<PAGE>
[LETTERHEAD OF 7-UP/RC BOTTLING COMPANY OF SOUTHERN CALIFORNIA]
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS
IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND YOU ARE
REQUESTED NOT TO SEND THE COMPANY A PROXY.
This Information Statement is being mailed on or about March 14, 1997, to
holders of record of the Common Stock, par value $0.01 per share ("Share",
collectively the "Shares" or the "Common Stock") of Seven-Up/RC Bottling
Company of Southern California, Inc., a Delaware corporation (the "Company"),
at the close of business on or about February 28, 1997. You are receiving this
Information Statement in connection with the possible election to the Company's
Board of Directors (the "Board" or the "Board of Directors") of that number of
persons designated by Dr Pepper Bottling Company of Texas, a Texas corporation
("Parent"), as will give Parent that number of directors, rounded up to the
next whole number (but in no event more than one less than the total number of
directors on the Board of Directors of the Company), on the Company's Board of
Directors equal to the product of the total number of directors on the Board of
Directors of the Company multiplied by the percentage that the number of Shares
purchased by Parent or any of its subsidiaries pursuant to the Offer (as
defined below) bears to the aggregate number of Shares outstanding.
Parent and its subsidiary, DPB Acquisition Corp., a Delaware corporation
("Purchaser"), have commenced a tender offer to purchase all outstanding Shares
on the terms and subject to the conditions set forth in the Offer to Purchase,
dated March 7, 1997 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which, together with the Offer to Purchase and any amendments or
supplements thereto, collectively constitute the "Offer"). The Offer was
disclosed in a Tender Offer Statement on Schedule 14D-1, dated March 7, 1997
(the "Schedule 14D-1"), which was filed with the Securities and Exchange
Commission (the "Commission") pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and the rules promulgated by the Commission
thereunder. The Offer is being made by Purchaser pursuant to the Agreement and
Plan of Merger, dated as of February 28, 1997 (the "Merger Agreement"), by and
among the Company, Parent, and Purchaser. The Company filed a
Solicitation/Recommendation Statement on Schedule 14D-9 with the Commission on
March 7, 1997 pursuant to Section 14(d)(4) of the Exchange Act and the rules
promulgated thereunder. Attached as Schedule I hereto is a copy of the written
opinion dated February 28, 1997 of Houlihan, Lokey, Howard & Zukin, Inc., the
Company's financial advisor, to the effect that, as of such date and based upon
and subject to certain matters stated therein, the consideration to be received
by holders of Shares (other than the Purchaser and its affiliates) pursuant to
the terms of the Merger Agreement is fair to such holders from a financial
point of view.
The Merger Agreement requires the Company, at the request of Parent, to take
all action necessary to cause Parent's designees to be elected to the Board
under the circumstances described therein. This Information Statement is
required by Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. YOU
ARE URGED TO READ THIS INFORMATION STATEMENT CAREFULLY. YOU ARE NOT, HOWEVER,
REQUIRED TO TAKE ANY ACTION HEREUNDER.
<PAGE>
Pursuant to the Merger Agreement, Parent and Purchaser commenced the Offer
on March 7, 1997. The Offer is scheduled to expire at 12:00 midnight, New York
City time, on Thursday, April 3, 1997, unless the Offer is extended in
accordance with its terms.
The information contained in this Information Statement concerning Parent
and Purchaser and their respective board designees has been furnished to the
Company by Parent and Purchaser, and the Company assumes no responsibility for
the accuracy or completeness of such information.
REORGANIZATION
On May 13, 1996, the Company and Beverage Group Acquisition Corporation, the
Company's then immediate holding company parent ("BGAC"), filed voluntary
petitions for reorganization relief under Chapter 11 of the Bankruptcy Code in
the Bankruptcy Court for the District of Delaware. Following commencement of
the Chapter 11 cases, all actions and proceedings against the Company and BGAC
and all acts to obtain any property of the bankruptcy estate were
automatically stayed under section 362 of the Bankruptcy Code. Subsequent to
the filing of the bankruptcy petitions and until the effective date of the
First Amended Joint Plan of Reorganization of the Company and BGAC (the "Plan
of Reorganization"), which Plan of Reorganization (and accompanying Disclosure
Statement) was filed with the Bankruptcy Court on May 20, 1996, the Company
and BGAC continued to operate their respective businesses as debtors-in-
possession.
Under the terms and conditions of the Plan of Reorganization and consistent
with an agreement in principle reached with an unofficial committee of the
holders of the Company's $140,000,000 11.5% Senior Secured Notes due 1999 (the
"Senior Secured Notes" or "Notes"), the holders of the Notes exchanged their
Senior Secured Notes for approximately 98% of the equity of the Company and
received the net proceeds (approximately $55 million in cash) from the sale of
the Company's wholly-owned subsidiary, Seven-Up/RC Bottling Company of Puerto
Rico, Inc.
The Bankruptcy Court approved the Disclosure Statement on June 19, 1996 and
confirmed the Plan of Reorganization on August 2, 1996. On August 15, 1996
(the "Consummation Date"), the Plan of Reorganization was consummated and the
Company emerged from bankruptcy.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of February 28, 1997, there were
5,000,000 Shares issued and outstanding. The Board presently consists of five
members, and there are currently no vacancies on the Board. Each director
holds office until such director's successor is elected and qualified or until
such director's earlier resignation, death, or removal.
RIGHT TO DESIGNATE DIRECTORS; PARENT'S DESIGNEES
The Merger Agreement provides that promptly upon the purchase by Parent or
any of its subsidiaries of such number of Shares which represents at least 65%
of the outstanding Shares on a fully-diluted basis (as defined in the Merger
Agreement), and from time to time thereafter, Parent shall be entitled to
designate such number of directors, rounded up to the next whole number (but
in no event more than one less than the total number of directors on the
Board) as will give Parent, subject to compliance with Section 14(f) of the
Exchange Act, representation on the Board equal to the product of (x) the
number of directors on the Board (giving effect to any increase in the number
of directors pursuant to the Merger Agreement) and (y) the percentage that
such number of Shares so purchased bears to the aggregate number of Shares
outstanding (such number being the "Board Percentage"). The Company has
agreed, upon request of Parent, to promptly satisfy the Board Percentage by
increasing the size of the Board or by using its best efforts to secure the
resignations of such number of directors as is necessary to be so elected,
provided that no such action shall be taken which would
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result in there being, prior to the consummation of the Merger, less than two
directors of the Company that are not affiliated with Parent. Following the
election or appointment of Parent's designees pursuant to the Merger Agreement
and prior to the Effective Time (as defined in the Merger Agreement) of the
Merger, any amendment or termination of the Merger Agreement, extension for
the performance or waiver of the obligations or other acts of Parent or
Purchaser or waiver of the Company's rights thereunder shall require the
concurrence of a majority of the directors of the Company then in office who
are Continuing Directors. The term "Continuing Directors" means (x) each
member of the Board on the date of the Merger Agreement who voted to approve
the Merger Agreement and (y) any successor to any Continuing Director who was
recommended to succeed such Continuing Director by a majority of the
Continuing Directors then on the Board.
It is expected that Parent's designees may assume office at any time
following the purchase of Shares by Purchaser pursuant to the Offer, which
purchase may not be consummated prior to midnight New York City time on
Thursday, April 3, 1997, and that, upon assuming office, Parent's designees
will thereafter constitute at least a majority of the Board of Directors. To
the extent the Board of Directors will consist of persons who are not Parent's
designees, the Company expects that such persons shall be Continuing
Directors.
Parent's designees will be selected by Parent from among the individuals
listed below. The Company has been informed that each of the following
individuals has consented to serve as a director of the Company if appointed
or elected. None of the following individuals owns any Shares. In addition,
none of the following individuals is a director of, or holds any position
with, the Company. The name, age, present principal occupation or employment,
and five-year employment history of each of the following individuals are set
forth below. Each person is a citizen of the United States, and, except as
indicated otherwise, the business address of each person is 2304 Century
Center Blvd., Irving, Texas 75062.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION
OR EMPLOYMENT AND FIVE-YEAR
NAME AGE EMPLOYMENT HISTORY
---- --- ----------------------------
<S> <C> <C>
Jim L. Turner.................... 49 Chairman of the Board of Dr Pepper Bottling
Holdings, Inc. (1985-present); Chairman,
President and Chief Executive Officer of Parent
(1985-present); Director, President and
Treasurer of Purchaser (February 21, 1997-
present); Director of The Morningstar Group
Inc.; Director of All American Bottling
Corporation.
William O. Hunt.................. 63 Director of Dr Pepper Bottling Holdings, Inc.;
Chairman of the Board, Chief Executive Officer
and President of Intellical Inc. (1992-present);
Director of Allen Group, Inc.; Director of
American Homestar Corporation.
Thomas J. Taszarek............... 48 Senior Vice President--Administration of Parent
(1993-present); Vice President--Personnel of
Parent (since 1986).
Holly Lovvorn.................... 41 Vice President--Finance and Chief Financial
Officer of Parent and Dr Pepper Bottling
Holdings, Inc. (1995-present); Vice President
and Secretary of Purchaser (February 21, 1997-
present); Vice President--Financial Analysis and
Special Projects of Parent and Dr Pepper
Bottling Holdings, Inc. (1990-1995).
</TABLE>
DIRECTORS OF THE COMPANY
The total number of directors is fixed by the Board of Directors pursuant to
authority granted it under the Company's By-Laws. Prior to the Consummation
Date, the Board of Directors was comprised of six directors. At present, the
Board of Directors is comprised of five directors, one of whom is a salaried
employee of the Company. All directors of the Company are elected and serve
until a successor is duly elected and qualified or until such director's
earlier death, resignation, or removal. There are no family relationships
between any director of the Company or any executive officer of the Company.
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Set forth below is certain information concerning the Company's current
directors, including their ages, present principal occupations and business
experience during the past five years, and the period during which they have
served as directors. The business address of each director is 3220 East 26th
Street, Vernon, California 90023.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION DIRECTOR
NAME AGE DURING LAST FIVE YEARS SINCE
---- --- ---------------------- --------
<C> <C> <S> <C>
Bart S. Brodkin...... 55 Chief Executive Officer, President and 1990
Chairman of the Board of the Company.
Jack R. Attwood...... 67 President, Attwood Enterprises (1988- 1990
present); Director, Sports Chalet, Inc.
William Langley...... 58 Executive Vice President, Chief Credit August
and Risk Policy Officer, Chemical Bank 1996
and Chemical Banking Corporation (1991-
1996); Executive Vice President of Chase
Manhattan Corporation (April 1996-July
1996).
Monroe L. Lowenkron.. 65 President and Chief Executive Officer of August
A. Heileman Brewing Co. Inc. (1995-June 1996
1996); President and Chief Executive
Officer of A&W Brands, Inc. (1980-1993).
Daniel D. Villanueva. 59 Chairman and Managing Director of Bastion August
Capital Corporation (1990-present). 1996
</TABLE>
CERTAIN INFORMATION REGARDING THE BOARD OF DIRECTORS AND COMMITTEES OF THE
BOARD OF DIRECTORS
During the fiscal year ended December 31, 1996, the Board of Directors held
seven meetings (exclusive of committee meetings). The Board of Directors held
five meetings prior to the Consummation Date and two meetings subsequent to
the Consummation Date. Each of the directors of the Company attended at least
75 percent of the aggregate total number of meetings of the Board of Directors
and meetings of any committee of the Board on which that director served and
which took place subsequent to his election as director.
The Board of Directors has standing Audit, Personnel and Compensation, and
Strategic Committees.
Audit Committee. Messrs. Langley and Villanueva are the members of the Audit
Committee, which held three meetings during the 1996 fiscal year, all of which
meetings were held subsequent to the Consummation Date. The Audit Committee is
responsible for reviewing, as it shall deem appropriate, and recommending to
the Board of Directors internal accounting and financial controls for the
Company and accounting principles and auditing practices and procedures to be
employed in the preparation and review of the Company's financial statements.
The Audit Committee is also responsible for recommending to the Board of
Directors independent public accountants to audit the annual financial
statements of the Company, the scope of the audit to be undertaken by such
accountants and for reviewing the results of such audit.
Personnel and Compensation Committee. Messrs. Attwood and Lowenkron are the
members of the Personnel and Compensation Committee (the "Compensation
Committee"), which held three meetings during the 1996 fiscal year. One
meeting of the Compensation Committee was held prior to the Consummation Date
and two meetings of the Compensation Committee were held subsequent to the
Consummation Date. The Compensation Committee makes recommendations to the
Board of Directors with respect to the compensation of directors, officers,
and employees of the Company. In addition, the Compensation Committee
administers the Company's Management Incentive Plan and the 1996-1997 Stock
Option Plan (although the Board retains the authority to grant stock options
pursuant thereto). For additional information concerning the Compensation
Committee, see "Compensation Committee Report on Executive Compensation"
below.
Strategic Committee. Messrs. Lowenkron and Langley are the members of the
Strategic Committee. The Strategic Committee held no meetings during the 1996
fiscal year. The Strategic Committee reviews and evaluates any offers made to
acquire the Company.
4
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COMPENSATION OF NON-EMPLOYEE DIRECTORS
Directors who are not employees of the Company are paid an annual retainer
of $20,000 plus an additional fee of $1,000 for each meeting of the Board of
Directors attended and are reimbursed for expenses incurred in attending
meetings of the Board.
The Company's 1996-1997 Stock Option Plan provides for the granting of
nonqualified stock options (options that are not intended to satisfy the
requirements of Section 422 of the Internal Revenue Code) to directors of the
Company. Subsequent to the end of the 1996 fiscal year, a total of 84,000
options were granted to non-employee directors of the Company pursuant to the
terms and conditions of the 1996-1997 Stock Option Plan.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information concerning the executive
officers of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Bart S. Brodkin......... 55 Chief Executive Officer, President and Chairman of
the Board
Richard Ferguson........ 40 Executive Vice President/Chief Financial Officer
Roy S. Breneman......... 55 Executive Vice President/Chief Sales and Marketing
Officer
Louis Janicich.......... 59 Senior Vice President of Administration/Legal Serv-
ices, Chief Human Resources Officer
F.L. Joseph Chalmers.... 54 Senior Vice President of Operations
</TABLE>
Bart S. Brodkin began his career in the soft drink industry in 1967 with the
Pepsi-Cola Bottling Company, where he held various sales and marketing
positions and ultimately became Group Marketing Manager. He joined
Westinghouse's Beverage Group in 1973 as Vice President of the Western
Division and in 1980 was promoted to Business Unit President and General
Manager. He is a director of and has served as President of the Seven-Up
Bottlers Association and is currently Treasurer of the National Soft Drink
Association and a director of the RC Bottlers Association.
Richard Ferguson has been with the Company since 1979 and has held various
positions of increasing importance in accounting and finance. He has held the
position of Executive Vice President, Chief Financial Officer since October
1996 and was previously the Vice President of Financial and Business Planning
since 1981.
Roy S. Breneman began his career in the soft drink industry in 1968 as a
merchandising manager with the Pepsi-Cola Company. He served as Vice
President, General Manager for the Dr. Pepper bottler in Dallas and was
National Sales Manager for the Country Time ready-to-drink division of General
Foods Corporation. He joined Westinghouse's Beverage Group as Vice President
of Marketing Services and became Senior Vice President of Sales and Marketing
in 1986.
Louis Janicich has been involved in human resources in the soft drink
industry since 1967 as Director of Industrial Relations with the Pepsi-Cola
Bottling Company of Los Angeles. He joined Westinghouse's Beverage Group as
Director of Industrial Relations in 1970 and in 1987 assumed his current
position of Senior Vice President of Human Resources.
F.L. Joseph Chalmers joined Westinghouse in 1969 and held various positions
in purchasing and operations. He joined Westinghouse's Beverage Group in 1976
and has held various positions of increasing importance in purchasing, sales
and operations. He assumed his current position as Senior Vice President of
Operations in June 1996.
5
<PAGE>
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of February 28, 1997,
with respect to the beneficial ownership of Shares by (i) all persons known by
the Company to be the beneficial owners of more than 5% of the outstanding
Shares (as derived solely from the Company's review of Schedules B, D, and 13G
on file with the Commission and from correspondence received from certain
stockholders of the Company), (ii) each director of the Company, (iii) the
Chief Executive Officer and the four other most highly compensated executive
officers of the Company as of February 28, 1997 whose total annual
compensation for the year ended December 31, 1996 exceeded $100,000, and (iv)
all executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP
NAME AND ADDRESS OF BENEFICIAL OWNER OF COMMON STOCK PERCENT OF CLASS (1)
------------------------------------ -------------------- --------------------
<S> <C> <C>
Dean Witter Intercapital Inc. (2).... 1,854,805 30.91%
2 World Trade Center
New York, New York 10048
Merrill Lynch & Co., Inc. (3)........ 763,000 12.71%
World Financial Center, North Tower
250 Vesey Street
New York, New York 10281
Metropolitan Life Insurance Company 605,500 10.09%
(4).................................
One Madison Avenue
New York, New York 10010
Bart S. Brodkin (5).................. 395,151(6) 6.58%
Richard Ferguson (5)................. 47,700(7) *
Louis Janicich (5)................... 33,500(8) *
F.L. Joseph Chalmers (5)............. 33,500(9) *
Roy S. Breneman (5).................. 30,100(10) *
Jack R. Attwood (5).................. 21,000(11) *
William Langley (5).................. 21,000(11) *
Monroe L. Lowenkron (5).............. 21,000(11) *
Daniel D. Villanueva (5)............. 21,000(11) *
All executive officers and directors 719,101(12) 11.98%
as a group (14 Persons).............
</TABLE>
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* Less than 1%.
(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all
Shares shown as beneficially owned by them, subject to community property
laws, where applicable.
(2) All Shares are owned by the following funds for which Dean Witter
Intercapital Inc. acts as investment advisor: Dean Witter High Yield
Securities (456,055 Shares); Dean Witter High Income Securities (490,000
Shares); High Income Advantage Trust (140,000 Shares); High Income
Advantage Trust II (175,000 Shares); High Income Advantage Trust III
(70,000 Shares); Dean Witter Diversified Income Trust (322,675 Shares);
and Variable Investment Series--High Yield (201,075 Shares).
(3) All Shares may also be deemed to be beneficially owned by Merrill Lynch
Group, Inc., a wholly-owned subsidiary of Merrill Lynch & Co., Inc.,
Princeton Services, Inc., a wholly owned subsidiary of Merrill Lynch
Group, Inc., Fund Asset Management, L.P., a limited partnership of which
Princeton Services, Inc. is a general partner, and Merrill Lynch
Corporate Bond Fund, Inc. (High Income Portfolio), a registered
investment company advised by Fund Asset Management, L.P.
(4) All Shares may also be deemed to be beneficially owned by State Street
Research & Management Company, a wholly-owned subsidiary of Metropolitan
Life Insurance Company and a registered investment advisor.
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(5) The business address of such person is c/o Seven-Up/RC Bottling Company
of Southern California, Inc., 3220 East 26th Street, Vernon, California
90023.
(6) Represents Shares subject to non-qualified options and includes 8,980
Shares subject to non-qualified options exercisable pursuant to certain
anti-dilution provisions contained in the stock purchase warrant held by
WB Bottling Corporation and pursuant to certain anti-dilution provisions
contained in the letter agreement evidencing the grant of such non-
qualified options to executive.
(7) Represents Shares subject to non-qualified options and includes 1,800
Shares subject to non-qualified options exercisable pursuant to certain
anti-dilution provisions contained in the stock purchase warrant held by
WB Bottling Corporation and pursuant to certain anti-dilution provisions
contained in the letter agreement evidencing the grant of such non-
qualified options to executive.
(8) Represents Shares subject to non-qualified options and includes 1,250
Shares subject to non-qualified options exercisable pursuant to certain
anti-dilution provisions contained in the stock purchase warrant held by
WB Bottling Corporation and pursuant to certain anti-dilution provisions
contained in the letter agreement evidencing the grant of such non-
qualified options to executive.
(9) Represents Shares subject to non-qualified options and includes 1,250
Shares subject to non-qualified options exercisable pursuant to certain
anti-dilution provisions contained in the stock purchase warrant held by
WB Bottling Corporation and pursuant to certain anti-dilution provisions
contained in the letter agreement evidencing the grant of such non-
qualified options to executive.
(10) Represents Shares subject to non-qualified options and includes 1,250
Shares subject to non-qualified options exercisable pursuant to certain
anti-dilution provisions contained in the stock purchase warrant held by
WB Bottling Corporation and pursuant to certain anti-dilution provisions
contained in the letter agreement evidencing the grant of such non-
qualified options to executive.
(11) Represents Shares subject to non-qualified options.
(12) Represents Shares subject to non-qualified options and includes 17,930
Shares subject to non-qualified options exercisable pursuant to certain
anti-dilution provisions contained in the stock purchase warrant held by
WB Bottling Corporation and pursuant to certain anti-dilution provisions
contained in the letter agreement evidencing the grant of such non-
qualified options to executive.
Registration Rights Agreement. The Company is party to a Registration Rights
Agreement with certain funds advised by Dean Witter Intercapital, Inc.
pursuant to which such entities have the right to cause the Company to
register Shares under Rule 415 of the Securities Act of 1933, as amended (the
"Shelf Registration"). The Company is obligated to pay all registration
expenses (other than underwriting discounts and commissions and subject to
certain limitations) incurred in connection with the Shelf Registration.
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<PAGE>
EXECUTIVE COMPENSATION AND OTHER MATTERS
The following table sets forth information concerning the compensation of
the Chief Executive Officer of the Company and the four other most highly
compensated executive officers of the Company, as of December 31, 1996, whose
annual compensation for the fiscal year ended December 31, 1996 exceeded
$100,000, for services in all capacities to the Company and its subsidiaries
during each of the fiscal years ended December 31, 1994, 1995, and 1996:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
NAME AND ---------------------- ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS(1) COMPENSATION(2)
------------------ ---- -------- -------- ---------------
<S> <C> <C> <C> <C>
Bart S. Brodkin 1996 $316,098 $250,000 $ 9,091
Director, Chief 1995 300,000 54,000 7,933
Executive Officer, 1994 275,580 53,573 12,120
and President
Roy S. Breneman 1996 $127,824 $ 16,877 $ 5,400
Chief Sales and 1995 138,960 -- 14,785
Marketing Officer, 1994 133,920 -- 17,740
and Executive Vice
President
Louis Janicich 1996 $129,600 $ 15,581 $ 16,880
Senior Vice President 1995 128,295 -- 165,413(3)
of Human 1994 123,660 -- 22,421
Resources and
Secretary
Richard Ferguson 1996 $ 94,271 $ 14,666 $ 6,000
Chief Financial 1995 77,100 -- --
Officer and Executive 1994 75,120 -- --
Vice President
F.L. Joseph Chalmers 1996 $117,060 $ 6,721 $ 3,720
Senior Vice President 1995 110,685 -- 3,720
of Operations 1994 106,680 -- 3,720
</TABLE>
- --------
(1) Represents annual incentive compensation earned during the prior calendar
year but paid in the subsequent year.
(2) Represents amounts paid by the Company for life insurance premiums,
automobile reimbursement and employer matched 401(k) payments. Includes
contributions by the Company to the Company's target benefit defined
contribution plan on behalf of each of the named executives for 1995.
Contributions by the Company under this plan on behalf of the named
executives for 1996 have not yet been calculated.
(3) Includes funds received from termination of the 401-E program that was
previously reported as bonus for these employees.
During the fiscal year ended December 31, 1996, there were no option grants
to the Chief Executive Officer of the Company or to any of the four other most
highly compensated executive officers of the Company.
TERMINATION AND CHANGE-OF-CONTROL ARRANGEMENTS
At a meeting held on October 31, 1996 of the Compensation Committee, the
Compensation Committee recommended that the Board of Directors review and
evaluate the employment agreement between the Company and Mr. Brodkin. After a
series of negotiations between the Compensation Committee and Mr. Brodkin, on
January 22, 1997, the Company entered into a Second Amended and Restated
Management Agreement with Mr. Brodkin, the Chief Executive Officer of the
Company (the "Brodkin Agreement"). The annual compensation payable by the
Company to Mr. Brodkin under the Brodkin Agreement is $400,000. The Brodkin
Agreement expires on December 31, 1999, subject to automatic one-year renewals
unless terminated upon written notice by either party at least 90 days prior
to the end of the year or earlier upon Mr. Brodkin's death, Disability,
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<PAGE>
resignation, retirement, or removal for Cause (as such capitalized terms are
defined in the Brodkin Agreement). In addition, the Brodkin Agreement provides
for severance benefits to be paid in a lump sum by the Company to Mr. Brodkin
upon a Change of Control (as defined in the Brodkin Agreement).
The Brodkin Agreement was amended by a First Amendment to Management
Agreement, dated as of February 28, 1997 (the "First Amendment"). The First
Amendment shall only become effective immediately prior to the purchase of
Shares by the Purchaser in the Offer and shall be of no further force or
effect if the Merger Agreement is terminated. The execution and delivery of
the First Amendment was a condition to the execution and delivery of the
Merger Agreement by Parent. The First Amendment, will, among other things,
significantly amend certain of the provisions regarding severance payments to,
and continued fringe benefits for, Mr. Brodkin following the termination of
his employment. In this regard, the special provisions requiring the Company
to pay to Mr. Brodkin an amount equal to three times his base salary and bonus
and to maintain certain benefits for him for 36 months if his employment is
terminated under certain circumstances following a Change of Control (as
defined in the Brodkin Agreement) will be eliminated. In addition, under the
First Amendment, the circumstances constituting Good Reason (as defined in the
Brodkin Agreement) under which Mr. Brodkin may resign and obtain severance
benefits will be significantly narrowed and certain procedural requirements
for the benefit of Mr. Brodkin that would have been applicable if he had been
terminated under certain circumstances constituting Cause (as defined in the
Brodkin Agreement) will be terminated. The First Amendment will also eliminate
Mr. Brodkin's right to receive certain severance payments in the event that he
resigns other than for Good Resign (as defined in the Brodkin Agreement).
Pursuant to the First Amendment, the automatic extension under the Brodkin
Agreement is limited to one additional year, such extension still being
subject to neither party giving contrary notice. The First Amendment will not
alter the base salary provided under the Brodkin Agreement or Mr. Brodkin's
rights to participate in the Company's annual bonus program.
On February 10, 1997, the Company entered into Management Agreements with
Rick Ferguson and Roy Breneman (the "Ferguson Agreement" and the "Breneman
Agreement," respectively). Each of the Ferguson Agreement and the Breneman
Agreement provides for severance benefits to be paid by the Company in a lump
sum to Messrs. Ferguson and Breneman, respectively, upon a Change of Control
(as defined in each of the Ferguson Agreement and the Breneman Agreement). The
Ferguson Agreement was amended by a Termination Agreement, dated as of
February 28, 1997 (the "Ferguson Contract Termination Agreement"). The
execution and delivery of the Ferguson Contract Termination Agreement was a
condition to the execution and delivery of the Merger Agreement by Parent. The
Ferguson Contract Termination Agreement shall only become effective
immediately prior to the purchase of Shares by the Purchaser in the Offer and
shall be of no further force or effect if the Merger Agreement is terminated.
In the event that the provisions of the Ferguson Contract Termination
Agreement become effective, the Ferguson Agreement will be terminated and will
cease to be of any further force and effect.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee reviews and recommends salaries for corporate
officers and key employees. In addition, the Compensation Committee
administers the Company's 1996-1997 Stock Option Plan, although the Board
retains the authority to grant stock options pursuant thereto, and administers
the Company's Management Incentive Plan. The Compensation Committee retains
the services of the Compensation Resource Group, Inc. ("CRG"), a compensation
and benefits consulting firm, to provide information to the Committee to
assist it in connection with the performance of its duties. CRG provides
advice to the Compensation Committee with respect to the compensation of
executive officers of the Company. The following is a summary of the policies
of the Compensation Committee that affected the compensation paid to executive
officers, as reflected in the tables set forth elsewhere in this Information
Statement.
The Company's executive compensation is based on three components: base
salary, annual bonuses, and stock options.
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Base Salary. Base salary for each executive officer of the Company is set at
a level that the Compensation Committee believes is competitive with salaries
of executive officers serving in similar capacities at similar companies.
Salaries are reviewed annually and may be increased based on (x) increases in
the executive officer's contributions to the Company or (y) increases in
competitive salary levels. The Company's Chief Executive Officer, Bart S.
Brodkin, received a base salary of $316,098 in 1996, an increase of
approximately 5% over his 1995 salary and an amount that the Committee
believes is commensurate with salaries of CEO's at companies of similar size
and in similar lines of business.
Annual Bonuses. The Company awards annual bonuses to executive officers
based on the Company's financial performance in the prior year and the
experience and performance level of each executive officer. The Compensation
Committee believes that these bonuses provide and excellent link between the
executive officer's pay and the short-term performance of the Company. To
determine any individual's annual bonus, the Compensation Committee reviews
the Company's overall financial performance and such individual's contribution
to the Company's financial performance.
Stock Options. The Compensation Committee believes that the long-term
interests of the Company's executive officers can be aligned with the long-
term interests of the Company's stockholders by granting stock options to the
executive officers. The Compensation Committee grants stock options to those
executive officers who have the greatest ability to affect the long-term
growth and profitability of the Company.
The Compensation Committee has reviewed the Company's exposure with respect
to qualifying executive officer compensation for a deduction under Section
162(m) of the Internal Revenue Code. The Compensation Committee has deferred
adopting a policy on this issue as it does not expect compensation to reach
relevant levels in the near future.
The foregoing report has been submitted by the Compensation Committee of the
Company's Board of Directors.
Jack R. Attwood, Chairman
Monroe L. Lowenkron
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PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return since the Common Stock became publicly traded on September 6, 1996 with
the Russell 2000 Index and the Dow Jones Soft Drinks Market Index (Weighted)
for the period indicated as prescribed by the rules of the Commission.
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN (1) AMONG SEVEN-UP/RC
BOTTLING COMPANY OF SOUTHERN CALIFORNIA, INC., RUSSELL 2000 INDEX, AND THE DOW
JONES SOFT DRINKS MARKET INDEX (WEIGHTED) (2)
[PERFORMANCE GRAPH GOES HERE]
- --------
(1) This graph assumes that the value of the investment in the Common Stock
and each index was $100 on September 6, 1996 and that all dividends were
reinvested. No cash dividends have been paid on the Company's Common
Stock. Stockholder returns presented in the above performance graph are
generally not necessarily indicative of future results.
(2) The Dow Jones Soft Drinks Market Index (Weighted) is prepared by Dow Jones
& Company, Inc.
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SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers, directors,
and persons who beneficially own more than ten percent of a registered class of
the Company's equity securities ("Insiders") to file with the Commission
initial reports of beneficial ownership on Form 3 and reports of changes in
beneficial ownership on Forms 4 and 5 with respect to the Company's Common
Stock. Insiders are also required by rules promulgated by the Commission to
furnish the Company with copies of all Section 16(a) reports they file with the
Commission.
None of the Company's directors or officers filed Form 3's upon the
registration of the Company's Common Stock under Section 12 of the Exchange
Act. However, no such persons beneficially owned any of the Company's Common
Stock at any point during the fiscal year ended December 31, 1996.
Additionally, no Form 3's were received by the Company from Dean Witter
Intercapital Inc., Merrill Lynch & Co., Inc., and Metropolitan Life Insurance
Company upon the registration of the Company's Common Stock under Section 12 of
the Exchange Act.
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SCHEDULE I
[LETTERHEAD OF HOULIHAN, LOKEY, HOWARD & ZUKIN]
February 28, 1997
To The Board of Directors
of Seven-Up/RC Bottling Company
of Southern California, Inc.
Gentlemen:
We understand that Dr Pepper Bottling Company of Texas, Inc., a Texas
corporation ("DP Texas"), proposes to make a cash tender offer (the "Offer")
to purchase 100% of the outstanding shares of common stock, par value $0.01
per share ("Common Stock"), of Seven-Up/RC Bottling Company of Southern
California, Inc., a Delaware corporation (the "Company"), for $12.00 per
share. In connection with the Offer, the Company, DP Texas and a wholly owned
subsidiary of DP Texas ("Sub") will enter into an Agreement and Plan of Merger
(the "Merger Agreement") pursuant to which Sub will merge with and into the
Company (the "Merger). The Offer, the Merger and all transactions related
thereto are referred to collectively herein as the "Transaction."
You have requested our opinion (the "Opinion") as to the matters set forth
below. The Opinion does not address the Company's underlying business decision
to effect the Transaction. We have not been requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the
Company. Furthermore, at your request, we have not negotiated the Transaction.
We express no opinion with regard to the terms and/or fairness of the Merger
Agreement, except with regard to the consideration to be received by the
Company's stockholders in the Transaction.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. reviewed (a) the Company's annual reports to shareholders and on Form
10-K for the fiscal years ended December 31, 1995 and December 31, 1994,
(b) quarterly report on Form 10-Q for the quarter ended September 30, 1996,
and (c) Company-prepared financial and operating statements for the fiscal
years ended December 31, 1992, December 31, 1993, December 31, 1994,
December 31, 1995 and December 31, 1996, which the Company's management has
identified as being the most current financial statements available;
2. reviewed copies of the following documents:
(a) the Merger Agreement,
(b) the Company's 1996-1997 Stock Option Plan,
(c) the Company's Management Incentive Plan, and
(d) the Company's 1997 Cost Reduction Plan;
3. reviewed the various company prepared operating and other statements,
and other documentation presented to DP Texas by the Company on February 7,
1997;
4. reviewed the Company's Disclosure Statement dated June 19, 1996;
5. met with certain members of senior management of the Company to
discuss the operations, financial condition, future prospects and projected
operations and performance of the Company;
6. visited certain facilities and business offices of the Company;
7. reviewed management-prepared forecasts and projections of the
Company's financial performance for the years ended December 31, 1997
through 2000;
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8. reviewed the historical market prices and trading volume for the
Company's publicly traded securities and selected individual block trades;
9. reviewed certain confidential detailed information regarding the
Company's 1997 financial performance, the Company's compensation
arrangements and employee benefits plans, and the Company's franchise
assets and fixed assets;
10. reviewed certain other publicly available financial data for selected
companies that we deem comparable to the Company, and publicly available
prices and premiums paid in other transactions that we considered similar
to the Transaction; and
11. conducted such other studies, analyses and inquiries as we have
deemed appropriate.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably
prepared and reflect the best currently available estimates of the future
financial results and condition of the Company, and that there has been no
material change in the assets, financial condition, business or prospects of
the Company since the date of the most recent financial statements made
available to us.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to the Company and do not assume any
responsibility for independent verification with respect to it. We have not
made any physical inspection or independent appraisal of any of the properties
or assets of the Company. Our opinion is necessarily based on business,
economic, market and other conditions as they exist and can be evaluated by us
at the date of this letter.
For purposes of this opinion, we have assumed that the Company's capital
stock consists of five million shares of outstanding Common Stock, outstanding
warrants to purchase 280,899 shares of Common Stock exercisable at $7.30 per
share, outstanding options to purchase 337,079 shares of Common Stock
exercisable at $7.30 per share, and outstanding options to purchase 382,022
shares of Common Stock exercisable at $8.00 per share.
Based upon the foregoing, and in reliance thereon, it is our opinion that
the consideration to be received by the stockholders of the Company in
connection with the Transaction is fair to them from a financial point of
view.
Houlihan, Lokey, Howard & Zukin,
Inc.
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