<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] 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
</TABLE>
PETE'S BREWING COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
PETE'S BREWING COMPANY
------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JULY 22, 1997
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of PETE'S
BREWING COMPANY, a California corporation (the "Company"), will be held on
Tuesday, July 22, 1997 at 1:00 p.m. local time, at the San Francisco Airport
Hilton, San Francisco International Airport, San Francisco, California for the
following purposes:
1. To elect directors to serve until the next Annual Meeting of
Shareholders and until their successors are elected.
2. To ratify the appointment of Coopers & Lybrand LLP as independent
auditors of the Company for the fiscal year ending December 31, 1997.
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only shareholders of record at the close of
business on June 10, 1997 are entitled to notice of and to vote at the meeting.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any shareholder attending
the meeting may vote in person even if he or she has returned a Proxy.
Sincerely,
JEFFREY A. ATKINS
Secretary
Palo Alto, California
June 20, 1997
YOUR VOTE IS IMPORTANT.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING,
YOU ARE REQUESTED TO COMPLETE, SIGN AND DATE THE ENCLOSED PROXY
AS PROMPTLY AS POSSIBLE AND RETURN IT IN THE ENCLOSED ENVELOPE.
<PAGE> 3
PETE'S BREWING COMPANY
------------------------
PROXY STATEMENT FOR 1997
ANNUAL MEETING OF SHAREHOLDERS
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
PETE'S BREWING COMPANY, a California corporation (the "Company"), for use at the
Annual Meeting of Shareholders to be held Tuesday, July 22, 1997 at 1:00 p.m.
local time, or at any adjournment thereof, for the purposes set forth herein and
in the accompanying Notice of Annual Meeting of Shareholders. The Annual Meeting
will be held at the San Francisco Airport Hilton, San Francisco International
Airport, San Francisco, California. The Company's principal executive offices
are located at 514 High Street, Palo Alto, California 94301. Its telephone
number at that location is (415) 328-7383.
These proxy solicitation materials and the Annual Report to Shareholders
for the year ended December 31, 1996, including financial statements, were first
mailed on or about June 20, 1997 to all shareholders entitled to vote at the
meeting.
RECORD DATE AND PRINCIPAL SHARE OWNERSHIP
Shareholders of record at the close of business on June 10, 1997 are
entitled to notice of and to vote at the meeting. The Company has one series of
Common Shares outstanding, designated Common Stock, no par value. At the record
date, 10,780,688 shares of the Company's Common Stock were issued and
outstanding and held of record by 473 shareholders. No shares of the Company's
Preferred Stock were outstanding.
The following table sets forth certain information regarding the beneficial
ownership of Common Stock of the Company as of June 10, 1997 as to (i) each
person who is known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock, (ii) each director and nominee for director
of the Company, (iii) each of the executive officers named in the Summary
Compensation Table below and (iv) all directors and executive officers as a
group.
<TABLE>
<CAPTION>
APPROXIMATE
FIVE PERCENT SHAREHOLDERS, DIRECTORS COMMON STOCK PERCENTAGE
AND CERTAIN EXECUTIVE OFFICERS BENEFICIALLY OWNED OWNED(1)
---------------------------------------------------- ------------------ -----------
<S> <C> <C>
The Stroh Brewery Company(2)........................ 1,150,805 9.65%
100 River Place
Detroit, MI 48207
Christopher T. Sortwell(2).......................... 1,150,805 9.65%
100 River Place
Detroit, MI 48207
DDJ Capital Management, LLC(3)...................... 1,047,570 9.72%
141 Linden Street, Suite 4
Wellesley, MA 02181
Audrey MacLean(4)................................... 856,845 7.94%
21100 Saratoga Hills Road
Saratoga, CA 95070
O'Rourke Investment Corporation(5).................. 767,805 7.12%
12930 Saratoga Ave., Suite B-7
Saratoga, CA 95070
Kevin O'Rourke(5)................................... 767,805 7.12%
12930 Saratoga Ave., Suite B-7
Saratoga, CA 95070
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
APPROXIMATE
FIVE PERCENT SHAREHOLDERS, DIRECTORS COMMON STOCK PERCENTAGE
AND CERTAIN EXECUTIVE OFFICERS BENEFICIALLY OWNED OWNED(1)
---------------------------------------------------- ------------------ -----------
<S> <C> <C>
Mark F. Bozzini(6).................................. 657,436 6.10%
1510 Oak Creek Dr., #405
Palo Alto, CA 94304
Pete S. Slosberg(7)................................. 604,926 5.60%
514 High Street
Palo Alto, CA 94301
FMR Corporation(8).................................. 563,300 5.23%
82 Devonshire Street
Boston, MA 02109
James E. Collins(9)................................. 479,926 4.44%
514 High Street
Palo Alto, CA 94301
Mark J. Bronder(10)................................. 409,565 3.80%
514 High Street
Palo Alto, CA 94301
David M. Bozzini(11)................................ 310,100 2.87%
132 Otis Avenue
Woodside, CA 94062
All directors and executive officers as a group (12 4,301,791 35.85%
persons)(12)......................................
</TABLE>
- ---------------
* Less than 1%
(1) Applicable percentage of ownership is based on 10,780,688 shares of Common
Stock outstanding as of June 10, 1997 together with applicable options for
such shareholder. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission, and includes voting and
investment power with respect to shares. Shares of Common Stock subject to
options currently exercisable or exercisable within 60 days after June 10,
1997 are deemed outstanding for computing the percentage ownership of the
person holding such options, but are not deemed outstanding for computing
the percentage of any other person.
(2) Includes 1,140,284 shares of Common Stock which may be acquired upon
exercise of a warrant held by The Stroh Brewery Company ("Stroh") of which
Mr. Sortwell is Executive Vice President and Chief Financial Officer, and
for which he may be deemed to have voting and investment power, and 8,021
shares of Common Stock which may be acquired by Mr. Sortwell upon exercise
of stock options which are presently exercisable or will become exercisable
within 60 days of June 10, 1997.
(3) Reflects ownership as reported on Schedule 13D/A dated April 23, 1997 filed
with the Securities and Exchange Commission by DDJ Capital Management, LLC
("DDJ"). Represents shares beneficially owned by: (i) The Copernicus Fund,
L.P. of which DDJ Copernicus, LLC is the general partner and for which DDJ
serves as investment manager; (ii) The Galileo Fund, L.P., of which DDJ
Galileo, LLC is the general partner and for which DDJ serves as investment
manager; (iii) Kepler Overseas Corp., for which DDJ serves as investment
manager; (iv) DDJ Overseas Corp., of which DDJ Galileo, LLC owns all of the
voting securities, and for which DDJ serves as investment manager; and, (v)
Crocodile I, LLC, for which DDJ serves as investment manager. DDJ Overseas
Corp. owns, and DDJ Galileo, LLC and DDJ beneficially own as majority
shareholder and investment manager, respectively, of DDJ Overseas Corp.,
757,630 shares of Common Stock. The Copernicus Fund, L.P. owns, and DDJ
Copernicus, LLC and DDJ beneficially own, as general partner and investment
manager, respectively, of The Copernicus Fund, L.P., 158,250 shares of
Common Stock. The Galileo Fund, L.P. owns, and DDJ Galileo, LLC and DDJ
beneficially own as the general partner and investment manager,
respectively, of The Galileo Fund, L.P., 68,850 shares of Common Stock.
Kepler Overseas Corp. owns, and DDJ as investment manager for Kepler
Overseas Corp. beneficially owns 31,420 shares of Common Stock. DDJ, as
investment manager to The Copernicus Fund, L.P., The Galileo Fund, L.P.,
Kepler Overseas
2
<PAGE> 5
Corp., DDJ Overseas Corp. and Crocodile I, LLC may be deemed to
beneficially own 1,047,570 shares of Common Stock.
(4) Includes 848,824 shares held in trust over which Ms. MacLean may be deemed
to have voting and investment power and 8,021 shares of Common Stock which
may be acquired by Ms. MacLean upon exercise of stock options which are
presently exercisable or will become exercisable within 60 days of June 10,
1997.
(5) Includes 759,784 shares of Common Stock owned by O'Rourke Investment
Corporation of which Mr. O'Rourke is Chief Financial Officer and for which
he may be deemed to have voting and investment power and 8,021 shares of
Common Stock which may be acquired by Mr. O'Rourke upon exercise of stock
options which are presently exercisable or will become exercisable within
60 days of June 10, 1997.
(6) Includes 59,000 shares held in trust over which Mr. Mark Bozzini may be
deemed to have voting and investment power. Mr. Mark Bozzini retired from
all positions with the Company effective February 28, 1997.
(7) Includes 591,800 shares held in trust over which Mr. Slosberg may be deemed
to have voting and investment power and 13,126 shares of Common Stock which
may be acquired by Mr. Slosberg upon exercise of stock options which are
exercisable or will become exercisable within 60 days of June 10, 1997.
(8) Reflects ownership as reported on Schedule 13G dated February 12, 1997
filed with the Securities and Exchange Commission by FMR Corp. ("FMR").
Represents shares beneficially owned by (i) FMR through its wholly-owned
subsidiaries Fidelity Management & Research Company, a registered
investment advisor ("Fidelity"), and Fidelity Management Trust Company, a
"bank" under the Securities Exchange Act of 1934 ("FMTC"); (ii) certain
investment companies for which Fidelity serves as an investment advisor
(the "Funds"); (iii) certain institutional accounts for which FMTC serves
as investment manager (the "Institutional Accounts"); and (iv) Edward C.
Johnson 3d, as Chairman of FMR and through certain members of his family by
virtue of their controlling interest as a group of the voting stock of FMR;
and (v) Abigail P. Johnson, as a Director of FMR and through certain
members of her family by virtue of their controlling interest as a group of
the voting stock of FMR. Fidelity is the beneficial owner of 551,900 shares
of Common Stock. Mr. Johnson and FMR, through control of Fidelity and the
Funds, each has sole dispositive power over 551,900 shares of Common Stock.
Neither FMR nor Mr. Johnson has the sole power to vote or direct the voting
of the shares owned by the Funds which power resides with the Funds'
trustees. Fidelity carries out the voting of these shares under written
guidelines established by the Funds' Boards of Trustees. FMTC is the
beneficial owner of 11,400 shares of Common Stock. Mr. Johnson and FMR,
through control of FMTC, each has sole dispositive power over 11,400 shares
of Common Stock and sole power to vote or to direct the voting of 11,400
shares of Common Stock.
(9) Includes 457,452 shares held in trust over which Mr. Collins may be deemed
to have voting and investment power and 15,313 shares of Common Stock which
may be acquired by Mr. Collins and 3,313 shares of Common Stock which may
be acquired by Dorothea McFarland, wife of Mr. Collins and an employee of
the Company, upon exercise of stock options which are presently exercisable
or will become exercisable within 60 days of June 10, 1997.
(10) Includes 92,500 shares held in trust over which Mr. Bronder may be deemed
to have voting and investment power and 8,021 shares of Common Stock which
may be acquired by Mr. Bronder upon exercise of stock options which are
presently exercisable or which will become exercisable within 60 days of
June 10, 1997.
(11) Includes 100,000 shares directly owned by Mr. David Bozzini's wife and
24,000 shares held in trust over which Mr. David Bozzini may be deemed to
have voting and investment power, and 20,000 shares of Common Stock which
may be acquired by Mr. David Bozzini upon exercise of stock options which
are presently exercisable. Mr. David Bozzini's employment with the Company
was terminated effective March 31, 1997.
3
<PAGE> 6
(12) Includes 77,259 shares of Common Stock which may be acquired upon exercise
of stock options which are presently exercisable or will become exercisable
within 60 days of June 10, 1997, which amount represents options for all
current officers and directors.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a later
date or by attending the meeting and voting in person.
VOTING AND SOLICITATION
Each shareholder is entitled to one vote for each share held. Every
shareholder voting for the election of directors (Proposal One) may cumulate
such shareholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of shares that such
shareholder is entitled to vote, or distribute such shareholder's votes on the
same principle among as many candidates as the shareholder may select, provided
that votes cannot be cast for more than six candidates. However, no shareholder
shall be entitled to cumulate votes unless the candidate's name has been placed
in nomination prior to the voting and the shareholder, or any other shareholder,
has given notice at the meeting, prior to the voting, of the intention to
cumulate the shareholder's votes. On all other matters, each share of Common
Stock has one vote. A quorum comprising the holders of the majority of the
outstanding shares of Common Stock on the record date must be present or
represented for the transaction of business at the Annual Meeting. Abstentions
and broker non-votes will be counted in establishing the quorum.
This solicitation of proxies is made by the Company, and all related costs
will be borne by the Company. In addition, the Company may reimburse brokerage
firms and other persons representing beneficial owners of shares for their
expenses in forwarding solicitation material to such beneficial owners. Proxies
may also be solicited by certain of the Company's directors, officers and
regular employees, without additional compensation, personally or by telephone
or telegram.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
Proposals of shareholders of the Company that are intended to be presented
by such shareholders at the Company's 1998 Annual Meeting of Shareholders must
be received by the Company no later than February 20, 1998 in order that they
may be considered for inclusion in the proxy statement and form of proxy
relating to that meeting.
PROPOSAL ONE
ELECTION OF DIRECTORS
NOMINEES
A board of six directors is to be elected at the Annual Meeting of
Shareholders. Unless otherwise instructed, the proxy holders will vote the
proxies received by them for the Company's six nominees named below, all of whom
are presently directors of the Company. In the event that any nominee of the
Company is unable or declines to serve as a director at the time of the Annual
Meeting of Shareholders, the proxies will be voted for any nominee who shall be
designated by the present Board of Directors to fill the vacancy. The Company is
not aware of any nominee who will be unable or will decline to serve as a
director. In the event that additional persons are nominated for election as
directors, the proxy holders intend to vote all proxies received by them in such
a manner (in accordance with cumulative voting) as will assure the election of
as many of the nominees listed below as possible, and, in such event, the
specific nominees to be voted for will be determined by the proxy holders. The
term of office for each person elected as a director will continue until the
next Annual Meeting of Shareholders or until a successor has been elected and
qualified. As presently constituted, the Board has one vacant seat.
4
<PAGE> 7
VOTE REQUIRED
If a quorum is present and voting, the six nominees receiving the highest
number of votes will be elected to the Board of Directors. Abstentions and
"broker non-votes" are not counted in the election of directors.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE POSITION WITH THE COMPANY SINCE
- --------------------------------- --- --------------------------------- --------
<S> <C> <C> <C>
Mark J. Bronder.................. 46 Director, Co-Founder 1986
Audrey MacLean................... 45 Director 1987
Philip A. Marineau............... 50 Director, Chairman of the Board 1996
Kevin O'Rourke................... 42 Director 1994
Pete S. Slosberg................. 46 Director, Co-Founder 1986
Christopher T. Sortwell.......... 40 Director 1995
</TABLE>
There is no family relationship between any current director or executive
officer of the Company.
Mark J. Bronder co-founded the Company and has been a director since 1986.
During 1995, Mr. Bronder was a consultant to Digidesign Corporation, a division
of Avid Technology, Inc., a manufacturer of digital sound editing systems. From
1993 to 1994, Mr. Bronder was Chief Executive Officer and a member of the Board
of Directors of Infonow Corporation, a software company. From March 1988 to
March 1992 Mr. Bronder was Director of Information Systems for Sun Microsystems,
Inc., a computer workstation and software company.
Audrey MacLean has been a director of the Company since 1987. From 1988 to
1993, Ms. MacLean served as Chief Executive Officer of ADAPTIVE, Inc., a
manufacturer of high speed communication switching products. In 1993, ADAPTIVE,
Inc. merged with Network Equipment Technologies, a publicly traded supplier of
wide area networking products that Ms. MacLean co-founded in 1983. Ms. MacLean
has been an early stage investor and board member of a number of rapid growth,
high technology companies including Pure Software, Inc. and Internet Middleware
Corp.
Philip A. Marineau has been a director of the Company since May 1996 and
Chairman of the Board since February 1997. Mr. Marineau has been President,
Chief Operating Officer and a member of the Board of Directors of Dean Foods, a
food and beverage manufacturer, since December 1996. Prior to joining Dean
Foods, Mr. Marineau was with The Quaker Oats Company, a diversified manufacturer
of packaged foods and beverages, from 1972 to 1995, most recently as President,
Chief Operating Officer and Director. Currently, Mr. Marineau is a director of
Arthur J. Gallagher, Co., an insurance brokerage, risk management and financial
services company.
Kevin O'Rourke has been a director of the Company since May 1994. Mr.
O'Rourke has been Chief Financial Officer and a director of O'Rourke Investment
Corporation, a venture capital investment firm, since 1980, and President of Red
Lodge Financial, a commercial finance lender, since April 1991. Mr. O'Rourke was
also Director, Financial Services of High Level Design Systems, Inc., a software
company from May 1995 to November 1995.
Pete S. Slosberg co-founded the Company and has been a director since the
Company's inception in 1986. Since January 1, 1993, he has been employed by the
Company as its spokesperson. Prior to joining the Company as an employee, Mr.
Slosberg was with Siemens from January 1990 to December 1992 as the Director of
Alliances. He was previously with IBM and Rolm in various marketing and finance
positions.
Christopher T. Sortwell has been a director of the Company since October
1995. Since July 1996, Mr. Sortwell has been Executive Vice President and Chief
Financial Officer of Stroh. From August 1990 to June 1996, Mr. Sortwell served
as Senior Vice President and Chief Financial Officer of Stroh, where he has been
employed since 1985.
5
<PAGE> 8
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six (6) meetings
during fiscal 1996. No director attended fewer than 75% of the meetings of the
Board of Directors and committees thereof, if any, upon which such director
served. The Board of Directors has an Audit Committee and a Compensation
Committee. The Board of Directors has no nominating committee or any committee
performing such functions.
The Audit Committee, which consisted of Messrs. Sortwell and Bronder and
O'Rourke during fiscal 1996, is responsible for overseeing actions taken by the
Company's independent auditors and reviews the Company's internal financial
controls. The Audit Committee met one (1) time during fiscal 1996.
The Compensation Committee, which consisted of Ms. MacLean and Messrs.
Bronder and O'Rourke during fiscal 1996, met four (4) times during fiscal 1996.
The Compensation Committee is responsible for determining salaries, incentives
and other forms of compensation for executive officers and other employees of
the Company and administers various incentive compensation and benefit plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Ms. MacLean and Messrs. Bronder and
O'Rourke. As Chief Executive Officer of the Company, Mr. Atkins participates in
all discussions regarding salaries and incentive compensation for all employees
and consultants to the Company, except that he is excluded from discussions
regarding his own salary and incentive compensation.
PROPOSAL TWO
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has selected Coopers & Lybrand LLP, independent
auditors, to audit the consolidated financial statements of the Company for the
fiscal period ending December 31, 1997, and recommends that shareholders vote
for ratification of such appointment. In the event of a negative vote on
ratification, the Board of Directors will reconsider its selection.
Coopers & Lybrand LLP had audited the Company's financial statements
annually since 1989. Representatives of Coopers & Lybrand LLP are expected to be
present at the meeting with the opportunity to make a statement if they desire
to do so and are expected to be available to respond to appropriate questions.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF COOPERS & LYBRAND LLP AS INDEPENDENT AUDITORS.
6
<PAGE> 9
EXECUTIVE COMPENSATION AND OTHER MATTERS
EXECUTIVE COMPENSATION
The following table sets forth total compensation for the fiscal years
ended December 31, 1996, 1995 and 1994 for the Chief Executive Officer and each
of the next four most highly compensated executive officers whose salary and
bonus for 1996 exceeded $100,000 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION(1) NUMBER OF
--------------------------------- SECURITIES
FISCAL OTHER ANNUAL UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS COMPENSATION
- ----------------------------------- ------ -------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Mark F. Bozzini(2)................. 1996 $210,000 -- $6,750 -- --
President, Chief Executive 1995 169,000 $70,000 6,000 120,000 --
Officer and Director 1994 140,000 70,000 6,000 -- --
James E. Collins................... 1996 $130,000 -- $6,750 -- --
Vice President, Operations 1995 120,000 $45,000 6,000 35,000 --
1994 112,000 36,000 6,000 -- --
David M. Bozzini(3)................ 1996 $145,000 -- $6,750 -- --
Vice President, Sales and 1995 120,000 $70,000 6,000 60,000 --
Marketing
1994 95,500 60,000 6,000 -- --
</TABLE>
- ---------------
(1) Other than salary and bonus described herein, the Company did not pay the
persons named in the Summary Compensation Table any compensation, including
incidental personal benefits, in excess of 10% of such executive officer's
salary.
(2) Mr. Mark Bozzini retired from all positions with the Company effective
February 28, 1997.
(3) Mr. David Bozzini's employment with the Company was terminated effective
March 31, 1997.
OPTION GRANTS AND
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
No grants of options to purchase the Company's Common Stock were made
during the fiscal year ended December 31, 1996 to the Named Executive Officers.
The following table sets forth certain information regarding the exercise of
stock options by the Named Executive Officers in the fiscal year ended December
31, 1996 and the value of stock options held as of December 31, 1996 by such
individuals.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT OPTIONS AT
ACQUIRED ON VALUE DECEMBER 31, 1996(#) DECEMBER 31, 1996($)(1)
EXERCISE REALIZED --------------------------- ---------------------------
NAME (#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------- ----------- ------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark F. Bozzini(2)........... -- -- 32,501 87,499 -- --
James E. Collins............. 5,048 $92,757 9,480 25,520 -- --
David M. Bozzini(3).......... 1,528 $28,115 16,251 43,749 -- --
</TABLE>
- ---------------
(1) Fair market value of the Common Stock as of the date of exercise or December
31, 1996, as the case may be, minus the exercise price.
(2) Mr. Mark Bozzini retired from all positions with the Company effective
February 28, 1997.
(3) Mr. David Bozzini's employment with the Company was terminated effective
March 31, 1997.
7
<PAGE> 10
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
Except as set forth below, the Company currently has no employment
contracts with any of the Named Executive Officers, and the Company has no
compensatory plan or arrangement with such Named Executive Officers where the
amounts to be paid exceed $100,000 and which are activated upon resignation,
termination or retirement of any such executive officer upon a change in control
of the Company.
On December 13, 1996, the Company granted options to purchase 150,000
shares at $6.50 per share to Jeffery A. Atkins, Chief Executive Officer, Acting
Chief Financial Officer and Secretary, pursuant to its 1995 Stock Option Plan.
The grant is subject to a one year vesting period with 25% of the shares vesting
on the first anniversary of the date of grant and at a rate of 1/48th of the
shares vesting on a monthly basis thereafter. Mr. Atkins' agreement contains a
provision which accelerates all vesting upon a change of control of the Company,
the effectiveness of a merger or reorganization of the Company or the sale of
all or substantially all of the assets of the Company. In addition, Mr. Atkin's
offer letter entered into in connection with his employment with the Company
provides for severance benefits for twelve months equal to his then-current base
salary in the event his employment is terminated other than for cause.
COMPENSATION OF DIRECTORS
Mr. Marineau receives a quarterly cash fee of $5,000 for serving as a
director. No other directors currently receive cash fees for serving as
directors. The Company's 1995 Director Option Plan provides for the
non-discretionary automatic grant of options to each non-employee director of
the Company ("Outside Director"). Each Outside Director was automatically
granted an option to purchase 15,000 shares upon the effective date of the
Company's initial public offering which vests at a rate of 25% on the first
anniversary of the date of grant and at a rate of 1/48th of the shares per month
thereafter. Each new Outside Director is automatically granted an option to
purchase 15,000 shares upon the date on which such person first becomes a
director which vests at a rate of 25% on the first anniversary of the date of
grant and at a rate of 1/48th of the shares per month thereafter. Subsequently,
each Outside Director is granted an additional option to purchase 5,000 shares
of Common Stock at the next meeting of the Board of Directors following the
Annual Meeting of Shareholders if, on such date, he or she has served as a
director for at least six months, which vests at a rate of 25% on the first
anniversary of the date of grant and at a rate of the shares per month
thereafter. The exercise price of options granted to Outside Directors must be
100% of the fair market value of the Company's Common Stock on the date of
grant. On May 28, 1996, Messrs. Bronder, O'Rourke and Sortwell and Ms. MacLean
were each granted an option to purchase 5,000 shares of the Company's Common
Stock at an exercise price of $18 per share. On July 23, 1996, Mr. Marineau was
granted an option to purchase 15,000 shares of the Company's Common Stock at an
exercise price of $9.25 per share.
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REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
The Compensation Committee (the "Committee") of the Board of Directors
reviews and approves the Company's executive compensation policies. The
following is the report of the Committee describing the compensation policies
and rationales applicable to the Company's executive officers with respect to
the compensation paid to such executive officers for the fiscal year ended
December 31, 1996.
Compensation Philosophy
The Company's philosophy in setting its compensation policies for executive
officers is to maximize shareholder value over time. The primary goal of the
Company's executive compensation program is therefore to closely align the
interests of the executive officers with those of the Company's shareholders. To
achieve this goal, the Company attempts to (i) offer compensation opportunities
that attract and retain executives whose abilities are critical to the long-term
success of the Company, motivate individuals to perform at their highest level
and reward outstanding achievement, (ii) maintain a portion of the executive's
total compensation at risk, tied to achievement of financial, organizational and
management performance goals, and (iii) encourage executives to manage from the
perspective of owners with an equity stake in the Company. To achieve these
goals, the Committee has established an executive compensation program primarily
consisting of three integrated components: base salary, performance-based awards
and stock options.
The base salary component of the total compensation is designed to
compensate executives competitively within the industry and the marketplace. The
Committee reviewed and approved fiscal 1996 base salaries for the Chief
Executive Officer and other executive officers at the beginning of the fiscal
year. In establishing base salaries of executive officers, the Committee
evaluates each executive's salary history, scope of responsibility at the
Company, prior experience, past performance for the Company and recommendations
from management. The Committee also takes into account the salaries for similar
positions at comparable companies, based on each individual Committee member's
industry experience. In reviewing base salaries, the Committee focused
significantly on each executive's historical salary level, which in most
instances was established upon the executive's original employment with the
Company, the prior performance with the Company and the expected contribution to
the Company's future success. In making its salary decisions, the Committee
exercised its discretion and judgment based upon these factors. No specific
formula was applied to determine the weight of each factor.
Annual incentive bonuses for executive officers are intended to reflect the
Committee's belief that a portion of the compensation of each executive officer
should be contingent upon the performance of the Company, as well as the
individual contribution of each executive officer. To carry out this philosophy,
the Board of Directors reviews and approves the financial budget for the fiscal
year. The Committee then establishes specific Company-based performance bonus
targets based upon such budget which accelerates if the actual financial results
exceed the original budget. The Company-based performance goals are tied to
different indicators of Company performance, such as achievement of specific
levels of orders, revenues and pre-tax profits, and are competitively sensitive
to the Company's business and operations. The Committee evaluates the overall
performance of the Company in the completion of these performance goals, and
approves a performance bonus relative to the goals so completed. The Committee
believes that the bonus arrangement provides an excellent link between the
Company's earnings performance and the incentives paid to executives.
The Company provides long-term incentives through its 1995 Stock Option
Plan (the "Plan"). The purpose of the Plan is to attract and retain its best
employee talent available and to create a direct link between compensation and
the long-term performance of the Company. The Committee believes that stock
options directly motivate an executive to maximize long-term shareholder value.
The options also utilize vesting periods that encourage key executives to
continue in the employ of the Company. All options granted to executive officers
to date have been granted at the fair market value of the Company's Common Stock
on the date of grant. The Board considers the grant of each option subjectively,
considering factors such as the individual performance of the executive officer
and the anticipated contribution of the executive officer to the attainment of
the Company's long-term strategic performance goals.
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<PAGE> 12
Impact of Section 162(m) of the Internal Revenue Code
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code on the compensation paid to the Company's executive
officers. Section 162(m) generally disallows a tax deduction for any publicly
held corporation for individual compensation exceeding $1.0 million in any
taxable year for any of the executive officers named in the proxy statement,
unless compensation is performance-based. In general, it is the Company's policy
to qualify, to the maximum extent possible, its executives' compensation for
deductibility under applicable tax laws. As a result, at a Special Meeting of
Shareholders in August 1995, the shareholders approved certain amendments to the
Plan intended to preserve the Company's ability to deduct the compensation
expense relating to stock options granted under the Plan. In approving the
amount and form of compensation for the Company's executive officers, the
Committee will continue to consider all elements of the cost to the Company of
providing such compensation, including the potential impact of Section 162(m).
Respectfully submitted by:
COMPENSATION COMMITTEE
Mark J. Bronder
Audrey MacLean
Kevin O'Rourke
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PERFORMANCE GRAPH
Set forth below is a line graph comparing the annual percentage change in
the cumulative return to the shareholders of the Company's Common Stock with the
cumulative return of the S&P Smallcap 600 Index and of a Peer Group for the
period commencing November 6, 1995 (the date the Company became subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended) and
ending on December 31, 1996. Returns for the indices are weighted based on
market capitalization at the beginning of each fiscal year.
- ---------------
(1) The graph assumes that $100 was invested on November 6, 1995 (the date the
Company first became subject to the reporting requirements of the Securities
Exchange Act of 1934, as amended) in the Company's Common Stock and in the
S&P Smallcap 600 Index and in a Peer Group and that all dividends were
reinvested. No dividends have been declared or paid on the Company's Common
Stock. Shareholder returns over the indicated period should not be
considered indicative of future shareholder returns.
The information contained above under the captions "Report of the
Compensation Committee of the Board of Directors" and "Performance Graph" shall
not be deemed to be "soliciting material" or to be "filed" with the Securities
and Exchange Commission, nor shall such information be incorporated by reference
into any future filing under the Securities Act or Exchange Act, except to the
extent that the Company specifically incorporates it by reference into such
filing.
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<PAGE> 14
CERTAIN TRANSACTIONS WITH MANAGEMENT
In February 1997, the Company entered into an agreement with Mark Bozzini
in connection with his retirement as President, Chief Executive Officer and a
director of the Company, the terms of which provide that the Company shall pay
Mr. Bozzini a monthly retainer until February 1998 for an aggregate amount of
$280,000 in consideration for Mr. Bozzini's exclusive consulting services to the
Company.
In October, 1995, the Company entered into a nine year Manufacturing
Services Agreement ("the Stroh Agreement") with the Stroh Brewery Company
("Stroh") of Detroit, Michigan, pursuant to which, the Company is obligated with
certain limited exceptions, to brew all of its beers at the Stroh breweries.
Stroh is the beneficial owner of approximately 9.65% of the outstanding Common
Stock and Christopher T. Sortwell, a director of the Company, is also the
Executive Vice President and Chief Financial Officer of Stroh. The Company pays
Stroh a manufacturing services price equal to the aggregate of a contractually
specified brewing fee and the cost of materials for all beer shipped. During
fiscal year 1996, the Company paid Stroh an aggregate amount of $28.6 million
and had accrued expenses payable of $2.0 million as of December 31, 1996,
pursuant to the terms of the Stroh Agreement. In connection with the Stroh
Agreement, the Company issued a warrant to Stroh to purchase 1,140,284 shares of
the Company's Common Stock at an exercise price of $14 per share.
The Company believes that the transactions set forth above were made on
terms no less favorable to the Company than could be obtained from unaffiliated
third parties. All future transactions, including loans, between the Company and
its officers, directors, principal shareholders and their affiliates will be
approved by a majority of the Board of Directors, including a majority of the
independent and disinterested outside directors and will continue to be on terms
no less favorable to the Company than could be obtained from unaffiliated third
parties.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and directors, and persons who own
more than ten percent of a registered class of the Company's equity securities
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC") and the National Association of Securities Dealers,
Inc. Executive officers, directors and greater than ten percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely in its review of the copies of such forms
received by it, or written representations from certain reporting persons, the
Company believes that, during the period from November 6, 1995 to December 31,
1996 all executive officers and directors of the Company complied with all
applicable filing requirements.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend.
THE BOARD OF DIRECTORS
Dated: June 20, 1997
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<PAGE> 15
PETE'S BREWING COMPANY
1997 ANNUAL MEETING OF SHAREHOLDERS
July 22, 1997
This Proxy is solicited on behalf of the Board of Directors
The undersigned shareholder of PETE'S BREWING COMPANY, a California
corporation, hereby acknowledges receipt of the Notice of Annual Meeting of
Shareholders and Proxy Statement, each dated June 20, 1997, and hereby appoints
Jeffrey A. Atkins and Philip A. Marineau, and each of them proxies and
attorneys-in-fact, with full power to each of substitution, on behalf and in the
name of the undersigned, to represent the undersigned at the 1997 Annual Meeting
of Shareholders of PETE'S BREWING COMPANY to be held on July 22, 1997 at 1:00
p.m. local time, at the San Francisco Airport Hilton, San Francisco, California
and at any adjournment or adjournments thereof, and to vote all shares of Common
Stock which the undersigned would be entitled to vote if then and there
personally present, on the matters set forth on the reverse.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS
INDICATED, WILL BE VOTED FOR THE ELECTION OF DIRECTORS, FOR THE RATIFICATION OF
THE APPOINTMENT OF COOPERS & LYBRAND LLP AS INDEPENDENT AUDITORS AND AS SAID
PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
(Continued and to be signed on the reverse side)
<PAGE> 16
Please Detach and Mail in the Envelope Provided
A / X / Please mark your votes as in the example.
1. ELECTION OF DIRECTORS:
If you wish to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list at right:
For all nominees Nominees: Philip A. Marineau
listed at right Mark J. Bronder
(except as indicated) WITHHOLD Audrey MacLean
/ / / / Kevin O'Rourke
Pete S. Slosberg
Christopher T. Sortwell
2. PROPOSAL TO RATIFY THE APPOINTMENT OF COOPERS & LYBRAND LLP AS THE
INDEPENDENT AUDITORS OF THE COMPANY FOR THE FISCAL PERIOD ENDING DECEMBER 31,
1997.
FOR AGAINST ABSTAIN
/ / / / / /
and, in their direction, upon each other matter or matters which may properly
come before the meeting or any adjournment or adjournments thereof.
I plan to attend the meeting.......... / /
I do not plan to attend the meeting... / /
- -------------------------- Change of address and note at left.... / /
- --------------------------
- --------------------------
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
PREPAID ENVELOPE.
Signature________________ Signature______________ Dated:_____________, 1997
NOTE: (This Proxy should be marked, dated and signed by the shareholder(s)
exactly as his or her name appears hereon and returned promptly in the
enclosed envelope. Persons signing in a fiduciary capacity should so
indicate. If shares are held by joint tenants or are community property,
both should sign.)
