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UNITED STATES
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 the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
PORTLAND BREWING COMPANY
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed per Exchange Act Rules 14a-6(i)(4) and 0-11.
[ ] 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.
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PORTLAND BREWING COMPANY
2730 NW 31ST AVENUE
PORTLAND, OREGON 97210
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
--------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders (the
"Annual Meeting") of Portland Brewing Company, an Oregon corporation (the
"Company"), will be held on Saturday, June 21, 1997, at 3:00 p.m., local time,
at the Company's offices, 2730 NW 31st Avenue, Portland, Oregon, 97210, for the
following purposes:
1. To elect six Directors to serve until the next Annual Meeting of
Shareholders and until their successors are duly elected and qualified
(Proposal No. 1);
2. To ratify the appointment of Arthur Andersen LLP as independent
accountants for the Company for the fiscal year ending December 31,
1997 (Proposal No. 2);
3. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on May 5, 1997 as
the record date for determining shareholders entitled to notice of and to vote
at the meeting or any adjournments thereof. Only shareholders of record at the
close of business on that date are entitled to notice of and to vote at the
Annual Meeting or any adjournments thereof.
By Order of the Board of Directors
Glenmore James
VICE PRESIDENT, CHIEF FINANCIAL OFFICER,
CHIEF OPERATING OFFICER, TREASURER AND
SECRETARY
Portland, Oregon
May 12, 1997
YOUR VOTE IS IMPORTANT WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN
PERSON. PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY, IN
THE ACCOMPANYING ENVELOPE SO THAT YOUR SHARES WILL BE VOTED. YOUR PROXY MAY BE
REVOKED AT ANY TIME PRIOR TO THE TIME IT IS VOTED. IF YOU DECIDE TO ATTEND THE
MEETING AND WISH TO CHANGE YOUR PROXY VOTE, YOU MAY DO SO AUTOMATICALLY BY
VOTING IN PERSON AT THE MEETING.
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PORTLAND BREWING COMPANY
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 21, 1997
_______________
INTRODUCTION
GENERAL
This Proxy Statement and the accompanying 1996 Annual Report to
Shareholders is being furnished to the shareholders of Portland Brewing Company,
as part of the solicitation of proxies by the Company's Board of Directors (the
"Board of Directors") for use at the Company's Annual Meeting to be held on
Saturday, June 21, 1997, at 3:00 p.m., local time, or at any adjournments
thereof. At the Annual Meeting, shareholders will be asked to elect six members
of the Board of Directors, ratify the appointment by the Board of Directors of
Arthur Andersen LLP as independent accountants for the Company for the fiscal
year ending December 31, 1997, and transact such other business as may properly
come before the meeting or any adjournments thereof. This Proxy Statement,
together with the enclosed proxy card and the 1996 Annual Report to Shareholders
is first being mailed to shareholders of the Company on or about May 12, 1997.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
The Board of Directors has fixed the close of business on May 5, 1997 as
the record date for the determination of the shareholders entitled to notice of
and to vote at the Annual Meeting. Accordingly, only holders of record of shares
of Common Stock at the close of business on such date will be entitled to vote
at the Annual Meeting, with each such share entitling its owner to one vote on
all matters properly presented at the Annual Meeting. On the record date, there
were 2,074,943 shares of Common Stock outstanding. The presence, in person or by
proxy of a majority of the total number of outstanding shares of Common Stock
entitled to vote at the Annual Meeting is necessary to constitute a quorum at
the Annual Meeting.
If the enclosed form of proxy is properly executed and returned in time to
be voted at the Annual Meeting, the shares represented thereby will be voted in
accordance with the instructions marked thereon. EXECUTED BUT UNMARKED PROXIES
WILL BE VOTED FOR THE ELECTION OF THE SIX NOMINEES FOR ELECTION TO THE BOARD OF
DIRECTORS AND FOR THE RATIFICATION OF THE APPOINTMENT OF ARTHUR ANDERSEN LLP AS
THE COMPANY'S INDEPENDENT ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 1997. The
Board of Directors does not know of any matters other than those described in
the Notice of Annual Meeting that are to come before the Annual Meeting. If any
other matters are properly brought before the Annual Meeting, the persons named
in the proxy will vote the shares represented by such proxy upon such matters as
determined by a majority of the Board of Directors.
Shareholders who execute proxies retain the right to revoke them at any
time prior to the exercise of the powers conferred thereby by filing a written
notice of revocation with, or by delivering a duly executed proxy bearing a
later date to, Corporate Secretary, Portland Brewing Company, 2730 NW 31st
Avenue, Portland, Oregon 97210, or by attending the Annual Meeting and voting in
person. All valid, unrevoked proxies will be voted at the Annual Meeting.
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ELECTION OF DIRECTORS
(PROPOSAL NO. 1)
NOMINEES FOR DIRECTOR
In accordance with the Company's Bylaws, as amended, the Board of Directors
shall consist of no less than five and no more than nine Directors, the specific
number to be determined by resolution adopted by the Board of Directors. The
Board of Directors has set the number of directors at six. Unless otherwise
instructed, the proxy holders will vote the proxies received by them FOR the
nominees named below. In the event that any nominee of the Company is unable or
declines to serve as a Director at the time of the Annual Meeting, the proxies
will be voted for any nominee who shall be designated by the present Board of
Directors to fill the vacancy. The Company is not aware of any nominee who will
be unable or will decline to serve as a Director.
In the event that additional persons are nominated for election as
Directors, the proxy holders intend to vote all proxies received by them in such
a manner as will assure the election of as many of the nominees listed below as
possible, and, in such event, the specific nominees to be voted for will be
determined by the proxy holders.
Information with respect to the persons nominated by the Board of Directors
to be elected as Directors is set forth below. The term of office for each
person elected as a director will continue until the next Annual Meeting of
Shareholders and until a successor has been elected and qualified.
NAME OF NOMINEE AGE
--------------- ---
Charles A. (Tony) Adams 50
Edwin Hunt 74
Robert M. MacTarnahan 81
R. Scott MacTarnahan 50
Simon C. Ostler 50
Howard M. Wall, Jr. 51
CHARLES A. (TONY) ADAMS. Mr. Adams has been Chairman of the Board of
Directors and President of the Company since February 1992. Mr. Adams has been a
Director of the Company since October 1988. Mr. Adams is president of Electra
Partners, Inc., a private investment holding company. Mr. Adams was active in
the real estate business beginning in 1973, including owning and operating his
own real estate company until 1983, when he became a sales associate at CB
Commercial Real Estate Group, Inc., where he was employed until 1992. He holds a
B.A. in Geology from the University of Virginia and has studied graduate level
economics and business administration at the University of San Francisco,
Portland State University and Stanford University.
EDWIN HUNT. Mr. Hunt has been a Director since November 1993. Mr. Hunt is
the Chairman of Huntair, Inc., a company which manufactures air moving and
environmental systems for clean rooms. In September 1992, Mr. Hunt retired as
president of Brod & McClung-Pace Co., a manufacturer of high quality heating and
ventilating equipment as well as heat transfer equipment, where he had been
employed for 46 years.
ROBERT M. MACTARNAHAN. Mr. MacTarnahan has been a Director since July 1985.
Mr. MacTarnahan has been a partner in Harmer Company and Black Lake Investments
for more than five years. Mr. MacTarnahan has been the president of Honeyman
Aluminum Products Company, a manufacturer of hand trucks for the beverage
industry, for more than 10 years. He is also active in the promotion of the
Company and the Company's MacTarnahan's Ale is named after him. (See "Certain
Relationships And Related Transactions") Mr. R. Scott MacTarnahan is his son.
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R. SCOTT MACTARNAHAN. Mr. MacTarnahan has been a Director since July 1985.
He has been vice president and general manager of Honeyman Aluminum Products
Company and Harmer Company for more than 10 years. Mr. MacTarnahan received a
B.S. in Business Administration from Portland State University in 1968. Mr.
Robert M. MacTarnahan is his father.
SIMON C. OSTLER. Mr. Ostler has been a Director since October 1988. He has
been president of Systems Manufacturing Company, Inc., a manufacturer of
industrial finishing systems for more than five years. Mr. Ostler received a
C.O.P. from Greenmore College in England, in 1964.
HOWARD M. WALL, JR. Mr. Wall has been a Director of the Company since
October 1992. Since 1984 he has been the president and chief executive officer
of Portco Corporation, a Vancouver, Washington manufacturer of paper and plastic
flexible packaging for the produce, fish, and roofing industries. He has had a
long association with the Northwest hop industry as Portco developed the world's
only biodegradable paper hop string. Mr. Wall received a B.A. in English from
the University of Oregon in 1973.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company held a total of six (6) meetings
during 1996 and took action pursuant to one (1) unanimous consents. During
1996, each incumbent Director attended at least 75% of the aggregate number
of meetings of the Board of Directors and of the committees of the Board of
Directors on which he served. The Board of Directors has an Audit Committee,
an Executive Compensation Committee, a Nominating Committee, and an
Administrative Committee of the 1992 Incentive Stock Option Plan. The Audit
Committee met three (3) times during 1996, with all members present at each
meeting. The Nominating Committee met one (1) time during 1996, with all
members present at that meeting. None of the other committees met during
1996.
The Audit Committee, which consists of Messrs. Hunt and Wall is responsible
for overseeing actions taken by the Company's independent accountants and
reviews the Company's internal financial controls. The Executive Committee,
which consists of Messrs. R. Scott MacTarnahan, Wall and Ostler is responsible
for determining the compensation of the officers of the Company. The Nominating
Committee, which consists of Messrs. Adams, R. Scott MacTarnahan, Wall and
Ostler is responsible for recommending to the Board of Directors a slate of
nominees to be proposed for election at the Annual Meeting of Shareholders. The
Company's Nominating Committee will consider recommendations from the Company's
shareholders of nominees for the Board of Directors. Presently, the Nominating
Committee has no formal procedures for the submission of such recommendations.
See "Management - Director Compensation" for certain information regarding
compensation of directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE FOR
THE ELECTION OF ITS NOMINEES FOR DIRECTOR. If a quorum is present, the Company's
Bylaws provide that directors are elected by a plurality of the votes cast by
the shares entitled to vote. Abstentions and broker non-votes are counted for
purposes of determining whether a quorum exists at the Annual Meeting, but are
not counted and have no effect on the determination of whether a plurality
exists with respect to a given nominee.
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RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(PROPOSAL NO. 2)
The Board of Directors has selected Arthur Andersen LLP, independent
accountants, to audit the financial statements of the Company for the year
ending December 31, 1997, subject to ratification by the shareholders.
Unless otherwise indicated, properly executed proxies will be voted in
favor of ratifying the appointment of Arthur Andersen LLP to audit the books
and accounts of the Company for the year ending December 31, 1997. No
determination has been made as to what action the Board of Directors would take
if the shareholders do not ratify the appointment.
A representative of Arthur Andersen LLP is expected to be present at the
Annual Meeting. The representative will be given the opportunity to make a
statement on behalf of his firm if such representative so desires, and will be
available to respond to any appropriate questions of any shareholder. Arthur
Andersen LLP was the Company's independent accountants for the year ended
December 31, 1996.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL. If
a quorum is present the Company's Bylaws provide that ratification of this
proposal will be approved if the votes cast by the shareholders entitled to vote
favoring the ratification exceeds the votes cast opposing the ratification.
Abstentions and broker non-votes are counted for purposes of determining whether
a quorum exists at the Annual Meeting, but are not counted and have no effect on
the determination of the outcome of this proposal.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of Common Stock of the Company as of March 31, 1997 as to (i) each
person who is known by the Company to own beneficially 10% or more of the
outstanding shares of the Company's Common Stock, (ii) each of the three most
highly compensated officers and (iii) all Directors and officers as a group.
Except as otherwise noted, the Company believes the persons listed below have
sole investment and voting power with respect to the Common Stock owned by them.
SHARES PERCENT OF
NAME OF BENEFICIAL OWNER OR BENEFICIALLY SHARES
NUMBER OF PERSONS IN GROUP OWNED(1) OUTSTANDING
--------------------------- ------------ -----------
Robert M. MacTarnahan (3) 296,043.75 13.9%
4670 SW Pacific Avenue
Beaverton, Oregon 97005
R. Scott MacTarnahan (4) 273,783.75 12.9%
4670 SW Pacific Avenue
Beaverton, Oregon 97005
Charles A. (Tony) Adams (2) (5) 282,228.75 13.1%
Glenmore James (2) (6) 19,500 *
All Officers and Directors as a
group, (8 persons) (7) 700,467.50 31.2%
* Less than 1%
(1) Beneficial ownership includes voting power and investment power with
respect to shares and includes shares issuable upon the exercise of
outstanding stock options and warrants.
(2) The business address for these individuals is 2730 NW 31st Avenue,
Portland, Oregon 97210.
(3) Includes 22,860 shares owned individually by Mr. Robert M.
MacTarnahan, 73,335 shares held by Black Lake Investments, 120,000
shares held by Harmer Mill & Logging Supply Co., and 30,000 shares
held by Harco Products, Inc., each of which is controlled by Mr. and
Mrs. Robert M. MacTarnahan and Mr. R. Scott MacTarnahan, 43,848.75
shares which may be purchased for $3.3333 per share upon exercise of a
warrant held by MacTarnahan Limited Partnership, whose general partner
is Harmer Mill & Logging Supply Co. and whose limited partners are Mr.
Robert M. MacTarnahan and Mrs. Ruth MacTarnahan, and 6,000 shares
which may be purchased for $5.3333 per share upon exercise of a
non-qualified stock option held by Mr. Robert M. MacTarnahan. The
non-qualified options are immediately exercisable but are subject to
repurchase at the underlying exercise price by the Company if the
optionee ceases to provide service (as defined in the Company's 1994
Nonqualified Stock Option Plan) to the Company during a three-year
period following the date of grant. The repurchase right expires as to
one-third of the nonqualified options shares on each anniversary of
the date of grant. As of March 31, 1997, options to purchase 2,000
shares of the Company's Common Stock are subject to repurchase. The
repurchase rights expire in August 1997.
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(4) Includes 73,335 shares held by Black Lake Investments, 120,000 shares
held by Harmer Mill & Logging Supply, Co., and 30,000 shares held by
Harco Products, Inc., each of which is controlled by Mr. Robert M.
MacTarnahan and Mr. R. Scott MacTarnahan, 600 shares held by Mr. R.
Scott MacTarnahan's spouse, 43,848.75 shares which may be purchased
for $3.3333 per share upon exercise of a warrant held by MacTarnahan
Limited Partnership, whose general partner is Harmer Mill & Logging
Supply Co. and whose limited partners are Mr. Robert M. MacTarnahan
and Mrs. Ruth MacTarnahan and, 6,000 shares which may be purchased for
$5.3333 per share upon exercise of a non-qualified stock option held
by Mr. R. Scott MacTarnahan. The non-qualified options are immediately
exercisable but are subject to repurchase at the underlying exercise
price by the Company if the optionee ceases to provide service (as
defined in the Company's 1994 Nonqualified Stock Option Plan) to the
Company during a three-year period following the date of grant. The
repurchase right expires as to one-third of the nonqualified options
shares on each anniversary of the date of grant. As of March 31, 1997,
options to purchase 2,000 shares of the Company's Common Stock are
subject to repurchase. The repurchase rights expire in August 1997.
(5) Includes 180,300 shares held by Electra Partners, Inc., an entity
controlled by Mr. Adams, 21,030 shares held by Mr. Adams as Trustee of
the Charles A. Adams Family Trust, 525 shares held by Mr. Adams'
daughter and 525 shares held by Mr. Adams' son, 43,848.75 shares which
may be purchased for $3.3333 upon exercise of a warrant held by
Electra Partners, Inc. and 36,000 shares which may be purchased for
$5.8666 per share upon exercise of an incentive stock option held by
Mr. Adams.
(6) Includes 12,000 and 6,000 shares which may be purchased for $5.3333
and $7.00 per share, respectively, upon exercise of incentive stock
options held by Mr. James.
(7) Includes 83,000 shares which may be purchased for prices ranging from
$3.333 to $7.00 per share, upon exercise of stock options held by all
Directors and officers, as a group. Includes 43,848.75 shares which
may be purchased for $3.3333 per share upon exercise of a warrant held
by MacTarnahan Limited Partnership and 43,848.75 shares which may be
purchased for $3.3333 upon exercise of a warrant held by Electra
Partners, Inc.
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OPTIONS, WARRANTS AND RIGHTS
The following table sets forth certain information regarding outstanding
options and warrants to purchase shares of Common Stock of the Company as of
March 31, 1997 as to (i) each person who is known by the Company to own
beneficially 10% or more of the outstanding shares of the Company's Common
Stock, (ii) each of the three most highly compensated officers and (iii) all
Directors and officers as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF COMMON
STOCK CALLED FOR BY OPTIONS
NAME OF HOLDER AND WARRANTS EXERCISE PRICE DATE OF EXERCISE
--------------- ------------ -------------- ----------------
<S> <C> <C> <C>
MacTarnahan Limited
Partnership (1) 43,848.75 $3.333 (2)
Electra Partners, Inc. (1) 43,848.75 $3.333 (2)
Robert M. MacTarnahan 6,000 $5.333 (2)(6)
R. Scott MacTarnahan 6,000 $5.333 (2)(6)
Charles A. (Tony) Adams 36,000 $5.866 (3)
Glenmore James 18,000 $5.333-$7.00 (4)
All Directors and officers as
a group, (8 persons) 170,697.5 $3.333-$7.00 (5)(6)
</TABLE>
(1) MacTarnahan Limited Partnership is an entity whose general partner is
Harmer Mill & Logging Supply Co. and whose limited partners are Robert
M. MacTarnahan and Ruth MacTarnahan. Electra Partners, Inc. is an
entity controlled by Mr. Adams.
(2) Options and Warrants are currently exercisable.
(3) As of March 31, 1997, options to purchase 20,250 shares of Common
Stock were exercisable. Options to purchase the remaining 15,750
shares of Common Stock become exercisable quarterly, and will be fully
exercisable in November 1998.
(4) As of March 31, 1997, options to purchase 6,600 shares of Common Stock
were exercisable. Options to purchase the remaining 11,400 shares of
Common Stock become exercisable quarterly, and will be fully
exercisable as follows: 6,600 shares in November 1999, and 4,800
shares in January 2001.
(5) As of March 31, 1997, options to purchase 49,450 shares of Common
Stock were exercisable. Options to purchase the remaining 33,550
shares of Common Stock become exercisable quarterly, and will be fully
exercisable at various dates from July 1998 through January 2001. As
of March 31, 1997, warrants to purchase 87,697.5 shares of Common
Stock were exercisable.
(6) Options to purchase shares of Common Stock granted under the Company's
1994 Nonqualified Stock Option Plan are immediately exercisable but
are subject to repurchase at the underlying exercise price by the
Company if the optionee ceases to provide service (as defined in the
Company's 1994 Nonqualified Stock Option Plan) to the Company during a
three-year period following the date of grant. The repurchase right
expires as to one-third of the nonqualified option shares on each
anniversary of the date of grant. As of March 31, 1997 options to
purchase 7,000 shares of the Company's are subject to repurchase. The
repurchase rights expire in August 1997.
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MANAGEMENT
EXECUTIVE OFFICERS
Information with respect to the Company's current executive officers is set
forth below. Officers of the Company are elected by the Board of Directors and
hold office until their successors are elected and qualified.
NAME AGE CURRENT POSITION(S) WITH COMPANY
---- --- --------------------------------
Charles A. (Tony) Adams 50 Chairman of the Board, President
Frederick L. Bowman 52 Vice President
Glenmore James 42 Vice President, Chief Financial Officer,
Chief Operating Officer, Treasurer and
Secretary
For information on the business background of Mr. Adams, see "Nominees for
Director" above.
FREDERICK L. BOWMAN. Mr. Bowman is a founder of the Company and has been
Vice President since February 1992. Mr. Bowman serves as corporate liaison to
the beer industry and assists in marketing efforts including public relations
and the Company's distributor support program. Mr. Bowman designed the Company's
original products and brewery. Previous to founding Portland Brewing Company,
Mr. Bowman was involved in the wholesale automotive industry as both a
technician and a district service manager. Mr. Bowman has attended Portland
State University, University of Oregon and Oregon State University. In addition,
Mr. Bowman attended the Brewing Microbiology and Microscopy course at the Siebel
Institute in 1988.
GLENMORE JAMES. Mr. James has been Vice President, Chief Financial Officer
and Treasurer since June 1994, Chief Operating Officer since March 1996, and
Secretary since September 1996. He joined the Company full-time in April 1994.
Prior to that, Mr. James acted as a consultant to the Company. Mr. James is
responsible for the financial and operations departments of the Company. Mr.
James has worked for fifteen years in the Portland area business community,
initially in financial accounting management positions in various manufacturing
and distribution companies and more recently as an independent business
consultant. Mr. James received his ICSA certification in 1976 from Mid-Essex
Technical College, England.
SIGNIFICANT EMPLOYEES
The names, ages and positions of the Company's significant employees are as
follows:
NAME AGE CURRENT POSITION WITH COMPANY
---- --- -----------------------------
Alan Kornhauser 46 Brewmaster
ALAN KORNHAUSER. Mr. Kornhauser joined the Company in December 1995 as
Brewmaster. He is responsible for the entire brewing process, from raw materials
to the finished product. Prior to joining the Company, Mr. Kornhauser was
Brewmaster for G. Heileman Brewing Company of Milwaukee, Wisconsin and he also
spent 18 years with Anchor Brewing Company in San Francisco, California. Mr.
Kornhauser has a B.A. degree from Beloit College and has done post graduate work
in Chemistry at the University of Rhode Island.
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EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table and notes set forth information regarding all cash
compensation paid by the Company during the year ended December 31, 1996, to
each of the three most highly compensated officers and all officers as a group.
AGGREGATE
NAME OR NUMBER IN GROUP CAPACITIES IN WHICH SERVED COMPENSATION (1)
- ----------------------- -------------------------- ----------------
Charles A. (Tony) Adams Chairman of the Board, President $ 86,204
Glenmore James Vice President, Chief Financial
Officer, Chief Operating Officer,
Treasurer and Secretary 86,535
G. Eugene Clark Vice President, Sales and Marketing 98,562
All officers as a group (4 persons) 323,267
(1) Included in 1996 aggregate compensation amounts are matching amounts
contributed to the Company's 401k Plan of $1,912, and $1,460, for
Messrs. Adams and James respectively. As of January 1, 1997, Mr. Clark
was no longer employed by the Company.
INCENTIVE STOCK OPTION PLAN. In October 1992, the shareholders of the
Company approved the Company's 1992 Incentive Stock Option Plan ("ISOP"). The
ISOP is administered by a disinterested committee of the Board of Directors (the
Administrative Committee of the 1992 Incentive Stock Option Plan) and provides
for grants to officers and employees of options to acquire up to 163,500 shares
of the Company's Common Stock, subject to the limitations set forth in the ISOP.
Pursuant to the ISOP, the Board of Directors has the authority to set the terms
and conditions of the options granted, including the option exercise price which
must be a price equal to at least 100% of the fair market value of the subject
shares of Common Stock at the time the option is granted. As of March 31, 1997,
options covering 141,500 shares of the Company's Common Stock were outstanding
under the ISOP.
RESTATED CASH INCENTIVE PLAN. The Company may award its officers and
employees under its Restated Cash Incentive Plan bonuses in an amount up to 10
percent (10%) of net operating profits before taxes. Awards under the plan will
be allocated among the officers and employees in accordance with the provisions
of the plan at the discretion of the Board of Directors. No amounts were awarded
in 1996 under the Restated Cash Incentive Plan.
NON-QUALIFIED STOCK OPTION PLAN. In August 1994, the Board of Directors
adopted the 1994 Non-Qualified Stock Option Plan ("NQSOP"). The NQSOP is
administered by the Board of Directors and provides for grants to officers,
employees, directors and consultants of options to acquire up to 45,000 shares
of the Company's Common Stock at an exercise price of at least 85% of the fair
market value of the subject shares of Common Stock at the time the option is
granted. As of March 31, 1997, options covering 21,000 shares of the Company's
Common Stock are outstanding under the NQSOP.
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DIRECTOR COMPENSATION
Directors receive no cash compensation for serving on the Board of
Directors. Each Director, with the exception of Mr. Adams, has been granted
options under the Company's Non-Qualified Stock Option Plan ("NQSOP"). As of
March 31, 1997, options to purchase 21,000 shares of the Company's Common Stock
at $5.3333 per share have been granted to Directors under the NQSOP.
In March 1996, the Company entered into a Memorandum of Agreement with one
of its Directors, Simon Ostler, under which Mr. Ostler provided consulting
services in connection with the expansion of the Company's Flanders Street Pub,
in Portland, Oregon. Mr. Ostler operates a separate consulting business, is the
owner of a restaurant in a different geographic market and has substantial
experience in the restaurant industry. Mr. Ostler's services included consulting
as to the scope of the project, design, menu, layout, interior design and theme,
in return for which Mr. Ostler was paid $13,300. The Company believes that the
terms and conditions of the Memorandum of Agreement with Mr. Ostler were fair
and reasonable and are no less favorable to the Company than could have been
obtained from unaffiliated parties.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LEASE AGREEMENT WITH PORTLAND BREWING BUILDING, LLC
In November 1992, the Company executed a triple net, 15 year lease (with
three five-year renewal options) with Portland Brewing Building Partners
("Brewing Partners"), which developed the Company's new brewery at 2730 NW 31st
Avenue in Portland. Brewing Partners was an equal 50/50 partnership of Electra
Partners, Inc. ("Electra"), a company controlled by Mr. Adams, and Harmer Mill &
Logging Supply Co. ("Harmer"), a company controlled by Mr. and Mrs. Robert M.
MacTarnahan. In 1994 and 1995, Harmer assigned its partnership interest to
MacTarnahan Limited Partnership ("MLP"), whose general partner is Harmer and
whose limited partners are Robert M. MacTarnahan and Ruth MacTarnahan. In 1995,
Brewing Partners was dissolved and its assets, including the new brewery, were
distributed to Electra and MLP, its two partners, in equal 50/50 shares.
Immediately thereafter, Electra sold 24.8396 percent of the new brewery property
to L & L Land Co., a general partnership consisting of Howard M. Wall, a
director of the Company, and his wife, Patricia Wall; Electra retained its other
25.1604 percent interest in the new brewery property. Immediately following this
conveyance, the three owners of the property (MLP, Electra and L & L Land Co.)
contributed their collective 100 percent interest in the new brewery property to
a new limited liability company called Portland Brewing Building, L.L.C., with
each contributor receiving an interest in Portland Brewing Building, L.L.C. in
the same percentage as its previous ownership of the new brewery property (a 50
percent interest for MLP, a 25.1604 interest for Electra, and a 24.8396 percent
interest for L & L Land Co.)
Monthly lease payments, which began June 15, 1993, are currently $22,060
plus property taxes, insurance and maintenance, with lease payments to be
adjusted at the beginning of the sixth and eleventh years to reflect the greater
of changes in the Consumer Price Index or 95% of fair market rental value. The
Company believes that the terms and conditions of its lease, as amended, are
fair and reasonable and are no less favorable to the Company than could be
obtained from unaffiliated parties. In connection with the original negotiation
of the lease in 1992 and as an inducement to provide lease financing of
approximately $900,000 of special purpose tenant improvements, the Company
granted Brewing Partners a warrant to purchase 87,697.5 shares of Common Stock.
On December 28, 1995, the warrant was divided equally between MacTarnahan
Limited Partnership and Electra Partners, Inc. The warrants are exercisable at
any time through December 31, 2002, at an exercise price of $3.333 per share.
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LEASE AGREEMENT WITH L & L LAND CO.
In January 1995, the Company entered into a sublease of approximately
10,025 square feet of space (the "sublease") located in the building commonly
known as 2750 N.W. 31st Avenue, Portland, Oregon (the "Adjacent Building"). The
Adjacent Building was owned by an unrelated third party and was leased to Power
Transmission Products, Inc., who executed the sublease in favor of the Company.
The Adjacent Building includes a total of approximately 23,000 square feet of
improved space. The term of the sublease expires March 31, 1999.
In December 1995, L & L Land Co. (also appearing of record as L & L Land)
acquired the Adjacent Building. L & L Land Co. is a general partnership between
Howard M. Wall, a director of the Company, and his wife, Patricia Wall. In
acquiring the Adjacent Building, L & L Land Co. also became the landlord under
the lease to Power Transmission Products, Inc.
Contemporaneously with the acquisition of the Adjacent Building, L & L Land
Co. executed an agreement with the Company dated December 28, 1995, entitled
Option to Purchase and Agreement and Option to Lease (the "Option Agreement")
pursuant to which (a) L & L Land Co. granted to the Company the exclusive and
irrevocable right and option to acquire the Adjacent Building, at the election
of the Company to be exercised by written notice of election given no later than
December 31, 1998, in which event the Company would acquire the Adjacent
Building from L & L Land Co. for a total purchase price of $1,100,000 (the
amount paid by L & L Land Co. to acquire the Adjacent Building), plus the
amount, up to $200,000, paid by L & L Land Co. for the improvements described
below, (b) L & L Land Co. granted to the Company the right and option to lease
the entirety of the Adjacent Building if the Company so elects by written notice
given no later than the later of the Company receiving written confirmation that
Power Transmission Products, Inc. has vacated the Adjacent Building and that L &
L Land Co. has the legal ability to lease the entirety of the Adjacent Building
to the Company or September 30, 1998, in which event the Adjacent Building would
be leased to the Company for a 10-year term at a rent of $10,833 per month for
the first five years and at a fair market rental value rate for the remaining
five years, and (c) the Company agrees to lease the entirety of the Adjacent
Building through March 31, 1999 in the event the Power Transmission Products,
Inc. lease is terminated and Power Transmission Products, Inc. vacates the
Adjacent Building prior to March 31, 1999.
As consideration for the Option Agreement, the Company agreed to pay L & L
Land Co. monthly in arrears an amount equal to interest which would accrue at
the annual rate of 10% on the sum expended by L & L Land Co. for the
improvements described below, up to a maximum expenditure of $200,000, with such
amount to commence to accrue upon final completion of the improvements and to
cease upon the earlier of acquisition of the Adjacent Building by the Company,
execution of a direct lease by the Company for the entire Adjacent Building, the
termination of the Option Agreement, or March 31, 1999, whichever is the
earliest of such dates.
L & L Land Co. agreed, in the Option Agreement, to construct certain
improvements (consisting of a shipping dock) to the Adjacent Building. In 1996,
the Company and L & L Land Co. paid approximately $400,000, split equally, for
the construction of the shipping dock.
LICENSE AGREEMENT WITH ROBERT M. MACTARNAHAN
In July 1994, the Company entered into a License Agreement ("License
Agreement") with Robert M. MacTarnahan, a director of the Company, and Harmer
Mill & Logging Supply Co., a company controlled by Mr. and Mrs. Robert M.
MacTarnahan. Pursuant to the License Agreement, (i) Mr. MacTarnahan confirms to
the Company the right to use his surname and its variation "McTarnahan" as a
Company trademark, and (ii) the Company has been granted an exclusive worldwide
license to use Mr. MacTarnahan's likeness, image and other personal attributes
to promote the sale of the Company's products, merchandise, and related
materials. The license expires on December 31, 2093. In consideration of the
license grant, the Company must pay a royalty of $1.00 per barrel of
MacTarnahan's Ale sold by the Company for the term of the license. The Company
has the right to terminate the Agreement on 30-days' written notice. The
license shall also terminate (a) if, in any
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subsequent year after Dilution (as defined below), the Company or its successors
fails to sell a volume of products equal to or greater than 20% of the average
annual value of sales of products in the prior five (5) years, or (b) if the
Company or its successors fail to make any sales of MacTarnahan's Ale for a
period of twelve months. The term "Dilution" means the occurrence of any of the
following: (i) MacTarnahan, his affiliates, Charles A. (Tony) Adams, Mr. Adams'
affiliates, and Portland Brewing Building Partners, L.L.C., collectively, cease
to own at least ten percent (10%) of the common stock of the Company (or any
successor), including the shares that could be purchased by any of the foregoing
upon exercise of all outstanding warrants or options granting rights to purchase
Company stock; (ii) the Company sells substantially all of its assets; or (iii)
the Company sells or assigns its right, title and interest to the brands
"MacTarnahan's Ale," "MacTarnahan's Scottish Ale," any other version of the
MacTarnahan name used as a brand name and/or the License Agreement. In the
event the license is terminated or terminates, the Company must assign its
rights to the trademark "MacTarnahan" and the above variations to Mr.
MacTarnahan.
Royalties paid under the License Agreement for 1996 and 1995 were $21,974
and $15,809, respectively, based on the sale of 21,974 and 15,809 barrels,
respectively, of MacTarnahan's Ale during the same periods.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's executive officers and Directors, and persons who own
more than ten percent of a registered class of the Company's equity securities
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission ("SEC"). Executive officers, Directors and greater than ten
percent stockholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on its review of the
copies of such forms received by it, or written representations from certain
reporting persons, the Company believes that, during 1996, all executive
officers, Directors and greater than 10% shareholders complied with all
applicable filing requirements.
SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Shareholder proposals intended to be presented at the Company's 1998 Annual
Meeting of Shareholders must be received by the Company at its principal office
no later than January 12, 1998, in order that they may be considered for
inclusion in the Proxy Statement and form of Proxy relating to that meeting.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed form of Proxy to vote the shares they represent as
the Board of Directors may recommend or proxy holders determine.
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COST OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. In addition to
use of the mails, proxies may be solicited personally or by telephone by Chase
Mellon Shareholder Services, at an approximate cost of $1,000, or by directors,
officers and employees of the Company, who will not be specially compensated for
such activities. Such solicitations may be made personally, or by mail,
facsimile, telephone telegraph or messenger. The Company will also request
persons, firms and companies holding shares in their names or in the name of
their nominees, which are beneficially owned by others, to send proxy materials
to and obtain proxies from such beneficial owners. The Company will reimburse
such persons for their reasonable expenses incurred in that connection.
ADDITIONAL INFORMATION
A copy of the Company's Annual Report to Shareholders for the year ended
December 31, 1996 accompanies this Proxy Statement. The Company will provide,
without charge on the written request of any beneficial owner of shares of the
Company's Common Stock entitled to vote at the Annual Meeting, a copy of the
Company's Annual Report on Form 10-KSB as filed with the Securities and Exchange
Commission for the year ended December 31, 1996. Written requests should be
mailed to the Secretary, Portland Brewing Company, 2730 NW 31st Avenue,
Portland, Oregon, 97210.
By Order of the Board of Directors
Glenmore James
VICE PRESIDENT, CHIEF FINANCIAL OFFICER,
CHIEF OPERATING OFFICER, TREASURER, AND
SECRETARY
Dated: May 12, 1997
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PORTLAND BREWING COMPANY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 21, 1997
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders and Proxy Statement, each dated May 12, 1997 and hereby names,
constitutes and appoints Charles A. Adams and Glenmore James, or either of them
acting in absence of the other, with full power of substitution, my true and
lawful attorneys and Proxies for me and in my place and stead to attend the
Annual Meeting of the Shareholders of Portland Brewing Company (the "Company")
to be held at 3:00 p.m. on Saturday, June 21, 1997, and at any adjournment
thereof, and to vote all the shares of Common Stock held of record in the name
of the undersigned on May 5, 1997, with all the powers that the undersigned
would possess if he or she were personally present.
1. PROPOSAL 1--Election of Directors / / FOR all nominees listed below
(except as marked to the contrary below)
/ / WITHHOLD AUTHORITY
(to vote for all nominees listed below)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE,
STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST BELOW.)
CHARLES A. (TONY) ADAMS EDWIN HUNT ROBERT M. MACTARNAHAN
R. SCOTT MACTARNAHAN SIMON C. OSTLER HOWARD M. WALL, JR.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR EACH OF THE
NOMINEES NAMED ABOVE.
2. PROPOSAL 2--To ratify the appointment of Arthur Andersen LLP as the
Company's independent accountants for the fiscal year ending December 31,
1997.
FOR PROPOSAL 2 / / AGAINST PROPOSAL 2 / / ABSTAIN ON PROPOSAL 2 / /
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE APPROVAL OF
PROPOSAL 2.
3. Upon such other matters as may properly come before, or incident to the
conduct of the Annual Meeting, the Proxy holders shall vote in such manner as
they determine to be in the best interests of the Company. The Company is not
presently aware of any such matters to be presented for action at the meeting.
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THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY. IF NO
SPECIFIC DIRECTION IS GIVEN AS TO ANY OF THE ABOVE ITEMS, THIS PROXY WILL BE
VOTED FOR EACH OF THE NOMINEES NAMED IN PROPOSAL 1 AND FOR PROPOSAL 2.
Dated
---------------------------------------------
--------------------------------------------------
Shareholder (print name)
--------------------------------------------------
Shareholder (sign name)
I do ( ) do not ( ) plan to attend the meeting.
(Please check)
The shareholder signed above reserves the right to
revoke this Proxy at any time prior to its exercise
by written notice delivered to the Company's
Secretary at the Company's corporate offices at 2730
NW 31st Avenue, Portland, Oregon, 97210, prior to
the Annual Meeting. The power of the Proxy holders
shall also be suspended if the shareholder signed
above appears at the Annual Meeting and elects in
writing to vote in person.
