-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ek1lb99UYbGztZ83hYKEvzLo8Z32bYPmNh/swe9d0U6F1qjHNmh5mZyTpc4MODL1 CM7xQ8aLwlMMa1LARcIp4w== 0000950149-97-001779.txt : 19971002 0000950149-97-001779.hdr.sgml : 19971002 ACCESSION NUMBER: 0000950149-97-001779 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971103 FILED AS OF DATE: 19970929 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONDAVI ROBERT CORP CENTRAL INDEX KEY: 0000902276 STANDARD INDUSTRIAL CLASSIFICATION: 2080 IRS NUMBER: 942765451 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-21624 FILM NUMBER: 97686927 BUSINESS ADDRESS: STREET 1: 7801 ST HELENA HWY STREET 2: PO BOX 106 CITY: OAKVILLE STATE: CA ZIP: 94562 BUSINESS PHONE: 7072599463 MAIL ADDRESS: STREET 1: 7801 ST HELENA HWY CITY: OAKVILLE STATE: CA ZIP: 94562 DEF 14A 1 DEFINITIVE PROXY STATEMENT 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 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 [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
THE ROBERT MONDAVI CORPORATION - - -------------------------------------------------------------------------------- (Name of Registrant as Specified in Its Charter) - - -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement) Payment of filing fee (Check the appropriate box): [ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2). [ ] $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 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 0-11:1(1) * ----------------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: * ----------------------------------------------------------------------------------- * 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: * -----------------------------------------------------------------------------------
- - --------------- (1) Set forth the amount on which the filing fee is calculated and state how it was determined. 2 THE ROBERT MONDAVI CORPORATION 7801 ST. HELENA HIGHWAY OAKVILLE, CALIFORNIA 94562 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS OF THE ROBERT MONDAVI CORPORATION TO BE HELD NOVEMBER 3, 1997 To the Shareholders: The Annual Meeting of Shareholders of The Robert Mondavi Corporation (the "Company") will be held at the Robert Mondavi Winery, 7801 St. Helena Highway, Oakville, California 94562, on Monday, November 3, 1997, at 10:00 a.m. local time, for the following purposes: 1. To elect three Class A Directors and five Class B Directors; 2. To ratify the appointment of Price Waterhouse as the Company's independent auditors for the 1998 fiscal year; 3. To ratify proposed amendments to the Company's 1993 Equity Incentive Plan; and 4. To transact such other business as may properly come before the meeting and any adjournment thereof. All of the above matters are more fully described in the accompanying Proxy Statement. Only shareholders of record at the close of business on September 15, 1997 are entitled to notice of and to vote at the meeting or any postponement or adjournment thereof. By Order of the Board of Directors /s/ MIKE BEYER ------------------------------- Mike Beyer, Secretary Napa, California September 29, 1997 - - ------------------------------------------------------------------------------- WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ENCLOSED REPLY ENVELOPE. THIS WILL NOT LIMIT YOUR RIGHT TO ATTEND OR VOTE AT THE MEETING. - - ------------------------------------------------------------------------------- 3 THE ROBERT MONDAVI CORPORATION 7801 ST. HELENA HIGHWAY OAKVILLE, CALIFORNIA 94562 ------------------------------------------- PROXY STATEMENT ------------------------------------------- Your proxy in the form enclosed is solicited by the Board of Directors of The Robert Mondavi Corporation (the "Company") for use in voting at the Annual Meeting of Shareholders to be held on Monday, November 3, 1997 at 10:00 a.m. local time, or at any adjournment thereof. The Annual Meeting will be held at the Robert Mondavi Winery, 7801 St. Helena Highway, Oakville, California 94562. This Proxy Statement and the enclosed form of proxy, together with the Company's Annual Report for fiscal 1997, were first mailed to shareholders on or about September 29, 1997. The Company's principal executive offices are located at 7801 St. Helena Highway, Oakville, California 94562, and its telephone number is (707) 259-9463. D.F. King & Co., Inc., who is assisting with the mechanics of the return of the proxies, may be contacted at (212) 269-5550. The shares represented by those proxies received, properly dated and executed, and not revoked, will be voted at the Annual Meeting. A proxy may be revoked at any time before it is exercised by delivering to the Secretary of the Company at the Company's principal executive offices, no later than the start of the Annual Meeting, a written notice of revocation or a duly executed proxy relating to the same shares bearing a later date than the revoked proxy, or by attending the Annual Meeting and voting the shares covered by the proxy in person. All shares represented by proxies that are properly dated, executed and returned, and which have not been revoked, will be voted in accordance with the specifications on the enclosed proxy. If no such specifications are made, shares of Class A Common Stock will be voted FOR the election of the three nominees for Class A Directors listed in this Proxy Statement and FOR approval of proposal 2 and proposal 3 set forth in the Notice of Annual Meeting of Shareholders and described in this Proxy Statement. Similarly, if no specifications are made, shares of Class B Common Stock will be voted FOR the election of the five Class B Directors listed in this Proxy Statement and FOR approval of proposal 2 and proposal 3. The Company will bear the expense of preparing, printing and mailing this Proxy Statement and the proxies solicited hereby and will reimburse brokerage firms and nominees for their reasonable expenses in forwarding solicitation materials to beneficial owners of shares held of record by such brokerage firms and nominees. In addition to the solicitation of proxies by mail, officers and regular employees of the Company may communicate with shareholders either in person or by telephone or facsimile for the purpose of soliciting such proxies; no additional compensation will be paid for such solicitation. The Company has retained D.F. King & Co., Inc., at an estimated cost of $3,000, plus reimbursement of expenses, to assist in the solicitation of proxies from brokers, nominees, institutions and individuals. OUTSTANDING SHARES AND VOTING RIGHTS September 15, 1997 has been fixed as the record date for determining the holders of Class A Common Stock and the holders of Class B Common Stock entitled to notice of and to vote at the Annual Meeting. As of the close of business on the record date, the Company had outstanding 7,527,174 shares of Class A Common Stock and 7,676,012 shares of Class B Common Stock. Only holders of Class A 1 4 Common Stock are entitled to vote in the election of Class A Directors. Only holders of Class B Common Stock are entitled to vote in the election of Class B Directors. On all matters other than the election of Directors, the holders of Class A Common Stock and the holders of Class B Common Stock vote together as a single class, with each Class A share entitled to one (1) vote, or a total of 7,527,174 Class A votes, and each Class B share entitled to ten (10) votes, or a total of 76,760,120 Class B votes. A majority of the outstanding shares of Class A Common Stock, represented in person or by proxy, will constitute a quorum for purposes of electing Class A Directors, and a majority of the outstanding shares of Class B Common Stock, represented in person or by proxy, will constitute a quorum for purposes of electing Class B Directors. On all other matters that may be presented at the meeting, the holders of shares entitled to cast a majority of the votes which could be voted thereon will constitute a quorum. ELECTION OF DIRECTORS (PROPOSAL 1 ON PROXY) The Company's Bylaws provide that the Board of Directors shall consist of not less than seven nor more than eleven directors. The Board of Directors, pursuant to the authority conferred on them by the Bylaws, have set the current number of directors at nine, three of whom are to be elected by holders of the Company's Class A Common Stock and six of whom are to be elected by holders of the Class B Common Stock. Three Class A directors and five Class B directors, named below, have been nominated for election at the Annual Meeting. Proxies cannot be voted for a greater number of persons than the number of nominees named. Thus there will be one vacancy on the board, entitled to be filled by holders of the Class B Common Stock or the Class B directors. Unless you request on your proxy card that voting of your proxy be withheld from any one or more of the following nominees for director, each of whom currently serves as a member of the Board, proxies of Class A Common Stock will be voted for the election of the three nominees for Class A Directors named below and proxies of Class B Common Stock will be voted for the election of the five nominees for Class B Directors named below. In the event any nominee named below becomes unavailable for election, the proxies in the form solicited will be voted for an alternative or alternatives designated by the present Board of Directors. Directors serve until the next Annual Meeting of Shareholders and until their successors are elected or chosen. NOMINEES FOR CLASS A DIRECTORS Philip Greer, age 61, became a director of the Company in 1992. He is chairman of the Audit Committee and a member of the Compensation Committee. Mr. Greer is a Senior Managing Principal of Weiss, Peck & Greer, L.L.C. ("WPG"), an investment company. He was a general partner of WPG's predecessor, Weiss, Peck & Greer, for over twenty-five years. Mr. Greer is also a director of Federal Express Corporation and Network Computing Devices, Inc. He graduated from Princeton University and the Harvard Graduate School of Business. Frank E. Farella, age 68, has been a partner in the law firm of Farella, Braun & Martel since 1962. He has been a director of the Company since 1992. He is a member of the Audit Committee and the Compensation Committee. Mr. Farella is also a director of Security First Group, Security First Life Insurance Company and Fidelity Standard Life Insurance Company, members of The London Insurance Group of Companies, the separate accounts of which are registered under the Investment Company Act of 1940. He is a graduate of San Francisco State University and Stanford University Law School. James L. Barksdale, age 54, became a director in 1996. He is the President, CEO and a member of the Board of Directors of Netscape Communications Corporation. From January 1992 to January 2 5 1995 Mr. Barksdale served as President and Chief Operating Officer, and, as of September 1994, Chief Executive Officer, of AT&T Wireless Services. From April 1983 to January 1992 he was Executive Vice President and Chief Operating Officer of Federal Express Corporation. Mr. Barksdale is also a director of 3Com Corporation and @Home Corporation. He is a graduate of the University of Mississippi. NOMINEES FOR CLASS B DIRECTORS Robert G. Mondavi, age 84, founded the Company in 1966 and has been Chairman of the Board since that time. Robert Mondavi was also Chief Executive Officer of the Company from its founding to 1990. He began making wine in California in 1937 and in 1943 his family purchased the Charles Krug winery in the Napa Valley where he served as General Manager until 1966. He has been inducted into Fortune Magazine's Business Hall of Fame. He is a member of the American Institute of Wine and Food, the American Wine Society and the Commanderie de Bordeaux. He graduated from Stanford University. Robert Mondavi is the father of Michael and Timothy Mondavi and Marcia Mondavi Borger. R. Michael Mondavi, age 54, is the Company's President and Chief Executive Officer. He helped found the Robert Mondavi Winery with his father in 1966 and has been a member of the Board of Directors since that time. Michael Mondavi has served as Chairman of the Wine Institute and of the Napa Valley Vintners Association and as a director of the American Vineyard Foundation. Mr. Mondavi is a director of Premier Package and Label Corporation. He graduated from Santa Clara University. Marcia Mondavi Borger, age 50, has been a director of the Company since 1978. She has worked for the Company in various capacities since 1967. From 1982 to 1992, she was the Company's Vice President, Eastern Sales. She is a graduate of Santa Clara University. Timothy J. Mondavi, age 46, is the Company's Managing Director and Winegrower. He began working at the Robert Mondavi Winery in 1974 and has been a member of the Board of Directors since 1978. Timothy Mondavi is a member of the Napa Valley Wine Technical Group and has served as a director of the Wine Institute. He graduated from the University of California at Davis, where he studied viticulture and enology. Bartlett R. Rhoades, age 59, became a director of the Company in 1989. He is chairman of the Compensation Committee and a member of the Audit Committee. Mr. Rhoades is the Chief Executive Officer of Medical Data International, Inc. in Irvine, California. From 1991 to 1994 he was the Chief Executive Officer, President and a director of Medical SelfCare Inc. He graduated from Harvard College and the Harvard Graduate School of Business. RECOMMENDATION The Board of Directors recommends that Class A shareholders vote FOR re-election of the above-named Class A Directors and that Class B shareholders vote FOR re-election of the above-named Class B Directors. VOTE REQUIRED The three nominees for Class A Directors and the five nominees for Class B Directors receiving the highest number of affirmative votes of the shares entitled to be voted for them shall be elected as Class A Directors and Class B Directors, respectively. Votes withheld from any director are counted for purposes of determining the presence or absence of a quorum, but have no legal effect under California law. While there is no definitive statutory or case law authority in California as to the proper treatment 3 6 of abstentions and broker non-votes in the election of directors, the Company believes that both abstentions and broker non-votes should be counted for purposes of determining whether a quorum is present at the Annual Meeting. In the absence of precedent to the contrary, the Company intends to treat abstentions and broker non-votes with respect to the election of directors in this manner. OTHER EXECUTIVE OFFICERS The following are additional executive officers of the Company. All executive officers serve at the discretion of the Board of Directors, subject to the terms of any employment agreement. Gregory M. Evans, age 48, has been the Company's Chief Financial Officer since 1983. Mr. Evans graduated from the University of California at Berkeley and holds an M.B.A. degree from the Harvard Graduate School of Business. Peter Mattei, age 45, has been the Company's Senior Vice President, Production and Vineyards since 1991. Mr. Mattei holds a B.S. degree from the University of California at Davis and an M.B.A. degree from Stanford University. Michael K. Beyer, age 48, became the Company's Senior Vice President, General Counsel and Secretary in 1992. From 1978 to 1992, he was a member of the law firm of Feldman, Waldman and Kline. Mr. Beyer graduated from Harvard College and Boalt Hall School of Law of the University of California. Alan E. Schnur, age 44, joined the Company in August 1994 as Senior Vice President, Human Resources. From 1989 to 1994 he was a principal in Towers Perrin, a management consulting firm. He has a B.A. and Ph.D. from the University of California at Berkeley. Mitchell J. Clark, age 48, began working for the Company in 1979 and became Senior Vice President, Sales in 1994. He is a graduate of San Diego State University. Martin C. Johnson, age 46, joined the Company in 1992 and became Senior Vice President, Marketing in 1994. Prior to joining the Company, Mr. Johnson was Vice President, Marketing of Heublein Fine Wine Group. He is a graduate of Northern Arizona University. Steven R. Soderberg, age 37, joined the Company in January 1997 as the Senior Vice President, Information Systems. Prior to joining the Company he was Director of Information Systems, responsible for both International Information Systems and Application Development, at Symantec Corporation. Mr. Soderberg is a graduate of Stanford University. MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS The Board of Directors held a total of four meetings during fiscal 1997. The Board of Directors has a Compensation Committee and an Audit Committee. Messrs. Greer, Rhoades and Farella sit on those committees. The Compensation Committee adopts and administers compensation plans for executive officers of the Company, including the Company's 1993 Equity Incentive Plan. The Compensation Committee held six meetings in fiscal 1997. The Audit Committee selects the independent auditors for the Company (subject to ratification by the shareholders), reviews the scope and results of the annual audit, approves the services to be 4 7 performed by the independent auditors, and reviews the independence of the auditors, the performance and fees of the independent auditors, the effectiveness and adequacy of the system of financial reporting and internal accounting controls, and the scope and results of internal auditing procedures. The Audit Committee held 6 meetings during fiscal 1997. During fiscal 1997, no director attended fewer than 75% of the aggregate of all meetings of the Board of Directors and the committees, if any, upon which such director served and which were held during the period of time that such person served on the Board or such committee. PRINCIPAL SHAREHOLDERS The following table sets forth certain information as of September 15, 1997 with respect to the beneficial ownership of the outstanding shares of Class A Common Stock and Class B Common Stock by (i) all persons known by the Company to own more than five percent of either class of the Company's Common Stock, (ii) each director and director nominee and the executive officers named below under "Executive Compensation -- Summary Compensation Table", and (iii) all directors and executive officers as a group. Except as indicated 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.
CLASS A COMMON STOCK CLASS B COMMON STOCK (1) -------------------------------------------------------- ----------------------------- SHARES THAT MAY BE ACQUIRED WITHIN 60 DAYS OUTSTANDING BY EXERCISE OF OPTIONS PERCENT SHARES SHARES OR CONVERSIONS OF OF BENEFICIALLY PERCENT BENEFICIAL OWNER BENEFICIALLY OWNED CLASS B SHARES CLASS (2) OWNED OF CLASS - - ---------------- ------------------ -------------- --------- ----- -------- Robert G. Mondavi -- 2,328,257(3) 23.6 2,328,257 30.3 7801 St. Helena Hwy Oakville, CA 94562 R. Michael Mondavi 1,000 1,896,485(4) 20.1 1,688,985(7) 22.0 7801 St. Helena Hwy Oakville, CA 94562 Timothy J. Mondavi -- 1,772,785(5) 19.1 1,690,285(8) 22.0 7801 St. Helena Hwy Oakville, CA 94562 Marcia Mondavi Borger -- 1,647,555(6) 18.0 1,628,055(9) 21.2 7801 St. Helena Hwy Oakville, CA 94562 Capital Group Cos. 1,201,420(10) -- 16.0 -- -- Wellington Management 551,600(10) -- 7.3 -- -- Fidelity Management 551,500(10) -- 7.3 -- -- Clifford S. Adams 33,612(11) 103,034(12) 1.8 -- -- Gregory M. Evans -- 147,250(12) 1.9 -- -- Mitchell J. Clark 328 37,500(12) * -- -- Frank E. Farella -- 18,700(12) * -- -- Philip Greer -- 18,700(12) * -- -- Bartlett R. Rhoades 800 18,700(12) * -- -- James L. Barksdale -- 3,514(12) * -- All executive officers and 35,740 8,130,049(13) 52.0 7,335,582(14) 95.6 directors as a group (16 persons)
- - ---------- * Less than 1% (1) 214,209 shares of Class B Common Stock held by Robert Mondavi Properties, Inc., a wholly-owned subsidiary of the Company, are not considered outstanding for purposes of these calculations. (2) Under Rule 13d-3 under the Securities Exchange Act of 1934, as amended, a holder of Class B Common Stock is deemed to own beneficially the same number of shares of Class A Common Stock since the holder has the right, 5 8 subject to the terms of the Stock Buy-Sell Agreement among the Company and the holders of the outstanding shares of Class B Common Stock, to convert his Class B Common Stock to Class A Common Stock. Pursuant to the same Rule, for purposes of calculating the percentage of the outstanding shares of Class A Common Stock owned by each named shareholder, the shares of Class A Common Stock which a holder of Class B Common Stock may acquire by conversion are considered outstanding only with respect to that holder. As a result, the stated percentages of ownership of the Class A Common Stock do not reflect the beneficial ownership of the Class A Common Stock which is actually outstanding as of September 15, 1997. (3) Represents shares of Class A Common Stock which the holder has the right to acquire upon conversion of Class B Common Stock. (4) Includes 1,688,985 shares of Class A Common Stock which the holder has the right to acquire upon conversion of Class B Common Stock and 207,500 shares of Class A Common Stock issuable pursuant to options exercisable within 60 days of September 15, 1997. (5) Includes 1,690,285 shares of Class A Common Stock which the holder has the right to acquire upon conversion of Class B Common Stock and 82,500 shares of Class A Common Stock issuable pursuant to options exercisable within 60 days of September 15, 1997. (6) Represents 1,628,055 shares of Class A Common Stock which the holder has the right to acquire upon conversion of Class B Common Stock and 19,500 shares of Class A Common Stock issuable pursuant to options exercisable within 60 days of September 15, 1997. (7) Excludes 80,000 shares of Class B Common Stock held by irrevocable trusts for the benefit of Michael Mondavi's children. Michael Mondavi is not the trustee of such trusts and has neither voting nor dispositive power with respect to such shares. (8) Excludes 80,000 shares of Class B Common Stock held by irrevocable trusts for the benefit of Timothy Mondavi's children. Timothy Mondavi is not the trustee of such trusts and has neither voting nor dispositive power with respect to such shares. (9) Excludes 142,230 shares of Class B Common Stock held by irrevocable trusts for the benefit of Ms. Borger's children. Ms. Borger is not the trustee of such trusts and has neither voting nor dispositive power with respect to such shares. Also excludes 80,000 shares of Class B Common Stock held in trusts for the benefit of Timothy Mondavi's children, for which Ms. Borger serves as trustee and with respect to which she disclaims beneficial ownership. (10) Based on most recent available filings on Form 13F. (11) Excludes 500 shares owned by Mr. Adams as trustee. Mr. Adams disclaims any beneficial interest in the shares owned in his capacity as trustee. (12) Represents shares of Class A Common Stock issuable pursuant to outstanding options exercisable within 60 days of September 15, 1997. (13) Includes an aggregate of 794,467 shares of Class A Common Stock issuable pursuant to outstanding options exercisable within 60 days of September 15, 1997. (14) Excludes an aggregate of 36,900 shares of Class B Common Stock gifted by Robert G. Mondavi to his nine grandchildren. AGREEMENT AMONG HOLDERS OF CLASS B COMMON STOCK The holders of the outstanding shares of Class B Common Stock and the Company are parties to a Stock Buy-Sell Agreement (the "Buy-Sell Agreement"). Pursuant to the Buy-Sell Agreement, no holder of shares of Class B Common Stock may, with limited exceptions, transfer Class B Common Stock or convert Class B Common Stock into Class A Common Stock without first offering such stock to the Company and then to the other parties to the Buy-Sell Agreement. The Buy-Sell Agreement applies to a broad range of transfers and dispositions other than (i) certain lifetime or testamentary transfers to issue of Robert and Marjorie Mondavi, (ii) transfers to or in trust for charitable institutions or (iii) certain other permitted transfers. 6 9 EXECUTIVE COMPENSATION The following table sets forth all compensation received for services rendered to the Company in all capacities during the fiscal years ended June 30, 1997, 1996 and 1995, respectively, by (i) the Company's Chief Executive Officer and (ii) the Company's four other most highly compensated executive officers (together, the "Named Executive Officers"): SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION ----------------------------------------------------- --------------------------------------------- OTHER # SECURITIES PAYOUTS NAME AND PRINCIPAL FISCAL ANNUAL UNDERLYING LONG-TERM ALL OTHER POSITION YEAR SALARY BONUS COMPENSATION OPTIONS INCENTIVE PLAN COMPENSATION -------- --------- --------- ------------- --------- --------------- ------------ (1) (10) (11) Robert G. Mondavi 1997 $ 450,000 -- --(2) -- -- -- Chairman of the Board 1996 450,000 -- --(2) -- -- -- 1995 450,000 $ 50,000 --(2) -- -- -- R. Michael Mondavi 1997 400,000 -- $ 75,500(3) 50,000 $ 372,270 $ 263,784 Chief Executive Officer 1996 429,016 400,000 81,984(4) 70,000 181,584 356,785 1995 444,377 250,000 82,044(5) -- 183,624 287,349 Timothy J. Mondavi 1997 400,000 25,000 58,524(6) 30,000 372,270 263,784 Managing Director, 1996 429,016 150,000 63,697(7) 35,000 181,584 356,785 Winegrower 1995 444,377 100,000 60,200(8) -- 183,624 287,349 Gregory M. Evans 1997 292,065 80,000 --(2) 20,000 145,424 189,503 Chief Financial Officer 1996 292,065 150,000 --(2) -- 100,027 269,390 1995 292,065 120,000 --(2) 25,000 95,138 229,649 Mitchell J. Clark 1997 200,000 65,000 32,488(9) 30,000 -- 14,000 Sr. Vice President Sales 1996 189,615 150,000 --(2) -- -- 13,273 1995 150,000 99,000 --(2) 25,000 -- 10,500
- - ---------- (1) Includes perquisites, none of which exceeded 25% of total perquisites for the Named Executive Officer, except as noted. (2) Individual perquisites do not exceed the lesser of $50,000 or 10% of salary and bonus. (3) Includes $35,500 in life insurance benefits and $19,500 in financial planning services. (4) Includes $35,500 in life insurance benefits and $30,752 in financial planning services. (5) Includes $35,500 in life insurance benefits and $20,379 in financial planning services. (6) Includes $18,524 in life insurance benefits and $23,588 in financial planning services. (7) Includes $18,524 in life insurance benefits and $24,640 in financial planning services. (8) Includes $18,524 in life insurance benefits and $19,630 in financial planning services. (9) Includes $12,488 in life insurance benefits and $12,435 in automobile allowance. (10) Represents that portion paid in fiscal 1995, 1996 and 1997, respectively, of the named executive's accumulated earnings on 1990, 1991 and 1992 units granted under the terms of the Company's Executive Incentive Compensation Plan (the "E.I.C.P."). Under the E.I.C.P., the Compensation Committee of the Board of Directors may make annual awards of units to senior management plan participants. Each unit earns a percentage of plan income, based on the Company's pre-tax earnings as calculated on a FIFO basis, for a period of five years. The percentage of plan income earned varies from 0.01% to 0.014%. Unit earnings vest at the rate of 20% per year over the same five-year period. At the end of five years, a portion of the earnings is distributed to the participant and any balance is deferred and earns interest at the Company's average borrowing rate until distribution under the terms of the E.I.C.P. For units granted prior to fiscal 1989, up to 30% of the earnings were initially distributed to the participant. For units granted during and after fiscal 1989, the participant may elect in the year of grant to receive up to 100% of earnings in the initial distribution or to defer any portion of such amount. Upon termination of employment due to death, disability, retirement or involuntary termination without cause, the participant's units become fully vested and the participant is entitled to receive all earnings accumulated on units through the end of the fiscal year in which the termination occurs. Upon termination of employment for cause or certain voluntary terminations, the participant is entitled to receive all earnings accumulated on units through the end of the fiscal year prior to the year the termination occurs. The Company has the option to distribute plan balances over a ten-year period. (11) Includes the Company's contribution on behalf of the Named Executive Officers to the Company's defined contribution retirement plan and supplemental executive retirement plan. Retirement plan contributions in fiscal 1997 were $54,059 for R. Michael Mondavi; $54,059 for Timothy J. Mondavi; $14,000 for Mitchell J. Clark; and $30,620 for Gregory M. Evans. Also includes earnings as a percentage of fiscal 1997 plan income under the E.I.C.P. described at Note 10 above. Fiscal 1997 E.I.C.P. earnings were $209,725 for R. Michael Mondavi; $209,725 for Timothy J. Mondavi; and $158,883 for Gregory M. Evans. In fiscal 1992, no earnings were declared 7 10 on outstanding units under the E.I.C.P. and the plan was amended to provide participants with higher accrual rates over the 1993 through 1996 fiscal years with respect to outstanding units. Outstanding units will continue to accrue earnings in future years, but the Board of Directors has determined that no new unit awards will be made under the E.I.C.P. subsequent to fiscal 1993. Amounts indicated do not include interest on plan balances. Amounts reported as E.I.C.P. earnings are reported again as Long Term Incentive Plan Payouts in the year payment is made. The accrued but unpaid balances, exclusive of interest earnings, for all participants as a group under the E.I.C.P. at June 30, 1995, 1996 and 1997, respectively, were $5,189,348, $5,761,179 and $5,418,056. OPTION GRANTS The following table sets forth information with respect to options granted to the Named Executive Officers during the 1997 fiscal year: OPTION GRANTS IN LAST FISCAL YEAR (1)
POTENTIAL REALIZABLE VALUE AT ASSUMED ANNUAL RATES OF STOCK PRICE APPRECIATION FOR INDIVIDUAL GRANTS OPTION TERM (2) ---------------------------------------------------------------- -------------------------- NUMBER OF PERCENT OF TOTAL SECURITIES OPTIONS GRANTED EXERCISE OR UNDERLYING TO EMPLOYEES IN BASE PRICE NAME OPTIONS GRANTED FISCAL YEAR ($/SH) EXPIRATION DATE 5% 10% - - ---- --------------- ----------- --------- ----------------- --------- ----------- Robert G. Mondavi - - - - - - R. Michael Mondavi 50,000 24.5 $ 28.50 9/03/06 $ 896,175 $ 2,271,083 Timothy J. Mondavi 30,000 14.7 28.50 9/03/06 537,705 1,362,650 Gregory M. Evans 20,000 9.8 28.50 9/03/06 358,470 908,433 Mitchell J. Clark 30,000 14.7 28.50 9/03/06 537,705 1,362,650
(1) All options in this table relate to shares of Class A Common Stock. (2) Potential realizable value is based on an assumption that the stock price appreciates at the annual rate shown (compounded annually) from the date of grant until the end of the option term (ten years). These numbers are calculated based on the requirements promulgated by the Securities and Exchange Commission and do not reflect the Company's estimate of future stock price growth. Actual gains, if any, on stock option exercises are dependent on the Company's future financial performance, overall market conditions and the optionee's continued employment during the prescribed vesting period. OPTION EXERCISES AND YEAR-END VALUE OF UNEXERCISED OPTIONS The following table sets forth information regarding each exercise of stock options during the 1997 fiscal year by a Named Executive Officer and the number and value of unexercised stock options held by the Named Executive Officers at June 30, 1997: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES (1)
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-MONEY UNEXERCISED OPTIONS AT FISCAL YEAR END OPTIONS AT FISCAL YEAR END (2) SHARES ACQUIRED VALUE -------------------------------------- ---------------------------------- NAME ON EXERCISE REALIZED ($) UNEXERCISABLE EXERCISABLE EXERCISABLE UNEXERCISABL - - ---- --------------- ------------- -------------------- ----------- --------------- -------------- Robert G. Mondavi -- -- -- -- -- -- R. Michael Mondavi -- -- 170,000 -- $8,032,500 -- Timothy J. Mondavi 50,000 $1,537,500 65,000 -- 3,071,250 -- Gregory M. Evans -- -- 137,500 42,500 6,496,875 $2,008,125 Mitchell J. Clark -- -- 33,333 36,667 1,574,984 1,732,516
(1) All options in this table relate to shares of Class A Common Stock. (2) Represents the fair value of the underlying securities at fiscal year-end ($47.25 per share based on the NASDAQ closing price) minus the exercise price. 8 11 BOARD COMPENSATION Directors who are not employed by the Company are paid a $12,000 annual retainer, $1,000 for each Board meeting attended and $500 for each committee meeting attended. Non-employee directors are also reimbursed for expenses incurred in attending meetings. Prior to the Company's initial public offering in June 1993, Messrs. Greer, Farella and Rhoades were each granted options under the Company's 1993 Non-Employee Directors' Stock Option Plan to buy 12,000 shares of Class A Common Stock at $11.90 per share. The options are exercisable over a ten-year period beginning February 26, 1993, the date of grant, and vest at the rate of 1.667% per month over a period of five years. Pursuant to the Company's 1993 Non-Employee Directors' Stock Option Plan, any non-employee Director of the Company is similarly entitled, on the date of his or her initial election as a non-employee director, to a grant of options to acquire shares of Class A Common Stock. On May 29, 1996, Mr. Barksdale was granted options to buy 5,345 shares of Class A Common Stock at $28.0625 per share. On November 4, 1996, Mr. Adams was granted options to buy 5,172 shares of Class A Common Stock at $29.00 per share. The Non-Employee Directors' Stock Option Plan also provides for additional annual grants to the outside directors of 2,000 options each year. REPORT OF THE COMPENSATION COMMITTEE General The Compensation Committee of the Board of Directors administers the Company's executive compensation program. The Compensation Committee is composed entirely of directors who are not employees of the Company. The objective of the Company's executive compensation program is to develop and maintain executive reward programs which (i) contribute to the enhancement of shareholder value, (ii) are competitive with the pay practices of other industry-leading companies and (iii) attract, motivate and retain key executives who are critical to the long-term success of the Company. As discussed in detail 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, stock option grants and other stock-based awards under the Company's Amended and Restated 1993 Equity Incentive Plan (the "1993 Equity Plan") and unit awards under the Company's Executive Incentive Compensation Plan (the "E.I.C.P."). These elements are designed to operate on an integrated basis and together comprise total compensation value. The Compensation Committee reviews executive compensation in light of the Company's performance during the fiscal year and compensation data at companies that are considered comparable. In reviewing the Company's performance during fiscal 1997, the Compensation Committee considered a variety of factors. Net revenues increased by 25% to $300.8 million in fiscal 1997 from $240.8 million in fiscal 1996. At the same time net income increased by 15% to $28.2 million in fiscal 1997 from $24.4 million in fiscal 1996, and operating expenses as a percentage of net revenues were reduced. The Company also launched its new Vichon Mediterranean brand, introduced the Caliterra wines from Chile, initiated other product line extensions, and pursued the expansion of the Woodbridge Winery and Napa Valley vineyard replantings. In reviewing Company performance, the Compensation Committee considered these factors as a whole without assigning specific weights to particular factors. Base Salary Base salary levels for the Company's executives are determined by the Compensation Committee based on factors such as individual performance (e.g. leadership, level of responsibility, management 9 12 skills and industry activities), Company performance (as discussed above) and competitive pay practices. The base salary level for Mr. Robert Mondavi is established by his employment agreement described below. Base compensation for Michael Mondavi, the Company's Chief Executive Officer, was reviewed by the Compensation Committee in the context of compensation packages awarded to senior executive officers at comparable companies selected by an outside compensation consultant. The companies included in the comparison are not the same as the companies included in the peer group index in the performance graph included elsewhere herein. The Compensation Committee believes that the Company's most direct competitors for executive talent in the San Francisco Bay Area are not necessarily the same companies to which the Company would be compared for stock performance purposes. The Chief Executive Officer's base salary was reviewed against the 75th percentile of the comparative data. Annual Cash Incentives The annual cash incentive is designed to provide a short-term (one-year) incentive to executives, is based on the Company meeting certain predetermined levels of pre-tax operating income, and is allocated among the executives based on the Committee's assessment of the performance of each executive, following consultation with the Chief Executive Officer. In addition, cash incentive compensation may be granted by the Committee to certain executives based on their performance of individual goals established in advance by the Committee. These individual goals may include objective and subjective factors, such as leadership and management skills, successful acquisitions or financings and improved performance of assets. Annual cash incentives were awarded to the Named Executive Officers, as indicated in the above Summary Compensation Table, based on the Committee's evaluation of each Named Executive Officer's contribution to the Company's performance in fiscal 1997. Stock Options Stock options are designed to provide long-term (ten-year) incentives and rewards tied to the price of the Company's Class A Common Stock. Given the fluctuations of the stock market, stock price performance and financial performance are not always consistent. The Compensation Committee believes that stock options, which provide value to participants only when the Company's shareholders benefit from stock price appreciation, are an important component of the Company's executive compensation program. The Compensation Committee has not established any target level of ownership of Company Class A Common Stock by the Company's executives. However, retention of shares of Company stock by executives is encouraged. On September 3, 1996, the Board of Directors, on recommendation of the Compensation Committee, awarded an aggregate of 180,000 options to the Company's executive officers, including the options granted to Named Executive Officers as reported above in the section captioned "Option Grants." The Board has adopted, subject to ratification by the Shareholders at the 1997 Annual Meeting, amendments to the 1993 Incentive Plan to broaden the types of stock-based awards encompassed within the Plan. These new incentives include stock appreciation rights, performance grants, stock bonuses and awards of restricted stock. The Committee believes that such incentives will provide it with more tools to align compensation with the long term financial interests of the Company and its Shareholders. E.I.C.P. Like the 1993 Equity Plan, the E.I.C.P. is designed to provide long-term (five-year) incentives and rewards tied to Company performance. Under the E.I.C.P., the Compensation Committee may make annual awards of units to executive officers which earn a percentage of plan income based on the 10 13 Company's pre-tax net income, as more fully described in footnote 10 to the Summary Compensation Table. The use of the E.I.C.P. as a regular element of compensation for executive officers was discontinued upon adoption of the 1993 Equity Plan and no awards were made during fiscal 1997. However, pursuant to the terms of the E.I.C.P., outstanding units will continue to accrue earnings in future years. The Summary Compensation Table shows under the caption "Payouts - Long Term Incentive Plan" the cash payments made to the Named Executive Officers under the E.I.C.P. during fiscal 1997. While use of E.I.C.P. awards will no longer be a regular element of long-term compensation, the Compensation Committee believes that the E.I.C.P. has and continues to serve as a valuable long-term incentive for executive officers and as a strong and direct link between corporate performance and compensation. The foregoing report is given by the members of the Compensation Committee, namely: Frank E. Farella Philip Greer Bartlett R. Rhoades COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee of the Company's Board of Directors consists of Frank Farella, Philip Greer and Bartlett Rhoades. Mr. Farella is a partner in the law firm of Farella, Braun & Martel which provides certain legal services to the Company. The Company also buys wine grapes from Mr. Farella at market prices pursuant to a written agreement. The Company paid Mr. Farella $18,000 for grapes during the fiscal year ended June 30, 1997. PERFORMANCE GRAPH The line graph below compares the cumulative total return to holders of the Company's Common Stock in the period from June 10, 1993 (the date the Company was admitted to trading on the NASDAQ National Market System) to June 30, 1997, with the cumulative total return in the same period on (i) the NASDAQ Stock Market Index (U.S.) and (ii) a peer group index comprised of the following companies whose returns have been weighted based on market capitalization as of June 30, 1997: Chalone Wine Group, Ltd., Canandaigua Wine Inc., Adolph Coors Company, Anheuser-Busch Companies, Inc., Brown-Forman Corporation and Genesee Corporation. The graph assumes an investment of $100.00 on June 10, 1993 in the Company and in the two comparison indices. "Total return," for purposes of the graph, assumes reinvestment of all dividends. [GRAPH] 11 14 The information contained in the performance graph shall not be deemed to be "soliciting material" or to be "filed" with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or the Securities Exchange Act of 1934 (the "Exchange Act"), except to the extent that the Company specifically incorporates it by reference into such filing. BENEFICIAL OWNERSHIP REPORTING COMPLIANCE The Company's executive officers, directors and greater-than-ten-percent beneficial owners are required under Section 16(a) of the Exchange Act to file reports of ownership and changes in ownership with the SEC. Copies of those reports must also be furnished to the Company. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons that no Forms 5 were required for those persons, the Company believes that during fiscal 1997 all filing requirements applicable to the Company's officers, directors and greater-than-ten-percent beneficial owners under Section 16(a) of the Exchange Act were complied with. EMPLOYMENT AGREEMENT In February 1993, Robert Mondavi entered into an agreement with the Company which replaced his Personal Services Agreement executed in 1979. The current agreement provides for a fixed annual salary of up to $500,000. CERTAIN TRANSACTIONS The Company buys wine grapes from Frank Farella at market prices pursuant to a written agreement. See "Executive Compensation--Compensation Committee Interlocks and Insider Participation." It is the Company's current policy that all transactions by the Company with its officers, directors, 5% shareholders and their affiliates will be entered into only if such transactions are approved by a majority of the disinterested directors, are on terms no less favorable to the Company than could be obtained from unaffiliated parties and are reasonably expected to benefit the Company. APPOINTMENT OF AUDITORS (PROPOSAL 2 ON PROXY) The firm of Price Waterhouse LLP has served as independent auditors for the Company since fiscal 1978 and has been appointed by the Audit Committee of the Board of Directors as the Company's independent auditors for the fiscal year 1998, subject to ratification by the shareholders at the Annual Meeting. Representatives of Price Waterhouse LLP are expected to be available at the annual meeting to respond to appropriate questions from shareholders and will have the opportunity to make a statement if they wish. RECOMMENDATION The Board of Directors recommends that shareholders vote FOR ratification of the appointment of Price Waterhouse LLP as the Company's independent auditors. 12 15 RATIFICATION OF AMENDMENTS OF 1993 EQUITY INCENTIVE PLAN (PROPOSAL 3 ON PROXY) The Company's 1993 Equity Plan was adapted by the Board of Directors and the shareholders, and became effective in February 1993. A total of 1,835,294 shares of Class A Common Stock were reserved for issuance under the 1993 Equity Plan at time of its adoption. On September 10, 1997, the Board of Directors approved, subject to ratification by the shareholders at this Annual Meeting, amendments to the 1993 Equity Plan to (i) reserve an additional 750,000 shares of Class A Common Stock for issuance under the 1993 Equity Plan; (ii) expand the types of stock-based awards authorized for issuance; (iii) meet certain requirements of Section 162(m) of the Code; and (iv) conform the 1993 Equity Plan to recent amendments of Rule 16b-3 of the Securities and Exchange Commission. Attached as Exhibit A is a copy of the 1993 Equity Plan as restated to give effect to the proposed amendments. The following summary of the 1993 Equity Plan, as so amended, is qualified in its entirety by reference to Exhibit A. SHARES AVAILABLE UNDER PLAN To date options to purchase an aggregate of 1,834,256 shares of Class A Common Stock have been granted under the 1993 Equity Plan, net of options that have been forfeited and become available for regrant. Accordingly there remain 1,038 options available for grant, before increase in the number of shares reserved for that purpose. If the proposed amendments of the 1993 Equity Plan are approved by the shareholders, the Board of Directors (or its designated committee) will have authority to grant up to 751,038 additional options. PURPOSE The purpose of the 1993 Equity Plan is to afford participants the opportunity to buy an equity interest in the Company, so as to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive for employees and consultants of the Company and to promote the success of the Company's business. ADMINISTRATION The 1993 Equity Plan is administered by the Compensation Committee of the Board of Directors. The 1993 Equity Plan provides that it shall be administered so as to satisfy certain requirements under federal securities laws. The interpretation and construction of any provision of the 1993 Equity Plan shall be within the sole discretion of the Compensation Committee whose determination shall be final and binding. ELIGIBILITY The 1993 Equity Plan provides that options and other forms of stock-based awards may be granted to key employees (including officers and directors who are also employees) and consultants to the Company or any parent or subsidiary. Incentive stock options may only be granted to employees. The Compensation Committee selects qualified participants and determines the amount of the award and pertinent terms and restrictions applicable to each participant. In making such determination, there is taken into account the duties and responsibilities of the employee or consultant, the value of his or her services, his or her present and potential contribution to the success of the Company and other relevant factors. 13 16 TYPES OF STOCK-BASED INCENTIVES As originally adopted, the 1993 Equity Plan authorized stock options and stock bonuses. The revisions of the plan authorize the Compensation Committee to grant stock options, stock appreciation rights, performance grants, stock bonuses and awards of restricted stock. TERMS OF OPTIONS Options granted under the 1993 Equity Plan are evidenced by a written Option Agreement between the Company and the optionee. The Compensation Committee may determine the specific terms of each Option Agreement within the limits set forth in the 1993 Equity Plan. Options are designated at the time of grant as incentive stock options or non-statutory options. Options granted by the Company are typically subject to the following terms and conditions: (a) Exercise of the Option. Options generally vest at the rate of 1.67% per month over a 60 month period and terminate ten years after the date of the grant. An option is exercised by giving written notice of exercise to the Company, specifying the number of full shares of Class A Common Stock to be purchased and tendering payment of the purchase price to the Company. Payment for shares issued upon exercise of an option may be by cash, or, in the discretion of the Board or its committee, by (i) delivery to the Company of other Class A Common Stock, (ii) a deferred payment plan with interest payable at least annually, (iii) various cashless exercise methods, or (iv) any other form of legal consideration that is acceptable to the Board. Options expire ten years after the date of grant. (b) Exercise Price. The exercise price of any incentive stock option granted under the 1993 Equity Plan must be at least 100% of the fair market value per share at the time of grant. The exercise price of any non-statutory stock option granted under the 1993 Equity Plan must be at least 50% of the fair market value per share at the time of grant. The Compensation Committee may, with the consent of holders of outstanding options, reprice or grant new options in substitution for outstanding options. (c) Termination of Employment. If an optionee's employment or consulting relationship with the Company is terminated, options which have vested must generally be exercised within six months after termination. In case of an optionee's death, disability or retirement, the Compensation Committee, in its discretion, may extend the option exercise period. (d) Transferability. Except as may be allowed by the Compensation Committee in specific cases, options may not be sold, pledged, assigned or otherwise disposed of other than by will or by the laws of descent and distribution and may be exercised during the lifetime of the optionee only by such optionee. STOCK APPRECIATION RIGHTS A stock appreciation right or SAR is a right to receive a payment, in cash, shares of stock or a combination of cash and stock, equal to the excess of the market price at time of exercise of a specified number of shares over the exercise price of the SAR. The 1993 Equity Plan authorizes the Compensation Committee to grant SAR's either separately or in tandem with options. PERFORMANCE GRANTS A performance grant is a grant, subject to the attainment of specified performance goals, of shares of stock or of the right to receive shares of stock (or their cash equivalent or a combination of both) in the future. The 1993 Equity Plan authorizes the Compensation Committee to fix the terms of each performance grant, including the performance goals on whose attainment the value of the grant is 14 17 conditioned. Performance goals may include, among other things, return on assets, operating ratios, cash flow, shareholder return, revenue growth, net income, earnings per share, debt reduction, return on investment, revenue and attainment of budgets. The earned portion of a performance grant may be paid out in restricted or non-restricted shares, cash or a combination of shares and cash in the discretion of the Compensation Committee. STOCK BONUSES AND RESTRICTED STOCK The 1993 Equity Plan authorizes the Compensation Committee to award shares as a stock bonus, as well as to make shares available to a participant for purchase, subject to vesting requirements or other restrictions as the Compensation Committee may impose. Stock may be awarded or sold in consideration of past services rendered to the Company. Awards may provide that shares will be issued at the time of award, subject to forfeiture if the restrictions are not satisfied, or that shares will be issued only upon fulfillment or expiration of the restrictions. AMENDMENT AND TERMINATION OF THE PLAN The Board may amend or terminate the 1993 Equity Plan, except that such termination may not affect options previously granted nor may any amendment make any change in an option previously granted, which adversely affects the rights of any participant. No amendment may be made to the 1993 Equity Plan without prior approval of the shareholders to the extent necessary to comply with Rule 16b-3 under the Securities Exchange Act of 1934, as amended, or Section 422 of the Internal Revenue Code of 1986, as amended. Unless sooner terminated, the 1993 Equity Plan will expire on February 25, 2003. RESTRICTIONS ON RESALE Certain officers and directors of the Company may be deemed to be "affiliates" of the Company as that term is defined under the Securities Act of 1933. Even though the sale of Class A Common Stock by the Company to affiliates and other participants under the 1993 Equity Plan is registered under the Securities Act, such shares may only be reoffered or resold by affiliates pursuant to an effective registration statement, Rule 144 under the Securities Act or another exemption from the registration requirements of the Securities Act. Participants who are not affiliates may resell stock acquired under the 1993 Equity Plan without further registration and free of the restrictions of Rule 144. Executive officers and directors who participate in the 1993 Equity Plan may also be subject to the prohibition on short-swing profits contained in Section 16(b) of the Securities Exchange Act of 1934, although the 1993 Equity Plan is designed to meet the exemption created by Rule 16 b-3. TAX CONSEQUENCES OF OPTIONS Incentive Stock Options (a) General Rules. If an option granted under the 1993 Equity Plan is treated as an incentive stock option (an "ISO") under the Code, the optionee will recognize no income upon grant of the option, and will recognize no income upon exercise of the option unless the alternative minimum tax rules apply. See "Alternative Minimum Tax" below. The Company will not be entitled to a deduction either at the time of the option grant or upon exercise of the option. (b) Holding Periods. Upon the sale of the shares at least two years after the grant of an ISO and one year after exercise of an ISO (the "statutory holding periods"), any gain will be taxed to the optionee as either mid-term or long-term capital gain. If the statutory holding periods are not satisfied (i.e., the optionee makes a "disqualifying disposition"), the optionee will recognize compensation income equal to the difference between the exercise price and the lower of (i) the fair market value of the stock at 15 18 the date of the option exercise or (ii) the sale price of the stock, and the Company will be entitled to a deduction in the same amount. Any additional gain or loss recognized on a disqualifying disposition of the shares will be characterized as capital gain or loss. Different rules may apply if shares are purchased by an optionee who is subject to the short-swing prohibitions of Section 16(b) of the Securities Exchange Act of 1934 and the optionee subsequently disposes of such shares prior to the expiration of statutory holding periods. Vested ISO's which are not exercised within ninety days after the optionee's termination of employment automatically become non-statutory options and are taxed in the manner described below. (c) Surrendered Shares. If shares of the Company's Class A Common Stock which were acquired on exercise of an ISO are surrendered ("surrendered shares") in connection with the exercise of another ISO within the statutory holding periods, the exchange will be treated as a "disqualifying disposition" of such surrendered shares and the excess of the fair market value of such shares on the date they were purchased over the purchase price will be recognized by the optionee as compensation income, unless the fair market value of the surrendered shares declined in value since the shares were purchased. In that event, the optionee's compensation income will be limited to the amount (if any) by which the fair market value of the surrendered shares at the date of the exchange exceeds the option price paid for such surrendered shares. Any excess of the fair market value of the surrendered shares at the date the shares are surrendered over the purchase price paid for such surrendered shares, which is not recognized as compensation income as described above, will not be recognized as taxable gain at the time of the exchange. The Company will be allowed a deduction in the amount of the ordinary income recognized by the optionee. If the surrender of shares of the Company's Class A Common Stock in connection with the exercise of an ISO does not result in a disqualifying disposition of such surrendered shares, the optionee will not recognize taxable income at the time of such option exercise (unless the alternative minimum tax rules apply), and the Company will not be allowed a deduction. (d) Federal Estate Taxes. Upon the death of an optionee who has not exercised an ISO, the value of such option (determined under applicable Treasury regulations) will be includable in the optionee's estate for federal estate tax purposes. Upon the exercise of such option, the holder's basis in the option shares will include the value of the option included in the estate plus the price paid for the option shares. Different rules apply if the option shares are sold before the expiration of the one-year and two-year holding periods described above. Non-statutory Options (a) General Rules. An optionee will not recognize any taxable income at the time he is granted a non-statutory option. Upon exercise of the option, the optionee will generally recognize compensation income for federal tax purposes measured by the excess, if any, of the then fair market value of the shares over the exercise price. Taxation may be deferred for a six-month period after exercise (unless a Section 83(b) election is filed with the Internal Revenue Service within 30 days after the date of exercise) when shares are purchased by an optionee who is subject to Section 16(b) of the Exchange Act. Upon the surrender of shares of the Company's Class A Common Stock in connection with the exercise of a non-statutory stock option, the optionee will recognize compensation income as described above. A number of the acquired shares, equal in number to the surrendered shares, will have a basis equal to the optionee's basis in the surrendered shares. Any additional shares acquired in the exchange will have a zero basis, increased by any compensation income recognized with respect to the exercise of the non-statutory option. 16 19 The Company will be entitled to a tax deduction in the amount and generally at the time that the Optionee recognizes ordinary income with respect to shares acquired upon exercise of a non-statutory option. (b) Withholding. The compensation income recognized by an optionee who is also an employee or former employee will be treated as wages and will be subject to income tax and employment tax withholding by the Company out of the current compensation paid to the optionee. If such current compensation is insufficient to pay the withholding tax, the optionee will be required to make direct payment to the Company for the tax liability. (c) Gain or Loss on Sale. Upon a resale of such shares by the optionee, any difference between the sales price and the fair market value of the shares on the date of exercise of the non-statutory option will be treated as capital gain or loss. (d) Federal Estate Tax. Upon the death of an optionee who has not exercised his or her non-statutory option, the value of such option (determined under applicable Treasury regulations) will be includable in the optionee's estate for federal estate tax purposes. Upon the exercise of such option, the holder will recognize compensation income as described above, and will be allowed a deduction based upon any estate tax paid with respect to the value of such option. Alternative Minimum Tax The exercise of an ISO may subject the optionee to the alternative minimum tax ("AMT") under Section 55 of the Code. The AMT is calculated by applying a tax rate of 26% on the first $175,000 in excess of the exemption amount and 28% on the excess over $175,000. Alternative minimum taxable income is equal to (i) taxable income adjusted for certain items, plus (ii) items of tax preference, less (iii) an exclusion of $45,000 for joint returns and $33,750 for individual returns. These exclusion amounts are reduced by an amount equal to 25% of the amount by which the alternative minimum taxable income exceeds $150,000 and $112,500, respectively. In computing alternative minimum taxable income, shares purchased upon exercise of an ISO are treated as if they had been acquired by the optionee pursuant to a non-statutory option. This may be particularly significant with respect to optionees who are subject to Section 16(b) of the Exchange Act. See "Non-statutory Options." Under certain circumstances, an optionee may affect the timing and measurement of AMT by filing an election with the Internal Revenue Service under Section 83(b) within thirty days after the date of exercise of an ISO. Therefore, an optionee should consult his own tax advisor prior to exercising an ISO concerning the advisability of filing an election under Section 83(b) of the Code. NEW PLAN BENEFITS A participant granted a Stock Appreciation Right or SAR will have no taxable income upon the grant, but will recognize taxable income upon the exercise of the SAR measured by the difference between the market value of the underlying Class A Common Stock at exercise and the exercise price. The Company will be entitled to a corresponding tax deduction at that time. With respect to Performance Grants, Stock Bonuses and Restricted Stock, a participant will generally include as ordinary income the excess of the fair market value of the Class A Common Stock received over any applicable exercise price at the time that the stock becomes substantially vested. The Company will be entitled to a corresponding tax deduction at that time. 17 20 PROVISIONS RELATING TO SECTION 162(m) OF THE CODE Section 162(m), as added to the Code in 1993, denies a deduction to any publicly held corporation for compensation paid to certain covered employees in a taxable year to the extent such compensation exceeds $1 million. It is possible that compensation attributable to awards under the 1993 Equity Plan, when combined with all other types of compensation received by a covered employee from the Company, may cause this limitation to be exceeded in any particular year. Certain types of compensation, however, including so-called "performance-based compensation," are disregarded for purposes of the deduction limitation. Compensation attributable to stock options and SARs having an exercise price not less than the fair market value of the Company's Class A Common Stock on the grant date should qualify as performance-based compensation under the 1993 Equity Plan. Compensation attributable to Performance Grants has also been structured to qualify for the performance-based compensation exclusion to the $1 million deduction limitation. RECENT STOCK PRICE The closing price of the Class A Common Stock on September 15, 1997, as reported on the NASDAQ Stock Market, was $54.00 per share. RECOMMENDATION The Board of Directors recommends that shareholders vote FOR ratification of the proposed amendments to the 1993 Equity Plan. If this proposal is not approved, the 1993 Equity Plan will remain in effect as adopted. OTHER MATTERS GENERAL The Board of Directors does not know of any business to be presented at the Annual Meeting other than the matters described above. If any other business should properly come before the meeting, it is the intention of the persons named in the proxies to vote in accordance with the recommendation of the Board of Directors. Discretionary authority for them to do so is contained in the proxy cards. DEADLINE FOR SHAREHOLDER PROPOSALS Any shareholder proposal intended for presentation at the 1998 Annual Meeting must be received by the Secretary of the Company at the Company's principal executive offices located at 7801 St. Helena Highway, Oakville, California 94562 by May 31, 1998 for inclusion in the Company's proxy materials related to that meeting. The Bylaws of the Company provide that in order for a shareholder to bring business before or propose director nominations at an Annual Meeting, the shareholder must give written notice to the Secretary of the Company 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 70 days' notice or prior public disclosure of the date of the Annual Meeting is given or made to 18 21 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 first occurs. By Order of the Board of Directors, /s/ MIKE BEYER Mike Beyer Secretary September 29, 1997 19 22 EXHIBIT A THE ROBERT MONDAVI CORPORATION AMENDED AND RESTATED 1993 EQUITY INCENTIVE PLAN 1. PURPOSE. (a) The purpose of this Plan is to provide a means by which selected key Employees of and Consultants to the Company and its Affiliates may be given an opportunity to benefit from increases in value of the stock of the Company through the granting of Stock Awards including (i) Stock Options, (ii) Stock Appreciation Rights, (iii) Performance Grants, (iv) Stock Bonuses and (v) Restricted Stock or Restricted Stock Units, all as defined below. (b) The Company, by means of the Plan, seeks to retain the services of persons who are now Employees of or Consultants to the Company or its Affiliates, to secure and retain the services of new Employees and Consultants, and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Affiliates. (c) In the discretion of the Committee to which responsibility for administration of the Plan is delegated pursuant to Section 3, an Employee or Consultant may be granted any Stock Award permitted under the provisions of the Plan, and more than one Stock Award may be granted to a participant. Stock Awards may be granted as alternatives to or replacements of Stock Awards outstanding under the Plan or any other awards outstanding under another plan or arrangement of the Company or an Affiliate. All Stock Awards which are granted as Options shall be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and a separate certificate or certificates will be issued for shares purchased on exercise of each type of Option. 2. DEFINITIONS. (a) "AFFILIATE" means any parent corporation, subsidiary corporation, whether now or hereafter existing, as those terms are defined in Sections 424(e) and (f), respectively, of the Code or a partnership, joint venture or other entity in which the Company owns a substantial equity interest. (b) "BOARD" means the Board of Directors of the Company. (c) "CODE" means the Internal Revenue Code of 1986, as amended. (d) "COMMITTEE" means the Compensation Committee of the Board of Directors or another committee appointed by the Board in accordance with subsection 3(c) of the Plan. (e) "COMPANY" means The Robert Mondavi Corporation, a California corporation. (f) "CONSULTANT" means any person, including an advisor, engaged by the Company or an Affiliate to render services and who is compensated for such services, provided that the term "Consultant" shall not include Directors who are paid only a director's fee by the Company or who are not compensated by the Company for their services as Directors. (g) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the employment or the relationship as a Consultant is not interrupted or terminated. The Committee, in its sole discretion, may determine whether Continuous Status as an Employee or Consultant shall be considered interrupted in the case of (i) any approved leave of absence, including sick leave, military leave, or any other personal 23 leave, or (ii) transfers between locations of the Company or between the Company and its Affiliates or their successors. (h) "DIRECTOR" means a member of the Board. (i) "DISABILITY" means total and permanent disability as defined in Section 22(e)(3) of the Code. (j) "EMPLOYEE" means any person, including Officers and Directors, employed by the Company or any Affiliate of the Company. Neither service as a Director nor payment of a director's fee by the Company shall be sufficient to constitute "employment" by the Company. (k) "EXCHANGE ACT" means the Securities and Exchange Act of 1934, as amended from time to time. (l) "FAIR MARKET VALUE" means the value of the Company's Class A Common Stock as determined from time to time in good faith by the Committee. (m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder. (n) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as an Incentive Stock Option. (o) "OFFICER" means a person who is an "executive officer" of the Company within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder. (p) "OPTION" means a stock option granted pursuant to the Plan. (q) "OPTION AGREEMENT" means a written agreement between the Company and an Optionee evidencing the terms and conditions of an individual Option grant. Each Option Agreement shall be subject to the terms and conditions of the Plan. (r) "OPTIONED SHARES" means that number of shares of Class A Common Stock of the Company subject to an Option. (s) "OPTIONEE" means an Employee or Consultant who holds an outstanding Option. (t) "PERFORMANCE CRITERIA" means the various business criteria set forth in Section 8(b). (u) "PERFORMANCE GRANT" means a grant of shares of Class A Common Stock or of a right to receive shares of Class A Common Stock (or their cash equivalent or a combination of both) based on such performance goals, factors or other conditions, restrictions or contingencies as may be fixed by the Committee and as set forth herein. (v) "PLAN" means this 1993 Equity Incentive Plan. (w) "RESTRICTED STOCK" AND "RESTRICTED STOCK UNITS" means Optioned Shares awarded and held subject to the restrictions set forth in Section 9, and rights to receive Restricted Stock, respectively. In lieu of Restricted Stock, the Company may grant Restricted Stock Units. 2 24 (x) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3 as in effect when discretion is being exercised with respect to the Plan. (y) "STOCK APPRECIATION RIGHT" or "SAR" means the right of a participant to receive, in cash, Class A Common Stock or Optioned Shares, the excess of (A) the Fair Market Value of a specified number of shares of Class A Common Stock at the time of exercise, over (B) an exercise price established by the Committee. (z) "STOCK AWARD" means any right granted under the Plan, including any Option, Stock Appreciation Right, Performance Grant, any Stock Bonus, an award of Restricted Stock or Restricted Stock Units, and any other incentive-based awards adopted pursuant to Section 15 of this Plan. (aa) "STOCK AWARD AGREEMENT" means a written agreement between the Company and a holder of a Stock Award evidencing the terms and conditions of an individual Stock Award grant. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan. (bb) "STOCK BONUS" means current or deferred Optioned Shares granted pursuant to Section 9. 3. ADMINISTRATION. (a) The Plan shall be administered by a Committee, unless the Board, in its discretion, assumes administration of the Plan, whereupon the Board shall have all powers herein conferred on the Committee. (b) The Committee shall have the power, subject to, and within the limitations of, the express provisions of the Plan: (1) To determine from time to time which of the persons eligible under the Plan shall be granted Stock Awards; when and how each Stock Award shall be granted; the provisions of each such Stock Award (which need not be identical); and the number of shares with respect to which Stock Awards shall be granted to each such person. The maximum number of Optioned Shares that may be covered by Options, Stock Appreciation Rights, Performance Grants, Stock Bonuses and Restricted Stock granted to any one individual shall be 100,000 shares during any single calendar year. (2) To construe and interpret the Plan and Stock Awards granted under it, and to establish, amend and revoke rules and regulations for its administration. The Committee, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan or in any Stock Award in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective. (3) Generally, to exercise such powers and to perform such acts as the Committee deems necessary or expedient to promote the best interests of the Company. (c) The Committee shall consist of not fewer than two (2) members of the Board. The Committee's powers enumerated above shall be subject to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board. (d) All judgments, determinations, and actions of every kind and nature with respect to the Plan and its administration undertaken by the Committee or the Board shall be made in the sole discretion of the Committee or Board as the case may be. 3 25 4. SHARES SUBJECT TO THE PLAN. (a) Subject to the provisions of Section 14 below, the maximum number of Optioned Shares that may be issued to participants and their beneficiaries under the Plan shall not exceed in the aggregate two million five hundred eighty five thousand two hundred ninety four (2,585,294). If any Stock Award shall for any reason expire or otherwise terminate, in whole or in part, without having been exercised in full, the Optioned Shares not acquired shall revert to and again become available for issuance under the Plan. In the event of payment for Optioned Shares or settlement of an SAR by delivery to the Company of other shares of its Class A Common Stock, only the net shares issued shall be considered toward the maximum number of Optioned Shares. In the event of an exercise of an SAR for cash, or payment of cash for Restricted Stock Units, no Optioned Shares shall be deemed to have been utilized. (b) The stock subject to the Plan may be unissued shares or reacquired shares, bought on the market or otherwise. 5. ELIGIBILITY. (a) Incentive Stock Options may be granted only to key Employees. Stock Awards other than Incentive Stock Options may be granted only to key Employees or Consultants. (b) No person shall be eligible for the grant of an Incentive Stock Option if, at the time of grant, such person owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any of its Affiliates, unless the exercise price of such Incentive Stock Option is at least one hundred ten percent (110%) of the Fair Market Value of such stock at the date of grant and the Incentive Stock Option is not exercisable after the expiration of five (5) years from the date of grant. 6. OPTION PROVISIONS. An Option represents the right to purchase a specified number of shares during a specified period at a price per share that is no less than that required by Section 6(b). Each Option shall be in such form and shall contain such terms and conditions as the Committee shall deem appropriate. The provisions of separate Options need not be identical, but each Option shall include (through incorporation of provisions hereof by reference in the Option Agreement or otherwise) the substance of each of the following provisions: (a) No Option shall be exercisable after the expiration of ten (10) years from the date it was granted. (b) The exercise price of each Incentive Stock Option shall be not less than one hundred percent (100%) of the Fair Market Value of the stock subject to the Option on the date the Option is granted. The exercise price of each Nonstatutory Stock Option shall be not less than fifty percent (50%) of the Fair Market Value of the stock subject to the Option on the date the Option is granted. The foregoing not withstanding, the Committee may provide that the date of grant of any Nonstatutory Stock Option is the date on which the Optionee was hired or promoted (or similar event) if the grant of the Option occurs not more than 90 days after the date of such hiring, promotion or other event. The exercise price of each Option shall be specified in the Option Agreement. (c) The purchase price of stock acquired pursuant to an Option shall be paid, to the extent permitted by applicable statutes and regulations, either (i) in cash at the time the Option is exercised, or (ii) at the discretion of the Committee, exercised either at the time of the grant or exercise of the Option, 4 26 (A) by delivery to the Company (including by attestation) of other Class A Common Stock of the Company, (B) according to a deferred payment or other arrangement (which may include, without limiting the generality of the foregoing, the use of other Class A Common Stock of the Company) with the person to whom the Option is granted or to whom the Option is transferred pursuant to subsection 6(d), (C) by cashless exercise methods which are permitted by law, including, without limitation, methods whereby a broker sells the Optioned Shares to which the exercise relates or holds them as collateral for a margin loan, delivers the Option Price to the Company, and delivers the remaining proceeds to the Optionee (and in connection therewith, the Company may establish a cashless exercise program including a program where the commissions on the sale of Optioned Shares to which the exercise relates are paid by the Company), or (D) in any other form of legal consideration that may be acceptable to the Committee. In the case of any deferred payment arrangement, interest shall be payable at least annually and shall be charged at the minimum rate of interest necessary to avoid the treatment as interest, under any applicable provisions of the Code, of any amounts other than amounts stated to be interest under the deferred payment arrangement. (d) Except as may be permitted by the Committee in any particular Option Agreement, an Option shall not be transferable except by will or by the laws of descent and distribution and shall be exercisable during the lifetime of the person to whom the Option is granted only by such person. (e) The total number of Optioned Shares may, but need not, be allotted in periodic installments (which may, but need not, be equal). The Option Agreement may provide that from time to time during each of such installment periods, the Option may become exercisable ("vest") with respect to some or all of the shares allotted to that period, and may be exercised with respect to some or all of the shares allotted to such period and/or any prior period as to which the Option became vested but was not fully exercised. During the remainder of the term of the Option (if its term extends beyond the end of the installment periods), the Option may be exercised from time to time with respect to any Optioned Shares then remaining subject to the Option. The provisions of this subsection 6(e) are subject to any Option provisions in the Option Agreement governing the minimum number of shares as to which an Option may be exercised. (f) In the event an Optionee's Continuous Status as an Employee or Consultant terminates (other than upon Disability or death), the Optionee may exercise his or her Option, but only within such period of time as is determined by the Committee and specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). (g) In the event an Optionee's Continuous Status as an Employee or Consultant terminates as a result of Disability, the Optionee may exercise his or her Option, but only within such period of time as is determined by the Committee and specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement). (h) In the event an Optionee's Continuous Status as an Employee or Consultant terminates as a result of death, the Option may be exercised, but only within such period of time as is determined by the Committee and specified in the Option Agreement (but in no event later than the expiration of the term of such Option as set forth in the Option Agreement), by the Optionee's estate or by a person who acquired the right to exercise the Options by bequest or inheritance, but only to the extent the Optionee was entitled to exercise the Option at the time of death. (i) The Option Agreement may, but need not, include a provision whereby the Optionee may elect at any time while an Employee or Consultant to exercise the Option as to any part or all of the shares subject to the Option prior to the full vesting of the Option. Any unvested shares so purchased may be 5 27 subject to a repurchase right in favor of the Company or to any other restriction the Committee determines to be appropriate. 7. STOCK APPRECIATION RIGHTS ("SARs"). (a) A Stock Appreciation Right or SAR is a right to receive a payment, in cash, Class A Common Stock, Optioned Shares or a combination of the foregoing, equal to the excess of the Fair Market Value at time of exercise of a specified number of shares over the aggregate exercise price of the SARs being exercised. The aggregate exercise price of SARs shall not be less than fifty percent (50%) of the Fair Market Value of the specified number of shares subject to the SARs. Subject to the other applicable provisions of the Plan, the Committee shall have the authority to grant SARs to a Plan participant either separately or in tandem with other Stock Awards. The exercise of a tandem Stock Award shall result in an immediate cancellation of its corresponding SAR, and the exercise of a tandem SAR shall cause an immediate cancellation of its corresponding Stock Award. SARs shall be subject to such other terms and conditions as the Committee may specify. (b) Upon the exercise of an SAR, the participant shall be entitled to receive an amount equal to the difference between the Fair Market Value of a share of Class A Common Stock of the Company on the date of exercise and the exercise price of the SAR. The Committee shall decide whether such payment shall be in cash, Class A Common Stock, Optioned Shares or in a combination thereof. 8. PERFORMANCE GRANTS. (a) A Performance Grant is a grant, subject to the attainment of the Performance Criteria, of shares of stock or of the right to receive shares of stock (or their cash equivalent or a combination of both) in the future. Subject to the other applicable provisions of the Plan, Performance Grants may be awarded to Employees or Consultants at any time and from time to time as determined by the Committee. The Committee shall have complete discretion in determining the size and composition of Performance Grants so issued to a participant and the appropriate period over which performance is to be measured ("performance cycle"). (b) The value of each Performance Grant may be fixed or it may be permitted to fluctuate based on the Performance Criteria selected by the Committee. The Committee shall establish Performance Criteria that, depending on the extent to which they are met, will determine the ultimate value of the Performance Grant or the portion of such Performance Grant earned by participants, or both. The Committee shall establish performance goals and objectives for each performance cycle and shall identify one or more of the following business criteria or objectives that is to be monitored during the performance cycle in determining the Performance Grant: return on assets, operating ratios, cash flow, shareholder return, revenue growth, net income, earnings per share, debt reduction, return on investment, revenue and attainment of budgets. (c) The Committee shall determine the portion of each Performance Grant that is earned by a participant on the basis of the achievement of the Performance Criteria during the performance cycle in relation to the performance goals for such cycle. The earned portion of a Performance Grant may be paid out in restricted or non-restricted shares, cash or a combination of both as the Committee may determine. (d) A participant must be an Employee or Consultant of the Company at the end of the performance cycle in order to be entitled to payment of a Performance Grant issued in respect of such cycle; provided, however, that, except as otherwise determined by the Committee, if a participant ceases to be an Employee or Consultant of the Company upon the occurrence of his or her death, retirement, Disability or other reasons determined by the Committee prior to the end of the performance cycle, the 6 28 participant shall earn a proportionate portion of the Performance Grant based upon the elapsed portion of the performance cycle and the Company's performance over that portion of such cycle. 9. STOCK BONUSES AND RESTRICTED STOCK. The Committee may at any time and from time to time award a Stock Bonus, Restricted Stock or Restricted Stock Units to such participants and in such amounts as it determines. An award of Restricted Stock or Restricted Stock Units may specify, in the Stock Award Agreement, the applicable restrictions, if any, on the shares subject thereto, the duration of such restrictions, and the time or times at which the restrictions shall lapse with respect to all or part of the shares that are part of the award. Each Stock Bonus or Stock Award Agreement shall be in such form and shall contain such terms and conditions as the Committee shall deem appropriate. The terms and conditions of Stock Bonuses or grants of Restricted Stock or Restricted Stock Units may change from time to time, and the terms and conditions of separate agreements need not be identical, but each Stock Bonus or Stock Award Agreement shall include (through incorporation of provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions as appropriate: (a) The Committee may determine that eligible participants in the Plan may be awarded Optioned Stock pursuant to a Stock Bonus in consideration for past services actually rendered to the Company or for its benefit. (b) Except as permitted by the Committee in any particular Stock Award Agreement, no rights under a Stock Bonus or Stock Award Agreement shall be transferable except by will or by the laws of descent and distribution so long as Optioned Shares awarded under such agreement remain subject to the terms of the agreement. (c) The purchase price of Optioned Shares acquired pursuant to a Stock Award Agreement shall be paid either: (i) in cash at the time of purchase; (ii) at the discretion of the Committee, according to a deferred payment or other arrangement with the person to whom the stock is sold; or (iii) in any other form of legal consideration that may be acceptable to the Committee in its discretion. 10. CANCELLATION AND RE-GRANT OF OPTIONS. The Committee shall have the authority to effect, at any time and from time to time, with the consent of the affected holders of Options (i) the repricing of any outstanding Options under the Plan and/or (ii) the cancellation of any outstanding Options under the Plan and the grant in substitution therefor of new Options under the Plan covering the same or different numbers of shares of stock but having an exercise price per share of not less than fifty percent (50%) of the Fair Market Value (one hundred percent (100%) of the Fair Market Value in the case of an Incentive Stock Option or, in the case of a 10% stockholder (as described in subsection 5(c)), not less than one hundred ten percent (110%) of the Fair Market Value) per share of stock on the new grant date. 11. COVENANTS OF THE COMPANY. (a) During the terms of the Stock Awards, the Company shall keep available at all times the number of shares of stock required to satisfy such Stock Awards. (b) The Company shall seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to issue and sell shares of stock upon exercise of Stock Awards; provided, however, that this undertaking shall not require the Company to register under the Securities Act of 1933 (the "Securities Act") either the Plan, any Stock Awards or any stock 7 29 issued or issuable pursuant to any such Stock Awards. If, after reasonable efforts, the Company is unable to obtain from any such regulatory commission or agency the authority which counsel for the Company deems necessary for the lawful issuance and sale of stock under the Plan, the Company shall be relieved from any liability for failure to issue and sell stock upon exercise of Stock Awards unless and until such authority is obtained. 12. USE OF PROCEEDS FROM STOCK. Proceeds from the sale of stock pursuant to Stock Awards shall constitute general funds of the Company. 13. MISCELLANEOUS. (a) The Committee shall have the power to accelerate the time at which a Stock Award may first be exercised, or the time during which a Stock Award or any part thereof will vest, notwithstanding the vesting conditions of the original grant. (b) Neither a Plan participant nor any person to whom a Stock Award may be transferred under the applicable restrictions of the Plan shall be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares subject to such Stock Award unless and until such person has satisfied all requirements for exercise of the Option pursuant to its terms or the reservations, conditions and contingencies applicable to each other form of Stock Award shall have been satisfied. (c) Nothing in the Plan or any instrument executed or Stock Award granted pursuant hereto shall confer upon any Employee, Consultant, Optionee or other holder of Stock Awards any right to continue in the employ or service of the Company or any Affiliate or shall affect the right of the Company or any Affiliate to terminate the employment or relationship as a Consultant of any Employee, Consultant, Optionee or other holder of Stock Awards with or without cause. (d) To the extent that the aggregate Fair Market Value (determined at the time of grant) of stock with respect to which Incentive Stock Options granted after 1986 are exercisable for the first time by any Optionee during any calendar year under all plans of the Company and its Affiliates exceeds one hundred thousand dollars ($100,000), the Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Nonstatutory Stock Options. (e) The Company may require any recipient of a Stock Award, or any person to whom a Stock Award is transferred in accordance with the applicable terms of the Plan, as a condition of exercising any such Stock Award, (1) to give written assurances satisfactory to the Company as to such person's knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters, and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award, and (2) to give written assurances satisfactory to the Company stating that such person is acquiring the stock subject to the Stock Award for such person's own account and not with any present intention of selling or otherwise distributing the stock. The foregoing requirements, and any assurances given pursuant to such requirements, shall be inoperative if (i) the issuance of the shares upon the exercise of or acquisition of stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or (ii) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws. The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under 8 30 the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the stock. (f) To the extent provided by the terms of a Stock Award Agreement, the person to whom a Stock Award is granted may satisfy any federal, state or local tax withholding obligation relating to the exercise of or acquisition of stock under a Stock Award by any of the following means or by a combination of such means: (1) withholding from compensation; (2) tendering a cash payment; (3) authorizing the Company to withhold shares from the shares of Class A Common Stock otherwise issuable to the participant as a result of the exercise of or acquisition of stock under the Stock Award; or (4) delivering to the Company owned and unencumbered shares of the Class A Common Stock of the Company owned by such person. 14. ADJUSTMENTS UPON CHANGES IN STOCK. (a) If any change is made in the stock subject to the Plan or subject to any Stock Award (through merger, consolidation, reorganization, recapitalization, stock dividend, dividend in property other than cash, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or otherwise), the Plan and outstanding Stock Awards will be appropriately adjusted in the class(es) and maximum number of shares subject to the Plan and the class(es) and number of shares and price per share of stock subject to outstanding Stock Awards. (b) In the event of: (1) a dissolution or liquidation of the Company; (2) a merger or consolidation in which the Company is not the surviving corporation; (3) a reverse merger in which the company is the surviving corporation but the shares of the Company's Class A Common Stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (4) any other capital reorganization in which more than fifty percent (50%) of the shares of the Company entitled to vote are exchanged, then at the sole discretion of the Committee and to the extent permitted by applicable law: (i) any surviving corporation shall assume any Stock Awards outstanding under the Plan or shall substitute similar Stock Awards for those outstanding under the Plan, (ii) the time during which such Stock Award may be exercised shall be accelerated and the Stock Awards terminated if not exercised prior to such event, or (iii) such Stock Awards shall continue in full force and effect. 15. AMENDMENT OF THE PLAN. (a) The Board at any time, and from time to time, may amend the Plan in any manner. However, except as provided in Section 14 relating to adjustments upon changes in stock, no amendment shall be effective unless approved by the shareholders of the Company within twelve (12) months before or after the adoption of the amendment where the amendment will: (1) Increase the number of shares reserved for Stock Awards under the Plan; (2) Modify the requirements as to eligibility for participation in the Plan (to the extent such modification requires shareholder approval in order for the Plan to satisfy the requirements of Section 162(m) or Section 422 of the Code); or (3) Modify the Plan in any other way if such modification requires shareholder approval in order for the Plan to satisfy the requirements of Section 162(m) or Section 422 of the Code, of Rule 16b-3 under the Exchange Act, or of the Nasdaq National Market or any exchange on which the Company's shares may be listed. 9 31 (b) It is expressly contemplated that the Board may amend the Plan in any respect the Board deems necessary or advisable to provide eligible Employees or Consultants with the maximum benefits provided or to be provided under the provisions of the Code and the regulations promulgated thereunder relating to Incentive Stock Options and/or to bring the Plan and/or Incentive Stock Options granted under it into compliance therewith; provided, however, shares covered by any Stock Awards in excess of the maximum number of Optioned Shares provided for in Section 4(a) above shall be deemed awarded on the date of the Initial Stock Award if shareholders approve the increase pursuant to this Section 15. (c) Rights and obligations under any Stock Award granted before amendment of the Plan shall not be altered or impaired by any amendment of the Plan unless (i) the Company requests the consent of the person to whom the Stock Award was granted and (ii) such person consents in writing. 16. TERMINATION OR SUSPENSION OF THE PLAN. (a) The Board may suspend or terminate the Plan at any time. Unless sooner terminated, the Plan shall terminate on February 25, 2003. No Stock Awards may be granted under the Plan while the Plan is suspended or after it is terminated. (b) Rights and obligations under any Stock Award granted while the Plan is in effect shall not be altered or impaired by suspension or termination of the Plan, except with the consent of the person to whom the Stock Award was granted. 10 32 PROXY THE ROBERT MONDAVI CORPORATION CLASS A COMMON STOCK PROXY FOR ANNUAL MEETING OF SHAREHOLDERS NOVEMBER 3, 1997 The undersigned hereby appoints Gregory M. Evans and Michael K. Beyer, or either of them, each with the power of substitution, as proxies to represent the undersigned at the Annual Meeting of Shareholders of THE ROBERT MONDAVI CORPORATION to be held at the Robert Mondavi Winery, 7801 St. Helena Highway, Oakville, California on November 3, 1997 at 10:00 a.m., and any adjournment thereof, and to vote the number of shares of the CLASS A COMMON STOCK OF THE ROBERT MONDAVI CORPORATION that the undesigned would be entitled to vote if personally present. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE ROBERT MONDAVI CORPORATION. THIS PROXY WILL BE VOTED AS DIRECTED. IN THE ABSENCE OF DIRECTION, THIS PROXY WILL BE VOTED FOR THE NOMINEES FOR ELECTION, FOR THE RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE AND FOR THE RATIFICATION OF THE PROPOSED AMENDMENTS OF THE 1993 EQUITY INCENTIVE PLAN. In their discretion, the proxy holders are authorized to vote upon such other business as may properly come before the meeting or any adjournment thereof to the extent authorized by Rule 14a-4(c) promulgated by the Securities and Exchange Commission and by applicable state laws (including matters that the proxy holders do not know, a reasonable time before this solicitation, are to be presented). THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER(S). IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR THE ELECTION OF EACH OF THE NOMINEES FOR DIRECTORS AND FOR PROPOSAL 2 AND PROPOSAL 3 LISTED BELOW. (continued and to be signed on reverse side) 33 (continued from other side) 1. ELECTION OF DIRECTORS TO BE ELECTED BY HOLDERS OF CLASS A COMMON STOCK, VOTING AS A CLASS [ ] FOR THE NOMINEES LISTED BELOW (EXCEPT AS MARKED TO THE CONTRARY). [ ] WITHHOLD AUTHORITY TO VOTE FOR THE NOMINEES LISTED BELOW. NOMINEES: PHILIP GREER, FRANK E. FARELLA, JAMES L. BARKSDALE. TO WITHHOLD AUTHORITY TO VOTE FOR AN INDIVIDUAL NOMINEE, WRITE SUCH NOMINEE'S NAME BELOW: - - ------------------------------------------------------------------------------- 2. PROPOSAL TO RATIFY THE APPOINTMENT OF PRICE WATERHOUSE AS INDEPENDENT ACCOUNTANTS FOR THE CURRENT FISCAL YEAR: [ ] FOR [ ] AGAINST [ ] ABSTAIN 3. PROPOSAL TO RATIFY THE PROPOSED AMENDMENTS OF THE 1993 EQUITY INCENTIVE PLAN: [ ] FOR [ ] AGAINST [ ] ABSTAIN PROXY INSTRUCTIONS: 1. Please sign exactly as the name or names appear on your stock certificates (as indicated hereon). 2. If the shares are issued in the name of two or more persons, all of them must sign the proxy. 3. A proxy executed by a corporation must be signed by its name by an authorized officer. 4. Executors, administrators, trustees and partners should indicate their capacity when signing. The undersigned acknowledges receipt of (a) the Notice of 1997 Annual Meeting of Shareholders, (b) the accompanying Proxy Statement and (c) Company's Annual Report pursuant to SEC Rule 14a-3 for the fiscal year ended June 30, 1997. Dated , 1997 ----------------------------------- Signature ----------------------------------- Signature -----END PRIVACY-ENHANCED MESSAGE-----