EXHIBIT 10.4
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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.
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
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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 multiplying the original Bonus by a fraction, the numerator of
which is the number of months from the first day
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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.
Dated: June 23, 1997 CANANDAIGUA WINE COMPANY, INC.
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By: /s/ Richard Sands
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Title: President
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Date of Stockholder Approval: July 22, 1997
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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.
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"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.