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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
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
THE BOSTON BEER COMPANY, INC.
(Name of Registrant as Specified In Its Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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THE BOSTON BEER COMPANY, INC.
NOTICE OF THE 1998 ANNUAL MEETING OF STOCKHOLDERS
JUNE 2, 1998
To the Stockholders:
The 1998 Annual Meeting of the Stockholders of THE BOSTON BEER COMPANY,
INC. (the "Corporation") will be held on Tuesday, June 2, 1998, at 10:00 a.m. at
The Brewery located at 30 Germania Street, Jamaica Plain, Boston, Massachusetts,
for the following purposes:
1. To consider and act upon a proposal to amend Article IV, Section 1, of
the Restated Articles of Organization (the "Articles") and Sections 4.1
and 4.8 of the By-Laws (the "By-Laws") of the Corporation, each as
amended and currently in effect, such that (i) the number of Directors
of the Corporation shall be such number as fixed annually by the Board
of Directors, but not fewer than seven (7) nor more than eleven (11),
consisting of not fewer than two (2) nor more than four (4) Directors
elected by the holders of the Corporation's Class A Common Stock (the
"Class A Directors") and not fewer than five (5) nor more than seven (7)
Directors elected by the holders of the Corporation's Class B Common
Stock (the "Class B Directors"), and subject to the further requirement
that no Class B Directors in excess of five (5) Class B Directors shall
be elected unless a like number of Class A Directors is also elected.
2. If Item 1 above is so approved, then for the election by the holders of
the Class A Common Stock of three (3) Class A Directors, each to serve
for a term of one (1) year; provided, however, that if Item 1 above
shall not be so approved, then, for the election by the holders of the
Class A Common Stock of two (2) Class A Directors, each to serve for a
term of one (1) year.
3. For the election by the sole holder of the Class B Common Stock of five
(5) Class B directors.
4. For the approval by the sole holder of the Class B Common Stock of a
further amendment to the Articles to increase the number of authorized
shares of the Corporation's Class A Common Stock, $0.01 par value, from
20,300,000 shares to 22,700,000 shares of Class A Common Stock.
5. To consider and act upon any other business which may properly come
before the meeting.
The Board of Directors has fixed the close of business on April 3, 1998 as
the record date for the meeting. All stockholders of record on that date are
entitled to notice of and to vote at the meeting.
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE MEETING IN PERSON.
By order of the Board of
Directors
C. JAMES KOCH, Clerk
Boston, Massachusetts
April 13, 1998
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THE BOSTON BEER COMPANY, INC.
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Boston Beer Company, Inc. (the
"Corporation", which is sometimes referred to in this Proxy Statement, together
with its affiliate, Boston Beer Company Limited Partnership (the "Partnership")
as the "Company") for use at the 1998 Annual Meeting of Stockholders to be held
on Tuesday, June 2, 1998, at the time and place set forth in the notice of the
meeting, and at any adjournments thereof. The approximate date on which this
Proxy Statement and form of proxy are first being sent to stockholders is April
13, 1998.
If the enclosed proxy is properly executed and returned, it will be voted
in the manner directed by the stockholder. If no instructions are specified with
respect to any particular matter to be acted upon, proxies will be voted in
favor thereof. Any person giving the enclosed form of proxy has the power to
revoke it by voting in person at the meeting, or by giving written notice of
revocation to the Clerk of the Corporation at any time before the proxy is
exercised.
The holders of a majority in interest of the issued and outstanding Class A
Common Stock are required to be present in person or be represented by proxy at
the Meeting in order to constitute a quorum for the election of the Class A
Directors. The election of each of the nominees for Class A Director, as
hereinafter set forth in greater detail, will be decided by plurality vote of
the holders of Class A Common Stock present in person or represented by proxy at
the Meeting. The affirmative vote of the sole holder of the outstanding shares
of Class B Common Stock voting in person or by proxy at the meeting is required
to elect the Class B Directors, as hereinafter set forth in greater detail, and
to approve all other matters listed in the notice of meeting. The proposed
amendment to the Corporation's Articles of Organization and By-Laws with respect
to the number of the members of the Corporation's Board of Directors requires
the affirmative vote of at least 75% of the issued and outstanding shares of the
Class A Common Stock.
The Corporation will bear the cost of the solicitation. In addition to
mailing this material to shareholders, the Corporation has asked banks and
brokers to forward copies to persons for whom they hold stock of the Corporation
and request authority for execution of the proxies. The Corporation will
reimburse the banks and brokers for their reasonable out-of-pocket expenses in
doing so. Officers and regular employees of the Company, without being
additionally compensated, may solicit proxies by mail, telephone, telegram,
facsimile or personal contact. In addition, the Corporation may designate
representatives of Kissell Blake to assist the Corporation in soliciting proxies
by mail, telephone, facsimile or personal contact. If the Corporation so engages
Kissell Blake to assist in the solicitation of such proxies, the fee shall be
based on the number of proxy solicitations which the Corporation requests
Kissell Blake to make, but it is not expected that the additional cost of any
such proxy solicitation by Kissell Blake would exceed the sum of $10,000. All
reasonable proxy soliciting expenses will be paid by the Corporation in
connection with the solicitation of votes for the Annual Meeting.
The Corporation's principal executive offices are located at 75 Arlington
Street, Boston, Massachusetts 02116, telephone number (617) 368-5000.
RECORD DATE AND VOTING SECURITIES
Only stockholders of record at the close of business on April 3, 1998 are
entitled to notice of and to vote at the meeting. On that date, the Corporation
had outstanding and entitled to vote 16,377,829 shares of Class A Common Stock,
$01 par value per share, and 4,107,355 shares of Class B Common Stock, $.01 par
value per share. Each outstanding share of the Corporation's Class A and Class B
Common Stock entitles the record holder to one (1) vote on each matter properly
brought before the Class.
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ITEM 1. AMENDMENT TO THE CORPORATION'S ARTICLES AND BY-LAWS
Article IV, Section 1, of the Corporation's Restated Articles of
Organization (the "Articles") and Sections 4.1 and 4.8 of the By-Laws of the
Corporation (the "By-Laws") currently provide that the Board of Directors of the
Corporation shall consist of seven (7) Directors, consisting of two (2) Class A
Directors elected each year by the holders of the Class A Common Stock, and five
(5) Class B Directors, elected each year by the holders of the Class B Stock,
with each Director so elected for a term of one (1) year.
It is proposed that Article IV, Section 1, of the Articles and Sections 4.1
and 4.8 of the By-Laws, each as amended and currently in effect, be amended such
that (i) the number of Directors of the Corporation shall be such number as is
fixed annually by the Board of Directors but not fewer than seven (7) nor more
than eleven (11), consisting of not fewer than two (2) nor more than four (4)
Directors elected by the holders of the Corporation's Class A Common Stock (the
"Class A Directors") and not fewer than five (5) nor more than seven (7)
Directors elected by the holders of the Corporation's Class B Common Stock (the
"Class B Directors") and subject to the further requirement that no Class B
Directors in excess of five (5) Class B Directors shall be elected unless a like
number of Class A Directors is also then, or previously, elected.
The foregoing proposed amendment to the Articles and By-Laws requires the
affirmative vote of at least seventy-five percent (75%) of the issued and
outstanding shares of Class A Common Stock.
THE BOARD RECOMMENDS A VOTE IN FAVOR OF THE PROPOSED AMENDMENT OF THE
ARTICLES AND BY-LAWS.
ITEMS 2 AND 3. ELECTION OF CLASS A AND CLASS B DIRECTORS
ELECTION OF DIRECTORS IF ITEM 1 -- AMENDMENT TO ARTICLES AND BY-LAWS IS
APPROVED:
If Item 1 above is so approved, then the Board of Directors proposes that
the total number of Directors be set at eight (8), with the Board of Directors
being divided into two (2) classes, Class A Directors, consisting of three (3)
Directors elected each year by the holders of Class A Common Stock for a term of
one (1) year, and Class B Directors, consisting of five (5) Directors elected
each year by the holders of Class B Common Stock, also for a term of one (1)
year.
It is proposed that each of the two (2) nominees for Class A Director and
five (5) nominees for Class B Director listed below whose term expires at this
meeting, be elected as Class A and Class B Directors, respectively, together
with the additional nominee for Class A Director so designated below in the
section entitled "Additional Nominee if Amendment to Articles and By-Laws is
Approved", be elected as Class A and Class B Directors, respectively, each to
serve for a term of one (1) year and until his successor is duly elected and
qualified or until he sooner dies, resigns or is removed.
ELECTION OF DIRECTORS IF ITEM 1 -- AMENDMENT TO ARTICLES AND BY-LAWS IS
DISAPPROVED:
If Item 1 above is not so approved, then pursuant to the Articles of
Organization and By-Laws of the Corporation, the Board of Directors shall be
fixed for the ensuing year at seven (7), consisting of two (2) Class A Directors
to be elected by the holders of the Class A Common Stock for a term of one (1)
year, and five (5) Class B Directors to be elected by the sole holder of the
Class B Common Stock, with each Director so elected for a term of one (1) year.
The person named in the accompanying proxy will vote, unless authority is
withheld, for the election of the nominees named below. In the event that any of
the nominees should become unavailable for election, which is not anticipated,
the person named in the accompanying proxy will vote for such substitute
nominees as the incumbent Class A Directors, acting pursuant to Section 4.8 of
the Corporation's By-Laws as a
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Nominating Committee, may nominate. As indicated below, except for Messrs.
Cummin and Wing, all Directors are either Executive Officers of the Corporation
or its subsidiaries or related to such Executive Officers. The nominee proposed
in the section entitled "Additional Nominee if Amendment to Articles and By-
Laws is Approved" is not an Executive Officer of the Corporation or its
subsidiaries and is not related to such Executive Officers.
NOMINEES PROPOSED IN ACCORDANCE WITH THE TERMS OF THE ARTICLES OF
ORGANIZATION AND BY-LAWS OF THE CORPORATION, AS IN EXISTENCE PRIOR TO THE DATE
OF THIS ANNUAL MEETING OF STOCKHOLDERS: Set forth below are the nominees for
election as Class A and Class B Directors, respectively, for terms ending in
1999 and certain information about each of them.
CLASS A DIRECTORS:
YEAR FIRST POSITION WITH THE CORPORATION
ELECTED A OR PRINCIPAL OCCUPATION
NAME OF NOMINEE AGE DIRECTOR DURING THE PAST FIVE YEARS
- - --------------- --- ---------- -----------------------------
Pearson C. Cummin III................ 54 1995 Mr. Cummin has served as a general partner of
Consumer Venture Partners, a Greenwich,
Connecticut based venture capital firm, since
January 1986. Mr. Cummin is currently Chairman
of the Board of Natural Wonder, Inc. and a
Director of Pacific Sunwear of California, Inc.
James C. Kautz....................... 67 1995 Mr. Kautz is currently a limited partner of The
Goldman Sachs Group, L.P. and the second cousin
of the Company's founder and chief executive
officer, C. James Koch.
CLASS B DIRECTORS:
YEAR FIRST POSITION WITH THE CORPORATION
ELECTED A OR PRINCIPAL OCCUPATION
NAME OF NOMINEE AGE DIRECTOR DURING THE PAST FIVE YEARS
- - --------------- --- ---------- -----------------------------
C. James Koch........................ 48 1995 Mr. Koch founded the Company in 1984 and has
been the Chief Executive Officer throughout the
Company's history. Mr. Koch also serves as the
Corporation's President and Clerk and is the
Company's principal executive officer.
Alfred W. Rossow, Jr. ............... 65 1995 Mr. Rossow joined the Company in late 1989 as
Chief Operating Officer and Chief Financial
Officer. At present, Mr. Rossow serves as both
the Executive Vice President and Chief
Financial Officer of the Company.
Rhonda L. Kallman.................... 37 1995 Ms. Kallman co-founded the Company. She has
been Vice President -- Sales since 1985.
Charles Joseph Koch.................. 75 1995 Mr. Koch is the father of founder, C. James
Koch. In 1989, Mr. Koch retired as founder and
co-owner of Chemicals, Inc., a distributor of
brewing and industrial chemicals in
southwestern Ohio.
John B. Wing......................... 51 1995 Mr. Wing has been Chairman and CEO of The Wing
Group Limited, Co., a developer of energy
projects in Turkey, Kuwait and China, since
1991.
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ADDITIONAL NOMINEE IF AMENDMENT TO ARTICLES AND BY-LAWS
IS APPROVED AT THIS MEETING
ADDITIONAL CLASS A DIRECTOR NOMINEE:
NAME OF NOMINEE AGE PRINCIPAL OCCUPATION DURING THE PAST FIVE YEARS
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Robert N. Hiatt...................... 61 Mr. Hiatt was Chairman of Maybelline, Inc. from 1996
until he retired in 1997. From 1990 until 1996, Mr.
Hiatt was President and CEO of Maybelline, Inc. In
addition, Mr. Hiatt has served as a Director of Genovese
Drug Stores, Inc. since 1997.
ITEM 4: AMENDMENT TO THE CORPORATION'S ARTICLES OF ORGANIZATION
Article III of the Corporations' Restated Articles of Organization provides
for the issuance of up to 20,300,000 shares of the Class A Common Stock, $0.01
par value per share. It is proposed that the number of such authorized shares be
increased to 22,700,000 shares.
As of April 3, 1998, there were 16,377,829 shares of the Corporation's
Class A Common Stock outstanding. In addition, there are outstanding 4,107,355
shares of the Class B Common Stock which may be converted to shares of Class A
Common Stock; 1,000,338 shares outstanding pursuant to the grant of stock
options under the terms of the Corporation's Employee Equity Incentive Plan
("Plan") and 1,027,002 shares reserved for issuance under the Plan; 20,000
shares outstanding pursuant to the grant of stock options under the terms of the
Corporation's Stock Option Plan for Non-Employe Directors ("Directors' Plan")
and 80,000 shares reserved for issuance under the Directors' Plan. Therefore,
approximately 2,400,000 additional shares of authorized Class A Common Stock are
required in order to meet the potential requirements described.
Consistent with the provisions of Article IV, Section 2, of the Articles,
the foregoing amendment to the Articles requires the affirmative vote of the
sole holder of the Corporation's issued and outstanding shares of Class B Common
Stock, but not the approval of the holders of the Corporation's issued and
outstanding shares of Class A Common Stock.
THE BOARD ANTICIPATES A FAVORABLE VOTE ON THIS PROPOSAL.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During the Corporation's 1997 fiscal year, there were seven (7) meetings of
the Board of Directors of the Corporation. All of the Directors, except for John
B. Wing, attended at least 75% of the aggregate of (i) the total number of
meetings of the Board of Directors and (ii) the total number of meetings held by
committees of the Board of Directors on which they served. In 1997, Mr. Wing
attended 57% of the meetings of the Board of Directors, 50% of the meetings of
the Compensation Committee and 66 2/3% of the meetings of the Audit Committee.
The Class A Directors in office from time to time serve as a nominating
committee for the purpose of nominating persons for election as Class A
Directors. The Corporation does not otherwise have a nominating committee.
The Audit Committee of the Board of Directors reviews with the
Corporation's independent auditors the scope of the audit for the year, the
results of the audit when completed and the independent auditors' fees for
services performed. The Audit Committee also recommends independent auditors to
the Board of Directors and reviews with management various matters related to
its internal accounting controls. The present members of the Audit Committee are
Pearson C. Cummin III (Chairman), James C. Kautz and John B. Wing. The Audit
Committee met on three (3) occasions in 1997.
The Corporation also has a Compensation Committee, whose purpose is to
administer the Corporation's Employee Equity Incentive Plan and otherwise act
with respect to matters of executive compensation. The
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members of such Committee are Pearson C. Cummin III, James C. Kautz (Chairman)
and John B. Wing. The Compensation Committee met on four (4) occasions in 1997.
SECURITY OWNERSHIP OF PRINCIPAL HOLDERS OF
VOTING SECURITIES, DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Class A Common Stock as of April 3, 1998 (i) by each
person (or group of affiliated persons) known by the Company to be the
beneficial owner(s) of more than five percent (5%) of the outstanding Class A
Common Stock, (ii) by each Director of the Company, (iii) by each person
nominated as a Director of the Company, (iv) by the Company's Chief Executive
Officer and the other officers named below in the Summary Compensation Table and
(v) all of the Company's executive officers and Directors as a group. Unless
otherwise indicated, the individuals named below held sole voting and investment
power over the shares listed below.
SHARES BENEFICIALLY OWNED(1)
NAMED EXECUTIVE OWNERS, ----------------------------
DIRECTORS AND 5% STOCKHOLDERS NUMBER PERCENT
----------------------------- ----------- ---------
C. James Koch(2)(3)......................................... 5,587,554 27.3%
Rhonda L. Kallman(3)(4)..................................... 367,447 2.2%
Alfred W. Rossow, Jr.(3)(5)................................. 97,472 0.6%
Martin Roper(3)(6).......................................... 167,443 1.0%
John Chappell(3)(7)......................................... 5,000 *
Pearson C. Cummin III(3)(8)(13)............................. 5,000 *
James C. Kautz(9)........................................... 527,531 3.2%
Charles Joseph Koch(3)(10).................................. 7,000 *
John B. Wing(11)............................................ 436,892 2.7%
Hambrecht & Quist LLC(12)................................... 966,238 5.9%
Consumer Venture Partners I, L.P.(13)....................... 1,058,820 6.5%
All Directors and Executive Officers as a group (10
people)................................................... 7,207,872 34.7%
Contingent Nominee for Class A Director: Robert N.
Hiatt(3)(14).............................................. 4,000 *
- - ---------------
* Less than 1% of the outstanding shares of Class A Common Stock.
(1) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commission and includes general voting and/or
investment power with respect to securities. Shares of Class A Common Stock
subject to options and warrants currently exercisable or exercisable within
60 days after the record date are deemed outstanding for computing the
percentage of a person holding such options but are not deemed outstanding
for computing the percentage of any other person. No shares of Class B
Common Stock are subject to options or warrants. All shares are Class A
Common Stock except for shares of Class B Common Stock held by C. James
Koch. See Note 2 below.
(2) Includes 4,107,355 shares of Class B Common Stock, constituting all of the
outstanding shares of Class B Common Stock. Includes 604,553 shares of
Class A Common Stock held in several trusts for the benefit of C. James
Koch and certain of his family members; does not include shares deposited
in Exchange Funds which have been treated as sales for purposes of
reporting purposes.
(3) Executive officer and/or Director and/or nominee for Director of the
Company. Mailing address is c/o The Boston Beer Company, Inc., 75 Arlington
Street, Boston, MA 02116.
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(4) Includes options to acquire 101,671 shares of Class A Common Stock
exercisable currently or within 60 days; does not include shares deposited
in Exchange Funds which have been treated as sales for reporting purposes.
(5) Consists of options to acquire 15,000 shares of Class A Common Stock
exercisable currently or within 60 days.
(6) Consists of options to acquire 167,443 shares of Class A Common Stock
exercisable currently or within 60 days.
(7) Consists of options to acquire 5,000 shares of Class A Common Stock
exercisable currently or within 60 days.
(8) Director of the Company. Consists of options to acquire 5,000 shares of
Class A Common Stock exercisable currently or within 60 days.
(9) Director of the Company. Shares are owned of record by Kautz Family
Partners, L.P. of which Mr. Kautz is general partner. Mailing address is
c/o Goldman, Sachs & Co., 85 Broad Street, New York, New York 10004.
Includes options to acquire 5,000 shares of Class A Common Stock
exercisable currently or within 60 days.
(10) Director of the Company and father of C. James Koch. Includes options to
acquire 5,000 shares of Class A Common Stock exercisable currently or
within 60 days and 2,000 shares owned by the spouse of Mr. Koch.
(11) Director of the Company. Mailing address is c/o The Wing Group, 1610
Woodstead Court, Suite 200, The Woodlands, Texas 77380. Includes options to
acquire 5,000 shares of Class A Common Stock exercisable currently or
within 60 days.
(12) Includes shares owned by various entities affiliated with Hambrecht & Quist
LLC, including H&Q London Ventures, Hamquist, Hamco Capital Corporation,
Hambrecht & Quist Group and H&Q Investors. Mailing address for each of
these entities is c/o Hambrecht & Quist Venture Partners, One Bush Street,
15th Floor, San Francisco, California 94104.
(13) Mailing address is Three Pickwick Plaza, Greenwich, Connecticut 06830.
Pearson C. Cummin III, a Director of the Company, is and has been a general
partner of Consumer Venture Partners since January 1986.
(14) Includes 1,000 shares of Class A Common Stock owned by the spouse of Robert
N. Hiatt.
DIRECTOR COMPENSATION FOR THE LAST FISCAL YEAR
Except as described in the following paragraph, the Company's Directors are
not compensated for their services as such, although they are on occasion
reimbursed for out-of-pocket expenses incurred in attending meetings.
On May 21, 1996, the Company adopted a Non-Employee Director Stock Option
Plan pursuant to which each non-employee director of the Company is granted an
option for 2,500 shares of the Company's Class A Common Stock annually as of the
date of the Annual Stockholders' Meeting of the Company. The exercise price for
such options is based upon the fair market value of the Company's stock as of
the date of grant. On May 21, 1996, each non-employee director was granted an
option to purchase up to 2,500 shares at a per share price of $18.5625 per share
and, on June 3, 1997, each non-employee director was granted an option to
purchase up to 2,500 shares of the Company's stock at $9.50 per share. The grant
of stock options under this Non-Employee Director Stock Option Plan is subject
to the requirement that each director comply with his fiduciary obligations to
the Company. If any breach of such obligations should occur, the Company shall
be entitled, in addition to any other remedies available to it, to recover all
profit realized by him as a result of the
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exercise of such option during the last 12 months of his term as director and at
any time after the expiration of such term. On December 19, 1997, the Board
amended the terms of such Non-Employee Director Stock Option Plan (and of each
stock option previously granted pursuant to the terms of such Plan) to increase
from ninety (90) days to three (3) years the period within which each option
would remain exercisable following the date on which the optionee ceased to be a
Director of the Company subject in any case to the ten (10) year term of each
option.
COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
Compensation Philosophy. The Corporation's executive compensation system
continues to be comprised of base salaries, annual bonuses and stock option
awards. Executive compensation is subject to the oversight and approval of the
Compensation Committee of the Board of Directors (the "Committee"), which
reviews executive officer compensation annually. Executive officers are eligible
to receive annual cash bonuses upon achievement of predetermined performance
targets. Compensation paid to the Corporation's executive officers is intended
to reflect the responsibility associated with each executive officer's position,
the past performance of the specific executive officer, the goals of management
and the profitability of the Corporation.
Executive compensation is designed to be competitive within the alcoholic
beverages industry and other companies of comparable size and complexity, so as
to enable the Company to continue to attract and retain talented and motivated
individuals in key positions. Compensation in any particular case may vary from
any industry average on the basis of annual and long-term Company performance,
as well as individual performance. The Compensation Committee will exercise its
discretion to set compensation where, in its judgment, external or individual
circumstances warrant it.
Equity-Based Compensation. During 1997, the Compensation Committee devoted
significant attention to the Corporation's Employee Equity Incentive Plan that
was adopted by the Board of Directors and approved by the sole Class B
stockholder and a majority in interest of the then Class A stockholders of the
Corporation effective November 20, 1995, and amended and restated effective on
February 23, 1996 (the "Employee Equity Plan" or the "Plan"). As discussed below
and elsewhere in this Proxy Statement, the Employee Equity Plan was further
amended and restated effective December 19, 1997 (the "1997 Restatement").
As in effect prior to the 1997 Restatement, the Employee Equity Plan
provides for both so-called Management Options, which carry an exercise price of
$0.01 per share, and Discretionary Options, the exercise price of which has
historically been set by the Compensation Committee at the market value of the
underlying shares as of the time of grant. The right to exercise options granted
under the Employee Equity Plan vests over a period of years set by the
Compensation Committee and, in the absence of a specific determination to the
contrary, over a period of five (5) years. Options granted under the Plan expire
ten (10) years from the date of grant, subject to earlier termination if the
optionee leaves the Corporation's employ or service, whether voluntarily or by
virtue of his or her death or disability. The Employee Equity Plan also permits
all employees to purchase shares of Class A Common Stock (so-called "Investment
Shares") at a discount based on length of service with the Company.
The Discretionary Options feature of the Employee Equity Plan has been used
by the Compensation Committee as an integral part of the overall compensation
approach for the officers of the Corporation. Such stock option awards are
designed to provide incentive to the Corporation's key management employees to
increase the market value of the Corporation's stock, thus linking corporate
performance and stockholder value to executive compensation. In granting (and
henceforth in recommending the grant of options), the Compensation Committee
takes into account the position and responsibilities of the optionee being
consid-
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ered, the nature and value to the Company of his or her service and
accomplishments, his or her present and potential contributions to the success
of the Company and such other factors as the Compensation Committee deem
relevant.
As a result of its own review of the Employee Equity Plan and other
possible approaches to equity-based compensation, and the recommendations of
Management, the Compensation Committee recommended, and the full Board and the
sole holder of the Corporation's Class B Common Stock approved, amendments to
the Employee Equity Plan itself and changes in the manner in which it will
henceforth be implemented. These amendments and changes are detailed elsewhere
in this Proxy Statement and include an increase in the number of shares of Class
A Common Stock issuable under the Plan, the discontinuance of Management
Options, the shift from the Compensation Committee to the full Board of
authority to act under the Plan, based on recommendations brought to it by the
Compensation Committee, and a new formal options approval process that will
result, generally, in options being granted only once every year. The
Compensation Committee believes that the combination of the discontinuance of
the Management Options, the anticipated expansion of the use of Discretionary
Options, and the implementation of a structured annual option grant program,
subject to oversight by both the Compensation Committee and the full Board, will
further enable the Compensation Committee to align executive compensation with
corporate performance and stockholder value.
Up to an aggregate of 2,687,500 shares of Class A Common Stock may be
issued under the Employee Equity Plan. As of April 3, 1998, there were 1,027,002
shares of Class A Common Stock available for grant under the Employee Equity
Plan.
The Employee Equity Plan may be further amended or terminated by the Board
of Directors, subject to the approval of the holders of a majority in interest
of the Class B Common Stock of the Corporation.
A detailed description of the Employee Equity Plan is included elsewhere in
this Proxy Statement.
Chief Executive Officer Compensation. The Compensation Committee reviewed
and approved the compensation paid to the Corporation's Chief Executive Officer,
C. James Koch, during 1997. In reviewing such compensation, the Committee
evaluated the Corporation's success in executing against the Company's strategic
plan for maintaining its leading position in the highly competitive better beer
industry. The Compensation Committee believes that the compensation paid to Mr.
Koch in 1997 was reasonable in light of the Corporation's overall performance,
especially in the area of profitability. In light of Mr. Koch's significant
equity position in the Corporation, the Compensation Committee feels that his
interests are closely aligned with those of all stockholders. The Compensation
Committee has not, to date, granted any Discretionary Options to Mr. Koch.
THE COMPENSATION COMMITTEE:
James C. Kautz, Chairman
Pearson C. Cummin, III
John B. Wing
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EXECUTIVE OFFICERS OF THE CORPORATION
Information required by Item 7(b) of Schedule 14A with respect to executive
officers of the Corporation is set forth below. The executive officers of the
Corporation are elected annually by the Board of Directors and hold office until
their successors are elected and qualified, or until their earlier removal or
resignation.
C. James Koch, 48, founded the Company in 1984 and has been the Chief
Executive Officer throughout the Company's history.
Rhonda L. Kallman, 37, co-founded the Company. She has been Vice
President -- Sales since 1985.
Alfred W. Rossow, Jr., 65, joined the Company in late 1989 as Chief
Operating Officer and Chief Financial Officer. Since April 1997, Mr. Rossow has
served as Executive Vice President and Chief Financial Officer of the Company.
Martin Roper, 35, has served as Chief Operating Officer since April 1997.
He joined the Company as Vice President -- Operations in September 1994 from
Steel Works Inc. where he was President of the MEG Division. From July 1990 to
October 1992, Mr. Roper was Executive Vice President of Blocksom & Co.
John Chappell, 40, is Vice President -- Brand Development. He joined the
Company in 1994 after nine years at Labatt's USA where he was Director of Brand
Management.
David Grinnell, 40, has been Manager of Brewing Operations of the Company
since 1988.
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EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or
paid to the Corporation's Chief Executive Officer and each of the Corporation's
executive officers (other than the Chief Executive Officer) whose total annual
salary and bonus exceeded $100,000 for all services rendered in all capacities
to the Company for the Company's three most recent fiscal years ended December
27, 1997, December 28, 1996 and December 31,1995.
SUMMARY COMPENSATION TABLE
ANNUAL OTHER
COMPENSATION(1) COMPENSATION
------------------- OTHER ANNUAL FROM
NAME AND PRINCIPAL POSITION YEARS SALARY BONUS(2) COMPENSATION SECURITIES
--------------------------- ----- -------- -------- ------------ ------------
C. James Koch............................ 1997 $184,465 $ 36,750 $ 1,185 --
President and Chief Executive Officer 1996 $184,465 $129,940 $ 797 $1,400,134
1995 $184,465 $ -- $ 4,972 --
Rhonda L. Kallman........................ 1997 $175,680 $ 90,125 $ 525 $1,042,143
Vice President -- Sales 1996 $174,353 $ 77,000 $ 505 $ 579,830
1995 $110,575 $ 43,609 $ 5,120 $ 1,520
Alfred W. Rossow, Jr. ................... 1997 $191,160 $ 14,450 $64,888(3) $1,106,461
Executive Vice President and 1996 $176,940 $ 35,000 $61,095(3) $1,497,808
Chief Financial Officer 1995 $140,923 $ -- $60,738(3) $ 940
Martin F. Roper.......................... 1997 $213,302 $ 500 $ 209 --
Chief Operating Officer 1996 $158,592 $ 47,500 $ 90 --
1995 $ 88,426 $ 1,000 $ 2,316 --
John Chappell............................ 1997 $169,908 $ 13,500 $ 244 --
Vice President -- Brand Development 1996 $149,599 $ 47,231 $ 148 --
1995 $135,525 $ 1,000 $37,363(4) $ 1,137
- - ---------------
(1) Included in this column are amounts earned, though not necessarily received,
during the corresponding fiscal year.
(2) The bonus amounts for the executive officers have been restated so that the
bonus for all fiscal year periods is recorded for each officer in the year
in which such bonus is paid.
(3) Included in these amounts are deferred compensation of $61,000, $59,000 and
$56,000 for fiscal years 1997, 1996 and 1995. See "Deferred Compensation
Agreement with Alfred W. Rossow, Jr." below.
(4) Includes $32,800 moving allowance.
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The following sets forth, as of December 31, 1997, information regarding
options exercised by the Executive Officers during the fiscal year ended
December 27, 1997 as well as information regarding unexercised options held by
such Executive Officers and the value of "in-the-money" options.
AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES
AS OF DECEMBER 31, 1997
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
FY-END(#) FY-END($)(7)
SHARES ACQUIRED -------------------- --------------------
BANE ON EXERCISE(#) VALUE REALIZED($)(8) EXER./UNEXERCISABLE EXER./UNEXERCISABLE
---- --------------- -------------------- -------------------- --------------------
C. James Koch.......... -- -- 1,802 1,125 $ 14,229 $8,883
Rhonda L. Kallman...... 151,556 $1,040,258 52,856 167,162 $117,650 $3.909
Alfred W. Rossow,
Jr. ................. 160,000 $1,105,223 15,000 -- -- --
Martin F. Roper........ -- -- 129,110 375,773 -- --
John Chappell.......... -- -- -- 30,000 -- --
- - ---------------
(7) Based upon a fair market value at December 31, 1997 of $7.9063 per share,
determined in accordance with the rules of the Securities and Exchange
Commission, less the option exercise price or purchase price.
(8) Excludes value realized from the vesting of Investment Shares purchased in
prior year periods.
EMPLOYMENT AGREEMENTS
The Company has not entered into employment agreements with any of its
employees. However, the Stockholder Rights Agreement between the Company and
initial stockholders of the Company provides that so long as Mr. Koch remains an
employee of the Company (i) he will devote such time and effort, as a full-
time, forty (40) hours per week occupation, as may be reasonably necessary for
the proper performance of his duties and to satisfy the business needs of the
Company, (ii) the Company will provide Mr. Koch benefits no less favorable than
those formerly provided to him by the Partnership and (iii) the Company will
purchase and maintain in effect term life insurance on the life of Mr. Koch.
DEFERRED COMPENSATION AGREEMENT FOR ALFRED W. ROSSOW, JR.
Effective December 1, 1992, the Company entered into a Deferred
Compensation Agreement (the "Agreement") with Mr. Rossow. Under this Agreement,
Mr. Rossow (i) waived any right to participate further in the Company's then
existing investment and incentive share plans and (ii) agreed to defer and have
paid over to a trust called for by the Agreement (the "Trust") the first $20,833
of any annual cash bonus to which he might otherwise be entitled after December
1, 1992. In exchange, the Company agreed to (i) cause the Trust to be formed,
(ii) pay over to the Trust as of December 1, 1992 and on November 30 in each of
the years 1993 through 1999, the sum of $43,500 plus certain additional
insurance premium amounts, and (iii) pay Mr. Rossow $50,000 per year for 18
years after his employment with the Company terminates. The $50,000 annual
benefit is subject to reduction if Mr. Rossow's employment terminates prior to
April 1, 2000 and is subject to forfeiture in certain limited circumstances.
Funds held by the Trust are used to pay the annual premiums on a life insurance
policy (the "Policy") on Mr. Rossow's life, the owner and beneficiary of which
is the Trust. The total insurance amount of the Policy including the basic
insurance amount of $275,011
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and the adjustable term insurance is $531,752. The assets held in the Trust,
including the Policy, are intended to secure the Company's obligations to Mr.
Rossow under the Agreement.
EMPLOYEE EQUITY INCENTIVE PLAN
The Employee Equity Plan is the successor to the Partnership's 1995
Management Option Plan (which had, in turn, succeeded various Partnership
incentive share plans) and is also the successor to various Partnership employee
investment unit plans. The predecessor Incentive Share Plans entitled eligible
employees to certain deferred compensation, generally payable after termination
of employment and calculated based on appreciation in the value of equity
interests in the Company from the date of an award, and (ii) a series of plans
under which a broader group of employees of the Partnership were permitted to
purchase similar deferred compensation rights.
As of April 3, 1998, there are (i) outstanding options for 88,789 shares of
Class A Common Stock at an exercise price of $0.01 per share, of which options
to purchase 68,458 shares are immediately exercisable, (ii) outstanding options
for 911,549 shares of Class A Common Stock at an average exercise price of
$11.40 per share and (iii) rights to receive 23,766 Investment Shares, of which
rights to receive 11,340 shares have vested.
A more complete discussion of the specific terms and provisions of the
Employee Equity Plan is provided below.
STOCK OPTIONS
The following table sets forth certain information concerning grants of
stock options made during the year ended December 31, 1997 to the executive
officers named below.
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1997
INDIVIDUAL GRANTS
--------------------------------------------------------------------------------
POTENTIAL REALIZABLE VALUE AT
NUMBER OF PERCENT OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS EXERCISE STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO OR FOR OPTION TERM(1)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------------------
NAME GRANTED(#) FISCAL YEAR PER SHARE DATE 0% 5% 10%
- - ---- ---------- ---------------- ----------- ---------- -------- ---------- ----------
C. James Koch.......... -- -- -- -- -- -- --
Rhonda L. Kallman...... -- -- -- -- -- -- --
Alfred W. Rossow,
Jr................... -- -- -- -- -- -- --
Martin Roper........... 250,000 100% $9.53 10/19/2007 $102,500 $1,665,303 $4,062,950
John Chappell.......... -- -- -- -- -- -- --
- - ---------------
(1) The potential realizable value of the options reported above was calculated
by assuming 5% and 10% annual rates of appreciation above the fair market
value of the Class A Common Stock of the Company from the date of grant
(determined in accordance with the rules of the Securities and Exchange
Commission) of the options until the expiration of the options. These
assumed annual rates of appreciation were used in compliance with the rules
of the Securities and Exchange Commission and are not intended to forecast
future price appreciation of the Class A Common Stock of the Company. The
actual value realized from the options could be higher or lower than the
values reported above, depending upon the future appreciation or
depreciation of the Class A Common Stock during the option period, the
option holder's continued employment through the option period and the
timing of the exercise of the options.
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OTHER RELATED TRANSACTIONS
For the period from March 11, 1997 through May 7, 1997, the Chief Financial
Officer of the Company had borrowings under demand notes, totaling $320,000. The
notes bear interest at the applicable federal rate, being the rate which is
equal to the minimum rate required by the Internal Revenue Service to avoid
imputed interest provided, however, that the rate is subject to upward or
downward adjustments in order to maintain the interest rate within 1% of the
Company's marginal borrowing rate. These notes were paid in full on or before
August 5, 1997.
COMPANY STOCK PERFORMANCE
The chart set forth below shows the value of an investment of $100 on
November 21, 1995 in each of the Corporation's stock ("Boston Beer"), the
Standard & Poor's 500 Index ("S&P 500") and a peer group as of December 31,
1997.
[CHART]
11/95 1995 1996 1997
BOSTON BEER 100 118.75 51.25 39.06
S&P 500 100 106.40 130.83 174.48
S&P Beverages - Alcoholic 100 99.85 119.78 124.85
PEER GROUP ONLY 100 70.72 28.33 15.75
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THE EMPLOYEE EQUITY INCENTIVE PLAN
On November 20, 1995, the Company adopted the Employee Equity Plan which
provided for the grant of Management Options, Discretionary Options and
Investment Shares (each is described below). The maximum number of shares of the
Company's Class A Common Stock originally authorized for issuance under the
Employee Equity Plan was 1,687,500 shares. On October 20, 1997, the Board of
Directors (the "Board") and the sole holder of the Corporation's Class B Common
Stock amended the Employee Equity Plan to provide for an additional 1,000,000
authorized shares and, on December 19, 1997, the Company further amended the
Employee Equity Plan to delete the provision which had permitted the grant of
Management Options which had been granted at a per share exercise price of $0.01
and to provide for a shift from the Compensation Committee to the full Board of
authority to act under the Employee Equity Plan, based on recommendations
brought to it by the Compensation Committee. Shares of Class A Common Stock
which are the subject of Management Options or Discretionary Options which lapse
unexercised or Investment Shares which do not vest and are repurchased by the
Company or which are redeemed by the Company shall again be available for
issuance under the Employee Equity Plan. The maximum number of shares available
for grants is subject to adjustment for capital changes.
In adopting the Employee Equity Plan, the Company has also approved,
subject to certain further restrictions described below, the assumption of
rights to acquire equity interests in the Company granted under certain
predecessor plans of the Partnership.
ADMINISTRATION, TERMINATION AND AMENDMENT
The Employee Equity Plan is administered by the Board of Directors (the
"Board"), taking into account the recommendations made by the Compensation
Committee of the Board. The Compensation Committee consists of at least two (2)
members of the Board, none of whom shall be or at any time have been employees
of the Company. The members of the Compensation Committee are appointed by the
Board and the Board may at any time, subject to the above restrictions, appoint
one or more members of the Compensation Committee in substitution for or in
addition to the member or members then in office and may fill vacancies on the
Compensation Committee however caused. The Board, subject to the approval of the
holders of a majority in interest of the Company's then issued and outstanding
Class B Common Stock may modify, amend or terminate the Employee Equity Plan at
any time. Termination or amendment of the Employee Equity Plan shall not,
without the consent of any person affected thereby, modify or in any way affect
any Discretionary Options granted or Investment Shares purchased prior to such
termination or amendment.
ELIGIBILITY TO PARTICIPATE
Employees eligible to participate in the Employee Equity Plan ("Eligible
Employees") are those employees of the Company who:
(i) have been employed by the Company for at least one (1) year; and
(ii) have entered into an Employment Agreement with the Company
containing certain terms and conditions as the Board, in its discretion may
from time to time require. Only full-time management-level Eligible
Employees, as determined by the Compensation Committee in its sole
discretion, shall be selected by the Compensation Committee for a
recommendation to the Board to be granted Discretionary Options. In
designating Optionees for Discretionary Options, the Compensation Committee
shall take into account each prospective Optionee's level of
responsibility, performance, potential and such other considerations as the
Compensation Committee deems appropriate.
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TERMS AND PROVISIONS
Management Options and Discretionary Options. While Management Options
granted prior to December 31, 1997 remain outstanding, effective as of December
19, 1997, the Employee Equity Plan no longer provides for the grant of
Management Options. Henceforth, at its meeting in October of each year, the
Compensation Committee shall make preliminary recommendations to the Board and
to management concerning the overall total number of shares for which options
should be granted during the then current fiscal year and such other and further
details as the Compensation Committee may deem appropriate. Immediately prior to
the Board's meeting in December of each year, the Compensation Committee will
finalize its recommendation, taking into consideration the recommendations of
management, and will thereafter makes its final recommendation to the Board with
respect to the grant of Discretionary Options to selected Optionees. The terms
of each Discretionary Option shall be set forth in an Option Agreement, which
shall include the following terms, conditions and restrictions:
(i) The right to exercise a Discretionary Option shall vest over the
period of five (5) years after the Option Date at the rate of twenty
percent (20%) of the Option Shares covered thereby per year, or upon such
other vesting schedule as the Compensation Committee recommends, and the
Board shall so approve, so long as the Optionee continues to be employed by
the Company as of each vesting date, provided, however, that (i) the Board
may permit accelerated vesting in its discretion, (ii) Discretionary
Options shall become exercisable in full in the event of an Optionee's
retirement at or after reaching age 65, death or disability, and (iii) the
Compensation Committee may recommend, and the Board may so approve, tying
exercisability to compliance by an Optionee with any applicable restrictive
covenants; and
(ii) Except as recommended by the Compensation Committee, and approved
by the Board, from time to time, a Discretionary Option shall terminate on
the earlier to occur of the expiration of (i) ninety (90) days after the
Optionee ceases to be an employee of the Company and (ii) ten (10) years
after the Option Date.
Investment Shares. Eligible Employees may also become Participants in the
Employee Equity Plan and invest up to ten percent (10%) of their most recent
annual W-2 earnings in shares ("Investment Shares") of Class A Common Stock. The
number of Investment Shares which can be purchased by each Participant will be
computed by dividing 10% of the Participant's W-2 earnings by the Investment
Share Value. The "Investment Share Value" shall be the mean between the high and
the low prices at which shares of Class A Common Stock traded on the New York
Stock Exchange or on any other exchange on which such shares may be traded, on
the day next preceding the date of a Participant's investment in Investment
Shares, which ordinarily shall be effective as of January 1 in each applicable
year (based upon the market value of the shares, determined as set forth above,
as of the last trading day in December immediately preceding such January 1) and
discounted, according to the Participant's years of service with the Company, as
follows:
YEARS OF SERVICE DISCOUNT
---------------- --------
Less than 2 years................................... 0%
2-3 years........................................... 20%
3-4 years........................................... 30%
More than 4 years................................... 40%
For each full year Investment Shares are held after issuance and the
Participant remains employed with the Company, twenty percent (20%) of such
Investment Shares will become vested. All Investment Shares which have not yet
vested shall automatically vest in the event of the termination of a
Participant's employment with the Company by reason of his or her retirement at
or after reaching age 65, death or disability. The Compensation Committee may
also accelerate vesting at any time in its discretion. All
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unvested Investment Shares shall be held in escrow by an escrow agent selected
by the Compensation Committee, pursuant to a Restricted Stock Escrow Agreement.
Any Participant who is not subject to the provisions of Section 16(b) of
the Securities Exchange Act of 1934, as amended, shall have the right at any
time to cause the Company to redeem all, but not less than all, of such
Participant's Investment Shares at a price equal to the lesser of (i) the
Discounted Investment Share Value at which the Investment Shares were issued and
(ii) the fair market value of such Investment Shares, as of the date next
preceding the date on which the Investment Shares are tendered for redemption.
In the event that a Participant's employment with the Company is terminated
other than because of retirement at or after the age of 65, death or disability,
the Company has the right, but not the obligation, to redeem within ninety (90)
days after such termination any or all of the Investment Shares previously
purchased by the Participant which have not vested, at a price, payable in cash,
equal to the lesser of (i) the Discounted Investment Share Value at which the
Shares were issued and (ii) the fair market value of such Investment Shares, as
of the date next preceding the date on which the Investment Shares are called
for redemption.
No right or interest under the Employee Equity Plan of any Eligible
Employee shall be assignable or transferable, in whole or in part, either
directly or by operation of law or otherwise, including, but not by way of
limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or in
any other manner, other than by will or the laws of descent and distribution;
and no such right or interest of any Eligible Employee shall be subject to any
obligation or liability of such Eligible Employee. A Management Option or
Discretionary Option shall be null and void and without effect upon the
bankruptcy of the Optionee or upon the attempted assignment or transfer, except
as hereinabove provided, including without limitation any purported assignment,
whether voluntary or by operation of law, pledge, hypothecation or other
disposition contrary to the provisions hereof, or levy of execution, attachment,
trustee process or similar process, whether legal or equitable, upon the option.
RECENT GRANTS
The following summarizes the total grants of Management Options and
Discretionary Options during fiscal year 1997. Dollar values below are based
upon a fair market value of Class A Common Stock at December 31, 1997 of $7.9063
per share, determined in accordance with the rules of the Securities and
Exchange Commission, less the option exercise price. No Investment Shares were
purchased either by the executive officers or employees of the Company during
the year ended December 31, 1997.
During the year ended December 31, 1997, no officers were granted
Management Options. Employees, as a group, were granted Management Options for
7,587 shares. Based upon the fair market value for shares of the Company's Class
A Common Stock at December 31, 1997, of $7.9063 per share, these 7,857
Management Options had a total value of $56,261.
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The following sets forth the details of Discretionary Options granted
during the year ended December 31, 1997:
DISCRETIONARY OPTION GRANTS
----------------------------
DOLLAR NUMBER OF
NAME AND POSITION VALUE(1) SHARES
----------------- ------------ ------------
C. James Koch, CEO.......................................... -- --
Rhonda L. Kallman, VP Sales................................. -- --
Alfred W. Rossow, Jr., Exec. VP and CFO..................... -- --
Martin F. Roper, Chief Operating Officer.................... $(659,100) 250,000
John Chappell, VP Brand Development......................... -- --
Executive Officers as a Group............................... $(659,100) 250,000
All Directors (excluding Executive Officers)................ $ (31,874) 20,000
Employees as a Group (excluding Executive Officers)......... -- --
RECAPITALIZATION, REORGANIZATIONS
The Employee Equity Plan provides that in the event that the outstanding
shares of Class A Stock are changed into or exchanged for a different number or
kind of shares or other securities of the Company or of another corporation by
reason of any reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination of shares, or dividends payable in
capital stock, appropriate adjustment shall be made in the number and kind of
shares which may be issued under the Employee Equity Plan and as to which
outstanding Management Options or Discretionary Options or portions thereof then
unexercised shall be exercisable, to the end that the proportionate interest of
the Optionee shall be maintained as before the occurrence of such event; such
adjustment in outstanding Discretionary Options shall be made without change in
the total price applicable to the unexercised portion of such Discretionary
Options and with a corresponding adjustment in the exercise price per share. The
exercise price per share of Management Options shall remain $0.01 per share.
PREVIOUSLY GRANTED OPTIONS AND INVESTMENT SHARES
All options granted by the Partnership prior to November 20, 1995, which
were assumed under the Employee Equity Plan on that date and became Management
Options or Discretionary Options, first became exercisable, to the extent that
the right to exercise had otherwise then vested, on March 1, 1996, except that
any such options held by Optionees subject to the provisions of Section 16(b) of
the 1934 Act did not become exercisable until May 20, 1996. All Investment
Shares purchased from the Partnership prior to November 20, 1995, which had
vested prior to March 1, 1996, were issued to the applicable Participants on
that date, except that vested Investment Shares otherwise then issuable to
Participants subject to the provisions of Section 16 (b) of the 1934 Act did not
become issuable until May 20, 1996.
RESALE RESTRICTIONS
Notwithstanding any other provision of the Employee Equity Plan, the
Company may delay the issuance of shares covered by the exercise of a Management
Option or a Discretionary Option or any Investment Shares which have vested (in
any such case, "Shares") until one of the following conditions shall be
satisfied:
(i) Such Shares are at the time of issuance effectively registered
under applicable federal and state securities acts, as now in force or
hereafter amended; or
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(ii) Counsel for the Company shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld, that the
issuance of such Shares is exempt from registration under applicable
federal and state securities acts, as now in force or hereafter amended.
Moreover, unless the Shares to be issued have been effectively registered
under the Securities Act of 1933, as amended (the "1933 Act"), the Company shall
be under no obligation to issue such Shares unless the Optionee or Participant
shall first give written representation to the Company, satisfactory in form and
scope to the Company's counsel and upon which in the opinion of such counsel the
Company may reasonably rely, that he or she is acquiring the Shares to be issued
to him or her as an investment and not with a view to or for sale in connection
with any distribution thereof in violation of the 1933 Act. The Company shall
have no obligation, contractual or otherwise, to any Optionee or Participant to
register under any federal or state securities laws any Shares issued under the
Employee Equity Plan to such Optionee or Participant.
Notwithstanding the above, Shares acquired under the Employee Equity Plan
while a Registration Statement relating to such Shares is in effect under the
1933 Act, by persons who are not affiliates of the Company may be sold by such
persons without registration under the 1933 Act, and without the need to comply
with Rule 144 thereunder. Public resales of shares acquired (while a
Registration Statement relating to such shares is in effect under the 1933 Act)
under the Employee Equity Plan by persons who are affiliates of the Company will
be subject to registration or compliance with the requirements of Rule 144 under
the 1933 Act, other than the holding period requirement of paragraph (d) of that
Rule. Employees who are Directors or officers of the Company may be deemed to be
affiliates of the Company.
TAX EFFECTS OF EMPLOYEE EQUITY PLAN PARTICIPATION
The Employee Equity Plan described herein is not a qualified plan under
Section 401 of the Internal Revenue Code and is not subject to the provisions of
the Employee Retirement Income Security Act of 1974.
Management and Discretionary Options. Upon the grant of a Management
Option or Discretionary Option, the Participant will not recognize ordinary
income nor will the Company be entitled to a deduction. Upon the exercise of a
Management Option or a Discretionary Option, the Participant will generally
recognize ordinary income in the amount by which the fair market value of Class
A Common Stock at the time of exercise exceeds the exercise price for the Shares
then purchased and the Company will generally be entitled to a deduction for
such amount of ordinary income recognized. Upon a subsequent disposition of
Class A Common Stock, the Participant will realize a short-term or long-term
capital gain or loss, depending upon the holding period of the Class A Common
Stock, with the basis for computing such gain or loss equal to the fair market
value of Class A Common Stock on the date of exercise.
Investment Shares. Upon the purchase of an Investment Share, the
Participant will not recognize ordinary income unless the Participant makes an
election under Section 83(b) of the Internal Revenue Code (such election is
referred to herein as a "Section 83(b) election"). If the Participant makes a
Section 83(b) election then the Participant will immediately recognize ordinary
income in the amount by which the fair market value of the Investment Shares on
the date of acquisition exceeds the purchase price therefor. Otherwise, upon
vesting of the Investment Shares, the Participant will recognize ordinary income
in the amount by which the fair market value of the Investment Shares then
vesting, as of the date of vesting, exceeds the purchase price therefor. The
Company will generally be allowed a deduction in an amount equal to the income
recognized by the Participant in the tax year in which such income is
recognized. Upon the disposition of Investment Shares, the Participant will
realize a short-term or long-term capital gain or loss, depending upon the
holding period of the Investment Shares, after they have vested, with the basis
for computing such gain or loss equal to the amount of ordinary income realized
on such shares plus the purchase price therefor. Participants purchasing
Investment Shares should consult their tax advisors regarding the
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advisability of making a Section 83(b) election. A Section 83(b) election must
be made within thirty (30) days of the purchase of Investment Shares.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors has appointed Coopers & Lybrand L.L.P. as
independent auditors to examine the consolidated financial statements of the
Company for the fiscal year ending December 27, 1997. The Board will take
further action with respect to the appointment of independent auditors for the
fiscal year ending December 26, 1998 at its meeting to be held on April 16,
1998. A representative of Coopers & Lybrand, L.L.P. is expected to be present at
the meeting and will have the opportunity to make a statement if he or she so
desires and to respond to appropriate questions. The engagement of Coopers &
Lybrand, L.L.P. was approved by the Board of Directors, at the recommendation of
the Audit Committee of the Board of Directors, and by the sole holder of the
Corporation's Class B Common Stock.
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Corporation's officers and Directors and persons owning more than 10% of the
outstanding Class A Common Stock of the Corporation to file reports of ownership
and changes in ownership with the Securities and Exchange Commission. Officers,
Directors and greater than 10% holders of Class A Common Stock are required by
SEC regulation to furnish the Corporation with copies of all Section 16(a) forms
they file.
Based solely on copies of such forms furnished as provided above, the
Company believes that during fiscal 1997, all Section 16(a) filing requirements
applicable to its officers, Directors and owners of greater than 10% of its
Class A Common Stock were timely submitted, as required.
DEADLINES FOR SUBMISSION OF STOCKHOLDER PROPOSALS
Under regulations adopted by the Securities and Exchange Commission, any
proposal submitted for inclusion in the Corporation's Proxy Statement relating
to the Annual Meeting of Stockholders to be held in 1999 must be received at the
Corporation's principal executive offices in Boston, Massachusetts on or before
December 22, 1998. Receipt by the Corporation of any such proposal from a
qualified stockholder in a timely manner will not ensure its inclusion in the
proxy material because there are other requirements in the proxy rules for such
inclusion.
OTHER MATTERS
Management knows of no matters which may properly be and are likely to be
brought before the meeting other than the matters discussed herein. However, if
any other matters properly come before the meeting, the persons named in the
enclosed proxy will vote in accordance with their best judgment.
The cost of this solicitation will be borne by the Corporation. It is
expected that the solicitation will be made primarily by mail, but regular
employees or representatives of the Corporation may also solicit proxies by
telephone, telegraph and in person and arrange for brokerage houses and other
custodians, nominees and fiduciaries to send proxies and proxy material to their
principals at the expense of the Corporation.
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1O-K REPORT
THE CORPORATION WILL PROVIDE EACH BENEFICIAL OWNER OF ITS SECURITIES WITH A
COPY OF AN ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO, REQUIRED TO BE FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE CORPORATION'S MOST RECENT FISCAL YEAR, WITHOUT CHARGE, UPON
RECEIPT OF A WRITTEN REQUEST FROM SUCH PERSON. SUCH REQUEST SHOULD BE SENT TO
ALFRED W. ROSSOW, JR., CHIEF FINANCIAL OFFICER, THE BOSTON BEER COMPANY, INC.,
75 ARLINGTON STREET, BOSTON, MA 02116.
VOTING PROXIES
The Board of Directors recommends an affirmative vote for (i) the amendment
to the Corporation's Restated Articles of Organization and By-Laws, as described
herein and (ii) for the election of the three (3) nominees for Class A Director.
Proxies will be voted as specified. If signed proxies are returned without
specifying an affirmative or negative vote, the shares represented by such
proxies will be voted in favor of the nominees.
By order of the Board of Directors
C. JAMES KOCH, Clerk
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THE BOSTON BEER COMPANY, INC.
PROXY - ANNUAL MEETING OF STOCKHOLDERS - JUNE 2, 1998
CLASS A COMMON STOCK
The undersigned, a stockholder of THE BOSTON BEER COMPANY, INC., does
hereby appoint C. James Koch the undersigned's proxy, with full power of
substitution, to appear and vote at the Annual Meeting of Stockholders, to be
held on June 2, 1998 at 10:00 a.m., local time, or at any adjournments thereof,
upon such matters as may come before the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned hereby instructs said proxy, or his substitute, to vote as
specified on the reverse side on the following matters and in accordance with
his judgment on other matters which may properly come before the Meeting.
(Continued and to be Completed on Reverse Side)
FOLD AND DETACH HERE
ADMISSION TICKET
THE BOSTON BEER COMPANY, INC.
1998 ANNUAL MEETING
TUESDAY, JUNE 2, 1998
10:00 A.M.
THE BREWERY
30 GERMANIA STREET
BOSTON, MA
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TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATION, SIGN AND DATE
THIS CARD IN THE SPACE BELOW. NO BOXES NEED TO BE CHECKED.
1. To amend Article IV, Section 1, of the Restated Articles of Organization (the
"Articles") and Sections 4.1 and 4.8 of the By-Laws (the By-Laws") of the
Corporation, each as amended and currently in effect, such that (i) the number
of Directors of the Corporation shall be such number as is fixed annually by the
Board of Directors, but not fewer than seven (7) nor more than eleven (11),
consisting of not fewer than two (2) nor more than four(4) Directors elected by
the holders of the Corporation's Class A Common Stock (the "Class A Directors")
and not fewer than five (5) nor more than seven (7) Directors elected by the
holders of the Corporation's Class B Common Stock (the "Class B Directors"), and
subject to the further requirement that no Class B Directors in excess of five
(5) Class B Directors shall be elected unless a like number of Class A Directors
is also then elected, and otherwise as described in the Proxy Statement.
FOR AGAINST ABSTAIN
2. Election of Class A Directors: PEARSON C. CUMMIN, III AND JAMES C. KAUTZ I plan to attend the meeting.
ROBERT N. HIATT (IF ITEM 1 ABOVE IS APPROVED)
PLANNING TO ATTEND? Please help our
FOR all nominees WITHHOLD (Instructions: To withhold authority to vote for planning efforts by letting us know if
listed (Except as authority from any individual nominee, write that nominee's you expect to attend the Annual Meeting.
marked to the nominees name in the space provided below.) Call (617) 368-5050, and check the box
contrary to the listed. _____________________________________ above.
right)
THE SHARES REPRESENTED BY THIS PROXY WILL
BE VOTED AS DIRECTED. IF NO DIRECTION IS IN-
DICATED AS TO ITEMS 1 OR 2, SUCH SHARES WILL
BE VOTED IN FAVOR OF SUCH ITEM.
IMPORTANT: Before returning this Proxy, please sign
your name or names on the line(s) below exactly as
shown hereon. Executors, administrators, trustees,
guardians or corporate offices should indicate their
full title when signing. Where shares are registered
in the name of joint tenants or trustees, each joint
tenant or trustee should sign.
Dated: ____________________, 1998
_________________________________________(L.S.)
_________________________________________(L.S.)
Stockholder(s) Sign Here
PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
FOLD AND DETACH HERE
(INSERT DIRECTIONS/MAP HERE)