FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: May 9, 1995
THE CHALONE WINE GROUP, LTD.
Incorporated under the laws of Commission File IRS Employer Identification
the State of California Number: 0-13406 Number: 94-1696731
Principal Executive Offices:
621 Airpark Road
Napa, CA 94558
Telephone: (707) 254-4200
<PAGE>
Item 5: Other Events.
On April 26, 1995, The Chalone Wine Group, Ltd. (the "Company"),
reached agreement in principle with its two largest shareholders, Domaines
Barons de Rothschild (Lafite) ("DBR") and Summus Financial, Inc. ("Summus"), for
the infusion of substantial new equity into the Company and a restructuring of
the Company's operational relationship with DBR. The agreement, which is subject
to the achievement and execution of definitive agreements and the approval of
the Company's shareholders, is memorialized in a certain "Summary of Terms," a
copy of which is attached hereto as Exhibit 1 and incorporated herein by
reference.
In summary, the agreement involves the following major points:
1. The Company will offer to all of the holders of its outstanding 5%
Convertible Subordinated Debentures Due 1999, in total face amount of
$20,884,000, the right to convert those Debentures into shares of the Company's
no par value common stock at a conversion price of $7.00. DBR has agreed so to
convert its Debentures, totalling $12,384,000, thus receiving 1,769,143 shares
of common stock.
2. DBR and Summus will each contribute the sum of $2,500,002 in new
equity to the Company, for the purchase of shares of common stock at a per-share
price of $6.00, thus each receiving 416,667 shares of such stock. Additionally,
each will receive warrants for the purchase of an additional 416,667 shares, at
a unit price of $8.00.
3. The Company will exchange 13,983 "ordinary shares" of stock of DBR,
of the total 13,984 of such shares currently held by the Company, for a 23.5%
partnership interest in Chateau Duhart-Milon, a subsidiary of DBR. The Company
will continue to hold one "ordinary share" of DBR stock and will continue to
have the right to nominate one director of DBR.
4. The Company's Board of Directors will be increased in size from the
current nine to eleven members. DBR and Summus, which currently have two and one
designee(s), respectively, on the Company's Board, will each receive the right
to nominate an additional director to one of the newly created seats.
5. The existing "standstill agreement," by which DBR is restricted in
its ability to acquire equity in the Company absent the Company's
contemporaneous consent, will be terminated, with DBR agreeing not to increase
its aggregate holding of the Company's stock above 49.9%, on a fully diluted
basis, through December 31, 1999.
<PAGE>
Item 7: Financial Statements and Exhibits.
(a) Financial statements.
Financial statements pertaining to the Chateau Duhart-Milon
element of the transaction will be filed within sixty days of this filing.
(c) Exhibits.
1. "Summary of Terms," dated April 26, 1995.
2. Press release, dated April 27, 1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereto duly authorized.
Dated: May 9, 1995.
THE CHALONE WINE GROUP, LTD.
By: /s/ William L. Hamilton
William L. Hamilton
Executive Vice President and
Chief Financial Officer
Summary of Terms
Proposed Transaction Between
The Chalone Wine Group, Ltd. ("Chalone") and
Les Domaines Barons de Rothschild (Lafite) ("DBR")
Conversion of debentures: Offer by Chalone to convert all of its $20,884,000
of convertible debentures into common stock of
$7.00 per share, with DBR agreeing to convert the
$12,394,000 of convertible debentures that it
holds. DBR will receive 1,759,143 shares of
Chalone common stock upon conversion.
Sale of equity: Sale by Chalone of $2,800,000 of new common stock
to each of DBR and Summus Financial, Inc.
("Summus") at $6.00 per share and issuance of one
warrant to purchase one share of common stock at
$8.00 per share for each share for each new share
purchased. DBR and Summus will each receive
416,667 shares of common stock and 416,667
warrants.
Exchange of DBR interest: Contribution by Chalone of nearly its entire
interest in DBR (12,983 shares) to Chateau
Duhart-Milon ("D-M") in exchange for a 23.5%
interest in D-M. Chalone will retain a nominal
interst (one share) in DBR and maintain the right
to nominate one director to the DBR board.
As an equity holder in D-M, Chalone is deemed to
be a general partner and is entitled to receive
its pro rata portion of D-M's earnings and
distributions. Chalone also receives the right to
participate in any increases in capital of D-M on
a pro rata basis.
D-M sale of DBR shares: Sale by D-M of the 13,983 shares of DBR
contributed to D-M by Chalone for not less than
FF58,685,000 in cash on or before December 31,
1995.
Standstill: Termination of the existing standstill agreement
between Chalone and DBR and agreement by DBR
through December 31, 1999 not to increase its
aggregate holdings of Chalone common stock to over
49.9% of the fully diluted shares outstanding. To
be accomplished through either modification of the
existing shareholders' agreement or creation of a
new shareholders' agreement.
EXHIBIT 1
<PAGE>
Summary of Terms
Proposed Transaction Between
The Chalone Wine Group, Ltd. ("Chalone") and
Les Domaines Barons de Rothschild (Lafite) ("DBR") (cont'd)
Board representation: Increase in the number of directors from nine to
eleven. Of the eleven, three directors will be
nominated by DBR and two directors will be
nominated by Summus.
Shareholder vote: Shareholders to vote at special meeting to be
scheduled as soon as practically possible.
D-M financials: D-M financial records and statements to be subject
to maintenance and audit as required to meet SEC
reporting requirements. Any costs associated with
such requirements, to the extent these costs are
in excess of D-M's normal cost of maintaining
auditing its financial statements, will be the
responsibility of Chalone.
Fairness opinion: Chalone's receipt of a fairness opinion is a
condition to the completion of the transaction as
contemplated above.
Interest on debentures: Interest on the Chalone debentures held by DBR
will accrue until the closing of the transaction
when the debentures are converted to common stock.
Dividend on DBR stock: Chalone is entitled to the entire 1994 dividend on
the DBR shares it now holds. These dividends are
scheduled to be paid in June or July 1995.
D-M partnership distribution: Chalone will receive 23.5% of the entire 1995
distributions from D-M, it being the parties'
intention that D-M will distribute 100% of its
earnings for the year, according to French
accounting standards. (Chalone's reported earnings
on its D-M interest, for G.A.A.P. purposes, will
commence effective with the closing.) Future
distributions will be determined by the partners
of D-M as appropriate.
-2-
<PAGE>
Summary of Terms
Proposed Transaction Between
The Chalone Wine Group, Ltd. ("Chalone") and
Les Domaines Barons de Rothschild (Lafite) ("DBR") (cont'd)
Timing: Chalone and DBR shall use their respective best
efforts to negotiate, sign and close the proposed
transaction as soon as possible. Chalone and DBR
agree to cooperate in the preparation of all
filings and other materials necessary to
consummate the proposed transaction.
Not binding: This document is not intended as a binding
agreement. Definitive documents will refelect the
final terms binding on the parties.
Confirmed and Agreed to: Confirmed and Agreed to:
/s/ W. Philip Woodward /s/ Eric de Rothschild
- ------------------------ ------------------------
The Chalone Wine Group, Ltd. Les Domaines Barons de Rothschild (Lafite)
By: W. Philip Woodward By: Eric de Rothschild
Title: President Title: Gerant
Date: April 26, 1995 Date: 26/4/95
-3-
EXHIBIT 2
FOR IMMEDIATE RELEASE
CHALONE WINE GROUP TO OBTAIN NEW EQUITY
AND ACQUIRE OWNERSHIP IN CHATEAU DUHART-MILON
NAPA, CALIFORNIA, APRIL 27, 1995 - The Board of Directors of The
Chalone Wine Group, Ltd. (NASDAQ: CHLN) has reached an agreement with two of its
largest shareholders, Domaines Barons de Rothschild (Lafite) ("DBR") and Summus
Financial, Inc., to substantially increase its equity base.
Subject to the successful conclusion of definitive agreements and
approval by Chalone's shareholders, Chalone will receive equity of $5 million at
$6.00 per share provided equally by DBR and Summus. DBR and Summus will also
receive an equivalent number of warrants to purchase additional shares at $8.00
per share. In addition, DBR has agreed to convert its $12.4 million holding of
debentures, at $7.00 per share, into 1.77 million shares of Chalone common
stock. All other holders of the remaining outstanding debentures will be offered
the same conversion terms.
The Company will use the proceeds to pay down its bank lines of credit.
Along with the conversion of DBR's debentures, the resulting annual interest
savings will be over $1 million. Chalone's shareholder equity will increase from
$24 million to a minimum of $41 million.
Chalone will exchange substantially all of its existing ownership in
DBR for a 23.5% partnership interest in Chateau Duhart-Milon, a classified
fourth growth Bordeaux estate in Pauillac. DBR will continue as the managing
partner.
Also as part of the agreement, Chalone will increase its Board of
Directors from nine to eleven members. DBR and Summus will each receive the
right to designate a nominee for one of the two new seats. Philip Woodward,
Chalone's President and CEO, will remain on the Board of Directors of DBR.
"These positive changes in Chalone's balance sheet and in its vineyard
portfolio will allow the Company to be in a stronger position to take advantage
of future opportunities," commented Mr. Woodward.
The Chalone Wine Group is a Napa-based company that produces, markets
and sells premium white and red varietal table wines. The company owns and
operates Chalone Vineyard in Monterey County, Acacia Winery in the Carneros
District of Napa County, Carmenet Vineyard in Sonoma County; in conjunction with
its joint-venture partner, Paragon Vineyard Co., owns and operates Edna Valley
Vineyard in San Luis Obispo County; and owns a 50% interest in Canoe Ridge
Vineyard and a 51% interest in Canoe Ridge Winery, both in Washington State.
Additionally, Chalone has a cross-investment and marketing alliance with
Domaines Barons de Rothschild (Lafite)(DBR), owners of the Bordeaux estates of
Chateau Duhart-Milon, Chateau Rieussec, Chateau L'Evangile and general manager
of Chateau Lafite-Rothschild. DBR also has wine-making interests in Chile (Vina
Los Vascos) and Portugal (Quinta do Carmo).
CONTACT: William L. Hamilton, Executive Vice President, (707) 254-4220
