SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
CONSTELLATION BRANDS, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[CONSTELLATION LOGO]
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Annual Meeting of Stockholders
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June 20, 2002
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of Stockholders of
Constellation Brands, Inc. at ONE HSBC PLAZA, 100 Chestnut Street, Rochester,
New York, on Tuesday, July 23, 2002 at 11:00 a.m. (local time).
The accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement describe in detail the matters expected to be acted upon at the
meeting. Also contained in this package is the Company's 2002 Annual Report to
Stockholders, which consists of the Company's 2002 glossy report and its Form
10-K for the fiscal year ended February 28, 2002 that sets forth important
business and financial information concerning the Company.
We hope you are able to attend this year's Annual Meeting.
Very truly yours,
/s/ Richard Sands
RICHARD SANDS
Chairman of the Board, President
and Chief Executive Officer
Please note that HSBC Plaza is a new venue and is located at the corner of Court
Street and Chestnut Street in downtown Rochester, New York. Limited parking is
available at HSBC's underground parking garage off of Broad Street. Additional
parking is available, among other locations, at the Midtown Parking Garage with
entrances on Clinton Street, Broad Street and Court Street.
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CONSTELLATION BRANDS, INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 23, 2002
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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
CONSTELLATION BRANDS, INC. (the "Company") will be held at One HSBC Plaza, 100
Chestnut Street, Rochester, New York, on Tuesday, July 23, 2002 at 11:00 a.m.
(local time) for the following purposes more fully described in the accompanying
Proxy Statement:
1. To elect directors of the Company (Proposal No. 1).
2. To amend and restate the Company's existing Restated Certificate of
Incorporation (Proposal No. 2) to:
(a) increase the number of authorized shares of the Company's Class A
Common Stock from 120,000,000 shares to 275,000,000 shares, and
(b) increase the number of authorized shares of the Company's Class B
Common Stock from 20,000,000 shares to 30,000,000 shares.
3. To re-approve the Company's Long-Term Stock Incentive Plan pursuant to
Section 162(m) of the Internal Revenue Code (Proposal No. 3).
4. To re-approve the Company's Annual Management Incentive Plan pursuant
to Section 162(m) of the Internal Revenue Code (Proposal No. 4).
5. To consider and act upon a proposal to ratify the selection of KPMG
LLP, Certified Public Accountants, as the Company's independent public
accountants for the fiscal year ending February 28, 2003 (Proposal No.
5).
6. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on May 31, 2002 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Annual Meeting or any adjournment thereof.
A Proxy Statement and proxy are enclosed.
WE HOPE YOU WILL ATTEND THIS MEETING IN PERSON, BUT IF YOU CANNOT, PLEASE
SIGN AND DATE THE ENCLOSED PROXY. RETURN THE PROXY IN THE ENCLOSED ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ David S. Sorce
DAVID S. SORCE, Secretary
Fairport, New York
June 20, 2002
[This Page Intentionally Left Blank]
CONSTELLATION BRANDS, INC.
300 WillowBrook Office Park
Fairport, New York 14450
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PROXY STATEMENT
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2002 ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is being furnished to the stockholders of
CONSTELLATION BRANDS, INC. (the "Company") in connection with the solicitation
of proxies by the Board of Directors of the Company. The proxies are for use at
the 2002 Annual Meeting of Stockholders of the Company and at any adjournment
thereof (the "Meeting"). The Meeting will be held on Tuesday, July 23, 2002 at
11:00 a.m. (local time) at One HSBC Plaza, 100 Chestnut Street, Rochester, New
York.
The shares represented by your proxy, if the proxy is properly executed and
returned, and not revoked, will be voted at the Meeting as therein specified.
You may revoke your proxy at any time before the proxy is exercised by
delivering to the Secretary of the Company a written revocation or a duly
executed proxy bearing a later date. You may also revoke your proxy by
attending the Meeting and voting in person.
The shares represented by your proxy will be voted FOR the election of the
director nominees named herein (Proposal No. 1), unless you specifically
withhold authority to vote for one or more of the director nominees. Further,
unless you indicate otherwise, the shares represented by your proxy will be
voted FOR the proposal to amend and restate the Company's existing Restated
Certificate of Incorporation, which would include a vote FOR the approval to
increase the number of authorized shares of the Company's Class A Common Stock
from 120,000,000 shares to 275,000,000 shares and a vote FOR the approval to
increase the number of authorized shares of the Company's Class B Common Stock
from 20,000,000 shares to 30,000,000 shares (collectively, Proposal No. 2); FOR
the proposal to re-approve the Company's Long-Term Stock Incentive Plan pursuant
to Section 162(m) of the Internal Revenue Code (Proposal No. 3); FOR the
proposal to re-approve the Company's Annual Management Incentive Plan pursuant
to Section 162(m) of the Internal Revenue Code (Proposal No. 4); and FOR the
ratification of the selection of KPMG LLP as the Company's independent public
accountants for the fiscal year ending February 28, 2003 (Proposal No. 5).
The enclosed proxy has been designed so that it can be used by stockholders
owning any combination of the Company's outstanding capital stock. The
outstanding capital stock of the Company consists of Class A Common Stock, par
value $.01 per share (the "Class A Stock"), and Class B Common Stock, par value
$.01 per share (the "Class B Stock"). ALL SHARE, OPTION AND SIMILAR INFORMATION
INCLUDED IN THIS PROXY STATEMENT REFLECTS THE EFFECT OF THE COMPANY'S
TWO-FOR-ONE STOCK SPLITS THAT WERE DISTRIBUTED IN THE FORM OF STOCK DIVIDENDS ON
MAY 14, 2001 AND MAY 13, 2002 TO STOCKHOLDERS OF RECORD ON APRIL 30, 2001 AND
APRIL 30, 2002, RESPECTIVELY.
This Proxy Statement and the accompanying proxy are being first mailed to
stockholders on or about June 26, 2002.
The cost of soliciting proxies will be borne by the Company. In addition
to the solicitation by use of the mails, directors, officers or regular
employees of the Company, without extra compensation, may solicit proxies in
person or by telephone or facsimile. The Company has requested persons holding
stock for others in their names or in the names of nominees to forward these
materials to the
beneficial owners of such shares. If requested, the Company will reimburse such
persons for their reasonable expenses in forwarding these materials.
VOTING SECURITIES
The total outstanding capital stock of the Company, as of May 31, 2002,
consisted of 77,115,176 shares of Class A Stock and 12,099,090 shares of Class
B Stock. Each share of Class B Stock is convertible into one share of Class A
Stock at any time at the option of the holder.
Only holders of record of Class A Stock and Class B Stock on the books of
the Company at the close of business on May 31, 2002, the record date for
eligibility to vote at the Meeting, are entitled to notice of and to vote at the
Meeting and at any adjournment thereof. Except as otherwise required by Delaware
law, the holders of the Class A Stock and the holders of the Class B Stock vote
together as a single class on all matters other than the election of directors.
Each holder of Class A Stock is entitled to one (1) vote for each share of Class
A Stock registered in such holder's name, and each holder of Class B Stock is
entitled to ten (10) votes for each share of Class B Stock registered in such
holder's name. Therefore, holders of Class A Stock are entitled to cast a total
of 77,115,176 votes and holders of Class B Stock are entitled to cast a total
of 120,990,900 votes at the Meeting.
The holders of a majority of the outstanding aggregate voting power of the
Class A Stock and the Class B Stock present at the Meeting, in person or by
proxy, will constitute a quorum. Shares represented by proxies marked as
abstentions will be counted toward determining the presence of a quorum.
Proxies relating to shares held in "street name" by brokers or other nominees
which may be voted with respect to some, but not all, matters without
instruction from the beneficial owner ("broker non-votes") are counted as shares
present for determining a quorum.
Under Delaware law and the Company's Restated Certificate of Incorporation
and By-laws, directors are elected by a plurality of the votes cast (the highest
number of votes cast) by the holders of the shares entitled to vote and actually
voting, in person or by proxy. Pursuant to the Company's Restated Certificate
of Incorporation, the holders of the Class A Stock, voting as a separate class,
are entitled to elect one-fourth of the number of directors to be elected at the
Meeting (rounded up to the next number if the total number of directors to be
elected is not evenly divisible by four). The holders of the Class B Stock,
voting as a separate class, are entitled to elect the remaining number of
directors to be elected at the Meeting. Since the Board of Directors nominated
seven directors, the holders of Class A Stock will be entitled to elect two
directors and the holders of Class B Stock will be entitled to elect five
directors. Because the directors are elected by a plurality of the votes cast
in each election, votes that are withheld will not be counted and, therefore,
will not affect the outcome of the elections.
The adoption of the proposal to amend and restate the Company's existing
Restated Certificate of Incorporation (Proposal No. 2) requires two separate
votes: one vote to approve the increase in the number of authorized shares of
the Company's Class A Stock from 120,000,000 shares to 275,000,000 shares and
another vote to approve the increase in the number of authorized shares of the
Company's Class B Stock from 20,000,000 shares to 30,000,000 shares. Each
approval requires the affirmative vote of the holders of a majority of all
outstanding shares of Class A Stock and Class B Stock entitled to vote thereon,
voting together as a single class, provided that the holders of Class A Stock
will have one (1) vote per share and the holders of Class B Stock will have ten
(10) votes per share. Abstentions and broker non-votes, if applicable, will
therefore have the effect of negative votes. The increases in the number of
authorized shares of Class A Stock and Class B Stock are interdependent, and the
Company's existing Restated Certificate of Incorporation will not be amended and
restated unless the requisite vote for both approvals is obtained.
The adoption of the proposal to re-approve the Company's Long-Term Stock
Incentive Plan pursuant to Section 162(m) of the Internal Revenue Code (Proposal
No. 3) requires the affirmative vote of a majority of the votes entitled to be
cast by stockholders present in person or represented by proxy at the Meeting.
With respect to this proposal, holders of Class A Stock and Class B Stock are
entitled to vote as a single class at the Meeting, with holders of Class A Stock
having one (1) vote per share and holders of Class B Stock having ten (10) votes
per share. Therefore, abstentions will have the effect of negative votes.
However, because broker non-votes are not considered entitled to vote, they will
not affect the outcome of the vote.
The adoption of the proposal to re-approve the Company's Annual Management
Incentive Plan pursuant to Section 162(m) of the Internal Revenue Code (Proposal
No. 4) requires the affirmative vote of a majority of the votes entitled to be
cast by stockholders present in person or represented by proxy at the Meeting.
With respect to this proposal, holders of Class A Stock and Class B Stock are
entitled to vote as a single class at the Meeting, with holders of Class A Stock
having one (1) vote per share and holders of Class B Stock having ten (10) votes
per share. Therefore, abstentions will have the effect of negative votes.
However, because broker non-votes are not considered entitled to vote, they will
not affect the outcome of the vote.
The ratification of the selection of KPMG LLP as the Company's independent
public accountants for the fiscal year ending February 28, 2003 (Proposal No. 5)
requires the affirmative vote of a majority of the votes entitled to be cast by
stockholders present in person or represented by proxy at the Meeting. With
respect to this proposal, holders of Class A Stock and Class B Stock are
entitled to vote as a single class at the Meeting, with holders of Class A Stock
having one (1) vote per share and holders of Class B Stock having ten (10) votes
per share. Therefore, abstentions will have the effect of negative votes.
However, because broker non-votes are not considered entitled to vote, they will
not affect the outcome of the vote.
BENEFICIAL OWNERSHIP
As of May 31, 2002, the following tables and notes set forth (i) the
persons known to the Company to beneficially own more than 5% of the Class A
Stock or Class B Stock, (ii) the number of shares beneficially owned by them,
and (iii) the percent of such class so owned, rounded to the nearest one-tenth
of one percent. This information is based on information furnished to the
Company by or on behalf of each person concerned. Unless otherwise noted, the
percentages of ownership were calculated on the basis of 77,115,176 shares of
Class A Stock and 12,099,090 shares of Class B Stock outstanding as of the close
of business on May 31, 2002.
CLASS A STOCK
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AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (1)
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NAME AND ADDRESS OF SOLE POWER TO SHARED POWER TO PERCENT OF
BENEFICIAL OWNER VOTE OR DISPOSE VOTE OR DISPOSE TOTAL CLASS (1)
------------------- ---------------- --------------- ------------ ----------
Robert Sands
300 WillowBrook Office Park
Fairport, NY 14450 968,092 (2) 294,712 (2) 1,262,804 1.6%
Richard Sands
300 WillowBrook Office Park
Fairport, NY 14450 949,031 (4) 294,712 (4) 1,243,743 1.6%
NAME AND ADDRESS OF SOLE POWER TO SHARED POWER TO PERCENT OF
BENEFICIAL OWNER VOTE OR DISPOSE VOTE OR DISPOSE TOTAL CLASS (1)
------------------- ---------------- --------------- ------------ ----------
CWC Partnership-I
300 WillowBrook Office Park
Fairport, NY 14450 - 236,188 (5) 236,188 0.3%
Trust for the benefit of Andrew
Stern, M.D. under the will of
Laurie Sands
300 WillowBrook Office Park
Fairport, NY 14450 - 236,188 (6) 236,188 0.3%
Stockholders Group Pursuant to
Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (7) - 2,211,835 (7) 2,211,835 2.8%
CLASS B STOCK
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NAME AND ADDRESS OF SOLE POWER TO SHARED POWER TO PERCENT OF
BENEFICIAL OWNER VOTE OR DISPOSE VOTE OR DISPOSE TOTAL CLASS (1)
------------------- ---------------- --------------- ------------ ----------
Richard Sands
300 WillowBrook Office Park
Fairport, NY 14450 2,954,116 5,430,072 (4) 8,384,188 69.3%
Robert Sands
300 WillowBrook Office Park
Fairport, NY 14450 2,951,296 5,430,072 (2) 8,381,368 69.3%
Trust for the benefit of Andrew
Stern, M.D. under the will of
Laurie Sands
300 WillowBrook Office Park
Fairport, NY 14450 - 3,331,356 (6) 3,331,356 27.5%
CWC Partnership-I
300 WillowBrook Office Park
Fairport, NY 14450 - 3,049,540 (5) 3,049,540 25.2%
Trust for the benefit of the
Grandchildren of Marvin and
Marilyn Sands
300 WillowBrook Office Park
Fairport, NY 14450 - 2,025,000 (8) 2,025,000 16.7%
Stockholders Group Pursuant to
Section 13(d)(3) of the Securities
Exchange Act of 1934, as
amended (7) - 11,335,484 (7) 11,335,484 93.7%
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(1) The number of shares and the percentage of ownership set forth in the Class
A Stock table includes the number of shares of Class A Stock that can be
purchased by exercising stock options that are exercisable on May 31, 2002
or become exercisable within 60 days thereafter ("presently exercisable").
Such number does not include the number of option shares that may become
exercisable within sixty (60) days of May 31, 2002 due to certain
acceleration provisions in certain awards, which accelerations cannot be
foreseen on the date of this Proxy Statement. Such number also does not
include the shares of Class A Stock issuable pursuant to the conversion
feature of the Class B Stock beneficially owned by each person. The number
of shares and percentage of ownership assuming conversion of Class B Stock
into Class A Stock are contained in the footnotes. For purposes of
calculating the percentage of ownership of Class A Stock in the table and
in the footnotes, additional shares of Class A Stock equal to the number of
presently exercisable options and, as appropriate, the number of shares of
Class B Stock owned by each person are assumed to be outstanding pursuant
to Rule 13d-3(d)(1) under the Securities Exchange Act. Where the footnotes
reflect shares of Class A Stock as being included, such shares are included
only in the Class A Stock table and where the footnotes reflect shares of
Class B Stock as being included, such shares are included only in the Class
B Stock table.
(2) The amount reflected as shares of Class A Stock over which Robert Sands has
the sole power to vote or dispose includes 698,186 shares of Class A Stock
issuable upon the exercise of options which are presently exercisable by
Mr. Sands. The amounts reflected as shares over which Mr. Sands shares
power to vote or dispose include, as applicable, 235,804 shares of Class A
Stock and 2,715,856 shares of Class B Stock owned by CWC Partnership-I, a
New York general partnership ("CWCP-I"), of which Robert Sands is a
managing partner, 73,716 shares of Class B Stock owned by the Marvin Sands
Master Trust (the "Master Trust"), of which Robert Sands is a trustee and
beneficiary, 384 shares of Class A Stock and 333,684 shares of Class B
Stock owned by M, L, R & R, a New York general partnership ("MLR&R"), of
which Mr. Sands and the Master Trust are general partners, 281,816 shares
of Class B Stock owned by CWC Partnership-II, a New York general
partnership ("CWCP-II"), of which Mr. Sands is a trustee of the managing
partner, 2,025,000 shares of Class B Stock owned by the trust described in
footnote (8) below, and 58,524 shares of Class A Stock owned by the Mac and
Sally Sands Foundation, Incorporated, a Virginia corporation (the "Sands
Foundation"), of which Mr. Sands is a director and officer. Mr. Sands
disclaims beneficial ownership of all of the foregoing shares except to the
extent of his ownership interest in CWCP-I and MLR&R and his beneficial
interest in the Master Trust. The amounts reflected do not include 91,760
shares of Class A Stock owned by Mr. Sands' wife, individually and as
custodian for their minor children, the remainder interest Mr. Sands has in
709,430 of the 2,150,004 shares of Class A Stock subject to the life estate
held by Marilyn Sands described in footnote (3) below or the remainder
interest of CWCP-II in 723,906 of such shares. Mr. Sands disclaims
beneficial ownership with respect to all such shares. Assuming the
conversion of Class B Stock beneficially owned by Mr. Sands into Class A
Stock, Mr. Sands would beneficially own
9,644,172 shares of Class A Stock, representing 11.2% of the outstanding
Class A Stock after such conversion.
(3) Marilyn Sands is the beneficial owner of a life estate in 2,150,004 shares
of Class A Stock that includes the right to receive income from and the
power to vote and dispose of such shares. The remainder interest in such
shares is held by Richard Sands, Robert Sands and CWCP-II.
(4) The amount reflected as shares of Class A Stock over which Richard Sands
has the sole power to vote or dispose includes 747,653 shares of Class A
Stock issuable upon the exercise of options which are presently exercisable
by Mr. Sands. The amounts reflected as shares over which Mr. Sands shares
power to vote or dispose include, as applicable, 235,804 shares of Class A
Stock and 2,715,856 shares of Class B Stock owned by CWCP-I, of which
Richard Sands is a managing partner, 73,716 shares of Class B Stock owned
by the Master Trust, of which Mr. Sands is a trustee and beneficiary, 384
shares of Class A Stock and 333,684 shares of Class B Stock owned by MLR&R,
of which Mr. Sands and the Master Trust are general partners, 281,816
shares of Class B Stock owned by CWCP-II, of which Mr. Sands is a trustee
of the managing partner, 2,025,000 shares of Class B Stock owned by the
trust described in footnote (8) below, and 58,524 shares of Class A Stock
owned by the Sands Foundation, of which Mr. Sands is a director and
officer. Mr. Sands disclaims beneficial ownership of all of the foregoing
shares except to the extent of his ownership interest in CWCP-I and MLR&R
and his beneficial interest in the Master Trust. The amounts reflected do
not include 7,860 shares of Class A Stock owned by Mr. Sands' wife, the
remainder interest Mr. Sands has in 716,668 of the 2,150,004 shares of
Class A Stock subject to the life estate held by Marilyn Sands described in
footnote (3) above or the remainder interest of CWCP-II in 723,906 of such
shares. Mr. Sands disclaims beneficial ownership with respect to all such
shares. Assuming the conversion of Class B Stock beneficially owned by Mr.
Sands into Class A Stock, Mr. Sands would beneficially own 9,627,931 shares
of Class A Stock, representing 11.2% of the outstanding Class A Stock after
such conversion.
(5) The amounts reflected include, as applicable, 384 shares of Class A Stock
and 333,684 shares of Class B Stock owned by MLR&R, of which CWCP-I is a
general partner. The shares owned by CWCP-I are included in the number of
shares beneficially owned by Richard Sands and Robert Sands, the managing
partners of CWCP-I, the Marital Trust (defined in footnote (6) below), a
partner of CWCP-I which owns a majority in interest of the CWCP-I
partnership interests, and the group described in footnote (7) below. The
other partners of CWCP-I are trusts for the benefit of Laurie Sands'
children. Assuming the conversion of Class B Stock beneficially owned by
CWCP-I into Class A Stock, CWCP-I would beneficially own 3,285,728 shares
of Class A Stock, representing 4.1% of the outstanding Class A Stock after
such conversion.
(6) The amounts reflected include, as applicable, 235,804 shares of Class A
Stock and 2,715,856 shares of Class B Stock owned by CWCP-I, in which the
Trust for the benefit of Andrew Stern, M.D. under the will of Laurie Sands
(the "Marital Trust") is a partner and owns a majority in interest of the
CWCP-I partnership interests, 281,816 shares of Class B Stock owned by
CWCP-II, in which the Marital Trust is a partner and owns a majority in
interest of the CWCP-II partnership interests, and 384 shares of Class A
Stock and 333,684 shares of Class B Stock owned by MLR&R, of which CWCP-I
is a general partner. The Marital Trust disclaims beneficial ownership with
respect to all of the foregoing shares except to the extent of its
ownership interest in CWCP-I and CWCP-II. The amounts reflected do not
include the remainder interest CWCP-II has in 723,906 of the 2,150,004
shares of Class A Stock subject to the life estate held by Marilyn Sands
described in footnote (3) above. The Marital Trust disclaims beneficial
ownership with respect to all such shares. Assuming the conversion of
Class B Stock beneficially owned by the Marital Trust into Class A Stock,
the Marital Trust would beneficially own 3,567,544 shares of Class A Stock,
representing 4.4% of the outstanding Class A Stock after such conversion.
(7) The group as reported consists of Richard Sands, Robert Sands, CWCP-I,
CWCP-II, and the trust described in footnote (8) (collectively, the
"Group"). The basis for the Group consists of: (i) a Stockholders Agreement
among Richard Sands, Robert Sands and CWCP-I and (ii) the fact that the
familial relationship between Richard Sands and Robert Sands, their actions
in working together in the conduct of the business of the Company and their
capacity as partners and trustees of the other members of the Group may be
deemed to constitute an agreement to "act in concert" with respect to the
Company's shares. The members of the Group disclaim that an agreement to
act in concert exists.
Except with respect to the shares subject to the Stockholders Agreement,
the shares owned by CWCP-I and CWCP-II and the shares held by the trust
described in footnote (8) below, no member of the Group is required to
consult with any other member of the Group with respect to the voting or
disposition of any shares of the Company. Assuming the conversion of Class
B Stock beneficially owned by the Group into Class A Stock, the Group would
beneficially own 13,547,319 shares of Class A Stock, representing 15.1% of
the outstanding Class A Stock after such conversion.
(8) The trust was created by Marvin Sands under the terms of an Irrevocable
Trust Agreement dated November 18, 1987 (the "Trust"). The Trust is for the
benefit of the present and future grandchildren of Marvin and Marilyn
Sands. The Co-Trustees of the Trust are Richard Sands and Robert Sands.
Unanimity of the Co-Trustees is required with respect to voting and
disposing of the Class B Stock owned by the Trust. The shares owned by the
Trust are included in the number of shares beneficially owned by Richard
Sands, Robert Sands and the Group. Assuming the conversion of Class B Stock
beneficially owned by the Trust into Class A Stock, the Trust would
beneficially own 2,025,000 shares of Class A Stock, representing 2.6% of
the outstanding Class A Stock after such conversion.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table summarizes the annual and long-term compensation paid
to the Company's Chief Executive Officer and the other four most highly
compensated executive officers (as determined at the end of the fiscal year
ended February 28, 2002 (collectively, the "Named Executives")) for the fiscal
years ended February 28, 2002, February 28, 2001 and February 29, 2000.
SUMMARY COMPENSATION TABLE
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LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS (2)
------------------------------------ ------------
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
COMPENSATION OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) (3) (4)
---- ---------- --------- ------------ ------------ ------------
Richard Sands, 2002 $ 630,300 $ 819,390 $ 84,480 (5) 163,200 $ 56,217
Chairman of the Board, President and 2001 606,050 425,447 74,359 (5) 125,200 49,039
Chief Executive Officer 2000 545,782 491,204 - 65,600 51,191
2002 $ 559,100 $ 726,830 $ 84,051 (6) 136,000 $ 50,174
Robert Sands, 2001 537,601 377,396 84,607 (6) 115,200 44,076
Group President 2000 530,241 477,217 87,806 (6) 64,000 49,870
Alexander L. Berk, 2002 $ 494,000 $ 543,400 - 84,000 $ 44,818
President and Chief Executive Officer of 2001 475,000 328,150 - 100,000 41,196
Barton Incorporated (7) 2000 440,000 374,000 - 100,000 48,800
Peter Aikens, 2002 $ 394,186 $ 401,092 - 68,400 $ 141,907
President and Chief Executive Officer of 2001 354,870 127,095 - 68,000 127,751
Matthew Clark plc (8) 2000 386,886 138,611 - 33,600 139,277
Thomas S. Summer, 2002 $ 343,200 $ 377,520 - 84,400 $ 32,934
Executive Vice President and Chief 2001 330,000 178,200 - 76,400 29,025
Financial Officer 2000 261,800 176,715 - 22,000 27,053
----------------------
(1) None of the Named Executives, other than as indicated, received any
individual perquisites or other personal benefits exceeding the lesser of
$50,000 or 10% of the total salary and bonus reported for such executive
officer during the periods covered by the Summary Compensation Table.
(2) None of the Named Executives received any restricted stock awards or any
pay-outs under long-term incentive plans during the periods covered by the
Summary Compensation Table.
(3) The securities consist of shares of Class A Stock underlying stock options.
See the table below entitled "Option Grants in Last Fiscal Year" and the
footnotes to that table for additional information.
(4) Amounts reported for 2002 consist of:
- Company 401(k) contributions under the Company's 401(k) and Profit
Sharing Plan: Richard Sands $5,100; Robert Sands $4,831; Alexander
Berk $5,100; and Thomas Summer $5,100.
- Company profit sharing contributions under the Company's 401(k) and
Profit Sharing Plan: Richard Sands $13,787; Robert Sands $13,787;
Alexander Berk $13,668; and Thomas Summer $13,787.
- Company contributions under the Company's Supplemental Executive
Retirement Plan: Richard Sands $37,330; Robert Sands $31,556;
Alexander Berk $26,050; and Thomas Summer $14,047.
- Company contribution to personal pension plan for Peter Aikens:
$141,907.
(5) The amounts shown include $84,480 in 2002 and $73,463 in 2001 for use of
the corporate aircraft.
(6) The amounts shown include $84,051 in 2002, $84,057 in 2001 and $87,176 in
2000 for use of the corporate aircraft.
(7) Barton Incorporated is a wholly-owned subsidiary of the Company.
(8) In April 2002, Mr. Aikens retired from his employment with Matthew Clark
plc, a wholly-owned subsidiary of the Company. Mr. Aikens is paid in
British pound sterling. The amounts appearing in the table and footnotes
are converted into dollars using the weighted average exchange rate for the
applicable fiscal year.
STOCK OPTIONS
The following table contains information concerning stock option grants to
the Named Executives during the fiscal year ended February 28, 2002. No stock
appreciation rights ("SARs") were granted to any of the Named Executives in that
year. The columns labeled "Potential Realizable Value" are based on
hypothetical 5% and 10% growth assumptions, as required by the Securities and
Exchange Commission. The Company cannot predict the actual growth rate of its
Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR
-------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------------------------------ VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------------
NAME GRANTED (1) FISCAL YEAR ($/SH) (2) DATE 5% 10%
---- ----------- ------------ ------------ ---------- ----------- -----------
Richard Sands 63,200 (3) 1.3% $ 17.7425 04/10/11 $ 705,196 $ 1,787,105
100,000 (4) 2.0% $ 20.50 09/26/11 $ 1,289,234 $ 3,267,172
Robert Sands 56,000 (3) 1.1% $ 17.7425 04/10/11 $ 624,857 $ 1,583,511
80,000 (4) 1.6% $ 20.50 09/26/11 $ 1,031,387 $ 2,613,738
Alexander L. Berk 44,000 (3) 0.9% $ 17.7425 04/10/11 $ 490,959 $ 1,244,187
40,000 (4) 0.8% $ 20.50 09/26/11 $ 515,694 $ 1,306,869
Peter Aikens 28,400 (3) 0.6% $ 17.7425 04/10/11 $ 316,892 $ 803,066
40,000 (4) 0.8% $ 20.50 09/26/11 $ 515,694 $ 1,306,869
Thomas S. Summer 34,400 (3) 0.7% $ 17.7425 04/10/11 $ 383,841 $ 972,728
50,000 (4) 1.0% $ 20.50 09/26/11 $ 644,617 $ 1,633,586
----------------------
(1) The securities consist of shares of Class A Stock underlying non-qualified
stock options that were granted pursuant to the Company's Long-Term Stock
Incentive Plan, as amended (the "Plan"). The stock options were granted for
terms of no greater than 10 years, subject to earlier termination upon the
occurrence of certain events related to termination of employment. Under
the Plan, the vesting of stock options accelerates in the event of a change
of control, as defined in the Plan.
(2) The exercise price per share of each option is equal to the closing market
price of a share of Class A Stock on the date of grant.
(3) This option has become fully exercisable.
(4) This option vests and becomes fully exercisable on September 26, 2005,
unless it becomes exercisable on an earlier date as follows: (i) 50% of
this option has become exercisable; and (ii) the remaining 50% of this
option will become exercisable after the fair market value of a share of
Class A Stock has been at least $31.175 for fifteen (15) consecutive
trading days.
The following table sets forth information regarding: (i) shares acquired
and the value realized upon the exercise of stock options by the Named
Executives during the fiscal year ended February 28, 2002; and (ii) the number
and value of exercisable and unexercisable stock options held by the Named
Executives as of February 28, 2002. There are no outstanding SARs.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
------------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS OPTIONS
ACQUIRED AT FY-END (1) AT FY-END
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ----------- ----------- ------------- ------------- -------------
Richard Sands - - 654,226 194,974 $ 11,160,935 $ 2,004,296
Robert Sands - - 636,693 169,707 $ 11,059,218 $ 1,774,876
Alexander L. Berk 87,040 $ 1,575,620 385,600 123,360 $ 6,260,853 $ 1,410,613
Peter Aikens 129,800 $ 1,129,011 146,826 93,374 $ 1,979,346 $ 1,022,980
Thomas S. Summer 164,960 $ 2,350,763 113,700 108,940 $ 1,501,163 $ 1,175,784
---------------------
(1) The securities consist of shares of Class A Stock underlying stock options
that were granted pursuant to Company plans that were approved by its
stockholders.
REPORT WITH RESPECT TO EXECUTIVE COMPENSATION
The following report is required by the Securities and Exchange
Commission's executive compensation rules in order to standardize the reporting
of executive compensation by public companies. This information shall not be
deemed incorporated by reference in any filing under the federal securities laws
by virtue of any general incorporation of this Proxy Statement by reference and
shall not otherwise be treated as filed under the securities laws.
GENERAL
The Human Resources Committee of the Board of Directors administers the
Company's executive compensation program. The Human Resources Committee is
composed of Jeananne Hauswald, Thomas McDermott and Paul Smith, each of whom is
a non-employee director.
The objectives of the Company's executive compensation program are to (i)
be competitive with the pay practices of other companies of comparable size and
status, including those in the beverage alcohol industry, and (ii) attract,
motivate and retain key executives who are vital 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-based
compensation elements. These elements are designed to operate together to
comprise performance-based annual cash compensation and stock-based compensation
which align the interests of the Company's executives with the interests of its
stockholders.
Executive compensation is determined in light of the Company's performance
during the fiscal year and taking into account compensation data of comparable
companies. Specifically considered in fiscal year 2002 was the Company's
adjusted operating income for fiscal 2002 as compared to that set forth in its
fiscal 2002 operating plan.
BASE SALARY
With respect to annual compensation, the fundamental objective in setting
base salary levels for the Company's senior management is to pay competitive
rates to attract and retain high quality, competent executives. Competitive pay
levels are determined based upon input of compensation consultants, independent
industry surveys, proxy disclosures, salaries paid to attract new managers and
past experience. The Human Resources Committee reviews data generated by Mercer
Human Resource Consulting, Inc., a consultant to the Company, for competitive
analyses. Base salary levels are determined based upon factors such as
individual performance (e.g., leadership, level of responsibility, management
skills and industry activities), Company performance and competitive pay
packages.
ANNUAL MANAGEMENT INCENTIVES
In addition to their base salary, the Company's executives have the
opportunity to earn an annual cash bonus. The annual bonus for executive
officers for fiscal 2002 was based on attainment of certain target financial
performance goals for the Company. Awards were based on a percentage of base
salary, with target awards ranging from 55% to 65% of base salaries for
executive officers. The purpose of the annual bonus is to motivate and provide
an incentive to management to achieve specific business objectives and
initiatives as set forth in the Company's annual operating plan and budget. For
fiscal 2002, annual cash bonuses were awarded to each of the Named Executives in
the amounts indicated in the Summary Compensation Table.
Future cash bonuses for the participating executives will be determined by
the Human Resources Committee pursuant to, or in a manner similar to that
contemplated by, the Company's Annual Management Incentive Plan. Pursuant to
that plan, the Committee would award cash bonuses to the participating
executives in the event that the Company attains one or more pre-set performance
targets.
STOCK OPTIONS, SARs AND RESTRICTED STOCK
In connection with the executive compensation program, long-term incentive
awards in the form of, among others, stock options, stock appreciation rights
and restricted stock are available for grant under the Company's Long-Term Stock
Incentive Plan and Incentive Stock Option Plan. Awards have been primarily in
the form of non-qualified stock options granted under the Company's Long-Term
Stock Incentive Plan. These arrangements balance the annual operating objectives
of the annual cash incentive plan with the Company's longer-term stockholder
value building strategies. The Human Resources Committee and the Board of
Directors grant these stock-based incentive awards from time to time for the
purpose of attracting and retaining key executives, motivating them to attain
the Company's long-range financial objectives, and closely aligning their
financial interests with long-term stockholder interests and share value.
The Company believes that through the use of stock options, executives'
interests are directly tied to enhanced stockholder value. The Human Resources
Committee of the Board (as well as the full Board) has the flexibility of
awarding non-qualified stock options, restricted stock, stock appreciation
rights and other stock-based awards under the Company's Long-Term Stock
Incentive Plan and incentive stock options under the Company's Incentive Stock
Option Plan. This flexibility enables the Company to fine-tune its grants in
order to maximize the alignment of the interests of the stockholders and
management.
During fiscal 2002, the Human Resources Committee awarded nonqualified
options to all executive officers, including the Company's Chief Executive
Officer, taking into account relevant market survey data, their position with
the Company and the financial performance of the Company. The exercise prices
of all the stock options awarded were equal to the market value of the
underlying shares on the date of grant. Accordingly, the value of the awards
depends solely upon future growth in the share value of the Company's Class A
Stock.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
For fiscal year 2002, the compensation of Richard Sands, the Company's
Chief Executive Officer, was based on a variety of factors, as noted above. In
this regard, the Human Resources Committee considered the Company's performance,
as well as Mr. Sands' individual performance. In addition, the compensation
packages of chief executive officers of certain comparable companies selected by
Mercer Human Resource Consulting, Inc. were considered. Also taken into account
was the Company's current executive salary and compensation structure.
Richard Sands' base salary is believed to be in line with salaries of
executives of similar companies and chief executive officers with similar
responsibilities. Mr. Sands' annual cash incentive for fiscal 2002 was a
percentage of his base salary based upon the Company's fiscal 2002 adjusted
operating income as compared to that set forth in the Company's fiscal 2002
operating plan. The range for Mr. Sands' cash incentive award, from threshold,
target and maximum (16%, 65% and 130%, respectively), was comparable to industry
compensation survey data for executives in Richard Sands' position. For the
fiscal year ended February 28, 2002, Richard Sands received a bonus of $819,390,
130% of his salary. As noted elsewhere in this Proxy Statement, during fiscal
2002, Mr. Sands also received stock options to purchase up to 163,200 shares of
Class A Stock of the Company.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code provides that certain
compensation in excess of $1 million per year paid to a company's chief
executive officer and four other most highly paid executive officers may not be
deductible by the company unless it qualifies as performance-based compensation.
The Human Resources Committee recognizes the benefits of structuring executive
compensation so that Section 162(m) does not limit the Company's tax deductions
for such compensation, and the Company's Long-Term Stock Incentive Plan,
Incentive Stock Option Plan and Annual Management Incentive Plan have been
designed so that the Human Resources Committee may award performance-based
compensation that is not subject to the limits imposed by Section 162(m). Under
certain circumstances, the Human Resources Committee may decide to award
executive compensation in an amount and form that is not deductible under
Section 162(m).
The foregoing report is given by the members of the Human Resources
Committee.
HUMAN RESOURCES COMMITTEE
Thomas C. McDermott (Chair)
Jeananne K. Hauswald
Paul L. Smith
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As described above, during fiscal 2002, Jeananne Hauswald, Thomas McDermott
and Paul Smith served as members of the Human Resources Committee of the
Company's Board of Directors. None of these individuals are or have ever been
officers or employees of the Company.
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a line graph comparing, for the fiscal years ended the
last day of February 1998, 1999, 2000, 2001 and 2002, the cumulative total
stockholder return of the Company's Class A Stock and Class B Stock, with the
cumulative total return of the S&P MidCap 400 Index, the Russell 2000 Index (see
footnote (1) to the graph) and a peer group index comprised of companies in the
beverage industry (the "Selected Peer Group Index") (see footnote (2) to the
graph). The graph assumes the investment of $100.00 on February 28, 1997 in the
Company's Class A Stock, Class B Stock, the S&P MidCap 400 Index, the Russell
2000 Index and the Selected Peer Group Index, and also assumes the reinvestment
of all dividends.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
-----------------------------------------------
[PERFORMANCE GRAPH]
1997 1998 1999 2000 2001 2002
------- ------- ------- ------- ------- -------
STZ $100.00 $181.30 $173.58 $159.35 $207.64 $353.50
STZ.B 100.00 168.42 154.89 147.37 192.48 320.84
Peer Group Index 100.00 118.75 127.97 99.40 124.55 134.04
Russell 2000 Index 100.00 129.95 111.58 166.56 138.51 138.98
S&P MidCap 400 Index 100.00 136.52 139.42 182.63 198.93 190.13
------------------
(1) The Company has historically compared its performance to that of the
Russell 2000 Index. The Company has determined that a better measure for
comparison purposes would be the S&P MidCap 400 Index, as opposed to the
Russell 2000 Index or Russell 1000 Index, because the investment
characteristics of the companies in the S&P MidCap 400 Index more closely
match those of the Company. During the fiscal year ended February 28, 2002,
as a result of the Company's increased market capitalization, the Company
moved from the Russell 2000 Index to the Russell 1000 Index. In addition,
the Company recently became a member of the S&P MidCap 400 Index, which is
comprised of companies of comparable market capitalization.
(2) The Selected Peer Group Index is weighted according to the respective
issuer's stock market capitalization and is comprised of the following
companies: Adolph Coors Company (Class B Shares); Anheuser-Busch Companies,
Inc.; The Boston Beer Company, Inc.; Brown-Forman Corporation (Class A and
Class B Shares); Cadbury Schweppes plc; The Chalone Wine Group, Ltd.;
Coca-Cola Bottling Co. Consolidated; Coca-Cola Company; Coca-Cola
Enterprises Inc.; Diageo plc-ADR; LVMH Moet Hennessy Louis Vuitton; The
Robert Mondavi Corporation (Class A Shares); PepsiCo, Inc.; and
PepsiAmericas, Inc.
There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted by the graph
above. The Company neither makes nor endorses any predictions as to future
stock performance.
The Stock Price Performance Graph set forth above shall not be deemed
incorporated by reference in any filing under the federal securities laws by
virtue of any general incorporation of this Proxy Statement by reference and
shall not otherwise be treated as filed under the securities laws.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Alexander Berk and Barton Incorporated, a wholly-owned subsidiary of the
Company, are parties to an employment agreement dated as of September 1, 1990,
as amended on November 11, 1996 and October 20, 1998, that provides for Mr.
Berk's compensation and sets forth the terms and conditions of Mr. Berk's
employment with Barton. Under his employment agreement, Mr. Berk serves as the
President and Chief Executive Officer of Barton and, by virtue of his current
responsibilities with Barton, he is deemed an executive officer of the Company.
While the initial term of the employment agreement expired on February 28, 2001,
in accordance with the agreement, the term is automatically extended for
one-year periods unless either Mr. Berk or Barton notifies the other that such
party does not wish to extend it. The agreement will terminate prior to the
expiration of the current term (i) upon Mr. Berk's death or Retirement, (ii) at
Barton's election, for Cause or upon Mr. Berk's Complete Disability, and (iii)
at Mr. Berk's election, for Good Reason (all as set forth in the agreement). If
Barton decides not to extend the term of the agreement, or if the agreement
terminates by reason of Mr. Berk's death, Complete Disability, or Retirement, or
for Good Reason, Barton is obligated to pay to Mr. Berk a post-termination
benefit equal to 100% of his then current base salary plus the amount of the
bonus paid to him for the immediately preceding fiscal year. If Mr. Berk decides
not to extend the term of the agreement, then Barton is obligated to pay to Mr.
Berk a post-termination benefit equal to one half of the foregoing amount. In
the event that Mr. Berk's employment is terminated for Good Reason, or is
terminated by Barton for reasons other than death, Complete Disability, Cause,
or Barton's decision not to extend the term of the agreement, then Mr. Berk is
entitled to be paid (i) if the applicable conditions are satisfied, a
supplementary post-termination benefit equal to what he otherwise would have
been entitled to receive as his share of Barton's contribution to its
profit-sharing and retirement plan for the fiscal year in which such termination
occurs and (ii) an amount equal to the product of his then current base salary
multiplied by the number of years remaining in the then term of the agreement.
Post-termination benefits are payable to Mr. Berk in a lump sum as soon as
practicable after employment terminates, except that any supplementary
post-termination benefit is payable promptly after Barton's contribution to the
retirement plan. The agreement requires Mr. Berk to keep certain information
with respect to the Company confidential during and after his employment with
the Company.
Under the terms of a letter agreement between the Company and Thomas
Summer, Executive Vice President and Chief Financial Officer of the Company, if
Mr. Summer's employment is terminated without cause or if he voluntarily resigns
within 30 days after a demotion or a material diminishment in his
responsibilities, in either case without cause, or if there is a change in
control of the Company, he will be entitled to receive severance compensation
equal to his then current base compensation for a period of 12 months.
In April 2002, Peter Aikens, President and Chief Executive Officer of
Matthew Clark plc, retired from his employment with Matthew Clark. Consistent
with the terms of Mr. Aikens' service agreement with the Company and in
recognition of his service and his undertakings, among others, to assure a
smooth transition of his duties and responsibilities and to refrain from
engaging in certain activities competitive with the Company's business, the
Company and Mr. Aikens entered into an agreement relating to his retirement from
Matthew Clark. In accordance with the agreement, Mr. Aikens will serve as
Non-Executive Chairman of Matthew Clark through April 30, 2004, and will be
available to provide consulting services when needed through such date. Under
the agreement, the Company paid to Mr. Aikens (pound) 151,008 (equivalent to
$220,170, based on the exchange rate on his date of retirement (the "Exchange
Rate")), which represents an amount equivalent to Mr. Aikens' target bonus award
for the bonus year ended February 28, 2003. In addition,for one year following
the date of his retirement, and provided Mr. Aikens continues to comply with the
terms set forth in the agreement , the Company will pay him (pound) 33,363
(equivalent to $48,643, based on the Exchange Rate) each month for that year and
will permit him to continue to participate, through April 30, 2003, in the
Company's private health insurance arrangements on the same basis as during his
employment. Further, upon Mr. Aikens' compliance with certain terms of the
agreement, on March 30, 2003, the Company will (i) pay him the sum of (pound)
400,352 (equivalent to $583,713, based on the Exchange Rate) (representing an
amount equivalent to his 12 months' salary, pension contributions and benefits
excluding private medical insurance), (ii) pay him the sum of (pound) 151,008
(equivalent to $220,170, based on the Exchange Rate) (representing an amount
equivalent to Mr. Aikens' target bonus award for the bonus year ended February
29, 2004), and (iii) permit him to continue to participate, through April 30,
2004, in the Company's private health insurance arrangements on the same basis
as during his employment.
The son of Peter Aikens has an equity interest in Harold Whitehead and
Partners, which provides consulting services to Matthew Clark on an as needed
basis. Over the course of the last year, approximately $469,193 was paid to
Harold Whitehead and Partners for services rendered to Matthew Clark.
Agustin Francisco Huneeus ("Mr. Huneeus") is the President and Chief
Executive Officer of Franciscan Vineyards, Inc. ("Franciscan"), a wholly-owned
subsidiary of the Company, and by virtue of his responsibilities with
Franciscan, he is deemed an executive officer of the Company. His father,
Agustin Huneeus, and other members of his immediate family, as well as Mr.
Huneeus, individually and through various family owned entities (the "Huneeus
Interests") engaged in certain transactions with Franciscan during the last
fiscal year that are expected to be of an ongoing nature from year to year. The
Huneeus Interests (a) engage Franciscan for certain wine processing services;
(b) engage Franciscan as the exclusive distributor of Quintessa wines under a
long-term contract; (c) sell grapes
to Franciscan pursuant to existing long-term contracts; (d) participate as
partners with Franciscan in the ownership and operation of a winery and
vineyards in Chile; (e) render brand management consulting and advisory services
in the United States and internationally with respect to the Veramonte brand;
and (f) render consulting services to Franciscan and the Company. Payments to
the Huneeus Interests pursuant to these transactions and arrangements totaled
approximately $4,790,300 for the last fiscal year. Payments from the Huneeus
Interests to Franciscan for certain wine processing services totaled
approximately $354,349 for the last fiscal year.
By an Agreement dated December 20, 1990, the Company entered into a
split-dollar insurance agreement with a trust established by Marvin Sands of
which Robert Sands is the trustee. Pursuant to the Agreement, the Company pays
the annual premium on an insurance policy (the "Policy") held in the trust,
$209,063 in fiscal 2002, and the trust reimburses the Company for the portion of
the premium equal to the "economic benefit" to Marilyn Sands, calculated in
accordance with the United States Treasury Department rules then in effect
($25,236 for fiscal 2002). The Policy is a joint life policy payable upon the
death of Marilyn Sands, as the survivor of the two insureds, with a face value
of $5 million. Pursuant to the terms of the trust, Richard Sands, Robert Sands
(in his individual capacity) and the children of Laurie Sands (the deceased
sister of Richard and Robert Sands) will each receive one-third of the proceeds
of the Policy (after the repayment of the indebtedness to the Company out of
such proceeds as described below), if they survive Marilyn Sands. From the
inception of the agreement through the end of fiscal 2002, the Company has paid
aggregate premiums, net of reimbursements, of $2,382,327. The aggregate amount
of such unreimbursed premiums constitutes indebtedness from the trust to the
Company and is secured by a collateral assignment of the Policy. Upon the
termination of the Agreement, whether by the death of Marilyn Sands or earlier
cancellation, the Company is entitled to be repaid by the trust the amount of
such indebtedness.
Richard Sands, Robert Sands and four trusts formed under the will of Laurie
Sands are the beneficial owners of a limited partnership which owns railroad
cars. These cars are leased by the Company from the partnership at fair market
rates. During fiscal year 2002, with respect to leasing these cars, the Company
made payments to this limited partnership in the amount of $30,797. The Company
expects to continue its present relationship with the limited partnership during
fiscal year 2003.
Richard Sands, Robert Sands and their mother, Marilyn Sands are beneficial
owners of L, R, R & M, LLC, a Delaware limited liability company which owns the
Inn on the Lake in Canandaigua, New York (the "Inn"). The Inn is leased and
operated by a third party. The Inn is frequently used by the Company for
Company functions and for its out-of-town employees visiting the Company on
business. During the last fiscal year, the Company paid the operators of the
Inn approximately $38,035 (exclusive of employee reimbursed expenses).
In September 2001, R, R, M & C Partners, L.L.C., a Missouri limited
liability company ("RRM&C") and M, L, R & R, a New York general partnership
("MLR&R"), both of which are affiliates of the Sands family, sold an aggregate
of 4,300,000 shares of Class A Common Stock in a registered public offering.
Substantially all of the equity interest of RRM&C is indirectly beneficially
owned by Marilyn Sands, Richard Sands, Robert Sands and CWC Partnership-I, a New
York general partnership ("CWCP-I"). Richard Sands and Robert Sands are the
managing partners of CWCP-I. The general partners of MLR&R are Richard Sands,
Robert Sands, CWCP-I, the Marvin Sands Master Trust (of which Marilyn Sands is a
trustee and Richard Sands and Robert Sands are trustees and beneficiaries), and
Andrew Stern (the brother-in-law of Richard Sands and Robert Sands). In
connection with this offering, the Company provided customary indemnification to
the selling stockholders and has been reimbursed for its expenses incurred in
connection with the offering. In
addition, as part of this offering, the Company sold 645,000 shares of its Class
A Stock as a result of the underwriter's exercise of its option to purchase
these shares at the public offering price less the underwriting discount, for
the purpose of covering over-allotments.
George Bresler, a director of the Company, is a partner of the law firm of
Kurzman Eisenberg Corbin Lever & Goodman, LLP in New York, New York. The
Company pays to Mr. Bresler individually an annual retainer of $30,000 for his
legal services to the Company. The Company also includes Mr. Bresler under its
non-working group medical policy and pays a monthly premium of approximately
$264 for his coverage. James A. Locke III, a director of the Company, is a
partner in the law firm of Nixon Peabody LLP, Rochester, New York, the Company's
principal outside counsel.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act requires the Company's
directors and executive officers, and persons who beneficially own more than 10%
of a registered class of the Company's equity securities, to file with the
Securities and Exchange Commission reports of ownership and changes in ownership
of the Company's Class A Stock and Class B Stock. Executive officers, directors
and greater than 10% stockholders are required to furnish the Company with
copies of all such reports they file. Based solely upon review of copies of such
reports furnished to the Company and related information, the Company believes
that all such filing requirements for fiscal 2002 were complied with in a timely
fashion, with three exceptions. Each of R, R, M & C Group, L.P. and R, R, M & C
Management Corporation inadvertently filed a report one month late, where each
reported the same transaction, and Jon Moramarco inadvertently filed one report
late, where he reported one transaction involving a small number of shares of
the Company.
STOCK OWNERSHIP OF MANAGEMENT
The following table and notes thereto set forth, as of May 31, 2002, the
beneficial ownership of Class A Stock and Class B Stock by the Company's
directors and nominees, the Named Executives, and all of the Company's directors
and executive officers as a group. This information is based on information
furnished to the Company by or on behalf of each person concerned. Unless
otherwise noted, the named individual has sole voting power and investment
discretion with respect to the shares attributed to him or her and the
percentages of ownership are calculated on the basis of 77,115,176 shares of
Class A Stock and 12,099,090 shares of Class B Stock outstanding as of the close
of business on May 31, 2002.
-------------------------------------------------------------------------------
Class A Stock (1) Class B Stock
----------------------------------------------- -----------------------------
Shares Beneficially Owned
--------------------------------
Shares
Acquirable Percent of Percent of
Within 60 days Class Shares Class
Outstanding by Exercise of Beneficially Beneficially Beneficially
NAME OF BENEFICIAL OWNER Shares Options (2) Owned Owned Owned
------------------------ --------------- -------------- ------------ -------------- -------------
Richard Sands 496,090 (3) 747,653 (3) 1.6% (3) 8,384,188 (3) 69.3% (3)
Robert Sands 564,618 (3) 698,186 (3) 1.6% (3) 8,381,368 (3) 69.3% (3)
Alexander L. Berk 7,040 446,240 * - *
Peter Aikens - 119,653 * - *
Thomas S. Summer 8,708 (4) 165,560 * - *
James A. Locke III 7,216 24,000 * (5) 132 *
George Bresler 3,020 12,000 * - *
Jeananne K. Hauswald 3,020 24,000 * - *
Paul L. Smith 4,020 12,000 * - *
Thomas C. McDermott 3,020 48,000 * - *
All Executive Officers and
Directors as a Group
(15 persons) (6) 820,820 2,996,625 4.8% (6) 11,335,616 93.7%
---------------------
* Percentage does not exceed one percent (1%) of the outstanding shares of
such class.
(1) The shares and percentages of Class A Stock set forth in this table do not
include (i) shares of Class A Stock that may be acquired within 60 days by
an employee under the Company's Employee Stock Purchase Plan (because such
number of shares is not presently determinable) and (ii) shares of Class A
Stock that are issuable pursuant to the conversion feature of the Company's
Class B Stock, although, such information is provided in a footnote where
appropriate. For purposes of calculating the percentage of Class A Stock
beneficially owned in the table and in the footnotes, additional shares of
Class A Stock equal to the number of presently exercisable options and, as
appropriate, the number of shares of Class B Stock owned by the named
person or by the persons in the group of executive officers and directors
are assumed to be outstanding only for that person or group of persons
pursuant to Rule 13-3(d)(1) under the Securities Exchange Act.
(2) Reflects the number of shares of Class A Stock that can be purchased by
exercising stock options that are exercisable on May 31, 2002 or become
exercisable within sixty (60) days thereafter. Such number does not include
the number of option shares that may become exercisable within sixty (60)
days of May 31, 2002 due to certain acceleration provisions in certain
awards, which accelerations cannot be foreseen on the date of this Proxy
Statement.
(3) Includes shares in which the named individual shares voting power or
investment discretion. See tables and footnotes under "Beneficial
Ownership" above for information with respect to such matters and for the
number and percentage of shares of Class A Stock that would be owned
assuming the conversion of Class B Stock into Class A Stock.
(4) Mr. Summer shares the power to vote and dispose of 3,392 shares with his
spouse.
(5) Assuming the conversion of Mr. Locke's 132 shares of Class B Stock into
Class A Stock, Mr. Locke would beneficially own 31,348 shares of Class A
Stock, representing less than one percent (1%) of the outstanding Class A
Stock after such conversion.
(6) This group consists of the Company's current executive officers and
directors; therefore, Mr. Aikens is not included in this group. Assuming
the conversion of a total of 11,335,616 shares of Class B Stock
beneficially owned by the executive officers and directors as a group into
Class A Stock, all executive officers and directors as a group would
beneficially own 15,153,061 shares of Class A Stock, representing 16.6% of
the outstanding Class A Stock after such conversion.
PROPOSAL NO. 1
--------------
ELECTION OF DIRECTORS
DIRECTOR NOMINEES
The Board of Directors of the Company nominated seven directors to be
elected by the stockholders to hold office until the next Annual Meeting of
Stockholders and until their successors are elected and qualified. The nominees
for election to the Board of Directors are Richard Sands, Robert Sands, George
Bresler, Jeananne K. Hauswald, James A. Locke III, Thomas C. McDermott and Paul
L. Smith, all of whom currently serve as directors of the Company. Of the seven
nominees, Messrs. McDermott and Smith have been designated as the nominees to be
elected by the holders of the Class A Stock, voting as a separate class. The
remaining five nominees are to be elected by the holders of the Class B Stock,
voting as a separate class.
Management does not anticipate that any of the nominees will become
unavailable for any reason, but if that should occur before the Meeting, proxies
will be voted FOR another nominee or nominees to be selected by the Board of
Directors of the Company. The following paragraphs contain certain biographical
information about the nominees.
GEORGE BRESLER DIRECTOR SINCE 1992
--------------
Mr. Bresler, age 77, has been engaged in the practice of law since 1957. Since
1992, Mr. Bresler has been a partner of the law firm of Kurzman Eisenberg
Corbin Lever & Goodman, LLP, and its predecessor firms, in New York, New York.
Mr. Bresler provides legal services to the Company.
JEANANNE K. HAUSWALD DIRECTOR SINCE 2000
--------------------
Ms. Hauswald, age 58, has been a managing partner of Solo Management Group, LLC,
a corporate financial and investment management consulting company, since
September 1998. From 1987 to 1998, Ms. Hauswald was employed by The Seagram
Company Ltd., a beverage and entertainment/communications company, where she
served in various positions, including Vice President Human Resources from
1990 to 1993 and Vice President and Treasurer from 1993 to 1998. Ms. Hauswald
currently serves on the Board of Directors of Thomas & Betts Corporation and is
the Chairman of its Audit Committee.
JAMES A. LOCKE III DIRECTOR SINCE 1983
------------------
Mr. Locke, age 60, has been a partner in the law firm of Nixon Peabody LLP, and
its predecessor firm, in Rochester, New York, the Company's principal outside
counsel, since January 1, 1996. For twenty years prior to joining Nixon
Peabody, Mr. Locke was a partner at another law firm in Rochester, New York.
THOMAS C. MCDERMOTT DIRECTOR SINCE 1997
-------------------
Mr. McDermott, age 65, is Chairman of GPM Associates, LLP (formerly, Forbes
Products, LLC), a custom vinyl business products company, since January 1998.
From 1994 to 1997, Mr. McDermott
was President and Chief Executive Officer of Goulds Pumps, Incorporated, a
centrifugal pumps company for industrial, domestic and agricultural markets,
where he also was Chairman from 1995 to 1997. From 1986 to 1993, he was
President and Chief Operating Officer of Bausch & Lomb Incorporated, a contact
lens, lens-care and eyewear products company.
RICHARD SANDS, PH.D. DIRECTOR SINCE 1982
--------------------
Mr. Sands, age 51, is the Chairman of the Board, President and Chief Executive
Officer of the Company. He has been employed by the Company in various
capacities since 1979. He was elected Executive Vice President and a director
in 1982, became President and Chief Operating Officer in May 1986, and was
elected Chief Executive Officer in October 1993. In September 1999, Mr. Sands
was elected Chairman of the Board. He is the brother of Robert Sands.
ROBERT SANDS DIRECTOR SINCE 1990
------------
Mr. Sands, age 44, is Group President of the Company. He was appointed Group
President in April 2000 and has served as a director since January 1990. Mr.
Sands also had served as Chief Executive Officer, International from December
1998 through April 2000, as Executive Vice President from October 1993 through
April 2000, as General Counsel from June 1986 to May 2000, and as Vice President
from June 1990 through October 1993. He is the brother of Richard Sands.
PAUL L. SMITH DIRECTOR SINCE 1997
-------------
Mr. Smith, age 66, retired from Eastman Kodak Company in 1993 after working
there for thirty-five years. Mr. Smith was employed in various positions at
Eastman Kodak Company, the last of which was from 1983 to 1993, when he served
as Senior Vice President and Chief Financial Officer. Also from 1983 to 1993,
Mr. Smith served on the Board of Directors of Eastman Kodak Company. Mr. Smith
currently serves on the Board of Directors of Home Properties of New York, Inc.
and Performance Technologies, Incorporated.
See also information regarding George Bresler, Richard Sands and Robert
Sands under the caption "Certain Relationships and Related Transactions". For
information with respect to the number of shares of the Company's common stock
beneficially owned by each of the above named director nominees, see the table
and the footnotes thereto under the caption "Stock Ownership of Management".
DIRECTOR COMPENSATION
The Company's general policy is to pay its non-employee directors $35,000
per year for their services as directors, with no additional compensation for
serving as members of committees of the Board. However, the compensation of
non-employee directors was revised with respect to the two-year period
beginning on September 1, 2000 and ending on August 31, 2002, such that each
non-employee director will be paid partly in cash and partly in the form of an
award of restricted shares of Class A Stock. The cash component consists of an
annual amount of $17,500 and the restricted stock component consists of an award
of 3,020 shares, which was valued at the time of the award to be approximately
$35,000 for the two-year period. Subject to applicable provisions in the award
document, fifty percent (50%) of the restricted stock vested on August 31, 2001
and fifty percent (50%) of the restricted stock will vest on August 31, 2002.
George Bresler, Jeananne K. Hauswald, James A. Locke III, Thomas C. McDermott
and Paul L. Smith qualify for such payments. During fiscal 2002, the Company
awarded a stock option to purchase up to 12,000 shares of Class A Stock to each
of the non-employee directors, Ms. Hauswald and Messrs. Bresler, Locke,
McDermott and Smith, at an exercise price of $20.50 per share and with an
exercise period of March 27, 2002 through September 26, 2011. The Company also
reimburses its directors for reasonable expenses incurred in
connection with attending meetings of the Board of Directors and committees of
the Board of Directors. Directors who are also employees of the Company receive
no additional compensation for serving as directors. The Board of Directors is
scheduled to consider director compensation at its June 2002 board meeting, at
which time the compensation paid to directors may be modified.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held six (6) meetings during the
Company's fiscal year ended February 28, 2002. The standing committees of the
Board are the Audit Committee, Corporate Governance Committee and Human
Resources Committee. During fiscal 2002, each of the incumbent directors,
during his or her period of service, attended at least 75% of the total number
of meetings held by the Board and each committee of the Board on which he or she
served.
AUDIT COMMITTEE. The Audit Committee is currently composed of Paul L. Smith
(Chair), Jeananne K. Hauswald and Thomas C. McDermott, each of whom is
independent in accordance with the definition in the New York Stock Exchange's
listing standards. The Audit Committee operates under a written charter that was
approved by the Company's Board of Directors and which was attached to the
Company's proxy statement dated June 15, 2001. This Committee assists the Board
of Directors in fulfilling its oversight responsibilities as they relate to the
Company's accounting policies, internal controls and financial reporting
practices. In addition, this Committee maintains a line of communication between
the Board of Directors and the Company's financial management, internal auditors
and independent accountants. The Audit Committee held five (5) meetings during
fiscal 2002.
CORPORATE GOVERNANCE COMMITTEE. The Corporate Governance Committee is currently
composed of James A. Locke III (Chair), Thomas C. McDermott, Robert Sands and
Paul L. Smith. The full Board is responsible for nominating candidates to
become directors, but has delegated the screening process involved to the
Corporate Governance Committee. The Corporate Governance Committee advises the
Board concerning appropriate composition of the Board and its committees and
advises the Board regarding appropriate corporate governance practices and
assists the Board in achieving them. Among other matters, this Committee also
makes recommendations to the full Board with respect to an officer to be
designated as Chief Executive Officer, and a director to serve as Chairman of
the Board. In addition, this Committee recommends to the Board compensation for
directors who are neither present or former full-time officers of the Company.
This Committee held one (1) meeting during fiscal 2002. The Corporate
Governance Committee will consider nominations by stockholders of the Company.
Those nominations should include sufficient biographical information so that the
Committee can appropriately assess the proposed nominee's background and
qualifications. All submissions should be sent in writing to the attention of
the Corporate Secretary, Constellation Brands, Inc., 300 WillowBrook Office
Park, Fairport, New York 14450.
HUMAN RESOURCES COMMITTEE. The Human Resources Committee is currently composed
of Thomas C. McDermott (Chair), Jeananne K. Hauswald and Paul L. Smith. The
Human Resources Committee monitors, among other matters: human resources
policies and procedures as they relate to the goals and objectives of the
Company and good management practices; and procedures and internal controls
which relate to personnel administration, pay practices and benefits
administration. The Human Resources Committee is responsible for reviewing total
executive compensation in relation to individual executive performance, Company
performance, salary information and other parameters deemed reasonable in the
assignment of executive compensation levels. This Committee also reviews and
approves executive benefits and perquisites and reviews performance systems,
including reward programs. The Human Resources Committee is responsible for
evaluating the performance of the Chief Executive Officer and approves his
salary, as well as the salaries of other executives. This Committee also
presently administers the Company's Long-Term Stock Incentive Plan, Incentive
Stock Option Plan, Annual Management Incentive Plan, 1989 Employee Stock
Purchase Plan and U.K. Sharesave Scheme and reviews succession planning for the
Company and other important human resources issues. The Human Resources
Committee held four (4) meetings during fiscal 2002.
AUDIT COMMITTEE REPORT
The following report shall not be deemed incorporated by reference in any
filing under the federal securities laws by virtue of any general incorporation
of this Proxy Statement by reference and shall not otherwise be treated as filed
under the securities laws.
The Audit Committee of the Board of Directors provides oversight to the
Company's financial reporting process through periodic meetings with the
Company's independent public accountants, internal auditors and management. The
management of the Company is responsible for the preparation and integrity of
the financial reporting information and related systems of internal controls.
The independent public accountants are responsible for performing an independent
audit of the Company's consolidated financial statements in accordance with
generally accepted auditing standards and for issuing a report thereon. The
Committee, in carrying out its role, relies on the Company's senior management
and its independent public accountants.
In connection with the preparation and filing of the Company's Annual
Report on Form 10-K for the fiscal year ended February 28, 2002, the Audit
Committee reviewed and discussed the audited financial statements of the Company
with the Company's management. Also, the Committee discussed with Arthur
Andersen LLP, the Company's independent public accountants with respect to the
fiscal year ended February 28, 2002, the matters required to be discussed by
Statement on Auditing Standards No. 61 (Codification of Statements on Auditing
Standards, AU Sec. 380).
In addition, the Committee received the written disclosures and the letter
from Arthur Andersen required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and discussed with Arthur
Andersen the independence of that firm as the Company's independent public
accountants.
Based on the review and discussions described above, the Audit Committee
recommended to the Board of Directors that the Company's audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 2002 for filing with the Securities and Exchange
Commission.
AUDIT COMMITTEE
Paul L. Smith (Chair)
Jeananne K. Hauswald
Thomas C. McDermott
VOTE REQUIRED
A plurality of the votes cast at the Meeting by the holders of Class A
Stock is required for the election of the two directors to be elected by the
holders of Class A Stock. A plurality of the votes cast at the Meeting by the
holders of Class B Stock is required for the election of the five directors to
be elected by the holders of Class B Stock.
The Board of Directors recommends a vote FOR the nominees. Unless
authority to vote for one or more of the nominees is specifically withheld, the
shares represented by your proxy, if properly executed and returned, and not
revoked, will be voted FOR the election of all the nominees for whom you are
entitled to vote.
PROPOSAL NO. 2
--------------
PROPOSED AMENDMENT TO AND RESTATEMENT OF
THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION
GENERAL
The Board of Directors of the Company has approved, subject to the approval
of the stockholders of the Company, a Restated Certificate of Incorporation of
the Company (the "Proposed Certificate"). The Proposed Certificate would effect
two changes: (a) an increase in the number of authorized shares of Class A Stock
to 275,000,000 shares, and (b) an increase in the number of authorized shares of
Class B Stock to 30,000,000 shares. As a result of these increases, the
aggregate number of authorized shares of the Company would be increased to
306,000,000 shares. No other change to the Company's existing Restated
Certificate of Incorporation (the "Restated Certificate") would result from the
Proposed Certificate.
The Restated Certificate currently authorizes the Company to issue an
aggregate of 141,000,000 shares, consisting of 120,000,000 shares of Class A
Stock, 20,000,000 shares of Class B Stock, and 1,000,000 shares of Preferred
Stock having a par value of $.01 per share. The Proposed Certificate will
increase the number of authorized shares of Class A Stock by 155,000,000 shares,
the number of shares of Class B Stock by 10,000,000 shares, and the aggregate
number of authorized shares by 165,000,000 shares. If approved by the
stockholders of the Company at the Meeting, the Proposed Certificate will become
effective when it is filed with the Delaware Secretary of State.
The Board of Directors has recommended that the stockholders of the Company
approve the Proposed Certificate. This approval would consist of two parts that
would be voted on separately at the Meeting: an approval of the proposed
increase in the number of authorized shares of Class A Stock and an approval of
the proposed increase in the number of authorized shares of Class B Stock.
REASONS FOR INCREASING THE NUMBER OF SHARES
The availability of an adequate supply of authorized and unissued shares of
Class A Stock and Class B Stock provides the Company with flexibility in
utilizing the shares for future stock dividends and other proper corporate
purposes, including acquisitions, equity financings, other stock distributions,
and grants of options and other stock rights, all as deemed necessary or
advisable by the Board of Directors. The availability of additional shares for
such purposes without the expense and delay of a special meeting of stockholders
(except as may be required by applicable law, regulations or the rules of any
stock exchange or other market system on which the Company's securities may then
be listed) will be beneficial to the Company by providing it with the
flexibility required to consider and respond to future business opportunities
and needs as they arise.
Except for the issuance of Class A Stock (i) pursuant to the Company's
stock-based plans and outstanding options/rights under those plans, and (ii)
upon the conversion of shares of Class B Stock (shares of Class B Stock are
convertible into shares of Class A Stock on a one-to-one basis at any time at
the option of the holder), the Company has no present plans, understandings,
agreements or arrangements for the issuance of any shares of Class A Stock or
Class B Stock. If the Board of Directors deems it in the best interests of the
Company and the stockholders to issue additional shares of Class A Stock or
Class B Stock in the future, the Board would not generally seek further approval
of the stockholders unless such approval is required by applicable law,
regulations or rules.
VOTES REQUIRED
The adoption of Proposal No. 2 to approve the Proposed Certificate requires
two separate votes: one vote to approve the increase in the number of authorized
shares of the Company's Class A Stock from 120,000,000 shares to 275,000,000
shares and another vote to approve the increase in the number of authorized
shares of the Company's Class B Stock from 20,000,000 shares to 30,000,000
shares. Each approval requires the affirmative vote of the holders of a majority
of all outstanding shares of Class A Stock and Class B Stock entitled to vote
thereon. With respect to each approval, holders of Class A Stock and Class B
Stock will vote together as a single class at the Meeting, with holders of Class
A Stock having one (1) vote per share and holders of Class B stock having ten
(10) votes per share. The increases in the number of authorized shares of Class
A Stock and Class B Stock are interdependent, and the Restated Certificate will
not be amended and restated unless the requisite vote for both approvals is
obtained.
The Board of Directors recommends that the stockholders approve the
Proposed Certificate by approving both (a) the increase in the number of
authorized shares of the Company's Class A Stock from 120,000,000 shares to
275,000,000 shares, and (b) the increase in the number of authorized shares of
the Company's Class B Stock from 20,000,000 shares to 30,000,000 shares.
Accordingly, the Board of Directors recommends that you vote FOR both approvals
required to adopt Proposal No. 2. Unless otherwise directed therein, the shares
represented by your proxy, if properly executed and returned, and not revoked,
will be voted FOR both approvals and, therefore, FOR the Proposed Certificate.
PROPOSAL NO. 3
--------------
RE-APPROVAL OF LONG-TERM STOCK INCENTIVE PLAN
On July 22, 1997, the Company's stockholders approved, in accordance with
Section 162(m) of the Internal Revenue Code, the Company's Long-Term Stock
Incentive Plan (as amended by Amendments One through Four thereto, the "Stock
Plan"), which amended and restated the Company's stock option plan then in
effect. The purpose of the Stock Plan is to provide the Company with
flexibility to attract and retain valued employees and directors and to provide
them with incentives to maintain and enhance the Company's long-term
performance, thereby aligning their interests with those of the Company's
stockholders.
Section 162(m) and its related regulations, require that stockholders
approve the material terms of incentive compensation plans every five years if
the Company has the ability to change
performance targets from year to year. Accordingly, under this proposal, the
Company's stockholders are being asked again to approve the Stock Plan.
The following discussion summarizes certain provisions of the Stock Plan.
This summary does not purport to be complete and is subject to and qualified in
its entirety by reference to the full text of the Stock Plan, which was filed
electronically with the Securities and Exchange Commission as an appendix to
this Proxy Statement, but is not included in the printed version of this Proxy
Statement. A copy of the Stock Plan is available from the Company's Secretary at
300 WillowBrook Office Park, Fairport, New York 14450.
SUMMARY OF TERMS
Awards under the Stock Plan may consist of any combination of non-qualified
stock options, stock appreciation rights, restricted stock or other stock-based
awards (collectively, "Awards"). As used in this Proxy Statement, the phrase
"Other Stock-Based Awards" means all Awards other than stock options, stock
appreciation rights and restricted stock. The aggregate number of shares of the
Company's Class A Stock available for Awards under the Stock Plan is
28,000,000 shares. Non-qualified options to purchase 12,638,057 shares of Class
A Stock were outstanding under the Stock Plan on May 31, 2002 and rights with
respect to 5,755,379 shares were then available for grant. Any Awards granted
pursuant to the Stock Plan are automatically adjusted to prevent dilution or
enlargement in the event of any stock dividend, stock split, reorganization
or other event affecting the Class A Stock. The market value of the Class A
Stock as of June 18, 2002 was $28.40 per share.
The Stock Plan is administered by the Human Resources Committee of the
Company's Board of Directors. The Human Resources Committee may delegate its
authority to others as provided in the Stock Plan, and the entire Board of
Directors may act as the Committee, as defined in the Stock Plan. As used in
this section, the term "Committee" means (i) the Human Resources Committee, (ii)
a delegate acting under the authority of the Human Resources Committee or (iii)
the entire Board of Directors acting as the Committee, as defined in the Stock
Plan, as applicable. Under the Stock Plan, the Committee is charged with
responsibility for selecting the participants and for determining the number and
type of Awards to be granted to each participant, the timing of the Awards, and
any other terms and conditions applicable to the Awards.
The persons who are eligible to participate in the Stock Plan include
directors and employees (including officers) of the Company and its
subsidiaries. Five non-employee directors and approximately 5,140 employees are
eligible to participate in the Stock Plan; however, only directors and employees
selected by the Committee will be granted Awards under the Stock Plan.
Outstanding non-qualified options granted under the Stock Plan are, as of May
31, 2002, held by approximately 1,020 employees.
The Stock Plan may be amended, modified or terminated by the Committee from
time to time. No amendment, modification or termination of the Stock Plan will
be effective without stockholder approval if such approval is required under any
applicable law, rule or regulation. The exercisability of any Award will
terminate if the Committee determines that the participant is engaged in
competition with the Company or has been terminated for "cause" as defined in
the Stock Plan.
The following table sets forth the aggregate number of stock options
granted under the Stock Plan to certain individuals and groups of individuals
during the fiscal year ended February 28, 2002 and the subsequent period through
the date of this Proxy Statement:
FISCAL YEAR ENDED PERIOD FROM MARCH 1, 2002
INDIVIDUAL OR GROUP OF INDIVIDUALS FEBRUARY 28, 2002 THROUGH JUNE 20, 2002
--------------------------------------------- ----------------- -------------------------
Richard Sands,
Chairman of the Board, President and
Chief Executive Officer 163,200 -
Robert Sands,
Group President 136,000 -
Alexander L. Berk,
President and Chief Executive Officer
of Barton Incorporated 84,000 -
Peter Aikens,
President and Chief Executive Officer
of Matthew Clark plc 68,400 -
Thomas S. Summer,
Executive Vice President and Chief
Financial Officer 84,400 -
All Executive Officers, as a Group
(10 persons) (1) 872,000 150,000
All Directors who are not Executive Officers,
as a Group (5 persons) 60,000 -
All employees other than Executive Officers,
as a Group 4,183,100 989,700
--------------------------------------
(1) This group consists of the Company's current executive officers; therefore,
Mr. Aikens is not included in this group.
COVERED EMPLOYEE RESTRICTIONS. There are special rules under the Stock Plan
relating to the Chief Executive Officer of the Company, the four other most
highly compensated executive officers of the Company and such other officers of
the Company as the Committee may designate (the "Covered Employees"). These
provisions are necessary for the Stock Plan to comply with Section 162(m) of the
Internal Revenue Code. The aggregate fair market value of any restricted stock
granted to any individual Covered Employee in any fiscal year may not exceed
$2.5 million, and the aggregate fair market value of Other Stock-Based Awards,
discussed below, granted to any individual Covered Employee in any fiscal year
may not exceed $2.5 million. Also, no individual Covered Employee may receive
Awards in any fiscal year relating to a number of shares of Class A Stock in
excess of 2.5% of the number of shares of Class A Stock outstanding on June 27,
1997.
STOCK OPTIONS. Under the Stock Plan, the Committee may grant Awards in the
form of non-qualified options to purchase shares of Class A Stock. The
Committee will, with regard to each stock option, determine the number of shares
subject to the option, the manner and period during which the option may be
exercised and the exercise price per share of stock subject to the option
(which, except in the case of Covered Employees, may be less than the fair
market value of the Class A Stock on the date of the grant). The exercise price
of stock options granted to Covered Employees must be equal to or greater than
the fair market value of the Company's Class A Stock on the date the stock
option is granted. Unless otherwise determined by the Committee, stock options
will become exercisable 20% per year on each of the first five anniversaries of
the grant; however, they become immediately exercisable upon a change of
control. The Committee has fixed the terms of recently granted options
so that they automatically and fully vest after four years but may vest earlier,
in whole or in part, based on increases in the market value of the Class A Stock
over a specified period of time. Upon exercise, the option price may be paid in
cash, shares of Class A Stock, a combination thereof, or such other
consideration as the Committee may deem appropriate. While incentive stock
options were at one time permitted to be granted under the Stock Plan, they are
no longer permitted to be granted under it. No incentive stock options were ever
granted under the Stock Plan.
STOCK APPRECIATION RIGHTS. The Stock Plan authorizes the Committee to
grant SARs either in tandem with a stock option or independent of a stock
option. An SAR is a right to receive a payment equal to the difference between
the fair market value of a share of Class A Stock on the date the SAR is
exercised and the SAR's reference price. A tandem SAR may be granted either at
the time of the grant of the related stock option or at any time thereafter
during the term of the stock option. Unless otherwise determined by the
Committee, an SAR will become exercisable 20% per year on each of the first five
anniversaries of the grant; however, they become immediately exercisable upon a
change of control. The reference price of an SAR will be fixed by the
Committee, but the reference price of a tandem SAR must be no less than the
exercise price of its related stock option and the reference price of an SAR
granted to a Covered Employee must equal or exceed the fair market value of a
share of Class A Stock on the date of the grant. Upon the exercise of a stock
option as to some or all of the shares covered by a tandem SAR, the related
tandem SAR will automatically expire in accordance with the terms and conditions
specified in the grant.
RESTRICTED STOCK AWARDS. The Stock Plan authorizes the Committee to grant
Awards in the form of restricted shares of Class A Stock. Such Awards will be
subject to such terms, conditions, restrictions, and/or limitations, if any, as
the Committee deems appropriate, including restrictions on transferability and
continued employment. The terms and conditions will include one or more
performance criteria and performance targets for Covered Employees if the grant
is intended to comply with Section 162(m) of the Internal Revenue Code and may
contain such criteria and targets under other circumstances and for other
participants.
OTHER STOCK-BASED AWARDS. The Committee may make Other Stock-Based Awards
under the Stock Plan. The Other Stock-Based Awards will be subject to such
terms, conditions and limitations as the Committee deems appropriate, which will
include one or more performance criteria and performance targets for Covered
Employees if the grant is intended to comply with Section 162(m) of the Internal
Revenue Code and may contain such criteria and targets under other circumstances
and for other participants.
PERFORMANCE CRITERIA AND TARGETS. For each restricted stock award and
Other Stock-Based Award to Covered Employees under the Stock Plan intended to
comply with Section 162(m) of the Internal Revenue Code, the Committee will
establish specific annual performance targets for performance periods of one or
more years (or partial years). The performance targets will be based on one or
more of the following business criteria: fair market value of the Class A
Stock, shareholder value added, cash flow, earnings per share, EBITDA (earnings
before interest, taxes, depreciation and amortization), return on equity, return
on capital, return on assets or net assets, cost reduction or control, operating
income or net operating income, operating margins/sales in one or more business
segments or product lines, return on operating revenue, market share in one or
more business segments or product lines, or on any combination thereof.
Performance targets must be established while the performance relative to the
target remains substantially uncertain within the meaning of Section 162(m) of
the Internal Revenue Code. Concurrently with the selection of the performance
targets, the Committee must establish an objective formula or standard for
calculating the maximum Award granted to each Covered Employee. The Committee
may adjust performance targets to take into account extraordinary items
affecting the Company, as defined in the Stock Plan. While the
Committee has no authority to make upward adjustments to Awards to Covered
Employees, it may in its discretion make such adjustments with respect to Awards
to other employees.
Covered Employees who are designated by the Committee as participants for a
given performance period shall only be entitled to receive payments of Awards
for such period to the extent that the pre-established objective performance
targets set by the Committee for such period are attained. With regard to a
particular performance period, the Committee will have the discretion, subject
to the Stock Plan's terms, to select the length of the performance period, the
type(s) of performance criteria to be used, the performance targets that will be
used to measure performance for the period and the performance formula that will
be used to determine what portion, if any, of the Award has been earned for the
period. Such discretion shall be exercised by the Committee in writing within
the time prescribed by Section 162(m) of the Internal Revenue Code (generally,
the first 90 days of the performance period) and performance for the period will
be measured by the Committee following the end of the performance period.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
A participant who receives a non-qualified stock option will not realize
income upon the grant of the option. The participant will realize ordinary
income at the time of exercise of non-qualified stock options in the amount of
the difference between the exercise price and the fair market value of the Class
A Stock on the date of exercise multiplied by the number of shares with respect
to which the option is exercised. The Company is entitled to a deduction equal
to the amount of such income at the time such income is realized by the
participant.
With respect to SARs, participants will not realize any income at the time
of grant. Upon exercise, any cash received and the fair market value on the
exercise date of any shares received will constitute ordinary income to the
participant. The Company will be entitled to a deduction in the amount of such
income at the time such income is realized by the participant.
Participants who receive grants of restricted stock should not realize
income at the time of grant, assuming the restrictions constitute a substantial
risk of forfeiture for federal income tax purposes. When such restrictions
lapse, the participants will receive taxable income in an amount equal to the
then fair market value of the Class A Stock. The federal income tax
consequences of Other Stock-Based Awards will depend on the type of Award.
Generally, a participant who receives a stock-based award in the form of a right
to receive Company stock will recognize ordinary income equal to the fair market
value of the stock when the stock is received by the participant and is no
longer subject to a substantial risk of forfeiture. In either case, the Company
will be entitled to a deduction of such amounts at the time the income is
realized.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
The following table sets forth information with respect to the Company's
compensation plans under which its equity securities may be issued, as of
February 28, 2002. The equity compensation plans approved by security holders
include the Company's Long-Term Stock Incentive Plan, Incentive Stock Option
Plan and 1989 Employee Stock Purchase Plan. The equity compensation plans not
approved by security holders include the Company's UK Sharesave Scheme (the "UK
Plan"). Under the UK Plan, 2,000,000 shares of Class A Stock may be issued to
eligible United Kingdom employees and directors of the Company in offerings that
typically extend from three to five years. Under the terms of the UK Plan,
participants may purchase shares of Class A Stock at the end of the offering
period through payroll deductions made during the offering period. The payroll
deductions are kept in interest bearing accounts until the participant either
exercises the option at the end of the offering or withdraws from the offering.
The exercise price for each offering is fixed at the beginning of the offering
by the committee administering the plan and may be no less than 80% of the
closing price of the stock on the day the exercise price is fixed. If a
participant ceases to be employed by the Company, that participant may exercise
the option during a period of time specified in the UK Plan or may withdraw from
the offering.
EQUITY COMPENSATION PLAN INFORMATION
--------------------------------------------------------------------------------------------------
(a) (b) (c)
NUMBER OF SECURITIES
NUMBER OF SECURITIES REMAINING AVAILABLE FOR
TO BE ISSUED UPON WEIGHTED-AVERAGE FUTURE ISSUANCE UNDER
EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (a))
--------------------- -------------------- -------------------- -------------------------
Equity compensation
plans approved by
security holders 12,477,808 $ 14.12 13,227,354
Equity compensation
plans not approved by
security holders - - 2,000,000
Total 12,477,808 $ 14.12 15,227,354
--------------------------
(1) There are currently two ongoing offerings under the UK Plan. The exercise
prices for shares that may be purchased at the end of these offerings are
$12.6093 and $14.21, respectively. The number of options outstanding that
represent the right to purchase shares at the end of the offerings is not
determinable because the exchange rate is not known and because the Company
cannot predict the level of participation by employees during the remaining
term of the offerings.
REASONS FOR RE-APPROVAL
The Board of Directors believes that it is desirable and in the best
interests of the Company and its stockholders to provide employees and directors
with incentives to maintain and enhance the Company's long-term performance.
The Stock Plan provides the Committee with alternate types of awards and serves
the Company's interests by providing the Committee with discretion in selecting
the participants, the number, the type and the timing of Awards, and the terms
and conditions applicable to the Awards. Re-approval of the Stock Plan is being
sought to preserve the Company's ability to deduct compensation paid to
executives in excess of one million dollars annually.
VOTE REQUIRED
The adoption of Proposal No. 3 to re-approve the Stock Plan pursuant to the
requirements of Internal Revenue Code Section 162(m) requires the affirmative
vote of a majority of the votes entitled to be cast by stockholders present in
person or represented by proxy at the Meeting. With respect to this proposal,
holders of Class A Stock and Class B Stock will vote together as a single class
at the Meeting, with holders of Class A Stock having one (1) vote per share and
holders of Class B Stock having ten (10) votes per share.
The Board of Directors recommends that the stockholders re-approve the
Company's Long-Term Stock Incentive Plan and, accordingly, recommends that you
vote FOR Proposal No. 3. Unless otherwise directed therein, the shares
represented by your proxy, if properly executed and returned, and not revoked,
will be voted FOR such proposal.
PROPOSAL NO. 4
--------------
RE-APPROVAL OF
ANNUAL MANAGEMENT INCENTIVE PLAN
On July 22, 1997, the Company's stockholders approved, in accordance with
Section 162(m) of the Internal Revenue Code, the Company's Annual Management
Incentive Plan (as amended by Amendments One and Two, thereto, the "Incentive
Plan"). The purpose of the Incentive Plan is to enable the Company to attract
and retain valued Company employees and to provide them with incentives to
attain certain annual financial and performance goals. The Incentive Plan is
intended to satisfy the requirements for performance-based compensation within
the meaning of Section 162(m) of the Code.
Section 162(m) and its related regulations, require that stockholders
approve the material terms of incentive compensation plans every five years if
the Company has the ability to change performance targets from year to year.
Accordingly, under this proposal, the Company's stockholders are being asked
again to approve the Incentive Plan.
The following discussion summarizes certain provisions of the Incentive
Plan. This summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the full text of the Incentive Plan,
which was filed electronically with the Securities and Exchange Commission as an
appendix to this Proxy Statement, but is not included in the printed version of
this Proxy Statement. A copy of the Incentive Plan is available from the
Company's Secretary at 300 WillowBrook Office Park, Fairport, New York 14450.
SUMMARY OF TERMS
The Incentive Plan establishes a vehicle for the payment of cash bonuses to
participating employees and tying such bonuses to the performance of the
Company with respect to certain financial criteria. The Incentive Plan is
administered by the Human Resources Committee of the Company's Board of
Directors, all of whom are "outside directors" within the meaning of Section
162(m) of the Internal Revenue Code and not eligible to participate in the
Incentive Plan.
The Committee establishes specific annual performance targets corresponding
to annual performance periods for each key employee who participates in the
Incentive Plan. The performance targets are based on one or more of the
following business criteria: fair market value of the Class A Stock, shareholder
value added, cash flow, earnings per share, EBITDA (earnings before interest,
taxes, depreciation and amortization), return on equity, return on capital,
return on assets or net assets, cost reduction or control, operating income or
net operating income, operating margins/sales in one or more business segments
or product lines, return on operating revenue, market share in one or more
business segments or product lines, or on any combination thereof. Performance
targets for participants who are subject to Section 162(m) of the Internal
Revenue Code must be established while the performance relative to the target
remains substantially uncertain within the meaning of Section 162(m).
Concurrently with the selection of the performance targets, the Committee must
establish an objective formula or standard for calculating the maximum bonus
payable to each participating employee.
The eligible persons under the Incentive Plan are certain key employees who
are selected by the Committee. There are approximately 110 key employees
currently participating in the Incentive Plan.
The following table sets forth the payment of cash bonuses under the
Incentive Plan to participating employees for the fiscal year ended February 28,
2002:
INDIVIDUAL OR GROUP OF INDIVIDUALS DOLLAR VALUE
--------------------------------------------- ------------
Richard Sands
Chairman of the Board, President and
Chief Executive Officer $ 819,390
Robert Sands
Group President $ 726,830
Alexander L. Berk
President and Chief Executive Officer
of Barton Incorporated $ 543,400
Peter Aikens
President and Chief Executive Officer
of Matthew Clark plc $ 401,092
Thomas S. Summer
Executive Vice President and Chief
Financial Officer $ 377,520
All Executive Officers,
as a Group (10 persons) (1) $ 3,828,216
All Directors who are not Executive Officers,
as a Group (5 persons) -
All employees other than Executive Officers,
as a Group $ 8,852,426
--------------------------
(1) This group consists of the Company's current executive officers; therefore,
Mr. Aikens is not included in this group.
Under the Incentive Plan, the maximum bonus any participating employee may
receive in any one fiscal year is $2,000,000. In addition to this overall
maximum, the Committee has sole discretion to determine whether payment of any
bonus will be deferred, subject in each case to the Incentive Plan's terms and
any other written commitment authorized by the Committee. The Committee may
also take into account the effects of any extraordinary items in a manner
consistent with the determination of the original bonus. All bonuses are to be
paid in cash or cash equivalents.
The Incentive Plan may be amended, modified or terminated, in whole or in
part, by the Committee from time to time, but no amendment, modification or
termination will be effective without Board and/or stockholder approval if such
approval is required to comply with the applicable rules under Section 162(m) of
the Internal Revenue Code.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
For information with respect to the Company's compensation plans under
which its equity securities may be issued, see Proposal No. 3.
REASONS FOR RE-APPROVAL
The Board of Directors believes that it is desirable and in the best
interests of the Company and its stockholders to insure that the Company's
compensation plans comply with the requirements of Section 162(m). Re-approval
of the Incentive Plan is being sought to preserve the Company's ability to
deduct annual compensation in excess of one million dollars paid to participants
subject to Section 162(m). The Board further believes that the Incentive Plan is
consistent with the Company's existing policies that closely relate employee
compensation to the Company's performance. The Incentive Plan also serves the
Company's interests by granting the Committee discretion both in selecting the
criteria by which performance is to be measured and in determining the actual
amount of each participating employee's bonus within the maximum limits imposed
pursuant to the Incentive Plan.
VOTE REQUIRED
The adoption of Proposal No. 4 to re-approve the Incentive Plan pursuant to
the requirements of Internal Revenue Code Section 162(m) requires the
affirmative vote of a majority of the votes entitled to be cast by stockholders
present in person or represented by proxy at the Meeting. With respect to this
proposal, holders of Class A Stock and Class B Stock will vote together as a
single class at the Meeting, with holders of Class A Stock having one (1) vote
per share and holders of Class B Stock having ten (10) votes per share.
The Board of Directors recommends that the stockholders re-approve the
Company's Annual Management Incentive Plan and, accordingly, recommends that you
vote FOR Proposal No. 4. Unless otherwise directed therein, the shares
represented by your proxy, if properly executed and returned, and not revoked,
will be voted FOR such proposal.
PROPOSAL NO. 5
--------------
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Arthur Andersen LLP, Certified Public Accountants, served as
the independent public accountants of the Company for the fiscal year ended
February 28, 2002. On April 4, 2002, the Board of Directors of the Company,
based on the recommendation of its Audit Committee, determined to dismiss Arthur
Andersen as its independent public accountants and to engage KPMG LLP to serve
as the Company's independent public accountants for the fiscal year ending
February 28, 2003, effective upon the filing by the Company of its Annual Report
on Form 10-K for the fiscal year ended February 28, 2002 with the Securities and
Exchange Commission. As contemplated, upon the filing of the Company's Annual
Report on Form 10-K on May 21, 2002, each of Arthur Andersen's dismissal and
KPMG's engagement as the Company's independent public accountants became
effective. The selection of KPMG as the Company's independent public accountants
will be presented to the stockholders for their ratification at the Meeting. If
the stockholders do not approve the selection of KPMG, the Board of Directors
will reconsider its choice.
Arthur Andersen's reports on the Company's consolidated financial
statements for each of the fiscal years ended February 28, 2002 and February 28,
2001 did not contain an adverse opinion or a disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope or accounting principles.
During the fiscal years ended February 28, 2002 and February 28, 2001, and
the subsequent interim period through May 21, 2002, there were no disagreements
between the Company and Arthur Andersen on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure
which, if not resolved to Arthur Andersen's satisfaction, would have caused
Arthur Andersen to make reference to the subject matter of any such
disagreements in connection with its reports on the Company's consolidated
financial statements for such years.
None of the reportable events described under Item 304(a)(1)(v) of
Securities and Exchange Commission's Regulation S-K occurred during the
Company's fiscal years ended February 28, 2002 and February 28, 2001, and the
subsequent interim period through May 21, 2002.
During the fiscal years ended February 28, 2002 and February 28, 2001 and
the subsequent interim period through May 21, 2002, the Company did not consult
with KPMG with respect to the
application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Company's consolidated financial statements, or any other matters or
reportable events as described in Item 304(a)(2)(i) and (ii) of Regulation S-K.
The following sets forth information regarding fees billed to the Company
by Arthur Andersen:
AUDIT FEES: The aggregate fees billed by Arthur Andersen for professional
services rendered in connection with the audit of the Company's annual
financial statements for the year ended February 28, 2002 and for the
review of the financial statements included in the Company's quarterly
reports on Form 10-Q for such year were approximately $494,000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES: Arthur
Andersen did not provide any services to the Company for the design and
implementation of financial information systems during the Company's 2002
fiscal year.
ALL OTHER FEES: The aggregate fees billed by Arthur Andersen for all other
services rendered to the Company during the Company's 2002 fiscal year were
approximately $1,235,000. These fees consisted primarily of fees for
services relating to acquisitions, debt and equity offerings, tax
compliance and statutory audits.
The Audit Committee reviewed and determined that the non-audit services
provided by Arthur Andersen during the Company's 2002 fiscal year are compatible
with maintaining the independence of such auditors.
A representative of Arthur Andersen is not expected to be present at the
Meeting. However, a representative of KPMG is expected to be present at the
Meeting and will be given an opportunity to make a statement if he or she so
desires and will be available to respond to any appropriate questions.
VOTE REQUIRED
The adoption of Proposal No. 5 to ratify the selection of KPMG LLP as the
Company's independent public accountants requires the affirmative vote of a
majority of the votes entitled to be cast by stockholders present in person or
represented by proxy at the Meeting. With respect to this proposal, holders of
Class A Stock and Class B Stock will vote together as a single class at the
Meeting, with holders of Class A Stock having one (1) vote per share and holders
of Class B Stock having ten (10) votes per share.
The Board of Directors recommends that the stockholders ratify the
selection of KPMG LLP as the independent public accountants of the Company for
the fiscal year ending February 28, 2003 and, accordingly, recommends that you
vote FOR Proposal No. 5. Unless otherwise directed therein, the shares
represented by your proxy, if properly executed and returned, and not revoked,
will be voted FOR such proposal.
STOCKHOLDER PROPOSALS FOR THE 2003 ANNUAL MEETING
In order for any stockholder proposal submitted pursuant to Rule 14a-8
promulgated under the Securities Exchange Act of 1934, as amended (the "Act"),
to be included in the Company's Proxy Statement to be issued in connection with
the 2003 Annual Meeting of Stockholders, such proposal must be received by the
Company no later than February 20, 2003.
Any notice of a proposal submitted outside the processes of Rule 14a-8
promulgated under the Act, which a stockholder intends to bring forth at the
Company's 2003 Annual Meeting of Stockholders, will be untimely for purposes of
Rule 14a-4 of the Act and the By-laws of the Company, if received by the Company
after February 20, 2003.
FINANCIAL INFORMATION
The Company has furnished its financial statements to stockholders by
including in this mailing the Company's 2002 Annual Report to Stockholders,
which consists of its Form 10-K for the fiscal year ended February 28, 2002
(excluding the exhibits thereto) and its 2002 glossy report. In addition, upon
the request of any stockholder, the Company will provide, without charge,
another copy of its Annual Report on Form 10-K for the fiscal year ended
February 28, 2002, as filed with the Securities and Exchange Commission
(excluding the exhibits thereto). Written requests for such copies should be
directed to Constellation Brands, Inc., Attention: Mark Maring, Vice President,
300 WillowBrook Office Park, Fairport, New York 14450; telephone number:
(585) 218-2169.
OTHER
As of the date of this Proxy Statement, the Board of Directors does not
intend to present, and has not been informed that any other person intends to
present, any matter at the Meeting other than those specifically referred to in
this Proxy Statement. If any other matters properly come before the Meeting, it
is intended that the holders of the proxies will act in respect thereto in
accordance with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ David S. Sorce
DAVID S. SORCE, Secretary
Fairport, New York
June 20, 2002
P R O X Y
CONSTELLATION BRANDS, INC.
PROXY FOR CLASS A COMMON STOCK AND CLASS B COMMON STOCK
The undersigned hereby appoints David S. Sorce and Thomas S. Summer, or any
one of them, proxies for the undersigned with full power of substitution to vote
all shares of CONSTELLATION BRANDS, INC. (the "Company") that the undersigned
would be entitled to vote at the Annual Meeting of Stockholders of the Company
to be held at One HSBC Plaza, 100 Chestnut Street, Rochester, New York, on
Tuesday, July 23, 2002, at 11:00 a.m. (local time), and any adjournment thereof
(the "Meeting").
Class A Stockholders, voting as a separate class, are entitled to elect two
directors at the Meeting. Class B Stockholders, voting as a separate class, are
entitled to elect five directors at the Meeting. Please refer to the Proxy
Statement for details. Your shares of Class A Common Stock and/or Class B Common
Stock appear on the back of this card. PLEASE SIGN ON THE BACK.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED BY THE
UNDERSIGNED. THIS PROXY REVOKES ANY PRIOR PROXY GIVEN BY THE UNDERSIGNED. UNLESS
AUTHORITY TO VOTE FOR ONE OR MORE OF THE NOMINEES IS SPECIFICALLY WITHHELD, THE
SHARES REPRESENTED BY A SIGNED PROXY WILL BE VOTED FOR THE ELECTION OF ALL
---
NOMINEES AS DIRECTORS AND, UNLESS OTHERWISE SPECIFIED, THE SHARES REPRESENTED BY
A SIGNED PROXY WILL BE VOTED FOR PROPOSALS 2 (BOTH (a) AND (b)), 3, 4 AND 5.
---
TO APPROVE THE BOARD OF DIRECTORS' RECOMMENDATIONS, SIMPLY SIGN ON THE
BACK. YOU NEED NOT MARK ANY BOXES.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
[SEE REVERSE SIDE]
BALLOT PLEASE MARK
YOUR VOTES AS [X]
INDICATED IN
THIS EXAMPLE
1. Election of Directors: To elect Directors as set forth in the Proxy
Statement.
CLASS A STOCKHOLDERS: 01 Thomas C. McDermott, 02 Paul L. Smith
FOR BOTH [ ] WITHHELD [ ]
NOMINEES FROM BOTH
(except as NOMINEES
noted below)
----------------------------------
Vote withheld from nominee
identified on above line
CLASS B STOCKHOLDERS: 01 George Bresler,
02 Jeananne K. Hauswald, 03 James A. Locke III,
04 Richard Sands, 05 Robert Sands
FOR ALL [ ] WITHHELD [ ]
NOMINEES FROM ALL
(except as NOMINEES
noted below)
----------------------------------
Vote withheld from nominee(s)
identified on above line.
2. Proposal to amend and restate the Company's Restated Certificate of
Incorporation to:
(a) increase the number of authorized shares of the Company's Class A
Common Stock from 120,000,000 shares to 275,000,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
(b) increase the number of authorized shares of the Company's Class B
Common Stock from 20,000,000 shares to 30,000,000 shares.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to re-approve the Company's Long-Term Stock Incentive Plan pursuant
to Section 162(m) of the Internal Revenue Code.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Proposal to re-approve the Company's Annual Management Incentive Plan
pursuant to Section 162(m) of the Internal Revenue Code.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. Proposal to ratify the selection of KPMG LLP, Certified Public Accountants,
as the Company's independent public accountants for the fiscal year ending
February 28, 2003.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. In their discretion, the proxies are authorized to vote upon such other
business not known at the time of the solicitation of this Proxy as may
properly come before the Meeting or any adjournment thereof.
[ ] MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
THE UNDERSIGNED ACKNOWLEDGES RECEIPT WITH THIS PROXY OF A COPY OF THE NOTICE OF
ANNUAL MEETING AND PROXY STATEMENT FOR THE COMPANY'S 2002 ANNUAL MEETING,
DESCRIBING MORE FULLY THE PROPOSALS SET FORTH HEREIN.
SIGNATURE DATE
------------------------------------ ---------------------------
SIGNATURE DATE
------------------------------------ ---------------------------
NOTE: PLEASE DATE THIS PROXY AND SIGN YOUR NAME ABOVE EXACTLY AS IT APPEARS
HEREON. EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC. SHOULD SO INDICATE WHEN
SIGNING. IF THE STOCKHOLDER IS A CORPORATION OR OTHER ENTITY, THE FULL ENTITY
NAME SHOULD BE INSERTED AND THE PROXY SIGNED BY A DULY AUTHORIZED REPRESENTATIVE
OF THE ENTITY, INDICATING HIS OR HER TITLE OR CAPACITY.
APPENDIX A
EXPLANATORY NOTE: The Constellation Brands, Inc. Long-Term Stock Incentive Plan,
as amended, is filed herewith, pursuant to Instruction 3 to Item 10 of Schedule
14A and is not part of the Proxy Statement.
CANANDAIGUA WINE COMPANY, INC.
LONG-TERM STOCK INCENTIVE PLAN
This Long-Term Stock Incentive Plan, which amends and restates in its
entirety the Canandaigua Wine Company, Inc. Stock Option and Stock Appreciation
Right Plan, was approved by the Board of Directors of the Company by unanimous
written consent as of June 23, 1997, to be effective immediately. Certain
capitalized terms used in the Plan are defined in Annex A.
1. PURPOSE
The Plan is designed to provide the Company with increased flexibility to
attract and retain valued employees and directors and to provide them with
incentives to maintain and enhance the Company's long-term performance record by
aligning the interests of the Participants and the stockholders of the Company.
2. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall
possess the authority, in its discretion, (a) to determine the employees and
directors of the Company to whom Awards shall be granted and the time or times
at which Awards shall be granted; (b) to determine at the time of grant the
number of shares to be subject to each Award; (c) to prescribe the form of the
instrument representing such Award; (d) to establish any appropriate terms and
conditions applicable to the Awards including any limitations on grants, vesting
or exercisability, and to make any amendments to such instruments or the Awards
which may, without limitation, include any acceleration of vesting or
exercisability, waiver of any condition or requirement or taking of other action
consistent with the purposes of the Plan; (e) to interpret and construe the
Plan; (f) to make and amend rules and regulations relating to the Plan; and (g)
to make all other determinations necessary or advisable for the administration
of the Plan. The Committee's determinations shall be conclusive and binding on
all Participants and all persons claiming under or through any Participant. No
member of the Committee shall be liable for any action taken or decision made in
good faith relating to the Plan or any Award granted under the Plan.
No outstanding Award may be exercised by any person if the Participant to
whom the Award is granted (x) is, or at any time after the date of grant has
been, in competition with the Company or its affiliates or (y) has been
terminated by the Company for Cause. The Committee shall determine, in its
discretion, whether a Participant's actions constitute competition with the
Company or its affiliates.
3. ELIGIBLE EMPLOYEES AND NON-EMPLOYEE DIRECTORS
All employees of the Company are eligible to receive Awards under the Plan.
Awards may be made to non-employee directors of the Company. No Awards under the
Plan shall be made to Covered Employees which are intended to qualify under
Section 162(m) of the Code until the Plan is approved by stockholders of the
Company.
4. SHARES AVAILABLE; TYPES OF AWARDS
The total number of shares of the Company's Common Stock available for
Awards under the Plan in the aggregate shall not exceed four million shares. The
maximum number of Shares which may be subject to Awards granted to any Covered
Employee in any fiscal year shall not exceed 2 1/2% of the outstanding Common
Stock as of the date the Plan is approved by the Board of Directors. Shares
subject to Awards may be authorized and unissued shares or may be treasury
shares.
If an Award expires, terminates or is cancelled without being exercised or
becoming vested, new Awards may thereafter be granted under the Plan covering
such shares unless the applicable Rules under Section 16(b) of the Exchange Act
or Section 162(m) of the Code require otherwise.
The Committee may make Awards from time to time in any one or more of the
following types singly or in tandem: Nonqualified Stock Options, Stock
Appreciation Rights, Restricted Stock or Other Stock-Based Awards.
5. STOCK OPTIONS
Stock Option Awards under the Canandaigua Wine Company, Inc. Stock Option
and Stock Appreciation Right Plan made prior to the date this Long-Term Stock
Incentive Plan was adopted by the Board of Directors shall remain outstanding
and in full force in accordance with their terms. Each Stock Option Award shall
specify the following terms and conditions, as well as any other terms,
conditions, limitations and restrictions specified by the Committee:
(a) Exercise Price. The exercise price per Share under each Stock
Option shall be specified by the Committee, provided that the exercise
price per Share for each Stock Option granted to a Covered Employee shall
equal the Fair Market Value of the Common Stock on the date the Award is
granted.
(b) Duration of Option. The duration of each Stock Option shall be
specified. Stock Options must be exercised on or before 5:00 p.m. Eastern
Time on their expiration date.
(c) Exercise Terms. Each Stock Option granted under the Plan shall
become exercisable in five equal annual installments commencing on the
first anniversary of the date of grant except as otherwise provided by the
Committee. Stock Options may be partially exercised from time to time
during the period extending from the time they first become exercisable in
accordance with the terms of the Award until the expiration of the exercise
period specified in the Award. Exercise of related Stock Appreciation
Rights will cause the immediate automatic expiration of related Stock
Options on the terms and conditions specified by the Committee. The
Committee may impose such additional limitations or conditions on the
vesting or exercise of any Stock Option as it deems appropriate.
(d) Payment of Exercise Price. A Stock Option shall be exercised upon
such notice as is required by the Committee accompanied by payment in full
of the exercise price for the Shares being acquired in such form as the
Committee may provide in accordance with Section 9 of the Plan, together
with all applicable withholding taxes as provided in Section 10 of the
Plan.
6. STOCK APPRECIATION RIGHTS
Stock Appreciation Rights may be granted by the Committee in Awards which
are in tandem with Stock Options or freestanding. Tandem Awards may be granted
at the same time as the grant of the related Stock Option or at any time
thereafter prior to the end of the exercise period for the related Stock Option.
(a) Value. The value of each Stock Appreciation Right shall be the
difference between the Fair Market Value of a Share on the date of exercise
of the Stock Appreciation Right and the reference amount specified in the
Award, which for each Stock Appreciation Right granted in tandem with a
Stock Option shall be not less than the exercise price of the related Stock
Option. The reference amount for each Stock Appreciation Right granted to a
Covered Employee shall not be less than the Fair Market Value of a Share on
the date of grant of the Stock Appreciation Right.
(b) Duration of Stock Appreciation Right. The duration of each Stock
Appreciation Right shall be specified. Each tandem Stock Appreciation Right
shall specify the Stock Option to which it is related and the terms and
conditions under which exercise or expiration of the related Stock Option
will result in automatic expiration of the related Stock Appreciation Right
and the terms and conditions on which exercise or expiration of the Stock
Appreciation Right will result in automatic expiration of the related Stock
Option.
(c) Exercise Terms. Each Stock Appreciation Right granted under the
Plan shall become exercisable in five equal annual installments commencing
on the first anniversary of the date of grant except as otherwise provided
by the Committee. Stock Appreciation Rights may be partially exercised from
time to time during the period extending from the time they first become
exercisable in accordance with the terms of the Award until the expiration
of the exercise period specified in the Award. Exercise of related Stock
Options will cause the immediate automatic expiration of related Stock
Appreciation Rights on the terms and conditions specified by the Committee.
The Committee may impose such additional limitations or conditions on the
exercise of any Stock Appreciation Right as specified in the Award as it
deems appropriate, including such additional limitations or conditions on
the vesting or exercise of any Stock Appreciation Right as it deems
appropriate. A Stock Appreciation Right shall be exercised upon such notice
as is required by the Committee.
7. RESTRICTED STOCK
Shares of Restricted Stock may be granted by the Committee from time to
time in its discretion to Participants subject to such terms and conditions as
may be required by law or are specified in the Award, including any payment
required for the Shares. The Award will also specify the availability of
dividends and other distributions with respect to which Shares of Restricted
Stock are entitled and the voting rights, if any, associated with such Shares of
Restricted Stock. Restricted Stock Awards to Participants who may be Covered
Employees which are intended to satisfy the requirements for "performance-based
compensation" under Section 162(m) of the Code shall only be made if payout is
contingent upon achievement of Performance Targets within or at the end of the
Performance Period with respect to one or more Performance Criteria as specified
by the Committee and the Committee certifies the extent to which any Performance
Target has been satisfied and the number of Shares of Restricted Stock
deliverable as a result thereof, prior to the delivery of any such Shares to
Covered Employees. In any fiscal year, the value of Restricted Stock Awards to
any individual Covered Employee shall not exceed $2.5 million (measured by the
difference between the amount of any payment for the Shares by the Participant
and the Fair Market Value of the Shares on the date of the Award).
8. OTHER STOCK-BASED AWARDS
From time to time in its discretion, the Committee may grant Other
Stock-Based Awards to any Participant on such terms and conditions as may be
determined by the Committee and specified in the Award. Grants of Other
Stock-Based Awards to Participants who may be Covered Employees which are
intended to satisfy the requirements for "performance-based compensation" under
Section 162(m) of the Code shall only be made if payout or exercise is
contingent upon achievement of Performance Targets within or at the end of the
Performance Period with respect to one or more Performance Criteria as specified
by the Committee and the Committee certifies the extent to which any Performance
Target has been satisfied, and the number of Shares or other compensation
deliverable as a result thereof, prior to the delivery of any such Shares or
compensation to Covered Employees. Any exercise of Other Stock-Based Awards
shall be made upon such notice as is required by the Committee to the Company
accompanied by payment in full of any exercise price for the Shares or other
compensation being acquired in such form as the Committee may provide in
accordance with Section 9 of the Plan, together with all applicable withholding
taxes as provided in Section 10 of the Plan. In any fiscal year, the value of
Other Stock-Based Awards to any individual Covered Employee shall not exceed
$2.5 million (measured by the difference between the amount of any payment or
exercise price for the Award by the Participant and the Fair Market Value of the
Shares or the Award on the date of the Award).
9. PAYMENT FOR PURCHASE OR EXERCISE OF AWARDS
The exercise price of Stock Options and any Other Stock-Based Awards
providing for exercise prices and the purchase price for any Restricted Stock or
Other Stock-Based Awards for purchase prices shall be paid to the Company upon
exercise or acquisition of such Award in the manner which the Committee may
determine which may include by (a) delivery of cash or a check in the amount of
the price of the Award, (b) tendering previously acquired Shares having a Fair
Market Value at the time of delivery equal to the price of the Award, (c)
delivery of
irrevocable instructions to a broker or other agent acceptable to the Company to
promptly sell Shares received under the Award and to deliver to the Company the
amount of proceeds to pay the price related to such Award, or (d) such other
method of payment as the Committee in its discretion deems appropriate, in each
case together with all applicable withholding taxes as provided in Section 10.
Previously acquired Shares tendered in payment must have been owned by
Participant for at least six months prior to the tender in payment of an Award.
10. WITHHOLDING TAXES
Whenever required by law in connection with an Award, the Company shall
require the Participant to remit to the Company an amount sufficient to satisfy
any federal, state and/or local income and employment withholding tax
requirements prior to the delivery of any certificate or certificates for Shares
or to take any other appropriate action to satisfy such withholding
requirements, including any method permitted for payment under Section 9 as
determined by the Committee. To the extent permitted under such rules as the
Committee may promulgate and in compliance with any requirements to avoid
violations under Section 16(b) of the Exchange Act and related Rules, the
Participant may satisfy such obligation in whole or in part by electing to have
the Company withhold Shares from the Shares to which the Participant is
otherwise entitled under the Award.
11. PERFORMANCE CRITERIA
For each Award of Restricted Stock or Other Stock-Based Award intended to
qualify as "performance based compensation" under Section 162(m) of the Code and
related Rules, the Committee shall select the applicable Performance Criteria,
Performance Period and Performance Target for the Award consistent with the
terms of the Plan and Section 162(m). The Committee may select Performance
Criteria, Performance Periods and Performance Targets for Restricted Stock and
Other Stock-Based Awards for Participants other than Covered Employees in its
discretion. The Committee shall have no discretion to increase the amount of
compensation payable to Covered Employees if a Performance Target has been
attained, but the Committee may adjust compensation to increase the amount, in
its discretion, to any other Participant. The Committee may adjust Performance
Targets to take into account the effects of any Extraordinary Items equitably in
a manner consistent with the determination of the original Award, provided,
however, no such adjustment may be made with respect to any Award to a Covered
Employee which is intended to qualify as "performance based compensation" unless
such adjustment satisfies the requirements of Code Section 162(m) and the
related Rules.
For Awards to Covered Employees which are intended to qualify as
"performance based compensation" under Code Section 162(m), the Performance
Target with respect to the selected Performance Criteria must be established by
the Committee in advance of the deadlines applicable under Code Section 162(m)
and the Rules thereunder and while the performance relating to the Performance
Target remains substantially uncertain within the meaning of such Section 162(m)
and Rules. At the time the Performance Targets are established, the Committee
shall provide, in terms of an objective formula or standard for each Covered
Employee, the method of computing the specific amount that will represent the
maximum number of Shares or amount of other compensation payable to the
Participant if the Performance Target is attained.
12. AWARDS NOT TRANSFERABLE
Unless transferability is permitted under certain conditions as determined
by the Committee, no Award is transferable by the Participant other than (i) by
will or the laws of descent and distribution, (ii) pursuant to a domestic
relations order, or (iii) to the extent permitted under the Plan, the Award or
interpretation of the Committee, by gift to family members or by gift or
permitted non-cash exchange to entities beneficially owned by family members or
other permitted transferees, and shall be exercisable only by the Participant,
the Participant's legal representative, or the Participant's permitted
transferees. Shares of Restricted Stock may not be sold or otherwise transferred
until ownership vests in the Participant.
13. GENERAL RESTRICTION ON ISSUANCE OF STOCK CERTIFICATES
The Company shall not be required to deliver any certificate upon the
grant, vesting or exercise of any Award until it has been furnished with such
documents as it may deem necessary to insure compliance with any law or Rules of
the SEC or any other governmental authority having jurisdiction under the Plan.
Certificates for Shares delivered upon such grant or exercise shall bear legends
restricting transfer or other restrictions or conditions to the extent required
by law or determined by the Committee. Each Award under the Plan is subject to
the condition that, if at any time the Committee shall determine that the
listing, registration or qualification of the Shares subject to such Award under
any state or federal law or other applicable Rule, or the consent or approval of
any governmental regulatory body, is necessary or desirable as a condition of
the granting of such Awards or the issue or purchase of Shares thereunder, such
Awards may not vest or be exercised in whole or in part unless such listing,
registration, qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.
14. TERMINATION OF EMPLOYMENT
If the employment of a Participant terminates by reason of the
Participant's Retirement, Disability or death, any Award may be exercised or
received by the Participant, the Participant's designated beneficiary or legal
representative or permitted transferee at any time on or prior to the earlier of
the expiration date of the Award or the expiration of one year after the date of
Retirement, Disability or death but only if, and to the extent that the
Participant was entitled to exercise or receive the Award at the date of
Retirement, Disability or death and subject to such other terms and conditions
as may be specified in the Award and the Plan. All Awards or any portion thereof
not yet vested or exercisable on the date of Retirement, Disability or death
shall terminate immediately on the date of termination (except as otherwise
provided by the Committee or an employment agreement between the Company and the
Participant). Upon termination of the Participant's employment for any reason
other than Retirement, Disability or death, any Award may be exercised or
received by the Participant, the Participant's designated beneficiary or legal
representative or permitted transferee at any time on or prior to the earlier of
the expiration date of the Award or the expiration of thirty days after the date
of termination but only if, and to the extent that the Participant was entitled
to exercise or receive the Award at the date of termination and subject to such
other terms and conditions as may be specified in the Award and the Plan. All
Awards or any portion thereof not yet vested or exercisable on the date of
termination other than by reason of Retirement, Disability or death shall
terminate immediately on the date of termination (except as otherwise provided
by the Committee or an employment agreement between the Company and the
Participant).
Unless otherwise determined by the Committee, an authorized leave of
absence pursuant to a written agreement or other leave entitling the Participant
to reemployment in a comparable position by law or Rule shall not constitute a
termination of employment for purposes of the Plan unless the Participant does
not return at or before the end of the authorized leave or within the period for
which re-employment is guaranteed by law or Rule.
15. ADJUSTMENT OF AWARDS
In the event of any change in the Common Stock of the Company by reason of
any stock dividend, stock split, recapitalization, reorganization, merger,
consolidation, split-up, combination, or exchange of shares, or rights offering
to purchase Common Stock at a price substantially below fair market value, or of
any similar change affecting the Common Stock, the number and kind of shares
authorized under Section 4 for the Plan, the number and kind of shares which
thereafter are subject to an Award under the Plan and the number and kind of
unexercised Stock Options or Other Stock-Based Awards and the number of Shares
of Restricted Stock and the price per share shall be adjusted automatically
consistent with such change to prevent substantial dilution or enlargement of
the rights granted to, or available for, Participants in the Plan.
16. NO EMPLOYMENT RIGHTS
The Plan and any Awards granted under the Plan shall not confer upon any
Participant any right with respect to continuance as an employee of the Company,
nor shall the Plan or such Awards interfere in any way with the right of the
Company to terminate the Participant's position as an employee or director at
any time.
17. RIGHTS AS A SHAREHOLDER
The recipient of any Award under the Plan shall have no rights as a
shareholder with respect thereto unless and until certificates for the
underlying Shares are issued to the recipient, except as otherwise specifically
provided by the Committee.
18. SECTION 162(m) CONDITIONS
It is the intent of the Company that the Plan and Awards granted under the
Plan satisfy and be interpreted in a manner that satisfies any applicable
requirements of Code Section 162(m) as performance-based compensation. Any
provision, application or interpretation of the Plan inconsistent with this
intent to satisfy the standards in Code Section 162(m) shall be disregarded.
Notwithstanding anything to the contrary in the Plan, the provisions of the Plan
may at any time be bifurcated by the Committee in any manner so that certain
provisions of the Plan or any Award intended (or required in order) to satisfy
the applicable requirements of Code Section 162(m) are applicable only to
Covered Employees.
19. AMENDMENT AND DISCONTINUANCE
The Plan and any Award outstanding under the Plan may be amended, modified
or terminated by the Committee at any time and all Awards shall be subject to
the Plan, as amended from time to time, except that the Committee may not,
without approval of the Participant to whom the Award was granted or his legal
representative or permitted transferee adversely affect the rights of such
person under such Award. No amendment, modification, or termination of the Plan
shall be effective without stockholder approval if such approval is required
under applicable law or Rule or any regulation of the stock market on which the
Common Stock is traded.
20. CHANGE IN CONTROL
(a) Notwithstanding other provisions of the Plan, in the event of a
Change in Control of the Company, all of a Participant's Awards shall become
immediately vested and exercisable or fully earned at the maximum amount, except
with respect to Covered Employees for "performance based compensation" as
otherwise determined by the Committee.
(b) In the event of a Change in Control, in the discretion of the
Committee, each Participant who is a Section 16 insider with respect to whom the
Change in Control might result in a violation under Section 16(b) of the
Exchange Act, may receive, in exchange for the surrender of the Stock Option, an
amount of cash equal to the difference between the fair market value (based on
the kind and amount of any securities, cash, other property or other
consideration to be received with respect to each Share in the Change in Control
transaction as determined by the Committee) of the Common Stock covered by the
Award and the option price of such Common Stock under the Stock Option or to
receive, in exchange for any other Award, an amount of cash equivalent to such
fair market value had the Participant received the Shares or other compensation
as intended under the Award prior to the Change in Control.
(c) Notwithstanding the foregoing, the Plan and any Awards outstanding
under the Plan shall be binding upon any successor to the Company, whether such
successor is the result of a direct or indirect purchase, merger, consolidation
or other acquisition of all or substantially all of the business and/or assets
of the Company.
21. GOVERNING LAW
The Plan and any Award made pursuant to it shall be construed under the
laws of the State of Delaware.
Dated: June 23, 1997 CANANDAIGUA WINE COMPANY, INC.
By: /s/ RICHARD SANDS
--------------------------
Title: President
-----------------------
Date of Stockholder Approval July 22, 1997
-------------
ANNEX A
TO
LONG-TERM STOCK INCENTIVE PLAN
CERTAIN DEFINITIONS
Capitalized terms used in the Plan shall have the meanings set forth below:
"AWARD" means any grant of Stock Options, Restricted Stock, Stock Appreciation
Rights or Other Stock-Based Award under the Plan.
"CAUSE" means, solely for the purposes of the Plan, gross negligence or willful
misconduct or commission of a felony or an act of moral turpitude determined by
the Committee to be detrimental to the best interests of the Company or, if the
Participant is subject to a written agreement with the Company "cause" shall
have the meaning set forth in that agreement.
"CHANGE IN CONTROL" means:
(a) there shall be consummated
(i) any consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which any
Shares are to be converted into cash, securities or other property,
provided that the consolidation or merger is not with a corporation
which was a direct or indirect wholly-owned subsidiary of the Company
or a parent of the Company immediately before the consolidation or
merger; or
(ii) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of
the assets of the Company; or
(b) the stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; or
(c) any person (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) shall become the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act), directly or indirectly, of 30% or
more of the voting control of the Company's then outstanding common
stock, provided that such person shall not be a wholly-owned
subsidiary of the Company immediately before it becomes such 30%
beneficial owner of voting control; or
(d) individuals who constitute the Company's Board of Directors on the
date hereof (the "Incumbent Board") cease for any reason to constitute
at least a majority thereof, provided, however, that any person
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of at least three quarters of the directors comprising the
Incumbent Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee
for director without objection to such nomination) shall be, for
purposes of this clause (d), considered as though such person were a
member of the Incumbent Board.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means Canandaigua Wine Company, Inc. and its Subsidiaries, except
where the context indicates that only the parent company is intended.
"COMMITTEE" means the committee appointed by the Company's Board of Directors
(the "Committee") consisting of not fewer than the number of members of the
Board of Directors required under Code Section 162(m) and the Rules
of the IRS thereunder for determining performance based compensation which is
deductible by the Company who are "outside directors" as defined from time to
time under the IRS Rules and, to the extent possible are also "Non-Employee
Directors" as defined from time to time under the SEC Rules for approval of
Awards exempt from Section 16(b). If any member of the Committee does not
qualify as an "outside director", Awards under the Plan for Covered Employees
shall be administered by a subcommittee of the Committee comprised solely of
members who qualify as outside directors to the extent desireable to preserve
the deductibility of such compensation under Section 162(m) of the Code and such
subcommittee shall constitute the Committee for all purposes under the Plan. The
full Board of Directors, in its discretion, may act as the Committee under the
Plan and shall do so with respect to grants of Awards to non-employee directors.
The Committee may delegate to selected officers of the Company, individually or
acting as a committee, any portion of its authority, except as otherwise
expressly provided in the Plan. In the event of a delegation to management, the
term "Committee" as used herein shall include the officer or committee with
respect to the delegated authority. Notwithstanding any such delegation of
authority, the Committee comprised of members of the Board of Directors shall
retain overall responsibility for the operation of the Plan. Management acting
pursuant to delegated authority shall not make Awards under the Plan to any
Covered Employees or other Section 16 insider.
"COMMON STOCK" means the Class A Common Stock of the Company, par value $.01 per
Share.
"COVERED EMPLOYEE" means the Chief Executive Officer of the Company and the four
other most highly compensated officers of the Company as such term is defined
under the Rules promulgated under Section 162(m) of the Code and such other
officers as may be designated by the Committee.
"DISABILITY" means the inability of a Participant to perform his or her duties
for a period in excess of the applicable statutory short-term disability
coverage provided by the Company. The date of termination with respect to
Disability shall be the day following the date such short term disability
protection lapses.
"EXTRAORDINARY ITEMS" means (a) items presented as such (or other comparable
terms) on the Company's audited financial statements, (b) extraordinary, unusual
or nonrecurring items of gain or loss, (c) changes in tax or accounting laws or
Rules, and (d) the effects of mergers, acquisitions, divestitures, spin offs or
significant transactions, each of which are identified in the audited financial
statements and notes thereto or in the "management's discussion and analysis" of
the financial statements in a period report filed with the SEC under the
Exchange Act.
"FAIR MARKET VALUE" of a Share means the closing price of the Common Stock on
the NASDAQ Stock Market or other national stock exchange on which the Common
Stock is actively traded for the date as reported in the WALL STREET JOURNAL,
Eastern Edition or such other standard reference service as the Committee may
select.
"IRS" means the Internal Revenue Service and, if the context permits, the courts
interpreting the Code.
"OTHER STOCK-BASED AWARD" means an Award granted pursuant to Section 8 of the
Plan which is subject to the terms, conditions and restrictions set forth in the
instrument evidencing the Award.
"PARTICIPANT" means any employee of the Company or non-employee director of the
Company who has received an Award under the Plan.
"PERFORMANCE CRITERIA" means one or more of the following performance criteria
selected by the Committee with respect to any performance-based Award: (a)
increases in the Fair Market Value of a Share, (b) shareholder value added, (c)
cash flow, (d) earnings per share, (e) earnings of the Company before deducting
interest, taxes, depreciation and amortization, (f) return on equity, (g) return
on capital, (h) return on assets or net assets, (i) cost reduction or control,
(j) operating income or net operating income, (k) operating margins/sales in one
or more business segments or product lines, (l) return on operating revenue, and
(m) market share in one or more business segments or product lines. Performance
criteria may be established on a corporate, divisional, business unit or
consolidated basis and measured absolutely or relative to the Company's peers.
"PERFORMANCE PERIOD" means the fiscal year or years or other period established
by the Committee with respect to which the Performance Targets are set by the
Committee.
"PERFORMANCE TARGET" means one or more specific objective goal or goals (which
may be cumulative or alternative) that are timely set in writing by the
Committee for each Participant for the applicable Performance Period with
respect to any one or more of the Performance Criteria.
"PLAN" means the Long-Term Stock Incentive Plan of the Company, as amended from
time to time.
"RESTRICTED STOCK" means Shares granted pursuant to Section 7 of the Plan which
are subject to the terms, conditions and restrictions set forth in the
instrument evidencing the Award.
"RETIREMENT" means a termination of employment by an employee who is at least 60
years of age and after at least 10 years of service with the Company (which
shall include entities acquired by the Company, if the Committee so determines).
"RULES" means rules, regulations and interpretations issued by the governmental
authority charged with administering any law and any judicial interpretations
applicable thereto.
"SEC" means the Securities and Exchange Commission.
"SHARES" means shares of the Company's Class A Common Stock, par value $.01 per
share.
"STOCK OPTION" means any nonqualified Stock Option granted pursuant to Section 5
of the Plan which is subject to the terms, conditions and restrictions set forth
in the instrument evidencing the Award and the Plan.
"SUBSIDIARIES" means (a) all corporations of which at least fifty percent of the
voting stock is owned by the Company directly or through one or more
corporations at least fifty percent of whose voting stock is so owned, and (b)
partnerships or other entities in which the Company has, either directly or
indirectly, at least a fifty percent interest in the capital or profits.
OTHER TERMS: Any other terms used in the Plan which are defined in Sections 83,
162(m) or 421 of the Internal Revenue Code as amended, or the Rules thereunder
or corresponding provisions of subsequent laws and Rules in effect at the time
Awards are made under the Plan, shall have the meanings set forth in such laws
or Rules.
AMENDMENT NUMBER ONE TO THE
CANANDAIGUA WINE COMPANY, INC.
LONG-TERM STOCK INCENTIVE PLAN
This Amendment Number One to the Canandaigua Wine Company, Inc. Long-Term
Stock Incentive Plan (the "Plan") was approved pursuant to Section 19 of the
Plan by the Board of Directors of Canandaigua Brands, Inc. (f/k/a Canandaigua
Wine Company, Inc., the "Company"), acting in its capacity as the Committee
under the Plan. Capitalized terms used herein which are not otherwise defined
shall have the meanings ascribed to them in the Plan and Annex A thereto.
1. NAME. The name of the Plan is hereby changed to "Canandaigua Brands,
Inc. Long-Term Stock Incentive Plan."
2. DEFINITION OF COMMITTEE. The definition of the term "Committee" as used
in the Plan and defined in Annex A to the Plan is hereby amended and restated to
read in its entirety as follows:
"COMMITTEE" means the committee appointed from time to time by the
Company's Board of Directors to administer the Plan (the "Committee").
The full Board of Directors, in its discretion, may act as the
Committee under the Plan, whether or not a Committee has been
appointed, and shall do so with respect to grants of Awards to
non-employee directors. The Committee may delegate to one or more
members of the Committee or officers of the Company, individually or
acting as a committee, any portion of its authority, except as
otherwise expressly provided in the Plan. In the event of a delegation
to a member of the Committee, officer or a committee thereof, the term
"Committee" as used herein shall include the member of the Committee,
officer or committee with respect to the delegated authority.
Notwithstanding any such delegation of authority, the Committee
comprised of members of the Board of Directors and appointed by the
Board of Directors shall retain overall responsibility for the
operation of the Plan.
In witness whereof, Canandaigua Brands, Inc. has caused this instrument to
be executed as of September 15, 1997.
CANANDAIGUA BRANDS, INC.
By: /s/ Richard Sands
------------------------
Richard Sands, President
AMENDMENT NUMBER TWO TO THE
CANANDAIGUA BRANDS, INC.
LONG-TERM STOCK INCENTIVE PLAN
This Amendment Number Two to the Canandaigua Brands, Inc. Long-Term Stock
Incentive Plan, as amended (the "Plan"), was approved pursuant to Section 19 of
the Plan by the Board of Directors of Canandaigua Brands, Inc. (the "Company"),
acting in its capacity as the Committee under the Plan, and by the stockholders
of the Company. Capitalized terms used herein which are not otherwise defined
shall have the meanings ascribed to them in the Plan and Annex A thereto.
The Plan is hereby amended to increase the number of shares of the
Company's Common Stock with respect to which Awards may be made under the Plan
from four million shares to seven million shares by amending the first sentence
of the first paragraph of Section 4 of the Plan to read in its entirety as
follows:
The total number of shares of the Company's Common Stock available for
Awards under the Plan in the aggregate shall not exceed seven million shares.
In witness whereof, Canandaigua Brands, Inc. has caused this instrument to
be executed as of July 20, 1999.
--
CANANDAIGUA BRANDS, INC.
By: /s/ Richard Sands
-------------------------
Richard Sands, President
AMENDMENT NUMBER THREE
TO THE
CANANDAIGUA BRANDS, INC.
LONG-TERM STOCK INCENTIVE PLAN
This Amendment Number Three to the Canandaigua Brands, Inc. Long-Term Stock
Incentive Plan, as amended (the "Plan"), is adopted pursuant to Section 19 of
the Plan by the Human Resources Committee of the Board of Directors of
Canandaigua Brands, Inc. Capitalized terms used herein, which are not otherwise
defined, shall have the meanings ascribed to them in the Plan.
1. Section 14 of the Plan is amended, effective June 21, 2000, by deleting
the second sentence of the first paragraph of such section and substituting in
its place the following:
All Awards or any portion thereof not yet vested or exercisable on the
date of Retirement, Disability or death shall become immediately vested
and exercisable on the date of termination due to Retirement,
Disability or death (except as otherwise provided by the Committee or
an employment agreement between the Company and the Participant).
IN WITNESS WHEREOF, Canandaigua Brands, Inc. has caused this instrument to
be executed as of June 21, 2000.
CANANDAIGUA BRANDS, INC.
By:/s/Richard Sands
--------------------------
Richard Sands, President
AMENDMENT NUMBER FOUR
TO THE
CANANDAIGUA BRANDS, INC.
LONG-TERM STOCK INCENTIVE PLAN
This Amendment Number Four to the Canandaigua Brands, Inc. Long-Term Stock
Incentive Plan (the "Plan") is adopted pursuant to Section 19 of the Plan by the
Board of Directors of Constellation Brands, Inc. (f/k/a Canandaigua Brands,
Inc.) (the "Company"), acting in its capacity as the Committee under the Plan.
Capitalized terms used herein which are not otherwise defined shall have the
meanings ascribed to them in the Plan and Annex A thereto.
1. NAME. The name of the Plan is hereby changed to "Constellation Brands,
Inc. Long-Term Stock Incentive Plan," and all references to the
Company name in the Plan are hereby replaced by references to
"Constellation Brands, Inc."
In witness whereof, Constellation Brands, Inc. has caused this instrument to be
executed as of December 21, 2000.
CONSTELLATION BRANDS, INC.
By: /s/ Richard Sands
------------------------
Richard Sands, President
APPENDIX B
EXPLANATORY NOTE: The Constellation Brands, Inc. Annual Management Incentive
Plan, as amended, is filed herewith, pursuant to Instruction 3 to Item 10 of
Schedule 14A and is not part of the Proxy Statement.
CANANDAIGUA WINE COMPANY, INC.
ANNUAL MANAGEMENT INCENTIVE PLAN
This Annual Management Incentive Plan was approved by the Board of
Directors of the Company on June 23, 1997 and shall be effective upon approval
by the stockholders. Certain capitalized terms used in the Plan are defined in
Annex A.
1. PURPOSE
The Plan is designed to enable the Company to attract and retain valued
employees and to provide them with incentives to attain certain annual
performance goals.
2. ADMINISTRATION
The Plan shall be administered by a Committee of the Company's Board of
Directors. This Committee shall consist of at least two members of the Company's
Board of Directors, all of whom are (a) "outside directors" within the meaning
of Section 162(m), and (b) not eligible to participate in the Plan. Subject to
the Plan, the Committee shall possess the sole authority, in its discretion, to
(i) establish and administer the Performance Criteria and Performance Targets,
(ii) select the Participating Executives who will receive Bonuses under the
Plan, (iii) determine the amount of such Bonuses and any terms, conditions or
limitations on the payment of any Bonuses, (iv) interpret the Plan, (v) make and
amend rules and regulations relating to the Plan, and (vi) make all other
determinations necessary or advisable for the administration of the Plan.
3. TERMS AND CONDITIONS OF BONUSES
For each Performance Period, the Committee shall select, at the time the
Performance Criteria and Performance Targets are determined, the Participating
Executives. Each Participating Executive may receive a Bonus if and only if the
Performance Targets established by the Committee, relative to the applicable
Performance Criteria, are attained. The applicable Performance Period and
Performance Targets shall be determined by the Committee consistent with the
terms of the Plan and Section 162(m). The Committee may adjust Performance
Targets to take into account the effects of any Extraordinary Items equitably in
a manner consistent with the determination of the original Bonus, provided,
however, no such adjustment may be made with respect to any Bonus to a
Participating Executive which is intended to qualify as "performance based
compensation" unless such adjustment satisfies the requirements of Section
162(m) and the related Rules.
The Performance Target with respect to the Performance Criteria must be
established by the Committee in advance of the deadlines applicable under
Section 162(m) and while the performance relating to the Performance Target
remains substantially uncertain within the meaning of Section 162(m). At the
time the Performance Target is established, the Committee shall provide, in
terms of an objective formula or standard for each Participating Executive, the
method of computing the specific amount that will represent the maximum amount
of Bonus payable to the Participant if the Performance Target is attained.
Notwithstanding any other provision hereof, no Participating Executive
shall receive a Bonus under the Plan for any fiscal year or other Performance
Period in excess of $2 million. Any Bonuses awarded by the Committee under the
Plan shall be paid within 30 days after year-end financial results are reported
or, if later, as soon as practicable following the Committee's determinations
and certification under this Section. Any such payment shall be in cash or cash
equivalent, subject to applicable withholding requirements. Notwithstanding the
foregoing, the Committee may, in its sole discretion, defer the payout of any
Bonus. In the case of the delay of a Bonus otherwise payable at or after the
attainment and certification of the applicable Performance Target, any
additional amount payable as a result of the delay shall be limited to the
Moody's Average Corporate Bond Yield during the deferral period.
No Participating Executive shall receive any payment under the Plan unless
the Committee has certified, by resolution or other appropriate action in
writing, that the amount thereof has been accurately
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determined in accordance with the terms, conditions and limits of the Plan and
that the Performance Target and any other material terms previously established
by the Committee or set forth in the Plan were in fact satisfied.
4. TERMINATION OF EMPLOYMENT
If the employment of a Participating Executive terminates by reason of such
Participating Executive's Retirement, Disability, death or involuntary
termination without Cause, a ratable portion of any applicable Bonus shall be
paid, subject to the attainment of the applicable Performance Target, at or
after the attainment and certification of the applicable Performance Target at
the end of the fiscal year or other Performance Period. The ratable portion of
the Bonus shall be determined by multiplying the bonus by a fraction, the
numerator of which is the number of full or partial months during the
Performance Period during which the Participating Executive was employed, and
the denominator of which is the number of calendar months in the Performance
Period. Upon termination of the Participating Executive's employment by
voluntary resignation or for Cause, all Bonuses for which the Participating
Executive may be eligible shall be forfeited unless the Committee otherwise
expressly so provides in a written contract or other written instrument.
5. ADJUSTMENTS
In the event of any change in the Company's applicable accounting
principles or practices by reason of any stock dividend, stock split,
recapitalization, reorganization, merger, consolidation, split-up, combination,
exchange of shares, rights offering or other similar change which occurs after
the Performance Targets are established for a given Performance Period, the
amount of the Bonuses paid under the Plan for such Performance Period shall be
automatically adjusted consistent with such change to prevent dilution or
enlargement of the Bonuses under the Plan.
6. NO EMPLOYMENT RIGHTS
The Plan shall not confer upon any Participating Executive any right with
respect to continuance as an employee of the Company, nor shall it interfere in
any way with the right of the Company to terminate the Participating Executive's
position as an employee.
7. DISCRETION OF COMPANY
Any decision made or action taken by the Company, the Committee or the
Board of Directors in connection with the creation, amendment, construction,
administration, interpretation or effect of the Plan shall be within the
absolute discretion of such entity and shall be conclusive and binding upon all
persons. No officer, director or member of the Committee shall have any
liability for actions taken or omitted under the Plan by the member or by any
other person.
8. AMENDMENT AND DISCONTINUANCE
The Plan may be amended, modified or terminated by the Committee at any
time, and all Bonuses shall be subject to the Plan as amended from time to time,
except that the Committee may not, without the approval of a Participating
Executive adversely affect any rights under the Plan. No amendment, modification
or termination shall be effective without the approval of the Board of Directors
and/or the stockholders if such approval is necessary to comply with the
applicable provisions of Section 162(m).
9. CHANGE OF CONTROL
Notwithstanding other provisions of the Plan, in the event of a Change of
Control of the Company, the Performance Period for a Participating Executive
shall end on the date of the Change of Control and the Performance Target shall
be adjusted to reflect the early termination of the Performance Period. If the
Performance Target, as adjusted, is deemed satisfied by the Committee, the
Participating Executive may receive a ratable portion of the Bonus that would
have been paid if the Performance Period had not been terminated early and the
Performance Target had been satisfied. The ratable portion of the Bonus shall be
determined by multiplying the original Bonus by a fraction, the numerator of
which is the number of months from the first day
Page 3
of the Performance Period to the date of the Change of Control (including any
fractional month) and the denominator of which is the total number of months in
the original Performance Period.
The Plan shall be binding upon any successor to the Company, whether such
successor is the result of a direct or indirect purchase, merger, consolidation
or other acquisition of all or substantially all of the business and/or assets
of the Company.
10. SECTION 162(m) CONDITIONS
It is the intent of the Company that the Plan and Bonuses paid under the
Plan satisfy and be interpreted in a manner that satisfies any applicable
requirements of Section 162(m) as performance-based compensation. Any provision,
application or interpretation of the Plan inconsistent with this intent to
satisfy the standards in Section 162(m) shall be disregarded. Notwithstanding
anything to the contrary in the Plan, the provisions of the Plan may at any time
be bifurcated by the Committee in any manner so that certain provisions of the
Plan or any Bonus intended (or required in order) to satisfy the applicable
requirements of Section 162(m) are applicable only to persons whose compensation
is subject to Section 162(m).
11. NO FUNDING OF THE PLAN
The Company shall not be required to fund or otherwise segregate any cash
or any other assets which may at any time be paid to any Participating Executive
under the Plan. The Plan shall constitute an "unfunded" plan of the Company. The
Company shall not, by any provisions of the Plan, be deemed to be a trustee of
any property, and any rights of any Participating Executive shall be limited to
those of a general unsecured creditor.
12. NON-TRANSFERABILITY
Except as expressly provided by the Committee, no benefit payable under the
Plan shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any such attempted action shall
be void. This Section shall not apply to an assignment of a contingency or
payment due after the death of a Participating Executive to such Participating
Executive's legal representative or beneficiary.
13. EFFECTIVE DATE
The effective date of the Plan shall be the date the Plan is approved by
the Company's stockholders.
14. DEFINITIONS
Any terms or provisions used herein which are defined in Section 162(m)
shall have the meanings as therein defined.
15. GOVERNING LAW
To the extent not inconsistent with the provisions of Section 162(m), the
Plan shall be construed under the laws of the State of New York.
Dated: June 23, 1997 CANANDAIGUA WINE COMPANY, INC.
--
By: /s/ Richard Sands
-----------------------
Title: President
--------------------
Date of Stockholder Approval: July 22, 1997
------------
Page 1
ANNEX A
TO
ANNUAL MANAGEMENT INCENTIVE PLAN
CERTAIN DEFINITIONS
Capitalized terms used in the Plan shall have the meanings set forth below:
"BONUS" means a cash payment or payment opportunity, as the context requires.
"CAUSE" means, solely for the purposes of the Plan, gross negligence or willful
misconduct or commission of a felony or an act of moral turpitude determined by
the Committee to be detrimental to the best interests of the Company or, if the
Participating Executive is subject to a written agreement with the Company
"cause" shall have the meaning set forth in that agreement.
"CHANGE OF CONTROL" means:
(a) there shall be consummated
(i) any consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which any
Shares are to be converted into cash, securities or other property,
provided that the consolidation or merger is not with a corporation
which was a direct or indirect wholly-owned subsidiary of the Company
or a parent of the Company immediately before the consolidation or
merger; or
(ii) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of
the assets of the Company; or
(b) the stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; or
(c) any person (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) shall become the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act), directly or indirectly, of 30% or
more voting control of the Company's then outstanding common stock,
provided that such person shall not be a wholly-owned subsidiary of
the Company immediately before it becomes such 30% beneficial owner of
voting control; or
(d) individuals who constitute the Company's Board of Directors on the
date hereof (the "Incumbent Board") cease for any reason to constitute
at least a majority thereof, provided, however, that any person
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of at least three quarters of the directors comprising the
Incumbent Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee
for director without objection to such nomination) shall be, for
purposes of this clause (d), considered as though such person were a
member of the Incumbent Board.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means Canandaigua Wine Company, Inc. and its Subsidiaries, except when
the context indicates that only the parent company is intended.
"COMMITTEE" means the committee appointed by the Board of Directors of the
Company to administer the Plan as provided in Section 2.
"DISABILITY" means the inability of a Participant to perform his or her duties
for a period in excess of the applicable statutory short-term disability
coverage provided by the Company. The date of termination with respect to
Disability shall be the day following the date such short-term disability
protection lapses.
Page 2
"EXTRAORDINARY ITEMS" means (a) items presented as such (or other comparable
terms) on the Company's audited financial statements, (b) extraordinary, unusual
or nonrecurring items of gain or loss, (c) changes in tax or accounting laws or
Rules, and (d) the effects of mergers, acquisitions, divestitures, spin offs or
significant transactions, each of which are identified in the audited financial
statements and notes thereto or in the "management's discussion and analysis" of
the financial statements in a period report filed with the SEC under the
Exchange Act.
"PARTICIPATING EXECUTIVE" means a key employee (including any officer) of the
Company or one of its Subsidiaries selected by the Committee to participate in
the Plan.
"PERFORMANCE CRITERIA" means one or more of the following performance criteria
selected by the Committee with respect to any performance-based Award: (a)
increases in the Fair Market Value of a Share, (b) shareholder value added, (c)
cash flow, (d) earnings per share, (e) earnings of the Company before deducting
interest, taxes, depreciation and amortization, (f) return on equity, (g) return
on capital, (h) return on assets or net assets, (i) cost reduction or control,
(j) operating income or net operating income, (k) operating margins/sales in one
or more business segments or product lines, (l) return on operating revenue, and
(m) market share in one or more business segments or product lines. Performance
criteria may be established on a corporate, divisional, business unit or
consolidated basis and measured absolutely or relative to the Company's peers.
"PERFORMANCE PERIOD" means the fiscal year or years or other period established
by the Committee with respect to which the Performance Targets are set by the
Committee.
"PERFORMANCE TARGET" means one or more specific objective goal or goals (which
may be cumulative or alternative) that are timely set in writing by the
Committee for each Participant for the applicable Performance Period with
respect to any one or more of the Performance Criteria.
"PLAN" means the Annual Management Incentive Plan of the Company, as amended
from time to time.
"RETIREMENT" means a termination of employment by an employee who is at least 60
years of age and after at least 10 years of service with the Company (which
shall include entities acquired by the Company, if the Committee so determines).
"RULES" means rules, regulations and interpretations issued by the governmental
authority charged with administering any law and any judicial interpretations
applicable thereto.
"SECTION 162(m)" means Section 162(m) of the Code, together with the regulations
promulgated thereunder, all as amended from time to time.
"SHARES" means shares of the Company's Class A Common Stock, par value $.01 per
share.
"SUBSIDIARIES" means (a) all corporations of which at least fifty percent of the
voting stock is owned by the Company directly or through one or more
corporations at least fifty percent of whose voting stock is so owned, and (b)
partnerships or other entities in which the Company has, either directly or
indirectly, at least a fifty percent interest in the capital or profits.
AMENDMENT NUMBER ONE
TO THE
CANANDAIGUA WINE COMPANY, INC.
ANNUAL MANAGEMENT INCENTIVE PLAN
This Amendment Number One to the Canandaigua Wine Company, Inc. Annual
Management Incentive Plan (the "Plan") was approved pursuant to Section 8 of the
Plan by the Human Resources Committee of the Board of Directors of Canandaigua
Brands, Inc. (f/k/a Canandaigua Wine Company, Inc.) (the "Company"), acting in
its capacity as the Committee under the Plan. Capitalized terms used herein
which are not otherwise defined shall have the meanings ascribed to them in the
Plan and Annex A thereto.
1. NAME. The name of the Plan is hereby changed to "Canandaigua Brands,
Inc. Annual Management Incentive Plan."
2. DEFINITION OF COMPANY. The definition of the term "Company" as used in
the Plan and defined in Annex A to the Plan is hereby amended and restated to
read in its entirety as follows:
"Company" means Canandaigua Brands, Inc. and its Subsidiaries, except
when the context indicates that only the parent company is intended.
In witness whereof, Canandaigua Brands, Inc. has caused this instrument to
be executed as of March 31, 1998
CANANDAIGUA BRANDS, INC.
By: /s/ Richard Sands
------------------------
Richard Sands, President
AMENDMENT NUMBER TWO
TO THE
CANANDAIGUA BRANDS, INC.
ANNUAL MANAGEMENT INCENTIVE PLAN
This Amendment Number Two to the Canandaigua Brands, Inc. Annual Management
Incentive Plan (the "Plan") is adopted pursuant to Section 8 of the Plan by the
Human Resources Committee of the Board of Directors of Constellation Brands,
Inc. (f/k/a Canandaigua Brands, Inc.) (the "Company"), acting in its capacity as
the Committee under the Plan. Capitalized terms used herein which are not
otherwise defined shall have the meanings ascribed to them in the Plan and Annex
A thereto.
1. NAME. The name of the Plan is hereby changed to "Constellation Brands,
Inc. Annual Management Incentive Plan," and all references to the
Company name in the Plan are hereby replaced by references to
"Constellation Brands, Inc."
In witness whereof, Constellation Brands, Inc. has caused this instrument to be
executed as of December 21, 2000.
CONSTELLATION BRANDS, INC.
By: /s/ Richard Sands
------------------------
Richard Sands, President