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:
/ / Preliminary proxy statement
/ / Confidential, for use of the Commission only (as permitted by
Rule 14a-6(e)(2))
/x/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
Chalone Wine Group, Ltd.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Chalone Wine Group, Ltd.
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) or Schedule 14A
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / 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 transactions applies:
- ----------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
- ----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing
fee is calculated and state how it was determined):
- ----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- ----------------------------------------------------------------------------
(5) Total fee paid:
- ----------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing party:
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(4) Date filed:
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<PAGE>
=================================
CHALONE
Wine Group
=================================
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
THE CHALONE WINE GROUP, LTD.
Monday, May 13, 1996
TO ALL SHAREHOLDERS:
PLEASE TAKE NOTICE that the Annual Meeting of Shareholders of THE
CHALONE WINE GROUP, LTD., will be held at the Company's executive offices, 621
Airpark Road, Napa, California 94558-6272, on Monday, May 13, 1996, commencing
at the hour of 10:00 a.m. local time.
Shareholders of record as of the close of business on March 21, 1996,
will be entitled to vote at the meeting and any adjournments thereof.
The meeting will be held for the following purposes:
1. Election of directors for the ensuing year.
2. Ratification of the appointment of the Company's independent
certified public accountants.
3. Consideration and action on any other matter properly brought
before the meeting.
Management's proxy and proxy statement are enclosed.
You are requested to date and sign the enclosed proxy, which is
solicited by the Company's Board of Directors, and to return it promptly in the
envelope which is also enclosed. Shareholders who execute and return proxies
retain the right to revoke them at any time prior to the voting thereof.
By Order of the Board of Directors
/s/ William L. Hamilton
William L. Hamilton
Secretary
Napa, California
April 10, 1996
YOUR VOTE IS IMPORTANT REGARDLESS OF THE NUMBER OF SHARES YOU OWN. WHETHER OR
NOT YOU PLAN TO BE PRESENT AT THE MEETING, PLEASE COMPLETE, DATE, SIGN, AND
RETURN THE ENCLOSED PROXY PROMPTLY.
<PAGE>
=================================
CHALONE
Wine Group
==================================
PROXY STATEMENT
-------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
May 13, 1996
--------------------------------------------
INFORMATION CONCERNING THE SOLICITATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of THE CHALONE WINE GROUP, LTD. (the
"Company"), for the 1996 Annual Meeting of Shareholders, to be held May 13,
1996. The proxies solicited are revocable at any time prior to the voting
thereof. All properly executed proxies received by the Company and not revoked
will be voted as directed or, if no direction is given, will be voted (except
where excluded):
1. For election of management's proposed slate of directors, as
described herein, for the ensuing year.
2. For ratification of the appointment of Deloitte & Touche as the
Company's certified public accountants.
The proxies will also be voted in the discretion of the appointed
proxy-holders on any other matter of business properly brought before the
meeting.
The cost of soliciting proxies in the enclosed form will be borne by
the Company. The Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses incurred in
forwarding solicitation materials to such beneficial owners. Proxies may also be
solicited personally or by telecommunication by one or more of the Company's
directors, officers, and/or employees, at no additional compensation. This Proxy
Statement is first being mailed to shareholders of the Company on or about April
10, 1996.
Pursuant to Section 2.9 of the Company's By-Laws, the record date for
the determination of the shareholders of the Company entitled to vote at the
Annual Meeting has been fixed at March 21, 1996. The Company had outstanding, as
of such record date, a total of 7,590,246 shares of its common stock, its only
class of voting securities. At the Annual Meeting, each shareholder will be
entitled to one vote for each share held on the record date, except that, for
the election of directors, upon request therefor made prior to the commencement
of voting, each shareholder will be accorded cumulative voting rights, under
which (s)he will be entitled to as many votes as equals the number of shares of
stock held, multiplied by the number of directorship positions to be filled
(eleven), all of which votes may be cast for a single candidate or distributed
among any or all of the candidates in such proportions as each shareholder sees
fit.
Any proxy given pursuant to this solicitation may be revoked by a
shareholder prior to the voting at the Annual Meeting by written notice to the
Secretary of the Company, by submission of another proxy bearing a later date,
or upon oral request at the meeting.
Under the Company's By-Laws and the laws of the State of California,
assuming a quorum (3,795,124 shares) is present, the eleven director-nominees
receiving the highest number of affirmative votes of the shares represented and
voting will be elected as directors. All other matters require the affirmative
vote of a majority of the shares represented and voting at the meeting. The
Company will count shares duly represented but abstaining, including broker
non-votes, towards the determination of whether a quorum exists.
1
<PAGE>
ELECTION OF DIRECTORS
In 1995, the Company acquired new equity from two of its largest
shareholders, Domaines Barons de Rothschild (Lafite) ("DBR") and Summus
Financial, Inc. ("Summus"), pursuant to an agreement dated August 22, 1995 (the
"Omnibus Agreement"). The transactions described in the Omnibus Agreement were
approved by the shareholders of the Company at a Special Meeting held on October
25, 1995. Pursuant to the terms of the Omnibus Agreement, the Company increased
the size of its Board from nine to eleven directors, and designees of DBR and
Summus, Yves-Andre Istel and Mark A. Hojel, respectively, were appointed to the
two newly-created Board seats. Summus subsequently transferred its shares of the
Company's common stock to an affiliate, SFI Intermediate Ltd., a Texas limited
partnership ("SFI"), and SFI transferred such shares to another affiliate, Hook
Financial Inc., an exempted company organized under the laws of the Cayman
Islands ("HFI").
In addition to Mr. Istel, DBR currently has two nominees on the Board
of Directors: Eric de Rothschild and Christophe Salin. In addition to Mr. Mark
A. Hojel, HFI currently has one nominee on the Board: Phillip M. Plant. The
Company has undertaken to include the three DBR designees and the two HFI
designees in the slate of nominees for election at the Annual Meeting pursuant
to the terms of a voting agreement between the Company, DBR, Summus, and the
Company's President, Mr. W. Philip Woodward, as more fully described below under
the caption "Voting Agreement."
All of the nominees for election are now serving as directors of the
Company, except for William G. Myers who will be standing for election for the
first time. John A. McQuown, who is currently serving as a director, has decided
that he will not stand for re-election. Richard C. Hojel, a director of the
Company for three years and the president of Summus, passed away on December 15,
1995. On February 5, 1996, Phillip M. Plant was appointed to the vacancy created
upon Richard C. Hojel's death. Phillip M. Plant and Mark A. Hojel are related by
marriage, and Mark A. Hojel is the son of Richard C. Hojel and Phyllis S. Hojel.
Phyllis S. Hojel is president and sole director of HFI.
At the Annual Meeting, directors will be elected to serve until the
1997 Annual Meeting and their successors have been duly elected and qualified.
Each nominee has consented to be named in this proxy statement and has consented
to serve as a director if so elected. The Company has no reason to believe that
any of the nominees will not be available to serve; if however, any nominee
would for any reason become unable or unwilling to serve, the shares represented
by proxies received by the Company will (unless otherwise directed) be voted for
the election of such person as the Board of Directors may recommend, in place of
the unavailable nominee.
The eleven nominees are listed in the following section, together with
summary biographical information.
Director Nominees
Richard H. Graff. Age 59. Mr. Graff served as President and Chief
Executive Officer of the Company from its formation in June of 1969 until
December of 1974, when he relinquished the presidency to Mr. Woodward,
continuing as Chairman of the Board. From December of 1974 through December of
1992 he served as the Company's Chief Operating Officer, with overall
responsibility for the Company's vineyard and winemaking activities. In February
of 1994 he resigned as an employee of the Company, so as to pursue other
interests. He continues as Chairman of the Board and as a part-time consultant
to the Company, on an independent-contractor basis. Mr. Graff is a founder, past
Chairman, and currently Chairman Emeritus of the American Institute of Wine and
Food, and currently serves on the board of The Philharmonia Baroque Orchestra.
He has been a director of the Company since its formation in 1969.
W. Philip Woodward. Age 56. Mr. Woodward joined the Company as Vice
President and Chief Financial Officer in 1972 and in December of 1974 became its
President and Chief Executive Officer. He continued as Chief Financial Officer
until October of 1983. He has overall responsibility for all aspects of the
Company's operations. He is a director of DBR, the Northern Trust Bank of
California, and Hog Island Oyster Company. Mr. Woodward is serving as President
and a director of the Marin Theatre Company. He has been a director of the
Company since 1972.
William L. Hamilton. Age 51. Mr. Hamilton joined the Company as Chief
Financial and Administrative Officer in September of 1985. In November 1986 his
title was changed to Vice President, Finance and Administration, and he was also
appointed Assistant Secretary. In September of 1990, he was appointed Executive
Vice President of the Company, and in 1996 was appointed Secretary of the
Company. He is a trustee of the Marin Community Foundation. He has been a
director of the Company since April of 1986.
2
<PAGE>
C. Richard Kramlich. Age 60. Mr. Kramlich has, since 1978, been
Managing General Partner of New Enterprise Associates, a San Francisco-based
venture capital company. He was a director of Carmenet Vineyard, Inc., from its
inception until its merger into the Company effective January 1, 1984. From that
date until his election as a director he served as an Advisor to the Board. He
is a director of Ascend Communications, Inc., Macromedia, Corp., Neopath, Inc.,
Silicon Graphics, Inc., Syquest Technology, Inc., Graphix Zone, Lunisys, Inc.
and Telebit Corporation. He has been a director since May of 1990, and is a
member of the Executive and Audit Committees.
James H. Niven. Age 53. Since January 1989 Mr. Niven has been President
of Paragon Vineyard Co., Inc., a grape-growing firm located in San Luis Obispo
County, California. Paragon is the Company's joint venture partner in the Edna
Valley Vineyard joint venture. Mr. Niven has, since 1985, been a partner in
Niven & Smith, a San Francisco law firm specializing in real estate matters. Mr.
Niven has been a director of the Company since July of 1993.
Eric de Rothschild. Age 55. Baron Eric de Rothschild has, since 1982,
been a Managing Partner of DBR as well as Chairman of one of DBR's major
shareholders, Paris Orleans, S.A., a French publicly-held company, Chairman of
Francarep, a subsidiary of Paris-Orleans, and Managing Partner of another of
DBR's major shareholders, Chateau Lafite Rothschild. DBR holds a significant
interest in the Company, resulting from cross-purchases of securities in April
of 1989 and September of 1991, through participation in a 1993 private
placement, and through the conversion of its convertible debentures in 1995.
Since 1981, Baron Eric de Rothschild has been a partner in Rothschild & Cie.
Banque, Paris, and is also a director of N.M. Rothschild & Sons, London, and a
director of Rothschild North America, Inc., New York. He has been a director of
the Company since April of 1989, and is a member of the Executive Committee.
Christophe Salin. Age 40. Since January of 1990, Mr. Salin has been
President and a director of DBR, which company he joined in 1985. He is also the
Chairman of Grancru and of Societe de Gestion et d'Assistance Viticole, and a
director of Chateau Rieussec, Societe Financiere Viticole, Domaines Barons de
Rothschild Developpement, Vi-a Los Vascos, and Quinta do Carmo, La Viticole de
Participation, and all affiliated companies of DBR. He has been a director of
the Company since September of 1991, and is the Chairman of the Executive
Committee.
Yves-Andre Istel. Age 60. Since 1993, Mr. Istel has served as the Vice
Chairman of Rothschild Inc., a New York banking firm. Prior to that, from 1988
through 1993, Mr. Istel was Managing Director of Wasserstein Perella & Co.,
Inc., a New York banking firm. He is also the Vice Chairman of Rothschild
Europe, B.V., and Director of Rothschild et Cie. Banque, Paris, France. Mr.
Istel was appointed a director of the Company in November of 1995.
Mark A. Hojel. Age 27. Since September of 1994, Mr. Hojel has been
pursuing a Masters Degree in Business Administration at the Anderson School at
the University of California at Los Angeles. Mr. Hojel was employed as an
Industrial Engineer from January of 1992 through August of 1994 at PGI
International in Houston, Texas. Mr. Hojel was appointed a director of the
Company in November of 1995.
Phillip M. Plant. Age 50. Since 1985, Mr. Plant has served as Senior
Vice-President, Manager, of Rauscher, Pierce, Refsnes, Inc., an investment
banking and brokerage firm. Mr. Plant is an advisory director of the American
National Bank, Corpus Christi, Texas, and a director for Rauscher, Pierce &
Clark, London, England. Mr. Plant was appointed a director of the Company in
February of 1996, and is a member of the Executive Committee.
William G. Myers. Age 68. Since 1962, Mr. Myers has served as Chief
Executive Officer of Ojai Ranch and Investment Company, Inc., which has
agribusiness and investment interests. Mr. Myers currently serves as director of
Security Capital Industrial Trust, Santa Fe, New Mexico, Security Capital
Pacific Trust, El Paso, Texas, S.E.E. International of Santa Barbara,
California, The Library of Congress, James Madison Council, of Washington, D.C.,
California Historical Society Foundation, of San Francisco, California, H.C. and
R.C. Merritt Trusts, of Los Angeles, California, and Idetek, Inc., of Sunnyvale,
California. Mr. Myers has served as a director in the past for Bank of A. Levy,
Oxnard, California, Bradley REIT, Boston, Massachusetts, Oregon Shakespeare
Festival, Ashland, Oregon, Santa Barbara Botanic Garden, Santa Barbara,
California, and Santa Barbara Museum of Art, Santa Barbara, California.
3
<PAGE>
Shareholding Information as to Directors, Director Nominees and Management
The following table sets forth information respecting security
ownership of the Company's no par value common stock, the Company's only class
of voting securities, beneficially owned by each of the Company's directors,
director-nominees, and executive officers, and all directors, director-nominees
and executive officers as a group, as of March 15, 1996.
The persons named in the table have sole voting and investment power
with respect to all shares shown as beneficially owned by them, respectively,
subject to applicable community property laws and to the qualifications
contained in the footnotes to the table.
Name of Share
Title Beneficial Beneficially Percent
of Class Owner Owned of Class
- -------- ----- ----- --------
No par value W. Philip Woodward(1) 410,192 4.3%
common William G. Myers 263,100 2.8%
J.A. McQuown(2) 126,000 1.3%
Richard H. Graff(3) 104,646 1.1%
William L. Hamilton(4) 91,889 1.0%
Larry M. Brooks(5) 49,051 *
C. Richard Kramlich(6) 38,216 *
Robert B. Farver(7) 8,824 *
Christophe Salin(8) 8,010 *
Eric de Rothschild(8) 5,390 *
James H. Niven(9) 2,620 *
Phillip M. Plant 400 *
Yves-Andre Istel 0 *
Mark A. Hojel(10) 0 *
All directors, director-nominees 1,108,338 10.5%
and executive officers as a group
(14 persons)(11)
*Less than 1% ownership.
- ----------------------------------------
(1) Includes 11,043 shares held by Mr. Woodward's wife and 1,577 shares held
by Mr. Woodward's children, as to all of which Mr. Woodward disclaims
beneficial ownership. Includes 22,100 shares held by trusts of which Mr.
Woodward is the beneficiary. Includes 123,500 shares issuable on exercise
of options which are vested or will vest within the next 60 days, warrants
for the purchase of an aggregate of 42,857 shares collectively held by Mr.
Woodward and the aforesaid trusts, and 941 shares in the Company's Profit
Sharing Plan.
(2) Includes 13,510 shares issuable on exercise of options which are vested or
will vest within the next 60 days.
(3) Includes 99,710 shares issuable to Mr. Graff on exercise of options which
are vested or will vest within the next 60 days.
(4) Includes 637 shares held by Mr. Hamilton's wife and 30 shares held by Mr.
Hamilton's children, as to all of which Mr. Hamilton disclaims beneficial
ownership. Includes 95,500 shares issuable to Mr. Hamilton on exercise of
options which are vested or will vest within the next 60 days and an
additional 416 shares similarly issuable to Mrs. Hamilton, as to which
latter Mr. Hamilton disclaims beneficial ownership. Also includes 680
shares in the Company's Profit Sharing Plan.
(5) Includes 43,388 shares issuable to Mr. Brooks on exercise of options which
are vested or will vest within the next 60 days.
(6) Includes 13,510 shares issuable to Mr. Kramlich on exercise of options
which are vested or will vest within the next 60 days.
(7) Includes 6,500 shares issuable to Mr. Farver on exercise of options which
are vested or will vest within the next 60 days.
(8) Consists of shares issuable on exercise of options which are vested or
will vest within the next 60 days. Excludes shares held and acquirable by
DBR, of which Baron de Rothschild is Managing Partner and Mr. Salin is
President, which holdings are set forth in the next section, and as to
which the two individuals named disclaim beneficial ownership.
(9) Consists of shares issuable on exercise of options which are vested or
will vest within the next 60 days. Excludes 10,000 shares held by Paragon
Vineyard Co., Inc., of which Mr. Niven is President, as to which Mr. Niven
disclaims beneficial ownership.
(10) Excludes shares held and acquirable by HFI as set forth in the next
section, as to which Mr. Hojel disclaims beneficial ownership.
(11) Includes 411,638 shares issuable on exercise of options which are vested
or will vest within the next 60 days, warrants for the purchase of 42,857
shares, and 1,621 in the Company's Profit Sharing Plan.
4
<PAGE>
Shareholding By Other Owners of More Than Five Percent
<TABLE>
In addition to the foregoing shareholdings by directors,
director-nominees and management, the Company is aware of two other beneficial
owners of more than 5% of the Company's common stock, the Company's only class
of voting securities, as described in the following table and explanatory
paragraphs. The information disclosed below is based on information furnished by
the holders or contained in filings made with the Securities and Exchange
Commission. The percentage number is based on shares and warrants outstanding on
March 21, 1996:
<CAPTION>
Shares Percent of Class
Title of Class Name of Beneficial Owner Beneficially Owned Beneficially Owned
-------------- ------------------------ ------------------ ------------------
<S> <C> <C> <C>
No par value Domaines Barons de Rothschild (Lafite) 3,871,668 42.7%
common 33 rue de la Baume
75008 Paris, France
Hook Financial Inc. 1,756,919 19.4%
5810 East Skelly Drive, Suite 1000
Tulsa, Oklahoma 74135-6403
</TABLE>
The holding of DBR consists of 3,097,858 shares held outright, and
773,810 shares acquirable on exercise of warrants.
The holding of HFI consists of 1,054,538 shares held outright, and
702,381 shares acquirable on exercise of warrants. HFI and Phyllis S. Hojel
share voting power and the power to dispose or direct the disposition of such
shares.
Committees
Executive Committee. In 1993, the Company established a five-person
Compensation Review Committee, with specific jurisdiction over employment and
compensation matters concerning the Company's senior executive officers.
Subsequently the Committee was redesignated the Executive Committee and its
jurisdiction broadened to encompass matters customarily handled by such
committees. The Committee also assumed the duties of the Company's Compensation
and Benefits Committee, previously held by the prior Executive Compensation
Committee. The Committee's membership currently includes Messrs. Kramlich,
McQuown, Plant, Rothschild and Salin, although as noted above Mr. McQuown will
not be standing for re-election at the Annual Meeting. The Committee met six
times in 1995.
Audit Committee. The Audit Committee, currently comprised of Messrs.
Kramlich and McQuown, concerns itself with the Company's internal accounting
controls as well as meeting and conferring with the Company's certified public
accountants and reviewing the results of their auditing engagement. The
Committee typically meets in March of each year, in conjunction with the annual
audit, and so met in 1995, with both members in attendance. As noted above, Mr.
McQuown will not be standing for re-election at the Annual Meeting.
The Company has no standing nominating committee.
Board Meetings and Compensation
The Company's Board of Directors met seven times during 1995. Each
director attended at least 75% of the aggregate of those meetings and the
meetings of those committees of which he was a member, with the exception of
Messrs. Salin, McQuown, and Rothschild.
Each director who is not an employee of the Company is compensated on
the basis of $500 per year plus $100 for each Board of Directors meeting
attended, plus reimbursement of extraordinary travel costs to attend meetings.
No additional compensation is or has been paid for committee participation or
special assignments.
Non-employee directors also receive quarterly grants of options to
purchase the Company's stock, pursuant to the Company's Non-Discretionary Stock
Option Plan. During 1995, the seven non-employee directors received options
covering a total of 2,060 shares. The exercise price in each instance was the
market value of the stock on the date of grant. The weighted average per-share
exercise price of all such options is $7.74.
5
<PAGE>
Executive Compensation
<TABLE>
The following Table shows compensation paid by the Company for the past
three years to its Chief Executive Officer and each other executive officer of
the Company.
<CAPTION>
Summary Compensation Table
Annual Long Term All Other
Compensation Compensation Compensation
------------ ------------ ------------
Name and
Principal Position Year Salary Bonus Options(1)
- ------------------ ---- ------ ----- -------
<S> <C> <C> <C> <C> <C>
W. Philip Woodward 1995 $121,700 $18,000 10,000 shs. ---
President and Chief 1994 $105,000 --- 10,000 shs. ---
Executive Officer 1993 $124,313 --- 25,000 shs. ---
William L. Hamilton 1995 $105,300 $10,300 2,500 shs. ---
Executive Vice-President 1994 $101,750 --- 10,000 shs. ---
and Chief Financial Officer 1993 $102,732 --- 25,000 shs. ---
Larry M. Brooks 1995 $ 88,333 $ 5,000 10,000 shs. ---
Vice President, Production, and 1994 $ 78,958 $ --- 10,000 shs. ---
Managing Director, Acacia Winery 1993 $ 75,173 $ --- 2,500 shs. ---
Robert B. Farver 1995 $ 85,000 $36,056 --- ---
Vice President, Sales 1994 $ 65,000 $28,675 --- ---
1993 $ 60,000 $15,400 6,500 shs. ---
<FN>
(1) All of the options were incentive stock options, granted pursuant to the
Company's 1987 Stock Option Plan, when initially awarded.
</FN>
</TABLE>
<TABLE>
Option Grants In Fiscal Year 1995
<CAPTION>
Potential Realizable
Percentage of Value at Assumed Annual
Total Options Rates of Stock Price
Granted to Exercise Appreciation for
Options Employees or Expiration Option Term
Name Granted(1) in Fiscal Year Base Price Date ------------
---- ---------- -------------- ---------- ---- 5% 10%
-- ---
<S> <C> <C> <C> <C> <C> <C>
W. Philip Woodward 10,000 shs. 27.6% $6.75/sh. 2/15/05 $42,500 $107,500
William L. Hamilton 2,500 shs. 6.9% $6.75/sh. 2/15/05 $10,625 $ 26,875
Larry M. Brooks 10,000 shs. 27.6% $6.75/sh. 2/15/05 $42,500 $107,500
Robert B. Farver --- --- --- --- ---
<FN>
- -------------------------------
(1) Options are incentive stock options, granted pursuant to the Company's 1987
Stock Option Plan. They became exercisable on February 15, 1996
(2) Potential realizable value is calculated based on an assumption that the
price of the Company's common stock appreciates at the annual rate shown
(5% and 10%), compounded annually, from the date of grant of the option
until the end of the option term (10 years). The value is net of the
exercise price but is not adjusted for the taxes that would be due upon
exercise. The 5% and 10% assumed rates of appreciation are mandated by the
rules of the Securities and Exchange Commission and do not represent the
Company's estimate or projection of future stock prices. Actual gains, if
any, upon future exercise of any of these options will depend on the actual
performance of the Company's common stock and the continued employment of
the executive officer holding the option through its vesting period. At 5%
annual appreciation from $6.75 over a ten-year term, the stock price would
be $11.00. At 10% annual appreciation from $6.75 over a ten-year term, the
stock price would be $17.50.
</FN>
</TABLE>
6
<PAGE>
<TABLE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-The-Money Options
at FY-End at FY-End
Name Shares Acquired Value Execisable/ Exercisable/
---- on Exercise Realized Unexercisable Unexercisable
--------------- -------- ------------- -------------
<S> <C> <C> <C> <C>
W. Philip Woodward --- --- 113,500/ $228,062.50/
10,000 $ 26,250.00
William L. Hamilton --- --- 93,000/ $158,250.00/
2,500 $ 6,562.50
Larry M. Brooks --- --- 33,388/ $ 64,375.00/
10,000 $ 26,250.00
Robert B. Farver --- --- 6,500/ $ 15,437.50/
--- 0
</TABLE>
7
<PAGE>
Performance Graph
The line graph below compares the cumulative total return to holders of
the Company's common stock in the period from January 1, 1990 to December 31,
1995, with the cumulative total return in the same period on (i) the NASDAQ
Stock Market Index (U.S.) and (ii) a peer group index comprised of the following
companies whose returns have been weighted based on market capitalization as of
the beginning of each period for which a return is indicated: Robert Mondavi
Corp., Canandaigua Wine Inc., Adolph Coors Company, Anheuser-Busch Companies,
Inc., Brown-Forman Corporation and Genesee Corporation. The graph assumes an
investment of $100.00 on December 31, 1990 in the Company and in two comparison
indices. "Total return," for purposes of the graph, assumes reinvestment of all
dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG CHALONE WINE GROUP, LTD., THE NASDAQ STOCK MARKET-US INDEX
AND A PEER GROUP
{The following descriptive data is supplied in accordance to with Rule 304(d) of
Regulation S-T}
Cumulative Total Return
------------------------------------------------------
1990 1991 1992 1993 1994 1995
Chalone Wine Group 100 110 79 73 65 106
Peer Group 100 142 140 127 136 181
Nasdaq Stock Market 100 161 187 214 210 297
* $100 invested on 12/31/90 in stock or index including reinvestment of
dividends, fiscal year ending December 31.
The information contained in the performance graph shall not be deemed to be
"soliciting material" or to be "filed" with the SEC, nor shall such information
be incorporated by reference into any future filing under the Securities Act of
1933 or the Securities Exchange Act of 1934 (the "Exchange Act"), except to the
extent that the Company specifically incorporates it by reference into such
filing.
Compensation Committee Interlocks and Insider Participation
Compensation decisions are made by the Executive Committee of the Board
of Directors, whose current members are: Messrs. Kramlich, McQuown, Plant,
Rothschild and Salin. Mr. McQuown will not be standing for re-election at the
Annual Meeting. Baron de Rothschild and Mr. Salin are, respectively, the
Managing Partner and President of DBR. As described above, in 1995 the Company
and DBR entered into the Omnibus Agreement whereby the Company acquired new
equity from DBR and another shareholder of the Company, and the Company and DBR
engaged in certain related transactions which are described in more detail below
under the caption "Certain Relationships and Related Transactions."
8
<PAGE>
Compensation Committee Report on Compensation of Executive Officers
General. The Executive Committee of the Board of Directors (the
"Committee") performs the functions of a compensation committee and administers
the Company's executive compensation program. The Executive Committee is
composed entirely of directors who are not employees of the Company.
The objective of the Company's executive compensation program is to
develop and maintain executive reward programs which (i) contribute to the
enhancement of shareholder value, (ii) are competitive with the pay practices of
other industry-leading companies and (iii) attract, motivate and retain key
executives who are critical to the long-term success of the Company. As
discussed below, the Company's executive compensation program consists of both
fixed (base salary) and variable (incentive) compensation elements. Variable
compensation consists of annual cash incentives and stock option grants under
the Company's 1987 Stock Option Plan ( the "1987 Plan"). These elements are
designed to operate on an integrated basis and together comprise total
compensation value.
The Executive Committee reviews executive compensation in light of the
Company's performance during the fiscal year. In reviewing the Company's
performance during 1995, the Committee considered a variety of factors. Sales
increased by 22% for the year, the highest level achieved in the Company's
history. Profits increased to a record $207,000 for the year as compared to a
break-even 1994. In addition, the Company completed a transaction whereby it
acquired substantial new equity from two of its shareholders, as more fully
described below under the caption "Certain Relationships and Related
Transactions." In reviewing Company performance, the Committee considered these
factors as a whole without assigning specific weights to particular factors.
Base Salary. Base salary levels for the Company's executives are
determined by the Committee based on factors such as individual performance
(e.g., leadership, level of responsibility, management skills and industry
activities), and Company performance (as discussed above). For 1995, base
salaries for the named executive officers, including that of the Chief Executive
Officer, were established as above.
Annual Cash Incentives. The annual cash incentive is designed to
provide a short-term (one-year) incentive. The Company does not adhere to any
firmly established formulas for the award of annual cash incentives. Rather,
incentive awards are based on the achievement of corporate and individual
performance for the year, including subjective factors. The Summary Compensation
Table shows annual cash incentives paid to the named executive officers,
including the CEO, for 1995, 1994 and 1993.
Stock Options. Stock options are designed to provide long-term
incentives and rewards tied to the price of the Company's common stock. Given
the fluctuations of the stock market, stock price performance and financial
performance are not always consistent. The Committee believes that stock
options, which provide value to participants only when the Company's
shareholders benefit from stock price appreciation, are an important component
of the Company's executive compensation program. The number of options or shares
of stock currently held by an executive is not a factor in determining
individual grants, and the Committee has not established any target level of
ownership of Company common stock by the Company's executives. However,
retention of shares of Company stock by executives is encouraged.
The Company does not adhere to any firmly established formulas for the
issuance of options. The Summary Compensation Table shows the options granted to
the named executive officers for the past three years, including the CEO. In
determining the size of the grants to the CEO and the other named executive
officers, the Committee assessed relative levels of responsibility and the
long-term incentive practices of other comparable companies.
In accordance with the provisions of the 1987 Plan, the exercise price
of all options granted was equal to the market value of the underlying common
stock on the date of grant. Accordingly, the value of these grants to the
officers is dependent solely upon the future growth and share value of the
Company's common stock.
The foregoing report is given by the members of the Executive
Committee, namely:
C. Richard Kramlich
John A. McQuown
Phillip M. Plant
Eric de Rothschild
Christophe Salin
9
<PAGE>
Voting Agreement
In 1995, DBR, Summus and Mr. Woodward entered into a voting agreement
which provides that they will vote their shares (and use their best efforts to
have certain others vote their shares) in favor of the other signatories'
designees to the Company's Board of Directors, including the nomination of such
designees for directorship positions. The agreement provides for a signatory's
right to designate one or more nominees, according to the percentage of total
shares outstanding then held by the particular signatory, as follows: 26% or
greater, three designees; 12%-26%, two designees; and 5%-12%, one designee. The
agreement has a five-year term and supersedes a prior 1993 voting agreement
among the parties and certain other directors and officers of the Company.
Certain Relationships and Related Transactions
Mr. Niven is the President of Paragon Vineyard Co., Inc. ("Paragon"),
the Company's joint venture partner in the Edna Valley Vineyard Joint Venture.
In 1991, the Company and Paragon entered into a set of agreements to convert the
Joint Venture into a "permanent partnership" of unlimited duration. A
significant element of the transaction was the purchase by the Company of an
option for $1,017,174 (with $175,439 remaining due in annual installments
through 1997) which gives the Company the right to convert the limited-term
venture into a permanent relationship upon final payments to Paragon of $200,000
in 1998 and 1999 and $4,500,000 in 2000. The Company continued as the Managing
Joint Venture Partner. Paragon also receives and will receive, annually,
significant sums as the provider of grapes to the Joint Venture pursuant to a
grape purchase contract between the Joint Venture and Paragon, and additional
sums by reason of Paragon's provision of white-wine grapes to the Company's
Carmenet Vineyard facility. In 1995, grape-purchase payments to Paragon amounted
to approximately $1,144,700 from the Joint Venture and $73,800 from the Company
for Carmenet Vineyard. Paragon leases to Edna Valley Vineyard the land on which
the winery is located at an annual fee of $10,240 with adjustments to the fees
every three years. In 1995, the Company advanced $500,000 to Paragon pursuant to
an understanding relating to a short crop at the Edna Valley Vineyard.
Certain directors and nominees have relationships with DBR, Summus, and
Summus' affiliate, HFI. Baron de Rothschild and Mr. Salin are, respectively, the
Managing Partner and President of DBR, and Mr. Istel is a director of certain
affiliates of DBR. Mr. Mark A. Hojel is the son of deceased director Richard C.
Hojel and Phyllis S. Hojel. Richard C. Hojel was a director of the Company for
three years and the president of Summus. Phyllis S. Hojel is the president and
sole director of Summus' affiliate, HFI. Mr. Plant has served as a financial
advisor to the Hojel family and is related to the Hojel family by marriage. On
April 26, 1995, the Company reached agreement in principle with DBR and Summus
for the infusion of new equity into the Company and a restructuring of the
Company's operational relationship with DBR and its affiliated group of
companies, which agreement was formalized in the Omnibus Agreement. On October
25, 1995, the transaction was approved at a Special Meeting of the Shareholders.
The principal terms of the Agreement may be summarized as follows:
1. DBR converted its $12.4 million principal amount of the Company's
convertible debentures, at a conversion price of $7.00, into 1,769,143 shares of
common stock.
2. The Company received a total of $4.5 million, net of expenses, in
cash, contributed in equal amounts of $2.5 million by DBR and Summus, in return
for the issuance to each of 416,667 units, each unit consisting of one share of
common stock and one warrant for the purchase of one share of common stock, at a
per-unit price of $6.00. The warrants, which have a five-year term, are
exercisable at $8.00/share.
3. The Company exchanged essentially all of its existing ownership in
DBR for a 23.5% interest in Chateau Duhart-Milon, a Bordeaux wine-producing
estate located in Pauillac, France, and an affiliated company of DBR. The effect
of this element of the overall transaction was to convert an essentially passive
11.3% interest in DBR into an interest in an active, operating vineyard and
winery operation.
4. The Company retained one share of stock in DBR and will continue to
hold one seat on DBR's board of directors (Conseil de Surveillance), with the
Company's President continuing to fill that seat. DBR will review the Company's
nomination to that seat on an annual basis.
5. The Company's Board of Directors was increased from nine to eleven
positions, with DBR and Summus each given the right to designate a nominee to
one of the newly created positions. As described above, Mr. Istel and Mr. Mark
A. Hojel were appointed to the two newly-created Board seats.
6. DBR was released from its existing "standstill" restriction on
increasing its ownership position in the Company, but with a commitment not to
increase that position to over 49.9% of total shares outstanding, on a fully
diluted basis, through December 31, 1999.
10
<PAGE>
As a result of the investment in the Company by DBR, the Company
receives an allocation of the wines of DBR, including the wines of Chateau
Lafite-Rothschild and Duhart-Milon, to sell primarily to the Company's
shareholders.
The Company pays approximately $65,000 annually to director Richard H.
Graff in connection with consulting services provided to the Company. As of
December 31, 1995, Mr. Graff owed $85,426 to the Company for processing of wines
for the Richard Graff Vineyard, his own winemaking venture, which amount bears
interest at a rate of 8.31%.
On February 28, 1996, Director and Chief Financial Officer William L.
Hamilton paid to the Company all remaining amounts due pursuant to a loan by the
Company to Mr. Hamilton in the principal amount of $96,666.
In the judgment of the Company, all material transactions between the
Company and its directors, officers and principal shareholders, and their
affiliates, have been made on terms no less favorable to the Company than could
have been obtained from unaffiliated third parties.
Compliance with Section 16(a) of the Securities and Exchange Act of 1934
The Company's executive officers, directors and
greater-than-ten-percent beneficial owners are required under Section 16(a) of
the Exchange Act to file reports of ownership and changes in ownership with the
SEC. Copies of those reports must also be furnished to the Company.
Based on review of copies of filings received by it, the Company
believes that during fiscal year 1995 all filing requirements applicable to the
Company's officers, directors and greater-than-ten-percent beneficial owners
under Section 16(a) of the Exchange Act were complied with, except that two of
the Company's executive officers, Larry M. Brooks and Robert B. Farver,
inadvertently failed to file the required report upon achieving the status of
executive officers during 1995, and Mr. Brooks inadvertently failed to file a
report upon receiving a grant of options in 1995.
11
<PAGE>
RATIFICATION OF APPOINTMENT OF CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors has reappointed Deloitte & Touche LLP as the
Company's independent certified public accountants. Deloitte & Touche and its
constituent predecessor, Touche Ross & Co., have been the Company's certified
public accountants since 1986.
Although not required by California law, the Company makes a practice
of seeking shareholder ratification of the appointment of the Company's
auditors, at each annual meeting. In the event the necessary vote is not
obtained, the matter will be returned to the Board of Directors for
consideration of alternatives.
Representatives of Deloitte & Touche are expected to be in attendance
at the Annual Meeting, with the opportunity to make a statement if they so
desire and to be available to answer shareholders' questions.
OTHER MATTERS
The Company does not know of any matter other than those discussed in
the foregoing materials contemplated for action at the Annual Meeting. Should
any other matter be properly brought before the Meeting, the holders of the
proxies herein solicited will vote thereon in their discretion.
FINANCIAL STATEMENTS
Shareholders should refer to the Consolidated Financial Statements and
Supplemental Data, Management's Discussion and Analysis, and Selected Financial
Data set forth in the Company's Annual Report on Form 10-K, concurrently being
provided, which financial statements are incorporated herein by reference.
SUBMISSION OF SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any proposal which a shareholder wishes to have presented at the 1997
Annual Meeting and included in the Company's proxy statement for such meeting
must be received by the Company, at its principal executive office, 621 Airpark
Road, Napa, California 94558-6272, no later than December 10, 1996. Proposals
should be addressed to the attention of Mr. William L. Hamilton, Executive Vice
President.
April 10, 1996 By Order of the Board of Directors
/s/ William L. Hamilton
William L. Hamilton
Secretary
A COPY OF THE COMPANY'S MOST CURRENT ANNUAL REPORT ON FORM 10-K (LESS EXHIBITS)
IS CONCURRENTLY BEING PROVIDED TO EACH SHAREHOLDER AS THE COMPANY'S ANNUAL
REPORT TO SHAREHOLDERS.
12
<PAGE>
APPENDIX A
THE CHALONE WINE GROUP, LTD.
P
R PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
O
X For Annual Meeting of Shareholders, May 13, 1995
Y
KNOW ALL MEN BY THESE PRESENTS that the undersigned, shareholder(s) of
THE CHALONE WINE GROUP, LTD. do(es) hereby appoint W. PHILIP WOODWARD and
WILLIAM L. HAMILTON, and each of them, proxies, each with full power of
substitution, for and in the name and stead of the undersigned at the Annual
Meeting of Shareholders of THE CHALONE WINE GROUP, LTD., to be held on May 13,
1996, and at any and all adjournments thereof, to vote all shares of capital
stock held by the undersigned, with all powers that the undersigned would
possess if personally present, on each of the matters referred to herein.
This proxy, when properly executed, will be voted in the manner
directed by the undersigned shareholder(s). If no direction is made, this proxy
will be voted FOR the election of the nominees for director named in item 1 and
FOR item 2. It will also be voted in the discretion of the proxyholders on any
other matter of business properly coming before the Meeting. In the event that
any nominee for director is unable or declines to serve as a director, this
Proxy will be voted for any nominee who shall be designated by the Board of
Directors.
SEE REVERSE
SIDE
(Continued and to be signed on reverse side)
O-B-V-E-R-S-E
<PAGE>
<TABLE>
[ X ] Plese mark
votes as in
this example
<CAPTION>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING:
<S> <C>
1. ELECTION OF DIRECTORS: 2. Ratification of appointment FOR AGAINST ABSTAIN
Nominees: Richard H. Graff, W. Philip Woodward, of Deloitte & Touche LLP as [ ] [ ] [ ]
William L. Hamilton, C. Richard Kramlich, James H. the Company's certified
Niven, Eric de Rothschild, Christophe Salin, Yves- public accountants.
Andre Istel, Mark A. Hojel, Phillip M. Plant, William
G. Myers
FOR the nominees listed WITHHOLD authority to PLEASE PROMPTLY MARK, SIGN MARK HERE FOR
[ ] above (except as [ ] vote for all Nominees DATE AND RETURN THIS PROXY ADDRESS CHANGE [ ]
marked to the contrary listed above. IN THE ENVELOPE PROVIDED. AND NOTE AT
below). LEFT
To withhold authority to vote for any individual Nominee, This proxy revokes any and all other proxies heretofore
write that Nominee's name in the space provided below: given by the undersigned.
Please sign exactly as name appears hereon. When shares are
- ---------------------------------------------------------- held by joint tenants, both should sign. When signing as
attorney, executor, administrator, trustee, guardian or in a
fiduciary capacity, please give full title as such. If a
corporation, please sign in full corporate name by
President or authorized person. If a partnership, please
sign in partnership's name by authorized person.
Signature: Date:
------------------------------ ---------
Signature: Date:
------------------------------ ---------
(if held jointly)
</TABLE>
R-E-V-E-R-S-E
