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 [ ]
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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)
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THE BOSTON BEER COMPANY, INC.
NOTICE OF THE 2002 ANNUAL MEETING OF STOCKHOLDERS
MAY 21, 2002
To the Stockholders:
The 2002 Annual Meeting of the Stockholders of THE BOSTON BEER COMPANY,
INC. (the "Company") will be held on Tuesday, May 21, 2002, 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 22, 2002 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
Boston, Massachusetts
April 12, 2002
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 2002 Annual Meeting of Stockholders to be held on
Tuesday, May 21, 2002, 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 12, 2002.
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 with
respect to any particular matter to be acted upon, proxies will be voted in
favor of such matters. 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.
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
hereinafter set forth 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, as hereinafter set forth in greater
detail, and to approve all other matters listed in the notice of meeting.
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 on March 22, 2002 are
entitled to notice of and to vote at the meeting. On that date, the Company had
outstanding and entitled to vote 12,246,023 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. The 4,328,300 shares of Class A Common Stock, $.01 par
value per share, held in treasury by the Company at March 22, 2002 are not
entitled to vote.
ITEMS 1 AND 2. ELECTION OF CLASS A AND CLASS B DIRECTORS
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 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 six (6) at such time as he deems appropriate and to elect up
to two (2) 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.
The person 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 person 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, except for Messrs. Cummin, Wing and
Hiatt, all Directors are either Executive Officers of the Company or its
subsidiaries or related to such Executive Officers.
Nominees Proposed in Accordance with the Terms of the Articles of
Organization and By-Laws of the Company. Set forth below are the nominees for
election as Class A and Class B Directors, respectively, for terms ending in
2003 and certain information about each of them.
CLASS A DIRECTORS:
------------------
YEAR FIRST
ELECTED A POSITION WITH THE COMPANY OR PRINCIPAL
NAME OF NOMINEE AGE DIRECTOR OCCUPATION DURING THE PAST FIVE YEARS
--------------- --- ---------- --------------------------------------
Pearson C. Cummin, III............ 59 1995 Mr. Cummin has served as a general partner of
Consumer Venture Partners, a Greenwich,
Connecticut based venture capital firm, since
January 1986. Mr. Cummin also serves as a Director
of Pacific Sunwear of California, Inc.
James C. Kautz.................... 71 1995 Mr. Kautz, formerly a limited partner of The
Goldman Sachs Group, L.P., now serves as a
non-profit trustee and private investor. Mr. Kautz
is the second cousin of the Company's founder and
Chairman, C. James Koch.
Robert N. Hiatt................... 65 1998 Mr. Hiatt was Chairman of Maybelline, Inc. from
1996 until he retired in 1997. From 1990 until
1996, Mr. Hiatt was President and Chief Executive
Officer of Maybelline, Inc. Mr. Hiatt also served
as a Director of Genovese Drug Stores, Inc. from
1997 to 1999.
CLASS B DIRECTORS:
C. James Koch..................... 52 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............... 79 1995 Mr. Koch 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.
John B. Wing...................... 55 1995 Since 1993, Mr. Wing has served as President of
Wing Aviation, Inc. Mr. Wing also served as
Chairman and Chief Executive Officer of The Wing
Group Limited, Co., a developer of energy projects
in Turkey, Kuwait and China from 1991 through
1998.
2
YEAR FIRST
ELECTED A POSITION WITH THE COMPANY OR PRINCIPAL
NAME OF NOMINEE AGE DIRECTOR OCCUPATION DURING THE PAST FIVE YEARS
--------------- --- ---------- --------------------------------------
Martin F. Roper................... 39 1999 Mr. Roper was appointed the Chief Executive
Officer of the Company in January 2001, after
having 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.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During the Company's 2001 fiscal year, there were five (5) meetings of the
Board of Directors of the Company. All of the Directors attended, either in
person or by telephone, (i) all of the total number of meetings of the Board of
Directors with the exception of one (1) Director who was unable to attend one
(1) meeting; and (ii) all of the total number of meetings of the Committees of
the Board of Directors on which they served. The Class A Directors in office
from time to time serve as a nominating committee for the purpose of nominating
persons for election as Class A Directors. The Company does not otherwise have a
nominating committee.
The Audit Committee of the Board of Directors reviews with the Company's
independent auditors the scope of the audit for the year, the results of the
audit when completed and the independent auditors' fees for services performed.
The Audit Committee also recommends independent auditors to the Board of
Directors and reviews with management various matters related to its internal
accounting controls. The present members of the Audit Committee are Pearson C.
Cummin, III (Chairman), Robert N. Hiatt, James C. Kautz and John B. Wing. The
Audit Committee met on three (3) occasions in 2001.
The Company also has a Compensation Committee, whose purposes are to make
recommendations to the full Board of Directors concerning the Company's Employee
Equity Incentive Plan and otherwise to act with respect to matters of executive
compensation. The members of such Committee are Pearson C. Cummin, III, Robert
N. Hiatt, James C. Kautz (Chairman) and John B. Wing. The Compensation Committee
met on two (2) occasions in 2001.
SECURITY OWNERSHIP OF PRINCIPAL HOLDERS OF
VOTING SECURITIES, DIRECTORS AND EXECUTIVE OFFICERS
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 22, 2002 (i) 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, (ii) by each Director of the Company, (iii) by
each person nominated as a Director of the Company, (iv) by the Company's Chief
Executive Officer and the other officers named below in the Summary Compensation
Table and (v) all of the Company's executive officers and Directors as a group.
Unless otherwise indicated, the individuals named below held sole voting and
investment power over the shares listed below:
SHARES BENEFICIALLY OWNED(1)
NAMED EXECUTIVE OFFICERS, ----------------------------
DIRECTORS AND 5% STOCKHOLDERS NUMBER PERCENT
----------------------------- ----------- ---------
C. James Koch(2)(3)......................................... 5,368,885 32.8%
Martin F. Roper(3)(4)....................................... 591,768 3.6%
Richard P. Lindsay(3)(5).................................... 32,200 *
Jeffrey D. White(3)(6)...................................... 33,769 *
Robert H. Hall(3)(7)........................................ 30,000 *
Pearson C. Cummin, III(3)(8)................................ 83,923 *
James C. Kautz(3)(9)........................................ 542,531 3.3%
3
SHARES BENEFICIALLY OWNED(1)
NAMED EXECUTIVE OFFICERS, ----------------------------
DIRECTORS AND 5% STOCKHOLDERS NUMBER PERCENT
----------------------------- ----------- ---------
Charles Joseph Koch(3)(10).................................. 22,000 *
John B. Wing(3)(11)......................................... 402,250 2.4%
Robert N. Hiatt(3)(12)...................................... 19,000 *
Credit Suisse Asset Management, LLC(13)..................... 671,402 4.1%
Chilton Investment Company, Inc.(14)........................ 638,500 3.9%
All Directors and Executive Officers as a group (10
people)................................................... 7,126,326 43.5%
---------------
* Less than one percent (1%) of the outstanding shares of Class A Common
Stock.
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission and includes general voting and/or
investment power with respect to securities. Shares of Class A Common Stock
subject to options and warrants currently exercisable or exercisable within
sixty (60) days after the record date are deemed outstanding for computing
the percentage of a person holding such options but are not deemed
outstanding for computing the percentage of any other person. No shares of
Class B Common Stock are subject to options or warrants. All shares are
Class A Common Stock, except for shares of Class B Common Stock held by C.
James Koch. See Note 2 below.
(2) Includes 4,107,355 shares of Class B Common Stock, constituting all of the
outstanding shares of Class B Common Stock. Includes 363,107 shares of
Class A Common Stock held in several trusts for the benefit of C. James
Koch and certain of his family members; does not include shares deposited
in Exchange Funds which have been treated as sales for reporting purposes.
Also, includes options to acquire 27,927 shares of Class A Common Stock
exercisable currently or within sixty (60) days and 8,906 shares of Class A
Common Stock purchased under the Company's Investment Share Plan which are
not yet vested.
(3) Executive officer and/or Director and/or nominee for Director of the
Company. Mailing address is c/o The Boston Beer Company, Inc., 75 Arlington
Street, Boston, MA 02116.
(4) Includes options to acquire 574,216 shares of Class A Common Stock
exercisable currently or within sixty (60) days and 12,323 shares of Class
A Common Stock purchased under the Company's Investment Share Plan which
are not yet vested.
(5) Includes options to acquire 32,000 shares of Class A Common Stock
exercisable currently or within sixty (60) days.
(6) Includes options to acquire 32,634 shares of Class A Common Stock
exercisable currently or within sixty (60) days.
(7) Consists of options to acquire 30,000 shares of Class A Common Stock
exercisable currently or within sixty (60) days.
(8) Includes options to acquire 20,000 shares of Class A Common Stock
exercisable currently or within sixty (60) days and 2,293 shares of Class A
Common Stock owned by a profit sharing plan, of which Mr. Cummin is
trustee.
(9) Includes options to acquire 20,000 shares of Class A Common Stock
exercisable currently or within sixty (60) days and 522,531 shares of Class
A Common Stock owned of record by the Kautz Family Partners, L.P. of which
Mr. Kautz is general partner.
(10) Consists of options to acquire 20,000 shares of Class A Common Stock
exercisable currently or within sixty (60) days and 2,000 shares of Class A
Common Stock owned by the spouse of Mr. Charles Joseph Koch.
(11) Includes options to acquire 20,000 shares of Class A Common Stock
exercisable currently or within sixty (60) days.
4
(12) Includes options to acquire 15,000 shares of Class A Common Stock
exercisable currently or within sixty (60) days and 1,000 shares of Class A
Common Stock owned by the spouse of Mr. Hiatt.
(13) Based on information provided to the Company on Schedule 13G for the period
ended December 31, 2001 by Credit Suisse Asset Management, LLC, 466
Lexington Avenue, New York, NY 10017, representing that it owns 5.5% of the
Company's Class A Common Stock.
(14) Based on information provided to the Company on Schedule 13G dated March 7,
2002 by Chilton Investment Company, Inc., 1266 E. Main Street, 7th Floor,
Stamford, CT 06902, representing that it owns 5.2% of the Company's Class A
Common Stock.
DIRECTOR COMPENSATION FOR THE LAST FISCAL YEAR
On May 21, 1996, the Company adopted a Non-Employee Director Stock Option
Plan pursuant to which each non-employee director of the Company receives the
grant of 2,500 shares of the Company's Class A Common Stock annually as of the
date of the Annual Meeting of Stockholders of the Company. This Plan was amended
on May 30, 2000 to increase the annual grant to 5,000 shares of the Company's
Class A Common Stock. The grant price for such options is based upon the fair
market value of the Company's stock as of the date of grant. The Shares granted
to each non-employee director and the grant price are set forth below:
NO. OF SHARES
GRANTED TO EACH
NON-EMPLOYEE TOTAL SHARES
DATE OF GRANT GRANT PRICE DIRECTOR GRANTED
------------- ----------- --------------------- ------------
5/21/96 $ 18.5624 2,500 10,000
6/03/97 $ 9.50 2,500 10,000
6/01/98 $ 11.1875 2,500 12,500
6/01/99 $ 8.125 2,500 12,500
5/30/00 $ 8.575 5,000 25,000
5/22/01 $ 9.24 5,000 25,000
The grant of stock options under this Non-Employee Director Stock Option
Plan is subject to the requirement that each director comply with his fiduciary
obligations with the Company. If any breach of such obligations should occur,
the Company shall be entitled, in addition to any other remedies available to
it, to recover all profit realized by him as a result of the exercise of such
option during the last twelve (12) months of his term as director and at any
time after the expiration of such term. On December 19, 1997, the Board amended
the terms of such Non-Employee Director Stock Option Plan (and of each stock
option grant made pursuant to the terms of such Plan) to increase from ninety
(90) days to three (3) years the period within which each option would remain
exercisable following the date on which the optionee ceased to be a Director of
the Company, subject in any case to the ten (10) year term of each option.
Effective May 30, 2000, the Board of Directors adopted a program, which was
approved by the Class B Stockholder of the Company, to compensate non-employee
directors for attending meetings of the Board of Directors and meetings of the
Audit and Compensation Committees, as well as providing a retainer of $7,500
upon election to the Board of Directors. Under the program, non-employee
directors receive $2,500 for each meeting of the Board of Directors attended in
person and $1,000 for each meeting of the Board of Directors attended by
telephone. In addition, non-employee directors receive $500 for each meeting of
the Audit and/or Compensation Committee attended in person and $200 for each
meeting of such committees attended by telephone. Further, Chairmen of the Audit
and Compensation Committees each receives $1,000 as an annual
5
retainer upon election to such position. In 2001, the non-employee Directors
received the following compensation:
SUMMARY COMPENSATION TABLE FOR NON-EMPLOYEE DIRECTORS
FOR FISCAL YEAR ENDED DECEMBER 29, 2001
NAME COMPENSATION
---- ------------
Pearson C. Cummin, III...................................... $23,500
James C. Kautz.............................................. $23,500
Robert N. Hiatt............................................. $22,500
Charles Joseph Koch......................................... $12,500
John B. Wing................................................ $17,200
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy. The Company's executive compensation system
continues to be comprised of base salaries, annual bonuses and stock option
awards. Executive compensation is subject to the oversight and approval of the
Compensation Committee of the Board of Directors (the "Committee"), which
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. Compensation in any particular case may
vary from any industry average on the basis of annual and long-term Company
performance, as well as individual performance. The Compensation Committee will
exercise its discretion to set compensation where, in its judgment, external or
individual circumstances warrant it.
Equity-Based Compensation. During 2001, the Compensation Committee again
devoted significant attention to the grant of so-called Discretionary Options
under the Company's Employee Equity Incentive Plan. The Discretionary Options
feature of the Employee Equity Incentive Plan 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. Such stock option awards are
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 compensation.
As amended and restated in 1997, the Employee Equity Incentive Plan calls
for the Committee to make recommendations to the full Board with respect to the
grant of Discretionary Options. In recommending the grant of options, 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 2001, the Committee
met with the Company's Chairman in October to review Management's preliminary
thinking with respect to Discretionary Options to be granted effective January
1, 2002. The Committee met again with the Chairman in December to review final
recommendations in the context of the overall compensation plan for executives.
Based on this review, the Committee recommended that options covering an
aggregate of 240,200 shares of Class A Common Stock be granted by the Board,
effective as of January 1, 2002. The Committee also recommended, and the Board
approved, that a portion of the options granted to the Company's executive
officers carry exercise prices representing a premium over the current market
price for the Company's Class A Common Stock.
6
Up to an aggregate of 3,687,500 shares of Class A Common Stock may be
issued under the Employee Equity Incentive Plan. As of March 22, 2002, there
were approximately 1,090,185 shares of Class A Common Stock available for grant
under the Employee Equity Incentive Plan. A detailed description of the Employee
Equity Incentive Plan is included elsewhere in this Proxy Statement. The
Employee Equity Incentive Plan may be amended or terminated by the Board of
Directors, subject to the approval of the holders of a majority in interest of
the Class B Common Stock of the Company.
Chief Executive Officer Compensation. The Compensation Committee reviewed
and approved the compensation paid to Martin F. Roper as the Company's Chief
Executive Officer during 2001. In reviewing such compensation, the Committee
evaluated the Company's success in executing against the Company's strategic
plan for maintaining its leading position in the highly competitive craft beer
industry. The Compensation Committee believes that the compensation paid to Mr.
Roper in 2001 was reasonable in light of the Company's overall performance,
especially in the area of profitability. Accordingly, the Compensation Committee
recommended, and the Board approved, the grant to Mr. Roper of a Discretionary
Option covering 30,000 shares, effective January 1, 2002, of which 22,000 shares
carry an exercise price of $17.545; 2,500 shares carry an exercise price of
$23.334; 2,500 shares carry an exercise price of $29.30; and 3,000 shares carry
an exercise price of $35.09.
THE COMPENSATION COMMITTEE:
JAMES C. KAUTZ, Chairman
PEARSON C. CUMMIN, III
ROBERT N. HIATT
JOHN B. WING
EXECUTIVE OFFICERS OF THE COMPANY
Information required by Item 7(b) of Schedule 14A 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, 52, currently serves as Chairman and Clerk of the Company.
Mr. Koch founded the Company in 1984 and was the Chief Executive Officer since
that time until January 2001.
Martin F. Roper, 39, 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.
Richard P. Lindsay, 40, serves as Chief Financial Officer and Treasurer of
the Company. Mr. Lindsay joined the Company in 1997 to assist in the acquisition
and integration of the Company's Cincinnati brewery. Following the acquisition,
Mr. Lindsay served as Corporate Controller until he was appointed Vice President
of Finance in November 1998. He assumed his current position in October 1999.
Prior to joining the Company, Mr. Lindsay held various finance and consulting
positions at Agility, Inc., KPMG Peat Marwick LLP and Shawmut Bank.
Jeffrey D. White, 44, was appointed Chief Operating Officer of the Company
in February 2001, after serving as Vice President of Operations since April
1997. Mr. White had 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, 41, 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.
7
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 29, 2001, December 30, 2000, and December 25, 1999.
SUMMARY COMPENSATION TABLE FOR FISCAL YEARS
ENDED DECEMBER 29, 2001, DECEMBER 30, 2000 AND DECEMBER 25, 1999
ANNUAL OTHER
COMPENSATION(1) COMPENSATION
------------------- OTHER ANNUAL FROM
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(3) COMPENSATION(2) SECURITIES
--------------------------- ---- -------- -------- --------------- ------------
C. James Koch......................... 2001 $184,465 -- $ 864 $ 7,911
Chairman and Clerk 2000 $184,465 -- $ 455 $ 4,366
1999 $184,465 -- $ 976 $ 2,072
Martin F. Roper....................... 2001 $399,579 $63,000 $ 162 $ 7,825
President and Chief Executive
Officer 2000 $399,579 $50,000 $ 579 --
1999 $324,461 $45,000 $ 168 --
Richard P. Lindsay.................... 2001 $162,696 $16,500 $ 162 --
Chief Financial Officer and
Treasurer 2000 $142,246 $14,000 $ 155 --
1999 $128,017 $11,500 $ 84 --
Jeffrey D. White...................... 2001 $172,489 $ 9,000 $ 172 --
Chief Operating Officer 2000 $121,085 $12,000 -- --
1999 $109,339 $13,000 $ 89 $ 5,471
Robert H. Hall(4)..................... 2001 $262,350 $ 2,500 $ 183 $54,350
Vice President of Brand Development 2000 $148,891 $35,000 $11,858 --
1999 -- -- -- --
---------------
(1) Included in this column are amounts earned, though not necessarily received,
during the corresponding fiscal year.
(2) Included in this column are amounts of other compensation paid for
miscellaneous taxable employee benefits, including costs relating to Mr.
Hall's relocation benefit.
(3) The bonus amounts for the executive officers have been restated so that the
bonus for all fiscal year periods is recorded for each officer in the year
in which such bonus is paid.
(4) Mr. Hall joined the Company in June 2000.
8
The following sets forth, as of December 29, 2001, information regarding
options exercised by the Executive Officers during the fiscal year ended
December 29, 2001 as well as information regarding unexercised options held by
such Executive Officers and the value of "in-the-money" options.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
AS OF DECEMBER 29, 2001
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END(#) AT FY-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
C. James Koch.............. 0 0 14,927 53,000 $ 164,278 $ 244,077
Martin F. Roper............ 0 0 504,883 250,000 $3,450,703 $1,907,109
Richard P. Lindsay......... 0 0 14,750 70,250 $ 147,011 $ 572,931
Jeffrey D. White........... 0 0 20,034 53,400 $ 160,289 $ 459,448
Robert H. Hall............. 10,000 $54,350 26,000 164,000 $ 245,310 $1,441,183
---------------
(1) Based upon a fair market value at December 28, 2001 of $17.835 per share,
determined in accordance with the rules of the Securities and Exchange
Commission, less the option exercise price or purchase price.
EMPLOYMENT AGREEMENTS
The Company has not entered into employment agreements with any of its
employees. However, the Stockholder Rights Agreement between the Company and
initial stockholders of the Company provides that so long as Mr. 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.
THE EMPLOYEE EQUITY INCENTIVE PLAN
The Employee Equity Incentive Plan is the successor to the 1995 Management
Option Plan of the Boston Beer Company Limited Partnership (the "Partnership"),
the various Partnership employee investment unit plans, and various
discretionary options granted by the Partnership. The predecessor Incentive
Share Plans entitled eligible employees to certain deferred compensation,
generally payable after termination of employment and calculated based on
appreciation in the value of equity interests in the Company from the date of an
award, and (ii) a series of plans under which a broader group of employees of
the Partnership were permitted to purchase similar deferred compensation rights.
As of March 22, 2002, there are (i) outstanding Management Options for
18,762 shares of Class A Common Stock at an exercise price of $0.01 per share,
of which options to purchase 17,602 shares are immediately exercisable; (ii)
outstanding Discretionary Options for 1,644,693 shares of Class A Common Stock
at an average exercise price of $10.37 per share of which the options to
purchase 773,506 shares are immediately exercisable; and (iii) rights to receive
155,144 Investment Shares, of which rights to receive 73,083 shares have vested.
A more complete discussion of the specific terms and provisions of the
Employee Equity Incentive Plan is provided below.
9
STOCK OPTIONS GRANTED
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 29, 2001 to the executive officers named below:
OPTION GRANTS TO EXECUTIVE OFFICERS IN YEAR ENDED
DECEMBER 29, 2001
NUMBER OF PERCENT OF POTENTIAL REALIZABLE VALUE AT
SECURITIES TOTAL ASSUMED ANNUAL RATES OF
UNDERLYING OPTIONS STOCK PRICE APPRECIATION
OPTIONS GRANTED TO EXERCISE OR FOR OPTION TERM(2)
GRANTED EMPLOYEES IN BASE PRICE EXPIRATION ------------------------------
NAME (#)(1) FISCAL YEAR PER SHARE DATE 0% 5% 10%
---- ---------- ------------ ----------- ----------- ----- --------- ----------
C. James Koch.............. 20,000 7.3% [See Note 3 [See Note 3 0 0 $ 17,400
below] below]
Martin F. Roper............ 40,000 14.6% [See Note 4 [See Note 4 0 0 $ 34,800
below] below]
Richard P. Lindsay......... 40,000 14.6% [See Note 5 [See Note 5 0 $65,523 $299,293
below] below]
Jeffrey D. White........... 30,000 10.9% [See Note 6 [See Note 6 0 $88,379 $290,593
below] below]
Robert H. Hall............. 20,000 7.3% [See Note 7 [See Note 7 0 0 $ 17,400
below] below]
---------------
(1) Options vest at twenty percent (20%) each year. 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 zero percent (0%), 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 Securities and Exchange Commission) of the options
until the expiration of the options. These assumed annual rates of
appreciation were used in compliance with the rules of the Securities and
Exchange Commission 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, 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.
(3) Options for 4,000 shares carry an exercise price of $8.84375; 5,000 shares
carry an exercise price of $11.7622; 5,000 shares carry an exercise price of
$14.7691; and 6,000 shares carry an exercise price of $17.6875. The Options
terminate on the expiration of the 10-day period that commences on the third
business day after the Company files with the Securities and Exchange
Commission its Annual Report on Form 10-K for its 2005 fiscal year.
(4) Options for 8,000 shares carry an exercise price of $8.84375; 10,000 shares
carry an exercise price of $11.7622; 10,000 shares carry an exercise price
of $14.7691; and 12,000 shares carry an exercise price of $17.6875. The
Options terminate on the expiration of the 10-day period that commences on
the third business day after the Company files with the Securities and
Exchange Commission its Annual Report on Form 10-K for its 2005 fiscal year.
(5) Options for 4,000 shares carry an exercise price of $8.84375; 5,000 shares
carry an exercise price of $11.7622; 5,000 shares carry an exercise price of
$14.7691; and 6,000 shares carry an exercise price of $17.6875; which
options terminate on the expiration of the 10-day period that commences on
the third business day after the Company files with the Securities and
Exchange Commission its Annual Report on
10
Form 10-K for its 2005 fiscal year. Options for 20,000 shares carry an
exercise price of $8.84375 and have an expiration date of December 31, 2010.
(6) Options for 2,000 shares carry an exercise price of $8.84375; 2,500 shares
carry an exercise price of $11.7622; 2,500 shares carry an exercise price of
$14.7691; and 3,000 shares carry an exercise price of $17.6875; which
options terminate on the expiration of the 10-day period that commences on
the third business day after the Company files with the Securities and
Exchange Commission its Annual Report on Form 10-K for its 2005 fiscal year.
Options for 20,000 shares carry an exercise price of $8.84375 and have an
expiration date of December 31, 2010.
(7) Options for 4,000 shares carry an exercise price of $8.84375; 5,000 shares
carry an exercise price of $11.7622; 5,000 shares carry an exercise price of
$14.7691; and 6,000 shares carry an exercise price of $17.6875. The Options
terminate on the expiration of the 10-day period that commences on the third
business day after the Company files with the Securities and Exchange
Commission its Annual Report on Form 10-K for its 2005 fiscal year.
OTHER RELATED TRANSACTIONS
Company Stock Performance
The chart set forth below shows the value of an investment of $100 on
November 21, 1995 in each of the Company's stock ("Boston Beer Inc."), the
Standard & Poor's 500 Index ("S&P 500"), the Standard & Poor's Beverage Index
(Alcoholic) ("Beverages-Alcoholic") and a peer group as of December 29, 2001.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
ASSUMES INITIAL INVESTMENT OF $100
DECEMBER 2001
[PERFORMANCE CHART]
BOSTON BEER INC S&P 500 BEVERAGES - ALCOHOLIC PEER GROUP
--------------- ------- --------------------- ----------
1996 100.00 100.00 100.00 100.00
1997 76.22 133.36 104.24 59.57
1998 82.93 171.47 148.15 44.77
1999 70.12 207.56 158.80 31.54
2000 85.96 188.66 207.30 28.50
2001 167.29 166.24 204.11 33.32
--------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001
--------------------------------------------------------------------------------
Boston Beer Inc. 100.00 76.22 82.93 70.12 85.96 167.29
S&P 500 100.00 133.36 171.47 207.56 188.66 166.24
Beverages--Alcoholic 100.00 104.24 148.15 158.80 207.30 204.11
Peer Group 100.00 59.57 44.77 31.54 28.50 33.32
11
THE EMPLOYEE EQUITY INCENTIVE PLAN
On November 20, 1995, the Company adopted the Employee Equity Incentive
Plan which provided for the grant of Management Options, Discretionary Options
and Investment Shares (each is described below). The maximum number of shares of
the Company's Class A Common Stock originally authorized for issuance under the
Employee Equity Incentive Plan was 1,687,500 shares. On October 20, 1997, the
Board of Directors (the "Board") and the sole holder of the Company's Class B
Common Stock amended the Employee Equity Incentive Plan to provide for an
additional 1,000,000 authorized shares and, on December 19, 1997, the Company
further amended the Employee Equity Incentive Plan to delete the provision which
had permitted the grant of Management Options which had been granted at a per
share exercise price of $0.01 and to provide for a shift from the Compensation
Committee to the full Board of Directors authority to act under the Employee
Equity Incentive Plan, based on recommendations brought to it by the
Compensation Committee. On December 14, 2001, the Board and the sole holder of
Class B Common Stock of the Company amended the Employee Equity Incentive Plan
to provide for an additional 1,000,000 authorized shares. Shares of Class A
Common Stock which are the subject of Management Options or Discretionary
Options which lapse unexercised or Investment Shares which do not vest and are
repurchased by the Company or which are redeemed by the Company shall again be
available for issuance under the Employee Equity Incentive Plan. The maximum
number of shares available for grants is subject to adjustment for capital
changes.
In adopting the Employee Equity Incentive Plan, the Company has also
approved, subject to certain further restrictions described below, the
assumption of rights to acquire equity interests in the Company granted under
certain predecessor plans of the Partnership.
ADMINISTRATION, TERMINATION AND AMENDMENT
The Employee Equity Incentive Plan is administered by the Board and the
sole holder of the Company's Class B Common Stock, taking into account
recommendations from the Compensation Committee of the Board. The Compensation
Committee consists of at least two (2) members of the Board, none of whom shall
be or at any time have been employees of the Company. The members of the
Compensation Committee are appointed by the Board and the Board may at any time,
subject to the above restrictions, appoint one or more members of the
Compensation Committee in substitution for or in addition to the member or
members then in office and may fill vacancies on the Compensation Committee,
however caused. The Board, subject to the approval of the holders of a majority
in interest of the Company's then issued and outstanding Class B Common Stock,
may modify, amend or terminate the Employee Equity Incentive Plan at any time.
Termination or amendment of the Employee Equity Incentive Plan shall not,
without the consent of any person affected thereby, modify or in any way affect
any Discretionary Options granted or Investment Shares purchased prior to such
termination or amendment.
ELIGIBILITY TO PARTICIPATE
Employees eligible to participate in the Employee Equity Incentive Plan
("Eligible Employees") are those employees of the Company who (i) have been
employed by the Company for at least one (1) year and (ii) have entered into an
Employment Agreement with the Company containing certain terms and conditions as
the Board, in its discretion, may from time to time require. Only full-time
management-level Eligible Employees, as determined by the Compensation Committee
in its sole discretion, shall be selected by the Compensation Committee for a
recommendation to the Board to be granted Discretionary Options. In designating
Optionees for Discretionary Options, the Compensation Committee shall take into
account each prospective Optionee's level of responsibility, performance,
potential and such other considerations as the Compensation Committee deems
appropriate.
TERMS AND PROVISIONS
Management Options and Discretionary Options. While Management Options
granted prior to December 31, 1997 remain outstanding, effective as of December
19, 1997, the Employee Equity Incentive Plan no longer provides for the grant of
Management Options. Therefore, as of the date of its meeting in October of
12
each year, the Compensation Committee shall make its recommendation to the Board
concerning the overall total number of shares which are eligible for option
grants and such other and further details as the Compensation Committee may deem
appropriate. Immediately prior to the Board's meeting in December of each year,
the Compensation Committee will finalize its recommendation, taking into
consideration the recommendations of management, and will thereafter makes its
final recommendation to the Board with respect to the grant of Discretionary
Options to selected Optionees. The terms of each Discretionary Option shall be
set forth in an Option Agreement, which shall include the following terms,
conditions and restrictions:
(i) The right to exercise a Discretionary Option shall vest over the
period of five (5) years after the Option Date at the rate of twenty
percent (20%) of the Option Shares covered thereby per year, or upon such
other vesting schedule as the Compensation Committee recommends, and the
Board shall so approve, so long as the Optionee continues to be employed by
the Company as of each vesting date, provided, however, that (i) the Board
may permit accelerated vesting in its discretion, (ii) Discretionary
Options shall become exercisable in full in the event of an Optionee's
retirement at or after reaching age sixty-five (65), death or disability,
and (iii) the Compensation Committee may recommend, and the Board may so
approve, tying exercisability to compliance by an Optionee with any
applicable restrictive covenants; and
(ii) Except as recommended by the Compensation Committee, and approved
by the Board, from time to time, a Discretionary Option shall terminate on
the earlier to occur of the expiration of (i) ninety (90) days after the
Optionee ceases to be an employee of the Company and (ii) ten (10) years
after the Option Date.
Investment Shares. Eligible Employees may also become Participants in the
Employee Equity Incentive Plan and invest up to ten percent (10%) of their most
recent annual W-2 earnings in shares ("Investment Shares") of Class A Common
Stock. The number of Investment Shares which can be purchased by each
Participant will be computed by dividing ten percent (10%) of the Participant's
W-2 earnings by the Investment Share Value. The "Investment Share Value" shall
be the mean between the high and the low prices at which shares of Class A
Common Stock traded on the New York Stock Exchange or on any other exchange on
which such shares may be traded, on the day next preceding the date of a
Participant's investment in Investment Shares, which ordinarily shall be
effective as of January 1 in each applicable year (based upon the market value
of the shares, determined as set forth above, as of the last trading day in
December immediately preceding such January 1) and discounted, according to the
Participant's years of service with the Company, as follows:
YEARS OF SERVICE DISCOUNT
---------------- --------
Less than 2 years........................................... 0%
2-3 years................................................... 20%
3-4 years................................................... 30%
More than 4 years........................................... 40%
For each full year Investment Shares are held after issuance and the
Participant remains employed with the Company, twenty percent (20%) of such
Investment Shares will become vested. All Investment Shares which have not yet
vested shall automatically vest in the event of the termination of a
Participant's employment with the Company by reason of his or her retirement at
or after reaching age sixty-five (65), death or disability. The Compensation
Committee may also accelerate vesting at any time in its discretion. All
unvested Investment Shares shall be held in escrow by an escrow agent selected
by the Compensation Committee, pursuant to a Restricted Stock Escrow Agreement.
Any Participant who is not subject to the provisions of Section 16(b) of
the Securities Exchange Act of 1934, as amended, shall have the right at any
time to cause the Company to redeem all, but not less than all, of such
Participant's Investment Shares at a price equal to the lesser of (i) the
Discounted Investment Share Value at which the Investment Shares were issued and
(ii) the fair market value of such Investment Shares, as of the date next
preceding the date on which the Investment Shares are tendered for redemption.
13
In the event that a Participant's employment with the Company is terminated
other than because of retirement at or after the age of sixty-five (65), death
or disability, the Company has the right, but not the obligation, to redeem
within ninety (90) days after such termination any or all of the Investment
Shares previously purchased by the Participant which have not vested, at a
price, payable in cash, equal to the lesser of (i) the Discounted Investment
Share Value at which the Shares were issued and (ii) the fair market value of
such Investment Shares, as of the date next preceding the date on which the
Investment Shares are called for redemption.
Except as otherwise specifically provided for above, no right or interest
under the Employee Equity Incentive Plan of any Eligible Employee shall be
assignable or transferable, in whole or in part, either directly or by operation
of law or otherwise, including, but not by way of limitation, execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner, other than
by will or the laws of descent and distribution; and no such right or interest
of any Eligible Employee shall be subject to any obligation or liability of such
Eligible Employee. A Management Option or Discretionary Option shall be null and
void and without effect upon the bankruptcy of the Optionee or upon the
attempted assignment or transfer, except as hereinabove provided, including
without limitation any purported assignment, whether voluntary or by operation
of law, pledge, hypothecation or other disposition contrary to the provisions
hereof, or levy of execution, attachment, trustee process or similar process,
whether legal or equitable, upon the option.
RECENT GRANTS
The following sets forth the details of Discretionary Options granted
during the year ended December 29, 2001:
DISCRETIONARY OPTION GRANTS
----------------------------------
NAME AND POSITION DOLLAR VALUE(1) NUMBER OF SHARES
----------------- --------------- ----------------
C. James Koch, Chairman..................................... $ 82,544 20,000
Martin F. Roper, President and Chief Executive Officer...... $ 165,087 40,000
Richard P. Lindsay, Chief Financial Officer and Treasurer... $ 262,369 40,000
Jeffrey D. White, Chief Operating Officer................... $ 221,097 30,000
Robert H. Hall, Vice President of Brand Development......... $ 82,544 20,000
Employees as a Group (excluding Executive Officers)......... $1,119,411 124,500
---------------
(1) Dollar values below are based upon a fair market value of Class A Common
Stock at December 28, 2001 of $17.835 per share, determined in accordance
with the rules of the Securities and Exchange Commission, less the option
exercise price, and multiplying by the number of shares subject to
Discretionary Options granted.
RECAPITALIZATION, REORGANIZATIONS
The Employee Equity Incentive Plan provides that in the event that the
outstanding shares of Class A Stock are changed into or exchanged for a
different number or kind of shares or other securities of the Company or of
another corporation by reason of any reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination of shares, or
dividends payable in capital stock, appropriate adjustment shall be made in the
number and kind of shares which may be issued under the Employee Equity
Incentive Plan and as to which outstanding Management Options or Discretionary
Options or portions thereof then unexercised shall be exercisable, to the end
that the proportionate interest of the Optionee shall be maintained as before
the occurrence of such event; such adjustment in outstanding Discretionary
Options shall be made without change in the total price applicable to the
unexercised portion of such Discretionary Options and with a corresponding
adjustment in the exercise price per share. The exercise price per share of
Management Options shall remain $0.01 per share.
14
PREVIOUSLY GRANTED OPTIONS AND INVESTMENT SHARES
All options granted by the Partnership prior to November 20, 1995, which
were assumed under the Employee Equity Incentive Plan on that date and became
Management Options or Discretionary Options, first became exercisable, to the
extent that the right to exercise had otherwise then vested, on March 1, 1996,
except that any such options held by Optionees subject to the provisions of
Section 16(b) of the 1934 Act did not become exercisable until May 20, 1996. All
Investment Shares purchased from the Partnership prior to November 20, 1995,
which had vested prior to March 1, 1996, were issued to the applicable
Participants on that date, except that vested Investment Shares otherwise then
issuable to Participants subject to the provisions of Section 16 (b) of the 1934
Act did not become issuable until May 20, 1996.
RESALE RESTRICTIONS
Notwithstanding any other provision of the Employee Equity Incentive Plan,
the Company may delay the issuance of shares covered by the exercise of a
Management Option or a Discretionary Option or any Investment Shares which have
vested (in any such case, "Shares") until one of the following conditions shall
be satisfied:
(i) Such Shares are at the time of issuance effectively registered
under applicable federal and state securities acts, as now in force or
hereafter amended; or
(ii) Counsel for the Company shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld, that the
issuance of such Shares is exempt from registration under applicable
federal and state securities acts, as now in force or hereafter amended.
Moreover, unless the Shares to be issued have been effectively registered
under the Securities Act of 1933, as amended (the "1933 Act"), the Company shall
be under no obligation to issue such Shares unless the Optionee or Participant
shall first give written representation to the Company, satisfactory in form and
scope to the Company's counsel and upon which in the opinion of such counsel the
Company may reasonably rely, that he or she is acquiring the Shares to be issued
to him or her as an investment and not with a view to or for sale in connection
with any distribution thereof in violation of the 1933 Act. The Company shall
have no obligation, contractual or otherwise, to any Optionee or Participant to
register under any federal or state securities laws any Shares issued under the
Employee Equity Incentive Plan to such Optionee or Participant.
Notwithstanding the above, Shares acquired under the Employee Equity
Incentive Plan while a Registration Statement relating to such Shares is in
effect under the 1933 Act, by persons who are not affiliates of the Company may
be sold by such persons without registration under the 1933 Act, and without the
need to comply with Rule 144 thereunder. Public resales of shares acquired
(while a Registration Statement relating to such shares is in effect under the
1933 Act) under the Employee Equity Incentive Plan by persons who are affiliates
of the Company will be subject to registration or compliance with the
requirements of Rule 144 under the 1933 Act, other than the holding period
requirement of paragraph (d) of that Rule. Employees who are Directors or
officers of the Company may be deemed to be affiliates of the Company.
TAX EFFECTS OF EMPLOYEE EQUITY INCENTIVE PLAN PARTICIPATION
The Employee Equity Incentive Plan described herein is not a qualified plan
under Section 401 of the Internal Revenue Code and is not subject to the
provisions of the Employee Retirement Income Security Act of 1974.
Management and Discretionary Options. Upon the grant of a Management
Option or Discretionary Option, the Participant will not recognize ordinary
income nor will the Company be entitled to a deduction. Upon the exercise of a
Management Option or a Discretionary Option, the Participant will generally
recognize ordinary income in the amount by which the fair market value of Class
A Common Stock at the time of exercise exceeds the exercise price for the Shares
then purchased and the Company will generally be entitled to a deduction for
such amount of ordinary income recognized. Upon a subsequent disposition of
Class A Common Stock, the Participant will realize a short-term or long-term
capital gain or loss, depending upon the
15
holding period of the Class A Common Stock, with the basis for computing such
gain or loss equal to the fair market value of Class A Common Stock on the date
of exercise.
Investment Shares. Upon the purchase of an Investment Share, the
Participant will not recognize ordinary income provided the Participant makes an
election under Section 83(b) of the Internal Revenue Code (such election is
referred to herein as a "Section 83(b) election"). If the Participant makes a
Section 83(b) election then the Participant will immediately recognize ordinary
income in the amount by which the fair market value of the Investment Shares on
the date of acquisition exceeds the purchase price therefor. If the Participant
does not make a Section 83(b) election, then, upon vesting of the Investment
Shares, the Participant will recognize ordinary income in the amount by which
the fair market value of the Investment Shares then vesting, as of the date of
vesting, exceeds the purchase price therefor. The Company will generally be
allowed a deduction in an amount equal to the income recognized by the
Participant in the tax year in which such income is recognized. Upon the
disposition of Investment Shares, the Participant will realize a short-term or
long-term capital gain or loss, depending upon the holding period of the
Investment Shares, after they have vested, with the basis for computing such
gain or loss equal to the amount of ordinary income realized on such shares plus
the purchase price therefor. Participants purchasing Investment Shares should
consult their tax advisors regarding the advisability of making a Section 83(b)
election. A Section 83(b) election must be made within thirty (30) days of the
purchase of Investment Shares.
REPORT OF THE AUDIT COMMITTEE((1))
The following is the report of the Audit Committee with respect to the
Company's audited financial statements for the fiscal year ended December 29,
2001.
The Audit Committee has reviewed and discussed the Company's audited
financial statements with management. The Audit Committee has discussed with
Arthur Andersen LLP, the Company's independent accountants, the matters required
to be discussed by Statement of Auditing Standards No. 61, Communication with
Audit Committees, 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 Arthur Andersen LLP required by Independence Standards Board
Standard No. 1 relating to the accountant's independence from the Company, has
discussed with Arthur Andersen LLP their independence from the Company, and has
considered the compatibility of non-audit services with the accountant's
independence.
Fees paid to the Company's independent auditors' for fiscal 2001 were
comprised of the following:
- Audit Fees. Arthur Andersen LLP's fee for its audit of the Company's
annual financial statements for the year ended December 29, 2001 was
$135,000. This is comprised of fees for the annual audit and quarterly
reviews.
- Financial Information Systems Design and Implementation. Arthur Anderson
LLP billed the Company a total of $0 in fees for financial information
systems design and implementation in 2001.
- All Other Fees. Arthur Andersen LLP billed the Company a total of
$40,000 in 2001 for all other services. This is comprised of fees for
accounting-related tax and consulting services.
The Audit Committee acts pursuant to the written Audit Committee Charter.
Each of the members of the Audit Committee qualifies as an "independent"
Director under the current listing standards on the NYSE.
---------------
(1)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
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 29, 2001.
AUDIT COMMITTEE:
PEARSON C. CUMMIN, III, Chairman
ROBERT N. HIATT
JAMES C. KAUTZ
JOHN B. WING
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors appointed Arthur Andersen, LLP as independent
auditors to examine the consolidated financial statements of the Company for the
fiscal year ending December 29, 2001. The engagement of Arthur Andersen, LLP was
approved by the Board of Directors, at the recommendation of the Audit Committee
of the Board of Directors, and by the sole holder of the Company's Class B
Common Stock.
A representative of Arthur Andersen, LLP is expected to be present at the
meeting and will have the opportunity to make a statement if he or she so
desires and to respond to appropriate questions.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
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 Securities and Exchange Commission. 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.
Based solely on copies of such forms furnished as provided above, or
written representations that no Forms 5 were required, the Company believes that
during the fiscal year ended December 29, 2001, 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, except
that through inadvertence (i) Martin F. Roper reported the vesting on January 1,
2001 of 1,720 Investment Shares purchased under the Company's Employee Equity
Incentive Plan on a Form 5 filed on February 14, 2002, rather than on a Form 4
that should have been filed no later than February 10, 2001; (ii) C. James Koch
reported the vesting on January 1, 2001 of 1,870 Investment Shares purchased
under the Company's Employee Equity Incentive Plan on a Form 5 filed on February
14, 2002, rather than on a Form 4 that should have been filed no later than
February 10, 2001; (iii) Robert H. Hall reported the exercise of 10,000 options
in December, 2001, on a Form 5 filed on February 14, 2002, rather than on a Form
4 that should have been filed no later than January 10, 2002; and (iv) David
Grinnell reported the exercise of 8,836 options in December, 2001, on a Form 5
filed on February 14, 2002, rather than on a Form 4 that should have been filed
no later than January 10, 2002.
DEADLINES FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Under regulations adopted by the Securities and Exchange Commission, any
proposal submitted for inclusion in the Company's Proxy Statement relating to
the Annual Meeting of Stockholders to be held in 2003 must be received at the
Company's principal executive offices in Boston, Massachusetts on or before
December 14, 2002. Receipt by the Company of any such proposal from a qualified
stockholder in a timely manner will not ensure its inclusion in the proxy
material because there are other requirements in the proxy rules for such
inclusion.
17
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.
The cost of this solicitation will be borne by the Company. It is expected
that the solicitation will be made primarily by mail, but regular employees or
representatives of the Company may also solicit proxies by telephone, telegraph
and in person and arrange for brokerage houses and other custodians, nominees
and fiduciaries to send proxies and proxy material to their principals at the
expense of the Company.
10-K REPORT
THE COMPANY WILL PROVIDE EACH BENEFICIAL OWNER OF ITS SECURITIES WITH A
COPY OF AN ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE COMPANY'S MOST RECENT FISCAL YEAR, WITHOUT CHARGE, UPON
RECEIPT OF A WRITTEN REQUEST FROM SUCH PERSON. SUCH REQUEST SHOULD BE SENT TO
RICHARD P. LINDSAY, CHIEF FINANCIAL OFFICER, 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
Boston, Massachusetts
April 12, 2002
18
THE BOSTON BEER COMPANY, INC.
PROXY - ANNUAL MEETING OF STOCKHOLDERS - MAY 21, 2002
CLASS A COMMON STOCK
The undersigned, a stockholder of THE BOSTON BEER COMPANY, INC., does
hereby appoint C. James Koch and Prederick 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 May 21,
2002 at 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
his judgment on other matters which may properly come before the Meeting.
(Continued and to be Completed on Reverse Side)
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A FOLD AND DETACH HERE
----------------
ADMISSION TICKET
----------------
THE BOSTON BEER COMPANY, INC.
2002 ANNUAL MEETING
Tuesday, May 21, 2002
10:00 A.M.
The Brewery
30 Germania Street
Boston, MA
Please mark [X]
your vote as
indicated in
this example
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.
1. Election of Class A Directors
FOR all nominees listed WITHHOLD authority
(Except as marked for all nominees
to the contrary listed.
to the right.)
[ ] [ ]
01 Pearson C. Cummin, III. 02 James C. Kautz and 03 Robert M. Hiatt
(Instructions: 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 us know if you
expect to attend the Annual Meeting Please call (800) 372-1131 Ext. 5050, and
check the box below.
[ ]
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTION
IS INDICATED SUCH SHARES WILL BE VOTED IN FAVOR OF SUCH ITEM.
IMPORTANT: Before returning this Proxy, please sign your name or number on the
line(s) below exactly as shown thereon. Executor, administrator, trustee,
guaradian or corporate officers should indicated their full title when signing.
Where shares are registered in the name of joint tenant or trustee, each joint
tenant or trustee should sign.
Date:__________________, 2002
______________________ (L.E.)
______________________ (L.S.)
Signature(s) sign here
PLEASE MARK SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE
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FOLD AND DETACH HERE
[MAP]
DIRECTIONS TO THE BREWERY
FROM THE SOUTH OF BOSTON
Take 95N 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 make 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 Tremont 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 Centre 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
Tale 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).