<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. __)
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, For Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Pepsi-Cola Puerto Rico Bottling Company
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies.
______________________________________________________________________
(2) Aggregate number of securities to which transactions applies:
______________________________________________________________________
(3) Pre unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
______________________________________________________________________
(4) Proposed maximum aggregate value of transaction:
______________________________________________________________________
(5) Total fee paid:
______________________________________________________________________
<PAGE>
[ ] Fee paid previously with preliminary materials:
______________________________________________________________________
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
______________________________________________________________________
(2) Form, Schedule or Registration Statement no.:
______________________________________________________________________
(3) Filing party:
______________________________________________________________________
(4) Date filed:
______________________________________________________________________
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
Carretera 865 Km. 0.4
Bo. Candelaria Arenas
Toa Baja, Puerto Rico
----------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 17, 1999
----------------
TO THE SHAREHOLDERS OF PEPSI-COLA PUERTO RICO BOTTLING COMPANY:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the "Annual
Meeting") of Pepsi-Cola Puerto Rico Bottling Company (the "Company") will be
held at the Marriott Biscayne Bay, 1633 N. Bayshore Dr., Miami, Florida on
Wednesday, February 17, 1999 at 1:00 p.m. for the following purposes:
1. To elect eight directors to constitute the Board of Directors, each to
serve until the next annual meeting of shareholders or until their
successors have been duly elected and shall have qualified;
2. To ratify the appointment of Arthur Andersen LLP as the Company's
independent public accountants for the fiscal year ending December 31,
1999; and
3. To consider and act upon such other business as may properly come before
the Annual Meeting.
The close of business on January 14, 1999 has been fixed as the record date
for the determination of all shareholders entitled to receive notice of the
Annual Meeting and to vote at such meeting for any adjournment thereof.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE ENCLOSED
ADDRESSED ENVELOPE, EVEN IF YOU PLAN TO ATTEND THE ANNUAL MEETING. IF YOU
ATTEND THE ANNUAL MEETING AND VOTE IN PERSON, THE PROXY WILL NOT BE USED.
By Order of the Board of Directors,
/s/ Brian D. Wenger
-------------------------
BRIAN D. WENGER
Secretary
Dated: January 19, 1999
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
Carretera 865 Km. 0.4
Bo. Candelaria Arenas
Toa Baja, Puerto Rico
----------------
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 17, 1999
----------------
PROXY STATEMENT
This Proxy Statement is being mailed to shareholders of Pepsi-Cola Puerto
Rico Bottling Company (the "Company") on or about January 19, 1999 in
connection with the solicitation by the Board of Directors of the Company of
proxies for use at the Annual Meeting of Shareholders of the Company (the
"Annual Meeting") to be held at the Marriott Biscayne Bay, 1633 N. Bayshore
Dr., Miami, Florida on Wednesday, February 17, 1999 at 1:00 p.m. The Annual
Meeting has been called for the following purposes: (1) to elect eight
directors to constitute the Board of Directors, each to serve until the next
annual meeting of shareholders or until their successors have been duly
elected and shall have qualified; (2) to ratify the appointment of Arthur
Andersen LLP as the Company's independent public accountants for the fiscal
year ending December 31, 1999; and (3) to consider and act upon such other
business as may properly come before the Annual Meeting.
PROXIES AND VOTING RIGHTS
The voting securities of the Company outstanding on January 14, 1999
consisted of 5,000,000 shares of Class A Common Stock, par value $.01 per
share (the "Class A Shares"), entitling the holders thereof to six votes per
share, and 16,690,000 shares of Class B Common Stock, par value $.01 per share
(the "Class B Shares"), entitling the holders thereof to one vote per share.
Only shareholders of record at the close of business on January 14, 1999 (the
"Record Date") are entitled to notice of and to vote at the Annual Meeting.
There was no other class of voting securities of the Company outstanding on
the Record Date. A majority of the shares entitled to vote must be present in
person or by proxy to constitute a quorum at the Annual Meeting.
The enclosed proxy is being solicited by the Board of Directors of the
Company in order to provide every shareholder with an opportunity to vote on
all matters that properly come before the Annual Meeting, whether or not the
shareholder attends in person. The Company is bearing the cost of the
solicitation of the enclosed proxy. Shares cannot be voted at the Annual
Meeting unless the owner of record is present to vote or is represented by a
proxy executed in writing by the shareholder or the shareholder's duly
authorized attorney-in-fact. When the enclosed proxy is properly signed, dated
and returned, the shares represented by the proxy will be voted by the persons
named as proxies in accordance with the shareholder's directions. Except as
otherwise specified in the proxy, shares will be voted for the election of the
nominees for director named herein, for the ratification of the appointment of
Arthur Andersen LLP as independent public accountants for the year ending
December 31, 1999, and for any other matter that may properly be brought
before the Annual Meeting in accordance with the judgment of the person voting
the proxy. Any person who has signed and returned a proxy may revoke it at any
time before it is exercised by submitting a subsequently executed proxy, by
giving notice of revocation to the Secretary of the Company or by voting in
person at the Annual Meeting.
Holders of Class A Shares and Class B Shares generally vote as a single
class on all matters submitted to a vote of shareholders at the Annual
Meeting, including the election of directors, except for matters where
applicable
1
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law requires the approval of one or both classes voting separately. Directors
are elected by a plurality of the votes of the shares present in person or
represented by proxy at the Annual Meeting and entitled to vote. Approval of
all other matters at the Annual Meeting requires the affirmative vote of the
majority of the votes of the shares present in person or represented by proxy
at the Annual Meeting and entitled to vote. A quorum must be present at the
Annual Meeting for any shareholder action to be effective. After a quorum has
been established, a withdrawal of shareholders that reduces the number of
shareholders entitled to vote at the meeting below the number required for a
quorum does not affect the validity of an adjournment of the meeting or any
action taken at the meeting prior to the shareholders' withdrawal. Shares that
are not present at the meeting, either in person or by proxy, cannot count
towards a quorum. Also, shares are not considered present for quorum purposes
if a shareholder attends the meeting only to protest the legality of the
meeting. Treasury shares, shares of stock of the Company owned by another
corporation the majority of the voting stock of which is owned or controlled
by the Company, and shares of stock of the Company that it holds in a
fiduciary capacity may not be voted directly or indirectly, at any meeting,
and will not be counted in determining the total number of outstanding shares
at any time. Abstentions and broker non-votes are not counted in determining
the number of votes of the shares voted for or against any nominee for
director or any other voting matter. They are, however, counted in determining
the presence of a quorum. Under the rules of the New York Stock Exchange, Inc.
("NYSE"), brokers who hold shares in street name for customers have the
authority to vote on certain items if they have transmitted proxy soliciting
material to the beneficial owner of the shares; have not received instructions
from beneficial owners; and the broker giving or authorizing the proxy has no
knowledge of any contest as to action to be taken at the meeting and the
action to be taken at the meeting has been disclosed adequately to the
shareholders and does not include authorization for a merger, consolidation,
or any matter which may substantially affect the rights and powers of the
shares.
SECURITY OWNERSHIP
The Company's Common Stock is currently divided into Class A Shares, each of
which is entitled to six votes per share, and Class B Shares, each of which is
entitled to one vote per share. Information with respect to beneficial
ownership of the Company's Common Stock is based on the Company's records,
data supplied to the Company by its shareholders and, with respect to 5% or
greater shareholders, Schedule 13D or Schedule 13G filings with the Securities
and Exchange Commission.
2
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Class A Shares
The following table sets forth information regarding the beneficial
ownership of all of the Class A Shares outstanding as of December 31, 1998.
<TABLE>
<CAPTION>
Percentage
Number of of
Class A Class A
Shares Shares
Directors, Executive Officers and 5% Beneficially Beneficially
Shareholders Owned Owned(1)
------------------------------------ ------------ ------------
<S> <C> <C>
Pohlad Companies.............................. 4,250,000(2) 85.0%
60 South Sixth Street
Suite 3800
Minneapolis, MN 55402
P-PR Transfer, LLP (3)(4)..................... 4,000,000 80.0
60 South Sixth Street
Suite 3800
Minneapolis, MN 55402
V. Suarez & Co., Inc. (4)..................... 1,000,000 20.0
P.O. Box 364588
San Juan, Puerto Rico 00936-4588
</TABLE>
- --------
(1) Based on 5,000,000 total outstanding Class A Shares on December 31, 1998.
Because the same shares may be deemed to be beneficially owned by more
than one person, the total percentages will exceed 100%.
(2) Pohlad Companies has limited voting control over 4,000,000 of these shares
pursuant to the Partnership Agreement of P-PR Transfer, LLP, of which
Pohlad Companies is a general partner. Such shares are held directly by P-
PR Transfer, LLP. Pohlad Companies has voting control over the remaining
250,000 of these shares pursuant to a Stockholders' Agreement among the
Company, P-PR Transfer, LLP and V. Suarez & Co., Inc. Such 250,000 shares
are held directly by V. Suarez & Co., Inc. See "Security Ownership--
Change in Control and Certain Voting Arrangements."
(3) P-PR Transfer, LLP is a Delaware limited liability partnership whose
general partners are Pohlad Companies and Beverage, Foods & Service
Industries, Inc., a wholly owned subsidiary of PepsiCo, Inc. Certain of
the Company's directors and executive officers are also affiliated with
Pohlad Companies. The Company is a franchisee of PepsiCo, Inc. See
"Security Ownership--Change in Control and Certain Voting Arrangements"
and "Certain Relationships and Related Transactions."
(4) P-PR Transfer, LLP and V. Suarez & Co., Inc. constitute a "group" for
purposes of Section 13(d) of the Securities Exchange Act and the
regulations thereunder, and have filed a joint Schedule 13D disclosing
their ownership of the Company's Common Stock. Each disclaims beneficial
ownership of the shares of the Company's Common Stock held by the other.
3
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Class B Shares
The following table sets forth information regarding the beneficial
ownership of the Class B Shares outstanding as of December 31, 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 and nominee for election as a director,
(iii) each of the executive officers named in the summary compensation table
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.
<TABLE>
<CAPTION>
Percentage
Number of of
Class B Class B
Shares Shares
Directors, Executive Officers and 5% Beneficially Beneficially
Shareholders Owned Owned(1)
------------------------------------ ------------ ------------
<S> <C> <C>
Pohlad Companies.............................. 6,328,844(2) 35.1%
60 South Sixth Street
Suite 3800
Minneapolis, MN 55402
P-PR Transfer, LLP (3)(4)..................... 6,328,344(5) 35.1
60 South Sixth Street
Suite 3800
Minneapolis, MN 55402
Shapiro Capital Management Company, Inc....... 3,391,425 20.3
3060 Peachtree Rd. NW
Suite 1555
Atlanta, GA 30305
V. Suarez & Co., Inc. (4)..................... 1,631,685(6) 9.6
P.O. Box 364588
San Juan, Puerto Rico 00936-4588
Rafael Nin.................................... 1,516,667(7) 8.3
Basil K. Vasiliou............................. 68,920(8) *
A. David Velez................................ 40,000(7) *
David L. Virginia............................. 38,000(9) *
Reinaldo Rodriguez............................ 10,000(7) *
Diego Suarez, Jr.............................. 6,400(10) *
Christopher E. Clouser........................ 1,000(7) *
Philip N. Hughes.............................. 1,000(7) *
John F. Woodhead.............................. 1,000(7) *
Raymond W. Zehr, Jr........................... 1,000(7) *
Robert C. Pohlad.............................. 500(11) *
Michael D. White.............................. 0 *
All Directors and Executive Officers as a
Group (14) persons........................... 119,820(12) *
</TABLE>
- --------
* Less than 1%
(1) Based on 16,690,000 total outstanding Class B Shares on December 31, 1998.
Because the same shares may be deemed to be beneficially owned by more
than one person, the total percentages will exceed 100%.
(2) Pohlad Companies has limited voting control over 6,328,344 of these shares
(including 1,360,000 shares issuable pursuant to presently exercisable
warrants) pursuant to the Partnership Agreement of P-PR Transfer, LLP, of
which Pohlad Companies is a general partner. Such shares are held directly
by P-PR Transfer, LLP. The remaining 500 of these shares are held directly
by Pohlad Companies. See "Security Ownership -- Change in Control and
Certain Voting Arrangements."
4
<PAGE>
(3) P-PR Transfer, LLP is a Delaware limited liability partnership whose
general partners are Pohlad Companies and Beverage, Foods & Service
Industries, Inc., a wholly owned subsidiary of PepsiCo, Inc. Certain of
the Company's directors and executive officers are also affiliated with
Pohlad Companies. The Company is a franchisee of PepsiCo, Inc. See
"Security Ownership--Change in Control and Certain Voting Arrangements"
and "Certain Relationships and Related Transactions."
(4) P-PR Transfer, LLP and V. Suarez & Co., Inc. constitute a "group" for
purposes of Section 13(d) of the Securities Exchange Act and the
regulations thereunder, and have filed a joint Schedule 13D disclosing
their ownership of the Company's Common Stock. Each disclaims beneficial
ownership of the shares of the Company's Common Stock held by the other.
(5) Includes 1,360,000 shares which may be purchased pursuant to a warrant.
(6) Includes 340,000 shares which may be purchased pursuant to a warrant.
(7) Consists of shares which may be purchased pursuant to stock options.
(8) Includes 1,000 shares which may be purchased pursuant to stock options.
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.
(9) Includes 20,000 shares which may be purchased pursuant to stock options.
(10) Includes 1,000 shares which may be purchased pursuant to stock options.
Mr. Suarez is Chief Executive Officer and a director of V. Suarez & Co.,
Inc.
(11) Consists of shares held directly by Pohlad Companies. Does not include
the shares of Common Stock over which Pohlad Companies exercises voting
control. Mr. Pohlad is President, a director and a one-third equity owner
of Pohlad Companies, one of the general partners of P-PR Transfer, LLP.
(12) Includes 46,000 shares which may be purchased pursuant to stock options.
Does not include the shares of Common Stock held directly by Pohlad
Companies or the shares of Common Stock over which Pohlad Companies
exercises voting control.
Change in Control and Certain Voting Arrangements
Change in Control. On July 17, 1998, P-PR Transfer, LLP, a Delaware
registered limited liability partnership (the "Partnership"), and V. Suarez &
Co., Inc., a Puerto Rico corporation ("Suarez"), purchased an aggregate of
5,000,000 Class A Shares and 6,210,429 Class B Shares of the Company. The
Partnership is a joint venture between Pohlad Companies, a holding company
including independent Pepsi-Cola bottlers, and Beverages, Foods and Service
Industries, Inc., a subsidiary of PepsiCo. Inc. ("BFSI"). The transactions
were previously disclosed by the Company in a current report on Form 8-K filed
with the Securities and Exchange Commission on July 31, 1998.
The Partnership purchased the 5,000,000 Class A Shares pursuant to a stock
option agreement between Rafael Nin, the Company's former President and Chief
Executive Officer, and the holders of the Class A Shares. In consideration of
a payment of $23,750,000 to the Company, Mr. Nin assigned the stock option
agreement to the Partnership. The Partnership paid the holders of the Class A
Shares a total of $5,000,000, or $1.00 per Class A Share, which was the
purchase price under the stock option agreement.
The Partnership purchased a total of 6,210,429 Class B Shares from various
shareholders for a total price of $22,543,857, or $3.63 per Class B Share.
Suarez purchased a total of 1,000,000 Class A Shares and 1,242,085 Class B
Shares from the Partnership on July 17, 1998, for a total of $10,258,770.
The Partnership purchased the Common Stock with funds contributed to the
Partnership by its partners. Pohlad Companies' contribution to the partnership
consisted of working capital, including funds obtained from
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an affiliated corporation. BFSI's contribution to the Partnership consisted of
working capital obtained from a PepsiCo affiliate. Suarez purchased the Common
Stock from the Partnership with working capital.
In connection with the change in control, the Company issued warrants to the
Partnership and Suarez dated July 17, 1998 for the purchase of 1,360,000 Class
B Shares and 340,000 Class B Shares, respectively, exercisable at $6.875 per
share at any time during a period of seven years and six months after the date
of the warrants. The warrants may be transferred and give the holders one
demand and unlimited piggyback registration rights.
Also in connection with the change in control, six of the Company's seven
directors resigned on July 17, 1998. Effective July 18, 1998, the size of the
Board of Directors was increased to eight members and seven new directors were
appointed, each of whom were designated by the Partnership. Also effective
July 18, 1998, certain of the Company's officers resigned.
The Partnership. The purpose of the Partnership is to invest in, acquire
ownership interests in, or establish Pepsi-Cola franchised bottlers in the
Caribbean region and such other territories as may be agreed upon by the
Partners. The capital contributions to the Partnership were 80% by Pohlad
Companies and 20% by BFSI, which represent their relative partnership
interests. The Partnership is managed by a Management Committee which consists
of five individuals, four appointed by Pohlad Companies and one appointed by
BFSI. The Management Committee generally acts upon the affirmative vote of a
majority of its members, except that certain specified actions by the
Partnership require unanimous consent of the Management Committee members.
The Partnership Agreement provides that the Common Stock owned by the
Partnership will be voted so that one member of the Company's Board of
Directors will be a person designated by BFSI. Pohlad Companies has the right
to designate and vote all of the other Common Stock owned by the Partnership
for all of the other members of the Company's Board of Directors, subject to
the rules of the NYSE requiring the election of two independent directors.
BFSI has a right of first refusal to purchase any Common Stock which the
Partnership proposes to sell to a third party, for a period of 60 days and on
the same terms and conditions as the Partnership proposes to sell such shares.
If BFSI does not exercise its right to purchase within the 60-day period, the
Partnership may sell the shares to a third party on terms no more favorable
than those offered to BFSI. The Partnership Agreement also contains
limitations on each partner's ability to transfer its Partnership interests
and to assign or transfer voting control over itself except to certain
affiliates. In the event that the Partnership's Management Committee becomes
deadlocked with respect to certain matters, a buy-sell procedure gives a
partner the right to purchase the other partner's interest in the Partnership.
In the event that Pohlad Companies acquires BFSI's interest, BFSI and PepsiCo
agree to maintain soft drink concentrate pricing and marketing spending at
agreed upon levels.
Suarez Stockholders' Agreement. The Company, the Partnership and Suarez
entered into a Stockholders' Agreement dated as of August 5, 1998 (the
"Stockholders' Agreement"). Under the Stockholders' Agreement, Suarez has
granted to Pohlad Companies the right to vote 250,000 of the Class A Shares
held by Suarez (or such lesser number of shares as Suarez may own), so long as
Pohlad Companies or an affiliate owns directly or indirectly an equity
interest in the Partnership. Pohlad Companies' right to vote such shares
applies to all matters except (a) the sale of all or substantially all of the
assets or stock of the Company and (b) a plan of merger, exchange or
consolidation of the Company with another entity in which transaction the
Company is not the surviving entity.
The Stockholders' Agreement also restricts Suarez from selling,
transferring, granting an irrevocable proxy with respect to, assigning,
converting any Class A Shares into Class B Shares or in any other way
disposing of or granting a security interest in any Class A Shares or Class B
Shares, except with the prior written consent of the Partnership or pursuant
to the right of first refusal provisions described below.
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Suarez has granted a right of first refusal to the Partnership to purchase
all (but not less than all) Class A Shares and Class B Shares which Suarez
proposes to sell to a third party, for a period of 45 days and on the same
terms and conditions as Suarez proposes to sell such shares, except that the
Partnership may elect to pay cash. Suarez has also granted a right of first
refusal to the Partnership to purchase any Class A Shares or Class B Shares
which Suarez proposes to sell through a broker's transaction in the open
market, for a period of 15 days and at a price equal to the average closing
price of the Class B Shares for the 10 trading days immediately prior to the
date Suarez notifies the Partnership of its intention to sell. Suarez is
required to convert Class A Shares into an equivalent number of Class B Shares
prior to any such sales. The Company has agreed to register the Class B Shares
purchased by a third party pursuant to the provisions of the registration
rights described below.
In the event that the Partnership intends to sell Class A Shares or Class B
Shares (other than to an affiliate of Pohlad Companies or through open market
sales), Suarez will have the right to sell to the proposed purchaser a pro
rata portion of its Class A Shares or Class B Shares, for the same purchase
price and on the same terms and conditions as the Partnership receives. Suarez
must give the Partnership written notice to exercise its co-sale right within
30 days of receiving the Partnership's written notice of its intention to
sell.
The Stockholders' Agreement includes an agreement by the Company to prepare
and file a registration statement under the Securities Act of 1933, as amended
(the "Act"), covering the 1,242,085 Class B Shares purchased by Suarez on July
17, 1998, and to use its best efforts to cause such registration statement to
become effective on or before August 1, 1999 and to remain effective until
Suarez no longer owns such Class B Shares or until Suarez is eligible to sell
all of its remaining Class B Shares in a single transaction pursuant to Rule
144 under the Act. The registration rights include standard expense and
indemnification provisions.
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS
Election of Directors
Eight directors are to be elected at the Annual Meeting to serve one-year
terms until the next annual meeting of shareholders and until their respective
successors are elected and qualified. The persons named in the accompanying
proxy intend to vote for the election of the nominees identified below unless
authority to vote for one or more of such nominees is specifically withheld in
the proxy:
Christopher E. Clouser
Philip N. Hughes
Robert C. Pohlad
Diego Suarez, Jr.
Basil K. Vasiliou
Michael D. White
John F. Woodhead
Raymond W. Zehr, Jr.
The Board of Directors has been informed that all the nominees are willing
to serve as directors, but if any of them decline to serve or become
unavailable for election as a director at the Annual Meeting, an event which
the Board of Directors does not anticipate, the persons named in the proxy
will vote for such nominee or nominees as may be designated by the Board of
Directors, unless the Board of Directors reduces the number of directors
accordingly.
Pursuant to its right under the Partnership Agreement, Pohlad Companies
intends to vote the Common Stock held by P-PR Transfer, LLP for each of the
nominees named above. P-PR Transfer, LLP holds a sufficient number of Class A
Shares and Class B Shares to elect all of the directors. See "Security
Ownership-Change in Control and Certain Voting Arrangements."
7
<PAGE>
Information Concerning Nominees and Members of the Board of Directors
The following table sets forth certain information concerning each of the
Company's current directors and the nominee for director:
<TABLE>
<CAPTION>
Director
Name Age Position Since
---- --- -------- --------
<S> <C> <C> <C>
Christopher E. Clouser................................ 46 Director 1998
Philip N. Hughes...................................... 63 Director 1998
Robert C. Pohlad...................................... 44 Director 1998
Diego Suarez, Jr...................................... 44 Director 1998
Basil K. Vasiliou..................................... 48 Director 1998
Michael D. White...................................... 47 Nominee --
John F. Woodhead...................................... 59 Director 1998
Raymond W. Zehr, Jr................................... 52 Director 1998
</TABLE>
The following is a brief description of the business background of each of
the current directors and the nominee for director of the Company.
Christopher E. Clouser has been a Director of the Company since July 1998.
Mr. Clouser has served as Senior Vice President--Administration of Northwest
Airlines, Inc. since September 1996. He joined Northwest in April 1991. Mr.
Clouser has previously held officer positions at Bell Atlantic, Hallmark
Cards, Sprint Corporation and United Telecom. Mr. Clouser is a director of
Mesaba Holdings, Inc.; Delta Beverage Group, Inc.; CRP Sports, Inc., the
managing general partner of the Minnesota Twins Baseball Club; and Marquette
Bancshares, Inc.
Philip N. Hughes has been a Director of the Company since July 1998. Mr.
Hughes is Chairman and CEO of Miller Printing, Inc., a commercial printer, and
owner of Rocket Lube, Inc., a chain of quick-service 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 has served as Chairman, Chief Executive Officer and a
Director of the Company since July 1998. Mr. Pohlad has been a Director and
Chief Executive Officer of Delta Beverage Group, Inc. since 1988. Since 1987,
Mr. Pohlad has also served as President of Pohlad Companies. 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., and Grow Biz
International, Inc.
Diego Suarez, Jr. has been a Director of the Company since July 1998. Mr.
Suarez has been Chief Executive Officer of V. Suarez & Co., Inc. since 1995
and in various other positions with V. Suarez & Co., Inc. since 1984. He is
also a director of V. Suarez & Co., Inc.; Bank Trust, Puerto Rico; Atlantic
Pipe Corporation and Wine & Spirits Wholesalers of America.
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 and was a director of Interco
Inc. from 1992 to 1995.
Michael D. White is a nominee for Director. Mr. White has been Senior Vice
President and Chief Financial Officer of PepsiCo, Inc. since March 1998, and
previously served as Executive Vice President and CFO of Pepsi-Cola Company
beginning in March 1996, Executive Vice President and CFO of PepsiCo Foods
International beginning in February 1994 and CFO of Frito-Lay North America
beginning in February 1993. He joined Frito-Lay in 1990 as Vice President of
Planning.
8
<PAGE>
John F. Woodhead has been a Director of the Company since July 1998. Mr.
Woodhead has provided management consulting services to Dakota Beverage
Company, Inc., a PepsiCo franchise 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. Since 1992, Mr. Woodhead
has also served as Chairman, President and CEO of Park National Bank. Mr.
Woodhead is currently a director of Delta Beverage Group, Inc.
Raymond W. Zehr, Jr. has been a Director of the Company since July 1998. Mr.
Zehr has been Vice President of Pohlad Companies since 1987 and in various
other capacities with Pohlad 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.
Recommendation of the Board of Directors
The Board of Directors recommends a vote "FOR" the election of each of the
nominees.
Meetings and Committees
The Board of Directors met or took action by unanimous written consent on
eight occasions during the fiscal year ended September 30, 1998. Robert C.
Pohlad serves as Chairman of the Board of Directors of the Company. There are
three committees of the Board of Directors: the Audit Committee, the
Compensation Committee and the Executive Committee. The members of the Audit
Committee are Raymond W. Zehr, Jr., Philip N. Hughes and Basil K. Vasiliou,
none of whom are officers or employees of the Company. The members of the
Compensation Committee are Christopher E. Clouser, Robert C. Pohlad, Diego
Suarez, Jr. and John F. Woodhead. The members of the Executive Committee are
Christopher E. Clouser and Robert C. Pohlad.
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 Audit Committee met three times during the fiscal year ended
September 30, 1998. The Compensation 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 Compensation Committee also assists in making decisions concerning
salaries for employees and consultants of the Company. The Compensation
Committee met two times during the fiscal year ended September 30, 1998. The
Executive Committee assists in making decisions relating to the management of
the Company and takes action on matters that arise between Board meetings. The
Executive Committee did not meet during the fiscal year ended September 30,
1998.
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
Christopher E. Clouser and Philip N. Hughes, who did not attend the Board of
Directors meeting held during the period Mr. Clouser and Mr. Hughes served as
directors.
Directors of the Company receive the following compensation for serving as a
director on the Board of Directors of the Company, with the exception of
Robert C. Pohlad who receives no compensation for serving as a director:
$1,500 per board meeting attended, $1,000 per committee meeting attended and
options to purchase 1,000 shares of Class B Common Stock per year. All
directors are reimbursed for travel expenses incurred in attending meetings of
the Company.
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 reports. The Company is
required to disclose in this Proxy Statement any failure to file on a timely
basis by such persons. During the fiscal year ended September 30, 1998, all
reports required to be filed by the Company's directors, executive officers
and 10% shareholders were timely filed with the SEC.
9
<PAGE>
EXECUTIVE COMPENSATION
The following table discloses the annual and long-term compensation received
in each of the last three fiscal years by (i) all persons serving in the
capacity of Chief Executive Officer of the Company during the last fiscal
year, (ii) the Company's executive officers serving at the end of the last
fiscal year whose salary and incentive compensation exceeded $100,000 in the
last fiscal year, and (iii) any executive officer of the Company who resigned
during the last fiscal year whose salary and incentive compensation exceeded
$100,000 in the last fiscal year.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
------------------------
Name and Principal Other Annual All Other
Position Year Salary Bonus Compensation Compensation(1)
- ------------------ ---- ---------- --------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Robert C. Pohlad(2)..... 1998 $ 0 $ 0 $ 0 $ 0
Chairman and Chief
Executive Officer
A. David Velez(3)....... 1998 $ 137,596 $ 0 $ 55,993(4) $ 0
Vice President 1997 76,558 0 56,000(5) 0
Rafael Nin(6)........... 1998 $ 163,975 $ 0 $171,473(7) $ 0
1997 291,500 0 100,000(8) 0
1996 92,304 0 0 0
David L. Virginia(9).... 1998 $ 76,500 $ 0 $ 95,397(10) $ 0
1997 95,146 0 97,000(11) 0
1996 12,096(12) 0 11,695(13) 0
Reinaldo Rodriguez
(14)................... 1998 $ 120,000 $ 0 $125,669(15) $ 0
1997 81,092 25,000 122,200(16) 1,370
1996 0 0 19,863(13) 0
</TABLE>
- --------
(1) Amounts in this column represent contributions under the Company's
Section 165(e) Plan (equivalent to a Section 401(k) plan).
(2) Mr. Pohlad became Chairman and Chief Executive Officer of the Company in
July 1998. Mr. Pohlad receives no compensation from the Company but is
compensated through Pohlad Companies. The Company receives executive
management services from Pohlad Companies pursuant to a Management
Agreement. See "Certain Relationships and Related Transactions."
(3) Mr. Velez became Vice President in March 1997.
(4) Of this amount, $3,493 represents travel and entertainment expenses,
$12,000 represents a car allowance, $18,000 represents a moving allowance
and $22,500 represents dividends on management stock paid by Beverage
Plastics Company, a wholly owned subsidiary of the Company.
(5) Of this amount, $6,000 represents a car allowance and $50,000 represents
dividends on management stock paid by Beverage Plastics Company, a wholly
owned subsidiary of the Company.
(6) Mr. Nin served as President and Chief Executive Officer of the Company
from June 1996 until his resignation in July 1998.
(7) Of this amount, $71,473 represents travel and entertainment expenses and
$100,000 represents dividends on management stock paid by Beverage
Plastics Company, a wholly owned subsididary of the Company.
(8) Represents compensation received in the form of dividends on management
stock paid by Beverage Plastics Company, a wholly owned subsidiary of the
Company.
(9) Mr. Virginia served as Vice President and Chief Financial Officer of the
Company from September 1996 until his resignation in July 1998. Mr.
Virginia was hired as a consultant to the Company in July 1996.
10
<PAGE>
(10) Of this amount, $6,897 represents travel and entertainment expenses,
$12,000 represents a car allowance and $76,500 represents dividends on
management stock paid by Beverage Plastics Company, a wholly owned
subsidiary of the Company.
(11) Of this amount, $12,000 represents a car allowance and $85,000 represents
dividends on management stock paid by Beverage Plastics Company, a wholly
owned subsidiary of the Company.
(12) Represents compensation from July to September 1996.
(13) Represents consulting fees.
(14) Mr. Rodriguez served as Vice President--Human Resources and Government
Affairs of the Company from October 1996 until his resignation in July
1998. Mr. Rodriguez was hired as a consultant to the Company in August
1996.
(15) Of this amount, $1,169 represents travel and entertainment expenses,
$12,000 represents a car allowance and $112,500 represents dividends on
management stock paid by Beverage Plastics Company, a wholly owned
subsidiary of the Company.
(16) Of this amount, $12,000 represents a car allowance, $30,000 represents a
consulting fee, $5,200 represents a housing allowance and $75,000
represents dividends on management stock paid by Beverage Plastics
Company, a wholly owned subsidiary of the Company.
Option Grants for the Year Ended September 30, 1998
<TABLE>
<CAPTION>
Potential
Realizable Value
at
Assumed
Percent of Annual Rates
Number of Total Options of Stock Price
Securities Granted to Exercise Appreciation for
Underlying Employees or Base Option Term(1)
Options in Fiscal Price Expiration -----------------
Name Granted Year Per Share Date 5% 10%
---- ---------- ------------- --------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
A. David Velez.......... 40,000 36.3% $6.25 3/3/08 $157,224 $398,436
David L. Virginia....... 20,000 18.2 6.25 7/17/99 78,612 199,218
Reinaldo Rodriguez...... 10,000 9.0 6.25 7/17/99 39,306 99,609
</TABLE>
- --------
(1) These amounts are based on the assumed rates of appreciation as suggested
by the rules of the Securities and Exchange Commission and do not
represent a prediction by the Company of future stock prices. Actual
gains, if any, on stock option exercises are dependent upon the future
performance of the Company's Common Stock.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Shares Unexercised In-The-Money
Acquired Value Options At Options At
Name On Exercise Realized Fiscal Year-End Fiscal Year End
---- ----------- -------- --------------- ---------------
<S> <C> <C> <C> <C>
A. David Velez.......... None None 40,000 None
Rafael Nin.............. 190,000(1) $380,000(2) None None
Rafael Nin.............. None None 1,516,667(3) $1,516,667(4)
David L. Virginia....... None None 20,000 None
Reinaldo Rodriguez...... None None 10,000 None
</TABLE>
- --------
(1) On September 3, 1998, Rafael Nin exercised 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.
(2) This value represents the difference between the market value of 190,000
Class B Shares and the exercise price of the option on September 3, 1998.
On September 3, 1998, the market value of 190,000 Class B Shares was
$1,330,000, which is the product of 190,000 Class B Shares and $7.00, the
last reported sale price of Class B Shares on the NYSE on September 3,
1998. The exercise price of the option was $950,000, which is the product
of 190,000 Class B Shares and the exercise price of $5.00 per Share.
11
<PAGE>
(3) On October 15, 1996, the Company granted Rafael Nin an option to purchase
1,516,667 Class B Shares at an exercise price of $5.00 per share. This
option may be exercised in whole or in part and is unlimited in duration
until exercised in full.
(4) This value represents the difference between the market value of the
1,516,667 Class B Shares and the exercise price of the option on September
30, 1998. On September 30, 1998, the market value of 1,516,667 Class B
Shares was $9,100,002, which is the product of 1,516,667 Class B Shares
and $6.00, the last reported sale price of Class B Shares on the NYSE on
September 30, 1998. The exercise price of the option is $7,583,335, which
is the product of 1,516,667 Class B Shares and the 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, 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 also agreed to give Mr. Nin a management stock dividend from Beverage
Plastics Company, a wholly owned subsidiary of the Company, of $100,000
annually, payable in four quarterly installments of $25,000. Under the
employment agreement, Mr. Nin was also entitled to receive other benefits
including an automobile with all operating expenses paid, and health and life
insurance. During the fiscal year ended September 30, 1998, Mr. Nin did not
receive any bonus, and his compensation reflected a voluntary salary reduction
as of April 1, 1997. Mr. Nin's employment agreement was terminated in July
1998 in connection with the change in control of the Company.
Employee Benefit Plans
Salaried Employees' Retirement Plan. The formula used to determine
retirement benefits under the Company's salaried employees' retirement plan
(the "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 1 2/3% 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
$160,000. The Company froze the Retirement Plan as of May 1, 1997, and no
accruals have been, or will be, made after that date. The Highest Average
Monthly Compensation will be based on compensation received prior to the
freeze.
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 1 2/3% 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 normal
form of benefit for a married participant is a qualified joint and survivor
annuity and for an unmarried participant is a single life annuity.
The table below sets forth the estimated annual retirement benefits
(contributory and non-contributory) payable on a straight line 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>
Credit Years of Service
Average Yearly ---------------------------------------------------------------------------
Compensation 15 20 25 30 35
- -------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$125,000 $40,080 $45,107 $50,134 $55,162 $61,412
150,000 48,830 55,107 61,384 67,662 75,162
175,000 52,330 59,107 65,884 72,662 80,662
200,000 52,330 59,107 65,884 72,662 80,662
225,000 52,330 59,107 65,884 72,662 80,662
250,000 52,330 59,107 65,884 72,662 80,662
300,000 52,330 59,107 65,884 72,662 80,662
400,000 52,330 59,107 65,884 72,662 80,662
450,000 52,330 59,107 65,884 72,662 80,662
500,000 52,330 59,107 65,884 72,662 80,662
</TABLE>
12
<PAGE>
As of December 31, 1997, David L. Virginia had accrued an estimated annual
benefit of $1,417 per month for an estimated 12 credited years of service,
payable upon his retirement date, and Reinaldo Rodriguez had accrued an
estimated annual benefit of $2,148 per month for an estimated 12 credited
years of service, payable upon his retirement date. Messrs. Virginia and
Rodriguez are no longer employed by the Company. None of the Company's current
executive officers participate in the 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"). 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 "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. The Stock Option Plans are administered by
the Board of Directors. The Board of Directors has appointed a committee (the
"Compensation Committee") to assist in the management and administration of
the Stock Option Plans. The Compensation Committee may recommend to the Board
of Directors any action to be taken under the Stock Option Plans.
Each of the Stock Option Plans is authorized to issue up to 500,000 Class B
Shares in connection with Options, 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 is
transferable except by will or the laws of descent and distribution, and each
Option is 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 is 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 Compensation Committee). Pursuant to
the Non-Qualified Stock Option Plan, under certain circumstances the Company
may grant Options at 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 and (ii)
upon voluntary resignation or termination of an Option holder's employment
without cause, vested Options are exercisable for a period of thirty days
following the date of resignation or termination, or such longer period as may
be approved by the Board of Directors. Upon the occurrence of an event
specified in (i) and (ii) 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 Plans and the manner in which such options are exercised.
Compensation Committee Report on Executive Compensation
Introduction
The current members of the Compensation Committee were appointed by the
Board of Directors on August 5, 1998, and consist of three independent, non-
employee directors and the Company's Chief Executive Officer. The composition
of the Compensation Committee changed entirely during fiscal 1998;
consequently the current members did not participate in compensation decisions
made by the Company's prior management. The present Compensation Committee did
not meet during fiscal 1998, but has held one meeting and anticipates
additional meetings during the current fiscal year.
13
<PAGE>
The Company receives certain executive management services through a
Management Agreement with Pohlad Companies. Robert C. Pohlad, the Company's
Chief Executive Officer, does not receive any compensation directly from the
Company. The Compensation Committee determines compensation policies and
levels only for the executive officers employed directly by the Company, but
not for Mr. Pohlad.
The Board of Directors has authorized the Compensation Committee to
determine the annual salary and bonus for the executive officers employed by
the Company, to grant stock options to officers and key employees and to
review and approve general compensation policies and employee benefit plans
for the Company. The full Board of Directors reviews and approves the
Compensation Committee's recommendations.
Compensation Philosophy
The objectives of the Company's executive compensation policies are to:
. Attract and retain key executives important to the long-term success of
the Company;
. Provide incentives for performance with respect to the Company's profit
and long-term goals;
. Align the executive's interests with those of the Company's shareholders
through participation in stock-based plans; and
. Reward individuals for outstanding contributions to the Company's
success.
The principal components of the Company's executive compensation consist of
base salary, bonus payments and stock options.
Base Salary and Bonuses
The Compensation Committee intends to review the base salaries of the
executive officers employed by the Company to determine whether the salaries
should be adjusted, based principally on the executive's performance,
responsibilities and experience. Other factors which the Compensation
Committee expects to consider include industry standards and competitive
market factors.
The Compensation Committee believes that a significant portion of the
overall compensation paid to executives should consist of annual bonuses that
are linked to performance objectives. Individual job performance and the
financial performance of the Company are both relevant to determining bonuses,
although the Compensation Committee does not expect to apply any predetermined
formula or weighting to any specific factors.
Stock Options
The Company's stock option plans are intended to enhance the Company's
ability to attract and retain key employees and to reward them for stock price
appreciation. By receiving stock options that become exercisable over a period
of years, option holders have an incentive to remain with the Company and to
strengthen its performance.
Chief Executive Officer Compensation
As noted above, the Company's Chief Executive Officer does not receive
compensation from the Company and neither the Board of Directors nor the
Compensation Committee determine his compensation.
Respectfully submitted,
THE COMPENSATION COMMITTEE
Christopher E. Clouser
Robert C. Pohlad
Diego Suarez, Jr.
John F. Woodhead
14
<PAGE>
Price Performance Graph
The following graph compares the total cumulative return on the Company's
Class B Common Stock with the S&P Beverage Index and the S&P 500 Index. The
total cumulative return for each period is based on the investment of $100 on
September 20, 1995, assuming compounded daily returns and the reinvestment of
all dividends. The Company's Class B Common Stock began trading on the NYSE on
September 20, 1995.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Company Class B S&P 500 S&P Beverage
Common Stock Index Index
--------------- ------- ------------
September 20, 1995 $100.00 $100.00 $100.00
September 30, 1995 92.86 100.00 100.00
September 30, 1996 34.55 120.34 137.54
September 30, 1997 50.46 169.01 174.79
September 30, 1998 43.64 184.30 158.97
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
P-PR Transfer, LLP, which acquired a controlling interest in the Company's
Common Stock in July 1998, is a Delaware limited liability partnership whose
general partners are Pohlad Companies and Beverage, Foods & Service
Industries, Inc., a wholly owned subsidiary of PepsiCo, Inc. ("PepsiCo"). The
Company is a party to various contractual relationships with PepsiCo, Pohlad
Companies and certain of their affiliates, as described below.
Franchise Arrangements
The Company has entered into a master franchise commitment letter (the
"Franchise Commitment Letter") with PepsiCo with respect to the sale of
PepsiCo soft drink products in Puerto Rico. The Company has also entered into
exclusive bottling appointment agreements (each an "Exclusive Bottling
Appointment" and collectively, with the Franchise Commitment Letter, the
"Franchise Arrangements") for the relevant trademarks of Pepsi-Cola, Diet
Pepsi-Cola, Pepsi-Cola Free, Diet Pepsi-Cola Free, Lemon-Lime Slice, Diet
Lemon-Lime Slice, Mandarin Orange Slice, Diet Mandarin Orange Slice, Grape
Slice, Teem, Diet Teem, Wonder Kola and Mountain Dew. The Franchise Commitment
Letter runs concurrently with the Exclusive Bottling Appointments and will
terminate in the event of the termination or expiration of the Exclusive
Bottling Appointments. All of the Franchise Arrangements have the provisions
described below and were renegotiated with the change in ownership control
effective July 17, 1998.
The Franchise Arrangements require the Company to purchase its entire
requirements of concentrates and syrups for all of the PepsiCo soft drink
products from certain affiliates of PepsiCo. Pursuant to the Franchise
Commitment Agreement between the company and PepsiCo, PepsiCo charges the
Company the actual price of a unit of concentrate that is paid by bottlers for
the same or similar concentrate in the continental United States on an
equivalent yield basis based upon the then current domestic list price for
each of the respective PepsiCo products.
The Exclusive Bottling Appointments have ten-year terms expiring on July 17,
2008. Thereafter, each agreement is automatically renewed for additional five-
year terms unless either party gives written notice of its intention not to
renew the agreement at least 12 months prior to the date of expiration of the
term. PepsiCo may terminate the Franchise Arrangements if the Company fails to
comply in any material respect with the terms and conditions of the Franchise
Arrangements, subject to a right to cure in certain instances. In addition,
PepsiCo may terminate the Franchise Arrangements if there is a change of
effective control of the Company without PepsiCo's prior written consent
Management Agreement
The Company entered into a Management Agreement with Pohlad Companies
effective July 20, 1998 (the "Management Agreement") which provides for Pohlad
Companies to perform executive management functions for the Company. In return
for such services, the Company must pay Pohlad Companies an annual fee of
$250,000, which will escalate each year with increases in the Company's gross
revenue. Management fees of approximately $50,000 were incurred in fiscal year
1998 under the Management Agreement. Either party may terminate the Management
Agreement after ten years. Robert C. Pohlad, the Company's Chairman and Chief
Executive Officer, is a director, President and Chief Executive Officer of
Pohlad Companies.
Accounting Services Agreement
The Company entered into an Accounting Services Agreement with Delta
Beverage Group, Inc. ("Delta Beverage") effective July 20, 1998 (the
"Accounting Services Agreement") which provides for Delta Beverage to perform
accounting and management information systems services for the Company. The
Company must pay Delta Beverage an annual fee for such services in an amount
equal to the aggregate costs and expenses incurred by Delta Beverage and
allocated by Delta Beverage based on case volume of the Company. Accounting
services fees of approximately $76,000 were incurred in fiscal year 1998 under
the Accounting Services Agreement. Either party may terminate the Accounting
Services Agreement after ten years. Robert C. Pohlad, the Company's Chairman
and Chief Executive Officer, is a director and Chief Executive Officer of
Delta Beverage. Pohlad Companies holds an equity interest in Delta Beverage.
16
<PAGE>
PROPOSAL NO. 2 -- INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Arthur Andersen LLP has been selected as the
independent public accountants for the Company for the fiscal year ending
December 31, 1999. Although the selection of accountants does not require
shareholder ratification, the Board of Directors has directed that the
appointment of Arthur Andersen LLP be submitted to shareholders for
ratification due to the significance of their appointment by the Company. If
the shareholders do not ratify the appointment of Arthur Andersen LLP, the
Board of Directors will consider the appointment of other certified public
accountants. A representative of that firm, which served as the Company's
independent public accountants for the fiscal year ended September 30, 1998,
is expected to be present at the Annual Meeting and, if he or she so desires,
will have the opportunity to make a statement, and in any event will be
available to respond to appropriate questions.
The Board of Directors Recommends a Vote "FOR" Adoption of Proposal No. 2.
On August 24, 1998, the Company engaged Arthur Andersen LLP as its principal
independent accountants to audit its financial statements. On the same date,
the Company informed KPMG Peat Marwick LLP ("KPMG") that KPMG would no longer
serve as the Company's independent auditor. The replacement of KPMG by Arthur
Andersen LLP was approved by the Company's Board of Directors on August 5,
1998.
KPMG's reports on the Company's financial statements for the fiscal years
ending September 30, 1996 and 1997 have not contained an adverse opinion or a
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. There have been no disagreements, during
or subsequent to the Company's fiscal years ending September 30, 1996 and 1997
to August 24, 1998, between the Company and KPMG on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which, if not resolved to KPMG's satisfaction, would have caused
KPMG to make reference to the subject matter of such disagreements in
connection with its report.
SOLICITATION STATEMENT
All expenses in connection with the solicitation of proxies will be borne by
the Company. In addition to the use of the mails, solicitations may be made by
regular employees of the Company by telephone, telegraph or personal contact,
without additional compensation. The Company will, upon request, reimburse
brokerage houses and persons holding shares of Common Stock in the names of
their nominees for their reasonable expenses in sending solicitation materials
to their principals.
STOCKHOLDER PROPOSALS
In order to be considered for inclusion in the proxy materials to be
distributed in connection with the next annual meeting of shareholders of the
Company, shareholder proposals for such meeting must be submitted to the
Company no later than January 15, 2000.
OTHER MATTERS
The Company is not aware of any business other than the proposals described
above to be presented for action by the shareholders at the Annual Meeting,
but it is intended that the proxies will be voted upon any other matters and
proposals that may legally come before the Annual Meeting or any adjournment
thereof, in accordance with the discretion of the persons named therein.
ANNUAL REPORT
All shareholders of record as of January 14, 1999 are receiving with this
proxy statement a copy of the Company's Annual Report for the fiscal year
ended September 30, 1998, which includes the Company's Annual Report on Form
10-K. The Form 10-K contains certified consolidated financial statements of
the Company and its subsidiaries for the fiscal year ended September 30, 1998.
17
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PEPSI-COLA PUERTO RICO BOTTLING COMPANY
Carretera 865 Km. 0.4, Bo. Candelaria Arenas, Toa Baja, Puerto Rico 00949
PROXY
This proxy is solicited on behalf of the Board of Directors of
Pepsi-Cola Puerto Rico Bottling Company
The undersigned hereby appoints Robert C. Pohlad and John F. Bierbaum as
proxies (each with the power to act alone and with the power of substitution and
revocation) to represent the undersigned and to vote all of the shares of Common
Stock of Pepsi-Cola Puerto Rico Bottling Company entitled to be voted by the
undersigned as of January 14, 1999 as directed below and, in their discretion,
on all other matters which may properly come before the Annual Meeting of
Shareholders (the "Meeting") to be held at the Marriott Biscayne Bay, 1633 N.
Bayshore Dr., Miami, Florida, on Wednesday, February 17, 1999, at 1:00 p.m. and
at any adjournment thereof as if the undersigned were present and voting at the
Meeting.
Whether or not you expect to attend the Meeting, you are urged to execute
and return this proxy, which you may revoke at any time prior to its use.
IF NO CONTRARY DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS RETURNED,
SUCH SHARES WILL BE VOTED FOR ALL ITEMS.
(Continued and to be dated and signed on the reverse side.)
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
P.O. BOX 11132
NEW YORK, N.Y. 10203-0132
<TABLE>
<S> <C> <C> <C>
1. Election of the following FOR all nominees [ ] WITHHOLD AUTHORITY [ ] *EXCEPTIONS [ ]
nominees: listed below to vote for all nominees
listed below.
</TABLE>
Nominees: Christopher E. Clouser, Philip N. Hughes, Robert C. Pohlad, Diego
Suarez, Jr., Basil K. Vasiliou, Michael D. White, John F. Woodhead, Raymond W.
Zehr, Jr.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark
the "Exceptions" box and write that nominee's name in the space provided below.)
* Exceptions __________________________________________________________________
2. Ratification of appointment of Arthur Andersen LLP as independent public
accountants for the year ending December 31, 1999.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
Change of Address and [ ]
or Comments Mark Here
Please date and sign this Proxy exactly as your name appears
to the left on this Proxy and return it promptly in the
postage-paid return envelope. When shares are held by joint
tenants, both should sign. If a corporation, please sign the
full corporate name by any authorized officer. If a
partnership, please sign the partnership name by an
authorized person.
Dated: _______________________________________________, 1999
____________________________________________________________
Signature
____________________________________________________________
Signature
PLEASE MARK, SIGN AND DATE THIS PROXY Votes must be indicated
PROMPTLY AND MAIL IT IN THE ENCLOSED [X] in black or Blue ink.
ENVELOPE. TO BE VALID, THIS PROXY
MUST BE SIGNED AND DATED.
