SCHEDULE 14A
(RULE 14A-101)
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Under Rule
14a-12
THE CHALONE WINE GROUP, LTD.
________________________________________________
(Name of Registrant as Specified in Its Charter)
________________________________________________________________________
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
__________________________________________________________
(2) Aggregate number of securities to which transaction
applies:
__________________________________________________________
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
__________________________________________________________
(4) Proposed maximum aggregate value of the transaction:
__________________________________________________________
(5) Total fee paid:
__________________________________________________________
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11 (a) (2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
__________________________________________________________
(2) Form, Schedule or Registration Statement No.:
__________________________________________________________
(3) Filing Party:
__________________________________________________________
(4) Date Filed:
__________________________________________________________
APRIL 18, 2004
======================================
CHALONE
WINE GROUP
======================================
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF
THE CHALONE WINE GROUP, LTD.
TO BE HELD ON MAY 28, 2004
TO ALL SHAREHOLDERS:
It is with great pleasure that we invite you to the Annual Meeting of
Shareholders of The Chalone Wine Group, Ltd., which will be held at 2:00 p.m.,
Pacific Time, on Friday, May 28, 2004 at the Company's executive offices, 621
Airpark Road, Napa, California, for the following purposes:
1. Election of directors for the ensuing year.
2. Ratification of the appointment of Moss-Adams LLP as the Company's
independent auditors for the fiscal year ending December 31, 2004.
3. Consideration and action on any other matter properly brought before
the meeting. Shareholders of record as of the close of business on April 12,
2004, the record date, are entitled to notice of, and to vote at, the annual
meeting and any postponement or adjournment thereof.
You are requested to date, complete and sign the enclosed proxy, which
is solicited by the Company's Board, and to return it promptly in the envelope
provided. Even if you return this proxy, and you later decide to attend the
annual meeting, you may vote your shares in person by completing a ballot or
proxy at the meeting.
By Order of the Board of Directors,
/s/ CHRISTOPHE SALIN
___________________________________
Christophe Salin
Chairman of the Board
Napa, California
April 18, 2004
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. YOU MAY REVOKE
YOUR PROXY AT ANY TIME BEFORE IT IS VOTED AT THE ANNUAL MEETING.
======================================
CHALONE
WINE GROUP
======================================
Acacia Vineyards - Canoe Ridge Vineyards - Chalone Vineyard
Chateau Duhart-Milon - Dynamite Vineyards - Echelon Vineyards
Edna Valley Vineyard - Hewitt Vineyard - Monte Xanic - Moon Mountain Vineyards
Jade Mountain Vineyards - Orogeny Vineyards - Provenance Vineyards
Sagelands Vineyards
PROXY STATEMENT
________________________________________________________________________________
ANNUAL MEETING OF SHAREHOLDERS
May 28, 2004
________________________________________________________________________________
VOTING PROCEDURES AND INFORMATION CONCERNING THE SOLICITATION
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors (the "Board") of The Chalone Wine Group,
Ltd., a California corporation (the "Company"), for use at the 2004 Annual
Meeting of Shareholders of the Company (the "Meeting"), to be held at 2:00 p.m.,
Pacific time, on Friday, May 28, 2004, at the Company's executive offices, 621
Airpark Road, Napa, California 94558-6272 and any adjournments thereof (the
"Meeting").
Only holders of the Company's common stock (the "Common Stock") of
record as of the close of business on April 12, 2004, the record date fixed by
the Board, will be entitled to notice of, and to vote at, the Meeting. As of the
record date, 12,082,857 shares of Common Stock were issued and outstanding.
Holders of Common Stock are entitled to cast one vote for each share held of
record by them on each proposal submitted to a vote at the Meeting except that,
for the election of directors, upon request made prior to the commencement of
voting, each shareholder will be accorded cumulative voting rights, under which
he or she will be entitled to as many votes as equals the number of shares held,
multiplied by the number of directorship positions to be filled (11), all of
which may be cast for a single candidate or distributed among any or all
candidates in such proportions as each shareholder sees fit. Shareholders may
vote in person or by proxy. Execution of a proxy will not in any way affect a
shareholder's right to attend the Meeting and vote in person. Any shareholder
giving a proxy has the right to revoke that proxy by (i) filing a later-dated
proxy or a written notice of revocation with the Secretary of the Company at the
address set forth above at any time before it is exercised, or (ii) voting in
person at the Meeting.
1
________________________________________________________________________________
HOW YOU CAN VOTE
Shareholders of record can give a proxy to be voted at the Meeting
either (i) over the telephone by calling a toll-free number, (ii)
electronically, using the Internet, or (iii) by mail.
The telephone and Internet voting procedures are designed to
authenticate each shareholder's identity, to permit voting and to confirm that
such votes are recorded accurately. Any shareholder of record who wishes to vote
by telephone or the Internet should refer to the specific instructions set forth
on the enclosed proxy card. Shareholders who prefer to vote by mail should
return a signed proxy card to the Company before the Meeting.
Whether voting by telephone, the Internet, or by mail, shareholders
may specify whether shares should be voted for all, some, or none of the
nominees for director (Proxy Item No. 1); and to approve, disapprove, or abstain
from the ratification of the Company's independent auditors (Proxy Item No. 2).
________________________________________________________________________________
The Company's Secretary, President, and Chairman have been appointed as
the persons to receive and vote the proxies at the Meeting. All properly
executed proxies returned in time to be counted at the Meeting will be voted as
stated below under "Voting Procedures." Any shareholder giving a proxy has the
right to withhold authority to vote for any individual nominee to the Board by
so marking the proxy in the space provided thereon. Where a choice has been
specified on the proxy with respect to the foregoing matters, including the
election of directors, the shares represented by the proxy will be voted in
accordance with the choice specified. If no choice is specified, the proxy will
be voted as follows:
Proxy Item No. 1. FOR election of management's proposed slate of
directors, as set forth herein.
Proxy Item No. 2. FOR ratification of the appointment of Moss-Adams LLP
as the Company's independent auditors for the fiscal year ending December 31,
2004.
The Board knows of no other matters to be presented at the Meeting. If
any other matter should be presented at the Meeting upon which a vote may be
properly taken, including any proposal to adjourn the Meeting, shares
represented by all proxies received by the Board will be voted with respect
thereto in accordance with the judgment of the persons named as attorneys in the
proxies.
2
An Annual Report to Shareholders on Form 10-K, containing financial
statements for the year ended December 31, 2003, is being mailed concurrently to
all shareholders entitled to vote. This Proxy Statement and the form of proxy
were first mailed to shareholders on or about April 26, 2004. All costs of this
solicitation will be borne by the Company.
The presence, in person or by proxy, of at least a majority of the
outstanding shares of Common Stock entitled to vote at the Meeting is necessary
to establish a quorum for the transaction of business. Shares represented by
proxies pursuant to which votes have been withheld from any nominee for
director, or which contain one or more abstentions, including broker non-votes,
are counted as present for purposes of determining the presence or absence of a
quorum for the Meeting.
All properly executed proxies delivered pursuant to this solicitation
and not revoked will be voted at the Meeting as specified in such proxies. The
eleven (11) director-nominees receiving the highest number of affirmative votes
of the shares present or represented and voting on the election of directors at
the Meeting will be elected as directors.
For all other matters being submitted to shareholders at the Meeting,
the affirmative vote of the majority of shares present, in person or represented
by proxy, and voting on that matter is required for approval.
ELECTION OF DIRECTORS
(PROXY ITEM NO. 1)
Management is proposing and supports re-election of all eleven (11) of
the nominees named herein.
At the Meeting, directors will be elected to serve until the 2005
Annual Meeting or until 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 and qualified. 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 Board
may vote to fix the number of directors at a lesser number, but not less than
seven (7), or direct that the shares represented by proxies received by the
Company be voted for the election of such person as the Board may recommend in
place of the unavailable nominee.
DIRECTOR-NOMINEES
THOMAS B. SELFRIDGE. Age 60. Mr. Selfridge joined the Company as
President on January 1, 1998 and was appointed the Company's Chief Executive
Officer as of July 1, 1998. He has been a director of the Company since May 1998
and is a member of the Board's Operating Committee. Mr. Selfridge also is a
director of Edna Valley Vineyard. Before joining the Company, Mr. Selfridge was
Vice President-Marketing and Production of Kendall-Jackson Winery, Ltd. and
prior to that, served as President of Beaulieu Vineyard.
CHRISTOPHE SALIN. Age 48. Mr. Salin has been a director of the Company
since 1989, chairman of the Board since August 2001. He also serves as chairman
of the Board's Operating Committee and a member of the Compensation Committee.
3
Since 1990, he has been President and a director of DBR (Lafite), which he
joined in 1985. Mr. Salin also is chairman of Les Domaines Barons de Rothschild
(Lafite) Distribution. He serves as a director of Chateau Rieussec, Societe
Financiere Viticole, Vina Los Vascos (Chile), Quinta do Carmo (Portugal),
Bodegas CARO (Argentina), Rocca di Frassinello (Italy), La Viticole de
Participation, Pasternak Wine Import, Domaines d'Aussieres. Mr. Salin is also a
director of Comite Colbert.
JOHN DIEFENBACH. Age 67. Mr. Diefenbach has been a director of the
Company since May 2003. Since 2001, he has been a Partner with TrueBrand, a
Company he co-founded. Before joining TrueBrand, Mr. Diefenbach was CEO and
co-founder of Diefenbach Elkins (now FutureBrand) and prior to that, he served
as CEO and the major shareholder of Landor Associates.
MARCEL GANI. Age 51. Mr. Gani has been a director of the Company since
May 2003 and is Chairman of the Board's Audit Committee. Since 1997, he has been
Chief Financial Officer and Executive Vice President for Juniper Networks. Prior
to that, he served as Vice President and Chief Financial Officer of NVIDIA
Corporation, Grand Junction Networks and Primary Access Corporation. Mr. Gani
holds an M.B.A. from the University of Michigan.
MARK A. HOJEL. Age 35. Mr. Hojel has been a director of the Company
since 1995 and is a member of the Board's Operating and Compensation Committees.
Since 1996, Mr. Hojel has been President of Monte Xanic, a premium winery
located in Baja California, Mexico. He lives in Mexico City, Mexico.
YVES-ANDRE ISTEL. Age 68. Mr. Istel has been a director of the Company
since 1995. Mr. Istel is currently Senior Advisor to Rothschild, Inc. From 1993
to 2002, Mr. Istel was Vice Chairman of Rothschild Inc. He is Director of
Rothschild et Cie. Banque, Paris, France; Compagnie Financiere Richemont; Valeo
S.A.; and Imperial Sugar.
C. RICHARD KRAMLICH. Age 68. Mr. Kramlich has been a director of the
Company since 1990 and is a member of the Board's Compensation Committee. He was
a director of Carmenet Winery, Inc. from its inception until its merger into the
Company in 1984. Between 1984 and 1990, he served as an advisor to the Board.
Since 1978, Mr. Kramlich has been General Partner of New Enterprise Associates,
a San Francisco-based venture capital firm. He also is a director of Zhone
Technologies, Semiconductor Manufacturing International and various private
companies.
GEORGE E. MYERS. Age 46. Mr. Myers has been a director of the Company
since February 2002. Serving in senior management capacity for more than twenty
years for the Myers Family, he currently is a director of the Ladera Management
Co, Inc. In addition, he serves as a director of The Merchants National Bank of
Sacramento, AgraQuest, Inc., The National Foundation for Teaching
Entrepreneurship and as an advisor to The Lake County Wine Grape Commission, The
Sonoma Land Trust and the California Agricultural Education Foundation.
JAMES H. NIVEN. Age 61. Mr. Niven has been a director of the Company
since 1993 and is a member of the Board's Audit Committee. Since 1995, Mr. Niven
has been President of Paragon Vineyard Co., Inc., the Company's partner in the
Edna Valley Vineyard Joint Venture. He also is a partner of Niven & Smith, a San
Francisco law firm. Mr. Niven is a director of The Wine Institute, serves as
First Vice Chairman and is the Chairman of the Institute's Public Policy
committee. Mr. Niven also is a director of The Woodward Graff Foundation and
several private companies.
4
PHILLIP M. PLANT. Age 58. Mr. Plant has been a director of the Company
since 1996 and is a member of the Board's Audit Committee. Since 1998, Mr. Plant
has been a partner in the firm of Herndon Plant Oakley, Ltd. Previously, he was
Senior Vice-President, of Dain Rauscher Corp. (formerly Rauscher Pierce Refsnes,
Inc.). Mr. Plant also serves as an advisory director of RP & C International
Ltd. and the American Bank of Corpus Christi, Texas. In addition, Mr. Plant is
involved in an advisory capacity with a wide variety of charitable organizations
including V.P. & Trustee of Christus Spohn Development Foundation, Trustee of
Christus Health Investment Subcommitee, Past President, Board of Directors,
Executive Committee of the USS Lexington Museum on the Bay, and V.P. of the
Texas A&M Foundation.
ERIC DE ROTHSCHILD. Age 63. Baron Eric de Rothschild has been a
director of the Company since 1989. Since 1982, he has been a Managing Partner
of DBR (Lafite). Baron de Rothschild also is chairman of publicly held French
companies Paris-Orleans, S.A. and Francarep, a subsidiary of Paris-Orleans,
S.A., which is one of DBR's (Lafite) major shareholders.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE "FOR" MANAGEMENT'S NOMINEES
OTHER EXECUTIVE OFFICERS
ROBERT B. FARVER, Vice President, Sales and Distribution. Age 47. Mr.
Farver joined the Company in 1992 as the Sales Manager for the Northeast United
States and has been the Company's Vice President, Sales and Distribution, since
1996. Previously, he was Director of National Sales and Marketing.
SHAWN M. CONROY BLOM, Vice President, Finance and Chief Financial
Officer. Age 43. Ms. Blom joined the Company in December 2000 as Vice President
of Finance and Chief Financial Officer. Before joining the Company, Ms. Blom was
Chief Financial Officer of Jackson Family Farms, a collection of wineries owned
by Jess Jackson and his family. Prior to that time she was Controller at Cambria
Winery and Sanford Winery.
ALAN SCOTT DRAGE, Vice President, Human Resources. Age 37. Mr. Drage
joined the Company in October 1999 as Controller and has been the Company's Vice
President, Human Resources, since August 2002. Previously, he was Director of
Human Resources. Before joining the Company, Mr. Drage held positions of Chief
Financial Officer, Chief Operating Officer, Business Operations Manager and
in-house legal counsel primarily in the health care industry.
BOARD MEETINGS AND COMPENSATION
The Company's Board met four times during the year ended December 31,
2003. Each director attended at least 75% of the aggregate of those meetings,
except Mr. John Diefenbach and Baron Eric de Rothschild.
5
Each director who is not an employee of the Company is paid
compensation of $500 per year plus $100 for each Board meeting attended and
reimbursement of extraordinary travel costs to attend meetings. Additionally,
each non-employee director receives quarterly grants of options to purchase the
Company's Common Stock ("Automatic Quarterly Options") and is eligible to
receive additional stock options as set forth below ("Additional Options"), in
each case pursuant to the Company's 1997 Stock Option Plan. Baron Eric de
Rothschild declines to take non-employee director options.
The exercise price of the Automatic Quarterly Options is the fair
market value of the Company's Common Stock as of the final day of each calendar
quarter. The exercise price of the Additional Options is the fair market value
of the Company's Common Stock as of the date of the grant. The number of
Automatic Quarterly Options granted is equal to ten (10) shares per each 100,000
shares of the Company's Common Stock outstanding as the same date. Additional
Options are granted in amounts established annually by the Board to recognize
and encourage active participation by non-employee directors in the committees
established by the Board for various purposes.
For the year ended December 31, 2003, non-employee directors were
eligible for additional grants as follows: to each member of the Compensation
Committee, 1,500 additional shares per meeting attended; to each member of the
Operating Committee, 750 additional shares per meeting attended; to each member
of the Audit Committee, 750 additional shares per meeting attended; to each of
the Chairman of the Board and the chairman of the Operating Committee, 25,000
and 10,000 additional shares, respectively; to the chairman of the Compensation
Committee, 2,000 additional shares; and, to the chairman of the Audit Committee,
5,000 additional shares.
For the year ended December 31, 2003, Automatic Quarterly Options
covering a total of 40,800 shares were granted to and among nine of the
Company's non-employee directors. The weighted average per-share exercise price
of all Automatic Quarterly Options is $8.05.
In February, 2004 the Board voted to grant Additional Options to
certain non-employee directors for the year ended December 31, 2003. Although
these Additional Options are intended to reward non-employee directors for their
services rendered during the year ended December 31, 2003, they will be granted
subsequent to the end of the year and, therefore, will be included in the
directors' compensation for the 2004 year, rather than the 2003 year.
COMMITTEES AND CORPORATE GOVERNANCE
The Board has established three standing committees to which it has
delegated certain responsibilities: an Operating Committee, Audit Committee and
Compensation Committee. It does not have a standing Nominating Committee.
Nominees for election to the Board are selected by the Board. The Board will
consider shareholder nominations provided such nominations are submitted
6
pursuant to the procedures and timelines described in the "Submission of
Shareholder Proposals" section of the Proxy Statement. The Company has prepared
a proposed code of ethics which is expected to be considered for adoption by the
Board at its scheduled May 2004 meeting.
OPERATING COMMITTEE. The Operating Committee consists of Messrs. Salin,
Hojel, and Selfridge. The Operating Committee may exercise all powers and
authority of the Board to manage the Company's business and affairs, subject to
limitations prescribed by the Board, Bylaws of the Company, and California law.
The Operating Committee met four times during the year ended December 31, 2003.
AUDIT COMMITTEE. In 2003, the Audit Committee was comprised of Messrs.
Gani, Niven and Plant. Mr. Gani serves as the Chairman of the Audit Committee.
Messrs. Gani and Plant are each "independent" as defined in Rule 4200(a)(14) of
the National Association of Securities Dealers' listing standards. Mr. Gani
qualifies as an "independent financial expert" pursuant to standards promulgated
by NASDAQ and the Securities and Exchange Commission.
Mr. Niven is not independent under the NASD rule because of his
interest in Paragon Vineyard Co., Inc. ("Paragon"), the Company's partner in the
Edna Valley Vineyard Joint Venture. The Company and the Edna Valley Joint
Venture have made and will continue to make certain significant payments to
Paragon in exchange for grapes used in the Company's and Edna Valley's Joint
Venture wines. The Company's transactions with Paragon are described in more
detail below under the caption "Certain Relationships and Related
Transactions--The Edna Valley Vineyard Joint Venture." The Company's Board has
determined that, due to Mr. Niven's long-time membership in the California bar,
his many years of financial management of Paragon and his prior service on the
Company's Audit Committee, that Mr. Niven's service as a member of the Audit
Committee is in the best interest of the Company and its shareholders.
The Audit Committee operates in accordance with a written charter
adopted by the Company's Board on May 18, 2000. Among other things, the Audit
Committee Charter specifies:
(1) the scope of the Audit Committee's responsibilities and the processes
by which they will be carried out;
(2) the Audit Committee's responsibility for ensuring its receipt from the
outside auditors of a formal written statement delineating all
relationships between the auditor and the Company, the Audit
Committee's responsibility for actively engaging in a dialogue with the
auditor with respect to any disclosed relationship or services that may
impact the objectivity and independence of the auditor and for taking,
or recommending that the full Board take appropriate action to oversee
the independence of the outside auditor; and
(3) the outside auditor's ultimate accountability to the Board and the
Audit Committee, as representatives of the shareholders, and the
ultimate authority of the Board to select, evaluate and, where
appropriate, replace the outside auditor (or to nominate the outside
auditor to be proposed for shareholder approval in any proxy
statement).
The Audit Committee met four times during the year ended December 31,
2003.
7
COMPENSATION COMMITTEE. The compensation committee consists of Mr.
Kramlich, as chairman, and Messrs. Hojel and Salin. The Compensation Committee
is authorized to exercise all of the powers and authority of the Board with
respect to the hiring, performance review, formation, employment arrangements or
agreements, compensation and bonuses of the Company's senior executive officers.
The Compensation Committee met one time during the year ended December 31, 2003.
AUDIT COMMITTEE REPORT
The Audit Committee monitors the Company's internal accounting controls
and confers with the Company's independent auditors and reviews the results of
their auditing engagement. The Company's Board adopted a written charter for the
audit Committee on May 18, 2000. A copy of the charter is included as Appendix A
to this Proxy Statement.
The Audit Committee has reviewed the Company's audited consolidated
financial statements and discussed such statements with the Company's
management. The Audit Committee has discussed with Moss-Adams LLP, the Company's
independent auditors for year, the matters required to be discussed by Statement
of Auditing Standards No. 61 (Communication with Audit and Finance Committees,
as amended).
The Audit Committee received from Moss-Adams LLP the written
disclosures required by Independence Standards Board Standard No. 1 and
discussed with them their independence. Based on the review and discussions
noted above, the Audit Committee recommended to the Board that the Company's
audited consolidated financial statements be included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2003, and be filed with the
Securities and Exchange Commission.
This report of the Audit Committee shall not be deemed incorporated by
reference by any general statement into any filing under the Securities Act of
1933, as amended, or the securities Exchange Act of 1934, as amended, except to
the extent that the Company specifically incorporates this information by
reference, and shall not otherwise be deemed filed under such Acts.
The foregoing report is given by the members of the Audit Committee,
namely:
Marcel Gani
James H. Niven
Phillip M. Plant
COMPENSATION COMMITTEE REPORT ON COMPENSATION OF EXECUTIVE OFFICERS
GENERAL. 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
8
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 1997 Stock Option Plan (the "Plan"). These elements are designed
to operate on an integrated basis and together comprise total compensation
value.
The Committee reviews executive compensation in light of the Company's
performance during the year. In reviewing the Company's performance during the
year, the Committee considered a variety of factors. Despite a weakened economy,
a flood of imported wines and intense domestic competition, the Company posted a
9 percent adjusted increase in total cases sales and a 6 percent increase in
gross revenues compared to the prior year. In addition, the Committee considered
the continued success of the Echelon brand, the strong category growth of the
Company's Pinot Noir and Syrah brands, the launch of the Provenance
luxury-priced red wine brand, as well as the Company's ability to manage
operating and capital costs during the uncertain economic environment. In
reviewing the Company performance, the Committee considered these factors as a
whole without assigning specific weight 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 2003, 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, typically paid as a
bonus, is designed to provide a short-term (one-year) incentive. The Company
does not adhere to any firmly established formula for the award of annual cash
incentives. Rather, incentive awards are based on the achievement of corporate
and individual goals for the year, including subjective factors. The Summary
Compensation Table shows annual cash incentives paid to the Named Executive
Officers during the nine-month transition period ended December 31, 2001 and the
years ended December 31, 2002 and 2003.
STOCK OPTIONS. Stock options are designed to provide long-term
incentives and rewards tied to the price of the 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 recipients 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
the Common Stock by its executives. However, retention of shares by executives
is encouraged. For certain of the Company's sales personnel, including Mr.
Farver, there is a formula for annual cash incentives based on meeting sales,
depletion, and budgetary goals including subjective factors.
The Company does not adhere to any firmly established formula for the
issuance of stock options. The Summary Compensation Table shows the options
granted to the Named Executive Officers during the past three years. In
9
determining the size of the grants to the 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 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 Common Stock.
The foregoing report is given by the members of the Committee, namely:
C. Richard Kramlich
Christophe Salin
Mark A. Hojel
SHAREHOLDING INFORMATION AS TO DIRECTORS, DIRECTOR NOMINEES AND MANAGEMENT
The following table sets forth information as of March 31, 2004
respecting the beneficial ownership of the Common Stock, the Company's only
class of voting securities, by (i) all persons known by the Company to own more
than five percent of the Common Stock, (ii) each director, director-nominee, and
executive officers named below under "Executive Compensation--Summary
Compensation Table," and (iii) all directors and executive officers as a group.
Except as may be noted in the footnotes to the table, the Company
believes that the persons named in the table have sole voting and investment
power with respect to all shares of Common Stock shown as beneficially owned by
them, subject to community property laws where applicable.
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES BENEFICIALLY OWNED(2) PERCENT OF CLASS
____________________________________ _________________________ ________________
Les Domaines Barons de Rothschild (Lafite) 5,556,103 46.0%
33 rue de la Baume
75008 Paris, France
The Hojel Family(3) 2,218,154 18.4%
c/o Phillip Plant
Herndon Plant Oakley, Ltd.
One Shoreline Plaza
Suite 2200, North Tower
Corpus Christi, TX 78401-3700
__________________
1 Pursuant to Item 403(a) of Regulation S-K, addresses are provided only for
beneficial owners of more than 5% of the Company's Common Stock.
2 Except as otherwise noted, all shareholding information is reported as of
March 31, 2004. Shares of Common Stock subject to stock options exercisable
within 60 days from March 31, 2004 are deemed outstanding for computing the
percentage of the class of securities owned by the person or group holding
such securities.
3 Includes the following 2,151,659 shares owned by SFI Intermediate. Ltd. and
66,495 shares owned by HC Holding Company, Ltd. SFI Intermediate Ltd. is a
Texas limited partnership of which GHA 1 Holdings, Inc. is the general
partner. Phyllis S. Hojel, mother of Mark A. Hojel, is the sole stockholder
and director of GHA 1 Holdings, Inc. Mrs. Hojel, GHA 1 Holdings, Inc., and
SFI Intermediate Ltd. share voting power and the power to dispose or direct
the disposition of such shares. Excludes the personal holdings of Mark A.
Hojel set forth elsewhere herein.
10
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES BENEFICIALLY OWNED(2) PERCENT OF CLASS
____________________________________ _________________________ ________________
George E. Myers(4) 410,243 3.4%
621 Airpark Road
Napa, CA 94558-6272
Thomas B. Selfridge(5) 322,383 2.6%
621 Airpark Road
Napa, CA 94558-6272
Christophe Salin(6) 215,944 1.8%
621 Airpark Road
Napa, CA 94558-6272
Robert B. Farver(7) 126,995 1.0%
621 Airpark Road
Napa, CA 94558-6272
C. Richard Kramlich(8) 96,134 *
621 Airpark Road
Napa, CA 94558-6272
Mark A. Hojel(9) 53,727 *
621 Airpark Road
Napa, CA 94558-6272
Shawn Conroy Blom(10) 45,668 *
621 Airpark Road
Napa, CA 94558-6272
Phillip M. Plant(11) 41,067 *
621 Airpark Road
Napa, CA 94558-6272
James H. Niven(12) 38,797 *
621 Airpark Road
Napa, CA 94558-6272
Yves-Andre Istel(13) 24,477 *
621 Airpark Road
Napa, CA 94558-6272
4 Includes 267,086 shares held by various family-controlled entities as to
which Mr. Myers may have shared voting power. Includes 24,557 shares issuable
to Mr. Myers on exercise of options which are vested or will vest within the
next 60 days.
5 Includes 319,500 shares issuable to Mr. Selfridge on exercise of options that
are vested or will vest within the next 60 days.
6 Includes of 215,017 shares issuable on exercise of options that are vested or
will vest within the next 60 days. Excludes shares held and acquirable by DBR
(Lafite), of which Mr. Salin is President, which holdings are set forth
separately above and as to which Mr. Salin disclaims beneficial ownership.
7 Includes 40 shares held by various family members as to which Mr. Farver may
have shared voting power. Includes 113,468 shares issuable to Mr. Farver on
exercise of options which are vested or will vest within the next 60 days.
8 Includes 50,047 shares issuable to Mr. Kramlich on exercise of options that
are vested or will vest within the next 60 days.
9 Includes 52,727 shares issuable to Mr. Hojel on exercise of options that are
vested or will vest within the next 60 days. Excludes shares held and
acquirable by the Hojel family as set forth above, as to which Mr. Hojel
disclaims beneficial ownership.
10 Consists of 45,000 shares issuable to Ms. Conroy Blom on exercise of options
that are vested or will vest within the next 60 days.
11 Includes 300 shares owned by Mr. Plant's family members as to which Mr. Plant
disclaims beneficial ownership. Includes 39,517 shares issuable to Mr. Plant
on the exercise of options that are vested or will vest within the next 60
days.
11
NAME AND ADDRESS OF BENEFICIAL OWNER(1) SHARES BENEFICIALLY OWNED(2) PERCENT OF CLASS
____________________________________ _________________________ ________________
Marcel Gani(14) 10,100 *
621 Airpark Road
Napa, CA 94558-6272
Alan Scott Drage(15) 4,385 *
621 Airpark Road
Napa, CA 94558-6272
John Diefenbach(16) 3,600 *
621 Airpark Road
Napa, CA 94558-6272
All directors, director-nominees and executive 1,393,520 10.7%
officers as a group (13 persons)
12 Consists of 38,797 shares issuable on exercise of options that 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.
13 Includes 24,477shares issuable to Mr. Istel on exercise of options that are
vested or will vest within the next 60 days.
14 Includes 10,100 shares issuable to Mr. Gani on exercise of options that are
vested or will vest within the next 60 days.
15 Includes 4,000 shares issuable to Mr. Drage on exercise of options that are
vested or will vest within the next 60 days.
16 Includes 3,600 shares issuable to Mr. Diefenbach on exercise of options that
are vested or will vest within the next 60 days.
12
EXECUTIVE COMPENSATION
The following table sets forth for the nine-month transition period
ended December 31, 2001 and the years ended December 31, 2002 and 2003, a
summary of compensation awarded to, earned by, or paid to, the Company's Chief
Executive Officer and each of the Company's three other most highly compensated
executive officers who were serving as of December 31, 2003 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
_________________________________________________________________________________________________________________________
Annual Compensation Long-Term Compensation
_________________________________________________________________________________________________________________________
Securities
Other Under-
Annual Restricted lying
Compen- Stock Options/ LTIP
Name And Principal Year Salary Bonus sation Award SARs Payouts
Position ($) 1/ ($) ($) 2/ ($)3/ ($) (#) 4/ ($)
___________________________ ______ ________ _______ _______ __________ __________ _______
Thomas B. Selfridge 2003 $285,000 $ 0 $9,000 -- 00,000 --
Chief Executive Officer 2002 262,500 85,000 9,000 -- 47,500 --
2001C 202,838 50,000 6,750 -- 47,000 --
Robert B. Farver 2003 $165,000 $ 0 $9,000 -- 00,000 --
Vice President, Sales and 2002 143,000 81,500 9,000 -- 25,000 --
Distribution 2001C 109,846 50,000 6,750 -- 25,000 --
Shawn Conroy Blom 2003 $160,000 $ 0 $6,000 -- 00,000 --
Vice President, Finance and 2002 143,000 30,000 6,000 -- 25,000 --
Chief Financial Officer 2001C 109,942 12,000 4,500 -- 25,000 --
Alan Scott Drage 2003 $125,000 $ 0 $6,000 -- 00,000 --
Vice President, Human 2002 115,000 25,000 6,000 -- 20,000 --
Resources 2001C 81,827 7,500 2,000 -- -- --
1/ 2001C refers to nine-month transition period ending December 31, 2001.
2/ Bonuses of each of the Named Executive Officers for the year ended December
31, 2003 are scheduled to be paid subsequent to this filing. The Bonuses
will be reported as 2003 compensation.
3/ Other annual compensation includes car allowances.
4/ All options were incentive stock options granted pursuant to the Company's
1987 and 1997 Stock Option Plans.
13
OPTION GRANTS IN 2003
The following table sets forth certain information regarding options
granted during the year ended December 31, 2003 to the Company's Named Executive
Officers:
Individual Grants
_________________________________________________________________________________________
Percentage Of Potential Realizable
Number Of Total Value at Assumed Annual
Securities Options/SARs Rates of Stock Price
Underlying Granted to Exercise Appreciation For
Option/SARs Employees or Expiration OPTION TERM 1/
Name Granted(#) In Fiscal Year Base Price Date 5% 10%
___________________ ___________ ______________ __________ __________ ________ ________
Thomas B. Selfridge 47,500 40.4% $8.40 5/13/13 $250,929 $635,903
Robert B. Farver 25,000 21.3% $8.40 5/13/13 $132,068 $334,686
Shawn Conroy Blom 25,000 21.3% $8.40 5/13/13 $132,068 $334,686
Alan Scott Drage 20,000 17.0% $8.40 5/13/13 $105,654 $267,749
1/ Potential realizable value is calculated based on an assumption that
the price of the Common Stock appreciates at the annual rate shown
(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 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, will depend on the future performance of the Company, overall
market conditions and the continued employment of the executive officer
during the applicable vesting period.
14
AGGREGATED OPTION EXERCISES IN 2003 AND VALUE OF UNEXERCISED OPTIONS
The following table sets forth information regarding each exercise of
stock options during the year ended December 31, 2003, and the number and value
of unexercised stock options held by each Named Executive Officer as of the same
date. The closing price of the Common Stock on December 31, 2003 was $8.24 per
share based on the NASDAQ closing price.
Number of
Securities
Underlying
Unexercised Value of Unexercised
Options/SARs In-The-Money Options/SARs
Value at Calendar Year-End at Calendar Year-
Net (#) End ($)
Shares Acquired Realized Exercisable/ Exercisable/
NAME on Exercise (#) ($) Unexercisable Unexercisable
___________________ _______________ ________ ____________________ _________________________
Thomas B. Selfridge 0 319,500/38,000 $19,738/$15,200
Robert B. Farver 0 113,468/20,000 $7,724/$8,000
Shawn Conroy Blom 0 45,000/20,000 $2,000/$8,000
Alan Scott Drage 0 4,000/16,000 1,600/$6,400
EQUITY COMPENSATION PLAN INFORMATION
Information as of December 31, 2003 regarding equity compensation plans
approved and not approved by shareholders is summarized in the following table:
Number of Shares to
be Issued Upon Weighted Average
Exercise of Exercise Price of Number of Shares
Outstanding Options, Outstanding Options, Remaining for
Plan Category Warrants and Rights Warrants and Rights Future Issuance
_________________________ ____________________ ____________________ _________________
Equity compensation plans 1,062,622 $9.81 N/A
approved by the
shareholders
Equity compensation plans 0 0 0
not approved by
shareholders
15
PROFIT SHARING 401(K) PLAN
The Company's Profit Sharing 401(k) Plan (the "401(k) Plan") is
intended to be a qualified retirement plan under Section 401(k) of the Internal
Revenue Code of 1986, as amended (the "Code"). Under this plan, participating
employees (including the Named Executive Officers) may contribute up to 15% of
their compensation, but not exceeding the maximum amount allowed under
applicable tax laws. All employees of the Company with one year of service,
unless covered by a collective bargaining agreement, are eligible to participate
in the 401(k) Plan. The Company's Edna Valley Vineyard joint venture has a
similar plan.
EMPLOYEE STOCK PURCHASE PLAN
Under the Company's Employee Stock Purchase Plan (the "Stock Purchase
Plan"), pursuant to Section 423 of the Code, all Company employees, with one
year of service (including the Named Executive Officers) may contribute up to
10% of their compensation during each 27-month period of the Stock Purchase
Plan. At the end of the period, the employee's contributions are invested in the
Common Stock at 85% of the market price of said shares on the commencement or
ending date of the offering period, whichever is lower. On February 26, 2003,
the Board adopted, subject to Shareholder approval, a 2003 Employee Stock
Purchase Plan to replace the previous stock purchase plan. The Shareholders
approved the 2003 Employee Stock Purchase Plan at the 2003 annual meeting.
PERFORMANCE GRAPH
The line graph on the following page compares the cumulative total
return to holders of the Common Stock in the period from March 31, 1997 to
December 31, 2003, 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
six companies whose returns have been weighted based on market capitalization as
of the beginning of each period for which a return is indicated: Brown-Forman
Corporation, Constellation Brands, Inc., Robert Mondavi Corp., Golden State
Vintners, Scheid Vineyards, and Willamette Valley Vineyards. The graph assumes
an investment of $100.00 on March 31, 1997 in the Company and in the two
comparison indices. "Total return," for purposes of the graph, assumes
reinvestment of all dividends.
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 of the Company's existing
shelf registrations or future filings under the Securities Act of 1933 or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates it by reference into such filing.
16
COMPARISON OF A YEAR CUMULATIVE TOTAL RETURN
[GRAPH GOES HERE]
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE EDNA VALLEY VINEYARD JOINT VENTURE (the "EVV Joint Venture"). Mr.
Niven, a director of the Company, is the President and a substantial shareholder
of Paragon Vineyard Co., Inc. ("Paragon"), the Company's partner in the EVV
Joint Venture. In December 1996, the Company and Paragon entered into an
agreement (the "Joint Venture Amendment") that amended and restated the terms of
the EVV Joint Venture. Under the terms of the Joint Venture Amendment, the
Company was obligated to make substantial payments in order to maintain its 50%
ownership interest in the EVV Joint Venture and to extend its term in
definitely. Specifically, the Company previously paid Paragon $1,070,000 (the
"Deposit") as a deposit toward future payments due for the foregoing purposes
and the sum of $5,390,000 in four installments, the most recent of which was
paid in January 2002. The Company fulfilled its option to purchase 50% of the
"EDNA VALLEY" brand-name for $200,000 in January 2002. Additionally, the Company
makes payments in respect of the Joint Venture Amendment and ground lease.
Under the terms of a grape purchase agreement, Paragon sells fixed
quantities of Chardonnay and Pinot Noir grapes to the Edna Valley Joint Venture
at negotiated prices based on reference to the average prices paid for
Chardonnay grapes in Santa Barbara and Napa Counties during the preceding year,
with certain adjustments depending on the grapes' sugar content. During 2003,
the value of the grapes sold by Paragon to the Edna Valley Joint Venture
pursuant to the foregoing contracts was approximately $5,947,000.
LES DOMAINES BARONS DE ROTHSCHILD (LAFITE). Certain director-nominees
have a relationship with DBR (Lafite). Baron de Rothschild and Mr. Salin are,
respectively, Managing Partner and President of DBR (Lafite), and Mr. Istel is a
director of certain affiliates of DBR (Lafite).
17
Pursuant to DBR's (Lafite) investment in the Company, the Company
receives an allocation of DBR (Lafite) wines, including the wines of Chateau
Lafite-Rothschild and Duhart-Milon. During 2003, the Company paid approximately
$712,320 to DBR (Lafite), of which approximately $0 represents deposits for wine
which will be delivered in future years (i.e., wine "futures").
MYERS FAMILY. The Company has a grape purchase agreement, expiring as
late as 2012 with some varietals, with Snows Lake Vineyard at prices negotiated
yearly with reference to existing market conditions. Mr. Myers is President of
Ojai Ranch & Investments, which controls Snows Lake Vineyard. During 2003, the
Company paid approximately $1,480,000 under the grape purchase contract.
OTHER. 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors, certain officers, and persons who own more than 10% of the
outstanding common stock of the Company to file with the Commission reports of
changes in ownership of the common stock of the Company held by such persons.
Officers, directors and greater than 10% stockholders are also required to
furnish the Company with copies of all forms they file under this regulation.
To the Company's knowledge, based solely on a review of the copies of
such reports furnished to the Company during the fiscal year ended December 31,
2003, all Section 16(a) filing requirements applicable to its officers,
directors and greater than 10% stockholders were complied.
18
RATIFICATION OF APPOINTMENT OF THE COMPANY'S
INDEPENDENT AUDITORS
(PROXY ITEM NO. 2)
The Board has appointed Moss-Adams LLP as the Company's independent
auditors for the year ending December 31, 2004 subject to ratification by the
shareholders at the Meeting. Moss-Adams LLP has been the Company's independent
auditors since December 2001. Representatives of Moss-Adams LLP are expected to
be in attendance at the Meeting, with the opportunity to make a statement, and
to be available to respond to shareholders' questions.
Fees billed by Moss-Adams LLP for each of the last two fiscal years
were as follows:
Fiscal year ended Fiscal year ended
Type of fees December 31, 2003 December 31, 2002
____________________ _________________ _________________
Audit fees/1 $158,428 $132,961
Audit-Related Fees/2 $ 44,748 $ 5,110
Tax Fees/3 $ 0 $ 0
All Other Fees/4 $ 26,113 $ 51,972
1/ Consists of fees in connection with the audit of the Company's annual
financial statements and review of financial statements included in the
Company's Forms 10-Q or services that are normally provided in connection
with statutory and regulatory filings.
2/ Consists of fees in connection with the performance of the audit and review
of the Company's financial statements and are not reported under item (1)
above.
3/ Consists of fees in connection with professional services rendered by
Moss-Adams LLP for tax compliance, tax advice and tax planning, including
the preparation and review of tax returns and the provision of incidental
tax advice.
4/ Consists of fees in connection with products and services provided by Moss-
Adams LLP, other than those reported under items (1) through (3) above.
The Audit Committee has adopted procedures for pre-approving all audit
and non-audit services provided by the Company's independent auditors. It is the
Audit Committee's responsibility to review and approve or disapprove all
proposed related party transactions (including all transactions required to be
disclosed by Item 404 of Regulation S-K promulgated by the Securities and
Exchange Commission.
Shareholder ratification of the appointment of Moss-Adams LLP as the
Company's independent auditors is not required by the Company's bylaws or any
other applicable legal document. The Board is submitting the appointment of
Moss-Adams LLP to the shareholders as a matter of good corporate practice. If
the shareholders fail to ratify the selection, the Audit Committee and the Board
will reconsider the appointment. Even if the appointment is ratified, the Board
may, at its discretion, direct the appointment of a different independent
auditor at any time.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION AND APPOINTMENT OF
MOSS-ADAMS LLP AS THE COMPANY'S INDEPENDENT AUDITORS.
19
OTHER MATTERS
The Company does not know of any matter other than those discussed in
the foregoing materials contemplated for action at the Meeting. Should any other
matter be properly brought before the Meeting, it is the intention of the
persons designated by the Board to receive and vote the proxies in accordance
with the recommendation of the Board. Discretionary authority for them to do so
is contained in the proxy.
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, which was previously
filed with the Securities and Exchange Commission and is being furnished to
shareholders concurrently with this proxy statement.
SUBMISSION OF SHAREHOLDER
PROPOSALS FOR 2004 ANNUAL MEETING
Any proposal which a shareholder wishes to have presented at the 2004
Annual Meeting and included in the Company's proxy statement for that meeting
must be received by the Company, at its principal executive office, 621 Airpark
Road, Napa, California 94558-6272, no later than March 31, 2005. Proposals
should be addressed to the attention of the Chief Financial Officer of the
Company. In order to avoid controversy as to the date on which a proposal was
received by the Company, it is suggested that any shareholder who wishes to
submit a proposal submit such proposal by certified mail, return receipt
requested.
The Bylaws of the Company provide that in order for a shareholder to
bring business before or propose director nominations at an annual meeting of
shareholders, the shareholder must provide advance notice of such proposal or
nomination. Specifically, the shareholder must give written notice to the
Corporate Secretary not less than sixty (60) days nor more than ninety (90) days
prior to the date of the annual meeting. The notice must contain specified
information about the proposed business or each nominee and about the
shareholder making the proposal or nomination. In the event that less than
seventy (70) days' prior notice or prior public disclosure of the date of the
annual meeting is given or made to shareholders, notice by the shareholder in
order to be timely must be received no later than the close of business on the
tenth day following the date on which such notice of the annual meeting date was
mailed or public disclosure of the date of the annual meeting was made,
whichever occurs first.
By Order of the Board of Directors,
/s/ CHRISTOPHE SALIN
___________________________________
Christophe Salin
Chairman of the Board
Napa, California
April 18, 2004
20
APPENDIX A
THE CHALONE WINE GROUP, LTD.
AUDIT COMMITTEE CHARTER
(as adopted May 18, 2000)
The Audit Committee is appointed by the Board of Directors of the Company to
assist the Board in monitoring (1) the integrity of the financial statements of
the Company, (2) the Company's compliance with legal and regulatory requirements
and (3) the independence and performance of the Company's external auditors.
The Audit Committee shall consist of at least three directors. On or before the
first anniversary of the adoption of this Audit Committee Charter, the members
of the Audit Committee shall meet the independence and experience requirements
of The NASDAQ Stock Market, Inc., except to the extent that the Board, under
exceptional and limited circumstances, determines that membership on the Audit
Committee by one director who is not independent is required by the best
Interests of the Company and its shareholders and the Board discloses, in the
next annual proxy statement subsequent to such determination, the nature of the
relationship and the reasons for that determination. The members of the Audit
Committee shall be appointed by the Board.
The Audit Committee shall have the authority to retain special legal, accounting
or other consultants to advise the Committee. The Audit Committee may request
any officer or employee of the Company or the Company's outside counsel or
independent auditor to attend a meeting of the Committee or to meet with any
members of, or consultants to, the Committee.
The Audit Committee shall make regular reports to the Board.
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter annually and recommend
any proposed changes to the Board for approval.
2. Review the annual audited financial statements with management,
including major issues regarding accounting principles and practices as
well as the adequacy of internal controls that could significantly
affect the Company's financial statements.
3. Review an analysis prepared by management and the independent auditor
of significant financial reporting issues and judgments made in
connection with the preparation of the Company's financial statements.
4. Review with management and the independent auditor the Company's finan-
cial position prior to the filing of its Form 10-Q and Form 10-K.
21
5. Meet periodically with management to review the Company's major
financial risk exposures, if any and the steps management has taken to
monitor and control such exposures.
6. Review major changes in the Company's accounting principles and prac-
tices as suggested by the independent auditor management.
7. Recommend to the Board the appointment of the independent auditor,
which firm is ultimately accountable to the Audit Committee and the
Board.
8. Approve the fees to be paid to the independent auditor.
9. Receive periodic reports from the independent auditor regarding the
Auditor's independence consistent with Independence Standards Board
Standard 1, discuss such reports with the auditor, and if so determined
by the Audit Committee, take or recommend that the full Board take,
appropriate action to oversee the independence of the auditor.
10. Evaluate together with the Board the performance of the independent
Auditor and, if so determined by the Audit Committee, recommend that
the Board replace the independent auditor.
11. Review the appointment and any replacement of the chief financial
officer.
12. Meet with the independent auditor prior to the audit to review the
planning and staffing of the audit.
13. Obtain from the independent auditor assurance that Section 10A of the
Securities Exchange Act of 1934 has not been implicated.
14. Obtain reports from management, the Company's senior financial
Executive and the independent auditor that the Company's
Subsidiary/foreign affiliated entities are in conformity with
Applicable legal requirements and the Company's policies regarding
Ethics and standards of conduct.
15. Discuss with the independent auditor the matters required to be dis-
cussed by Statement on Auditing Standards No. 61 relating to the
conduct of the audit.
16. Review with the independent auditor any problems or difficulties the
Auditor may have encountered and any management letter provided by the
Auditor and any response of the Company to that letter.
22
17. Prepare the report of the Audit Committee required by the rules of the
Securities and Exchange Commission to be included in the Company's
annual proxy statement.
18. Advise the Board with respect to the Company's policies and procedures
regarding compliance with applicable laws and regulations and with the
Company's policies regarding ethics and standards of conduct.
19. Review with the Company's legal advisors' legal matters that may have a
material impact on the financial statements, the Company's compliance
policies and any material reports or inquiries received from regulators
or governmental agencies.
20. Meet at least annually with the chief financial officer and the inde-
pendent auditor in separate executive sessions.
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is the
responsibility of management and the independent auditor. Nor is it the duty of
the Audit Committee to conduct investigations, to resolve disagreements, if any,
between management and the independent auditor or to assure compliance with laws
and regulations and the Company's policies regarding ethics and standards of
conduct.
23
APPENDIX B
VOTE VIA TELEPHONE OR THE INTERNET
IT'S QUICK, EASY AND IMMEDIATE
Your telephone or Internet vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card. PLEASE
NOTE THAT ALL VOTES CAST VIA THE TELEPHONE OR THE INTERNET MUST BE CAST PRIOR TO
5 P.M., MAY 27, 2004. If you wish to change your address or notify the Company
that you plan to attend the meeting, please mark the boxes below and return your
proxy by mail.
TELEPHONE VOTING
o There is NO CHARGE for this call.
o On a Touch-tone phone call TOLL FREE 1-877-779-8683, 24-hours per day,
seven days a week.
o You will be asked to enter the Control Number that is located above your
name and address.
________________________________________________________________________________
OPTION #1: If you wish to vote as the Board of Directors RECOMMENDS, PRESS 1
Your vote will be confirmed and cast as you directed.
END OF CALL
________________________________________________________________________________
OPTION # 2: If you choose to vote on each proposal separately, PRESS 2
YOU WILL HEAR THESE INSTRUCTIONS:
Proposal 1: To vote as the Board of Directors RECOMMENDS, PRESS 1; to
vote AGAINST, PRESS 2; to ABSTAIN, PRESS 3.
Proposal 2: To vote as the Board of Directors RECOMMENDS, PRESS 1; to
vote AGAINST, PRESS 2; to ABSTAIN, PRESS 3.
Your vote will be confirmed and cast as you directed.
END OF CALL
________________________________________________________________________________
24
INTERNET VOTING
Log on to the Company's transfer agent's Internet voting site at
http://www.eproxyvote.com/chln and follow the instructions on your screen.
________________________________________________________________________________
IF YOU VOTE VIA TELEPHONE OR THE INTERNET, IT IS NOT
NECESSARY TO RETURN YOUR PROXY CARD BY MAIL.
________________________________________________________________________________
THANK YOU FOR VOTING.
25
CHALONE WINE GROUP, LTD.
C/O EQUISERVE TRUST COMPANY, N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
YOUR VOTE IS IMPORTANT. PLEASE VOTE IMMEDIATELY.
________________________________________ ___________________________________
VOTE-BY-INTERNET OR VOTE-BY-TELEPHONE
LOG ON TO THE INTERNET AND GO TO CALL TOLL-FREE
HTTP://WWW.EPROXYVOTE.COM/CHLN 1-877-PRX-VOTE (1-877-779-8683)
________________________________________ ___________________________________
IF YOU VOTE OVER THE INTERNET OR BY TELEPHONE, PLEASE DO NOT MAIL YOUR CARD.
[1820-CHALONE WINE GROUP][FILE NAME:ZCWG51.ELX][VERSION-(1)][03/31/04]
[ORIG. 03/31/04]
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
ZCWG51
|X| PLEASE MARK 1820
VOTES AS IN
THIS EXAMPLE.
_____________________________________________________________________________________________________________________________
FOR AGAINST ABSTAIN
_____________________________________________________________________________________________________________________________
1. ELECTION OF DIRECTORS
NOMINEES: (01) John Diefenbach, (02) Marcel Gani, 2. Proposal to ratify the appointment of | | | | | |
(03) Mark A. Hojel, (04) Yves-Andre Istel, (05) C. Moss-Adams LLP as the Company's
Richard Kramlich, (06) George E. Myers, (07) James independent auditors for the year
H. Niven, (08) Phillip M. Plant, (09) Eric de ending December 31, 2004.
Rothschild, (10) Christophe Salin, (11) Thomas B.
Selfridge
_____________________________________________________________________________________________________________________________
FOR | | | | WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
_____________________________________________________________________________________________________________________________
| |
_________________________________________________
IF YOU WISH TO WITHHOLD AUTHORITY TO VOTE FOR ANY
INDIVIDUAL NOMINEE(S), WRITE SUCH NOMINEE(S) NAME
ON THE LINE ABOVE.
_____________________________________________________________________________________________________________________________
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT | |
_____________________________________________________________________________________________________________________________
(This Proxy should be marked, dated and signed
by the shareholder(s)exactly as his or her name appears
hereon and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so
indicate. If shares are held by joint tenants or as
community property, both shareholders should sign.)
_____________________________________________________________________________________________________________________________
Signature: Date: Signature Date:
______________________________ __________ _________________________________ ___________________
26
CHALONE
WINE GROUP
THIS IS YOUR PROXY.
YOUR VOTE IS IMPORTANT.
DEAR SHAREHOLDER:
REGARDLESS OF WHETHER YOU PLAN TO ATTEND THE 2004 ANNUAL MEETING OF
SHAREHOLDERS, YOU CAN BE SURE YOUR SHARES ARE REPRESENTED AT THE MEETING BY
PROMPTLY RETURNING YOUR PROXY CARD IN THE ENCLOSED ENVELOPE OR BY VOTING VIA
TELEPHONE OR THE INTERNET. INSTRUCTIONS ARE ON THE REVERSE SIDE OF THIS CARD.
THANK YOU,
INVESTOR RELATIONS DEPARTMENT
[1820-CHALONE WINE GROUP][FILE NAME:ZCWG52.ELX][VERSION-(1)][03/31/04]
[ORIG. 03/31/04]
DETACH HERE ZCWG52
PROXY
THE CHALONE WINE GROUP, LTD.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS, MAY 28, 2004
The undersigned, shareholder(s) of The Chalone Wine Group, Ltd., do(es) hereby
appoint the Corporation's Secretary and Chairman and/or President, 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 28, 2004, and at any and all postponements
or 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 WILL BE VOTED AS DIRECTED OR, IF NO CONTRARY DIRECTION IS INDICATED,
WILL BE VOTED "FOR" ELECTION OF MANAGEMENT'S DIRECTOR-NOMINEES AND "FOR"
RATIFICATION OF THE APPOINTMENT OF THE COMPANY'S INDEPENDENT AUDITORS, AND AS
SAID PROXIES DEEM ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE
THE MEETING AND ANY POSTPONEMENT(S) OR ADJOURNMENT(S) THEREOF.
_______________ ______________
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
_______________ ______________
27