Pyramid Breweries 10-K 2005
Documents found in this filing:
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2
COMMISSION FILE NUMBER 0-27116
PYRAMID BREWERIES INC.
(exact name of registrant as specified in its charter)
91 South Royal Brougham Way, Seattle, WA 98134
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No þ.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No þ
The aggregate market value of the voting stock held by non-affiliates of the registrant as of the last business day of the registrants most recently completed second quarter, June 30, 2004, was $19,534,067.
The number of shares outstanding of the registrants common stock as of March 18, 2005, was 8,781,840.
TABLE OF CONTENTS
Pyramid Breweries Inc. (also referred to as the Company, we or our) is filing this Amendment No. 2 to its Form 10-K for the fiscal year ended December 31, 2004 (the Form 10-K), originally filed with the Securities and Exchange Commission on March 31, 2005 and amended on Form 10-K/A filed on April 11, 2005, for the sole purpose of including the information required under Part III. The Company is also updating the signature page, the Exhibit Index referenced in Item 15 of Part IV and Exhibits 31.1, 31.2, 31.3, 32.1, 32.2 and 32.3.
Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, as amended, the complete text of each of Items 10, 11, 12, 13 and 14 of Part III and Item 15 of Item IV, as amended, is set forth below. The remainder of the Form 10-K is unchanged and is not reproduced in this Amendment No. 2. This Amendment No. 2 speaks as of the original filing date of the Form 10-K and reflects only the changes discussed above. No other information included in the Form 10-K, including the Companys financial statements and the footnotes thereto, has been modified or updated in any way.
Item 10 Directors and Executive Officers of the Company
George Hancock (60) Chairman of the Board
Mr. Hancock has been a director of the Company since 1989. Mr. Hancock served as our Chief Executive Officer from May 1992 until his retirement in December 1999, and as our Chairman of the Board from January 1997 to December 1999, as well as our interim Chief Executive Officer from February, 2004 to August, 2004 and Chairman of the Board since February 2004. Mr. Hancock previously served as our Chairman of the Board from July 1989 until July 1995. He was President of Penknife Computing, Inc., a computer software company, from 1988 to May 1992. Mr. Hancock was previously employed by the international accounting firm of Coopers & Lybrand, where he was primarily responsible for management consulting projects. Mr. Hancock was also the founder of two startup software companies in England and the United States. He was awarded a Masters in Business Administration by Cranfield Institute of Technology, England in 1981. He qualified as an accountant in England in 1967.
Scott S. Barnum (49) Director
Mr. Barnum has been a director since February 1999. Since July, 2002, Mr. Barnum has been Chief Executive Officer of Cocoa Petes Chocolate Adventures, a premium chocolate company founded by the creator of Petes Wicked Ale. In February, 2001, he co-founded Plan B, a consumer marketing consultancy and outsourced marketing department and was its Managing Partner from February, 2001 to July, 2002. From January, 1999 to February, 2000, Mr. Barnum was Vice President/General Manager International for eBay Inc, an online auction company. From June, 1997 to September, 1998, Mr. Barnum served as President and Chief Operating Officer of Petes Brewing Company, formerly the nations second largest brewer of craft beers. His beer background also includes four years with Miller Brewing Company (Miller), where he held several senior level marketing management appointments and where he ultimately launched and became General Manager of Millers specialty beer division. Prior to Miller, Mr. Barnum spent eight years in brand management with PepsiCo Inc., a food and beverage company, in its soft drink and snack divisions, both domestically and internationally. Mr. Barnum earned an MBA from Columbia University and a Bachelors of Business Administration Degree from Pacific Lutheran University.
Kurt Dammeier (46) Director
Mr. Dammeier has been a director since June 1999. Mr. Dammeier also served as our Chairman of the Board from December 1999 until May 2001. Mr. Dammeier is a private investor and sole Manager of Sugar Mountain Capital, LLC, a venture capital firm. Mr. Dammeier was President and Chief Executive Officer of Quebecor Integrated Media, an information services company. Mr. Dammeier earned a Bachelors Degree from Washington State University in 1982.
Scott Svenson (39) Director
Mr. Svenson has been a director since August 2001. Since January, 2002, Mr. Svenson has been Chairman and Managing Partner of The Sienna Group, a private investment group based in Seattle and London. From February 1999 to October 1999, Mr. Svenson was President of Starbucks Europe, a retail coffee company, during which time he authored its European Strategic Plan and from May, 1998 to February 1999, was President of Starbucks UK. In 1994 Mr. Svenson co-founded Seattle Coffee Company, the first gourmet coffee retailer and wholesaler in the UK, which he built to over 70 locations before selling the company to Starbucks in early 1998. Prior to this, Mr. Svenson served as Deputy Chief Executive of CrestaCare plc, the third largest long-term healthcare provider in the UK, and as an advisor to high growth, middle market companies with Apax Partners and Drexel Burnham Lambert. Mr. Svenson earned a Bachelors Degree from Harvard University.
John Lennon (50) President and Chief Executive Officer, Director
Mr. Lennon has been our President and Chief Executive Officer since August 2004. From November, 2000 to December 2003, Mr. Lennon was President and Chief Executive Officer of Becks North America, a $150 million division of Interbrew, where he had responsibility for the United States, Canada and the Caribbean. Mr. Lennon has over twenty years experience as a senior executive in marketing, sales and general management, including ten years leading and managing businesses within the branded consumer goods industry. In addition to Mr. Lennons work with Becks, he has held senior positions with Diageo, Guinness, FEMSA, Grand Metropolitan and Nestle. He earned an MBA from Syracuse University and a Bachelors Degree from the State University of New York.
Jim Hilger (43) Vice President Finance, Chief Financial Officer and Secretary
Mr. Hilger has been our Vice President Finance, Chief Financial Officer and Secretary since September 2003. From May, 2000 to July 2003, Mr. Hilger was Chief Executive Officer of WorldCatch, Inc., a Seattle, Washington based seafood importing company which developed e-commerce solutions for the seafood industry. As Chief Executive Officer of WorldCatch, Inc., Mr. Hilger had primary responsibility for all financial and operational aspects of the company, which serviced large retailers, food service distributors and seafood processing companies. Mr. Hilger also held Chief Financial Officer positions with WorldCatch, American Gem Seafoods, The Albert Fisher Group, and Profish International. Mr. Hilger earned an MBA from Pacific Lutheran University and a Bachelors Degree from Gonzaga University. He is a registered CPA in the state of Washington.
Gary McGrath (45) Vice President Sales
Mr. McGrath was appointed as Vice President Sales in November 1999. Mr. McGrath has over 20 years of experience in the alcohol and non-alcohol beverage industry. From 1994 to 1999, he held the position of General Manager for Millers northwest region, responsible for growing sales, market share and profit in a seven-state area. Also at Miller, Mr. McGrath worked as Director of National Accounts, accountable for setting strategy and developing sales in the convenience and mass merchandise channels. Prior to Miller, he held numerous sales and operating positions with Pepsi Cola USA, 7UP and Oscar Mayer. Mr. McGrath earned his Graduate Degree from Harvard University and a Bachelors Degree from Fredonia State University in New York.
Patrick Coll (42) Vice President Alehouse Operations
Mr. Coll has been Vice President Alehouse Operations since September 2002. Mr. Coll is responsible for directing the operational performance of the five existing alehouses as well as successfully opening and directing additional sites as they are developed. Mr. Coll has over 15 years of experience in the restaurant industry ranging from Chef to Opening Project Manager. Most recently, he held the position of Managing Partner with Essential Food Group from 2001 to 2002, a restaurant consulting company and Director of Food Service Operations for the Old Navy Division of Gap Inc, from 1998 to 2001. Prior to Gap Inc., Mr. Coll was with the Real Restaurant Group in Sausalito, California, responsible for the successful development and opening of restaurant concepts.
Mark House (46) Vice President Brewery Operations
Mr. House has been Vice President Brewery Operations since July 2001. Mr. House is responsible for directing the performance of the five existing breweries as well as purchasing, transportation, product development, forecasting, and facility issues. Mr. House had been Director of Corporate Operations since 1999, responsible for quality assurance, product development, forecasting and distribution. He joined the Company in 1996 as Manager of Distribution/Production. Prior to joining the Company, Mr. House had 14 years of brewing industry experience with the G. Heileman Brewing Co. (Heileman). As Distribution Manager for Heileman, House was responsible for warehousing/distribution, production planning, and customer service for both the Rainier Brewery in Seattle, Washington and Henry Weinhards Brewery in Portland, Oregon. Mr. House earned a Bachelors Degree from Washington State University.
Independence of the Board of Directors
Based on its review of the relationships between the Company and each of its directors, the Board of Directors has determined that all of the directors, other than Mr. Lennon, our Chief Executive Officer, and Mr. Hancock, our former Chief Executive Officer, are independent within the meaning of Nasdaq Marketplace Rule 4200.
The Board of Directors met nine times during 2004. Each of the Companys current directors attended at least 75% of the aggregate number of Board meetings and Board committee meetings of which he was a member.
The Company does not have a specific policy regarding director attendance at the annual meeting of shareholders; however, all directors are encouraged to attend if available. Messrs. Hancock, Svenson, Dammeier and Ms. Mootz were present at the 2004 annual meeting.
Committees of the Board of Directors
The Audit Committee, currently comprised of Messrs. Svenson and Barnum, recommends the selections of the Companys independent auditors and consults with the independent auditors on the Companys internal accounting controls. Each current member of the Audit Committee is independent within the meaning of Nasdaq Marketplace Rule 4200 and financially sophisticated under applicable Nasdaq rules. The Board of Directors has determined that Mr. Svenson is an audit committee financial expert, within the meaning of applicable Securities and Exchange Commission rules. On December 15, 2004, we notified The Nasdaq Stock Market, Inc. (Nasdaq) that a member of our Audit Committee, Ms. Nancy Mootz, had unexpectedly passed away, and that as a result of Ms. Mootzs death, we are not in compliance with the audit committee composition requirements set forth in Rule 4350(d)(2)(A) of Nasdaqs Marketplace Rules, which requires a listed issuer to have at least three independent members on its audit committee. The Companys board is considering its options regarding this vacancy and understands that, pursuant to Nasdaq Rule 4350(d)(4)(B), the vacancy must be filled by the date of the Companys next annual meeting. The Audit Committee met four times during 2004.
The Compensation Committee, currently comprised of Messrs. Barnum and Dammeier, recommends to the Board salaries and bonuses for the Companys executive officers and administers the Companys 2004 Equity Incentive Plan. The Board of Directors has determined that Messrs. Barnum and Dammeier are independent within the meaning of Nasdaq Marketplace Rule 4200. The Compensation Committee met two times in 2004.
Code of Ethics and Code of Conduct
We have adopted a Code of Ethics that applies to our Chief Executive Officer, Chief Financial Officer, Controller Chief Accounting Officer and persons performing similar functions. We have also adopted a Code of Conduct applicable to all employees, officers and directors. These codes are posted on our website at http://www.pyramidbrew.com/about/investor.php. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding any amendment to or waiver of the Code of Ethics with respect to the covered persons by posting such information on our website.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires reports relating to the stock ownership of the Companys directors, executive officers and beneficial owners of more than 10% of any equity security of the Company to be filed with the SEC. Based solely on its review of copies of these reports and representations of such reporting persons, the Company believes that the required Section 16(a) reports during fiscal 2004 for our directors, executive officers and 10% of more beneficial holders were timely filed, except for a late Form 4 for Nancy Mootz with respect to one transaction.
Item 11 Executive Compensation
Each non-employee director receives a fee of $1,500 for each Board meeting attended, $750 for each Audit Committee meeting attended and $500 for all other Committee meetings attended. In addition, non-employee directors receive a $10,000 annual retainer, which the directors have the choice to receive in our common stock or cash and the Chairman of the Board receives an additional $10,000 annual retainer and all other committee chairman receive a $2,500 annual retainer. All directors are reimbursed for out of pocket expenses for each Board meeting attended, and non-employee directors also participate in the Non-Employee Directors Stock Option Plan (Director Plan) and the Non-Employee Stock Compensation Plan. Employee directors are not compensated for their duties as directors.
The Director Plan provides for grants of stock options covering 5,000 shares of common stock to be made automatically on the date of each annual meeting of shareholders to each of our non-employee directors, so long as shares of common stock remain available under the Directors Plan. The exercise price under each option is the fair market value of the common stock on the date of grant. Each option expires ten years after the date of grant or one year after the death of the recipient director. A total of 250,000 shares of Common Stock are reserved for future grants of options under the Directors Plan. During 2004, 20,000 options were granted under the Directors Plan: 5,000 shares each to Messrs. Barnum, Dammeier, Svenson and Ms. Mootz.
The Director Compensation Plan provides for each non-employee Director of the Company annual compensation of $10,000 payable in shares of the Companys common stock valued at the last sale price of the stock on the Nasdaq Stock Market on the date of the annual meeting for which the compensation is payable or in cash at each directors discretion. As of March 31, 2005, 14,982 shares had been issued under this plan.
Summary of Cash and Certain Other Executive Compensation
Compensation Summary. The following table summarizes the annual compensation for services rendered during 2004, 2003, and 2002 for the Companys Chief Executive Officer and its other executive officers whose salary and bonus exceeded $100,000 in 2004 (Named Executive Officers).
SUMMARY COMPENSATION TABLE
Option Exercises and Year End Holdings
The following table sets forth information concerning the number and value of options held by the Named Executive Officers on December 31, 2004.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
LONG-TERM INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
The following table sets forth information with respect to restricted stock that will be issued to Mr. Lennon pursuant to his employment agreement upon the achievement of certain performance goals.
Employment Contracts, Termination of Employment and Change of Control Agreements
The Company entered into an employment agreement with Mr. Lennon dated effective July 16, 2004, whereby he serves as a Director and Chief Executive Officer of the Company. Mr. Lennons employment agreement provides an annual base salary of $250,000 plus a car allowance. Mr. Lennon also may receive a personal performance bonus in accordance with the Officer Incentive Plan in effect. Mr. Lennon was also provided a relocation budget of $100,000 to cover relocation expenses. If Mr. Lennons employment is terminated without cause, he will receive his annual base salary for a period of one year following the date of such termination.
In addition Mr. Lennon will receive restricted stock awards for up to 350,000 shares of the Company stock pursuant to the terms of his employment agreement. Mr. Lennon will be issued restricted stock awards for 35,000 shares on each of January 1, 2006 and the next four anniversaries of that date. If Mr. Lennons employment is terminated by the Company without cause or by Mr. Lennon for good reason, or as a result of Mr. Lennons death or disability, Mr. Lennon will be issued a prorated portion of the relevant annual restricted stock award as of the date his employment is terminated. Mr. Lennon will be issued restricted stock awards for an additional 35,000 shares on each of January 1, 2006 and the next four anniversaries of that date based on the Companys achievement of certain performance goals. If Mr. Lennons employment is terminated by the Company without cause or by Mr. Lennon for good reason, or as a result of Mr. Lennons death or disability, Mr. Lennon will be issued a prorated portion of the relevant annual performance award as if the relevant annual performance goal had been reached, prorated to the date his employment is terminated and granted as of the date his employment is terminated: These restricted stock awards will be issued outside of the Companys equity incentive plans, including the Companys 2004 Equity Incentive Plan (the 2004 Plan), but subject to the terms and conditions of the Plan. The restricted stock awards will be subject to a forfeiture restriction that will lapse on the first anniversary of their respective dates of issuance. In addition, the forfeiture restriction will lapse on an accelerated basis under certain circumstances in the event of a company transaction or change in control as provided in the Plan.
On March 30, 2005 the Board approved an amendment to the Employment Agreement between John Lennon and the Company dated July 15, 2004 to provide that if Mr. Lennons employment with the Company is terminated without cause or for good reason during 2005, Mr. Lennon will receive the full amount of the restricted stock awards that would otherwise be made on January 1, 2006 as if the conditions to such awards had been satisfied, and such awards will be fully vested.
We entered into an employment agreement with Mr. McGrath on October 25, 1999. The agreement provides for a base compensation plus quarterly and annual bonuses based on the Company and Mr. McGrath achieving certain performance targets set by the Chief Executive Officer. The total amount of these annual bonuses can total up to 30% of Mr. McGraths base compensation. If Mr. McGrath is terminated without cause (as defined in the agreement), he is entitled to three months base salary plus a pro rata portion of any incentive bonuses earned during the year of termination.
Under the 2004 Plan, to maintain all of the participants rights in the event of a company transaction that is not a change in control or a related party transaction (as those terms are defined in the 2004 Plan), unless the compensation committee determines otherwise at the time of grant with respect to a particular award or elects to cash out awards:
In addition, under the 2004 Plan, to maintain all of the participants rights in the event of a change in control, unless the compensation committee determines otherwise with respect to a particular award:
If certain corporate transactions occur (such as a merger, consolidation or acquisition by another corporation of all or substantially all of our assets), each outstanding option to purchase shares under the Employee Stock Purchase Plan will be assumed or an equivalent option substituted by a successor company or its parent. If the successor company refuses to assume or substitute for the option, the offering period during which a participant may purchase stock will be shortened to a specified date before the proposed transaction. In the event of a proposed liquidation or dissolution of the Company, the offering period during which a participant may purchase stock will be shortened to a specified date before the date of the proposed liquidation or dissolution.
Item 12 Security Ownership of Certain Beneficial Owners and Management
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 18, 2005, for (i) each person known to the Company to own beneficially more than 5% of the common stock, (ii) each of the Companys directors and Named Executive Officers, and (iii) all of the Companys executive officers and directors as a group. Except as otherwise noted, the named beneficial owner has sole voting and investment power. Except as otherwise noted, the address of the named shareholder is c/o Pyramid Breweries Inc., 91 South Royal Brougham Way, Seattle, Washington 98134.
Equity Compensation Plan Information
The following table sets forth information regarding our common stock that may be issued upon the exercise of options, warrants and other rights granted to employees, consultants or directors under all of our existing equity compensation plans, as of December 31, 2004.
Item 13 Certain Relationships and Related Transactions
During 2001, the Company granted Mr. Martin Kelly, our former Chief Executive Officer, 150,000 stock options at an exercise price of $2.125 pursuant to a stock purchase and restriction agreement. On the date of the grant, the closing price of the Companys common stock on the Nasdaq Stock Market was $2.62. Mr. Kelly agreed to immediately exercise those options and all other options held by him. Concurrently, the Company agreed to accept a $787,000 full recourse note from Mr. Kelly in payment of the exercise price for the 387,400 options to purchase shares of the Companys common stock. In addition, the Company paid withholding taxes of $115,000 due on the exercise of the options and received from Mr. Kelly an additional full recourse note for the amount of the withholding taxes. On February 26, 2004 the Company announced that Mr. Kelly was stepping down as Chief Executive Officer. Mr. Kellys last official day was March 10th, 2004. Per the full recourse note agreement dated June 2001 with Mr. Kelly, upon termination he had the right to require the Company to buy-back the 387,400 shares collateralizing the promissory notes and pay any balances owed under the notes, with any net cash balance made payable to Mr. Kelly. On April 9, 2004, Mr. Kelly exercised his right and the Company repurchased the 387,400 shares at a five day average market price of $3.18 per share. The total sales value of $1,233,000 was applied to the notes payable in the amount of $843,000, to interest balances in the amount of $25,000 and the balance of $365,000 was paid to Mr. Kelly.
The information provided in Item 11 under the headings Director Compensation and Employment Contracts, Termination of Employment and Change of Control Agreements is hereby incorporated by reference into this Item 13.
Item 14 Principal Accountant Fees and Services
The aggregate fees billed by Moss Adams LLP and KPMG LLP for professional services rendered for the audit of the Companys annual financial statements for the fiscal years ended December 31, 2004 and 2003 are as follows:
Audit Committee Pre-Approval Policy
The Audit Committee has adopted a policy for the pre-approval of all audit and non-audit services provided by our independent accountants. The policy is designed to ensure that the provision of these services does not impair the accountants independence. Under the policy, any services provided by the independent accountants, including audit, audit-related, tax and other services, must be specifically pre-approved by the Audit Committee.
The Audit Committee may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated are required to report any pre-approval decisions to the Audit Committee at its next scheduled meeting. The Audit Committee does not delegate responsibilities to pre-approve services performed by the independent accountants to management.
For 2004, all audit and non-audit services provided by our independent accountants were pre-approved.
Item 15 Exhibits, Financial Statement Schedules, and Reports on Form 8-K
Documents filed as part of this report are as follows:
Exhibits: The required exhibits are included at the end of the Annual Report on Form 10-K and are described in the Exhibit Index immediately preceding the first exhibit.
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
May 4, 2005
The following exhibits are filed as part of this Annual Report on Form 10-K or are incorporated herein by reference. Where an exhibit is incorporated by reference, the number, which follows the description of the exhibit, indicates the document to which cross reference is made. See the end of this exhibit index for a listing of cross-referenced documents.