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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(4) Date Filed:
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[CONSTELLATION LOGO]
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Annual Meeting of Stockholders
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June 9, 2004
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 20, 2004 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 2004 Annual Report to
Stockholders that contains 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
and Chief Executive Officer
Please note that HSBC Plaza 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. Entrances to
the garage are 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 20, 2004
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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 20, 2004 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 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, 2005 (Proposal No. 2).
3. To consider and act upon a proposal to approve Amendment Number Five to the
Company's Long-Term Stock Incentive Plan (Proposal No. 3).
4. 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 24, 2004 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 card are enclosed.
WE HOPE YOU WILL ATTEND THIS MEETING IN PERSON, BUT IF YOU CANNOT, PLEASE
SIGN AND DATE THE ENCLOSED PROXY CARD. RETURN THE PROXY CARD 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 9, 2004
[This Page Intentionally Left Blank]
CONSTELLATION BRANDS, INC.
370 WOODCLIFF DRIVE, SUITE 300
FAIRPORT, NEW YORK 14450
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PROXY STATEMENT
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2004 ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is being furnished to the stockholders of the common
stock 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 2004 Annual Meeting of Stockholders of the Company and at any
adjournment thereof (the "Meeting"). The Meeting will be held on Tuesday, July
20, 2004 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 ratification of the selection of KPMG LLP as the Company's
independent public accountants for the fiscal year ending February 28, 2005
(Proposal No. 2) and FOR the approval of Amendment Number Five to the Company's
Long-Term Stock Incentive Plan (Proposal No. 3).
The outstanding capital common stock of the Company consists of Class A
Common Stock, par value $.01 per share ("Class A Stock"), and Class B Common
Stock, par value $.01 per share ("Class B Stock"). The enclosed proxy card has
been designed so that it can be used by stockholders owning any combination of
the Company's outstanding Class A Stock and 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 card are being first mailed
to stockholders on or about June 17, 2004.
The cost of soliciting proxies will be borne by the Company. In addition
to solicitation by use of the mail, 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 common stock of the Company, as of May 24,
2004 (the "Record Date"), consisted of 94,929,474 shares of Class A Stock and
12,054,630 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.
Of the 94,929,474 shares of Class A Stock outstanding on the Record Date,
1,499,960 shares were held by CHESS Depositary Nominees Pty Ltd. (ACN 071 346
506) ("CDN"), a wholly-owned subsidiary of the Australian Stock Exchange Limited
(ACN 008 624 691) (the "ASX"). CDN has issued Constellation CHESS Depositary
Interests ("Constellation CDIs") that represent beneficial interests in the
Class A Stock held by CDN. Constellation CDIs are traded on the electronic
transfer and settlement system operated by the ASX. As of the Record Date there
were 14,999,600 Constellation CDIs outstanding that were held by 981 holders of
record. All references in this Proxy Statement to outstanding shares of Class A
Stock include the shares of Class A Stock held by CDN and all references to
holders of Class A Stock include CDN.
Holders of Constellation CDIs receive all the economic benefits of actual
ownership of Class A Stock at a ratio of ten (10) Constellation CDIs to each
share of Constellation Class A Stock. Constellation CDIs can be converted to
Class A Stock at any time at the option of the holder of the Constellation CDI
at a ratio of one share of Class A Stock for each ten (10) Constellation CDIs.
Holders of Constellation CDIs have the right to attend stockholders' meetings of
the Company and to direct the vote of the shares of Class A Stock which underlie
their CDIs. CDN, as the holder of record of the shares of Class A Stock
underlying the Constellation CDIs, will vote such shares in accordance with the
directions of the holders of the Constellation CDIs. If CDN does not receive a
direction from a holder of Constellation CDIs as to how to vote the shares
represented by those Constellation CDIs, those shares will not be voted and will
not be considered present at the Meeting for quorum purposes. A holder of
Constellation CDIs will be entitled to vote at the stockholder's meeting only if
such holder directs CDN to designate such holder as proxy to vote the shares of
Class A Stock underlying the Constellation CDIs held by such holder. A form to
be used to direct CDN how to vote shares of Class A Stock represented by
Constellation CDIs is being delivered with this Proxy Statement to each holder
of Constellation CDIs.
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 24, 2004, 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. However, under arrangements established
between the Company and CDN in connection with the issuance of Constellation
CDIs, the holders of Constellation CDIs are entitled to notice of and to attend
the Meeting. Except as otherwise required by Delaware law, the holders of Class
A Stock and the holders of Class B Stock vote together as a single class on all
matters other than the election of the group of directors who are elected solely
by the holders of the Class A Stock. 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 94,929,474 votes and holders of
Class B Stock are entitled to cast a total of 120,546,300 votes at the Meeting.
The holders of a majority of the outstanding aggregate voting power of
Class A Stock (including the shares evidenced by and underlying Constellation
CDIs) and 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 that 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 the rules of the New York Stock Exchange, brokers and nominees
are generally permitted to vote with respect to Proposal No. 1 and Proposal No.
2 without
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receiving direction from the beneficial owner of Class A Stock or Class B Stock
but are not permitted to vote with respect to Proposal No. 3 unless such
direction is received. Accordingly, the Company expects to receive broker
non-votes with respect to Proposal No. 3 but does not expect to receive broker
non-votes with respect to Proposal No. 1 or Proposal No. 2 unless one or more
beneficial owners have withheld discretionary authority from their respective
brokers or nominees.
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 Class A Stock (including the shares evidenced
by and underlying Constellation CDIs), 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 Class A Stock (including the
shares evidenced by and underlying Constellation CDIs) and Class B Stock, voting
as a single class, are entitled to elect the remaining number of directors to be
elected 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. Since the
Board of Directors nominated seven (7) directors, the holders of Class A Stock
will be entitled to elect two (2) directors and the holders of Class A Stock and
Class B Stock, voting as a single class, will be entitled to elect five (5)
directors. Because the directors are elected by a plurality of the votes cast
in each election, votes that are withheld (including broker non-votes, if any)
will not be counted and, therefore, will not affect the outcome of the
elections.
The ratification of the selection of KPMG LLP as the Company's independent
public accountants for the fiscal year ending February 28, 2005 (Proposal No. 2)
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 (including the shares
evidenced by and underlying Constellation CDIs) 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, if any, are not considered entitled to vote, they will
not affect the outcome of the vote.
The approval of Amendment Number Five to the Company's Long-Term Stock
Incentive Plan (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 (including the shares evidenced by and underlying Constellation CDIs) 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.
3
BENEFICIAL OWNERSHIP
As of May 24, 2004, the following tables and notes set forth (i) the
persons known to the Company to beneficially own more than 5% of 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 94,929,474 shares of
Class A Stock and 12,054,630 shares of Class B Stock outstanding as of the close
of business on May 24, 2004.
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)
- ------------------- ---------------- --------------- -------------- ----------
Richard Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450 1,083,568 (2) 300,712 (2) 1,384,280 1.4%
Robert Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450 1,077,346 (4) 300,712 (4) 1,378,058 1.4%
CWC Partnership-I
370 Woodcliff Drive, Suite 300
Fairport, NY 14450 - 236,188 (5) 236,188 0.2%
Trust for the benefit of Andrew
Stern, M.D. under the will of
Laurie Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450 - 236,188 (6) 236,188 0.2%
Stockholders Group Pursuant to
Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (7) - 2,461,626 (7) 2,461,626 2.5%
FMR Corp.
82 Devonshire Street
Boston, MA 02109 (8) (8) (8) 7,431,773 (8) 7.8%
Wellington Management
Company, LLP
75 State Street
Boston, MA 02109 (9) - (9) 10,169,096 (9) 10.7%
4
CLASS B 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)
- ------------------- ---------------- --------------- -------------- ----------
Richard Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450 2,954,116 5,430,072 (2) 8,384,188 69.6%
Robert Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450 2,951,296 5,430,072 (4) 8,381,368 69.5%
Trust for the benefit of Andrew
Stern, M.D. under the will of
Laurie Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450 - 3,331,356 (6) 3,331,356 27.6%
CWC Partnership-I
370 Woodcliff Drive, Suite 300
Fairport, NY 14450 - 3,049,540 (5) 3,049,540 25.3%
Trust for the benefit of the
Grandchildren of Marvin and
Marilyn Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450 - 2,025,000 (10) 2,025,000 16.8%
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 94.0%
- --------------------------
(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
24, 2004 or become exercisable within sixty (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
24, 2004 due to certain acceleration provisions in certain awards, which
accelerations cannot be foreseen on the date of this Proxy Statement.
Additionally, such number does not include the shares of Class A Stock
issuable pursuant to the conversion feature of 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.
As of May 24, 2004, none of the beneficial owners of the Company's Class A
Stock have reported any interest in the Company's 5.75% Mandatory
Convertible Preferred Stock.
(2) The amount reflected as shares of Class A Stock over which Richard Sands
has the sole power to vote or dispose includes 887,390 shares of Class A
Stock issuable upon the exercise of options that 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
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Richard Sands is a managing partner, 73,716 shares of Class B Stock owned
by the Marvin Sands Master Trust (the "Master Trust"), of which Richard
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 (10) below, and 64,524 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 14,560 shares of Class A Stock owned by Mr. Sands' wife,
individually and as custodian for their children, 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) 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 9,768,468 shares of Class A
Stock, representing 9.4% 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 Robert Sands
has the sole power to vote or dispose includes 813,440 shares of Class A
Stock issuable upon the exercise of options that 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
Robert Sands is a managing partner, 73,716 shares of Class B Stock owned
by 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
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 (10) below, and 64,524 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 91,760 shares of Class A Stock owned by Mr.
Sands' wife, individually and as custodian for their 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) 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
9,759,426 shares of Class A Stock, representing 9.4% 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 3.4% 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
6
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 3.6% 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 (10) (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 (10)
below and the Master Trust, 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 13,797,110 shares of Class A Stock, representing
12.8% of the outstanding Class A Stock after such conversion. Of the
shares of Class A Stock and Class B Stock held by the Group, 595,500
shares of Class A Stock and 3,264,771 shares of Class B Stock have been
pledged under a credit facility with a financial institution by certain
members of the Group as collateral for loans made to such members of the
Group and certain other Sands-related entities. In the event of
noncompliance with certain covenants under the credit facility, the
financial institution has the right to sell the pledged shares subject to
certain protections afforded to the pledgors.
(8) The number of shares equals the number of shares of Class A Stock
reported to be beneficially owned by FMR Corp., Edward C. Johnson 3d and
Abigail P. Johnson (collectively, "FMR") in its Schedule 13G (Amendment
No. 2) dated February 16, 2004, filed with the Securities and Exchange
Commission. The percentage of ownership reflected in the table is
calculated on the basis of 94,929,474 shares of Class A Stock outstanding
on May 24, 2004. The Schedule 13G (Amendment No. 2) indicates that of the
7,431,773 shares beneficially owned by FMR, through its control of
Fidelity Management & Research Company, FMR has sole dispositive power
with respect to 7,070,573 shares, through its control of Fidelity
Management Trust Company, FMR has sole dispositive and voting power with
respect to 262,600 shares, and through other relationships, FMR has sole
dispositive and voting power with respect to 98,600 shares. For further
information pertaining to FMR, reference should be made to FMR's Schedule
13G (Amendment No. 2) filed with the Securities and Exchange Commission.
With respect to the information contained herein pertaining to shares of
Class A Stock beneficially owned by FMR, the Company has relied solely on
the information reported in FMR's Schedule 13G (Amendment No. 2) and has
not independently verified FMR's beneficial ownership as of May 24, 2004.
(9) The number of shares equals the number of shares of Class A Stock reported
to be beneficially owned by Wellington Management Company, LLP ("WMC") in
its Schedule 13G (Amendment No. 2) dated February 13, 2004, filed with the
Securities and Exchange Commission. The percentage of Ownership reflected
in the table is calculated on the basis of 94,929,474 shares of Class A
Stock outstanding on May 24, 2004. The Schedule 13G (Amendment No. 2)
indicates that of the 10,169,096 shares beneficially owned by WMC in its
capacity as an investment advisor, WMC has shared voting power with
respect to 8,256,386 shares and has shared dispositive power with respect
to 10,169,096 shares. For further information pertaining to WMC, reference
should be made to WMC's Schedule 13G (Amendment No. 2) filed with the
Securities and Exchange Commission. With respect to the
7
information contained herein pertaining to shares of Class A Stock
beneficially owned by WMC, the Company has relied solely on the information
reported in WMC's Schedule 13G (Amendment No. 2) and has not independently
verified WMC's beneficial ownership as of May 24, 2004.
(10) 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 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 2.1% 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 29, 2004 (collectively, the "Named Executives")) for the fiscal
years ended February 29, 2004, February 28, 2003 and February 28, 2002.
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------------
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, 2004 $ 875,500 $ 868,715 $ 88,729 (5) 106,100 $ 64,514
Chairman of the Board and 2003 850,000 1,108,613 104,002 (5) - 70,313
Chief Executive Officer 2002 630,300 819,390 84,480 (5) 163,200 56,217
Robert Sands, 2004 $ 618,000 $ 613,211 - 83,800 $ 46,497
President and 2003 600,000 782,550 $ 54,493 (6) - 49,735
Chief Operating Officer 2002 559,100 726,830 84,051 (6) 136,000 50,174
Alexander L. Berk, 2004 $ 545,900 $ 610,731 - 40,500 $ 50,352
Chief Executive Officer, Constellation 2003 530,000 567,784 - - 51,874
Beers and Spirits (7) 2002 494,000 543,400 - 84,000 44,818
Stephen B. Millar, 2004 $ 553,703 $ 263,452 $ 98,796 (9) 215,606 $ 139,023
Chief Executive Officer, Constellation 2003 - - - - -
Wines (8) 2002 - - - - -
Thomas S. Summer, 2004 $ 412,000 $ 327,046 - 61,500 $ 32,997
Executive Vice President and Chief 2003 400,000 382,580 - - 34,899
Financial Officer 2002 343,200 377,520 - 84,400 32,934
- -----------------------
(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.
8
(3) The securities consist of shares of Class A Stock underlying stock
options.
(4) Amounts reported for 2004 consist of:
- Company 401(k) contributions under the Company's 401(k) and Profit
Sharing Plan: Richard Sands $6,118; Robert Sands $5,276; Alexander
Berk $6,080; and Thomas Summer $5,517.
- Company profit sharing contributions under the Company's 401(k) and
Profit Sharing Plan: Richard Sands $13,340; Robert Sands $13,340;
Alexander Berk $16,220; and Thomas Summer $13,340.
- Company contributions under the Company's Supplemental Executive
Retirement Plan: Richard Sands $45,056; Robert Sands $27,881;
Alexander Berk $28,052; and Thomas Summer $14,140.
- Company contributions to Superannuation Plan for Stephen Millar:
$139,023.
(5) The amounts shown include $83,959 in 2004, $94,080 in 2003 and $84,480 in
2002 for use of the corporate aircraft.
(6) The amounts shown include $54,267 in 2003 and $84,051 in 2002 for use of
the corporate aircraft.
(7) Mr. Berk is employed by Barton Incorporated, a wholly-owned subsidiary of
the Company. Mr. Berk is also President and Chief Executive Officer of
Barton Incorporated.
(8) Mr. Millar joined the Company in April 2003 with the acquisition of BRL
Hardy Limited (now known as Hardy Wine Company Limited) at which time he
became an executive officer of the Company. Mr. Millar remains an employee
of Hardy Wine Company Limited. The reported information is the amount paid
to him during the portion of the 2004 fiscal year that he was an executive
officer of the Company. Mr. Millar is paid in Australian dollars. The
amounts appearing in the table and footnotes are converted into United
States dollars using the weighted average exchange rate for the indicated
fiscal year.
(9) The amount shown includes $55,184 for air transportation services in 2004
and $29,826 for use of a motor vehicle in 2004.
9
STOCK OPTIONS
The following table contains information concerning stock option grants to
the Named Executives during the fiscal year ended February 29, 2004. No stock
appreciation rights ("SARs") were granted to any of the Named Executives in that
year. The columns labeled "Potential Realizable Value" are based on
hypothetical 5% and 10% growth assumptions, as required by the Securities and
Exchange Commission. The Company cannot predict the actual growth rate of its
Common Stock.
OPTION GRANTS IN LAST FISCAL YEAR
- -------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
- ------------------------------------------------------------------------------ VALUE AT ASSUMED
ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------------
NAME GRANTED (1) FISCAL YEAR ($/SH) (2) DATE 5% 10%
- ---- ----------- ------------ ------------ ---------- ----------- -----------
Richard Sands 76,100 (3) 2.7% $ 23.59 04/02/13 $ 1,128,991 $ 2,861,085
30,000 (4) 1.1% $ 23.50 04/03/13 $ 443,371 $ 1,123,588
Robert Sands 53,800 (3) 1.9% $ 23.59 04/02/13 $ 798,157 $ 2,022,685
30,000 (4) 1.1% $ 23.50 04/03/13 $ 443,371 $ 1,123,588
Alexander L. Berk 40,500 (3) 1.4% $ 23.59 04/02/13 $ 600,843 $ 1,522,654
Stephen B. Millar 100,000 (5) 3.6% $ 23.40 04/08/13 $ 1,471,613 $ 3,729,357
100,000 (6) 3.6% $ 23.40 04/08/13 $ 1,471,613 $ 3,729,357
15,606 (7) 0.6% $ 30.50 06/26/13 $ 299,343 $ 758,594
Thomas S. Summer 31,500 (3) 1.1% $ 23.59 04/02/13 $ 467,322 $ 1,184,286
30,000 (4) 1.1% $ 23.50 04/03/13 $ 443,371 $ 1,123,588
- -------------------------
(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 "LTSIP Plan") or the Company's Incentive
Stock Option Plan, as amended (the "ISOP 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 LTSIP Plan and the ISOP Plan, the vesting of
stock options accelerates in the event of a change of control, as defined
in the LTSIP Plan and the ISOP 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 vests and becomes fully exercisable on April 2, 2007, 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 $35.88 for fifteen (15) consecutive trading days.
(4) This option vests 25% per year as follows: (i) 25% of this option has
become exercisable; (ii) the next 25% of this option will become
exercisable on April 3, 2005; (iii) the next 25% will become exercisable
on April 3, 2006; and (iv) the remaining 25% of this option will become
exercisable on April 3, 2007.
(5) This option vests and becomes fully exercisable on April 8, 2007, 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 $35.59 for fifteen (15) consecutive trading days.
10
(6) This option vests 25% per year as follows: (i) 25% of this option has
become exercisable; (ii) the next 25% of this option will become
exercisable on April 8, 2005; (iii) the next 25% will become exercisable
on April 8, 2006; and (iv) the remaining 25% of this option will become
exercisable on April 8, 2007.
(7) This option vests 20% per year as follows: (i) 20% of this option will
become exercisable on June 26, 2004; (ii) the next 20% of this option will
become exercisable on June 26, 2005; (iii) the next 20% will become
exercisable on June 26, 2006; (iv) the next 20% will become exercisable on
June 26, 2007; and (v) the remaining 20% of this option will become
exercisable on June 26, 2008.
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 29, 2004; and (ii) the number
and value of exercisable and unexercisable stock options held by the Named
Executives as of February 29, 2004. 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 - - 872,530 82,770 $ 17,068,415 $ 802,618
Robert Sands - - 798,580 71,620 $ 15,876,681 $ 712,191
Alexander L. Berk 94,000 $ 2,518,064 414,090 34,330 $ 7,271,554 $ 420,484
Stephen B. Millar - - 50,000 165,606 $ 415,000 $ 1,263,727
Thomas S. Summer 4,960 $ 57,040 218,550 55,670 $ 3,451,037 $ 554,277
- --------------------
(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.
HARDY WINE COMPANY SUPERANNUATION PLAN
Mr. Millar participates in the defined benefit component of the Hardy Wine
Company ("Hardy") Superannuation Plan (the "Hardy Plan"), which provides for a
lump sum payment to him upon his retirement from Hardy. This benefit will be an
amount equal to twenty percent of (i) Mr. Millar's average salary (salary being
the same for purposes of the Hardy Plan as that which appears in the Summary
Compensation Table above) for his three final years of employment prior to
retirement ("final average salary"), multiplied by (ii) Mr. Millar's years of
service with Hardy. As of February 29, 2004, Mr. Millar was credited with 13
years of service for purposes of the Hardy Plan. Based on service through
February 29, 2004, the Company estimates that the amount of the benefit to which
Mr. Millar would be entitled if he had then retired would be AUD$1,845,122. The
Company estimates that the retirement benefit under the Hardy Plan for Mr.
Millar, assuming that he continues in Hardy's employ to age 65 (the normal
retirement date for purposes of the Hardy Plan) and that his final average
salary for purposes of calculating his benefit amount is twenty percent greater
than his current salary, would be AUD$3,461,880. Such amounts are not subject
to deduction or offset for any other private or public retirement benefit to
which Mr. Millar is entitled. If converted into United States dollars using the
weighted average exchange rate for the 2004 fiscal year, these amounts would be,
respectively, $1,302,103 and $2,443,049.
11
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
an independent 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 takes into account compensation data of comparable
companies. Specifically considered in fiscal year 2004 with respect to annual
management incentives was the Company's operating income for fiscal 2004,
adjusted for certain items, as compared to that set forth in its fiscal 2004
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 2004 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 60% to 75% 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.
Because the financial performance of the Company met or exceeded the established
targeted goals,
12
actual bonuses paid executive officers generally exceeded the target awards. For
fiscal 2004, 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 and the Company's Incentive Stock Option 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 2004, 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. Additionally, during
fiscal 2004 the Human Resources Committee awarded incentive stock options to
three executive officers, one of whom joined the Company upon completion of a
business acquisition and the other two being recently promoted to executive
officer positions with the Company. These incentive stock option awards took
into account relevant market survey data and the individual's position with the
Company. In each case, the exercise price of the stock options awarded was
equal to the market value of the underlying shares on the date of grant.
Accordingly, the value of the award depends solely upon future growth in the
share value of the Company's Class A Stock.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
For fiscal year 2004, 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.
13
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 2004 was a
percentage of his base salary based upon the Company's fiscal 2004 operating
income, adjusted for certain items, as compared to that set forth in the
Company's fiscal 2004 operating plan. The range for Mr. Sands' cash incentive
award, from threshold, target and maximum (18.75%, 75% and 150%, respectively),
was comparable to industry compensation survey data for executives in Richard
Sands' position. For the fiscal year ended February 29, 2004, Richard Sands
received a bonus of $868,715, which is equal to 99.2% of his salary. As noted
elsewhere in this Proxy Statement, during fiscal 2004, Mr. Sands also received
stock options to purchase up to 106,100 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 2004, 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 2000, 2001, 2002, 2003 and 2004, 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 and a peer group index
comprised of companies in the beverage industry (the "Selected Peer Group
Index") (see footnote (1) to the graph). The graph assumes the investment of
$100.00 on February 28, 1999 in the Company's Class A Stock, Class B Stock, the
S&P MidCap 400 Index and the Selected Peer Group Index, and also assumes the
reinvestment of all dividends.
14
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
-----------------------------------------------
[PERFORMANCE GRAPH]
[PERFORMANCE GRAPH KEY]
1999 2000 2001 2002 2003 2004
-------- -------- -------- -------- -------- --------
STZ $ 100.00 $ 91.80 $ 119.63 $ 203.65 $ 184.58 $ 237.56
STZ.B 100.00 95.15 124.27 207.15 190.29 246.21
Peer Group Index 100.00 76.82 96.84 104.64 87.36 124.49
S&P MidCap 400 Index 100.00 130.99 142.68 146.54 119.19 178.45
- ------------------------
(1) 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.
15
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 ("Barton"), 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 and his designation by the Company as
Chief Executive Officer, Constellation Beers and Spirits, 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 current term of the agreement. Post-termination benefits are payable to
Mr. Berk in a lump sum as soon as practicable after his 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.
Stephen Millar and BRL Hardy Limited (now known as Hardy Wine Company
Limited) had entered into an Memorandum of Agreement (Service Contract) dated as
of June 11, 1996 (the "Service Contract") that provides for Mr. Millar's
compensation and sets forth terms and conditions of his employment with BRL
Hardy Limited. Mr. Millar and BRL Hardy Limited also entered into a
Non-Competition Agreement effective April 4, 2003. Effective April 8, 2003, BRL
Hardy Limited became a wholly-owned subsidiary of the Company. Mr. Millar and
the Company entered into a letter agreement under which Mr. Millar serves as the
Chief Executive Officer, Constellation Wines and by virtue of these
responsibilities, he is deemed an executive officer of the Company. The letter
agreement provides for certain of Mr. Millar's compensation arrangements and
provides for additional terms and conditions of his employment. Those
provisions of the 1996 Service Contract not inconsistent with the letter
agreement continue. Pursuant to the Service Contract, Mr. Millar may
16
receive a remuneration entitlement consisting of his annual salary and benefits
package in the event his position becomes redundant, including redundancy
associated with a change in control of BRL Hardy Limited. The Service Contract
requires Mr. Millar to keep certain information with respect to BRL Hardy
Limited confidential during and after his employment and the Non-Competition
Agreement restrains Mr. Millar from engaging in certain activities in
competition with the Company for a period of twelve (12) months following
termination of his employment.
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 thirty (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 twelve (12) months.
Agustin Francisco Huneeus ("Mr. Huneeus") was the President and Chief
Executive Officer of Franciscan Vineyards, Inc. ("Franciscan"), a wholly-owned
subsidiary of the Company, until November 30, 2003. By virtue of his
responsibilities with Franciscan, he was deemed an executive officer of the
Company until the April 2003 acquisition of BRL Hardy Limited. 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 for projects begun while Mr. Huneeus was an executive officer of
this Company. The Huneeus Interests (a) render 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) lease a vineyard
to Franciscan; (f) render brand management consulting and advisory services in
the United States and internationally with respect to the Veramonte brand; and
(g) render consulting services to Franciscan and the Company. Payments to the
Huneeus Interests pursuant to these transactions and arrangements totaled
approximately $7,066,932 for the last fiscal year. Payments from the Huneeus
Interests to Franciscan for payments of certain services provided or payments
made on their behalf totaled approximately $91,111 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, in prior years
the Company has paid the annual premium on an insurance policy (the "Policy")
held in the trust, and the trust has reimbursed the Company for the portion of
the premium equal to the "economic benefit" to Marvin and/or Marilyn Sands,
calculated in accordance with the United States Treasury Department rules then
in effect. 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. While the Company
made no premium payment on behalf of the trust in fiscal 2004, from the
inception of the agreement through the end of fiscal 2004, 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.
17
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 $32,101 (exclusive of employee reimbursed expenses).
George Bresler, a director of the Company, is a senior counsel 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 provides Mr. Bresler
medical insurance coverage and pays a monthly premium for his coverage. During
calendar 2003, the cost of this coverage was approximately $330 per month.
During calendar 2004, it will be approximately $404 per month. 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 2004 were complied with in
a timely fashion.
18
STOCK OWNERSHIP OF MANAGEMENT
The following table and notes thereto set forth, as of May 24, 2004, 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. Additionally, as of May 24, 2004, none of
such persons holds any interest in the Company's 5.75% Mandatory Convertible
Preferred Stock. 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 94,929,474 shares of Class A Stock and 12,054,630
shares of Class B Stock outstanding as of the close of business on May 24, 2004.
-------------------------------------------------------------------------------
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 (2) Options (3) Owned Owned Owned
- ------------------------ --------------- -------------- ------------ -------------- -------------
Richard Sands 496,890 (4) 887,390 (4) 1.4% (4) 8,384,188 (4) 69.6% (4)
Robert Sands 564,618 (4) 813,440 (4) 1.4% (4) 8,381,368 (4) 69.5% (4)
Alexander L. Berk 14,080 317,530 * - *
Stephen B. Millar 9,755 (5) 78,121 * - *
Thomas S. Summer 19,031 (6) 231,010 * - *
George Bresler 1,436 2,257 * - *
Jeananne K. Hauswald 2,928 26,257 * - *
James A. Locke III 8,632 26,257 * (7) 132 *
Thomas C. McDermott 4,436 42,257 * - *
Paul L. Smith 4,146 2,257 * - *
All Executive Officers and
Directors as a Group
(13 persons) (8) 838,405 2,769,549 3.7% (8) 11,335,616 94.0%
- --------------------------
* 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 sixty (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) Includes the number of shares of Class A Stock that underlie any holdings
of CHESS Depositary Interests.
19
(3) Reflects the number of shares of Class A Stock that can be purchased by
exercising stock options that are exercisable on May 24, 2004 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 24, 2004 due to certain acceleration provisions in certain
awards, which accelerations cannot be foreseen on the date of this Proxy
Statement.
(4) 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.
(5) This amount represents the number of shares of Class A Stock that underlie
the CHESS Depositary Interests held by Mr. Millar. Such amount does not
include 14,561 shares of Class A Stock that underlie the CHESS Depositary
Interests held by his spouse and for which Mr. Millar disclaims beneficial
ownership.
(6) Mr. Summer shares the power to vote and dispose of 18,151 shares with his
spouse. Such number does not include 800 shares of Class A Stock that his
spouse holds as a custodian and for which Mr. Summer disclaims beneficial
ownership.
(7) Assuming the conversion of Mr. Locke's 132 shares of Class B Stock into
Class A Stock, Mr. Locke would beneficially own 35,021 shares of Class A
Stock, representing less than one percent (1%) of the outstanding Class A
Stock after such conversion.
(8) This group consists of the Company's current executive officers and
directors. 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 14,943,570 shares of Class A Stock, representing
13.7% 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 (7) 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
(7) 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 (5) nominees are to be elected by the holders of the Class A
Stock and the Class B Stock, voting as a single 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. The reported age of each nominee is as of
June 9, 2004.
20
GEORGE BRESLER DIRECTOR SINCE 1992
- --------------
Mr. Bresler, age 79, has been engaged in the practice of law since 1957. During
the past year, Mr. Bresler became senior counsel of the law firm of Kurzman
Eisenberg Corbin Lever & Goodman, LLP. Prior to that time, since 1992, he was a
partner of that firm 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 60, has been a managing partner of Solo Management Group, LLC,
a corporate finance and investment management consulting company, since
September 1998. From 1987 to her retirement in 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.
JAMES A. LOCKE III DIRECTOR SINCE 1983
- ------------------
Mr. Locke, age 62, has been engaged in the practice of business and corporate
law since 1971. He has been a partner in the law firm of Nixon Peabody LLP, and
its predecessor firm, in Rochester, New York since 1996. Nixon Peabody LLP is
the Company's principal outside counsel. For twenty years prior to joining
Nixon Peabody LLP, Mr. Locke practiced law in Rochester, New York as a partner
with another law firm.
THOMAS C. MCDERMOTT DIRECTOR SINCE 1997
- -------------------
Mr. McDermott, age 67, has been 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 53, is the Chairman of the Board and Chief Executive Officer of
the Company. He has been employed by the Company in various capacities since
1979. He was elected Chief Executive Officer in October 1993 and has served as
a Director since 1982. In September 1999, Mr. Sands was elected Chairman of the
Board. He served as Executive Vice President from 1982 to May 1986, as
President from May 1986 to December 2002 and as Chief Operating Officer from May
1986 to October 1993. He is the brother of Robert Sands.
ROBERT SANDS DIRECTOR SINCE 1990
- ------------
Mr. Sands, age 45, is President and Chief Operating Officer of the Company. He
was appointed to these positions in December 2002 and has served as a director
since January 1990. He also served as Group President from April 2000 to
December 2002, 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 68, 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, Inc.
21
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 current compensation program for the period beginning July
15, 2003 through August 31, 2004, and annually thereafter unless otherwise
changed by the Board of Directors is to pay its non-employee directors for their
services as directors, partly in cash, partly in restricted stock, and partly in
stock options. The cash component consists of (i) an annual retainer of
$35,000, (ii) a Board meeting fee of $1,500 for each Board meeting attended
(which includes regular, special and annual Board meetings and attendance in
person or by conference telephone); (iii) a committee meeting fee of $750 per
meeting for each committee meeting attended (including attendance by conference
telephone); and (iv) an annual fee of $8,000 paid for the position of Chair of
the Audit Committee and a fee of $4,000 paid for the position of Chair of each
of the Human Resources Committee and the Corporate Governance Committee.
In addition to the cash payments, the compensation program anticipates that
each non-management director will receive, if and as approved by the Board of
Directors, commencing in September 2003 and annually thereafter, a grant of
non-qualified stock options and, commencing in September 2004 and annually
thereafter, a restricted stock award. Subject to Board approval, the number of
shares on an annual basis which may be subject to an option grant for each
non-management director will not exceed the number obtained by dividing $70,000
by the closing price of the Company's Class A shares on the date of the grant.
Also subject to Board approval, the number of shares of restricted stock that
will be awarded to each non-management director will be calculated by dividing
the sum of $20,125 by the closing price of the Company's Class A shares on the
date of grant. During fiscal 2004, the Company awarded a stock option to
purchase up to 2,257 shares of Class A Stock to each of the non-management
directors, at an exercise price of $31.01 per share and with an exercise period
of March 25, 2004 through September 25, 2013. No restricted stock was awarded
in the last fiscal year.
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, and directors also receive complimentary wine
products. The Company's non-management directors are George Bresler, Jeananne
K. Hauswald, James A. Locke III, Thomas C. McDermott and Paul L. Smith. The
remaining two directors, Richard Sands and Robert Sands, who are also employees
of the Company, receive no additional compensation for serving as directors.
The Board of Directors is expected to consider director compensation at a future
Board meeting, at which time the compensation paid to directors may be modified.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
On December 19, 2003, the Board of Directors adopted revised Board of
Directors Corporate Governance Guidelines containing categorical standards for
determining director independence. The Board of Directors Corporate Governance
Guidelines are available on the Company's website at www.cbrands.com under
---------------
Investors/Corporate Governance and an excerpt containing the categorical
standards is appended to this Proxy Statement. The Board of Directors has
affirmatively determined that each current member of the Board, other than
Richard Sands and Robert Sands, meets the categorical standards set by the Board
to qualify as an independent director. Therefore, a majority of
22
the members of the current Board of Directors are independent. The Board of
Directors of the Company held six (6) meetings during the Company's fiscal year
ended February 29, 2004. In addition, the non-management members of the Board of
Directors, all of whom are independent, meet periodically in regularly scheduled
sessions without management. The non-management directors select a Lead
Director. In accordance with the Board of Directors Corporate Governance
Guidelines, Paul Smith presides at these meetings in his capacity as Lead
Director. Stockholders may arrange to communicate directly with the directors,
the Lead Director or the non-management directors as a group by writing to them
in the care of the Company at 370 Woodcliff Drive, Suite 300, Fairport, New
York 14450. The Company will forward all such stockholder communications
(other than unsolicited advertising materials).
The standing committees of the Board are the Audit Committee, Corporate
Governance Committee and Human Resources Committee. During fiscal 2004, 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. The Company's directors are encouraged to
attend the Company's Annual Meeting and all directors attended the Company's
2003 Annual Meeting of Stockholders.
AUDIT COMMITTEE. The Audit Committee is currently composed of Paul L. Smith
(Chair), Jeananne K. Hauswald and Thomas C. McDermott, each of whom the Board of
Directors has determined is an audit committee financial expert. Additionally,
each is independent in accordance with the definition in the New York Stock
Exchange's listing standards, the requirements of the Securities and Exchange
Commission and the Categorical Standards of Independence contained within the
Company's Board of Directors Corporate Governance Guidelines. The Audit
Committee operates under a written charter that was approved by the Company's
Board of Directors and which is appended to this Proxy Statement and is also
available on the Company's website at www.cbrands.com under Investors/Corporate
---------------
Governance. This Committee performs the Board of Directors' 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 eight (8) meetings during fiscal 2004.
CORPORATE GOVERNANCE COMMITTEE. The Corporate Governance Committee is currently
composed of James A. Locke III (Chair), George Bresler, Jeananne K. Hauswald,
Thomas C. McDermott and Paul L. Smith, each of whom is independent in accordance
with the definition of the New York Stock Exchange's listing standards and the
Categorical Standards of Independence contained within the Company's Board of
Directors Corporate Governance Guidelines. This committee functions as the
nominating committee of the Board of Directors and operates under a written
charter that was approved by the Company's Board of Directors. The Corporate
Governance Committee Charter is available on the Company's website at
www.cbrands.com under Investors/Corporate Governance. The Corporate Governance
- ---------------
Committee identifies individuals qualified to become Board members, consistent
with criteria and qualifications for membership approved by the Board and
selects, or recommends that the Board select, director nominees for the annual
meetings of stockholders. The Corporate Governance Committee advises the Board
concerning the appropriate composition of the Board and its committees, develops
and recommends to the Board the corporate governance principles applicable to
the Company, 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 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 nor former full-time officers of the Company.
This Committee held two (2) meetings during fiscal 2004.
23
The Corporate Governance Committee identifies potential director candidates
from any outside advisors it may retain, as well as from other members of the
Board, executive officers and other contacts. The Corporate Governance
Committee will consider nominations by stockholders of the Company. Those
nominations must include sufficient biographical information so that the
Committee can appropriately assess the proposed nominee's background and
qualifications. In its assessment of potential candidates, the Corporate
Governance Committee will review the candidate's character, wisdom, acumen,
business experiences and understanding of the Company's business environment,
and ability to devote the time and effort necessary to fulfill his or her
responsibilities, all in the context of the perceived needs of the Board at that
time.
To be considered for nomination at the 2005 Annual Meeting of Stockholders,
stockholder submissions for nomination should be received in writing at the
Company's offices, to the attention of the Corporate Secretary, Constellation
Brands, Inc., 370 Woodcliff Drive, Suite 300, Fairport, New York 14450, no later
than February 9, 2005. Stockholder recommendations made in accordance with
these procedures will receive the same consideration and be evaluated in the
same manner as other potential nominees.
HUMAN RESOURCES COMMITTEE. The Human Resources Committee is currently composed
of Thomas C. McDermott (Chair), Jeananne K. Hauswald and Paul L. Smith, each of
whom is independent in accordance with the definition of the New York Stock
Exchange's listing standards and the Categorical Standards of of Independence
contained within the Company's Board of Directors Corporate Governance
Guidelines. This committee functions as the compensation committee of the Board
of Directors and operates under a written charter that was approved by the
Company's Board of Directors. The Human Resources Committee Charter is
available on the Company's website at www.cbrands.com under Investors/Corporate
---------------
Governance. The Human Resources Committee fulfills the Board of Directors'
responsibilities relating to the compensation of the Company's executives,
including the Chief Executive Officer. Additionally, 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; the Company's material policies and procedures which
relate to compliance with pertinent human resources laws and regulations, the
human resources aspects of the ethical conduct of the business, and the
management of human resources capital; and procedures and internal controls that
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 2004.
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.
24
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 29, 2004, the Audit
Committee reviewed and discussed the audited financial statements of the Company
with the Company's management. Also, the Committee discussed with KPMG LLP, the
Company's independent public accountants with respect to the fiscal year ended
February 29, 2004, the matters required to be discussed by Statement on Auditing
Standards ("SAS") No. 61, as amended by SAS 89 and SAS 90 (Codification of
Statements on Auditing Standards, AU Section 380).
In addition, the Committee received the written disclosures and the letter
from KPMG LLP required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees) and discussed with KPMG LLP 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 29, 2004 for filing with the Securities and Exchange
Commission.
The Audit Committee has adopted a policy for the pre-approval of audit and
non-audit services that may be provided by the Company's independent auditors.
The Committee's policy is to pre-approve all audit and permissible non-audit
services provided by KPMG LLP prior to the engagement. Any pre-approval is
detailed as to the particular service or category of services and is generally
subject to a specific budget. The Audit Committee has delegated to its
Chairperson authority to pre-approve proposed audit and non-audit services that
arise between Audit Committee meetings, provided that the decision to approve
the service is presented at the next scheduled Audit Committee meeting. All
audit and non-audit services performed by KPMG LLP during the fiscal year ended
February 29, 2004 were pre-approved in accordance with this policy. These
services have included audit services, audit-related services and tax services.
The Committee did not pre-approve any other products or services that did not
fall into these categories and KPMG LLP provided no other products or services
during the past fiscal year. Information concerning the aggregate fees billed
by KPMG LLP in the last two fiscal years for audit and non-audit services is set
forth in the Company's Proxy Statement under Proposal No. 2, titled "Selection
of Independent Accountants."
AUDIT COMMITTEE
Paul L. Smith (Chair)
Jeananne K. Hauswald
Thomas C. McDermott
25
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 (2) 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 A Stock and Class B Stock voting as a single class is required
for the election of the five (5) directors to be elected by the holders of Class
A Stock and Class B Stock voting as a single class.
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
--------------
SELECTION OF INDEPENDENT PUBLIC ACCOUNTANTS
On April 7, 2004, the Audit Committee determined to engage KPMG LLP to
serve as the Company's independent public accountants for the fiscal year ending
February 28, 2005. Although ratification by stockholders of this selection is
not required, the selection of KPMG LLP as the Company's independent public
accountants will be presented to the stockholders for their ratification at the
Annual Meeting. If the stockholders do not ratify the selection of KPMG LLP,
the Audit Committee will reconsider its choice. The firm of KPMG LLP, Certified
Public Accountants, served as the independent public accountants of the Company
for the fiscal years ended February 29, 2004 and February 28, 2003.
The firm of Arthur Andersen LLP, Certified Public Accountants, served as
the independent public accountants for 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 LLP 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 LLP's dismissal and
KPMG LLP's engagement as the Company's independent public accountants became
effective. The Company's stockholders ratified the selection of KPMG LLP at
their Annual Meeting held on July 23, 2002.
Arthur Andersen LLP'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 LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure that, if not resolved to Arthur Andersen LLP's satisfaction, would
have caused Arthur Andersen LLP 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.
26
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 LLP 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 fees were billed to the Company by KPMG LLP for services
rendered during the fiscal years ended February 29, 2004 and February 28, 2003:
AUDIT FEES: These amounts relate to the annual audit of the Company's
consolidated financial statements included in the Company's Annual Report
on Form 10-K, quarterly reviews of interim financial statements included in
the Company's Form 10-Q reports, service normally provided by the
independent auditor in connection with statutory or regulatory filings or
its engagement for the indicated fiscal year, statutory audits of certain
of the Company's subsidiaries, and services relating to filings under the
Securities Act of 1933 and the Exchange Act of 1934. The aggregate audit
fees billed by KPMG LLP for the year ended February 29, 2004 were
$1,228,498 which amount included approximately $60,000 of out-of-pocket
expenses. For the year ended February 28, 2003 these audit fees were
$638,000 which amount included approximately $60,000 of out-of-pocket
expenses.
AUDIT-RELATED FEES: These amounts relate to benefit plan reviews,
assistance on acquisitions/divestitures and other audit-related projects.
The aggregate audit-related fees billed by KPMG LLP for the year ended
February 29, 2004 were $126,213 and the services comprising these fees were
in the nature of various employee benefit plan audits and reviews. For the
year ended February 28, 2003 these audit-related fees were $291,000 and the
services comprising these fees were in the nature of various employee
benefit plan audits and reviews, fees associated with certain due diligence
in connection with the acquisition of BRL Hardy Limited (now known as Hardy
Wine Company Limited), and fees related to a proposed financing
transaction.
TAX FEES: These amounts relate to professional services for tax compliance,
tax advice and tax planning. The aggregate tax fees billed by KPMG LLP for
the year ended February 29, 2004 were $2,316,175 and the services
comprising these fees were tax compliance, tax advice and tax planning. For
the year ended February 28, 2003, the fees for these tax services were an
aggregate of $2,187,534.
ALL OTHER FEES: These amounts relate to all other products and services
provided to the Company by KPMG LLP, other than services disclosed in the
categories above. For the year ended February 29, 2004, KPMG LLP did not
provide any products or services other than as disclosed above and,
consequently, did not bill the Company for any fees other than as disclosed
above. For the year ended February 28, 2003, the aggregate fees billed by
KPMG LLP for all other products and services provided to the Company, other
than services disclosed in categories above for the 2003 fiscal year, were
approximately $33,348. These fees consisted primarily of fees for services
relating to business continuity consultations.
27
The Audit Committee has reviewed the non-audit services provided by KPMG
and has determined that the non-audit services provided by KPMG LLP are
compatible with maintaining the independence of such auditors. Please see the
Audit Committee Report for information concerning the Audit Committee's policy
regarding pre-approval of audit and non-audit services provided by KPMG LLP.
A representative of KPMG LLP 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. 2 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, 2005 AND, ACCORDINGLY, RECOMMENDS THAT YOU
VOTE FOR 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 SUCH PROPOSAL.
PROPOSAL NO. 3
--------------
PROPOSED AMENDMENT NUMBER FIVE TO THE
COMPANY'S LONG-TERM STOCK INCENTIVE PLAN
The Company's Board of Directors has approved an amendment to the Company's
Long-Term Stock Incentive Plan ("Long-Term Stock Plan") to increase the
aggregate number of shares of the Class A Stock available for awards under the
plan from 28,000,000 shares to 40,000,000 shares. This amendment will become
effective upon the approval of the stockholders of the Company. The following
discussion summarizes certain provisions of the Long-Term 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 Long-Term 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, and Amendment Number Five to the Long-Term Stock Plan attached
hereto as Appendix C. A copy of the Long-Term Stock Plan is available from the
Company's Secretary at 370 Woodcliff Drive, Suite 300, Fairport, New York
14450.
SUMMARY OF TERMS
Awards under the Long-Term 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
Long-Term Stock Plan is
28
increased by the amendment from 28,000,000 shares to 40,000,000 shares.
Non-qualified options to purchase 13,149,787 shares of Class A Stock were
outstanding under the Long-Term Stock Plan on May 24, 2004. No stock
appreciation rights were then outstanding. Additionally, a total of 122,180
shares of restricted stock had previously been awarded under the Long-Term
Stock Plan. Based on these figures, an aggregate of 940,784 shares were
available for Awards under the Long-Term Stock Plan. If the proposed amendment
to the Long-Term Stock Plan is approved, and based upon these figures, the
aggregate shares available for awards would increase to 12,940,784 shares. Any
Awards granted pursuant to the Long-Term 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 8, 2004 was $37.48 per share.
The Long-Term 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 Long-Term Stock Plan, and the entire
Board of Directors may act as the Committee. 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 Long-Term Stock Plan, as
applicable. Under the Long-Term 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 Long-Term Stock Plan
include directors and employees (including officers) of the Company and its
subsidiaries. Five non-employee directors and approximately 7,800 employees are
eligible to participate in the Long-Term Stock Plan; however, only directors and
employees selected by the Committee will be granted Awards under the Long-Term
Stock Plan. Outstanding non-qualified options granted under the Long-Term Stock
Plan are, as of May 24, 2004, held by approximately 1,360 employees.
The Long-Term Stock Plan may be amended, modified or terminated by the
Committee from time to time. No amendment, modification or termination of the
Long-Term 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 Long-Term Stock Plan.
Stock options and other Awards previously granted pursuant to the Long-Term
Stock Plan will not be affected by the amendment of the Long-Term Stock Plan and
will remain outstanding until they are exercised, expire or otherwise terminate.
The following table sets forth the aggregate number of options granted under the
Long-Term Stock Plan to certain individuals and groups of individuals during the
fiscal year ended February 29, 2004 and the subsequent period through the date
of this Proxy Statement:
29
PERIOD FROM
FISCAL YEAR MARCH 1, 2004
ENDED THROUGH
INDIVIDUAL OR GROUP OF INDIVIDUALS FEBRUARY 29, 2004 JUNE 9, 2004
- ---------------------------------- ----------------- -------------
Richard Sands 106,100 121,400
Robert Sands 83,800 95,900
Alexander L. Berk 40,500 42,300
Stephen B. Millar 200,000 50,700
Thomas S. Summer 61,500 31,900
All Executive Officers as a Group
(8 persons) 647,200 418,300
All Directors who are not Executive
Officers as a Group (5 persons) 11,285 0
All employees other than Executive
Officers as a Group 2,123,250 2,047,950
Please also see the discussion regarding the Company's compensation program
for Non-Management Directors and appearing at page 22 of this Proxy Statement.
COVERED EMPLOYEE RESTRICTIONS. There are special rules under the Long-Term
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 Long-Term 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 any Other Stock-Based Awards 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 1/2% of the number of shares of Class A Stock
outstanding on June 27, 1997.
STOCK OPTIONS. Under the Long-Term 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 Long-Term Stock Plan,
they are no longer permitted to be granted under it. No incentive stock options
were ever granted under the Long-Term Stock Plan.
30
STOCK APPRECIATION RIGHTS. The Long-Term Stock Plan authorizes the
Committee to grant stock appreciation rights ("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, and vice versa.
RESTRICTED STOCK AWARDS. The Long-Term 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 Long-Term 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 Long-Term 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 Long-Term 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
31
attained. With regard to a particular performance period, the Committee will
have the discretion, subject to the Long-Term 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 stock appreciation rights, 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.
Individual income tax consequences may differ with respect to participants
who are resident in jurisdictions outside the United States.
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 29, 2004. The equity compensation plans approved by security holders
include the Company's Long-Term Stock 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
32
Company, that participant may exercise the option during a period of time
specified in the UK Plan or may withdraw from the offering. During the year
ended February 29, 2004, an aggregate of 27,791 shares were issued pursuant to
the UK Plan.
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 11,287,473 $ 17.73 9,425,948
Equity compensation
plans not approved by
security holders (1) - - 1,971,451
Total 11,287,473 $ 17.73 11,397,399
- -------------------------
(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 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. An
increase in the number of shares of Class A Stock with respect to which Awards
may be granted under the Long-Term Stock Plan will enable the Company to
continue to provide such incentives.
VOTE REQUIRED
Approval of Proposal No. 3 to approve the amendment to the Long-Term Stock
Plan 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 APPROVE THE
AMENDMENT OF THE 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.
33
STOCKHOLDER PROPOSALS FOR THE 2005 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 2005 Annual Meeting of Stockholders, such proposal must be received by the
Company no later than February 9, 2005. Nominations for directors submitted by
stockholders must also be received no later than February 9, 2005.
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 2005 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 9, 2005.
AVAILABLE INFORMATION
The Company has furnished its financial statements to stockholders by
including in this mailing the Company's 2004 Annual Report to Stockholders. In
addition, upon the request of any stockholder, the Company will provide, without
charge, a copy of its Annual Report on Form 10-K for the fiscal year ended
February 29, 2004, 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
Investor Relations, 370 Woodcliff Drive, Suite 300, Fairport, New York 14450;
telephone number: (888) 922-2150.
The Company's Board of Directors Corporate Governance Guidelines, Code of
Business Conduct and Ethics, Chief Executive Officer and Senior Financial
Executive Code of Ethics, and the charters of the Audit Committee, the Corporate
Governance Committee and the Human Resources Committee are available on the
Company's website at www.cbrands.com under "Investors/Corporate Governance" and
---------------
are also available in print to any shareholder who requests them. Such requests
should be directed to Mark Maring, Vice President Investor Relations, 370
Woodcliff Drive, Suite 300, Fairport, New York 14450.
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 9, 2004
34
Appendix A
CONSTELLATION BRANDS, INC.
BOARD OF DIRECTORS'
AUDIT COMMITTEE CHARTER
COMPOSITION
- -----------
The Audit Committee of the Board of Directors shall be composed of at least
three, but not more than five, members of the Board, each of whom shall meet the
independence and other qualification requirements of the New York Stock
Exchange, Inc., the Sarbanes-Oxley Act of 2002 (the "Act"), and all other
applicable laws and regulations. Each member of the Audit Committee shall be
financially literate and at least one member of the Audit Committee shall have
accounting or related financial management expertise, as each such qualification
is interpreted by the Board of Directors in its business judgment. To the
extent practicable, at least one member of the Audit Committee shall be an
"audit committee financial expert" as such term is defined by the Securities and
Exchange Commission (the "SEC"). The number of members of the Audit Committee
shall be determined from time to time by resolution of the Board of Directors.
The Audit Committee and its Chairperson shall be nominated by the Corporate
Governance Committee and elected by the Board.
PURPOSES
- --------
The primary purposes of the Audit Committee shall be to:
1. Perform Board of Directors' oversight responsibilities as they relate to
the Company's accounting policies, internal controls and financial
reporting practices, including, among other things, monitoring:
- the integrity of the Company's financial statements,
- the Company's compliance with legal and regulatory requirements,
- the qualifications and independence of the independent accountants, and
- the performance of the Company's internal audit function and the
Company's independent accountants;
2. Maintain, through regularly scheduled meetings, a line of communication
between the Board of Directors and the Company's financial management,
internal auditors and independent accountants; and
3. Prepare, with such assistance from management as it determines is
appropriate, the report to be included in the Company's annual proxy
statement, as required by the SEC's rules.
A-1
RESPONSIBILITIES
- ----------------
The Audit Committee will:
1. Oversee the external audit coverage. The Company's independent
accountants are ultimately accountable to the Audit Committee, which has
the authority and direct responsibility to appoint, retain, compensate,
evaluate and terminate the independent accountants. In connection with its
oversight of the external audit coverage, the Audit Committee will:
- Have the direct authority to approve the engagement letter and the fees
to be paid to the independent accountants;
- Pre-approve all audit and non-audit services to be performed by the
independent accountants and the related fees for such services (subject
to the de minimus exceptions set forth in the Act and in SEC rules
thereunder);
- Obtain confirmation and assurance as to the independent accountants'
independence, including ensuring that they submit on a periodic basis
(not less than annually) to the Audit Committee a formal written
statement delineating all relationships between the independent
accountants and the Company. The Audit Committee is responsible for
actively engaging in a dialogue with the independent accountants with
respect to any disclosed relationships or services that may impact the
objectivity and independence of the independent accountants and for
taking appropriate action in response to the independent accountants'
report to satisfy itself of their independence;
- At least annually, obtain and review a report by the independent
accountants describing: the firm's internal quality-control
procedures; any material issues raised by the most recent internal
quality-control review, or peer review, of the firm, or by any inquiry
or investigation by governmental or professional authorities, within
the preceding five years, respecting one or more independent audits
carried out by the firm, and any steps taken to deal with any such
issues; and, to assess the independent accountants' independence, all
relationships between the independent accountants and the Company;
- Meet with the independent accountants prior to the annual audit to
discuss planning and staffing of the audit;
- Review and evaluate the performance of the independent accountants,
as the basis for any decision to reappoint or replace the independent
accountants;
- Set clear hiring policies for employees or former employees of the
independent accountants, as required by applicable laws and regulations;
and
- Ensure the regular rotation of audit partners on the audit engagement,
as required by applicable laws and regulations, and consider whether
rotation of the independent accountant is required to ensure
independence.
2. Review and discuss the annual audited financial statements and the
Company's disclosures provided in periodic annual reports including
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" with management, the senior internal auditing executive, and
the independent accountants. In connection with such review, the Audit
Committee will:
A-2
- Discuss with the independent accountants the matters required to be
discussed by Statement on Auditing Standards No. 61 (as may be modified
or supplemented) relating to the conduct of the audit;
- Review significant changes in accounting or auditing policies;
- Review with the independent accountants any problems or difficulties
encountered in the course of their audit, including any change in the
scope of the planned audit work and any restrictions placed on the scope
of such work, and management's response to such problems or
difficulties; and
- Review with the independent accountants, management, and the senior
internal auditing executive, the condition of the Company's internal
controls, and any significant findings and recommendations with respect
to such controls.
3. Review and discuss the quarterly financial statements and the Company's
disclosures provided in periodic quarterly reports including "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
with management, the senior internal auditing executive and the independent
accountants.
4. Receive reports required to be submitted by the independent accountants
concerning: (a) all critical accounting policies and practices used; (b)
all alternative treatments of financial information within generally
accepted accounting principles "GAAP" that have been discussed with
management, the ramifications of such alternatives, and the accounting
treatment preferred by the independent accountants; and (c) any other
material written communications with management; and review (x) major
issues regarding accounting principles and financial statement
presentations, including any significant changes in the Company's selection
or application of accounting principles, and major issues as to the
adequacy of the Company's internal controls and any special audit steps
adopted in light of material control deficiencies; (y) analyses prepared by
management and/or the independent accountants setting forth significant
financial reporting issues and judgements made in connection with the
preparation of the financial statements, including analysis of the effects
of alternative GAAP methods on the financial statements; and (z) the effect
of regulatory and accounting initiatives, as well as off-balance sheet
structures, on the financial statements of the Company.
5. Discuss policies and procedures concerning earnings press releases and
review the type and presentation of information to be included in earnings
press releases (paying particularly attention to any use of "pro forma," or
"adjusted" non-GAAP, information), as well as review any financial
information and earnings guidance provided to analysts and rating agencies.
6. Review major accounting policies and significant policy decisions as they
deem appropriate.
7. Obtain from management a notification of issues and responses whenever a
second opinion is sought from an independent public accountant.
8. Review annually executive officers' perquisites, including use of corporate
assets.
9. Review periodically the internal audit charter that explains the functional
and organizational framework for providing services to management and to
the Audit Committee.
A-3
10. Meet periodically with the Company's General Counsel to discuss legal,
regulatory and corporate compliance matters that may have a significant
impact on the Company.
11. Obtain advice and assistance from outside legal, accounting or other
advisers, and determine compensation for such services, as the Audit
Committee deems necessary to carry out its duties.
12. Review internal audit coverage. In connection with this responsibility, the
Audit Committee will:
- Meet periodically with management and the senior internal auditing
executive to review and assess the Company's major financial risk
exposures and the manner in which such risks are being monitored and
controlled; and discuss guidelines and policies to govern the process by
which risk assessment and management is undertaken;
- Review, in consultation with management and the senior internal auditing
executive, the plan and scope of internal audit activities; and
- Review significant reports to management prepared by the internal
auditing department and management's responses to such reports.
13. Resolve any differences in financial reporting between management and
the independent accountants.
14. Establish procedures for (a) receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
accounting controls or auditing matters and (b) the confidential, anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters.
15. Meet periodically (not less than annually) in separate executive session
with each of management, the senior internal auditing executive, and the
independent accountants.
16. Review and reassess the adequacy of this Charter annually and propose to
the Board any recommended changes.
17. Report on Audit Committee activities and issues to the Board regularly.
18. Prepare, with such assistance from management as it determines is
appropriate, the report of the Audit Committee required by the rules of the
SEC to be included in the proxy statement for each annual meeting of
stockholders.
19. Provide for an annual performance evaluation of the Audit Committee.
PROCEDURES
- ----------
1. MEETINGS
The Audit Committee shall meet at least quarterly, preferably in
conjunction with regular Board meetings. Meetings may, at the
discretion of the Audit Committee, include members of management,
independent consultants, and such other persons as the Audit Committee
shall determine. The Audit Committee, in discharging its
responsibilities, may meet privately for advice and counsel with
independent consultants, lawyers, or any other persons, including
associates of the Company, knowledgeable in the matters under
consideration. The Audit
A-4
Committee may also meet by telephone conference call or by any other
means permitted by law or the Company's By-laws.
2. ACTION
A majority of the members of the entire Audit Committee shall
constitute a quorum. The Audit Committee shall act on the affirmative
vote of a majority of members present at a meeting at which a quorum
is present. Without a meeting, the Audit Committee may act by
unanimous written consent of all members. However, the Audit Committee
may delegate to one or more of its members the authority to grant
pre-approvals of audit and permitted non-audit services, provided the
decision is reported to the full Audit Committee at its next scheduled
meeting.
3. FUNDING
The Company shall provide for appropriate funding, as determined by
the Audit Committee: (a) for payment of compensation to outside legal,
accounting or other advisors employed by the Audit Committee; and (b)
for ordinary administrative expenses of the Audit Committee that are
necessary or appropriate in carrying out its duties.
4. RULES
The Audit Committee shall determine, as appropriate, its own rules and
procedures, consistent with this Charter and the By-laws of the
Company.
5. CHAIRPERSON RESPONSIBILITIES
The Chairperson of the Audit Committee shall report to the Board on
the Committee's determinations and shall present recommendations for
approval whenever necessary or desirable.
*************
While the Audit Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Audit Committee to plan or conduct audits or
to determine that the Company's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is
the responsibility of management and the independent accountants.
*************
Adopted: September 25, 2003
Confirmed: December 19, 2003
A-5
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Appendix B
EXCERPT FROM THE COMPANY'S CORPORATE GOVERNANCE GUIDELINES
CLASSIFICATION AND DEFINITION OF DIRECTORS.
The principal classifications of directors are "Independent," "Management" and
"Non-Management."
An "Independent Director" of the Company shall be one who meets the
qualification requirements for being an independent director under the corporate
governance listing standards of the New York Stock Exchange ("NYSE"), including
the requirement that the Board must have affirmatively determined that the
director has no material relationships with the Company (either directly or as a
partner, stockholder or officer of an organization that has a relationship with
the Company). References to "Company" include any parent or subsidiary in a
consolidated group with Constellation Brands, Inc. References to "immediate
family member" includes a person's spouse, parents, children, siblings, mothers
and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, in
addition to anyone (other than domestic employees) who shares such person's
home. To guide its determination whether or not a business or charitable
relationship between the Company and an organization with which a director is so
affiliated is material, the Board has adopted the following categorical
standards:
A. A director will not be Independent if, within the preceding three
years, (i) the director was employed by the Company; (ii) an immediate
family member of the director was employed by the Company as an executive
officer; (iii) the director or an immediate family member of the director
received from the Company more than $100,000 per year in direct
compensation (other than director and committee fees and pension or other
forms of deferred compensation for prior service, and also provided such
deferred compensation is not contingent in any way on continued service);
(iv) the director was employed by or affiliated with the Company's present
or former internal or external auditor; (v) an immediate family member of
the director was employed by a present or former internal or external
auditor of the Company in a professional capacity (such as a partner,
principal or manager); (vi) a Company executive officer was on the
compensation committee of the board of directors of a company which
employed the Company director, or which employed an immediate family member
of the Company director as an executive officer; or (vii) the director was
an executive officer or an employee, or an immediate family member of the
director was an executive officer, of a company that makes payments to, or
receives payments from, the Company for property or services in an amount
which, in any single fiscal year, exceeds the greater of $1,000,000 or two
percent (2%) of such other company's consolidated gross revenues.
B. The following commercial or charitable relationships will not be
considered to be material relationships that would impair a director's
independence: (i) an immediate family member of the director is or was
employed by the Company other than as an executive officer; (ii) if the
director or an immediate family member of the director received from the
Company $100,000 or less per year in direct compensation
B-1
(other than director and committee fees and pension or other forms of
deferred compensation for prior service, and also provided such deferred
compensation is not contingent in any way on continued service); (iii) if
an immediate family member of the director is or was employed by a present
or former internal or external auditor of the Company in other than a
professional capacity (such as other than a partner, principal or manager);
(iv) if a Company director is or was an executive officer or employee,
partner or shareholder, or an immediate family member of the director is or
was an executive officer, partner or shareholder of another company that
does business with the Company and the annual sales to, or purchases from,
the Company for property and/or services are less than the greater of
$1,000,000 or two percent (2%) of the annual revenues of such other
company; (v) if a Company director is or was an executive officer,
employee, partner or shareholder of another company which is indebted to
the Company, or to which the Company is indebted, and the total amount of
either company's indebtedness to the other is less than two percent (2%) of
the total consolidated assets of the company for which he or she serves as
an executive officer, employee, partner or shareholder; and (vi) if a
Company director serves or served as an officer, director or trustee of a
charitable organization, and the Company's discretionary charitable
contributions to the organization are less than the greater of $1,000,000
or two percent (2%) of that organization's total annual charitable
receipts. The Board will annually review all commercial and charitable
relationships of directors.
C. In assessing the materiality of a director's relationship not covered
by paragraph B set forth above, the directors at the time sitting on the
Board who are independent under the standards set forth in paragraphs A and
B above shall determine whether the relationship is material and,
therefore, whether the director would be independent. In such instance, the
Company will explain in the next proxy statement the basis for any Board
determination that a relationship was immaterial despite the fact it did
not meet the categorical standards of immateriality in paragraph B above.
D. In accordance with the NYSE's Transition Rules, the three (3) year
look back period referenced in paragraph A above shall be a one (1) year
look back period until November 4, 2004.
A "Non-Management Director" is a director who is not a Company officer (as that
term is defined in Rule 16a-1(f) under the Securities Act of 1933), and includes
such directors who are not independent by virtue of a material relationship,
former status or family membership, or for any other reason. The group of
Non-Management Directors includes both Independent Directors and those
Non-Management Directors who do not qualify as Independent Directors.
A "Management Director" is an officer (as that term is defined in Rule 16a-1(f)
under the Securities Act of 1933) of the Company who serves on the Board.
B-2
Appendix C
AMENDMENT NUMBER FIVE
TO THE
CONSTELLATION BRANDS, INC.
LONG-TERM STOCK INCENTIVE PLAN
This Amendment Number Five to the Constellation 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. (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
to forty 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 forty million shares.
In witness whereof, Constellation Brands, Inc. has caused this instrument
to be executed as of , 2004.
---------------
CONSTELLATION BRANDS, INC.
--------------------------
Name:
- - ---------------------
Title:
--------------------
C-1
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 20, 2004, 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 A Stockholders and Class B Stockholders, voting
as a single 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 AND 3.
---
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
Address Change/Comments (Mark the corresponding box on the reverse side)
BALLOT Please
Mark Here [ ]
for Address
Change
SEE REVERSE SIDE
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 are entitled to vote for the following:
01 George Bresler, 02 Jeananne K.
Hauswald, 03 James A. Locke III,
04 Richard Sands, 05 Robert Sands,
06 Thomas C. McDermott,
07 Paul L. Smith
FOR ALL [ ] WITHHELD [ ]
NOMINEES FROM ALL
(except as NOMINEES
noted below)
- ----------------------------------
Vote withheld from nominee(s)
identified on above line.
CLASS B STOCKHOLDERS are entitled
to vote for the following:
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 ratify the selection of KPMG LLP, Certified Public Accountants,
as the Company's independent public accountants for the fiscal year ending
February 28, 2005.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to amend Amendment Number Five to the Company's Long-Term Stock
Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. 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.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT WITH THIS PROXY OF A COPY OF THE NOTICE OF
ANNUAL MEETING AND PROXY STATEMENT FOR THE COMPANY'S 2004 ANNUAL MEETING
THAT DESCRIBE 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.
CDI VOTING INSTRUCTION FORM
[LOGO] CONSTELLATION
ALL CORRESPONDENCE TO:
Computershare Investor Services Pty Limited
CONSTELLATION BRANDS, INC. GPO Box 1903 Adelaide
ARBN 103 442 646 South Australia 5001 Australia
Enquiries (within Australia) 1800 030 606
(outside Australia) 61 3 9415 4000
Facsimile 61 8 8236 2305
www.computershare.com
Mark this box with an 'X' if you have made any
changes to your address details (see reverse) [ ]
ANNUAL GENERAL MEETING - 20 JULY 2004
YOUR VOTING INSTRUCTIONS ARE BEING SOUGHT SO THAT CHESS DEPOSITARY NOMINEES PTY
LTD MAY RESPOND TO A PROXY SOLICITATION ON BEHALF OF THE BOARD OF DIRECTORS OF
CONSTELLATION BRANDS, INC.
VOTING INSTRUCTIONS TO CHESS DEPOSITARY NOMINEES PTY LTD
I/We being a holder of CHESS Depositary Interests of the above Company hereby
direct,
[ ] CHESS Depositary
Nominees Pty Ltd (CDN) OR [ ] Write here the name of the
(mark with an 'X') ----------------- person you are appointing
if this person is someone
other than CDN.
to vote the shares underlying my/our holding at the Annual General Meeting in
respect of the resolutions outlined below. If you do not complete one of the
above boxes, CDN will vote the shares represented by those CDI's as directed
below.
CHESS DEPOSITARY NOMINEES PTY LTD WILL VOTE AS DIRECTED. PLEASE MARK WITH AN [X]
TO INDICATE YOUR DIRECTIONS.
1. Election of Directors as set forth in the Proxy Statement.
For Withheld
1.1 Election of George Bresler [ ] [ ]
1.2 Election of Jeananne K. Hauswald [ ] [ ]
1.3 Election of James A. Locke III [ ] [ ]
1.4 Election of Richard Sands [ ] [ ]
1.5 Election of Robert Sands [ ] [ ]
1.6 Election of Thomas C. McDermott [ ] [ ]
1.7 Election of Paul L. Smith [ ] [ ]
For Against Abstain*
2 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, 2005. [ ] [ ] [ ]
3. Proposal to approve Amendment Number Five
to the Company's Long-Term Stock Incentive
Plan. [ ] [ ] [ ]
* If you mark the Abstain box for this item, you are directing your proxy to
abstain from voting on your behalf, therefore your votes will not be counted
in computing the required majority.
By execution of this CDI Voting Instruction Form the undersigned hereby
authorises CHESS Depositary Nominees Pty Ltd to appoint such proxies or their
substitutes to vote as directed above and in their discretion on such other
business as may properly come before the meeting.
PLEASE SIGN HERE THIS SECTION MUST BE SIGNED IN ACCORDANCE WITH THE
INSTRUCTIONS OVERLEAF TO ENABLE YOUR DIRECTIONS TO BE
IMPLEMENTED.
Individual or Securityholder 1
- ----------------------------------------
- ----------------------------------------
Sole Director and Sole Company Secretary
Securityholder 2
- ----------------------------------------
- ----------------------------------------
Director
Securityholder 3
- ----------------------------------------
- ----------------------------------------
Director/Company Secretary
/ /
------------------- ------------------------- -------------
Contact Name Contact Daytime Telephone Date
C B R CBRPR
- --------------------------------------------------------------------------------
INSTRUCTION FOR COMPLETION OF CDI VOTING INSTRUCTION FORM
YOUR VOTE IS IMPORTANT
Each Constellation Brands, Inc. CHESS Depositary Interest (CDI) is equivalent to
one tenth of one share of Class A Common Stock of Constellation Brands, Inc., so
that every 10 CDI's that you own at 24 May 2004 (record date) entitles you to
direct one vote. Class A Stockholders, voting as a separate class, are entitled
to elect two directors at the annual general meeting of Constellation Brands,
Inc. Class A Stockholders and Class B Stockholders, voting as a single class,
are entitled to elect five directors at that meeting. Please refer to the Proxy
Statement for details.
You can vote by completing, signing and returning your CDI Voting Instruction
Form. The CDI Voting Instruction Form gives you two options:
(a) You can give your voting instructions to CHESS Depositary Nominees Pty Ltd
(CDN), which will vote the underlying shares on your behalf; or
(b) You can instruct CDN to appoint you or your nominee as proxy to vote the
the shares underlying your CDIs in person at the annual general meeting of
Constellation Brands, Inc.
In either case, you need to return your completed CDI Voting Instruction Form so
that it is received at the address shown on the Form by not later than 5pm
Australian time on 14 July 2004. That will give CHESS Depositary Nominees Pty
Ltd enough time to tabulate all CHESS Depositary Interest votes, to vote the
underlying shares and to appoint the proxies.
DIRECTING CDN TO VOTE
- ---------------------
If you wish to direct CDN to vote the shares underlying your CDIs, you may do so
by placing a cross in the box next to CDN's name at the top of the form and then
placing a mark in one of the boxes opposite each item of business. All your CDIs
will be voted in accordance with such a direction. If you mark more than one box
on an item your vote on that item will be invalid.
If you sign and return the CDI Voting Instruction Form and cross the box to
direct CDN how to vote but do not indicate next to the items of business on the
form how your votes are to be directed, the shares represented by those CDIs
will not be voted by CDN.
If you sign and return the CDI Voting Instruction Form but you do not cross the
box to direct CDN how to vote and you do not nominate a proxy but you do
indicate next to the items of business on the form how your votes are to be
directed, the shares represented by those CDIs will be voted by CDN.
DIRECTING CDN TO APPOINT A PROXY
- --------------------------------
If you wish to direct CDN to appoint a proxy to vote the shares underlying your
CDIs in person at the annual general meeting of Constellation Brands, Inc., you
need to fill in the name of the person who is to be appointed as proxy in the
box at the top of the form. You may direct CDN to appoint you as the proxy or
your nominee.
If you direct CDN to appoint a proxy to vote the shares underlying your CDIs in
person at the annual general meeting of Constellation Brands, Inc., the proxy
appointed may vote as the proxy wishes.
If CDN does not receive a CDI Voting Instruction Form from a holder of
Constellation CDIs the shares represented by those Constellation CDIs will not
be voted.
If you have completed and returned your CDI Voting Instruction Form, you may
revoke the directions contained therein by a written notice of revocation to
Computershare Investor Services Pty Limited no later than 14 July 2004 bearing a
later date than the CDI Voting Instruction Form.
SIGNATURE(S) OF CHESS DEPOSITARY INTEREST HOLDERS
Each holder must sign this form. If your CDIs are held in joint names, all
holders must sign in the boxes. If you are signing as an Attorney, then the
Power of Attorney must have been noted by the Company's Australian Registry or a
certified copy of it must accompany this form.
Only duly authorised officer/s can sign on behalf of a company. Please sign in
the boxes provided, which state the office held by the signatory, ie. Sole
Director and Sole Company Secretary, or Director, or Director and Company
Secretary.
If you require further information on how to complete the CDI Voting Instruction
Form, telephone the Registry on 1800 030 606.
LODGEMENT OF NOTICE
CDI Voting Instruction Forms must be returned to Computershare Investor Services
Pty Limited, Level 5, 115 Grenfell Street, Adelaide, SA 5000 or GPO Box 1326
Adelaide SA 5001 Australia.
FOR ASSISTANCE PLEASE CONTACT COMPUTERSHARE INVESTOR SERVICES PTY LIMITED
ON 1800 030 606
ATTACHMENT 1
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 or, 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