DEF 14A: Definitive proxy statements
Published on June 19, 2006
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed
by
the Registrant [X]
Filed
by
a Party other than the Registrant [ ]
Check
the
appropriate box:
| [ ] | Preliminary Proxy Statement |
| [ ] | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
| [X] | Definitive Proxy Statement |
| [ ] | Definitive Additional Materials |
| [ ] | Soliciting Material Pursuant to Section 240.14a-12 |
CONSTELLATION
BRANDS, INC.
(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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(2)
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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):
|
| ____________________________________________ | ||
|
(4)
|
Proposed maximum aggregate value of transaction: | |
| ____________________________________________ | ||
|
|
(5)
|
Total fee paid: |
| [ ] | 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: | |
| ____________________________________________ | ||
|
(2)
|
Form, Schedule or Registration Statement No.: | |
| ____________________________________________ | ||
|
(3)
|
Filing Party: | |
| ____________________________________________ | ||
|
(4)
|
Date Filed: | |
| ____________________________________________ |
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ANNUAL
MEETING OF
STOCKHOLDERS
|
June
7,
2006
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
East Main Street, Rochester, New York, on Thursday, July 27, 2006 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 2006 Annual Report to Stockholders
that contains important business and financial information concerning the
Company.
We
hope
you are able to attend this year’s Annual Meeting.
| Very truly yours, |
| /s/ Richard Sands |
| RICHARD SANDS |
|
Chairman of the Board
|
| and Chief Executive Officer |
Please
note that the Rochester Riverside Convention Center is located at the corner
of
East Main Street and South Avenue in downtown Rochester, New York. Parking
is
available at the St. Joseph Garage, which is located at 72 North Clinton Avenue.
A shuttle bus will be available to take you to the meeting. Additional parking
is also available at other public garages in the
area.
CONSTELLATION
BRANDS, INC.
|
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
TO
BE HELD JULY 27, 2006
|
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 East Main Street, Rochester, New York, on Thursday, July 27, 2006 at 11:00
a.m. (local time) for the following purposes more fully described in the
accompanying Proxy Statement:
|
1.
|
To
elect directors of the Company (Proposal No. 1).
|
|
2.
|
To
consider and act upon a proposal to ratify the selection of KPMG
LLP,
Certified Public Accountants, as the Company’s independent public
accountants for the fiscal year ending February 28, 2007 (Proposal
No.
2).
|
|
3.
|
To
consider and act upon a proposal to approve The Constellation Brands
UK
Sharesave Scheme (Proposal No. 3).
|
|
4.
|
To
transact such other business as may properly come before the Meeting
or
any adjournment thereof.
|
The
Board
of Directors has fixed the close of business on May 31, 2006 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 or proxy cards are enclosed.
WE
HOPE
YOU WILL ATTEND THIS MEETING IN PERSON, BUT IF YOU CANNOT, PLEASE SIGN AND
DATE
THE ENCLOSED PROXY CARD(S). RETURN THE PROXY CARD(S) IN THE ENCLOSED ENVELOPE,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
| BY ORDER OF THE BOARD OF DIRECTORS |
| /s/ David S. Sorce |
| DAVID S. SORCE, Secretary |
Fairport,
New York
June
7,
2006
[This
Page Intentionally Left Blank]
CONSTELLATION
BRANDS, INC.
370
Woodcliff Drive, Suite 300
Fairport,
New York 14450
|
PROXY
STATEMENT
|
2006
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 2006 Annual Meeting of Stockholders of the Company and at any adjournment
thereof (the “Meeting”). The Meeting will be held on Thursday, July 27, 2006 at
11:00 a.m. (local time) at the Rochester Riverside Convention Center, 123 East
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, 2007 (Proposal No. 2) and
FOR
the
approval of The Constellation Brands UK Sharesave Scheme (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”). Accordingly, the Company has enclosed
with the proxy materials a Class A Stock proxy card and/or a Class B Stock
proxy
card, depending on the holdings of the stockholder to whom proxy materials
are
mailed. Stockholders who receive both a Class A Stock proxy card and a Class
B
Stock proxy card must sign and return both
proxy
cards in accordance with their respective instructions to ensure the voting
of
the shares of each class owned. 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, 2005 to stockholders of record on April
29, 2005.
This
Proxy Statement and the accompanying proxy cards are being first mailed to
stockholders on or about June 19, 2006.
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, 2006 (the “Record
Date”), consisted of 199,922,154 shares of Class A Stock and 23,845,338 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
199,922,154 shares of Class A Stock outstanding on the Record Date, 2,337,791
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 23,377,910 Constellation CDIs outstanding
that were held by 820 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, 2006, 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 199,922,154 votes and holders of Class
B
Stock are entitled to cast a total of 238,453,380 votes at the
Meeting.
2
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, 2007 (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
approval of The Constellation Brands UK Sharesave Scheme (Proposal No. 3)
requires the affirmative vote of the holders 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 the Class B Stock having ten (10)
votes per share. Therefore, abstentions will have the effect of negative votes.
However, because broker non-votes are not considered entitled to vote, they
will
not affect the outcome of the vote.
3
BENEFICIAL
OWNERSHIP
As
of May
31, 2006, 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 199,922,154 shares of Class A Stock and 23,845,338
shares of Class B Stock outstanding as of the close of business on May 31,
2006.
Class
A Stock
|
Name
and Address of Beneficial Owner
|
Amount
and Nature
of
Beneficial Ownership (1)
|
Percent
of
Class
(1)
|
||
|
Sole
Power
to
Vote
or
Dispose
|
Shared
Power
to
Vote
or
Dispose
|
Total
|
||
|
Richard
Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
|
2,147,856
(2)
|
601,424 (2)
|
2,749,280
|
1.4%
|
|
Robert
Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
|
2,073,912
(4)
|
601,424 (4)
|
2,675,336
|
1.3%
|
|
CWC
Partnership-I
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
|
-
|
472,376 (5)
|
472,376
|
0.2%
|
|
Trust
for the benefit of Andrew Stern,
M.D.
under the will of Laurie Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
|
-
|
472,376 (6)
|
472,376
|
0.2%
|
|
Stockholders
Group Pursuant to
Section
13(d)(3) of the
Securities
Exchange Act of 1934,
as
amended (7)
|
-
|
4,823,192
(7)
|
4,823,192
|
2.4%
|
|
FMR
Corp.
82 Devonshire Street
Boston, MA 02109 (8)
|
(8)
|
(8)
|
16,646,339 (8)
|
8.3%
|
|
Capital
Research and Management Company
333 South Hope Street
Los Angeles, CA 90071 (9)
|
(9)
|
(9)
|
10,034,000 (9)
|
5.0%
|
4
Class
B Stock
|
Name
and Address of Beneficial Owner
|
Amount
and Nature
of
Beneficial Ownership (1)
|
Percent
of
Class
(1)
|
||
|
Sole
Power to
Vote
or
Dispose
|
Shared
Power
to
Vote
or Dispose
|
Total
|
||
|
Richard
Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
|
5,908,232
(2)
|
10,860,144
(2)
|
16,768,376
|
70.3%
|
|
Robert
Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
|
5,902,592
(4)
|
10,860,144
(4)
|
16,762,736
|
70.3%
|
|
Trust
for the benefit of Andrew Stern,
M.D.
under the will of Laurie Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
|
-
|
6,662,712
(6)
|
6,662,712
|
27.9%
|
|
CWC
Partnership-I
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
|
-
|
6,099,080
(5)
|
6,099,080
|
25.6%
|
|
Trust
for the benefit of the Grandchildren
of
Marvin and Marilyn Sands
370 Woodcliff Drive, Suite 300
Fairport, NY 14450
|
-
|
4,050,000 (10)
|
4,050,000
|
17.0%
|
|
Stockholders
Group Pursuant to
Section
13(d)(3) of the Securities
Exchange
Act of 1934, as amended (7)
|
-
|
22,670,968
(7)
|
22,670,968
|
95.1%
|
______________________________
|
(1)
|
The
number of shares and the percentage of ownership set forth in the
Class A
Stock table includes the number of shares of Class A Stock that can
be
purchased by exercising stock options that are exercisable on May
31, 2006
or become exercisable within sixty (60) days thereafter (“presently
exercisable”) and reflects acceleration of the vesting of certain stock
options as discussed in footnote three of the Option Grants in Last
Fiscal
Year Table appearing at page 10 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, 2006, none of the beneficial owners of the Company’s Class A
Stock have reported any interest in the Company’s 5.75% Mandatory
Convertible Preferred Stock.
|
|
(2)
|
The
amount reflected as shares of Class A Stock over which Richard Sands
has
the sole power to vote or dispose includes 1,701,000 shares of Class
A
Stock issuable upon the exercise of options that are presently exercisable
by Mr. Sands and 1,000,000 shares of Class B Stock owned by a grantor
retained annuity trust, for which Richard Sands serves as trustee.
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
|
5
|
|
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 Sands
Family
Foundation, Inc., 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 19,517,656 shares of Class A Stock,
representing 8.9% of the outstanding Class A Stock after such
conversion.
|
|
(3)
|
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.
|
|
(4)
|
The
amount reflected as shares of Class A Stock over which Robert Sands
has
the sole power to vote or dispose includes 1,491,600 shares of Class
A
Stock issuable upon the exercise of options that are presently exercisable
by Mr. Sands and 1,000,000 shares of Class B Stock owned by a grantor
retained annuity trust, for which Robert Sands serves as trustee.
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
19,438,072 shares of Class A Stock, representing 8.9% of the outstanding
Class A Stock after such
conversion.
|
|
(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 3.2% 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
|
6
|
|
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 27,494,160 shares of Class A Stock, representing
12.2% of the outstanding Class A Stock after such conversion. Of
the
shares of Class A Stock and Class B Stock held by the Group, 1,190,232
shares of Class A Stock and 5,405,893 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. and Edward C. Johnson 3d (collectively,
“FMR”) in its Schedule 13G (Amendment No. 4) dated February 14, 2006.
The
percentage of ownership reflected in the table is calculated on the
basis
of 199,922,154 shares of Class A Stock outstanding on May 31, 2006.
The
Schedule 13G (Amendment No. 4) indicates that of the 16,646,339 shares
beneficially owned by FMR through its control of various entities,
FMR has
sole voting power with respect to 550,339 shares and sole dispositive
power with respect to 16,646,339 shares. For further information
pertaining to FMR, reference should be made to FMR’s Schedule 13G
(Amendment No. 4) 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. 4) and has not
independently verified FMR’s beneficial ownership as of May 31, 2006.
|
|
(9)
|
The
number of shares equals the number of shares of Class A Stock reported
to
be beneficially owned by Capital Research and Management Company
(“CRMC”)
in its Schedule 13G dated February 6, 2006. The percentage of ownership
reflected in the table is calculated on the basis of 199,922,154
shares of
Class A Stock outstanding on May 31, 2006. The Schedule 13G indicates
that
of the 10,034,000 shares beneficially owned by CRMC in its capacity
as an
investment advisor, CRMC has sole voting power with respect to 6,834,000
shares and has sole dispositive power with respect to 10,034,000
shares.
For further information pertaining to CRMC, reference should be made
to
CRMC’s Schedule 13G filed with the Securities and Exchange Commission.
With respect to the information contained herein pertaining to shares
of
Class A Stock beneficially owned by CRMC, the Company has relied
solely on
the information reported in CRMC’s Schedule 13G and has not independently
verified CRMC’s beneficial ownership as of May 31, 2006.
|
7
|
(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, 2006 (collectively, the “Named Executives”)) for the fiscal years ended
February 28, 2006, February 28, 2005 and February 29, 2004.
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
|
2006
2005
2004
|
$1,000,000
950,000
875,500
|
$1,228,817
1,154,250
868,715
|
$161,178
(5)
121,524
(5)
88,729
(5)
|
156,200
282,800
212,200
|
$83,357
77,620
64,514
|
|
Robert
Sands,
President
and Chief
Operating Officer
|
2006
2005
2004
|
$820,000
750,000
618,000
|
$1,006,944
911,250
613,211
|
$147,196
(6)
113,850
(6)
-
|
128,000
231,800
167,600
|
$69,335
62,431
46,497
|
|
Stephen
B. Millar,
Chief Executive Officer,
Constellation Wines
(7)
|
2006
2005
2004
|
$690,715
652,834
553,703
|
$473,278
590,684
263,452
|
$74,753
(8)
54,934
(8)
98,796
(8)
|
64,800
141,400
431,212
|
$138,143
128,893
139,023
|
|
Alexander
L. Berk,
Chief Executive Officer,
Constellation Beers and Spirits
(9)
|
2006
2005
2004
|
$584,768
562,277
545,900
|
$493,310
630,200
610,731
|
-
-
-
|
53,800
84,600
81,000
|
$53,310
52,267
50,352
|
|
Thomas
S. Summer,
Executive Vice President and
Chief Financial Officer
|
2006
2005
2004
|
$441,334
424,360
412,000
|
$325,463
412,478
327,046
|
-
-
-
|
40,600
103,800
123,000
|
$40,291
37,778
32,997
|
_________________________
|
(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 2006 consist of: |
|
•
|
Company
401(k) contributions under the Company’s 401(k) and Profit Sharing Plan:
Richard Sands $6,531; Robert Sands $6,381; Alexander Berk $6,412;
and
Thomas Summer $6,378.
|
8
|
•
|
Company
profit sharing contributions under the Company’s 401(k) and Profit Sharing
Plan: Richard Sands $16,149; Robert Sands $16,149; Alexander Berk
$16,842;
and Thomas Summer $16,149.
|
|
•
|
Company
contributions under the Company’s 2005 Supplemental Executive Retirement
Plan: Richard Sands $60,677; Robert Sands $46,805; Alexander Berk
$30,056;
and Thomas Summer $17,764.
|
|
•
|
Company contributions to the Superannuation Plan for Stephen Millar: $138,143. |
|
(5)
|
The
amounts shown include $152,509 in 2006, $114,324 in 2005 and $83,959
in
2004 for use of the corporate
aircraft.
|
|
(6)
|
The
amounts shown include $135,047 in 2006 and $105,564 in 2005 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, even following his retirement on February
28,
2006, from the position Chief Executive Officer, Constellation Wines.
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.
As Mr. Millar remained an executive officer through the end of the
Company’s 2006 fiscal year, the reported information for 2006 is the
amount paid to him during the entire 2006 fiscal year. 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 0.7513 for 2006, 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 $60,399
in
2006, $42,301 in 2005 and $29,826 in 2004, and air transportation
services
in the amount of $55,184 in 2004.
|
|
(9)
|
Mr.
Berk is employed by Barton Incorporated, a wholly-owned subsidiary
of the
Company.
Mr.
Berk is also President and Chief Executive Officer of Barton
Incorporated.
|
Stock
Options
The
following table contains information concerning stock option grants to the
Named
Executives during the fiscal year ended February 28, 2006. No stock appreciation
rights (“SARs”) were granted to any of the Named Executives in that year. The
columns labeled “Potential Realizable Value” are based on hypothetical 5% and
10% growth assumptions, as required by the Securities and Exchange Commission.
The Company cannot predict the actual growth rate of its Common
Stock.
9
Option
Grants In Last Fiscal Year
|
Individual
Grants
|
Potential
Realizable
Value
at Assumed
Annual
Rates
of
Stock Price
Appreciation
for
Option
Term
|
|||||
|
Name
|
Number
of
Securities
Underlying
Options
Granted
(1)
|
%
of Total
Options
Granted
to
Employees
in
Fiscal
Year
|
Exercise
or Base Price ($/Sh) (2)
|
Expiration
Date
|
||
|
5%
|
10%
|
|||||
|
Richard
Sands
|
156,200
(3)
|
4.0
%
|
$
27.235
|
04/07/15
|
$
2,675,385
|
$
6,779,951
|
|
Robert
Sands
|
128,000
(3)
|
3.2
%
|
$
27.235
|
04/07/15
|
$
2,192,377
|
$
5,555,914
|
|
Stephen
B. Millar
|
64,800 (3)
|
1.6
%
|
$
27.235
|
04/07/15
|
$
1,109,891
|
$
2,812,681
|
|
Alexander
L. Berk
|
53,800 (3)
|
1.4
%
|
$
27.235
|
04/07/15
|
$
921,483
|
$
2,335,220
|
|
Thomas
S. Summer
|
40,600 (3)
|
1.0
%
|
$
27.235
|
04/07/15
|
$
695,395
|
$
1,762,266
|
__________________
|
(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”). 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, the vesting of stock options accelerates in the
event of
a change of control, as defined in the LTSIP.
|
|
(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 as a result of action
taken by
the Board of Directors to accelerate, effective February 16, 2006,
all
stock options with a market condition performance accelerator based
on the
price of the Company’s Class A Stock (“PASOs”). As more fully discussed in
a Current Report on Form 8-K filed with the Securities and Exchange
Commission on February 23, 2006, the Board of Directors, on February
16,
2006, approved the acceleration of the vesting of certain unvested
options
to purchase shares of the Company’s Class A Stock previously granted to
the employees, including its executive officers, under the Company’s LTSIP
and the Company’s Incentive Stock Option Plan. The acceleration of vesting
was effective for (i) all unvested PASOs outstanding on February
16, 2006
and (ii) certain unvested options that do not contain a market condition
performance accelerator (“non-PASOs”), including those non-PASOs held by
Mr. Millar. The purpose of the vesting acceleration of the PASOs
was to
enable the Company to prevent potential earnings volatility that
can be
caused by an unpredictable market condition performance accelerator.
The
acceleration of PASOs and non-PASOs also resulted in compensation
expense
not being recorded in the Company’s income statements for future periods
with respect to such options. All of Mr. Millar’s non-PASO options were
accelerated in connection with his retirement as Chief Executive
Officer,
Constellation Wines. The Stock Ownership of Management Table appearing
at
page 19 of this Proxy Statement also reflects these
accelerations.
|
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, 2006; and (ii) the number and value of
exercisable and unexercisable stock options held by the Named Executives as
of
February 28, 2006. There are no outstanding SARs.
10
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
|
633,600
|
$
13,925,239
|
1,686,000
|
30,000
|
$
25,923,350
|
$
437,700
|
|
Robert
Sands
|
593,600
|
$
13,235,983
|
1,476,600
|
30,000
|
$
23,264,182
|
$
437,700
|
|
Stephen
B. Millar
|
50,000
|
$
786,295
|
537,412
|
-
|
$
5,855,535
|
-
|
|
Alexander
L. Berk
|
-
|
-
|
632,680
|
-
|
$
9,694,992
|
-
|
|
Thomas
S. Summer
|
325,440
|
$
6,768,976
|
337,400
|
30,000
|
$
3,715,333
|
$
437,700
|
________________________
|
(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 2006 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, 2006, Mr. Millar was credited with 15
years of service for purposes of the Hardy Plan. Based on service through
February 28, 2006, the Company estimates that the amount of the benefit to
which
Mr. Millar would be entitled if he had then retired would be AUD$2,529,828.
Mr.
Millar has announced that he will retire from the Company effective February
9,
2007 and the Company estimates that his final average salary for purposes of
calculating his benefit amount will be AUD$907,753. Such amounts are not subject
to deduction or offset for any other private or public retirement benefit to
which Mr. Millar is entitled. As Mr. Millar will be age 63 at the date of his
announced retirement, the Company estimates that his retirement benefit under
the Hardy Plan will be AUD$2,762,354. If converted into United States dollars
using the weighted average exchange rate for the 2006 fiscal year, these amounts
would be, respectively, $1,900,660 and $681,995 and $2,075,357.
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.
11
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. Management personnel within the Company’s Human Resources Department
support the Human Resources Committee in its work. In addition, the Human
Resources Committee has the authority under its Charter to retain external
consultants to assist in the evaluation of Chief Executive Officer or senior
executive officer compensation. In accordance with this authority, the Human
Resources Committee has engaged Mercer Human Resource Consulting, Inc. as a
consultant to assist the Committee in its review and analysis of executive
compensation data and to advise the Human Resources Committee on matters
relating to Chief Executive Officer and other executive officer compensation.
A
company affiliated with Mercer Human Resource Consulting, Inc. provides
administration and recordkeeping services to the Company’s 401(k) and Profit
Sharing Plan.
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 2006 with respect to annual
management incentives was the Company’s operating income for fiscal 2006,
adjusted for certain items, as compared to that set forth in its fiscal 2006
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 Human Resources Committee,
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 2006 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 100% of base salaries for executive officers. The purpose of
the
annual bonus is to motivate and provide an incentive to management to achieve
12
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
to executive officers exceeded the target awards. For fiscal 2006, 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 2006, the Human Resources Committee awarded non-qualified 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 the efforts expected
in
connection with the consummation of a significant acquisition by the Company,
in
April 2006 the Human Resources Committee awarded additional non-qualified
options to six (6) 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, and these options will
not
vest unless the acquisition is consummated within a specific timeframe.
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 2006, the compensation of Richard Sands, the Company’s Chief Executive
Officer, was based on a variety of factors, as noted above. In this regard,
the
Human Resources Committee considered the Company’s performance, as well as Mr.
Sands’ individual performance. In addition, the compensation packages of chief
executive officers of certain comparable companies selected by Mercer Human
Resource Consulting, Inc. were considered. Also taken into account was the
Company’s current executive salary and compensation structure.
13
Richard
Sands’ base salary is believed to be in line with salaries of executives of
similar companies and chief executive officers with similar responsibilities.
Pursuant to the Company’s Annual Management Incentive Plan, Mr. Sands’ annual
cash incentive attributable to fiscal 2006 was a percentage of his base salary
based upon the Company’s fiscal 2006 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 2006
operating plan. The range for Mr. Sands’ cash incentive award, from threshold,
target and maximum (25%, 100% and 200%, respectively), was comparable to
industry compensation survey data for executives in Richard Sands’ position. For
the fiscal year ended February 28, 2006, Richard Sands received a bonus of
$1,228,817, which is equal to 123.0% of his salary. As noted elsewhere in this
Proxy Statement, during fiscal 2006, Mr. Sands also received stock options
to
purchase up to 156,200 shares of Class A Stock of the Company.
Deductibility
of Executive Compensation
Section
162(m) of the Internal Revenue Code provides that certain compensation in excess
of $1 million per year paid to a company’s chief executive officer and four
other most highly paid executive officers may not be deductible by the company
unless it qualifies as performance-based compensation. The Human Resources
Committee recognizes the benefits of structuring executive compensation so
that
Section 162(m) does not limit the Company’s tax deductions for such
compensation, and the Company’s Long-Term Stock Incentive Plan, Incentive Stock
Option Plan and Annual Management Incentive Plan have been designed so that
the
Human Resources Committee may award performance-based compensation that is
not
subject to the limits imposed by Section 162(m). Under certain circumstances,
the Human Resources Committee may decide to award executive compensation in
an
amount and form that is not deductible under Section 162(m).
The
foregoing report is given by the members of the Human Resources
Committee.
| Human Resources Committee |
| Thomas C. McDermott (Chair) |
| Jeananne K. Hauswald |
| Paul L. Smith |
Compensation
Committee Interlocks and Insider Participation
As
described above, during fiscal 2006, 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.
14
Stock
Price Performance Graph
Set
forth
below is a line graph comparing, for the fiscal years ended the last day of
February 2002, 2003, 2004, 2005 and 2006, the cumulative total stockholder
return of the Company’s Class A Stock and Class B Stock, with the cumulative
total return of the S&P MidCap 400 Index, the S&P 500 Index and a peer
group index comprised of companies in the beverage industry (the “Selected Peer
Group Index”) (see footnote (1) to the graph). The graph assumes the investment
of $100.00 on February 28, 2001 in the Company’s Class A Stock, the Company’s
Class B Stock, the S&P MidCap 400 Index, the S&P 500 Index and the
Selected Peer Group Index, and also assumes the reinvestment of all dividends.
The comparison to the S&P MidCap 400 Index is provided for transitional
purposes as the Company was included in that index until it was added to the
S&P 500 Index of companies in July 2005.
Comparison
of Five Year Cumulative Total Return
|
2001
|
2002
|
2003
|
2004
|
2005
|
2006
|
|
|
STZ
|
$100.00
|
$170.24
|
$154.30
|
$198.59
|
$335.35
|
$330.02
|
|
STZ.B
|
100.00
|
166.69
|
153.13
|
198.13
|
339.44
|
325.00
|
|
S
& P MidCap 400 Index
|
100.00
|
102.70
|
83.54
|
125.07
|
140.25
|
164.58
|
|
S
& P 500 Index
|
100.00
|
90.49
|
69.96
|
96.92
|
103.68
|
112.38
|
|
Peer
Group Index
|
100.00
|
102.33
|
87.05
|
119.09
|
115.83
|
123.91
|
___________________________
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.
15
There
can
be no assurance that the Company’s stock performance will continue into the
future with the same or similar trends depicted by the graph above. The Company
neither makes nor endorses any predictions as to future stock
performance.
The
Stock
Price Performance Graph set forth above shall not be deemed incorporated
by
reference in any filing under the federal securities laws by virtue of any
general incorporation of this Proxy Statement by reference and shall not
otherwise be treated as filed under the securities laws.
Certain
Relationships and Related Transactions
Alexander
Berk and Barton Incorporated (“Barton”), a wholly-owned subsidiary of the
Company, are parties to an employment agreement dated as of September 1,
1990,
as amended on November 11, 1996 and October 20, 1998, that provides for Mr.
Berk’s compensation and sets forth the terms and conditions of Mr. Berk’s
employment with Barton. Under his employment agreement, Mr. Berk serves as
the
President and Chief Executive Officer of Barton and, by virtue of his current
responsibilities with Barton and his designation by the Company as Chief
Executive Officer, Constellation Beers and Spirits, he is deemed an executive
officer of the Company. While the initial term of the employment agreement
expired on February 28, 2001, in accordance with the agreement, the term
is
automatically extended for one-year periods unless either Mr. Berk or Barton
notifies the other that such party does not wish to extend it. The agreement
will terminate prior to the expiration of the current term (i) upon Mr. Berk’s
death or Retirement, (ii) at Barton’s election, for Cause or upon Mr. Berk’s
Complete Disability, and (iii) at Mr. Berk’s election, for Good Reason (all as
set forth in the agreement). If Barton decides not to extend the term of
the
agreement, or if the agreement terminates by reason of Mr. Berk’s death,
Complete Disability, or Retirement, or for Good Reason, Barton is obligated
to
pay to Mr. Berk a post-termination benefit equal to 100% of his then current
base salary plus the amount of the bonus paid to him for the immediately
preceding fiscal year. If Mr. Berk decides not to extend the term of the
agreement, then Barton is obligated to pay to Mr. Berk a post-termination
benefit equal to one-half of the foregoing amount. In the event that Mr.
Berk’s
employment is terminated for Good Reason, or is terminated by Barton for
reasons
other than death, Complete Disability, Cause, or Barton’s decision not to extend
the term of the agreement, then Mr. Berk is entitled to be paid (i) if the
applicable conditions are satisfied, a supplementary post-termination benefit
equal to what he otherwise would have been entitled to receive as his share
of
Barton’s contribution to its profit-sharing and retirement plan for the fiscal
year in which such termination occurs and (ii) an amount equal to the product
of
his then current base salary multiplied by the number of years remaining
in the
then current term of the agreement. Post-termination benefits are payable
to Mr.
Berk in a lump sum as soon as practicable after his employment terminates,
except that any supplementary post-termination benefit is payable promptly
after
Barton’s contribution to the retirement plan. The agreement requires Mr. Berk to
keep certain information with respect to the Company confidential during
and
after his employment with the Company.
Stephen
Millar and BRL Hardy Limited (now known as Hardy Wine Company Limited) had
entered into an Memorandum of Agreement (Service Contract) dated as of June
11,
1996 (the “Service Contract”) that provides for Mr. Millar’s compensation and
sets forth terms and conditions of his employment with BRL Hardy Limited.
Mr.
Millar and BRL Hardy Limited also entered into a Non-Competition Agreement
effective April 4, 2003. Effective April 8, 2003, BRL Hardy Limited became
a
wholly-owned subsidiary of the Company and is now known as Hardy Wine Company
Limited (“Hardy”). Mr. Millar and the Company entered into a letter agreement
under which Mr. Millar served as the Chief Executive Officer, Constellation
Wines and by virtue of these responsibilities, he was deemed an executive
officer of the Company. The letter agreement provided for certain of Mr.
Millar’s compensation arrangements and provided for additional terms and
conditions of his employment. Those provisions of the 1996 Service Contract
not
inconsistent with the letter agreement continued. Pursuant to the Service
Contract, Mr. Millar may receive a remuneration entitlement
16
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. In February 2006, the Company and
Mr.
Millar entered into an Agreement whereby Mr. Millar ceased to hold the position
of Chief Executive Officer, Constellation Wines at the conclusion of the
Company’s fiscal year on February 28, 2006, while still retaining a
non-executive employment relationship with the Company until February 9,
2007,
consistent with the terms and conditions of the 1996 Service Contract. Upon
termination of Mr. Millar’s Service Contract on February 9, 2007, he will be
paid in accordance with its terms, including a termination payment in the
aggregate amount of AUD$3,681,984, together with an additional bonus in the
amount of US$100,000 in recognition of his contributions to the Company.
He will
also be entitled to retirement benefits under the Hardy Wine Company
Superannuation Plan in accordance with the terms of that Plan.
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 2006, from the inception of the agreement through the
end of
fiscal 2006, 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 other members of the Sands family beneficially own
various entities, through which, among other activities, they own and operate
the Inn on the Lake in Canandaigua, New York (the “Inn”). 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 operator of the Inn approximately $58,713 (exclusive of employee reimbursed
expenses).
Richard
Sands is Chief Executive Officer and a director of Friends of the Finger
Lakes
Performing Arts Center, Inc., a registered New York charity located in
Canandaigua, New York to which Constellation Brands, Inc. has pledged the
amount
of $1.5 million, payable over fifteen (15) years in exchange for naming rights
for the performing arts center. The Company has selected the name “The
Constellation Brands - Marvin Sands Performing Arts Center.” Marvin Sands was
the
17
founder
of the Company. Robert Sands is also a director of that
entity. Additionally, Robert Sands is President and a director of The New
York
State Wine and Culinary Center, Inc., which is also a registered New York
charity located in Canandaigua, New York, to which the Company has provided
financial support that includes a donation of land valued at approximately
$650,000.
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 2006 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, 2006) other than
Mr.
Fromberg who was elected to the Board in 2006.
The
following table and notes thereto set forth, as of May 31, 2006, 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 current
executive officers as a group. Additionally, as of May 31, 2006, 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 199,922,154 shares of Class A Stock and 23,845,338
shares of Class B Stock outstanding as of the close of business on May 31,
2006.
18
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)
|
1,701,000 (4)
|
1.4%
(4)
|
16,768,376
(4)
|
70.3%
|
|
Robert
Sands
|
1,183,736
(4)
|
1,491,600 (4)
|
1.3%
(4)
|
16,762,736
(4)
|
70.3%
|
|
Alexander
L. Berk
|
46,286
|
632,680
|
*
|
-
|
*
|
|
Stephen
B. Millar
|
21,846 (5)
|
537,412
|
*
|
-
|
*
|
|
Thomas
S. Summer
|
59,337 (6)
|
352,400
|
*
|
-
|
*
|
|
Barry
A. Fromberg
|
514
|
-
|
*
|
-
|
*
|
|
Jeananne
K. Hauswald
|
6,936
|
46,727
|
*
|
-
|
*
|
|
James
A. Locke III
|
19,760
|
58,727
|
*
(7)
|
264
|
*
|
|
Thomas
C. McDermott
|
11,368
|
90,727
|
*
|
-
|
*
|
|
Paul
L. Smith
|
8,571
|
6,213
|
*
|
-
|
*
|
|
All
Executive Officers
and
Directors as a Group
(12
persons) (8)
|
1,813,838
|
5,588,892
|
3.6%
(8)
|
22,671,232
|
95.0%
|
______________________
*
Percentage does not exceed one percent (1%) of the outstanding shares of
such
class.
|
(1)
|
The
shares and percentages of Class A Stock set forth in this table
do not
include (i) shares of Class A Stock that may be acquired within
sixty (60)
days by an employee under the Company’s Employee Stock Purchase Plan
(because such number of shares is not presently determinable) and
(ii)
shares of Class A Stock that are issuable pursuant to the conversion
feature of the Company’s Class B Stock, although such information is
provided in a footnote where appropriate. For purposes of calculating
the
percentage of Class A Stock beneficially owned in the table and
in the
footnotes, additional shares of Class A Stock equal to the number
of
presently exercisable options and, as appropriate, the number of
shares of
Class B Stock owned by the named person or by the persons in the
group of
executive officers and directors are assumed to be outstanding
only for
that person or group of persons pursuant to Rule 13d-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, 2006 or become exercisable
within sixty (60) days thereafter and also reflects the February
16, 2006
acceleration of vesting of (i) all unvested options outstanding
on
February 16, 2006 with a market condition performance accelerator
based on
the price of the Company’s Class A Stock (“PASOs”) and (ii) certain
unvested options that do not contain a market condition performance
accelerator (“non-PASOs”), including those non-PASOs held by Mr. Millar.
Please see footnote three of the Option Grants in Last Fiscal Year
Table
appearing at page 10 of this Proxy Statement for a more detailed
discussion of these accelerations.
|
|
(4)
|
Includes
shares in which the named individual shares voting power or investment
discretion. See tables and footnotes under the caption “Beneficial
Ownership” 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.
|
19
|
(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 78,751 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.
Therefore, Mr. Millar, a former executive officer, is not included
in this
group. Assuming the conversion of a total of 22,671,232 shares
of Class B
Stock beneficially owned by the current executive officers and
directors
as a group into Class A Stock, this group would beneficially own
30,073,962 shares of Class A Stock, representing 13.2% 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, Barry A. Fromberg,
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
7,
2006.
|
Barry
A. Fromberg
|
Director
since 2006
|
Mr.
Fromberg, age 51, who is currently retired, had been Executive Vice President
and Chief Financial Officer of Dean Foods Company, a food and beverage company,
from 1998 until April 1, 2006. From 1995 to 1998, Mr. Fromberg served as
Chairman and Chief Executive Officer of a subsidiary of Paging Network, Inc.,
a
provider of wireless communications services, and from 1993 to 1995 he was
Senior Vice President and Chief Financial Officer of Paging Network, Inc.
He
served as Executive Vice President and Chief Financial Officer of Simmons
Communications, Inc., a cable television operator, from 1987 to 1993. He
is a
Certified Public Accountant.
|
Jeananne
K. Hauswald
|
Director
since 2000
|
Ms.
Hauswald, age 62, 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
20
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 64, 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 69, 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 55, 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 70, 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, he served
on
the Board of Directors of Eastman Kodak Company. Mr. Smith served a term
on the
Financial Accounting Standards Advisory Council and currently serves on the
Board of Directors of Home Properties, Inc.
See
also
information regarding James A. Locke III, 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.”
21
Director
Compensation
The
Company’s compensation program for members of the Board of Directors runs from
the annual period beginning with the first meeting of the Board following
the
annual meeting of stockholders, unless otherwise changed by the Board of
Directors. For the annual period beginning July 28, 2005, pursuant to that
compensation program, the Company pays 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 $50,000,
(ii) a Board meeting fee of $2,000 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 $1,500 per meeting
for each committee meeting attended (including attendance by conference
telephone); and (iv) an annual fee of $12,000 paid for the position of Chair
of
the Audit Committee and a fee of $9,000 paid for the position of Chair of
each
of the Human Resources Committee and the Corporate Governance Committee.
In
addition to the cash payments, the compensation program anticipates that
each
non-management director will receive annually, if and as approved by the
Board
of Directors, an annual grant of non-qualified stock options and an annual
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 $40,000
by the closing price of the Company’s Class A shares on the date of grant.
During fiscal 2006, the Company awarded a stock option to purchase up to
2,503
shares of Class A Stock to each of the non-management directors who then
served
on the Board, at an exercise price of $27.96 per share and with an exercise
period of January 28, 2006 through July 28, 2015. Consistent with this
compensation program, during fiscal 2006, each of the non-management directors
who then served on the Board also was granted 1,430 restricted shares of
the
Company’s Class A Stock. On the date of grant, the Company’s Class A Stock was
valued at $27.96 per share. Subject to applicable provisions in the award
document, the restricted stock will vest on July 28, 2006, or earlier in
the
event a director resigns on account of disability. As Barry A. Fromberg joined
the Board in April 2006 to fill a vacancy, he also received compensation
consistent with the foregoing, but with the amount of his annual retainer,
annual option grant and restricted stock award prorated to the remaining
portion
of the unexpired term. Specifically, in addition to a pro-rated annual cash
retainer, on April 4, 2006, Mr. Fromberg was awarded a stock option to purchase
up to 901 shares of Class A Stock at an exercise price of $25.89 per share
and
with an exercise period of October 4, 2006 through April 4, 2016, and also
was
granted 514 restricted shares of the Company’s Class A Stock. On the April 4,
2006 date of grant, the Company’s Class A Stock was valued at $25.89 per share.
Subject to applicable provisions in the award document, the restricted stock
will vest on April 4, 2007.
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 current non-management directors are Barry A. Fromberg,
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.
22
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 most recently revised on October 6, 2005.
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 ten (10) meetings during the Company’s fiscal year ended February
28, 2006. 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 2006, each of the incumbent
directors who were directors during that period and 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 2005 Annual Meeting of Stockholders, except Mr.
Fromberg who was not at that time a member of the Board of Directors.
Audit
Committee. The
Audit
Committee is a standing committee currently composed of Paul L. Smith (Chair),
Barry A. Fromberg, 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 2006.
Corporate
Governance Committee. The
Corporate Governance Committee is a standing committee currently composed
of
James A. Locke III (Chair), 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
23
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. This Committee held three (3) meetings
during fiscal 2006.
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
engaged the services of an independent third-party search firm in order to
assist the Corporate Governance Committee in identifying and evaluating
potential director candidates who will bring to the Board specific skill
sets as
established by the Corporate Governance Committee. As a result of this process,
Barry A. Fromberg was identified as a potential candidate for nomination
to the
Board and was subsequently elected.
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 2007 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 7, 2007. 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,
24
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 2006.
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, 2006, 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, 2006, 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, 2006 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
25
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, 2006 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) |
| Barry A. Fromberg |
| 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
6, 2006, the Audit Committee determined to engage KPMG LLP to serve as the
Company’s independent public accountants for the fiscal year ending February 28,
2007. 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, 2006 and February 28, 2005.
The
following fees were billed to the Company by KPMG LLP for services rendered
during the fiscal years ended February 28, 2006 and February 28,
2005:
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 and audit of internal control, service normally provided by the
26
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, 2006 were
$3,451,888, which amount included out-of-pocket expenses. For the year ended
February 28, 2005, these audit fees were $4,217,287, which amount included
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. The aggregate
audit-related fees billed by KPMG LLP for the year ended February 28, 2006
were
$28,640 and for the year ended February 28, 2005 were $46,608.
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, 2006 were $47,512 and for the year ended February 28, 2005 were an aggregate
of $46,143. 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, 2006 and February 28, 2005, 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, 2007 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.
27
PROPOSAL
NO. 3
THE
CONSTELLATION BRANDS UK SHARESAVE SCHEME
The
Constellation Brands UK Sharesave Scheme (the “UK Sharesave”), originally
adopted by the Company in 1999, is an existing equity compensation plan not
approved by security holders. It is an equity compensation plan approved by
HM
Revenue & Customs (previously known as Inland Revenue) which is a
governmental taxing authority in the United Kingdom. As previously disclosed
in
various Company filings, an aggregate of 2,000,000 shares of Class A Stock
may
be issued pursuant to the UK Sharesave to eligible employees and directors
of
the Company. The Board of Directors seeks stockholder approval of the UK
Sharesave prior to effecting any new offerings to eligible personnel in the
United Kingdom.
The
following discussion summarizes certain provisions of the UK Sharesave which
has
been approved by HM Revenue & Customs, the relevant taxing authority in the
United Kingdom, in the form as approved through the date of this Proxy
Statement. This summary does not purport to be complete and is subject to and
qualified in its entirety by reference to the full text of the UK Sharesave,
which was filed electronically with the Securities and Exchange Commission
as an
appendix to this Proxy Statement, but is not included in the printed version
of
this Proxy Statement. A copy of the UK Sharesave is available from the Company’s
Secretary at 370 Woodcliff Drive, Suite 300, Fairport, New York
14450.
Summary
of Terms
The
UK
Sharesave was originally adopted by the Board of Directors in October 1999.
Offerings may only be made under the UK Sharesave within the period of ten
years
beginning on the date of adoption. Therefore, unless the UK Sharesave is
extended in the future, no further offerings may be made under the UK Sharesave
after the expiration of this ten year period in October 2009.
Under
the
UK Sharesave, a maximum of 2,000,000 shares of Class A Stock may be issued
to
eligible employees and directors of a Participating Company in offerings that
may extend from three to seven years. In order to be eligible, a participant
must (i) be an employee or director of a “Participating Company” as determined
by the Board of Directors and (ii), under United Kingdom laws and regulation,
must be resident and ordinarily resident in the United Kingdom for taxation
purposes (or be nominated to participate in the UK Sharesave by the Board of
Directors). “Participating Companies” are generally intended to be United
Kingdom subsidiaries of the Company. Under the terms of the UK Sharesave,
Participants (as that term is defined in the UK Sharesave) may purchase shares
of Class A Stock at the end of the offering period through payroll deductions
made during the offering period, together with any associated interest or bonus
(as applicable) on those funds. The payroll deductions are kept in interest
bearing accounts until the participant either exercises the option at the end
of
the offering or withdraws from the offering. The exercise price for each
offering is fixed at the beginning of the offering and may be not less than
80%
of the closing price of the stock on the day the exercise price is fixed. If
a
Participant ceases to be employed by the Company in certain circumstances as
set
out in the UK Sharesave, the Participant may exercise the option during a period
of time specified in the UK Sharesave (but only to the extent of savings made,
plus any interest paid, at the date of exercise) or may withdraw from the
offering. On a change of control of the Company, options may be exercised within
the period of time specified in the UK Sharesave, but only to the extent of
any
savings made, and any interest paid, at the date of exercise. Alternatively,
in
certain circumstances, options may, with the agreement of the relevant acquiring
company, be rolled over into equivalent options over shares in the acquiring
company. Options offered under the UK Sharesave may be adjusted in the event
of
a variation in the share capital of the Company.
28
The
UK
Sharesave is administered by the Board of Directors or a committee appointed
by
the Board, such as the Human Resources Committee. As used in this section,
the
term “Board” means (i) the Board of Directors or (ii) a committee appointed by
the Board of Directors, such as the Human Resources Committee. The Board is
charged with responsibility for determining the Participating Companies, the
Grant Day, duration (3, 5 or 7 years) of the offering, fixing the exercise
price
for the offering (in accordance with the terms of the UK Sharesave), determining
the maximum number of shares of Class A Stock for which a Participant may apply
to subscribe, and the manner of exercise of options. Eligible employees and
directors of Participating Companies apply to participate in an offering and
make monthly contributions under Savings Contracts, which are a type of
certified savings program approved by the relevant United Kingdom taxing
authority. The statutory maximum that an employee may save under all approved
sharesave contracts in which he or she participates is currently £250 per
month.
The
persons who are eligible to participate in the UK Sharesave include directors
and employees (including officers) of the Company and its subsidiaries who
are
resident and ordinarily resident in the United Kingdom and subject to United
Kingdom income taxation. The Board may establish qualifying periods of prior
employment for participation in connection with a particular offering under
the
UK Sharesave, provided that no such qualifying period may be more than five
years in duration. Currently, only employees and directors of certain of the
Company’s United Kingdom subsidiaries are eligible to participate in the UK
Sharesave. As of May 31, 2006, approximately 55 Participants employed by Company
subsidiaries in the United Kingdom participate in a current offering under
the
UK Sharesave and approximately 2,120 persons could participate were a new
offering made available by the Board. No executive officers or directors of
the
Company currently participate in the UK Sharesave.
The
Board
may, by resolution, alter the provisions of the UK Sharesave at any time,
provided that no alteration shall be made at any time when the UK Sharesave
is
approved by the United Kingdom’s HM Revenue and Customs without the prior
approval of the United Kingdom’s HM Revenue & Customs. A current offering
under the UK Sharesave will not be affected by the shareholder approval of
the
UK Sharesave, and that offering will remain outstanding until it matures and
Participants elect whether or not to exercise their option. The exercise price
for shares that may be purchased at the end of this current offering is $7.105.
The number of options outstanding that represent the right to purchase shares
at
the end of the offering is not determinable at this stage because the exchange
rate that will apply at that time is not known at this stage and also because
the Company cannot predict the level of participation by employees during the
remaining duration of the offering.
On
May
31, 2006, the closing price of the Class A Stock on the New York Stock Exchange
was $24.70.
The
Board
of Directors has recommended that the stockholders of the Company approve the
UK
Sharesave. A copy of the UK Sharesave is available from the Company’s Secretary
at 370 Woodcliff Drive, Suite 300, Fairport, New York 14450.
Certain
U. S. Federal Income Tax Consequences
Employees
of the Company who are citizens of the United States are subject to U.S. federal
income tax on their worldwide income even if they are residents of another
country. The following is a brief description of certain federal income tax
consequences under current law of participating in the UK Sharesave by any
participant who is resident and ordinarily resident in the U.K. while a U.S.
citizen. This summary description is not intended to be comprehensive. It does
not take into account
29
any
state, local, non-income, or non-U.S. tax consequences, any
provisions of an international tax treaty for the avoidance of double taxation,
nor any special tax credits, exclusions or deductions available to a U.S.
citizen who is a resident and employed outside the U.S.
Securities Authorized for Issuance under Equity Compensation Plans
There
would be no U.S. tax consequences to becoming eligible for, or making an
election to participate in, the UK Sharesave arrangement. Upon exercise of
an
option to purchase, a U.S. citizen would, for federal income tax purposes,
realize taxable income on the excess of the then-fair market value of the
shares
acquired less the purchase price paid. A U.S. citizen who subsequently sells
the
shares would realize gain or loss equal to the difference between the sale
proceeds and the individual’s tax basis in the shares. The individual’s tax
basis in the shares will equal the purchase price plus the amount includible
in
income upon the purchase of the shares. This gain or loss would be treated
as
either a capital or ordinary gain or loss depending on how long the individual
held the shares after exercising the option. Generally, if the individual
sells
the shares after holding them for more than one year, the gain or loss will
be
taxed at capital gains rates. If the employee sells the shares within one
year,
the gain generally will be taxed as ordinary income.
Securities Authorized for Issuance under Equity Compensation Plans
The
following table sets forth information with respect to the Company’s
compensation plans under which its equity securities may be issued, as of
February 28, 2006. The equity compensation plans approved by security holders
include the Company’s Long-Term Stock Incentive Plan, Incentive Stock Option
Plan and 1989 Employee Stock Purchase Plan. The Company’s UK Sharesave is an
equity compensation plan not approved by security holders. Under the UK
Sharesave, 2,000,000 shares of Class A Stock may be issued to eligible employees
and directors of the Company in offerings that typically extend from three
to
five years. Under the terms of the UK Sharesave, participants may purchase
shares of Class A Stock at the end of the offering period with payroll
deductions made during the offering period. The payroll deductions are kept
in
interest bearing accounts until the participant either exercises the option
at
the end of the offering or withdraws from the offering. The exercise price
for
each offering is fixed at the beginning of the offering by the committee
administering the plan and may be not less than 80% of the closing price of
the
stock on the day the exercise price is fixed. If a participant ceases to be
employed by the Company in certain circumstances set out in the UK Sharesave,
that participant may exercise the option during a period of time specified
in
the UK Sharesave or may withdraw from the offering. During the year ended
February 28, 2006, an aggregate of 92,622 shares were issued pursuant to the
UK
Sharesave.
Equity
Compensation Plan Information
|
(a)
|
(b)
|
(c)
|
|
|
Plan
Category
|
Number
of securities
to
be issued upon
exercise
of
outstanding
options,
warrants
and rights
|
Weighted-average
exercise
price of
outstanding
options,
warrants
and rights
|
Number
of securities
remaining
available for
future
issuance under
equity
compensation plans
(excluding
securities
reflected
in column (a))
|
|
Equity
compensation plans approved by
security
holders
|
23,652,958
|
$14.43
|
32,152,816
|
|
Equity
compensation plans not approved by security holders (1)
|
-
|
-
|
1,776,116
|
|
Total
|
23,652,958
|
$14.43
|
33,928,932
|
30
______________________
(1) The
indicated plan is the UK Sharesave which is the subject of Proposal 3 of this
Proxy Statement. There is currently one ongoing offering under the UK Sharesave.
The exercise price for shares that may be purchased at the end of this offering
is $7.105. The number of options outstanding that represent the right to
purchase shares at the end of the offering is not determinable at this stage
because the exchange rate that will apply at that time is not known at this
stage and because the Company cannot predict the level of participation by
employees during the remaining term of the offering.
Reasons
for Approval
The
Board
of Directors believes that it is desirable and in the best interests of the
Company and its stockholders to provide employees and directors with incentives
to maintain and enhance the Company’s long-term performance. While the Company’s
employees in the United States, Canada, Australia and New Zealand are eligible
to participate in the 1989 Employee Stock Purchase Plan, that opportunity is
not
available to United Kingdom employees. The Board of Directors believes it in
the
best interests of the Company to make similar opportunities available to all
employees to the extent administratively and economically feasible. Approval
of
the UK Sharesave will enable the Company to continue to provide such incentives.
Vote
Required
The
adoption of Proposal No. 3 to approve the UK Sharesave requires the affirmative
vote of a majority of the votes entitled to be cast by stockholders present
in
person or represented by proxy at the Meeting. With respect to this proposal,
holders of Class A Stock and Class B Stock will vote together as a single class
at the Meeting, with holders of Class A Stock having one (1) vote per share
and
holders of Class B Stock having ten (10) votes per share.
The
Board of Directors recommends that the stockholders approve The Constellation
Brands UK Sharesave Scheme. 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 2007 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 2007 Annual
Meeting of Stockholders, such proposal must be received by the Company no later
than February 7, 2007. Nominations for directors submitted by stockholders
must
also be received no later than February 7, 2007.
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 2007
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 7, 2007.
AVAILABLE
INFORMATION
The
Company has furnished its financial statements to stockholders by including
in
this mailing the Company’s 2006 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
31
the
fiscal year ended February 28, 2006, 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
stockholder 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 |
| /s/ David S. Sorce |
| DAVID S. SORCE, Secretary |
Fairport,
New York
June
7,
2006
32
Appendix
A
Constellation
Brands, Inc.
Board
of Directors’
Audit
Committee Charter
Composition
The
Audit
Committee of the Board of Directors shall be composed of at least three, but
not
more than five, members of the Board, each of whom shall meet the independence
and other qualification requirements of the New York Stock Exchange, Inc.,
the
Sarbanes-Oxley Act of 2002 (the “Act”),
and
all other applicable laws and regulations. Each member of the Audit Committee
shall be financially literate and at least one member of the Audit Committee
shall have accounting or related financial management expertise, as each such
qualification is interpreted by the Board of Directors in its business judgment.
To the extent practicable, at least one member of the Audit Committee shall
be
an “audit committee financial expert” as such term is defined by the Securities
and Exchange Commission (the “SEC”).
The
number of members of the Audit Committee shall be determined from time to time
by resolution of the Board of Directors. The Audit Committee and its Chairperson
shall be nominated by the Corporate Governance Committee and elected by the
Board.
Purposes
The
primary purposes of the Audit Committee shall be to:
1.
Perform
Board of Directors’ oversight responsibilities as they relate to the Company’s
accounting policies, internal controls and financial reporting practices,
including, among other things, monitoring:
|
·
|
the
integrity of the Company’s financial
statements,
|
|
·
|
the
Company’s compliance with legal and regulatory
requirements,
|
|
·
|
the
qualifications and independence of the independent accountants,
and
|
|
·
|
the
performance of the Company’s internal audit function and the Company’s
independent accountants;
|
2.
Maintain,
through regularly scheduled meetings, a line of communication between the Board
of Directors and the Company’s financial management, internal auditors and
independent accountants; and
3. Prepare,
with such assistance from management as it determines is appropriate, the report
to be included in the Company’s annual proxy statement, as required by the SEC’s
rules.
A-1
Responsibilities
The
Audit
Committee will:
1.
Oversee
the external audit coverage. The Company's independent accountants are
ultimately accountable to the Audit Committee, which has the authority and
direct responsibility to appoint, retain, compensate, evaluate and terminate
the
independent accountants. In connection with its oversight of the external audit
coverage, the Audit Committee will:
|
·
|
Have
the direct authority to approve the engagement letter and the fees
to be
paid to the independent
accountants;
|
|
·
|
Pre-approve
all audit and non-audit services to be performed by the independent
accountants and the related fees for such services (subject to the
de
minimis
exceptions set forth in the Act and in SEC rules
thereunder);
|
|
·
|
Obtain
confirmation and assurance as to the independent accountants’
independence, including ensuring that they submit on a periodic basis
(not
less than annually) to the Audit Committee a formal written statement
delineating all relationships between the independent accountants
and the
Company. The Audit Committee is responsible for actively engaging
in a
dialogue with the independent accountants with respect to any disclosed
relationships or services that may impact the objectivity and independence
of the independent accountants and for taking appropriate action
in
response to the independent accountants’ report to satisfy itself of their
independence;
|
|
·
|
At
least annually, obtain and review a report by the independent accountants
describing: the firm’s internal quality-control procedures; any material
issues raised by the most recent internal quality-control review,
or peer
review, of the firm, or by any inquiry or investigation by governmental
or
professional authorities, within the preceding five years, respecting
one
or more independent audits carried out by the firm, and any steps
taken to
deal with any such issues; and, to assess the independent accountants’
independence, all relationships between the independent accountants
and
the Company;
|
|
·
|
Meet
with the independent accountants prior to the annual audit to discuss
planning and staffing of the audit;
|
|
·
|
Review
and evaluate the performance of the independent accountants, as the
basis
for any decision to reappoint or replace the independent
accountants;
|
|
·
|
Set
clear hiring policies for employees or former employees of the independent
accountants, as required by applicable laws and regulations;
and
|
|
·
|
Ensure
the regular rotation of audit partners on the audit engagement, as
required by applicable laws and regulations, and consider whether
rotation
of the independent accountant is required to ensure
independence.
|
2.
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
|
·
|
Discuss
with the independent accountants the matters required to be discussed
by
Statement on Auditing Standards No. 61 (as may be modified or
supplemented) relating to the conduct of the
audit;
|
|
·
|
Review
significant changes in accounting or auditing
policies;
|
|
·
|
Review
with the independent accountants any problems or difficulties encountered
in the course of their audit, including any change in the scope of
the
planned audit work and any restrictions placed on the scope of such
work,
and management’s response to such problems or difficulties; and
|
|
·
|
Review
with the independent accountants, management, and the senior internal
auditing executive, the condition of the Company’s internal controls, and
any significant findings and recommendations with respect to such
controls.
|
3.
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.
A-3
10. Meet
periodically with the Company’s General Counsel to discuss legal, regulatory and
corporate compliance matters that may have a significant impact on the
Company.
11. Obtain
advice and assistance from outside legal, accounting or other advisers, and
determine compensation for such services, as the Audit Committee deems necessary
to carry out its duties.
12. Review
internal audit coverage. In connection with this responsibility, the Audit
Committee will:
|
·
|
Meet
periodically with management and the senior internal auditing executive
to
review and assess the Company’s major financial risk exposures and the
manner in which such risks are being monitored and controlled; and
discuss
guidelines and policies to govern the process by which risk assessment
and
management is undertaken;
|
|
·
|
Review,
in consultation with management and the senior internal auditing
executive, the plan and scope of internal audit activities;
and
|
|
·
|
Review
significant reports to management prepared by the internal auditing
department and management’s responses to such
reports.
|
13. Resolve
any differences in financial reporting between management and the independent
accountants.
14. Establish
procedures for (a) receipt, retention and treatment of complaints received
by
the Company regarding accounting, internal accounting controls or auditing
matters and (b) the confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters.
15. Meet
periodically (not less than annually) in separate executive session with each
of
management, the senior internal auditing executive, and the independent
accountants.
16. Review
and reassess the adequacy of this Charter annually and propose to the Board
any
recommended changes.
17. Report
on
Audit Committee activities and issues to the Board regularly.
18. Prepare,
with such assistance from management as it determines is appropriate, the report
of the Audit Committee required by the rules of the SEC to be included in the
proxy statement for each annual meeting of stockholders.
19.
Provide for an annual performance evaluation of the Audit Committee.
Procedures
1.
Meetings
The
Audit
Committee shall meet at least quarterly, preferably in conjunction with regular
Board meetings. Meetings may, at the discretion of the Audit Committee, include
members of management, independent consultants, and such other persons as
the
Audit Committee shall determine. The Audit Committee, in discharging its
responsibilities, may meet privately for advice and counsel with independent
consultants, lawyers, or any other persons, including associates of the Company,
knowledgeable in the matters under consideration. The Audit
A-4
Committee
may also meet
by telephone conference call or by any other means permitted by law or the
Company’s By-laws.
2.
Action
A
majority of the members of the entire Audit Committee shall constitute a quorum.
The Audit Committee shall act on the affirmative vote of a majority of members
present at a meeting at which a quorum is present. Without a meeting, the Audit
Committee may act by unanimous written consent of all members. However, the
Audit Committee may delegate to one or more of its members the authority to
grant pre-approvals of audit and permitted non-audit services, provided the
decision is reported to the full Audit Committee at its next scheduled
meeting.
3.
Funding
The
Company shall provide for appropriate funding, as determined by the Audit
Committee: (a) for payment of compensation to outside legal, accounting or
other advisors
employed by the Audit Committee; and (b) for ordinary administrative expenses
of
the Audit Committee that are necessary or appropriate in carrying out its
duties.
4. Rules
The
Audit
Committee shall determine, as appropriate, its own rules and procedures,
consistent with this Charter and the By-laws of the Company.
5.
Chairperson
Responsibilities
The
Chairperson of the Audit Committee shall report to the Board on the Committee’s
determinations and shall present recommendations for approval whenever necessary
or desirable.
*************
While
the
Audit Committee has the responsibilities and powers set forth in this Charter,
it is not the duty of the Audit Committee to plan or conduct audits or to
determine that the Company’s financial statements are complete and accurate and
are in accordance with generally accepted accounting principles. This is
the
responsibility of management and the independent accountants.
*************
Adopted:
September 25, 2003
Confirmed:
December 19, 2003
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:
|
A.
|
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.
|
B-1
|
B.
|
The
following commercial or charitable relationships will not be considered
to
be material relationships that would impair a director’s independence: (i)
an immediate family member of the director is or was employed by
the
Company other than as an executive officer; (ii) if the director
or an
immediate family member of the director received $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.
|
|
C.
|
In
assessing the materiality of a director’s relationship not covered by
paragraph B set forth above, the directors at the time sitting on
the
Board who are independent under the standards set forth in paragraphs
A
and B above shall determine whether the relationship is material
and,
therefore, whether the director would be independent. In such instance,
the Company will explain in the next proxy statement the basis for
any
Board determination that a relationship was immaterial despite the
fact it
did not meet the categorical standards of immateriality in paragraph
B
above.
|
|
D.
|
In
accordance with the NYSE’s Transition Rules, the three (3) year look back
period referenced in paragraph A above shall be a one (1) year look
back
period until November 4, 2004.
|
A
“Non-Management
Director” is
a
director who is not a Company officer (as that term is defined in Rule 16a-1(f)
under the Securities Act of 1933), and includes such directors who are not
independent by virtue of a material relationship, former status or family
membership, or for any other reason. The group of Non-Management Directors
includes both Independent Directors and those Non-Management Directors who
do
not qualify as Independent Directors.
A
“Management
Director”
is
an
officer (as that term is defined in Rule 16a-1(f) under the Securities Act
of
1933) of the Company who serves on the Board.
B-2
[THIS
PAGE INTENTIONALLY LEFT BLANK]
|
|
|
|
P
R
O
X
Y
|
CONSTELLATION
BRANDS, INC.
PROXY
FOR CLASS A COMMON STOCK
The
undersigned hereby appoints David S. Sorce and Thomas S. Summer,
or any
one of them, proxies for the undersigned with full power of
substitution
to vote all shares of CONSTELLATION BRANDS, INC. (the "Company")
that the
undersigned would be entitled to vote at the Annual Meeting
of
Stockholders of the Company to be held at the Rochester Riverside
Convention Center, 123 Main Street, Rochester, New York, on
Thursday, July
27, 2006, at 11:00 a.m. (local time), and any adjournment thereof
(the
"Meeting").
Class
A Stockholders, voting as a separate class, are entitled to
elect two
directors at the Meeting. Class A Stockholders and Class B
Stockholders,
voting as a single class, are entitled to elect five directors
at the
Meeting. Please refer to the Proxy Statement for details. Your
shares of
Class A Common Stock appear on the back of this card. PLEASE SIGN ON
THE BACK.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY. THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED
BY THE
UNDERSIGNED. THIS PROXY REVOKES ANY PRIOR PROXY GIVEN BY THE
UNDERSIGNED.
UNLESS AUTHORITY TO VOTE FOR ONE OR MORE OF THE NOMINEES IS
SPECIFICALLY
WITHHELD, THE SHARES REPRESENTED BY A SIGNED PROXY WILL BE
VOTED
FOR
THE ELECTION OF ALL NOMINEES AS DIRECTORS AND, UNLESS OTHERWISE
SPECIFIED,
THE SHARES REPRESENTED BY A SIGNED PROXY WILL BE VOTED
FOR
PROPOSALS 2 AND 3.
TO
APPROVE THE BOARD OF DIRECTORS' RECOMMENDATIONS, SIMPLY SIGN
ON THE
BACK.
YOU NEED NOT MARK ANY BOXES.
CONTINUED
AND TO BE SIGNED ON REVERSE SIDE
Address
Change/Comments (Mark the corresponding box on the reverse
side)
|
----------------------------------------------------------------------------------------------------
FOLD
AND DETACH HERE
|
Please
Mark
Here
for
Address
Change
SEE
REVERSE SIDE
|
[
]
|
|
Please
mark
your
votes as
indicated
in
this
example
|
[X]
|
|
1. Election
of Directors: To elect Directors as set forth in the Proxy
Statement.
|
FOR
ALL
NOMINEES
(except
as
noted
below)
|
[
]
|
WITHHELD
FROM
ALL
NOMINEES
|
[
]
|
|
|
Class
A Stockholders
are entitled to vote for the following:
01 Barry
A. Fromberg,
02
Jeananne K. Hauswald,
03
James A. Locke III,
04
Richard Sands,
05
Robert Sands,
06
Thomas C. McDermott,
07
Paul L. Smith
|
_____________________________________________
Vote
withheld from nominee(s) identified on above line.
|
FOR
|
AGAINST
|
ABSTAIN
|
||
| 2. |
Proposal
to ratify the selection of KPMG LLP, Certified Public Accountants,
as the
Company's
independent
public accountants for the fiscal year ending February 28,
2007.
|
[
]
|
[
]
|
[
]
|
| 3. | Proposal to approve The Constellation Brands UK Sharesave Scheme. |
[
]
|
[
]
|
[
]
|
| 4. | In their discretion, the proxies are authorized to vote upon such other business not known at the time of the solicitation of this Proxy as may properly come before the Meeting or any adjournment thereof. | |||
The
undersigned acknowledges receipt with this Proxy of a copy of the Notice
of
Annual Meeting and Proxy Statement for the Company’s 2006 Annual Meeting that
describe more fully the proposals set forth herein.
|
Signature
_________________
|
Date
________
|
Signature
_________________
|
Date
________
|
NOTE:
Please date this Proxy and sign your name above exactly as it appears
hereon.
Executors, administrators, trustees, etc. should so indicate when signing.
If
the stockholder is a corporation or other entity, the full entity name
should be
inserted and the Proxy signed by a duly authorized representative of
the entity,
indicating his or her title or capacity.
----------------------------------------------------------------------------------------------
FOLD
AND DETACH HERE
|
Please
note that, this year, there are two (2)
proxy cards, one for Class A Stockholders and one for Class B
Stockholders. Stockholders who receive a Class A Common Stock proxy
card and a Class B Common Stock proxy card must sign and return
BOTH proxy cards in accordance with their respective instructions
to ensure the voting of shares of each class
owned.
|
|
|
|
|
P
R
O
X
Y
|
CONSTELLATION
BRANDS, INC.
PROXY
FOR CLASS B COMMON STOCK
The
undersigned hereby appoints David S. Sorce and Thomas
S. Summer, or any
one of them, proxies for the undersigned with full
power of substitution
to vote all shares of CONSTELLATION BRANDS, INC. (the
"Company") that the
undersigned would be entitled to vote at the Annual
Meeting of
Stockholders of the Company to be held at the Rochester
Riverside
Convention Center, 123 Main Street, Rochester, New
York, on Thursday, July
27, 2006, at 11:00 a.m. (local time), and any adjournment
thereof (the
"Meeting").
Class
A Stockholders, voting as a separate class, are entitled
to elect two
directors at the Meeting. Class A Stockholders and
Class B Stockholders,
voting as a single class, are entitled to elect five
directors at the
Meeting. Please refer to the Proxy Statement for details.
Your shares
of Class B Common Stock appear on the back of this card.
PLEASE SIGN
ON THE BACK.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY. THE
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED
BY THE
UNDERSIGNED. THIS PROXY REVOKES ANY PRIOR PROXY GIVEN
BY THE UNDERSIGNED.
UNLESS AUTHORITY TO VOTE FOR ONE OR MORE OF THE NOMINEES
IS SPECIFICALLY
WITHHELD, THE SHARES REPRESENTED BY A SIGNED PROXY
WILL BE VOTED
FOR
THE ELECTION OF ALL NOMINEES AS DIRECTORS AND, UNLESS
OTHERWISE SPECIFIED,
THE SHARES REPRESENTED BY A SIGNED PROXY WILL BE VOTED
FOR
PROPOSALS 2 AND 3.
TO
APPROVE THE BOARD OF DIRECTORS' RECOMMENDATIONS, SIMPLY
SIGN ON THE
BACK.
YOU NEED NOT MARK ANY BOXES.
CONTINUED
AND TO BE SIGNED ON REVERSE SIDE
Address
Change/Comments (Mark the corresponding box on the
reverse
side)
|
-------------------------------------------------------------------------------------------
FOLD
AND DETACH HERE
|
Please
Mark
Here
for
Address
Change
SEE
REVERSE SIDE
|
[
]
|
|
Please
mark
your
votes as
indicated
in
this
example
|
[X]
|
|
1. Election
of Directors: To elect Directors as set forth in the
Proxy
Statement.
|
FOR
ALL
NOMINEES
(except
as
noted
below)
|
[
]
|
WITHHELD
FROM
ALL
NOMINEES
|
[
]
|
|
|
Class B
Stockholders
are entitled to vote for the following:
01 Barry
A. Fromberg,
02
Jeananne K. Hauswald,
03
James A. Locke III,
04
Richard Sands,
05
Robert Sands
|
_____________________________________________
Vote
withheld from nominee(s) identified on above line.
|
FOR
|
AGAINST
|
ABSTAIN
|
||
| 2. |
Proposal
to ratify the selection of KPMG LLP, Certified Public
Accountants, as the
Company's independent
public accountants for the fiscal year ending February
28,
2007.
|
[
]
|
[
]
|
[
]
|
| 3. | Proposal to approve The Constellation Brands UK Sharesave Scheme. |
[
]
|
[
]
|
[
]
|
| 4. | In their discretion, the proxies are authorized to vote upon such other business not known at the time of the solicitation of this Proxy as may properly come before the Meeting or any adjournment thereof. | |||
The
undersigned acknowledges receipt with this Proxy of a copy of
the Notice of
Annual Meeting and Proxy Statement for the Company’s 2006 Annual Meeting that
describe more fully the proposals set forth herein.
|
Signature
_________________
|
Date
________
|
Signature
_________________
|
Date
________
|
NOTE:
Please date this Proxy and sign your name above exactly as it
appears hereon.
Executors, administrators, trustees, etc. should so indicate
when signing. If
the stockholder is a corporation or other entity, the full entity
name should be
inserted and the Proxy signed by a duly authorized representative
of the entity,
indicating his or her title or capacity.
----------------------------------------------------------------------------------------------------------
FOLD
AND DETACH HERE
|
Please
note that, this year, there are two (2)
proxy cards, one for Class A Stockholders and one for Class B
Stockholders. Stockholders who receive a Class A Common Stock proxy
card and a Class B Common Stock proxy card must sign and return
BOTH proxy cards in accordance with their respective
instructions
to ensure the voting of shares of each class
owned.
|
CDI
Voting Instruction Form
[LOGO]
CONSTELLATION
| Constellation Brands, Inc. |
All
correspondence to:
|
|
|
ARBN
103 442 646
Mark this box with an 'X' if you have made any changes
to your address
details [ ]
|
Computershare
Investor Services Pty Limited
GPO
Box 1903 Adelaide
South
Australia 5001 Australia
Enquiries
(within Australia) 1800 030 606
(outside
Australia) 61 3 9415 4000
Facsimile
61 8 8236 2305
www.computershare.com
|
Annual
General Meeting - 27 July 2006
Your
Voting Instructions are being sought so that CHESS Depositary
Nominees Pty Ltd
may respond to a proxy solicitation on behalf of the
Board
of
Directors of
Constellation Brands, Inc.
Voting
Instructions to CHESS Depository Nominees Pty Ltd
I/We
being a
holder of CHESS Depositary Interests of the above Company hereby
direct,
|
[
]
|
CHESS
Depositary
Nominees
Pty Ltd (CDN)
(mark
with an 'X')
|
OR
|
__________________________________________
|
Write
here the name of the person you are appointing if this
person is
someone other than CDN.
|
to
vote the
shares underlying my/our holding at the Annual General Meeting
in respect of the
resolutions outlined below. If you do not complete one of the above
boxes, CDN
will vote the shares represented by those CDI's as directed below.
CHESS
Depositary Nominees Pty Ltd will vote as directed. Please mark
with an [X] to
indicate your directions.
1.
Election of Directors as set forth in the Proxy
Statement.
|
For
|
Withheld
|
||
| 1.1 | Election of Barry A. Fromberg |
[
]
|
[
]
|
| 1.2 | Election of Jeananne K. Hauswald |
[
]
|
[
]
|
| 1.3 | Election of James A. Locke III |
[
]
|
[
]
|
| 1.4 | Election of Richard Sands |
[
]
|
[
]
|
| 1.5 | Election of Robert Sands |
[
]
|
[
]
|
|
1.6
|
Election
of Thomas C. McDermott
|
[
]
|
[
]
|
|
1.7
|
Election
of Paul L. Smith
|
[
]
|
[ ]
|
|
For
|
Against
|
Abstain*
|
||
|
2.
|
Proposal
to ratify the selection of KPMG LLP, Certified Public
Accountants, as the
Company's independent public accountants for the fiscal
year ending
February 28, 2007.
|
[
]
|
[
]
|
[
]
|
|
3.
|
Proposal
to approve The Constellation Brands UK Sharesave Scheme.
|
[
]
|
[
]
|
[
]
|
*
If you
mark the Abstain box for this item, you are directing your proxy
to abstain from
voting on your behalf, therefore your votes will not be counted
in computing the
required majority.
By
execution
of this CDI Voting Instruction Form the undersigned hereby authorises
CHESS
Depositary Nominees Pty Ltd to appoint such proxies or their substitutes
to
vote as
directed above and in their discretion on such other business as
may properly
come before the meeting.
If
you do not mark either the ‘FOR’ or ‘AGAINST’ box your vote will not be counted.
PLEASE
SIGN HERE This section
must be signed in accordance
with the
instructions overleaf to enable your directions to be
implemented.
| Individual or Securityholder 1 | Securityholder 2 | Securityholder 3 |
|
____________________________________
|
___________________________________
|
____________________________________
|
| Sole Director and Sole Company Secretary | Director | Director/Company Secretary |
/
/
____________________________________
____________________________ _____________________
Contact Name
Contact Daytime
Telephone
Date
Instructions
for Completion of CDI Voting Instruction Form
Your
vote is important
Each
Constellation Brands, Inc. CHESS Depositary Interest (CDI) is equivalent
to one
tenth of one share of Class A Common Stock of Constellation Brands,
Inc., so
that every 10 CDIs that you own at 31 May 2006 (record date) entitles
you to
direct one vote. Class A Stockholders, voting as a separate class,
are entitled
to elect two directors at the annual general meeting of Constellation
Brands,
Inc. Class A Stockholders and Class B Stockholders, voting as a
single class,
are entitled to elect five directors at that meeting. Please refer
to the Proxy
Statement for details.
You
can
vote by completing, signing and returning your CDI Voting Instruction
Form.
The CDI Voting Instruction Form gives you two options:
|
(a)
|
You
can give your voting instructions to CHESS Depositary
Nominees Pty Ltd
(CDN), which will vote the underlying shares on your
behalf;
or
|
|
(b)
|
You
can instruct CDN to appoint you or your nominee as proxy
to vote the
shares underlying your CDIs in person at the annual general
meeting of
Constellation Brands, Inc.
|
In
either
case, you need to return your completed CDI Voting Instruction
Form so that it
is received at the address shown on the Form by not later than
5pm Australian
time on 24 July 2006. That will give CHESS Depositary Nominees
Pty Ltd enough
time to tabulate all CHESS Depositary Interest votes, to vote the
underlying
shares and to appoint the proxies.
Directing
CDN to Vote
If
you wish
to direct CDN to vote the shares underlying your CDIs, you may
do so by placing
a cross in the box next to CDN's name at the top of the form and
then placing a
mark in one of the boxes opposite each item of business. All your
CDIs will be
voted in accordance with such a direction. If you mark more than
one box on an
item your vote on that item will be invalid.
If
you sign
and return the CDI Voting Instruction Form and cross the box to
direct CDN how
to vote but do not indicate next to the items of business on the
form how your
votes are to be directed, the shares represented by those CDIs
will not be voted
by CDN.
If
you sign
and return the CDI Voting Instruction Form but you do not cross
the box to
direct CDN how to vote and you do not nominate a proxy but you
do indicate next
to the items of business on the form how your votes are to be directed,
the
shares represented by those CDIs will be voted by CDN.
Directing
CDN to Appoint a Proxy
If
you wish
to direct CDN to appoint a proxy to vote the shares underlying
your CDIs in
person at the annual general meeting of Constellation Brands, Inc.,
you need to
fill in the name of the person who is to be appointed as proxy
in the box at the
top of the form. You may direct CDN to appoint you as the proxy
or your
nominee.
If
you
direct CDN to appoint a proxy to vote the shares underlying your
CDIs in person
at the annual general meeting of Constellation Brands, Inc., the
proxy appointed
may vote as the proxy wishes.
If
CDN does
not receive a CDI Voting Instruction Form from a holder of Constellation
CDIs
the shares represented by those Constellation CDIs will not be
voted.
If
you have
completed and returned your CDI Voting Instruction Form, you may
revoke the
directions contained therein by a written notice of revocation
to Computershare
Investor Services Pty Limited no later than 5pm Australian time
on 24 July 2006
bearing a later date than the CDI Voting Instruction Form.
Signature(s)
of CHESS Depositary Interest Holders
Each
holder
must sign this form. If your CDIs are held in joint names, all
holders must sign
in the boxes. If you are signing as an Attorney, then the Power
of Attorney must
have been noted by the Company's Australian Registry or a certified
copy of it
must accompany this form.
Only
duly
authorised officer/s can sign on behalf of a company. Please sign
in the boxes
provided, which state the office held by the signatory, ie. Sole
Director and
Sole Company Secretary, or Director, or Director and Company
Secretary.
If
you
require further information on how to complete the CDI Voting Instruction
Form,
telephone the Registry on 1800 030 606.
Lodgement
of Notice
CDI
Voting
Instruction Forms must be returned to Computershare Investor Services
Pty
Limited, Level 5, 115 Grenfell Street, Adelaide, SA 5000 Australia
or GPO Box
1326 Adelaide SA 5001 Australia.
For
assistance please contact Computershare Investor Services Pty
Limited
on
1800 030 606
ATTACHMENT
1
EXPLANATORY
NOTE: The Constellation Brands UK Sharesave
Scheme is filed herewith pursuant to Instruction 3 to Item 10 of Schedule
14A and is not part of the Proxy Statement.
|
THE
CONSTELLATION BRANDS UK SHARESAVE SCHEME
Changes
to Scheme name and to limit (Rule 10.1) to reflect change
of Company name
and
stock split approved by Revenue on 25 March 2002
Board
resolved to amend limit in Rule 10.1 further with effect
from May 13 2002
(subject
to Revenue approval which was obtained on 1 May
2002)
Changes
to limit (Rule 10.1) to remove discretion to exceed the
cap on the number
of
shares
with consequent changes to rules 4.1 and 5.1 (subject to
Inland Revenue
and
Company
Stockholder approvals, which were obtained
on
4 May 2006 and [27] July 2006, respectively)
|
|||
Date
adopted: 29 October 1999
Inland
Revenue ref: SRS 2318
|
CONTENTS
|
||
|
Clause
|
Page
|
|
|
1.
|
DEFINITIONS AND INTERPRETATION.............................................................................................................................
|
1
|
|
2.
|
ELIGIBILITY.........................................................................................................................................................................
|
2
|
|
3.
|
GRANT OF OPTIONS...........................................................................................................................................................
|
3
|
|
4.
|
LIMIT....................................................................................................................................................................................
|
6
|
|
5.
|
EXERCISE OF OPTIONS......................................................................................................................................................
|
6
|
|
6.
|
TAKEOVER, RECONSTRUCTION AND WINDING UP.....................................................................................................
|
9
|
|
7.
|
VARIATION OF CAPITAL..................................................................................................................................................
|
10
|
|
8.
|
ALTERATIONS....................................................................................................................................................................
|
11
|
|
9.
|
MISCELLANEOUS...............................................................................................................................................................
|
11
|
|
10.
|
AVAILABLE
SHARES.........................................................................................................................................................
|
12
|
| 1. |
DEFINITIONS AND INTERPRETATION
|
| 1.1 |
In
this Scheme, unless the context otherwise
requires:-
|
"3-Year
Option",
"5-Year
Option"
and
"7-Year
Option"
have
the meanings given in sub-rule 3.2 below;
"Associated
Company"
means
an associated company within the meaning given to that expression
by section
187(2) of the Taxes Act 1988 for the purposes of paragraph 23 of
Schedule
9;
"the
Board"
means
the board of directors of the Company or a committee appointed by
them;
"Bonus
Date",
in
relation to an option, means:-
| 1.1.1 |
in
the case of a 3-Year Option, the earliest date on which
the bonus is
payable,
|
| 1.1.2 |
in
the case of a 5-Year Option, the earliest date on which
a bonus is
payable, and
|
| 1.1.3 |
in
the case of a 7-Year Option, the earliest date on which
the maximum bonus
is payable;
|
and
for
this purpose "payable" means payable under the Savings Contract made
in
connection with the option;
"Common
Stock"
means
the Class A Common Stock of the Company, par value $0.01 per share;
"the
Company"
means
Constellation Brands, Inc., a company organised under the laws of
the State of
Delaware in the USA;
"the
Grant Day"
shall
be construed in accordance with sub-rule 2.1 below;
"Participant"
means a
person who holds an option granted under this Scheme;
"Participating
Company"
means
the Company or any Subsidiary to which the Board has resolved that
this Scheme
shall for the time being extend;
"Savings
Body"
means
any building society, institution authorised under the Banking Act
1987 or
relevant European institution (within the meaning of Schedule 15A
to the Taxes
Act 1988) with which a Savings Contract can be made;
"Savings
Contract"
means
an agreement to pay monthly contributions under the terms of a certified
contractual savings scheme, within the meaning of section 326 of
the Taxes Act
1988, which has been approved by the Inland Revenue for the purposes
of Schedule
9;
"Schedule
9"
means
Schedule 9 to the Taxes Act 1988;
-
1 -
"Subsidiary"
means a
body corporate which is a subsidiary of the Company (within the meaning
of
section 736 of the Companies Act 1985) and of which the Company has
control
(within the meaning of section 840 of the Taxes Act 1988);
"the
Taxes Act 1988"
means
the Income and Corporation Taxes Act 1988;
and
expressions not otherwise defined in this Scheme have the same meanings
as they
have in Schedule 9.
| 1.2 |
Any
reference in this Scheme to any enactment includes a reference
to that
enactment as from time to time modified, extended or
re-enacted.
|
| 1.3 |
Expressions
in italics are for guidance only and do not form part of
this
Scheme.
|
| 2. |
ELIGIBILITY
|
| 2.1 |
Subject
to sub-rule 2.5 below, an individual is eligible to be
granted an option
on any day ("the
Grant Day")
if (and only if):-
|
| 2.1.1 |
he
is on the Grant Day an employee or director of a company
which is a
Participating Company; and
|
| 2.1.2 |
he
either satisfies the conditions specified in sub-rule 2.2
below or is
nominated by the Board for this
purpose.
|
| 2.2 |
The
conditions referred to in sub-rule 2.1.2 above are that
the
individual:-
|
| 2.2.1 |
shall
at all times during the qualifying period have been an
employee (but not a
director) or a full-time director of the Company or a company
which was
for the time being a Subsidiary;
and
|
| 2.2.2 |
was
at the relevant time chargeable to tax in respect of his
employment or
office under Case I of Schedule
E.
|
| 2.3 |
For
the purposes of sub-rule 2.2
above:-
|
| 2.3.1 |
the
relevant time
is
the date on which any invitation is given under Rule 3.6
below or such
other time during the period of 5 years ending with the
Grant Day as the
Board may determine (provided that no such determination
may be made if it
would have the effect that the qualifying period would
not fall within
that 5-year period);
|
| 2.3.2 |
there
shall be no qualifying period prior to the relevant time
unless the Board
determines otherwise (provided that no determination may
be made if it
would have the effect that the qualifying period would
not fall within the
said 5-year period);
|
-
2 -
| 2.3.3 |
an
individual shall be treated as a full-time
director
of
a company if he is obliged to devote to the performance
of the duties of
his office or employment with the company not less than
25 hours a
week;
|
| 2.3.4 |
Chapter
I of Part XIV of the Employment Rights Act 1996 shall have
effect, with
any necessary changes, for ascertaining the length of the
period during
which an individual shall have been an employee or a full-time
director
and whether he shall have been an employee or a full-time
director at all
times during that period.
|
| 2.4 |
Any
determination of the Board under paragraph 2.3.1 or 2.3.2
above shall have
effect in relation to every individual for the purpose
of ascertaining
whether he is eligible to be granted an option on the Grant
Day.
|
| 2.5 |
An
individual is not eligible to be granted an option at any
time if he is at
that time ineligible to participate in this Scheme by virtue
of paragraph
8 of Schedule 9 (material
interest in close company).
|
| 3. |
GRANT OF OPTIONS
|
| 3.1 |
Subject
to Rule 4 below, the Board may grant an option to acquire
shares of Common
Stock which satisfy the requirements of paragraphs 10 to
14 of Schedule
9
(fully paid up, unrestricted, ordinary share capital),
upon the terms set out in this Scheme, to any individual
who:-
|
| 3.1.1 |
is
eligible to be granted an option in accordance with Rule
2 above,
and
|
| 3.1.2 |
has
applied for an option and proposed to make a Savings Contract
in
connection with it (with a Savings Body approved by the
Board) in the form
and manner prescribed by the Board,
|
and
for
this purpose an option to acquire includes an option to purchase
and an option
to subscribe.
| 3.2 |
The
type of option to be granted to an individual, that is
to say a 3-Year
Option, a 5-Year Option or a 7-Year Option, shall be determined
by the
Board or, if the Board so permits, by the individual; and
for this
purpose:-
|
| 3.2.1 |
a
3-Year
Option
is
an option in connection with which a three year Savings
Contract is to be
made and in respect of which, subject to sub-rule 4.3 below,
the repayment
is to be taken as including the
bonus;
|
| 3.2.2 |
a
5-Year
Option
is
an option in connection with which a five year Savings
Contract is to be
made and in respect of which, subject to sub-rule 4.3 below,
the repayment
is to be taken as including a bonus other than the maximum
bonus;
and
|
-
3 -
| 3.2.3 |
a
7-Year
Option
is
an option in connection with which a five year Savings
Contract is to be
made and in respect of which the repayment is to be taken
as including the
maximum bonus.
|
| 3.3 |
The
amount of the monthly contribution under the Savings Contract
to be made
in connection with an option granted to an individual shall,
subject to
sub-rule 4.3 below, be the amount which the individual
shall have
specified in his application for the option that he is
willing to pay or,
if lower, the maximum permitted amount, that is to say,
the maximum amount
which:-
|
| 3.3.1 |
when
aggregated with the amount of his monthly contributions
under any other
Savings Contract linked to this Scheme or to any other
savings-related
share option scheme approved under Schedule 9, does not
exceed £250 or
such other maximum amount as may for the time being be
permitted by
paragraph 24(2)(a) of Schedule 9;
|
| 3.3.2 |
does
not exceed the maximum amount for the time being permitted
under the terms
of the Savings Contract; and
|
| 3.3.3 |
when
aggregated with the amount of his monthly contributions
under any other
Savings Contract linked to this Scheme, does not exceed
any maximum amount
determined by the Board.
|
| 3.4 |
The
number of shares of Common Stock in respect of which an
option may be
granted to any individual shall be the maximum number which
can be paid
for, at the price determined under sub-rule 3.5 below,
with monies equal
to the amount of the repayment due on the Bonus Date under
the Savings
Contract to be made in connection with the
option.
|
| 3.5 |
The
price at which shares of Common Stock may be acquired by
the exercise of
options of a particular type granted on any day shall be
a price
denominated in US dollars which is determined by the Board
and stated on
that day, provided that:-
|
| 3.5.1 |
if
shares of Common Stock are quoted on the New York Stock
Exchange, the
price shall not be less than the Specified Percentage of
the closing price
of shares of Common Stock on the New York Stock Exchange
(as reported by
such Exchange) on:
|
| (a) |
the
dealing day last preceding the date on which invitations
to apply for the
options were given pursuant to sub-rule 3.6 below,
or
|
| (b) |
if
that dealing day does not fall within the period of 30
days (or, where
sub-rule 4.3 below applies, 42 days) ending with the day
on which the
options are granted or falls prior to the date on which
the Company last
announced its results, on the dealing day last preceding
the day on which
the options
|
-
4 -
|
are
granted or such other dealing day as may be agreed with
the Inland
Revenue;
|
| 3.5.2 |
if
sub-rule 3.5.1 above does not apply, the price shall not
be less than the
Specified Percentage of the market value (within the meaning
of Part VIII
of the Taxation of Chargeable Gains Act 1992) of shares
of Common Stock,
as agreed in advance for the purposes of this Scheme with
the Shares
Valuation Division of the Inland Revenue, on
-
|
| (a) |
the
date on which invitations to apply for the options were
given pursuant to
sub-rule 3.6 below, or
|
| (b) |
if
that date does not fall within the period of 30 days (or,
where sub-rule
4.3 below applies, 42 days) ending with the day on which
the options are
granted, on the day on which the options are granted or
such other day as
may be agreed with the Inland Revenue;
and
|
| 3.5.3 |
in
the case of an option to acquire shares of Common Stock
only by
subscription, the price shall not be less than the nominal
value of those
shares;
|
and
for
this purpose "the
Specified Percentage"
is
80 per cent. or such other percentage as may be specified in paragraph
25
of Schedule 9.
| 3.6 |
The
Board shall ensure that, in relation to the grant of options
on any
day:-
|
| 3.6.1 |
every
individual who is eligible to be granted an option on that
day has been
given an invitation;
|
| 3.6.2 |
the
invitation specifies a period of not less than 14 days
in which an
application for an option may be made;
and
|
| 3.6.3 |
every
eligible individual who has applied for an option as mentioned
in sub-rule
3.1 above is in fact granted an option on that
day.
|
| 3.7 |
An
invitation to apply for an option may only be given within
the period of
10 years beginning with the date on which this Scheme is
adopted by the
Company.
|
| 3.8 |
An
option granted to any person:-
|
| 3.8.1 |
shall
not, except as provided in sub-rule 5.3 below, be capable
of being
transferred by him; and
|
| 3.8.2 |
shall
lapse forthwith if he is adjudged
bankrupt.
|
-
5 -
| 4. |
LIMIT
|
| 4.1 |
No
options shall be granted to acquire a number of shares
of Common Stock
which exceeds any number ("the Limit") determined by the
Board using the
sterling/US dollar exchange rate at the date the invitation
to enter a
Savings Contract closes.
|
| 4.2 |
If
the grant of options on any day would but for this sub-rule
cause the
Limit to be exceeded, the provisions set out in sub-rule
4.3 below shall
be successively applied (in the order in which they are
set out) so far as
is necessary to ensure that the Limit is not
exceeded.
|
| 4.3 |
Those
provisions are:-
|
| 4.3.1 |
any
option which would otherwise be a 7-Year Option shall be
a 5-Year
Option;
|
| 4.3.2 |
the
repayment under the Savings Contract shall be taken as
not including a
bonus;
|
| 4.3.3 |
unless
paragraph 4.3.4 below applies, the amount of the monthly
contribution
determined under sub-rule 3.3 above shall be taken as successively
reduced
by 0.5 per cent. thereof, 1 per cent. thereof, 1.5 per
cent. thereof and
so on and then rounded up to the nearest pound, but shall
not be reduced
to less than the minimum amount permitted under the terms
of the Savings
Contract;
|
| 4.3.4 |
if
the Board shall have decided that this paragraph is to
apply, for the
purpose of determining the amount of the monthly contribution,
the maximum
permitted amount referred to in sub-rule 3.3 above shall
be taken as
successively reduced by £1, £2, £3 and so on, but shall not be reduced to
less than the minimum amount permitted under the terms
of the Savings
Contract;
|
| 4.3.5 |
any
option which would otherwise be a 5-Year Option shall be
a 3-Year
Option;
|
| 4.3.6 |
the
Board shall not grant any options on the day in
question.
|
| 5. |
EXERCISE OF OPTIONS
|
| 5.1 |
The
exercise of any option shall be effected in the form and
manner prescribed
by the Board, provided that the monies paid for shares
of Common Stock on
such exercise shall not exceed the amount of the repayment
made and any
interest paid under the Savings Contract made in connection
with the
option, so that if the prevailing sterling/US dollar exchange
rate at the
time of exercise of any option has fluctuated to the extent
that fewer
shares may be purchased by a Participant than the maximum
amount over
which the Participant has been granted options, the Board
will adjust
downwards when allotting the shares to the
Participant.
|
| 5.2 |
Subject
to sub-rules 5.3, 5.4 and 5.6 below and to Rule 6 below,
an option shall
not be capable of being exercised before the Bonus
Date.
|
| 5.3 |
Subject
to sub-rule 5.8 below:-
|
-
6 -
| 5.3.1 |
if
any Participant dies before the Bonus Date, any option
granted to him may
(and must, if at all) be exercised by his personal representatives
within
12 months after the date of his death, and
|
| 5.3.2 |
if
he dies on or within 6 months after the Bonus Date, any
option granted to
him may (and must, if at all) be exercised by his personal
representatives
within 12 months after the Bonus
Date,
|
provided
in either case that his death occurs at a time when he either holds
the office
or employment by virtue of which he is eligible to participate in
this Scheme or
is entitled to exercise the option by virtue of sub-rule 5.4 below.
| 5.4 |
Subject
to sub-rule 5.8 below, if any Participant ceases to hold
the office or
employment by virtue of which he is eligible to participate
in this Scheme
(otherwise than by reason of his death), the following
provisions apply in
relation to any option granted to
him:-
|
| 5.4.1 |
if
he so ceases by reason of injury, disability, redundancy
within the
meaning of the Employment Rights Act 1996, or retirement
on reaching the
age of 65 or any other age at which he is bound to retire
in accordance
with the terms of his contract of employment, the option
may (and subject
to sub-rule 5.3 above must, if at all) be exercised within
6 months of his
so ceasing;
|
| 5.4.2 |
if
he so ceases by reason only that the office or employment
is in a company
of which the Company ceases to have control, or relates
to a business or
part of a business which is transferred to a person who
is neither an
Associated Company of the Company nor a company of which
the Company has
control, the option may (and subject to sub-rule 5.3 above
must, if at
all) be exercised within 6 months of his so
ceasing;
|
| 5.4.3 |
if
he so ceases for any other reason within 3 years of the
grant of the
option, the option may not be exercised at
all;
|
| 5.4.4 |
if
he so ceases for any other reason (except for dismissal
for misconduct)
more than 3 years after the grant of the option, the option
may (and
subject to sub-rule 5.3 above must, if at all) be exercised
within 6
months of his so ceasing.
|
| 5.5 |
Subject
to sub-rule 5.8 below, if, at the Bonus Date, a Participant
holds an
office or employment with a company which is not a Participating
Company
but which is an Associated Company or a company of which
the Company has
control, any option granted to him may (and subject to
sub-rule 5.3 above
must, if at all) be exercised within 6 months of the Bonus
Date.
|
| 5.6 |
Subject
to sub-rule 5.8 below, where any Participant continues
to hold the office
or employment by virtue of which he is eligible to participate
in this
Scheme after the date on which he reaches the age of 65,
he may exercise
any option within 6 months of that
date.
|
-
7 -
| 5.7 |
Subject
to sub-rule 5.3 above, an option shall not be capable of
being exercised
later than 6 months after the Bonus
Date.
|
| 5.8 |
Where,
before an option has become capable of being exercised,
the Participant
gives notice that he intends to stop paying monthly contributions
under
the Savings Contract made in connection with the option,
or is deemed
under its terms to have given such notice, or makes an
application for
repayment of the monthly contributions paid under it, the
option may not
be exercised at all.
|
| 5.9 |
A
Participant shall not be treated for the purposes of sub-rules
5.3 and 5.4
above as ceasing to hold the office or employment by virtue
of which he is
eligible to participate in this Scheme until he ceases
to hold an office
or employment in the Company or any Associated Company
or company of which
the Company has control, and a female Participant who ceases
to hold the
office or employment by virtue of which she is eligible
to participate in
this Scheme by reason of pregnancy or confinement and who
exercises her
right to return to work under the Employment Rights Act
1996 before
exercising her option shall be treated for the purposes
of sub-rule 5.4
above as not having ceased to hold that office or
employment.
|
| 5.10 |
A
Participant shall not be eligible to exercise an option
at any
time:-
|
| 5.10.1 |
unless,
subject to sub-rules 5.4 and 5.5 above, he is at that time
a director or
employee of a Participating
Company;
|
| 5.10.2 |
if
he is not at that time eligible to participate in this
Scheme by virtue of
paragraph 8 of Schedule 9 (material
interest in close company).
|
| 5.11 |
An
option shall not be capable of being exercised more than
once.
|
| 5.12 |
Within
30 days after an option has been exercised by any person,
the Board shall
allot to him (or a nominee for him) or, as appropriate,
procure the
transfer to him (or a nominee for him) of the number of
shares of Common
Stock in respect of which the option has been exercised,
provided
that:-
|
| 5.12.1 |
the
Board considers that the issue or transfer thereof would
be lawful in all
relevant jurisdictions; and
|
| 5.12.2 |
in
a case where a Participating Company is obliged to (or
would suffer a
disadvantage if it were not to) account for any tax (in
any jurisdiction)
for which the person in question is liable by virtue of
the exercise of
the option and/or for any social security contributions
recoverable from
the person in question (together, the "Tax Liability"),
that person has
either:
|
| (a) |
made
a payment to the Participating Company of an amount equal
to the Tax
Liability; or
|
-
8 -
| (b) |
entered
into arrangements acceptable to that or another Participating
Company to
secure that such a payment is made (whether by authorising
the sale of
some or all of the shares of Common Stock on his behalf
and the payment to
the Participating Company of the relevant amount out of
the proceeds of
sale or otherwise).
|
| 5.13 |
All
shares of Common Stock allotted under this Scheme shall
rank equally in
all respects with shares of Common Stock then in issue
except for any
rights attaching to such shares of Common Stock by reference
to a record
date before the date of the allotment.
|
| 5.14 |
If
shares of Common Stock are listed on any stock exchange,
the Company shall
apply to that stock exchange for any shares of Common Stock
so allotted to
be admitted thereto.
|
| 6. |
TAKEOVER, RECONSTRUCTION AND WINDING UP
|
| 6.1 |
If
any person obtains control of the Company as a result of
making a general
offer to acquire shares in the Company, or having obtained
control makes
such an offer, the Board shall within 7 days of becoming
aware thereof
notify every Participant thereof and, subject to sub-rules
5.3, 5.4, 5.7
and 5.8 above, any option may be exercised within one month
(or such
longer period as the Board may permit) of the notification,
but not later
than 6 months after that person has obtained
control.
|
| 6.2 |
For
the purposes of sub-rule 6.1 above, a person shall be deemed
to have
obtained control of the Company if he and others acting
in concert with
him have together obtained control of
it.
|
| 6.3 |
If
a compromise or arrangement is effected for the purposes
of or in
connection with a scheme for the reconstruction of the
Company or its
amalgamation with any other company or companies, or if
the Company passes
a resolution for voluntary winding up, the Board shall
forthwith notify
every Participant thereof and, subject to sub-rules 5.3,
5.4, 5.7 and 5.8
above, any option may be exercised within one month of
the notification,
but to the extent that it is not exercised within that
period shall
(notwithstanding any other provision of this Scheme) lapse
on the
expiration of that period.
|
| 6.4 |
If
any company ("the acquiring
company"):-
|
| 6.4.1 |
obtains
control of the Company as a result of making-
|
| (a) |
a
general offer to acquire the whole of the issued ordinary
share capital of
the Company which is made on a condition such that if it
is satisfied the
acquiring company will have control of the Company,
or
|
| (b) |
a
general offer to acquire all the shares in the Company
which are of the
same class as the shares which may be acquired by the exercise
of options
granted under this Scheme,
|
-
9 -
any
Participant may at any time within the appropriate period (which
expression
shall be construed in accordance with paragraph 15(2) of Schedule 9),
by agreement with the acquiring company, release any option which
has not lapsed
("the old option") in consideration of the grant to him of an option
("the new
option") which (for the purposes of that paragraph) is equivalent
to the old
option but relates to shares in a different company (whether the
acquiring
company itself or some other company falling within paragraph 10(b)
or (c) of
Schedule 9).
| 6.5 |
The
new option shall not be regarded for the purposes of sub-rule
6.4 above as
equivalent to the old option unless the conditions set
out in paragraph
15(3) of Schedule 9 are satisfied, but so that the provisions
of this
Scheme shall for this purpose be construed as
if:-
|
| 6.5.1 |
the
new option were an option granted under this Scheme at
the same time as
the old option;
|
| 6.5.2 |
except
for the purposes of the definitions of "Participating Company"
and
"Subsidiary" in sub-rule 1.1 and sub-rules 5.4.2, 5.5 and
5.9 above, the
expression "the Company" were defined as "a company whose
shares may be
acquired by the exercise of options granted under this
Scheme";
|
| 6.5.3 |
the
Savings Contract made in connection with the old option
had been made in
connection with the new option;
|
| 6.5.4 |
the
Bonus Date in relation to the new option were the same
as that in relation
to the old option.
|
| 7. |
VARIATION OF CAPITAL
|
| 7.1 |
Subject
to sub-rule 7.3 below, in the event of any variation of
the share capital
of the Company, the Board may make such adjustments as
it considers
appropriate under sub-rule 7.2
below.
|
| 7.2 |
An
adjustment made under this sub-rule shall be to one or
more of the
following:-
|
| 7.2.1 |
the
price at which shares of Common Stock may be acquired by
the exercise of
any option;
|
| 7.2.2 |
where
any option has been exercised but no shares of Common Stock
have been
allotted or transferred pursuant to the exercise, the price
at which they
may be acquired;
|
| 7.2.3 |
the
number of shares of Common Stock mentioned in Rule 10
below.
|
| 7.3 |
At
a time when this Scheme is approved by the Inland Revenue
under Schedule
9, no adjustment under sub-rule 7.2 above shall be made
without the prior
approval of the Inland Revenue.
|
-
10 -
| 7.4 |
An
adjustment under sub-rule 7.2 above may have the effect
of reducing the
price at which shares of Common Stock may be acquired by
the exercise of
an option to less than their nominal value, but only if
and to the extent
that the Board shall be authorised to capitalise from the
reserves of the
Company a sum equal to the amount by which the nominal
value of the shares
of Common Stock in respect of which the option is exercised
exceeds the
price at which such shares may be subscribed for and to
apply that sum in
paying up that amount on such shares; and so that on the
exercise of any
option in respect of which such a reduction shall have
been made the Board
shall capitalise that sum (if any) and apply it in paying
up that
amount.
|
| 8. |
ALTERATIONS
|
The
Board
may at any time alter this Scheme, provided that no alteration shall
be made at
a time when this Scheme is approved by the Inland Revenue under Schedule
9
without the prior approval of the Inland Revenue.
| 9. |
MISCELLANEOUS
|
| 9.1 |
The
rights and obligations of any individual under the terms
of his office or
employment with the Company or a Subsidiary shall not be
affected by his
participation in this Scheme or any right which he may
have to participate
in it, and an individual who participates in it shall waive
all and any
rights to compensation or damages in consequence of the
termination of his
office or employment for any reason whatsoever insofar
as those rights
arise or may arise from his ceasing to have rights under
or be entitled to
exercise any option as a result of such
termination.
|
| 9.2 |
In
the event of any dispute or disagreement as to the interpretation
of this
Scheme, or as to any question or right arising from or
related to this
Scheme, the decision of the Board shall be final and binding
upon all
persons.
|
| 9.3 |
The
Company and any Subsidiary may provide money to the trustees
of any trust
or any other person to enable them or him to acquire shares
of Common
Stock to be held for the purposes of this Scheme, or enter
into any
guarantee or indemnity for those purposes, to the extent
permitted by any
applicable laws.
|
| 9.4 |
Any
notice or other communication under or in connection with
this Scheme may
be given by personal delivery or by sending it by post,
in the case of a
company to its registered office, and in the case of an
individual to his
last known address, or, where he is a director or employee
of the Company
or a Subsidiary, either to his last known address or to
the address of the
place of business at which he performs the whole or substantially
the
whole of the duties of his office or
employment.
|
-
11 -
| 10. |
AVAILABLE
SHARES
|
| 10.1 |
No
more than 2,000,000 shares of Common Stock shall be made
available under
this Scheme, provided that this number may be adjusted
by the Board as
provided for in Rule 7.2.3 above.
|
| 10.2 |
The
shares of Common Stock to be made available under this
Scheme may be
authorised and unissued shares of Common Stock, previously
issued shares
of Common Stock acquired by the Company and held as treasury
shares or
shares of Common Stock purchased in the open
market.
|
-
12 -