NAPA, Calif., May 18, 2005 (PRIMEZONE) -- The Napa County, California, Superior Court has preliminary approved a settlement in the Chalone class action litigation and has set a settlement hearing for June 24, 2005.
TO: All persons who held beneficially or of record The Chalone Wine
Group, Ltd., ("Chalone") common stock at any time between May
17, 2004, and February 8, 2005, and their successors in
interest and transferees, immediate and remote, but not
defendants, members of the immediate families of the
individual defendants, any entity in which any defendant
has or had a controlling interest, directors and officers of
Chalone, The Buying Group and Diageo and the legal
representatives, heirs, successors, or assigns of any such
excluded person or entity.
Please read this notice carefully and in its entirety. Your
rights may be affected by proceedings in this litigation. If
the court approves the proposed settlement, you will be forever
barred from contesting the fairness of the proposed settlement,
pursuing the released claims (defined herein) and excluding
yourself from the settlement class.
This Notice has been sent to you pursuant to an Order of the Napa County Superior Court (the "Court"). The purpose of this Notice is to inform you of the proposed settlement (the "Settlement") of this class action Litigation (defined below) and of the hearing (the "Settlement Hearing") to be held by the Court to consider the fairness, reasonableness, and adequacy of the Settlement. This Notice also informs you of the Court's provisional certification of a Settlement Class (defined below) and notifies you of your right to participate in the Settlement Hearing to be held on June 24, 2005, at the Superior Court of California, County of Napa, Room C, 825 Brown Street, Napa, California 94559, to determine whether the Court should approve the Settlement as fair, reasonable, adequate and in the best interests of the Plaintiffs and the Settlement Class and end the Litigation, to determine whether Plaintiffs and their Counsel have adequately represented the interests of the Settlement Class in the Litigation, and to consider other matters, including the payment of attorneys' fees.
The Court has determined that the Litigation shall be provisionally certified as a Class Action under California Code of Civil Procedure section 382 by plaintiff Ron Melville, ("Plaintiff") as Settlement Class representative and by Plaintiffs' Lead Counsel, on behalf of all persons who held beneficially or of record Chalone common stock at any time between May 17, 2004, and February 8, 2005, and their successors in interest and transferees, immediate and remote but not but not Defendants, members of the immediate families of the individual defendants, any entity in which any Defendant has or had a controlling interest, directors and officers of Chalone, the Buying Group (defined below) and Diageo and the legal representatives, heirs, successors, or assigns of any such excluded person or entity (the "Settlement Class"). Settlement Class members may not exclude themselves from the Settlement Class.
This Notice describes the rights you may have in connection with the Settlement and what steps you may take in relation to the Settlement and Litigation.
This notice is not an expression of any opinion by the court about the merits of any of the claims or defenses asserted by any party in this litigation or the fairness or adequacy of the proposed settlement.
I. THE LITIGATION
On May 17, 2004, Chalone announced that defendant Domaines Barons de Rothschild ("DBR"), on behalf of itself, defendant Constellation Brands, Inc. ("CBI") and Huneeus Vintners LLC (together with DBR and CBI, the "Buying Group"), had made, by letter to Chalone, a written offer to acquire the remaining shares of Chalone that the Buying Group did not already own for $9.25 per share in cash (the "Offer"). On May 26, 2004, Chalone's Board of Directors formed a Special Committee of independent directors (the "Special Committee") to negotiate the terms of the transaction with the Buying Group.
Beginning on May 18, 2004, five actions were filed against Chalone, DBR, CBI, Thomas B. Selfridge, Christophe Salin, John Diefenbach, Marcel Gani, Mark Hojel, Yves-Andre Istel, C. Richard Kramlich, George E. Myers, James H. Niven, Phillip M. Plant and Eric de Rothschild ("Defendants"), alleging that the transaction proposed by DBR, if consummated, would result in Chalone's directors breaching their fiduciary duties to Chalone's minority public shareholders. On May 25, 2004 the Court consolidated the five cases and appointed Wolf Popper LLP as Lead Counsel in the consolidated action entitled Wiedamann v. Chalone Wine Group, Ltd. et al., Case No. 26-25479 (consolidated) in the Superior Court of the State of California, County of Napa (the "Litigation").
Following the commencement of the Litigation, Plaintiffs investigated the price and process of the Offer through formal and informal discovery methods, which included reviewing public and non-public documents. On May 25, 2004, the Court granted Plaintiffs' motion for expedited discovery. Plaintiffs sent several letters to the Special Committee demanding that the Special Committee ensure the fairness of any transaction. Plaintiffs hired a financial expert and were prepared to review the financial and fairness analyses undertaken by the Special Committee, Chalone and the Buying Group.
After negotiations lasting over five months, the Special Committee ultimately agreed to a transaction pursuant to which DBR would acquire the publicly-held shares of Chalone common stock for $11.75 per share in cash (the "DBR Merger Agreement"). In addition to the increase in price, the DBR Merger Agreement provided several structural enhancements that benefited the public shareholders of Chalone. These enhancements include a broad "fiduciary-out" clause (allowing Chalone to terminate the transaction if a superior offer was received) and "a majority of the minority" provision that would allow the transaction contemplated by the DBR Merger Agreement (the "DBR Transaction") to be consummated only if a majority of the public shareholders of Chalone voted in favor of the transaction.
Plaintiffs' Counsel, with the assistance of their financial expert, reviewed the financial analyses supporting the Special Committee's negotiations with the Buying Group and the fairness opinion of the Special Committee's investment banker attesting to the fairness of the DBR Transaction. Plaintiffs then reviewed and provided revisions to the disclosures contained in the preliminary proxy statement/prospectus that was filed with the SEC on November 24, 2004.
On December 13, 2004, Chalone received an acquisition proposal from Diageo North America, Inc. ("Diageo") to acquire Chalone in a transaction in which Chalone shareholders would receive $13.75 per share in cash. Thereafter, DBR declined to increase the DBR Merger Agreement price. On December 17, 2004, the Buying Group entered into a Consent and Waiver Agreement for the benefit of Diageo and Chalone in consideration of Diageo making an irrevocable offer to enter into a transaction in which Chalone shareholders would receive $14.25 per share in cash (the "Merger"). On December 18, 2004, Chalone's Board of Directors exercised its right to terminate the DBR Merger Agreement. On February 8, 2005, the Merger closed and became effective.
On March 1, 2005, following negotiations among the parties to the Settlement that began in November 2004, the parties entered into an agreement setting forth the preliminary terms and conditions of the Settlement, subject to additional discovery as appropriate and necessary to confirm the fairness and reasonableness of the terms of the Settlement.
II. TERMS OF THE PROPOSED SETTLEMENT
Chalone, DBR and the individual defendants agreed to enhanced terms in the DBR Merger Agreement that allowed Chalone to enter into negotiations with and agree to the Merger with Diageo at a price of $14.25 per share, a greatly increased price over the $9.25 offer originally made by the Buying Group.
Chalone and the individual defendants acknowledge that the Litigation and the efforts of Plaintiffs' Counsel were taken into account by the Special Committee during the course of its efforts to secure enhanced terms relating to the DBR Transaction for the benefit of the public shareholders of Chalone.
Lead Counsel were afforded the opportunity to provide comments on and review the preliminary proxy statement/prospectus issued in connection with the DBR Merger Agreement prior to the filing of the preliminary proxy statement/prospectus with the Securities and Exchange Commission (the "SEC").
Chalone has agreed, on behalf of all Defendants, subject to the terms of the Settlement and the Court's approval of the Settlement, to pay the sum of $150,000 to Plaintiffs' Counsel for their attorneys' fees and expenses (the "Fee Award"). The Fee Award is not an integral part of the Settlement. The parties understand and agree that any modification by the Court of the Fee Award shall not operate to terminate or cancel the Settlement or affect the finality of any judgment approving the Settlement, or any orders pursuant to the Settlement.
The parties agree, for purposes of the Settlement only, to the certification of the Settlement Class pursuant to section 382 of the California Code of Civil Procedure. In the event the Settlement is not approved, Defendants reserve the right to oppose certification of a class in any future proceedings.
III. REASONS FOR THE SETTLEMENT
Plaintiffs believe that the claims asserted in the Litigation have merit. However, Plaintiffs' Counsel recognize and acknowledge the expense and length of continued proceedings necessary to prosecute the Litigation against Defendants through trial and through appeals. Counsel for the Plaintiffs also have taken into account the uncertain outcome and the risk of any litigation, especially in a complex action such as this Litigation, as well as the difficulties and delays inherent in such litigation. Plaintiffs' Counsel also are mindful of the inherent problems of proof and possible defenses to the claims asserted in the Litigation. Plaintiffs' Counsel, having made a thorough investigation of the facts, believe that the Settlement confers substantial benefits upon the Settlement Class. Based on their evaluation, Plaintiffs' Counsel have determined that the Settlement is in the best interests of the Plaintiffs and the Settlement Class.
Defendants deny all allegations of wrongdoing, fault, liability or damage to Plaintiffs and the Settlement Class, deny that they engaged in any wrongdoing, deny that they committed any violation of law, deny that they acted improperly in any way, believe that they acted properly at all times, and believe that the Litigation has no merit, but wish to settle the Litigation on the terms and conditions stated herein to eliminate the burden and expense of further litigation and to put the Released Claims to rest finally and forever, without in any way acknowledging any wrongdoing, fault, liability or damage to Plaintiffs and the Settlement Class.
IV. NOTICE OF HEARING ON PROPOSED SETTLEMENT
A Settlement Hearing will be held on June 24, 2005, at 8:30 a.m., before the Honorable Raymond A. Guadagni at the Superior Court of California, County of Napa, Room C, 825 Brown Street, Napa, California 94559 (the "Settlement Hearing"). The purpose of the Settlement Hearing will be to determine: (a) whether the Settlement should be approved as fair, just, reasonable and adequate; and (b) whether the Litigation should be dismissed with prejudice. The Court may adjourn or continue the Settlement Hearing by oral announcement at such hearing or at any adjournment without further notice of any kind.
V. DISMISSAL AND RELEASES
If the proposed Settlement is approved, the Court will enter a Final Judgment and Order of Dismissal with Prejudice (the "Judgment"). The Judgment will dismiss the Litigation with prejudice. Upon the Effective Date, as defined in the Stipulation of Settlement dated as of April 18, 2005 ("Stipulation"), the Plaintiffs, Plaintiffs' Counsel and the members of the Settlement Class shall be deemed to have, and by operation of the Court's Judgment shall have, fully, finally, and forever, discharged, relinquished and released any claims, known or unknown, liquidated or unliquidated, contingent or absolute, that have been, could have been, or in the future can or might be asserted in the Litigation or in any court, tribunal or proceeding (including but not limited to any claims arising under federal, state, foreign, or common law, including the federal securities laws and any state disclosure law), by or on behalf of any member of the Settlement Class, whether individual, class, derivative, representative, legal, equitable, or any other type or in any other capacity against Defendants or any person that could be alleged to have aided, abetted or otherwise acted in concert with any Defendant or any of their families, parent entities, associates, affiliates or subsidiaries and each and all of their respective past, present or future officers, directors, stockholders, principals, representatives, employees, attorneys, financial or investment advisors, consultants, accountants, investment bankers, commercial bankers, advisors or agents, heirs, executors, trustees, general or limited partners or partnerships, personal representatives, estates, administrators, predecessors, successors and assigns (collectively, the "Released Persons"), which have arisen, arise now or hereafter may arise out of or relate in any manner to the allegations, facts or any other matter whatsoever set forth in or are otherwise related, directly or indirectly to the sale of Chalone to Diageo, the complaints filed in the Litigation, the DBR Transaction, the Merger, the disclosures in the proxy statement/prospectus filed in connection with the DBR Merger Agreement, the information statement filed and disseminated in connection with the Merger, or other related disclosures, or the additional agreements and transactions described therein (the "Released Claims"); provided, however, nothing contained herein shall be construed as a release or waiver by the Defendants of their obligations under the Stipulation itself. By operation of the entry of the Judgment, upon the Effective Date, the Plaintiffs and the members of the Settlement Class agree to waive and shall be deemed to agree to have waived any and all rights and benefits that they now have, or in the future may have, by virtue of the provisions of section 1542 of the California Civil Code, which section provides as follows:
A general release does not extend to claims which the creditor
does not know or suspect to exist in his or her favor at the
time of executing the release, which if known by him or her must
have materially affected his or her settlement with the debtor.
Plaintiffs and the members of the Settlement Class, upon the Effective Date, shall be deemed to have waived, and by operation of the Judgment shall have, expressly waived and relinquished any and all provisions, rights and benefits conferred by any law of any state or territory of the United States, or principle of common law, which is similar, comparable or equivalent to section 1542 of the California Civil Code. Plaintiffs and the members of the Settlement Class may hereafter discover facts in addition to or different from those which he, she or it now knows or believes to be true with respect to the subject matter of the Released Claims, but each Plaintiff and member of the Settlement Class, upon the Effective Date, shall be deemed to have, and by operation of the Judgment shall have, fully, finally and forever settled and released any and all Released Claims, known or unknown, suspected or unsuspected, contingent or non-contingent, whether or not concealed or hidden, upon any theory of law or equity now existing or coming into existence in the future including, but not limited to, conduct which is negligent, intentional, with or without malice, or a breach of any duty, law or rule, without regard to the subsequent discovery or existence of such different or additional facts. Notwithstanding the above, Released Claims shall not bar the statutory appraisal rights permitted under applicable law.
Upon the Effective Date, each of the Released Persons shall be deemed to have, and by operation of the Judgment shall have, fully, finally, and forever released, relinquished and discharged each and all of the Settlement Class members and Plaintiffs' Counsel from all claims, known or unknown, based upon or arising out of the institution, prosecution, assertion, Settlement or resolution of the Litigation or the Released Claims. However, nothing herein shall be construed as a release or waiver by the Plaintiffs of their obligations under the Stipulation.
VI. APPLICATION FOR ATTORNEYS' FEES AND EXPENSES
Chalone has agreed, on behalf of all Defendants and subject to the Court's approval of the Settlement, to pay the sum of $150,000 to Plaintiffs' Counsel. The Fee Award is not an integral part of the Settlement. The parties understand and agree that any modification by the Court of the Fee Award shall not operate to terminate or cancel the Stipulation or affect the finality of any judgment approving the Stipulation and the Settlement, or any orders pursuant to the Stipulation. Members of the Settlement Class are not personally liable for any attorneys' fees or expenses. Lead Counsel were afforded the opportunity to provide comments on and review the preliminary proxy statement/prospectus issued in connection with the DBR Merger Agreement prior to the filing of the preliminary proxy statement/prospectus with the SEC. Chalone, DBR and the individual defendants agreed to enhanced terms in the DBR Merger Agreement that allowed Chalone to enter into negotiations with and agree to the Merger with Diageo at a price of $14.25 per share, a greatly increased price over the $9.25 offer originally made by the Buying Group. Chalone and the individual defendants acknowledge that the Litigation and the efforts of Plaintiffs' Counsel were taken into account by the Special Committee during the course of its efforts to secure enhanced terms relating to the DBR Transaction for the benefit of the public shareholders of Chalone.
VII. CONDITIONS FOR SETTLEMENT
The Settlement is conditioned upon the occurrence of certain events. Those events include, among other things: (1) entry of the Judgment by the Court, as provided for in the Stipulation; and (2) expiration of the time to appeal from or alter or amend the Judgment. If, for any reason, any one of the conditions described in the Stipulation is not met, the Stipulation might be terminated and, if terminated, will become null and void, and the parties to the Stipulation will be restored to their respective positions in the Litigation.
VIII. THE RIGHT TO BE HEARD AT THE HEARING
Any Member of the Settlement Class who (a) objects to the: (i) Settlement; (ii) Class Action determination; (iii) the adequacy of representation by Plaintiff and Plaintiffs' Lead Counsel; (iv) the dismissal of the Litigation; and (v) Judgment to be entered thereto; or (b) otherwise wishes to be heard, may appear in person or by his or her attorney at the Settlement Hearing. If you wish to do so, however, you must, not later than June 10, 2005, file with the Clerk of the Superior Court of the State of California for the County of Napa, 825 Brown Street, Napa, California 94559: (i) a written notice of your intention to appear; (ii) proof of your membership in the Settlement Class; (iii) a statement of your objections to any matters before the Court; and (iv) the grounds thereof or the reasons for your desiring to appear and be heard, as well as any documents or writings that you desire the Court to consider. Also, on or before the date you file such papers, you must serve them in a manner so that they are received on or before June 10, 2005, by each of the following:
Michael A. Schwartz Wolf Popper LLP 845 Third Avenue New York, New York 10022 Attorneys for Plaintiffs Jay L. Pomerantz Latham & Watkins 135 Commonwealth Drive Menlo Park, CA 94025 Attorneys for Defendants C. Richard Kramlich, Marcel Gani, Phillip M. Plant and John Diefenbach Julie Lyn Lipscomb Davis Polk & Wardwell 1600 El Camino Real, Menlo Park, CA 94025 Attorneys for Defendants Domaines Baron de Rothschild (Lafite), Christophe Salin, Yves-Andres Istel, and Eric de Rothschild Paul T. Friedman Morrison & Foerster LLP 425 Market Street San Francisco, CA 94105 Attorneys for Defendants Chalone Wine Group, Ltd., Thomas B. Selfridge George E. Myers, Mark Hojel and James H. Niven Richard Hoffman, Nixon Peabody LLP, Two Embarcadero Center San Francisco, California 9411 Attorneys for Defendant Constellation Brands, Inc.
Only members of the Settlement Class who have submitted written notices of objection in this manner will be entitled to be heard at the Settlement Hearing, unless the Court orders otherwise. Any Settlement Class member who does not object to the Settlement or the Class Action determination need not do anything.
Any person who fails to object in the manner described above shall be deemed to have waived the right to object (including the right to appeal) and will be forever banned from raising such objection in this or any other action or proceeding.
IX. Interim Injunction
Pending final determination of whether the Settlement should be terminated pursuant to the Stipulation, the Plaintiffs and all members of the Settlement Class, and each of them, either directly, representatively, or in any other capacity are barred and enjoined from commencing or prosecuting against any of the Released Persons any action or proceeding in any court or tribunal asserting any of the Released Claims, including any motion for preliminary injunction or other interim equitable relief relating to the Merger.
X. Order and Final Judgment of the Court
If the Court determines that the Settlement is fair, reasonable, adequate and in the best interests of the Settlement Class, the parties will ask the Court to enter a Final Judgment and Order, which will, among other things: (1) approve the Settlement pursuant to California Rule of Court 1859 and adjudge the terms thereof to be fair, reasonable, adequate and in the best interests of the Settlement Class; (2) authorize and direct the performance of the Settlement in accordance with its terms and conditions and reserve jurisdiction to supervise the consummation of the Settlement provided herein; and (3) dismiss the Litigation with prejudice and release Defendants, and each of them, and all the Released Persons from the Released Claims.
XI. EXAMINATION OF PAPERS
This Notice is a summary and does not describe all of the details of the Stipulation. For full details of the matters discussed in this Notice, you may desire to review the Stipulation filed with the Court, which may be inspected during business hours, at the office of the Clerk, Napa County Superior Court, 825 Brown Street, Napa, California 94559, or you may contact Plaintiffs' Lead Counsel, Michael A. Schwartz, Esq., Wolf Popper LLP, 845 Third Avenue, New York, NY 1002, or mschwartz@wolfpopper.com.
DO NOT TELEPHONE THE COURT REGARDING THIS NOTICE.
Dated this 4th day of May, 2005
BY ORDER OF THE COURT
STATE OF CALIFORNIA
COUNTY OF NAPA