SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 240.14a-12
SWWT, Inc.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
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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):
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[ ] 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:
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4) Date Filed:
<PAGE>
SWWT, Inc.
3492 W. 109th Circle
Westminster, CO 80030
303/460-8017
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD WEDNESDAY, MAY 13, 1998
TO THE SHAREHOLDERS OF SWWT, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders
of SWWT, 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. (local time),
on May 13, 1998 to consider and vote on the following matters as described in
this notice and the accompanying Proxy Statement:
1. To elect seven (7) 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 1998
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 8, 1998
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, 1997, 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 22, 1998 /s/ Patrick E. Thomas
---------------------
Patrick E. Thomas, Secretary
<PAGE>
SweetWater, Inc.
3492 W. 109th Circle
Westminster, CO 80030
303/460-8017
---------------------------------------
PROXY STATEMENT
---------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
Meeting Date: May 13, 1998
General Information
This Proxy Statement and the accompanying form of proxy is being sent
on or about April 22, 1998 in connection with the solicitation of proxies by the
Board of Directors of SWWT, Inc., a Delaware corporation ("Company"). The
proxies are for use at the 1998 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. (local time) on May 13, 1998, 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 8, 1998 ("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 3492 W. 109th Circle, Westminster, CO
80030 and its telephone number is 303/460-8017.
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 3,122,254 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 seven 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) the executive
officer of the Company, and (iv) all directors and the executive officer 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.
Beneficial Owner Shares Beneficially Owned(1)
---------------------------------------
Number Percent
------ -------
Directors:
Clarke H. Bailey 28,000 *
Thomas Barnds 621,845(2) 19.9%
Thomas A. Barron 34,583 1.1%
Blair W. Effron 18,750 *
Peter W. Gilson 7,792 *
Randall A. Hack 635,799(3) 20.4%
J. Merrick Taggart - -
Executive Officer 13,072 *
Executive officer & directors as a
group (includes 7 persons) 738,243 23.6%
Other 5% Shareholders:
Nassau Capital Partners L.P. 621,598 19.9%
22 Chambers Street
Princeton, NJ 08542
Swiss Army Brands, Inc. 611,000 19.6%
One Research Drive
Shelton, CT 06484
Hudson River Capital LLC 420,536(4) 13.1%
667 Madison Avenue
Suite 2500
New York, NY 10021
Charles Elsener 197,500 6.3%
CH-6438
Ibach, Switzerland
- --------------------------
* Less than 1%
2
<PAGE>
(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. 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 621,598 shares held by Nassau Capital Partners L.P. and 247
shares which represent Mr. Barnds' interest in shares directly or
indirectly held by NAS Partners I L.L.C., a limited liability company
in which he is a member. Mr. Barnds is an employee of Nassau Capital
L.L.C., which serves as the sole general partner of Nassau Capital
Partners L.P. Mr. Barnds disclaims beneficial ownership of shares held
by Nassau Capital Partners L.P.
(3) Includes 621,598 shares held by Nassau Capital Partners L.P. and 1,701
shares which represent Mr. Hack's interest in shares held directly or
indirectly by NAS Partners I L.L.C., a limited liability company in
which he is a member. 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. Mr. Hack disclaims beneficial ownership of shares held
by Nassau Capital Partners L.P.
(4) Includes 79,591 shares issuable upon exercise of a common stock
purchase warrant.
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 six (6) members.
Shareholders will be asked at the Annual Meeting to elect seven (7)
directors. The Board has nominated the seven 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. With the exception of Mr. Taggart, 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.
Name Positions With the Company Age Director Since
- ---- -------------------------- --- --------------
Peter W. Gilson Chairman of the Board 58 1993
Thomas Barnds Director 29 1998
Clarke H. Bailey Director 43 1998
Thomas A. Barron Director 46 1993
Blair W. Effron Director 35 1995
Randall A. Hack Director 50 1995
J. Merrick Taggart Nominee 47 Nominee
3
<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
Peter W. Gilson has served as a director since June 1993 and as Chairman of
the Board since February 1998. Mr. Gilson served as President and Chief
Executive Officer of Physician Support Systems, Inc. a company specializing in
the management of physician and hospital practices, from 1991 through December
1997. From 1989 to the present, Mr. Gilson has also served as Chief Executive
Officer of the Warrington Group, Inc., a manufacturer of safety products which
was previously a division of The Timberland Company. From 1987 to 1988, he
served as Chief Operating Officer of The Timberland Company, a manufacturer of
footwear and outdoor clothing. 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 a director of
Glenayre Technologies, Inc. and of New Hope Foundation.
Thomas C. Barnds has served as a director since February 1998. Since August
1996, Mr. Barnds has served as an associate at Nassau Capital L.L.C., which
manages a $1 billion portfolio in private companies and assets on behalf of
Princeton University's endowment. From 1992 to 1994, Mr. Barnds was employed by
McGaw, Inc., a health care company, most recently as manager of new business
development. From 1990 to 1992, he was a financial analyst at Alex. Brown &
Sons, an investment banking firm. Mr. Barnds received a B.A. from Princeton
University in 1990 and an M.B.A. from Stanford University which he attended from
1994 to 1996.
Clarke H. Bailey has served as a director of the Company since February
1998. Since February 1995, Mr. Bailey has served as Co-Chairman of the Board and
a director of Hudson River Capital LLC, a private equity firm specializing in
middle market acquisitions, recapitalizations and expansion capital investments.
Mr. Bailey also served as Chairman, Chief Executive Officer and a director of
Arcus Group, Inc., the leading national provider of secure off-site computer
data storage and related disaster recovery services as well as information
technology staffing solutions, from February 1995 until its merger with Iron
Mountain Incorporated in January 1998. He served as Chief Executive Officer and
a director of Glenayre Technologies, Inc., a paging and messaging infrastructure
technology firm, from December 1990 until March 1994 and as its Vice Chairman of
the Board from November 1992 to July 1996. In March 1994, Mr. Bailey was named
Chairman of the Executive Committee of the Board of Glenayre Technologies, and
he relinquished the title of Chief Executive Officer. Mr. Bailey is also a
director of Swiss Army Brands, Inc., Iron Mountain Incorporated and Connectivity
Technologies, Inc.
Thomas A. Barron has served as a director since June 1993. From November
1995 until February 1998, he served as Chairman of the Board of the Company. 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.
4
<PAGE>
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 now known as
SBC Warburg Dillon Read, 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 the 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.
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 Chief Executive Officer 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 Chief
Executive Officer of Capstone Equities, Inc. and, from 1979 to 1988, President
and Chief Executive Officer 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.
J. Merrick Taggart is a nominee for director of the Company. Mr. Taggart
has served as a director and as President of Swiss Army Brands, Inc., the
exclusive United States and Canadian importer and distributor of Victorinox
Original Swiss Army Knives and professional cutlery as well as other products,
since December 1995. From 1993 to November 1995, Mr. Taggart was President of
Duofold, Inc., a sports apparel company, and Pringle of Scotland U.S.A., an
apparel company. From 1990 to November 1992, Mr. Taggart was President of
O'Brien International, a manufacturer and marketer of water sports equipment.
Prior to that, Mr. Taggart was Senior Vice President of Product Development for
the Timberland Company. Mr. Hart is also a director of Swiss Army Brands, 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. J. Merrick Taggart,
Clarke H. Bailey and Randall A. Hack were nominated by Swiss Army Brands, Inc.,
Hudson River Capital LLC. and Nassau Capital Partners, L.P., respectively,
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 1997, the Board of Directors met eight 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 Mr. Effron who attended 55%
of such meetings. The Board of Directors has three standing committees; an
Executive Committee, a Compensation Committee, and an Audit Committee.
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. From May 1997 until
February 1998, the Executive Committee was comprised of Thomas A. Barron, Peter
5
<PAGE>
W. Gilson, Keith Lively and Ralph Sorenson. The Executive Committee took action
by unanimous consent twice in 1997.
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. From May
1997 until February 1998, the Compensation Committee was comprised of A. Clinton
Allen, Blair W. Effron, and Ralph Sorenson. The Compensation Committee met once
in 1997.
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. From May 1997 until February 1998, the Audit Committee
was comprised of Randall A. Hack and Keith Lively. The Audit Committee met once
in 1997.
Director's Compensation Fees
In 1997, non-employee Directors of the Company did not receive fees for
attending board meetings or committee meetings. Directors were reimbursed for
their out-of-pocket expenses, including travel, incurred in the performance of
their duties as directors.
As a result of the sale of substantially all of the assets of the
Company on February 6, 1998, all outstanding stock options, including options
issued to directors of the Company, expired on that date. In February 1998, the
Board granted each director of the Company an option entitling him to purchase
60,000 shares of Common Stock at an exercise price of $1.3125 per share, which
option is fully vested but is not exercisable until February 5, 2000.
EXECUTIVE OFFICERS
Executive Officers
The following discussion sets forth information about the Company's
only executive officer.
Name Positions With the Company Age Officer Since
- ---- -------------------------- --- -------------
Patrick E. Thomas President, Chief Executive Officer & 43 1994
Chief Financial Officer
Patrick E. Thomas, CPA has served as President and Chief Executive Officer
of the Company since February 1998 and 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.
6
<PAGE>
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, 1997, 1996 and 1995 and to the additional executive officers
who received in excess of $100,000 in compensation for 1997.
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
---------------------------------------------------------------------------------
Other
Annual Restricted All other
Compen- Stock Options/ LTIP compen-
Name & Principal Year Salary ($) Bonus ($) sation ($) Award ($) SARs ($) Payouts ($) sation ($)(1)
- ---------------- ---- ---------- --------- ---------- --------- -------- ----------- -------------
Position
- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ERIC M. REYNOLDS 1997 $95,000 $38,000(2) -0- -0- -0- -0- $3,800
Chief Executive Officer 1996 $95,000 -0- -0- -0- -0- -0- $3,106
1995 $89,518 -0- -0- -0- 56,250 -0- $3,580
PATRICK E. THOMAS 1997 $85,000 $38,000(2) -0- -0- -0- -0- $3,400
Vice President - Finance 1996 $85,000 -0- -0- -0- -0- -0- $3,400
1995 $79,423 -0- -0- -0- 16,000 -0- $3,177
JERRY COGDILL 1997 $85,000 $38,000(2) -0- -0- -0- -0- $3,400
Chief of Operations 1996 $85,000 -0- -0- -0- -0- -0- $3,400
1995 $79,423 -0- -0- -0- 16,000 -0- $3,177
<FN>
(1) Represents the Company's Contribution to the executive officer's
401(k) account.
(2) Represents the performance bonus accrued at December 31, 1997 under
the terms of the Management Agreement described below under the heading "Certain
Relationships and Related Transactions." This accrued bonus, together with the
additional bonus of $136,188 earned under such agreement as a result of the sale
of substantially all of the assets of the Company, was paid to each executive
officer in February 1998.
</FN>
</TABLE>
Option/SAR Grants in Last Fiscal Year
No stock options were granted to executive officers in 1997.
The following table sets forth certain information regarding the number
and value of unexercised stock options held by the executive officers of the
Company as of the end of the Company's 1997 fiscal year.
<TABLE>
<CAPTION>
Aggregate Option/SAR Exercises in Last Fiscal Year
and FY-End Option SAR Values
Number of Securities Value of Unexercised In-the-
Shares Acquired Underlying Unexercised Money Options at FY-End
NAME On Exercise Value Realized ($) Options at FY-END (#) ($)(1)
- ----
-------------------------------------------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Eric M. Reynolds -0- -0- 29,296 26,954 -0- -0-
Patrick E. Thomas -0- -0- 22,333 13,667 -0- -0-
Jerry Cogdill -0- -0- 22,333 13,667 -0- -0-
<FN>
(1) No value is set forth herein as the fair market value of a share of
Common Stock at December 31, 1997, was lower than the exercise price of each
option.
</FN>
</TABLE>
<PAGE>
SweetWater, Inc. 401(k) Profit Sharing 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 contributed 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 could also elect to make discretionary contributions.
Employees vested in Company contributions over six years of service with the
Company. Forfeitures of the unvested portion were allocated to the remaining
employees in the plan proportionately based upon current year compensation. The
Company terminated the 401(k) Plan in 1998.
REPORT OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
During 1997, the Company's Board of Directors monitored the performance
and compensation of executive officers and other key employees and reviewed
compensation plans. In the first quarter of 1997, the Company reduced its
personnel and initiated a cost containment program designed to reduce costs,
conserve cash resources and enable the Company to concentrate its resources on
its portable water filtration and purification products (the "Outdoor
Business"). As an incentive to maximize cash flow from the Outdoor Business, to
conserve the Company's cash resources and to retain senior management, in May
1997, the Company and Messrs. Reynolds, Thomas and Cogdill (collectively,
"Management"), entered into an agreement (the "Management Agreement") which was
designed to retain the executives required to continue to operate the Outdoor
Business while providing an incentive for them to improve the performance of
such business. After reviewing the compensation paid to the executives in 1996,
the Board elected to continue the 1996 base salaries and to grant
performance-based cash bonuses and a right of first refusal to purchase the
Outdoor Business under certain circumstances. By linking the bonus earned by the
executive directly to his success in conserving the Company's cash resources and
improving its profitability, the Board sought to increase the overall value of
the Outdoor Business to the shareholders. The terms of the Management Agreement
are more specifically set forth under the heading "Certain Relationships and
Related Transactions".
Chief Executive Officer Compensation
In 1997, the Board of Directors reviewed the compensation paid to Eric
M. Reynolds, the Company's Chief Executive Officer. In assessing the
compensation paid to Mr. Reynolds, including the terms of the Management
Agreement, the Board considered his extensive experience in the outdoor
industry, his increased responsibility for sales and administrative functions as
a result of the decrease in the Company's personnel, his 1996 base salary and
the stock based compensation awarded in prior years. As a result of this
analysis, the Board continued his base salary at the 1996 level and approved the
terms of the Management Agreement which included performance based bonuses.
Board of Directors
A. Clinton Allen*
Thomas A. Barron
Blair W. Effron
Peter Gilson
Randall A. Hack
Keith R. Lively*
Ralph Sorenson*
Juan Rodriguez*
*Messrs. Allen, Lively, Sorenson and Rodriguez participated in the decisions of
the Board with respect to executive compensation which were made prior to their
resignations as directors.
8
<PAGE>
Certain Relationships And Related Transactions
In May 1997, the Company and Messrs. Reynolds, Thomas and Cogdill, members
of the Company's senior management ("Management"), entered into an agreement
(the "Management Agreement") pursuant to which the Management agreed to remain
with the Company through January 31, 1998 in exchange for certain performance
bonuses and a right of first refusal to purchase the Company's Outdoor Business
in the event certain performance targets were met and the Company elected to
sell such business within a specified period after December 31, 1997.
Specifically, the Management Agreement provided that, Management, as a group,
under certain circumstances, would 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") exceeded $1,000,000. In addition, in the event Year End Cash
exceeded a specified target (which was lower than $1,000,000), Management had a
right of first refusal in the event the Company elected to sell the Outdoor
Business to a third party. If such right was not exercised, Management, as a
group, would 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 elected to
sell the Outdoor Business to Management, Management had 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 was subject
to certain adjustments, and would have been reduced by the amount by which Year
End Cash exceeded the target amount. If Year End Cash equaled or exceeded
$1,000,000, the Management Price would have been a nominal amount.
Under the terms of the Management Agreement, Management, as a group,
earned a Performance Bonus equal to $114,000 and a Value Enhancement Bonus of
$408,563, as a result of the sale of the Outdoor Business to Cascade Designs,
Inc., which amounts were paid upon the completion of such sale in February 1998.
In 1996, the Company retained Dillon, Read & Co., Inc., now known as
SBC Warburg Dillon Read, 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 SBC Warburg Dillon Read.
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, 1998. 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 not expected to be present at the
Annual Meeting.
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.
9
<PAGE>
ANNUAL REPORT
A copy of the Company's Annual Report on Form 10-K, including financial
statements for the year ended December 31, 1997 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,
1997 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., 3492 W. 109th CIRCLE, WESTMINSTER,
COLORADO 80030 303/460-8017.
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 22,
1998. 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
Westminster, Colorado
April 22, 1998
10
<PAGE>
REVOCABLE PROXY SWWT, INC. REVOCABLE PROXY
ANNUAL MEETING OF STOCKHOLDERS - May 13, 1998
The undersigned hereby appoints Peter W. Gilson 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 SWWT, Inc., which the
undersigned is entitled to vote at the Annual Meeting of Stockholders, to be
held on May 13, 1998 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.
Clarke H. Bailey Thomas Barnds Thomas A. Barron Blair W. Effron
Peter W. Gilson Randall A. Hack J. Merrick Taggart
2. Ratification of the appointment of Arthur Andersen, L.L.P. as auditors for
the fiscal year ending December 31, 1998.
|_| 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.THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSITIONS
STATED. IF ANY OTHER BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE
VOTED BY THOSE NAMED IN THIS PROXY IN THEIR DISCRETION.
<PAGE>
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
Dated: _____________________________________ , 1998
____________________________________________________________
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.
