<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
CHECK THE APPROPRIATE BOX:
/X/ Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SCHEID VINEYARDS INC.
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement
if other than the Registrant)
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:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price of 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):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / 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:
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(2) Form, Schedule or Registration Statement No.:
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<PAGE>
PRELIMINARY COPY
SCHEID VINEYARDS INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on May 28, 1998
To the Stockholders of
Scheid Vineyards Inc.
The Annual Meeting of Stockholders of Scheid Vineyards Inc. will be held at
3:00 p.m. (local time) on Thursday, May 28, 1998, at the World Trade Club,
located in the World Trade Center, Ferry Building, on the Embarcadero at Market
Street, San Francisco, California 94111-4274, for the following purposes:
1. To elect five Directors, each to serve for a one-year term;
2. To consider and act on two proposals to amend the Company's
Certificate of Incorporation and Bylaws with respect to certain
matters under California law, which, in certain circumstances may be
applicable to the internal affairs of the Company; and
3. To transact any other business which may properly come before the
meeting and any adjournments or postponements thereof.
A proxy statement containing information for stockholders is annexed
hereto and a copy of the Annual Report of the Company for the fiscal year ended
December 31, 1997 is enclosed herewith.
The Board of Directors has fixed the close of business on April 16, 1998,
as the record date for the determination of stockholders entitled to notice of
and to vote at the meeting.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, PLEASE DATE AND
SIGN THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE ENVELOPE ENCLOSED
FOR THAT PURPOSE.
By order of the Board of Directors
Alfred G. Scheid
Chairman and
Chief Executive Officer
Marina del Rey, California
April __, 1998
<PAGE>
PRELIMINARY COPY
SCHEID VINEYARDS INC.
13470 Washington Boulevard
Marina del Rey, California 90292
(310) 301-1555
PROXY STATEMENT
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Scheid Vineyards Inc. ("SVI" or the
"Company"), a Delaware corporation, for use only at its Annual Meeting of
Stockholders to be held on Thursday, May 28, 1998, and any adjournments or
postponements thereof (the "Annual Meeting").
Shares may not be voted unless the appropriate signed proxy card is
returned or other specific arrangements are made to have shares represented at
the meeting. Any stockholder of record giving a proxy may revoke it at any time
before it is voted by filing with the Secretary of SVI a notice in writing
revoking it, by duly executing a proxy bearing a later date, or by attending the
Annual Meeting and expressing a desire to revoke the proxy and vote the shares
in person. Stockholders whose shares are held in street name should consult
with their brokers or other nominees concerning procedures for revocation.
Subject to such revocation, all shares represented by a properly executed proxy
card will be voted as directed by the stockholder on the proxy card. IF NO
CHOICE IS SPECIFIED, PROXIES WILL BE VOTED "FOR" THE PERSONS NOMINATED BY THE
BOARD OF DIRECTORS AND THE AMENDMENTS TO THE CERTIFICATE OF INCORPORATION AND
BYLAWS.
In addition to soliciting proxies by mail, Company officers, Directors and
other regular employees, without additional compensation, may solicit proxies
personally or by other appropriate means. The total cost of solicitation of
proxies will be borne by SVI. Although there are no formal agreements to do so,
it is anticipated that SVI will reimburse banks, brokerage houses and other
custodians, nominees and fiduciaries for their reasonable expenses in forwarding
any proxy soliciting materials to their principals.
Only stockholders of record at the close of business on Thursday, April 16,
1998 are entitled to receive notice of and to vote at the Annual Meeting. On
April 16, 1998, SVI had outstanding 2,325,000 shares of Class A Common Stock and
4,375,000 shares of Class B Common Stock, which constituted all of the
outstanding voting securities of SVI. Generally, except with respect to the
election or removal of Directors, the outstanding shares of Class A Common Stock
and Class B Common Stock vote together as a single class, with each outstanding
share of Class A Common Stock on the record date entitled to one vote and each
share of Class B Common Stock outstanding on the record date entitled to five
votes on each matter. With respect to matters on which the Class A Common Stock
and Class B Common Stock vote together as a single class, shares representing a
majority of the votes entitled to be cast in respect of the shares of Common
Stock outstanding on the record date will constitute a quorum.
<PAGE>
The holders of the Class A Common Stock, voting as a separate class, are
entitled to elect two of the five Directors, and the holders of the Class B
Common Stock, voting as a separate class, are entitled to elect the remaining
three Directors. Directors elected by the holders of Class A Common Stock and
Class B Common Stock will be voted upon from separate slates of nominees. In
the election of Directors, each share of Class A Common Stock is entitled to one
vote multiplied by the number of Directors to be elected by the holders of the
Class A Common Stock, and each share of Class B Common Stock is entitled to five
votes multiplied by the number of Directors to be elected by the holders of the
Class B Common Stock.
Directors are elected by a plurality of votes cast. Stockholders may not
cumulate their votes for any one or more nominees for election as Directors.
The affirmative vote of a majority of the voting power represented by the
outstanding shares of the Company's Class A and Class B Common Stock, voting
together as a single class, will be required to approve the proposed amendments
to the Company's Certificate of Incorporation and Bylaws. The affirmative vote
of a majority of the voting power present, either in person or represented by
proxy, and entitled to vote at the Annual Meeting will be required to approve
the other matters to be voted upon at the Annual Meeting.
Under the General Corporation Law of the State of Delaware: (i) shares
that are subject to abstention or a broker "non-vote" are counted as present and
entitled to vote for purposes of determining the presence or absence of a quorum
for the transaction of business; (ii) neither abstentions nor broker "non-votes"
are counted for purposes of the election of Directors; (iii) abstentions in any
other matter to be voted upon at the Annual Meeting will be considered to be
present but not voting, and thus will have the effect of a "No" vote; and (iv) a
broker "non-vote" in any other matter to be voted upon at the Annual Meeting
will be considered to be not present and not entitled to vote on such matter,
and thus will not be considered in the tabulation of votes on such matter. A
broker "non-vote" occurs when a nominee holding shares for a beneficial owner
does not vote on a particular proposal or matter because the nominee does not
have discretionary voting power with respect to that proposal or matter and has
not received voting instructions from the beneficial owner.
Alfred G. Scheid, Scott D. Scheid, Heidi M. Scheid, each an executive
officer and Director of the Company, and Kurt J. Gollnick, an executive officer
of the Company, and certain members of their families, beneficially own
4,375,000 shares of the Company's Class B Common Stock, which, as of April 16,
1998, represents 100% of the voting power of the Class B Common Stock and 90.4%
of the combined voting power of the Class A and Class B Common Stock when such
classes vote together as a single class. The holders of the Class B Common
Stock intend to vote all shares held by them in favor of the persons nominated
by the Board of Directors as the slate for election by the holders of the
Class B Common Stock and the proposals to approve certain amendments to the
Company's Certificate of Incorporation and Bylaws.
It is anticipated that this proxy statement and accompanying proxy card
will first be mailed to stockholders on or about April 25, 1998.
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<PAGE>
PROPOSAL NO. 1
ELECTION OF DIRECTORS
INFORMATION CONCERNING THE NOMINEES
The Company's Certificate of Incorporation provides that the holders of the
Class A Common Stock, voting as a separate class, are entitled to elect 25% of
the authorized number of Directors, rounded up to the nearest whole number, and
that the holders of the Class B Common Stock, voting as a separate class, are
entitled to elect the remaining Directors. The Board of Directors is currently
composed of five members, thereby entitling the holders of the Class A Common
Stock and Class B Common Stock to elect two and three Directors, respectively.
The Board of Directors has nominated the incumbent Directors to be elected for a
term expiring at the 1999 Annual Meeting of Stockholders, and until, in each
case, such person's successor has been duly elected and qualified or until his
or her earlier death, resignation or removal. Biographical information
concerning the nominees is set forth under the caption "-- Directors and
Executive Officers" below. See "Security Ownership of Certain Beneficial Owners
and Management" for information regarding such persons' holdings of Common
Stock.
The Board of Directors has divided the nominees into two slates, one for
election by the holders of the Class A Common Stock and the other for election
by the holders of the Class B Common Stock. Only holders of the specified class
of Common Stock may vote on the respective slates of nominees for Directors.
The slates are as follows:
FOR ELECTION BY THE HOLDERS FOR ELECTION BY THE HOLDERS
OF CLASS A COMMON STOCK OF CLASS A COMMON STOCK
---------------------------------- -------------------------------------
John L. Crary Alfred G. Scheid
Robert P. Hartzell Scott D. Scheid
Heidi M. Scheid
The Board of Directors has no reason to believe that any of its nominees
will be unable or unwilling to serve if elected. However, should any nominee
named herein become unable or unwilling to accept nomination or election, the
persons named as proxies will vote instead for such other person as the Board
of Directors may recommend.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
ABOVE-NAMED NOMINEES AS DIRECTORS.
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<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth certain information as of April 1, 1998 with
regard to each of the Directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Alfred G. Scheid(1) 66 Chairman of the Board of Directors
and Chief Executive Officer
Scott D. Scheid 37 Vice President, Chief Operating Officer
and Director
Heidi M. Scheid(2) 34 Vice President Finance, Chief Financial
Officer, Treasurer and Director
Kurt J. Gollnick 39 Vice President Vineyard Operations
Ernest M. Brown 70 Vice President and Secretary
John L. Crary(1)(2) 44 Director
Robert P. Hartzell(1)(2) 63 Director
</TABLE>
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(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
ALFRED G. SCHEID, the Company's Chairman of the Board and Chief
Executive Officer, was one of the founders of the Company in 1972 and has served
continuously as its Chief Executive Officer since that time. Mr. Scheid has
been engaged full-time in the business of SVI since 1988, when he became the
sole owner of the Company. Prior to 1988, Mr. Scheid had other business affairs
outside SVI. Mr. Scheid is a founder of the California Association of Winegrape
Growers, a trade association that represents the interests of California wine
grape producers and has served as its chairman. He is also a founder of
Monterey County Vintners and Growers Association, a trade association composed
primarily of wine grape and wine producers, and has been an associate member of
the Wine Institute, a San Francisco-based trade organization, for more than 25
years. Mr. Scheid is a graduate of the Harvard Graduate School of Business, and
is the father of Scott D. Scheid and Heidi M. Scheid.
SCOTT D. SCHEID became Chief Operating Officer and a Director of the
Company in 1997. Mr. Scheid joined the Company in 1986 as Vice President and
has been engaged full-time in the business of the Company since that time.
Prior to joining SVI, he was employed as an options trader with E.F. Hutton &
Company Inc. Mr. Scheid was recently elected as a director of the California
Association of Winegrape Growers, and he previously has served as a director of
Monterey County Vintners and Growers Association. Mr. Scheid holds a B.A.
degree in economics from Claremont Men's College.
HEIDI M. SCHEID became the Company's Vice President Finance, Chief
Financial Officer, Treasurer and a Director in 1997. Ms. Scheid joined the
Company in 1992 as Director of Planning after serving as a senior valuation
analyst at Ernst & Young, LLP for two years. Prior to that, she was an
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<PAGE>
associate with Interven Partners, a venture capital firm. Ms. Scheid holds an
M.B.A. degree from the University of Southern California.
KURT J. GOLLNICK has been the Company's Vice President Vineyard Operations
since 1997. Mr. Gollnick joined SVI in 1988 as General Manager, Vineyard
Operations. For seven years prior to joining the Company, Mr. Gollnick was a
vineyard manager for Thornhill Ranches of Santa Maria, California, where he
managed 1,200 acres of vineyards. He has served as a director of the California
Association of Winegrape Growers from 1989 through 1997. Mr. Gollnick has also
served as president of the Central Coast Grape Growers and Monterey Grape
Growers Associations. Mr. Gollnick holds a B.S. degree in agricultural
economics from the California Polytechnic State University San Luis Obispo.
ERNEST M BROWN joined the Company in 1972, and at various times has served
as the Company's Vice President, Controller and Secretary. Mr. Brown currently
holds the positions of Vice President and Secretary. Mr. Brown is a licensed
certified public accountant and was formerly a partner with the accounting firm
of Lee, Sperling, Brown and Hisamune.
JOHN L. CRARY became a Director of the Company in 1997. Since 1988, Mr.
Crary has been a corporate financial advisor and venture capital investor active
with companies in the agricultural, bioscience and energy industries. From 1980
to 1988, Mr. Crary was an investment banker in the corporate finance department
of E.F. Hutton & Company Inc. Mr. Crary has been a consultant to SVI and its
predecessors since 1993 in connection with financial matters, acquisitions and
business strategy. Mr. Crary is a founder and director of Petroleum Capital
Associates, Inc., a privately held oil and gas investment concern, and is a
graduate of the University of California at Irvine and the Columbia University
Graduate School of Business.
ROBERT P. HARTZELL became a Director of the Company in 1997. Mr. Hartzell
is the owner of Harmony Vineyards, a producer of premium Zinfandel wine grapes
near Lodi, California. From 1978 to 1996, Mr. Hartzell was President of the
California Association of Winegrape Growers. For six years during this period,
Mr. Hartzell also served on the Agricultural Policy Advisory Committee to the
U.S. Secretary of Agriculture and the U.S. Trade Representative in connection
with the General Agreement on Trade and Tariffs negotiations. Mr. Hartzell has
also served as Deputy Director of the California Department of Food and
Agriculture. Mr. Hartzell holds a B.S. degree from the University of California
at Davis.
Officers serve at the discretion of the Board of Directors.
BOARD OF DIRECTORS, COMMITTEES AND COMPENSATION
Directors are elected to serve a one-year term and until their successors
are duly elected and qualified. The Company pays each non-employee Director an
annual fee of $5,000 and meeting fees at the rate of $500 for each Board meeting
attended in person and reimburses such Director for all expenses incurred by him
in his capacity as a Director of the Company. No fees are paid for
participation in telephonic meetings of the Board of Directors or its committees
or actions taken in writing. The Board of Directors held two meetings in 1997.
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<PAGE>
Under the Company's 1997 Stock Option/Stock Issuance Plan (the "Plan"),
each individual who was serving as a non-employee Director on the date the
underwriting agreement for the Company's initial public offering was executed
(July 24, 1997) received an option grant on such date for 10,000 shares of Class
A Common Stock, provided such individual had not been in the prior employ of the
Company. Such option grants were made to each of Messrs. Crary and Hartzell.
Each individual who first becomes a non-employee Director in the future will
receive a 10,000-share option grant on the date such individual joins the Board,
provided that such individual has not been in the prior employ of the Company
and has not previously received an option grant from the Company in his or her
capacity as a non-employee Director. In addition, at each Annual Meeting of
Stockholders, beginning with the 1998 Annual Meeting, each non-employee Director
with at least six months' service who is to continue to serve as a non-employee
Director after the Annual Meeting will receive an additional option grant to
purchase 2,500 shares of Class A Common Stock, whether or not such individual
has been in the prior employ of the Company.
Each automatic option grant to a non-employee Director has or will have a
term of 10 years, subject to earlier termination following the optionee's
cessation of Board service. The initial 10,000-share option grant becomes or
will become exercisable in a series of four successive equal annual installments
over the optionee's period of Board service. Each additional 2,500-share option
grant becomes or will become exercisable upon the optionee's completion of one
year of Board service measured from the grant date. However, each outstanding
option will immediately vest upon (i) certain changes in the ownership or
control of the Company or (ii) the death or disability of the optionee while
serving as a Director.
The Board of Directors has appointed an Audit Committee and a Compensation
Committee. The members of the Audit Committee are Messrs. Crary and Hartzell
and Ms. Scheid. Responsibilities of the Audit Committee include reviewing
financial statements and consulting with the independent auditors concerning the
Company's financial statements, accounting and financial policies and internal
controls and reviewing the scope of the independent auditors' activities and
fees. The members of the Compensation Committee are Messrs. Crary, Hartzell and
Alfred G. Scheid. The Company's Compensation Committee establishes and reviews
salary, bonus and other forms of compensation for officers of the Company,
provides recommendations to the Board of Directors for the salaries and
incentive compensation of the employees and consultants of the Company, reviews
training and human resources policies and makes recommendations to the Board of
Directors regarding such matters. The Company has no nominating committee or
committee performing similar functions. The Audit Committee held no meetings in
1997, and the Compensation Committee held one meeting in 1997.
Each Director attended at least 75% of the total number of the meetings
held of the Board of Directors and each committee thereof on which such Director
served during the fiscal year ended December 31, 1997.
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<PAGE>
PROPOSALS NO. 2 AND 3
AMENDMENTS TO THE CERTIFICATE OF INCORPORATION AND BYLAWS
GENERAL
Under Section 2115 of the California General Corporation Law
("Section 2115"), certain foreign corporations having specified minimum contacts
with California are made subject to certain provisions of the California General
Corporation Law with respect to the internal governance of their affairs.
Section 2115 provides that in such instances California law is to apply to the
exclusion of the laws of the state in which such a corporation is incorporated.
Although the constitutionality of Section 2115 has been upheld by the California
courts in the few reported cases that have considered the issue, the Board of
Directors believes that significant legal issues regarding the constitutionality
and enforceability of Section 2115 remain. Nonetheless, the Board of Directors
believes it would be prudent and in the best interests of the stockholders to
adopt Proposals Nos. 2 and 3 (collectively, the "California Law Amendments"),
which would effect certain amendments to the Certificate of Incorporation (the
"Charter") and Bylaws, respectively, so that the internal affairs of the
Company, if governed by California law at any time, will be subject to legal
requirements as comparable as possible to those of Delaware law, under which the
Company is incorporated.
Section 2115 applies to a foreign corporation if all of the following
conditions are met:
(i) the corporation does not have a class of equity securities
that is listed on the New York or American Stock Exchanges;
(ii) the corporation does not have a class of equity securities
that is designated for trading as a National Market Security on the Nasdaq Stock
Market, or if the corporation does have a class of equity securities so
designated for trading as a National Market Security, the corporation has less
than 800 record holders of its equity securities as of the record date of its
most recent annual meeting;
(iii) the average of the corporation's property factor, payroll
factor and sales factor (each as determined in accordance with certain
provisions of the California Revenue and Taxation Code) is greater than 50% in
respect of the corporation's latest full income year; and
(iv) more than one-half of the corporation's outstanding voting
securities are held of record by persons having addresses in California.
For purposes of (iv) above, shares held of record by certain institutional
nominee holders ("Nominee Holders") are required not to be considered
outstanding unless the Nominee Holder has provided certain certifications to the
corporation. For purposes of clause (ii), the number of record holders of
outstanding equity securities includes the beneficial owners of shares held by
Nominee Holders if the Nominee Holder has provided such certifications to the
corporation.
The average of the Company's statutory property, payroll and sales factors
were in excess of 50% for the fiscal year ended December 31, 1997, and
management does not expect that this will change for the foreseeable future. In
addition, more than one-half of the Company's outstanding voting
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<PAGE>
securities are held of record by persons having addresses in California, and
management does not expect that this will change for the foreseeable future.
Although the Company's Class A Common Stock is designated for trading as a
National Market Security on the Nasdaq Stock Market, the number of holders of
the Company's equity securities (calculated in the manner described above)
currently was less than 800 as of the record date for the 1998 Annual Meeting
of Stockholders. As a result, the Company will become subject to Section
2115 on January 1, 1999.
Many of the substantive requirements of Section 2115 are not subject to
variation by the charter or bylaws of a subject corporation. For example, a
corporation subject to Section 2115 may not have a classified board of directors
and must permit directors to be elected by cumulative voting. However,
California law does permit a corporation to include provisions in its charter or
bylaws that modify the statutory requirements relating to the standard of care
to which directors are held and the indemnification of agents, both of which are
addressed by the California Law Amendments.
The text of the California Law Amendments is set forth in full as
EXHIBITS A AND B hereto. Exhibit A sets forth the proposed amendments to the
Charter (Proposal No. 2) and Exhibit B sets forth the proposed amendments to the
Bylaws (Proposal No. 3).
DESCRIPTION OF THE CALIFORNIA LAW AMENDMENTS
DIRECTORS' STANDARD OF CARE. Under Delaware law and the Charter, a
director of the Company shall not be liable to the Company or any stockholder
for monetary damages for breach of fiduciary duty as a director, except that
such liability shall not be limited or eliminated (1) for any breach of the
director's duty of loyalty to the Company or its stockholders, (2) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (3) for the payment of dividends or certain other
payments to stockholders in violation of Delaware law or (4) for any
transaction from which the director derived an improper personal benefit.
Under California law, such liability cannot be limited or eliminated by
provisions in the Charter (1) for acts or omissions that involve intentional
misconduct or a knowing and culpable violation of law, (2) for acts or
omissions that a director believes to be contrary to the best interests of
the Company and its stockholders or that involve the absence of good faith on
the part of the director, (3) for any transaction from which the director
derived an improper personal benefit, (4) for acts or omissions that show a
reckless disregard for the director's duty to the Company or its stockholders
in circumstances in which the director was aware, or should have been aware,
in the ordinary course of performing a director's duties, of a risk of
serious injury to the Company or its stockholders, (5) for acts or omissions
that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the Company or its stockholders, (6) for
transactions between the Company and a director or between the Company and
another corporation with an interrelated board that are void or voidable
under California law, (7) for the payment of dividends or certain other
payments to stockholders in violation of California law or (8) for the making
of loans to, or guaranteeing indebtedness of, directors, officers or certain
stockholders of the Company in violation of California law.
The California Law Amendments would amend the Charter to provide that,
at any time the Company is subject to the requirements of Section 2115, a
director of the Company will not be liable to the Company or any stockholder
for monetary damages for breach of fiduciary duty as a director to the
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<PAGE>
maximum extent permissible under California law. The provisions of the
Charter relating to such liabilities under Delaware law would remain
effective.
INDEMNIFICATION OF AGENTS. Under the Charter and the Bylaws, the Company
is required to indemnify officers and directors of the Company (and may
indemnify other employees and agents of the Company) to the fullest extent
permitted by Delaware law. Delaware law currently permits indemnification of
such a person against expenses and other liabilities if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful;
provided, however, that if the action or proceeding is by or in the right of the
corporation, indemnification shall not be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Delaware Court of Chancery or
such other court in which such action was brought shall determine that, in view
of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses (but not other liabilities) as the court
shall deem proper. To the extent that a present or former officer or director
is successful on the merits in the defense of an action, Delaware law requires
the corporation to indemnify such person for the person's actual and reasonable
expenses incurred in connection with such defense. Whether a person who is a
director or officer at the time of determination has met the requisite standard
of care (unless otherwise determined by a court) shall be made by the board of
directors by a majority vote of a quorum consisting of disinterested directors,
by a committee of the board of directors comprised of disinterested directors
designated by a majority of the disinterested directors, by independent legal
counsel in a written opinion or by the stockholders. Under Delaware law and the
Bylaws, the Company may advance expenses of an agent in defending an action upon
such terms and conditions as the Company deems appropriate; provided, that such
advancement of expenses on behalf of an officer or director (other than a former
officer or director) may be made only if the person provides an undertaking to
reimburse the Company if it is ultimately determined that the person is not
entitled to be indemnified against such expenses.
The Company has entered into agreements to provide indemnification for its
Directors and certain officers in addition to the indemnification provided for
in the Bylaws. These agreements, among other things, indemnify such parties to
the fullest extent permitted by Delaware law for certain expenses (including
attorneys' fees), and all losses, claims, liabilities, judgments, fines and
settlement amounts incurred by such persons arising out of or in connection with
such persons' service as Directors or officers of the Company or an affiliate of
the Company.
The requirements of California law relating to the indemnification of
agents are similar in most respects to the requirements of Delaware law
described above. The principal differences between the laws of the two states
are that under California law: (1) all agents, not just officers and directors,
are subject to the requirement that advancement of expenses of defense may be
made only if the person provides an undertaking to reimburse the corporation if
it is ultimately determined that the person is not entitled to be indemnified
against such expenses; (2) indemnification approved by the stockholders must
exclude the shares of the proposed indemnitee as being entitled to vote for such
purpose; and (3) no agent may be indemnified for any acts or omissions from
which a director may not be relieved of liability under California law as set
forth above under "Directors' Standard of Care."
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The California Law Amendments would amend the Charter and the Bylaws to
provide that, at any time the Company is subject to the requirements of section
2115, agents of the Company shall be entitled to be indemnified to the fullest
extent permitted under California law. The California Law Amendments also would
amend the Charter to provide that the indemnification agreements described above
and similar future indemnification obligations will be deemed limited and
modified to the extent necessary to prevent such agreements or obligations from
exceeding the limits on indemnification permitted under California law.
PURPOSES AND EFFECTS OF THE CALIFORNIA LAW AMENDMENTS
In order to attract and retain qualified persons as directors and officers
of public corporations in light of the hazard of unfounded litigation against
such persons and the high cost of liability insurance against such liabilities,
such corporations have found it necessary to exculpate such persons from and
indemnify such persons against many of the potential liabilities they may be
faced with by reason of their serving as directors or officers. The corporate
statutes of a number of states, including Delaware and California, have been
amended since the mid-1980's to permit expanded exculpation and indemnification
provisions.
The Company's current Charter and Bylaws take advantage of the Delaware
statutory provisions. The California Law Amendments would provide for the
Company to take advantage of the California statutory provisions to the extent
that California law, by virtue of Section 2115, controls such exculpation and
indemnification. Although California law on these subjects is more restrictive
than Delaware law, as described above, the Board of Directors believes that the
additional restrictions are relatively slight, and that the differences do not
and will not affect the Company's ability to attract and retain qualified
directors and officers.
VOTE REQUIRED FOR ADOPTION OF CALIFORNIA LAW AMENDMENTS
The affirmative vote of the holders of a majority of the voting power
represented by the outstanding shares of the Company's Class A and Class B
Common Stock, voting together as a single class, is required to adopt each of
the California Law Amendments.
Under regulations of the Securities and Exchange Commission, each of the
California Law Amendments must be voted on as a separate proposal, and the
enclosed proxy card provides for a separate vote on each of the California Law
Amendments. However, due to the interrelationship of the California Law
Amendments, the Board of Directors of the Company has conditioned the adoption
of either of the California Law Amendments on the adoption of both of the
California Law Amendments. Thus, a vote against one of the California Law
Amendments would have the effect of a vote against both of the California Law
Amendments, notwithstanding a vote in favor of the other California Law
Amendment.
The Board of Directors unanimously recommends a vote FOR the adoption of
each of the California Law Amendments.
-10-
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP
The following table sets forth certain information as of April 1, 1998,
with respect to persons known by the Company to be beneficial owners of more
than five percent of either the Company's Class A Common Stock or the Company's
Class B Common Stock, as well as beneficial ownership of such classes of Common
Stock by the executive officers and Directors of the Company, and all executive
officers and Directors as a group. The persons named in the table have sole
voting and investment power with respect to all shares beneficially owned,
unless otherwise indicated.
<TABLE>
<CAPTION>
Class A Common Stock Class B Common Stock
Beneficially Owned(1) Beneficially Owned(1)
--------------------- ---------------------
Number of Number of
Shares Percentage Shares Percentage
------ ---------- ------ ----------
Name and Address of Beneficial Owner(2)
- ---------------------------------------
<S> <C> <C> <C> <C>
Alfred G. Scheid(3)(4) . . . . . . . . . . 2,709,589 53.8 2,709,589 61.9
Scott D. Scheid(4)(5). . . . . . . . . . . 327,093 12.3 327,093 7.5
Heidi M. Scheid(4)(6). . . . . . . . . . . 337,093 12.7 337,093 7.7
Kurt J. Gollnick(4)(7) . . . . . . . . . . 300,093 11.4 300,093 6.9
Ernest M. Brown(4) . . . . . . . . . . . . 5,000 * 0 0.0
John L. Crary. . . . . . . . . . . . . . . 0 0.0 0 0.0
Robert P. Hartzell . . . . . . . . . . . . 0 0.0 0 0.0
Emily K. Liberty(4)(8) . . . . . . . . . . 299,066 11.4 299,066 6.8
Tyler P. Scheid(4) . . . . . . . . . . . . 299,066 11.4 299,066 6.8
John Hancock Advisors, Inc.(9) . . . . . . 388,600 16.9 0 0.0
Wellington Management Company, LLP(10) . . 290,000 12.6 0 0.0
Delaware Management Company, Inc.(11). . . 169,900 7.4 0 0.0
Putnam Investment Management, Inc.(12) . . 141,500 6.2 0 0.0
Fidelity Management & Research Company(13) 125,000 5.4 0 0.0
All executive officers and Directors
as a group (7 PERSONS) . . . . . . . . 3,666,868 61.2 3,661,868 83.7
</TABLE>
- -------------------------
* Less than one percent.
(1) Except in the cases of Mr. Brown, John Hancock Advisors, Inc., Wellington
Management Company, LLP, Delaware Management Company, Inc., Putnam
Investment Management, Inc. and Fidelity Management & Research Company (the
"Institutional Holders"), all shares of Class A Common Stock reflected as
beneficially owned by each person named in this table represent shares
issuable upon conversion of the beneficial holder's shares of Class B
Common Stock. Beneficial ownership and the percentages of the Class A
Common Stock and Class B Common Stock outstanding have been determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules promulgated thereunder.
(2) The address of each of the persons named in this table, other than the
Institutional Holders, is c/o Scheid Vineyards Inc., 13470 Washington
Boulevard, Marina del Rey, California 90292. The addresses of the
Institutional Holders are set forth in notes 9 through 13 below. Scott D.
Scheid, Heidi M. Scheid, Emily K. Liberty and Tyler P. Scheid are children
of Alfred G. Scheid.
(3) Owned by Alfred G. Scheid as Trustee of the Alfred G. Scheid Revocable
Trust dated October 8, 1992. Does not include 100,000 shares of Class B
Common Stock owned by a revocable trust of which Mr. Scheid's wife is the
sole trustee and over which Mr. Scheid does not have any voting power or
investment power. Mr. Scheid disclaims beneficial ownership of the shares
beneficially owned by his wife's trust.
-11-
<PAGE>
(4) Pursuant to agreements provided to the representatives of the underwriters
for the Company's initial public offering, each of these stockholders has
agreed, subject to certain exceptions, not to sell or dispose of any shares
of capital stock of the Company, either publicly or privately, without the
prior written consent of Cruttenden Roth Incorporated until July 24, 1998.
(5) Includes 315,093 shares of Class B Common Stock owned by Scott D. Scheid
and 12,000 shares of Class B Common Stock owned by trusts for the benefit
of the children of Heidi M. Scheid, of which Mr. Scheid is a co-trustee
together with Heidi M. Scheid. Does not include 11,000 shares of Class B
Common Stock owned by Mr. Scheid's wife and over which Mr. Scheid does not
have any voting power or investment power. Mr. Scheid disclaims beneficial
ownership of the shares beneficially owned by his wife.
(6) Includes 325,093 shares of Class B Common Stock owned by Heidi M. Scheid
and 12,000 shares of Class B Common Stock owned by trusts for the benefit
of the children of Ms. Scheid, of which Ms. Scheid is a co-trustee together
with Scott D. Scheid. Does not include 1,000 shares of Class B Common
Stock owned by Ms. Scheid's husband and over which Ms. Scheid does not have
any voting power or investment power. Ms. Scheid disclaims beneficial
ownership of the shares beneficially owned by her husband.
(7) Does not include 1,000 shares of Class B Common Stock owned by Mr.
Gollnick's wife and over which Mr. Gollnick does not have any voting power
or investment power. Mr. Gollnick disclaims beneficial ownership of the
shares beneficially owned by his wife.
(8) Does not include 1,000 shares of Class B Common Stock owned by Ms.
Liberty's husband and over which Ms. Liberty does not have any voting power
or investment power. Ms. Liberty disclaims beneficial ownership of the
shares beneficially owned by her husband.
(9) John Hancock Advisors, Inc. ("JHA") is an indirect wholly owned subsidiary
of John Hancock Mutual Life Insurance Company. JHA is the investment
adviser to various clients that beneficially own these 388,600 shares of
Class A Common Stock, including John Hancock Emerging Growth Fund, which
beneficially owns 316,200 of these shares. The address of JHA is 101
Huntington Avenue, Boston, Massachusetts 02199.
(10) The address of Wellington Management Company, LLP is 75 State Street,
Boston, Massachusetts 02109.
(11) Lincoln National Corp. is the ultimate parent of Delaware Management
Company, Inc. ("DMC") The address of DMC is 2005 Market Street,
Philadelphia, Pennsylvania 19103.
(12) Putnam Investment Management, Inc. ("PIM") is an indirect wholly owned
subsidiary of Marsh & McLennan Companies, Inc. PIM is the investment
adviser to the Putnam Capital Appreciation Fund, which beneficially owns
these 141,500 shares of Class A Common Stock. The address of PIM is One
Post Office Square, Boston, Massachusetts 02109.
(13) Fidelity Capital Research & Management Company ("FCR&MC") is a wholly owned
subsidiary of FMR Corp. FCR&MC is the investment adviser to the Fidelity
Capital Appreciation Fund, which beneficially owns these 125,000 shares of
Class A Common Stock. The address of FCR&MC is 82 Devonshire Street,
Boston, Massachusetts 02109.
AGREEMENT AMONG CLASS B STOCKHOLDERS
The holders of the outstanding shares of Class B Common Stock and the
Company are parties to an Amended and Restated Buy-Sell Agreement (the "Buy-Sell
Agreement"). Pursuant to the Buy-Sell Agreement, no holder of shares of Class B
Common Stock other than Alfred G. Scheid may, with limited exceptions, transfer
Class B Common Stock or convert Class B Common Stock into Class A Common Stock
without first offering such stock, in a specified order, to the Company,
Alfred G. Scheid, Scott D. Scheid and Heidi M. Scheid. The Buy-Sell Agreement
applies to a broad range of transfers and dispositions other than transfers to
(i) the Company, (ii) certain other Class B stockholders, (iii) a current or
former spouse or direct lineal descendant of any Class B stockholder including,
without limitation, adopted persons (if adopted during minority) and persons
born out of wedlock, and excluding foster
-12-
<PAGE>
children and stepchildren, (iv) a trust under which all of the beneficiaries
are persons described in clauses (ii) or (iii) above, and (v) a corporation,
partnership or limited liability company, all of the equity interests of
which are owned by persons or entities described in clauses (i), (ii), (iii)
and (iv) above or corporations, partnerships and limited liability companies
described in this clause (v). The Buy-Sell Agreement also grants an option,
exercisable in a specified order, to the Company, Alfred G. Scheid, Scott D.
Scheid and Heidi M. Scheid, to purchase the shares of Class B Common Stock
held by certain Class B stockholders at specified prices upon (A) the death
of such Class B Stockholder, (B) the entry or imposition of certain
judgments, levies or attachments affecting the shares of Class B Common Stock
held by such stockholder, (C) certain bankruptcy or insolvency events
affecting such stockholder or (D) in the case of Kurt J. Gollnick, the
termination of his employment with the Company.
-13-
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION OF NAMED EXECUTIVE OFFICERS
The following table sets forth information concerning the annual and
long-term compensation earned by the Named Executive Officers for services
rendered in all capacities to the Company for the fiscal years ended December
31, 1997 and 1996. The "Named Executive Officers" include (i) each person
who served as Chief Executive Officer during 1997 (one person), (ii) each
person who (a) served as an executive officer at December 31, 1997, (b) was
among the four most highly paid executive officers of the Company, not
including the Chief Executive Officer, during 1997 and (c) earned total
annual salary and bonus compensation in 1997 in excess of $100,000 (four
persons), and (iii) up to two persons who would be included under clause (ii)
above had they served as an executive officer at December 31, 1997 (no
persons).
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
--------------------------
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION(4)
--------------------------------------------- ----------------
OTHER SHARES
ANNUAL UNDERLYING ALL OTHER
NAME AND CAPACITY FISCAL SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
IN WHICH SERVED YEAR ($)(2) ($) ($)(3) (#) ($)(5)(6)
- ------------------------- ------ --------- -------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Alfred G. Scheid, 1997 $400,000 $140,000 -- 0 $168,183
CHAIRMAN OF THE BOARD AND 1996 $400,000 $0 -- 0 $97,095
CHIEF EXECUTIVE OFFICER
Scott D. Scheid, VICE 1997 $118,300 $105,000 -- 20,000 $3,550
PRESIDENT AND CHIEF 1996 $90,000 $75,000 -- 0 $2,700
OPERATING OFFICER
Heidi M. Scheid, VICE 1997 $106,700 $90,000 -- 20,000 $3,200
PRESIDENT FINANCE, CHIEF 1996 $75,000 $30,000 -- 0 $2,250
FINANCIAL OFFICER AND
TREASURER
Kurt J. Gollnick, VICE 1997 $111,700 $105,000 -- 20,000 $3,350
PRESIDENT VINEYARD 1996 $92,700 $85,000 -- 0 $2,781
OPERATIONS
Ernest M. Brown, VICE 1997 $120,000 $72,000 -- 20,000 $3,600
PRESIDENT AND SECRETARY 1996 $118,000 $72,000 -- 0 $2,070
</TABLE>
- ----------
(1) Amounts shown include cash compensation earned for the periods reported
whether paid or accrued in such periods.
(2) As of April 1, 1998, the annual salary levels for the Named Executive
Officers were: Alfred G. Scheid ($400,000); Scott D. Scheid ($130,000);
Heidi M. Scheid ($120,000); Kurt J. Gollnick ($120,000); and Ernest M.
Brown ($120,000).
(3) During 1997 and 1996, the Named Executive Officers received personal
benefits, the aggregate amounts of which for each Named Executive Officer
did not exceed the lesser of $50,000 or 10% of the total of the annual
salary and bonus reported for such Named Executive Officer in such years.
(4) The Named Executive Officers did not receive any restricted stock awards or
long-term incentive plan payouts in 1997 or 1996.
(5) Except as described in note 6, all amounts in this column represent
matching contributions under the Company's 401(k) plan. In the case of
Alfred G. Scheid, matching contributions in 1997 and 1996 were $4,750 and
$4,620, respectively.
-14-
<PAGE>
(6) In the case of Alfred G. Scheid, includes $163,433 and $92,475 in 1997 and
1996, respectively, representing benefits received under a split dollar
life insurance trust arrangement pursuant to which Alfred G. Scheid is
entitled to designate the beneficiary of a $2,000,000 life insurance policy
and the Company is obligated to advance a portion of the premiums. The
owner of the insurance policy is a trust, the trustees of which include
Scott D. Scheid and Heidi M. Scheid, each of whom is an executive officer
and Director of the Company and a child of Alfred G. Scheid. Advances by
the Company are required to be repaid out of the surrender proceeds or
death benefits payable under the policy. The amount of the benefits
received in each year represents (i) the premiums payable by the Company
during the year ($163,433 in 1997 and $92,475 in 1996) plus (ii) the
proportionate amount, if any, of the excess of the actuarially projected
cash surrender value of the policy at the end of such year over the
aggregate amount of premiums advanced by the Company through such year ($0
at each of December 31, 1997 and 1996). Such proportionate amount is
measured by the time-weighted compounded returns on the premiums advanced
by each of the Company and the policy owner, and assuming a constant rate
of return from inception of the policy.
OPTION GRANTS
The following table sets forth information with respect to grants of
stock options to the Named Executive Officers during fiscal 1997, which stock
options are exercisable for shares of Class A Common Stock of the Company.
No stock appreciation rights were granted by the Company in fiscal 1997.
OPTIONS/SAR GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE PRICE EXPIRATION
Name GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE
- --------------------------------------- ------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
Scott D. Scheid. . . . . . . . . . . . . 20,000 14.2% $10.00 July 23, 2007
Heidi M. Scheid. . . . . . . . . . . . . 20,000 14.2% $10.00 July 23, 2007
Kurt J. Gollnick . . . . . . . . . . . . 20,000 14.2% $10.00 July 23, 2007
Ernest M. Brown. . . . . . . . . . . . . 20,000 14.2% $10.00 July 23, 2007
</TABLE>
- ------------
(1) These options were granted under the Plan on July 24, 1997. The
exercise price is equal to the fair market value of the Class A Common
Stock on the date of grant. The options vest 25% on the first
anniversary of the grant date with the remaining 75% vesting ratably
in 36 monthly installments following the first anniversary of the
grant date; provided, however, that the vesting of options will be
accelerated immediately prior to certain corporate transactions
involving certain changes in control of the Company unless the options
are assumed, or replaced with comparable options or a cash incentive
program, by the successor corporation. The stock options are subject
to termination prior to the expiration date following the termination
of the optionee's employment with the Company. The terms of the stock
options granted to the Named Executive Officers are the same as those
granted on the same date to other employees of the Company, except
that none of the stock options granted to the Named Executive Officers
are "incentive stock options," and the stock options granted to the
Named Executive Officers provide for the acceleration of vesting and
extension of the option termination dates upon the termination of the
optionee's employment with the Company under certain circumstances
following certain changes in control of the Company. See "--
Employment Agreements, Termination of Employment and Change-in-Control
Arrangements" below.
-15-
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth with respect to the Named Executive
Officers information concerning the exercise of stock options during 1997 and
unexercised options held as of the end of the year. The Company has never
granted stock appreciation rights.
AGGREGATED OPTION/SAR EXERCISES
AND 1996 YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER
OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
SHARES VALUE FISCAL YEAR END(#) AT FISCAL YEAR END(#)
ACQUIRED REALIZED -------------------------- --------------------------
NAME ON EXERCISE ($) UNEXERCISABLE EXERCISABLE UNEXERCISABLE EXERCISABLE
- ----------------------------- ----------- -------- ------------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Alfred G. Scheid. . . . . . . 0 $0 0 0 -- --
Scott D. Scheid . . . . . . . 0 $0 20,000 0 $0 $0
Heidi M. Scheid . . . . . . . 0 $0 20,000 0 $0 $0
Kurt J. Gollnick. . . . . . . 0 $0 20,000 0 $0 $0
Ernest M. Brown . . . . . . . 0 $0 20,000 0 $0 $0
</TABLE>
(1) The values of unexercised in-the-money options have been determined based
on the per share closing price of the Company's Common Stock as reported
in the Nasdaq-National Market System on December 31, 1997 ($9.125).
EMPLOYMENT AGREEMENTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company has entered into an employment agreement (collectively, the
"Employment Agreements") with each of Alfred G. Scheid, Scott D. Scheid, Heidi
M. Scheid and Kurt J. Gollnick (collectively, the "Employees") providing for a
minimum employment of three years beginning on July 19, 1997, except for
Alfred G. Scheid, whose Employment Agreement has a one-year term. Under their
respective Employment Agreements, Alfred G. Scheid currently is entitled to an
annual base salary of $400,000, Scott D. Scheid currently is entitled to an
annual base salary of $130,000 and each of Heidi M. Scheid and Kurt J. Gollnick
is entitled to an annual base salary of $120,000. The base salary under each
Employment Agreement is subject to upward adjustment, and each Employee is
eligible for bonus compensation pursuant to bonus arrangements, as determined by
the Board of Directors upon the recommendation of the Compensation Committee.
The Company may terminate each Employee's employment at any time with or without
cause, and no severance payment obligations are provided.
A Buy-Sell Agreement among the Company and the holders of Class B
Common Stock provides, among other things, that the shares of Class B Common
Stock held by Mr. Gollnick (currently 290,093) are purchasable at the option
first of the Company, next of Alfred G. Scheid if the Company does not
exercise such option, and thereafter of Scott D. Scheid and Heidi M. Scheid
if the Company and Alfred G. Scheid do not exercise such options, if Mr.
Gollnick's employment with the Company
-16-
<PAGE>
terminates for any reason. See "Security Ownership of Certain Beneficial
Owners and Management -- Agreement Among Class B Stockholders". If such
termination is a voluntary termination by Mr. Gollnick that occurs prior to
July 29, 2004, or is for "cause" (as defined) regardless of when such
termination for "cause" occurs, the per share purchase price for Mr.
Gollnick's shares of Class B Common Stock will be equal to the price per
share he paid for such shares, and if such termination occurs for any other
reason or under any other circumstances, or upon the death of Mr. Gollnick,
the per share purchase price will be the weighted average trading price of
the Class A Common Stock for the immediately preceding 20 trading days on
which such Class A Common Stock actually was traded.
The outstanding stock options exercisable for shares of Class A Common
Stock of the Company that have been granted under the Plan, including those
granted to the Directors and Named Executive Officers, provide for
accelerated vesting in connection with certain corporate transactions
involving certain changes in control of the Company unless the options are
assumed, or replaced with comparable options or a cash incentive program, by
the successor corporation. In addition, the stock options that have been
granted to the Named Executive Officers provide for immediate acceleration of
these options upon an "involuntary termination" of employment occurring
within 18 months of a "change in control." In the event of such an
acceleration, the options will remain exercisable until the earlier of the
expiration date specified in the option grant and one year after the date of
involuntary termination. For purposes of these provisions: an "involuntary
termination" means, generally, termination by the Company other for
"misconduct" (as defined) or termination by the employee following an
involuntary material change in position and responsibility, an involuntary
reduction in compensation by more than 15% or an involuntary relocation by
more than 50 miles; and a "change in control" means, generally, the
acquisition of securities representing a majority of the voting power of the
Company other than by the Company and its affiliates, a change in a majority
of the Board of Directors over a period of 36 month or less involving new
Directors that have not been elected or nominated by the other Directors or a
change in ownership of securities representing more than a majority of the
voting power of certain subsidiaries of the Company.
The Company has an individual retirement agreement with Ernest M.
Brown, Vice President and Secretary of the Company, age 70. This agreement
provides for the Company to pay to Mr. Brown $100,000 per annum at the time
of his retirement or disability for the rest of his life. Mr. Brown has not
set a date for his retirement and this retirement agreement is unfunded;
therefore, it is not possible to determine the absolute dollar amount for
which the Company is liable in the future. The Company has, however,
reserved $662,000 for this contingency as of December 31, 1997.
The Company has entered into agreements to provide indemnification for
the Company's Directors and certain officers in addition to the
indemnification provided for in the Company's Bylaws. These agreements,
among other things, will indemnify the Company's Directors and certain
officers to the fullest extent permitted by Delaware law for certain expenses
(including attorneys' fees), and all losses, claims, liabilities, judgments,
fines and settlement amounts incurred by such person arising out of or in
connection with such persons' service as Directors or officers of the Company
or an affiliate of the Company. These agreements provide for the advancement
of expenses incurred in defending a claim prior to resolution of the merits
of the claim. These agreements also require the Company to maintain
directors and officers liability insurance. The Employment Agreements impose
similar indemnification obligations on the Company. There is no pending
litigation or proceeding involving a Director, officer,
-17-
<PAGE>
employee or agent of the Company, and the Company is not aware of any
threatened litigation or proceeding which may result in a claim for such
indemnification.
CERTAIN TRANSACTIONS
FORMATION OF SVI
SVI was incorporated in Delaware in July 1997 to act as a holding
company for Scheid Vineyards California Inc., a California corporation
("SVI-Cal"), the Company's operating subsidiary, and to participate in the
Exchange Transaction described below. See "-- Exchange of Shares,
Partnership Units and Limited Liability Company Interests for Class B Common
Stock."
EXCHANGE OF SHARES, PARTNERSHIP UNITS AND LIMITED LIABILITY COMPANY INTERESTS
FOR CLASS B COMMON STOCK
Prior to the Company's initial public offering, SVI-Cal was the
general partner of (i) Vineyard Investors 1972 ("VI-1972"), a California
limited partnership having as its limited partners SVI-Cal, Big Vines Limited
Liability Company ("Big Vines"), a California limited liability company
having Scott D. Scheid (the son of Alfred G. Scheid and an executive officer
and a Director of the Company) and Heidi M. Scheid (the daughter of Alfred G.
Scheid and an executive officer and a Director of the Company) as its
members, Emanty Limited Liability Company, a California limited liability
company having Alfred G. Scheid (an executive officer and a Director of the
Company), Tyler P. Scheid (the son of Alfred G. Scheid) and Emily K. Liberty
(the daughter of Alfred G. Scheid) as its members, and Kurt J. Gollnick (an
executive officer of the Company); and (ii) Vineyard 405 ("V-405"), a
California limited partnership having as its limited partners SVI-Cal and
VI-1972. Prior to the initial public offering, SVI-Cal also was a member of
Quadra Partners LLC ("Quadra Partners"), a California limited liability
company having Alfred G. Scheid, Scott D. Scheid, Heidi M. Scheid and Kurt J.
Gollnick as additional members. During their respective existences, VI-1972,
V-405 and Quadra Partners were the owners or ground lessees of various
vineyard properties currently owned or leased by the Company.
In connection with the initial public offering, the capital stock of
SVI-Cal held by its sole stockholder, the membership interests held by all
members of each of Quadra Partners and Big Vines and the limited partnership
units held by all limited partners (other than SVI-Cal) in VI-1972 were
contributed to the Company in exchange for (i) 4,400,000 shares of Class B
Common Stock of the Company (the "Exchange Transaction"), representing 100%
of the issued and outstanding common stock of the Company prior to the
initial public offering, and (ii) a commitment by SVI-Cal to make the
distributions described below. See "-- Termination of SVI-Cal's S
Corporation Status." The Company, as part of the Exchange Transaction,
simultaneously contributed such limited partnership units in VI-1972 and such
membership interests in each of Quadra Partners and Big Vines to SVI-Cal and,
as a result, each of Quadra Partners, Big Vines, VI-1972 and V-405 was
terminated and dissolved and the assets and liabilities of each became assets
and liabilities of SVI-Cal. The following table sets forth the number and
percentage of shares of Class B Common Stock of SVI that were issued to the
sole stockholder of SVI-Cal and the members of and limited partners in Quadra
Partners, Big Vines and VI-1972 as a result of the Exchange Transaction:
-18-
<PAGE>
<TABLE>
<CAPTION>
Number of Shares Percentage of Class B
of Class B Common Stock
Common Stock Outstanding Following
Name of Member or Partner Received Exchange Transaction
- ------------------------------------------ ------------------ -----------------------
<S> <C> <C>
Emanty Limited Liability Company(1). . . . 573,870 13.0%
Alfred G. Scheid(2). . . . . . . . . . . . 2,955,851 67.2%
Scott D. Scheid. . . . . . . . . . . . . . 290,093 6.6%
Heidi M. Scheid. . . . . . . . . . . . . . 290,093 6.6%
Kurt J. Gollnick . . . . . . . . . . . . . 290,093 6.6%
--------- -----
Total 4,400,000 100%
--------- -----
--------- -----
</TABLE>
- -------------
(1) Emanty Limited Liability Company has been dissolved by agreement of its
members, and its shares of Class B Common Stock have been distributed to
its members (Alfred G. Scheid and two of his children) pro rata in
accordance with their respective membership interests. See "Security
Ownership of Certain Beneficial Owners and Management."
(2) All of these shares were issued to Mr. Scheid as Trustee of the Alfred G.
Scheid Revocable Trust dated October 8, 1992.
TERMINATION OF SVI-CAL'S S CORPORATION STATUS
SVI-Cal was a Subchapter S Corporation for federal and California
state income tax purposes from 1989 until July 1997. As a result, the net
income of SVI-Cal for federal and certain state income tax purposes for such
periods was reported by, and taxed directly to, SVI-Cal's sole stockholder,
Alfred G. Scheid, whether or not such earnings were distributed. Prior to
the Company's initial public offering, SVI-Cal's cumulative S Corporation
earnings were determined and a distribution of $3,193,000 was made to Mr.
Scheid. In addition, a distribution of $480,000 was made to the limited
partners of Vineyard Investors 1972 (as of immediately prior to the Exchange
Transaction) to pay income taxes on income from the partnership. The
Exchange Transaction resulted in the termination of SVI-Cal's S Corporation
status. See "-- Exchange of Shares, Partnership Units and Limited Liability
Company Interests for Class B Common Stock."
CORPORATE HEADQUARTERS LEASE
Pursuant to a five-year lease (the "Lease"), the Company leases the
third floor of a three-story office building in Marina del Rey, a suburb of
Los Angeles, from Tesh Partners, L.P., a limited partnership comprised of
members of the Scheid family. The Company occupies 5,685 square feet and the
rest of the building (approximately 5,300 square feet) is leased to unrelated
parties. The general partner of Tesh Partners, L.P. is SVI-Cal and the
limited partners are Alfred G. Scheid's four children, two of whom are Scott
D. Scheid and Heidi M. Scheid, each an executive officer and a Director of
the Company. The lease runs until 1999 and the rent is $98,616 annually,
plus an additional annual amount of $3,660 for parking. The Company believes
that the terms of the Lease are at least as favorable to the Company as if
the Lease were entered into with an unaffiliated third party.
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<PAGE>
GOLLNICK NOTE
On December 30, 1994, Kurt J. Gollnick, an executive officer of the
Company, purchased 555 limited partnership units of VI-1972 from SVI in
exchange for the delivery by Mr. Gollnick to the Company of a Promissory Note
(the "Gollnick Note") in the original principal amount of $98,790. The
Gollnick Note bore interest at the rate of 8.23% per annum, and was payable
interest only on the 30th day of December of each year until December 30,
2004, at which time the entire principal balance and all accrued, unpaid
interest was payable in full. The Gollnick Note was repaid in full in
December 1997.
CONSULTING AGREEMENTS
The Company periodically consults with John L. Crary and Robert P.
Hartzell, both Directors of the Company, on various matters relating to its
business activities. The Company pays Messrs. Crary and Hartzell on an
hourly basis, at varying rates depending on the nature of service being
provided. Consulting fees and reimbursable consulting-related expenses paid
to Mr. Crary by the Company during 1997 aggregated $124,864.
FUTURE TRANSACTIONS
The Company does not have any current intentions to enter into any
future transactions with related parties with respect to the acquisition or
development of additional vineyard or other properties. The Company has
adopted a policy requiring future transactions with affiliates to be on terms
no less favorable to the Company than could be obtained from unaffiliated
parties.
FORM 10-KSB
SVI will furnish without charge to each stockholder, upon written
request addressed to SVI c/o Linda Carris, 13470 Washington Boulevard, Marina
del Rey, California 90292, a copy of its Annual Report on Form 10-KSB for
the year ended December 31, 1997 (excluding the exhibits thereto), as filed
with the Securities and Exchange Commission. The Company will provide a copy
of the exhibits to its Annual Report on Form 10-KSB for the year ended
December 31, 1997 upon the written request of any beneficial owner of the
Company's securities as of the record date for the Annual Meeting and
reimbursement of the Company's reasonable expenses. Such request should be
addressed to SVI c/o Linda Carris at the above address.
FUTURE STOCKHOLDER PROPOSALS
Any stockholder proposal intended to be presented at the 1999 Annual
Meeting of Stockholders must be submitted sufficiently far in advance so that
it is received by SVI not later than December 31, 1998.
OTHER MATTERS
The Company's independent public accountants for the fiscal year ended
December 31, 1997 were Deloitte & Touche LLP, which firm is expected to be
appointed to serve in such capacity for the
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<PAGE>
current year. A representative of Deloitte & Touche LLP is expected to be
present at the meeting with the opportunity to make a statement if he or she
so desires and to respond to appropriate questions.
Neither the Company nor any of the persons named as proxies knows of
matters other than those stated above to be voted on at the Annual Meeting.
However, if any other matters are properly presented at the meeting, the
persons named as proxies are empowered to vote in accordance with their
discretion on such matters.
The Annual Report of SVI for the fiscal year ended December 31, 1997
accompanies this proxy statement, but it is not to be deemed a part of the
proxy soliciting material.
PLEASE COMPLETE, SIGN AND RETURN
THE ENCLOSED PROXY PROMPTLY
SCHEID VINEYARDS INC.
By order of the Board of Directors
Alfred G. Scheid
Chairman of the Board
and Chief Executive Officer
Marina del Rey, California
April , 1998
----
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<PAGE>
EXHIBIT A
PROPOSAL NO. 2
CALIFORNIA LAW AMENDMENTS
AMENDMENT OF CERTIFICATE OF INCORPORATION
IT IS PROPOSED TO AMEND THE CERTIFICATE OF INCORPORATION BY ADDING AN ARTICLE
XIII, AS FOLLOWS:
ARTICLE XIII
To the extent that the laws of California govern the affairs of the
corporation at any time and from time to time by virtue of the
application of Section 2115 of the California General Corporation Law,
the following provisions shall be applicable:
A. The liability of the directors of the corporation for
monetary damages shall be eliminated to the fullest extent permissible
under California law.
B.1. The corporation is authorized to provide indemnification of
agents, as that term is defined in Section 317 of the California
General Corporation Law, for breach of duty to the corporation and its
stockholders, in excess of that expressly permitted by said
Section 317, under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, to the fullest extent such
indemnification may be authorized hereby, subject to the limits on
such excess indemnification set forth in Section 204 of the California
General Corporation Law. In the event that any indemnification
obligation provided for in any bylaw, agreement, vote of stockholders
or disinterested directors or otherwise, whether currently in effect
or hereafter adopted, exceeds the limits on excess indemnification set
forth in Section 204 of the California General Corporation Law, such
indemnification obligation shall be construed, and shall be deemed to
be limited and modified, to the extent, but only to the extent,
necessary to prevent such indemnification obligation from exceeding
such limits on excess indemnification.
2. The corporation is further authorized to provide insurance
for agents as set forth in Section 317 of the California General
Corporation Law, provided that, in cases where the corporation owns
all or a portion of the shares of the company issuing the insurance
policy, the company and/or the policy must meet one of the two sets of
conditions set forth in Section 317.
3. Any repeal or modification of the foregoing provisions of
this Paragraph B of this Article XIII by the stockholders of this
corporation shall not adversely affect any right or protection of an
agent of the corporation existing at the time of such repeal or
modification.
A-1
<PAGE>
EXHIBIT B
PROPOSAL NO. 3
CALIFORNIA LAW AMENDMENTS
AMENDMENT OF BYLAWS
IT IS PROPOSED TO AMEND THE BYLAWS BY ADDING A SECTION 2 TO ARTICLE IX, AS
FOLLOWS:
SECTION 2. This Section shall apply to any time and from time to
time only to the extent that the laws of California govern the affairs
of the corporation by virtue of the application of Section 2115 of the
California General Corporation Law.
(a) For purposes of this Section: "agent" means any person
who is or was a director, officer, employee or other agent of the
corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
foreign or domestic corporation, partnership, joint venture,
trust or other enterprise, or was a director, officer, employee
or agent of a foreign or domestic corporation that was a
predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation; and
"proceeding" means any threatened, pending or completed action or
proceeding, whether civil, criminal, administrative or
investigative.
(b) The corporation shall indemnify each of its directors
and officers, acting in any capacity as an agent of the
corporation, to the fullest extent permissible under the
California General Corporation Law, as now in effect or as
hereafter amended, including those circumstances in which
indemnification would otherwise be discretionary, against any and
all costs, charges, expenses, liabilities and losses (including,
without limitation, attorneys' fees, judgments, fines, amounts
paid in settlement and ERISA excise taxes or penalties, and
including attorneys' fees and any expenses of establishing a
right to indemnification under this subsection (b)) reasonably
incurred or suffered by such person in connection with any
proceedings, whether brought by or in the right of the
corporation or otherwise, in which such person may be involved,
as a party or otherwise, by reason of such person being or having
been an agent of the corporation, and such right of
indemnification shall inure to the benefit of such person's
heirs, executors, personal representatives and estate.
Expenses incurred in defending any proceeding shall be
advanced by the corporation before the final disposition of the
proceeding upon receipt of a written undertaking by or on behalf
of an agent covered by this subsection (b) to repay the amount of
the advance if it shall be determined ultimately that the agent
is not entitled to be indemnified as authorized by these Bylaws,
law, the Certificate of Incorporation or agreement.
B-1
<PAGE>
The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere shall not, of itself,
create a presumption that a person is not entitled to indemnification
hereunder.
The corporation shall determine whether a person is entitled to
indemnification under this subsection (b) by any of the following:
(i) a majority vote of a quorum consisting of directors who are not
parties to the involved proceeding, (ii) if such quorum of directors
is not obtainable, by independent legal counsel, selected by the
mutual agreement of the corporation and the person seeking
indemnification, in a written opinion, or (iii) approval by the
affirmative vote of the holders of shares representing a majority of
the voting power of the corporation represented at a duly held meeting
at which a quorum is present; provided, that, for purposes of
determining the required quorum of any meeting of stockholders called
to approve indemnification of such person and the vote, the shares
owned by the person to be indemnified shall not be considered
outstanding and shall not be entitled to vote thereon.
The rights of a person covered by this subsection (b) to
bring suit against the corporation shall include the following:
(i) In the case of a director, if there has been no
determination by the corporation, or if the corporation
determines, that the director substantively would not be
permitted to be indemnified in whole or in part under the
California General Corporation Law, such director shall have the
right to bring suit seeking an initial determination by the court
or challenging any such determination by the corporation or any
aspect thereof, and the corporation, by this subsection (b),
consents to service of process and to appear in any such
proceeding. Any determination by the corporation otherwise shall
be conclusive and binding on the corporation and such director.
(ii) If a claim for advances under this subsection (b) is
not paid in full by the corporation within 30 days after a
written claim and appropriate undertaking have been received by
the corporation, such person may at any time thereafter bring
suit against the corporation to recover the unpaid amount. If
successful, in whole or in part, such person shall be entitled to
be paid also the expenses of prosecuting such claim.
In any action brought by a person to enforce a right of
indemnification hereunder, or by the corporation to recover payments
by the corporation of expenses incurred by such person in connection
with a proceeding in advance of its final disposition, the burden of
proving that such person is not entitled to be indemnified under this
subsection (b) or otherwise shall be on the corporation. Neither the
failure of the corporation to have made a determination prior to the
commencement of a proceeding that indemnification of a person covered
by this
B-2
<PAGE>
subsection (b) is proper in the circumstances because such person has
met the applicable standard of conduct under the California General
Corporation Law, nor an actual determination by the corporation that
such person has not met such applicable standard of conduct, shall
create a presumption that such person has not met the applicable
standard of conduct or, in the case of an action brought by such
person, be a defense to the action.
(c) The corporation shall have the power, but except as provided
in subsection (b) above shall not be obligated, to indemnify each of
its agents to the fullest extent permissible under the California
General Corporation Law, as now in effect or as hereafter amended,
including those circumstances in which indemnification would otherwise
be discretionary, against any and all costs, charges, expenses,
liabilities and losses (including, without limitation, attorneys'
fees, judgments, fines and ERISA excise taxes or penalties) reasonably
incurred or suffered by such person in connection with any
proceedings, whether brought by or in the right of the corporation or
otherwise, in which such person may be involved, as a party or
otherwise, by reason of such person being or having been an agent of
the corporation, and any such indemnification shall inure to the
benefit of such person's heirs, executors, personal representatives
and estate.
Expenses incurred in defending any proceeding may, in the
discretion of the corporation, be advanced by the corporation before
the final disposition of the proceeding upon receipt of a written
undertaking by or on behalf of an agent covered by this subsection (c)
to repay the amount of the advance if it shall be determined
ultimately that the agent is not entitled to be indemnified as
authorized by these Bylaws, law, the Certificate of Incorporation or
agreement.
The termination of any proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere, shall not, of itself,
create a presumption that a person is not eligible to be indemnified
hereunder.
The corporation shall determine whether a person seeking
indemnification under this subsection (c) is eligible to be so
indemnified and whether the corporation shall indemnify such person or
shall provide advances to such person by any of the following at the
corporation's sole option: (i) a majority vote of a quorum consisting
of directors who are not parties to the involved proceeding, (ii) if
such a quorum is not obtainable, by independent legal counsel selected
by the corporation in a written opinion, or (iii) approval by the
affirmative vote of the holders of shares representing a majority of
the voting power of the corporation represented at a duly held meeting
at which a quorum is present; provided, that, for purposes of
determining the required quorum of any meeting of stockholders called
to approve indemnification of such person and the vote, the shares
owned by the person to be indemnified shall not be considered
outstanding and shall not be entitled to vote thereon. Any such
determination by the corporation shall be conclusive and binding on
the corporation and such person.
B-3
<PAGE>
(d) The indemnification provided for in this Section 2 shall not
be deemed exclusive of any other rights to indemnification which any
person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation or Bylaws, agreement, vote of
stockholders or disinterested directors or otherwise. The right of
indemnification under subsection (b) above shall be deemed to create
contractual rights in favor of persons entitled to indemnification
thereunder. The provisions of this Section 2 shall be applicable to
claims commenced after the adoption hereof, whether arising from acts
or omissions occurring before or after the adoption hereof.
(e) Neither the amendment nor repeal of this Section 2, nor the
adoption of any provision of the Certificate of Incorporation or
Bylaws or of any statute inconsistent with this Section 2, shall
adversely affect any right or protection of a director, officer or
agent of the corporation existing at the time of such amendment,
repeal or adoption of such a provision.
(f) Upon and in the event of a determination by the Board of
Directors of the corporation to purchase such insurance, the
corporation shall purchase and maintain insurance on behalf of any
agent of the corporation against any liability asserted against or
incurred by the agent in such capacity or arising out of the agent's
status as such whether or not the corporation would have the power to
indemnify the agent against such liability under the provisions of
this Section 2.
B-4
<PAGE>
PRELIMINARY COPY
REVOCABLE PROXY FOR CLASS A COMMON STOCK
SCHEID VINEYARDS INC.
ANNUAL MEETING OF STOCKHOLDERS -- MAY 28, 1998
The undersigned stockholder(s) of Scheid Vineyards Inc. (the "Company")
hereby nominates, constitutes and appoints Alfred G. Scheid, Scott D. Scheid and
Heidi M. Scheid, and each of them, the attorney, agent and proxy of the
undersigned, with full power of substitution, to vote all shares of CLASS A
COMMON STOCK of the Company that the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Company to be held at the World Trade
Club, located in the World Trade Center, Ferry Building, on the Embarcadero at
Market Street, San Francisco, California, at 3:00 p.m. (local time) on Thursday,
May 28, 1998, and any and all adjournments or postponements thereof, with
respect to the matters described in the accompanying Proxy Statement, and in
their discretion, on such other matters which properly come before the meeting,
as fully and with the same force and effect as the undersigned might or could do
if personally present thereat, as follows:
<TABLE>
<S> <C> <C> <C>
1. PROPOSAL NO. 1 / / AUTHORITY GIVEN / / WITHHOLD AUTHORITY
ELECTION OF to vote for the nominees listed below (except as to vote for the nominees.
DIRECTORS indicated to the contrary below).
</TABLE>
(INSTRUCTIONS: To withhold authority to vote for any nominee, strike a line
through such nominee's name below.)
JOHN L. CRARY ROBERT P. HARTZELL
2. PROPOSAL NO. 2 -- To approve an amendment to the Company's Certificate of
Incorporation with respect to certain matters under California law.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL NO. 3 -- To approve an amendment to the Company's Bylaws with
respect to certain matters under California law.
/ / FOR / / AGAINST / / ABSTAIN
4. To transact such other business as may properly come before the Meeting and
any adjournment or adjournments or postponements thereof. Management
currently knows of no other business to be presented by or on behalf of the
Company or its Board of Directors at the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED
PRIOR TO ITS EXERCISE.
PLEASE SIGN AND DATE ON THE REVERSE SIDE OF THIS PROXY.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF "AUTHORITY GIVEN" FOR THE
ELECTION OF DIRECTORS AND "FOR" THE PROPOSALS TO AMEND THE CERTIFICATE OF
INCORPORATION AND BYLAWS. THE PROXY CONFERS AUTHORITY TO AND SHALL BE VOTED
"AUTHORITY GIVEN" FOR THE ELECTION OF DIRECTORS AND "FOR" THE PROPOSALS TO
APPROVE AMENDMENTS TO THE CERTIFICATE OF INCORPORATION AND BYLAWS UNLESS OTHER
INSTRUCTIONS ARE INDICATED, IN WHICH CASE THE PROXY SHALL BE VOTED IN ACCORDANCE
WITH SUCH INSTRUCTIONS.
IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY SHALL BE VOTED
IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
Dated: ______________________, 1998
___________________________________
(Please Print Name)
_____________________________________
(Signature of Class A Stockholder)
_____________________________________
(Please print name)
_____________________________________
(Signature of Stockholder)
Please date this Proxy and sign your
name as it appears on your stock
certificates. (Executors,
administrators, trustees, etc.,
should give their full titles. All
joint owners should sign).
I do / / do not / / expect to attend
the Meeting.
Number of Persons: ____________
<PAGE>
PRELIMINARY COPY
- ----------------
REVOCABLE PROXY FOR CLASS B COMMON STOCK
SCHEID VINEYARDS INC.
ANNUAL MEETING OF STOCKHOLDERS -- MAY 28, 1998
The undersigned stockholder(s) of Scheid Vineyards Inc. (the "Company")
hereby nominates, constitutes and appoints Alfred G. Scheid, Scott D. Scheid
and Heidi M. Scheid, and each of them, the attorney, agent and proxy of the
undersigned, with full power of substitution, to vote all shares of CLASS B
COMMON STOCK of the Company that the undersigned is entitled to vote at the
Annual Meeting of Stockholders of the Company to be held at the World Trade
Club, located in the World Trade Center, Ferry Building, on the Embarcadero
at Market Street, San Francisco, California, at 3:00 p.m. (local time) on
Thursday, May 28, 1998, and any and all adjournments or postponements
thereof, with respect to the matters described in the accompanying Proxy
Statement, and in their discretion, on such other matters which properly come
before the meeting, as fully and with the same force and effect as the
undersigned might or could do if personally present thereat, as follows:
1. PROPOSAL NO. 1 / / AUTHORITY GIVEN / / WITHHOLD AUTHORITY
ELECTION OF DIRECTORS to vote for the nominees to vote for the
listed below (except as nominees.
indicated to the contrary
below).
(INSTRUCTIONS: To withhold authority to vote for any nominee, strike a line
through such nominee's name below.)
ALFRED G. SCHEID SCOTT D. SCHEID HEIDI M. SCHEID
2. PROPOSAL NO. 2 -- To approve an amendment to the Company's Certificate of
Incorporation with respect to certain matters under California law.
/ / FOR / / AGAINST / / ABSTAIN
3. PROPOSAL NO. 3 -- To approve an amendment to the Company's Bylaws with
respect to certain matters under California law.
/ / FOR / / AGAINST / / ABSTAIN
4. To transact such other business as may properly come before the Meeting and
any adjournment or adjournments or postponements thereof. Management
currently knows of no other business to be presented by or on behalf of the
Company or its Board of Directors at the Meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MAY BE REVOKED
PRIOR TO ITS EXERCISE. PLEASE SIGN AND DATE ON THE REVERSE SIDE OF
THIS PROXY.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE OF "AUTHORITY GIVEN" FOR THE
ELECTION OF DIRECTORS AND "FOR" THE PROPOSALS TO AMEND THE CERTIFICATE OF
INCORPORATION AND BYLAWS. THE PROXY CONFERS AUTHORITY TO AND SHALL BE VOTED
"AUTHORITY GIVEN" FOR THE ELECTION OF DIRECTORS AND "FOR" THE PROPOSALS TO
APPROVE AMENDMENTS TO THE CERTIFICATE OF INCORPORATION AND BYLAWS UNLESS
OTHER INSTRUCTIONS ARE INDICATED, IN WHICH CASE THE PROXY SHALL BE VOTED IN
ACCORDANCE WITH SUCH INSTRUCTIONS.
IF ANY OTHER BUSINESS IS PRESENTED AT THE MEETING, THIS PROXY SHALL BE
VOTED IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS.
Dated: , 1998
-----------------------
--------------------------------------
(Please print name)
--------------------------------------
(Signature of Class B Stockholder)
--------------------------------------
(Please print name)
--------------------------------------
(Signature of Stockholder)
Please date this Proxy and sign your
name as it appears on your stock
certificates. (Executors,
administrators, trustees, etc., should
give their full titles. All joint
owners should sign).
I do / / do not / / expect to attend
the Meeting.
Number of Persons:
----------------
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