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 Rule 14a-11(c) or Rule 14a-12
CANANDAIGUA WINE COMPANY, INC.
(Name of Registrant as Specified in Its Charter)
-------------------------------------------------------------------
(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: ________
(2) Aggregate number of securities to which transaction applies: ___________
(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: ____________________________________________________________
June 26, 1997
To Our Stockholders:
You are cordially invited to attend the Annual Meeting of
Stockholders of Canandaigua Wine Company, Inc. at Chase Tower, One
Chase Square, Rochester, New York, on Tuesday, July 22, 1997 at 11:00
a.m.
The accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement describe in detail the matters expected to be acted upon at
the meeting. The Company's 1997 Annual Report, which is contained in
this package, sets forth important business and financial information
concerning the Company.
We hope you are able to attend this year's Annual Meeting.
Very truly yours,
MARVIN SANDS
Chairman of the Board
RICHARD SANDS
President and Chief Executive
Officer
CANANDAIGUA WINE COMPANY, INC.
116 BUFFALO STREET
CANANDAIGUA, NEW YORK 14424
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 22, 1997
----------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
CANANDAIGUA WINE COMPANY, INC. will be held at Chase Tower, One Chase Square,
Rochester, New York, on Tuesday, July 22, 1997 at 11:00 a.m. 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 amend the Company's Restated
Certificate of Incorporation to change the name of the Company to
Canandaigua Brands, Inc. (Proposal No. 2).
3. To consider and act upon a proposal to approve the amendment and
restatement of the Stock Option and Stock Appreciation Right Plan as the
Long-Term Stock Incentive Plan (Proposal No. 3).
4. To consider and act upon a proposal to approve the Incentive Stock
Option Plan (Proposal No. 4).
5. To consider and act upon a proposal to approve the Annual Management
Incentive Plan (Proposal No. 5).
6. To consider and act upon a proposal to ratify the selection of Arthur
Andersen LLP, Certified Public Accountants, as the Company's independent
auditors for the fiscal year ending February 28, 1998 (Proposal No. 6).
7. 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 June 2, 1997 as
the record date for the determination of stockholders entitled to notice of
and to vote at the Meeting or any adjournments thereof.
A Proxy Statement and Proxy are enclosed.
WE HOPE YOU WILL ATTEND THIS MEETING IN PERSON, BUT IF YOU CANNOT, PLEASE
SIGN AND DATE THE ENCLOSED PROXY. RETURN THE PROXY IN THE ENCLOSED ENVELOPE
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
BY ORDER OF THE BOARD OF DIRECTORS
ROBERT SANDS, Secretary
Dated at Canandaigua, New York
June 26, 1997
CANANDAIGUA WINE COMPANY, INC.
116 BUFFALO STREET
CANANDAIGUA, NEW YORK 14424
DATED JUNE 26, 1997
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
(JULY 22, 1997)
This Proxy Statement is being furnished to stockholders in connection with
the solicitation of proxies by the Board of Directors of CANANDAIGUA WINE
COMPANY, INC. (the "Company"). The proxies are for use at the 1997 Annual
Meeting of Stockholders of the Company and at any adjournments thereof (the
"Meeting"). The Meeting will be held on Tuesday, July 22, 1997 at 11:00 a.m.
at Chase Tower, One Chase Square, Rochester, New York.
The proxy, if properly executed and delivered to the Secretary of the
Company prior to the Meeting, will be voted as therein specified unless
revoked. You may revoke the proxy by delivering to the Secretary prior to the
Meeting a written revocation or a duly executed proxy bearing a later date.
You may also revoke the proxy in person at the Meeting.
Your proxy will vote 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, your
proxy will be voted FOR the proposal to change the name of the Company to
Canandaigua Brands, Inc. (Proposal No. 2), FOR the proposal to approve the
amendments to the Company's existing Stock Option and Stock Appreciation Right
Plan (the "Original Stock Plan") and to restate the Original Stock Plan as the
Long-Term Stock Incentive Plan (as amended and restated, the "Long-Term Stock
Plan") and the proposals to approve the two new incentive compensation plans
(Proposal Nos. 3, 4 and 5), and FOR the ratification of the selection of
Arthur Andersen LLP as the Company's independent auditors for the fiscal year
ending February 28, 1998 (Proposal No. 6).
The outstanding capital stock of the Company consists of Class A Common
Stock and Class B Common Stock. The enclosed proxy has been designed so that
it can be used by stockholders owning Class A Common Stock or Class B Common
Stock or both Class A Common Stock and Class B Common Stock.
The cost of soliciting proxies will be borne by the Company. In addition to
the solicitation by use of the mails, directors, officers or regular employees
of the Company, without extra compensation, may solicit proxies in person or
by telephone or facsimile. The Company has requested persons holding stock for
others in their names or in the names of nominees to forward these materials
to the beneficial owners of such shares. If requested, the Company will
reimburse such persons for their reasonable expenses in forwarding these
materials.
This Proxy Statement and accompanying proxy are being first mailed to
stockholders on or about June 27, 1997.
VOTING SECURITIES
The total outstanding capital stock of the Company as of June 2, 1997,
consisted of 15,212,378 shares of Class A Common Stock, par value $.01 per
share (the "Class A Stock"), and 3,330,458 shares of Class B Common Stock, par
value $.01 per share (the "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.
Only holders of record of Class A Stock and Class B Stock on the books of
the Company at the close of business on June 2, 1997, the record date for
eligibility to vote at the Meeting, are entitled to notice of and to vote at
the Meeting and at any adjournments thereof. Subject to certain contrary
provisions of Delaware law, the holders of the Class A Stock and the holders
of the Class B Stock vote together as a single class on all matters other than
the election of directors. Each holder of Class A Stock is entitled to one (1)
vote for each share of Class A Stock registered in his or her name, and each
holder of Class B Stock is entitled to ten (10) votes for each share of Class
B Stock registered in his or her name.
The holders of a majority of the outstanding aggregate voting power of the
Class A Stock and the 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 nominee names by brokers which 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 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 the Class A Stock, 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
the Class B Stock, voting as a separate class, are entitled to elect the
remaining number of directors to be elected at the Meeting. At the Meeting,
the holders of Class A Stock will be entitled to elect two directors and the
holders of Class B Stock will be entitled to elect four directors. Because the
directors are elected by a plurality of the votes cast in each election, votes
that are withheld will not be counted and will therefore not affect the
outcome of the elections.
The adoption of the proposal to change the Company's name to Canandaigua
Brands, Inc. (Proposal No. 2) requires the affirmative vote of the holders of
a majority of all outstanding shares of Class A Stock and Class B Stock
entitled to vote thereon, voting together as a single class, provided that the
holders of Class A Stock will have one (1) vote per share and the holders of
Class B Stock will have ten (10) votes per share. Abstentions and broker non-
votes, if applicable, will therefore have the effect of negative votes.
The approval of amendments to and a restatement of the Original Stock Plan
and the approval of the two new incentive compensation plans (Proposal Nos. 3,
4 and 5), and the ratification of the selection of Arthur Andersen LLP as the
Company's independent auditors (Proposal No. 6), each requires a majority vote
of all outstanding shares of Class A Stock and Class B Stock entitled to vote
thereon, present in person or by proxy, voting together as a single class,
provided that the holders of Class A Stock will have one (1) vote per share
and the holders of Class B Stock will have ten (10) votes per share.
Abstentions will therefore 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 votes.
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BENEFICIAL OWNERSHIP
The following tables and notes set forth as of June 2, 1997 or such other
date specifically noted (i) the persons known to the Company to beneficially
own more than 5% of the 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 15,212,378 shares of Class A Stock and 3,330,458
shares of Class B Stock outstanding as of the close of business on June 2,
1997.
CLASS A STOCK
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP(1)
-----------------------------------------
PERCENT
NAME AND ADDRESS OF SOLE POWER TO SHARED POWER TO OF
BENEFICIAL OWNER VOTE OR DISPOSE VOTE OR DISPOSE TOTAL CLASS(1)
- ------------------- --------------- --------------- --------- --------
Marilyn Sands................ 788,875(2) 0 788,875 5.2%
116 Buffalo Street
Canandaigua, NY 14424
Richard Sands................ 320,667 356,467(3) 677,134 4.5%
116 Buffalo Street
Canandaigua, NY 14424
Robert Sands................. 326,799(4) 356,467(4) 683,266 4.5%
116 Buffalo Street
Canandaigua, NY 14424
CWC Partnership-I............ 0 356,467(5) 356,467 2.3%
116 Buffalo Street
Canandaigua, NY 14424
Stockholders Group........... 0 1,030,334 1,030,334 6.8%
Pursuant to Section 13(d)(3)
of the Securities Exchange
Act of 1934, as amended(6)
Wellington Management
Company, LLP................. 0 (7) 980,070 6.4%
75 State Street
Boston, MA 02109
CLASS B STOCK
AMOUNT AND NATURE
OF BENEFICIAL OWNERSHIP(1)
-----------------------------------------
PERCENT
NAME AND ADDRESS OF SOLE POWER TO SHARED POWER TO OF
BENEFICIAL OWNER VOTE OR DISPOSE VOTE OR DISPOSE TOTAL CLASS(1)
- ------------------- --------------- --------------- --------- --------
Marilyn Sands................ 146,250(2) 0 146,250 4.4%
116 Buffalo Street
Canandaigua, NY 14424
Richard Sands................ 691,279 1,207,941(3) 1,899,220 57.0%
116 Buffalo Street
Canandaigua, NY 14424
Robert Sands................. 691,051 1,207,941(4) 1,898,992 57.0%
116 Buffalo Street
Canandaigua, NY 14424
CWC Partnership-I............ 0 678,964(5) 678,964 20.4%
116 Buffalo Street
Canandaigua, NY 14424
Trust for the benefit of the
Grandchildren of
Marvin and Marilyn Sands .... 0 506,250(8) 506,250 15.2%
116 Buffalo Street
Canandaigua, NY 14424
Stockholders Group........... 0 2,692,121 2,692,121 80.8%
Pursuant to Section 13(d)(3)
of the Securities Exchange
Act of 1934, as amended(6)
3
- --------
(1) The number of shares and the percentage of ownership set forth in the
Class A Stock table does not include the shares of Class A Stock issuable
pursuant to the conversion feature of the 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 footnotes, additional shares of Class A Stock equal
to the number of Shares of Class B Stock owned by each person are assumed
to be outstanding pursuant to Rule 13-3(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. Where
the footnotes reflect shares of Class B Stock as being included, such
shares are included in only the Class B Stock table.
(2) With respect to 787,501 shares of the 788,875 shares of Class A Stock,
Marilyn Sands is the beneficial owner of a life estate which 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 CWC Partnership-II, a New York general partnership
("CWCP-II"). The amounts reflected do not include 26,401 shares of Class A
Stock and 101,850 shares of Class B Stock owned by Marilyn Sands' husband,
Marvin Sands, with respect to which she disclaims beneficial ownership.
The amounts reflected include 67,500 and 74,250 shares of Class B Stock
owned by Ms. Sands in her capacity as trustee under Irrevocable
Declarations of Trust Nos. 3 and 4. Assuming the conversion of Class B
Stock beneficially owned by Ms. Sands into Class A Stock, Ms. Sands would
beneficially own 935,125 shares of Class A Stock, representing 6.1% of the
outstanding Class A Stock after such conversion.
(3) The amounts reflected include 308,951 shares of Class A Stock and 678,964
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,
47,516 shares of Class A Stock owned by MLR&R, a New York general
partnership ("MLR&R"), of which Mr. Sands is a general partner, 22,727
shares of Class B Stock owned by CWCP-II, of which Mr. Sands is a trustee
of the managing partner, and 506,250 shares of Class B Stock owned by the
trust described in footnote (8) below. Mr. Sands disclaims beneficial
ownership of such shares except to the extent of his ownership interest in
CWCP-I and MLR&R. The amounts relected do not include 1,787 shares of
Class A Stock owned by Mr. Sands' wife, the remainder interest Mr. Sands
has in 262,501 of the 787,501 shares of Class A Stock subject to the life
estate held by Marilyn Sands or the remainder interest of CWCP-II in
265,151 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 2,576,354 shares of Class A Stock, representing 15.1% of
the outstanding Class A Stock after such conversion.
(4) The amounts reflected include 308,951 shares of Class A Stock and 678,964
shares of Class B Stock owned by CWCP-I, of which Robert Sands is a
managing partner, 47,516 shares of Class A Stock owned by MLR&R, of which
Mr. Sands is a general partner, 22,727 shares of Class B Stock owned by
CWCP-II, of which Mr. Sands is a trustee of the managing partner, and
506,250 shares of Class B Stock owned by the trust described in footnote
(8) below. Mr. Sands disclaims beneficial ownership of such shares except
to the extent of his ownership interest in CWCP-I and MLR&R. The amounts
reflected include 5,000 shares of Class A Stock issuable upon the exercise
of options which Mr. Sands may exercise commencing on July 1, 1997. The
amounts reflected do not include 22,406 shares of Class A Stock owned by
Mr. Sands' wife, individually and as custodian for their minor children,
the remainder interest Mr. Sands has in 259,849 of the 787,501 shares of
Class A Stock subject to the life estate held by Marilyn Sands or the
remainder interest of CWCP-II in 265,151 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 2,582,258 shares of Class A
Stock, representing 15.1% of the outstanding Class A Stock after such
conversion.
(5) 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, and the group described in footnote (6) below. The
other partners of CWCP-I are the estate of Laurie Sands and trusts for the
benefit of Ms. Sands' children, Abigail and Zachary Stern. Upon final
settlement of Laurie Sands' estate or earlier distribution, the
4
partnership interests owned by the estate of Laurie Sands will be
distributed in accordance with Ms. Sands' will to a marital trust for the
benefit of Ms. Sands' husband, Andrew Stern, M.D. Assuming the conversion of
Class B Stock beneficially owned by CWCP-I into Class A Stock, CWCP-I would
beneficially own 1,035,431 shares of Class A Stock, representing 6.5% of the
outstanding Class A Stock after such conversion.
(6) The group as reported consists of Marvin Sands (the husband of Marilyn
Sands and the father of Richard and Robert Sands), Richard Sands, Robert
Sands, CWCP-I, CWCP-II, and the trust described in footnote (8)
(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 Marvin Sands, 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 (8) below, 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 3,722,455 shares of Class A Stock, representing 20.8% of
the outstanding Class A Stock after such conversion.
(7) The number of shares equals the number of shares of Class A Stock reported
to be beneficially owned by Wellington Management Company, LLP ("WMC") in
its Schedule 13G (Amendment No. 3) dated January 24, 1997, filed with the
Securities and Exchange Commission. The percentage of ownership reflected
in the table is calculated on the basis of 15,212,378 shares of Class A
Stock outstanding on June 2, 1997. In its Schedule 13G (Amendment No. 3),
WMC reports that, in its capacity as investment advisor, it may be deemed
the beneficial owner of 980,070 shares of Class A Stock of the Company
which are owned by a variety of investment advisory clients of WMC, which
clients are entitled to receive dividends and the proceeds from the sale of
such shares. Further, WMC reports that no such client is known to have such
interest with respect to more than five percent (5%) of the Class A Stock.
WMC also reports that Wellington Trust Company, N.A. (BK) is the subsidiary
of WMC which acquired the Class A Stock reported on by WMC. The Schedule
13G (Amendment No. 3) indicates that of the number of shares beneficially
owned by WMC, WMC has shared voting power with respect to 552,020 shares
and shared dispositive power with respect to 980,070 shares. WMC reported
no sole voting or sole dispositive power with respect to the Class A Stock
beneficially owned. For further information pertaining to WMC, reference
should be made to WMC's Schedule 13G and Amendment Nos. 1, 2 and 3 thereto
filed with the Securities and Exchange Commission. With respect to the
information contained herein pertaining to shares of Class A Stock
beneficially owned by WMC, the Company has relied solely on the information
reported in WMC's Schedule 13G (Amendment No. 3) and has not independently
verified WMC's beneficial ownership as of June 2, 1997.
(8) 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 the 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 506,250 shares of Class A Stock, representing 3.2% of the
outstanding Class A Stock after such conversion.
5
EXECUTIVE COMPENSATION
SUMMARY INFORMATION
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 (the "Named Executives"). The table is designed
to provide stockholders with a concise, comprehensive view of the Company's
executive compensation. It therefore includes all aspects of compensation for
services rendered to the Company during the fiscal year ended February 28,
1997, the transition period from September 1, 1995 to February 29, 1996 (see
footnote (2) below), and the fiscal years ended August 31, 1995 and 1994.
None of the Named Executives 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, any restricted stock awards or
any pay-outs under long-term incentive plans during the periods covered by the
Summary Compensation Table.
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------- --------------
SECURITIES
NAME AND OTHER UNDERLYING
PRINCIPAL ANNUAL OPTIONS/ ALL OTHER
POSITION YEAR SALARY(3) BONUS COMPENSATION(4) SARS(5) COMPENSATION(6)
--------- ---- --------- -------- --------------- -------------- ---------------
Richard Sands........... 1997 $439,112 $148,200 $ 304 90,000 sh. (7) $19,217
President and Chief 1996(2) 205,192 92,337 (7) 19,687
Executive 1995 387,750 148,314 22,456
Officer(1) 1994 371,635 241,784 31,001
Marvin Sands............ 1997 $447,239 $150,943 $45,585
Chairman of the 1996(2) 212,971 95,837 41,368
Board(1) 1995 415,531 158,941 44,358
1994 401,196 260,987 41,203
Ellis Goodman........... 1997 $412,000 $329,600 85,000 sh. (8) $40,893
Chief Executive 1996(2) 200,000 160,000 31,902
Officer, Barton 1995 385,200 308,150 39,509
Incorporated 1994 363,283 214,200 47,452
Robert Sands............ 1997 $426,528 $143,953 $ 190 85,000 sh. (9) $17,490
Executive Vice 1996(2) 203,109 91,399 (9) 21,210
President, 1995 389,546 149,001 (9) 22,130
General Counsel and 1994 322,356 209,692 30,643
Secretary
Daniel Barnett.......... 1997 $315,412 $ 94,671 $6,045 54,500 sh. (10) $43,800
Sr. Vice President and 1996(2) 90,012 40,505 (10) 1,321
President of the wine
division(10)
- --------
(1) On October 28, 1993, Richard Sands succeeded Marvin Sands as the
Company's Chief Executive Officer. Marvin Sands continues to serve as
Chairman of the Board of Directors.
(2) During January 1996, the Board of Directors of the Company changed the
Company's fiscal year-end from August 31 to the last day of February.
This change in fiscal year caused the Company to have a transition period
from September 1, 1995 through February 29, 1996 (the "Transition
Period"). Therefore, the information provided for 1996 includes
compensation paid during the period from September 1, 1995 through
February 29, 1996.
6
(3) Amounts shown include cash compensation earned and received by the Named
Executives as well as amounts earned but deferred.
(4) Amounts shown are for payments to offset tax liabilities incurred by the
Named Executives.
(5) The securities consist of shares of Class A Stock underlying stock
options. See the tables below entitled "Option/SAR Grants in Last Fiscal
Year" and "Ten-Year Option/SAR Repricings" for additional information.
(6) Amounts reported for 1997 consist of:
Company contributions under the Company's Retirement Savings Plan (a plan
established under Section 401(k) of the Internal Revenue Code): Richard
Sands $2,182; Marvin Sands $2,310; Robert Sands $757; and Daniel Barnett
$2,462.
Company contributions to the Canandaigua Wine Company, Inc. Profit
Sharing Retirement Plan: Richard Sands $16,226; Marvin Sands $16,226; and
Robert Sands $16,226.
Company contributions to the Barton Incorporated Employees' Profit Sharing
and 401(k) Plan: Ellis Goodman $18,750.
Imputed income from Company group term life insurance coverage: Marvin
Sands $11,371; and Ellis Goodman $2,460.
Company premium payments for executive life insurance coverage: Richard
Sands $809; Robert Sands $507; and Daniel Barnett $926.
Benefit from personal use of Company-owned automobile for Marvin Sands of
$15,678.
Reimbursement of club memberships as required under Ellis Goodman's
employment agreement with Barton Incorporated of $18,074.
Economic benefit of Company payment of premium on whole life (split-dollar)
life insurance for Ellis Goodman: $1,609.
Relocation costs reimbursed to Daniel Barnett of $40,412, in addition to
amounts received by Mr. Barnett under the Company's relocation plan
available to salaried employees generally.
(7) Richards Sands was granted an option to purchase 70,000 shares of Class A
Stock during the Transition Period which was repriced during fiscal year
1997. An option to purchase an additional 20,000 shares was granted in
fiscal year 1997.
(8) Ellis Goodman was granted an option to purchase 50,000 shares of Class A
Stock during fiscal year 1997 which was repriced in 1997. He was also
granted an option to purchase 15,000 shares and an option to purchase
20,000 shares of Class A Stock in fiscal year 1997.
(9) Robert Sands was granted an option to purchase 15,000 shares of Class A
Stock in fiscal year 1995 which was repriced during the Transition Period
and again in fiscal year 1997. During the Transition Period, he was
granted an option to purchase 50,000 shares of Class A Stock which was
repriced in fiscal year 1997. He was granted an option to purchase an
additional 20,000 shares of Class A Stock in fiscal year 1997.
(10) Daniel Barnett joined the Company in November 1995 as Senior Vice
President and President of the Company's wine division. Mr. Barnett was
granted options to purchase 43,500 shares of Class A Stock during the
Transition Period which were repriced twice during fiscal year 1997. He
was granted options to purchase an additional 11,000 shares in fiscal
year 1997.
7
STOCK OPTIONS
The following table contains information concerning stock option grants to
the Named Executives during the fiscal year ended February 28, 1997. No stock
appreciation rights ("SARs") were granted to any of the Named Executives in
that year. The columns labelled "Potential Realizable Value" are based on
hypothetical 5% and 10% growth assumptions, as required by the Securities and
Exchange Commission. The Company cannot predict the actual growth rate of its
Common Stock.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
-------------------------------------------------
POTENTIAL REALIZABLE
NUMBER OF VALUE AT ASSUMED
SECURITIES % OF TOTAL ANNUAL RATES OF
UNDERLYING OPTIONS/SARS STOCK PRICE
OPTIONS/ GRANTED TO EXERCISE APPRECIATION FOR
SARS EMPLOYEES OR BASE OPTION TERM
GRANTED IN FISCAL PRICE EXPIRATION ---------------------
NAME (1)(2) YEAR ($/SH)(2) DATE 5% 10%
- ---- -------------- ------------ --------- ---------- ---------- ----------
Richard Sands.......... 70,000 sh. (3) 4.3% $30.00 1/28/06 $1,320,679 $3,346,859
President and Chief 20,000 (4) 1.2% 26.75 12/18/06 336,459 852,652
Executive Officer
Marvin Sands........... -- -- -- -- -- --
Chairman of the Board
Ellis Goodman.......... 50,000 sh. (5) 3.0% $17.00 5/22/06 $ 534,560 $1,354,681
Chief Executive 15,000 (6) 0.9% 17.00 9/5/06 160,368 406,404
Officer, 20,000 (4) 1.2% 26.75 12/18/06 336,459 852,652
Barton Incorporated
Robert Sands........... 15,000 sh. (7) 0.9% $30.00 8/27/05 $ 283,003 $ 717,184
Executive Vice 50,000 (8) 3.0% 30.00 1/24/06 943,342 2,390,614
President, 20,000 (4) 1.2% 26.75 12/18/06 336,459 852,652
General Counsel and
Secretary
Daniel Barnett......... 40,000 sh. (9) 2.4% $17.00 1/24/06 $ 427,648 $1,083,745
Sr. Vice President and 3,500 (10) 0.2% 17.00 5/22/06 37,419 94,828
President of the wine 11,000 (6) 0.7% 17.00 9/5/06 117,603 298,030
division
- --------
(1) The stock options were granted under the Original Stock Plan and are
"non-qualified stock options" exercisable for shares of Class A Stock.
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 Plan, the vesting of
stock options accelerates in the event of a change of control, as defined
in the Plan.
(2) The exercise price per share of each option is equal to the closing
market price of a share of Class A Stock on the date of grant (which may
be a grant pursuant to a repricing). The table shows all options as
repriced. See the table below entitled "Ten Year Option/SAR Repricings."
(3) This option vests and first becomes exercisable on January 29, 2001.
(4) This option vests and becomes exercisable at a rate of 20% per year
beginning December 19, 1997.
(5) This option was granted in 1997 with an exercise price of $30.00 and was
repriced during 1997. This option vests and first becomes exercisable on
May 23, 2001.
(6) These options vest and become exercisable at a rate of 20% per year
beginning September 6, 1997.
(7) This option vests and first becomes exercisable on August 28, 2000.
(8) This option vests and first becomes exercisable on January 25, 2001.
8
(9) This option was granted in 1997 with an exercise price of $30.00 and was
repriced during 1997. Under the original grant, this option first became
exercisable on January 25, 2001, however, in April 1997, the vesting
schedule was amended to provide that it vests and becomes exercisable at
the rate of 20% on April 23, 1997 and 20% per year for four years
commencing January 25, 1998. In the event Mr. Barnett's employment with
the Company is terminated for certain reasons, the option becomes
immediately exercisable.
(10) This option was granted in 1997 with an exercise price of $30.00 and was
repriced during 1997. This option vests and becomes exercisable at the
rate of 20% per year beginning May 23, 1997.
The table below sets forth information regarding the number and value of
exercisable and unexercisable stock options held by the Named Executives as of
February 28, 1997. None of the Named Executives exercised any stock options
during the fiscal year ended February 28, 1997. There are no outstanding SARs.
The stock options reflected on the table were granted under the Original Stock
Plan.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END(1) AT FY-END
-------------- --------------
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE
- ---- -------------- --------------
Richard Sands................................. 90,000 sh. $132,500
President and Chief Executive Officer (Unexercisable) (Unexercisable)
Marvin Sands.................................. -- --
Chairman of the Board
Ellis Goodman................................. 85,000 sh. $973,750
Chief Executive Officer, Barton Incorporated (Unexercisable) (Unexercisable)
Robert Sands.................................. 90,000 sh. $225,000
Executive Vice President, General Counsel and (Unexercisable) (Unexercisable)
Secretary
Daniel Barnett................................ 54,500 sh. $749,375
Sr. Vice President and President of the wine (Unexercisable) (Unexercisable)
division
- --------
(1) The securities consist of shares of Class A Stock underlying stock
options.
REPORT OF THE COMPENSATION COMMITTEE WITH RESPECT TO EXECUTIVE COMPENSATION
The following report of the Compensation Committee and accompanying table
are 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 and, other than
with respect to the "Report on Repricing of Options" and "Ten-Year Options/SAR
Repricings" table, shall not otherwise be treated as filed under the
securities laws.
GENERAL
The Compensation Committee of the Board of Directors administers the
Company's executive compensation program. The Compensation Committee is
composed of Marvin Sands, the Chairman of the Board, and George Bresler, a
non-employee director.
9
The objective of the Company's executive compensation program is to develop
and maintain executive compensation programs which (i) are competitive with
the pay practices of other companies of comparable revenues, 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 aligns the interests of
the Company's executives with the interests of its stockholders.
Executive compensation is determined in light of the Company's performance
during the fiscal year and taking into account compensation data of comparable
companies. Factors specifically considered in fiscal year 1997 included net
sales increasing 15% from $987 million to $1.1 billion, net income rising $3.7
million to $27.7 million, a 15% improvement, and earnings per share on a fully
diluted basis increasing 17% from $1.20 to $1.40, as compared to the twelve-
month period ended February 29, 1996.
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 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 Compensation Committee reviews data generated by William H.
Mercer Incorporated, a consultant to the Company, for competitive analyses.
Base salary levels are determined based upon factors such as individual
performance (e.g., leadership, level of responsibility, management skills and
industry activities), Company performance and competitive pay packages.
ANNUAL MANAGEMENT INCENTIVES
In addition to their base salary, the Company's executives have the
opportunity to earn an annual cash bonus. The annual bonus is based on
multiple criteria measuring attainment of certain target financial performance
goals. The incentive opportunities for executive management vary based on
objective and subjective factors relating to the performance of the Company
and the individual, such as performance of assets, leadership and management
skills and successful acquisitions or financings. Awards are based on a
percentage of base salary and target awards currently range from 25% to 45% of
base salaries for executive management. The purpose of the annual bonus is to
motivate and provide an incentive to management to achieve specific business
objectives and initiatives as set forth in the Company's annual operating plan
and budget. For fiscal year 1997, annual cash bonuses were awarded to each of
the Named Executives in the amounts indicated in the Summary Compensation
Table based upon achievement of certain goals relative to each Named
Executive's 1997 performance.
If Proposal No. 5 is approved, future cash bonuses for the participating
executives will be determined by a committee of the Board of Directors
pursuant to the Annual Management Incentive Plan. Pursuant to such plan, the
committee administering the plan would award cash bonuses to the participating
executives in the event that the Company attains one or more pre-set
performance targets.
STOCK OPTIONS AND SARS
In connection with the executive compensation program, the Compensation
Committee has granted long-term incentive awards in the form of stock options
and stock appreciation rights under the Company's Original Stock Plan. This
arrangement balances the annual operating objectives of the annual cash
incentive plan with the Company's longer-term stockholder value building
strategies. The Compensation Committee grants these incentives from time to
time for the purpose of attracting and retaining key executives and closely
aligning their financial interests with long-term stockholder interests and
share value. The Compensation Committee believes
10
that stock options and SARs provide value to participants only when the
Company's stockholders benefit from stock price appreciation, an important
component of the executive compensation program.
The Compensation Committee believes that through the use of stock options,
executives' interests are directly tied to enhanced stockholder value. The
exercise prices of the stock options awarded have generally been equal to the
market value of the underlying shares on the date of grant. Accordingly, the
value of the awards depends solely upon future growth in the share value of
the Company's Class A Stock.
If Proposal Nos. 3 and 4 are approved, the Board or an appropriate committee
of the Board would have the flexibility of awarding non-qualified stock
options, restricted stock, stock appreciation rights and other stock-based
awards under the Long-Term Stock Plan and incentive stock options under the
new Incentive Stock Option Plan. This would enable the committee to fine-tune
its grants in order to maximize the alignment of the interests of the
stockholders and management.
REPORT ON REPRICING OF OPTIONS
The Compensation Committee has approved the replacement or repricing of
outstanding stock options twice in fiscal year 1997: once in May and once in
September. At the time of each replacement or repricing, the exercise price of
the Company's broadly distributed stock options exceeded the market value of
the Company's Class A Stock.
On May 23, 1996, the Compensation Committee approved replacing options
granted during fiscal year 1995 and the Transition Period with new options to
the employees holding those options, including Named Executives, at the fair
market value on the date of the new grant ($30.00 per share). On September 6,
1996, the Compensation Committee approved the repricing of all options granted
between January 1, 1994 and September 5, 1996 (including the replacement
options granted on May 23, 1996 grants) other than those granted to Richard
Sands and Robert Sands. The new exercise price was the closing price of the
Class A Stock on September 6, 1996 ($17.00).
The decision to approve the repricings followed a review of existing option
grants and the recognition that, because of a decline in the market value of
the Company's Class A Stock, many of the outstanding options at each of these
times were exercisable at prices which substantially exceeded the market value
of the Company's Class A Stock. The Compensation Committee determined that
many of these options were significantly less likely to serve their purpose of
retaining and motivating employees. In addition, the Compensation Committee
was advised by management that it believed that employee morale and
productivity would benefit as a result of a repricing. In keeping with the
Company's philosophy of utilizing equity incentives to motivate and retain
qualified employees, the Compensation Committee felt it was important and in
the best interests of the Company to regain the incentive intended to be
provided by options for employees generally. In September 1996, the
Compensation Committee did not reprice the options of two of the Named
Executives: Richard Sands, Chief Executive Officer, and Robert Sands,
Executive Vice President. The Compensation Committee determined that morale
and motivation of these two executives, or employees generally, would not be
any better served by changing the exercise price of the options held by these
two executives.
11
The table below sets forth information concerning repricings of options held
by executive officers during the last ten completed fiscal years. The stock
options reflected on the table were granted under the Original Stock Plan.
TEN-YEAR OPTION/SAR REPRICINGS
MARKET
NUMBER OF PRICE EXERCISE LENGTH OF
SECURITIES OF STOCK AT PRICE AT ORIGINAL
UNDERLYING TIME OF TIME OF OPTION TERM
OPTIONS/ REPRICING REPRICING NEW REMAINING AT
SARS OR OR EXERCISE DATE OF
REPRICED OR AMENDMENT AMENDMENT PRICE REPRICING OR
NAME DATE AMENDED ($) ($) ($) AMENDMENT
---- ------- ----------- ----------- --------- -------- ---------------
Richard Sands.......... 5/23/96 70,000 sh. $30.00 $36.00 $30.00 9 yrs., 8 mos.
President and Chief
Executive Officer
Ellis Goodman.......... 9/6/96 50,000 sh. $17.00 $30.00 $17.00 9 yrs., 9 mos.
Chief Executive
Officer,
Barton Incorporated
Robert Sands........... 1/25/96 15,000 sh. $35.75 $44.75 $35.75 9 yrs., 7 mos.
Executive Vice 5/23/96 15,000 30.00 35.75 30.00 9 yrs., 3 mos.
President, 5/23/96 50,000 30.00 35.75 30.00 9 yrs., 8 mos.
General Counsel and
Secretary
Lynn Fetterman......... 1/25/96 7,500 sh. $35.75 $44.75 $35.75 9 yrs., 7 mos.
Vice President 5/23/96 7,500 30.00 35.75 30.00 9 yrs., 3 mos.
5/23/96 3,500 30.00 35.75 30.00 9 yrs., 8 mos.
9/6/96 7,500 17.00 30.00 17.00 9 yrs.
9/6/96 3,500 17.00 30.00 17.00 9 yrs., 9 mos.
9/6/96 6,000 17.00 24.25 17.00 7 yrs., 10 mos.
Daniel Barnett......... 5/23/96 40,000 sh. $30.00 $35.75 $30.00 9 yrs., 8 mos.
Sr. Vice President 5/23/96 3,500 30.00 35.75 30.00 9 yrs., 8 mos.
and President of the 9/6/96 40,000 17.00 30.00 17.00 9 yrs., 5 mos.
wine division 9/6/96 3,500 17.00 30.00 17.00 9 yrs., 9 mos.
Bertram Silk........... 5/23/96 2,500 sh. $30.00 $35.75 $30.00 9 yrs., 8 mos.
Sr. Vice President 9/6/96 2,500 17.00 30.00 17.00 9 yrs., 9 mos.
9/6/96 5,000 17.00 24.25 17.00 7 yrs., 10 mos.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
For fiscal year 1997, the compensation of Richard Sands, the Company's Chief
Executive Officer, was based on the Company's performance and growth as
described under the caption "General" above and its progress in certain
restructuring initiatives. In addition, the compensation packages of chief
executive officers of certain comparable companies selected by William H.
Mercer Incorporated were considered. Also taken into account was the Company's
current executive salary and compensation structure.
Richard Sands' base salary is believed to be in line with executives of
similar companies and with chief executive officers with similar
responsibilities. Annual cash incentives were set as a percentage of Richard
Sands' base salary based upon the performance of the Company and other
measures, both objective and subjective. The ranges for these awards, from
threshold, target and maximum (18%, 45% and 67.5% respectively), were
comparable to industry compensation survey data for executives in Richard
Sands' position. For the fiscal year ended February 28, 1997, Richard Sands
received a bonus of $148,200.
12
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 Compensation Committee generally believes that compensation
of its executives should be deductible by the Company except in unusual
circumstances, and the amendment and restatement of the Stock Option and Stock
Appreciation Right Plan as the Long-Term Stock Incentive Plan and the two new
compensation plans (Proposal Nos. 3, 4 and 5) have been designed to provide
for performance-based compensation for "covered employees" under Section
162(m) if properly administered. At this time, the Company does not have
enough "outside directors" as defined under Section 162(m) to administer the
plans in a manner qualifying awards to "covered employees" under Section
162(m) but will seek one or more additional qualified directors who will meet
the requirements and enable qualifying awards to be made.
The foregoing report is given by the members of the Compensation Committee,
COMPENSATION COMMITTEE
Marvin Sands
George Bresler
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal year 1997, Marvin Sands and George Bresler served as members
of the Compensation Committee of the Company's Board of Directors. Marvin
Sands is the Chairman of the Board and serves in this capacity as the
Company's senior executive officer. Mr. Bresler is a partner in the law firm
of Rosner, Bresler, Goodman & Bucholz in New York, New York. Mr. Bresler's
firm occasionally performs legal services for the Company.
13
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a line graph comparing, for the fiscal years ended August
31, 1991, 1992, 1993, 1994 and 1995, the Transition Period from September 1,
1995 to February 29, 1996, and the fiscal year ended February 28, 1997, the
cumulative total stockholder return of the Company's Class A Stock and Class B
Stock, based on the market price of the Class A Stock and the Class B Stock
and assuming reinvestment of dividends, with the cumulative total return of
companies on the Nasdaq Market Index and an index comprised of companies in
the beverage industry (the "Selected Peer Group Index").*
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN OF
CANANDAIGUA WINE COMPANY, INC.,
THE NASDAQ MARKET INDEX AND
SELECTED PEER GROUP INDEX
[PEFORMANCE GRAPH]
1991 1992 1993 1994 1995 1996** 1997
Wine A..................... $100 $121.38 $200.05 $274.23 $424.83 $341.66 $276.47
Wine B..................... 100 125.87 206.79 287.71 429.32 341.66 298.95
Peer Group................. 100 118.28 120.72 126.93 168.84 211.03 287.21
NASDAQ..................... 100 101.69 132.39 144.65 172.11 179.65 215.63
- ---------------------
* The Selected Peer Group Index is comprised of the following companies:
Anheuser-Busch Companies Inc., Brown-Forman Corporation (Class A and Class
B Shares), Cable Car Beverage Corporation, Cadbury-Schwepps plc,
Canandaigua Wine Company, Inc. (Class A and Class B Shares), Chalone Wine
Group Ltd., Coca Cola Bottling Consolidated, Coca Cola Company, Coca Cola
Enterprises, Adolph Coors Company (Class B Shares), Genesee Corporation
(Class B Shares), Kirin Brewery Ltd. ADR, LVMH Moet-Hen Louis Vuit, Pepsico
Inc., Seagram Company Ltd., Whitman Corporation.
** The Transition Period.
14
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 and shall not
otherwise be treated as filed under the securities laws.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On June 29, 1993, as part of the acquisition of Barton Incorporated
("Barton"), the Company extended Ellis Goodman's employment agreement with
Barton. Under his employment agreement, Mr. Goodman serves as Chairman of the
Board and Chief Executive Officer of Barton (the Company's beer and spirits
division). By virtue of his position and responsibilities with Barton, Mr.
Goodman is deemed an executive officer of the Company. He formerly served as a
director of the Company. Under his employment agreement, Mr. Goodman has full
and complete authority to direct the day-to-day management of the business,
operations and affairs of Barton and its subsidiaries. The employment
agreement expires on December 31, 1999 but will be automatically extended for
additional one-year periods unless either Mr. Goodman or Barton notifies the
other of their desire not to extend it. Under the employment agreement, (i)
Barton is obligated to review Mr. Goodman's compensation annually and afford
him participation under employee benefit and compensation plans offered from
time to time to other key executives of Barton, and (ii) Mr. Goodman has
agreed not to compete with Barton for a period of 12 months following the
termination of his employment with Barton for certain specified reasons. Upon
the expiration of the employment agreement or its earlier termination for
certain reasons, Barton is obligated to make a severance payment to Mr.
Goodman in an amount equal to 200% of his then base salary and 200% of the
incentive compensation payable to him for Barton's fiscal year ended
immediately prior to the date of termination, plus an amount equal to the base
compensation, if any, remaining to be paid to Mr. Goodman for the remaining
term of the employment agreement. If Barton fails to achieve certain earnings
levels through fiscal 1999, then Mr. Goodman's employment may be terminated.
Pursuant to the terms of the Stock Purchase Agreement dated April 27, 1993,
as amended, among the Company, Barton and the former stockholders of Barton,
under which the Company acquired Barton, Ellis Goodman, the Gillian and Ellis
Goodman Foundation, and certain trusts established for the benefit of Mr.
Goodman's children (collectively, the "Goodman Recipients") have received,
since June 1993, cash payments aggregating $82,769,549, $10,209,767 of which
was paid in fiscal year 1997. Under the Stock Purchase Agreement, the Goodman
Recipients also received (prior to fiscal year 1997) an aggregate of 673,021
shares of the Company's Class A Stock.
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, the Company pays the
annual premium on an insurance policy (the "Policy") held in the trust,
$209,063 in fiscal year 1997, and the trust reimburses the Company for the
portion of the premium equal to the "economic benefit" to Marvin Sands
calculated in accordance with the United States Treasury Department rules then
in effect ($10,936 in fiscal year 1997). The Policy is a joint life policy
payable upon the death of the second to die of the insureds, Marvin Sands and
his wife Marilyn, 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 Marvin Sands and Marilyn Sands. From the inception of the
agreement through the end of fiscal year 1997, the Company has paid aggregate
premiums, net of reimbursements, of $1,427,365. 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 the survivor of the insureds or
earlier cancellation, the Company is entitled to be repaid by the trust the
amount of such indebtedness.
15
By an Agreement dated August 12, 1988, Barton entered into a split-dollar
insurance agreement with a trust established by Ellis Goodman of which Gillian
Goodman and Edwin H. Goldberger are the trustees. Pursuant to the Agreement,
Barton pays the annual premium on an insurance policy (the "Goodman Policy")
held in the trust. The Goodman Policy is a single life policy, payable upon
the death of Mr. Goodman, with a face value of $1 million. The amount of all
premiums paid by Barton is secured by an assignment of certain rights in the
Policy. Upon the termination of the Agreement, whether by the death of Mr.
Goodman or earlier cancellation, Barton is entitled to receive an amount equal
to the premiums which it has paid. The premium paid by Barton during the
Company's 1997 fiscal year was $19,370. From the inception of the Agreement
through the end of fiscal year 1997, the Company has paid aggregate premiums
of $232,440.
Under the terms of a letter agreement between the Company and Daniel
Barnett, Senior Vice President of the Company and President of the Company's
wine division, if Mr. Barnett's employment with the Company is terminated
without cause or if he voluntarily resigns from the Company within 30 days
after he is demoted or his responsibilities are materially diminished, in
either case without cause, he will be entitled to receive severance payments
equal to his then current base compensation for a period of 12 months. Under
those circumstances, certain stock options granted to Mr. Barnett to purchase
up to 40,000 shares of the Company's Class A Stock shall, to the extent not
then exercisable, become immediately exercisable.
Richard Sands, Robert Sands and the Estate of Laurie Sands are the
beneficial owners of a limited partnership which owns railroad cars. These
cars are leased by the Company from the partnership at fair market rates.
During fiscal year 1997, the Company made lease payments to this limited
partnership in the amount of $37,703. The Company expects to continue its
present relationship with the limited partnership during fiscal year 1998.
George Bresler, a director of the Company, is a partner in the law firm of
Rosner, Bresler, Goodman & Bucholz in New York, New York. Mr. Bresler has
rendered legal services to the Company in the past and continues to render
legal services to the Company. James A. Locke, III, a director of the Company,
is a partner in the law firm of Nixon, Hargrave, Devans & Doyle LLP,
Rochester, New York, the Company's principal outside counsel. The Company's
policy is to pay its non-employee directors $35,000 per year for their
services as directors. Mr. Locke has waived the payment of directors' fees.
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.
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
1997 were complied with in a timely fashion, except that the Estate of Laurie
Sands, filed an Initial Statement of Beneficial Ownership report late.
16
PROPOSAL NO. 1--NOMINATION AND ELECTION OF DIRECTORS
On May 13, 1997, the Board of Directors of the Company nominated six
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 Marvin
Sands, Richard Sands, Robert Sands, George Bresler, James A. Locke, III, and
Bertram E. Silk. Messrs. Bresler and Locke have been designated as the
nominees to be elected by the holders of the Class A Stock, voting as a
separate class. The remaining directors are to be elected by the holders of
the Class B Stock, voting as a separate class. Unless authority to vote for
one or more of the nominees is specifically withheld, the shares represented
by the enclosed proxy, if properly executed and returned, will be voted FOR
the election of the six nominees.
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
management of the Company.
On July 12, 1993, the Company adopted a policy to pay its non-employee
directors $35,000 per year for their services as directors. George Bresler and
James Locke qualify for such payments but Mr. Locke has waived the payment of
directors' fees. 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.
The Board of Directors of the Company held five meetings during the
Company's fiscal year ended February 28, 1997. The Company has an Audit
Committee and a Compensation Committee of the Board of Directors, but has no
nominating or other standing committees of the Board of Directors. The Audit
Committee is responsible for assisting the Board of Directors in overseeing
the financial reporting and internal operating controls of the Company. The
members of the Audit Committee are George Bresler, James Locke and Richard
Sands. The Audit Committee held no meetings during the fiscal year ended
February 28, 1997. The Compensation Committee administers the Company's
executive compensation program, its Employee Stock Purchase Plan and, until
its amendment and restatement, administered the Original Stock Plan. The
Compensation Committee may be designated as the committee to administer one or
more of the Long-Term Stock Plan, the Incentive Stock Option Plan and the
Annual Management Incentive Plan provided the Compensation Committee is
composed of members meeting the criteria of each such plan. The members of the
Compensation Committee are George Bresler and Marvin Sands. The Compensation
Committee held three meetings during the fiscal year ended February 28, 1997.
During fiscal year 1997, all incumbent directors attended all meetings of the
Board of Directors and attended all meetings held by each committee of the
Board on which he served.
17
The information appearing in the following table and in the notes thereto
has been furnished to the Company by the current directors and nominees to the
Board of Directors, the Named Executives, and the Company's other executive
officers. Unless otherwise indicated, the named individual has sole voting
power and investment discretion with respect to the shares attributed to him.
Executive officers of the Company hold office until the next Annual Meeting of
the Board of Directors and until their successors are elected and qualified.
SHARES OF STOCK
BENEFICIALLY
SERVED AS OWNED PERCENT
DIRECTOR AS OF JUNE 2, OF
NAME AND BACKGROUND SINCE 1997 CLASS(1)
------------------- --------- --------------- --------
Marvin Sands, age 73, is the founder of the 1946 73,917 sh. (2)
Company, which is the successor to a Class A Stock
business he started in 1945. Mr. Sands
continues to serve as an officer of the 101,850 sh. 3.1%
Company as Chairman of its Board of Class B Stock
Directors. He has been a director of the (3) (3)
Company and its predecessor since 1946 and
was Chief Executive Officer until October
1993. He is the father of Richard Sands and
Robert Sands.
Richard Sands, Ph.D., age 46, is the 1982 677,134 sh. 4.5%
President and Chief Executive Officer of Class A Stock
the Company. He has been employed by the
Company in various capacities since 1979. 1,899,220 sh. 57.0%
He was elected Executive Vice President and Class B Stock
a director in 1982, became President and (4) (4)
Chief Operating Officer in May 1986, and
was elected Chief Executive Officer in
October 1993. He is a son of Marvin Sands
and the brother of Robert Sands.
Robert Sands, age 39, is Executive Vice 1990 683,266 sh. 4.5%
President, General Counsel and Secretary of Class A Stock
the Company. He was appointed Vice
President and General Counsel in June 1990, 1,898,992 sh. 57.0%
was elected Executive Vice President in Class B Stock
October 1993 and was appointed Secretary in (4) (4)
January 1995. From June 1986, until his
appointment as Vice President and General
Counsel, Mr. Sands was employed by the
Company as General Counsel. He is a son of
Marvin Sands and the brother of Richard
Sands.
George Bresler, age 72, has been engaged in 1992 10,000 sh. (2)
the practice of law since 1957. From August Class A Stock
1987 through July 1992, Mr. Bresler was a
partner in the law firm of Bresler and Bab,
New York, New York. Currently, Mr. Bresler
is a partner in the law firm of Rosner,
Bresler, Goodman & Bucholz in New York, New
York. (5)
James A. Locke, III, age 55, has been a 1983 7,049 sh. (6) (2)
partner in the law firm of Nixon, Hargrave, Class A Stock
Devans and Doyle LLP, Rochester, New York,
the Company's principal outside counsel, 33 sh. (2)
since January 1, 1996. For twenty years Class B Stock
prior to joining Nixon, Hargrave, Mr. Locke
was a partner in the law firm of Harter,
Secrest and Emery, Rochester, New York.
Bertram E. Silk, age 65, has been Vice 1973 6,600 sh. (7) (2)
President of the Company since 1973 and was Class A Stock
elected Senior Vice President of the
Company in October 1993. He has been 1,125 sh. (2)
employed by the Company since 1965. Class B Stock
Currently, Mr. Silk is responsible for
industry relations with respect to labor
unions in California, as well as for
various trade association and international
beverage alcohol industry matters.
Immediately prior to his current position,
he was in charge of the Company's grape
grower relations in California. Before
moving from Canandaigua, New York to
California in 1989, Mr. Silk was in charge
of production for the Company. From 1989 to
August 1994, Mr. Silk was in charge of the
Company's grape juice concentrate business
in California.
18
SHARES OF STOCK
BENEFICIALLY
SERVED AS OWNED PERCENT
DIRECTOR AS OF JUNE 2, OF
NAME AND BACKGROUND SINCE 1997 CLASS(1)
------------------- --------- --------------- ---------
Ellis M. Goodman, age 60, is the Chief N/A 259,680 sh. (8) 1.7%
Executive Officer of Barton and serves in Class A Stock
that capacity under the terms of an
employment agreement with Barton. From
July 1993 to January 1996, Mr.Goodman
served as a director of the Company. Also,
from July 1993 to October 1993, he served
as a Vice President of the Company and
from October 1993 to January 1996, he
served as an Executive Vice President of
the Company. Mr. Goodman has been Chief
Executive Officer of Barton since 1987 and
Chief Executive Officer of Barton Brands,
Ltd. (the predecessor of Barton) since
1982.
Daniel C. Barnett, age 47, joined the N/A 9,398 sh. (9) (2)
Company during November 1995 as a Senior Class A Stock
Vice President and President of the
Company's wine division. From July 1994 to
October 1995, Mr. Barnett served as
President and Chief Executive Officer of
Koala Springs International, a juice
beverage company. Prior to that, from
April 1991 to June 1994, Mr. Barnett was
Vice President and General Manager of
Nestle USA's beverage businesses. From
October 1988 to April 1991, he was
President of Weyerhauser's baby diaper
division.
All Executive Officers and Directors as a 1,323,261 sh. 8.7%(10)
Group (9 persons) Class A Stock
2,693,279 sh. 80.9%(10)
Class B Stock
- ---------------------
(1) Unless otherwise noted, percentages of ownership are calculated on the
basis of 15,212,378 shares of Class A Stock outstanding and 3,330,458
shares of Class B Stock outstanding on June 2, 1997.
(2) Percentage does not exceed one percent (1%) of the outstanding shares of
such class.
(3) The number of shares of Class A Stock includes 47,516 shares of Class A
Stock owned by MLR&R, a partnership in which Mr. Sands is a general
partner. Mr. Sands has shared voting power and investment discretion with
respect to these shares. Mr. Sands disclaims beneficial ownership of such
shares except to the extent of his ownership interest in MLR&R. The
number does not include 101,850 shares of Class B Stock owned by Mr.
Sands or 788,875 shares of Class A Stock and 146,250 shares of Class B
Stock beneficially owned by Mr. Sands' wife, Marilyn Sands. Mr. Sands
disclaims beneficial ownership of all shares owned by Marilyn Sands.
Assuming the conversion of Class B Stock beneficially owned by Mr. Sands
into Class A Stock, Mr. Sands would beneficially own 175,767 shares of
Class A Stock, representing 1.1% of the outstanding Class A Stock after
such conversion.
(4) See tables and footnotes under "Beneficial Ownership" above.
(5) Mr. Bresler has in the past rendered legal services to the Company and
continues to do so.
(6) The number of shares of Class A Stock includes presently exercisable
options to purchase up to 6,000 shares of Class A Stock but does not
include 33 shares of Class A Stock issuable pursuant to the conversion
feature of the Company's Class B Stock owned by Mr. Locke. Assuming the
conversion of Class B Stock beneficially owned by Mr. Locke into Class A
Stock, Mr. Locke would beneficially own 7,082 shares of Class A Stock,
representing less than one percent (1%) of the outstanding Class A Stock
after such conversion.
(7) The number of shares of Class A Stock includes presently exercisable
options to purchase up to 3,000 shares of Class A Stock but does not
include 1,125 shares of Class A Stock issuable pursuant to the conversion
feature of the Company's Class B Stock owned by Mr. Silk. Assuming the
conversion of Class B Stock beneficially owned by Mr. Silk into Class A
Stock, Mr. Silk would beneficially own 7,725 shares of Class A Stock,
representing less than one percent (1%) of the outstanding Class A Stock
after such conversion. The number of shares of Class A Stock does not
include shares of Class A Stock that may be acquired within 60 days under
the Company's Employee Stock Purchase Plan. Such number of shares is not
presently determinable.
19
(8) Includes 59,680 shares owned of record by the Gillian and Ellis Goodman
Foundation. Mr. Goodman is president of the Foundation with full voting
and dispositive power with respect to such shares and disclaims
beneficial ownership of these shares.
(9) The number of shares includes presently exercisable options to purchase
up to 8,700 shares of Class A Stock. The number of shares does not
include shares that may be acquired within 60 days under the Company's
Employee Stock Purchase Plan. Such number of shares is not presently
determinable.
(10) The percentage of ownership of all executive officers and directors as a
group is based on 15,235,078 shares of Class A Stock deemed outstanding
pursuant to Rule 13d-3(d)(1) under the Securities Exchange Act. The
amount of Class A Stock in the table includes presently exercisable
options to purchase up to 22,700 shares of Class A Stock, but excludes
shares of Class A Stock issuable to members of the group pursuant to the
conversion feature of Class B Stock beneficially owned by them. Assuming
the conversion of Class B Stock beneficially owned by the executive
officers and directors as a group into Class A Stock, all executive
officers and directors as a group would beneficially own 4,016,540 shares
of Class A Stock, representing 22.4% of the outstanding Class A Stock
after such conversion based upon 17,928,357 shares deemed outstanding
pursuant to Rule 13d-3(d)(1) under the Securities Exchange Act.
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 directors elected by the holders of
Class A Stock. A plurality of the votes cast at the Meeting by the holders of
Class B Stock is required for the election of the four directors elected by
the holders of Class B Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES.
PROPOSAL NO. 2--PROPOSED AMENDMENT TO THE COMPANY'S
RESTATED CERTIFICATE OF INCORPORATION TO CHANGE
THE NAME OF THE COMPANY TO CANANDAIGUA BRANDS, INC.
GENERAL
The Board of Directors of the Company has approved changing the name of the
Company from Canandaigua Wine Company, Inc. to Canandaigua Brands, Inc.
subject to stockholder approval. The change in the Company's name will be
effected through an amendment to the Company's Restated Certificate of
Incorporation.
REASONS FOR NAME CHANGE
The Board of Directors believes that the Company's current name does not
accurately reflect the scope of the Company's operations as a marketer,
distributor and producer of brands within all three beverage alcohol product
categories: beer, wine and spirits. The Company believes the new name,
Canandaigua Brands, Inc., better reflects to the investing public the breadth
of its products and activities while continuing to reflect the heritage of the
Company. The new name will be used principally to identify the corporate
management organization which will oversee the various operating divisions and
be responsible for consolidated financial results. The Company's beer and
spirits division will retain the name Barton Incorporated, and the Company's
wine division is expected to adopt the name Canandaigua Wine Company, Inc.
The proposed amendment to the Company's Restated Certificate of
Incorporation is subject to the consent of certain banks under the Company's
credit agreement. The Company expects to receive this consent prior to the
Meeting, but will not actually change the name by filing the amendment until
it has completed all formalities. The change of the Company's name will not in
any way affect the validity of currently outstanding stock certificates, nor
will stockholders be required to surrender or exchange any of their stock
certificates.
20
VOTE REQUIRED
In accordance with applicable Delaware law and the Company's Restated
Certificate of Incorporation, approval of Proposal No. 2 to change the name of
the Company requires the affirmative vote of the holders of a majority of all
outstanding shares of Class A Stock and Class B Stock entitled to vote
thereon, voting together as a single class, provided that the holders of Class
A Stock will have one (1) vote per share and the holders of Class B Stock will
have ten (10) votes per share.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS APPROVE THE PROPOSED
AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO CHANGE THE
NAME OF THE COMPANY TO CANANDAIGUA BRANDS, INC. AND ACCORDINGLY RECOMMENDS
THAT YOU VOTE FOR PROPOSAL NO. 2.
PROPOSAL NO. 3--LONG-TERM STOCK INCENTIVE PLAN
The Company's Board of Directors has amended and restated the Company's
Stock Option and Stock Appreciation Right Plan (referred to herein as the
"Original Stock Plan") as the Long-Term Stock Incentive Plan (referred to
herein as the "Long-Term Stock Plan"). The Long-Term Stock Plan became
effective when adopted by the Board of Directors except to the extent that it
requires stockholder approval. The following discussion summarizes certain
provisions of the Long-Term Stock Plan. This summary does not purport to be
complete and is subject to and qualified in its entirety by reference to the
full text of the Long-Term Stock Plan which is set forth in Appendix A to this
Proxy Statement.
The purpose of the amendment and restatement of the Original Stock Plan was
to give the Company more flexibility to attract and retain valued employees
and directors and to provide them with incentives to maintain and enhance the
Company's long-term performance, thereby aligning their interests with those
of the Company's stockholders. The material changes to the Original Stock Plan
include: increasing the aggregate number of shares of the Company's Class A
Stock available for Awards under the plan from 3,000,000 to 4,000,000,
expanding the awards that can be made under the plan to include restricted
stock and other stock-based awards, amending the plan to comply with Section
162(m) of the Internal Revenue Code, modifying the impact of a change of
control and modifying the amendments to the plan which require stockholder
approval. The Board of Directors believes that the increase in the number of
shares and the types of awards available under the plan improves its
usefulness in achieving these goals.
SUMMARY OF TERMS
Awards under the Long-Term Stock Plan may consist of any combination of non-
qualified stock options, stock appreciation rights, restricted stock or other
stock-based awards (collectively, "Awards"). The aggregate number of shares of
the Company's Class A Stock available for Awards under the plan is increased
by the amendments from 3,000,000 to 4,000,000. Non-qualified options to
purchase 1,509,595 shares of Class A Stock were outstanding on May 31, 1997
under the Original Stock Plan and rights with respect to 1,302,420 shares were
then available for grant. Based on these figures, an aggregate of 2,302,420
shares would be available for awards under the Long-Term Stock Plan. Any
Awards granted pursuant to the Long-Term Stock Plan are automatically adjusted
to prevent dilution or enlargement in the event of any stock dividend, stock
split, reorganization or other event affecting the Class A Stock. The market
value of the Class A Stock as of June 19, 1997 was $34.00 per share.
The Long-Term Stock Plan will be administered by a committee of the
Company's Board of Directors, certain members of which must be outside
directors within the meaning of the Internal Revenue Code. The committee may
delegate its authority to others as provided in the plan, and the entire Board
of Directors may act as the committee. The Long-Term Stock Plan is presently
administered by the entire Board of Directors because there are not enough
outside directors to constitute a committee meeting the criteria of the plan.
Under the Long-Term Stock Plan, the committee is charged with responsibility
for selecting the participants and for determining
21
the number and type of Awards to be granted to each participant, the timing of
the Awards, and any other terms and conditions applicable to the Awards.
The persons who are eligible to participate in the Long-Term Stock Plan
include directors and employees (including officers) of the Company and its
subsidiaries. Two non-employee directors and approximately 2,500 employees are
eligible to participate in the Long-Term Stock Plan; however, only directors
and employees selected by the committee will be granted Awards under the plan.
Outstanding non-qualified options granted under the Original Stock Plan are
currently held by approximately 625 employees.
The Long-Term Stock Plan may be amended, modified or terminated by the
committee from time to time. No amendment, modification or termination of the
Long-Term Stock Plan will be effective without stockholder approval if such
approval is required under any applicable law, rule or regulation. The
exercisability of any Award will terminate if the committee determines that
the participant is engaged in competition with the Company or has been
terminated for "cause" as defined in the Long-Term Stock Plan.
Neither the participants, nor the type, number or timing of any Awards for
fiscal year 1998, have yet been determined, except that a stock option to
purchase up to 5,000 shares of the Company's Class A Stock will be granted to
an employee, who will also be an officer of the Company or a subsidiary,
following commencement of his employment with the Company. Stock options and
stock appreciation rights previously granted pursuant to the Original Stock
Plan were not affected by the amendment and restatement of the Original Stock
Plan and will remain outstanding until they are exercised, expire or otherwise
terminate.
Covered Employee Restrictions. There are special rules under the Long-Term
Stock Plan relating to the Chief Executive Officer of the Company, the four
other most highly compensated executive officers of the Company and such other
officers of the Company as the committee may designate ("Covered Employees").
These provisions are necessary for the plan to comply with Section 162(m) of
the Internal Revenue Code. All Awards to Covered Employees must be granted by
the committee, which must have the requisite number of outside directors.
Also, the aggregate fair market value of any restricted stock granted to any
individual Covered Employee in any fiscal year may not exceed $2.5 million,
and the aggregate fair market value of any other stock-based awards granted to
any individual Covered Employee in any fiscal year may not exceed $2.5
million. Finally, no individual Covered Employee may receive Awards in any
fiscal year relating to a number of shares of Class A Stock in excess of 2
1/2% of the number of shares of Class A Stock outstanding on the date the
Board of Directors adopted the amendment and restatement of the Original Stock
Plan as the Long-Term Stock Plan. The approval of the Company's stockholders
is required to implement the Long-Term Stock Plan with respect to Awards
granted to Covered Employees which are intended to qualify as performance-
based compensation under Section 162(m) of the Internal Revenue Code.
Stock Options. Under the Long-Term Stock Plan, the committee may continue to
grant awards in the form of non-qualified options to purchase shares of Class
A Stock. The committee will, with regard to each stock option, determine the
number of shares subject to the option, the manner and period during which the
option may be exercised and the exercise price per share of stock subject to
the option (which, except in the case of Covered Employees, may be less than
the fair market value of the Class A Stock on the date of the grant). The
exercise price of stock options granted to Covered Employees must be equal to
or greater than the fair market value of the Company's Class A Stock on the
date the stock option is granted. Unless otherwise determined by the
committee, stock options will become exercisable 20% per year on each of the
first five anniversaries of the grant; however, they become immediately
exercisable upon a change of control. Upon exercise, the option price may, at
the discretion of the committee, be paid in cash, shares of Class A Stock, a
combination thereof, or such other consideration as the committee may deem
appropriate. No additional incentive stock options may be granted under the
Long-Term Stock Plan.
Stock Appreciation Rights. The Long-Term Stock Plan authorizes the committee
to grant SARs either in tandem with a stock option or independent of a stock
option. An SAR is a right to receive a payment equal to the difference between
the fair market value of a share of Class A Stock on the date the SAR is
exercised and the SAR's reference price. A tandem SAR may be granted either at
the time of the grant of the related stock option or at any time thereafter
during the term of the stock option. Unless otherwise determined by the
22
committee, an SAR will become exercisable 20% per year on each of the first
five anniversaries of the grant; however, they become immediately exercisable
upon a change of control. The reference price of an SAR will be fixed by the
committee, but the reference price of a tandem SAR must be no less than the
exercise price of its related stock option and the reference price of an SAR
granted to a Covered Person must equal or exceed the fair market value of a
share of Class A Stock on the date of the grant. Upon the exercise of a stock
option as to some or all of the shares covered by a tandem SAR, the related
tandem SAR will automatically expire in accordance with the terms and
conditions specified in the grant.
Restricted Stock Awards. The Long-Term Stock Plan authorizes the committee
to grant awards in the form of restricted shares of Class A Stock. Such awards
will be subject to such terms, conditions, restrictions, and/or limitations,
if any, as the committee deems appropriate, including restrictions on
transferability and continued employment. The terms and conditions will
include one or more performance criteria and performance targets for Covered
Employees if the grant is intended to comply with Section 162(m) and may
contain such criteria and targets under other circumstances and for other
participants.
Other Stock-Based Awards. The committee may make other stock-based awards
under the Long-Term Stock Plan. The other stock-based awards will be subject
to such terms, conditions and limitations as the committee deems appropriate,
which will include one or more performance criteria and performance targets
for Covered Employees if the grant is intended to comply with Section 162(m)
and may contain such criteria and targets under other circumstances and for
other participants.
Performance Criteria and Targets. For each restricted stock award and other
stock-based award to Covered Employees under the Long-Term Stock Plan, the
committee will establish specific annual performance targets for performance
periods of one or more years (or partial years). The performance targets will
be based on one or more of the following business criteria: fair market value
of the Class A Stock, shareholder value added, cash flow, earnings per share,
EBITDA (earnings before interest, taxes, depreciation and amortization),
return on equity, return on capital, return on assets or net assets, cost
reduction or control, operating income or net operating income, operating
margins/sales in one or more business segments or product lines, return on
operating revenue, market share in one or more business segments or product
lines, or on any combination thereof. Performance targets must be established
while the performance relative to the target remains substantially uncertain
within the meaning of Section 162(m) of the Internal Revenue Code.
Concurrently with the selection of the performance targets, the committee must
establish an objective formula or standard for calculating the maximum Award
granted to each Covered Employee. The committee may adjust performance targets
to take into account extraordinary items affecting the Company, as defined in
the Long-Term Stock Plan. While the committee has no authority to make upward
adjustments to Awards to Covered Employees, it may in its discretion make such
adjustments with respect to Awards to other employees.
Covered Employees who are designated by the committee as participants for a
given performance period shall only be entitled to receive payments of Awards
for such period to the extent that the pre-established objective performance
targets set by the committee for such period are attained. With regard to a
particular performance period, the committee will have the discretion, subject
to the Long-Term Stock Plan's terms, to select the length of the performance
period, the type(s) of performance criteria to be used, the performance
targets that will be used to measure performance for the period and the
performance formula that will be used to determine what portion, if any, of
the Award has been earned for the period. Such discretion shall be exercised
by the committee in writing within the time prescribed by Section 162(m) of
the Internal Revenue Code (generally, the first 90 days of the performance
period) and performance for the period will be measured by the committee
following the end of the performance period.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
A participant who receives a non-qualified stock option will not realize
income upon the grant of the option. The participant will realize ordinary
income at the time of exercise of non-qualified stock options in the amount of
the difference between the exercise price and the fair market value of the
Class A Stock on the date of exercise
23
multiplied by the number of shares with respect to which the option is
exercised. The Company is entitled to a deduction equal to the amount of such
income at the time such income is realized by the participant.
With respect to stock appreciation rights, participants will not realize any
income at the time of grant. Upon exercise, any cash received and the fair
market value on the exercise date of any shares received will constitute
ordinary income to the participant. The Company will be entitled to a
deduction in the amount of such income at the time such income is realized by
the participant.
Participants who receive grants of restricted stock should not realize
income at the time of grant, assuming the restrictions constitute a
substantial risk of forfeiture for federal income tax purposes. When such
restrictions lapse, the participants will receive taxable income in an amount
equal to the then fair market value of the Class A Stock. The federal income
tax consequences of other stock-based awards will depend on the type of Award.
Generally, a participant who receives a stock-based award in the form of a
right to receive Company stock will recognize ordinary income equal to the
fair market value of the stock when the stock is received by the participant
and is no longer subject to a substantial risk of forfeiture. In either case,
the Company will be entitled to a deduction of such amounts at the time the
income is realized.
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. The Long-Term Stock Plan provides the committee with alternative
types of awards and serves the Company's interests by providing the committee
with discretion in selecting the participants, the number, the type and the
timing of Awards, and the terms and conditions applicable to the Awards.
Additionally, the Long-Term Stock Plan is designed to permit grants of Awards
to Covered Employees to comply with the requirements of Section 162(m) of the
Internal Revenue Code.
VOTE REQUIRED
In accordance with applicable Delaware law and the Company's Restated
Certificate of Incorporation, approval of Proposal No. 3 to approve the
amendment and restatement of the Original Stock Plan as the Long-Term Stock
Plan requires a majority vote of all outstanding shares of Class A Stock and
Class B Stock entitled to vote thereon, present in person or by proxy, voting
together as a single class, provided that the holders of Class A Stock will
have one (1) vote per share and the holders of Class B Stock will have ten
(10) votes per share.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS APPROVE THE LONG-
TERM STOCK INCENTIVE PLAN AMENDING AND RESTATING THE STOCK OPTION AND STOCK
APPRECIATION RIGHT PLAN AND ACCORDINGLY RECOMMENDS THAT YOU VOTE FOR PROPOSAL
NO. 3.
PROPOSAL NO. 4--INCENTIVE STOCK OPTION PLAN
The Company's Board of Directors has adopted an Incentive Stock Option Plan,
the implementation of which is subject to the approval of the Company's
stockholders. The following discussion summarizes certain provisions of the
Incentive Stock Option Plan. This summary does not purport to be complete and
is subject to and qualified in its entirety by reference to the full text of
the Incentive Stock Option Plan which is set forth in Appendix B to this Proxy
Statement.
Incentive stock options, as provided under Section 422 of the Internal
Revenue Code, were authorized to be awarded under the Original Stock Plan for
a period of ten years from the date that plan was originally adopted. That
authorization would have expired in the summer of 1997; however, the power to
grant incentive stock options under the Original Stock Plan was eliminated
when it was amended and restated as the Long-Term
24
Incentive Plan. The purpose of the new Incentive Stock Option Plan is to
retain the Company's flexibility to award incentive stock options to attract
and retain valued employees and to provide them with incentives to maintain
and enhance the Company's long-term performance, thereby aligning their
interests with those of the Company's stockholders.
SUMMARY OF TERMS
The only awards that may be granted under the Incentive Stock Option Plan
are incentive stock options, as provided under Section 422 of the Internal
Revenue Code. The aggregate number of shares of the Company's Class A Stock
available for grants under the plan is 1,000,000. The market value of the
Class A Stock as of June 19, 1997 was $34.00 per share. Any incentive stock
options granted pursuant to the plan are automatically adjusted to prevent
dilution or enlargement in the event of any stock dividend, stock split,
reorganization or other event affecting the Class A Stock.
The Incentive Stock Option Plan will be administered by a committee of the
Company's Board of Directors, certain members of which must be outside
directors within the meaning of the Internal Revenue Code. The committee may
delegate its authority to others as provided in the plan, and the entire Board
of Directors may act as the committee. Under the plan, the committee is
charged with responsibility for selecting the participants and for determining
the number and type of incentive stock options to be granted to each
participant, the timing of the incentive stock options, and any other terms
and conditions applicable to the incentive stock options.
The persons who are eligible to participate in the Incentive Stock Option
Plan are employees (including officers) of the Company and its subsidiaries.
Approximately 2,500 employees are eligible to participate in the plan;
however, only employees selected by the committee will be granted awards under
the plan.
The Incentive Stock Option Plan may be amended, modified or terminated by
the committee from time to time. No amendment, modification or termination of
the plan will be effective without stockholder approval if such approval is
required under any applicable law, rule or regulation. The exercisability of
any incentive stock option will terminate if the committee determines that the
participant is engaged in competition with the Company or has been terminated
for "cause" as defined in the plan.
Covered Employee Restrictions. There are special rules and limitations under
the Incentive Stock Option Plan relating to Covered Employees which are
required to comply with Section 162(m) of the Internal Revenue Code. To comply
with these rules, all incentive stock options granted to Covered Employees
must be granted by the committee which must have the requisite number of
outside directors. Also, no individual Covered Employee may receive incentive
stock options in any fiscal year relating to a number of shares of Class A
Stock in excess of 2 1/2% of the number of shares of Class A Stock outstanding
on the date the Board of Directors adopted the plan.
Incentive Stock Options. Incentive stock options granted under the Incentive
Stock Option Plan will have an exercise price per share equal to the fair
market value of a share of Class A Stock on the date of the grant, except for
incentive stock options granted to a participant who owns more than a ten
percent interest in the Company or any of its affiliates, in which case the
exercise price will be 110% of such fair market value. Options will become
exercisable 20% per year on each of the first five anniversaries of the grant;
however, they become immediately exercisable upon a change of control. Upon
exercise, the exercise price may, at the discretion of the committee, be paid
in cash, shares of Class A Stock, a combination thereof, or such other
consideration as the committee may deem appropriate. The expiration date of
options is set by the committee but may not be later than ten years following
the date of the grant (or five years after the date of the grant for a
participant who owns more than a ten percent interest in the Company or any of
its affiliates).
25
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
A participant who receives an incentive stock option will not realize income
upon the grant or the exercise of the option. Although no income is realized
by a participant upon the exercise of the incentive stock option and the
Company is not entitled to a deduction, the difference between the fair market
value of the Class A Stock covered by the option on the date of exercise and
the exercise price of such stock is treated as an item of tax preference for
alternative minimum income tax purposes. If the participant does not dispose
of the shares acquired on the exercise of an incentive stock option within one
year after their receipt (and within two years after the initial grant of the
option), gain or loss realized on the subsequent disposition of the shares
will be treated as long-term capital gain or loss and the Company will not be
entitled to any deduction. In the event of an earlier disposition, the
participant will realize ordinary income and the Company will be entitled to a
deduction equal to the amount of such income.
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. The Incentive Stock Option Plan serves the Company's interests by
continuing to provide the committee with discretion to award incentive stock
options and in selecting the participants, the number, the type and the timing
of such options, and the terms and conditions applicable to such options.
Additionally, the plan is designed to permit grants of incentive stock options
to Covered Employees to comply with the requirements of Section 162(m) of the
Internal Revenue Code.
VOTE REQUIRED
In accordance with applicable Delaware law and the Company's Restated
Certificate of Incorporation, approval of Proposal No. 4 to approve the
Incentive Stock Option Plan requires a majority vote of all outstanding shares
of Class A Stock and Class B Stock entitled to vote thereon, present in person
or by proxy, voting together as a single class, provided that the holders of
Class A Stock will have one (1) vote per share and the holders of Class B
Stock will have ten (10) votes per share.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS APPROVE THE
INCENTIVE STOCK OPTION PLAN AND ACCORDINGLY RECOMMENDS THAT YOU VOTE FOR
PROPOSAL NO. 4.
PROPOSAL NO. 5--ANNUAL MANAGEMENT INCENTIVE PLAN
The Company's Board of Directors has adopted the Annual Management Incentive
Plan (the "Annual Management Plan"), the implementation of which is subject to
the approval of the Company's stockholders. The following discussion
summarizes certain provisions of the Annual Management Plan. This summary does
not purport to be complete and is subject to and qualified in its entirety by
reference to the full text of the Annual Management Plan which is set forth in
Appendix C to this Proxy Statement.
The purpose of the Annual Management Plan is to enable the Company to
attract and retain valued Company executives and to provide them with
incentives to attain certain annual financial and performance goals. The
Annual Management Plan is intended to satisfy the requirements for
performance-based compensation within the meaning of Section 162(m) of the
Code.
SUMMARY OF TERMS
The Annual Management Plan establishes a vehicle for the payment of cash
bonuses to participating executives and tying such bonuses to the performance
of the Company with respect to certain financial criteria. The Annual
Management Plan will be administered by a committee of the Company's Board of
Directors, all of
26
whom will be "outside directors" within the meaning of the Internal Revenue
Code. The committee has not yet been established, and there are not enough
outside directors at this time to constitute a committee satisfying the
criteria established by the Annual Management Plan. The committee cannot be
established, and the Annual Management Plan cannot be implemented, until the
Company has sufficient outside directors meeting the qualifications of Section
162(m).
Once the committee is created, it will establish specific annual performance
targets corresponding to annual performance periods for each executive officer
who participates in the plan. The performance targets will be based on one or
more of the following business criteria: fair market value of the Class A
Stock, shareholder value added, cash flow, earnings per share, EBITDA
(earnings before interest, taxes, depreciation and amortization), return on
equity, return on capital, return on assets or net assets, cost reduction or
control, operating income or net operating income, operating margins/sales in
one or more business segments or product lines, return on operating revenue,
market share in one or more business segments or product lines, or on any
combination thereof. Performance targets must be established while the
performance relative to the target remains substantially uncertain within the
meaning of Section 162(m) under the Internal Revenue Code. Concurrently with
the selection of the performance targets, the committee must establish an
objective formula or standard for calculating the maximum bonus payable to
each participating executive officer.
The eligible persons under the Annual Management Plan include certain key
executives who are selected by the committee. No executives have yet been
selected to participate in the plan; however, the Company contemplates that
approximately 30 executives will initially be selected to participate.
Under the Annual Management Plan, the maximum bonus any participating
executive may receive in any one fiscal year is $2,000,000. In addition to
this overall maximum, the committee has sole discretion to determine whether
payment of any bonus will be deferred, subject in each case to the Annual
Management Plan's terms and any other written commitment authorized by the
committee. The committee may also take into account the effects of any
extraordinary items in a manner consistent with the determination of the
original bonus. All bonuses are to be paid in cash or cash equivalents.
The Annual Management Plan may be amended, modified or terminated, in whole
or in part, by the committee from time to time, but no amendment, modification
or termination will be effective without Board and/or stockholder approval if
such approval is required to comply with the applicable rules under Section
162(m).
Because the committee has not yet been established, performance targets for
the remainder of fiscal year 1998 have not been set and eligible executives
have not been selected. If the Annual Management Plan is approved and any
necessary outside directors are appointed to the Board of Directors permitting
the creation of the committee, the committee may set partial year goals.
REASONS FOR APPROVAL
The Board of Directors believes that it is desirable and in the best
interests of the Company and its stockholders to insure that the Company's
executive compensation plans comply with the requirements of Code Section
162(m). The Board further believes that the Annual Management Plan is
consistent with the Company's existing policies that closely relate executive
compensation to the Company's performance. The Annual Management Plan also
serves the Company's interests by granting the committee discretion both in
selecting the criteria by which performance is to be measured and in
determining the actual amount of each eligible executive's bonus within the
maximum limits imposed pursuant to the plan.
VOTE REQUIRED
In accordance with applicable Delaware law and the Company's Restated
Certificate of Incorporation, approval of Proposal No. 5 to approve the Annual
Management Plan requires a majority vote of all outstanding
27
shares of Class A Stock and Class B Stock entitled to vote thereon, present in
person or by proxy, voting together as a single class, provided that the
holders of Class A Stock will have one (1) vote per share and the holders of
Class B Stock will have ten (10) votes per share.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS APPROVE THE ANNUAL
MANAGEMENT INCENTIVE PLAN AND ACCORDINGLY RECOMMENDS THAT YOU VOTE FOR
PROPOSAL NO. 5.
PROPOSAL NO. 6--SELECTION OF INDEPENDENT AUDITORS
The firm of Arthur Andersen LLP, Certified Public Accountants, served as the
independent auditors of the Company for the fiscal year ended February 28,
1997, and the Board of Directors has again selected Arthur Andersen LLP as the
Company's independent auditors for the fiscal year ending February 28, 1998.
This selection will be presented to the stockholders for their ratification at
the Meeting. The Board of Directors recommends a vote in favor of the proposal
to ratify this selection and (unless otherwise directed therein) it is
intended that the shares represented by the enclosed properly executed and
returned proxy will be voted FOR such proposal. If the stockholders do not
approve this selection, the Board of Directors may reconsider its choice.
A representative of Arthur Andersen LLP is expected to be present at the
Meeting. The representative will be given an opportunity to make a statement
if he or she so desires and will be available to respond to appropriate
questions concerning the audit of the Company's financial statements.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS APPROVE THE
SELECTION OF ARTHUR ANDERSEN LLP AS THE INDEPENDENT AUDITORS OF THE COMPANY
FOR THE FISCAL YEAR ENDING FEBRUARY 28, 1998 AND ACCORDINGLY RECOMMENDS THAT
YOU VOTE FOR PROPOSAL NO. 6.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
In order for any stockholder proposal to be included in the Company's proxy
statement to be issued in connection with the 1998 Annual Meeting of
Stockholders, such proposal must be received by the Company no later than
February 26, 1998.
FINANCIAL INFORMATION
The Company has furnished its financial statements to stockholders in its
1997 Annual Report, which accompanies this Proxy Statement. In addition, the
Company will promptly provide, without charge to any stockholder, on the
request of such stockholder, an additional copy of the 1997 Annual Report and
the Company's most recent Form 10-K. Written requests for such copies should
be directed to Canandaigua Wine Company, Inc., Attention: Kristen H. Jenks,
Vice President, 116 Buffalo Street, Canandaigua, New York 14424; telephone
number (716) 394-7900.
28
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 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
ROBERT SANDS, Secretary
Dated at Canandaigua, New York
June 26, 1997
29
APPENDIX A
CANANDAIGUA WINE COMPANY, INC.
LONG-TERM STOCK INCENTIVE PLAN
This Long-Term Stock Incentive Plan, which amends and restates in its
entirety the Canandaigua Wine Company, Inc. Stock Option and Stock
Appreciation Right Plan, was approved by the Board of Directors of the Company
by unanimous written consent as of June 23, 1997, to be effective immediately.
Certain capitalized terms used in the Plan are defined in Annex A.
1. PURPOSE
The Plan is designed to provide the Company with increased flexibility to
attract and retain valued employees and directors and to provide them with
incentives to maintain and enhance the Company's long-term performance record
by aligning the interests of the Participants and the stockholders of the
Company.
2. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall possess
the authority, in its discretion, (a) to determine the employees and directors
of the Company to whom Awards shall be granted and the time or times at which
Awards shall be granted; (b) to determine at the time of grant the number of
shares to be subject to each Award; (c) to prescribe the form of the
instrument representing such Award; (d) to establish any appropriate terms and
conditions applicable to the Awards including any limitations on grants,
vesting or exercisability, and to make any amendments to such instruments or
the Awards which may, without limitation, include any acceleration of vesting
or exercisability, waiver of any condition or requirement or taking of other
action consistent with the purposes of the Plan; (e) to interpret and construe
the Plan; (f) to make and amend rules and regulations relating to the Plan;
and (g) to make all other determinations necessary or advisable for the
administration of the Plan. The Committee's determinations shall be conclusive
and binding on all Participants and all persons claiming under or through any
Participant. No member of the Committee shall be liable for any action taken
or decision made in good faith relating to the Plan or any Award granted under
the Plan.
No outstanding Award may be exercised by any person if the Participant to
whom the Award is granted (x) is, or at any time after the date of grant has
been, in competition with the Company or its affiliates or (y) has been
terminated by the Company for Cause. The Committee shall determine, in its
discretion, whether a Participant's actions constitute competition with the
Company or its affiliates.
3. ELIGIBLE EMPLOYEES AND NON-EMPLOYEE DIRECTORS
All employees of the Company are eligible to receive Awards under the Plan.
Awards may be made to non-employee directors of the Company. No Awards under
the Plan shall be made to Covered Employees which are intended to qualify
under Section 162(m) of the Code until the Plan is approved by stockholders of
the Company.
4. SHARES AVAILABLE; TYPES OF AWARDS
The total number of shares of the Company's Common Stock available for
Awards under the Plan in the aggregate shall not exceed four million shares.
The maximum number of Shares which may be subject to Awards granted to any
Covered Employee in any fiscal year shall not exceed 2 1/2% of the outstanding
Common Stock as of the date the Plan is approved by the Board of Directors.
Shares subject to Awards may be authorized and unissued shares or may be
treasury shares.
If an Award expires, terminates or is cancelled without being exercised or
becoming vested, new Awards may thereafter be granted under the Plan covering
such shares unless the applicable Rules under Section 16(b) of the Exchange
Act or Section 162(m) of the Code require otherwise.
1
The Committee may make Awards from time to time in any one or more of the
following types singly or in tandem: Nonqualified Stock Options, Stock
Appreciation Rights, Restricted Stock or Other Stock-Based Awards.
5. STOCK OPTIONS
Stock Option Awards under the Canandaigua Wine Company, Inc. Stock Option
and Stock Appreciation Right Plan made prior to the date this Long-Term Stock
Incentive Plan was adopted by the Board of Directors shall remain outstanding
and in full force in accordance with their terms. Each Stock Option Award
shall specify the following terms and conditions, as well as any other terms,
conditions, limitations and restrictions specified by the Committee:
(a) Exercise Price. The exercise price per Share under each Stock Option
shall be specified by the Committee, provided that the exercise price per
Share for each Stock Option granted to a Covered Employee shall equal the Fair
Market Value of the Common Stock on the date the Award is granted.
(b) Duration of Option. The duration of each Stock Option shall be
specified. Stock Options must be exercised on or before 5:00 p.m. Eastern Time
on their expiration date.
(c) Exercise Terms. Each Stock Option granted under the Plan shall become
exercisable in five equal annual installments commencing on the first
anniversary of the date of grant except as otherwise provided by the
Committee. Stock Options may be partially exercised from time to time during
the period extending from the time they first become exercisable in accordance
with the terms of the Award until the expiration of the exercise period
specified in the Award. Exercise of related Stock Appreciation Rights will
cause the immediate automatic expiration of related Stock Options on the terms
and conditions specified by the Committee. The Committee may impose such
additional limitations or conditions on the vesting or exercise of any Stock
Option as it deems appropriate.
(d) Payment of Exercise Price. A Stock Option shall be exercised upon such
notice as is required by the Committee accompanied by payment in full of the
exercise price for the Shares being acquired in such form as the Committee may
provide in accordance with Section 9 of the Plan, together with all applicable
withholding taxes as provided in Section 10 of the Plan.
6. STOCK APPRECIATION RIGHTS
Stock Appreciation Rights may be granted by the Committee in Awards which
are in tandem with Stock Options or freestanding. Tandem Awards may be granted
at the same time as the grant of the related Stock Option or at any time
thereafter prior to the end of the exercise period for the related Stock
Option.
(a) Value. The value of each Stock Appreciation Right shall be the
difference between the Fair Market Value of a Share on the date of exercise of
the Stock Appreciation Right and the reference amount specified in the Award,
which for each Stock Appreciation Right granted in tandem with a Stock Option
shall be not less than the exercise price of the related Stock Option. The
reference amount for each Stock Appreciation Right granted to a Covered
Employee shall not be less than the Fair Market Value of a Share on the date
of grant of the Stock Appreciation Right.
(b) Duration of Stock Appreciation Right. The duration of each Stock
Appreciation Right shall be specified. Each tandem Stock Appreciation Right
shall specify the Stock Option to which it is related and the terms and
conditions under which exercise or expiration of the related Stock Option will
result in automatic expiration of the related Stock Appreciation Right and the
terms and conditions on which exercise or expiration of the Stock Appreciation
Right will result in automatic expiration of the related Stock Option.
(c) Exercise Terms. Each Stock Appreciation Right granted under the Plan
shall become exercisable in five equal annual installments commencing on the
first anniversary of the date of grant except as otherwise provided by the
Committee. Stock Appreciation Rights may be partially exercised from time to
time during the period extending from the time they first become exercisable
in accordance with the terms of the Award until the expiration of the exercise
period specified in the Award. Exercise of related Stock Options will cause
the
2
immediate automatic expiration of related Stock Appreciation Rights on the
terms and conditions specified by the Committee. The Committee may impose such
additional limitations or conditions on the exercise of any Stock Appreciation
Right as specified in the Award as it deems appropriate, including such
additional limitations or conditions on the vesting or exercise of any Stock
Appreciation Right as it deems appropriate. A Stock Appreciation Right shall
be exercised upon such notice as is required by the Committee.
7. RESTRICTED STOCK
Shares of Restricted Stock may be granted by the Committee from time to time
in its discretion to Participants subject to such terms and conditions as may
be required by law or are specified in the Award, including any payment
required for the Shares. The Award will also specify the availability of
dividends and other distributions with respect to which Shares of Restricted
Stock are entitled and the voting rights, if any, associated with such Shares
of Restricted Stock. Restricted Stock Awards to Participants who may be
Covered Employees which are intended to satisfy the requirements for
"performance-based compensation" under Section 162(m) of the Code shall only
be made if payout is contingent upon achievement of Performance Targets within
or at the end of the Performance Period with respect to one or more
Performance Criteria as specified by the Committee and the Committee certifies
the extent to which any Performance Target has been satisfied and the number
of Shares of Restricted Stock deliverable as a result thereof, prior to the
delivery of any such Shares to Covered Employees. In any fiscal year, the
value of Restricted Stock Awards to any individual Covered Employee shall not
exceed $2.5 million (measured by the difference between the amount of any
payment for the Shares by the Participant and the Fair Market Value of the
Shares on the date of the Award).
8. OTHER STOCK-BASED AWARDS
From time to time in its discretion, the Committee may grant Other Stock-
Based Awards to any Participant on such terms and conditions as may be
determined by the Committee and specified in the Award. Grants of Other
Stock-Based Awards to Participants who may be Covered Employees which are
intended to satisfy the requirements for "performance-based compensation"
under Section 162(m) of the Code shall only be made if payout or exercise is
contingent upon achievement of Performance Targets within or at the end of the
Performance Period with respect to one or more Performance Criteria as
specified by the Committee and the Committee certifies the extent to which any
Performance Target has been satisfied, and the number of Shares or other
compensation deliverable as a result thereof, prior to the delivery of any
such Shares or compensation to Covered Employees. Any exercise of Other Stock-
Based Awards shall be made upon such notice as is required by the Committee to
the Company accompanied by payment in full of any exercise price for the
Shares or other compensation being acquired in such form as the Committee may
provide in accordance with Section 9 of the Plan, together with all applicable
withholding taxes as provided in Section 10 of the Plan. In any fiscal year,
the value of Other Stock-Based Awards to any individual Covered Employee shall
not exceed $2.5 million (measured by the difference between the amount of any
payment or exercise price for the Award by the Participant and the Fair Market
Value of the Shares or the Award on the date of the Award).
9. PAYMENT FOR PURCHASE OR EXERCISE OF AWARDS
The exercise price of Stock Options and any Other Stock-Based Awards
providing for exercise prices and the purchase price for any Restricted Stock
or Other Stock-Based Awards for purchase prices shall be paid to the Company
upon exercise or acquisition of such Award in the manner which the Committee
may determine which may include by (a) delivery of cash or a check in the
amount of the price of the Award, (b) tendering previously acquired Shares
having a Fair Market Value at the time of delivery equal to the price of the
Award, (c) delivery of irrevocable instructions to a broker or other agent
acceptable to the Company to promptly sell Shares received under the Award and
to deliver to the Company the amount of proceeds to pay the price related to
such Award, or (d) such other method of payment as the Committee in its
discretion deems appropriate, in each case together with all applicable
withholding taxes as provided in Section 10. Previously acquired Shares
tendered in payment must have been owned by Participant for at least six
months prior to the tender in payment of an Award.
3
10. WITHHOLDING TAXES
Whenever required by law in connection with an Award, the Company shall
require the Participant to remit to the Company an amount sufficient to
satisfy any federal, state and/or local income and employment withholding tax
requirements prior to the delivery of any certificate or certificates for
Shares or to take any other appropriate action to satisfy such withholding
requirements, including any method permitted for payment under Section 9 as
determined by the Committee. To the extent permitted under such rules as the
Committee may promulgate and in compliance with any requirements to avoid
violations under Section 16(b) of the Exchange Act and related Rules, the
Participant may satisfy such obligation in whole or in part by electing to
have the Company withhold Shares from the Shares to which the Participant is
otherwise entitled under the Award.
11. PERFORMANCE CRITERIA
For each Award of Restricted Stock or Other Stock-Based Award intended to
qualify as "performance based compensation" under Section 162(m) of the Code
and related Rules, the Committee shall select the applicable Performance
Criteria, Performance Period and Performance Target for the Award consistent
with the terms of the Plan and Section 162(m). The Committee may select
Performance Criteria, Performance Periods and Performance Targets for
Restricted Stock and Other Stock-Based Awards for Participants other than
Covered Employees in its discretion. The Committee shall have no discretion to
increase the amount of compensation payable to Covered Employees if a
Performance Target has been attained, but the Committee may adjust
compensation to increase the amount, in its discretion, to any other
Participant. The Committee may adjust Performance Targets to take into account
the effects of any Extraordinary Items equitably in a manner consistent with
the determination of the original Award, provided, however, no such adjustment
may be made with respect to any Award to a Covered Employee which is intended
to qualify as "performance based compensation" unless such adjustment
satisfies the requirements of Code Section 162(m) and the related Rules.
For Awards to Covered Employees which are intended to qualify as
"performance based compensation" under Code Section 162(m), the Performance
Target with respect to the selected Performance Criteria must be established
by the Committee in advance of the deadlines applicable under Code Section
162(m) and the Rules thereunder and while the performance relating to the
Performance Target remains substantially uncertain within the meaning of such
Section 162(m) and Rules. At the time the Performance Targets are established,
the Committee shall provide, in terms of an objective formula or standard for
each Covered Employee, the method of computing the specific amount that will
represent the maximum number of Shares or amount of other compensation payable
to the Participant if the Performance Target is attained.
12. AWARDS NOT TRANSFERABLE
Unless transferability is permitted under certain conditions as determined
by the Committee, no Award is transferable by the Participant other than (i)
by will or the laws of descent and distribution, (ii) pursuant to a domestic
relations order, or (iii) to the extent permitted under the Plan, the Award or
interpretation of the Committee, by gift to family members or by gift or
permitted non-cash exchange to entities beneficially owned by family members
or other permitted transferees, and shall be exercisable only by the
Participant, the Participant's legal representative, or the Participant's
permitted transferees. Shares of Restricted Stock may not be sold or otherwise
transferred until ownership vests in the Participant.
13. GENERAL RESTRICTION ON ISSUANCE OF STOCK CERTIFICATES
The Company shall not be required to deliver any certificate upon the grant,
vesting or exercise of any Award until it has been furnished with such
documents as it may deem necessary to insure compliance with any law or Rules
of the SEC or any other governmental authority having jurisdiction under the
Plan. Certificates for Shares delivered upon such grant or exercise shall bear
legends restricting transfer or other restrictions or conditions to the extent
required by law or determined by the Committee. Each Award under the Plan is
subject to the condition that, if at any time the Committee shall determine
that the listing, registration or qualification of the Shares subject to such
Award under any state or federal law or other applicable Rule, or the consent
or
4
approval of any governmental regulatory body, is necessary or desirable as a
condition of the granting of such Awards or the issue or purchase of Shares
thereunder, such Awards may not vest or be exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Committee.
14. TERMINATION OF EMPLOYMENT
If the employment of a Participant terminates by reason of the Participant's
Retirement, Disability or death, any Award may be exercised or received by the
Participant, the Participant's designated beneficiary or legal representative
or permitted transferee at any time on or prior to the earlier of the
expiration date of the Award or the expiration of one year after the date of
Retirement, Disability or death but only if, and to the extent that the
Participant was entitled to exercise or receive the Award at the date of
Retirement, Disability or death and subject to such other terms and conditions
as may be specified in the Award and the Plan. All Awards or any portion
thereof not yet vested or exercisable on the date of Retirement, Disability or
death shall terminate immediately on the date of termination (except as
otherwise provided by the Committee or an employment agreement between the
Company and the Participant). Upon termination of the Participant's employment
for any reason other than Retirement, Disability or death, any Award may be
exercised or received by the Participant, the Participant's designated
beneficiary or legal representative or permitted transferee at any time on or
prior to the earlier of the expiration date of the Award or the expiration of
thirty days after the date of termination but only if, and to the extent that
the Participant was entitled to exercise or receive the Award at the date of
termination and subject to such other terms and conditions as may be specified
in the Award and the Plan. All Awards or any portion thereof not yet vested or
exercisable on the date of termination other than by reason of Retirement,
Disability or death shall terminate immediately on the date of termination
(except as otherwise provided by the Committee or an employment agreement
between the Company and the Participant).
Unless otherwise determined by the Committee, an authorized leave of absence
pursuant to a written agreement or other leave entitling the Participant to
reemployment in a comparable position by law or Rule shall not constitute a
termination of employment for purposes of the Plan unless the Participant does
not return at or before the end of the authorized leave or within the period
for which re-employment is guaranteed by law or Rule.
15. ADJUSTMENT OF AWARDS
In the event of any change in the Common Stock of the Company by reason of
any stock dividend, stock split, recapitalization, reorganization, merger,
consolidation, split-up, combination, or exchange of shares, or rights
offering to purchase Common Stock at a price substantially below fair market
value, or of any similar change affecting the Common Stock, the number and
kind of shares authorized under Section 4 for the Plan, the number and kind of
shares which thereafter are subject to an Award under the Plan and the number
and kind of unexercised Stock Options or Other Stock-Based Awards and the
number of Shares of Restricted Stock and the price per share shall be adjusted
automatically consistent with such change to prevent substantial dilution or
enlargement of the rights granted to, or available for, Participants in the
Plan.
16. NO EMPLOYMENT RIGHTS
The Plan and any Awards granted under the Plan shall not confer upon any
Participant any right with respect to continuance as an employee of the
Company, nor shall the Plan or such Awards interfere in any way with the right
of the Company to terminate the Participant's position as an employee or
director at any time.
17. RIGHTS AS A SHAREHOLDER
The recipient of any Award under the Plan shall have no rights as a
shareholder with respect thereto unless and until certificates for the
underlying Shares are issued to the recipient, except as otherwise
specifically provided by the Committee.
5
18. SECTION 162(m) CONDITIONS
It is the intent of the Company that the Plan and Awards granted under the
Plan satisfy and be interpreted in a manner that satisfies any applicable
requirements of Code Section 162(m) as performance-based compensation. Any
provision, application or interpretation of the Plan inconsistent with this
intent to satisfy the standards in Code Section 162(m) shall be disregarded.
Notwithstanding anything to the contrary in the Plan, the provisions of the
Plan may at any time be bifurcated by the Committee in any manner so that
certain provisions of the Plan or any Award intended (or required in order) to
satisfy the applicable requirements of Code Section 162(m) are applicable only
to Covered Employees.
19. AMENDMENT AND DISCONTINUANCE
The Plan and any Award outstanding under the Plan may be amended, modified
or terminated by the Committee at any time and all Awards shall be subject to
the Plan, as amended from time to time, except that the Committee may not,
without approval of the Participant to whom the Award was granted or his legal
representative or permitted transferee adversely affect the rights of such
person under such Award. No amendment, modification, or termination of the
Plan shall be effective without stockholder approval if such approval is
required under applicable law or Rule or any regulation of the stock market on
which the Common Stock is traded.
20. CHANGE IN CONTROL
(a) Notwithstanding other provisions of the Plan, in the event of a Change
in Control of the Company, all of a Participant's Awards shall become
immediately vested and exercisable or fully earned at the maximum amount,
except with respect to Covered Employees for "performance based compensation"
as otherwise determined by the Committee.
(b) In the event of a Change in Control, in the discretion of the Committee,
each Participant who is a Section 16 insider with respect to whom the Change
in Control might result in a violation under Section 16(b) of the Exchange
Act, may receive, in exchange for the surrender of the Stock Option, an amount
of cash equal to the difference between the fair market value (based on the
kind and amount of any securities, cash, other property or other consideration
to be received with respect to each Share in the Change in Control transaction
as determined by the Committee) of the Common Stock covered by the Award and
the option price of such Common Stock under the Stock Option or to receive, in
exchange for any other Award, an amount of cash equivalent to such fair market
value had the Participant received the Shares or other compensation as
intended under the Award prior to the Change in Control.
(c) Notwithstanding the foregoing, the Plan and any Awards outstanding under
the Plan shall be binding upon any successor to the Company, whether such
successor is the result of a direct or indirect purchase, merger,
consolidation or other acquisition of all or substantially all of the business
and/or assets of the Company.
21. GOVERNING LAW
The Plan and any Award made pursuant to it shall be construed under the laws
of the State of Delaware.
CANANDAIGUA WINE COMPANY, INC.
Dated: June 23, 1997
By: /s/ Richard Sands
------------------------
Title: President
------------------------
Date of Stockholder Approval ___________
6
ANNEX A
TO
LONG-TERM STOCK INCENTIVE PLAN
CERTAIN DEFINITIONS
Capitalized terms used in the Plan shall have the meanings set forth below:
"AWARD" means any grant of Stock Options, Restricted Stock, Stock
Appreciation Rights or Other Stock-Based Award under the Plan.
"CAUSE" means, solely for the purposes of the Plan, gross negligence or
willful misconduct or commission of a felony or an act of moral turpitude
determined by the Committee to be detrimental to the best interests of the
Company or, if the Participant is subject to a written agreement with the
Company "cause" shall have the meaning set forth in that agreement.
"CHANGE IN CONTROL" means:
(a) there shall be consummated
(i)any consolidation or merger of the Company in which the Company is
not the continuing or surviving corporation or pursuant to which any
Shares are to be converted into cash, securities or other property,
provided that the consolidation or merger is not with a corporation
which was a direct or indirect wholly-owned subsidiary of the Company or
a parent of the Company immediately before the consolidation or merger;
or
(ii)any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of the
assets of the Company; or
(b) the stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; or
(c) any person (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) shall become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act), directly or indirectly, of 30% or more of the
voting control of the Company's then outstanding common stock, provided that
such person shall not be a wholly-owned subsidiary of the Company
immediately before it becomes such 30% beneficial owner of voting control;
or
(d) individuals who constitute the Company's Board of Directors on the date
hereof (the "Incumbent Board") cease for any reason to constitute at least a
majority thereof, provided, however, that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least three
quarters of the directors comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director without objection to such
nomination) shall be, for purposes of this clause (d), considered as though
such person were a member of the Incumbent Board.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means Canandaigua Wine Company, Inc. and its Subsidiaries, except
where the context indicates that only the parent company is intended.
"COMMITTEE" means the committee appointed by the Company's Board of
Directors (the "Committee") consisting of not fewer than the number of members
of the Board of Directors required under Code Section 162(m) and the Rules of
the IRS thereunder for determining performance based compensation which is
deductible by the Company who are "outside directors" as defined from time to
time under the IRS Rules and,
1
to the extent possible are also "Non-Employee Directors" as defined from time
to time under the SEC Rules for approval of Awards exempt from Section 16(b).
If any member of the Committee does not qualify as an "outside director",
Awards under the Plan for Covered Employees shall be administered by a
subcommittee of the Committee comprised solely of members who qualify as
outside directors to the extent desireable to preserve the deductibility of
such compensation under Section 162(m) of the Code and such subcommittee shall
constitute the Committee for all purposes under the Plan. The full Board of
Directors, in its discretion, may act as the Committee under the Plan and
shall do so with respect to grants of Awards to non-employee directors. The
Committee may delegate to selected officers of the Company, individually or
acting as a committee, any portion of its authority, except as otherwise
expressly provided in the Plan. In the event of a delegation to management,
the term "Committee" as used herein shall include the officer or committee
with respect to the delegated authority. Notwithstanding any such delegation
of authority, the Committee comprised of members of the Board of Directors
shall retain overall responsibility for the operation of the Plan. Management
acting pursuant to delegated authority shall not make Awards under the Plan to
any Covered Employees or other Section 16 insider.
"COMMON STOCK" means the Class A Common Stock of the Company, par value $.01
per Share.
"COVERED EMPLOYEE" means the Chief Executive Officer of the Company and the
four other most highly compensated officers of the Company as such term is
defined under the Rules promulgated under Section 162(m) of the Code and such
other officers as may be designated by the Committee.
"DISABILITY" means the inability of a Participant to perform his or her
duties for a period in excess of the applicable statutory short-term
disability coverage provided by the Company. The date of termination with
respect to Disability shall be the day following the date such short term
disability protection lapses.
"EXTRAORDINARY ITEMS" means (a) items presented as such (or other comparable
terms) on the Company's audited financial statements, (b) extraordinary,
unusual or nonrecurring items of gain or loss, (c) changes in tax or
accounting laws or Rules, and (d) the effects of mergers, acquisitions,
divestitures, spin offs or significant transactions, each of which are
identified in the audited financial statements and notes thereto or in the
"management's discussion and analysis" of the financial statements in a period
report filed with the SEC under the Exchange Act.
"FAIR MARKET VALUE" of a Share means the closing price of the Common Stock
on the NASDAQ Stock Market or other national stock exchange on which the
Common Stock is actively traded for the date as reported in the Wall Street
Journal, Eastern Edition or such other standard reference service as the
Committee may select.
"IRS" means the Internal Revenue Service and, if the context permits, the
courts interpreting the Code.
"OTHER STOCK-BASED AWARD" means an Award granted pursuant to Section 8 of
the Plan which is subject to the terms, conditions and restrictions set forth
in the instrument evidencing the Award.
"PARTICIPANT" means any employee of the Company or non-employee director of
the Company who has received an Award under the Plan.
"PERFORMANCE CRITERIA" means one or more of the following performance
criteria selected by the Committee with respect to any performance-based
Award: (a) increases in the Fair Market Value of a Share, (b) shareholder
value added, (c) cash flow, (d) earnings per share, (e) earnings of the
Company before deducting interest, taxes, depreciation and amortization, (f)
return on equity, (g) return on capital, (h) return on assets or net assets,
(i) cost reduction or control, (j) operating income or net operating income,
(k) operating margins/sales in one or more business segments or product lines,
(l) return on operating revenue, and (m) market share in one or more business
segments or product lines. Performance criteria may be established on a
corporate, divisional, business unit or consolidated basis and measured
absolutely or relative to the Company's peers.
"PERFORMANCE PERIOD" means the fiscal year or years or other period
established by the Committee with respect to which the Performance Targets are
set by the Committee.
2
"PERFORMANCE TARGET" means one or more specific objective goal or goals
(which may be cumulative or alternative) that are timely set in writing by the
Committee for each Participant for the applicable Performance Period with
respect to any one or more of the Performance Criteria.
"PLAN" means the Long-Term Stock Incentive Plan of the Company, as amended
from time to time.
"RESTRICTED STOCK" means Shares granted pursuant to Section 7 of the Plan
which are subject to the terms, conditions and restrictions set forth in the
instrument evidencing the Award.
"RETIREMENT" means a termination of employment by an employee who is at
least 60 years of age and after at least 10 years of service with the Company
(which shall include entities acquired by the Company, if the Committee so
determines).
"RULES" means rules, regulations and interpretations issued by the
governmental authority charged with administering any law and any judicial
interpretations applicable thereto.
"SEC" means the Securities and Exchange Commission.
"SHARES" means shares of the Company's Class A Common Stock, par value $.01
per share.
"STOCK OPTION" means any nonqualified Stock Option granted pursuant to
Section 5 of the Plan which is subject to the terms, conditions and
restrictions set forth in the instrument evidencing the Award and the Plan.
"SUBSIDIARIES" means (a) all corporations of which at least fifty percent of
the voting stock is owned by the Company directly or through one or more
corporations at least fifty percent of whose voting stock is so owned, and (b)
partnerships or other entities in which the Company has, either directly or
indirectly, at least a fifty percent interest in the capital or profits.
OTHER TERMS: Any other terms used in the Plan which are defined in Sections
83, 162(m) or 421 of the Internal Revenue Code as amended, or the Rules
thereunder or corresponding provisions of subsequent laws and Rules in effect
at the time Awards are made under the Plan, shall have the meanings set forth
in such laws or Rules.
3
APPENDIX B
CANANDAIGUA WINE COMPANY, INC.
INCENTIVE STOCK OPTION PLAN
This Incentive Stock Option Plan was approved by the Board of Directors of
the Company by unanimous written consent as of June 23, 1997 and shall be
effective upon approval by the stockholders of the Company. Certain
capitalized terms used in the Plan are defined in Annex A.
1. PURPOSE
The Plan is designed to enable the Company to attract and retain valued
employees and to provide them with incentives to maintain and enhance the
Company's long-term performance record by aligning the interests of the
Participants and the stockholders of the Company through the grant of
Incentive Stock Options.
2. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall possess
the authority, in its discretion, (a) to determine the employees of the
Company to whom Incentive Stock Options shall be granted and the time or times
at which such Incentive Stock Options shall be granted; (b) to determine at
the time of grant the number of shares to be subject to each Incentive Stock
Option; (c) to prescribe the form of the instrument representing such
Incentive Stock Option; (d) to establish any appropriate terms and conditions
applicable to the Incentive Stock Options, including any limitations on
grants, vesting or exercisability, and to make any amendments to such
instruments or the Incentive Stock Options which may, without limitation,
include any acceleration of vesting or exercisability, waiver of any condition
or requirement or taking of other action consistent with the purposes of the
Plan; (e) to interpret and construe the Plan; (f) to make and amend rules and
regulations relating to the Plan; and (g) to make all other determinations
necessary or advisable for the administration of the Plan. The Committee's
determinations shall be conclusive and binding on all Participants and all
persons claiming under or through any Participant. No member of the Committee
shall be liable for any action taken or decision made in good faith relating
to the Plan or any Incentive Stock Option granted under the Plan.
No outstanding Incentive Stock Option may be exercised by any person if the
Participant to whom the Incentive Stock Option is granted (x) is, or at any
time after the date of grant has been, in competition with the Company or its
affiliates or (y) has been terminated by the Company for Cause. The Committee
shall determine, in its discretion, whether a Participant's actions constitute
competition with the Company or its affiliates.
3. ELIGIBLE EMPLOYEES
All employees of the Company are eligible to receive Incentive Stock Options
under the Plan.
4. SHARES AVAILABLE
The total number of shares of the Company's Common Stock available for
Incentive Stock Options under the Plan in the aggregate shall be one million
shares. The maximum number of Shares which may be subject to Incentive Stock
Options granted to any individual Covered Employee in any fiscal year shall
not exceed 2 1/2% of the outstanding Common Stock as of the date the Plan is
approved by the Board of Directors. Shares subject to Incentive Stock Options
may be authorized and unissued shares or may be treasury shares.
If an Option expires, terminates or is cancelled without being exercised or
becoming vested, new Incentive Stock Options may thereafter be granted under
the Plan covering such shares unless the applicable Rules under Section 16(b)
of the Exchange Act or Sections 162(m) or 422 of the Code require otherwise.
1
5. INCENTIVE STOCK OPTIONS
The Committee shall make such awards of Incentive Stock Options as it shall,
in its discretion, determine. Only employees of the Company shall be eligible
to receive Incentive Stock Options. No Incentive Stock Options shall be
granted more than ten years after the date the Plan is approved by the Board
of Directors. Each Stock Option Award shall specify the following terms and
conditions, as well as any other terms, conditions, limitations and
restrictions specified by the Committee:
(a) Exercise Price. The exercise price per Share for each Incentive Stock
Option shall equal the Fair Market Value of the Common Stock on the date
the Incentive Stock Option is granted. If any Incentive Stock Option is
granted to a Participant who at the time of the Incentive Stock Option is a
Ten-Percent Holder, the exercise price of the Incentive Stock Option shall
be at least 110% of the Fair Market Value on the date the Incentive Stock
Option is made.
(b) Duration of Option. The duration of each Incentive Stock Option shall
be specified. Each Incentive Stock Option shall specify that it shall not
be exercisable after the expiration of ten years from the date such option
is granted unless a longer term is permitted or a shorter term is required
under Section 422 of the Code. In the case of an Incentive Stock Option
granted to a Ten-Percent Holder, the Incentive Stock Option shall not, by
its terms, be exercisable more than five years from its date of grant.
(c) Exercise Terms. Each Incentive Stock Option granted under the Plan
shall become exercisable in five equal annual installments commencing on
the first anniversary of the date of grant except as otherwise provided by
the Committee. Stock Options may be partially exercised from time to time
during the period extending from the time they first become exercisable in
accordance with the terms of the Incentive Stock Option until the
expiration of the exercise period specified in the Incentive Stock Option.
Incentive Stock Options may only be exercised by the Participant (or his
legal representative, if Participant is disabled) during Participant's
lifetime.
(d) Payment of Exercise Price. An Incentive Stock Option shall be
exercised upon such notice as is required by the Committee accompanied by
payment in full of the exercise price for the Shares being acquired in such
form as the Committee may provide in accordance with Section 6 of the Plan,
together with all applicable withholding taxes as provided in Section 7 of
the Plan.
(e) Maximum Value of Incentive Stock Options. The aggregate Fair Market
Value (on the date of grant) of the Shares as to which all incentive stock
options granted under the Plan or any other plan of the Company first
become exercisable during any calendar year by a Participant shall not
exceed $100,000.
6. PAYMENT FOR EXERCISE OF INCENTIVE STOCK OPTIONS
The exercise price of Incentive Stock Options shall be paid to the Company
upon exercise in the manner which the Committee may determine, which may
include (a) delivery of cash or a check in the amount of the exercise price of
the Shares to be acquired under the Incentive Stock Option, (b) tendering
previously acquired Shares having a Fair Market Value at the time of delivery
equal to the exercise price of the Shares to be acquired under the Incentive
Stock Option, (c) delivery of irrevocable instructions to a broker or other
agent acceptable to the Company to promptly sell Shares received under the
Incentive Stock Option and to deliver to the Company the amount of proceeds to
pay the exercise price related to the Shares to be acquired under the
Incentive Stock Option, or (d) such other method of payment as the Committee
in its discretion deems appropriate, in each case together with all applicable
withholding taxes as provided in Section 7. Previously acquired Shares
tendered in payment must have been owned by Participant for at least six
months prior to the tender in payment of an Option.
7. WITHHOLDING TAXES
Whenever required by law in connection with an Incentive Stock Option, the
Company shall require the Participant to remit to the Company an amount
sufficient to satisfy any federal, state and/or local income and employment
withholding tax requirements prior to the delivery of any certificate or
certificates for Shares or to take any other appropriate action to satisfy
such withholding requirements, including any method permitted for
2
payment under Section 6 as determined by the Committee. To the extent
permitted under such rules as the Committee may promulgate and in compliance
with any requirements to avoid violations under Section 16(b) of the Exchange
Act and related Rules, the Participant may satisfy such obligation in whole or
in part by electing to have the Company withhold Shares from the Shares to
which the Participant is otherwise entitled under the Incentive Stock Option.
8. INCENTIVE STOCK OPTIONS NOT TRANSFERABLE
Unless transferability is permitted under certain conditions as determined
by the Committee and applicable IRS Rules for incentive stock options, no
Incentive Stock Option is transferable by the Participant other than by will
or the laws of descent and distribution. An Incentive Stock Option shall be
exercisable only by the Participant, the Participant's legal representative,
or the Participant's permitted transferees.
9. GENERAL RESTRICTION ON ISSUANCE OF STOCK CERTIFICATES
The Company shall not be required to deliver any certificate upon the
exercise of any Incentive Stock Option until it has been furnished with such
documents as it may deem necessary to insure compliance with any law or Rules
of the SEC or any other governmental authority having jurisdiction under the
Plan. Certificates for Shares delivered upon such grant or exercise shall bear
legends restricting transfer or other restrictions or conditions to the extent
required by law or determined by the Committee. Each Incentive Stock Option
under the Plan is subject to the condition that, if at any time the Committee
shall determine that the listing, registration or qualification of the Shares
subject to such Incentive Stock Option under any state or federal law or other
applicable Rule, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of the granting of such
Incentive Stock Options or the issue or purchase of Shares thereunder, such
Incentive Stock Options may not vest or be exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall
have been effected or obtained free of any conditions not acceptable to the
Committee.
10. TERMINATION OF EMPLOYMENT
If the employment of a Participant terminates by reason of the Participant's
Disability or death, any Incentive Stock Option may be exercised by the
Participant, the Participant's designated beneficiary or legal representative
or permitted transferee at any time on or prior to the earlier of the
expiration date of the Option or the expiration of one year after the date of
Disability or death but only if, and to the extent that the Participant was
entitled to exercise or receive the Incentive Stock Option at the date of
Disability or death and subject to such other terms and conditions as may be
specified in the Incentive Stock Option. In the event of the Participant's
Retirement or other termination of employment, any Incentive Stock Option may
be exercised by the Participant, the Participant's designated beneficiary or
legal representative at any time on or prior to the earlier of the expiration
date of the option or the expiration of thirty days after the date of
Retirement or termination but only if, and to the extent that, the Participant
was entitled to exercise the Incentive Stock Option at the date of Retirement
or termination, subject to such other terms and conditions as may be specified
in the Incentive Stock Option and the Plan. All Incentive Stock Options or any
portion thereof not yet vested or exercisable on the date of Disability or
death shall terminate immediately on the date of termination. All Incentive
Stock Options or any portion thereof not yet vested or exercisable on the date
of termination other than by reason of Disability or death shall terminate
immediately on the date of termination.
11. ADJUSTMENT OF INCENTIVE STOCK OPTIONS
In the event of any change in the Common Stock of the Company by reason of
any stock dividend, stock split, recapitalization, reorganization, merger,
consolidation, split-up, combination, or exchange of shares, or rights
offering to purchase Common Stock at a price substantially below fair market
value, or of any similar change affecting the Common Stock, the number and
kind of shares authorized under Section 4 for the Plan, the number and kind of
shares which thereafter are subject to Incentive Stock Options under the Plan
and the number and kind of unexercised Incentive Stock Options and the
exercise price per share shall be adjusted automatically
3
consistent with such change to prevent substantial dilution or enlargement of
the rights granted to, or available for, Participants in the Plan.
12. NO EMPLOYMENT RIGHTS
The Plan and any Incentive Stock Options granted under the Plan shall not
confer upon any Participant any right with respect to continuance as an
employee of the Company, nor shall the Plan or such Incentive Stock Options
interfere in any way with the right of the Company to terminate the
Participant's position as an employee or director at any time.
13. RIGHTS AS A SHAREHOLDER
The recipient of any Incentive Stock Option under the Plan shall have no
rights as a shareholder with respect thereto unless and until certificates for
the underlying Shares are issued to the recipient, except as otherwise
specifically provided by the Committee.
14. SECTION 162(m) CONDITIONS
It is the intent of the Company that the Plan and Incentive Stock Options
granted under the Plan satisfy and be interpreted in a manner that satisfies
any applicable requirements of Code Section 162(m) as performance-based
compensation. Any provision, application or interpretation of the Plan
inconsistent with this intent to satisfy the standards in Code Section 162(m)
shall be disregarded. Notwithstanding anything to the contrary in the Plan,
the provisions of the Plan may at any time be bifurcated by the Committee in
any manner so that certain provisions of the Plan or any Incentive Stock
Option intended (or required in order) to satisfy the applicable requirements
of Code Section 162(m) are applicable only to Covered Employees.
15. AMENDMENT AND DISCONTINUANCE
The Plan and any Incentive Stock Option outstanding under the Plan may be
amended, modified or terminated by the Committee at any time and all Incentive
Stock Options shall be subject to the Plan as amended from time to time,
except that the Committee may not, without approval of the Participant to whom
the Incentive Stock Option was granted or his legal representative or
permitted transferee adversely affect the rights of such person under such
Incentive Stock Option. No amendment, modification, or termination of the Plan
shall be effective without stockholder approval if such approval is required
under applicable law or Rule or any regulation of the stock market on which
the Common Stock is traded.
16. CHANGE IN CONTROL
(a) Notwithstanding other provisions of the Plan, in the event of a Change
in Control of the Company, all of a Participant's Incentive Stock Options
shall become immediately vested and exercisable or fully earned at the maximum
amount, except with respect to Covered Employees for "performance based
compensation" as otherwise determined by the Committee.
(b) In the event of a Change in Control, in the discretion of the
Committee,each Participant who is a Section 16 insider with respect to whom
the Change in Control might result in a violation under Section 16(b) of the
Exchange Act, may receive, in exchange for the surrender of the Incentive
Stock Option, an amount of cash equal to the difference between the fair
market value (based on the kind and amount of any securities, cash, other
property or other consideration to be received with respect to each Share in
the Change in Control transaction as determined by the Committee) of the
Common Stock covered by the Incentive Stock Option and the option price of
such Common Stock under the Incentive Stock Option.
(c) Notwithstanding the foregoing, the Plan and any Incentive Stock Options
outstanding under the Plan shall be binding upon any successor to the Company,
whether such successor is the result of a direct or indirect
4
purchase, merger, consolidation or other acquisition of all or substantially
all of the business and/or assets of the Company.
17. GOVERNING LAW
The Plan and any Incentive Stock Option made pursuant to it shall be
construed under the laws of the State of Delaware.
CANANDAIGUA WINE COMPANY, INC.
Dated: June 23, 1997
By: /s/ Richard Sands
_________________________________
Title: President
______________________________
Date of Stockholder Approval ___________
5
ANNEX A
TO
INCENTIVE STOCK OPTION PLAN
CERTAIN DEFINITIONS
Capitalized terms used in the Plan shall have the meanings set forth below:
"CAUSE" means, solely for the purposes of the Plan, gross negligence or
willful misconduct or commission of a felony or an act of moral turpitude
determined by the Committee to be detrimental to the best interests of the
Company or, if the Participant is subject to a written agreement with the
Company "cause" shall have the meaning set forth in that agreement.
"CHANGE IN CONTROL" means:
(a) there shall be consummated:
(i) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which any
Shares are to be converted into cash, securities or other property,
provided that the consolidation or merger is not with a corporation
which was a direct or indirect wholly-owned subsidiary of the Company or
a parent of the Company immediately before the consolidation or merger;
or
(ii) any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all,
of the assets of the Company; or
(b) the stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; or
(c) any person (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) shall become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act), directly or indirectly, of 30% or more of the
voting control of the Company's then outstanding common stock, provided that
such person shall not be a wholly-owned subsidiary of the Company
immediately before it becomes such 30% beneficial owner of voting control;
or
(d) individuals who constitute the Company's Board of Directors on the
date hereof (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided, however, that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
three quarters of the directors comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director, without objection to such
nomination) shall be, for purposes of this clause (d), considered as though
such person were a member of the Incumbent Board.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means Canandaigua Wine Company, Inc. and its Subsidiaries, except
where the context indicates that only the parent company is intended.
"COMMITTEE" means the committee appointed by the Company's Board of
Directors (the "Committee") consisting of not fewer than the number of members
of the Board of Directors required under Code Section 162(m) and the Rules of
the IRS thereunder for determining performance based compensation which is
deductible by the Company who are "outside directors" as defined from time to
time under the IRS Rules and, to the extent possible are also "Non-Employee
Directors" as defined from time to time under the SEC Rules for approval of
Incentive Stock Options exempt from Section 16(b). If any member of the
Committee does not qualify as an "outside director", Incentive Stock Options
under the Plan for Covered Employees shall be
1
administered by a subcommittee of the Committee comprised solely of members
who qualify as outside directors to the extent desireable to preserve the
deductibility of such compensation under Section 162(m) of the Code and such
subcommittee shall constitute the Committee for all purposes under the Plan.
The full Board of Directors, in its discretion, may act as the Committee under
the Plan. The Committee may delegate to selected officers of the Company
individually or acting as a committee any portion of its authority, except as
otherwise expressly provided in the Plan. In the event of a delegation to
management, the term "Committee" as used herein shall include the officer or
committee with respect to the delegated authority. Notwithstanding any such
delegation of authority, the Committee comprised of members of the Board of
Directors shall retain overall responsibility for the operation of the Plan.
Management acting pursuant to delegated authority shall not make awards under
the Plan to any Covered Employees or other Section 16 insider.
"COMMON STOCK" means the Class A Common Stock of the Company, par value
$.01 per Share.
"COVERED EMPLOYEE" means the Chief Executive Officer of the Company and the
four other most highly compensated officers of the Company as such term is
defined under the Rules promulgated under Section 162(m) of the Code and such
other officers as may be designated by the Committee.
"DISABILITY" means the inability of a Participant to perform his or her
duties for a period in excess of the applicable statutory short-term
disability coverage provided by the Company. The date of termination with
respect to Disability shall be the day following the date such short term
disability protection lapses.
"FAIR MARKET VALUE" of a Share means the closing price of the Common Stock
on the NASDAQ Stock Market or other national stock exchange on which the
Common Stock is actively traded for the date as reported in the Wall Street
Journal, Eastern Edition or such other standard reference service as the
Committee may select.
"IRS" means the Internal Revenue Service and, if the context permits, the
courts interpreting the Code.
"INCENTIVE STOCK OPTION" means any Stock Option granted under the Plan all
of which are designated as "incentive stock options" within the meaning of
Section 422 of the Code or any successor or replacement provision.
"PARTICIPANT" means any employee of the Company who has received an
Incentive Stock Option under the Plan.
"PLAN" means the Incentive Stock Option Plan of the Company, as amended from
time to time.
"RETIREMENT" means a termination of employment by an employee who is at
least 60 years of age and after at least 10 years of service with the Company
(which shall include entities acquired by the Company, if the Committee so
determines).
"RULES" means rules, regulations and interpretations issued by the
governmental authority charged with administering any law and any judicial
interpretations applicable thereto.
"SEC" means the Securities and Exchange Commission.
"SHARES" means shares of the Company's Class A Common Stock, par value $.01
per share.
"SUBSIDIARIES" means (a) all corporations of which at least fifty percent of
the voting stock is owned by the Company directly or through one or more
corporations at least fifty percent of whose voting stock is so owned, and (b)
partnerships or other entities in which the Company has, either directly or
indirectly, at least a fifty percent interest in the capital or profits.
"TEN PERCENT HOLDER" means a Participant who owns stock possessing more than
ten percent of the total combined voting power of all classes of capital stock
outstanding on the date of determination.
OTHER TERMS: Any other terms used in the Plan which are defined in Sections
83, 162(m) or 421 of the Internal Revenue Code as amended, or the Rules
thereunder or corresponding provisions of subsequent laws and Rules in effect
at the time Incentive Stock Options are granted under the Plan, shall have the
meanings set forth in such laws or Rules.
2
APPENDIX C
CANANDAIGUA WINE COMPANY, INC.
ANNUAL MANAGEMENT INCENTIVE PLAN
This Annual Management Incentive Plan was approved by the Board of Directors
of the Company on June 23, 1997 and shall be effective upon approval by the
stockholders. Certain capitalized terms used in the Plan are defined in Annex
A.
1. PURPOSE
The Plan is designed to enable the Company to attract and retain valued
employees and to provide them with incentives to attain certain annual
performance goals.
2. ADMINISTRATION
The Plan shall be administered by a Committee of the Company's Board of
Directors. This Committee shall consist of at least two members of the
Company's Board of Directors, all of whom are (a) "outside directors" within
the meaning of Section 162(m), and (b) not eligible to participate in the
Plan. Subject to the Plan, the Committee shall possess the sole authority, in
its discretion, to (i) establish and administer the Performance Criteria and
Performance Targets, (ii) select the Participating Executives who will receive
Bonuses under the Plan, (iii) determine the amount of such Bonuses and any
terms, conditions or limitations on the payment of any Bonuses, (iv) interpret
the Plan, (v) make and amend rules and regulations relating to the Plan, and
(vi) make all other determinations necessary or advisable for the
administration of the Plan.
3. TERMS AND CONDITIONS OF BONUSES
For each Performance Period, the Committee shall select, at the time the
Performance Criteria and Performance Targets are determined, the Participating
Executives. Each Participating Executive may receive a Bonus if and only if
the Performance Targets established by the Committee, relative to the
applicable Performance Criteria, are attained. The applicable Performance
Period and Performance Targets shall be determined by the Committee consistent
with the terms of the Plan and Section 162(m). The Committee may adjust
Performance Targets to take into account the effects of any Extraordinary
Items equitably in a manner consistent with the determination of the original
Bonus, provided, however, no such adjustment may be made with respect to any
Bonus to a Participating Executive which is intended to qualify as
"performance based compensation" unless such adjustment satisfies the
requirements of Section 162(m) and the related Rules.
The Performance Target with respect to the Performance Criteria must be
established by the Committee in advance of the deadlines applicable under
Section 162(m) and while the performance relating to the Performance Target
remains substantially uncertain within the meaning of Section 162(m). At the
time the Performance Target is established, the Committee shall provide, in
terms of an objective formula or standard for each Participating Executive,
the method of computing the specific amount that will represent the maximum
amount of Bonus payable to the Participant if the Performance Target is
attained.
Notwithstanding any other provision hereof, no Participating Executive shall
receive a Bonus under the Plan for any fiscal year or other Performance Period
in excess of $2 million. Any Bonuses awarded by the Committee under the Plan
shall be paid within 30 days after year-end financial results are reported or,
if later, as soon as practicable following the Committee's determinations and
certification under this Section. Any such payment shall be in cash or cash
equivalent, subject to applicable withholding requirements. Notwithstanding
the foregoing, the Committee may, in its sole discretion, defer the payout of
any Bonus. In the case of the delay of a Bonus otherwise payable at or after
the attainment and certification of the applicable Performance Target, any
additional amount payable as a result of the delay shall be limited to the
Moody's Average Corporate Bond Yield during the deferral period.
1
No Participating Executive shall receive any payment under the Plan unless
the Committee has certified, by resolution or other appropriate action in
writing, that the amount thereof has been accurately determined in accordance
with the terms, conditions and limits of the Plan and that the Performance
Target and any other material terms previously established by the Committee or
set forth in the Plan were in fact satisfied.
4. TERMINATION OF EMPLOYMENT
If the employment of a Participating Executive terminates by reason of such
Participating Executive's Retirement, Disability, death or involuntary
termination without Cause, a ratable portion of any applicable Bonus shall be
paid, subject to the attainment of the applicable Performance Target, at or
after the attainment and certification of the applicable Performance Target at
the end of the fiscal year or other Performance Period. The ratable portion of
the Bonus shall be determined by multiplying the bonus by a fraction, the
numerator of which is the number of full or partial months during the
Performance Period during which the Participating Executive was employed, and
the denominator of which is the number of calendar months in the Performance
Period. Upon termination of the Participating Executive's employment by
voluntary resignation or for Cause, all Bonuses for which the Participating
Executive may be eligible shall be forfeited unless the Committee otherwise
expressly so provides in a written contract or other written instrument.
5. ADJUSTMENTS
In the event of any change in the Company's applicable accounting principles
or practices by reason of any stock dividend, stock split, recapitalization,
reorganization, merger, consolidation, split-up, combination, exchange of
shares, rights offering or other similar change which occurs after the
Performance Targets are established for a given Performance Period, the amount
of the Bonuses paid under the Plan for such Performance Period shall be
automatically adjusted consistent with such change to prevent dilution or
enlargement of the Bonuses under the Plan.
6. NO EMPLOYMENT RIGHTS
The Plan shall not confer upon any Participating Executive any right with
respect to continuance as an employee of the Company, nor shall it interfere
in any way with the right of the Company to terminate the Participating
Executive's position as an employee.
7. DISCRETION OF COMPANY
Any decision made or action taken by the Company, the Committee or the Board
of Directors in connection with the creation, amendment, construction,
administration, interpretation or effect of the Plan shall be within the
absolute discretion of such entity and shall be conclusive and binding upon
all persons. No officer, director or member of the Committee shall have any
liability for actions taken or omitted under the Plan by the member or by any
other person.
8. AMENDMENT AND DISCONTINUANCE
The Plan may be amended, modified or terminated by the Committee at any
time, and all Bonuses shall be subject to the Plan as amended from time to
time, except that the Committee may not, without the approval of a
Participating Executive adversely affect any rights under the Plan. No
amendment, modification or termination shall be effective without the approval
of the Board of Directors and/or the stockholders if such approval is
necessary to comply with the applicable provisions of Section 162(m).
9. CHANGE OF CONTROL
Notwithstanding other provisions of the Plan, in the event of a Change of
Control of the Company, the Performance Period for a Participating Executive
shall end on the date of the Change of Control and the Performance Target
shall be adjusted to reflect the early termination of the Performance Period.
If the Performance Target, as adjusted, is deemed satisfied by the Committee,
the Participating Executive may receive a ratable portion of the Bonus that
would have been paid if the Performance Period had not been terminated early
and the Performance Target had been satisfied. The ratable portion of the
Bonus shall be determined by
2
multiplying the original Bonus by a fraction, the numerator of which is the
number of months from the first day of the Performance Period to the date of
the Change of Control (including any fractional month) and the denominator of
which is the total number of months in the original Performance Period.
The Plan shall be binding upon any successor to the Company, whether such
successor is the result of a direct or indirect purchase, merger,
consolidation or other acquisition of all or substantially all of the business
and/or assets of the Company.
10. SECTION 162(m) CONDITIONS
It is the intent of the Company that the Plan and Bonuses paid under the
Plan satisfy and be interpreted in a manner that satisfies any applicable
requirements of Section 162(m) as performance-based compensation. Any
provision, application or interpretation of the Plan inconsistent with this
intent to satisfy the standards in Section 162(m) shall be disregarded.
Notwithstanding anything to the contrary in the Plan, the provisions of the
Plan may at any time be bifurcated by the Committee in any manner so that
certain provisions of the Plan or any Bonus intended (or required in order) to
satisfy the applicable requirements of Section 162(m) are applicable only to
persons whose compensation is subject to Section 162(m).
11. NO FUNDING OF THE PLAN
The Company shall not be required to fund or otherwise segregate any cash or
any other assets which may at any time be paid to any Participating Executive
under the Plan. The Plan shall constitute an "unfunded" plan of the Company.
The Company shall not, by any provisions of the Plan, be deemed to be a
trustee of any property, and any rights of any Participating Executive shall
be limited to those of a general unsecured creditor.
12. NON-TRANSFERABILITY
Except as expressly provided by the Committee, no benefit payable under the
Plan shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, and any such attempted
action shall be void. This Section shall not apply to an assignment of a
contingency or payment due after the death of a Participating Executive to
such Participating Executive's legal representative or beneficiary.
13. EFFECTIVE DATE
The effective date of the Plan shall be the date the Plan is approved by the
Company's stockholders.
14. DEFINITIONS
Any terms or provisions used herein which are defined in Section 162(m)
shall have the meanings as therein defined.
15. GOVERNING LAW
To the extent not inconsistent with the provisions of Section 162(m), the
Plan shall be construed under the laws of the State of New York.
CANANDAIGUA WINE COMPANY, INC.
Dated: June 23, 1997
By: /s/ Richard Sands
_________________________________
Title: President
_______________________________
Date of Stockholder Approval _____________
3
ANNEX A
TO
ANNUAL MANAGEMENT INCENTIVE PLAN
CERTAIN DEFINITIONS
Capitalized terms used in the Plan shall have the meanings set forth below:
"BONUS" means a cash payment or payment opportunity, as the context
requires.
"CAUSE" means, solely for the purposes of the Plan, gross negligence or
willful misconduct or commission of a felony or an act of moral turpitude
determined by the Committee to be detrimental to the best interests of the
Company or, if the Participating Executive is subject to a written agreement
with the Company "cause" shall have the meaning set forth in that agreement.
"CHANGE OF CONTROL" means:
(a)there shall be consummated
(i)any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which
any Shares are to be converted into cash, securities or other
property, provided that the consolidation or merger is not with a
corporation which was a direct or indirect wholly-owned subsidiary
of the Company or a parent of the Company immediately before the
consolidation or merger; or
(ii)any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all,
of the assets of the Company; or
(b)the stockholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; or
(c)any person (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act) shall become the beneficial owner (within the meaning of
Rule 13d-3 under the Exchange Act), directly or indirectly, of 30% or
more voting control of the Company's then outstanding common stock,
provided that such person shall not be a wholly-owned subsidiary of the
Company immediately before it becomes such 30% beneficial owner of
voting control; or
(d)individuals who constitute the Company's Board of Directors on the
date hereof (the "Incumbent Board") cease for any reason to constitute
at least a majority thereof, provided, however, that any person
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of at least three quarters of the directors comprising the
Incumbent Board (either by a specific vote or by approval of the proxy
statement of the Company in which such person is named as a nominee for
director without objection to such nomination) shall be, for purposes
of this clause (d), considered as though such person were a member of
the Incumbent Board.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" means Canandaigua Wine Company, Inc. and its Subsidiaries, except
when the context indicates that only the parent company is intended.
"COMMITTEE" means the committee appointed by the Board of Directors of the
Company to administer the Plan as provided in Section 2.
"DISABILITY" means the inability of a Participant to perform his or her
duties for a period in excess of the applicable statutory short-term
disability coverage provided by the Company. The date of termination with
respect to Disability shall be the day following the date such short-term
disability protection lapses.
1
"EXTRAORDINARY ITEMS" means (a) items presented as such (or other comparable
terms) on the Company's audited financial statements, (b) extraordinary,
unusual or nonrecurring items of gain or loss, (c) changes in tax or
accounting laws or Rules, and (d) the effects of mergers, acquisitions,
divestitures, spin offs or significant transactions, each of which are
identified in the audited financial statements and notes thereto or in the
"management's discussion and analysis" of the financial statements in a period
report filed with the SEC under the Exchange Act.
"PARTICIPATING EXECUTIVE" means a key employee (including any officer) of
the Company or one of its Subsidiaries selected by the Committee to
participate in the Plan.
"PERFORMANCE CRITERIA" means one or more of the following performance
criteria selected by the Committee with respect to any performance-based
Award: (a) increases in the Fair Market Value of a Share, (b) shareholder
value added, (c) cash flow, (d) earnings per share, (e) earnings of the
Company before deducting interest, taxes, depreciation and amortization, (f)
return on equity, (g) return on capital, (h) return on assets or net assets,
(i) cost reduction or control, (j) operating income or net operating income,
(k) operating margins/sales in one or more business segments or product lines,
(l) return on operating revenue, and (m) market share in one or more business
segments or product lines. Performance criteria may be established on a
corporate, divisional, business unit or consolidated basis and measured
absolutely or relative to the Company's peers.
"PERFORMANCE PERIOD" means the fiscal year or years or other period
established by the Committee with respect to which the Performance Targets are
set by the Committee.
"PERFORMANCE TARGET" means one or more specific objective goal or goals
(which may be cumulative or alternative) that are timely set in writing by the
Committee for each Participant for the applicable Performance Period with
respect to any one or more of the Performance Criteria.
"PLAN" means the Annual Management Incentive Plan of the Company, as amended
from time to time.
"RETIREMENT" means a termination of employment by an employee who is at
least 60 years of age and after at least 10 years of service with the Company
(which shall include entities acquired by the Company, if the Committee so
determines).
"RULES" means rules, regulations and interpretations issued by the
governmental authority charged with administering any law and any judicial
interpretations applicable thereto.
"SECTION 162(m)" means Section 162(m) of the Code, together with the
regulations promulgated thereunder, all as amended from time to time.
"SHARES" means shares of the Company's Class A Common Stock, par value $.01
per share.
"SUBSIDIARIES" means (a) all corporations of which at least fifty percent of
the voting stock is owned by the Company directly or through one or more
corporations at least fifty percent of whose voting stock is so owned, and (b)
partnerships or other entities in which the Company has, either directly or
indirectly, at least a fifty percent interest in the capital or profits.
2
CANANDAIGUA WINE COMPANY, INC.
PROXY FOR CLASS A COMMON STOCK AND CLASS B COMMON STOCK
BALLOT
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 CANANDAIGUA WINE COMPANY, INC. (the "COMPANY") owned by
the undersigned at the Annual Meeting of Stockholders to be held at Chase Tower,
One Chase Square, Rochester, New York, on Tuesday, July 22, 1997, at 11:00 a.m.,
local time, and at any adjournments thereof (the "Meeting").
Class A Stockholders, voting as a separate class, are entitled to
elect two directors at the Meeting. Class B Stockholders, voting as a separate
class, are entitled to elect four directors at the Meeting. Please refer to the
Proxy Statement for details. Your Shares (if any) of the Class A Common Stock
are designated "CLA" and/or "ESP" on the back of this card and your Shares
(if any) of Class B Common Stock are designated "CLB". PLEASE SIGN ON THE
BACK.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
COMPANY. 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, A SIGNED PROXY WILL BE
VOTED FOR THE ELECTION OF DIRECTORS AND, UNLESS OTHERWISE SPECIFIED, THIS PROXY
---
WILL BE VOTED FOR PROPOSALS 2 THROUGH 6.
---
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
[SEE REVERSE SIDE]
- 2 -
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
1. Election of Directors: To elect Directors as set forth in the Proxy
Statement.
CLASS A STOCKHOLDERS CLASS B STOCKHOLDERS
George Bresler, James A. Locke, III Marvin Sands, Richard
Sands, Robert Sands,
Bertram E. Silk
FOR WITHHELD FOR WITHHELD
BOTH [ ] FROM [ ] ALL [ ] FROM [ ]
NOMINEES BOTH NOMINEES ALL
NOMINEES NOMINEES
For, except vote withheld from For, except vote withheld from
nominee below: nominee(s) below:
[ ] [ ]
------------------------------ -----------------------------
2. Proposal to amend the Company's Restated Certificate of Incorporation to
change the name of the Company to Canandaigua Brands, Inc.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Proposal to approve the amendment and restatement of the Stock Option and
Stock Appreciation Right Plan as the Long-Term Stock Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. Proposal to approve the Incentive Stock Option Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- 3 -
5. Proposal to approve the Annual Management Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. Proposal to ratify the selection of Arthur Andersen LLP, Certified Public
Accountants, as the Company's independent auditors for the fiscal year ending
February 28, 1998.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
7. 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 at any adjournments thereof.
[ ] MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT
The undersigned acknowledges receipt with this Proxy of a copy of the Notice of
Annual Meeting and Proxy Statement dated June 26, 1997, describing more fully
the proposals set forth herein.
NOTE: Please date this Proxy and sign your name below 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.
Signature: Date:
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Signature: Date:
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