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1.
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PROGRAM
OBJECTIVES
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1
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2.
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PROGRAM
ADMINISTRATION
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1
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3.
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PROGRAM
PARTICIPATION
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2
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4.
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TERMINATION
OF EMPLOYMENT
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2
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5.
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AWARD
LEVELS
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2
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6.
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PERFORMANCE
TARGETS
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3
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7.
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EFFECT
OF MERGER, ACQUISITION, REORGANIZATION, ETC.
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3
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8.
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PAYMENT
OF AWARDS
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4
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9.
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ASSIGNMENT
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4
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10.
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EMPLOYMENT
RIGHT
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4
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11.
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WITHHOLDING
FOR TAXES
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4
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12.
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SPECIAL
RULES FOR CERTAIN EXECUTIVES
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5
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13.
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DEFINITIONS
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5
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Purpose:
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This
document is intended to describe parameters for making incentive
awards
for the period commencing March 1, 2007 and ending February 29,
2008
during the Company’s 2008 fiscal year (the “Program”). The Company has
adopted the Annual Management Incentive Plan (the “Plan”) which authorizes
the Company to grant incentive compensation to certain employees.
All
awards granted under the Program will be granted pursuant and
subject to
the terms of the Plan. Notwithstanding anything to the contrary,
awards to
participants in the Program are subject to the Company’s shareholders
reapproving the terms of the Plan, including Amendment Number
3 to the
Plan. If the Company’s shareholders do not reapprove the Plan (including
Amendment Number 3) prior to February 29, 2008, no awards to
participants
will be made under the
Program.
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1.
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PROGRAM
OBJECTIVES
The
objectives of the Program are to:
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A.
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Support
the Company’s annual planning, budget and strategic planning
process;
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B.
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Provide
compensation opportunities which are competitive with those of
other
beverage alcohol or industry related companies in order to attract
and
retain key executives;
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C.
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Motivate
executives to achieve profit and other key goals of the
Company;
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D.
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Control
overhead by designating a portion of annual compensation as a variable
rather than fixed expense.
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2.
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PROGRAM
ADMINISTRATION
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A.
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The
Human Resources Committee (the “Committee”) of the Company’s Board of
Directors is responsible for determining which employees shall
receive
awards and the amounts, terms and conditions of all awards under
the
Program. The Committee will delegate certain administrative duties
to the
Executive Vice President, Chief Human Resources Officer.
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B.
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Decisions
and determinations by the Committee will be final and binding upon
all
persons, including, but not limited to, participants and their
personal
representatives, heirs and assigns.
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C.
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This
Program creates no vested or contractual right to the compensation
provided herein. The Committee shall have the authority to interpret,
amend or cancel the Program at any time, or to make any other
determinations that it believes necessary or advisable for the
administration of the Program. The Committee’s authority includes the
power, in its sole discretion, to reduce the amount of or eliminate
an
Award payable to a participant.
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3.
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PROGRAM
PARTICIPATION
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A.
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The
Committee is responsible for determining who may participate in
the
Program. The Company will provide a written recommendation to the
Committee of the employees who he believes should be included in
the
Program for a Plan Year. Generally, Awards will be made to employees
who
the Committee believes are in a position to make significant contributions
to the financial success of the Company.
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B.
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The
participants for the Plan Year are identified in Schedule A. These
schedules may be revised at any time during the year, as
appropriate.
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C.
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To
the extent permitted by Section 162(m) of the Internal Revenue
Code,
participants may be added to the Program at any time during a Plan
Year
provided that such addition occurs before December of the Plan
Year. In
this case, a participant’s Salary for purposes of determining an Award
shall be prorated for the period remaining in the Plan Year. For
purposes
of proration, a participant shall be given credit for the entire
month of
any month in which the participant participates in the
Program.
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4.
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TERMINATION
OF EMPLOYMENT
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A.
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In
the event that a participant terminates employment for reasons
other than
death, Disability, Retirement or involuntary termination without
Cause
during a Plan Year, the participant will forfeit all rights to
an Award
with respect to that Plan Year.
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B.
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In
the event that a participant terminates employment for reasons
of death,
Disability, Retirement, or involuntary termination without Cause,
a
ratable portion of any applicable Award may be paid, subject to
the
attainment of the applicable performance target. The ratable portion
of
the Award shall be determined by multiplying the Award by a fraction
the
numerator of which is the number of full or partial months during
the Plan
Year during which the participant was employed and the denominator
of
which is twelve. Such amount will be paid at the same time as when
Awards
are paid to other participants.
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5.
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AWARD
LEVELS
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A.
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The
amount of a participant’s Award will be calculated based on three
variables: the participant’s management position, Salary and achieved
performance for the Plan Year.
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B.
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Each
participant will be assigned to a certain category (“Participation
Category”) based on the participant’s management position in the Company
(see Schedule A).
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C.
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The
Committee has established performance targets for each participant
that
are based on one or more of the following: a Corporate financial
performance target(s) (“Corporate Target”), and a Division/Company
financial performance target(s) (“Divisional Target”). Schedule C sets
forth the applicable Corporate and Divisional Targets. Participants
who
are treated as “Covered Employees” under Section 12 will have their
incentive compensation calculated based solely on Corporate and
Divisional
Targets.
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| D. |
A
participant who has a Corporate Target(s) and/or a Divisional
Target(s)
will be assigned a weighting to determine the percentage that
each of the
targets will contribute towards the participant’s total Award. These
weightings are set forth at Schedule D (e.g.,
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the
Award for a Division CEO/President will be calculated [*****] based
on the
Corporate Target and [*****] based on the participant’s Divisional
Targets). The weightings assigned to the Corporate and Divisional
Targets
will be referred to as the “Corporate Percentage(s)” and “Divisional
Percentage(s)”, respectively.
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E.
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A
participant’s Award will be calculated by multiplying the participant’s
Salary by the appropriate percentage set forth in the Award Schedule
(Schedule B) taking into account the participant’s Participation Category
and performance level (e.g., threshold, target, maximum, etc.)
with
respect to the participant’s Corporate Target(s) and multiplying such
amount by the participant’s Corporate Percentage(s). If the actual
performance level falls between the designated levels of performance
set
forth in Schedule B, the percentage by which the participant’s salary is
multiplied will be interpolated. For example, if the actual performance
level falls half way between the “threshold” and “midpoint” levels, the
percentage will be calculated as the average of the percentages
for the
“threshold” and “midpoint” levels. A similar calculation is performed for
the participant’s Divisional Targets, if any, and the participant’s total
Award will be the sum of these calculations.
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Example: Assume
a Divison CEO of Constellation Brands was listed in Participation
Category
A1,
had a salary of [*****], and achieved the participant’s “threshold”
Corporate Target and “maximum” Divisional Targets. Based on these facts
and Schedules B, C and D, the participant’s Award would be [*****] (i.e.,
[*****] x [*****] x [*****] + [*****] x [*****] x [*****] + [*****]
x
[*****] x [*****]).
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6.
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PERFORMANCE
TARGETS
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A.
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Performance
measurement criteria will be established for the Plan Year and
such
criteria will relate to corporate and/or divisional objectives.
Performance targets will be established based on the selected criteria.
Schedule C sets forth the applicable corporate and divisional performance
criteria and targets for the Plan Year.
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B.
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Schedule
B sets forth the Award levels based on the attainment of the Corporate,
Divisional, Individual and Team Targets determined in accordance
with the
criteria and targets set forth in Schedule C.
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7.
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EFFECT
OF EXTRAORDINARY ITEMS, MERGER, ACQUISITION, REORGANIZATION,
ETC.
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A.
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The
Committee shall adjust the performance measurement criteria to
take into
account the effects of any “Extraordinary Items.” “Extraordinary Items”
means (1) items presented as such (or other comparable terms) on
the
Company’s audited financial statements, (2) extraordinary, unusual or
nonrecurring items of gain or loss (including, without limitation,
an
unbudgeted material expense incurred by or at the direction of
the Board
of Directors or a Committee of the Board or a material litigation
judgment
or
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settlement),
(3) changes in tax or accounting laws or rules, and (4) the effects
of
mergers, acquisitions, divestitures, spin-offs or significant transactions
(including, without limitation, a corporate merger, consolidation,
acquisition of property or stock, reorganization, restructuring
charge, or
joint venture), each of which are identified in the audited financial
statements and notes thereto or in the “management’s
discussion and analysis” of the financial statements in a period report
filed with the SEC under the Exchange Act. The Committee shall
make such
adjustments to the performance measurement criteria as shall be
equitable
and appropriate in order to make the criteria, as nearly as practicable,
equivalent to the criteria immediately prior to such transaction
or
event.
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B.
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In
the event of a Change of Control, as defined under the Plan, the
Plan Year
shall end on the date of the Change in Control and the Corporate
and
Divisional Targets shall be adjusted to reflect the early termination
of
the Plan Year. If the Corporate and Divisional Targets, as adjusted,
are
deemed satisfied by the Committee, a participant may receive a
ratable
portion of the Award that would have been paid if the Plan Year
had not
been terminated early and the Corporate and Divisional Targets
had been
satisfied. The ratable portion of the Award shall be determined
by
multiplying the original Award by a fraction with a numerator equal
to the
number of months from the first day of the Plan Year to the date
of the
Change of Control (including any fractional month) and a denominator
equal
to twelve.
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8.
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PAYMENT
OF AWARDS
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The
entire Award calculated in accordance herewith shall be payable
within
thirty (30) days after the Committee approves the final year end
performance in accordance with the plan document. Before any Award
is paid
to a participant, the Committee will certify, in writing, that
the
applicable performance targets were achieved and the amount of
the Award
is accurately calculated.
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9.
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ASSIGNMENT
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No
right or interest of any Participant in the Program shall be assignable
or
transferable, or subject to any lien, directly, by operation of
law, or
otherwise, including levy, garnishment, attachment, pledge or
bankruptcy.
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10.
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EMPLOYMENT
RIGHT
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The
Program shall not confer upon any participant any right to continued
employment. The right to dismiss any employee with or without cause
or
notice is specifically reserved to the Company.
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11.
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WITHHOLDING
FOR TAXES
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The
Company shall have the right to deduct from all payments under
this
Program any federal or state taxes or other employment related
withholdings required by law to be withheld with respect to such
payments.
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12.
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SPECIAL
RULES FOR CERTAIN EXECUTIVES
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A.
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The
Company’s Chief Executive Officer and certain other individuals designated
by the Committee (“Covered Employees”) will be subject to special rules to
ensure that the Awards granted to such individuals will be treated
as
qualified “performance-based compensation” under Internal Revenue Code
Section 162(m). All provisions of the Program and the Plan shall
be
interpreted and administered consistently with that intent. The
Committee
will designate those individuals who are to be treated as “Covered
Employees” on Schedule A.
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B.
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Notwithstanding
any provision to the contrary, the following rules will apply to
Covered
Employees:
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(1)
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The
Committee shall establish Corporate and Divisional Targets for
Covered
Employees that are tied to one or more of the Performance Criteria
set
forth in the Plan.
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(2)
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The
Committee shall establish a Corporate Target(s) and, if applicable,
a
Divisional Target(s) for Covered Employees within 90 days of the
commencement of the Plan Year. The satisfaction of such targets
shall be
substantially uncertain at the time they are established.
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(3)
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The
amount of the Award shall be computed under an objective formula
and the
Committee shall have no discretionary authority to increase the
amount of
the Award or alter the methodology for calculating the Award, except
as
permitted by Section 162(m) of the Internal Revenue Code and the
regulations promulgated thereunder.
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(4)
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The
maximum amount a Covered Employee can receive under the Plan for
the Plan
Year cannot exceed $5 million.
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(5)
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Before
any Award is paid to a Covered Employee, the Committee will certify,
in
writing, that the Corporate Target(s) and, if applicable, the Divisional
Target(s) was achieved and the amount of the Award is accurately
calculated.
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13.
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DEFINITIONS
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A.
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AWARD
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“Award”
shall mean the award to a Participant as determined under the
Program.
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B.
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CAUSE
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“Cause”
means gross negligence or willful misconduct or commission of a
felony or
an act of moral turpitude determined by the Committee to be detrimental
to
the best interests of the Company or, such other definition set
forth in a
written employment agreement with the Company.
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C.
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THE
COMPANY
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“The
Company” shall mean Constellation Brands, Inc. and its direct and indirect
subsidiaries.
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| D. |
DISABILITY
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“Disability”
is defined as termination of employment due to the inability of
a
Participant to engage in any substantial gain activity by reason
of any
medically determinable physical or mental impairment which can
be expected
to result in death or which has lasted or can be expected to last
for a
continuous period of not less than six months, all as verified
by a
physician acceptable, or selected by, the Committee.
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E.
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PLAN
and PLAN YEAR
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“Plan”
shall mean the Constellation Brands, Inc. Annual Management Incentive
Plan.“Plan
Year” shall be the period commencing on March 1, 2007 and ending on
February 29, 2008.
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F.
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RETIREMENT
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“Retirement”
shall mean a termination of employment by an employee who is at
least 60
years of age and after at least 10 years of service with the Company.
For
an individual who becomes employed by the Company in connection
with a
business acquisition (regardless of the form of the transaction),
service
shall include the individual’s service with the acquired business, unless
the Committee determines otherwise.
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G.
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SALARY
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“Salary”
shall mean the participant’s actual base compensation earned for the 2008
Fiscal Year. Actual base compensation earned shall be determined
exclusive
of any other compensation such as stock option income, grants of
any kind,
bonus awards, etc.
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Participation
Category
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Title
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Participant
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[*****]
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Chairman,
CEO
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R.
Sands *
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President,
COO
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R.S.
Sands *
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[*****]
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EVP
Chief Financial Officer
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T.
Summer +
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EVP
Chief Financial Officer**
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R.
Ryder *
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EVP
Chief Legal Officer
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T.
Mullin *
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EVP
Strategy & Business Development
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P.
Hetterich *
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EVP
Chief Human Resources Officer
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K.
Wilson *
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CEO
Barton
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A.
Berk *
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Participation
Category
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Threshold
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Midpoint
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Target
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Midpoint
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Maximum
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A2
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[*****]
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[*****]
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[*****]
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[*****]
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[*****]
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A1
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[*****]
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[*****]
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[*****]
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[*****]
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[*****]
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0.25X
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0.50X
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1.00X
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1.50X
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2.00X
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[*****]
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[*****]
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[*****]
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[*****]
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[*****]
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0.25X
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0.50X
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1.00X
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1.50X
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2.00X
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[*****]
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[*****]
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[*****]
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[*****]
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[*****]
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0.25X
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0.50X
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1.00X
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1.50X
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2.00X
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[*****]
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[*****]
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[*****]
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[*****]
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[*****]
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0.25X
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0.50X
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1.00X
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1.50X
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2.00X
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[*****]
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[*****]
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[*****]
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[*****]
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[*****]
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| · |
The
measure of “EBIT” (Earnings Before Interest and Taxes) for purposes hereof
shall be determined as the sum of Operating Income plus Equity in
Earnings
of Equity Method Investees. “EBIT” is measured based on the Company’s
performance for the period from March 1, 2007 through February 29,
2008.
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The
measure of “Free Cash Flow” for purposes hereof shall be calculated
as follows:
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Corporate/CBI
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Corporate
EBIT
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Corporate
Free Cash Flow
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Chairman/CEO
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[*****]
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[*****]
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President/COO
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[*****]
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[*****]
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EVP
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[*****]
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[*****]
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Division/Company
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Corporate
EBIT
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Divisional
EBIT/Other
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Divisional
Free Cash Flow
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CEO/President
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[*****]
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[*****]
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[*****]
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