs, personal representatives and successors of the parties hereto. OPTIONEE NORTHLAND CRANBERRIES, INC. _______________________ ___________________________________ Title: ____________________________ NORTHLAND CRANBERRIES, INC. NONSTATUTORY STOCK OPTION AGREEMENT THIS AGREEMENT, made and entered into as of this lst day of January, 1989 (the "Grant Date"), by and between NORTHLAND CRANBERRIES, INC., a Wisconsin corporation (the "Company"), and John Pazurek (the "Optionee"). W I T N E S S E T H: WHEREAS, the Company has adopted the Northland Cranberries, Inc. 1987 Stock Option Plan, as amended, (the "Plan"), the terms of which, to the extent not stated herein, are specifically incorporated by reference in this Agreement, and WHEREAS, the purpose of the Plan is to permit options to purchase shares of the Company's Class A Common Stock, $.01 par value ("Common Stock"), to be granted to certain key employees of the Company, and WHEREAS, the Optionee is now employed by the Company in a key capacity, and the Company desires him to remain in such employ, and to secure or increase his stock ownership in the Company in order to increase his incentive and personal interest in the welfare of the Company: NOW, THEREFORE, in consideration of the premises and of the covenants and agreements herein set forth, the parties hereby mutually covenant and agree as follows: 1. Subject to the terms and conditions set forth herein, the Company grants to the Optionee the option to purchase from the company all or any part of the aggregate amount of ___________________ shares of Common Stock of the Company (hereinafter referred to as the "Optioned Shares"; the option to purchase the Optioned Shares is referred to as the "Option"). 2. The price to be paid for the Optioned Shares shall be $ ________ per share, which has been determined by the Board of Directors of the Company (the "Board") to be not less than 100% of the fair market value of a share of Common Stock on the Grant Date. 3. The Option may be exercised by the Optionee while in the employ of the Company, in whole, or in part from time to time, during the period beginning on the Grant Date and ending January 1, 1999, but only in accordance with the following schedule: Elapsed Number of Cumulative Percentage of Years After Shares Subject to Option Grant Date Which May be Purchased Less Than One Year 0% One Year 20% Two Years 40% Three Years 60% Four Years 80% Five Years 100% 4. The Option may be exercised only by written notice to the Company by the Optionee of the Optionee's intent to exercise the Option, delivered to the Secretary of the Company at its office at Wisconsin Rapids, Wisconsin, specifying the number of Optioned Shares in respect to which the Option is being exercised, accompanied by payment for such shares: (a) in cash or its equivalent; (b) by delivering previously acquired shares of Common Stock valued at their fair market value at the time of exercise as determined by the Board consistent with the method of valuation set forth in Section 5 of the Plan; or (c) by any combination of (a) and (b). For purposes of (b) and (c) above, the term "previously acquired shares of Common Stock" shall only include Common Stock owned by the Optionee prior to the exercise of the Option and shall not include shares of Common Stock which are being acquired pursuant to the exercise of said Option. Upon payment of the purchase price, the Optioned Shares acquired pursuant to the exercise of the Option shall be fully paid and nonassessable by the Company, except as provided in Section 180.40(6) of the Wisconsin Statutes. 5. The Option shall not be transferable by the Optionee otherwise than by will or the laws of descent and distributions, and may be exercised during the life of the Optionee only by the Optionee. 6. (a) In the event that the Optionee's employment with the Company is terminated for any reason, other than termination of the Optionee's employment by the Company "for cause", the Option, to the extent not theretofore exercised but then permitted under the percentage limitations of Paragraph 3 hereof, may be exercised by the Optionee or by his legal representative at any time within thirty (30) days after the date such termination of employment, but in no event later than ten years after the Grant Date. (b) In the event the Optionee's employment is terminated by the Company "for cause", the Option, to the extent not theretofore exercised, shall terminate immediately and shall not be exercisable following such termination of employment. For purposes of this Paragraph 6, termination by the Company "for cause" shall mean any termination of the Optionee by reason of any action or omission on the part of the Optionee which is contrary to the interests of the Company or not in the interests of the Company. 7. Subject to the terms and conditions of the Plan and this Agreement, the Company grants to the Optionee a tax offset bonus with respect to 2,000 of the Optioned Shares. 8. Upon exercise of an Option with respect to which a tax offset bonus has been granted, the Optionee shall be entitled to receive from the Company an amount in cash determined by multiplying the excess of the fair market value of the shares of Common Stock for which the Option is exercised over the option price of such shares by the Bonus Factor, as hereinafter defined. The fair market value of such shares of Common Stock shall be determined in the same manner as the fair market value of Common Stock on the date of grant of an option is determined pursuant to Section 5 of the Plan and shall be determined as of the date of exercise; provided, however, that if the Optionee is an officer, director or more than 10% shareholder of the Company, such fair market value shall be determined as of the date which is six months after the date of such exercise. The day on which the Optionee exercises the Option pursuant to Paragraph 4 shall be considered the date on which such Option was exercised. The "Bonus Factor" shall be the fraction calculated by dividing the Applicable Tax Rate, as hereinafter described, by an amount equal to one minus the Applicable Tax Rate. The Board shall determine the Applicable Tax Rate to be used in determining the amount, if any, of tax offset bonuses payable to the Optionee, taking into account such factors as it may deem necessary, including without limitation, the maximum income tax rates applicable to individuals and the salary rate and grade of the Optionee; provided, however, that the Applicable Tax Rate shall not exceed the maximum income tax rate imposed on corporations. 9. The tax offset bonus shall be payable to the Optionee within 15 days following exercise of an Option with respect to which such bonus relates; provided, however, that if the Optionee is an officer, director or 10% or more shareholder of the Company, such bonus shall be payable within 15 days following the date as of which the fair market value of the Common Stock purchased upon exercise of the Option is determined pursuant to Paragraph 8. 10. The Company may deduct and withhold from any cash otherwise payable to the Optionee upon exercise of any part or all of an Option such amount as may be required for the purpose of satisfying the Company's liability to withhold federal, state or local taxes incurred by reason of the exercise of the Option and payment of such cash. Further, in the event the amount so withheld is insufficient for such purpose the Company may require as a condition precedent to the issuance or transfer of any shares of Stock upon exercise of the Option that the Optionee pay to the Company, upon its demand, or otherwise make arrangements satisfactory to the Company for payment of, such amount as may be requested by the Company to withhold any federal, state or local taxes. If the amount so requested is not so paid or if such arrangements are not made, the Company may refuse to issue or transfer any shares upon exercise of the Option. 11. In the event of a capital adjustment resulting from a stock dividend (other than a stock dividend in lieu of an ordinary cash dividend), stock split, reorganization, recapitalization, merger, consolidation, combination or exchange of shares or the like, the Optioned Shares shall be adjusted in a manner consistent with such capital adjustment; provided, however, that no such adjustment shall require the Company to sell any fractional shares and the adjustment shall be limited accordingly. The price of any shares under Option shall be adjusted so that there will be no change in the aggregate purchase price payable upon exercise of any such Option. The determination of the Board as to any adjustment shall be final. 12. The Optioned Shares may not be sold or offered for sale except pursuant to an effective registration statement under the Securities Act of 1933 or in a transaction exempt from the registration provisions of said Act. 13. The Optionee shall not be deemed for any purposes to be a stockholder of the Company with respect to any of the Optioned Shares except to the extent that the Option shall have been exercised, the shares shall have been fully paid, and a stock certificate issued therefore. 14. The existence of the Option shall not affect in any way the right or power of the Company or its shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock of the Company or the rights thereof, or dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. 15. It is understood that nothing herein contained shall be deemed to confer upon the Optionee any right to continue in the employ of the Company, nor to interfere in any way with the right of the Company to terminate the employment of the Optionee at any time. 16. As a condition of the granting of the Option, the Optionee agrees, for himself and his personal representatives, that this Agreement shall be interpreted by the Committee and that any interpretation by the Committee of the terms of this Agreement any determination made by the Committee pursuant to this Agreement shall be final, binding and conclusive. IN WITNESS WHEREOF, the Company has cause this instrument to be executed by its duly authorized officers and its corporate seal hereunto affixed, and the Optionee has hereunto affixed his hand and seal as of the day and year first above written. NORTHLAND CRANBERRIES, INC. By: ___________________________________ John Swendrowski, President Attest: __________________________________ __________________________________________ Optionee EX-10.6 8 EXHIBIT 10.6 1995 STOCK OPTION PLAN Exhibit 10.6 NORTHLAND CRANBERRIES, INC. AMENDED 1995 STOCK OPTION PLAN October 17, 1996 Section 1. Purpose The purpose of Northland Cranberries, Inc. 1995 Stock Option Plan (the "Plan") is to promote the best interests of Northland Cranberries, Inc. (the "Company") and its shareholders by providing key employees of the Company and its Affiliates (as defined below) and directors of the Company who are not employees of the Company and its Affiliates with an opportunity to acquire or increase their proprietary interest in the Company. It is intended that the Plan will promote continuity of management and increased incentive and personal interest in the welfare of the Company by those who are primarily responsible for shaping and carrying out the long-range plans of the Company and securing the Company's continued growth and financial success. Section 2. Definitions As used in the Plan, the following terms shall have the respective meanings set forth below: (a) "Affiliate" shall mean any entity that, directly or through one or more intermediaries, is controlled by, controls, or is under common control with, the Company. (b) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (c) "Commission" shall mean the Securities and Exchange Commission. (d) "Committee" shall mean the Compensation and Stock Option Committee of the Board of Directors of the Company (or any other committee thereof designated by such Board to administer the Plan); provided, however, that the Committee is composed of not less than two directors, each of whom is a "disinterested person" within the meaning of Rule 16b-3. (e) "Directors Fees" shall mean the amount which a Non-Employee Director (defined below) is paid for serving as a director of the Company in the relevant year, including separate fees for serving on committees of the Board of Directors and separate fees for attendance at meetings of the Board of Directors or any committee of the Board of Directors, but shall not include any separate fees for any other services provided for the Company. (f) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (g) "Fair Market Value" shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. (h) "Incentive Stock Option" shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code (or any successor provision thereto). (i) "Key Employee" shall mean any officer or other key employee of the Company or of any Affiliate who is responsible for or contributes to the management, growth or profitability of the business of the Company or any Affiliate as determined by the Committee in its discretion. (j) "Non-Qualified Stock Option" shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option and shall mean any option granted to a Non-Employee Director under Section 6(b) of the Plan. (k) "Non-Employee Director" shall mean any member of the Board of Directors of the Company who is not an employee of the Company and its Affiliates. (l) "Option" shall mean an Incentive Stock Option or a Non- Qualified Stock Option. (m) "Option Agreement" shall mean any written agreement, contract or other instrument or document evidencing any Option granted under the Plan. (n) "Participating Key Employee" shall mean a Key Employee designated to be granted an Award under the Plan. (o) "Person" shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization or government or political subdivision thereof. (p) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the Commission under the Exchange Act, or any successor rule or regulation thereto. (q) "Shares" shall mean shares of Class A common stock of the Company, $0.01 par value, and such other securities or property as may become subject to Options pursuant to an adjustment made under Section 4(b) of the Plan. Section 3. Administration The Plan shall be administered by the Committee; provided, however, that if at any time the Committee shall not be in existence, the functions of the Committee as specified in the Plan shall be exercised by those members of the Board of Directors of the Company who qualify as "disinterested persons" under Rule 16b-3. Subject to the terms of the Plan and applicable laws and without limitation by reason of enumeration, the Committee shall have full discretionary power and authority to: (i) designate Participating Key Employees; (ii) determine the type of Options to be granted to each Participating Key Employee under the Plan; (iii) determine the number of Shares to be subject to each Option granted to Participating Key Employees; (iv) determine the terms and conditions of any Option granted to a Participating Key Employee; (v) determine whether, to what extent and under what circumstances Options granted to Participating Key Employees may be exercised in cash, Shares, other securities or other property, and the method or methods by which Options may be exercised, canceled, forfeited or suspended; (vi) determine whether, to what extent and under what circumstances Shares with respect to Options granted to Participating Key Employees under the Plan shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret and administer the Plan and any instrument or agreement relating to, or Option made under, the Plan (including, without limitation, any Option Agreement); (viii) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations and other decisions under or with respect to the Plan or any Option shall be within the sole discretion of the Committee, may be made at any time or from time to time, and shall be final, conclusive and binding upon all Persons, including the Company, any Affiliate, any Participating Key Employee, any holder or beneficiary of any Option, any shareholder and any employee of the Company or of any Affiliate. Section 4. Shares Available for Award (a) Shares Available. Subject to adjustment as provided in Section 4(b): (i) Number of Shares Available. The number of Shares with respect to which Options may be granted under the Plan shall be 800,000 (on a post-September 3, 1996, two-for-one stock split basis). (ii) Accounting for Awards. The number of Shares covered by an Option under the Plan, or to which such Option relates, shall be counted on the date of grant of such Option against the number of Shares available for granting Options under the Plan. (iii) Sources of Shares Deliverable Under Options. Any Shares delivered pursuant to the exercise of an Option may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares. (b) Adjustments. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split- up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee may, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares subject to the Plan and which thereafter may be made the subject of Options under the Plan; (ii) the number and type of Shares subject to outstanding Options; and (iii) the grant, purchase or exercise price with respect to any Option, or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Option; provided, however, in each case, that with respect to Incentive Stock Options no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b) of the Code (or any successor provision thereto); and provided further that the number of Shares subject to any Option shall always be a whole number. Section 5. Eligibility Any Key Employee, including any executive officer or employee- director of the Company or of any Affiliate, who is not a member of the Committee shall be eligible to be designated a Participating Key Employee. All Non-Employee Directors shall receive Non-Qualified Stock Options as provided in Section 6(b). Section 6. Grants of Options (a) Option Awards to Key Employees. The Committee is hereby authorized to grant Options to Key Employees with the terms and conditions as set forth below and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine in its discretion. (i) Exercise Price. The exercise price per Share of an Option granted pursuant to this Section 6(a) shall be determined by the Committee; provided, however, that such exercise price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Option. (ii) Option Term. The term of each Option shall be fixed by the Committee; provided, however, that in no event shall the term of any Option exceed a period of ten years from the date of its grant. (iii) Exercisability and Method of Exercise. An Option shall become exercisable in such manner and within such period or periods and in such installments or otherwise as shall be determined by the Committee. The Committee also shall determine the method or methods by which, and the form or forms, including, without limitation, cash, Shares, other securities, other property or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price, in which payment of the exercise price with respect to any Option may be made or deemed to have been made. (iv) Incentive Stock Options. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code (or any successor provision thereto) and any regulations promulgated thereunder. Notwithstanding any provision in the Plan to the contrary, no Incentive Stock Option may be granted hereunder after the tenth anniversary of the adoption of the Plan by the Board of Directors of the Company. (b) Non-Qualified Stock Option Awards to Non-Employee Directors. Each Non-Employee Director shall automatically be granted Non- Qualified Stock Options under the Plan in the manner set forth in this Section 6(b). A Non-Employee Director may hold more than one Non- Qualified Stock Option, but only on the terms and subject to any restrictions set forth herein. (i) Exercise Price. The exercise price per Share shall be equal to 100% of the Fair Market Value of a Share on the date of grant of such Option. The "market value" of a Share on the date of grant to the Non-Employee Director shall be the last bid price per Share for the Shares in the Nasdaq National Market on the trading date next preceding such grant date; provided, however, that if the principal market for the Shares is then a national securities exchange, the "market value" shall be the closing bid price per Share for the Shares on the principal securities exchange on which the Shares are traded on the trading date next preceding the date of grant, or in either case above, if no trading occurred on the trading date next preceding the date on which the Non-Qualified Stock Option is granted, then the "market price" per Share shall be determined with reference to the next preceding date on which the Shares were traded. (ii) Grant of Options. On the last day of each fiscal year of the Company during the existence of the Plan, each Non- Employee Director shall be automatically granted an Option to purchase 1,000 Shares. All Options granted to Non-Employee Directors shall be Non-Qualified Stock Options. (iii) Exercisability and Termination of Options. Except as expressly provided herein, Non-Qualified Stock Options granted to Non-Employee Directors under the Plan shall not be exercisable until one (1) year from the date on which such Non- Qualified Stock Option is granted and shall terminate on the earlier of: (A) five years after the date of grant; (B) three months after the Non-Employee Director ceases to be a director of the Company by reason of death, disability or retirement after attaining age 65; or (C) immediately upon the Non-Employee Director ceasing to be a director of the Company for any reason other than by reason of death, disability or retirement. If a Non-Employee Director ceases to be a director of the Company by reason of death, disability or retirement prior to the date the Non-Statutory Stock Option becomes exercisable, the Non-Statutory Stock Option shall become immediately exercisable in full. (iv) Exercise of Options. A Non-Qualified Stock Option granted to a Non-Employee Director may be exercised, subject to its terms and conditions and the terms and conditions of the Plan, in full at any time or in part from time to time by delivery to the Company at its principal office in Wisconsin Rapids, Wisconsin, of a written notice of exercise specifying the number of Shares with respect to which the Non-Qualified Stock Option is being exercised. Any notice of exercise shall be accompanied by full payment of the Option price of the Shares being purchased (x) in cash or its equivalent; (y) by tendering previously acquired shares (valued at their Fair Market Value as of the date of exercise); or (z) by any combination of subparagraphs (x) and (y). No Shares shall be issued until full payment therefor has been made. (c) General. (i) No Consideration for Options. Options shall be granted for no cash consideration unless otherwise determined by the Committee. (ii) Option Agreements. Each Option granted under the Plan shall be evidenced by an Option Agreement in such form (consistent with the terms of the Plan) as shall have been approved by the Committee. (iii) Awards May Be Granted Separately or Together. Options to Participating Key Employees under the Plan may be granted either alone or in addition to, in tandem with, or in substitution for, any other award granted under any other plan of the Company or any Affiliate. Options granted in addition to, or in tandem with, other awards granted under any other plan of the Company or any Affiliate, may be granted either at the same time as or at a different time from the grant of such other awards. (iv) Limits on Transfer of Options. No Option shall be assignable, alienable, saleable or transferable otherwise than by will or by the laws of descent and distribution; provided, however, that a Participating Key Employee at the discretion of the Committee may, and a Non-Employee Director shall, be entitled, in the manner established by the Committee, to designate a beneficiary or beneficiaries to exercise his or her rights, and to receive any property distributable, with respect to any Option upon the death of the Participating Key Employee or the Non-Employee Director, as the case may be. Each Option shall be exercisable, during the lifetime of the Participating Key Employee or the Non-Employee Director, only by such individual or, if permissible under applicable law, by such individual's guardian or legal representative. No Options may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate. (v) Term of Options. Except as otherwise provided in the Plan, the term of each Option shall be for such period as may be determined by the Committee. (vi) Share Certificates; Representation. All certificates for Shares delivered under the Plan pursuant to the exercise of any Option shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the Commission, Nasdaq Stock Market or any stock exchange or other market upon which such Shares are then listed or traded, and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. The Committee may require each Participating Key Employee, Non-Employee Director or other Person who acquires Shares under the Plan by means of an Option originally granted to a Participating Key Employee, Non-Employee Director or other Person to represent to the Company in writing that such Participating Key Employee, Non-Employee Director or other Person is acquiring the Shares without a view to the distribution thereof. Section 7. Amendment and Termination of the Plan; Correction of Defects and Omissions (a) Amendments to and Termination of the Plan. The Board of Directors of the Company may at any time amend, alter, suspend, discontinue or terminate the Plan; provided, however, that shareholder approval of any amendment of the Plan shall also be obtained if otherwise required by: (i) the rules and/or regulations promulgated under Section 16 of the Exchange Act (in order for the Plan to remain qualified under Rule 16b-3); (ii) the Code or any rules promulgated thereunder (in order to allow for Incentive Stock Options to be granted under the Plan); or (iii) the quotation or listing requirements of the Nasdaq National Market or any principal securities exchange or market on which the Shares are then traded (in order to maintain the quotation or listing of the Shares thereon). Termination of the Plan shall not affect the rights of Participating Key Employees and Non-Employee Directors with respect to Options previously granted to them, and all unexpired Options shall continue in force and effect after termination of the Plan except as they may lapse or be terminated by their own terms and conditions. (b) Correction of Defects, Omissions and Inconsistencies. The Committee may in its discretion correct any defect, supply any omission or reconcile any inconsistency in any Option or Option Agreement in the manner and to the extent it shall deem desirable to carry the Plan into effect. Section 8. General Provisions (a) No Rights to Awards. No Key Employee, Participating Key Employee or other Person (other than a Non-Employee Director to the extent provided in Section 6(b) of the Plan) shall have any claim to be granted any Option under the Plan, and there is no obligation for uniformity of treatment of Key Employees, Participating Key Employees or holders or beneficiaries of Options under the Plan. The terms and conditions of Options need not be the same with respect to each Participating Key Employee. (b) Withholding. No later than the date as of which an amount first becomes includable in the gross income of a Participating Key Employee for federal income tax purposes with respect to any Option under the Plan, the Participating Key Employee shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Committee, withholding obligations arising with respect to Options granted to Participating Key Employees under the Plan may be settled with Shares previously owned by the Participating Key Employee; provided, however, that the Participating Key Employee may not settle such obligations with Shares that are part of, or are received upon exercise of, the Option that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company and any Affiliate shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participating Key Employee. The Committee may establish such procedures as it deems appropriate for the settling of withholding obligations with Shares, including, without limitation, the establishment of such procedures as may be necessary to satisfy the requirements of Rule 16b-3. With the consent of the Committee, an Option holder may be permitted to satisfy the Company's withholding tax requirements by electing to have the Company withhold shares otherwise issuable to the Option holder. The election shall be made in writing and shall be made according to such rules and in such form as the Company may determine. (c) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. (d) Rights and Status of Recipients of Options. The grant of an Option shall not be construed as giving a Participating Key Employee the right to be retained in the employ of the Company or any Affiliate. Further, the Company or any Affiliate may at any time dismiss a Participating Key Employee from employment, free from any liability, or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Option Agreement. The grant of an Option to a Non-Employee Director pursuant to Section 6(b) of the Plan shall confer no right on such Non-Employee Director to continue as a director of the Company. Except for rights accorded under the Plan and under any applicable Option Agreement, Participating Key Employees and Non-Employee Directors shall have no rights as holders of Shares as a result of the granting of Options hereunder. (e) Unfunded Status of the Plan. Unless otherwise determined by the Committee, the Plan shall be unfunded and shall not create (or be construed to create) a trust or a separate fund or funds. The Plan shall not establish any fiduciary relationship between the Company or the Committee and any Participating Key Employee, Non-Employee Director or other Person. To the extent any Person holds any right by virtue of a grant under the Plan, such right (unless otherwise determined by the Committee) shall be no greater than the right of an unsecured general creditor of the Company. (f) Governing Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the internal laws of the State of Wisconsin and applicable federal law. (g) Severability. If any provision of the Plan or any Option Agreement or any Option is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction, or as to any Person or Option, or would disqualify the Plan, any Option Agreement or any Option under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan, any Option Agreement or the Option, such provision shall be stricken as to such jurisdiction, Person or Option, and the remainder of the Plan, any such Option Agreement and any such Option shall remain in full force and effect. (h) No Fractional Shares. No fractional Shares or other securities shall be issued or delivered pursuant to the Plan or any Option Agreement, and the Committee shall determine (except as otherwise provided in the Plan) whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares or other securities, or whether such fractional Shares or other securities or any rights thereto shall be canceled, terminated or otherwise eliminated. (i) Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. Section 9. Effective Date of the Plan The Plan shall be effective as of May 17, 1995 subject to shareholder approval of the Plan within 12 months following the date of adoption of the Plan by the Board of Directors, and all Options granted under the Plan prior to the date of shareholder approval shall be subject to such approval and the effective date of such Option grants shall be deemed to be the date of such shareholder approval. Section 10. Term of the Plan No Option shall be granted under the Plan following the seventh anniversary of its effective date. However, unless otherwise expressly provided in the Plan or in an applicable Option Agreement, any Option theretofore granted may extend beyond such date and, to the extent set forth in the Plan, the authority of the Committee to amend, alter, adjust, suspend, discontinue or terminate any such Option, or to waive any conditions or restrictions with respect to any such Option, and the authority of the Board of Directors of the Company to amend the Plan, shall extend beyond such date. EX-10.7 9 EXHIBIT 10.7 FORM OF STOCK OPTION AGMT. Exhibit 10.7 FORM OF NORTHLAND CRANBERRIES, INC. NONQUALIFIED STOCK OPTION AGREEMENT THIS AGREEMENT, made and entered into as of this day of 19__ (the "Grant Date"), by and between NORTHLAND CRANBERRIES, INC., a Wisconsin corporation (the "Company"), and (the "Optionee"). W I T N E S S E T H : WHEREAS, the terms of the Northland Cranberries, Inc. 1995 Amended Stock Option Plan (the "Plan"), to the extent not stated herein, are specifically incorporated by reference in this Agreement and defined terms used herein which are not otherwise defined shall have the meaning set forth in the Plan; WHEREAS, the purpose of the Plan is to permit the grant of options to purchase shares of the Company's Class A Common Stock, $.01 par value ("Common Stock"), to certain key employees of the Company; WHEREAS, the Optionee is now employed by the Company in a key capacity and has exhibited judgment, initiative and efforts which have contributed materially to the successful performance of the Company; and WHEREAS, the Company desires the Optionee to remain in the Company's employ and wishes to provide the Optionee with the opportunity to secure or increase his stock ownership in the Company in order to develop even a stronger incentive to put forth maximum effort for the continued success and growth of the Company. NOW, THEREFORE, in consideration of the premises and of the covenants and agreements herein set forth, the parties hereby mutually covenant and agree as follows: 1. Grant of Options. Subject to the terms and conditions of the Plan and this Agreement, the Company grants to the Optionee this option (the "Option") to purchase from the Company all or any part of the aggregate number of shares of Common Stock (the "Optioned Shares"), subject to adjustment as provided in Paragraph 7. This Option is intended to constitute a nonqualified stock option and shall not be treated as an incentive stock option within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended. 2. Option Price. The option price to be paid for the Optioned Shares shall be $ per share, subject to adjustment as provided in Paragraph 7. The per share option price has been determined by the Compensation and Stock Option Committee (the "Committee") of the Board of Directors of the Company (the "Board") to be not less than 100% of the fair market value of the Common Stock on the Grant Date (i.e., the last bid price of the Common Stock on Nasdaq on the day prior to the Grant Date). 3. Exercise of Option. a. Subject to the terms and conditions of the Plan and except as otherwise provided in this Agreement, this Option may be exercised by the Optionee while in the employ of the Company, in whole or in part, from time to time or at any time, beginning on the Grant Date and ending on the tenth anniversary of the Grant Date (the "Termination Date"). b. If the Optionee is discharged or leaves the employ of the Company for any reason (other than termination by the Company for "cause" or the death or disability of the Optionee), prior to the Termination Date, this Option, to the extent not theretofore exercised, may be exercised by the Optionee or by his legal representative at any time within three months after the date of termination of employment upon the tender to the Company in cash or its equivalent of the full purchase price (and not by the tender of previously acquired Common Stock), but in no event later than the Termination Date. c. If the Optionee dies while he is in the employ of the Company, or if his employment is terminated by reason of his disability prior to the Termination Date, this Option, to the extent not theretofore exercised, may be exercised in whole or in part as follows: (i) by the legal representative of the Optionee at any time within six months after the date of the Optionee's death or (ii) by the Optionee or his legal representative at any time within three months after the termination of the Optionee's employment by reason of disability, but in no event later than the Termination Date. d. If the Optionee's employment is terminated by the Company "for cause," this Option to the extent not theretofore exercised shall terminate immediately and shall not be exercisable following such termination of employment. For purposes of this Paragraph 3, termination by the Company "for cause" shall mean any termination of the Optionee by reason of any action or omission on the part of the Optionee which is deemed contrary to the interests of the Company or not in the interests of the Company, as determined by the Board in its sole discretion. e. This Option may be exercised during the life of the Optionee only by the Optionee (or his legal representative as provided in this Paragraph 3). 4. Manner of Exercise and Payment. This Option may be exercised only by written notice to the Company by the Optionee (or his legal representative as provided in Paragraph 3) of the Optionee's (or such legal representative's) intent to exercise all or part of this Option, served upon the Secretary of the Company at its office at Wisconsin Rapids, Wisconsin, specifying the number of Optioned Shares in respect to which this Option is being exercised, accompanied by payment of the aggregate option price for such Optioned Shares, at the Optionee's (or such legal representative's) election (except as limited in Paragraph 3): (a) in cash or its equivalent; (b) by delivering previously acquired shares of Common Stock, duly endorsed in blank or accompanied by stock powers duly endorsed in blank, valued at their fair market value at the time of exercise as determined by the Committee; or (c) by any combination of (a) and (b). For purposes of (b) and (c) above, the term "previously acquired shares of Common Stock" shall only include Common Stock owned by the Optionee prior to the exercise of this Option and shall not include shares of Common Stock which are being acquired pursuant to the exercise of this Option. Upon receipt of the payment of the aggregate option price for all of the Optioned Shares so purchased, certificates for such Optioned Shares shall be issued by or on behalf of the Company to the Optionee. The Optioned Shares so acquired, upon payment in full of the aggregate option price, shall be fully paid and nonassessable, except as provided by Section 180.0622(2) (b) of the Wisconsin Statutes. 5. Nontransferability of Option. This Option shall not be transferable by the Optionee otherwise than by will or the laws of descent and distribution. 6. Tax Withholding. (a) The Company may require as a condition precedent to the issuance or transfer of any shares of Common Stock upon exercise of this Option that the Optionee pay to the Company, upon its demand, or otherwise make arrangements satisfactory to the Company for payment of, such amount as may be requested by the Company for the purpose of satisfying the Company's tax withholding requirement. If the amount so requested is not so paid or if such arrangements are not made, the Company may refuse to issue or transfer any Optioned Shares upon exercise of this Option. (b) The Optionee shall be permitted to satisfy the Company's tax withholding requirements by delivering shares of previously owned Common Stock having a fair market value (as determined by the Committee) on the date income is recognized by the Optionee (the "Tax Date") pursuant to the exercise of this Option equal to the minimum amount required to be withheld. If the number of shares of Common Stock determined pursuant to the preceding sentence shall include a fractional share, the number of shares delivered shall be reduced to the next lower whole number and the Optionee shall deliver to the Company cash in lieu of such fractional share, in an amount equal to the Common Stock's then fair market value as determined by the Committee, or otherwise make arrangements satisfactory to the Company for payment of such amount 7. Adjustment to Optioned Shares and Option Price. In the event of a capital adjustment resulting from a stock dividend (other than a stock dividend in lieu of an ordinary cash dividend), stock split, reorganization, spin-off, split-up or distribution of assets to shareholders, recapitalization, merger, consolidation, combination or exchange of shares or the like, the Optioned Shares and the per share option price (but not the aggregate option price for all Optioned Shares, as adjusted) shall be adjusted in a manner consistent with such capital adjustment and in accordance with the Plan; provided, however, that no such adjustment shall require the Company to issue any fractional shares and the adjustment shall be limited accordingly as determined by the Committee. The determination of the Committee as to any adjustment shall be final. 8. Transfer Restrictions. The Optioned Shares to be acquired upon exercise of this Option may not be sold or offered for sale except pursuant to an effective registration statement under the Securities Act of 1933, as amended ("Act"), or in a transaction which, in the opinion of legal counsel for the Company, is exempt from the registration provisions of the Act. 9. Status of Optionee. The Optionee shall not be deemed for any purposes to be a shareholder of the Company with respect to any of the Optioned Shares except to the extent that this Option shall have been exercised, the aggregate option price for the Optioned Shares purchased shall have been fully paid and a stock certificate shall have been issued by or on behalf of the Company therefor. 10. Employment. It is fully understood that nothing contained in this Agreement or the Plan shall be deemed to confer upon the Optionee any right to continue in the employ of the Company, nor to interfere in any way with the right of the Company to terminate the employment of the Optionee at any time. 11. Interpretation by Committee. As a condition of the granting of this Option, the Optionee agrees, for himself and his legal representatives, that the Plan and this Agreement shall be subject to discretionary interpretation by the Committee and that any interpretation by the Committee of the terms of the Plan and this Agreement shall be final, binding and conclusive on the Optionee and his legal representatives in all respects and shall not be subject to challenge or dispute by the Optionee or his legal representatives. 12. Modification. At any time and from time to time the Committee may direct execution of an instrument providing for the modification, extension or renewal of this Option; provided, however, that no such modification, extension or renewal shall (a) confer on the Optionee any right or benefit which could not be conferred on him by the grant of a new option under the Plan at such time or (b) alter, impair or adversely affect this Option or Agreement without the written consent of the Optionee. IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer and the Optionee has hereunto affixed his signature as of the day and year first above written. NORTHLAND CRANBERRIES, INC. By: ___________________________ John Swendrowski President _____________________________ , Optionee EX-18 10 EXHIBT 18 LTR. FROM DELOITTE & TOUCHE Exhibit 18 Deloitte & Touche LLP _________________________________________ 411 East Wisconsin Avenue (414) 271-3000 Milwaukee, Wisconsin 53202-4496 November 4, 1996 Northland Cranberries, Inc. 800 First Avenue South Wisconsin Rapids, WI 54494-8020 Dear Sirs: We have audited the consolidated financial statements of Northland Cranberries, Inc. as of August 31, 1996 and March 31, 1995, and for each of the years ended August 31, 1996, March 31, 1995 and 1994, and for the five-month period ended August 31, 1995 included in your Annual Report on Form 10-K to the Securities and Exchange Commission and have issue our report thereon dated November 4, 1996. Note 2 to such financial statements contains a description of your adoption of a change in the method of deferring crop growing costs. In our judgment, such change is to an alternative accounting principle that is preferable under the circumstances. Yours truly, /s/ Deloitte & Touche LLP DELOITTE & TOUCH LLP EX-23.1 11 EXHIBIT 23.1 CONSENT Exhibit 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement No. 33-32525 of Northland Cranberries, Inc. on Form S-8 of our report dated November 4, 1996, (which expresses an unqualified opinion and includes an explanatory paragraph relating to a change in the method of deferring crop growing costs) appearing in the Annual Report on Form 10-K of Northland Cranberries, Inc. for the year ended August 31, 1996. /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Milwaukee, Wisconsin November 27, 1996 EX-27 12 EXHIBIT 27 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED FINANCIAL STATEMENTS OF NORTHLAND CRANBERRIES, INC. AS OF AND FOR THE YEAR ENDED AUGUST 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 YEAR AUG-31-1996 SEP-01-1995 AUG-31-1996 266,467 1,259,548 2,631,434 0 12,414,426 18,617,497 141,098,591 18,609,490 145,484,619 12,067,187 56,978,095 0 0 133,705 60,183,370 145,484,619 36,390,156 37,607,845 16,516,785 7,020,416 0 0 2,657,067 11,413,577 4,509,577 6,904,577 0 0 0 6,904,577 0.50 0.50
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