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SCHEDULE 14A INFORMATION
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 o |
Check the appropriate box:
| o | Preliminary Proxy Statement |
| x | Definitive Proxy Statement |
| o | Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12 |
| o | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
The Boston Beer Company, Inc.
(Name of Registrant as Specified In Its
Charter)
The Boston Beer Company, Inc.
(Name of Person(s) Filing Proxy
Statement)
Payment of Filing Fee (Check the appropriate box):
| x | No fee required. |
| o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per 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:
| o | Fee paid previously with preliminary materials. |
| o | 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:
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THE
BOSTON BEER COMPANY, INC.
NOTICE OF THE 2006 ANNUAL
MEETING OF STOCKHOLDERS
May 23, 2006
To the Stockholders:
The 2006 Annual Meeting of the Stockholders of THE BOSTON BEER
COMPANY, INC. (the “Company”) will be held on Tuesday,
May 23, 2006, at 10:00 a.m. at The Brewery located at
30 Germania Street, Jamaica Plain, Boston, Massachusetts, for
the following purposes:
1. The election by the holders of the Class A Common
Stock of three (3) Class A Directors, each to serve
for a term of one (1) year.
2. The election by the sole holder of the Class B
Common Stock of four (4) Class B Directors, each to
serve for a term of one (1) year.
3. To consider and act upon any other business which may
properly come before the meeting.
The Board of Directors has fixed the close of business on
March 24, 2006 as the record date for the meeting. Only
stockholders of record on that date are entitled to notice of
and to vote at the meeting.
The foregoing items of business are more fully described in the
Proxy Statement accompanying this letter.
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE
PROVIDED, WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING
IN PERSON.
By order of the Board of Directors
C. James Koch,
Clerk
Clerk
Boston, Massachusetts
April 14, 2006
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THE
BOSTON BEER COMPANY, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of The Boston
Beer Company, Inc. (the “Company”) for use at the 2006
Annual Meeting of Stockholders to be held on Tuesday,
May 23, 2006, at the time and place set forth in the notice
of the meeting, and at any adjournments thereof. The approximate
date on which this Proxy Statement and form of proxy are first
being mailed to stockholders is April 14, 2006.
If the enclosed proxy is properly executed and returned, it will
be voted in the manner directed by the stockholder. If no
instructions are specified, proxies will be voted in favor of
the election of directors as set forth in this proxy statement.
In addition, if other matters come before the meeting, the
persons named in the accompanying proxy and acting thereunder
will have discretion to vote on these matters in accordance with
their best judgment. Any person giving the enclosed form of
proxy has the power to revoke it by voting in person at the
meeting, or by giving written notice of revocation to the Clerk
of the Company at any time before the proxy is exercised. Please
note, however, that if your shares are held of record by a
broker, bank or nominee and you wish to vote at the meeting, you
will not be permitted to vote in person unless you first obtain
a proxy issued in your name from the record holder.
The holders of a majority in interest of the issued and
outstanding Class A Common Stock are required to be present
in person or to be represented by proxy at the meeting in order
to constitute a quorum for the election of the Class A
Directors. The election of each of the nominees for Class A
Director, as set forth below in this Proxy Statement in greater
detail, will be decided by plurality vote of the holders of
Class A Common Stock present in person or represented by
proxy at the Meeting. The affirmative vote of the sole holder of
the outstanding shares of Class B Common Stock, voting in
person or by proxy at the meeting, is required to elect the
Class B Directors, also as set forth below in this Proxy
Statement in greater detail.
Abstentions and “non-votes” are counted as present in
determining whether the quorum requirement is satisfied. A
“non-vote” occurs when a nominee holding shares for a
beneficial owner votes on one proposal, but does not vote on
another proposal because the nominee does not have discretionary
voting power and has not received instructions from the
beneficial owner. Abstentions and broker non-votes will not be
taken into account in determining the outcome of the election of
directors.
The Company will bear the cost of the solicitation. In addition
to mailing this material to shareholders, the Company has asked
banks and brokers to forward copies to persons for whom they
hold stock of the Company and request authority for execution of
the proxies. The Company will reimburse the banks and brokers
for their reasonable
out-of-pocket
expenses in doing so. Officers and regular employees of the
Company, without being additionally compensated, may solicit
proxies by mail, telephone, telegram, facsimile or personal
contact. All reasonable proxy soliciting expenses will be paid
by the Company in connection with the solicitation of votes for
the Annual Meeting.
The Company’s principal executive offices are located at 75
Arlington Street, Boston, Massachusetts 02116, telephone number
(617) 368-5000.
RECORD
DATE AND VOTING SECURITIES
Only stockholders of record at the close of business
March 24, 2006 are entitled to notice of and to vote at the
meeting. On that date, the Company had outstanding and entitled
to vote 9,848,593 shares of Class A Common Stock,
$.01 par value per share, and 4,107,355 shares of
Class B Common Stock, $.01 par value per share. Each
outstanding share of the Company’s Class A and
Class B Common Stock entitles the record holder to one
(1) vote on each matter properly brought before the Class.
Items 1
and 2. ELECTION OF CLASS A AND CLASS B
DIRECTORS
Upon the recommendation of the Nominating/Governance Committee,
the Board of Directors proposes that the initial number of
Directors for the ensuing year be fixed at seven (7), consisting
of three (3) Class A Directors to
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be elected by the holders of the Class A Common Stock for a
term of one (1) year, and four (4) Class B
Directors to be elected by the sole holder of the Class B
Common Stock, also for a term of one (1) year, reserving
the right of the sole holder of the Class B Common Stock to
increase the number of Class B Directors to up to seven
(7) at such time as he deems appropriate and to elect up to
three (3) additional Class B Directors accordingly.
It is proposed that the holders of the Class A Common Stock
elect each of the three (3) nominees for Class A
Director to serve for a term of one (1) year and until his
successor is duly elected and qualified or until he sooner dies,
resigns or is removed.
It is anticipated that the sole holder of the Class B
Common Stock will elect each of the four (4) nominees for
Class B Director also to serve for a term of one
(1) year and until his successor is duly elected and
qualified or until he sooner dies, resigns or is removed. Three
(3) of the four (4) nominees for Class B
Directors are either Executive Officers of the Company or
immediate family members of such Executive Officers.
The persons named in the accompanying proxy will vote, unless
authority is withheld, for the election as Class A
Directors of the three (3) nominees named below. In the
event that any of the nominees should become unavailable for
election, which is not anticipated, the persons named in the
accompanying proxy will vote for such substitute nominees as the
incumbent Class A Directors, acting pursuant to
Section 4.8 of the Company’s By-Laws as a nominating
committee, may nominate. As indicated below, none of the
nominees for Class A Directors are Executive Officers of
the Company or its subsidiaries nor immediate family members of
such Executive Officers.
Nominees Proposed in Accordance with the Terms of the
Articles of Organization, By-Laws of the Company and the
Corporate Governance Guidelines. Set forth below
are the nominees for election as Class A and Class B
Directors, respectively, for terms ending in 2007 and certain
information about each of them.
Class A
Directors:
|
Year First |
Position With the Company |
|||||||||
|
Elected a |
or Principal Occupation |
|||||||||
|
Name of Nominee
|
Age | Director |
During the Past Five
Years
|
|||||||
|
David A. Burwick
|
44 | 2005 | Mr. Burwick is the President of Pepsi-QTG Canada. Prior to assuming that position in January 2006, he had served as Senior Vice President and Chief Marketing Officer of PepsiCo North America, a position he held since 2003. Prior to that, Mr. Burwick held several positions with PepsiCo North America, most recently Vice President of Marketing, Carbonated Soft Drinks, a position he held since 2000. | |||||||
|
Pearson C. Cummin, III
|
63 | 1995 | Mr. Cummin served as a general partner of Consumer Venture Partners, a Greenwich, Connecticut based venture capital firm, from January 1986 to December 2002. Mr. Cummin also serves as a Director, Chairman of the Compensation Committee and a member of the Nominating/Governance Committee of Pacific Sunwear of California, Inc., a California-based specialty apparel retailer. | |||||||
|
Jean-Michel Valette
|
45 | 2003 | Mr. Valette serves as Chairman of Robert Mondavi Winery, a California wine company. Prior to assuming that position, he had served as President and Managing Director of Robert Mondavi Winery since October 2004. He is also Chairman of the Board and a member of the Audit Committee of Peet’s Coffee and Tea Inc., a California-based specialty coffee retailer, and serves as a Director and Chairman of the Audit Committee of Select Comfort Corporation, a Minneapolis-based bed retailer. Mr. Valette also serves as an independent advisor to select branded consumer companies. Mr. Valette has served as a Class B Director of the Company for the last three years. | |||||||
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Class B
Directors:
|
Year First |
Position With the Company |
|||||||||
|
Elected a |
or Principal Occupation |
|||||||||
|
Name of Nominee
|
Age | Director |
During the Past Five
Years
|
|||||||
|
C. James Koch
|
56 | 1995 | Mr. Koch founded the Company in 1984 and currently serves as the Chairman and Clerk of the Company. Until January 2001, Mr. Koch also served as the Company’s Chief Executive Officer. | |||||||
|
Charles Joseph Koch
|
83 | 1995 | Mr. Koch, a former brewmaster, is the father of founder C. James Koch. In 1989, Mr. Koch retired as founder and co-owner of Chemicals, Inc., a distributor of brewing and industrial chemicals in southwestern Ohio. | |||||||
|
Jay Margolis
|
57 | 2006 | Mr. Margolis is the President of the Apparel Group of Limited Brands. Before assuming that position in 2005, he had been President and Chief Operating Officer of Reebok, Inc. since 2001, where he also served as a Director. | |||||||
|
Martin F. Roper
|
43 | 1999 | Mr. Roper is the President and Chief Executive Officer of the Company. Prior to assuming that position in January 2001, he had served as the President and Chief Operating Officer of the Company since December 1999. Mr. Roper joined the Company as Vice President of Manufacturing and Business Development in September 1994 and became the Chief Operating Officer in April 1997. | |||||||
CORPORATE
GOVERNANCE PRINCIPLES AND BOARD MATTERS
The Company is committed to having sound corporate governance
principles. The Company’s Corporate Governance Guidelines,
Code of Business Conduct and Ethics and the charters of the
Audit, Compensation and Nominating/Governance Committees are
available on the Company’s website,
www.bostonbeer.com/CorporateGovernance, and are also
available in print to any stockholder who requests them. Such
requests should be directed to the Investor Relations
Department, The Boston Beer Company, Inc., 75 Arlington Street,
Boston, MA 02116.
Board
Independence
The Board has determined that all of the Class A directors
standing for election, namely, Messrs. Burwick, Cummin and
Valette, and one (1) of the Class B directors standing
for election, namely, Mr. Margolis, together constituting a
majority of the Board of Directors, have no material
relationship with the Company (either directly or as a partner,
shareholder or officer of an organization that has a
relationship with the Company) and are independent as provided
in the New York Stock Exchange (“NYSE”) and Securities
and Exchange Commission (“SEC”) director independence
standards. In addition, the Board has determined that each
member of the Audit, Compensation and Nominating/Governance
Committees has no material relationship with the Company (either
directly or as a partner, shareholder or officer of an
organization that has a relationship with the Company) and is
independent as provided in the NYSE and SEC director
independence standards.
Board
Meetings and Structure; Committee Composition; Director
Compensation
During the Company’s 2005 fiscal year, there were five
(5) regular meetings of the Board of Directors of the
Company. All of the Directors attended, either in person or by
telephone, all board meetings and all meetings of the Committees
of the Board of Directors on which they served.
The Company strongly encourages all directors to attend annual
meetings of stockholders. All Directors except Charles Koch
attended the last annual meeting of stockholders.
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As of the date of this Proxy Statement, the Board has eight
(8) directors and three (3) standing committees,
namely, the Audit Committee, the Compensation Committee and the
Nominating/Governance Committee. Robert N. Hiatt, a Class A
Director since 1998, will be retiring from the Board at the end
of his current term. Committee membership during the last fiscal
year and the function of each committee are described below.
Each of the committees operates under a written charter adopted
by the Board.
In October 2005, the Compensation Committee considered a study
prepared by an independent executive compensation consulting
firm with respect to compensation of non-management Directors.
As a result, certain adjustments were made to non-management
Director compensation to take effect in 2006. Each year
non-management directors receive $7,500 as an annual retainer,
as well as an option grant for 5,000 shares of the
Company’s Class A Common Stock. In 2005, members of
the Audit Committee received an additional annual retainer of
$10,000, which, in 2006 will be reduced to $9,000, except for
the Chairman of the Audit Committee who will receive an annual
retainer of $11,000 for his services as a member and Chairman.
Each Committee Chair received an additional annual retainer of
$1,000 in 2005, which amount will be increased to $2,500 in 2006
for the Chairmen of the Compensation and Nominating/Governance
Committees. In 2006, non-management Directors other than
Chairman will receive an annual retainer of $500 for each
Committee of which such Director is a member. All retainers and
the annual option grant are pro rated if the non-management
Director is appointed after the annual meeting of stockholders.
Non-management directors also receive compensation for attending
Board and Committee meetings as follows: $2,500 was paid in 2005
for each Board meeting attended in person, which amount has been
increased to $3,000 effective January 1, 2006; $1,000 for
each Board meeting attended by telephone; $500 for each
Committee meeting attended in person in 2005, which amount has
been increased to $750 effective January 1, 2006; and $200
for each Committee meeting attended by telephone. The first time
a non-management director is elected to the Board of Directors,
he or she receives an option grant for 5,000 shares of the
Company’s Class A Common Stock pursuant to the
Company’s Non-Employee Director Stock Option Plan, as
amended. On February 14, 2003, the Board of Directors voted
to make a one-time option grant for 5,000 shares to all
current non-management directors upon their re-election to the
Board. All options to non-management directors are granted under
the Company’s Non-Employee Director Stock Option Plan, as
amended and restated, pursuant to which options are granted at
the fair market value on the date of grant, are immediately
vested and will expire the earlier of 10 years or
3 years after the grantee ceases to be a director of the
Company. In October 2004, the Non-Employee Director Stock Option
Plan was amended and restated by action of the sole Class B
Stockholder, pursuant to which the number of shares of
Class A Common Stock available for issuance under the Plan
was increased from 200,000 shares to 350,000 shares.
In 2005, non-management directors received the following cash
compensation:
|
Name
|
Cash Compensation | |||
|
David A. Burwick
|
$ | 24,500 | ||
|
Pearson C. Cummin, III
|
$ | 36,600 | ||
|
Robert N. Hiatt
|
$ | 36,600 | ||
|
Charles Joseph Koch
|
$ | 14,000 | ||
|
Jean-Michel Valette
|
$ | 43,400 | (1) | |
| (1) | Includes payment of $6,000 in pro rated retainer to Mr. Valette that was due upon his joining the Audit Committee in August 2004, but which was not made until February 2005. |
Audit
Committee
The Audit Committee of the Board of Directors assists the Board
in fulfilling its responsibility to oversee management’s
conduct of the Company’s financial reporting process,
including overseeing the financial reports and other financial
information provided by the Company’s systems of internal
accounting and financial controls and the annual independent
audit of the Company’s financial statements. The Audit
Committee prepares the Audit Committee report for inclusion in
the annual proxy statement; annually reviews the Audit Committee
charter and the committee’s performance; appoints,
evaluates and determines the compensation of the Company’s
independent auditors; reviews and approves the scope of the
annual audit, the audit fee and the financial statements;
pre-approves
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all audit and non-audit services provided to the Company by the
Company’s independent auditors; reviews the Company’s
disclosure controls and procedures, internal controls and
corporate policies relating to financial information and
earnings guidance; and reviews other risks that may have a
significant impact on the Company’s financial statements.
The present members of the Audit Committee are Pearson C.
Cummin, III (Chairman), Robert N. Hiatt, and Jean-Michel
Valette. The Audit Committee had seven (7) meetings in
2005. The report of the Audit Committee is included in this
Proxy Statement on page 16.
Compensation
Committee
The Compensation Committee discharges the Board’s
responsibilities relating to compensation of the Company’s
officers and directors and exercises overall responsibility for
evaluating and approving compensation programs and policies of
the Company relating to officers and directors; provides general
oversight of the Company’s compensation structure,
including the Company’s equity compensation plans; reviews
and makes recommendations to the Board concerning policies or
guidelines with respect to employment agreements, severance
arrangements,
change-in-control
agreements or arrangements involving senior executive officers
and directors of the Company; makes reports to the Board of
Directors on a regular basis; reviews its own performance and
reviews and reassesses the adequacy of its charter and
recommends any proposed changes to the Board of Directors for
its approval; and issues an annual report on executive
compensation for inclusion in the Company’s proxy
statement. Other responsibilities of the Compensation Committee
include the review and approval of corporate goals and
objectives relevant to the compensation of the Chairman and the
CEO and evaluation of the performance of the Chairman and the
CEO in light of those goals and objectives; and setting the
compensation levels of the Chairman and the CEO based on such
evaluation.
The present members of the Compensation Committee are Robert N.
Hiatt (Chairman), David A. Burwick, and Jean-Michel Valette. The
Compensation Committee held five (5) meetings in 2005. The
report of the Compensation Committee is included in this Proxy
Statement on page 8.
Nominating/Governance
Committee
The Nominating/Governance Committee assists the Board by
identifying individuals qualified to become Board members,
recommending nominees for election as Class A Directors to
the full Board of Directors, recommending to the Board nominees
for each Board committee, developing and recommending to the
Board a set of corporate governance principles applicable to the
Company and overseeing an annual evaluation of the Board and
management. The Nominating/Governance Committee periodically
assesses the size and composition of the Board; reviews the
adequacy of the Company’s corporate governance guidelines
and recommends any necessary changes to the full Board for
approval; conducts a preliminary review of director independence
and financial literacy and expertise of Audit Committee members;
annually evaluates the performance of the Chairman and the CEO;
and makes periodic reports to the Board on succession planning
and management development. The Chairman of the
Nominating/Governance Committee receives communications directed
to non-management directors.
The present members of the Nominating/Governance Committee are
Jean-Michel Valette (Chairman), David A. Burwick and Pearson C.
Cummin, III. The Nominating/Governance Committee met four
(4) times in 2005.
Consideration
of Nominees for Director
Identifying
and Evaluating Nominees for the Board of Directors
The Nominating/Governance Committee employs a variety of methods
for identifying and evaluating nominees for director. The
Committee assesses and reviews with the full Board at least
annually the skills and characteristics that should be reflected
in the composition of the Board as a whole. The review includes
an examination of the extent to which the requisite skills and
characteristics are reflected in the then current Board members
and seeks to identify any particular qualifications that should
be sought in new directors for the purpose of augmenting the
skills and experience represented on the Board. The assessment
takes into account issues of experience, judgment, age and
diversity in aspects of business relevant to the Company’s
affairs, all in the context of
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the perceived needs of the Board at that time. Candidates may
come to the attention of the Committee through a number of
sources, including current Board members, professional search
firms, shareholders or other persons. Candidates are evaluated
at regular or special meetings of the Nominating/Governance
Committee and may be considered at any point during the year.
Shareholder
Nominees
The policy of the Nominating/Governance Committee is to consider
properly submitted shareholder nominations for candidates for
membership on the Board as described above under
“Identifying and Evaluating Nominees for the Board
Directors.” The same process is used for evaluating a
director candidate submitted by a shareholder as is used in the
case of any other potential nominee. Any shareholder nominations
proposed for consideration by the Nominating/Governance
Committee should include the nominee’s name and
qualifications for Board membership and should be addressed to:
Chairman
Nominating/Governance Committee
The Boston Beer Company, Inc.
75 Arlington Street
Boston, MA 02116
Nominating/Governance Committee
The Boston Beer Company, Inc.
75 Arlington Street
Boston, MA 02116
If the Company receives a communication from a shareholder
nominating a candidate that is not submitted as described above,
it will forward such communication to the Chairman of the
Nominating/Governance Committee.
Executive
Sessions
Those non-management directors who are independent met in
scheduled executive sessions without management five
(5) times during the Company’s 2005 fiscal year, which
were chaired by Mr. Jean-Michel Valette.
Communications
with the Board
Stockholders may communicate with the Board of Directors or any
individual director by submitting an email to the Company’s
Board at bod@bostonbeer.com. All directors have
access to this email address. Communications that are intended
specifically for non-management directors should be sent to the
email address above to the attention of the Chairman of the
Nominating/Governance Committee.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding
beneficial ownership of the Company’s Class A Common
Stock and Class B Common Stock as of March 7, 2006 by:
| • | each person (or group of affiliated persons) known by the Company to be the beneficial owner(s) of more than five percent (5%) of the outstanding Class A Common Stock; | |
| • | each current director of the Company, nominees and the executive officers of the Company named below in the Summary Compensation Table on page 11; and | |
| • | all current directors and executive officers of the Company directors as a group. |
The information provided in the table is based on the
Company’s records, information filed with the SEC and
information provided to the Company, except where otherwise
noted.
Beneficial ownership is determined under the rules of the SEC
and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under those rules, beneficial
ownership includes any shares as to which the individual has the
sole or shared voting power or investment power and also any
shares that the individual has the right to acquire under
certain circumstances. Unless otherwise indicated, each person
named below held sole voting and investment power over the
shares listed below. All shares are Class A Common Stock,
except for shares of Class B Common Stock held by C. James
Koch.
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BENEFICIAL
OWNERSHIP TABLE
| Shares Beneficially Owned(1) | ||||||||
|
Name of Beneficial
Owner
|
(i) Number | Percent | ||||||
|
C. James
Koch(1)(2)
|
4,548,524 | 32.6 | % | |||||
|
Martin F.
Roper(1)(3)
|
543,119 | 5.2 | % | |||||
|
William F.
Urich(1)(4)
|
67,000 | * | ||||||
|
Jeffrey D.
White(1)(5)
|
43,000 | * | ||||||
|
Robert H.
Hall(1)(6)
|
88,400 | * | ||||||
|
David A.
Burwick(1)(7)
|
11,200 | * | ||||||
|
Pearson C.
Cummin, III(1)(8)
|
69,130 | * | ||||||
|
Robert N.
Hiatt(1)(9)
|
43,000 | * | ||||||
|
Charles Joseph Koch
(1)(10)
|
45,000 | * | ||||||
|
Jay
Margolis(1)(11)
|
6,000 | * | ||||||
|
Jean-Michel
Valette(1)(12)
|
40,500 | * | ||||||
|
Barclays Global Investors,
NA(13) Barclays Global Fund Advisors 45 Fremont Street, San Francisco, CA 94105 |
1,035,669 | 10.5 | % | |||||
|
Royce & Associates,
LLC(13) 1414 Avenue of the Americas, New York, NY 10019(13) |
992,800 | 10.1 | % | |||||
|
All Directors, Nominees for
Director and Executive Officers as a
group (11 people) |
5,504,873 | 37.1 | % | |||||
| * | Represents holdings of less than one percent (1%). |
| (1) | The mailing address for all directors, nominees and named executive officers is c/o The Boston Beer Company, Inc., 75 Arlington Street, Boston, MA 02116. | |
| (2) | Includes 4,107,355 shares of Class B Common Stock, constituting all of the outstanding shares of Class B Common Stock, options to acquire 34,000 shares of Class A Common Stock exercisable currently or within sixty (60) days and 4,908 shares of Class A Common Stock purchased under the Company’s Investment Share Plan which are not yet vested. Also includes 18,056 shares of Class A Common Stock held by Mr. Koch as custodian for the benefit of his children in which he has sole voting and investment power, but to which Mr. Koch disclaims any beneficial ownership. Does not include 62,186 shares of Class A Common Stock held by a limited liability company in which Mr. Koch’s children have a pecuniary interest, as to which Mr. Koch disclaims any beneficial ownership. | |
| (3) | Includes options to acquire 523,323 shares of Class A Common Stock exercisable currently or within sixty (60) days and 13,451 shares of Class A Common Stock purchased under the Company’s Investment Share Plan which are not yet vested. | |
| (4) | Consists of options to acquire 67,000 shares of Class A Common Stock exercisable currently or within sixty (60) days. | |
| (5) | Consists of options to acquire 42,300 shares of Class A Common Stock exercisable currently or within sixty (60) days and 700 shares of Class A Common Stock purchased under the Company’s Investment Share Plan which are not yet vested. | |
| (6) | Consists of options to acquire 88,400 shares of Class A Common Stock exercisable currently or within sixty (60) days. | |
| (7) | Includes options to acquire 11,000 shares of Class A Common Stock exercisable currently or within sixty (60) days. | |
| (8) | Includes options to acquire 42,500 shares of Class A Common Stock exercisable currently or within sixty (60) days. |
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| (9) | Includes options to acquire 40,000 shares of Class A Common Stock exercisable currently or within sixty (60) days. Does not include 1,000 shares of Class A Common Stock owned by Mr. Hiatt’s spouse. | |
| (10) | Includes options to acquire 42,500 shares of Class A Common Stock exercisable currently or within sixty (60) days. Does not include 1,000 shares of Class A Common Stock owned by Mr. Koch’s spouse nor 1,000 shares held in trust in which Mr. Koch disclaims any beneficial ownership. | |
| (11) | Consists of options to acquire 6,000 shares of Class A Common Stock exercisable currently or within sixty (60) days. | |
| (12) | Includes options to acquire 20,000 shares of Class A Common Stock exercisable currently or within sixty (60) days. | |
| (13) | Information has been derived from Schedule 13G for the year ended December 31, 2005 filed with the SEC. |
COMPENSATION
COMMITTEE
REPORT ON EXECUTIVE COMPENSATION(1)
REPORT ON EXECUTIVE COMPENSATION(1)
Compensation Philosophy. The Company’s
executive compensation system is comprised of base salaries,
annual bonuses based upon specific performance objectives and
the Company’s overall performance, and stock option and
restricted stock grants. The Compensation Committee of the Board
of Directors (the “Committee”), reviews executive
officer compensation annually. Executive compensation is
designed to be competitive within the alcoholic beverages
industry and other companies of comparable size and complexity,
so as to enable the Company to continue to attract and retain
talented and motivated individuals in key positions.
Compensation paid to the Company’s executive officers is
intended to reflect the responsibility associated with each
executive officer’s position, the past performance of the
specific executive officer, the goals of management and the
profitability of the Company.
In 2005, the Compensation Committee devoted particular attention
to developing specific goals and objectives to be achieved by
the Chairman and the Chief Executive Officer in 2006 and bonus
potential related to the achievement of those goals. In
addition, the Committee strengthened its evaluation process for
overall performance by the Chairman and the Chief Executive
Officer, as well as established criteria for evaluation of other
senior executive officers of the Company.
Equity-Based Compensation. As a result of the
Compensation Committee’s review of executive compensation
and a study presented by an independent executive compensation
consulting firm, the Compensation Committee devoted significant
attention to the equity-based compensation under the
Company’s Employee Equity Incentive Plan (the
“EEIP”). One feature of the EEIP, is the Discretionary
Option, which has been used by the Compensation Committee as an
integral part of the overall compensation approach for the
officers and senior managers of the Company. Further, in
December 2005, upon the recommendation of the Compensation
Committee, the Board of Directors amended the EEIP to include
Restricted Stock Awards as another feature of the plan designed
to provide incentive to the Company’s key employees to
increase the market value of the Company’s stock, thus
linking corporate performance and stockholder value to
executive, senior manager and key employee compensation.
The EEIP calls for the Compensation Committee to make
recommendations to the full Board with respect to the grant of
Discretionary Options and Restricted Stock Awards. In
recommending these grants, the Compensation Committee takes into
account the position and responsibilities of the optionee being
considered, the nature and value to the Company of his or her
service and accomplishments, his or her present and potential
contributions to the success of the Company and such other
factors as the Compensation Committee deems relevant. In
carrying out these responsibilities in 2005, the Committee met
with the Company’s Chairman in October to review
(1) The
material in this report is not “soliciting material,”
is not deemed filed with the SEC and is not to be incorporated
by reference in any filing of the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, whether made before or after the date hereof and
irrespective of any general incorporation language in any such
filing.
8
Table of Contents
Management’s preliminary recommendations with respect to
Discretionary Options and Restricted Stock Awards to be granted
effective January 1, 2006. The Compensation Committee met
again with the Chairman in December to review final
recommendations to be made to the Board of Directors in the
context of the overall compensation plan for executives. Based
on this review, the Committee recommended that the EEIP be
amended to include Restricted Stock Awards for key employees.
Upon the recommendation of the Compensation Committee, the Board
granted Discretionary Options covering an aggregate of
79,000 shares of Class A Common Stock, effective as of
January 1, 2006. Of this number, options covering
41,500 shares of Class A Common Stock were granted to
the named executive officers of the Company, constituting 53% of
the total options granted. All options granted to the named
executive officers were contingent options, whereby the actual
number of shares as to which the option shall become exercisable
in any year, if any, is dependent upon the Company’s
performance as measured against a benchmark determined by the
Company’s Board of Directors. In addition, upon the
recommendation of the Compensation Committee, the Board of
Directors awarded a total of 32,079 shares of Restricted
Stock under the amended EEIP to senior managers and key
employees, effective as of January 1, 2006.
The EEIP also contains a so-called Investment Share program,
pursuant to which all employees who have been employed by the
Company for at least one year may purchase shares of the
Company’s Class A Common Stock at a discount of up to
40% based on years of service. In December 2005, the Committee
adopted a policy precluding the Chairman and the Chief Executive
Officer from further participation in the Investment Share
program.
Up to an aggregate of 3,687,500 shares of Class A
Common Stock may be issued under the EEIP. As of March 7,
2006, there were approximately 124,000 shares of
Class A Common Stock available for grant under the
EEIP.
Compensation of Chief Executive Officer. The
Compensation Committee reviewed and approved the compensation
paid to Martin F. Roper as the Company’s Chief Executive
Officer during 2005. In February 2005, the Committee set
Mr. Roper’s annual base salary for 2005 at $567,000
and established bonus opportunities for him equal to 80% of his
2005 salary, with an incremental 64% tied to achieving certain
goals that would require substantial out-performance of the
Company’s financial plan for the year.
Mr. Roper’s objectives for 2005 as a percentage of his
bonus opportunities, including the out-performance goals, were
(i) depletions growth and other revenue
goals — 56%, (ii) increased gross profit and
other cost reductions — 17%, and
(iii) strategic initiatives and stock
price — 28%. In February 2006, the Committee
approved a bonus of $225,000, based on its assessment of
Mr. Roper’s achievement against those objectives and
the overall performance of the Company in 2005. In December
2005, the Committee established bonus opportunities for
Mr. Roper in 2006 equal to 80% of his 2006 salary, with an
incremental 64% tied to achieving certain goals that would
require substantial out-performance of the Company’s
financial plan for the year. The objectives for 2006 as a
percentage of Mr. Roper’s bonus opportunities,
including the out-performance goals, are (i) depletions
growth — 52.8%, (ii) increased gross
profit — 16.7%, (iii) cost reductions and
other strategic initiatives — 13.8%, and
(iv) stock price — 16.7%. In February 2006,
the Compensation Committee set Mr. Roper’s annual base
salary for 2006 at $606,700
Also, in June 2005, upon the recommendation of the Compensation
Committee, the Board of Directors granted Mr. Roper an
option to acquire 300,000 shares of the Company’s
Class A Common Stock pursuant to the EEIP with an exercise
price equal to the fair market value as of the date of grant.
The option vests, provided certain criteria are met, on
May 1, 2008 with respect to 180,000 shares, and on
May 1, 2010 with respect to the remaining
120,000 shares. Vesting criteria relate to volume growth
and increased earnings, in each case relative to certain
benchmarks as determined by the Compensation Committee. If the
criteria are not met on the applicable vesting date, then the
option will lapse with respect to the subject shares. In
addition, the option provides for partial accelerated vesting in
the event of Mr. Roper’s death or total disability or
termination of employment by the Company not for cause prior to
May 1, 2008, or in the event of a change in control
pursuant to which C. James Koch or members of his family no
longer control a majority of the Company’s issued and
outstanding Class B Common Stock.
Compensation of Chairman. The Compensation
Committee also reviewed and approved the compensation paid to C.
James Koch, the Chairman and a full-time employee of the
Company, in 2005. In February 2005, the Committee set
Mr. Koch’s annual base salary for 2005 at $195,000 and
established bonus opportunities for him equal to 100% of his
2005 salary based on the following objectives as a percentage of
his bonus opportunities for
9
Table of Contents
2005: (i) depletions growth — 30%,
(ii) relative depletions growth — 30%,
(iii) gross profit — 15%, and
(iv) stock price — 25%. In February 2006,
the Committee approved a bonus of $250,000, based on its
assessment of the overall performance of the Company in 2005. In
December 2005, the Committee established bonus opportunities for
Mr. Koch in 2006 equal to 100% of his 2006 salary. The
objectives for 2006 as a percentage of Mr. Koch’s
bonus opportunities are (i) depletions
growth — 30%, (ii) relative depletions
growth — 30%, (iii) gross
profit — 15%, and (iv) stock
price — 25%. In February 2006, the Compensation
Committee set Mr. Koch’s annual base salary for 2006
at $250,000. In addition, upon the recommendation of the
Committee, in February 2006, the Board granted to Mr. Koch
an option to acquire 15,000 shares of the Company’s
Class A Common Stock under the EEIP, with contingent
vesting on the same basis as those granted to other executives
on January 1, 2006.
Tax Limitation. Section 162(m) of the
U.S. Internal Revenue Code limits the tax deductibility by
a corporation of compensation in excess of $1,000,000 paid to
the Chief Executive Officer and any other of its four most
highly compensated executive officers. However, compensation
which qualifies as “performance-based” is excluded
from the $1,000,000 limit if, among other requirements, the
compensation is payable only upon attainment of pre-established,
objective performance goals under a plan approved by
stockholders. Mr. Roper’s bonuses and stock option
grants have been approved by the sole holder of the
Company’s Class B Common Stock, that acts with sole
authority on such matters, in accordance with the requirements
of Section 162(m).
The Compensation Committee does not presently expect that total
cash compensation to any individual executive, other than
Mr. Roper, will exceed $1,000,000. The Compensation
Committee will continue to monitor the compensation levels
potentially payable under the Company’s compensation
programs, but intends to retain the flexibility necessary to
provide total compensation in line with competitive practice,
the Company’s compensation philosophy and the
Company’s best interests. The Company has not adopted a
policy that all executive compensation be fully deductible.
The Compensation
Committee:
Robert N. Hiatt,
Chairman
David A. Burwick
Jean-Michel Valette
COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 2005, the members
of the Compensation Committee were Robert M. Hiatt (Chairman),
David A. Burwick and Jean-Michel Valette. No member of the
Compensation Committee was an officer or employee of the Company
or any of its subsidiaries during fiscal year 2005.
EXECUTIVE
OFFICERS OF THE COMPANY
Information with respect to executive officers of the Company is
set forth below. The executive officers of the Company are
elected annually by the Board of Directors and hold office until
their successors are elected and qualified, or until their
earlier removal or resignation.
C. James Koch, 56, currently serves as Chairman and Clerk
of the Company. Mr. Koch founded the Company in 1984 and
was the Chief Executive Officer from that time until January
2001.
Martin F. Roper, 43, was appointed Chief Executive Officer of
the Company in January 2001, and has been President of the
Company since December 1999, after having served as its Chief
Operating Officer since April 1997. He joined the Company as
Vice President of Operations in September 1994.
William F. Urich, 49, was appointed Chief Financial Officer and
Treasurer of the Company in September 2003. Prior to joining the
Company, Mr. Urich had been the Chief Financial Officer of
Acirca, Inc., a producer of organic foods and beverages, from
2001 to 2003. From 1998 to 2000, Mr. Urich served as Vice
President Finance and Business Development for United
Distillers & Vintners, a subsidiary of Diageo, PLC, and
from 1995 to 1998 as its Vice President Finance and Treasurer.
10
Table of Contents
Jeffrey D. White, 48, was appointed Chief Operating Officer of
the Company in February 2001, after serving as Vice President of
Operations since April 1997. Mr. White joined the Company
in 1989, and served as Director of Operations of the Company
from 1994 to 1997, Operations Manager from 1991 to 1994, and as
Distribution Manager from 1989 to 1991.
Robert H. Hall, 45, serves the Company as Vice President of
Brand Development. Prior to joining the Company in June 2000,
Mr. Hall had been employed by Kellogg Company from 1993 to
2000, where he held the positions of Vice President Marketing,
US Natural and Functional Foods Division, and Vice President
Global Cereal Innovation, North America.
EXECUTIVE
COMPENSATION
The following table sets forth all compensation awarded to,
earned by or paid to the Company’s Chief Executive Officer
and the Company’s four (4) highest paid executive
officers, other than the Chief Executive Officer, whose total
annual salary and bonus exceeded $100,000 for all services
rendered in all capacities to the Company for the Company’s
three most recent fiscal years ended December 31, 2005,
December 25, 2004, and December 27, 2003.
SUMMARY
COMPENSATION TABLE FOR FISCAL YEARS
ENDED DECEMBER 31, 2005, DECEMBER 25, 2004 AND DECEMBER 27, 2003
ENDED DECEMBER 31, 2005, DECEMBER 25, 2004 AND DECEMBER 27, 2003
|
Annual |
||||||||||||||||||||||||||||
| Compensation | ||||||||||||||||||||||||||||
|
Other |
Long Term Compensation |
All |
||||||||||||||||||||||||||
|
Annual |
Restricted |
Securities |
Other |
|||||||||||||||||||||||||
|
Base |
Compen- |
Stock |
Underlying |
Compen- |
||||||||||||||||||||||||
|
Name and Principal
Position
|
Year | Salary(1) | Bonus(2) | sation(3) | Awards($)(4) | Options | sation(5) | |||||||||||||||||||||
|
C. James
Koch (6)
|
2005 | $ | 198,555 | $ | 47,100 | $ | 1,297 | $ | 12,566 | — | $ | 7,775 | ||||||||||||||||
|
Chairman
|
2004 | $ | 188,503 | — | $ | 1,292 | $ | 17,016 | — | $ | 6,319 | |||||||||||||||||
| 2003 | $ | 188,420 | $ | 27,563 | $ | 1,170 | $ | 26,577 | 10,000 | $ | 5,238 | |||||||||||||||||
|
Martin F.
Roper (7)
|
2005 | $ | 577,012 | $ | 149,500 | $ | 3,736 | $ | 43,523 | 315,000 | $ | 7,088 | ||||||||||||||||
|
President and
|
2004 | $ | 529,936 | $ | 123,000 | $ | 3,529 | $ | 81,699 | 20,000 | $ | 7,288 | ||||||||||||||||
|
Chief Executive Officer
|
2003 | $ | 494,813 | $ | 85,100 | $ | 4,155 | $ | 35,069 | 30,000 | $ | 7,200 | ||||||||||||||||
|
William F.
Urich (8)
|
2005 | $ | 305,377 | $ | 59,850 | $ | 1,981 | — | 10,000 | $ | 7,801 | |||||||||||||||||
|
Chief Financial Officer
|
2004 | $ | 287,928 | $ | 28,756 | $ | 91,918 | — | — | $ | 6,038 | |||||||||||||||||
|
and Treasurer
|
2003 | $ | 79,327 | $ | 15,000 | — | — | 175,000 | — | |||||||||||||||||||
|
Jeffrey D. White
|
2005 | $ | 258,251 | $ | 31,717 | $ | 1,673 | — | 13,500 | $ | 7,088 | |||||||||||||||||
|
Chief Operating Officer
|
2004 | $ | 239,128 | — | $ | 1,595 | — | 13,500 | $ | 7,228 | ||||||||||||||||||
| 2003 | $ | 225,834 | — | $ | 1,999 | — | 25,000 | $ | 6,820 | |||||||||||||||||||
|
Robert H. Hall
|
2005 | $ | 330,280 | $ | 68,450 | $ | 2,138 | — | 10,000 | $ | 6,038 | |||||||||||||||||
|
Vice President of Brand
|
2004 | $ | 308,708 | $ | 57,800 | $ | 2,064 | — | 13,500 | $ | 7.288 | |||||||||||||||||
|
Development
|
2003 | $ | 293,912 | $ | 76,050 | $ | 2,556 | — | 20,000 | $ | 6,916 | |||||||||||||||||
| (1) | Included in this column are amounts earned, though not necessarily received, during the corresponding fiscal year. None of the individuals received other compensation exceeding reporting thresholds for perquisites and other personal benefits. In 2005, all employees received one extra week in pay as the Company adjusted from weekly to a bi-weekly payroll schedule. | |
| (2) | The bonus amounts for the executive officers have been restated so that the bonus for all fiscal year periods is recorded for each officer in the year in which such bonus is paid. | |
| (3) | Reflects reimbursement of taxes relating to long term disability premiums and, in the case of Mr. Urich, relocation costs. | |
| (4) | Consists of shares issued under the Company’s Investment Share Plan, pursuant to which eligible employees may purchase shares with a total purchase price up to 10% of their annual compensation (consisting of regular salary and bonuses) at a discount, depending on tenure with the Company. The shares purchased vest at the rate |
11
Table of Contents
| of 20% per year over a period of 5 years. The purchaser of such investment shares has voting power, but not dispositive power, with respect to the shares that have not yet vested. | ||
| (5) | Includes annual group life insurance premiums and Company matching contributions under the Company’s 401(k) plan paid in 2005, as follows: |
|
Group Life |
401(k) |
|||||||
|
Insurance |
Matching |
|||||||
|
Name
|
Premiums | Contributions | ||||||
|
C. James Koch
|
$ | 271 | $ | 6,800 | ||||
|
Martin F. Roper
|
$ | 288 | $ | 6,800 | ||||
|
William F. Urich
|
$ | 288 | $ | 6,800 | ||||
|
Jeffrey D. White
|
$ | 288 | $ | 6,800 | ||||
|
Robert H. Hall
|
$ | 288 | $ | 5,750 | ||||
| In addition in 2005, Mr. Koch received $704 and Mr. Urich received $713 as one-time awards for their participation as members of teams comprised of a cross-section of employees who, throughout the year, compete against one another in a variety of internal competitions. All members of Mr. Koch’s winning team and all members of Mr. Urich’s winning team received comparable payments. | ||
| (6) | As of December 31, 2005, Mr. Koch held 7,741 shares of unvested restricted stock issued under the Company’s Investment Share Plan with a market value of $116,364. | |
| (7) | As of December 31, 2005, Mr. Roper held 19,796 shares of unvested restricted stock issued under the Company’s Investment Shares Plan with a market value of $285,644. The Company’s lease for its offices in Boston includes one free parking space, which space is used by Mr. Roper. The annual retail value of such parking space is $4,620. | |
| (8) | Mr. Urich joined the Company in September, 2003. Includes compensation paid to him in 2004 in connection with his relocation costs. |
The following table sets forth certain information concerning
grants of stock options of the Company’s Class A
Common Stock made during the year ended December 31, 2005
to the executive officers named below:
OPTION
GRANTS TO EXECUTIVE OFFICERS IN YEAR ENDED
DECEMBER 31, 2005
DECEMBER 31, 2005
|
Number of |
Potential Realizable |
|||||||||||||||||||||||
|
Securities |
Percent of |
Value at Assumed |
||||||||||||||||||||||
|
Underlying |
Total Options |
Annual Rates of Stock |
||||||||||||||||||||||
|
Options |
Granted to |
Exercise or |
Price Appreciation for |
|||||||||||||||||||||
|
Granted |
Employees in |
Base Price |
Expiration |
Option Term(2) | ||||||||||||||||||||
|
Name
|
(#)(1) | Fiscal Year | Per Share | Date | 5% | 10% | ||||||||||||||||||
|
C. James Koch(3)
|
0 | 0 | % | — | — | $ | 0 | $ | 0 | |||||||||||||||
|
Martin F. Roper
|
315,000 | 71.3 | % | (4) | (4) | $ | 4,430,311 | $ | 11,227,278 | |||||||||||||||
|
William F. Urich
|
10,000 | 2.3 | % | $ | 21.14 | 12/31/2014 | (5) | $ | 132,948 | $ | 336,917 | |||||||||||||
|
Jeffrey D. White
|
13,500 | 3.1 | % | $ | 21.14 | 12/31/2014 | (6) | $ | 179,480 | $ | 454,838 | |||||||||||||
|
Robert H. Hall
|
10,000 | 2.3 | % | $ | 21.14 | 12/31/2014 | (7) | $ | 132,948 | $ | 336,917 | |||||||||||||
| (1) | With the exception of the option granted to Martin F. Roper on June 28, 2005, options become immediately exercisable in full in the event that C. James Koch and/or members of his family cease to control a majority of the Company’s issued and outstanding Class B Common Stock. | |
| (2) | The potential realizable value of the options reported above was calculated by assuming five percent (5%) and ten percent (10%) annual rates of appreciation above the fair market value of the Class A Common Stock of the Company from the date of grant (determined in accordance with the rules of the SEC) of the options until the expiration of the options. These assumed annual rates of appreciation were used in compliance with the rules of the SEC and are not intended to forecast future price appreciation of the Class A Common Stock of the Company. The actual value realized from the options could be higher or lower than the values reported above, |
12
Table of Contents
| depending upon the future appreciation or depreciation of the Class A Common Stock during the option period, the option holder’s continued employment through the option period and the timing of the exercise of the options. In March 2006, options for an aggregate of 9,700 shares covered by the contingent vesting options granted in 2005 lapsed because the vesting criteria were not met. | ||
| (3) | No options were granted to Mr. Koch in the fiscal year ending December 31, 2005. | |
| (4) | Mr. Roper was granted (i) an option for 15,000 shares, which carries an exercise price of $21.14 per share, vests at 20% per year provided that certain criteria are met, and has an expiration date of December 31, 2014; and (ii) an option for 300,000 shares, which carries an exercise price of $22.425 per share, vests, provided certain criteria are met, on May 1, 2008 with respect to 180,000 shares and on May 1, 2010 with respect to 120,000 shares, and has an expiration date of June 27, 2015. In each case, if the criteria are not met on the applicable vesting date, the option will lapse with respect to the subject shares. In March 2006, 3,000 shares covered by the contingent vesting option granted for 15,000 shares lapsed because the vesting criteria were not met. | |
| (5) | The option vests at 20% per year provided certain criteria are met and, if the criteria are not met on the applicable vesting date, the option will lapse with respect to the subject shares. In March 2006, 2,000 shares covered by the option lapsed because the vesting criteria were not met. | |
| (6) | The option vests at 20% per year provided certain criteria are met and, if the criteria are not met on the applicable vesting date, the option will lapse with respect to the subject shares. In March 2006, 2,700 shares covered by the option lapsed because the vesting criteria were not met. | |
| (7) | The option vests at 20% per year provided certain criteria are met and, if the criteria are not met on the applicable vesting date, the option will lapse with respect to the subject shares. In March 2006, 2,000 shares covered by the option lapsed because the vesting criteria were not met. |
The following sets forth, as of December 31, 2005,
information regarding options exercised by the named executive
officers during the fiscal year ended December 31, 2005, as
well as information regarding unexercised options held by such
Executive Officers and the value of
“in-the-money”
options.
AGGREGATED
OPTION EXERCISES AND YEAR-END OPTION VALUES
AS OF DECEMBER 31, 2005
AS OF DECEMBER 31, 2005
|
Number of Securities |
Value of Unexercised |
|||||||||||||||||||||||
|
Shares |
Underlying Unexercised |
In-the-Money
Options |
||||||||||||||||||||||
|
Acquired on |
Value |
Options at FY-End(#) | at FY-End($)(1) | |||||||||||||||||||||
|
Name
|
Exercise(#) | Realized($) | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||||||||||||||
|
C. James Koch
|
0 | 0 | 26,000 | 14,000 | $ | 252,223 | $ | 57,210 | ||||||||||||||||
|
Martin F. Roper
|
152,960 | $ | 2,010,984 | 499,323 | 369,000 | $ | 6,683,408 | $ | 1,189,670 | |||||||||||||||
|
William F. Urich
|
3,000 | $ | 30,630 | 67,000 | 115,000 | $ | 567,405 | $ | 930,225 | |||||||||||||||
|
Jeffrey D. White
|
0 | $ | 0 | 38,800 | 55,300 | $ | 364,662 | $ | 367,333 | |||||||||||||||
|
Robert H. Hall
|
15,000 | $ | 204,364 | 73,700 | 44,800 | $ | 991,367 | $ | 193,508 | |||||||||||||||
| (1) | Based upon a fair market value at December 31, 2005 of $24.95 per share, determined in accordance with the rules of the SEC, less the option exercise price or purchase price. |
13
Table of Contents
Employment
Contracts; Termination of Employment and
Change-in-Control
Arrangements
A Stockholder Rights Agreement between the Company and initial
stockholders of the Company provides that so long as C. James
Koch remains an employee of the Company (i) he will devote
such time and effort, as a full-time, forty (40) hours per
week occupation, as may be reasonably necessary for the proper
performance of his duties and to satisfy the business needs of
the Company, (ii) the Company will provide Mr. Koch
benefits no less favorable than those formerly provided to him
by the Boston Beer Company Limited Partnership and
(iii) the Company will purchase and maintain in effect term
life insurance on the life of Mr. Koch. Further, all
employees of the Company, including each of the named executive
officers, are required to enter into a non-competition agreement
with the Company which prohibits the employee from accepting
employment with a competitor for a period of one year after
leaving the Company. Nevertheless, all employees of the Company
are employed “at-will.”
With the exception of the option granted to Martin F. Roper on
June 28, 2005, all options granted under the Employee
Equity Incentive Plan, including those granted to the named
executive officers, become immediately exercisable in full in
the event that C. James Koch
and/or
members of his family cease to control a majority of the
Company’s issued and outstanding Class A Common Stock.
14
Table of Contents
Company
Stock
Performance(2)
The graph set forth below shows the value of an investment of
$100 on January 1, 2001 in each of the Company’s stock
(“The Boston Beer Company, Inc.”), the
Standard & Poor’s 500 Index (“S&P
500”), the Standard & Poor’s 500 Brewers,
which consists of Anheuser-Busch Companies, Inc. and Adolph
Coors Company (“S&P 500 Brewers”), and a peer
group which consists of Pyramid Breweries Inc. and Redhook
Ale Brewery, Inc. (“Peer Group”), as of
December 31, 2005.
Total
Return To Shareholders
(Includes reinvestment of dividends)
(Includes reinvestment of dividends)
| Annual Return Percentage Years Ending | ||||||||||||||||||||
|
Company Name/Index
|
Dec 01 | Dec 02 | Dec 03 | Dec 04 | Dec 05 | |||||||||||||||
|
THE BOSTON BEER COMPANY
INC
|
98.70 | (15.48 | ) | 25.95 | 13.47 | 18.20 | ||||||||||||||
|
S&P 500 INDEX
|
(10.89 | ) | (23.35 | ) | 27.47 | 12.34 | 5.07 | |||||||||||||
|
S&P 500 BREWERS
|
(1.13 | ) | 7.26 | 10.93 | 0.29 | (13.38 | ) | |||||||||||||
|
PEER GROUP
|
16.87 | 32.15 | 24.94 | (12.27 | ) | 3.14 | ||||||||||||||
| Indexed Returns Years Ending | ||||||||||||||||||||||||
|
Base |
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Period |
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Company Name/Index
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Dec00 | Dec 01 | Dec 02 | Dec 03 | Dec 04 | Dec 05 | ||||||||||||||||||
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THE BOSTON BEER COMPANY
INC
|
100 | 198.70 | 167.94 | 211.52 | 240.00 | 283.69 | ||||||||||||||||||
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S&P 500 INDEX
|
100 | 89.11 | 68.30 | 87.06 | 97.80 | 102.76 | ||||||||||||||||||
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S&P 500 BREWERS
|
100 | 98.87 | 106.04 | 117.64 | 117.97 | 102.19 | ||||||||||||||||||
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PEER GROUP
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100 | 116.87 | 154.45 | 192.98 | 169.30 | 174.63 | ||||||||||||||||||
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Peer Group Companies
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PYRAMID BREWERIES INC
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REDHOOK ALE BREWERY INC
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(2) The
material in this report is not “soliciting material,”
is not deemed filed with the SEC and is not to be incorporated
by reference in any filing of the Company under the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, whether made before or after the date hereof and
irrespective of any general incorporation language in any such
filing.
15
Table of Contents
REPORT OF
THE AUDIT
COMMITTEE(3)
The Audit Committee of the Board of Directors reviews the
Company’s auditing, accounting, financial reporting and
internal control functions and selects and engages the
Company’s independent registered public accounting firm. In
discharging its duties, the Audit Committee reviews and approves
the scope of the annual audit and non-audit services to be
performed by the independent registered public accounting firm
and the independent registered public accounting firm’s
audit and non-audit fees. The Audit Committee also reviews the
audited financial statements to be included in the Annual Report
on
Form 10-K
for filing with the Securities and Exchange Commission
(“SEC”); meets independently with the company’s
director of internal audit, independent registered public
accounting firm and senior management; and reviews the general
scope of the company’s accounting, financial reporting,
annual audit and internal audit programs and matters relating to
internal control systems, as well as the results of the annual
audit and interim financial statements, and auditor independence
issues. The Audit Committee acts pursuant to an Audit Committee
Charter, a copy of which is available on the Company’s
website at www.bostonbeer.com.
The Audit Committee of the Board of Directors is composed of
three directors and each of them qualifies as independent under
the current listing standards of the New York Stock Exchange and
applicable SEC rules and regulations. In addition, the Board of
Directors has determined that each member of the Audit Committee
qualifies as an “audit committee financial expert” in
accordance with applicable SEC rules based on their relevant
experience. Mr. Cummin served for many years as a partner
in a venture capital firm where he had extensive experience in
assessing the performance of companies and evaluating their
financial statements, and served for several years on an audit
committee of another publicly-held company. As President and CEO
of Maybelline, Inc., a large publicly-held company, and then as
Chairman, Mr. Hiatt had extensive experience actively
supervising the primary financial officer of the company.
Mr. Valette, who joined the Audit Committee in August 2004,
worked as a securities analyst for several years and has served
as CEO of two companies where he supervised the primary
financial officers. He currently serves as a member of the audit
committees of two other publicly-held companies, one of which as
its Chairman.
The Audit Committee’s policy is to pre-approve all audit
and permissible non-audit services provided by the
Company’s independent registered public accounting firm.
The Audit Committee pre-approved all such audit and non-audit
services provided by the Company’s current and former
independent registered public accounting firms,
Deloitte & Touche LLP and Ernst & Young
LLP, during 2005. Such services included for 2005 audit
services, audit-related services, tax services and other
services as follows:
| • | Audit Fees. The Company estimates that it will pay audit fees to Ernst & Young LLP in the amount of $455,000 for its audit of the Company’s annual financial statements and quarterly reviews during the fiscal year ended December 31, 2005, which amount includes fees for the review and certification of the Company’s compliance with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002. | |
| • | Audit-Related Fees. The Company paid Ernst & Young LLP $16,000 for audit-related services in 2005. There were no other audit-related fees paid during the last two fiscal years. The Company paid Deloitte & Touche LLP no other fees. The Company paid Deloitte & Touche LLP $4,815 in the fiscal year ended December 31, 2005 for services rendered in connection with transitional matters relating to the audit. | |
| • | Tax Fees. No fees were paid to either Deloitte & Touche LLP or to Ernst & Young LLP for tax services during the last two fiscal years. | |
| • | Other Fees. The Company paid no other fees to its independent auditors during the fiscal year ended December 31, 2005. |
(3) The
material in this report, including the Audit Committee Charter,
is not “soliciting material,” is not deemed filed with
the SEC and is not to be incorporated by reference in any filing
of the Company under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, whether made
before or after the date hereof and irrespective of any general
incorporation language in any such filing.
16
Table of Contents
The Audit Committee has reviewed and discussed the
Company’s audited financial statements with management and
the Company’s former independent registered public
accounting firm, Deloitte & Touche LLP, during the
first quarter of the fiscal year with respect to the
Company’s audited financial statements for the fiscal year
ended December 31, 2004, and with the Company’s
current independent registered public accounting firm,
Ernst & Young LLP, during the remainder of the year
with respect to the Company’s quarterly results and during
the first quarter of 2006 with respect to the Company’s
audited financial statements for the fiscal year ended
December 31, 2005. In addition, throughout the year, the
Audit Committee met with Ernst & Young LLP regarding
the Company’s internal controls and compliance with
Section 404 of the Sarbanes-Oxley Act of 2002. The Audit
Committee has discussed with Ernst & Young LLP, the
Company’s independent registered public accounting firm,
the matters required to be discussed by Statement of Auditing
Standards No. 61, Communication with Audit Committees,
as amended by SAS No. 90, “Audit Committee
Communications,” which provides that certain matters
related to the conduct of the audit of the Company’s
financial statements are to be communicated to the Audit
Committee. The Audit Committee has also received the written
disclosures and the letter from both Deloitte & Touche
LLP and Ernst & Young LLP required by Independence
Standards Board Standard No. 1 relating to the
accountant’s independence from the Company, has discussed
with such accountants their independence from the Company, and
has considered the compatibility of non-audit services with the
accountants’ independence.
Based on the review and discussions referred to above, the Audit
Committee recommended to the Company’s Board of Directors
that the Company’s audited financial statements be included
in the Company’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2005.
Audit Committee:
Pearson C.
Cummin, III, Chairman
Robert N. Hiatt
Jean-Michel Valette
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
On March 14, 2005, the Audit Committee of the Board of
Directors terminated the engagement of Deloitte &
Touche LLP (“Deloitte”) as the Company’s
independent public accountants and engaged the firm of
Ernst & Young, LLP (“Ernst & Young”)
as its independent auditors to serve as its independent public
accountants to audit the Company’s financial statements for
the 2005 fiscal year.
Neither Deloitte’s report on the Company’s financial
statements for 2004 nor Ernst & Young’s report on
the Company’s financial statements for 2005 contained an
adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or
accounting principles.
During the Company’s two most recent fiscal years, there
were no disagreements with either Deloitte or Ernst &
Young on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure
which, if not resolved to such accountants’ satisfaction,
would have caused such accountants to make reference to the
subject matter of the disagreement in connection with its
reports; and there were no reportable events as defined in
Item 304(a)(1)(v) of
Regulation S-K
promulgated by the Securities and Exchange Commission.
During the Company’s two most recent fiscal years and
through the date of engagement, the Company did not consult
Ernst & Young with respect to the application of
accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that
Ernst & Young might render on the Company’s
financial statements.
Representatives of Ernst & Young LLP are expected to be
present at the annual meeting, will have the opportunity to make
a statement if they desire to do so and are expected to be
available to respond to appropriate questions.
17
Table of Contents
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934
requires the Company’s officers and Directors and persons
owning more than ten percent (10%) of the outstanding
Class A Common Stock of the Company to file reports of
ownership and changes in ownership with the SEC. Officers,
Directors and greater than ten percent (10%) holders of
Class A Common Stock are required by SEC regulation to
furnish the Company with copies of all Section 16(a) forms
they file.
The Company believes that during the fiscal year ended
December 31, 2005, all Section 16(a) filing
requirements applicable to its officers, directors, and
beneficial owners of greater than ten percent (10%) of its
Common Stock were complied with. In making this statement, the
Company has relied upon examination of the copies of
Forms 3, 4 and 5, and amendments thereto, provided to
the Company and the written representations of its directors,
executive officers and 10% stockholders.
DEADLINES
FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholders interested in submitting a proposal for inclusion
in the proxy materials for the Annual Meeting of Stockholders to
be held in 2007 may do so by following the procedures set forth
in
Rule 14a-8
of the Securities Exchange Act of 1934, as amended. To be
eligible for inclusion, stockholder proposals must be received
at the Company’s principal executive offices in Boston,
Massachusetts on or before December 14, 2006.
OTHER
MATTERS
Management knows of no matters which may properly be and are
likely to be brought before the meeting other than the matters
discussed herein. However, if any other matters properly come
before the meeting, the persons named in the enclosed proxy will
vote in accordance with their best judgment.
10-K
REPORT
A COPY OF AN ANNUAL REPORT ON
FORM 10-K,
INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES THERETO,
REQUIRED TO BE FILED WITH THE SEC FOR THE COMPANY’S MOST
RECENT FISCAL YEAR, MAY BE FOUND ON THE COMPANY’S WEBSITE,
www.bostonbeer.com. IN ADDITION, THE COMPANY WILL
PROVIDE EACH BENEFICIAL OWNER OF ITS SECURITIES WITH A COPY OF
THE ANNUAL REPORT WITHOUT CHARGE, UPON RECEIPT OF A WRITTEN
REQUEST FROM SUCH PERSON. SUCH REQUEST SHOULD BE SENT TO THE
INVESTOR RELATIONS DEPARTMENT, THE BOSTON BEER COMPANY, INC., 75
ARLINGTON STREET, BOSTON, MA 02116.
VOTING
PROXIES
The Board of Directors recommends an affirmative vote for all
nominees specified herein. Proxies will be voted as specified.
If signed proxies are returned without specifying an affirmative
or negative vote, the shares represented by such proxies will be
voted in favor of the nominees.
By order of the Board of Directors
C. James Koch,
Clerk
Clerk
Boston, Massachusetts
April 14, 2006
18
Table of Contents
TO
VOTE IN ACCORDANCE WITH THE BOARD
OF DIRECTORS’ RECOMMENDATION, SIGN AND DATE THIS CARD IN THE SPACE BELOW. NO BOXES NEED TO BE CHECKED
|
Please
Mark Here for Address Change or Comments |
o | ||
SEE REVERSE SIDE
|
||||
| 1. Election of Class A Directors, | ||
| FOR all nominees | WITHHOLD | |
| listed. (except as) | authority for all | |
| marked to the contrary | nominees | |
| to the right. | listed. | |
| o | o |
01
David A. Burwick, 02 Pearson C. Cummin, III and 03 Jean-Michel Valette,
(Instruction:
To withhold authority to vote for any individual nominee. write that
nominee’s name in the space provided below.)
| PLANNING TO ATTEND? Please help our planning efforts by letting | o | |
| us know if you expect to attend the Annual Meeting. Please call | ||
| (800) 372-1131 ext. 5050, and check the box to the right. | ||
| THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTIONS IS INDICATED SUCH SHARES WILL BE VOTED IN FAVOR OS SUCH ITEM. | ||
Signature
|
Signature | Date | |||||||||
| IMPORTANT: Before returning this Proxy, please sign your names or the line(s) above exactly as shown hereon. Executors, administrators, trustees, guardians or corporate officers should their full title when signing. Where shares are registered in the name of joint tenants or trustees, each joint tenant or trustee should sign | |||||||||||
5 FOLD AND DETACH HERE 5
Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet
and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting day.
the day prior to annual meeting day.
Your Internet or telephone vote authorizes the named proxies to vote your shares in the same manner
as if you marked, signed and returned your proxy card.
as if you marked, signed and returned your proxy card.
| Internet | Telephone | |||||||
| http://www.proxyvoting.com/sam | 1-866-540-5760 | Mark, sign and date | ||||||
| Use the internet to vote your proxy. | Use any touch-tone telephone to | your proxy card and | ||||||
| Have your proxy card in hand | OR | vote your proxy. Have your proxy | OR | return it in the | ||||
| when you access the web site. | card in hand when you call. | enclosed postage-paid | ||||||
| envelope. |
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
you do NOT need to mail back your proxy card.
Table of Contents
| THE BOSTON BEER COMPANY, INC. | ||
| PROXY – Annual Meeting of Stockholders – May 23, 2006 | ||
| CLASS A COMMON STOCK | ||
The undersigned, a stockholder of THE BOSTON BEER COMPANY, INC., does hereby appoint C. James
Koch and Frederick H. Grein, Jr., or either of them, acting singly,
the undersigned’s proxy, with full power of
substitution, to appear and vote at the Annual Meeting of Stockholders, to be held on Tuesday, May 23, 2006 10:00 A.M., local time, or at any adjournments thereof, upon such matters as may come before the Meeting.
|
||
| THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS. | ||
The
undersigned hereby instructs said proxy, or his substitute, to vote as specified on the reverse side on the
following matters and in accordance with judgment on other matters which may properly come before the Meeting.
|
||
| (Continued and to be Completed on Reverse Side) |
| Address Change/Comments (Mark the corresponding box on the reverse side) | ||||
5 FOLD AND
DETACH HERE 5
Admission
Ticket
THE BOSTON BEER COMPANY, INC.
2006 ANNUAL MEETING
Tuesday, May 23, 2006
10:00 A.M.
The Brewery
30 Germania Street
Boston MA 02130
10:00 A.M.
The Brewery
30 Germania Street
Boston MA 02130
 |
DIRECTIONS TO
THE BREWERY
FROM THE SOUTH OF BOSTON
Take 93N to exit 18 (Mass Ave and Roxbury Exit). Go straight down Melnea
Cass Blvd toward Roxbury. Once on Melnea Cass Blvd you will go through
seven lights. At the eight light take a left on Tremont St
(Landmark: Northeastern University and Ruggles T Station will be on your right when you turn onto Tremont St. Note: Tremont St eventually becomes Columbus Ave).
Follow Trenmont St through seven lights. Take a right on Amory St
(Landmark: look for a big, powder blue Muffler Mart shop on the
right — directly after Center Street).
Follow Amory St through 2 lights. After the 2nd light take a left on Porter St (Landmark: Directly after Boylston St).
Go to the end of Porter St and the Brewery is on the right.FROM THE NORTH OF BOSTON Take 93S to exit 18(Mass Ave and Roxbury exit) and follow the above directions. FROM THE SUBWAY
Take the Orange Line outbound toward Forest Hills. Exit at the Stony
Brook stop. Above ground take a left onto Boylston St. Take your first right onto Amory St.
Then Take your first left onto Porter St to Brewery gate (the Brewery will be at the end of Porter St on your right).
|