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Paragraph
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Page
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1.
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PROGRAM
OBJECTIVES........................................................................................................................................................
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1
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2.
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PROGRAM
ADMINISTRATION.............................................................................................................................................
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1
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3.
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PROGRAM
PARTICIPATION.................................................................................................................................................
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1
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4.
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TERMINATION
OF
EMPLOYMENT......................................................................................................................................
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2
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5.
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AWARD
LEVELS.....................................................................................................................................................................
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2
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6.
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PERFORMANCE
TARGETS....................................................................................................................................................
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4
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7.
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AWARD
ADJUSTMENTS........................................................................................................................................................
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4
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8.
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EFFECT
OF MERGER, ACQUISITION, REORGANIZATION,
ETC.....................................................................................
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4
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9.
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PAYMENT
OF
AWARDS........................................................................................................................................................
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5
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10.
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ASSIGNMENT..........................................................................................................................................................................
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5
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11.
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EMPLOYMENT
RIGHT...........................................................................................................................................................
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5
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12.
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WITHHOLDING
FOR
TAXES.................................................................................................................................................
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5
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13.
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SPECIAL
RULES FOR CERTAIN
EXECUTIVES...................................................................................................................
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5
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14.
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DEFINITIONS..........................................................................................................................................................................
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6
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Purpose:
|
This
document is intended to describe parameters for making incentive
awards
for the period commencing March 1, 2005 and ending February 28,
2006
during the Company’s 2006 fiscal year (the “Program”). The Company has
adopted the Annual Management Incentive Plan (the “Plan”) which authorizes
the Company to grant incentive compensation to certain employees.
All
awards granted under Section 13 of the Program will be granted
pursuant
and subject to the terms of the
Plan.
|
| 1. |
PROGRAM
OBJECTIVES
|
| A. |
Support
the Company’s annual planning, budget and strategic planning
process;
|
| B. |
Provide
compensation opportunities which are competitive with those of
other
beverage alcohol or industry related companies in order to attract
and
retain key executives and management
employees;
|
| C. |
Motivate
executives to achieve profit and other key goals of the
Company;
|
| D. |
Control
overhead by designating a portion of annual compensation as a variable
rather than fixed expense.
|
| 2. |
PROGRAM
ADMINISTRATION
|
| A. |
The
Human Resources Committee (the “Committee”) of the Company’s Board of
Directors is responsible for determining which employees shall
receive
awards and the amounts, terms and conditions of all awards under
the
Program. The Committee will delegate certain administrative duties
to the
Executive Vice President, Chief Human Resources
Officer.
|
| B. |
Decisions
and determinations by the Committee will be final and binding upon
all
persons, including, but not limited to, participants and their
personal
representatives, heirs and assigns.
|
| C. |
This
Program creates no vested or contractual right to the compensation
provided herein. The Committee shall have the authority to interpret,
amend or cancel the Program at any time, or to make any other
determinations that it believes necessary or advisable for the
administration of the Program. The Committee’s authority includes the
power, in its sole discretion, to reduce the amount of or eliminate
an
Award payable to a participant.
|
| 3. |
PROGRAM
PARTICIPATION
|
| A. |
The
Committee is responsible for determining who may participate in
the
Program. The Company will provide a written recommendation to the
Committee of the employees who he believes should be included in
the
Program for a Plan Year. Generally, Awards will be made to employees
who
the Committee believes are in a position to make significant contributions
to the financial success of the
Company.
|
| B. |
The
participants for the Plan Year are identified in Schedules A
and
A2.
These schedules may be revised at any time during the year, as
appropriate.
|
| C. |
Participants
may be added to the Program at any time during a Plan Year provided
that
such addition occurs before December of the Plan Year. In this
case, a
participant’s Salary for purposes of determining an Award shall be
prorated for the period remaining in the Plan Year. For purposes
of
proration, a participant shall be given credit for the entire month
of any
month in which the participant participates in the
Program.
|
| 4. |
TERMINATION
OF EMPLOYMENT
|
| A. |
In
the event that a participant terminates employment for reasons
other than
death, Disability, Retirement or involuntary termination without
Cause
during a Plan Year, the participant will forfeit all rights to
an Award
with respect to that Plan Year.
|
| B. |
In
the event that a participant terminates employment for reasons
of death,
Disability, Retirement, or involuntary termination without Cause,
a
ratable portion of any applicable Award may be paid, subject to
the
attainment of the applicable performance target. The ratable portion
of
the Award shall be determined by multiplying the Award by a fraction
the
numerator of which is the number of full or partial months during
the Plan
Year during which the participant was employed and the denominator
of
which is twelve. Such amount will be paid at the same time as when
Awards
are paid to other participants.
|
| 5. |
AWARD
LEVELS
|
| A. |
The
amount of a participant’s Award will be calculated based on three
variables: the participant’s management position, Salary and achieved
performance for the Plan Year.
|
| B. |
Each
participant will be assigned to a certain category (“Participation
Category”) based on the participant’s management position in the Company
(see Schedules A and A2).
|
| C. |
The
Committee has established performance targets for each participant
that
are based on one or more of the following: a Corporate financial
performance target (“Corporate Target”), a Division/Company financial
performance target (“Divisional Target”), an individual performance target
(“Individual Target”) and a team performance target (“Team Target”).
Corporate and Divisional/Company Targets are calculated based on
the total
CBI and divisional/company operating income, respectively, using
the
first-in, first-out method of accounting for inventory valuation
before
any adjustments are made for reserves. Schedule C sets forth the
applicable Corporate and Divisional Targets. Participants who are
treated
as “Covered Employees” under Section 13 will have their incentive
compensation calculated based solely on Corporate and Divisional
Targets.
Individual and Team Targets are calculated based on the performance
of a
group of employees acting as a team or teams, or individual performance.
Individual and Team Targets for a participant shall be determined
by the
senior officer of the department in which the participant works
during the
Plan Year.
|
| D. |
A
participant who has a Corporate Target and one or more other types
of
targets (i.e., a Divisional Target, Individual Target and/or Team
Target)
will be assigned a weighting to determine the percentage that each
of the
targets will contribute towards the participant’s total Award. These
weightings are set forth at Schedule D (e.g., the Award for a Vice
President of Constellation Brands will be calculated [****] based
on the
Corporate Target and [****] based on the participant’s Individual Target).
The weightings assigned to the Corporate, Divisional, Individual
and Team
Targets will be referred to as the “Corporate Percentage”, “Divisional
Percentage”, “Individual Percentage” and “Team Percentage”,
respectively.
|
| E. |
A
participant’s Award will be calculated by multiplying the participant’s
Salary by the appropriate percentage set forth in the Award Schedule
(Schedule B) taking into account the participant’s Participation Category
and performance level (e.g., threshold, target, maximum, etc.)
with
respect to the participant’s Corporate Target and multiplying such amount
by the participant’s Corporate Percentage. If the actual performance level
falls between the designated levels of performance set forth in
Schedule
B, the percentage by which the participant’s salary is multiplied will be
interpolated. For example, if the actual performance level falls
half way
between the “threshold” and “midpoint” levels, the percentage will be
calculated as the average of the percentages for the “threshold” and
“midpoint” levels. A similar calculation is performed for the
participant’s Divisional, Individual and Team Targets, if any, and the
participant’s total Award will be the sum of these
calculations.
|
|
Example:
|
Assume
an employee of Constellation Brands was listed in Participation
Category
C, had a Salary of [****],
and achieved the participant’s “threshold” Corporate Target and “maximum”
Individual Target. Based on these facts and Schedules B, C and
D, the
participant’s Award would be [****] (i.e., [****] x [****] x [****] +
[****] x [****] x [****]).
|
| F. |
In
the event a participant changes Participation Categories during
a Plan
Year, the participant’s Award for that Plan Year, if any, shall be
determined separately for each Participation Category that the
Participant
served in, prorated for the portion of the Plan Year in which the
Participant served in the particular Participation Category. The
Participant’s Award shall be the sum thereof. For purposes of proration, a
participant shall be deemed to have served in the participant’s initial
Participation Category for the entire month in which the change
occurs if
such change occurs on a date other than the first of a month. In
the event
a participant changes to or from a Participation Category in which
Awards
are based in part on Divisional, Individual or Team Targets, such
targets
shall be determined separately for each Participation Category
and
prorated as above. With respect to the Participation Category from
which
the participant moved, the participant’s manager shall determine the
participant’s progress in meeting the Participant’s Individual and/or Team
Targets, if any, and base the determination of individual/team
performance
thereon.
|
|
Example:
|
Assume
a participant from Constellation Brands, Inc. was in Level C
for 3 ½
months of the Plan Year, was promoted to Level B for the
remainder of
the Plan Year, and achieved “target” performance in all categories
applicable to each level. The participant’s Award would be calculated in
the following manner:
|
|
+
|
[****]
x Salary x [****] (target performance) x [****] (Corp.
Target)
[****]
x Salary x [****] (target performance) x [****] (Individual
Target)
[****]
x Salary x [****] (target performance) x [****] (Corp.
Target)
[****]
x Salary x [****] (target performance) x [****] (Individual
Target)
TOTAL
AWARD
|
| 6. |
PERFORMANCE
TARGETS
|
| A. |
Performance
measurement criteria will be established for the Plan Year and
such
criteria will relate to corporate, divisional and/or individual
objectives. Performance targets will be established based on the
selected
criteria. Schedule C sets forth the applicable corporate and divisional
performance criteria and targets for the Plan
Year.
|
| B. |
Schedule
B sets forth the Award levels based on the attainment of the Corporate,
Divisional, Individual and Team Targets determined in accordance
with the
criteria and targets set forth in
Schedule C.
|
| 7. |
AWARD
ADJUSTMENTS
|
| A. |
The
Committee may make adjustments in the performance criteria, performance
targets, or in the manner in which such items are determined which
could
affect the Awards, either positively or negatively, provided that
such
adjustments will only be made for events which by their nature
are outside
the significant influence of Program participants or which would
cause
significant unintended effects. In addition, extraordinary occurrences
may
be excluded or adjustments made when calculating Individual and
Team
Targets to ensure that the best interests of the Company and its
participants are protected and that performance results are consistent
with long-term financial and developmental
objectives.
|
| B. |
There
may be additional adjustments to the Awards of a particular participant
in
order to recognize differing levels of personal performance as
assessed
after the close of the Plan Year by the
Committee.
|
| 8. |
EFFECT
OF MERGER, ACQUISITION, REORGANIZATION,
ETC.
|
| A. |
If
the Company participates during the Plan Year in any material transaction
such as a corporate merger, consolidation, acquisition of property
or
stock, or reorganization that does not result in the termination
of this
Program, the Committee shall make adjustments to the performance
criteria
as shall be equitable and appropriate in order to make the criteria,
as
nearly as practicable, equivalent to the criteria immediately prior
to
such transaction.
|
| B. |
In
the event of a Change of Control, as defined under the Plan, the
Plan Year
shall end on the date of the Change in Control and the Corporate,
Divisional, Individual and Team Targets shall be adjusted to reflect
the
early termination of the Plan Year. If the Corporate, Divisional,
Individual and Team Targets, as adjusted, are deemed satisfied
by the
Committee, a participant may receive a ratable portion of the Award
that
would have been paid if the Plan Year had not been terminated early
and
the Corporate, Divisional, Individual and Team Targets had been
satisfied.
The ratable portion of the Award shall be determined by multiplying
the
original Award by a fraction with a numerator equal to the number
of
months from the first day of the Plan Year to the date of the Change
of
Control (including any fractional month) and a denominator equal
to
twelve.
|
| 9. |
PAYMENT
OF AWARDS
|
| 10. |
ASSIGNMENT
|
| 11. |
EMPLOYMENT
RIGHT
|
| 12. |
WITHHOLDING
FOR TAXES
|
| 13. |
SPECIAL
RULES FOR CERTAIN
EXECUTIVES
|
| A. |
The
Company’s Chief Executive Officer and certain other individuals designated
by the Committee (“Covered Employees”) will be subject to special rules to
ensure that the Awards granted to such individuals will be treated
as
qualified “performance-based compensation” under Internal Revenue Code
Section 162(m). All provisions of the Program and the Plan shall
be
interpreted and administered consistently with that intent. The
Committee
will designate those individuals who are to be treated as “Covered
Employees” on Schedules A and A2.
|
| B. |
Notwithstanding
any provision to the contrary, the following rules will apply to
Covered
Employees:
|
| (1) |
The
Committee shall establish Corporate and Divisional Targets for
Covered
Employees that are tied to one or more of the Performance Criteria
set
forth in the Plan, and Covered Employees will not receive Awards
based on
Individual or Team Targets.
|
| (2) |
The
Committee shall establish a Corporate Target and, if applicable,
a
Divisional Target for Covered Employees within 90 days of the commencement
of the Plan Year. The satisfaction of such targets shall be substantially
uncertain at the time they are
established.
|
| (3) |
The
amount of the Award shall be computed under an objective formula
and the
Committee shall have no discretionary authority to increase the
amount of
the Award or alter the methodology for calculating the Award, except
as
permitted by Section 162(m) of the Internal Revenue Code and the
regulations promulgated thereunder (e.g., the Committee’s discretionary
authority to adjust performance criteria or targets set forth in
Section 7
would not apply to Covered
Employees).
|
| (4) |
The
maximum amount a Covered Employee can receive under the Plan for
the Plan
Year cannot exceed $2 million.
|
| (5) |
Before
any Award is paid to a Covered Employee, the Committee will certify,
in
writing, that the Corporate Target and, if applicable, the Divisional
Target was achieved and the amount of the Award is accurately
calculated.
|
| 14. |
DEFINITIONS
|
| A. |
AWARD
|
| B. |
CAUSE
|
| C. |
THE
COMPANY
|
| D. |
DISABILITY
|
| E. |
PLAN
|
| F. |
PLAN
YEAR
|
| G. |
RETIREMENT
|
| H. |
SALARY
|
|
Participation
Category
|
Title
|
Participant
|
|
[****]
|
[****]
|
[****]
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
[****]
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
[****]
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
[****]
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
Participation
Category
|
Title
|
Participant
|
|
[****]
|
[****]
|
[****]
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
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|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
[****]
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
||
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
[****]
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
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|
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|
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|
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|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
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|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
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|
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|
[****]
|
|
|
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|
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|
|
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|
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|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
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|
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|
[****]
|
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|
[****]
|
[****]
|
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[****]
|
[****]
|
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|
[****]
|
[****]
|
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|
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|
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|
[****]
|
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|
[****]
|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
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|
[****]
|
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|
|
|
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|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
|
[****]
|
[****]
|
|
Participation
Category
|
Threshold
|
Midpoint
|
Target
|
Midpoint
|
Maximum
|
|
A2
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
A1
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
A
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
B
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
C1
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
Participation
Category
|
Threshold
|
Midpoint
|
Target
|
Midpoint
|
Maximum
|
|
A
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
B1
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
B
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
C
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
0.25X
|
0.50X
|
1.00X
|
1.50X
|
2.00X
|
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
0.25X
|
0.50X
|
1.00X
|
1.50X
|
2.00X
|
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
0.25X
|
0.50X
|
1.00X
|
1.50X
|
2.00X
|
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
0.25X
|
0.50X
|
1.00X
|
1.50X
|
2.00X
|
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
0.25X
|
0.50X
|
1.00X
|
1.50X
|
2.00X
|
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
0.25X
|
0.50X
|
1.00X
|
1.50X
|
2.00X
|
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
0.25X
|
0.50X
|
1.00X
|
1.50X
|
2.00X
|
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
0.25X
|
0.50X
|
1.00X
|
1.50X
|
2.00X
|
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
0.25X
|
0.50X
|
1.00X
|
1.50X
|
2.00X
|
|
[****]
|
[****]
|
[****]
|
[****]
|
[****]
|
|
*
|
The
measure of “operating income” for purposes hereof shall be operating
income determined using the first-in, first-out method of accounting
for
inventory valuation before any adjustments are made for reserves.
“Operating Income” is measured based on the Company’s performance for the
period from March 1, 2005 through February 28,
2006.
|
|
Corporate/CBI
|
Corporate
FIFO
Operating
Income
|
Individual
|
|
Chairman/CEO
|
[****]
|
[****]
|
|
President/COO
|
[****]
|
[****]
|
|
EVP
|
[****]
|
[****]
|
|
SVP
|
[****]
|
[****]
|
|
VP
|
[****]
|
[****]
|
|
Division/Company
|
Corporate
FIFO
Operating
Income
|
Divisional
FIFO
Operating
Income/Other
|
|
CEO/President
|
[****]
|
[****]
|
|
EVP
|
[****]
|
[****]
|
|
SVP
|
[****]
|
[****]
|
|
VP
|
[****]
|
[****]
|