<PAGE>
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 BRANDS, 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: __________________________________________________________
<PAGE>
[CBI LOGO]
CANANDAIGUA BRANDS, INC.
Fine Wines, Spirits & Beers
------------------------------
ANNUAL MEETING OF STOCKHOLDERS
------------------------------
June 16, 1998
TO OUR STOCKHOLDERS:
You are cordially invited to attend the Annual Meeting of Stockholders
of Canandaigua Brands, Inc. at One Chase Square, Rochester, New York, on
Tuesday, July 21, 1998 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 1998 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,
/s/ MARVIN SANDS
MARVIN SANDS
Chairman of the Board
/s/ RICHARD SANDS
RICHARD SANDS
President and Chief Executive Officer
<PAGE>
CANANDAIGUA BRANDS, INC.
300 WILLOWBROOK OFFICE PARK
FAIRPORT, NEW YORK 14450
----------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JULY 21, 1998
----------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
CANANDAIGUA BRANDS, INC. the ("Company") will be held at One Chase Square,
Rochester, New York, on Tuesday, July 21, 1998 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 and restate the Company's
Restated Certificate of Incorporation, as presently amended, to
incorporate a prior amendment and to increase the number of authorized
shares of the Class A Common Stock of the Company from 60,000,000 to
120,000,000, thereby increasing the aggregate number of authorized
shares of the Company to 141,000,000 (Proposal No. 2).
3. 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, 1999
(Proposal No. 3).
4. To transact such other business as may properly come before the
Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on June 1, 1998 as
the record date for the determination of stockholders entitled to notice of and
to vote at the Meeting or any adjournment thereof.
A Proxy Statement and accompanying 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
/s/ ROBERT SANDS
ROBERT SANDS, Secretary
Fairport, New York
June 16, 1998
<PAGE>
CANANDAIGUA BRANDS, INC.
300 WILLOWBROOK OFFICE PARK
FAIRPORT, NEW YORK 14450
---------------
PROXY STATEMENT
---------------
1998 ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is being furnished to the stockholders of CANANDAIGUA
BRANDS, INC. (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company. The proxies are for use at the 1998
Annual Meeting of Stockholders of the Company and at any adjournment thereof
(the "Meeting"). The Meeting will be held on Tuesday, July 21, 1998 at 11:00 a.m
at One Chase Square, Rochester, New York.
The shares represented by your proxy, if the proxy is properly executed and
returned, and not revoked, will be voted at the Meeting as therein specified.
You may revoke your proxy at any time before the proxy is exercised by
delivering to the Secretary of the Company a written revocation or a duly
executed proxy bearing a later date. You may also revoke your proxy by attending
the Meeting and voting in person.
The shares represented by your proxy will be voted FOR the election of the
director nominees named herein (Proposal No. 1) unless you specifically withhold
authority to vote for one or more of the director nominees. Further, unless you
indicate otherwise, the shares represented by your proxy will be voted FOR the
proposal to amend and restate the Company's existing Restated Certificate of
Incorporation, as presently amended (the "Existing Certificate"), to incorporate
a prior amendment and to increase the number of authorized shares of the Class A
Common Stock of the Company from 60,000,000 to 120,000,000, thereby increasing
the aggregate number of authorized shares of the Company to 141,000,000
(Proposal No. 2), and FOR the ratification of the selection of Arthur An9dersen
LLP as the Company's independent auditors for the fiscal year ending February
28, 1999 (Proposal No. 3).
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 22, 1998.
<PAGE>
- 2 -
VOTING SECURITIES
The total outstanding capital stock of the Company as of June 1, 1998,
consisted of 15,472,059 shares of Class A Common Stock, par value $.01 per share
(the "Class A Stock"), and 3,296,976 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 1, 1998, the record date for
eligibility to vote at the Meeting, are entitled to notice of and to vote at the
Meeting and at any adjournment thereof. 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 "street name" by brokers or other nominees 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 Existing Certificate 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 Existing Certificate, 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
six 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 amend and restate the Existing Certificate
to incorporate a prior amendment and to increase the number of authorized shares
of Class A Stock of the Company from 60,000,000 to 120,000,000, thereby
increasing the aggregate number of authorized shares of the Company to
141,000,000 (Proposal No. 2), requires an affirmative majority vote of the
holders 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 ratification of the selection of Arthur Andersen LLP as the Company's
independent auditors (Proposal No. 3) 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 vote.
<PAGE>
- 3 -
BENEFICIAL OWNERSHIP
The following tables and notes set forth as of June 1, 1998 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 15,472,059 shares of Class A Stock and 3,296,976 shares of Class B
Stock outstanding as of the close of business on June 1, 1998.
<TABLE>
CLASS A STOCK
- - -----------------------------------------------------------------------------------------------------
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (1)
-----------------------------------------------
NAME AND ADDRESS OF SOLE POWER TO SHARED POWER TO PERCENT OF
BENEFICIAL OWNER VOTE OR DISPOSE VOTE OR DISPOSE TOTAL CLASS (1)
- - ------------------- --------------- --------------- --------- ----------
<S> <C> <C> <C> <C>
Marilyn Sands
300 WillowBrook Office Park
Fairport, NY 14450 789,053(2) 10,631(3) 799,684 5.2%
Robert Sands
300 WillowBrook Office Park
Fairport, NY 14450 335,152(4) 367,098(4) 702,250 4.5%
Richard Sands
300 WillowBrook Office Park
Fairport, NY 14450 329,145(5) 367,098(5) 696,243 4.5%
Marvin Sands
300 WillowBrook Office Park
Fairport, NY 14450 30,954(6) 367,098(6) 398,052 2.6%
CWC Partnership-I
300 WillowBrook Office Park
Fairport, NY 14450 - 356,467(7) 356,467 2.3%
Trust for the benefit of Andrew
Stern, M.D. under the Will of
Laurie Sands
300 WillowBrook Office Park
Fairport, NY 14450 - 356,467(8) 356,467 2.3%
Stockholders Group Pursuant to
Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (9) - 1,062,349 1,062,349 6.9%
Nicholas-Applegate Capital Management
600 West Broadway
29th Floor
San Diego, CA 92101 (10) (10) 1,291,450 8.3%
</TABLE>
<PAGE>
- 4 -
<TABLE>
CLASS B STOCK
- - -----------------------------------------------------------------------------------------------------
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP (1)
-----------------------------------------------
NAME AND ADDRESS OF SOLE POWER TO SHARED POWER TO PERCENT OF
BENEFICIAL OWNER VOTE OR DISPOSE VOTE OR DISPOSE TOTAL CLASS (1)
- - ------------------- --------------- --------------- --------- ----------
<S> <C> <C> <C> <C>
Richard Sands
300 WillowBrook Office Park
Fairport, NY 14450 713,779 1,230,668(5) 1,944,447 59.0%
Robert Sands
300 WillowBrook Office Park
Fairport, NY 14450 713,324 1,230,668(4) 1,943,992 59.0%
Marvin Sands
300 WillowBrook Office Park
Fairport, NY 14450 101,850 724,418(6) 826,268 25.1%
Trust for the benefit for Andrew
Stern, M.D. under the will of
Laurie Sands
300 WillowBrook Office Park
Fairport, NY 14450 - 724,418(8) 724,418 22.0%
CWC Partnership-I
300 WillowBrook Office Park
Fairport, NY 14450 - 678,964(7) 678,964 20.6%
Trust for the benefit of the
Grandchildren of Marvin and
Marilyn Sands
300 WillowBrook Office Park
Fairport, NY 14450 - 506,250(11) 506,250 15.4%
Marilyn Sands
300 WillowBrook Office Park
Fairport, NY 14450 78,750(3) - 78,750 2.4%
Stockholders Group Pursuant to
Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (9) - 2,759,621 2,759,621 83.7%
</TABLE>
- - --------------------------
(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 13d-3(d)(1) under the Securities Exchange Act.
Where the footnotes reflect shares of Class A Stock as being included, such
shares are included only in the Class A Stock table. Where the footnotes
reflect shares of Class B Stock as being included, such shares are included
in only the Class B Stock table.
<PAGE>
- 5 -
(2) With respect to 787,501 shares of the 789,053 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").
(3) The amounts reflected include, as applicable, 10,631 shares of Class A
Stock owned by the Mac and Sally Sands Foundation, Incorporated, a Virginia
corporation (the "Sands' Foundation"), of which Ms. Sands is a director,
and 74,250 shares of Class B Stock owned by Ms. Sands in her capacity as
trustee under Irrevocable Declaration of Trust No. 4. Ms. Sands disclaims
beneficial ownership with respect to all such shares owned by the Sands'
Foundation. The amounts reflected do not include any shares beneficially
owned by her husband, Marvin Sands, which are reflected in the tables and
described in footnote (6) below and with respect to which she disclaims
beneficial ownership. Assuming the conversion of Class B Stock beneficially
owned by Ms. Sands into Class A Stock, Ms. Sands would beneficially own
878,434 shares of Class A Stock, representing 5.6% of the outstanding Class
A Stock after such conversion.
(4) The amount reflected as shares of Class A Stock over which Robert Sands has
the sole power to vote or dispose includes 13,175 shares of Class A Stock
issuable upon the exercise of options which are presently exercisable by
Mr. Sands. The amounts reflected as shares over which Mr. Sands shares
power to vote or dispose include, as applicable, 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 Robert 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, 45,454
shares of Class B Stock owned by CWCP-II, of which Mr. Sands is a trustee
of the managing partner, 506,250 shares of Class B Stock owned by the trust
described in footnote (11) below, and 10,631 shares of Class A Stock owned
by the Sands' Foundation, of which Mr. Sands is a director and officer. Mr.
Sands disclaims beneficial ownership of all of the foregoing shares except
to the extent of his ownership interest in CWCP-I and MLR&R. The amounts
reflected do not include 22,940 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 described in footnote (2)
above 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 2,646,242 shares of
Class A Stock, representing 15.2% of the outstanding Class A Stock after
such conversion.
(5) The amount reflected as shares of Class A Stock over which Richard Sands
has the sole power to vote or dispose includes 8,300 shares of Class A
Stock issuable upon the exercise of options which are presently exercisable
by Mr. Sands. The amounts reflected as shares over which Mr. Sands shares
power to vote or dispose include, as applicable, 308,951 shares of Class A
Stock and 678,964 shares of Class B Stock owned by CWCP-I, of which Richard
Sands is a managing partner, 47,516 shares of Class A Stock owned by MLR&R,
of which Mr. Sands is a general partner, 45,454 shares of Class B Stock
owned by CWCP-II, of which Mr. Sands is a trustee of the managing partner,
506,250 shares of Class B Stock owned by the trust described in footnote
(11) below, and 10,631 shares of Class A Stock owned by the Sands'
Foundation, of which Mr. Sands is a director and officer. Mr. Sands
disclaims beneficial ownership of all of the foregoing shares except to the
extent of his ownership interest in CWCP-I and MLR&R. The amounts reflected
do not include 1,965 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 described in
footnote (2) above 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
<PAGE>
- 6 -
Class A Stock, Mr. Sands would beneficially own 2,640,690 shares of Class A
Stock, representing 15.2% of the outstanding Class A Stock after such
conversion.
(6) The amount reflected as shares of Class A Stock over which Marvin Sands has
the sole power to vote or dispose includes 4,375 shares of Class A Stock
issuable upon the exercise of options which are presently exercisable by
Mr. Sands. The amounts reflected as shares over which Mr. Sands shares
power to vote or dispose include, as applicable, 308,951 shares of Class A
Stock and 678,964 shares of Class B Stock owned by CWCP-I, of which Mr.
Sands is the special voting trustee of the marital trust described in
footnote (8) below (the "Marital Trust") which owns a majority in interest
of the CWCP-I partnership interests, 47,516 shares of Class A Stock owned
by MLR&R, of which Marvin Sands is a general partner, 45,454 shares of
Class B Stock owned by CWCP-II, of which Mr. Sands is the special voting
trustee of the Marital Trust which owns a majority in interest of the
CWCP-II partnership interests, and 10,631 shares of Class A Stock owned by
the Sands' Foundation, of which Mr. Sands is a director and officer. Mr.
Sands disclaims beneficial ownership with respect to all of the foregoing
shares except to the extent of his ownership interest in MLR&R. The amounts
reflected do not include 789,053 shares of Class A Stock or 78,750 shares
of Class B Stock owned by Mr. Sands' wife, Marilyn Sands, or the remainder
interest CWCP-II has in 265,151 of the 787,501 shares of Class A Stock
subject to the life estate held by Marilyn Sands described in footnote (2)
above. 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 1,224,320 shares
of Class A Stock, representing 7.5% of the outstanding Class A Stock after
such conversion.
(7) The amounts reflected include 47,516 shares of Class A Stock owned by
MLR&R, of which CWCP-I is a general partner. The shares owned by CWCP-I are
included in the number of shares beneficially owned by Richard Sands and
Robert Sands, the managing partners of CWCP-I, the Marital Trust, a partner
of CWCP-I which owns a majority in interest of the CWCP-I partnership
interests, Marvin Sands, the special voting trustee of the Marital Trust,
and the group described in footnote (9) below. The other partners of CWCP-I
are trusts for the benefit of Laurie Sands' children, Abigail and Zachary
Stern. 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 6.4% of the outstanding Class A Stock after
such conversion.
(8) The amounts reflected include, as applicable, 308,951 shares of Class A
Stock and 678,964 shares of Class B Stock owned by CWCP-I, in which the
Marital Trust is a partner and owns a majority in interest of the CWCP-I
partnership interests, 45,454 shares of Class B Stock owned by CWCP-II, in
which the Marital Trust is a partner and owns a majority in interest of the
CWCP-II partnership interests, and 47,516 shares of Class A Stock owned by
MLR&R, of which CWCP-I is a general partner. The Marital Trust disclaims
beneficial ownership with respect to all of the foregoing shares except to
the extent of its ownership interest in CWCP-I and CWCP-II. The amounts
reflected do not include the remainder interest CWCP-II has in 265,151 of
the 787,501 shares of Class A Stock subject to the life estate held by
Marilyn Sands described in footnote (2) above. The Marital Trust disclaims
beneficial ownership with respect to all such shares except to the extent
of its ownership interest in CWCP-II. Assuming the conversion of Class B
Stock beneficially owned by the Marital Trust into Class A Stock, the
Marital Trust would beneficially own 1,080,885 shares of Class A Stock,
representing 6.7% of the outstanding Class A Stock after such conversion.
(9) 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 (11)
(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
<PAGE>
- 7 -
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 (11) 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 3,821,970 shares of Class A
Stock, representing 20.9% of the outstanding Class A Stock after such
conversion.
(10) The number of shares equals the number of shares of Class A Stock reported
to be beneficially owned by Nicholas-Applegate Capital Management, a
California limited partnership ("NACM"), in its Schedule 13G dated February
3, 1998 filed with the Securities and Exchange Commission. The percentage
ownership reflected in the table is calculated on the basis of 15,472,059
shares of Class A Stock outstanding on June 1, 1998. The Schedule 13G
indicates that of the 1,291,450 shares beneficially owned by NACM, NACM has
sole voting power with respect to 1,068,600 shares, shared voting power
with respect to 2,750 shares, and sole dispositive power with respect to
all 1,291,450 shares. For further information pertaining to NACM, reference
should be made to NACM's Schedule 13G filed with the Securities and
Exchange Commission. With respect to the information contained herein
pertaining to shares of Class A Stock beneficially owned by NACM, the
Company has relied solely on the information reported in NACM's Schedule
13G and has not independently verified NACM's beneficial ownership as of
June 1, 1998.
(11) 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.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION
The following table summarizes the annual and long-term compensation paid
to the Company's Chief Executive Officer, the other four most highly compensated
executive officers at the end of the fiscal year ended February 28, 1998, and
Ellis Goodman, a former executive officer who was no longer employed by the
Company as of February 28, 1998 (collectively, 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 years ended
February 28, 1998 and 1997, the transition period from September 1, 1995 to
February 29, 1996 (see footnote (1) below), and the fiscal year ended August 31,
1995.
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, or any pay-outs under long-term
incentive plans during the periods covered by the Summary Compensation Table.
<PAGE>
- 8 -
<TABLE>
SUMMARY COMPENSATION TABLE
- - --------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------------------- -----------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING
COMPEN- STOCK OPTIONS/ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY (2) BONUS (3) SATION AWARD(S) SARs(#)(4) COMPENSATION (5)
- - --------------------------- ------- ---------- --------- ------ -------------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
Marvin Sands, 1998 $478,170 $502,079 - - 17,500 $ 18,890
Chairman of the Board 1997 447,239 150,943 - - - 18,536
1996(1) 212,971 95,837 - - - 18,483
1995 415,531 158,941 - - - 16,988
Richard Sands, 1998 $469,480 $492,954 - - 17,200 $ 18,254
President and Chief 1997 439,112 148,200 $ 304 - 90,000 (6) 18,408
Executive Officer 1996(1) 205,192 92,337 - - - (6) 17,445
1995 387,750 148,314 - - - 18,656
Robert Sands, 1998 $456,025 $478,859 - - 16,700 $ 18,444
Executive Vice 1997 426,528 143,953 $ 190 - 85,000 (7) 16,983
President, General 1996(1) 203,109 91,399 - - - (7) 18,123
Counsel and Secretary 1995 389,546 149,001 - - - (7) 17,494
Alexander Berk, 1998 $370,000 $323,750 - - 13,600 $ 20,000
President and Chief 1997 353,100 287,000 - - 43,500 (9) 18,750
Operating Officer of 1996(1) 172,625 100,500 - - - (9) 17,187
Barton Incorporated (8) 1995 327,550 190,400 - - - (9) 18,750
Daniel Barnett, 1998 $350,000 $235,620 $5,252 - 10,700 $ 19,127
President of 1997 315,412 94,671 6,045 - 54,500 (10) 48,946
Canandaigua Wine 1996(1) 90,012 40,505 - - - (10) 462
Company, Inc. (10)
Ellis Goodman, 1998 $435,000 $380,625 - $1,143,750(11) 18,600 $5,425,171
Former Chief Executive 1997 412,000 329,600 - - 85,000 (12) 20,359
Officer of Barton 1996(1) 200,000 160,000 - - - 17,187
Incorporated 1995 385,200 308,150 - - - 20,260
- - -------------------------
<FN>
(1) 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 Transition Period.
(2) Amounts shown include cash compensation earned and received by the Named
Executives as well as amounts earned but deferred.
(3) Amounts shown are for payments to offset tax liabilities incurred by the
Named Executives.
(4) The securities consist of shares of Class A Stock underlying stock options.
See the table below entitled "Option/SAR Grants in Last Fiscal Year" and
the footnotes to that table for additional information.
<PAGE>
- 9 -
(5) Amounts reported for 1998 consist of:
o Company contributions under the Company's Retirement Savings Plan (a
plan established under Section 401(k) of the Internal Revenue Code):
Marvin Sands $1,498; Richard Sands $862; Robert Sands $1,052; and
Daniel Barnett $1,735.
o Company contributions to the Company's Profit Sharing Retirement Plan:
Marvin Sands $17,392; Richard Sands $17,392; Robert Sands $17,392; and
Daniel Barnett $17,392.
o Company contributions to the Barton Incorporated Employees' Profit
Sharing and 401(k) Plan: Alexander Berk $20,000; and Ellis Goodman
$20,000.
o Economic benefit of Company payment of premium on whole life
(split-dollar) life insurance for Ellis Goodman: $1,678.
o Cumulative payments on annuity contract for Ellis Goodman: $473,551.
o Amount payable to Ellis Goodman under his amended employment agreement
in connection with his leaving the Company: $4,929,942. See also the
discussion of Mr. Goodman's amended employment agreement under the
caption "Certain Relationships and Related Transactions".
(6) Richard Sands was granted an option to purchase 70,000 shares of Class A
Stock during the Transition Period which was repriced in May 1996. An
option to purchase an additional 20,000 shares was granted in fiscal year
1997.
(7) 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 May 1996. During the Transition Period, he was granted an
option to purchase 50,000 shares of Class A Stock which was also repriced
in May 1996. He was granted an option to purchase an additional 20,000
shares of Class A Stock in fiscal year 1997.
(8) Barton Incorporated is a wholly-owned subsidiary of the Company. As of
February 28, 1998, Mr. Berk's position was expanded to include overall
responsibility for the Company's beer and spirits divisions. This change
occurred when Ellis Goodman, who formerly held this responsibility, left
Barton.
(9) Alexander Berk was granted two options to purchase a total of 20,000 shares
of Class A Stock in fiscal year 1995. With respect to these two options:
one option for 10,000 shares was repriced during fiscal year 1997; the
other option, also for 10,000 shares, was repriced during the Transition
Period and twice during fiscal year 1997. During the Transition Period, he
was granted an option to purchase 3,500 shares of Class A Stock, which was
also repriced twice in fiscal year 1997. He was granted options to purchase
an additional 20,000 shares in fiscal year 1997.
(10) Daniel Barnett joined the Company in November 1995 as head of its wine
division. (Canandaigua Wine Company, Inc. is a wholly-owned subsidiary of
the Company.) 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.
<PAGE>
- 10 -
(11) Ellis Goodman was granted an award of 25,000 shares of restricted stock on
September 29, 1997, of which 5,000 shares vested in December 1997 and,
pursuant to an amendment to the award, the remaining 20,000 shares vested
in May 1998. As of February 28, 1998, Mr. Goodman held 20,000 shares of
restricted stock, which, as of that date, were valued at $1,115,000. No
dividends were paid on the restricted stock.
(12) Ellis Goodman was granted an option to purchase 50,000 shares of Class A
Stock during fiscal year 1997 which was repriced in fiscal year 1997. He
was also granted an option to purchase 15,000 shares and an option to
purchase 20,000 shares of Class A Stock in fiscal year 1997.
</FN>
</TABLE>
STOCK OPTIONS
The following table contains information concerning stock option grants to
the Named Executives during the fiscal year ended February 28, 1998. No stock
appreciation rights ("SARs") were granted to any of the Named Executives in that
year. The columns labeled "Potential Realizable Value" are based on hypothetical
5% and 10% growth assumptions, as required by the Securities and Exchange
Commission. The Company cannot predict the actual growth rate of its Common
Stock.
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- - ------------------------------------------------------------------------------------------------------
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- - ---------------------------------------------------------------------------- ANNUAL RATES OF
NUMBER % OF TOTAL STOCK PRICE
OF SECURITIES OPTIONS/SARs APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS/SARs EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED (1)(2) FISCAL YEAR ($/sh) (2) DATE 5% 10%
- - ---- -------------- ------------ ----------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Marvin Sands 17,500(3) 3.2 % $41.00 09/14/07 $451,232 $1,143,510
Richard Sands 17,200(3) 3.1 % $41.00 09/14/07 $443,496 $1,123,907
Robert Sands 16,700(3) 3.0 % $41.00 09/14/07 $430,604 $1,091,235
Alexander Berk 13,600(3) 2.5 % $41.00 09/14/07 $350,672 $ 888,671
Daniel Barnett 10,700(3) 2.0 % $41.00 09/14/07 $275,896 $ 699,175
Ellis Goodman 18,600(4) 3.4 % $41.00 09/14/07 $479,595 $1,215,388
- - --------------------
<FN>
(1) The stock options were granted under the Long-Term Stock Incentive Plan and
are nonqualified 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.
(3) The options vest and become fully exercisable on September 15, 2002, unless
they become exercisable on an earlier date as follows: (i) 25% became
exercisable on January 15, 1998 because the fair market
<PAGE>
- 11 -
value of a share of Class A Stock had been at least $51.25 for fifteen (15)
consecutive trading days; (ii) an additional 25% will become exercisable
after such fair market value has been at least $64.0625 for fifteen (15)
consecutive trading days; and (iii) the remaining 50% will become
exercisable after such fair market value has been at least $80.0625 for
fifteen (15) consecutive trading days.
(4) Pursuant to an award amendment, this option became fully vested and
exercisable on February 28, 1998.
</FN>
</TABLE>
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, 1998. None of the Named Executives exercised any stock options
during the fiscal year ended February 28, 1998. There are no outstanding SARs.
The stock options reflected on the table were granted under the Company's
Long-Term Stock Incentive Plan.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARs AT FY-END (1) OPTIONS/SARs AT FY-END
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ---- ----------- ------------- ----------- -------------
Marvin Sands 4,375 13,125 $ 64,531 $ 193,594
Richard Sands 8,300 98,900 $ 179,425 $ 2,456,775
Robert Sands 13,175 93,525 $ 398,831 $ 2,322,494
Alexander Berk 8,100 49,000 $ 212,775 $ 1,575,950
Daniel Barnett 21,575 43,625 $ 771,831 $ 1,497,869
Ellis Goodman 103,600 - $ 3,373,100 -
- - --------------------------
(1) The securities consist of shares of Class A Stock underlying stock options.
REPORT WITH RESPECT TO EXECUTIVE COMPENSATION
The following report is required by the Securities and Exchange
Commission's executive compensation rules in order to standardize the reporting
of executive compensation by public companies. This information shall not be
deemed incorporated by reference in any filing under the federal securities laws
by virtue of any general incorporation of this Proxy Statement by reference and
shall not otherwise be treated as filed under the securities laws.
GENERAL
The Human Resources Committee (formerly known as the Compensation
Committee) of the Board of Directors administers the Company's executive
compensation program. During the period March 1, 1997, through January 20, 1998,
the Compensation Committee was composed of Marvin Sands, the Chairman of the
Board, and George Bresler, a nonemployee director. On January 20, 1998, Marvin
Sands resigned from the
<PAGE>
- 12 -
Compensation Committee and the Board of Directors changed the name of the
Compensation Committee to the Human Resources Committee, re-elected George
Bresler as a member of the Committee, and elected Thomas McDermott and Paul
Smith, each a nonemployee director, as new members of the Committee. On March
31, 1998, Mr. Bresler resigned from the Human Resources Committee. Since March
31, 1998, the Human Resources Committee has been composed of Messrs. McDermott
and Smith, each of whom is a nonemployee director. Messrs. Sands and Bresler
resigned voluntarily from the Committee so that the Committee could be composed
solely of "outside directors" as defined under Section 162(m) of the Internal
Revenue Code (see discussion below under "Deductibility of Executive
Compensation").
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 size and status, including those
in the beverage alcohol industry, and (ii) attract, motivate and retain key
executives who are vital to the long-term success of the Company. As discussed
in detail below, the Company's executive compensation program consists of both
fixed (base salary) and variable, incentive-based compensation elements. These
elements are designed to operate together to comprise performance-based annual
cash compensation and stock-based compensation which 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 1998 included the
Company's net sales increasing 7% from $1.1 billion to $1.2 billion, net income
increasing $22 million to $50 million, an 81 % improvement, and earnings per
common share on a diluted basis increasing 85% from $1.42 to $2.62, as compared
to the Company's fiscal 1997 results.
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 Human Resources 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 for executive
officers for fiscal 1998 was based on attainment of certain target financial
performance goals for the Company and, in one case, achievement of certain
management objectives. Awards were based on a percentage of base salary and
target awards ranged from 45% to 60% of base salaries for executive officers.
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 1998, annual
cash bonuses were awarded to each of the Named Executives in the amounts
indicated in the Summary Compensation Table.
Future cash bonuses for the participating executives will be determined by
the Human Resources Committee pursuant to the Company's Annual Management
Incentive Plan. Pursuant to that plan, the Committee would award cash bonuses to
the participating executives in the event that the Company attains one or more
pre-set performance targets.
<PAGE>
- 13 -
STOCK OPTIONS, SARs AND RESTRICTED STOCK
In connection with the executive compensation program, long-term incentive
awards in the form of stock options, stock appreciation rights and restricted
stock have been granted under the Company's Long-Term Stock Incentive 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 Human Resources Committee and the Board of Directors grant these
stock-based incentive awards from time to time for the purpose of attracting and
retaining key executives, motivating them to attain the Company's long-range
financial objectives, and closely aligning their financial interests with
long-term stockholder interests and share value.
The Company believes that through the use of stock options, executives'
interests are directly tied to enhanced stockholder value. The Human Resources
Committee of the Board (as well as the full Board) has the flexibility of
awarding nonqualified stock options, restricted stock, stock appreciation rights
and other stock-based awards under the Company's Long-Term Stock Incentive Plan
and incentive stock options under the Company's Incentive Stock Option Plan.
This flexibility enables the Company to fine-tune its grants in order to
maximize the alignment of the interests of the stockholders and management.
During fiscal 1998, in addition to options awarded by the full Board in
connection with the acceptance of an employment offer, the full Board awarded
nonqualified options to all executive officers, including the Company's Chief
Executive Officer, taking into account relevant market survey data, their
position with the Company and the financial performance of the Company. The
exercise prices of the stock options awarded were 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. The Human Resources Committee did not make any stock option grants to
executive officers in fiscal 1998 but took into account the stock option grants
made by the full Board to executive officers in considering other components of
executive compensation.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
For fiscal year 1998, 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. 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 salaries of
executives of similar companies and chief executive officers with similar
responsibilities. Annual cash incentives were set as a percentage of Richard
Sands' base salary based upon the financial performance of the Company. The
ranges for these awards, from threshold, target and maximum (15%, 60% and 105%,
respectively), were comparable to industry compensation survey data for
executives in Richard Sands' position. For the fiscal year ended February 28,
1998, Richard Sands received a bonus of $492,954. As noted above, during fiscal
1998, Mr. Sands received stock options to purchase up to 17,200 shares of Class
A Stock of the Company.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
Section 162(m) of the Internal Revenue Code provides that certain
compensation in excess of $1 million per year paid to a company's chief
executive officer and four other most highly paid executive officers may not be
deductible by the company unless it qualifies as performance-based compensation.
The Human Resources Committee generally believes that compensation of its
executives should be deductible by the Company except in unusual circumstances,
and the Company's Long-Term Stock Incentive Plan, Incentive
<PAGE>
- 14 -
Stock Option Plan and Annual Management Incentive Plan have been designed to
provide for performance-based compensation for "covered employees" under Section
162(m) if properly administered.
Because components of executive compensation in respect of fiscal 1998 were
determined by both the full Board and the Human Resources Committee, and because
the composition of the Human Resources Committee changed over the course of
fiscal 1998, the foregoing report is given, as applicable, by each person who at
any time during fiscal 1998 was a member of the Human Resources Committee and by
the remaining members of the Board of Directors (with respect to the grants of
nonqualified options made by the full Board).
HUMAN RESOURCES COMMITTEE
George Bresler Thomas C. McDermott
Marvin Sands Paul L. Smith
REMAINING MEMBERS OF THE BOARD OF DIRECTORS
James A. Locke, III Richard Sands
Robert Sands Bertram E. Silk
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
As described above, during fiscal year 1998, George Bresler, Thomas
McDermott, Marvin Sands and Paul Smith served as members of the
Compensation/Human Resources Committee of the Company's Board of Directors. With
respect to fiscal 1998, Marvin Sands served on the Committee through January 20,
1998 and, on that day, Messrs. McDermott and Smith were elected to the
Committee. No member of the Compensation/Human Resources Committee is or has
ever been an officer or employee of the Company, except Marvin Sands, Chairman
of the Board, who also serves in this capacity as an executive officer of the
Company. Mr. Bresler, an attorney, performs legal services for the Company, for
which he is paid $30,000 per year under the terms of a retainer arrangement. The
Company also includes Mr. Bresler under its non-working group medical policy and
pays a monthly premium of approximately $160 for his coverage.
STOCK PRICE PERFORMANCE GRAPH
Set forth below is a line graph comparing, for the fiscal years ended
August 31, 1993, 1994 and 1995, the Transition Period from September 1, 1995 to
February 29, 1996, and the fiscal years ended February 28, 1997 and 1998, the
cumulative total stockholder return of the Company's Class A Stock and Class B
Stock, with the cumulative total return of the NASDAQ Market Index and two peer
group indices comprised of companies in the beverage industry (individually, the
"Old Selected Peer Group Index" and the "New Selected Peer Group Index")(see
footnote (1) to the graph). The graph assumes the investment of $100.00 on
August 31, 1992 in the Company's Class A Stock, Class B Stock, the NASDAQ Market
Index and each of the peer group indices, and also assumes the reinvestment of
all dividends.
The Old Selected Peer Group Index is a group of companies in the beverage
industry that the Company has used prior to this year for comparative purposes
(excluding, however, Cable Car Beverage Corporation, due to its acquisition by
an entity that the Company feels is inappropriate for inclusion in the peer
group index due to the overall nature of its business). Beginning with fiscal
1998, the Company has elected to change the composition of the peer group index
used for comparative purposes. The Company elected this change in light
<PAGE>
- 15 -
of structural changes in certain members of the Old Selected Peer Group Index
and a reevaluation of companies in the beverage industry, including additional
beverage alcohol companies for which trading and public financial information
has become available over the last several years. In light of these
circumstances, the Company believes that the New Selected Peer Group Index
provides a more appropriate basis for comparison. Further, the Old Selected Peer
Group Index includes the Company's Class A and Class B Stock; however, to
further distinguish the performance of its shares from that of the peer group,
the Company has decided not to include its own shares in the New Selected Peer
Group Index.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN OF
CANANDAIGUA BRANDS, INC.,
THE NASDAQ MARKET INDEX,
OLD SELECTED PEER GROUP INDEX AND
NEW SELECTED PEER GROUP INDEX
--------------------------------------------------
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
1992 1993 1994 1995 1996* 1997 1998
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CBRNA $ 100.00 $ 164.81 $ 225.93 $ 350.00 $ 281.48 $ 227.78 $ 412.96
CBRNB 100.00 164.29 228.57 341.07 271.43 237.50 412.50
Old Selected Peer Group 100.00 103.39 108.89 138.17 171.48 222.92 251.36
New Selected Peer Group 100.00 101.30 105.82 139.25 177.68 238.32 270.75
NASDAQ 100.00 130.18 142.24 169.25 176.66 212.04 288.38
- - ------------------------
<FN>
* The Transition Period.
<PAGE>
- 16 -
(1) The OLD SELECTED PEER GROUP INDEX is comprised of the following companies:
Anheuser-Busch Companies, Inc.; Brown-Forman Corporation (Class A and Class
B Shares); Cadbury Schweppes plc; Canandaigua Brands, Inc. (Class A and
Class B Shares); The Chalone Wine Group, Ltd.; Coca-Cola Bottling Co.
Consolidated; Coca-Cola Company; Coca-Cola Enterprises Inc.; Adolph Coors
Company (Class B Shares); Genesee Corporation (Class B Shares); Kirin
Brewery Company, Ltd.; LVMH Moet Hennessy Louis Vuitton; PepsiCo, Inc.; The
Seagram Company Ltd.; and Whitman Corporation.
The NEW SELECTED PEER GROUP INDEX is comprised of the following companies:
Adolph Coors Company (Class B Shares); Anheuser-Busch Companies, Inc.;
Beringer Wine Estates Holdings, Inc. (Class B Shares) (included in 1998
only); The Boston Beer Company, Inc. (included in 1996, 1997 and 1998);
Brown-Forman Corporation (Class A and Class B Shares); Cadbury Schweppes
plc; The Chalone Wine Group, Ltd.; Coca-Cola Bottling Co. Consolidated;
Coca-Cola Company; Coca-Cola Enterprises Inc.; Genesee Corporation (Class B
Shares); LVMH Moet Hennessy Louis Vuitton; The Robert Mondavi Corporation
(Class A Shares); PepsiCo, Inc.; and Whitman Corporation. Note: Beringer
Wine Estates Holdings, Inc. (Class B Shares) and The Boston Beer Company,
Inc. are included only in the years for which trading and public
information were available.
</FN>
</TABLE>
There can be no assurance that the Company's stock performance will
continue into the future with the same or similar trends depicted by the graph
above. The Company neither makes nor endorses any predictions as to future stock
performance.
The Stock Price Performance Graph set forth above shall not be deemed
incorporated by reference in any filing under the federal securities laws by
virtue of any general incorporation of this Proxy Statement by reference and
shall not otherwise be treated as filed under the securities laws.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Effective as of February 27, 1998, Ellis Goodman, the Chairman and Chief
Executive Officer of Barton Incorporated, the Company's beer and spirits
division, left the employ of Barton. In recognition of Mr. Goodman's many years
of service and the outstanding results that he and his team produced at Barton,
as well as his undertakings, among others, to assure a smooth transition of his
duties and responsibilities, and to refrain from engaging in certain activities
competitive with the Company's business, the Company and Mr. Goodman agreed to
amend Mr. Goodman's employment agreement with Barton to provide for the terms of
his resignation from Barton. Under the agreement, on March 2, 1998, the Company
paid to Mr. Goodman $2,429,942 and, in addition, $380,625, which represents Mr.
Goodman's bonus payment for fiscal 1998. The Company also accelerated all of Mr.
Goodman's unvested stock options and extended the post-termination exercise
period for his stock options to the tenth anniversary of their grant. In
addition, the Company, at its expense, will continue to provide Mr. Goodman, and
his eligible dependents, with group life and health benefits until the later of
his or his spouse's 65th birthday, provided that the Company may terminate those
benefits earlier under certain circumstances. Also, the Company will continue to
make all premium payments through May 1, 2002, in order to provide Mr. Goodman
with the benefits set forth in the agreement regarding his "split dollar"
insurance policy. (This policy is further discussed below.) The Company also
assigned to Mr. Goodman an annuity contract that had an accumulated value of
approximately $517,000, for which it made cumulative payments totaling $473,551.
On behalf of Mr. Goodman, the Company also paid into its profit sharing plan
$20,000, representing a full contribution for fiscal 1998. Further, due to the
satisfaction of certain contingencies set forth in the agreement, during May
1998, (i) 20,000 shares of Class A Stock, previously awarded to Mr. Goodman as a
restricted stock grant, vested and (ii) the Company made a lump sum payment to
Mr. Goodman in the amount of $2,500,000.
<PAGE>
- 17 -
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 1998 fiscal year was $19,370. From the inception of the Agreement
through the end of fiscal year 1998, the Company has paid aggregate premiums of
$251,810. As noted above, the Company will cease making premium payments after
May 1, 2002.
Alexander Berk and Barton Incorporated are parties to an employment
agreement dated as of September 1, 1990, as amended on November 11, 1996, that
provides for Mr. Berk's compensation and sets forth the terms and conditions of
Mr. Berk's employment with Barton. Under his employment agreement, Mr. Berk
serves as the President and Chief Operating Officer of Barton and by virtue of
his current responsibilities with Barton, he is deemed an executive officer of
the Company. The employment agreement expires on February 28, 2001, but will be
automatically extended for additional one-year periods unless either Mr. Berk or
Barton notifies the other that such party does not wish to extend it. The
agreement will terminate prior to its expiration date (i) upon Mr. Berk's death
or Retirement, (ii) at Barton's election, for Cause or upon Mr. Berk's Complete
Disability, and (iii) at Mr. Berk's election, for Good Reason (all as set forth
in the agreement). If Barton decides not to extend the term of the agreement, or
if the agreement terminates by reason of Mr. Berk's death, Complete Disability,
or Retirement, or for Good Reason, Barton is obligated to pay to Mr. Berk a
post-termination benefit equal to 100% of his then current base salary plus the
bonus amount paid to him for the immediately prior fiscal year. If Mr. Berk
decides not to extend the term of the agreement, then Barton is obligated to pay
to Mr. Berk a post-termination benefit equal to one half of the foregoing
amount. In the event that Mr. Berk's employment is terminated for Good Reason,
or is terminated by Barton for reasons other than death, Complete Disability,
Cause, or Barton's decision not to extend the term of the agreement, then Mr.
Berk is entitled to be paid (i) if the applicable conditions are satisfied, a
supplementary post-termination benefit equal to what he otherwise would have
been entitled to receive as his share of Barton's contribution to its
profit-sharing and retirement plan for the fiscal year in which such termination
occurs and (ii) an amount equal to the product of his then current base salary
multiplied by the number of years remaining in the then term of the agreement.
Post-termination benefits are payable to Mr. Berk in a lump sum as soon as
practicable after employment terminates, except that any supplementary
post-termination benefit is payable promptly after Barton's contribution to the
retirement plan. The agreement requires Mr. Berk to keep certain information
with respect to the Company confidential during and after his employment with
the Company.
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 1998, 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 ($12,267 in fiscal year 1998). 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 1998, the Company has paid aggregate premiums,
net of reimbursements, of $1,624,161. 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
<PAGE>
- 18 -
insureds or earlier cancellation, the Company is entitled to be repaid by the
trust the amount of such indebtedness.
Under the terms of a letter agreement between the Company and Daniel
Barnett, President of Canandaigua Wine Company, Inc., if Mr. Barnett's
employment is terminated without cause or if he voluntarily resigns 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 compensation
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 1998, the Company made payments with respect to leasing these cars
to this limited partnership in the amount of $26,264.37. The Company expects to
continue its present relationship with the limited partnership during fiscal
year 1999.
George Bresler, a director of the Company, is a member of the law firm of
Rosner Bresler Goodman & Unterman, LLP in New York, New York. The Company pays
to Mr. Bresler individually an annual retainer of $30,000 for his legal services
to the Company. The Company also includes Mr. Bresler under its non-working
group medical policy and pays a monthly premium of approximately $160 for his
coverage. 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.
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 1998 were complied with in a timely
fashion, except that the Estate of Laurie Sands, in its Annual Statement of
Changes in Beneficial Ownership for fiscal 1998, reported six transactions that
were not reported on a timely basis.
STOCK OWNERSHIP OF MANAGEMENT
The following table and notes thereto set forth, as of June 1, 1998, the
beneficial ownership of the Company's directors and nominees, the Named
Executives, and all of the Company's directors and executive officers as a
group. This information is based on information furnished to the Company by or
on behalf of each person concerned. Unless otherwise noted, the named individual
has sole voting power and investment discretion with respect to the shares
attributed to him and the percentages of ownership are calculated on the basis
of 15,472,059 shares of Class A Stock and 3,296,976 shares of Class B Stock
outstanding as of the close of business on June 1, 1998.
<PAGE>
- 19 -
<TABLE>
<CAPTION>
CLASS A STOCK (1) CLASS B STOCK
----------------------------------------------- ------------------------------
SHARES BENEFICIALLY OWNED
-------------------------------
SHARES
ACQUIRABLE PERCENT OF PERCENT OF
WITHIN 60 DAYS CLASS SHARES CLASS
OUTSTANDING BY EXERCISE OF BENEFICIALLY BENEFICIALLY BENEFICIALLY
NAME OF BENEFICIAL OWNER SHARES OPTIONS (2) OWNED (3) OWNED OWNED
- - -------------------------- ------------- -------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Richard Sands 687,943 (4) 8,300 4.5% (4) 1,944,447 (4) 59.0% (4)
Robert Sands 689,075 (4) 13,175 4.5% (4) 1,943,992 (4) 59.0% (4)
Marvin Sands 393,677 (4) 4,375 2.6% (4) 826,268 (4) 25.1% (4)
Ellis Goodman 219,680 (5) 103,600 2.1% - *
Daniel Barnett 1,032 22,275 * - *
Bertram E. Silk 3,803 12,250 * (6) 1,125 *
James A. Locke, III 1,049 9,000 * (7) 33 *
Paul L. Smith 400 6,000 * - *
Alexander Berk - 8,800 * - *
George Bresler - 6,000 * - *
Thomas C. McDermott - 6,000 * - *
All Executive Officers and
Directors as a Group 1,043,057 (8) 124,350 7.5% (8) 2,760,779 83.7%
(11 persons)(8)
- - ----------------------
<FN>
* Percentage does not exceed one percent (1%) of the outstanding shares of
such class.
(1) The shares and percentages of Class A Stock set forth in this table do not
include (i) shares of Class A Stock that may be acquired within 60 days by
an employee under the Company's Employee Stock Purchase Plan (because such
number of shares is not presently determinable) and (ii) shares of Class A
Stock that are issuable pursuant to the conversion feature of the Company's
Class B Stock, although, such information is provided in a footnote, where
appropriate. For purposes of calculating the percentage of Class A Stock
beneficially owned in the footnotes, additional shares of Class A Stock
equal to the number of shares of Class B Stock owned by the named person or
by the persons in the group of executive officers and directors are assumed
to be outstanding only for that person or group of persons pursuant to Rule
13-3(d)(1) under the Securities Exchange Act.
(2) Reflects the number of shares of Class A Stock that can be purchased by
exercising stock options that are exercisable on June 1, 1998 or become
exercisable within sixty 60 days thereafter.
(3) The percentage of Class A Stock beneficially owned by each of the named
persons and by the executive officers and directors as a group as reflected
in the table is based on the total number of shares listed for that person
or group of persons under "Outstanding Shares" and "Shares Acquirable
within 60 days by Exercise of Options". For purposes of calculating the
percentage, the number of shares of Class A Stock listed under "Shares
Acquirable within 60 days by Exercise of Options" for a named person or
<PAGE>
- 20 -
for the executive officers and directors as a group are assumed to be
outstanding only for that person or group of persons pursuant to Rule
13d-3(d)(1) under the Securities Exchange Act.
(4) Includes shares with respect to which the named individual shares voting
power or investment discretion. See tables and footnotes under "Beneficial
Ownership" above for information with respect to such matters and for the
number and percentage of shares of Class A Stock that would be owned
assuming the conversion of Class B Stock into Class A Stock.
(5) Includes 54,680 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 such shares.
(6) Assuming the conversion of Mr. Silk's 1,125 shares of Class B Stock into
Class A Stock, Mr. Silk would beneficially own 17,178 shares of Class A
Stock, representing less than one percent (1%) of the outstanding Class A
Stock after such conversion.
(7) Assuming the conversion of Mr. Locke's 33 shares of Class B Stock into
Class A Stock, Mr. Locke would beneficially own 10,082 shares of Class A
Stock, representing less than one percent (1%) of the outstanding Class A
Stock after such conversion.
(8) This group consists of the Company's current executive officers and
directors; therefore, Mr. Goodman is not included in this group of people.
Also, includes 200 shares of Class A Stock with respect to which a member
of the group shares the power to vote or dispose with his spouse. Assuming
the conversion of a total of 2,760,779 shares 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 3,928,186 shares of Class A Stock, representing 21.4% of the
outstanding Class A Stock after such conversion.
</FN>
</TABLE>
PROPOSAL NO. 1
--------------
ELECTION OF DIRECTORS
DIRECTOR NOMINEES
On December 22, 1997, the Board of Directors of the Company increased the
number of directors on the Board of Directors from six (6) to eight (8) and
appointed Thomas C. McDermott and Paul L. Smith to fill the newly-created
directorships. On March 31, 1998, the Board of Directors of the Company
nominated eight 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, Thomas
C. McDermott, Bertram E. Silk and Paul L. Smith. Messrs. McDermott and Smith
have been designated as the nominees to be elected by the holders of the Class A
Stock, voting as a separate class. The remaining directors are to be elected by
the holders of the Class B Stock, voting as a separate class.
Management does not anticipate that any of the nominees will become
unavailable for any reason, but if that should occur before the Meeting, proxies
will be voted FOR another nominee or nominees to be selected by the management
of the Company.
<PAGE>
- 21 -
GEORGE BRESLER DIRECTOR SINCE 1992
Mr. Bresler, age 73, has been engaged in the practice of law since 1957. From
August 1987 through July 1992, Mr. Bresler was a member of the law firm of
Bresler and Bab, New York, New York. Since 1992, Mr. Bresler has been a member
of the law firm of Rosner Bresler Goodman & Unterman, LLP, and predecessor firm,
in New York, New York. Mr. Bresler provides legal services to the Company.
JAMES A. LOCKE, III DIRECTOR SINCE 1983
Mr. Locke, age 56, has been a partner in the law firm of Nixon, Hargrave, Devans
and Doyle LLP, Rochester, New York, the Company's principal outside counsel,
since January 1, 1996. For twenty years prior to joining Nixon, Hargrave, Mr.
Locke was a partner in the law firm of Harter, Secrest and Emery, Rochester, New
York.
THOMAS C. MCDERMOTT DIRECTOR SINCE 1997
Mr. McDermott, age 61, has been a proprietor of Forbes Products, LLC, a custom
vinyl business products company, since January 1998. From 1994 to 1997, Mr.
McDermott was President and Chief Executive Officer of Goulds Pumps,
Incorporated, a centrifugal pumps company for industrial, domestic and
agricultural markets, where he also was Chairman from 1995 to 1997. From 1986 to
1993, he was President and Chief Operating Officer of Bausch & Lomb
Incorporated, a contact lens, lens-care and eyewear products company. Mr.
McDermott also serves on the Board of Directors of Thomas & Betts Corporation.
MARVIN SANDS DIRECTOR SINCE 1946
Mr. Sands, age 74, is the founder of the Company, which is the successor to a
business he started in 1945. Mr. Sands continues to serve as an officer of the
Company as Chairman of its Board of Directors. He has been a director of the
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. DIRECTOR SINCE 1982
Mr. Sands, age 47, is the President and Chief Executive Officer of the Company.
He has been employed by the Company in various capacities since 1979. He was
elected Executive Vice President and a director in 1982, became President and
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 DIRECTOR SINCE 1990
Mr. Sands, age 40, is Executive Vice President, General Counsel and Secretary of
the Company. He was appointed Vice President and General Counsel in June 1990,
was elected Executive Vice President in October 1993 and was appointed Secretary
in 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.
BERTRAM E. SILK DIRECTOR SINCE 1973
Mr. Silk, age 66, is currently a Senior Vice President of Canandaigua Wine
Company, Inc., a wholly-owned subsidiary of the Company, and 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.
Mr. Silk has been employed by the Company since 1965 and has held various
positions and responsibilities. From October 1993 to October 1997, Mr. Silk
served as Senior Vice President of the Company and from 1973 to October 1993, he
served as Vice President of the Company. Immediately prior to holding his
current responsibilities, he was in charge of the Company's grape grower
relations in California, and from 1989 to August 1994, Mr. Silk was in charge of
the Company's California grape juice concentrate business. Before moving from
Canandaigua, New York to California in 1989, Mr. Silk was in charge of
production for the Company.
<PAGE>
- 22 -
PAUL L. SMITH DIRECTOR SINCE 1997
Mr. Smith, age 62, is currently retired from Eastman Kodak Company. For
thirty-five years prior to his retirement in 1993, Mr. Smith was employed in
various positions at Eastman Kodak Company, the last of which was from 1983 to
1993, when he served as Senior Vice President and Chief Financial Officer. Also,
from 1983 to 1993, Mr. Smith served on the Board of Directors of Eastman Kodak
Company. Mr. Smith also currently serves on the Board of Directors of Home
Properties of New York, Inc. and Performance Technologies, Incorporated.
See also information regarding George Bresler, Marvin Sands, Richard Sands,
and Robert Sands under the caption "Certain Relationships and Related
Transactions". For information with respect to the number of shares of the
Company's common stock beneficially owned by each of the above named directors,
see the table and the footnotes thereto under the caption "Stock Ownership of
Management".
DIRECTOR COMPENSATION
The Company's policy is to pay its nonemployee directors $35,000 per year
for their services as directors. George Bresler, James Locke, Thomas McDermott
and Paul Smith qualify for such payments, but Mr. Locke has waived the payment
of his director's fee. During fiscal 1998, the Company awarded stock options to
purchase Class A Stock to nonemployee directors as follows: George Bresler and
James Locke received 6,000 and 3,000 options, respectively, at an exercise price
of $35.375 per share, which options are currently exercisable and expire on July
21, 2007; and each of Thomas McDermott and Paul Smith received 6,000 options at
an exercise price of $49.00 per share, which options have an exercise period of
June 23, 1998 through December 21, 2007. The Company also reimburses its
directors for reasonable expenses incurred in connection with attending meetings
of the Board of Directors and committees of the Board of Directors. Directors
who are also employees of the Company receive no additional compensation for
serving as directors.
THE BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held six meetings during the
Company's fiscal year ended February 28, 1998. The standing committees of the
Board are the Audit Committee, Corporate Governance Committee and Human
Resources Committee. During fiscal 1998, each of the incumbent directors, during
his period of service, attended at least 75% of the total number of meetings
held by the Board and each committee of the Board on which he served.
AUDIT COMMITTEE. The Audit Committee is currently composed of Paul L. Smith
(Chair), Thomas C. McDermott and Richard Sands. During fiscal 1998, the
composition of the Audit Committee changed. From March 1, 1997 through January
20, 1998, the Committee was composed of George Bresler, James A. Locke and
Richard Sands. On January 20, 1998, Messrs. Bresler and Locke resigned
voluntarily from the Committee and Messrs. McDermott and Smith were elected, and
Mr. Sands was reelected to the Committee. The Audit Committee reviews the
Company's financial reports and monitors the Company's materials policies and
procedures which relate to compliance with: pertinent laws; the ethical conduct
of business; controls against employee conflict of interest and misconduct; and
maintenance of adequate internal controls. The Audit Committee held four
meetings during fiscal 1998.
CORPORATE GOVERNANCE COMMITTEE. The Corporate Governance Committee, which was
formed on January 20, 1998, is currently composed of James A. Locke (Chair),
Thomas C. McDermott, Robert Sands and Paul L. Smith. The full Board is
responsible for nominating candidates to become Directors, but has delegated the
screening process involved to the Corporate Governance Committee. The Corporate
Governance Committee advises the Board concerning appropriate composition of the
Board and its committees and advises the Board regarding appropriate corporate
governance practices and assists the Board in achieving them. Among other
matters, this Committee also makes recommendations to the full Board with
respect to an officer to be
<PAGE>
- 23 -
designated as Chief Executive Officer, and a director to serve as Chairman of
the Board. In addition, this Committee recommends to the Board compensation for
directors, who are neither present or former full-time officers of the Company.
This Committee held no meetings during fiscal 1998. The Corporate Governance
Committee will consider nominations by shareholders. Those suggestions should
include sufficient biographical information so that the Committee can
appropriately assess the person's background and qualifications. All submissions
should be sent in writing to the attention of the Corporate Secretary,
Canandaigua Brands, Inc., 300 WillowBrook Office Park, Fairport, NY 14450.
HUMAN RESOURCES COMMITTEE. The present members of the Human Resources Committee
are Thomas C. McDermott (Chair) and Paul L. Smith. During fiscal 1998, the
composition of the Human Resources Committee (formerly known as the Compensation
Committee) changed. From March 1, 1997 through January 20, 1998, the Committee
was composed of George Bresler and Marvin Sands. On January 20, 1998: Marvin
Sands resigned voluntarily from the Committee; the name of the Committee was
changed from the Compensation Committee to the Human Resources Committee; and
Messrs. McDermott and Smith were elected, and Mr. Bresler was reelected, to the
Committee. On March 31, 1998, Mr. Bresler resigned voluntarily from the
Committee. The Human Resources Committee monitors: human resources policies and
procedures as they relate to the goals and objectives of the Company and good
management practices; the Company's material policies and procedures which
relate to compliance with pertinent laws and the management of human resources
capital; and procedures and internal controls which relate to personnel
administration, pay practices and benefits administration. The Human Resources
Committee is responsible for reviewing total executive compensation in relation
to individual executive performance, Company performance, salary information and
other parameters deemed reasonable in the assignment of executive compensation
levels. This Committee also reviews and approves executive benefits and
perquisites and reviews performance systems, including reward programs. The
Human Resources Committee evaluates the performance of the Chief Executive
Officer and approves his salary, as well as the salaries of other executives.
This Committee also presently administers the Company's Long-Term Stock
Incentive Plan, Incentive Stock Option Plan and Annual Management Incentive Plan
and reviews succession planning for the Company and other important human
resources issues. The Human Resources Committee held two meetings during fiscal
1998.
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 six directors elected by the
holders of Class B Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES. UNLESS AUTHORITY
TO VOTE FOR ONE OR MORE OF THE NOMINEES IS SPECIFICALLY WITHHELD, THE SHARES
REPRESENTED BY YOUR PROXY, IF PROPERLY EXECUTED AND RETURNED, AND NOT REVOKED,
WILL BE VOTED FOR THE ELECTION OF ALL THE NOMINEES FOR WHOM YOU ARE ENTITLED TO
VOTE.
PROPOSAL NO. 2
--------------
PROPOSED AMENDMENT TO AND RESTATEMENT OF
THE COMPANY'S EXISTING RESTATED CERTIFICATE OF INCORPORATION
GENERAL
The Board of Directors of the Company has approved, subject to the approval
of the stockholders of the Company, a Restated Certificate of Incorporation of
the Company (the "Restated Certificate") which incorporates a prior amendment
changing the name of the Company and increases the number of authorized
<PAGE>
- 24 -
shares of Class A Stock to 120,000,000 shares and the aggregate number of
authorized shares of the Company to 141,000,000 shares. No other change to the
Company's Existing Certificate (i.e., the Company's existing Restated
Certificate of Incorporation, as presently amended) would result from the
Restated Certificate. With respect to the Existing Certificate, the
above-mentioned prior amendment, which changed the name of the Company to its
current name, was implemented by a Certificate of Amendment filed by the Company
on August 26, 1997.
The Existing Certificate currently authorizes the Company to issue an
aggregate of 81,000,000 shares consisting of 60,000,000 shares of Class A Stock,
20,000,000 shares of Class B Stock and 1,000,000 shares of Preferred Stock
having a par value of $.01 per share. The Restated Certificate will increase
both the aggregate number of authorized shares and the number of authorized
shares of Class A Stock by 60,000,000 shares. The shares of Class A Stock have
no pre-emptive rights. If approved by the stockholders at the Meeting, the
Restated Certificate will become effective when it is filed with the Delaware
Secretary of State.
REASONS FOR INCREASING THE NUMBER OF AUTHORIZED SHARES
The Board of Directors considers that it is desirable in the prudent
operation of the Company to have sufficient authorized but unissued shares of
Class A Stock available to allow the Company to take prompt advantage of market
or other conditions in connection with possible financings or acquisitions,
stock dividends, distributions or splits, grants of options and other stock
rights, and other proper corporate purposes deemed necessary or advisable by the
Board. The Board also believes that the availability of additional shares of
Class A Stock for such purposes without delay or the necessity for a special
meeting of stockholders (except as may be required by applicable law or
regulatory authorities or by the rules of The Nasdaq Stock Market, Inc. or any
stock exchange or other market system on which the Company's stock is then
listed (collectively, "Applicable Rules")) will be beneficial to the Company by
providing it with the flexibility required to consider and respond to future
business opportunities and needs as they arise.
Except for the issuance of Class A Stock (i) pursuant to the Company's
stock-based plans, outstanding options under those plans and a small number of
stock options not covered by any of those plans, and (ii) upon the conversion of
shares of Class B Stock (shares of Class B Stock are convertible into shares of
Class A Stock on a one-to-one basis at any time at the option of the holder),
the Company has no present plans, agreements or understandings for the issuance
of any shares of Class A Stock. If the Board of Directors deems it in the best
interests of the Company and the stockholders to issue additional shares of
Class A Stock in the future, the Board would not generally seek further approval
of the stockholders unless such approval is required by Applicable Rules.
VOTE REQUIRED
In accordance with applicable Delaware law and the Existing Certificate,
approval of Proposal No. 2 to amend and restate the Existing Certificate to
incorporate a prior amendment and to increase the number of authorized shares of
Class A Stock of the Company to 120,000,000, thereby increasing the aggregate
number of authorized shares of the Company to 141,000,000, requires an
affirmative majority vote of the holders 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
RESTATED CERTIFICATE WHICH INCORPORATES A PRIOR AMENDMENT AND INCREASES THE
NUMBER OF AUTHORIZED SHARES OF CLASS A STOCK OF THE COMPANY FROM 60,000,000 TO
120,000,000, THEREBY INCREASING THE AGGREGATE NUMBER OF AUTHORIZED SHARES OF THE
COMPANY TO 141,000,000. ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT YOU
VOTE FOR
<PAGE>
- 25 -
PROPOSAL NO. 2. UNLESS OTHERWISE DIRECTED THEREIN, THE SHARES REPRESENTED BY
YOUR PROXY, IF PROPERLY EXECUTED AND RETURNED, AND NOT REVOKED, WILL BE VOTED
FOR SUCH PROPOSAL.
PROPOSAL NO. 3
--------------
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,
1998, and the Board of Directors has again selected Arthur Andersen LLP as the
Company's independent auditors for the fiscal year ending February 28, 1999.
This selection will be presented to the stockholders for their ratification at
the Meeting. 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, 1999 AND ACCORDINGLY RECOMMENDS THAT YOU
VOTE FOR PROPOSAL NO. 3. UNLESS OTHERWISE DIRECTED THEREIN, THE SHARES
REPRESENTED BY YOUR PROXY, IF PROPERLY EXECUTED AND RETURNED, AND NOT REVOKED,
WILL BE VOTED FOR SUCH PROPOSAL.
STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
In order for any stockholder proposal to be included in the Company's proxy
statement to be issued in connection with the 1999 Annual Meeting of
Stockholders, such proposal must be received by the Company no later than
February 16, 1999.
FINANCIAL INFORMATION
The Company has furnished its financial statements to stockholders in its
1998 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, a copy of the Company's Annual Report on Form 10-K for the
fiscal year ended February 28, 1998, as filed with the Securities and Exchange
Commission (excluding the exhibits thereto). Written requests for such copies
should be directed to Canandaigua Brands, Inc., Attention: Kristen H. Jenks,
Vice President, 300 WillowBrook Office Park, Fairport, New York 14450; telephone
number (716) 218-2121.
<PAGE>
- 26 -
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
/s/ ROBERT SANDS
ROBERT SANDS, Secretary
Fairport, New York
June 16, 1998
<PAGE>
P R O X Y
CANANDAIGUA BRANDS, INC.
PROXY FOR CLASS A COMMON STOCK AND CLASS B COMMON STOCK
The undersigned hereby appoints David S. Sorce and Thomas S. Summer, or any
one of them, proxies for the undersigned with full power of substitution to vote
all shares of CANANDAIGUA BRANDS, INC. (the "Company") that the undersigned
would be entitled to vote at the Annual Meeting of Stockholders to be held at
One Chase Square, Rochester, New York, on Tuesday, July 21, 1998, 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 six directors at the Meeting. Please refer to the Proxy
Statement for details. Your Shares of Class A Common Stock and/or Class B Common
Stock appear on the back of this card. Note that Shares (if any) designated as
"EMP STK PURCHASE" refer to Shares of Class A Common Stock. PLEASE SIGN ON THE
BACK.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED BY THE
UNDERSIGNED. THIS PROXY REVOKES ANY PRIOR PROXY GIVEN BY THE UNDERSIGNED. UNLESS
AUTHORITY TO VOTE FOR ONE OR MORE OF THE NOMINEES IS SPECIFICALLY WITHHELD, THE
SHARES REPRESENTED BY A SIGNED PROXY WILL BE VOTED FOR THE ELECTION OF DIRECTORS
---
AND, UNLESS OTHERWISE SPECIFIED, THE SHARES REPRESENTED BY A SIGNED PROXY WILL
BE VOTED FOR PROPOSALS 2 AND 3.
---
TO APPROVE THE BOARD OF DIRECTORS' RECOMMENDATIONS, SIMPLY SIGN ON THE
BACK. YOU NEED NOT MARK ANY BOXES.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
[SEE REVERSE SIDE]
<PAGE>
BALLOT PLEASE MARK
YOUR VOTES AS [X]
INDICATED IN
THIS EXAMPLE
1. Election of Directors: To elect Directors as set forth in the Proxy
Statement.
CLASS A STOCKHOLDERS CLASS B STOCKHOLDERS
Thomas C. McDermott, Paul L. Smith 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 For, except vote withheld
from nominee identified on from nominee(s) identified on
above line. above line.
2. Proposal to amend and restate the Company's Restated Certificate of
Incorporation, as presently amended, to incorporate a prior amendment and
to increase the number of authorized shares of the Class A Common Stock of
the Company from 60,000,000 to 120,000,000, thereby increasing the
aggregate number of authorized shares of the Company to 141,000,000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. 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, 1999.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. In their discretion, the proxies are authorized to vote upon such other
business not known at the time of the solicitation of this Proxy as may
properly come before the Meeting or at any adjournments thereof.
[ ] MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
The undersigned acknowledges receipt with this Proxy of a copy of the
Notice of Annual Meeting and Proxy Statement for the Company's 1998 Annual
Meeting, describing more fully the proposals set forth herein.
SIGNATURE DATE
------------------------------------ ---------------------------
SIGNATURE DATE
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NOTE: PLEASE DATE THIS PROXY AND SIGN YOUR NAME ABOVE EXACTLY AS IT APPEARS
HEREON. EXECUTORS, ADMINISTRATORS, TRUSTEES, ETC. SHOULD SO INDICATE WHEN
SIGNING. IF THE STOCKHOLDER IS A CORPORATION OR OTHER ENTITY, THE FULL ENTITY
NAME SHOULD BE INSERTED AND THE PROXY SIGNED BY A DULY AUTHORIZED REPRESENTATIVE
OF THE ENTITY, INDICATING HIS OR HER TITLE OR CAPACITY.
