<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Echange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PYRAMID BREWERIES
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
-------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
-------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
<PAGE>
[LOGO OF PYRAMID BREWERIES INC.]
PYRAMID BREWERIES INC.
91 So. Royal Brougham Way
Seattle, Washington 98134
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO OUR SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of the shareholders of
Pyramid Breweries Inc. (the "Company") will be held at the Hyatt Regency
Bellevue at Bellevue Place, 900 Bellevue Way N.E., Bellevue, Washington on
Thursday, May 4, 2000 at 10:00 a.m., for the following purposes:
1. To elect five directors.
2. To approve an amendment to the Amended and Restated 1995 Employee
Stock Option Plan.
3. To approve amendments to the Non-Employee Director Stock Option
Plan.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only shareholders of record at the close of business on March 15, 2000 are
entitled to notice of and to vote at the meeting.
All shareholders are requested to be present in person or by proxy. For the
convenience of those shareholders who do not expect to attend the meeting in
person and desire to have their shares voted, a form of proxy and an envelope,
for which no postage is required, are enclosed. Any shareholder who later
finds that he or she can be present at the meeting, or for any reason desires
to do so, may revoke the proxy at any time before it is voted.
Please complete, sign, date and mail promptly the accompanying proxy card in
the return envelope furnished for that purpose, whether or not you plan to
attend the meeting. Your cooperation is appreciated since one-third of the
common stock must be represented, either in person or by proxy, to constitute
a quorum for the conduct of business.
By Order of the Board of Directors
/s/ Kurt Dammeier
Kurt Dammeier
Chairman
April 10, 2000
<PAGE>
[LOGO OF PYRAMID BREWERIES INC.]
PYRAMID BREWERIES INC.
PROXY STATEMENT
For Annual Meeting of Shareholders to be held
May 4, 2000
SOLICITATION AND REVOCATION OF PROXY
The enclosed proxies are solicited by the Board of Directors of Pyramid
Breweries Inc. (the "Company" or "Pyramid") to be voted at the annual meeting
of shareholders to be held on May 4, 2000, or any adjournments thereof (the
"Annual Meeting"). The individuals named as proxies are Kurt Dammeier and
Martin Kelly. The accompanying notice of meeting, this Proxy Statement and the
form of proxy are being first sent to shareholders on or about April 10, 2000.
All shares represented by proxies received will be voted in accordance with
instructions contained therein. In the absence of voting instructions, the
shares will be voted for the proposals listed herein and on the proxy. A
shareholder giving a proxy has the power to revoke it at any time before it is
voted.
At the close of business on March 15, 2000, there were 7,965,140 shares of
common stock, par value $.01 per share (the "Common Stock"), outstanding,
which represent all of the voting securities of the Company. Each share of
Common Stock is entitled to one vote. Shareholders do not have cumulative
voting rights in the election of directors. Only shareholders of record at the
close of business on March 15, 2000 (the "Record Date") will be entitled to
vote at the Annual Meeting. The holders of one-third of the Common Stock
issued and outstanding and entitled to vote at the Annual Meeting, present in
person or represented by proxy, constitute a quorum.
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 may, without being
additionally compensated, 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 does not currently intend to employ any other
party to assist in the solicitation process.
<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of March 15, 2000, for (i) each person known
to the Company to own beneficially more than 5% of the Common Stock, (ii) each
of the Company's directors and named executive officers (as defined herein),
and (iii) all of the Company's 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.
<TABLE>
<CAPTION>
Shares
Beneficially
Owned
-----------------
Name and Address Number Percent
---------------- --------- -------
<S> <C> <C>
Sugar Mountain Capital, LLC (1).......................... 1,607,600 20.2%
2415 Carillon Point
Kirkland, WA 98033
George Hancock........................................... 1,090,000 13.7
John Stoddard (2)........................................ 938,162 11.8
Brookhaven Capital Management, LLC (3) .................. 908,225 11.4
3000 Sandhill Road
Building 3, Suite 105
Menlo Park, California 94025
Richard Denmark (4)...................................... 150,611 1.9
Martin Kelly (5)......................................... 43,166 *
Edward Black (6)......................................... 27,233 *
1208 SW Camano Dr.
Camano Island, WA 98292
George Arnold (7)........................................ 24,156 *
11815 6th Place SW
Seattle, WA 98146
George C. Textor (8)..................................... 22,912 *
Robert Toledo (9)........................................ 14,412 *
Scott Barnum (9)......................................... 13,912 *
Thomas Schwalm (10)...................................... 11,912 *
All executive officers and directors as a group
(14 persons) (11)....................................... 3,952,687 49.6
</TABLE>
- --------
* Less than 1%
(1) The information provided with respect to Sugar Mountain Capital, LLC is
based solely on statements filed with the Securities and Exchange
Commission. The shares set forth in the table are owned by Sugar
Mountain Capital, LLC, a Washington limited liability company ("Sugar
Mountain"); and Kurt B. Dammeier ("Dammeier") with shared voting power.
The business address of Sugar Mountain and Dammeier is 2415 Carillon
Point, Kirkland, WA, 98033. Sugar Mountain is a private investment
company. Dammeier is the legal owner and sole Managing Member of Sugar
Mountain. On December 7, 1999, Dammeier was elected Chairman of the
Board of Directors of Pyramid Breweries Inc.
(2) Includes 7,500 vested options from the Non-Employee Directors Stock
Option Plan.
(3) The information provided with respect to Brookhaven Capital Management,
LLC is based solely on statements filed with the Securities and Exchange
Commission. The shares set forth in the table are owned by a group with
shared voting power consisting of the following:
Brookhaven Capital Management, LLC, a California limited liability
company ("LLC"); Vincent A. Carrino ("Carrino"); and Daniel R. Coleman
("Coleman"). The business address of LLC and Carrino is
2
<PAGE>
3000 Sandhill Road, Building 3, Suite 105, Menlo Park, California 94025.
The business address of Coleman is 1370 116th Avenue NE, Suite 210,
Bellevue, Washington 98004. The LLC is an investment adviser to various
accounts, including investment limited partnerships of which it is also a
general partner. Carrino is the sole Manger and the majority member of
LLC. Coleman is the Executive Vice President and a minority member of LLC.
(4) Includes 148,611 vested options.
(5) Includes 41,778 vested options.
(6) Includes 20,833 vested options. Mr. Black resigned from the company
October 20, 1999.
(7) Includes 22,667 vested options. Mr. Arnold resigned from the company
December 31, 1999.
(8) Includes 12,500 vested options from the Non-Employee Directors Stock
Option Plan.
(9) Includes 5,000 vested options from the Non-Employee Directors Stock
Option Plan.
(10) Includes 10,000 vested options from the Non-Employee Directors Stock
Option Plan
(11) Includes 282,500 vested options.
3
<PAGE>
ELECTION OF DIRECTORS
The Board of Directors currently has nine members. The Board is divided into
three classes. Initially, Class I directors were elected for one year, Class
II directors for two years and Class III directors for three years. Successors
to the class of directors whose term expires at any annual meeting shall be
elected for three-year terms. Each of Nancy Mootz, Thomas Schwalm and John
Stoddard is nominated as a member of Class II to serve for a three-year term
until the annual meeting of the shareholders in 2003 and until his or her
successor is elected and qualified. Each of Kurt Dammeier and Martin Kelly is
nominated as a member of Class III to serve for a one-year term until the
annual meeting of the shareholders in 2001 and until his successor is elected
and qualified. Unless otherwise directed, the persons named in the proxy
intend to cast all proxies in favor of the nominees, Ms. Mootz and Messrs.
Schwalm, Stoddard, Dammeier and Kelly.
Each of the nominees has indicated that he or she is willing and able to
serve as a director. If any nominee becomes unable or unwilling to serve, the
accompanying proxy may be voted for the election of such other person as shall
be designated by the Board of Directors. The Proxies being solicited hereby
will be voted for no more than five nominees at the 2000 Annual Meeting.
Vote Required
The five nominees receiving the largest number of votes cast, in person or
by proxy, at the Annual Meeting, assuming a quorum is present, will be elected
as Class II and III directors. Shareholders do not have cumulative voting
rights in the election of directors.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF ELECTION TO THE BOARD OF EACH OF THE
NOMINEES.
Directors
The following table sets forth information regarding each nominee for
election as a director and each director whose term of office will continue
after the Annual Meeting.
<TABLE>
<CAPTION>
Expiration
Name Current Position with Company(1) Age of Term
---- -------------------------------- --- ----------
<S> <C> <C> <C>
Kurt Dammeier.............. Chairman of the Board 41 2001
Martin Kelly............... Chief Executive Officer 45 2001
George Textor.............. Director 55 2001
George Hancock............. Director/Founder 55 2002
Robert A. Toledo........... Director 57 2002
Scott S. Barnum............ Director 44 2002
John Stoddard.............. Director 40 2003
Nancy Mootz................ Director 44 2003
Thomas Schwalm............. Director 55 2003
</TABLE>
- --------
(1) For a description of certain committees of the Board of Directors and the
members of such committees, see "Committees of the Board" below.
KURT DAMMEIER has been a director of the Company since June 1999 and was
elected Chairman of the Board in December 1999. Mr. Dammeier is a private
investor and sole Manager of Sugar Mountain Capital, LLC the Company's largest
investor. Mr. Dammeier was most recently President and Chief Executive Officer
of Quebecor Integrated Media, an information services company. Mr. Dammeier
earned his Bachelors Degree from Washington State University in 1982.
4
<PAGE>
MARTIN KELLY was appointed Chief Executive Officer on December 7, 1999 and
has been a director of the Company since December 1999. Mr. Kelly joined the
Company in August 1999 as President and Chief Operating Officer. Mr. Kelly has
over 20 years of beverage industry experience, earned at Miller Brewing
Company (Miller), Borden, Inc. (Borden), and Coca-Cola Enterprises (Coca-
Cola). At Miller, he served as Regional Vice President for 23 western states
and was responsible for the operations of the Jacob Leinenkugel Brewing
Company, a regional specialty brewer, and a wholly owned subsidiary of Miller.
Prior to joining Miller, Mr. Kelly was a Vice President of Marketing and Sales
Development at Borden. At Coca-Cola Enterprises, Mr. Kelly held a variety of
sales, marketing and general management positions, and most recently was
Division Vice President and General Manager of the Mid Atlantic Division. Mr.
Kelly earned a Masters Degree in Business Administration and a Bachelor of
Science Degree in Commerce from the University of Virginia.
GEORGE C. TEXTOR, JR. has been a director of the Company since December
1995. Mr. Textor is a founding General Partner of Capstan Partners, a private
equity investment fund. From 1981 to 1988 Mr. Textor was a founding General
Partner and Senior Vice President in the Corporate Finance Department of Cable
Howse and Ragen (now Ragen MacKenzie Inc.), a regional investment banking and
brokerage firm. Prior to that he worked for Seattle Trust and Savings Bank
(now Key Bank) from 1971 to 1981 as a Commercial Lending Officer and Vice
President and Manager of the Bank's main branch. He is a graduate of Lehigh
University and received his MBA from the University of Washington.
GEORGE HANCOCK served as Chief Executive Officer from May 1992 until his
retirement in December 1999, as President from July 1995 until December 1996
and as Chairman of the Board of the Company from January 1997 to December
1999. Mr. Hancock previously served as Chairman of the Board of the company
from July 1989 until July 1995 and has been a director since 1989. 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 Degree in Business Administration by Cranfield Institute of
Technology, England in 1981. He qualified as an accountant in England in 1967.
ROBERT A. TOLEDO has been a director of the Company since September 1998.
Mr. Toledo was most recently Owner/President of Miller Brands, Inc., a
beverage distribution company servicing King County, Washington. From 1972
through 1989 he held various marketing and planning positions with the Miller
Brewing Co. including Brand Manager, Director-Corporate Planning, Group
Product Director, Vice President of Brand Management and Vice President of
Brand and Promotion. From 1965 to 1972 Mr. Toledo held various sales positions
with Philip Morris International including Sales Manager of Philip Morris de
Puerto Rico. He is a US Small Business/SCORE volunteer counselor advising
small businesses. He is a graduate of St. John's University and completed the
Stanford University--Senior Management seminar.
SCOTT S. BARNUM has been a director of the Company since February 1999. Mr.
Barnum was most recently a Vice President--International for eBay Inc., the
leading Internet based person-to-person trading community. Prior to joining
eBay, Mr. Barnum was President and Chief Operating Officer of Pete's Brewing
Company, the nation's second largest brewer of craft beers. His background
includes four years with Miller Brewing company where he held several senior
level appointments in the marketing department and where he ultimately became
General Manger of the American Specialty and Craft Beer Co., a wholly owned
subsidiary formed to establish a national presence in the craft beer segment.
His previous experience included nine years with PepsiCo Inc. in its soft
drink and snack divisions, both domestically and internationally, in marketing
management. Mr. Barnum earned a Masters Degree in Business Administration from
Columbia University.
JOHN STODDARD has been a director of the Company since 1989. He served as
Chairman of the Board from July 1995 to January 1997 and President and Chief
Operating Officer from January 1997 to January 1999. Mr. Stoddard owned and
operated a winery, Paul Thomas Wines, Ltd. from July 1989 until the sale of
the business to Associated Vintners in 1994. Mr. Stoddard has substantial
experience in real estate development and construction. He was employed by
Northwest Building Corporation, a company primarily engaged in real estate
investment, development, and management, as its Director of Construction from
1982 to 1989.
5
<PAGE>
NANCY MOOTZ was elected a director in February 2000. Ms. Mootz is founder of
Mootz and Company, a restaurant consulting and development firm, as well as
Kona Pacific Enterprises, a food products marketing and distribution company.
Since 1991, her work has included strategic planning, expansion programs,
financial analysis and valuations, leasing, construction and new restaurant
launch assignments. Concurrently, she conceptualized, financed, constructed
and served as general partner and operator of three fine dining' restaurants
in the San Francisco Bay Area. Ms. Mootz is an instructor at the Culinary
Institute of America and also has been a guest lecturer for courses in
business and entrepreneurship at the University of San Francisco and
University of California, Berkeley Haas School of Business. Ms.Mootz has a
Bachelor of Arts in Economics from Stanford University, and a Masters in
Business Administration from Harvard.
THOMAS SCHWALM has been a director of the Company since February 1997. Mr.
Schwalm founded Greenwich Beverage Group, a firm that provides consulting
services to the beverage industry, in 1993. He also is a founder of South
Beach Beverage Co., which manufactures and distributes a line of non-alcoholic
teas and juices. During 1992 until it was sold in 1993, Mr. Schwalm served as
President of Barton Beers, Inc., the U.S. importer for, among others, Corona
and Tsing Tao. Barton Beers, Inc. also owned Steven's Point Brewing Company, a
craft brewer located in Wisconsin. From 1984 to 1992, Mr. Schwalm was Vice
President of Sales and Marketing for Dribeck Importers, Inc., the U.S.
importer of Beck's Beer. Before that, he spent two years as Group Marketing
Director with the Stroh Brewing Co. and fourteen years in various sales and
marketing positions with Jos. Schlitz Brewing Co., including four years as Old
Milwaukee Brand Director. Mr. Schwalm earned a Bachelors Degree from the
University of Wisconsin in 1968.
Committees of the Board of Directors
The Board has a standing Audit Committee and a Compensation Committee and
may form ad hoc Committees from time to time as appropriate. The Audit
Committee currently comprised of Ms. Mootz and Messrs. Textor and Toledo
recommends the selections of the Company's independent auditors and consults
with the independent auditors on the Company's internal accounting controls.
The Audit Committee met four times during 1999. The Compensation Committee,
currently comprised of Messrs. Barnum, Dammeier, Schwalm, Textor, and Toledo,
recommends to the Board salaries and bonuses for the Company's executive
officers and administers the Company's Amended and Restated 1995 Employee
Stock Option Plan. The Compensation Committee met three times in 1999. The
Board of Directors met five times during 1999. Each member of the Board of
Directors attended at least 75% of the Board meetings. Each member of the
Board who also served on one of the committees of the Board attended at least
75% of the meetings of all committees on which he served.
6
<PAGE>
Executive Compensation
Compensation Summary. The following table summarizes the annual compensation
for services rendered during 1999 and 1998 for the Company's chief executive
officer and its other executive officers whose salary and bonus exceeded
$100,000 in 1999 ("Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual
Compensation
----------------
Salary All Other
Name and Principal Position (1) Bonus Compensation (2)
- --------------------------- -------- ------- ----------------
<S> <C> <C> <C> <C>
George Hancock.......................... 1999 $153,600 $20,000 $302,458
Chief Executive Officer (3) 1998 153,600 0 3,181
1997 153,600 0 1,146
Martin Kelly............................ 1999 77,960 11,918 0
President & Chief Operating 1998 0 0 0
Officer (4) 1997 0 0 0
Richard Denmark......................... 1999 144,300 8,500 2,443
Chief Financial Officer, Vice 1998 138,600 15,000 0
President-Finance and Secretary 1997 42,646 15,000 0
Edward Black............................ 1999 126,600 7,500 37,520
Vice President, Sales (5) 1998 120,700 8,000 0
1997 9,285 0 0
George Arnold........................... 1999 106,100 9,600 55,055
Vice President, Brewery Operations (6) 1998 102,085 8,000 2,660
1997 93,430 8,933 2,131
</TABLE>
- --------
(1) Includes a car allowance.
(2) Consists of the Company's matching to the 401(k) plan and separation
payments as applicable.
(3) Mr. Hancock resigned from the Company December 31, 1999 and will receive
separation payments totaling $300,000 over a 24 month period.
(4) Mr. Kelly joined the Company on August 9, 1999 as Chief Operating Officer
and was appointed Chief Executive Officer on December 7, 1999, effective
January 1, 2000.
(5) Mr. Black resigned from the Company October 20, 1999, receiving six
months of separation payments of which $37,520 will be paid from December
31, 1999.
(6) Mr. Arnold resigned from the Company December 31, 1999 and received
separation payments totaling $53,050.
Grants of Stock Options
The following table sets forth certain information concerning Options
granted during 1999 to the named executives:
<TABLE>
<CAPTION>
Potential
Realizable
Value at
Assumed Annual
Rates of Stock
Individual Grants Price
------------------------------------------------ Appreciation
% of Total Exercise for Option Term
Options Granted or Base (1)
Option to Employees in Price Expiration ---------------
Name Granted (#) Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ---- ----------- --------------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Martin Kelly.. 200,000 73% $2.00 8/9/2009 251,558 637,497
</TABLE>
- --------
(1) Potential realizable values are based on assumed compound annual
appreciation rates specified by the SEC. These increases in value are
based on speculative assumptions and are not intended to forecast
possible future appreciation, if any, of the Company's stock price.
7
<PAGE>
Year End Options
The following table sets forth information concerning the number and value
of options held by the named executive officers on December 31, 1999. No stock
options were exercised by the named executive officers during the year ended
December 31, 1999.
Year End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Options at Year End at Year End(5)(6)
------------------------- -------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
George Hancock.............. 0 0 0 0
Martin Kelly(1)............. 22,300 177,700 0 0
Richard Denmark(2).......... 131,250 43,750 0 0
Edward Black(3)............. 20,833 0 0 0
George Arnold(4)............ 22,667 0 0 0
</TABLE>
- --------
(1) The exercise price of these options is $2.00 per share of common stock.
(2) The exercise price of these options is $2.88 per share of common stock.
(3) The exercise price of these options is $2.50 per share of common stock.
(4) The exercise price of these options is $10.75 and $2.56 per share of
common stock.
(5) The weighted-average exercise price of these options is $2.84 per share
of common stock.
(6) The closing price on the NASDAQ National Market on December 31, 1999 was
$1.91.
Employment Agreements
Mr. Kelly has an employment agreement with the Company of indefinite
duration that provides for an annual base salary of $210,000 plus a car
allowance. Mr. Kelly also may receive a personal performance bonus of up to
$50,000 annually based on achieving specific financial targets established by
the Company's Board of Directors, and an additional bonus of 10% or more of
base salary if certain financial targets are exceeded by 10% or more. If Mr.
Kelly's employment is terminated without cause, he will receive his annual
base salary for a period of one year following the date of such termination.
Mr. Denmark has an employment agreement with the Company of indefinite
duration that provides for an annual base salary of $140,660 plus a car
allowance. Mr. Denmark also may receive a personal performance bonus of up to
30% of his base salary annually based on achieving the Company's financial
targets. The agreement has a covenant not to compete during his employment and
for a period six months following the termination of employment. If Mr.
Denmark's employment is terminated without cause, he will receive his annual
base salary for a period of six months following the date of such termination.
Compensation of Directors
Each non-employee director receives a fee of $500 for each Board meeting
attended and $385 for each Committee meeting attended. In addition, directors
receive a $3,000 annual retainer which the directors chose to receive in
Pyramid Breweries Inc. Common Stock. 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").
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 commencing with the 1999 annual shareholders meeting (subject to
approval at the 2000 shareholders meeting) to each non-employee director of
the Company, 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 in ten years
after
8
<PAGE>
grant or one year after the death of the recipient director. A total of
125,000 shares of Common Stock are reserved for future grants of options under
the Directors Plan. During 1999, 30,000 options were granted under the
Directors Plan: 5,000 shares to each Messrs. Bryce, Schwalm, Textor, Stoddard,
Barnum and Toledo.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee during calendar 1999 were Messrs.
Barnum, Schwalm, Textor and Toledo (Chairman).
Report of Compensation Committee
The Compensation Committee of the Board of Directors of the Company (the
"Committee") determined and administered the compensation of the Company's
executive officers during 1999.
Compensation Philosophy. The Committee endeavors to ensure that the
compensation programs for executive officers of the Company are effective in
attracting and retaining key executives responsible for the success of the
Company and in promoting its long-term interests and those of its
shareholders. The Committee seeks to align total compensation for management
with corporate performance. The Committee places emphasis on variable,
performance-based components, such as stock option awards and cash bonuses,
the value of which could increase or decrease to reflect changes in corporate
and individual performances. These short- and long-term incentive compensation
programs are intended to reinforce management's commitment to enhancement of
profitability and shareholder value.
The Committee took into account various qualitative and quantitative
indicators of corporate and individual performance in determining the level
and composition of compensation for the Company's executive officers during
1999. In 1999 the Committee developed quantifiable corporate and individual
performance measures such as sales increases, margin improvement, net income
and adjusted EBITDA and implemented very specific performance measures for
each executive. The Committee also recognized qualitative factors, such as
demonstrated leadership ability.
Base salaries for the executive officers were established at levels
considered appropriate in light of the duties and scope of responsibilities of
each officer's position and the salaries paid to comparable officers by
companies which are competitors of the Company. Salaries are reviewed
periodically and adjusted as warranted to reflect individual performance. The
Committee focused primarily on total annual compensation, including incentive
awards, rather than base salary alone, as the appropriate measure of executive
officer performance and contribution.
From time to time, executive officers have been eligible to receive
incentive compensation awards under the Company's annual bonus plan and stock
option plan, based upon corporate and individual performance. In approving
grants and awards under the bonus plan and the option plan, the Committee
considered the quantitative and qualitative factors and industry comparisons
related to sales and earnings growth.
In general, compensation payments in excess of $1 million to the CEO are
subject to a limitation on deductibility for the Company under Section 162(m)
of the Internal Revenue Code of 1986, as amended (the "Code"). However,
certain performance based compensation is not subject to such limitation. The
Company's stock option plan currently qualifies for such performance based
exception. The Company does not expect that its cash compensation payable to
the CEO will exceed the $1 million limitation during fiscal 2000.
Chief Executive Officer Compensation. In evaluating the compensation of
George Hancock, Chairman and Chief Executive Officer of the Company for 1999,
the Committee reviewed Mr. Hancock's performance in managing the business
through a transition year.
The Committee noted that the Company's gross sales increased by 5.5% to
$28.8 million from $27.3 million in 1998. Total beverage sales increased 2% to
$19.8 million in 1999. Alehouse sales increased 16% to
9
<PAGE>
$7.3 million from $6.3 million the year before. Gross profit as a percentage
of sales increased to 24% from 22% in 1998. The Company's operating loss,
before an impairment charge of $3.3 million, was $1.6 million, a 31.6%
improvement over the prior year. The Company posted a loss of $4.4 million or
$0.53 per share compared to a loss of $1.1 million or $0.14 per share in the
prior year. Excluding the nearly $3.8 million in one-time charges in 1999, the
comparable net loss for fiscal year 1999 was $583,000, approximately one-half
the year ago loss. Cash provided by operations increased significantly to $1.9
million from $728,000. While the fiscal results were disappointing, 1999
operating performance improved substantially, the Company successfully
recruited and transitioned in a new CEO and the Company was repositioned to
execute a new balanced growth strategy.
In accordance with the compensation philosophy described above, the
Committee kept Mr. Hancock's base salary at its prior year level of $150,000,
and awarded a $20,000 cash bonus for personal performance. Mr. Hancock was
also eligible to receive, but was not awarded stock options.
1999 Compensation Committee
Robert A. Toledo--Chairman
Scott Barnum
Thomas Schwalm
George C. Textor, Jr.
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Performance Graph
The following graph compares the cumulative total shareholder return (stock
price appreciation plus dividends) on the Common Stock with the cumulative
total return of the S&P 500 Index and the following group of peer companies
(based on weighted market capitalization) selected by the Company: Boston Beer
Company, Redhook Ale Brewery Incorporated, Big Rock Brewery, Ltd., Minnesota
Brewing Company.
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG PYRAMID BREWERIES INC., THE S&P 500 INDEX AND A PEER GROUP
[PERFORMANCE GRAPH APPEARS HERE]
DATA FROM PERFORMANCE GRAPH
Years
-----------------------------------------------------
12/14/94 12/95 12/96 12/97 12/98 12/99
-------- ------- ------- ------- ------- -------
Pyramid Breweries Inc. $100.00 $ 80.26 $ 19.74 $ 14.14 $ 7.89 $ 10.24
S&P 500 $100.00 $101.93 $125.33 $167.14 $214.91 $260.13
Peer Group $100.00 $ 95.81 $ 42.53 $ 28.64 $ 28.82 $ 25.21
- --------
* $100 invested on 12/14/95 in stock or index -- including reinvestment of
dividends. Fiscal year ending December 31.
AMENDMENT OF 1995 EMPLOYEE STOCK OPTION PLAN
In 1995, the Board of Directors of the Company adopted the 1995 Employee
Stock Option Plan. The 1995 Plan was amended in 1998. The 1995 Plan was
approved by the shareholders in 1995 and the Amended and Restated 1995 Plan
was approved by the shareholders in 1998. A copy of the Amended and Restated
1995 Employee Stock Option Plan (the "Plan") may be obtained upon written
request to the Company's Secretary. The Plan is administered by the
Compensation Committee of the Board of Directors (the "Compensation
Committee"). Under the Plan, the Company currently is authorized to issue
815,000 shares of Common Stock upon the exercise of options granted under the
Plan. The Board of Directors has approved an amendment to the Plan which would
increase the number of options which may be granted under the Plan to
1,315,000 shares. The shareholders are being requested to approve this
amendment to the Plan.
The purpose of the Plan is to enable the Company to attract and retain
employees of ability and experience and to furnish such personnel significant
incentives to improve operations and increase profits of the Company. The Plan
is a broad-based plan; three employees received an aggregate of 275,000 stock
option grants under the Plan in fiscal year 1999. In fiscal years 1995--1998,
the total number of stock options granted by the Company, on average are
substantially higher than the current market price of the Common Stock and
thus offer little economic incentive to the employees who hold such options.
The Board continues to believe that equity-based incentive compensation is a
key component of employee compensation and that it is important to the ongoing
success of the Company to be able to offer stock options to employees.
Accordingly, the Board has increased the
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number of shares of Common Stock subject to the Plan by 500,000 shares, which
represents approximately 6% of the Company's outstanding shares plus
outstanding options at the date hereof.
In general, the Plan currently authorizes the Company to grant stock
options, either non-qualified stock options or incentive stock options (as
defined in section 422 of the Internal Revenue Code) to purchase up to 815,000
shares of Common Stock. The purchase price of each share of Common Stock
covered by an option may not be less than 100% of the fair market value of
Common Stock on the date of grant. The Compensation Committee has the
authority to select individuals who are to receive options and to specify the
terms and conditions of each option so granted, including the number of shares
covered by the option, the type of option (incentive stock option or non-
qualified stock option), the exercise price, vesting provisions, and the
overall option term.
Approval of the amendment to the Plan as described above requires the
affirmative vote of a majority of the outstanding shares of Common Stock
represented in person or by proxy at the meeting. In the event that the
amendment to the Plan is not adopted by the shareholders, the terms of the
existing Plan will remain in effect.
AMENDMENT OF NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
In 1995, the Board of Directors adopted the Non-Employee Director Stock
Option Plan (the "Director Plan") and the Director Plan was approved by
shareholders. A copy of the Director Plan may be obtained upon written request
to the Company's Secretary. The Director Plan is administered by the Company's
Board of Directors. Under the Director Plan, the Company is authorized to
issue 125,000 shares of Common Stock upon exercise of options granted under
the Director Plan. The Director Plan specifies an automatic grant of a non-
qualified stock option to purchase 2,500 shares of the Company's Common Stock
on the date of each annual meeting of the Company's shareholders. The Board of
Directors has approved amendments to the Director Plan which would increase
the number of shares of Common Stock which may be granted under the Director
Plan to 250,000 shares and which increases the annual grant to 5,000 shares
for each director. The shareholders are being requested to approve these
amendments to the Director Plan.
The Director Plan is designed to promote the long-term growth and financial
success of the Company by enabling the Company to attract, retain and motivate
such persons by providing for or increasing their proprietary interest in the
Company. The Board continues to believe that equity-based compensation is a
key component of director compensation and that it is important to the ongoing
success of the Company to be able to offer a competitive and enhanced option
plan to its directors. There are currently 72,500 shares available for future
grants and with the increase in non-employee directors and an increase in the
grant amount there will only be 32,500 shares available after the May 4, 2000
shareholders meeting. Accordingly, the Board has increased the number of
shares of Common Stock subject to the Director Plan by 125,000 shares and
increased the annual grant to individual directors by 2,500 shares.
Approval of the amendments to the Director Plan as described above requires
the affirmative vote of a majority of the outstanding shares of Common Stock
represented in person or by proxy at the meeting. In the event that the
amendment to the Director Plan is not adopted by the shareholders, the terms
of the existing Director Plan will remain in effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THESE PROPOSALS.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under SEC rules, the Company's directors, executive officers and beneficial
owners of more than 10% of any equity security of the Company are required to
file periodic reports of their ownership, and changes in that ownership, with
the SEC. Based solely on its review of copies of these reports and
representations of such reporting persons, the Company believes that during
fiscal 1999 such SEC filing requirements were satisfied.
12
<PAGE>
SHAREHOLDER PROPOSALS FOR 2001 ANNUAL MEETING
Shareholder proposals intended to be presented at the 2001 Annual Meeting of
Shareholders must be received by the Company no later than January 5, 2001.
Proposals may be mailed to the Company, to the attention of the Secretary, 91
So. Royal Brougham Way, Seattle, Washington 98134. The Company's management
will have discretionary authority to vote its proxies on any proposal
introduced by a shareholder at the Company's 2001 annual meeting unless the
shareholder notifies the Company on or before February 24, 2001 that such
shareholder intends to introduce a proposal.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors knows of no
matters, which will be presented for consideration at the Annual Meeting other
than the proposals set forth in this Proxy Statement. If any other matters
properly come before the meeting, it is intended that the persons named in the
proxy will act in respect thereof in accordance with their best judgment.
By Order of the Board of Directors
/s/ Kurt Dammeier
Kurt Dammeier
Chairman
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<PAGE>
DIRECTIONS TO
PYRAMID BREWERIES INC. ANNUAL MEETING of SHAREHOLDERS
Hyatt Regency Bellevue at Bellevue Place, Regency Ballroom
900 Bellevue Way N.E.
Bellevue, WA 98004
(425) 462-1234
[MAP TO ANNUAL MEETING OF SHAREHOLDERS]
There are three freeways that access the hotel. You may approach from I-90
(East-West), I-405 (North-South) and State Route 520 (East-West). Take I-405
if you are coming from a location North or South of Bellevue. If you are
coming from downtown Seattle, take I-90 or State Route 520, whichever is
closest.
I-405
Take the N.E. 8th St. Exit, Westbound over the bridge, which puts you on
N.E. 8th St. Stay on N.E. 8th St. going West. At the cross street of 106th
Ave. N.E., you will see a Washington Mutual Bank on the right hand
14
<PAGE>
side. The next driveway after the Bank will be the entrance to the Bellevue
Place complex. You may enter and park here. You will see signs directing you
toward the hotel elevator which brings you into the hotel lobby. From the
hotel lobby, take the stairs or elevator to the third floor and the Regency
Ballroom.
I-90 Eastbound
Take 1-405 North. Take N.E. 8th Street Westbound and proceed as directed
above.
SR 520
Take 1-405 South. Take N.E. 8th Street Westbound and proceed as directed
above.
Sea-Tac Airport
Follow "To All Freeways" sign and take the I-405 North Exit at Southcenter
and proceed as directed above.
Three hours of validated self-parking is available in the Hotel parking
garage.
For validation, please bring your parking ticket to the Pyramid Breweries Inc.
sign-in desk
located just outside the Regency Ballroom.
15
<PAGE>
Please mark
your votes as
indicated in [X]
this example.
This proxy when properly executed will be voted as directed. If no direction
is indicated, this proxy will be voted FOR the following proposals:
Proposal 1. Election of the Board of Directors
WITHHOLD
FOR VOTE
[ ] [ ]
Nominees: Nancy Mootz, Thomas Schwalm, John Stoddard, Kurt Dammeier, Martin
Kelly
(Instruction: to withhold authority to vote for any individual nominee, write
the nominee's name in the space provided below.)
- ----------------------
Proposal 2. Amendment of Amended and Restated 1995 Employee Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Proposal 3. Amendments of Non-Employee Director Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
With respect to the transaction of such other
business as may properly come before the
Meeting, Proxyholder, in his sole discretion,
will vote the proxy as he may see fit. When
shares are held by joint tenants, both should
sign. When signing as attorney, as executor,
administrator, trustee or guardian, please
give full title as such; if a corporation,
please sign in full corporate name by
President or other authorized officer. If a
partnership, please sign in partnership name
by authorized person.
Please mark, sign, date and return
the proxy card promptly using the
enclosed envelope.
Your name and address are shown as
registered - please notify the Corporation
of any change in your address.
Signature Signature if held jointly Dated , 2000
-------------- --------- -------
Please sign exactly as name appears.
. FOLD AND DETACH HERE .
<PAGE>
PROXY
PYRAMID BREWERIES INC.
91 So. Royal Brougham Way
Seattle, Washington 98134
For the Annual Meeting To Be Held Thursday, May 4, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE DIRECTORS OF THE COMPANY
Revoking any such prior appointment, the undersigned, a shareholder of Pyramid
Breweries Inc. hereby appoints Kurt Dammeier and Martin Kelly and either of
them, attorneys and agents of the undersigned, with full power of substitution,
to vote all shares of the Common Stock of the undersigned in said Corporation at
the Annual Meeting of Shareholders of said Corporation to be held at the Hyatt
Regency Bellevue at Bellevue Place, 900 Bellevue Way N.E., Bellevue, Washington,
on May 4, 2000 at 10:00 A.M. local time and at any adjournments thereof, as
fully and effectually as the undersigned could do if personally present and
voting, hereby approving, ratifying and confirming all that said attorneys and
agents or their substitutes may lawfully do in place of the undersigned as
indicated below.
(Continued and to be signed on reverse side)
. FOLD AND DETACH HERE .
