PRE 14A: Preliminary proxy statement not related to a contested matter or merger/acquisition
Published on June 3, 2005
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:
[X] Preliminary Proxy Statement
[ ]
Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ]
Definitive Proxy Statement
[ ]
Definitive Additional Materials
[ ]
Soliciting Material Pursuant to Section 240.14a-12
CONSTELLATION
BRANDS, INC.
(Name of
Registrant as Specified in its
Charter)
_______________________________________________
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
(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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_______________________________________________
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| (2) | Aggregate number of securities to which transaction applies: |
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_______________________________________________
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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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_______________________________________________
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(4)
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Proposed maximum aggregate value of transaction:
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_______________________________________________
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| (5) | Total fee paid: |
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_______________________________________________
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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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Preliminary
Copy
[LOGO]
CONSTELLATION
ANNUAL
MEETING OF STOCKHOLDERS |
June
___, 2005
To
Our Stockholders:
You
are cordially invited to attend the Annual Meeting of Stockholders of
Constellation Brands, Inc. at the Rochester
Riverside Convention Center,
123 Main Street, Rochester, New York, on Thursday, July 28, 2005 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 2005 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,
RICHARD SANDS
Chairman of the Board
and Chief Executive
Officer
Please
note that the Riverside Convention Center is located at the corner of Main
Street and South Avenue in downtown Rochester, New York. Parking is available at
the South Avenue garage, to which entrances are on South Avenue, Stone Street
and Court Street. Additional parking is also available at other public garages
in the area.
[This
Page Intentionally Left Blank]
Preliminary
Copy
CONSTELLATION
BRANDS, INC.
_________________________________________________________
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD JULY 28, 2005
_________________________________________________________
NOTICE
IS HEREBY GIVEN that the Annual Meeting of Stockholders of CONSTELLATION BRANDS,
INC. (the “Company”) will be held at the Rochester Riverside Convention Center,
123 Main Street, Rochester, New York, on Thursday, July 28, 2005 at 11:00 a.m.
(local time) for the following purposes more fully described in the accompanying
Proxy Statement:
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1.
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To
elect directors of the Company (Proposal No. 1).
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2.
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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, 2006 (Proposal No.
2).
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3.
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To
consider and act upon a proposal to amend the Company’s Restated
Certificate of Incorporation to increase the number of authorized shares
of the Company’s Class A Common Stock from 275,000,000 shares to
300,000,000 shares (Proposal No. 3).
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4.
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To
transact such other business as may properly come before the Meeting or
any adjournment thereof.
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The
Board of Directors has fixed the close of business on May 31, 2005 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
DAVID S. SORCE, Secretary
Fairport,
New York
June
___, 2004
[This
Page Intentionally Left Blank]
Preliminary Copy
CONSTELLATION BRANDS, INC.
370
Woodcliff Drive, Suite 300
Fairport,
New York 14450
___________________________
PROXY STATEMENT
___________________________
2005
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 2005 Annual Meeting of Stockholders of the Company and at any adjournment
thereof (the “Meeting”). The Meeting will be held on Thursday, July 28, 2005 at
11:00 a.m. (local time) at the Rochester Riverside Convention Center, 123 Main
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, 2006 (Proposal No. 2)
and FOR
the approval of the proposal to amend the Company’s Restated Certificate of
Incorporation, which would include a vote FOR
the approval to increase the number of authorized shares of the Company’s Class
A Common Stock from 275,000,000 shares to 300,000,000 shares (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 13, 2002 and May 13, 2005 to stockholders of
record on April 30, 2002, and April 29, 2005,
respectively.
This
Proxy Statement and the accompanying proxy card are being first mailed to
stockholders on or about June ___, 2005.
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, facsimile, Internet or electronic mail. 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 31, 2005 (the
“Record Date”), consisted of 195,947,790 shares of Class A Stock and 23,951,260
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 195,947,790 shares of Class A Stock outstanding on the Record Date,
2,477,534 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 24,775,340 Constellation CDIs outstanding
that were held by 886 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
underlying shares of Class A Stock represented by their Constellation CDIs. CDN,
as the holder of record of the underlying shares of Class A Stock represented by
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 underlying 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 stockholders’ meeting only if
such holder directs CDN to designate such holder as proxy to vote the underlying
shares of Class A Stock represented by the Constellation CDIs held by such
holder. A form to be used to direct CDN how to vote underlying 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 31, 2005, 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. 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 but may
only vote at the Meeting as proxy for CDN in the circumstances described above.
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 195,947,790 votes and holders of Class B
Stock are entitled to cast a total of 239,512,600 votes at the
Meeting.
The
holders of a majority of the outstanding aggregate voting power of Class A Stock
(including the underlying shares represented by 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 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
underlying shares represented by 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 underlying shares represented by 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, 2006 (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 underlying
shares represented by 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
adoption of the proposal to amend the Company’s Restated Certificate of
Incorporation (Proposal No. 3) requires the affirmative vote of the holders of a
majority of all outstanding shares of Class A Stock (including the underlying
shares represented by Constellation CDIs) and Class B Stock entitled to vote
thereon, voting together as a single class, with the holders of the Class A
Stock having one (1) vote per share and the holders of the Class B Stock having
ten (10) votes per share. Abstentions and broker non-votes, if applicable, will
therefore have the effect of negative votes.
BENEFICIAL
OWNERSHIP
As
of May 31, 2005, 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 195,947,790 shares of Class A Stock
and 23,951,260 shares of Class B Stock outstanding as of the close of business
on May 31, 2005.
Class
A Stock
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Name
and Address of Beneficial Owner
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Amount
and Nature
of
Beneficial Ownership (1)
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Percent
of
Class
(1)
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||
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Sole
Power to
Vote
or Dispose
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Shared
Power to
Vote
or Dispose
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Total
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||
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Richard
Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
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2,506,656
(2)
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601,424
(2)
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3,108,080
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1.6%
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Robert
Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
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2,420,912
(4)
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601,424
(4)
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3,022,336
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1.5%
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CWC
Partnership-I
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
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-
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472,376
(5)
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472,376
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0.2%
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Trust
for the benefit of Andrew Stern, M.D. under the will of Laurie
Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
|
-
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472,376
(6)
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472,376
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0.2%
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Stockholders
Group Pursuant to
Section
13(d)(3) of the
Securities
Exchange Act of 1934,
as
amended (7)
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-
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5,528,992
(7)
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5,528,992
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2.8%
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FMR
Corp.
82 Devonshire Street
Boston, MA 02109 (8)
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(8)
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(8)
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15,610,122 (8)
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7.9%
|
|
Wellington
Management
Company,
LLP
75 State Street
Boston, MA 02109 (9)
|
-
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(9)
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11,081,768 (9)
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5.7%
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Class
B Stock
|
Name
and Address of Beneficial Owner
|
Amount
and Nature
of
Beneficial Ownership (1)
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Percent
of
Class
(1)
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||
|
Sole
Power to
Vote
or Dispose
|
Shared
Power to
Vote
or Dispose
|
Total
|
||
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Richard
Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
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5,908,232
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10,860,144
(2)
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16,768,376
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70.0%
|
|
Robert
Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
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5,902,592
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10,860,144
(4)
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16,762,736
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70.0%
|
|
Trust
for the benefit of Andrew Stern, M.D. under the will of Laurie
Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
|
-
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6,662,712 (6)
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6,662,712
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27.8%
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CWC
Partnership-I
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
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-
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6,099,080 (5)
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6,099,080
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25.5%
|
|
Trust
for the benefit of the Grandchildren of Marvin and Marilyn Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
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-
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4,050,000 (10)
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4,050,000
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16.9%
|
|
Stockholders
Group Pursuant to
Section
13(d)(3) of the Securities
Exchange
Act of 1934, as amended (7)
|
-
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22,670,968 (7)
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22,670,968
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94.7%
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______________________________
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(1)
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The
number of shares and the percentage of ownership set forth in the Class A
Stock table includes the number of shares of Class A Stock that can be
purchased by exercising stock options that are exercisable on May 31, 2005
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 31, 2005 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 31,
2005, none of the beneficial owners of the Company’s Class A Stock, other
than FMR Corp., have reported any interest in the Company’s 5.75%
Mandatory Convertible Preferred Stock. The information pertaining to FMR
Corp. is set forth in more detail in footnote (8)
below.
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(2)
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The amount reflected as shares of Class A Stock over which
Richard Sands has the sole power to vote or dispose includes 2,059,800
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,
471,608 shares of Class A Stock and 5,431,712 shares of Class B Stock
owned by CWC Partnership-I, a New York general partnership (“CWCP-I”), of
which Richard Sands is a managing partner, 147,432 shares of Class B Stock
owned by the Marvin Sands Master Trust (the “Master Trust”), of which
Richard Sands is a trustee and beneficiary, 768 shares of Class A Stock
and 667,368 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, 563,632 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, 4,050,000 shares of Class B
Stock owned by the trust described in footnote (10) below, and 129,048
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 29,120 shares of
Class A Stock owned by Mr. Sands’ wife, individually and as custodian for
their children, the remainder interest Mr. Sands has in 1,433,336 of the
4,300,008 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 1,447,812 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 19,876,456 shares of Class A Stock,
representing 9.3% of the outstanding Class A Stock after such
conversion.
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(3)
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Marilyn Sands is the beneficial owner of a life estate in
4,300,008 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.
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(4)
|
The amount reflected as shares of Class A Stock over which
Robert Sands has the sole power to vote or dispose includes 1,838,600
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,
471,608 shares of Class A Stock and 5,431,712 shares of Class B Stock
owned by CWCP-I, of which Robert Sands is a managing partner, 147,432
shares of Class B Stock owned by the Master Trust, of which Robert Sands
is a trustee and beneficiary, 768 shares of Class A Stock and 667,368
shares of Class B Stock owned by MLR&R, of which Mr. Sands and the
Master Trust are general partners, 563,632 shares of Class B Stock owned
by CWCP-II, of which Mr. Sands is a trustee of the managing partner,
4,050,000 shares of Class B Stock owned by the trust described in footnote
(10) below, and 129,048 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 183,520 shares of Class A Stock owned by Mr. Sands’ wife,
individually and as custodian for their children, the remainder interest
Mr. Sands has in 1,418,860 of the 4,300,008 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 1,447,812 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 19,785,072 shares of
Class A Stock, representing 9.2% of the outstanding Class A Stock after
such conversion.
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(5)
|
The amounts reflected include, as applicable, 768 shares of
Class A Stock and 667,368 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 6,571,456 shares of Class A Stock, representing 3.3% of the
outstanding Class A Stock after such
conversion.
|
|
(6)
|
The amounts reflected include, as applicable, 471,608 shares
of Class A Stock and 5,431,712 shares of Class B Stock owned by CWCP-I, in
which the Trust for the benefit of Andrew Stern, M.D. under the will of
Laurie Sands (the “Marital Trust”) is a partner and owns a majority in
interest of the CWCP-I partnership interests, 563,632 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 768 shares
of Class A Stock and 667,368 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 1,447,812
of the 4,300,008 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 7,135,088
shares of Class A Stock, representing 3.5% 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 28,199,960 shares of Class A
Stock, representing 12.7% of the outstanding Class A Stock after such
conversion. Of the shares of Class A Stock and Class B Stock held by the
Group, [________] shares of Class A Stock and [__________] 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. 3) dated February 14, 2005, filed with the Securities and
Exchange Commission, and is also adjusted to reflect the effect of the
Company’s two-for-one stock split that was distributed in the form of a
stock dividend on May 13, 2005 (“2005 Stock Split”). The percentage of
ownership reflected in the table is calculated on the basis of 195,947,790
shares of Class A Stock outstanding on May 31, 2005 and includes the
additional shares of Class A Stock resulting from the assumed conversion
of the Company’s Depositary Shares held by FMR (as described below). The
Schedule 13G (Amendment No. 3), as adjusted for the 2005 Stock Split,
indicates that of the 15,610,122 shares beneficially owned by FMR, through
its control of Fidelity Management & Research Company, FMR has sole
dispositive power with respect to 14,847,282 shares (which includes
582,382 shares of Class A Stock resulting from the assumed conversion of
Company Depositary Shares, each representing 1/40 of a share of the
Company’s 5.75% Series A Mandatory Convertible Preferred Stock, that are
beneficially owned by FMR), through its control of Fidelity Management
Trust Company, FMR has sole dispositive and voting power with respect to
549,240 shares, and through other relationships, FMR has sole dispositive
and voting power with respect to 213,600 shares. For further information
pertaining to FMR, reference should be made to FMR’s Schedule 13G
(Amendment No. 3) 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. 3) and has not
independently verified FMR’s beneficial ownership as of May 31, 2005.
|
|
(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. 3) dated February 14, 2005,
filed with the Securities and Exchange Commission, and is also adjusted to
reflect the effect of the 2005 Stock Split. The percentage of ownership
reflected in the table is calculated on the basis of 195,947,790 shares of
Class A Stock outstanding on May 31, 2005. The Schedule 13G (Amendment No.
3), as adjusted for the 2005 Stock Split, indicates that of the 11,081,768
shares beneficially owned by WMC in its capacity as an investment advisor,
WMC has shared voting power with respect to 8,923,404 shares and has
shared dispositive power with respect to 11,081,768 shares. For further
information pertaining to WMC, reference should be made to WMC’s Schedule
13G (Amendment No. 3) filed with the Securities and Exchange Commission.
With respect to the 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. 3) and has
not independently verified WMC’s beneficial ownership as of May 31, 2005.
|
|
(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 4,050,000 shares of Class A Stock,
representing 2.0% of the outstanding Class A Stock after such
conversion.
|
EXECUTIVE
COMPENSATION
Summary
Compensation
The
following table summarizes the annual and long-term compensation paid to the
Company’s Chief Executive Officer and the other four most highly compensated
executive officers (as determined at the end of the fiscal year ended February
28, 2005 (collectively, the “Named Executives”)) for the fiscal years ended
February 28, 2005, February 29, 2004 and February 28, 2003.
Summary
Compensation Table
|
Annual
Compensation
|
Long-Term
Compensation
Awards
(2)
|
|||||
|
Name
and Principal Position
|
Year
|
Salary
|
Bonus
|
Other
Annual Compen-
sation
(1)
|
Securities
Underlying
Options
(3)
|
All
Other
Compen-
sation
(4)
|
|
Richard
Sands,
Chairman
of the Board and
Chief Executive Officer
|
2005
2004
2003
|
$
950,000
875,500
850,000
|
$1,154,250
868,715
1,108,613
|
$
121,524 (5)
88,729
(5)
104,002
(5)
|
282,800
212,200
-
|
$
77,620
64,514
70,313
|
|
Robert
Sands,
President
and Chief
Operating
Officer
|
2005
2004
2003
|
$
750,000
618,000
600,000
|
$
911,250
613,211
782,550
|
$
113,850 (6)
-
54,493
(6)
|
231,800
167,600
-
|
$
62,431
46,497
49,735
|
|
Stephen
B. Millar,
Chief
Executive Officer,
Constellation Wines
(7)
|
2005
2004
2003
|
$
652,834
553,703
-
|
$
590,684
263,452
-
|
$
54,934 (8)
98,796
(8)
-
|
141,400
431,212
-
|
$
128,893
139,023
-
|
|
Alexander
L. Berk,
Chief
Executive Officer,
Constellation Beers and Spirits
(9)
|
2005
2004
2003
|
$
562,277
545,900
530,000
|
$
630,200
610,731
567,784
|
-
-
-
|
84,600
81,000
-
|
$
52,267
50,352
51,874
|
|
Thomas
S. Summer,
Executive
Vice President and
Chief Financial Officer
|
2005
2004
2003
|
$
424,360
412,000
400,000
|
$
412,478
327,046
382,580
|
-
-
-
|
103,800
123,000
-
|
$
37,778
32,997
34,899
|
_________________________
|
(1)
|
None of the Named Executives, other than as indicated,
received any individual perquisites or other personal benefits exceeding
the lesser of $50,000 or 10% of the total salary and bonus reported for
such executive officer during the periods covered by the Summary
Compensation Table.
|
|
(2)
|
None of the Named Executives received any restricted stock
awards or any pay-outs under long-term incentive plans during the periods
covered by the Summary Compensation Table.
|
|
(3)
|
The securities consist of shares of Class A Stock underlying
stock options.
|
|
(4)
|
Amounts reported for 2005 consist
of:
|
|
•
|
Company 401(k) contributions under the Company’s 401(k) and
Profit Sharing Plan: Richard Sands $6,494; Robert Sands $6,277; Alexander
Berk $6,150; and Thomas Summer
$6,002.
|
|
•
|
Company profit sharing contributions under the Company’s
401(k) and Profit Sharing Plan: Richard Sands $15,355; Robert Sands
$15,355; Alexander Berk $16,810; and Thomas Summer
$15,355.
|
|
•
|
Company contributions under the Company’s 2005 Supplemental
Executive Retirement Plan: Richard Sands $55,771; Robert Sands $40,799;
Alexander Berk $29,307; and Thomas Summer $16,421.
|
| • | Company contributions to the Superannuation Plan for Stephen Millar: $128,893. |
|
(5)
|
The amounts shown include $114,324 in 2005, $83,959 in 2004
and $94,080 in 2003 for use of the corporate
aircraft.
|
|
(6)
|
The amounts shown include $105,564 in 2005 and $54,267 in
2003 for use of the corporate aircraft. No amount is shown for use of the
corporate aircraft in 2004.
|
|
(7)
|
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 for 2004 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. Specifically, amounts
were converted to US dollars from Australian dollars at the weighted
average exchange rate of 0.7385 for 2005 and the weighted average exchange
rate of 0.7057 for 2004.
|
|
(8)
|
The amounts shown include use of a motor vehicle in the
amount of $42,301 in 2005 and $29,826 in 2004 and air transportation
services in the amount of $55,184 in
2004.
|
|
(9)
|
Mr. Berk is employed by Barton Incorporated, a wholly-owned
subsidiary of the Company. Mr. Berk is also President and Chief Executive
Officer of Barton Incorporated.
|
Stock
Options
The
following table contains information concerning stock option grants to the Named
Executives during the fiscal year ended February 28, 2005. No stock appreciation
rights ("SARs") were granted to any of the Named Executives in that year. The
columns labeled "Potential Realizable Value" are based on hypothetical 5% and
10% growth assumptions, as required by the Securities and Exchange Commission.
The Company cannot predict the actual growth rate of its Common
Stock.
Option
Grants In Last Fiscal Year
|
Individual
Grants
|
Potential
Realizable
Value
at Assumed
Annual
Rates
of
Stock Price
Appreciation
for
Option
Term
|
|||||
|
Name
|
Number
of
Securities
Underlying
Options
Granted
(1)
|
%
of Total
Options
Granted to
Employees
in
Fiscal
Year
|
Exercise
or Base Price ($/Sh) (2)
|
Expiration
Date
|
||
|
5%
|
10%
|
|||||
|
Richard
Sands
|
242,800
(3)
|
3.6
%
|
$
16.63
|
04/06/14
|
$
2,539,328
|
$
6,435,156
|
|
40,000
(4)
|
0.6
%
|
$
23.02
|
12/23/14
|
$
579,086
|
$
1,467,518
|
|
|
Robert
Sands
|
191,800
(3)
|
2.8
%
|
$
16.63
|
04/06/14
|
$
2,005,944
|
$
5,083,455
|
|
40,000
(4)
|
0.6
%
|
$
23.02
|
12/23/14
|
$
579,086
|
$
1,467,518
|
|
|
Stephen
B. Millar
|
101,400
(3)
|
1.5
%
|
$
16.63
|
04/06/14
|
$
1,060,494
|
$
2,687,499
|
|
40,000
(4)
|
0.6
%
|
$
23.02
|
12/23/14
|
$
579,086
|
$
1,467,518
|
|
|
Alexander
L. Berk
|
84,600
(3)
|
1.2
%
|
$
16.63
|
04/06/14
|
$
884,791
|
$
2,242,233
|
|
Thomas
S. Summer
|
63,800
(3)
|
0.9
%
|
$
16.63
|
04/06/14
|
$
667,253
|
$
1,690,951
|
|
40,000
(4)
|
0.6
%
|
$
23.02
|
12/23/14
|
$
579,086
|
$
1,467,518
|
|
_______________________________
|
(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 is 100% vested and fully exercisable.
|
|
(4)
|
This option vests and becomes fully exercisable on December
23, 2008, unless it becomes exercisable on an earlier date as follows: (i)
25% of this option has become exercisable; (ii) an additional 25% of this
option will become exercisable after the fair market value of a share of
Class A Stock has been at least $30.45 for fifteen (15) consecutive
trading days; and (iii) 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 $35.01 for fifteen (15) consecutive trading days.
|
The
following table sets forth information regarding: (i) shares acquired and the
value realized upon the exercise of stock options by the Named Executives during
the fiscal year ended February 28, 2005; and (ii) the number and value of
exercisable and unexercisable stock options held by the Named Executives as of
February 28, 2005. There are no outstanding SARs.
Aggregated
Option Exercises In Last Fiscal Year
And
Fiscal Year-End Option Values
|
Name
|
Shares
Acquired on Exercise
|
Value
Realized
|
Number
of Securities
Underlying
Unexercised
Options
at
FY-End (1)
|
Value
of Unexercised
In-the-Money
Options
at
FY-End (2)
|
||
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|||
|
Richard
Sands
|
-
|
-
|
2,093,680
|
99,720
|
$
40,225,629
|
$
1,110,160
|
|
Robert
Sands
|
-
|
-
|
1,872,480
|
99,720
|
$
36,568,851
|
$
1,110,160
|
|
Stephen
B. Millar
|
50,000
|
$ 336,526
|
307,642
|
214,970
|
$
4,112,566
|
$
2,697,080
|
|
Alexander
L. Berk
|
402,560
|
$
5,628,668
|
564,800
|
14,080
|
$
9,659,205
|
$
281,811
|
|
Thomas
S. Summer
|
-
|
-
|
557,320
|
94,920
|
$
9,763,919
|
$
1,024,024
|
________________________
|
(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.
|
|
(2)
|
The indicated dollar values are calculated by determining
the difference between the closing price of the Class A Stock on the New
York Stock Exchange at the end of fiscal 2005 and the exercise price of
each indicated option.
|
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 28, 2005, Mr. Millar was credited with 14
years of service for purposes of the Hardy Plan. Based on service through
February 28, 2005, the Company estimates that the amount of the benefit to which
Mr. Millar would be entitled if he had then retired would be AUD$2,190,826. 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$3,599,995. 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 2005 fiscal year, these amounts would be,
respectively, $1,617,925 and $2,658,596.
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-management
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
incentive 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 2005 with respect to annual
management incentives was the Company’s operating income for fiscal 2005,
adjusted for certain items, as compared to that set forth in its fiscal 2005
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
data.
Annual
Management Incentives
In
addition to their base salary, the Company’s executives have the opportunity to
earn an annual cash bonus under the Company’s Annual Management Incentive Plan.
The annual bonus for executive officers, including the Chief Executive Officer,
for fiscal 2005 was based on three variables: the participant’s management
position, salary and achieved Company performance for the plan year. Performance
targets were based on operating income, using the first-in, first-out method of
accounting for inventory valuation before adjustments are made for reserves.
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, actual bonuses paid
executive officers exceeded the target awards. For fiscal 2005, annual cash
bonuses were awarded to each of the Named Executives in the amounts indicated in
the Summary Compensation Table.
Future
cash bonuses for the participating executives will be determined by the Human
Resources Committee pursuant to, or in a manner similar to that contemplated by,
the Company’s Annual Management Incentive Plan. Pursuant to that Plan, the
Committee would award cash bonuses to the participating executives in the event
that the Company attains one or more pre-set performance targets.
Stock
Options, SARs and Restricted Stock
In
connection with the executive compensation program, long-term incentive awards
in the form of, among others, stock options, stock appreciation rights and
restricted stock are available for grant under the Company’s Long-Term Stock
Incentive Plan and Incentive Stock Option Plan. Awards have been primarily in
the form of non-qualified stock options granted under the Company’s Long-Term
Stock Incentive Plan. These arrangements balance the annual operating objectives
of the annual cash incentive plan with the Company’s longer-term stockholder
value building strategies. The Human Resources Committee and the Board of
Directors grant these stock-based incentive awards from time to time for the
purpose of attracting and retaining key executives, motivating them to attain
the Company’s long-range financial objectives, and closely aligning their
financial interests with long-term stockholder interests and share value.
The
Company believes that through the use of stock options, executives’ interests
are directly tied to enhanced stockholder value. The Human Resources Committee
of the Board (as well as the full Board) has the flexibility of awarding
non-qualified stock options, restricted stock, stock appreciation rights and
other stock-based awards under the Company’s Long-Term Stock Incentive Plan and
incentive stock options under the Company’s Incentive Stock Option Plan. This
flexibility enables the Company to fine-tune its grants in order to maximize the
alignment of the interests of the stockholders and management.
During
fiscal 2005, 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. In recognition of personal efforts in a
significant acquisition by the Company, the Human Resources Committee awarded
additional nonqualified options to seven (7) executive officers, including the
Company’s Chief Executive Officer. 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 2005, the compensation of Richard Sands, the Company’s Chief
Executive Officer, was based on a variety of factors as noted above. In this
regard, the Human Resources Committee considered the Company’s performance, as
well as Mr. Sands’ individual performance. In addition, the compensation
packages of chief executive officers of certain comparable companies selected by
Mercer Human Resource Consulting, Inc. were considered. Also taken into account
was the Company’s current executive salary and compensation
structure.
Richard
Sands’ base salary is believed to be in line with salaries of executives of
similar companies and chief executive officers with similar responsibilities.
Pursuant to the Company’s Annual Management Incentive Plan, Mr. Sands’ annual
cash incentive attributable to fiscal 2005 was a percentage of his base salary
based upon the Company’s fiscal 2005 operating income (using the first-in,
first-out method of accounting for inventory valuation before adjustments are
made for reserves), as compared to that set forth in the Company’s fiscal 2005
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 28, 2005, Richard Sands received a bonus of
$1,154,250, which is equal to 121.5% of his salary. As noted elsewhere in this
Proxy Statement, during fiscal 2005, Mr. Sands also received stock options to
purchase up to 282,800 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 2005, 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 2001, 2002, 2003, 2004 and 2005, 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 29, 2000 in the Company’s Class A Stock, the Company’s Class B Stock,
the S&P MidCap 400 Index and the Selected Peer Group Index, and also assumes
the reinvestment of all dividends.
Comparison
of Five Year Cumulative Total Return
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
|
|
STZ
|
$100.00
|
$130.31
|
$221.84
|
$201.06
|
$258.78
|
$436.98
|
|
STZ.B
|
100.00
|
130.61
|
217.71
|
200.00
|
258.78
|
443.35
|
|
S
& P MidCap 400 Index
|
100.00
|
108.93
|
111.87
|
90.99
|
136.24
|
152.77
|
|
Peer
Group Index
|
100.00
|
122.31
|
125.15
|
106.45
|
145.53
|
141.55
|
____________________________
|
(1)
|
The
Selected Peer Group Index is weighted according to the respective
issuer's stock market capitalization and is comprised of the following
companies: Anheuser-Busch Companies, Inc.; The Boston Beer Company, Inc.;
Brown-Forman Corporation (Class A and Class B Shares); Cadbury Schweppes
plc; Coca-Cola Bottling Co. Consolidated; The Coca-Cola Company; Coca-Cola
Enterprises Inc.; Diageo plc; LVMH Moet Hennessy Louis Vuitton; Molson
Coors Brewing Company (Class B Shares); PepsiCo, Inc.; and PepsiAmericas,
Inc.
|
There
can be no assurance that the Company’s stock performance will continue into the
future with the same or similar trends depicted by the graph above. The Company
neither makes nor endorses any predictions as to future stock
performance.
The
Stock Price Performance Graph set forth above shall not be deemed incorporated
by reference in any filing under the federal securities laws by virtue of any
general incorporation of this Proxy Statement by reference and shall not
otherwise be treated as filed under the securities laws.
Certain
Relationships and Related Transactions
Alexander
Berk and Barton Incorporated (“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 and is now known as Hardy Wine Company
Limited (“Hardy”). 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 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 Hardy. The Service Contract
requires Mr. Millar to keep certain information with respect to Hardy
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.
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 2005, from the inception of the agreement through the end of
fiscal 2005, the Company has paid aggregate premiums, net of reimbursements, of
$2,382,327. The aggregate amount of such unreimbursed premiums constitutes
indebtedness from the trust to the Company and is secured by a collateral
assignment of the Policy. Upon the termination of the Agreement, whether by the
death of Marilyn Sands or earlier cancellation, the Company is entitled to be
repaid by the trust the amount of such indebtedness.
Richard
Sands, Robert Sands and 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 $33,627
(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 pays on Mr. Bresler’s behalf a
monthly premium for his medical insurance coverage. During calendar 2004, the
cost of this coverage was approximately $404 per month. During calendar 2005, it
will be approximately $445 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 2005 were complied with in a timely fashion.
STOCK
OWNERSHIP OF MANAGEMENT
The
Board has established targets for the minimum amounts of the Company’s common
stock that its non-management directors and its executive officers should
beneficially own. These targets for stock ownership consider the length of a
director’s tenure on the Board or an executive officer’s tenure as an executive
officer of the Company, and individuals have five years in which to reach their
targets. Ownership targets can be satisfied by the beneficial ownership of Class
A Stock or Class B Stock, vested stock options, and/or Class A Stock underlying
Constellation CDIs. The target for non-management directors is the beneficial
ownership of two times the annual retainer, while the target for executive
officers is based on each officer’s position in the organization and is a
multiple of annual base salary. The Chairman and Chief Executive Officer has a
stock ownership target of four (4) times his annual base salary. The President
and Chief Operating Officer has a stock ownership target of three (3) times his
annual base salary. Each of the other executive officers has a stock ownership
target of two (2) times his annual base salary. All non-management directors and
all executive officers of the Company have met their respective targets (based
on the closing price of Class A Stock as of February 28, 2005).
The
following table and notes thereto set forth, as of May 31, 2005, 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 31, 2005, 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 195,947,790 shares of Class A Stock and 23,951,260 shares of Class B
Stock outstanding as of the close of business on May 31, 2005.
Stock
Ownership of Management
|
Name
of Beneficial Owner
|
Class
A Stock (1)
|
Class
B Stock
|
|||
|
Shares
Beneficially Owned
|
|||||
|
Outstanding
Shares
(2)
|
Shares
Acquirable
within 60 days by Exercise of Options (3)
|
Percent
of Class Beneficially Owned
|
Shares
Beneficially
Owned
|
Percent
of Class Beneficially Owned
|
|
|
Richard
Sands
|
1,048,280 (4)
|
2,059,800 (4)
|
1.6%
(4)
|
16,768,376
(4)
|
70.0%
|
|
Robert
Sands
|
1,183,736 (4)
|
1,838,600 (4)
|
1.5%
(4)
|
16,762,736
(4)
|
70.0%
|
|
Alexander
L. Berk
|
46,286
|
578,880
|
*
|
-
|
*
|
|
Stephen
B. Millar
|
20,986 (5)
|
373,884
|
*
|
-
|
*
|
|
Thomas
S. Summer
|
38,922
(6)
|
399,440
|
*
|
-
|
*
|
|
George
Bresler
|
3,938
|
8,224
|
*
|
-
|
*
|
|
Jeananne
K. Hauswald
|
5,506
|
44,224
|
*
|
-
|
*
|
|
James
A. Locke III
|
18,330
|
56,224
|
* (7)
|
264
|
*
|
|
Thomas
C. McDermott
|
9,938
|
88,224
|
*
|
-
|
*
|
|
Paul
L. Smith
|
5,942
|
8,224
|
*
|
-
|
*
|
|
All
Executive Officers and Directors as a Group
(13
persons) (8)
|
1,809,264
|
6,425,336
|
4.1%
(8)
|
22,671,232
|
94.7%
|
______________________
* Percentage does not exceed one percent (1%) of the outstanding
shares of such class.
|
(1)
|
The shares and percentages of Class A Stock set forth in
this table do not include (i) shares of Class A Stock that may be acquired
within 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.
|
|
(3)
|
Reflects the number of shares of Class A Stock that can be
purchased by exercising stock options that are exercisable on May 31, 2005
or become exercisable within sixty (60) days thereafter. Such number does
not include the number of option shares that may become exercisable within
sixty (60) days of May 31, 2005 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 includes 19,550 shares of Class A Stock that
underlie the CHESS Depositary Interests held by Mr. Millar. Such amount
does not include 29,122 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 36,302
shares with his spouse. Such number does not include 1,600 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 264 shares of Class B
Stock into Class A Stock, Mr. Locke would beneficially own 74,818 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 22,671,232
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 30,905,832 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
15, 2005.
|
George
Bresler
|
Director
since 1992
|
|
Jeananne
K. Hauswald
|
Director
since 2000
|
Ms.
Hauswald, age 61, 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 63, has been engaged in the practice of business and corporate law,
including primarily, mergers and acquisitions, since 1971. He is, and has been
since 1996, a partner with the law firm of Nixon Peabody LLP. He is located in
the Rochester, New York office of the firm. Nixon Peabody LLP is the Company’s
principal outside counsel. Prior to joining Nixon Peabody LLP, Mr. Locke
practiced law in Rochester as a partner with another law
firm.
|
Thomas
C. McDermott
|
Director
since 1997
|
Mr.
McDermott, age 68, 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 54, 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 47, 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 69, 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.
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-management 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. Effective
September 1, 2004, the committee meeting fee was increased to $1,000 per meeting
for each committee meeting attended (including attendance by conference
telephone), the annual fee paid for the position of Chair of the Audit Committee
was increased to $10,000 and the annual fee paid for the position of Chair of
each of the Human Resources Committee and the Corporate Governance Committee was
increased to $5,000.
In
addition to the cash payments, the compensation program anticipates that each
non-management director will receive annually, if and as approved by the Board
of Directors, 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 2005, the Company
awarded a stock option to purchase up to 3,710 shares of Class A Stock to each
of the non-management directors, at an exercise price of $18.86 per share and
with an exercise period of March 29, 2005 through September 29, 2014. Consistent
with this compensation program, during fiscal 2005, each of the non-management
directors also was granted 1,066 restricted shares of the Company’s Class A
Stock. On the date of grant, the Company’s Class A Stock was valued at $18.86
per share. Subject to applicable provisions in the award document, the
restricted stock will vest on September 29, 2005.
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 Company
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. These were subsequently revised again on December 22,
2004. 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 the members of
the current Board of Directors are independent. The Board of Directors of the
Company held nine (9) meetings during the Company’s fiscal year ended February
28, 2005. 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, Jeananne
Hauswald presides at these meetings in her capacity as Lead Director.
Stockholders or other interested parties 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 communications
(other than unsolicited advertising materials).
Committees
of the Board include a standing Audit Committee, Corporate Governance Committee
and Human Resources Committee. During fiscal 2005, 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 2004 Annual
Meeting of Stockholders.
Audit
Committee. The
Audit Committee is a standing committee 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 and none of whom
simultaneously serve on the audit committees of more than two publicly
registered companies. 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 2005.
Corporate
Governance Committee. The
Corporate Governance Committee is a standing committee 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 in 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 guidelines 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.
In 2005, the Committee recommended to the Board a governance requirement, which
the Board adopted, that limits each of the Company’s directors to membership on
no more than four (4) public company boards, including the Board of
Constellation Brands, Inc. This Committee held three (3) meetings during fiscal
2005.
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 2006 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 ___, 2006. 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 a standing committee currently composed of Thomas C.
McDermott (Chair), Jeananne K. Hauswald and Paul L. Smith, each of whom is
independent in accordance with the definition in 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 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 2005.
Audit
Committee Report
The
following report shall not be deemed incorporated by reference in any filing
under the federal securities laws by virtue of any general incorporation of this
Proxy Statement by reference and shall not otherwise be treated as filed under
the securities laws.
The Audit
Committee of the Board of Directors provides oversight to the Company’s
financial reporting process through periodic meetings with the Company’s
independent public accountants, internal auditors and management. The management
of the Company is responsible for the preparation and integrity of the financial
reporting information and related systems of internal controls. The independent
public accountants are responsible for performing an independent audit of the
Company’s consolidated financial statements in accordance with generally
accepted auditing standards and for issuing a report thereon. They are also
responsible for issuing a report on the effectiveness of the Company’s internal
control over financial reporting and management’s assessment of the internal
control over financial reporting. The Committee, in carrying out its role,
relies on the Company’s senior management and its independent public
accountants.
In
connection with the preparation and filing of the Company’s Annual Report on
Form 10-K for the fiscal year ended February 28, 2005, the Audit Committee met,
reviewed and discussed with the Company’s management and with KPMG LLP, the
Company’s independent public accountants, the audited financial statements of
the Company and related disclosures, and the assessment of the adequacy and
effectiveness of the Company’s internal control over financial reporting. Also,
the Committee discussed with KPMG LLP, with respect to the fiscal year ended
February 28, 2005, 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 § 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 28, 2005 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 28, 2005 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
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 together 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, 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 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, 2005, the Audit Committee determined to engage KPMG LLP to serve as the
Company’s independent public accountants for the fiscal year ending February 28,
2006. 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 28, 2005 and February 29, 2004.
The
following fees were billed to the Company by KPMG LLP for services rendered
during the fiscal years ended February 28, 2005 and February 29,
2004:
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,
including fees associated with Section 404 of the Sarbanes-Oxley Act of 2002.
The aggregate audit fees billed by KPMG LLP for the year ended February 28, 2005
were $4,217,287, which amount included approximately $85,000 of out-of-pocket
expenses. For the year ended February 29, 2004 these audit fees were $1,228,498,
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, and the services comprising these fees were in
the nature of various employee benefit plan audits and reviews, as well as
review of an investment in a foreign subsidiary. The aggregate audit-related
fees billed by KPMG LLP for the year ended February 28, 2005 were $46,608 and
for the year ended February 29, 2004 were $126,213.
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
28, 2005 were $46,143 and for the year ended February 29, 2004 were an aggregate
of $2,316,175. The services comprising these fees were tax compliance, tax
advice and tax planning.
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 years
ended February 28, 2005 and 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.
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, 2006 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 TO THE
COMPANY’S
RESTATED CERTIFICATE OF INCORPORATION
General
The Board
of Directors has approved, subject to the approval of the stockholders of the
Company, an amendment to the Company’s Restated Certificate of Incorporation
(the “Proposed Amendment”). The Proposed Amendment would increase the number of
authorized shares of Class A Stock to 300,000,000 shares. As a result of this
increase, the aggregate number of authorized shares of the Company would be
increased to 331,000,000 shares. No other change to the Company’s Restated
Certificate of Incorporation (the “Certificate”) would result from the Proposed
Amendment.
The
Certificate currently authorizes the Company to issue an aggregate of
306,000,000 shares, consisting of 275,000,000 shares of Class A Stock,
30,000,000 shares of Class B Stock and 1,000,000 shares of Preferred Stock
having a par value of $.01 per share. The Proposed Amendment will increase the
number of authorized shares of Class A Stock by 25,000,000 shares. If approved
by the stockholders of the Company at the Annual Meeting, the Proposed Amendment
will become effective when it is filed with the Delaware Secretary of
State.
The Board
of Directors has recommended that the stockholders of the Company approve the
Proposed Amendment. A copy of the Certificate and of the Proposed Amendment are
available from the Company’s Secretary at 370 Woodcliff Drive, Suite 300,
Fairport, New York 14450.
Reasons
for Increasing the Number of Shares
The
primary purpose of the Proposed Amendment is to provide sufficient authorized
shares of Class A Stock to accommodate the issuance of shares under the
Company’s stock-based plans. The shares authorized by the Proposed Amendment
would also be available for use from time to time for corporate purposes that
the Board of Directors may consider desirable. The availability of an adequate
supply of authorized and unissued shares of Class A Stock, Class B Stock and
Preferred Stock benefits the Company by providing it with flexibility in
utilizing the shares for future stock dividends and other proper corporate
purposes, including acquisitions, equity financings, other stock distributions,
and grants of options and other stock rights, all as deemed necessary or
advisable by the Board of Directors. If the stockholders approve the Proposed
Amendment, the Company will have additional authorized but unissued shares of
Class A Stock that may be issued by the Board of Directors of the Company,
without the necessity of any further stockholder action, except to the extent
otherwise required by applicable law, regulations or the rules of any stock
exchange or other market system on which the Company’s securities may then be
listed.
The
Company has no present plans, understandings, agreements or arrangements for the
issuance of any shares of Class A Stock except for the issuance of Class A Stock
(i) pursuant to the Company’s stock-based plans and outstanding options/rights
under those plans (including compensation arrangements of directors, if and as
approved by the Board of Directors), (ii) upon the conversion of shares of Class
B Stock (shares of Class B Stock are convertible into shares of Class A Stock on
a one-to-one basis at any time at the option of the holder), (iii) upon the
conversion of Constellation CDIs (Constellation CDIs are convertible into shares
of Class A Stock on a ten-to-one basis at any time at the option of the holder),
and (iv) upon the conversion of our depositary shares, each representing 1/40 of
a share of our 5.75% Series A Mandatory Convertible Preferred Stock. (On
September 1, 2006, each depositary share will automatically convert, subject to
certain adjustments, into between 1.4638 and 1.7858 shares of Class A Stock; at
any time prior to September 1, 2006, holders may elect to convert each
depositary share, subject to certain adjustments, into 1.4638 shares of Class A
Stock. If the closing price per share of our Class A Stock exceeds $25.62 for at
least 20 trading days within a period of 30 consecutive trading days, the
Company may elect, subject to certain limitations, to cause the conversion of
all, but not less than all, of the depositary shares then outstanding into
shares of Class A Stock at a conversion rate of 1.4638 shares of Class A Stock
for each depositary share.)
Vote
Required
The
adoption of Proposal No. 3 to approve the Proposed Amendment requires the
affirmative vote of the holders of a majority of all outstanding shares of Class
A Stock and Class B Stock entitled to vote thereon. With respect to 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 Proposed
Amendment to increase the number of authorized shares of the Company’s
Class A Stock from 275,000,000 to 300,000,000 shares. Accordingly, the
Board of Directors 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.
STOCKHOLDER
PROPOSALS FOR THE 2006 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
2006 Annual Meeting of Stockholders, such proposal must be received by the
Company no later than February ___, 2006. Nominations for directors submitted by
stockholders must also be received no later than February ___, 2006.
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 2006
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 ___, 2006.
AVAILABLE
INFORMATION
The
Company has furnished its financial statements to stockholders by including in
this mailing the Company’s 2005 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 28, 2005,
as filed with the Securities and Exchange Commission (excluding the exhibits
thereto). Written requests for such copies should be directed to Investor
Relations Department, Constellation Brands, Inc., 370 Woodcliff Drive, Suite
300, Fairport, New York 14450; telephone number: (888) 922-2150.
The
Company’s Code of Business Conduct and Ethics, Global Code of Responsible
Practices for Beverage Alcohol Advertising and Marketing, Chief Executive
Officer and Senior Financial Executive Code of Ethics, Board of Directors
Corporate Governance Guidelines 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 Investor
Relations Department, Constellation Brands, Inc., 370 Woodcliff Drive, Suite
300, Fairport, New York 14450. Additonally, any amendments to, and waivers
granted to the Company’s directors and executive officers under the Company’s
codes of ethics will be posted in this area of the Company’s
website.
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
DAVID
S. SORCE, Secretary
Fairport,
New York
June
___, 2005
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:
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the
integrity of the Company’s financial
statements,
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the
Company’s compliance with legal and regulatory
requirements,
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the
qualifications and independence of the independent accountants,
and
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the
performance of the Company’s internal audit function and the Company’s
independent accountants;
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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:
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Have
the direct authority to approve the engagement letter and the fees to be
paid to the independent accountants;
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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
minimis
exceptions set forth in the Act and in SEC rules
thereunder);
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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;
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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;
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Meet
with the independent accountants prior to the annual audit to discuss
planning and staffing of the audit;
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Review
and evaluate the performance of the independent accountants, as the basis
for any decision to reappoint or replace the independent
accountants;
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Set
clear hiring policies for employees or former employees of the independent
accountants, as required by applicable laws and regulations;
and
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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.
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2. Meet to
review and discuss the annual audited financial statements and the Company’s
disclosures provided in periodic annual reports including review of the
Company’s specific disclosures under “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
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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;
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Review
significant changes in accounting or auditing
policies;
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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
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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.
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3. Meet to
review and discuss the quarterly financial statements and the Company’s
disclosures provided in periodic quarterly reports including review of the
Company’s specific disclosures under “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.
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.
A-3
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:
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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;
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Review,
in consultation with management and the senior internal auditing
executive, the plan and scope of internal audit activities;
and
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Review
significant reports to management prepared by the internal auditing
department and management’s responses to such
reports.
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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 Committee may also
meet by telephone conference call or by any other means permitted by law or the
Company’s By-laws.
A-4
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
Revised:
December 22, 2004
A-5
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:
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A.
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A
director will not be Independent if, (i) currently or within the last
three years the director was employed by the Company; (ii) an immediate
family member of the director is or has been within the last three years
an executive officer of the Company; (iii) the director or an immediate
family member of the director received, during any twelve-month period
within the last three years, more than $100,000 in direct compensation
from the Company (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 or an immediate family member of the director
is a current partner of a firm that is the Company's internal or external
auditor; (v) the director is a current employee of a firm that is the
Company’s internal or external auditor; (vi) the director has an immediate
family member who is a current employee of a firm that is the Company’s
internal or external auditor and such immediate family member participates
in that firm’s audit, assurance or tax compliance (but not tax planning)
practice; (vii) the director or an immediate family member of the director
was within the last three years (but is no longer) a partner or employee
of a firm that is the Company’s internal or external auditor and such
director or immediate family member personally worked on the Company’s
audit within that time; (viii) the director or an immediate family member
of the director is, or has been within the last three years, employed as
an executive officer of another company in which any of the Company’s
present executive officers at the same time serve or served on that other
company’s compensation committee; or (ix) the director is a current
employee, or an immediate family member of the director is a current
executive officer, of a company that has made payments to, or received
payments from, the Company for property or services in an amount which, in
any of the last three fiscal years, exceeded the greater of $1,000,000 or
two percent (2%) of such other company’s consolidated gross
revenues.
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B-1
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B.
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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 $100,000 or less in
direct compensation from the Company during any twelve-month period (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 employed by a present or
former internal or external auditor of the Company and such family member
does not participate in the firm’s audit, assurance or tax compliance (as
distinguished from tax planning) practice and did not personally work on
the Company’s audit within the last three years; (iv) if an immediate
family member of the director was (but is no longer) a partner or employee
of a present or former internal or external auditor of the Company and did
not personally work on the Company’s audit within the last three years;
(v) 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 or equal to
the greater of $1,000,000 or two percent (2%) of the annual revenues of
such other company; (vi) 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 or equal to 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 (vii) if a Company director serves or served as an officer, director
or trustee of a tax exempt organization, and the Company’s discretionary
contributions to the tax exempt organization are less than or equal to the
greater of $1,000,000 or two percent (2%) of that organization’s total
annual consolidated gross revenues. The Board will annually review all
commercial and charitable relationships of directors.
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|
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.
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|
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