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 statment
/ / Definitive additional materials
/ / Soliciting material pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12
CHALONE WINE GROUP
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(Name of Registrant as Specified in Its Charter)
CHALONE WINE GROUP
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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/ $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:
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(2) Aggregate number of securities to which transactions applies:
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(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):
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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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(4) Date filed:
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CHALONE
Wine Group
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
OF
THE CHALONE WINE GROUP, LTD.
Thursday, May 18, 1995
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, on Thursday, May 18, 1995, commencing at the
hour of 10:00 a.m.
Shareholders of record as of the close of business on March 20, 1995,
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. Amendment to the Company's Articles of Incorporation to increase
the authorized numbers of shares from 10 million to 15 million.
3. Ratification of the appointment of the Company's independent
certified public accountants.
4. 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
F. Conger Fawcett
Secretary
Napa, California
, 1995
- --------
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.
CHALONE
Wine Group
PROXY STATEMENT
-------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
May 18, 1995
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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 1995 Annual Meeting of Shareholders, to be held May 18, 1995.
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 amendment to the Company's Articles of Incorporation to
increase the authorized number of shares from 10 million to 15
million.
3. 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 another of the Company's
directors, officers, and/or employees, at no additional compensation.
Pursuant to Section 2.7 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 20, 1995. The Company had outstanding, as
of such record date, a total of 4,961,388 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
(nine), 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 (2,480,695 shares) is present, the nine director-nominees
receiving the highest number of affirmative votes of the shares represented and
voting will be elected as directors. The second matter requires for adoption the
affirmative vote of a majority of the shares outstanding and entitled to vote.
The final matter requires 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.
ELECTION OF DIRECTORS
The Company currently has nine directors. All were elected at the last
Annual Meeting. All nine directorship positions are to be voted upon at the
Annual Meeting, for directors to serve until the 1996 Annual Meeting and until
their successors have been duly elected and qualified.
The nine nominees are listed in the following section, together with
summary biographical information. 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 should 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 other person
as the Board of Directors may recommend, in place of the unavailable nominee.
DIRECTOR NOMINEES
Richard H. Graff. Age 58. 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, the better to pursue other,
increasingly time-consumptive 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 Domaines Barons de Rothschild (Lafite)
("DBR"), in which the Company holds an interest, a director of the Northern
Trust Bank of California, and President and a director of the Marin Theatre
Company.
William L. Hamilton. Age 50. Mr. Hamilton joined the Company as Chief
Financial and Administrative Officer in September of 1985. In November of 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. He is a trustee of the Marin Community
Foundation. He has been a director of the Company since April of 1986.
Richard C. Hojel. Age 55. Since 1974 Mr. Hojel has been a private
investor and a management consultant to numerous entities in which he owns an
interest. He has been Chairman of HM International, Inc., a private management
company, since 1979, and of Corporacion Frigus-Therme since 1975. He is a
director of and principal investor in the Monte Xanic Winery, located in
Ensenada, Baja California, Mexico. He is also a director of two publicly-held
Mexican companies, Q-Tel and Banca Quadrum. He has been a director of the
Company since March of 1993, and is Chairman of the Company's Executive
Committee.
C. Richard Kramlich. Age 59. 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, Inc.; Neopath, Inc.;
Sierra Monitor Corporation; Silicon Graphics, Inc.; Syquest Technologies, Inc.;
and Telebit Corporation. He has been a director since May of 1990, and is a
member of the Executive and Audit Committees.
J.A. McQuown. Age 60. Since 1974 Mr. McQuown has been a consultant to
banks and other financial institutions, and participated in the formation of
several new financial service ventures. He co-founded Dimensional Fund Advisors
in 1981, Diversified Corporate Loans in 1986, and Kealhofer, McQuown, Vasicek in
1989. He is also a director of Mortgage Information Corporation and MicroSource,
Inc. He has been a director of the Company since June of 1972, and is a member
of the Executive and Audit Committees. Mr. McQuown and Mr. Woodward are
brothers-in-law.
James H. Niven. Age 52. 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 was appointed a director of the Company in July of 1993.
2.
Eric de Rothschild. Age 54. Baron Eric de Rothschild has, since 1982,
+been Managing Director of Domaines Barons de Rothschild (Lafite) ("DBR"), as
well as President and a director of one of DBR's major shareholders, Paris
Orleans, S.A., a French publicly-held company, 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, and through participation in the 1993 private
placement. Since 1981, Baron 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 39. 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, Vina Los Vascos, and Quinta do Carmo, all affiliated
companies of DBR. He has been a director of the Company since September of 1991,
and is a member of the Executive Committee.
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, executive officers, and all
directors/director-nominees and executive officers as a group, as of March 15,
1995.
3.
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 SHARES
TITLE OF BENEFICIAL BENEFICIALLY PERCENT OF
CLASS OWNER OWNED CLASS
-------- ---------- --------- ------
No par Richard C. Hojel 1 925,205 17.6%
value W. Philip Woodward 2 434,965 8.5%
common J. A. McQuown 3 232,530 4.7%
Richard H. Graff 4 159,391 3.2%
William L. Hamilton 5 106,024 2.1%
C. Richard Kramlich 3 36,716 *
Christophe Salin 6 6,210 *
Eric de Rothschild 6 3,590 *
James H. Niven 7 820 *
All directors/director-nominees and
executive officers as a group
(9 persons) 8 1,905,481 33.8%
* Less than 1% ownership.
- --------
1 Consists of 637,871 shares held by Summus Financial, Inc., an affiliate of
Mr. Hojel, warrants for the purchase of an additional 285,714 shares, also
held by Summus, and 1,620 shares issuable to Mr. Hojel personally on exercise
of options which are vested or will vest within the next 60 days.
2 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 103,500 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.
3 Includes 11,710 shares issuable on exercise of options which are vested or
will vest within the next 60 days.
4 Includes 102,910 shares issuable on exercise of options which are vested or
will vest within the next 60 days.
5 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 99,666 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.
6 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 Domaines
Barons de Rothschild (Lafite), of which Baron de Rothschild is Managing
Director 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.
7 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.
8 Includes 341,716 shares issuable on exercise of options which are vested or
will vest within the next 60 days, warrants for the purchase of 328,571
shares, and 1,621 shares in the Company's Profit Sharing Plan.
4.
SHAREHOLDING BY OTHER OWNERS OF MORE THAN FIVE PERCENT
In addition to the foregoing shareholdings by management, the Company
is aware of one other beneficial owner 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 paragraph The percentage number is based on
shares outstanding on March 15, 1995, and assumes that only the prospective
dilutive events of the listed Owner occur:
PERCENT OF PERCENT OF
SHARES SHARES CLASS CLASS
CURRENTLY BENEFICIALLY CURRENTLY BENEFICIALLY
TITLE OF CLASS NAME OF BENEFICIAL OWNER OWNED OWNED OWNED OWNED
- -------------- -------------------------------------- ---------- ------------ --------- ------------
No par value Domaines Barons de Rothschild (Lafite) 912,048 2,504,386 18.4% 38.2%
common 33 rue de la Baume
75008 Paris, France
The holding of Domaines Barons de Rothschild (Lafite) consists of
912,048 shares held outright, 1,235,195 shares acquirable on exercise of
convertible debentures, and 357,143 shares acquirable on exercise of the
warrants purchased in the 1993 private-placement transaction. The debentures
were issued in two exchanges of securities with the Company, in April of 1989
and September of 1991; the number of shares issuable on conversion increased by
152,529 shares as a result of the 1993 private placement, and by an additional
50,666 shares as a result of the 1994 private placement, by virtue of an
anti-dilution provision in the debentures.
COMMITTEES
Executive Committee. In the 1993 private placement transaction, there
was 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 includes Mr. Hojel,
as Chairman, and Messrs. Kramlich, McQuown, Rothschild and Salin. The Committee
met five times in 1994.
Audit Committee. The Audit Committee, 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
1994, with both members in attendance.
The Company has no standing nominating committee.
BOARD MEETINGS
The Company's Board of Directors met seven times during 1994. Each
director-nominee attended at least 75% of the aggregate of those meetings and
meetings of committees of which he was a member with the exception of the Baron
de Rothschild.
EXECUTIVE COMPENSATION
The following Summary Compensation Table shows compensation paid by the
Company to its Chief Executive Officer and its Executive Vice President for
fiscal years 1994, 1993, and 1992, and to its Chairman of the Board for the
first two of those years. Effective January 1, 1994, the Chairman ceased to be
an employee of the Company. The Company has no other executive officers.
5.
SUMMARY COMPENSATION TABLE*
ANNUAL LONG TERM
COMPENSATION COMPENSATION
------------ ------------
NAME AND ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS1 COMPENSATION
- ------------------ ---- ------ ----- -------- ------------
W. Philip Woodward 1994 $105,000 --- 10,000 shs. ---
President and Chief 1993 124,313 --- 25,000 shs. ---
Executive Officer 1992 139,432 --- 12,000 shs. ---
William L. Hamilton 1994 $101,750 --- 10,000 shs. ---
Executive Vice-President 1993 102,732 --- 25,000 shs. ---
and Chief Financial Officer 1992 109,400 --- 12,000 shs. ---
Richard H. Graff 1993 $117,150 --- 25,000 shs. ---
Chairman of the Board 1992 132,000 --- 12,000 shs. ---
OPTION GRANTS IN FISCAL YEAR 1994
PERCENTAGE OF
TOTAL OPTIONS EXERCISE
OPTIONS GRANTED TO EMPLOYEES OR EXPIRATION
NAME GRANTED2 IN FISCAL YEAR BASE PRICE DATE
---- -------- -------------------- --------------- ---------
W. Philip Woodward 10,000 shs. 25.0% $5.00/sh. 4/10/04
William L. Hamilton 10,000 shs. 25.0% $5.00/sh. 4/10/04
<FN>
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* The Company is a small business issuer, within the meaning of Regulation S-B,
with annual revenues of less than $25,000,000 ($21,132,053 in 1994) and a
public float of its securities on December 31, 1994, of $17,041,816.
1 All of the options were incentive stock options, granted pursuant to the
Company's 1987 Stock Option Plan, when initially awarded. Mr. Graff's options
lapsed, according to the Plan's terms, following his resignation as an
employee. The lapsed options were subsequently replaced by an award of
non-Plan, non-statutory options, otherwise containing essentially identical
terms to the original grants.
2 Options are incentive stock options, granted pursuant to the Company's 1987
Stock Option Plan. They will vest and become exercisable on 1/1/96.
6.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS AT
AT FY-END FY-END
SHARES
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- -------- -------- ------------- -------------
W. Philip Woodward --- --- 78,500/ $3,000/
35,000 $7,500
William L. Hamilton --- --- 74,666/ $1,250/
35,000 $7,500
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE OF CONTROL
ARRANGEMENTS
None; not applicable.
COMPENSATION OF DIRECTORS
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 1994 each of the seven non-employee directors received
options covering a total of 1,760 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 $5.77.
VOTING AGREEMENT
As a part of the 1993 private placement, DBR, Mr. Hojel and Summus
Financial, directors Graff and McQuown and the Company's two executive officers,
directors Woodward and Hamilton, entered into a voting agreement whereby the
parties have agreed to vote their shares and any shares over which they exercise
voting control for the term of the agreement, to the extent legally permitted:
(i) for election as directors of the Company of two designees of DBR (so long as
DBR holds stock or securities exercisable for or convertible into stock equal to
at least 25.34% of the Company's stock then outstanding, on a fully diluted
basis), one designee of Summus (so long as Summus and/or Mr. Hojel hold(s) stock
or securities exercisable for or convertible into stock equal to at least 8.25%
of the Company's stock then outstanding, on a fully diluted basis) and two
designees of Mr. Woodward and Mr. McQuown (so long as Mr. Woodward and/or Mr.
McQuown hold(s) stock or securities exercisable for or convertible into stock
equal to at least 6.14% of the Company's stock then outstanding, on a fully
diluted basis), and (ii) so long as DBR and Summus hold no less than the
above-stated percentages of the Company's securities, against any amendment to
the Company's Articles of Incorporation or By-Laws which would be inconsistent
with certain corporate governance provisions as approved by the shareholders at
the 1993 Annual Meeting. The voting agreement terminates on March 29, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Niven is the President of Paragon Vineyard Company, Inc., the
Company's joint venture partner in the Edna Valley Vineyard Joint Venture.
Effective January 1, 1991, the co-venturers reached agreement for restructuring
the Joint Venture, including a mechanism for its continuation in perpetuity.
Significant elements of the transaction included an option purchased by the
Company for $1,077,277 (to be paid in annual installments through 1997)
7.
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
$4,500,000 in 1999, and the immediate purchase by the Company, from Paragon, of
a one-half ownership of the Edna Valley Vineyard winery building and
appurtenances, for the sum of $1,500,000. The Company continues 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 1994, grape-purchase payments to Paragon amounted
to approximately $1,737,032 from the Joint Venture and $81,237 from the Company
for Carmenet Vineyard; in 1993, those respective figures were $1,912,743 and
$85,143.
Baron de Rothschild and Mr. Salin are, respectively, the Managing
Director and President of Domaines Barons de Rothschild (Lafite) ("DBR").
Pursuant to two exchanges of securities, in 1989 and 1991, the Company holds a
total of 13,984 "ordinary shares" of DBR and DBR holds two 5% Convertible
Subordinated Debentures, with an aggregate face amount of $12,384,000,
convertible, after adjustment for the 1993 and 1994 private placements into a
total of 1,235,195 shares of the Company's common stock. DBR was also issued a
warrant, pursuant to which, as a part of the 1991 exchange, DBR became entitled
and obliged, subject to certain stated conditions, to purchase a total of
183,000 shares of the Company's common stock for a unit price of $10/share. DBR
exercised one-third of the warrant in 1991, a second one-third in 1992, and the
final one-third in 1993. DBR also holds 236,000 shares of the Company's stock
purchased from a third party in 1990 and 357,143 shares purchased as a part of
the 1993 private placement, next described. Under the terms of the original
Purchase Agreement between the Company and DBR, each of the two companies may
purchase wines of the other for selected distribution in their respective
countries. Such purchases are at fair market value. In 1994 and 1993,
respectively, the Company purchased $706,674 and $640,561 worth of DBR wines,
and in 1994 DBR purchased $1,710 of the Company's wines.
In March and July of 1993, the Company issued, in a private placement
to seven "accredited investors," units consisting of 828,571 shares of its
common stock and warrants covering an additional 828,571 shares, for a unit
price of $7.00. The warrants, which have a five-year term, entitle the holders
to purchase the additional shares at the price of $7.00 per share. Included in
the investor group were Domaines Barons de Rothschild (Lafite) ("DBR")
($2,500,001, for 357,143 units), an affiliate of Mr. Hojel ($1,999,998, for
285,714 units), and the Company's President, Mr. Woodward, and two trusts of
which he is beneficiary ($89,999, for 12,857 units). In accordance with
California law, the transaction was approved by the affirmative vote of the six
directors not a part of or connected with any of the investor group, and was
subsequently ratified by the requisite shareholder vote at the 1993 Annual
Meeting. The net proceeds to the Company from the placement were used to reduce
long- and short-term borrowings.
In April of 1994, the Company issued in a private placement transaction
a total of 348,128 shares of its common stock for a per-share price of $4.50,
and an aggregate sale price of slightly in excess of $1.6 million. The net
proceeds of the transaction were used principally to reduce corporate debt. The
purchasers in the transaction, all accredited investors, included, inter alia,
DBR (135,905 shares), Summus Financial, Inc. (142,857 shares), and Mr. Woodward
(23,810 shares).
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 EXCHANGE ACT
Based on review of copies of filings received by it, the Company
believes that each filing required to be made by its officers and directors
pursuant to Section 16(a) of the Securities Exchange Act was made in due and
timely fashion, with the exception of an unreported 5,000 share acquisition made
by Mr. Hojel's affiliate, Summus Financial, Inc., in December of 1993, and an
understatement of Mr. Hojel's initial report on Form 3 by an additional 7,100
shares.
8.
INCREASE IN AUTHORIZED SHARES
At its meeting held March 15, 1995, the Board of Directors voted to
amend the Company's Articles of Incorporation so as to increase the number of
authorized shares of common stock (the Company's only class of stock) from the
current 10 million to 15 million shares. As a matter of governing California
law, such an amendment also requires the affirmative vote of a majority of the
outstanding shares.
The present, 10 million share level was set a decade ago, when at the
1985 Annual Meeting the shareholders authorized an increase to that figure from
a then-existing 3 million share authorization. At that point there were just
over 2.9 million shares issued or reserved for issuance; at year-end 1985, total
assets of the Company were $16.2 million and shareholders' equity, $7.6 million.
Now, a decade later, shares issued or reserved total some 8.5 million,
or, about triple the 1985 number. At the same time, shareholders' equity has
(even with two recent difficult years) more than tripled to $24.2 million as of
December 31, 1994; and total assets have increased four-and-one-half-fold, to
$72.2 million.
During the period the Company acquired Acacia Winery, and more recently
commenced operations in the increasingly important Washington State through its
interest in the Canoe Ridge Vineyard properties. The issuance of new stock
played a direct part in both of these important steps.
Stock also played a critical albeit indirect role, through reservation
for possible conversation of debentures, in the forging of the Company's
historic alliance with Domaines Barons de Rothschild (Lafite), in 1989 and 1991,
which also raised $8.5 million in third-party debentures.
During the same period of time the Company concluded a purchase/option
arrangement with its partner in the Edna Valley Vineyard joint venture,
providing for the continuation essentially in perpetuity of this very important
part of the Company's business, and brought its three wholly-owned winery
facilities, Chalone Vineyard, Carmenet, and Acacia, to improved and enlarged
capacity.
All of this required cash, provided initially through operations,
institutional borrowings, and convertible debentures; then, when the weakened
wine market in the early '90s failed to support the Company's rapid expansion,
more straight equity financing was required, and was provided in the 1993 and
1994 private placements.
Internally, the Company established a number of stock option, stock
purchase, and related stock plans, acting on the principle that employee
ownership builds employee loyalty and commitment -- an assessment which, the
Company believes, results over the ensuing years have richly borne out.
Approximately 675,000 shares have been issued or are currently reserved for
issuance on granted options, with further similar needs arising for future
years.
Overall, the Board believes it has husbanded this valuable resource of
corporate stock well, and expended it prudently, to take advantage of corporate
opportunities as presented, to expand and improve existing facilities, to
strengthen employee relations, and, where necessary, to meet financial setbacks.
Happily, the Company is not now in a position of financial need. Nevertheless,
the Board believes that less than 1.5 million shares, or, 15 percent of total
authorized capital, is an inadequate reserve with which to face the future.
Accordingly, the Board has adopted the following resolution, which it
unanimously recommends also be approved by the shareholders:
RESOLVED:
Article THIRD of the Restated Articles of Incorporation of THE CHALONE
WINE GROUP, LTD., is amended to read as follows:
"THIRD. The Corporation is authorized to issue only one class of stock;
and the total number of shares which the Corporation is authorized to
issue is Fifteen Million (15,000,000)."
9.
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 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 1996 ANNUAL MEETING
Any proposal which a shareholder wishes to have presented at the 1996
Annual Meeting and included in the Company's proxy statement for such meeting
must be received by the Company, at its principal executive office, 625 Airpark
Road, Napa, California 94558-6272, no later than December 31, 1995. Proposals
should be addressed to the attention of Mr. William L. Hamilton, Executive Vice
President.
, 1995 By Order of the Board of Directors
- ----------
F. Conger Fawcett
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.
10.
APPENDIX A
THE CHALONE WINE GROUP, LTD.
PROXY SOLICITED ON BEHALF OF MANAGEMENT
For Annual Meeting of Shareholders, May 18, 1995
P KNOW ALL MEN BY THESE PRESENTS that the undersigned, shareholder(s) of
R THE CHALONE WINE GROUP, LTD. do(es) hereby appoint W. PHILIP WOODWARD and
O F. CONGER FAWCETT, and each of them, proxies, each with full power of
X substitution, for and in the name and stead of the undersigned at the
Y Annual Meeting of Shareholders of THE CHALONE WINE GROUP, LTD., to be held
on May 18, 1995, 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.
If no direction is made, this proxy will be voted FOR the election of
the nominees FOR director named in Item 1 and FOR Items 2 and 3. 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
(Continued and to be signed on reverse side) SIDE
----------------
Please mark
/x/ votes as in
this example.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ALL PROPOSALS
1. ELECTION OF DIRECTORS:
FOR AGAINST ABSTAIN
/ / / / / /
2. Amendment to Articles of Incoporation
Nominees: Richard H. Graff, W. to increase authorized number of
Philip Woodward, William L. shares from 10 million to 15 million.
Hamilton, Richard C. Hojal, C.
Richard Kramlich, J.A.
McQuown, James H. Niven, Eric / / / / / /
de Rothschild, Christophe 3. Ratification of appointment of
Salin FOR WITHHELD Deloitte & Touche LLP as the Company's
/ / / / certified public accountants.
/ /
- ------------------------------ MARK HERE
For all nominees except FOR ADDRESS
as noted above CHANGE AND
NOTE AT LEFT / /
This proxy revokes any and all other
proxies heretofore 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
other authorized person.
Signature: Date
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Signature: Date:
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