Paragraph | Page | |||
1. PROGRAM OBJECTIVES |
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2. PROGRAM ADMINISTRATION |
1 | |||
3. PROGRAM PARTICIPATION |
2 | |||
4. TERMINATION OF EMPLOYMENT |
2 | |||
5. AWARD LEVELS |
2 | |||
6. PERFORMANCE TARGETS |
3 | |||
7. EFFECT OF EXTRAORDINARY ITEMS, MERGER, ACQUISITION, REORGANIZATION, ETC. |
3 | |||
8. PAYMENT OF AWARDS |
4 | |||
9. ASSIGNMENT |
4 | |||
10. EMPLOYMENT RIGHT |
4 | |||
11. WITHHOLDING FOR TAXES |
4 | |||
12. SPECIAL RULES FOR CERTAIN EXECUTIVES |
4 | |||
13. DEFINITIONS |
5 |
ii
Purpose:
|
This document is intended to describe parameters for making incentive awards for the period commencing March 1, 2008 and ending February 28, 2009 during the Companys 2009 fiscal year (the Program). The Company has adopted the Annual Management Incentive Plan (the Plan) which authorizes the Company to grant incentive compensation to certain employees. All awards granted under the Program will be granted pursuant and subject to the terms of the Plan. |
A. | Support the Companys annual planning, budget and strategic planning process; | ||
B. | Provide compensation opportunities which are competitive with those of other beverage alcohol or industry related companies in order to attract and retain key executives; | ||
C. | Motivate executives to achieve profit and other key goals of the Company; | ||
D. | Control overhead by designating a portion of annual compensation as a variable rather than fixed expense. |
A. | The Human Resources Committee (the Committee) of the Companys Board of Directors is responsible for determining which employees shall receive awards and the amounts, terms and conditions of all awards under the Program. The Committee will delegate certain administrative duties to the Senior Vice President, Chief Human Resources Officer. |
B. | Decisions and determinations by the Committee will be final and binding upon all persons, including, but not limited to, participants and their personal representatives, heirs and assigns. |
C. | This Program creates no vested or contractual right to the compensation provided herein. The Committee shall have the authority to interpret, amend or cancel the Program at any time, or to make any other determinations that it believes necessary or advisable for the administration of the Program. The Committees authority includes the power, in its sole discretion, to reduce the amount of or eliminate an Award payable to a participant. |
A. | The Committee is responsible for determining who may participate in the Program. The Company will provide a written recommendation to the Committee of the employees who it believes should be included in the Program for a Plan Year. Generally, Awards will be made to employees who the Committee believes are in a position to make significant contributions to the financial success of the Company. |
B. | The participants for the Plan Year are identified in Schedule A. These schedules may be revised at any time during the year, as appropriate. |
C. | To the extent permitted by Section 162(m) of the Internal Revenue Code, participants may be added to the Program at any time during a Plan Year provided that such addition occurs before December of the Plan Year. In this case, a participants Salary for purposes of determining an Award shall be prorated for the period remaining in the Plan Year. For purposes of proration, a participant shall be given credit for the entire month of any month in which the participant participates in the Program. |
A. | In the event that a participant terminates employment for reasons other than death, Disability, Retirement or involuntary termination without Cause during a Plan Year, the participant will forfeit all rights to an Award with respect to that Plan Year unless otherwise stated in a current employment contract. |
B. | In the event that a participant terminates employment for reasons of death, Disability, Retirement, or involuntary termination without Cause, a ratable portion of any applicable Award shall be paid, subject to the attainment of the applicable performance target at the end of the plan year. The ratable portion of the Award shall be determined by multiplying the Award by a fraction the numerator of which is the number of full or partial months during the Plan Year during which the participant was employed and the denominator of which is twelve. Such amount will be paid at the same time as when Awards are paid to other participants. |
A. | The amount of a participants Award will be calculated based on three variables: the participants management position, Salary and achieved performance for the Plan Year. |
B. | Each participant will be assigned to a certain category (Participation Category) based on the participants management position in the Company (see Schedule A). |
C. | The Committee has established performance targets for each participant that are based on one or more of the following: a Corporate performance target(s) (Corporate Target), and a Division/Company performance target(s) (Divisional Target). Schedule C sets forth the applicable Corporate and Divisional Targets. |
D. | A participant who has a Corporate Target(s) and/or a Divisional Target(s) will be assigned a weighting to determine the percentage that each of the targets will contribute towards the participants total Award. These weightings are set forth in Schedule D (e.g., |
the Award for a Division CEO will be calculated 40% based on the Corporate Target and 60% based on the participants Divisional Targets). The weightings assigned to the Corporate and Divisional Targets will be referred to as the Corporate Percentage(s) and Divisional Percentage(s), respectively. |
E. | A participants Award will be calculated by multiplying the participants Salary by the appropriate percentage set forth in the Award Schedule (Schedule B) taking into account the participants Participation Category and performance level (e.g., threshold, target, maximum, etc.) with respect to the participants Corporate Target(s) and multiplying such amount by the participants Corporate Percentage(s). If the actual performance level falls between the designated levels of performance set forth in Schedule B, the percentage by which the participants salary is multiplied will be interpolated. For example, if the actual performance level falls half way between the threshold and midpoint levels, the percentage will be calculated as the average of the percentages for the threshold and midpoint levels. A similar calculation is performed for the participants Divisional Targets, if any, and the participants total Award will be the sum of these calculations. |
Example: | Assume a Divison CEO of Constellation Brands was listed in Participation Category A1, had a salary of $450,000, and achieved the participants threshold Corporate Target and maximum Divisional Targets. Based on these facts and Schedules B, C and D, the participants Award would be $409,500 (i.e., $450,000 x 40% x 17.5%+ $450,000 x 40% x 140% + $450,000 x 20% x 140%). |
A. | Performance measurement criteria will be established for the Plan Year and such criteria will relate to corporate and/or divisional objectives. Performance targets will be established based on the selected criteria. Schedule C sets forth the applicable corporate and divisional performance criteria and targets for the Plan Year. |
B. | Schedule B sets forth the Award levels based on the attainment of the Corporate, Divisional, Individual and Team Targets determined in accordance with the criteria and targets set forth in Schedule C. |
A. | The Committee shall adjust the performance measurement criteria to take into account the effects of any Extraordinary Items. Extraordinary Items means (1) items presented as such (or other comparable terms) on the Companys audited financial statements, (2) extraordinary, unusual or nonrecurring items of gain or loss (including, without limitation, an unbudgeted material expense incurred by or at the direction of the Board of Directors or a Committee of the Board or a material litigation judgment or settlement), (3) changes in tax or accounting laws or rules, and (4) the effects of mergers, |
acquisitions, divestitures, spin-offs or significant transactions (including, without limitation, a corporate merger, consolidation, acquisition of property or stock, reorganization, restructuring charge, or joint venture), each of which are identified in the audited financial statements and notes thereto or in the managements discussion and analysis of the financial statements in a period report filed with the SEC under the Exchange Act. The Committee shall make such adjustments to the performance measurement criteria as shall be equitable and appropriate in order to make the criteria, as nearly as practicable, equivalent to the criteria immediately prior to such transaction or event. |
B. | In the event of a Change of Control, as defined under the Plan, the Plan Year shall end on the date of the Change in Control and the Corporate and Divisional Targets shall be adjusted to reflect the early termination of the Plan Year. If the Corporate and Divisional Targets, as adjusted, are deemed satisfied by the Committee, a participant may receive a ratable portion of the Award that would have been paid if the Plan Year had not been terminated early and the Corporate and Divisional Targets had been satisfied. The ratable portion of the Award shall be determined by multiplying the original Award by a fraction with a numerator equal to the number of months from the first day of the Plan Year to the date of the Change of Control (including any fractional month) and a denominator equal to twelve. |
A. | The Companys Chief Executive Officer and certain other individuals designated by the Committee (Covered Employees) will be subject to special rules to ensure that the Awards granted to such individuals will be treated as qualified performance-based compensation under Internal Revenue Code Section 162(m). All provisions of the Program and the Plan shall be interpreted and administered consistently with that intent. The Committee will designate those individuals who are to be treated as Covered Employees on Schedule A. |
B. | Notwithstanding any provision to the contrary, the following rules will apply to Covered Employees: |
(1) | The Committee shall establish Corporate and Divisional Targets for Covered Employees that are tied to one or more of the Performance Criteria set forth in the Plan. |
(2) | The Committee shall establish a Corporate Target(s) and, if applicable, a Divisional Target(s) for Covered Employees within 90 days of the commencement of the Plan Year. The satisfaction of such targets shall be substantially uncertain at the time they are established. |
(3) | The amount of the Award shall be computed under an objective formula and the Committee shall have no discretionary authority to increase the amount of the Award or alter the methodology for calculating the Award, except as permitted by Section 162(m) of the Internal Revenue Code and the regulations promulgated thereunder. |
(4) | The maximum amount a Covered Employee can receive under the Plan for the Plan Year cannot exceed $5 million. |
(5) | Before any Award is paid to a Covered Employee, the Committee will certify, in writing, that the Corporate Target(s) and, if applicable, the Divisional Target(s) was achieved and the amount of the Award is accurately calculated. |
Participation Category | Title | Participant | ||
[****]
|
Chairman of the Board, COB | R. Sands * | ||
President, CEO | R.S. Sands * | |||
[****] |
||||
EVP Chief Financial Officer | R. Ryder* | |||
EVP Chief Legal Officer | T. Mullin * | |||
EVP Strategy & Business Development | P. Hetterich * | |||
EVP Chief Administrative Officer | K. Wilson * | |||
President & CEO Constellation Beers & Spirits | A. Berk* | |||
CEO Constellation International | J. Moramarco* | |||
President & CEO Constellation Wines North America | J. Fernandez* |
* | Covered employee |
Confidential materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote such omission. |
Participation | ||||||||||||||||||||
Category | Threshold | Midpoint | Target | Midpoint | Maximum | |||||||||||||||
A2
|
30 | % | 60 | % | 120 | % | 180 | % | 240 | % | ||||||||||
A1
|
17.5 | % | 35 | % | 70 | % | 105 | % | 140 | % |
AMIP Factor | [****]* | [****]* | [****]** | [****]** | ||||
2.00 |
$[****] | $[****] | $[****] | $[****] | ||||
1.75 |
$[****] | $[****] | $[****] | $[****] | ||||
1.50 |
$[****] | $[****] | $[****] | $[****] | ||||
1.25 |
$[****] | $[****] | $[****] | $[****] | ||||
1.00 |
$[****] | $[****] | $[****] | $[****] | ||||
0.50 |
$[****] | $[****] | $[****] | $[****] | ||||
0.25 |
$[****] | $[****] | $[****] | $[****] |
* | The measure of EBIT (Earnings Before Interest and Taxes) for purposes hereof shall be determined as the sum of Operating Income plus Equity in Earnings of Equity Method Investees. EBIT is measured based on the Companys performance for the period from March 1, 2008 through February 28, 2009. | |
** | Given the intra-company transfers and transactions that occur in these entities, the Company has determined that Divisional EBIT for the wine divisions, for purposes of this program, shall be calculated as EBIT (Earnings Before Interest and Taxes) of the Operating Company for the period from March 1, 2008 through February 28, 2009, plus EBIT earned by inter-company trading companies for exported products and EBIT earned by brand owner companies for imported products. |
AMIP Factor | [****] | [****] | [****] | [****] | |||||
2.00
|
$[****] | $[****] | $[****] | $[****] | |||||
1.75
|
$[****] | $[****] | $[****] | $[****] | |||||
1.50
|
$[****] | $[****] | $[****] | $[****] | |||||
1.25
|
$[****] | $[****] | $[****] | $[****] | |||||
1.00
|
$[****] | $[****] | $[****] | $[****] | |||||
0.50
|
$[****] | $[****] | $[****] | $[****] | |||||
0.25
|
$[****] | $[****] | $[****] | $[****] |
Confidential materials omitted and filed separately with the Securities and Exchange Commission. Asterisks denote such omission. |
Corporate | ||||||||
Corporate/CBI | EBIT | Corporate Free Cash Flow | ||||||
Chairman/CEO
|
80% | 20% | ||||||
EVP
|
80% | 20% |
Corporate | Divisional | Divisional Free | ||||||
Division/Company | EBIT | EBIT/Other | Cash Flow | |||||
CEO |
40% | 40% | 20% |