SweetWater, Inc.
2505 Trade Centre Avenue, Suite D
Longmont, CO 80503
303/530-2715
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FRIDAY, MAY 14, 1997
TO THE SHAREHOLDERS OF SWEETWATER, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of
SweetWater, Inc., a Delaware corporation (the "Company"), will be held at 667
Madison Avenue, Suite 2500, New York, New York 10021 at 9:30 a.m. (EST), on May
14, 1997 to consider and vote on the following matters as described in this
notice and the accompanying Proxy Statement:
1. To elect eight (8) members to the Company's Board of Directors to serve
for one year terms and until their successors are elected and qualified; and
2. To ratify the selection by the Company s Board of Directors of Arthur
Andersen LLP as independent auditors of the Company for the 1997 calendar year.
To transact such other business as may properly come before the meeting or
any adjournments.
The Board of Directors has fixed the close of business on April 4, 1997 as
the record date for determination of shareholders entitled to notice of and to
vote at the Annual Meeting or any adjournments thereof, and only record holders
of Common Stock at the close of business on that day are entitled to notice of
and to vote at the Annual Meeting. A copy of the Company s Annual Report on Form
10-K, including financial statements for the year ended December 31, 1996, is
enclosed with this Notice but is not to be considered part of the proxy
soliciting materials.
Each shareholder is cordially invited to attend the Annual Meeting in
person. TO ASSURE REPRESENTATION AT THE ANNUAL MEETING, HOWEVER, SHAREHOLDERS
ARE URGED TO SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN
THE POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. Any shareholder
attending the Annual Meeting may vote in person even if he or she previously
returned a proxy.
By Order of the Board of Directors
April 25, 1996 /s/ Patrick E. Thomas
-------------------------
Patrick E. Thomas, Secretary
<PAGE>
SweetWater, Inc.
2505 Trade Centre Avenue, Suite D
Longmont, CO 80503
303/530-2715
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
Meeting Date: May 14, 1997
General Information
This Proxy Statement and the accompanying form of proxy is being sent on or
about April 25, 1997 in connection with the solicitation of proxies by the Board
of Directors of SweetWater, Inc., a Delaware corporation ("Company"). The
proxies are for use at the 1997 Annual Meeting of Shareholders of the Company,
which will be held at 667 Madison Avenue, Suite 2500, New York, New York 10021
at 9:30 a.m. (EST) on May 14, 1997, and at any meetings held upon adjournment or
postponement thereof ("Annual Meeting"). The record date for the Annual Meeting
is the close of business on April 4, 1997 ("Record Date"), and all holders of
record of the Company s Common Stock on the Record Date are entitled to notice
of the Annual Meeting and to vote at the Annual Meeting and at any meetings held
upon postponement or adjournment thereof. The Company s principal executive
offices are located at 2505 Trade Centre Avenue, Suite D, Longmont, Colorado
80503 and its telephone number is 303/530-2715.
A proxy card is enclosed. Whether or not you plan to attend the Annual
Meeting in person, please complete, date, sign and return the enclosed proxy
card as promptly as possible, in the postage-prepaid envelope provided, to
ensure that your shares will be voted at the Annual Meeting. Any record
shareholder who returns a proxy in such form has the power to revoke it at any
time prior to its effective use by filing an instrument revoking it or a duly
executed proxy bearing a later date with the Secretary of the Company or by
attending the Annual Meeting, requesting the return of the proxy and voting in
person. Unless contrary instructions are given, any such proxy, if not revoked,
will be voted in accordance with the instructions contained in the proxy. If no
instructions are given, the proxy will vote the shares at the Annual Meeting for
(i) the Board of Directors slate of nominees for election as directors, (ii)
ratification of the selection of Arthur Andersen LLP as independent auditors of
the Company, and (iii) in accordance with his judgment on any matters which may
properly come before the Annual Meeting.
The voting securities of the Company are the outstanding shares of Common
Stock. Holders of Common Stock have one vote for each share on any matter that
may be presented for consideration and action by the shareholders at the Annual
Meeting. At the Record Date, the Company had 3,082,096 shares of Common Stock
issued and outstanding and entitled to vote. The presence, either in person or
by proxy, of persons entitled to vote a majority of the Company s outstanding
Common Stock is necessary to constitute a quorum for the transaction of business
at the Annual Meeting. Abstentions and broker non-votes are counted for purposes
of determining a quorum. A broker s non-vote occurs when a nominee holds shares
for a beneficial owner but cannot vote on a proposal because the nominee does
not have discretionary voting power and has not received instructions from the
beneficial owner. As directors are elected by a plurality vote, the eight
nominees receiving the highest vote totals will be elected and the outcome of
the vote for directors will not be affected by abstentions or broker s
non-votes. As the ratification of the selection of the auditors requires the
affirmative vote of a majority of the shares represented at the Annual Meeting
and entitled to vote, an abstention with respect to these proposals will have
the same effect as a negative vote. As broker's non-votes will not be considered
entitled to vote on this proposal, the outcome of this vote will not be affected
by broker s non-votes.
<PAGE>
The cost of preparing, assembling, printing and mailing this Proxy
Statement and the accompanying form of proxy, and the cost of soliciting proxies
relating to the Annual Meeting, will be borne by the Company. The Company may
request banks and brokers to solicit their customers who beneficially own Common
Stock listed of record in names of nominees and will reimburse such banks and
brokers for their reasonable out-of-pocket expenses of such solicitations. The
original solicitation of proxies by mail may be supplemented by telephone,
telegram and personal solicitation by officers, directors and regular employees
of the Company, but no additional compensation will be paid to such individuals.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables sets forth information regarding the beneficial
ownership of the Company s Common Stock as of March 31, 1997 by (i) each person
who is known by the Company to own beneficially more than 5% of the Company s
Common Stock, (ii) each director and nominee for director, (iii) each of the
executive officers of the Company, and (iv) all directors and executive officers
as a group. Except as otherwise noted, the Company knows of no agreements among
its shareholders which relate to voting or investment power over its Common
Stock.
<TABLE>
<CAPTION>
Beneficial Owner Shares Beneficially Owned(1)
Number Percent
------ -------
<S> <C> <C>
Directors:
A. Clinton Allen (2) 10,000 *
Thomas A. Barron(3) 90,083 2.9%
Blair W. Effron (2) 28,750 *
Peter W. Gilson (4) 30,792 *
Randall A. Hack (5) 22,500 *
Keith R. Lively (2) 10,000 *
Eric M. Reynolds (6) 146,092 4.7%
Juan A. Rodriguez (7) 172,666 5.6%
Ralph Z. Sorenson (4) 27,083 *
All executive officers & directors
as a group (includes 11 persons)(8) 575,526 17.4%
Other 5% Shareholders:
Nassau Capital Partners L.P.
22 Chambers Street
Princeton, NJ 08542 621,598(9) 20.2%
Swiss Army Brands, Inc.
One Research Drive
Shelton, CT 06484 611,000 19.8%
Hudson River Capital LLC
667 Madison Avenue
Suite 2500
New York, NY 10021 420,536(10) 13.3%
Charles Elsener
CH-6438
Ibach, Switzerland 197,500 6.4%
- ----------
* Less than 1%
<PAGE>
<FN>
(1) Unless otherwise indicated, the persons named in the table have sole
voting and investment power with respect to all shares shown as beneficially
owned by them, subject to community property laws where applicable. The shares
of Common Stock shown as beneficially owned include stock options exercisable on
or within 60 days after March 31, 1997. With respect to information regarding 5%
shareholders, the Company has relied on information provided in publicly-filed
documents and, in certain cases, on supplementary information provided by the
shareholder. (2) Includes 10,000 shares of Common Stock issuable upon exercise
of vested options. (3) Includes 55,500 shares of Common Stock issuable upon
exercise of vested stock options. (4) Includes 23,000 shares of Common Stock
issuable upon exercise of vested stock options. (5) Includes 10,000 shares of
Common Stock issuable upon exercise of vested stock options. Does not include
621,598 shares held by Nassau Capital Partners L.P. or 3,402 shares held by NAS
Partners I L.L.C. Mr. Hack is one of four members of Nassau Capital L.L.C. which
serves as the sole general partner of Nassau Capital Partners, L.P., and one of
two members of NAS Partners I L.L.C. (6) Includes 21,092 shares of Common Stock
issuable upon exercise of vested stock options. (7) Includes 23,000 shares of
Common Stock issuable upon exercise of vested stock options; also includes
41,666 shares held by an irrevocable trust for the benefit of Mr. Rodriguez s
children. Mr. Rodriguez s wife serves as the trustee of the trust. (8) Includes
an aggregate of 222,552 shares issuable upon exercise of vested stock options.
(9) Does not include 3,402 shares held by NAS Partners I L.L.C., the members of
which are also members of Nassau Capital L.L.C. which serves as the sole general
partner of Nassau Capital Partners, L.P. (10) Includes 79,591 shares issuable
upon exercise of a common stock purchase warrant.
</FN>
</TABLE>
PROPOSAL I
ELECTION OF DIRECTORS
The Company s Bylaws provide that the Board of Directors shall consist of
not less than one nor more than eleven (11) members. Each director is elected
for a term of one year or until his or her successor is elected. The Board of
Directors currently consists of nine (9) members and, effective at the
conclusion of the term of office of the current directors, the number of
directors constituting the Board shall be reduced to eight.
Shareholders will be asked at the Annual Meeting to elect eight (8)
directors. The Board has nominated the eight individuals named below to serve as
directors of the Company. Unless otherwise specified, all proxies received in
response to this solicitation will be voted FOR the election of the nominees
named below. Each of the nominees named below is now a director of the Company
and has served continuously as a director since the year indicated. All nominees
have indicated a willingness to serve if elected. If events not now known or
anticipated make any of the nominees unable to serve, the persons named in the
accompanying form of proxy may vote for the election of such substitute nominees
as the Board of Directors may propose or the Board may reduce the number of
directors comprising the Board. The accompanying form of proxy contains a
discretionary grant of authority with respect to this matter.
<TABLE>
<CAPTION>
Name Positions With the Company Age Director Since
- ---- -------------------------- --- --------------
<S> <C> <C> <C>
A. Clinton Allen Director 52 1995
Thomas A. Barron Chairman of the Board 45 1993
Blair W. Effron Director 33 1995
Peter W. Gilson Director 56 1993
Randall A. Hack Director 49 1995
Keith R. Lively Director 46 1995
Eric M. Reynolds President, 44 1993
Chief Executive Officer
& Director
Ralph Z. Sorenson Director 62 1993
</TABLE>
<PAGE>
Shareholder Approval
The affirmative vote of a plurality of the shares of common stock of the
Company represented at the Annual Meeting either in person or by proxy, assuming
a quorum is present, is required for the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" THE
ELECTION OF THE NOMINEES FOR THE BOARD OF DIRECTORS AS SET FORTH IN PROPOSAL 1.
INFORMATION CONCERNING DIRECTORS
A. Clinton Allen has served as a director since November 1995. Mr. Allen
has served as Chairman and Chief Executive Officer of A.C. Allen and Company, a
private consulting firm, since 1988. He serves as Vice Chairman of the Board of
both Psychemedics Corporation, Inc. and The DeWolfe Companies, Inc., and on the
boards of Swiss Army Brands, Inc., Victory Ventures LLC, and Connectivity
Technologies Inc. Mr. Allen was the original outside director of Blockbuster
Entertainment Corporation and Chairman of the Compensation Committee and served
until the company was acquired by Viacom / Paramount in September of 1994. Mr.
Allen also serves as a Trustee of Miss Porter s School in Farmington,
Connecticut. He is a member of the Board of Advisors of Vespoli, U.S.A., Inc., a
founder and director of The Joey Fund and serves on the Board of Advisors of
Stonehill College as well as the Executive Committee of the Friends of Harvard
and Radcliffe Crew and the Friends of Harvard Football. He is also a member of
the Major Gifts Committee of Harvard University and the Harvard University
Visiting Committee on University Resources.
Thomas A. Barron has served as a director since June 1993 and as Chairman
of the Board since November 1995. Mr. Barron is an author and has been Chairman
of Evergreen Management Corp., a private investment firm, since January 1990.
From November 1983 through November 1989, Mr. Barron was President, Chief
Operating Officer and a director of The Prospect Group, Inc., a publicly held
New York based holding company that conducted its major operations through
subsidiaries and affiliates engaged in the railroads and specialized consumer
products industries. Prior to that he served as a general partner of Sierra
Ventures, a venture capital limited partnership. Mr. Barron also serves as a
director of Swiss Army Brands, Inc. Mr. Barron, a Rhodes Scholar, has served as
a Trustee of Princeton University, and on national and regional boards of The
Wilderness Society and The Nature Conservancy.
Blair W. Effron has served as a director since November 1995. Mr. Effron
joined Dillon, Read & Co. Inc., a New York based investment bank, in 1987 and
currently serves as a Managing Director. Since 1993, Mr. Effron has been head of
the firm s consumer products group, where he has responsibility for several
clients including Anheuser-Busch Companies, Inc., General Mills, Inc., H. J.
Heinz Company, and Playtex Products Inc. Mr. Effron also heads Dillon, Read s
Financial Sponsor Group. Mr. Effron has been a founding investor in several
consumer products related enterprises including USA Detergents, Inc. and
American Value Brands, Inc. a processor and marketer of value brand food
products for mass merchandisers. Mr. Effron received a B.A. from Princeton
University in 1984 and an M.B.A. from Columbia University in 1987.
Peter W. Gilson has served as a director since June 1993. Mr. Gilson has
been President and Chief Executive Officer of Physician Support Systems, Inc. a
company specializing in the management of physician s practices, since 1991.
From 1989 to the present, Mr. Gilson has also served as Chief Executive Officer
of the Warrington Group, Inc., a manufacturer of safety products. From 1987 to
1988, he served as Chief Operating Officer of Timberland and was instrumental in
their Initial Public Offering and successful introduction of clothing and
outdoor wear product lines. From 1978 to 1986, he served as President of the
Gortex Fabrics Division of W. L. Gore Associates. Mr. Gilson is a director and
Chairman of the Executive Committee of Swiss Army Brands, Inc. and Glenayre
Technologies, Inc.
<PAGE>
Randall A. Hack has served as a director since November 1995. Since January
1995, Mr. Hack has served as a partner of Nassau Capital L.L.C., which manages a
$1 billion portfolio of investments in private companies and assets on behalf of
Princeton University s endowment. From 1990 to January 1995, Mr. Hack served as
President and CEO of the Princeton University Investment Company, which has
overall management responsibility for Princeton s $4 billion endowment fund.
From 1988 to 1990, Mr. Hack was the President and CEO of Capstone Equities, Inc.
and, from 1979 to 1988, President and CEO of Matrix Development Company, a
commercial and industrial development firm in New Jersey. Mr. Hack received a
B.A. from Princeton University in 1969 and an M.B.A. from Harvard University in
1972.
Keith R. Lively has served as a director since October 1995. Mr. Lively is
a private investor and has been a consultant to the Shansby Group since October
1995. He was a consultant to Hudson River Capital LLC from January through
December 1995. From 1988 through September 1994, Mr. Lively was the President,
Chief Executive Officer and a director of The Famous Amos Chocolate Chip Cookie
Corporation. From September 1992 through September 1994, Mr. Lively was also
Senior Vice President and a member of the Executive Committee of President
Baking Company, which purchased The Famous Amos Chocolate Chip Cookie
Corporation in September 1992. Mr. Lively is also a director of Swiss Army
Brands, Inc.
Eric M. Reynolds has served as President, Chief Executive Officer and a
director of the Company since January 1993. Mr. Reynolds founded Marmot Mountain
Works, Ltd., ("Marmot") in 1974. Under his leadership Marmot grew into an
industry leader in the design, manufacture and marketing of mountaineering,
backpacking and ski outerwear products. From 1974 to 1987, when he sold his
interest in Marmot, Mr. Reynolds served in various capacities including
President, Chief Executive Officer, Chairman of the Board and Vice President of
Sales, Marketing and Product Development. From 1987 through 1989, Mr. Reynolds
continued to serve as a consultant to Marmot in the marketing and product
development areas. From 1987 through 1990, Mr. Reynolds also served as a
marketing consultant to additional companies, including W. L. Gore & Associates.
Mr. Reynolds also serves as a director of Swiss Army Brands, Inc. and Hudson
River Capital LLC.
Ralph Z. Sorenson has served as a director since June 1993. From July 1992
to July 1993, he served as the Dean of the College of Business and
Administration at the University of Colorado where he still holds an appointment
as Professor Emeritus. From September 1989 through June 1992, he served as an
Adjunct Professor of Management at Harvard Business School. From June 1981
through July 1989, he served as Chairman and Chief Executive Officer of Barry
Wright Corporation, a diversified industrial company. From 1974 to 1981, he
served as President of Babson College in Wellesley, Massachusetts. He is a
director of Exabyte Corporation, Eaton Vance Corporation, Polaroid Corporation,
Houghton Mifflin Company, Whole Foods Market, Inc., and Xenometrix, Inc.
Directors of the Company are elected annually to serve until the next
annual meeting of shareholders or until their successors are duly elected. Swiss
Army Brands, Inc., Hudson River Capital LLC. and Nassau Capital Partners L.P.
each have the right to nominate one person to serve on the Company s Board of
Directors, and the Company has agreed to use its best efforts to secure the
election of each such nominee to the Board of Directors. Keith R. Lively, A.
Clinton Allen and Randall A. Hack were nominated by Swiss Army Brands, Inc.,
Hudson River Capital LLC. and Nassau Capital Partners, L.P., respectively. Each
were elected as directors pursuant to such arrangements. The Company knows of no
other arrangements or understandings between a director or nominee and any other
person pursuant to which he has been selected as a director or nominee. There
are no family relationships between any of the nominees, directors or executive
officers of the Company.
Board Committees and Actions
During calendar year 1996, the Board of Directors met nine times. Each
director attended at least 75% of the total number of meetings of the Board and
of committees on which the director served, except Messrs. Gilson and Lively who
each attended 73% of such meetings. The Board of Directors has three standing
committees; an Executive Committee, a Compensation Committee, and an Audit
Committee.
<PAGE>
During 1996, the Company s Audit Committee was comprised of Juan Rodriguez
(Chairman), Keith R. Lively and Randall A. Hack. The function of the Audit
Committee is to recommend the engagement of independent auditors, meet
periodically with the independent auditors and review the scope and results of
their annual audit of the Company, review accounting policies and internal
accounting controls and to consult as to audit, accounting and financial
matters. The Audit Committee met one time during the 1996 fiscal year.
During 1996, the Company s Compensation Committee was comprised of Ralph Z.
Sorenson (Chairman), A. Clinton Allen, Blair W. Effron and Keith R. Lively. The
function of the Compensation Committee is to review compensation paid to
executive officers, employees and other person performing substantial services
for the Company and to administer the 1993 Stock Option Plan. The Compensation
Committee met one time during the 1996 fiscal year.
During 1996, the Company s Executive Committee was comprised of Thomas A.
Barron (Chairman), Peter W. Gilson, Ralph Z. Sorenson and Juan Rodriguez. The
Executive Committee has all of the power of the Board of Directors in the
management of the business affairs of the Company, except as such powers are
limited by the Delaware General Corporation Law. It was necessary for the
Executive Committee to meet twice in 1996.
Director s Compensation Fees
In 1996, non-employee Directors of the Company received a flat fee of $250
for attending board meetings in person and $100 for attending board meetings via
telephone. Directors were also reimbursed for their out-of-pocket expenses,
including travel, incurred in the performance of their duties as directors.
In April 1994, the Board granted options to purchase a total of 85,000
shares of the Company Common Stock to directors of the Company at an exercise
price of $8.125 per share. On November 7, 1995, 40,000 shares were exercisable
in total for all directors and the remaining non-exercisable options were
canceled. On November 7, 1995 and January 29, 1996, the Board granted an
aggregate of 240,000 and 50,000 additional options, respectively, to
non-employee directors to purchase shares of Common Stock at $4.00 per share. A
director s ability to exercise these options generally vests over a four year
period and is limited in the event they cease to be a director. No options have
been exercised by non-employee directors to date.
In August 1996, Swiss Army Brands, Inc. agreed that, in the event Mr.
Barron introduces and facilitates an investment in SweetWater by a qualified
Outside Investor, as defined, who could assist in bringing SweetWater's products
to market and, on or before December 31, 1998, such investor acquires shares of
SweetWater Common Stock representing at least 20% of the issued and outstanding
Common Stock of SweetWater at an average purchase price of no less than $4.00
per share, Swiss Army Brands, Inc. would exchange an outstanding option to
purchase shares of common stock of Swiss Army Brands, Inc. (which is only
exercisable by Mr. Barron if SweetWater achieves a certain level of after tax
earnings) for a new option entitling him to purchase 50,000 shares of common
stock of Swiss Army Brands at an exercise price equal to the then fair market
value of shares of common stock of Swiss Army Brands Inc.
<PAGE>
EXECUTIVE OFFICERS
Executive Officers
<TABLE>
<CAPTION>
The following discussion sets forth information about the executive
officers of the Company.
Name Positions With the Company Age Officer Since
- ---- -------------------------- --- -------------
<S> <C> <C> <C>
Jerry L. Cogdill Chief of Operations 52 1994
Eric M. Reynolds President &
Chief Executive Officer 44 1993
Patrick E. Thomas Vice President &
Chief Financial Officer 42 1994
</TABLE>
Jerry L. Cogdill has served as Vice President of Operations since November
1994. Mr. Cogdill served as Vice President & Chief Operating Officer for
Management Solutions, Inc., a privately held computer products company from 1993
to 1994. From 1986 to 1993, he was Director of Strategic Alliances at US West,
Inc., a public telecommunications company. Prior to 1986, Mr. Cogdill held
engineering, marketing and sales positions at IBM Corporation for 20 years. Mr.
Cogdill has a B.S.M.E. degree and an M.B.A.
Patrick E. Thomas, CPA has served as Vice President and Chief Financial
Officer since November 1994. Mr. Thomas was Chief Financial Officer for Bird
Medical Technologies, Inc., a $50 million publicly traded medical products
manufacturer from 1990 to 1993. From 1993 to 1994 he held positions as Vice
President of Finance for Head Sports USA, Inc. a $50 million sporting goods
manufacturer and distributor, and then Chief Accounting Officer and Controller
for Synergen, Inc., a 600 employee publicly traded biotechnology pharmaceutical
development company. Mr. Thomas also served as Chief Financial Officer and
Director for LIFECARE International, Inc., a privately owned $20 million
international medical products manufacturer from 1984 to 1990. Mr. Thomas
received his B.S. in Accounting from University of Illinois in 1976.
Executive Compensation
The following table sets forth certain information regarding compensation
paid by the Company to its Chief Executive Officer for the years ended December
31, 1996, 1995 and 1994. No executive officer received in excess of $100,000 of
compensation in 1996.
<TABLE>
<CAPTION>
Long Term Compensation
----------------------
Annual Compensation Awards Payouts
----------------------------------------------------------------
Other
Annual Restricted All other
Compen- Stock Options/ LTIP compen-
Name & Principal Year Salary ($) Bonus sation ($) Award ($) SARs ($) Payouts ($) sation ($)(1)
Position ---- ---------- ----- ---------- --------- -------- ----------- -------------
- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ERIC M. REYNOLDS 1996 $95,000 -0- -0- -0- -0- -0- $3,106
Chief Executive Officer 1995 $89,518 -0- -0- -0- 56,250(1) -0- $3,580
1994 $59,685 -0- -0- -0- -0- -0- -0-
<FN>
(1) Represents the Company s Contribution to Mr. Reynolds 401(k) account.
</FN>
</TABLE>
<PAGE>
Option/SAR Grants in Last Fiscal Year
No stock options were granted to Mr. Reynolds in 1996.
The following table sets forth certain information regarding the number and
value of unexercised stock options held by Mr. Reynolds as of the end of the
Company s 1996 fiscal year.
<TABLE>
<CAPTION>
Aggregate Option/SAR Exercises in Last Fiscal Year
and FY-End Option SAR Values
Number of Securities Value of Unexercised In-the-
Shares Acquired Underlying Unexercised Money Options at FY-End
NAME On Exercise Value Realized ($) Options at FY-END (#) ($)(1)
------------------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric M. Reynolds -0- -0- 15,234 41,016 -0- -0-
</TABLE>
(1) No value is set forth herein as the fair market value of a share of
Common Stock at December 31, 1996, was lower than the exercise price of the
option.
SweetWater, Inc. 401(k) Profit Share Plan and Trust
Pursuant to the SweetWater, Inc. 401(k) Profit Sharing Plan and Trust (the
"401(k) Plan"), which was established effective January 1, 1995, the Company has
agreed to contribute matching contributions in the form of Company common stock
at the rate of 50% of the first 8% of employee salary deferral. Under the 401(k)
Plan, the Company may also elect to make discretionary contributions. Employees
vest in Company contributions over six years of service with the Company.
Forfeitures of the unvested portion are allocated to the remaining employees in
the plan proportionately based upon current year compensation.
REPORT OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
As members of the Compensation Committee it is our duty to monitor the
performance and compensation of executive officers and other key employees, to
review compensation plans and to administer the 1993 Stock Option Plan. The
Company s executive and key employee compensation programs are designed to
attract, motivate and retain the executive talent needed to enhance shareholder
value in a competitive environment. The fundamental philosophy is to relate the
amount of compensation "at risk" for an executive directly to his or her
contribution to the Company s success in achieving superior performance
objectives and to the overall success of the Company. The Company s executive
and key employee compensation program consists of a base salary component and a
component providing the opportunity to earn stock options that focus the
executives and key employees on building shareholder value through meeting
longer-term financial and strategic goals.
In designing and administering its executive compensation program, the
Company attempts to strike an appropriate balance among these various elements,
each of which is discussed in greater detail below.
Base Salary
Base salary is consistent with comparable public manufacturing and
technology companies. The Company s salary increase program is designed to
reflect individual performance consistent with the Company s overall financial
performance as well as competitive practice. Performance reviews, typically
performed annually, determine an individual s salary increases. Two executive
officers, Mr. Cogdill and Mr. Thomas, received salary increases during fiscal
1995 based on their previous performance. No salary increases were implemented
for 1996.
<PAGE>
Stock Option Plan
The Company s 1993 Stock Option Plan authorized the granting of options to
purchase shares of the Company s Common Stock to officers and key employees of
the Company and its subsidiaries. The Option Plan is designed to:
1. Encourage and create ownership and retention of the Company s Common Stock;
2. Balance long-term with short-term decision making;
3. Link the officers or key employees financial success to that of the
shareholders;
4. Focus attention on building shareholder value through meeting
longer-term financial and strategic goals; and
5. Ensure broad-based participation of key employees.
6. As the Company reduced the exercise price of outstanding options and
granted additional options to executive officers and employees in November 1995,
no additional options were granted to executive officers or employees in 1996.
Employee 401(k) Profit Sharing Plan and Trust
Pursuant to the Company s 401(k) Profit Sharing Plan and Trust (the "401(k)
Plan"), which was established in 1995, in addition to a matching contribution,
the Company may make discretionary contributions to the Savings Plan. For the
year 1996, no discretionary contributions were made or approved.
Chief Executive Officer Compensation
The Compensation Committee reviews the Chief Executive Officer s salary
annually. In assessing whether a salary increase is warranted, the Compensation
Committee considers the following factors: job performance, base salary of Chief
Executive Officers of the Company s competitors, and achievement of annual
financial, new products, and market share objectives. No increase in Chief
Executive Officer Compensation was made in 1996.
Compensation Committee
Ralph Z. Sorenson, Chairman
A. Clinton Allen
Blair W. Effron
Keith R. Lively
Certain Relationships And Related Transactions
The Company and Messrs. Reynolds, Thomas and Cogdill, members of the
Company's senior management ("Management"), have reached an agreement in
principle pursuant to which the Management would agree to remain with the
Company through December 31, 1997 in exchange for certain performance bonuses
and a right of first refusal to purchase the Company's portable water filtration
and purification business (the "Outdoor Business") in the event certain
performance targets are met and the Company elects to sell such business within
a specified period after December 31, 1997. The Company has not determined to
sell the Outdoor Business and will have no obligation to sell the Outdoor
Business to Management or to a third party at any time. The Company believes
that the agreement in principal will provide an incentive to Management to
<PAGE>
maximize cash flow from the Outdoor Business and to conserve the Company's cash
resources.
Specifically, this agreement in principle contemplates that, Management, as
a group, under certain circumstances, shall be entitled to receive a Performance
Bonus equal to 50% of the amount by which cash and cash equivalents as set forth
on the Company's audited balance sheet as of December 31, 1997, subject to
certain adjustments ("Year End Cash") exceeds $1,000,000. In addition, in the
event Year End Cash exceeds a specified target (which will be lower than
$1,000,000), Management shall have a right of first refusal in the event the
Company elects to sell the Outdoor Business to a third party. If such right is
not exercised, Management, as a group, shall be entitled to receive a Value
Enhancement Bonus equal to 30% of the excess of the third party purchase price
over the Management Price (as defined below) less the amount of the Performance
Bonus, if any. In the event the Company elects to sell the Outdoor Business to
Management, Management shall have the right to purchase the Outdoor Business for
a specified price (the "Management Price") and the assumption of the Outdoor
Business liabilities. The Management Price shall be subject to certain
adjustments, and shall be reduced by the amount by which Year End Cash exceeds
the target amount. If Year End Cash equals or exceeds $1,000,000, the Management
Price shall be a nominal amount. As the Company and Management are negotiating
the terms and structure of a proposed agreement, the final terms and structure
may differ substantially from the terms described herein. In addition, if the
Company and Management do not execute a final agreement, one or more of the
members of Management may elect to pursue other opportunities which could have a
material adverse effect on the Company.
In 1996, the Company retained Dillon, Read & Co., Inc. as its exclusive
agent to arrange a joint strategic alliance involving either a new equity
investment or the acquisition of stock or assets of the Company. Mr. Effron, a
director of the Company, is a Managing Director of Dillon, Read & Co., Inc.
In August 1993, Michael Burns, a former executive officer of the Company,
and Swiss Army Brands, Inc. entered into a Consulting Agreement (the "Consulting
Agreement") pursuant to which Mr. Burns agreed to perform consulting services
for Swiss Army and its subsidiaries and affiliates (other than the Company),
relating to potential joint marketing and other cooperative efforts between
Swiss Army and the Company and such other matters as Swiss Army may reasonably
request. Upon execution of the agreement, Swiss Army paid Mr. Burns $10,000 as a
sign-on bonus and agreed to pay him an additional $1,000 per month through
December 1993, and $25,000 per year for the calendar years 1994 and 1995 unless
Mr. Burns has terminated or breached the Consulting Agreement or unless Swiss
Army has terminated the Consulting Agreement for "cause." The Consulting
Agreement was continued by mutual agreement and Mr. Burns was paid an additional
$25,000 for the year ended December 31, 1996. Mr. Burns was employed by the
Company as Vice President of Sales until January 1997 and was compensated
directly by the Company for his services in such capacity. In connection with
the Consulting Agreement, Swiss Army also awarded Mr. Burns 12,000 shares of
Swiss Army Common Stock, 3,000 of which vested on August 1, 1994 and an
additional 7,250 shares vested from September 1, 1994, through the term of his
employment with SweetWater. In connection with such award of shares and in lieu
of awarding additional shares of Swiss Army Common Stock to Mr. Burns, Swiss
Army paid him an additional $132,000 to cover estimated federal and state income
taxes payable by him as a result of the stock grant.
PROPOSAL 2
RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
Arthur Andersen, LLP has audited the Company s financial statements since
the calendar year ended December 31, 1993. The Board of Directors has again
selected Arthur Andersen, LLP to serve as the Company s independent auditors for
the calendar year ending December 31, 1997. Although the matter is not required
to be submitted for shareholder approval, the Board of Directors has elected to
seek ratification of its selection of the independent auditors. Representatives
of Arthur Andersen, LLP are expected to be present at the Annual Meeting and
will have the opportunity to respond to appropriate questions and to make a
statement if they desire.
<PAGE>
Shareholder Approval
Ratification of the selection of the independent auditors requires the
affirmative vote of a majority of the outstanding shares of Common Stock of the
Company present in person or by proxy at the Annual Meeting or any adjournment
thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR"
THE RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS.
ANNUAL REPORT
A copy of the Company s Annual Report on Form 10-K, including financial
statements for the year ended December 31, 1996 is being mailed with this Proxy
Statement to shareholders of record on the Record Date, but such report is not
incorporated herein and is not deemed to be part of this proxy solicitation
material.
A COPY OF THE ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 1996 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WITHOUT
EXHIBITS, IS AVAILABLE WITHOUT CHARGE TO ANY SHAREHOLDER OF THE COMPANY
UPON WRITTEN REQUEST TO INVESTOR RELATIONS, SWEETWATER, INC., 2505 TRADE
CENTRE AVENUE, SUITE D, LONGMONT, COLORADO 80503 303/530-2715.
SHAREHOLDER PROPOSALS
Shareholders who wish to include proposals for action at the Company s 1998
Annual Meeting of Shareholders in next year s proxy statement and proxy must
cause their proposals to be received in writing by the Company at its address
set forth on the first page of this Proxy Statement no later than December 26,
1997. Such proposals should be addressed to the Company s Secretary.
OTHER BUSINESS
The Board of Directors knows of no matters other than those listed in the
attached Notice of the Annual Meeting which are likely to be brought before the
Annual Meeting. However, if any other matters should properly come before the
Annual Meeting or any adjournment thereof, the persons named in the enclosed
proxy will vote all proxies given to them in accordance with their judgment.
Each shareholder is urged to complete, date, sign and promptly return the
enclosed proxy card.
/s/ Patrick E. Thomas
Patrick E. Thomas, Secretary
Longmont, Colorado
April 25, 1997
<PAGE>
REVOCABLE PROXY SWEETWATER, INC. REVOCABLE PROXY
ANNUAL MEETING OF STOCKHOLDERS - May 14, 1997
The undersigned hereby appoints Eric M. Reynolds and Patrick E. Thomas, or
either of them, acting singly in the absence of the other, with full powers of
substitution, to act as attorneys and proxies for the undersigned to vote, as
designated below, all shares of Common Stock of SweetWater, Inc., which the
undersigned is entitled to vote at the Annual Meeting of Stockholders, to be
held on May 14, 1997 at 9:30 a.m. at 667 Madison Avenue, Suite 2500, New York,
New York 10021, and at any and all adjournments thereof, as follows:
1. The election as directors of all nominees listed below:
FOR __ AGAINST __ VOTE WITHHELD __
INSTRUCTION: To withhold your vote for any individual nominee, strike a
line in that nominee s name in the list below.
A. Clinton Allen Thomas A. Barron Blair W. Effron Peter W. Gilson
Randall A. Hack Keith R. Lively Eric M. Reynolds Ralph Z. Sorenson
2. Ratification of the appointment of Arthur Andersen, L.L.P. as auditors
for the fiscal year ending December 31, 1997.
FOR __ AGAINST __ VOTE WITHHELD __
In their discretion, upon such matters as may properly come before the
Meeting or any adjournment thereof.
The undersigned acknowledges receipt from the Company, prior to the
execution of this Proxy, of Notice of the Annual Meeting, and a Proxy Statement.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL NOMINEES IN PROPOSAL NO. 1 AND
FOR PROPOSAL NO. 2.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Dated: _____________________________, 1997
_________________________________________
Signature of Shareholder
_________________________________________
Signature if held jointly
Please sign exactly as your name appears above on this
card. When signing as attorney, executor, administrator,
trustee or guardian, please give your full title. If shares
are held jointly, each holder should sign.
PLEASE PROMPTLY COMPLETE, DATE, SIGN AND MAIL THIS PROXY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
