SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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: |_| Confidential, for Use of the
|_| Preliminary Proxy Statement Commission Only (as permitted
|X| Definitive Proxy Statement by Rule 14a-6(e)(2))
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to |_| Rule 240.14a-11(c) or |_| Rule
240.14a-12
Minnesota 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
|_| $125 per Exchange Act Rule o-11(c)(1)(ii), 14a-6(i)(1) or Item 22(a)(2) of
Schedule 14A
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions 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>
MINNESOTA BREWING COMPANY
882 WEST SEVENTH STREET
SAINT PAUL, MN 55102
(612) 228-9173
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 20, 1998
To the Shareholders of Minnesota Brewing Company:
Notice is hereby given that the Annual Meeting of Shareholders of
Minnesota Brewing Company will be held on Tuesday, May 20, 1998, at 3:00 p.m.
local time, at the Company's offices at 882 West Seventh Street, Saint Paul,
Minnesota, for the following purposes:
1. To elect six (6) directors to serve until the next annual
meeting of shareholders or until their successors are elected;
2. To ratify and approve amendments to the Company's 1993 Stock
Option Plan (the "Plan"); and
3. To act upon any other matters that may properly be presented
at the meeting.
Accompanying this Notice of Annual Meeting is a Proxy Statement,
form of Proxy and the Company's Annual Report to Shareholders for the fiscal
year ended December 31, 1997.
The Board of Directors has fixed the close of business on April 3,
1998, as the record date for the determination of shareholders entitled to
notice of, and to vote at, the meeting.
By Order of the Board of Directors
John J. Lee
PRESIDENT
Saint Paul, Minnesota
April 23, 1998
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY SO THAT YOUR SHARES MAY BE VOTED
AT THE MEETING. SHAREHOLDERS WHO ATTEND THE MEETING MAY REVOKE THEIR PROXIES AND
VOTE IN PERSON IF THEY DESIRE.
<PAGE>
MINNESOTA BREWING COMPANY
PROXY STATEMENT
This Proxy Statement is furnished to the shareholders of Minnesota
Brewing Company (the "Company") in connection with the solicitation of proxies
by the Board of Directors of the Company to be voted at the Annual Meeting of
Shareholders to be held on May 20, 1998, or any adjournment or adjournments
thereof. The cost of this solicitation will be borne by the Company. In addition
to the solicitation by mail, officers, directors and employees of the Company
may solicit proxies by telephone, telegraph or in person. The Company may also
request banks and brokers to solicit their customers who have a beneficial
interest in the Company's Common Stock registered in the name of nominees and
will reimburse such banks and brokers for their reasonable out-of-pocket
expenses.
Any proxy may be revoked at any time before it is voted by receipt
of a proxy properly signed and dated subsequent to an earlier proxy, or by
revocation of a written proxy by request in person at the Annual Meeting; if not
so revoked, the shares represented by such proxy will be voted. The Company's
principal offices are located at 882 West Seventh Street, Saint Paul, MN 55102,
and its telephone number is (612) 228-9173. The mailing of this proxy statement
to shareholders of the Company commenced on or about April 29, 1998.
The total number of shares of capital stock of the Company
outstanding and entitled to vote at the meeting as of April 3, 1998 consists of
3,389,211 shares of $.01 par value common stock (the "Common Stock"). Each share
of Common Stock is entitled to one vote and there is no cumulative voting. Only
shareholders of record at the close of business on April 3, 1998 will be
entitled to vote at the meeting. The presence in person or by proxy of the
holders of a majority of the shares entitled to vote at the Annual Meeting of
Shareholders constitutes a quorum for the transaction of business.
Under Minnesota law, each item of business properly presented at a
meeting of shareholders generally must be approved by the affirmative vote of
the holders of a majority of the voting power of the shares present, in person
or by proxy, and entitled to vote on that item of business. However, if the
shares present and entitled to vote on that item of business would not
constitute a quorum for the transaction of business at the meeting, then the
item must be approved by a majority of the voting power of the minimum number of
shares that would constitute such a quorum. Votes cast by proxy or in person at
the Annual Meeting of Shareholders will be tabulated at the meeting to determine
whether or not a quorum is present. Abstentions will be treated as shares that
are present and entitled to vote for purposes of determining the presence of a
quorum but as unvoted for purposes of determining the approval of the matter
submitted to the shareholders for a vote. If a broker indicates on the proxy
that it does not have discretionary authority as to certain shares to vote on a
particular matter, those shares will not be considered as present and entitled
to vote with respect to that matter.
<PAGE>
SECURITY OWNERSHIP OF PRINCIPAL
SHAREHOLDERS AND MANAGEMENT
The following table includes information as of April 3, 1998 concerning
the beneficial ownership of the holdings of Common Stock of the Company by (i)
all persons who are known by the Company to hold five percent (5%) or more of
the Company's Common Stock; (ii) each of the directors or nominees for director
of the Company; and (iii) all directors and officers of the Company as a group.
<TABLE>
<CAPTION>
Name and Address Shares Beneficially Owned(1) Percent of Class
- ---------------- ------------------------- ----------------
<S> <C> <C>
Minnesota Brewing Management 1,541,084 45.5
Company; Minnesota Brewing
Limited Partnership(2)
882 West Seventh Street
Saint Paul, MN 55102
Bruce E. Hendry(2) 1,541,084 45.5
882 West Seventh Street
Saint Paul, MN 55102
Perkins Capital Management, Inc.(3) 432,850 12.8
730 East Lake Street
Wayzata, MN 55391
John J. Lee(4) 213,946 6.2
882 West Seventh Street
Saint Paul, MN 55102
James A. Potter 5,000 *
Greg C. Heinemann 5,000 *
John R. Rollwagen 5,000 *
Richard A. Perrine 5,000 *
All Officers and Directors 1,796,696 51.6
as a Group (7 persons)
</TABLE>
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* Indicates ownership of less than one percent.
(1) Includes shares of Common Stock issuable upon the exercise of stock
options granted to the following persons and exercisable within 60 days:
Mr. Lee - 66,667 shares; Mr. Potter - 5,000 shares; Mr. Heinemann - 5,000
shares; Mr. Rollwagon - 5,000 shares; Mr. Perrine - 5,000 shares; all
officers and directors as a group - 95,000 shares. The options to
non-employee directors are subject to shareholder approval of amendments
to the Company's 1993 Stock Option Plan.
<PAGE>
(2) Minnesota Brewing Limited Partnership (the "Partnership") is a Minnesota
limited partnership that was established in September 1991 and currently
owns the real property and equipment that the Company leases to produce
its products. Minnesota Brewing Management Company is the General Partner
of the Partnership and owns 4.8% of the Partnership interest in the
Company as General Partner. Minnesota Brewing Management Company has the
right to vote all shares held by the Partnership. Bruce E. Hendry is the
sole shareholder of Minnesota Brewing Management Company and is a limited
partner in the Partnership.
(3) Based on a Schedule 13G dated February 11, 1998. Perkins Capital
Management, Inc. is an investment advisor registered with the Securities
and Exchange Commission. Of the shares listed above, Perkins Capital
Management, Inc. has the sole voting power with respect to 357,500 shares
and the sole dispositive power with respect to 432,850 shares. These
totals include 132,850 shares owned by clients of Perkins Capital
Management, Inc. and 300,000 shares owned by The Perkins Opportunity Fund,
a registered investment company for which Perkins Capital Management, Inc.
serves as investment advisor.
(4) Mr. Lee serves as the trustee for the Company's Employee Stock Ownership
Plan ("ESOP"). The share totals for Mr. Lee include all of the 146,779
shares held by the ESOP. Mr. Lee disclaims any beneficial ownership in the
shares held by ESOP.
PROPOSAL 1
ELECTION OF DIRECTORS
The nominees named below have been nominated by the Board of
Directors of the Company. Each nominee is presently a director of the Company.
Each of the nominees named below upon election will serve until the next annual
meeting or until his successor has been elected and qualified. If, for any
reason, any of the nominees becomes unavailable for election, the proxies
solicited by the Board of Directors will be voted for such nominee as is
selected by the Board of Directors. The Board of Directors has no reason to
believe that any of the nominees are not available or will not serve if elected.
Unless otherwise indicated, each nominee has held his present occupation as set
forth below, or has been an officer with the organization indicated, for more
than the past five years.
- --------------------------------------------------------------------------------
Bruce E. Hendry Chairman of the Board of Directors
Director since 1991 of the Company
Age -- 55
Mr. Hendry has been the Chairman of the Board of the Company since
its formation in 1991. Mr. Hendry has been employed as a registered
representative with the investment banking firm of Dougherty Summit Securities,
LLC (formerly Summit Investment Corporation) since October 1994. Prior to that
date he was employed as a registered representative with Craig-Hallum. He has
been involved in the restructuring of a number of financially distressed
companies that have gone through reorganization, including Kaiser Steel
Corporation, First Republic Bank Corporation, Erie Lackawanna, ET Railcar and
Wickes Cos., Inc. Mr. Hendry is also the sole shareholder of Minnesota Brewing
Management Company, the General Partner of the Partnership. See "Certain
Transactions."
<PAGE>
- --------------------------------------------------------------------------------
John J. Lee President and Chief Executive
Director since 1997 Officer of the Company
Age -- 39
Mr. Lee has been the President and Chief Executive Officer and a
director of the Company since May 1997. From 1989 to 1995, he was the Chief
Executive Officer of Rex Distributing, a beer distributor.
- --------------------------------------------------------------------------------
James A. Potter Investment Executive of
Director since 1997 Dougherty Summit Securities, LLC
Age -- 41
Mr. Potter has been a director of the Company since May 1997. Mr.
Potter has been employed as an Investment Executive of Dougherty Summit
Securities, LLC, an investment banking company since 1994. From 1983 to 1994,
Mr. Potter was an Investment Executive with Craig Hallum.
- --------------------------------------------------------------------------------
Greg C. Heinemann President, Kuester Partners
Director since 1997
Age -- 42
Mr. Heinemann has been a director of the Company since May 1997. Mr.
Heinemann has been employed by Kuester Partners since January 1996, and has
served as President since October 1997. Prior to joining Kuester Partners, Mr.
Heineman had served as Vice President of marketing for Carlson Marketing Group
since 1990.
- --------------------------------------------------------------------------------
John R. Rollwagen Private Investor and Business Advisor
Director since 1997
Age -- 57
Mr. Rollwagen is an investor and business advisor specializing in
information technology and serves as a venture partner at St. Paul Venture
Capital. Mr. Rollwagen has been a director of the Company since May 1997. Mr.
Rollwagen also serves as Chairman and a director of Computer Network Technology
and serves as a director of Minnesota Public Radio.
- --------------------------------------------------------------------------------
Richard A. Perrine Senior Vice President
Director since 1996 The Hays Group, Inc.
Age -- 43
Mr. Perrine has served as a director since November 1996. Mr.
Perrine is a certified public accountant and since May 1996 has been employed by
The Hays Group, Inc., a insurance brokerage firm. From 1991 to 1996, Mr. Perrine
was a Tax Partner with the accounting firm of McGladrey & Pullen, LLP.
<PAGE>
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VOTE REQUIRED
The affirmative vote of a majority of the voting shares represented
at the meeting of the Company's Common Stock is required for election of the
nominees.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED ABOVE.
----------------------
The Board of Directors met five times during 1997. During 1997, each
of the Company's incumbent directors attended at least 75% of all Board and
committee meetings on which he served. In 1997, the Board of Directors had two
standing committees, the Audit Committee and the Compensation Committee. The
Audit Committee is currently composed of Messrs. Perrine, Potter and Rollwagen
and met one time during 1997. Messrs. Perrine, Potter and Rollwagen serve on the
Compensation Committee, which determines the persons to whom options are granted
under the Company's 1993 Stock Option Plan and the amounts of such option
grants. The Compensation Committee did not meet during 1997.
The Company's Directors are not paid any fees for services as
members of the Board or attendance at Board meetings but prior to 1998 received
minor amounts of complimentary products and wearables. The Company is proposing
an amendment to the Minnesota Brewing Company 1993 Stock Option Plan to grant
options to non-employee directors. See Proposal 2 in this Proxy Statement.
In February 1998, the Company set up a Nominating Committee
consisting of Mr. Hendry and Mr. Lee to consider and recommend nominees to the
Board. The Committee will consider nominees recommended by shareholders provided
the shareholder submits the nominee's name in writing addressed to the Secretary
of the Company listing the nominee's qualifications together with a statement
signed by the nominee indicating a willingness to serve.
<PAGE>
EXECUTIVE COMPENSATION
The following table shows, for the fiscal years ending December 31,
1997, 1996 and 1995 the cash compensation paid by the Company, as well as
certain other compensation paid or accrued for those years, to John J. Lee, the
Company's current President and Chief Executive Officer as well as to Richard A.
McMahon, who served as the Company President and Chief Executive Officer prior
to Mr. Lee. Mr. Lee did not serve in any capacity with the Company prior to
1997. No other executive officer of the Company received total cash compensation
exceeding $100,000 during 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION AWARDS LONG TERM COMPENSATION
-------------------------------------------------
STOCK OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY (NUMBER) COMPENSATION(2)
- --------------------------- ---- ------ -------- ------------
<S> <C> <C> <C> <C>
John J. Lee 1997 $70,656 100,000 ____
President and Chief
Executive Officer
Richard A. McMahon(1) 1997 48,347 -0- 615
Former President and 1996 102,647 4,000 1,248
Chief Executive Officer 1995 102,547 -0- 1,550
</TABLE>
- -------------------
(1) Mr. McMahon served as President and Chief Executive Officer until May 1997,
when he was replaced by Mr. Lee.
(2) Consists of contributions to the Minnesota Brewing Company Employee Stock
Ownership Plan of $615 in 1997, $1,248 in 1996 and $1,550 in 1995 for the
account of Mr. McMahon.
OPTION GRANTS IN LAST FISCAL YEAR
The following table summarizes option grants in 1997 under the
Company's 1993 Stock Option Plan to Mr. Lee. No options were granted to Mr.
McMahon in 1997.
INDIVIDUAL GRANTS
-----------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO PRICE
OPTIONS EMPLOYEES IN PER EXPIRATION
NAME GRANTED FISCAL YEAR SHARE DATE
---- ------- ----------- ----- ----
John J. Lee 100,000 80% $4.50 05/20/02
<PAGE>
YEAR-END OPTIONS VALUES
No options were exercised by Mr. Lee during 1997. The following
table sets forth, with respect to Mr. Lee, certain information with respect to
unexercised stock options held as of the end of the fiscal year ended December
31, 1997. Mr. McMahon had no options at December 31, 1997.
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 1997 DECEMBER 31, 1997(1)
----------------------- -----------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
John J. Lee 33,333 66,667 -0- -0-
- -----------------
(1) The value of unexercised options is calculated by determining the fair
market value of the shares underlying the options at December 31, 1997 and the
exercise price of the options.
EMPLOYMENT AGREEMENTS
The Company has no written employment agreements with its executive
officers.
<PAGE>
PROPOSAL 2
APPROVAL OF AMENDMENTS TO THE COMPANY 1993 STOCK PLAN
The Company's Board of Directors has adopted the Minnesota Brewing
Company 1993 Stock Option Plan (the "1993 Plan"). The purpose of the 1993 Plan
is to attract and retain executives and other key employees, directors and
consultants, as well as to reward such persons who contribute to the achievement
of the Company's success, by giving them a proprietary interest in the Company.
The Company is submitting, for shareholder approval, amendments to
the 1993 Plan (i) to increase the number of shares of Common Stock reserved for
issuance under the 1993 Plan from 250,000 shares to 450,000 shares, (ii) to
limit to 100,000 shares the number of options that can be granted to any one
person in one fiscal year, and (iii) to ratify the granting of options to
purchase 15,000 shares to four of the Company's five non-employee directors in
February 1998.
The 1993 Plan authorizes the issuance of up to 250,000 shares of
Common Stock. At April 1, 1998, the Company had outstanding options to purchase
an additional 102,000 shares. In addition, the Company has authorized the grant
of 72,600 additional shares under the 1993 Plan, subject to shareholder
approval. In order to reserve sufficient shares for future options, the Board of
Directors proposes that the number of shares reserved under the 1993 Plan be
increased from 250,000 to 450,000 shares. The Board believes that granting
fairly priced stock options to employees is an effective means to promote the
future growth and development of the Company. Such options increase employees'
proprietary interest in the Company's success and enable the Company to attract
and retain qualified personnel.
The Company has also added a provision to the 1993 Plan that
provides that the Company may not, in any one fiscal year, grant options to
purchase more than 100,000 shares to any one person under the 1993 Plan. The new
provision is designed to ensure that the 1993 Plan complies with Section 162(m)
of the Internal Revenue Code, which limits the deductibility of certain
executive compensation over $1.0 million per year unless certain conditions are
met.
The 1993 Plan was also amended to grant non-qualified stock options
to purchase 15,000 shares to each of the Company's four non-employee directors
other than Mr. Hendry who has declined the right to receive options. The options
vest over a three-year period on the date of the Company's Annual Meeting of
Shareholders. The options were granted at a price of $2.125 per share which was
equal to fair market value on the date of grant.
Pursuant to the authority granted to the Board of Directors under
the 1993 Plan, the Board of Directors has also amended the 1993 Plan to comply
with the new Rule 16b-3, established by the Securities and Exchange Commission,
and Section 162(m) of the Internal Revenue Code. These other amendments include
the clarification that the 1993 Plan may be administered by the entire Board of
Directors or by a committee (the "Committee") of at least two directors who all
meet the definition of a "non-employee director" under Rule 16b-3 and the
definition of an "outside director" under Section 162(m).
<PAGE>
SUMMARY OF 1993 PLAN
A general description of the basic features of the 1993 Plan,
assuming the amendment described above is outlined below. This summary is
qualified in its entirety by the terms of the 1993 Plan, a copy of which, in its
amended form, may be obtained from the Secretary of the Company.
GENERAL. The 1993 Plan provides for the granting to participating
eligible employees of the Company of (i) options to purchase Common Stock that
qualify as "incentive stock options" within the meaning of Section 422 of the
Code ("Incentive Stock Options") and (ii) options to purchase Common Stock that
do not qualify as incentive stock options ("Non-Qualified Options"). The 1993
Plan is administered by the Board, or in its discretion, by a committee of not
less than two non-employee directors who are both "outside directors" as defined
in the 1993 Plan (the "Committee"), which selects the participants to be granted
options under the 1993 Plan, determines the amount of grants to participants and
prescribes discretionary terms and conditions of each grant not otherwise fixed
under the 1993 Plan. As of April 1, 1998, there were approximately 136 employees
of the Company who may be deemed to be eligible employees under the 1993 Plan,
of whom 11 were participants. The 1993 Plan will terminate in 2003, and may be
terminated before that date by action of the Board. No options will be granted
after the termination of the 1993 Plan. The maximum number of shares of Company
Common Stock that may be issued under the 1993 Plan is currently 250,000 and is
proposed to be increased to 450,000.
STOCK OPTIONS. Incentive Stock Options must be granted with an
exercise price equal to at least the fair market value of the Common Stock on
the date of grant (or, in the case of participants owning more than 10% of the
total combined voting power of all classes of stock of the Company, at least
equal to 110% of the fair market value on the date of grant). Non-Qualified
Options may be granted with an exercise price less than 100% of the fair market
value of the Common Stock on the date of grant.
For Incentive Stock Options granted after December 31, 1986, the
aggregate fair market value (determined as of the time the Incentive Stock
Option is granted) of shares of Common Stock with respect to which Incentive
Stock Options become exercisable for the first time by a participant under the
1993 Plan during any calendar year may not exceed $100,000. Incentive Stock
Options have a maximum term fixed by the Board Committee, not to exceed 10 years
from the date of grant (five years in the case of an Incentive Stock Option
granted to participants owning more than 10% of the total combined voting power
of all classes of stock of the Company). Non-Qualified Options have a maximum
term fixed by the Board, not to exceed 10 years from the date of grant. Stock
options become exercisable during their terms in the manner determined by the
Board. Stock options may not be transferred other than by will or the laws of
descent and distribution, and during the lifetime of a participant, they may be
exercised only by the participant.
FEDERAL INCOME TAX CONSEQUENCES. The following description of
federal income tax consequences is based on current statutes, regulations and
interpretations. The description does not include state or local income tax
consequences. In addition, the description is not intended to address specific
tax consequences applicable to an individual participant who receives an award.
INCENTIVE STOCK OPTIONS. There will not be any federal income tax
consequences to either the participant or the Company as a result of the grant
to a participant of an Incentive Stock Option under the 1993 Plan. The exercise
by a participant of an Incentive Stock Option also will not result in any
federal income tax consequences to the Company or the participant, except that
(i) an amount equal to the excess
<PAGE>
of the fair market value of the shares acquired upon exercise of the Incentive
Stock Option, determined at the time of exercise, over the consideration paid
for the shares by the participant will be a tax preference item for purposes of
the alternative minimum tax, and (ii) the participant may be subject to an
additional excise tax if any amounts are treated as "excess parachute payments"
within the meaning of the Code.
If a participant disposes of the shares acquired upon exercise of an
Incentive Stock Option, the federal income tax consequences will depend upon how
long the participant has held the shares. If the participant does not dispose of
the shares within two years after the Incentive Stock Option was granted, nor
within one year after the participant exercised the Incentive Stock Option and
the shares were transferred to the participant (the "Applicable Holding
Periods"), then the participant will recognize a long-term capital gain or loss.
If the Applicable Holding Periods are not satisfied, then any gain realized in
connection with the disposition of such stock will generally be taxable as
ordinary compensation income in the year in which the disposition occurred, to
the extent of the difference between the fair market value of such stock on the
date of exercise and the option exercise price. The Company is entitled to a tax
deduction to the extent, and at the time, the participant realizes compensation
income. The balance of any gain will be characterized as a capital gain. As part
of the Taxpayer Relief Act of 1997, Congress modified the maximum federal income
tax rate for most long-term capital gains recognized after May 6, 1997. Under
the new law, capital gains resulting from property held for more than 18 months
will be taxed at a reduced maximum rate of 20%. Capital gains resulting from
property held for less than 18 months but more than one year will continue to be
taxed at a maximum rate of 28%, and capital gains resulting from property held
for less than one year will continue to be taxed at ordinary income rates.
NON-QUALIFIED OPTIONS. An optionee will not realize taxable
compensation income upon the grant of a non-qualified stock option. As a general
matter, when an optionee exercises a non-qualified stock option, he or she will
realize taxable compensation income at that time equal to the difference between
the aggregate option price and the fair market value of the stock on the date of
exercise. The Company is entitled to a tax deduction to the extent, and at the
time, the participant realizes compensation income.
REGISTRATION WITH SEC
The Company has filed a Registration Statement covering the existing
250,000 shares offered under the 1993 Plan with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, as amended. If Proposal Two
is adopted, the Company intends to file a similar Registration Statement
covering the 200,000 additional shares available for issuance under the 1993
Plan.
VOTE REQUIRED
Shareholder approval of the amendments to the 1993 Plan requires the
affirmative vote by the holders of a majority of shares of Common Stock
represented at the Annual Meeting and entitled to vote.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
APPROVAL OF THE AMENDMENTS TO THE 1993 PLAN AS SET FORTH IN PROPOSAL TWO.
<PAGE>
CERTAIN TRANSACTIONS
On August 29, 1991 Bruce E. Hendry, the Company's current Chairman
and Chief Executive Officer, entered into an Asset Purchase Agreement with G.
Heileman Brewing Company ("Heileman") to purchase the real property commonly
known as the Jacob Schmidt Brewery in Saint Paul, Minnesota, certain equipment
and other tangible assets in connection therewith, the trademark "Grain Belt,"
and certain assets relating to the marketing and distribution of beer. Heileman
was operating as debtor-in-possession under the United States Bankruptcy Code in
the Southern District of New York.
Minnesota Brewing Limited Partnership (the "Partnership") was formed
by Mr. Hendry and other private investors in September 1991. Mr. Hendry assigned
the Asset Purchase Agreement to the Partnership, and the Partnership acquired
the brewery and equipment from Heileman for approximately $2.75 million. The
Company, however, acquired the Grain Belt trademark directly from Heileman. The
General Partner of the Partnership is Minnesota Brewing Management Company. Mr.
Hendry is the President and sole shareholder of Minnesota Brewing Management
Company. Mr. Lee, Mr. Perrine, Mr. Potter and Mr. Rollwagen each of whom is a
director of the Company are limited partners in the Partnership.
On September 11, 1991 the Company was incorporated under Minnesota
law. In October 1991, the Partnership contributed $2,600,000 to the Company and
received 1,541,084 shares of Common Stock. Concurrent with the closing of the
Company's initial public offering in 1993, the Partnership assumed approximately
$825,140 in obligations of the Company owed to the Housing and Redevelopment
Authority of the City of Saint Paul as well as to the City of Saint Paul.
The Company currently leases the real property and related assets
from the Partnership. The Company has entered into a real estate lease with the
Partnership for the real property associated with the brewery at a rate of
$25,000 per month and has entered into an equipment lease with the Partnership
at the rate of $1.00 per barrel of production. These leases expire in 2003 and
give the Company the right to purchase the facility and equipment at any time
over the term of the lease beginning December 1, 1995 for eight times trailing
12-month lease payments. The lease agreement also allows the Partnership to
acquire additional equipment or replacement equipment needed by the Company and
lease it to the Company over the taxable depreciable life of the equipment with
an interest rate of two points over the applicable treasury rate. The total
lease payments made or accrued by the Company under the leases from the
Partnership was $618,000, $712,000 and $902,000 for the years ended December 31,
1997, 1996 and 1995, respectively.
In March and April 1998, the Company entered into two additional
agreements with the Partnership under which the Partnership loaned the Company
an additional $475,000 and agreed to provide the Company with a $2.5 million
line of credit. See the section entitled "Management's Discussion and Analysis
of Financial Calculations and Results of Operations - Liquidity and Capital
Resources" in the Company's 1997 Annual Report," a copy of which is enclosed
with this Proxy Statement.
During 1997, the Company purchased $182,000 of insurance through The
Hays Group, Inc., an insurance broker of which Mr. Perrine is Vice President.
<PAGE>
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership of Common Stock and other equity securities of the Company with the
Securities and Exchange Commission. Executive officers and directors are
required by SEC regulations to furnish the Company with copies of all Section
16(a) forms they file. To the Company's knowledge, all insiders of the Company
filed in a timely manner all such reports.
SHAREHOLDER PROPOSALS
If a shareholder desires to present a proposal to be voted on at the
next meeting of shareholders of Minnesota Brewing Company, such proposal, in
order to be included in the proxy statement, must be received at the Company's
offices at 882 West Seventh Street, Saint Paul, Minnesota 55102, by December 27,
1998.
ANNUAL REPORT
An Annual Report of the Company setting forth the Company's
activities and containing financial statements of the Company for the fiscal
year ended December 31, 1997 accompanies this Notice of Annual Meeting and proxy
solicitation material.
The accounting firm of McGladrey & Pullen, LLP has served as
independent public accountants for the Company since the Company's inception in
September 1991. The Company has selected McGladrey & Pullen, LLP to serve as
independent public accountants for the Company for the fiscal year ended
December 31, 1998. The Company expects that a representative from McGladrey &
Pullen, LLP will attend the Annual Meeting and be available to respond to
appropriate shareholder questions.
FORM 10-K
A copy of the Company's Annual Report on Form 10-K as filed with the
Securities and Exchange Commission is available without charge to shareholders
of the Company. A copy of the Form 10-K may be obtained from the Company at 882
West Seventh Street, Saint Paul, Minnesota 55102.
OTHER BUSINESS
The management of the Company does not know of any other business to
be presented at the Annual Meeting of Shareholders. If any matter properly comes
before the meeting, however, it is intended that the persons named in the
enclosed form of proxy will vote said proxy in accordance with their best
judgment.
ALL PROXIES PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
BY SHAREHOLDERS. IF NO DIRECTION IS MADE, PROXIES WILL BE VOTED IN FAVOR OF THE
DIRECTORS.
By Order of the Board of Directors
John J. Lee
PRESIDENT
<PAGE>
PROXY MINNESOTA BREWING COMPANY
PROXY SOLICITED BY BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 1998
The undersigned hereby appoints Bruce R. Hendry and John J. Lee, or either
of them, proxies with full power of substitution to vote all shares of stock of
Minnesota Brewing Company of record in the name of the undersigned at the close
of business on April 3, 1998, at the Annual Meeting of Shareholders to be held
in Saint Paul, Minnesota on May 20, 1998, or at any adjournment or adjournments
thereof, hereby revoking all former proxies:
1. ELECTION OF DIRECTORS:
[ ] FOR all nominees listed below [ ] WITHHOLD AUTHORITY
(except as indicated to the to vote for nominees listed
contrary) below
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
strike a line through the nominee's name in the list below).
BRUCE R. HENDRY JOHN J. LEE JOHN R. ROLLWAGEN
JAMES A. POTTER GREG C. HEINEMANN RICHARD A. PERRINE
2. PROPOSAL TO RATIFY AND APPROVE AMENDMENTS TO THE COMPANY'S 1993 STOCK
OPTION PLAN.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(CONTINUED ON OTHER SIDE)
<PAGE>
(CONTINUED FROM OTHER SIDE)
3. IN THEIR DISCRETION, UPON ANY OTHER MATTERS COMING BEFORE THE MEETING.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE VOTED IN
FAVOR OF THE PROPOSALS.
Dated: ___________________________, 1998
________________________________________
Signature
________________________________________
Signature if held jointly
Please sign name(s) exactly as shown at
left. When signing as executor,
administrator, trustee or guardian, give
full title as such; when shares have
been issued in names of two or more
persons, all should sign.
