SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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Northland Cranberries, Inc.
---------------------------
(Name of Registrant as Specified in its Charter)
---------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
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[NORTHLAND CRANBERRIES, INC. LOGO]
NORTHLAND CRANBERRIES, INC.
800 First Avenue South, P.O. Box 8020
Wisconsin Rapids, Wisconsin 54495-8020
--------------------
NOTICE OF 2000 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 5, 2000
--------------------
TO OUR SHAREHOLDERS:
We would like to invite you to attend our 2000 annual meeting of
shareholders on Wednesday, January 5, 2000 at 3:00 p.m. at the Northland
Conference Center, located at 2321 West Grand Avenue, Wisconsin Rapids,
Wisconsin. As we describe in the accompanying proxy statement, we will be voting
on the election of seven directors and on other business that may properly come
before the annual meeting.
We have enclosed a proxy card and our 1999 annual report along with this
proxy statement. Your vote is important, no matter how many shares you own. Even
if you plan to attend the annual meeting, please complete, date and sign the
proxy card and mail it as soon as you can in the envelope we have provided. If
you attend the annual meeting, you can revoke your proxy and vote your shares in
person if you would like.
Thank you for your continued support. We look forward to seeing you at the
annual meeting.
NORTHLAND CRANBERRIES, INC.
/s/ David J. Lukas
David J. Lukas
Senior Vice President-Administration,
Secretary and Corporate Counsel
Wisconsin Rapids, Wisconsin
November 24, 1999
FREQUENTLY ASKED QUESTIONS
Q: Why have I received this proxy Q: What constitutes a quorum?
statement?
A "quorum" refers to the number of
Our Board of Directors has shares that must be in attendance
sent you this proxy statement, at a meeting to lawfully conduct
starting around November 24, business. A majority of the
1999, to ask for your vote as combined votes of the Class A
a Northland shareholder on shares and Class B shares entitled
certain matters to be voted on to be cast will represent a quorum.
at the upcoming annual As a result, shares representing at
shareholders' meeting. least 10,805,414 votes must be
present at the annual meeting to
constitute a quorum.
Q: What am I voting on? Q: What happens if I sign and
return my proxy card but do
You will vote on re-electing not mark my vote?
seven directors. Our Board of
Directors is not aware of any John Swendrowski and John Pazurek,
other matter which will be as proxies, will vote your shares
presented for your vote at the to elect the Board's nominees for
annual meeting. director.
Q: Do I need to attend the annual Q: Who will count the votes?
meeting in order to vote?
Harris Trust & Savings Bank, our
No. You can vote either in transfer agent and registrar, will
person by ballot at the annual count the votes and act as
meeting or by completing and inspector of elections.
mailing the enclosed proxy
card.
Q: Who is entitled to vote? Q: What percentage of Northland's
votes do directors and officers
If you owned shares as of the own?
close of business on November
19, 1999 (the Record Date), Our directors and officers together
you are entitled to vote. You own approximately 15.2% of our vote
will be entitled to one vote as of the Record Date. See page 6
per share for each share of for more details.
our Class A Common Stock you
owned on the Record Date.
Q: How many shares of Northland's Q: Who are the largest shareholders?
stock are entitled to vote?
The State of Wisconsin Investment
As of the Record Date, Board owned 2,910,400 Class A
19,702,221 Class A shares and shares, or approximately 14.8% of
636,202 Class B shares were our Class A shares and
entitled to vote at the annual approximately 13.5% of our voting
meeting. Since Class B shares power, as of January 16, 1999.
are entitled to three votes Gilder, Gagnon, Howe & Co. owned
per share, there were 3,058,780 Class A shares, or
21,610,827 votes represented approximately 15.5% of our Class A
by shares entitled to vote as shares and 14.2% of our voting
of the Record Date. All shares power, as of April 12, 1999.
vote together as one group.
2
ELECTION OF DIRECTORS
Director Nominees
At the annual meeting, you will elect seven directors to hold office
until our next annual meeting and until their successors are elected. Our Board
of Directors, which we refer to herein as the "Board," has nominated seven
people for election. John Swendrowski and John Pazurek, as proxies, intend to
vote for the election of all of the Board's nominees. They will also vote for
another person that the Board may recommend in place of a nominee if that
nominee becomes unable to serve as a director before the annual meeting. All of
the Board's nominees are currently serving as shareholder-elected Board members.
Under Wisconsin law, shareholders elect directors by a plurality of
the votes cast by shares which are entitled to vote in the election, assuming a
quorum is present. For this purpose, "plurality" means that the nominees
receiving the largest number of votes will be elected as directors. Any shares
which do not vote, whether by abstention, broker non-vote or otherwise, will not
affect the election of directors.
The Board's nominees to serve as our directors, and certain important
information regarding each nominee, are as follows:
John Swendrowski
John Swendrowski, 51, is the Chairman of the Board and originally
founded Northland in 1987. He has been a director since that time. He has also
served as our Chief Executive Officer since our inception in 1987.
Leroy J. Miles
Leroy J. Miles, 64, retired as our Corporate Secretary in August 1995
and as Executive Vice President at the end of 1994. Before retiring, Mr. Miles
held such executive positions since May 1987, and has also been one of our
directors since that time.
Robert E. Hawk
Robert E. Hawk, 44, was appointed Group President-Non-Branded
Divisions in August 1998. Before that, he served as our Executive Vice President
since October 1996; Vice President - Sales, Marketing and Special Projects since
January 1993; and Vice President - Operations since January 1989. Mr. Hawk has
been a director of Northland since 1989.
Patrick F. Brennan
Patrick F. Brennan, 68, has been a Northland director since 1989. He
retired as President and Chief Executive Officer of Consolidated Papers, Inc., a
Wisconsin Rapids, Wisconsin manufacturer of paper products, as of December 31,
1996, a position he had held since October 1993. Before that, he served as
Consolidated's President and Chief Operating Officer for five years, Executive
Vice President for over one year and Corporate Vice President for three years.
He has served as a director of Consolidated Papers, Inc. since February 1987.
Mr. Brennan is also a director of Valassis Communications Inc., Livonia,
Michigan, a supplier of newspaper inserts.
Jeffrey J. Jones
Jeffrey J. Jones, 46, is a partner in the law firm of Foley & Lardner
in Milwaukee, Wisconsin. Foley & Lardner has been Northland's general outside
legal counsel, and Mr. Jones has served as one of our directors, since our
formation in 1987.
3
Pat Richter
Pat Richter, 58, has been a director of Northland since 1997. Mr.
Richter became the Director of Athletics at the University of Wisconsin-Madison
in February 1990. Before that, he served as Vice President-Personnel of Oscar
Mayer Foods Co. since 1988. Mr. Richter is also a director of the Green Bay
Packers, Inc., Anchor Bancorp Wisconsin Inc., Madison, Wisconsin, a financial
institution, and Outlook Group Corp., Neenah, Wisconsin, a printing company.
John C. Seramur
John C. Seramur, 57, has served as Vice Chairman of Associated
Banc-Corp since October 1997. For over 31 years before that, Mr. Seramur served
as President, Chief Executive Officer and Chief Operating Officer of First
Financial Bank and its parent corporation, First Financial Corporation, a thrift
holding company that merged with Associated Banc-Corp in October 1997. Mr.
Seramur is also a director of Associated Banc-Corp and has been a director of
Northland since 1987.
Board Meetings and Committees
The following table lists the Board committees on which our directors
serve, as well as how many times the Board and each committee met in fiscal
1999.
Board Member Board Audit Executive Compensation
------------ ----- ----- --------- ------------
J. Swendrowski x* x*
L. Miles x x
R. Hawk x x
P. Brennan x x* x
J. Seramur x x x*
J. Jones x x
P. Richter x x x
Meetings Held in Fiscal 1999 5 1 0 3
*Chairman
Executive Committee. The Executive Committee acts on behalf of the
Board between Board meetings, except with respect to matters upon which
Wisconsin law does not allow a committee to act.
Audit Committee. The Audit Committee's principal functions include:
o recommending a firm of independent public accountants to serve as
our independent auditors for the next fiscal year;
o meeting with and reviewing reports of our independent accountants
and auditors;
o overseeing our quarterly and annual financial reporting process;
and
o conducting a post-audit review of our annual financial reporting
and audit process.
Compensation and Stock Option Committee. The Compensation and Stock
Option Committee administers our stock option plans, including granting options
to our key employees, and approves the compensation, bonuses and benefits of our
officers and key employees.
We do not have a nominating committee. Our Board as a whole performs
the functions that such a committee would otherwise perform. If you would like
to propose director nominees for consideration at the annual meeting, you can do
so under our by-laws only by giving our Secretary written notice of your intent
to make a nomination not less than 30 days before the annual meeting. You must
tell us in your notice, among other things, the nominee's name, biographical
data and qualifications.
4
STOCK OWNERSHIP OF MANAGEMENT AND OTHERS
Stock Ownership
We describe in the following table certain information regarding the
beneficial ownership of Class A shares and Class B shares as of the Record Date
held by (i) each of our directors and those of our executive officers who are
named in the Summary Compensation Table below under "Executive
Compensation--Summary Compensation Information"; (ii) all of our directors and
executive officers as a group; and (iii) each person or entity that we know
beneficially owns more than 5% of the Class A shares or Class B shares. We
believe that all of the people listed below have sole voting and investment
power over the listed shares, except as we have indicated otherwise in the
footnotes.
Class A Shares Class B Shares
Beneficially Beneficially Percentage of
Owned and Owned and Aggregate
Name of Individual or Entity Percentage of Percentage of Voting
or Number in Group Class(1) Class(1) Power
- ------------------------------------------------ ---------------------- ------------------- --------------
Directors and Executive Officers
John Swendrowski(2) 386,008(3) 636,202(4) 10.5%
(1.9%) (100.0%)
Leroy J. Miles 107,135(5) 287,998(6) 4.5%
* (45.3%)
Michael A. Morello 143,986(7) __ *
*
Robert E. Hawk 431,060(8) __ 2.0%
(2.2%)
John A. Pazurek 125,534(9)
*
Scott R. Corriveau 0 __ *
*
Patrick F. Brennan 10,558(10) __ *
*
Jeffrey J. Jones 26,400(11) __ *
*
Pat Richter 5,400(12) __ *
*
John C. Seramur 84,770(13) __ *
*
All directors and executive officers 1,463,265 636,202 15.2%
as a group (15 persons)(14) (7.2%) (100.0%)
Other Five Percent Holders
State of Wisconsin Investment Board 2,910,400 -- 13.5%
("SWIB")(15) (14.8%)
Gilder, Gagnon, Howe & Co. ("Gilder")(16) 3,058,780 -- 14.2%
(15.5%)
- --------------------------------
*Denotes less than 1%.
5
(1) Class B shares can be converted on a share-for-share basis into Class A
shares at any time. As a result, a holder of Class B shares is deemed to
beneficially own an equal number of Class A shares. However, so that we
don't overstate aggregate beneficial ownership, the Class A shares we
listed do not include Class A shares which the holder can acquire by
converting Class B shares into Class A shares. Similarly, when we
determined the percentages of outstanding Class A shares that we listed in
the table, we did not include Class A shares which the holder can acquire
by converting Class B shares into Class A shares.
(2) Mr. Swendrowski's address is 800 First Avenue South, P.O. Box 8020,
Wisconsin Rapids, Wisconsin 54495-8020.
(3) The Class A shares listed include (i) 53,275 shares which Mr. Swendrowski
owns directly; (ii) 19,000 shares owned by a charitable foundation with
respect to which he shares voting and investment power; (iii) 14,733 shares
which are owned by members of Mr. Swendrowki's family and with respect to
which he shares voting and investment power; and (iv) 279,000 shares which
Mr. Swendrowski can acquire by exercising vested stock options.
(4) The Class B shares listed include (i) 348,204 shares which Mr. Swendrowski
owns directly and (ii) 287,998 shares held by Cranberries Limited, Inc.
("CLI"), a corporation which Messrs. Swendrowski and Miles own and which
Mr. Swendrowski controls, with respect to which he shares voting and
investment power.
(5) The Class A shares listed include (i) 86,141 shares which Mr. Miles owns
directly; (ii) 18,000 shares which Mr. Miles can acquire by exercising
vested stock options; and (iii) 2,994 shares held for the account of Mr.
Miles' wife, with respect to which he shares voting and investment power.
(6) The Class B shares listed include the 287,998 shares which Mr. Miles is
deemed to beneficially own as an officer and shareholder of CLI and with
respect to which he shares voting and investment power. Those shares are
also included under the number of Class B shares which Mr. Swendrowski is
deemed to beneficially own. See note (4) above.
(7) The Class A shares listed include 2,000 shares which are owned by Mr.
Morello's children and with respect to which he shares voting and
investment power.
(8) The Class A shares listed include (i) 288,200 shares which Mr. Hawk owns
directly; (ii) 10,042 shares which Mr. Hawk's wife owns or which are held
in his wife's IRA account, with respect to which he shares voting and
investment power; (iii) 19,946 shares held in his IRA account; and (iv)
102,400 shares which Mr. Hawk can acquire by exercising vested stock
options.
(9) Includes 95,500 Class A shares which Mr. Pazurek can acquire by exercising
vested stock options.
(10) Includes 4,912 Class A shares which Mr. Brennan can acquire by exercising
vested stock options.
(11) Includes 4,912 Class A shares which Mr. Jones can acquire by exercising
vested stock options.
(12) Includes 2,000 Class A shares which Mr. Richter can acquire by exercising
vested stock options.
(13) Includes 2,690 Class A shares which Mr. Seramur can acquire by exercising
vested stock options and 82,080 shares held by the John C. Seramur FLITE
Trust with respect to which he shares voting and investment power.
(14) When we determined the aggregate beneficial ownership of Class A shares and
Class B shares for all of our directors and executive officers as a group,
we counted shares which are deemed to be beneficially owned by more than
one person only once to avoid overstatement. The number of Class A shares
listed (i) does not include shares owned by Mr. Morello since he was no
longer an executive officer as of the Record Date and (ii) includes 650,214
shares which certain of our executive officers and directors can acquire by
exercising vested stock options.
(15) The information given is as of or about January 16, 1999, as reported by
SWIB in its Schedule 13G filed with the Securities and Exchange Commission
("SEC"). SWIB's address is P.O. Box 7842, Madison, Wisconsin 53707.
(16) The information given is as of or about April 12, 1999, as reported by
Gilder in its Schedule 13G filed with the SEC. Gilder's address is 1775
Broadway, 26th Floor, New York, New York 10019. Gilder does not have the
power to vote these shares and shares investment power with respect to
these shares.
6
EXECUTIVE COMPENSATION
Report on Executive Compensation
Compensation Philosophy. As the Compensation and Stock Option
Committee of the Board, we evaluate and approve the compensation of our
executive officers. We intend our compensation policies and practices to:
o attract, motivate and retain qualified executive officers;
o provide a total compensation package which is based on corporate
and personal performance and which is competitive in the fruit
juice/beverage industry; and
o motivate our executive officers to achieve positive results by
giving them the chance to buy our stock in order to make their
interests more like our shareholders' interests.
Compensation Components. Compensation for our executive officers
consists of:
o base salary;
o potential annual bonuses;
o potential annual stock option grants; and
o the opportunity to participate in our 401(k) plan.
Base Salary. We establish each executive officer's base salary at the
start of each fiscal year. We consider several factors in determining the base
salary of our executive officers, including:
o the Chief Executive Officer's recommendations (except with
respect to his own base salary);
o our performance during the most recent fiscal year, with special
emphasis on our revenues, revenue growth, earnings per share,
cost and expense levels and balance sheet strength;
o how our performance compares to our historical results and our
expectations for that fiscal year;
o whether and to what extent we reached our strategic goals for the
fiscal year; and
o the individual achievements of our executive officers, including
contributions to our financial results for the past year, and
relationships with other Northland personnel.
For fiscal 1999 we also considered:
o the efforts of our officers in successfully integrating the
facilities, systems and products that we acquired from Seneca
Foods Corporation, as well as the roll-out of additional Seneca
brand products during the fiscal year;
o the increase in our revenues, including our substantially
increased sales of private label juice products and contract
packing services, as well as increases in market penetration of
our branded products;
o our increased presence in the industrial/ingredients market
through increased sales and the acquisitions of Potomac Foods of
Virginia, Inc. and assets formerly owned by Clermont, Inc.; and
o the increase in our overall size as a result of our fiscal 1999
acquisitions and the corresponding increase in the
responsibilities of our executive officers.
We also examined industry data regarding executive officers' salaries
at many of our competitors in the grocery juice aisle. This data showed that the
total compensation packages that we offer to our executive officers are
generally less favorable than those of many of our competitors. As a result of
this review, combined with the factors discussed above and our belief that we
must offer our executive officers compensation
7
packages competitive within the industry in order to attract and retain the high
quality individuals necessary to successfully manage our growth and realize our
long-term goals, we increased our executive officers' base salaries by an
average of 13.3% for the upcoming fiscal year, and increased the base salary of
our Chief Executive Officer by 5%. Although we review objective performance
criteria, we still consider certain subjective factors which aren't related
directly to our financial results in making these compensation decisions.
Bonuses. Our 1999 Incentive Bonus Plan provides incentive bonus
opportunities to our employees. The Bonus Plan bases incentive cash bonuses on
achieving specified objective and subjective goals, including certain earnings
goals and various departmental and individual goals. The Bonus Plan, which
applies to all of our employees, provides the chance to receive a bonus of up to
a specified percentage of base salary which varies by the employee's position.
In fiscal 1999, Northland's earnings were below the goals we set at
the end of last year. However, we did attain our earnings projections as revised
early in the fiscal year. Additionally, our failure to meet our earlier earnings
projections was caused in part by strategic revisions to our marketing plan
which were not reflective of employee performance. As a result, we paid bonuses
under the corporate performance component of the Bonus Plan generally at a level
significantly below the maximum allowable under the Bonus Plan. We also paid
bonuses for individual performance in connection with the subjective
achievements described in the discussion of base salary above. Specifically, in
deciding on the bonus paid to our Chief Executive Officer, we considered our
success in the integration of the Seneca operations, which increased our branded
product offerings and expanded our production capabilities, as well as his
leadership in connection with the continued expansion of sales into
industrial/ingredients, foodservice and private label markets, including his
efforts in the past fiscal year in retaining qualified personnel to lead our
branded, private label and industrial-ingredients operations.
Stock Options. We generally make regular annual stock option grants to
our executive officers under our stock option plans after the end of each fiscal
year. We base our option grants mainly on:
o each executive officer's relative position with Northland;
o the officer's individual initiatives and achievements and their
impact on Northland's performance;
o many of the salary and bonus factors discussed above;
o the officer's historical level of option grants; and
o the size of option grants to other similar executives.
Based on those factors, we decided to award regular annual option
grants to purchase a total of 51,000 Class A shares to our executive officers in
fiscal 1999.
Our stock option grants are intended to motivate key employees to
achieve the best results for the company by giving them the chance to acquire or
increase their current stock ownership in Northland. Since options are only
valuable if our stock price goes up, we believe that stock option grants help
make the financial interests of our management the same as yours. We grant
options with an exercise price equal to the value of the Class A shares on the
date of grant. The options usually expire in 10 years and either become
exercisable in increments of 20% on each of the first, second, third, fourth and
fifth anniversaries of the grant date, 33% on each of the first, second and
third anniversaries of the grant date, or, as has sometimes been the case with
grants to our senior executive officers, are exercisable immediately upon grant.
We believe our stock option plans, and the way in which we administer
them, comply with Internal Revenue Code Section 162(m).
By the Compensation and Stock Option Committee:
John C. Seramur, Chairman
Patrick F. Brennan
Pat Richter
8
Summary Compensation Information
In the table below, we describe the compensation we paid for the last
three fiscal years to our Chief Executive Officer and certain of our other
executive officers whose salary and bonuses were more than $100,000 in fiscal
1999. We sometimes refer to the people in the table below as our "named
executive officers."
Summary Compensation Table
Annual Stock
Name and Fiscal Compensation Option Grants Other Annual All Other
Principal Positions Year Salary Bonus (shares) Compensation(1) Compensation(2)
--------------------------- ---- ------ ----- ------ -------------- --------------
John Swendrowski 1999 $400,000 $115,000 15,000 $ 0 $ 4,999(3)
Chairman of the Board 1998 $350,000 $ 40,000 40,000 $ 0 $ 4,917
and Chief Executive 1997 $330,000 $ 0 0 $ 224,127 $ 4,552
Officer
Robert E. Hawk 1999 $170,000 $ 35,000 2,000 $ 59,080 $ 4,999
Group President- 1998 $140,000 $ 20,000 10,000 $ 0 $ 4,913
Non-Branded Divisions 1997 $140,000 $ 0 0 $ 0 $ 3,160
Michael A. Morello 1999 $190,000 $ 0 0 $ 0 $ 5,979
President, Minot(4) 1998 --- --- --- --- ---
1997 --- --- --- --- ---
Scott R. Corriveau 1999 $144,000 $ 30,000 10,000 $ 0 $ 4,999
President, Branded 1998 --- --- --- --- ---
Division(5) 1997 --- --- --- --- ---
John A. Pazurek 1999 $140,000 $ 25,000 7,500 $ 0 $ 3,199
Vice President-Finance, 1998 $130,000 $ 20,000 20,000 $ 0 $ 2,600
Treasurer and Chief 1997 $115,000 $ 0 0 $ 29,539 $ 3,156
Financial Officer
- ----------------------------
(1) Mr. Swendrowski, Mr. Pazurek and Mr. Hawk received these amounts to reimburse them in part for taxes
they paid after exercising stock options.
(2) Includes matching contributions we made under our 401(k) plan to each person.
(3) We paid $48,555, $49,066 and $49,327 of premiums on a split-dollar insurance policy on the life of
Mr. Swendrowski in fiscal 1999, 1998 and 1997, respectively. We did not include this data in the
table because when the policy is surrendered to us or when Mr. Swendrowski dies, we will be
reimbursed for these premium payments.
(4) Mr. Morello began his employment with us on July 1, 1998.
(5) Mr. Corriveau began his employment with us on December 7, 1998.
9
Stock Options
We have three stock option plans currently in place: the 1987, 1989
and 1995 Stock Option Plans. We are still granting options to our employees
under the 1989 and 1995 Plans. There are no shares remaining available under the
1987 Plan and only a few shares remaining available under the 1989 Plan. The
following table lists the option grants under the 1995 Plan which we made during
fiscal 1999, as well as certain other information relating to those grants.
Fiscal 1999 Option Grants
Potential Realizable Value
Shares Percentage of At Assumed Annual Rates of
Underlying Total Options Exercise Stock Price Appreciation
Options Granted to all Price (per Expiration For Option Term(4)
Name Granted(1) Employees share)(3) Date 5% 10%
- ---------------------- ---------- -------------- ----------- ---------- -------------------------------
John Swendrowski 15,000 14.4% $ 10.125 9/24/08 $ 95,513 $ 242,050
Robert E. Hawk 2,000 1.9% $ 10.125 9/24/08 $ 12,735 $ 32,273
Michael A. Morello 0 -- -- -- -- --
Scott R. Corriveau 10,000 9.6% $ 9.625 1/06/09 $ 60,531 $ 153,397
John A. Pazurek 7,500 7.2% $ 10.125 9/24/08 $ 47,757 $ 121,025
All Optionees 104,500(2) 100.0% $ (2) (2) $ 646,307 $ 1,637,869
All Shareholders(5) N/A N/A N/A N/A $125,013,447 $316,808,619
- ---------------------
(1) These options are nonqualified stock options under the Internal Revenue Code.
(2) The Compensation and Stock Option Committee, which we refer to as the "Committee," granted 74,500 options on
September 24, 1998 with an exercise price of $10.125 and an expiration date of September 24, 2008. The
Committee granted 5,000 options on November 2, 1998 with an exercise price of $11.125 and an expiration date
of November 2, 2008. The Committee granted 14,000 options on January 6, 1999 with an exercise price of $9.625
and an expiration date of January 6, 2009. The Committee granted 1,000 options on January 6, 1999 with an
exercise price of $10.125 and an expiration date of January 6, 2009. The Committee granted 3,000 options on
April 22, 1999 with an exercise price of $6.875 and an expiration date of April 22, 2009. The Committee
granted 3,000 options on July 14, 1999 with an exercise price of $8.50 and an expiration date of July 14,
2009. The Committee granted 4,000 options on August 31, 1999 with an exercise price of $6.6875 and an
expiration date of August 31, 2009.
(3) A holder can pay the exercise price of options in cash, by delivering previously issued Class A shares, or a
combination of both.
(4) These values represent the difference between the exercise price of the options and the value of the Class A
shares on the date that the options will be exercised, assuming certain rates of appreciation in the value of
Class A shares and assuming the options will be exercised on their respective expiration dates. We have not
taken into account taxes or other payments which the holders of options may have to pay upon exercise. The
actual values of the options will depend on the value of the Class A shares on the date the options are
exercised. The 5% and 10% rates we used in these calculations are not our estimates of our future performance
or the future price of Class A shares. Rather, we are required to use these rates by the rules of the SEC. We
cannot guarantee that these rates of appreciation will actually be achieved.
(5) These values represent the gain to all shareholders as a group, calculated in the same way as we calculated
the values referred to in footnote (4) to the table. Again, we cannot guarantee that these rates of
appreciation will actually be achieved.
10
We have set forth below certain information about the options
exercised in fiscal 1999 by our named executive officers and by all of our
option holders, as well as the number and value of unexercised stock options
held by our named executive officers and by all other option holders as of the
end of fiscal 1999.
Option Exercises in Fiscal 1999 and Fiscal 1999 Year-End Value Table
Number of Shares Value of Unexercised
Number of Underlying Options In-the-Money Options
Shares at End of Fiscal 1999(2) at End of Fiscal 1999(3)
Acquired Value
Name Upon Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- ------------- ----------- ----------- ------------- ----------- -------------
John Swendrowski -- -- 299,000 -- $ 251,600 --
Robert E. Hawk 40,000 $ 175,162 112,400 1,600 $ 112,400 $ 0
Michael A. Morello -- -- -- -- -- --
Scott R. Corriveau -- -- -- 10,000 -- $ 0
John A. Pazurek 4,000 $ 19,500 99,500 -- $ 68,860 --
All Optionees 91,350 $ 683,736 857,350 148,160 $ 673,418 $ 130
- ---------------------
(1) This reflects the dollar value difference between the closing sale price of the Class A shares on The Nasdaq
Stock Market on the date of exercise, less the stock option's exercise price, multiplied by the number of
Class A shares acquired upon exercise.
(2) These options are nonqualified stock options under the Internal Revenue Code. Each option has an exercise
price equal to the fair market value (last bid price) of the Class A shares on the date of grant.
(3) We calculated these dollar values by determining the difference between the value of the Class A shares and
the various exercise prices of the named executive officers' outstanding options at the end of fiscal 1999.
The last reported sale price of the Class A shares on The Nasdaq Stock Market on August 31, 1999 was $6.72 per
share.
Director Compensation
Directors of Northland who are also our employees receive no
additional compensation for serving on the Board. We compensate our non-employee
directors for their service on the Board by providing:
o an annual retainer fee of $15,000;
o $500 for each Board and committee meeting attended, plus an
additional $250 for each committee chairman per committee meeting
attended;
o reimbursement for directors' transportation, lodging and meal
expenses incurred in attending meetings; and
o annual automatic grants of stock options under the 1995 Plan
which
- are exercisable for 1,000 Class A shares;
- occur automatically (i) upon a director's appointment or
election to the Board and (ii) on each August 31;
- are granted at an exercise price equal to the fair market
value of the Class A shares on the date of grant;
- have a term of ten years; and
- vest in full either one year after the date they are granted
or immediately upon the happening of certain events.
11
Employment and Severance Agreements
We have entered into separate severance agreements with John
Swendrowski and Scott Corriveau which provide that, following a "change in
control" of the company (as defined in the severance agreements), we will employ
Mr. Swendrowski and Mr. Corriveau for three years in the same positions, to
perform similar duties, and at the same locations as was the case just before
the change of control. During the employment period, Mr. Swendrowski and Mr.
Corriveau will be entitled to receive salaries based upon their compensation
rates in effect at the date of change of control, and will also be entitled to
be included in our benefit plans. If during the employment period (i) we
terminate Mr. Swendrowski's or Mr. Corriveau's employment, other than for
"cause" (as defined in the severance agreements) or either of them becomes
disabled, or (ii) we change Mr. Swendrowski's or Mr. Corriveau's duties
substantially without their respective written consent and they terminate
employment as a result, then they would be entitled to receive severance
payments equal to three times their average base salary over the five previous
years, plus the other benefits due under the severance agreements.
We have also entered into an agreement with Mr. Corriveau pursuant to
which we will pay him $200,000 per year, subject to upward adjustment, to serve
as our President, Branded Division. The agreement entitles Mr. Corriveau to
participate in benefit plans applicable to our executive officers. If we
terminate Mr. Corriveau's employment prior to a change in control without "just
cause" (as defined below), he would be entitled to a lump sum payment in cash
within five days of the date of his termination equal to his annual salary at
the time of termination divided by two (but in no event less than $100,000). For
purposes of the agreement, "just cause" generally includes Mr. Corriveau's (i)
engaging in conduct which injures us financially or injures our reputation, (ii)
violating certain of our policies, (iii) conviction of a felony, or (iv) refusal
to perform his duties.
We have also entered into an employment agreement with Michael A.
Morello. The agreement provides that Mr. Morello will serve as the President of
our Minot division until June 30, 2001. During his employment, we will pay Mr.
Morello an annual salary of $190,000, subject to upward adjustment by our Board.
Mr. Morello will also receive certain benefits, including the right to
participate in our incentive, savings and retirement plans (including our stock
option plans) as well as our welfare plans such as medical, dental and life
insurance. Pursuant to the agreement, we can terminate Mr. Morello's employment
with or without "Cause." The term "Cause" generally means Mr. Morello's willful
failure to perform his duties or illegal or gross misconduct. If we terminate
his employment with Cause, then he would be entitled to receive his annual
salary through the date of termination. If we terminate his employment without
Cause, then he would be entitled to receive his annual salary through the date
of termination, a lump sum payment equal to his annual salary multiplied by the
number of years remaining in the term of his employment under the agreement, and
certain additional benefits. Also, Mr. Morello can terminate his employment for
any reason. If he terminates his employment because we decide to terminate the
business Minot conducts, or because we have materially breached the employment
agreement, then he would be entitled to receive the same payments from us as he
would have if we terminated him without Cause.
12
STOCK PERFORMANCE INFORMATION
The line graph below compares the percentage change during the last
five fiscal years in the total return on our Class A shares with the total
return of companies in the Nasdaq Total Return Index and companies in a peer
group we selected (including American Italian Pasta Co., Beringer Wine Estates,
Celestial Seasonings, J.M. Smucker Company, Robert Mondavi Corp., Triarc
Companies, Chalone Wine Group, LTD, Orange Co., Inc., Seneca Foods Corp. and
Todhunter International, Inc.)
Comparison of Five-Year Total Shareholder Returns
(on a dividend reinvested basis)
[GRAPHIC OMITTED]
08/31/94 08/31/95 08/31/96 08/31/97 08/31/98 08/31/99
Northland Cranberries, Inc. $100 78 195 188 108 76
Nasdaq Total Return Index $100 135 152 212 201 371
Peer Group Index $100 100 92 140 120 146
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires certain
of our executive officers, directors and persons who beneficially own more than
10% of our common stock to file reports of changes in ownership of our common
stock with the SEC. Those people are required by SEC regulations to furnish us
with copies of all Section 16(a) forms which they file. To our knowledge, all of
those people complied with all Section 16(a) filing requirements in fiscal 1999,
except Peter Mueller, Ricke A. Kress and Robert M. Wilson, officers of
Northland, did not timely file their Form 3 indicating their initial beneficial
ownership of our stock;
13
Robert M. Wilson did not timely file one Form 4 with respect one transaction;
and John C. Seramur, one of our directors, did not timely file one Form 4 with
respect to one transaction.
Certain Transactions
On April 22, 1999, we purchased all of the issued and outstanding
capital stock of Potomac Foods of Virginia, Inc. Robert M. Wilson, one of our
executive officers, beneficially owned all of the stock we purchased. We paid
the Potomac shareholders $400,000 in cash and issued 90,000 unregistered Class A
shares. Our management determined the purchase price through arms-length
negotiations.
John Swendrowski is a general partner in Cranberry Hills Partnership,
a Wisconsin general partnership. In fiscal 1999, we accrued approximately
$95,000 in payment obligations to Cranberry Hills in consideration for certain
lease rights and a right of first refusal we had assigned to us. We believe the
terms of those transactions are no less favorable than we could have obtained
from an unaffiliated third party.
Northland's Independent Auditors
The Board has reappointed Deloitte & Touche LLP to serve as our
independent auditors for fiscal 2000. We expect that representatives of Deloitte
& Touche LLP will be at the annual meeting and will have a chance to make a
statement if they would like to do so. They will also be available to respond to
your questions.
Miscellaneous
We will bear the cost of soliciting proxies. We expect to solicit
proxies mainly by mail. Some of our employees may also solicit proxies
personally and by telephone. We do not anticipate that we will retain anyone to
solicit proxies or that we will pay compensation to anyone for that purpose. We
will, however, reimburse brokers and other nominees for their reasonable
expenses in communicating with the persons for whom they hold Class A shares.
If you wish to include a proposal in our proxy statement for the 2001
annual meeting pursuant to Rule 14a-8 under the Securities Exchange Act of 1934,
you should forward the proposal to our Secretary by July 28, 2000. If you submit
a proposal other than pursuant to Rule 14a-8 less than 30 days in advance of the
2001 annual meeting, your proposal will be considered untimely under our by-laws
and we will not be required to present your proposal at the 2001 annual meeting.
If the Board chooses to present your proposal despite its untimeliness, the
people named in the proxies solicited by the Board for the 2001 annual meeting
will have the right to exercise discretionary voting power with respect to your
proposal.
If you would like to receive a copy of our fiscal 1999 annual report
on Form 10-K (without exhibits), please write to our Secretary at 800 First
Avenue South, P.O. Box 8020, Wisconsin Rapids, Wisconsin 54495-8020, and we will
provide you with a copy free of charge.
NORTHLAND CRANBERRIES, INC.
/s/ David J. Lukas
David J. Lukas
Senior Vice President-Administration,
Secretary and Corporate Counsel
Wisconsin Rapids, Wisconsin
November 24, 1999
14
PROXY FOR CLASS A PROXY FOR CLASS A
COMMON STOCK COMMON STOCK
NORTHLAND CRANBERRIES, INC.
ANNUAL MEETING OF SHAREHOLDERS - JANUARY 5, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
I hereby appoint either or both of John Swendrowski and John A.
Pazurek as my proxy, and hereby authorize either or both of them to represent
and to vote, as I have indicated below, all my shares of Class A Common Stock of
Northland Cranberries, Inc., which I held of record on November 19, 1999, at the
annual meeting of shareholders scheduled to be held on January 5, 2000, and at
any adjournment thereof. I also authorize either or both of them to appoint his
substitute.
I further acknowledge receipt of the Notice of the Annual Meeting, the
Proxy Statement and the 1999 Annual Report to Shareholders, and I hereby revoke
any other proxy I may have executed previously for the 2000 annual meeting of
shareholders.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD IMMEDIATELY
USING THE ENCLOSED ENVELOPE.
Please do not fold (Continued and to be signed on reverse side.)
- -------------------------------------------------------------------------------
NORTHLAND CRANBERRIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY [XX]
1.Election of Directors - FOR WITHHOLD FOR ALL (Except Nominee(s) written
Nominees: Patrick F. Brennan, ALL ALL below)
Robert E. Hawk, Jeffrey J.
Jones, Leroy J. Miles, |_| |_| |_| --------------------------
Pat Richter, John C. Seramur
and John Swendrowski
When properly executed, this proxy will
be voted as you have directed herein. If
no direction is made, this proxy will be
voted FOR the seven director nominees
indicated above. It will also be voted
in accordance with the best judgment of
the proxies named herein on any other
business that may properly come before
the meeting.
Dated:_________, ____
2.In their discretion, upon
such other business as may Signature(s)____________________________
properly come before the
meeting and at any adjournment
thereof Signature(s) ________________________________________
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS
ON THIS PROXY CARD. When shares are held
by joint tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give your full title as such. If
you are a corporation, please sign in
full corporate name by the president or
other authorized officers. If you are a
partnership, please sign in partnership
name by an authorized person.
- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD IMMEDIATELY
USING THE ENCLOSED ENVELOPE.