PEPSI-COLA PUERTO RICO BOTTLING COMPANY
Carretera 865 Km. 0.4
Bo. Candelaria Arenas
Toa Baja, Puerto Rico 00949
Information Statement Pursuant to
Section 14(f) of the Securities Exchange Act of 1934 and
Rule 14f-1 Thereunder
July 7, 1998
CHANGE IN CONTROL
This Information Statement is being furnished by Pepsi-Cola Puerto Rico
Bottling Company (the "Company") to its shareholders in connection with the
planned appointment of new directors of the Company, to be designated by P-PR
Transfer, LLP ("P-PR"), a Delaware limited liability partnership. P-PR is a
joint venture between Pohlad Companies, an independent Pepsi-Cola bottler, and
PepsiCo, Inc. ("PepsiCo").
THIS INFORMATION STATEMENT IS REQUIRED BY SECTION 14 (F) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (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.
In September 1996, in connection with his continued service as President
and Chief Executive Officer, Mr. Rafael Nin requested and was granted by the
members of the Charles H. Beach Voting Trust and the Michael J. Gerrits Voting
Trust (together, the "Essential Shareholders") and certain other shareholders, a
ten-year voting trust (the "Nin Voting Trust") which entitles him to vote, but
not own, 5,000,000 shares of the Company's Class A common stock, par value $.01
per share (the "Class A Shares"), representing a controlling interest in the
Company. Additionally, in connection with the Nin Voting Trust, Rafael Nin, the
Company and the shareholders of the Class A Shares entered into a stock option
agreement (the "Stock Option"), pursuant to which those shareholders granted
Rafael Nin a two-year option to purchase all or a portion of the 5,000,000 Class
A Shares at a price of $1.00 per share, subject to adjustment from time to time.
Mr. Nin may not exercise the Stock Option, but is only permitted to transfer the
option in whole or with respect to some shares to third parties (including the
Company) for the benefit of the Company.
The Company, Rafael Nin and P-PR entered into a Transfer Agreement dated as
of June 15, 1998 (the "Transfer Agreement") providing for the assignment by Mr.
Nin to P-PR of the Stock Option in consideration for a payment of $23.75 million
to the Company. P-PR intends to exercise the Stock Option at a closing scheduled
to be held on July 17, 1998. P-PR will contemporaneously purchase 6,210,429
shares of the Company's Class B common stock for $3.63 per share pursuant to a
stock purchase agreement between P-PR and certain shareholders of the Company.
After giving effect to these transactions, P-PR will hold approximately 52.1% of
the overall shares outstanding and 77.9% of the voting control of the Company.
The Company will also issue a warrant to P-PR for the purchase of an additional
1,700,000 shares of the Company's Class B common stock, exercisable at any time
during a period of 7-1/2 years after the closing at $6.875 per share. The
closing of the transactions requires the satisfaction of various conditions,
including obtaining consents from PepsiCo and the Company's principal lender,
Banco Popular de Puerto Rico, in connection with the change in control of the
Company.
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The Transfer Agreement provides that the Company's current board of
directors will appoint new directors selected by P-PR to fill vacancies created
by the resignation of current directors. Assuming the timely closing of the
transactions described in the preceding paragraph, the appointment of the new
directors will become effective on July 18, 1998. Appendix A contains certain
information about the persons proposed by P-PR to serve as the Company's new
directors. The information relating to P-PR contained in this Information
Statement has been supplied to the Company by P-PR. The Company assumes no
responsibility for the accuracy or completeness of such information.
The securities of the Company outstanding on June 30, 1998 consisted of
5,000,000 Class A Shares, entitling the holders thereof to six votes per share,
and 16,500,000 shares of Class B common stock, par value $.01 per share (the
"Class B Shares" and together with the Class A Shares, the "Common Stock"),
entitling the holders thereof to one vote per share. There were no other classes
of securities of the Company outstanding on June 30, 1998.
SECURITY OWNERSHIP
Class A Shares
The following table sets forth information regarding beneficial ownership
of the Class A Shares outstanding as of June 30, 1998 by (i) each person known
by the Company to be the beneficial owner of more than 5% of the Class A Shares,
(ii) each director of the Company who holds Class A Shares (iii) each of the
executive officers named in the summary compensation table who holds Class A
Shares and (iv) all directors and executive officers of the Company as a group.
Information with respect to beneficial ownership of Company's Common Stock is
based upon the Company's Common Stock records and data supplied to the Company
by its shareholders.
Percentage
Number of of
Class A Class A
Shares Shares
Beneficially Beneficially
Directors, Executive Officers and 5% Shareholders* Owned Owned(1)
- -------------------------------------------------- ------------ ------------
Rafael Nin, as Trustee(2) .......................... 5,000,000 100.0%
Charles H. and Patricia Beach(3) ................... 2,218,368 44.4
Michael J. Gerrits Investment Ltd.(4) .............. 417,488 8.3
Anton Schedlbauer(5) ............................... 377,443 7.5
Patrick T. Gerrits Investment Ltd.(4) .............. 341,146 6.8
John W. Beck(6) .................................... 339,698 6.8
Dorothy D'Angelo(7) ................................ 251,628 5.0
Charles R. Krauser(7) .............................. 209,355 4.2
All Directors and Executive Officers as a Group .... 5,000,000 100.0
- -----------------------
* The address of the directors, executive officers and 5% shareholders is
Pepsi-Cola Puerto Rico Bottling Company, Carretera 865Km. 0.4, Bo.
Candelaria Arenas, Toa Baja, Puerto Rico 00949, except for Charles H. Beach
and Patricia Beach, whose address is 700 South Federal Highway, Suite 100,
Boca Raton, FL 33432, Anton Schedlbauer, whose address is 12 Calle 1-25
Zona 10, Edificio Geminis 10, Torre Norte Oficina 1403-04, Guatemala City,
Guatemala and Michael J. Gerrits and Patrick T. Gerrits, whose address is
Gerrits Construction, Inc., 3465 N. W. 2nd Avenue, Miami, FL 33127.
(1) Based on 5,000,000 total outstanding Class A Shares on June 30, 1998.
(2) Rafael Nin is deemed to be the beneficial owner of 5,000,000 Class A Shares
which are held in the Nin Voting Trust because he holds sole voting power
with respect to such shares and, pursuant to the two-year option to
purchase all of such Class A Shares for the exclusive benefit of the
Company, currently holds sole dispositive power with respect to such
shares. However, Mr. Nin may not exercise the option and has no pecuniary
interest in such shares. In addition to direct ownership of 156,579 Class B
Shares, Mr. Nin beneficially owns 1,516,667 Class B Shares and 190,000
Class B Shares that may be acquired upon the exercise of a currently
exercisable option granted under the Stock Option Agreement dated October
15, 1996 between the Company and Mr. Nin, and the Company's Qualified Stock
Option Plan, respectively. As a result of his right to vote the 5,000,000
Class A Shares held in the Nin
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Voting Trust, his direct ownership of 156,579 Class B Shares, and assuming
that Mr. Nin exercised the options granted under the Stock Option Agreement
and Company's Qualified Stock Option Plan, Rafael Nin has the right to vote
29.57% of the total outstanding capital stock of the Company and the right
to exercise 66.09% of the total voting rights outstanding.
(3) Charles and Patricia Beach are deemed to be the beneficial owners of
2,218,368 Class A Shares, which are held in the Nin Voting Trust, because
they are entitled to receive dividends and other distributions on such
Class A Shares while they are in the Nin Voting Trust, and are entitled to
receive a return of such Class A Shares upon the termination of the Nin
Voting Trust. An Additional 25,578 Class A Shares owned by members of Mr.
Beach's immediate family are also held in the Nin Voting Trust, and Mr.
Beach may be deemed to be the beneficial owner (as that term is defined in
Rule 13d-3 ("Rule 13d-3") of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of the Class A Shares owned by the members of
his family. Mr. Beach disclaims such beneficial ownership with respect to
such Class A Shares owned by members of his immediate family.
(4) Michael J. Gerrits, through Michael J. Gerrits Investment Ltd., is deemed
to be the beneficial owner of 417,488 Class A Shares, which are held in the
Nin Voting Trust, because Michael J. Gerrits Investment Ltd. is entitled to
receive dividends and other distributions on such Class A Shares while they
are in the Nin Voting Trust, and is entitled to receive a return of such
Class A Shares upon the termination of the Nin Voting Trust. An additional
341,146 Class A Shares owned by Patrick T. Gerrits Investment Ltd. and
336,675 Class A Shares owned by other members of Mr. Gerrits's immediate
family and his affiliates, who are Mr. Gerrits's former business partners
or employees and their respective families, are also held in the Nin Voting
Trust, and Mr. Gerrits may be deemed to be the beneficial owner (as that
term is defined in Rule 13d-3) of the Class A Shares owned by the members
of his family and affiliates. Mr. Gerrits disclaims such beneficial
ownership with respect to such Class A Shares owned by members of his
immediate family and affiliates.
(5) Lumiye International S.A., a company controlled by Mr. Schedlbauer, is
deemed to beneficially own 264,210 Class A Shares, or 5.3% of Class A
Shares and Girasol Enterprises, a company controlled by Mr. Schedlbauer's
wife, is deemed to beneficially own 113,233 Class A Shares, or 2.2% of the
Class A Shares. All of these Class A Shares are held in the Nin Voting
Trust and are deemed beneficially owned because of the right to receive
dividends and other distributions on such Class A Shares while they are in
the Nin Voting Trust and a return of such Class A Shares upon termination
of the Trust.
(6) John W. Beck is a director of the Company. All of these Class A Shares are
held in the Nin Voting Trust and are deemed beneficially owned by Mr. Beck
because of Mr. Beck's right to receive dividends and other distributions on
such Class A Shares while they are in the Nin Voting Trust and a return of
such Class A Shares upon termination of the Nin Voting Trust.
(7) Charles R. Krauser is a director of the Company. All of these Class A
Shares are held in the Nin Voting Trust and are deemed beneficially owned
by Mr. Krauser because of the right to receive dividends and other
distributions on such Class A Shares while they are in the Nin Voting Trust
and a return of such Class A Shares upon termination of the Nin Voting
Trust. Additionally, Mr. Krauser may be deemed to be the beneficial owner
(as the term is defined under Rule 13d-3) of 545,528 Class A Shares
beneficially owned by his affiliates, including 251,628 Class A Shares
beneficially owned by Dorothy D'Angelo. Mr. Krauser disclaims such
beneficial ownership with respect to such Class A Shares owned by his
affiliates, who are Mr. Krauser's business partners and their respective
family members. See "--Voting Trust Agreements."
Class B Shares
The following table sets forth information regarding beneficial ownership
of the Class B Shares outstanding as of June 30, 1998 by (i) each person known
by the Company to be the beneficial owner of more than 5% of the Class B Shares,
(ii) each director of the Company who holds Class B Shares, (iii) each of the
executive officers named in the summary compensation table who holds Class B
Shares and (iv) all directors and executive officers of the Company as a group.
Unless otherwise indicated herein, each shareholder has sole voting power and
sole dispositive power with respect to the indicated shares. Information with
respect to beneficial ownership is based upon the Company's Common Stock records
and data supplied to the Company by its shareholders.
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Percentage
Number of of
Class B Class B
Shares Shares
Beneficially Beneficially
Directors, Executive Officers and 5% Shareholders** Owned Owned(1)
- -------------------------------------------------- ------------ ------------
Charles H. and Patricia Beach(2).................... 2,721,197 16.5%
Claims Administrator--Pepsi Puerto Rico
Security Litigation(3)............................. 2,000,000 12.1
Shapiro Capital Management(4)....................... 3,489,075 21.2
Michael J. Gerrits(5)............................... 1,385,036 8.4
John W. Beck(6)..................................... 454,301 2.8
Charles R. Krauser(7)............................... 217,520 1.3
Rafael Nin(8)....................................... 156,579 0.1
David L. Virginia(9)................................ 18,000 *
Richard Reiss(10)................................... 1,547 *
C. Leon Timothy(11)................................. 1,000 *
Basil Vasiliou(12).................................. 67,920 *
All Directors and Executive Officers as a Group..... 916,867 5.6
- -------------------
* Less than 1%
** The address of the directors, executive officers and 5% shareholders is
Pepsi-Cola Puerto Rico Bottling Company, Carretera 865Km. 0.4, Bo.
Candelaria Arenas, Toa Baja, Puerto Rico 00949, except for Charles H. Beach
and Patricia Beach, whose address is 700 South Federal Highway, Suite 100,
Boca Raton, FL 33432, Michael J. Gerrits whose address is Gerrits
Construction, Inc., 3465 N. W. 2nd Avenue, Miami, FL 33127 and Shapiro
Capital Management whose address is 3060 Peachtree Road NW, Suite 1555,
Atlanta, GA 30305.
(1) Based on 16,500,000 total outstanding Class B Shares on June 30, 1998.
(2) Charles and Patricia Beach own 2,721,197 Class B Shares, each of which is
entitled to one vote. Pursuant to the Charles H. Beach Voting Trust
described below, Mr. Beach has sole voting power with respect to 2,767,619
Class B Shares which include 46,422 Class B Shares owned by members of his
immediate family. Thus, Mr. Beach may be deemed to be the beneficial owner
(as that term is defined in Rule 13d-3) of such shares owned by members of
his immediate family. Mr. Beach disclaims such beneficial ownership with
respect to such Class B Shares owned by members of his immediate family.
See "--Voting Trust Agreements." Each member of the Charles H. Beach Voting
Trust has sole dispositive power with respect to his or her Class B Shares,
subject to certain restrictions on transfer described below. See
"--Shareholders Agreement."
(3) In September 1997, 2,500,000 Class B Shares were used by the Company to pay
a portion of the settlement payment made in connection with the settlement
of certain class action securities law suits in which the Company and some
of its directors were defendants. These 2,500,000 Class B Shares were
acquired by the Company from a number of the Company's shareholders,
including the original organizers of the Company in connection with the
settlement of the litigation. Pursuant to the settlement terms, 500,000
Class B Shares were delivered to lawyers for the plaintiffs in the
litigation and 2,000,000 Class B Shares were delivered to the
court-appointed claims administrator for the settlement.
(4) The information shown is derived from information provided to the Company
by Shapiro Capital Management with respect to its ownership of Class B
Shares.
(5) Michael J. Gerrits is the trustee of the Michael J. Gerrits Voting Trust.
The members of the Michael J. Gerrits Voting Trust include Mr. Gerrits and
members of his family and his affiliates, who are Mr. Gerrits's former
business partners or employees and their respective families. Mr. Gerrits,
pursuant to the Michael J. Gerrits Voting Trust, has the sole power to vote
1,385,036 Class B Shares which include 514,418 Class B Shares that Mr.
Gerrits owns through Michael J. Gerrits Investment Ltd.
(6) John W. Beck is a director of the Company and Chairman of the Board of
Directors of the Company.
(7) Charles R. Krauser is a director of the Company. All of these Class B
Shares are held by Krauser Family Investment Ltd. Charles R. Krauser
through Krauser Family Investment Ltd. owns 217,520 Class B Shares.
Pursuant to the Charles R. Krauser Voting Trust described below, Mr.
Krauser has sole voting power with respect to 1,009,559 Class B Shares,
which include 792,039 Class B Shares, owned by his affiliates, who are Mr.
Krauser's business partners and their respective family members. Thus, Mr.
Krauser may be deemed to be the beneficial owner (as the term is defined
under Rule 13d-3) of such shares. Mr. Krauser disclaims such beneficial
4
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ownership with respect to such Class B Shares owned by his affiliates. See
"--Voting Trust Agreements." Each member of the Voting Trust has sole
dispositive power with respect to his or her shares, subject to certain
restrictions on transfer described below. See "--Shareholders Agreement."
(8) Rafael Nin is a director of the Company and President and Chief Executive
Officer of the Company. In addition to direct ownership of 156,579 Class B
Shares, Mr. Nin beneficially owns 1,516,667 Class B Shares and 190,000
Class B Shares that may be acquired upon the exercise of a currently
exercisable option granted under the Stock Option Agreement dated October
15, 1996 between the Company and Mr. Nin, and the Company's Qualified Stock
Option Plan, respectively.
(9) David L. Virginia is Vice President-Chief Financial Officer of the Company.
(10) Richard Reiss is a director of the Company.
(11) C. Leon Timothy is a director of the Company.
(12) Basil Vasiliou is a director of the Company. Mr. Vasiliou owns 43,500 Class
B Shares through two Investment Retirement Accounts. Mr. Vasiliou's wife,
Jane T. Vasiliou, owns 17,000 Class B Shares, of which Mr. Vasiliou has
dispositive power. Pursuant to the Jane T. Vasiliou Trust, Mr. Vasiliou has
dispositive power with respect to 4,000 Class B Shares. Pursuant to the K&S
Vasiliou Trust, Mr. Vasiliou has dispositive power with respect to 3,000
Class B Shares. Mr. Vasiliou also beneficially owns 420 Class B Shares of
the Company as beneficiary of the Vasiliou & Company, Inc. Retirement Plan.
Voting Trust Agreements
On September 28, 1996, Rafael Nin, as trustee, the Company and the
shareholders of the Company's outstanding Class A Shares entered into the Nin
Voting Trust pursuant to which the shareholders created an irrevocable voting
trust. See "Change in Control."
The trustee of the Charles H. Beach Voting Trust is Charles H. Beach and
the other members of the trust are members of his immediate family. Charles H.
Beach, pursuant to the Charles H. Beach Voting Trust, has the sole power to vote
2,767,619 Class B Shares, which collectively represent 12.9% of the total
outstanding capital stock of the Company and 6.0% of the total voting rights
outstanding. The trustee of the Michael J. Gerrits Voting Trust is Michael J.
Gerrits and the other members of the trust are members of his immediate family
and his affiliates. Michael J. Gerrits, pursuant to the Michael J. Gerrits
Voting Trust, has the sole power to vote 1,385,036 Class B Shares, which
collectively represent 6.4% of the total outstanding capital stock of the
Company and 3.0% of the total voting rights outstanding. The trustee of the
Charles R. Krauser Voting Trust is Charles R. Krauser, a director of the
Company, and the other members of the Trust are affiliates of Mr. Krauser. Mr.
Krauser, pursuant to the Charles R. Krauser Voting Trust, has the sole power to
vote 1,009,559 Class B Shares which represent 4.7% of the outstanding capital
stock of the Company and 2.2% of the total voting rights outstanding. The Class
B Shares with respect to which Messrs. Beach, Gerrits and Krauser have sole
voting power pursuant to their respective voting trusts include shares which are
owned by members of their immediate family and affiliates. See footnotes 2, 5
and 7 to the table regarding beneficial ownership of the Class B Shares of the
Company.
The agreements creating the Charles H. Beach Voting Trust, the Michael J.
Gerrits Voting Trust and the Charles R. Krauser Voting Trust described in the
preceding paragraph (the "Voting Trust Agreements") govern the exercise of the
voting rights associated with the shares of Common Stock of the Company owned by
shareholders who are members of such voting trusts. Pursuant to the Voting Trust
Agreements, the trustee of each voting trust has the right to vote the shares
owned by the members of such voting trust. The provisions of the Shareholders
Agreement restrict transfer of the shares held pursuant to the Voting Trust
Agreements. See "Shareholders Agreement." In addition, the other members of the
relevant voting trusts have a right of first refusal to acquire any shares,
which are withdrawn from the trust account. The voting trusts terminate without
notice by, or action of, the respective trustees in 2005; provided, however,
that within two years prior to the termination of the current term or any
extension term thereof, the members of the relevant trust who are then
shareholders may agree to extend the duration of the relevant Voting Trust
Agreement for an additional period, not to exceed ten years. The Voting Trust
Agreements may be terminated prior to August 28, 2005 (i) upon termination of
the Exclusive Bottling Appointments, each dated April 27, 1987 and entered into
by the Company and PepsiCo pursuant to which the Company has certain exclusive
franchise rights with respect to certain PepsiCo products (the "Franchise
Agreements"), or the Shareholders Agreement, (ii) if none of the members of the
relevant voting trust are holders of record of shares of Common Stock of the
Company held in such voting trust or (iii) by written agreement of the relevant
trustee of the voting trust.
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Shareholders Agreement
The Essential Shareholders and the Company's other shareholders existing
prior to the Company's public offering on September 20, 1995 (the "Non-Essential
Shareholders" and together with the Essential Shareholders, the "Initial
Shareholders"), entered into a Shareholders Agreement governing the transfer of
the shares of the Company by such shareholders. Under the Shareholders
Agreement, the Essential Shareholders may not sell or otherwise transfer any
shares of the Company if such sale or transfer would give PepsiCo the right to
terminate any of the Franchise Agreements relating to the Company's Pepsi-Cola
products. In addition, under the Shareholders Agreement, the holders of Class A
Shares may not sell any Class A Shares, even after the termination of the Nin
Voting Trust, without the consent of the Company, and are required, at the
request of the Company, and to the extent that such Franchise Agreements require
the Essential Shareholders to maintain voting control of the Company, to
transfer to the Essential Shareholders, in exchange for Class B Shares held by
the Essential Shareholders, as many Class A Shares as shall be necessary, so
that, after the termination of the Nin Voting Trust, the Essential Shareholders
maintain voting control of the Company.
Except for the above restrictions, all of the Class B Shares owned by the
Initial Shareholders are, as a result of the settlement of certain class action
securities lawsuits against the Company in September 1997, no longer subject to
the restrictions on transferability previously contained in the Shareholders
Agreement. The Company has undertaken in the Shareholders Agreement to register
under the Securities Act of 1933 for resale by the Initial Shareholders all of
such Class B Shares and to pay all expenses related thereto, except for
underwriting commissions. Pursuant to that undertaking, the Company has filed a
registration statement on Form S-3 with the Securities and Exchange Commission
("SEC") to register for resale the 7,000,000 Class B Shares owned by the Initial
Shareholders.
Information Concerning Current Members of the Board of Directors
The following table sets forth certain information concerning each of the
Company's current directors:
Name Age Position Director Since
---- --- -------- --------------
John W. Beck 60 Director 1987
Charles R. Krauser 63 Director 1987
Rafael Nin 53 Director 1987
C. Leon Timothy 63 Director 1992
Richard Reiss 50 Director 1996
Sutton Keany 54 Director 1997
Basil K. Vasiliou 48 Director 1998
All directors serve until their successors have been elected.
The following is a brief description of the business background of each of
the current directors of the Company.
John W. Beck has been a director of the Company since 1987 and currently
serves as the Chairman of the Board of Directors of the Company. Mr. Beck has
served as President of Economics Corp., an economic consulting firm, since 1972;
he also served as President and Chief Executive Officer of First National Bank,
Winter Park from 1973 to 1986, and as Chairman and director of WMFE-TV/FM, a PBS
broadcasting station from 1985 to 1994.
Charles R. Krauser has been a director of the Company since 1987 and was a
director of Buenos Aires Embotelladora S. A. ("BAESA") from 1993 until December
1995. He has served as President of Atlantic Development & Management, Inc., a
real estate development company, since 1979. He was elected a director of
International Bioimmune Systems, Inc., a cancer diagnostics and therapeutics
company, in 1996.
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Rafael Nin has been a director of the Company since May 1987 and has been
the President and Chief Executive Officer of the Company since June 1996. He has
been a director of Bestov Foods, S.A., a Pizza Hut franchisee in Argentina,
since 1992, and has been President and Chief Executive Officer of Kana
Development, Inc., a land development company, since 1983.
C. Leon Timothy has been a director of the Company since December 1992. He
was a Senior Vice President of the Company from February 1990 through December
31, 1997, when he retired from that position. He continues to be available as a
consultant on an as-needed basis. He was a director of BAESA from April 1990
until June 1996 and a Senior Vice President of BAESA, responsible for
shareholder relations from November 1989 until June 1996.
Richard Reiss has been a director of the Company since February 1996.
Currently, Mr. Reiss specializes in the area of financial and management
consulting and has been the owner of Reiss and Associates since 1979. He was
President of Nova Comm., Inc., a start-up company manufacturing access control
units, from 1994 to 1996. Mr. Reiss has been a director of Banco Santander
Puerto Rico since 1979. He was President and Chief Executive Officer of Clear
Comm, LP from 1996 until early December 1997.
Sutton Keany has been a director of the Company since January 1997. He has
been a partner of Winthrop, Stimson, Putnam & Roberts, a law firm based in New
York City, since 1976.
Basil K. Vasiliou has been a director of the Company since February 1998.
He is currently the Chairman of Vasiliou & Co., Inc., a registered
broker-dealer. Mr. Vasiliou was the general partner of Smith-Vasiliou Special
Situations Fund, L.P., a partnership organized to invest in the financial
obligations of troubled corporations, from 1984 to 1994. Mr. Vasiliou has also
been a director of Costain Group PLC from November 1997. Mr. Vasiliou was a
director of Interco Inc. ("Interco") from 1992 to 1995.
Meetings and Committees
The Board of Directors met or took action by unanimous written consent on
twelve occasions during the fiscal year ended September 30, 1997. There are
three committees of the Board of Directors: the Audit Committee, the
Compensation Committee and the Stock Option Committee. The members of the Audit
Committee are Richard Reiss and Charles R. Krauser, neither of whom are officers
or employees of the Company. The members of the Compensation Committee and the
Stock Option Committee for the fiscal year ended September 30, 1997 were John W.
Beck, Anton Schedlbauer and Richard Reiss. Mr. Schedlbauer's term as a director
expired at the annual meeting held on February 2, 1998. The Audit Committee met
on five occasions during the fiscal year ended September 30, 1997. The Audit
Committee annually recommends to the Board of Directors independent public
accountants to serve as auditors of the Company's books, records and accounts,
reviews the scope of the audits performed by such auditors and the audit reports
prepared by them and reviews related party transactions. The Stock Option
Committee assists in the management and administration of the Company's stock
option plans and may make recommendations to the Board of Directors as to action
to be taken under such plans. The Stock Option Committee does not have any
decision-making authority. The Compensation Committee and the Stock Option
Committee met, together, three times during the fiscal year ended September 30,
1997.
During the Company's last fiscal year, each of the incumbent directors
attended at least 75% of the aggregate of (i) the total number of meetings of
the Board of Directors and (ii) the total number of meetings held by all
committees on which such director was a member during the period he was a member
of the Board of Directors and such committees, with the exception of Anton
Schedlbauer, who attended seven of the twelve Board of Directors meetings.
Directors of the Company, other than Mr. Nin, receive $2,000 per month and
$1,000 per Board meeting attended in person, as compensation for serving as a
director. Richard Reiss also receives an additional $1,000 per month for acting
as Chairman of the Audit Committee. Mr. Nin does not receive compensation for
serving as a director. All directors are reimbursed for travel expenses incurred
in attending meetings of the Company.
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The members of the Compensation Committee and the Stock Option Committee
are John W. Beck, Basil K. Vasilou and Richard Reiss, none of whom are officers
or employees of the Company. Mr. Beck serves as Chairman of the Board of
Directors of the Company.
Indemnification of Officers and Directors
As permitted by the Delaware General Corporation Law, the Company's
Certificate of Incorporation limits the personal liability of a director of the
Company for monetary damages for breach of fiduciary duty of care as a director.
Liability is not eliminated for (i) any breach of the director's duty of loyalty
to the Company or its shareholders, (ii) acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
unlawful payment of dividends or stock purchases or redemptions pursuant to
Section 174 of the Delaware General Corporation Law, or (iv) any transaction
from which the director derived an improper personal benefit.
Under provisions contained in the Company's Certificate of Incorporation
and Bylaws, the Company will indemnify any director, officer, employee or agent
of the Company who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company). Indemnification will be provided if the action, suit or
proceeding arose by reason of the fact that a director, officer, employee or
agent of the Company is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. Indemnification will be provided against
expenses including attorneys' fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner that he
reasonably believed to be in or not opposed to the best interests of the
Company. Indemnification will be allowed with respect to any criminal action or
proceeding if the director or officer involved had no reasonable cause to
believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interest of the Company. With
respect to any criminal action or proceeding, termination by one of the above
dispositions shall not, of itself, create a presumption that the person involved
had reasonable cause to believe that his conduct was unlawful.
The Company shall indemnify any person who was or is a party, or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Company to procure a judgment in its favor by
reason of the fact that he is or was a director, trustee, officer, employee or
agent of the Company. This includes situations where such person involved was
serving at the request of the Company as a director, trustee, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise. Under these circumstances, the Company shall indemnify such
director, trustee, officer, employee or agent against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of the action or suit, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company. No indemnification will be made by the Company for any claim, issue
or matter as to which such director, trustee, officer, employee or agent shall
have been adjudged to be liable to the Company. However, the Court of Chancery
of the State of Delaware or the court in which such action or suit was brought
may determine that, despite the adjudication of liability but in view of all the
circumstances of the case, such director, trustee, officer, employee or agent is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
To the extent that any director, trustee, officer, employee or agent
referred to above, has been successful on the merits or otherwise in defense of
any action, suit or proceeding described above, or in defense of any claim,
issue or matter described above, the Company will indemnify him against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Any indemnification will be made by the Company only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he has met the
applicable standard of conduct set forth above. This determination will be made
at the option of the person seeking indemnification, by one of the following:
(a) by the Board of Directors by a majority vote of directors
8
<PAGE>
who are not parties to such action, suit or proceedings, or (b) by independent
legal counsel selected by the person seeking indemnification from a specific
list of law firms or which are otherwise reasonably acceptable to the Company,
in a written opinion, or (c) if agreed upon by the Company, by the shareholders.
In making such determination, the person seeking indemnification be presumed to
have met the applicable standard of conduct set forth in the Bylaws, which
presumption may be rebutted with evidence to the contrary. This determination
shall be made by the Board of Directors or independent legal counsel, as the
case may be, as promptly as possible after submission to the Board of Directors
or legal counsel, and, to the extent possible, within 30 days of such
submission. A determination made in accordance with the Bylaws shall not be
deemed to affect any right to judicial review of such determination that a
person seeking indemnification may have under applicable law.
Expenses incurred by an officer or director in defending a civil or
criminal action, suit or proceeding shall be paid by the Company in advance of
the final disposition of such action, suit or proceeding upon receipt of any
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the Company under its indemnification policies described in Article Tenth of the
Certificate of Incorporation. The Company may pay such expenses incurred by its
other employees and agents upon such terms and conditions, if any, as the Board
of Directors deems appropriate.
The indemnification and advancement of expenses provided by, or granted
pursuant to, Article Tenth of the Certificate of Incorporation shall not be
deemed exclusive of any other rights to which those seeking indemnification may
be entitled under any statute, by-law, agreement, vote of shareholders or
disinterested directors or otherwise both as to action in his official capacity
and as to action in another capacity while holding such office.
The indemnification and advancement of expenses provided by, or granted
pursuant to, the Certificate of Incorporation shall, unless otherwise provided
when authorized or ratified, continue to a person who has ceased to be a
director or officer of the Company and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Expenses incurred by a present or former officer or director in defending a
civil or criminal action, suit, investigation or administrative matter
("Indemnifiable Events") in which such person is named as a party, subject or
witness, or brought against such person, by reason of his serving or acting, or
having served or acted as a director or officer, or arising or allegedly
arising, directly or indirectly, out of any act, omission, occurrence or event
involving such person, shall be paid by the Company in advance of the final
disposition or completion of such Indemnifiable Event upon the written request
of such person and compliance with the other requirements of the Bylaws. A
person requesting payments under the Bylaws shall be required to execute an
undertaking to repay such amount if it shall ultimately be determined that he is
not entitled to be indemnified by the Company and furnish or file with the
Company any other document required by law. Unless required by law, such
undertaking need not be secured. After receipt by the Company of such executed
undertaking and any other documents required by law, payment shall be made by
the Company promptly after receipt by it of a reasonably detailed invoice for
any such expenses, certified by the person seeking reimbursement or the payment
of the invoice, to the effect that such expense was actually incurred by him in
connection with his defense of a claim for which indemnification could be sought
under the Bylaws. It is the intent of the Company that the provisions of the
Bylaws be mandatory in operation and not subject to the discretion of the
Company. Further, fees and expenses shall be recoverable from the Company by any
person adjudged or determined to be entitled to indemnity under the Bylaws, if
such fees and expenses are incurred in order to enforce the Bylaws with respect
to advancement of expenses or indemnification.
The rights to indemnification and to the advancement or reimbursement of
expenses under the Bylaws (i) are and shall be contract rights based upon good
and valuable consideration, pursuant to which the persons in favor of whom such
rights are created may sue as if the provisions of the Bylaws were set forth in
a separate written contract or contracts between such persons and the Company,
and (ii) shall continue and remain available and enforceable, after any
revocation or restricted modification thereof, as to Indemnifiable Events
occurring or having occurred prior to such revocation or modification. To the
extent that any amendment to the Bylaws (including the amendment adopted on
January 24, 1998) establishes specific procedures relating to indemnification
and advancement of expenses or grants additional rights to persons covered
thereunder, such procedures and additional rights shall only be applicable with
respect to Indemnifiable Events relating to events or actions or omissions by
such persons in their capacity as director, officer, employee or agent of the
Company, in each case occurring after the date of such
9
<PAGE>
amendment. The Bylaws are intended to grant indemnification to persons covered
hereby only to the maximum extent permitted by applicable law.
Compliance with Reporting Requirements of Section 16 of the Exchange Act
Under Section 16(a) of the Exchange Act, the Company's executive officers
and any persons holding 10% or more of the Company's Common Stock are required
to report their ownership of Common Stock and changes in that ownership to the
SEC and to furnish the Company with copies of such report. Specific due dates
for these reports have been established and the Company is required to report in
this Information Statement any failure to file on a timely basis by such
persons. To the Company's knowledge, based upon review of such reports received
by it, during the fiscal year ended September 30, 1997, all reports required to
be filed by the Company's directors, executive officers and 10% shareholders
have been timely filed with the SEC.
EXECUTIVE OFFICERS
The executive officers of the Company are elected by the Board of Directors
and serve at its discretion. There is no family relationship among any of the
officers or directors. The following table sets forth certain information
regarding the executive officers of the Company.
Name Age Position
- ---- --- --------
Rafael Nin 53 President and Chief Executive Officer
A. David Velez 43 Vice President - Chief Operating Officer
Reinaldo Rodriguez 52 Vice President - Human Resources
David Lee Virginia 48 Vice President - Chief Financial Officer
Jose Gonzalez 40 Vice President - Internal Audit
The following is a brief description of the business background of each of
the executive officers of the Company.
Rafael Nin has been a Director of the Company since May 1987. He was
elected President and Chief Executive Officer in June 1996. He has been a
Director of Bestov Foods S.A., a Pizza Hut franchise in Argentina since 1992,
and is President and Chief Executive Officer of Kana Development, Inc., a land
development company, since 1983.
A. David Velez has been a Vice President of the Company in charge of
operations since March, 1997. He was the General Manager for BAESA's operations
in Rio de Janeiro from October 1995 to February 1997. Prior to that he was the
General Manager for PepsiCo's Miami bottling operations.
Reinaldo Rodriguez has been Vice President of the Company in charge of
Human Resources since September 1996 and from 1987 to 1990. He was Vice
president in charge of Human Resources for BAESA from 1990 to July 1996, and he
was Personnel Director for Pepsi Cola Metropolitan Bottling Company from 1982 to
1987.
David Lee Virginia has been Vice President of the Company in charge of
Finance since September 1996. He was Planning Director for Pepsi Cola
Engarrafadora Ltda from 1994 to 1996. He was employed with BAESA in a number of
positions including Vice President - Treasurer from 1992 to September 1994 and
he was Vice President in charge of Finance for Pepsi Cola Puerto Rico Bottling
Co. from 1987 to 1992. Mr. Virginia was also the Vice President of Finance of
Speciality Frozen Products LP from January 1993 to August 1993.
Jose Gonzalez has been a Vice President of the Company in charge of
Internal Audit since September 1996. He was previously Audit Manager, since
December 1995. He was Controller and Operations Manager for The West Company
from 1993 to 1995 and Assistant Controller and Account Manager for Nypro Puerto
Rico Inc. from 1989 to 1993. Previous positions include Senior Accountant for
Motorola of Puerto Rico and Senior Auditor for Coopers & Lybrand, from 1985 to
1992.
10
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal years ended September 30,
1995, 1996 and 1997, each component of compensation paid or awarded to, or
earned by the Chief Executive Officer of the Company and each of the executive
officers whose total annual salary and bonus exceeded $100,000 in the fiscal
years ended September 30, 1995, 1996 and 1997 (collectively referred to as the
"Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
------------------------ Other Annual All Other
Name and Principal Position Year Salary Bonus Compensation Compensation(1)
--------------------------- ---- ------ ----- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Rafael Nin(2)(21) 1997 $291,500 $ 0 $100,000(2) $ 0
President and Chief 1996 $ 92,304 $ 0 $ 0 $ 0
Executive Officer 1995 $ 0 $ 0 $ 0 $ 0
David Cuthbertson(3)(4)(5)
(6)(7)(21) 1997 $ 56,640 $ 0 $175,052(4) $ 749
$358,004(5)
Vice President 1996 $103,391 $23,430 $ 52,646(6) $ 1,593
1995 $ 91,972 $16,585 $106,109(7) $ 1,487
C. Leon Timothy(8) 1997 $125,120 $ 0 $ 0 $ 2,761
Sr. Vice President-- 1996 $ 12,308(8) $ 0 $ 0 $ 0
Investor Relations
David L. Virginia(9)(10)(21) 1997 $ 95,146 $ 0 $ 97,000(10) $ 1,796
Vice President--Chief 1996 $ 12,096(11) $ 0 $ 11,695(12) $ 0
Financial Officer
Reinaldo Rodriguez(13)(14)(21) 1997 $ 81,092 $25,000 $122,200(14) $ 1,370
Vice President-- 1996 $ 0 $ 0 $ 19,863(12) $ 0
Human Resources
And Government
Affairs
Jose A Gonzalez(15)(16)(17)(18) 1997 $ 97,923 $ 0 $ 12,000(16) $ 0
Vice President-- 1996 $ 39,423(17) $ 2,500 $ 8,258(18) $ 0
Internal Auditor
Angel David Velez(19)(20)(21) 1997 $ 76,558 $ 0 $ 56,000(20) $ 0
Vice President--Chief
Operating Officer
</TABLE>
- -------------------
(1) Amounts in this column, except for (5), represent contributions by the
Company to the account of the Chief Executive Officer and Named Executive
Officers under the Company's Section 165(e) Plan (equivalent to a Section
401(K) Plan).
(2) Mr. Nin assumed the office of President and Chief Executive Officer of the
Company on June 11, 1996. $100,000 represents compensation received by Mr.
Nin in the form of dividends on management stock paid by Beverage Plastics,
a wholly owned subsidiary of the Company ("Beverage Plastics").
(3) Mr. Cuthbertson's employment with the Company was terminated on May 1,
1997.
11
<PAGE>
(4) Of this amount, $7,000 represents compensation received by Mr. Cuthbertson
as car allowance, $23,750 represents compensation received by Mr.
Cuthbertson as reimbursements for repatriation expenses and $109,052
represents compensation received by Mr. Cuthbertson as a severance payment.
Additionally, of this amount, $35,250 represents compensation received by
Mr. Cuthbertson in the form of dividends on management stock paid by
Beverage Plastics.
(5) Mr. Cuthbertson received $358,004 to cash-out his retirement plan.
(6) Of this amount, $5,646 represents compensation received by Mr. Cuthbertson
as reimbursement for the payment of taxes and $47,000 represents
compensation received by Mr. Cuthbertson in the form of dividends on
Management Stock paid by Beverage Plastics.
(7) Of this amount, $48,309 represents compensation received by Mr. Cuthbertson
reimbursement for the payment of taxes, $10,800 represents compensation
received by Mr. Cuthbertson as car allowance and $47,000 represents
compensation received by Mr. Cuthbertson in the form of dividends on
management stock paid by Beverage Plastics.
(8) Mr. Timothy has been a director of the Company since December 1992 and was
Senior Vice President of the Company from February 1990 to December 1997.
He was a Director of BAESA from April 1990 until June 1996 and a Senior
Vice President of BAESA responsible for shareholder relations until June
1996. During fiscal years 1995 and 1996, the Company did not pay
compensation to Mr. Timothy directly; however, the Company paid a
management fee to BAESA for the management services in the amount of $0.8
million and $0.9 million for the fiscal years ended September 30, 1995 and
1996, which includes amounts paid as compensation for Mr. Timothy's
management services to the Company. In July 1996, Mr. Timothy resigned as
an officer and director of BAESA and was added to the Company's payroll on
August 8, 1996. This amount represents compensation earned by Mr. Timothy
in the fiscal year 1996 during the period from August to September 1996.
(9) Prior to Mr. Virginia's employment with the Company as Vice
President--Chief Financial Officer, Mr. Virginia was hired as a consultant
to the Company on July 2, 1996.
(10) Of this amount, $12,000 represents compensation received by Mr. Virginia as
car allowance and $85,000 represents compensation received by Mr. Virginia
in the form of dividends on management stock paid by Beverage Plastics.
(11) This amount represents compensation earned by Mr. Virginia in the fiscal
year 1996 during July to September 1996. On September 28, 1996, Mr.
Virginia was elected to become Vice President--Chief Financial Officer,
assuming his duties as such on October 1, 1996.
(12) Messrs. Virginia and Rodriguez received these amounts, respectively, as a
consultant fee.
(13) Mr. Rodriguez was hired as a consultant to the Company on August 1, 1996
and on September 28, 1996, Mr. Rodriguez was elected to the position of
Vice President--Human Resources and Government Affairs, assuming his duties
as such on October 1, 1996.
(14) Of this amount, $12,000 represents compensation received by Mr. Rodriguez
as a car allowance, $30,000 represents compensation received by Mr.
Rodriguez as a consulting fee and $5,200 represents compensation received
by Mr. Rodriguez as a housing allowance. Additionally, of this amount
$75,000 represents compensation received by Mr. Rodriguez in the form of
dividends on management stock paid by Beverage Plastics.
(15) Mr. Gonzalez was employed as the Company's internal auditor on December 11,
1995.
(16) $12,000 represents compensation received by Mr. Gonzalez as a car
allowance.
(17) This amount represents compensation received by Mr. Gonzalez in the fiscal
year 1996 during the period from December 1995 to September 1996. On
September 28, 1996, Mr. Gonzalez was elected to become Vice
President--Internal Auditor, assuming his duties as such on October 1,
1996.
(18) Of this amount, $3,858 represents compensation received by Mr. Gonzalez as
a car allowance and $4,400 represents compensation received by Mr. Gonzalez
as reimbursement for the payment of his child's school education.
(19) Mr. Velez was employed by the Company as Vice President-Chief Operating
Officer on March 1, 1997.
(20) Of this amount, $6,000 represents compensation received by Mr. Velez as a
car allowance and $50,000 represents compensation received by Mr. Velez in
the form of dividends on management stock paid by Beverage Plastics.
(21) Mr. Cuthbertson previously owned, and Mr. Nin, Mr. Virginia, Mr. Rodriguez,
and Mr. Velez currently own, management stock in Beverage Plastics. The
management stock has no voting rights and no actual ownership interest. It
is similar to preferred stock entitling holders to a certain amount of
dividends based on surplus of exempt income under Puerto Rican Industrial
Incentives Laws.
12
<PAGE>
Option Grants for the Year Ended September 30, 1997
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Number of Percent of Potential Realizable Value at
Securities Total Options Exercise Assumed Annual Rates of Stock
Underlying Granted to or Base Price Appreciation for Option
Options Employees Price Expiration Term
Name Granted in Fiscal Year Per Share Date 5% 10%
(a) (b) (c) (d) (e) (f) (g)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Rafael Nin, President & Chief 190,000 11.1% $5.00 10-15-06(1) $ 597,450 $ 1,514,055
Executive Officer
Rafael Nin, President & Chief 1,516,667 88.9% $5.00 Unlimited(1) $4,769,119(2) $12,085,883(2)
Executive Officer
</TABLE>
- -------------------
(1) On October 15, 1996, Rafael Nin was granted an option to purchase 190,000
Class B Shares, at an exercise price of $5.00, per share pursuant to the
Qualified Stock Option Plan. Additionally, on October 15, 1996, the Company
granted to Rafael Nin a stock option (the "Nin Stock Option") to acquire
1,516,667 Class B Shares, at an exercise price of $5.00 per share. Upon the
closing of the transactions described above under "Change in Control," the
Nin Stock Option will be amended to expire on July 30, 2001.
(2) The Expiration Date on this Option is unlimited. Potential realizable value
at assumed annual rates of stock price appreciation for option is
calculated on an assumed ten-year expiration date.
<TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Numbers of
Securities Value of
Underlying Unexercised
Unexercised In-The-
Options Money Option
At Fiscal At Fiscal
Shares Year-End Year End
Acquired Value Exercisable/ Exercisable/
Name On Exercise Realized Unexercisable Unexercisable
(a) (b) (c) (d) (e)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rafael Nin, President & None(1) None(1) 190,000(2) $ 368,125(3)
Chief Executive Officer Class B Shares
Rafael Nin, President & None(1) None(1) 1,516,667(2) $2,938,542(4)
Chief Executive Officer Class B Shares
</TABLE>
- --------------------
(1) On October 15, 1996, Rafael Nin was granted options to purchase (a) 190,000
Class B Shares, at an exercise price of $5.00 per share, pursuant to the
Company's Qualified Stock Option Plan and (b) 1,516,667 Class B Shares, at
an exercise price of $5.00 per share, pursuant to the Stock Option
Agreement. These options are exercisable in whole or in part. However, none
of these options have been exercised by Mr. Nin in the fiscal year ended
September 30, 1997.
(2) Both the option to purchase 190,000 Class B Shares and 1,516,667 Class B
Shares, are exercisable options.
(3) This value represents the difference between the market value of 190,000
Class B Shares and the exercise price of the option on September 30, 1997.
On September 30, 1997, the market value of 190,000 Class B Shares was
$1,318,125, which is the product of 190,000 Class B Shares and $6.9375, the
last reported sale price of Class B Shares on the New York Stock Exchange
on September 30, 1997. The exercise price of the option was $950,000, which
is the product of 190,000 Class B Shares and exercise price of $5.00 per
Share.
(4) This value represents the difference between the market value of 1,516,667
Class B Shares and the exercise price of the option at September 30, 1997.
On September 30, 1997, the market value of the Class B Shares was
$10,521,877, which is the product of 1,516,667 Class B Shares and $6.9375,
the last reported sale price of Class B Shares on the New York Stock
Exchange on September 30, 1997. The exercise price of the option is
$7,583,335, which is the product of 1,516,667 Class B Shares and exercise
price of $5.00 per Share.
Employment Agreement
On June 11, 1996, the Company entered into an employment agreement with
Rafael Nin providing for an annual base salary of $300,000 which is subject to
yearly review, as well as a year-end bonus of 50% of the annual salary,
predicated on the satisfactory completion of established and agreed-upon
objectives. The Company has also agreed to give Mr. Nin a management stock
dividend from Beverage Plastics of $100,000 annually payable in four quarterly
installments of $25,000. Under the employment agreement, Mr. Nin is also
entitled to receive other
13
<PAGE>
benefits including an automobile with all operating expenses paid, and health
and life insurance. During the fiscal year ended September 30, 1997, Mr. Nin did
not receive any bonus, and he voluntarily accepted salary reductions as of April
1, 1997 and December 31, 1997.
Employee Benefit Plan
Salaried Employees' Retirement Plan. The formula used to determine
retirement benefits under the Company's salaried employees' retirement plan (the
"Employees' Retirement Plan") considers the participant's (i) Highest Average
Monthly Compensation, (ii) years of service and (iii) normal or early
retirement. Highest Average Monthly Compensation is 12/3% of the total
compensation (including wages, salary, commissions and bonuses but excluding
contributions to pension or welfare plans) paid during the employee's five
consecutive most highly compensated calendar years, up to a maximum of $150,000.
In general, the monthly benefit payable at normal retirement age (age 65)
is equal to (i) the sum of (a) 3% of the participant's Highest Average Monthly
Compensation multiplied by the participant's years of service (and fractions
thereof) up to 10 years, plus (b) 1% of such participant's Highest Average
Monthly Compensation multiplied by the participant's years of service (and
fractions thereof) in excess of 10 years and (ii) reduced by 12/3% of the
participant's Primary Social Security Benefit (as defined in the plan)
multiplied by the participant's years of service, up to 30 years. The pension
plan's normal form of benefit for a married participant is a qualified joint and
survivor annuity and is a single life annuity for an unmarried participant.
The table below sets forth the estimated annual retirement benefits
(contributory and non-contributory) payable on a straight life annuity basis to
all eligible salaried employees, including employees who are officers, who meet
the credited service requirement for retirement at age 65. Normal retirement
benefits are not subject to deduction for social Security benefits or other
offset amounts.
<TABLE>
<CAPTION>
Average Yearly
Compensation Credit Years of Service
- ---------------------------------------------------------------------------------------------------------------------
15 20 25 30 35
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$125,000 $40,400 $45,600 $50,700 $55,800 $62,150
150,000 49,200 55,600 62,000 68,400 75,900
175,000 49,200 55,600 62,000 68,400 75,900
200,000 49,200 55,600 62,000 68,400 75,900
225,000 49,200 55,600 62,000 68,400 75,900
250,000 49,200 55,600 62,000 68,400 75,900
300,000 49,200 55,600 62,000 68,400 75,900
400,000 49,200 55,600 62,000 68,400 75,900
450,000 49,200 55,600 62,000 68,400 75,900
500,000 49,200 55,600 62,000 68,400 75,900
</TABLE>
As of December 31, 1996, David Cuthbertson had accrued an estimated annual
benefit of $36,551 for an estimated 13 credited years of service, payable upon
his retirement date, Reinaldo Rodriguez had accrued an estimated annual benefit
of $25,085 for an estimated 15 credited years of service, payable upon his
retirement date, C. Leon Timothy had accrued an estimated annual benefit of
$44,243 for an estimated 13 credited years of service, payable upon his
retirement date and David L. Virginia had accrued an estimated annual benefit of
$16,463 for an estimated 10 credited years of service, payable upon his
retirement date.
The Company has taken an action to freeze the Employees' Retirement Plan as
of December 31, 1996. Under this action, after December 31, 1996, no accruals
have been, or will be, made with respect to the retirement benefits of the
employees under the Employees' Retirement Plan.
Stock Option Plans. The Company has established two Stock Option Plans
(collectively, the "Stock Option Plans") for the granting of stock options to
purchase Class B Shares ("Options") to certain employees and directors of the
Company and its affiliates ("Key Employees") who have served in such capacities
for at least one year prior to the date Options are granted. One Stock Option
Plan (the "Qualified Stock Option Plan") permits the grant of "incentive stock
options" ("ISOs") under Section 422 of the U.S. Internal Revenue Code of 1986,
as amended (the
14
<PAGE>
"Code"). The other Stock Option Plan does not permit the grant of ISOs (the
"Non-Qualified Stock Option Plan"). The purposes of the Stock Option Plans are
to attract and retain individuals of experience and ability, as well as to
motivate such persons to exert their best efforts on behalf of the Company.
Key Employees of the Company and its subsidiaries and affiliates are
eligible to participate under the Stock Option Plans, as deemed appropriate by
the Company's Board of Directors. However, the Stock Option Plans do not permit
the granting of Options to employees or directors prior to their being employed
by or serving as director, for one year. The Stock Option Plans are administered
by the Board of Directors. The Board of Directors has appointed a committee (the
"Stock Option Committee") to assist in the management and administration of the
Stock Option Plans. The Stock Option Committee may recommend to the Board of
Directors any action to be taken under the Stock Option Plans but does not have
any decision-making authority.
The total number of Class B Shares reserved and available for issuance
under each of the Stock Option Plans in connection with grants of Options is
500,000, subject to adjustment in the case of any change in the outstanding
Class B Shares by reason of any stock split, stock dividend, recapitalization or
exchange of such shares. No Option shall be transferable by the Option holder
otherwise than by will or the laws of descent and distribution, and each Option
shall be exercisable during the Option holder's lifetime only by the Option
holder.
The Options granted pursuant to the Company's Qualified Stock Option Plan
will have exercise prices equal to the fair market value of the Class B Shares
at the date of grant. The "fair market value" of the Class B Shares shall be the
mean of the sales price for the Class B Shares on the New York Stock Exchange at
the close of business on the date of grant of the relevant Option (or, if the
Class B Shares are not publicly traded on such date, a value determined by an
independent appraiser selected by the Stock Option Committee). Pursuant to the
Non-Qualified Stock Option Plan, under certain circumstances the Company may
grant options, which will have an exercise price below fair market value. An
Option holder is able to exercise Options from time to time as specified in the
grantee's individual Option agreement. Options must be exercised during the
grantee's employment with the Company, except that (i) upon an Option holder's
death, total disability or retirement, all vested Options immediately become
exercisable and may be exercised until the expiration of such Options, (ii) upon
voluntary resignation, vested Options are exercisable for a period of 30 days
following the date of resignation and (iii) upon termination of an Option
holder's employment without cause, vested options are exercisable for a period
of 12 months following the date of termination. Upon the occurrence of an event
specified in (i), (ii) or (iii) above, all unvested Options held by an Option
holder will automatically expire and terminate. Subject to the foregoing, the
Board of Directors will have the sole discretion to determine the timing,
amount, vesting and exercise periods of any Options granted pursuant to the
Stock Option Plan and the manner in which such options are exercised.
The Company has undertaken, upon notice by any Option holder of his intent
to exercise any part of any options to take all necessary actions to enable such
holder to immediately resell to the public any Class B Shares acquired pursuant
to such exercise, in compliance with all applicable securities laws. The Company
has agreed to pay for all costs and expenses associated with this undertaking,
including but not limited to costs and expenses incurred in the preparation of
any applicable registration statements. Pursuant to the undertaking, the Company
filed a registration statement on Form S-8 with the SEC to register for resale
the Class B Shares that may be acquired upon exercise of the Option and such
shares are now registered.
Nin Stock Option. On October 15, 1996 the Company granted to Rafael Nin a
stock option (the "Nin Stock Option") to acquire 1,516,667 Class B Shares, at an
exercise price of $5.00 per share. The number of Class B Shares that Mr. Nin may
acquire pursuant to the Nin Stock Option will be subject to adjustment under
certain circumstances. The Nin Stock Option may be exercised in whole or in part
and will be unlimited in duration until exercised in full. Upon the closing of
the transactions described above under "Change in Control," the Nin Stock Option
will be amended to expire on July 30, 2001.
Under the terms of the Nin Stock Option, Mr. Nin may not transfer any Class
B Shares acquired pursuant to such option (the "Option Shares") unless (i) a
registration statement under the Securities Act with respect to the Option
Shares shall have become effective or (ii) Mr. Nin shall have notified the
Company of the proposed transfer and shall have furnished the Company with (a) a
detailed statement of the circumstances surrounding the proposed
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disposition and (b) an opinion of counsel in form and substance satisfactory to
the Company and its counsel that no registration of the Option Shares under the
Securities Act or qualification of the Option Shares under any other securities
laws is required. The Company has undertaken to register under the Securities
Act any Option Shares requested to be registered by the holders of such Option
Shares and to pay for all costs and expenses associated with this undertaking,
including but not limited to, costs and expenses incurred in the preparation of
any applicable registration statements. Pursuant to the undertaking, the Company
filed a registration statement on Form S-8 with the SEC to register for resale
the 1,516,667 Option Shares and such Option Shares are now registered.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Certain Transactions
The Company entered into agreements with Badillo/Saatchi & Saatchi and
Comstat/Rowland, pursuant to which such companies provide advertising and public
relations services to the Company. Both companies are controlled by Angel
Collado-Schwarz, a shareholder of the Company. The Company paid $3,671,058
pursuant to these agreements in the fiscal year ended September 30, 1997.
The Company uses the services of the law firm of McConnell Valdes. A
partner of such firm, Ana Matilde Nin is the sister of the President and Chief
Executive Officer of the Company. The Company paid $411,050 pursuant to the
services provided by McConnell Valdes in the fiscal year ended September 30,
1997.
The Company has requested that the law firm of Winthrop, Stimson, Putnam &
Roberts perform certain legal services for the Company. Sutton Keany, a director
of the Company, has been a partner at such firm since 1976. Billing for such
services has been minimal during the fiscal year ended September 30, 1997.
The Company has established stock option plans for certain employees and
directors. In addition, the Company has granted stock options to Rafael Nin. See
"Executive Compensation--Employee Benefit Plans--Stock Option Plans" and
"Executive Compensation--Employee Benefit Plans--Nin Stock Option."
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APPENDIX A
P-PR DIRECTOR DESIGNEES
The following table sets forth the name, business address, age, principal
occupation or employment at the present time and during the last five years and
business background of each of the persons designated by P-PR for appointment to
the Company's board of directors.
Present Principal Occupation
or Employment and
Name and Business Address Age Five Year Employment History
- ------------------------- --- ----------------------------
Christopher E. Clouser ........... 46 Mr. Clouser has served as Senior Vice
2700 Lone Oak Parkway President-Administration of Northwest
Eagan, MN 55121 Airlines, Inc. since September 1996. He
joined Northwest in April 1991. Mr.
Clouser has previously held officer
positions at Bell Atlantic, Hallmark
Cards, U.S. Sprint and United Telecom.
Mr. Clouser is a director of Mesaba
Holdings, Inc.; Delta Beverage Group,
Inc.; Mintertainment, Inc.; Epilepsy
Foundation of America; the Greater
Minneapolis Chamber of Commerce; CRP
Sports, Inc., the managing partner of
the Minnesota Twins Baseball Club; and
Marquette Bancshares, Inc.
Philip N. Hughes ................. 62 Mr. Hughes is owner of Miller Printing,
1924 South Utica Inc., a commercial printer, and Rocket
Suite 1218 Lube, Inc., a chain of quick-service
Tulsa, OK 74104 vehicle lubrication operations. From
1982 to 1986, Mr. Hughes was a director
of MEI Corporation, and from 1983 to
1986 served as Senior Vice President of
MEI Corporation. From May 1986 to
December 1986, Mr. Hughes was
President, MEI Division, Pepsi-Cola
Bottling Group, a division of PepsiCo,
Inc. From 1986 to 1993, Mr. Hughes
served as a director of MEI
Diversified, Inc. In February 1993, MEI
Diversified Inc. filed for Chapter 11
bankruptcy protection. A Plan of
Reorganization for MEI Diversified Inc.
was confirmed in October 1994, pursuant
to which its assets and liabilities
were liquidated. Mr. Hughes is also a
director of Delta Beverage Group, Inc.
Robert C. Pohlad ................. 43 Mr. Pohlad has been President of Pohlad
3880 Dain Bosworth Plaza Companies since 1987 and Director and
60 South Sixth Street Chief Executive Officer of Delta
Minneapolis, MN 55402 Beverage Group, Inc. since 1988. Prior
to 1987, Mr. Pohlad was Northwest Area
Vice President of the Pepsi- Cola
Bottling Group. Mr. Pohlad is currently
a director of Mesaba Holdings, Inc.,
Grow Biz International, Inc., and
Airtran Holdings, Inc.
Diego J. Suarez .................. 43 Mr. Suarez has been Chief Executive
P.O. Box 354588 Officer of V. Suarez & Company Inc.
San Juan, Puerto Rico 00936-4588 since 1995 and in various other
positions with V. Suarez & Company Inc.
since 1984. He is also a director of V.
Suarez & Company Inc.; Bank Trust,
Puerto Rico; Atlantic Pipe Corporation
and Wine & Spirits Wholesalers of
America.
Basil K. Vasiliou ................ 48 Mr. Vasiliou is the Chairman of
Carretara 865 Km. 0.4 Vasiliou & Co., Inc., a registered
Bo. Candelaria Arenas broker- dealer. Mr. Vasiliou was the
Toa Baja, Puerto Rico 00949 general partner of Smith-Vasiliou
Special Situations Fund, L.P., a
partnership organized to invest in the
financial obligations of troubled
corporations, from 1984 to 1994. Mr.
Vasiliou is a director of Pepsi-Cola
Puerto Rico Bottling Company and
Costain Group PLC and was a director of
Interco Inc. from 1992 to 1995.
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Craig E. Weatherup ............... 52 Mr. Weatherup is currently Chairman and
700 Anderson Hill Road Chief Executive Officer of the
Purchase, NY 10577-1444 Pepsi-Cola Company, a position he has
held since July 1996. He joined
Pepsi-Cola in 1974, and became
President of the Pepsi-Cola Bottling
Group in 1986. He was appointed
President of the Pepsi-Cola Company in
1988, President and Chief Executive
Officer of Pepsi-Cola North America in
1991, and served as PepsiCo's President
in 1996. Mr. Weatherup is a director of
PepsiCo, Inc. and Federated Department
Stores, Inc.
John Woodhead .................... 58 Mr. Woodhead has provided management
5353 Wayzata Blvd. consulting services to Dakota Beverage
Suite 201 Company, Inc., a PepsiCo franchise
Minneapolis, MN 55416 bottler which is a wholly- owned
subsidiary of the Pohlad Companies,
since 1971. Mr. Woodhead is also
currently owner and President of JFW
Inc., a management services company,
and Woodhead Properties, a real estate
investment firm. Since 1992, Mr.
Woodhead has also served as President
and Chairman of Park National Bank.
From 1982 to 1995, Mr. Woodhead was
owner and chairman of Allstate Medical
Products. Mr. Woodhead is currently a
director of Delta Beverage Group, Inc.
and WisPak, Inc.
Raymond W. Zehr, Jr. ............. 51 Mr. Zehr has been Vice President of
3880 Dain Bosworth Plaza Pohlad Companies since 1987 and in
60 South Sixth Street various other capacities with Pohlad
Minneapolis, MN 55402 Companies since 1971. Mr. Zehr is also
Chief Investment Manager of CRP
Holdings, LLC and Vice President of CRP
Sports, Inc., the managing general
partner of the Minnesota Twins baseball
club. Mr. Zehr is currently a director
of Mesaba Holdings, Inc.
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