-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PMEyxAMCNEBX8vmcHxMdGntYHjbzvTokz8H9eahRGfnqguUmAVOtN9vvXBh1tPnu OlXMnGU5R0K8ggzymeCK1Q== 0000016918-97-000010.txt : 19971001 0000016918-97-000010.hdr.sgml : 19971001 ACCESSION NUMBER: 0000016918-97-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19970831 FILED AS OF DATE: 19970930 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CANANDAIGUA BRANDS INC CENTRAL INDEX KEY: 0000016918 STANDARD INDUSTRIAL CLASSIFICATION: BEVERAGES [2080] IRS NUMBER: 160716709 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07570 FILM NUMBER: 97688009 BUSINESS ADDRESS: STREET 1: 235 NORTH BLOOMFIELD ROAD CITY: CANANDAIGUA STATE: NY ZIP: 14424 BUSINESS PHONE: 716-393-4130 MAIL ADDRESS: STREET 1: 235 NORTH BLOOMFIELD ROAD CITY: CANANDAIGUA STATE: NY ZIP: 14424 FORMER COMPANY: FORMER CONFORMED NAME: CANANDAIGUA WINE CO INC DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BATAVIA WINE CELLARS INC CENTRAL INDEX KEY: 0000914160 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 161222994 STATE OF INCORPORATION: NY FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-70824-01 FILM NUMBER: 97688010 BUSINESS ADDRESS: STREET 1: 116 BUFFALO STREET CITY: CANANDAIGUA STATE: NY ZIP: 14424 BUSINESS PHONE: 7163947900 MAIL ADDRESS: STREET 1: 116 BUFFALO CITY: CANANDAIGUA STATE: NY ZIP: 14424 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARTON INC CENTRAL INDEX KEY: 0000914167 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 363185921 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-70824-07 FILM NUMBER: 97688011 BUSINESS ADDRESS: STREET 1: 116 BUFFALO STREET CITY: CANANDAIGUA STATE: NY ZIP: 14424 BUSINESS PHONE: 7163947900 MAIL ADDRESS: STREET 1: 116 BUFFALO ST CITY: CANANDAIGUA STATE: NY ZIP: 14424 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARTON BRANDS LTD /DE/ CENTRAL INDEX KEY: 0000914168 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 362855879 STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-70824-08 FILM NUMBER: 97688012 BUSINESS ADDRESS: STREET 1: 116 BUFFALO STREET CITY: CANANDAIGUA STATE: NY ZIP: 14424 BUSINESS PHONE: 7163947900 MAIL ADDRESS: STREET 1: 116 BUFFALO CITY: CANANDAIGUA STATE: NY ZIP: 14424 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARTON BEERS LTD CENTRAL INDEX KEY: 0000914169 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 061048198 STATE OF INCORPORATION: CT FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-70824-09 FILM NUMBER: 97688013 BUSINESS ADDRESS: STREET 1: 116 BUFFALO STREET CITY: CANANDAIGUA STATE: NY ZIP: 14424 BUSINESS PHONE: 7163947900 MAIL ADDRESS: STREET 1: 116 BUFFALO CITY: CANANDAIGUA STATE: NY ZIP: 14424 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARTON BRANDS OF CALIFORNIA INC CENTRAL INDEX KEY: 0000914171 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 581215938 STATE OF INCORPORATION: GA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-70824-10 FILM NUMBER: 97688014 BUSINESS ADDRESS: STREET 1: 116 BUFFALO STREET CITY: CANANDAIGUA STATE: NY ZIP: 14424 BUSINESS PHONE: 7163947900 MAIL ADDRESS: STREET 1: 116 BUFFALO CITY: CANANDAIGUA STATE: NY ZIP: 14424 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARTON BRANDS OF GEORGIA INC CENTRAL INDEX KEY: 0000914172 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 131794441 STATE OF INCORPORATION: NY FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-70824-11 FILM NUMBER: 97688015 BUSINESS ADDRESS: STREET 1: 116 BUFFALO STREET CITY: CANANDAIGUA STATE: NY ZIP: 14424 BUSINESS PHONE: 7163947900 MAIL ADDRESS: STREET 1: 116 BUFFALO CITY: CANANDAIGUA STATE: NY ZIP: 14424 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARTON DISTILLERS IMPORT CORP CENTRAL INDEX KEY: 0000914173 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 510311795 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-70824-12 FILM NUMBER: 97688016 BUSINESS ADDRESS: STREET 1: 116 BUFFALO STREET CITY: CANANDAIGUA STATE: NY ZIP: 14424 BUSINESS PHONE: 7163947900 MAIL ADDRESS: STREET 1: 116 BUFFALO CITY: CANANDAIGUA STATE: NY ZIP: 14424 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BARTON FINANCIAL CORP CENTRAL INDEX KEY: 0000914174 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 390638900 STATE OF INCORPORATION: WI FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-70824-13 FILM NUMBER: 97688017 BUSINESS ADDRESS: STREET 1: 116 BUFFALO STREET CITY: CANANDAIGUA STATE: NY ZIP: 14424 BUSINESS PHONE: 7163947900 MAIL ADDRESS: STREET 1: 116 BUFFALO CITY: CANANDAIGUA STATE: NY ZIP: 14424 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STEVENS POINT BEVERAGE CO CENTRAL INDEX KEY: 0000914175 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 390638900 STATE OF INCORPORATION: NY FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-17673-13 FILM NUMBER: 97688018 BUSINESS ADDRESS: STREET 1: 116 BUFFALO STREET CITY: CANANDAIGUA STATE: NY ZIP: 14424 BUSINESS PHONE: 7163947900 MAIL ADDRESS: STREET 1: 116 BUFFALO CITY: CANANDAIGUA STATE: NY ZIP: 14424 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MONARCH IMPORT CO CENTRAL INDEX KEY: 0000914179 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 161443663 STATE OF INCORPORATION: NY FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-70824-16 FILM NUMBER: 97688019 BUSINESS ADDRESS: STREET 1: 116 BUFFALO STREET CITY: CANANDAIGUA STATE: NY ZIP: 14424 BUSINESS PHONE: 7163947900 MAIL ADDRESS: STREET 1: 116 BUFFALO CITY: CANANDAIGUA STATE: NY ZIP: 14424 FORMER COMPANY: FORMER CONFORMED NAME: BARTON MANAGEMENT INC DATE OF NAME CHANGE: 19931027 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CANANDAIGUA WINE CO INC /NY/ CENTRAL INDEX KEY: 0000928683 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 161462887 STATE OF INCORPORATION: NY FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 033-70824-19 FILM NUMBER: 97688020 BUSINESS ADDRESS: STREET 1: 235 NORTH BLOOMFIELD ROAD CITY: CANANDAIGUA STATE: NY ZIP: 14424 BUSINESS PHONE: 7163947900 MAIL ADDRESS: STREET 1: 116 BUFFALO CITY: CANANDAIGUA STATE: NY ZIP: 14424 FORMER COMPANY: FORMER CONFORMED NAME: CANANDAIGUA WEST INC DATE OF NAME CHANGE: 19940818 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VIKING DISTILLERY INC CENTRAL INDEX KEY: 0001028294 STANDARD INDUSTRIAL CLASSIFICATION: BEVERAGES [2080] IRS NUMBER: 582183528 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-17673-18 FILM NUMBER: 97688021 BUSINESS ADDRESS: STREET 1: 116 BUFFALO ST CITY: CANANDAIGUA STATE: NY ZIP: 14424 BUSINESS PHONE: 7163947900 MAIL ADDRESS: STREET 1: 55 EAST MONROE STREET CITY: CHICAGO STATE: IL ZIP: 60603 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 31,1997 -------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to to ---------------- ---------------- COMMISSION FILE NUMBER 0-7570 DELAWARE CANANDAIGUA BRANDS, INC. 16-0716709 AND ITS SUBSIDIARIES: NEW YORK BATAVIA WINE CELLARS, INC. 16-1222994 NEW YORK CANANDAIGUA WINE COMPANY, INC. 16-1462887 DELAWARE BARTON INCORPORATED 36-3500366 DELAWARE BARTON BRANDS, LTD. 36-3185921 MARYLAND BARTON BEERS, LTD. 36-2855879 CONNECTICUT BARTON BRANDS OF CALIFORNIA, INC. 06-1048198 GEORGIA BARTON BRANDS OF GEORGIA, INC. 58-1215938 NEW YORK BARTON DISTILLERS IMPORT CORP. 13-1794441 DELAWARE BARTON FINANCIAL CORPORATION 51-0311795 WISCONSIN STEVENS POINT BEVERAGE CO. 39-0638900 ILLINOIS MONARCH IMPORT COMPANY 36-3539106 GEORGIA THE VIKING DISTILLERY, INC. 58-2183528 (State or other (Exact name of registrant as (I.R.S. Employer jurisdiction of specified in its charter) Identification No.) incorporation or organization) 235 NORTH BLOOMFIELD ROAD, CANANDAIGUA, NEW YORK 14424 --------------------------------------------------------- (Address of principal executive offices) (Zip Code) (716) 393-4130 -------------- (Registrant's telephone number including area code) THE FORMER NAME OF CANANDAIGUA BRANDS, INC. WAS CANANDAIGUA WINE COMPANY, INC. ------------------------------------------------------------------------------ THE FORMER NAME OF CANANDAIGUA WINE COMPANY, INC. (A SUBSIDIARY) WAS -------------------------------------------------------------------- CANANDAIGUA WEST, INC. ---------------------- (Former name, if changed since last report) 116 BUFFALO STREET, CANANDAIGUA, NEW YORK 14424 ----------------------------------------------- (Former address, if changed since last report) Indicate by check mark whether the Registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding with respect to each of the classes of common stock of Canandaigua Brands, Inc., as of September 26, 1997, is set forth below (all of the Registrants, other than Canandaigua Brands, Inc., are direct or indirect wholly-owned subsidiaries of Canandaigua Brands, Inc.): CLASS NUMBER OF SHARES OUTSTANDING ----- ---------------------------- Class A Common Stock, Par Value $.01 Per Share 15,325,024 Class B Common Stock, Par Value $.01 Per Share 3,330,458 Page 1 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
August 31, 1997 February 28, 1997 --------------- ----------------- (unaudited) ASSETS ------ CURRENT ASSETS: Cash and cash investments $ 4,278 $ 10,010 Accounts receivable, net 160,885 142,592 Inventories, net 334,756 326,626 Prepaid expenses and other current assets 20,562 21,787 ----------- ----------- Total current assets 520,481 501,015 PROPERTY, PLANT AND EQUIPMENT, net 246,712 249,552 OTHER ASSETS 265,757 270,334 ----------- ----------- Total assets $ 1,032,950 $ 1,020,901 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES: Notes payable $ 29,200 $ 57,000 Current maturities of long-term debt 40,119 40,467 Accounts payable 120,511 63,492 Accrued Federal and state excise taxes 19,727 17,058 Other accrued expenses and liabilities 73,713 68,556 ----------- ----------- Total current liabilities 283,270 246,573 ----------- ----------- LONG-TERM DEBT, less current maturities 298,995 338,884 ----------- ----------- DEFERRED INCOME TAXES 62,695 61,395 ----------- ----------- OTHER LIABILITIES 8,577 9,316 ----------- ----------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Class A Common Stock, $.01 par value- Authorized, 60,000,000 shares; Issued, 17,515,029 shares at August 31, 1997, and 17,462,332 shares at February 28, 1997 175 174 Class B Convertible Common Stock, $.01 par value- Authorized, 20,000,000 shares; Issued, 3,956,183 shares at August 31, 1997, and February 28, 1997 40 40 Additional paid-in capital 223,806 222,336 Retained earnings 192,686 170,275 ----------- ----------- 416,707 392,825 ----------- ----------- Less-Treasury stock- Class A Common Stock, 2,267,119 shares at August 31, 1997, and 1,915,468 shares at February 28, 1997, at cost (35,087) (25,885) Class B Convertible Common Stock, 625,725 shares at August 31, 1997, and February 28, 1997, at cost (2,207) (2,207) ----------- ----------- (37,294) (28,092) ----------- ----------- Total stockholders' equity 379,413 364,733 ----------- ----------- Total liabilities and stockholders' equity $ 1,032,950 $ 1,020,901 =========== =========== The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
Page 2 CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in thousands, except share data)
For the Six Months Ended August 31, For the Three Months Ended August 31, ----------------------------------- ------------------------------------- 1997 1996 1997 1996 ----------- ----------- ----------- ----------- (unaudited) (unaudited) (unaudited) (unaudited) GROSS SALES $ 820,326 $ 754,866 $ 409,288 $ 378,037 Less - Excise taxes (212,791) (199,155) (107,764) (98,819) ---------- ---------- ---------- ---------- Net sales 607,535 555,711 301,524 279,218 COST OF PRODUCT SOLD (442,044) (412,969) (216,765) (209,383) ---------- ---------- ---------- ---------- Gross profit 165,491 142,742 84,759 69,835 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (111,483) (102,870) (56,258) (52,927) ---------- ---------- ---------- ---------- Operating income 54,008 39,872 28,501 16,908 INTEREST EXPENSE, net (16,024) (16,803) (7,545) (8,008) ---------- ---------- ---------- ---------- Income before provision for Federal and state income taxes 37,984 23,069 20,956 8,900 PROVISION FOR FEDERAL AND STATE INCOME TAXES (15,573) (9,627) (8,591) (3,959) ---------- ---------- ---------- ---------- NET INCOME $ 22,411 $ 13,442 $ 12,365 $ 4,941 ========== ========== ========== ========== SHARE DATA: Net income per common and common equivalent share: Primary $ 1.17 $ 0.68 $ 0.64 $ 0.25 ========== ========== ========== ========== Fully diluted $ 1.15 $ 0.68 $ 0.64 $ 0.25 ========== ========== ========== ========== Weighted average common and common equivalent shares outstanding: Primary 19,235,529 19,794,740 19,241,969 19,653,489 Fully diluted 19,416,282 19,794,740 19,317,865 19,653,489 The accompanying notes to consolidated financial statements are an integral part of these statements.
Page 3 CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
For the Six Months Ended August 31, ----------------------------------- 1997 1996 ----------- ----------- (unaudited) (unaudited) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 22,411 $ 13,442 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation of property, plant and equipment 12,625 12,424 Deferred tax provision 4,900 - Amortization of intangible assets 4,699 4,857 Stock option expense 350 13 Amortization of discount on long-term debt 172 - (Gain) loss on sale of property, plant and equipment (883) 201 Change in operating assets and liabilities: Accounts receivable, net (17,518) (9,872) Inventories, net (8,131) 13,333 Prepaid expenses and other current assets 1,285 5,109 Accounts payable 57,408 43,569 Accrued Federal and state excise taxes 2,669 1,845 Other accrued expenses and liabilities 1,584 13,351 Other (717) (8,466) ---------- ---------- Total adjustments 58,443 76,364 ---------- ---------- Net cash provided by operating activities 80,854 89,806 ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment, net of minor disposals (18,213) (21,795) Proceeds from sale of property, plant and equipment 8,512 5,200 ---------- ---------- Net cash used in investing activities (9,701) (16,595) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of long-term debt (40,409) (20,443) Net repayments of notes payable (27,800) (49,300) Purchases of treasury stock (9,233) (5,434) Payment of issuance costs of long-term debt (388) - Exercise of employee stock options 741 - Proceeds from employee stock purchases 204 657 ---------- ---------- Net cash used in financing activities (76,885) (74,520) ---------- ---------- NET DECREASE IN CASH AND CASH INVESTMENTS (5,732) (1,309) CASH AND CASH INVESTMENTS, beginning of period 10,010 3,339 ---------- ---------- CASH AND CASH INVESTMENTS, end of period $ 4,278 $ 2,030 ========== ========== The accompanying notes to consolidated financial statements are an integral part of these statements.
Page 4 CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AUGUST 31, 1997 1) MANAGEMENT'S REPRESENTATIONS: The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission applicable to quarterly reporting on Form 10-Q and reflect, in the opinion of the Company, all adjustments necessary to present the financial information for Canandaigua Brands, Inc. and its subsidiaries. All such adjustments are of a normal recurring nature. Certain information and footnote disclosures normally included in financial statements, prepared in accordance with generally accepted accounting principles, have been condensed or omitted as permitted by such rules and regulations. These consolidated financial statements and related notes should be read in conjunction with the consolidated financial statements and related notes included in the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997. 2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Certain August 1996 balances have been reclassified to conform with current year presentation. 3) INVENTORIES: Inventories are valued at the lower of cost (computed in accordance with the last-in, first-out (LIFO) or first-in, first-out (FIFO) methods) or market. Substantially all of the inventories are valued using the LIFO method. Elements of cost include materials, labor and overhead and consist of the following: August 31, February 28, 1997 1997 ----------- ----------- (in thousands) Raw materials and supplies $ 12,657 $ 14,191 Wines and distilled spirits in process 246,672 262,289 Finished case goods 100,748 72,526 ----------- ----------- 360,077 349,006 Less - LIFO reserve (25,321) (22,380) ----------- ----------- $ 334,756 $ 326,626 =========== =========== Information related to the FIFO method of inventory valuation may be useful in comparing operating results to those companies not using the LIFO method of inventory valuation. If the FIFO method had been used, reported net income would have been $1.7 million, or $0.09 per share on a fully diluted basis, higher for the six months ended August 31, 1997, and reported net income would have been $8.0 million, or $0.41 per share on a fully diluted basis, higher for the six months ended August 31, 1996. Page 5 4) NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE: Net income per common and common equivalent share is based on the weighted average number of common and dilutive common equivalent shares outstanding during each period. Dilutive common equivalent shares consist of stock options. 5) STOCK INCENTIVE PLANS: At the Company's Annual Meeting of Stockholders held on July 22, 1997, stockholders approved the amendment and restatement of the Company's Stock Option and Stock Appreciation Right Plan as the Long-Term Stock Incentive Plan and the adoption of the Company's Incentive Stock Option Plan. Under the Long-Term Stock Incentive Plan, non-qualified stock options, stock appreciation rights, restricted stock and other stock-based awards may be granted to employees, officers and directors of the Company. Grants, in the aggregate, may not exceed 4,000,000 shares of the Company's Class A Common Stock. Under the Incentive Stock Option Plan, incentive stock options may be granted to employees, including officers, of the Company. Grants, in the aggregate, may not exceed 1,000,000 shares of the Company's Class A Common Stock. The exercise price of any incentive stock option may not be less than the fair market value of the shares on the date of grant. 6) SUMMARIZED FINANCIAL INFORMATION - SUBSIDIARY GUARANTORS: The subsidiary guarantors are wholly owned and the guarantees are full, unconditional, joint and several obligations of each of the subsidiary guarantors. Summarized financial information for the subsidiary guarantors is set forth below. Separate financial statements for the subsidiary guarantors of the Company are not presented because the Company has determined that such financial statements would not be material to investors. The subsidiary guarantors comprise all of the direct and indirect subsidiaries of the Company, other than the non-guarantor subsidiaries which individually, and in the aggregate, are inconsequential. There are no restrictions on the ability of the subsidiary guarantors to transfer funds to the Company in the form of cash dividends or loan repayments. The subsidiary guarantors may not loan funds to the Company. The following table presents summarized financial information for subsidiary guarantors in connection with all of the Company's 8.75% Senior Subordinated Notes: August 31, February 28, 1997 1997 ---------- ----------- (in thousands) Balance Sheet Data: Current assets $ 423,854 $ 401,870 Noncurrent assets $ 395,735 $ 403,068 Current liabilities $ 148,833 $ 100,009 Noncurrent liabilities $ 64,701 $ 65,300 Page 6
For the Six Months Ended For the Three Months Ended August 31, August 31, ------------------------ -------------------------- 1997 1996 1997 1996 (in thousands) -------- -------- -------- -------- Income Statement Data: Net sales $514,338 $471,868 $253,064 $241,183 Gross profit $106,425 $ 94,422 $ 53,093 $ 48,867 Income before provision for Federal and state income taxes $ 41,448 $ 34,112 $ 20,233 $ 18,302 Net income $ 24,768 $ 20,223 $ 12,103 $ 10,660
7) ACCOUNTING PRONOUNCEMENTS: In February 1997, Statement of Financial Accounting Standards No. 128, "Earnings per Share," (SFAS No. 128) and Statement of Financial Accounting Standards No. 129, "Disclosure of Information about Capital Structure," (SFAS No. 129) were issued. SFAS No. 128 requires the Company to present basic and diluted earnings per share in the financial statements. The Company is required to adopt SFAS No. 128 for the year ending February 28, 1998, and restate previously reported earnings per share. Early adoption is not permitted. The Company believes the effect of adoption will not be material. SFAS No. 129 consolidates specific existing disclosure requirements and establishes standards for disclosing information about an entity's capital structure. The Company is required to adopt SFAS No. 129 for the year ending February 28, 1998. The Company believes the effect of adoption will not be material. In June 1997, Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income," (SFAS No. 130) and Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information," (SFAS No. 131) were issued. SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components in a full set of financial statements. The Company is required to adopt SFAS No. 130 for interim periods and fiscal years beginning March 1, 1998. Reclassification of financial statements for earlier periods provided for comparative purposes is required. The Company believes the effect of adoption will not be material. SFAS No. 131 establishes standards for reporting information about operating segments in annual financial statements and requires reporting of selected information in interim financial statements. The Company is required to adopt SFAS No. 131 for fiscal years beginning March 1, 1998, and for interim periods beginning March 1, 1999. Restatement of comparative information for earlier years is required in the initial year of adoption and comparative information for interim periods in the initial year of adoption is to be reported for interim periods in the second year of application. The Company has not yet determined the impact of SFAS No. 131 on its financial statements. Page 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. INTRODUCTION - ------------ The following discussion and analysis summarizes the significant factors affecting (i) consolidated results of operations of the Company for the three months ended August 31, 1997 ("Second Quarter 1998"), compared to the three months ended August 31, 1996 ("Second Quarter 1997"), and for the six months ended August 31, 1997 ("Six Months 1998"), compared to the six months ended August 31, 1996 ("Six Months 1997"), and (ii) financial liquidity and capital resources for the six months ended August 31, 1997. This discussion and analysis should be read in conjunction with the Company's consolidated financial statements and notes thereto included herein and in the Company's Annual Report on Form 10-K for the fiscal year ended February 28, 1997. The Company operates primarily in the beverage alcohol industry. The Company is principally a producer and supplier of wines and an importer and producer of beers and distilled spirits. The Company's branded products and its other products and services are marketed by three operating divisions: Canandaigua Wine Company, Barton Beers and Barton Brands. RESULTS OF OPERATIONS - --------------------- SECOND QUARTER 1998 COMPARED TO SECOND QUARTER 1997 NET SALES The following table sets forth the net sales (in thousands of dollars) and unit volumes (in thousands of cases), if applicable, for branded beverage alcohol products and other products and services sold by the Company for Second Quarter 1998 and Second Quarter 1997.
Second Quarter 1998 Compared to Second Quarter 1997 --------------------------------------------------------------------- Net Sales Unit Volume ---------------------------------- ----------------------------- Branded Beverage %Increase/ %Increase/ Alcohol Products: 1998 1997 (Decrease) 1998 1997 (Decrease) --------- --------- ---------- ------ ------ ---------- Wine $ 122,099 $ 116,746 4.6% 6,442 6,195 4.0% Beer 108,383 90,457 19.8% 8,691 7,227 20.3% Spirits 51,372 44,700 14.9% 2,575 2,356 9.3% Other (a) 19,670 27,315 (28.0%) N/A N/A N/A --------- --------- ----- ------ ------ ----- $ 301,524 $ 279,218 8.0% 17,708 15,778 12.2% ========= ========= ===== ====== ====== ===== (a) Other consists primarily of non-branded concentrate sales, contract bottling and other production services and bulk product sales, none of which are sold in case quantities.
Net sales for Second Quarter 1998 increased to $301.5 million from $279.2 million for Second Quarter 1997, an increase of $22.3 million, or 8.0%. This increase resulted primarily from (i) $17.9 million of additional beer sales, largely Mexican beers, (ii) $6.7 million of additional spirits sales and (iii) $6.4 million of additional table wine sales. These increases were partially offset by lower sales of grape juice concentrate and sparkling wines. Unit volume for branded beverage alcohol products for Second Quarter 1998 increased 12.2% as compared to Second Quarter 1997. The unit volume increase was largely the result of increased sales of the Company's Mexican beer brands and its spirits brands. The unit volume increase in wine was primarily the result of increased sales of the Company's table wine brands. Page 8 GROSS PROFIT The Company's gross profit increased to $84.8 million for Second Quarter 1998 from $69.8 million for Second Quarter 1997, an increase of $14.9 million, or 21.4%. As a percent of net sales, gross profit increased to 28.1% for Second Quarter 1998 from 25.0% for Second Quarter 1997. The dollar increase in gross profit resulted primarily from higher gross profit from branded wine sales related to cost structure improvements, pricing initiatives and additional sales volume, increased sales of beer and higher gross profit from spirits brands related to higher selling prices and increased volume. In general, the preferred method of accounting for inventory valuation is the last-in, first-out method ("LIFO") because, in most circumstances, it results in a better matching of costs and revenues. For comparison purposes to companies using the first-in, first-out method of accounting for inventory valuation ("FIFO") only, gross profit reflected a reduction of $0.6 million and $7.9 million in Second Quarter 1998 and Second Quarter 1997, respectively, due to the Company's LIFO accounting method. The Company's gross profit for Second Quarter 1998 reflects the cumulative effect of revised cost estimates, including more favorable grape costs than had been estimated in first quarter 1998. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses increased to $56.3 million for Second Quarter 1998 from $52.9 million for Second Quarter 1997, an increase of $3.3 million, or 6.3%. Selling, general and administrative expenses as a percent of net sales decreased to 18.7% for Second Quarter 1998 as compared to 19.0% for Second Quarter 1997. The dollar increase in selling, general and administrative expenses resulted principally from selling and other expenses related to the Company's increased sales volume and overall growth. INTEREST EXPENSE, NET Net interest expense decreased to $7.5 million for Second Quarter 1998 from $8.0 million for Second Quarter 1997, a decrease of $0.5 million, or 5.8%. The decrease was primarily due to a decrease in the Company's average borrowings which was partially offset by an increase in the average interest rate. PROVISION FOR FEDERAL AND STATE INCOME TAXES The Company's effective tax rate for Second Quarter 1998 decreased to 41.0% from 44.5% for Second Quarter 1997 as Second Quarter 1997 reflected the cumulative impact of a higher effective tax rate in California caused by statutory limitations on the Company's ability to utilize certain deductions. NET INCOME As a result of the above factors, net income increased to $12.4 million for Second Quarter 1998 from $4.9 million for Second Quarter 1997, an increase of $7.4 million, or 150.3%. For financial analysis purposes only, the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") for Second Quarter 1998 was $37.0 million, an increase of $11.4 million over EBITDA of $25.6 million for Second Quarter 1997. EBITDA should not be construed as an alternative to operating income or net cash flow from operating activities and should not be construed as an indication of operating performance or as a measure of liquidity. Page 9 SIX MONTHS 1998 COMPARED TO SIX MONTHS 1997 NET SALES The following table sets forth the net sales (in thousands of dollars) and unit volumes (in thousands of cases), if applicable, for branded beverage alcohol products and other products and services sold by the Company for Six Months 1998 and Six Months 1997.
Six Months 1998 Compared to Six Months 1997 ------------------------------------------------------------------------ Net Sales Unit Volume ---------------------------------- ------------------------------- Branded Beverage %Increase/ %Increase/ Alcohol Products: 1998 1997 (Decrease) 1998 1997 (Decrease) --------- --------- ---------- ------ ------ ---------- Wine $ 247,538 $ 240,404 3.0% 13,162 12,866 2.3% Beer 205,996 163,314 26.1% 16,439 13,072 25.8% Spirits 101,734 90,222 12.8% 5,124 4,759 7.7% Other (a) 52,267 61,771 (15.4%) N/A N/A N/A --------- --------- ----- ------ ------ ----- $ 607,535 $ 555,711 9.3% 34,725 30,697 13.1% ========= ========= ===== ====== ====== ===== (a) Other consists primarily of non-branded concentrate sales, contract bottling and other production services and bulk product sales, none of which are sold in case quantities.
Net sales for Six Months 1998 increased to $607.5 million from $555.7 million for Six Months 1997, an increase of $51.8 million, or 9.3%. This increase resulted primarily from (i) $42.7 million of additional beer sales, largely Mexican beers, (ii) $11.5 million of additional spirits sales and (iii) $10.7 million of additional table wine sales. These increases were partially offset by lower sales of grape juice concentrate, sparkling wines and dessert wines. Unit volume for branded beverage alcohol products for Six Months 1998 increased 13.1% as compared to Six Months 1997. The unit volume increase was largely the result of increased sales of the Company's Mexican beer brands and its spirits brands. The increase in table wine brands unit volume was partially offset by a decrease in unit volume of dessert wine brands and sparkling wine brands. GROSS PROFIT The Company's gross profit increased to $165.5 million for Six Months 1998 from $142.7 million for Six Months 1997, an increase of $22.7 million, or 15.9%. As a percent of net sales, gross profit increased to 27.2% for Six Months 1998 from 25.7% for Six Months 1997. The dollar increase in gross profit resulted primarily from increased sales of beer, higher gross profit from spirits brands related to higher selling prices and increased volume, and higher gross profit from branded wine and grape juice concentrate sales related to pricing initiatives and cost structure improvements, partially offset by higher grape costs. In general, the preferred method of accounting for inventory valuation is the last-in, first-out method ("LIFO") because, in most circumstances, it results in a better matching of costs and revenues. For comparison purposes to companies using the first-in, first-out method of accounting for inventory valuation ("FIFO") only, gross profit reflected a reduction of $2.9 million and $13.8 million in Six Months 1998 and Six Months 1997, respectively, due to the Company's LIFO accounting method. Page 10 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses increased to $111.5 million for Six Months 1998 from $102.9 million for Six Months 1997, an increase of $8.6 million, or 8.4%. Selling, general and administrative expenses as a percent of net sales decreased to 18.4% for Six Months 1998 as compared to 18.5% for Six Months 1997. The dollar increase in selling, general and administrative expenses resulted principally from selling and other expenses related to the Company's increased sales volume and overall growth. INTEREST EXPENSE, NET Net interest expense decreased to $16.0 million for Six Months 1998 from $16.8 million for Six Months 1997, a decrease of $0.8 million, or 4.8%. The decrease was primarily due to a decrease in the Company's average borrowings which was partially offset by an increase in the average interest rate. PROVISION FOR FEDERAL AND STATE INCOME TAXES The Company's effective tax rate for Six Months 1998 decreased to 41.0% from 41.7% for Six Months 1997 as Six Months 1997 reflected a higher effective tax rate in California caused by statutory limitations on the Company's ability to utilize certain deductions. NET INCOME As a result of the above factors, net income increased to $22.4 million for Six Months 1998 from $13.4 million for Six Months 1997, an increase of $9.0 million, or 66.7%. For financial analysis purposes only, the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") for Six Months 1998 was $71.3 million, an increase of $14.2 million over EBITDA of $57.2 million for Six Months 1997. EBITDA should not be construed as an alternative to operating income or net cash flow from operating activities and should not be construed as an indication of operating performance or as a measure of liquidity. FINANCIAL LIQUIDITY AND CAPITAL RESOURCES - ----------------------------------------- GENERAL The Company's principal use of cash in its operating activities is for purchasing and carrying inventories. The Company's primary source of liquidity has historically been cash flow from operations, except during the annual fall grape harvests when the Company has relied on short-term borrowings. The annual grape crush normally begins in August and runs through October. The Company generally begins purchasing grapes in August with payments for such grapes beginning to come due in September. The Company's short-term borrowings to support such purchases generally reach their highest levels in November or December. Historically, the Company has used cash flow from operating activities to repay its short-term borrowings. The Company will continue to use its short-term borrowings to support its working capital requirements. The Company believes that cash provided by operating activities and its financing activities, primarily short-term borrowings, will provide adequate resources to satisfy its working capital, liquidity and anticipated capital expenditure requirements for both its short-term and long-term capital needs. Page 11 SIX MONTHS 1998 CASH FLOWS OPERATING ACTIVITIES Net cash provided by operating activities for Six Months 1998 was $80.9 million which resulted primarily from an increase of $61.7 million in operating liabilities plus a net increase of $44.3 million in net income adjusted for noncash items, partially offset by a net increase of $24.4 million in operating assets. The increase of $61.7 million in operating liabilities was primarily due to a $57.4 million increase in accounts payable primarily due to the purchase of grapes associated with the 1997 harvest. The net increase of $24.4 million in operating assets resulted principally from a $17.5 million increase in accounts receivable primarily due to increased beer and spirits sales and an $8.1 million net increase in inventory levels. INVESTING ACTIVITIES AND FINANCING ACTIVITIES Net cash used in investing activities for Six Months 1998 was $9.7 million which resulted from $18.2 million of capital expenditures, including $7.2 million for vineyards, partially offset by proceeds from the sale of property, plant and equipment of $8.5 million. Net cash used in financing activities for Six Months 1998 was $76.9 million which resulted primarily from principal payments of $40.4 million of long-term debt, net repayments of $27.8 million of revolving loan borrowings under the Company's bank credit agreement and repurchase of $9.2 million of the Company's Class A Common Stock. During January 1996, the Company's Board of Directors authorized the repurchase of up to $30.0 million of its Class A Common Stock and Class B Common Stock (the "Repurchase Program"). During May 1997, the Company completed the Repurchase Program with the repurchase of 362,100 shares of its Class A Common Stock at a cost of $9.2 million. With respect to the Repurchase Program, the Company repurchased a total of 1,149,550 shares of Class A Common Stock at an aggregate cost of $30.0 million, or at an average cost of $26.10 per share. DEBT Total debt outstanding as of August 31, 1997, amounted to $368.3 million, a decrease of $68.0 million from February 28, 1997, resulting primarily from principal payments of long-term debt and the net repayments of revolving loan borrowings. The ratio of total debt to total capitalization decreased to 49.3% as of August 31, 1997, from 54.5% as of February 28, 1997. As of August 31, 1997, under its bank credit agreement, the Company had outstanding term loans of $146.0 million bearing interest at 6.5%, $29.2 million of revolving loans bearing interest at 7.3%, undrawn revolving letters of credit of $8.1 million and $147.7 million available to be drawn in revolving loans. As of August 31, 1997, the Company had outstanding $195.0 million aggregate principal amount of 8 3/4% Senior Subordinated Notes due 2003. The notes are unsecured and subordinated to the prior payment in full of all senior indebtedness of the Company, which includes the bank credit agreement. The notes are guaranteed, on a senior subordinated basis, by substantially all of the Company's operating subsidiaries. Page 12 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. At the Annual Meeting of Stockholders of Canandaigua Brands, Inc. (f/k/a Canandaigua Wine Company, Inc.) ("Canandaigua"), held on July 22, 1997 (the "Annual Meeting"), the holders of Canandaigua's Class A Common Stock (the "Class A Stock"), voting as a separate class, elected management's slate of director nominees designated to be elected by the holders of the Class A Stock, and the holders of Canandaigua's Class B Common Stock (the "Class B Stock"), voting as a separate class, elected management's slate of director nominees designated to be elected by the holders of the Class B Stock. In addition, at the Annual Meeting, the holders of Class A Stock and the holders of Class B Stock, voting together as a single class, voted upon the following proposals: (i) Proposal to amend Canandaigua's Restated Certificate of Incorporation to change the name of the Company from "Canandaigua Wine Company, Inc." to "Canandaigua Brands, Inc."; (ii) Proposal to approve the amendment and restatement of the Stock Option and Stock Appreciation Right Plan as the Long-Term Stock Incentive Plan; (iii)Proposal to approve the Incentive Stock Option Plan; (iv) Proposal to approve the Annual Management Incentive Plan; and (v) Proposal to ratify the selection of Arthur Andersen LLP, Certified Public Accountants, as Canandaigua's independent auditors for the fiscal year ending February 28, 1998. Set forth below is the number of votes cast for, against or withheld, as well as the number of abstentions and broker nonvotes, as applicable, as to each of the foregoing matters. I. The results of the voting for the election of Directors of Canandaigua are as follows: Directors Elected By the Holders of Class A Stock: -------------------------------------------------- For all nominees: 12,433,531 * Instructed: 466,671 Withheld from all nominees: 821,079 (* Number of votes withheld from a specified nominee as opposed to withheld from all nominees.) Page 13 The tabulation with respect to each nominee is as follows: George Bresler: For: 12,433,531; Withheld: 1,287,750 James A. Locke, III: For: 12,900,202; Withheld: 821,079 Directors Elected By the Holders of Class B Stock: -------------------------------------------------- For all nominees: 32,274,990 * Instructed: 2,000 Withheld from all nominees: 350,930 (* Number of votes withheld from specified nominees as opposed to withheld from all nominees.) The tabulation with respect to each nominee is as follows: Marvin Sands: For: 32,274,990; Withheld: 352,930 Richard Sands: For: 32,274,990; Withheld: 352,930 Robert Sands: For: 32,274,990; Withheld: 352,930 Bertram E. Silk: For: 32,276,990; Withheld: 350,930 II. The results of the voting with respect to the proposal to amend Canandaigua's Restated Certificate of Incorporation to change the name of the Company from Canandaigua Wine Company, Inc. to Canandaigua Brands, Inc. are as follows: For: 46,278,093 Against: 52,031 Abstain: 19,077 Broker Nonvotes: 0 III. The results of the voting with respect to the proposal to approve the amendment and restatement of the Stock Option and Stock Appreciation Right Plan as the Long-Term Stock Incentive Plan are as follows: For: 33,189,896 Against: 7,817,261 Abstain: 85,208 Broker Nonvotes: 5,256,836 Page 14 IV. The results of the voting with respect to the proposal to approve the Incentive Stock Option Plan are as follows: For: 33,857,121 Against: 7,139,505 Abstain: 95,739 Broker Nonvotes: 5,256,836 V. The results of the voting with respect to the proposal to approve the Annual Management Incentive Plan are as follows: For: 41,889,541 Against: 393,170 Abstain: 92,524 Broker Nonvotes: 3,973,966 VI. The results of the voting with respect to the proposal to ratify the selection of Arthur Andersen LLP, Certified Public Accountants, as the Company's independent auditors for the fiscal year ending February 28, 1998 are as follows: For: 46,217,353 Against: 57,424 Abstain: 74,424 Broker Nonvotes: 0 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) See Index to Exhibits located on Page 19 of this Report. (b) The following Report on Form 8-K was filed with the Securities and Exchange Commission during the quarter ended August 31, 1997: Form 8-K dated August 28, 1997. This Form 8-K reported information under Item 5 (Other Events). Page 15 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CANANDAIGUA BRANDS, INC. Dated: September 29, 1997 By: /s/ Thomas F. Howe ---------------------------------- Thomas F. Howe, Vice President, Corporate Reporting and Controller Dated: September 29, 1997 By: /s/ Thomas S. Summer ---------------------------------- Thomas S. Summer, Senior Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) SUBSIDIARIES BATAVIA WINE CELLARS, INC. Dated: September 29, 1997 By: /s/ Thomas F. Howe ---------------------------------- Thomas F. Howe, Controller Dated: September 29, 1997 By: /s/ Thomas S. Summer ---------------------------------- Thomas S. Summer, Treasurer (Principal Financial Officer and Principal Accounting Officer) CANANDAIGUA WINE COMPANY, INC. Dated: September 29, 1997 By: /s/ Thomas F. Howe ---------------------------------- Thomas F. Howe, Controller Dated: September 29, 1997 By: /s/ Thomas S. Summer ---------------------------------- Thomas S. Summer, Treasurer (Principal Financial Officer and Principal Accounting Officer) Page 16 BARTON INCORPORATED Dated: September 29, 1997 By: /s/ Alexander L. Berk ---------------------------------- Alexander L. Berk, President and Chief Operating Officer Dated: September 29, 1997 By: /s/ Raymond E. Powers ---------------------------------- Raymond E. Powers, Executive Vice President, Treasurer and Assistant Secretary (Principal Financial Officer and Principal Accounting Officer) BARTON BRANDS, LTD. Dated: September 29, 1997 By: /s/ Alexander L. Berk ---------------------------------- Alexander L. Berk, Executive Vice President Dated: September 29, 1997 By: /s/ Raymond E. Powers ---------------------------------- Raymond E. Powers, Executive Vice President, Treasurer and Assistant Secretary (Principal Financial Officer and Principal Accounting Officer) BARTON BEERS, LTD. Dated: September 29, 1997 By: /s/ Alexander L. Berk ---------------------------------- Alexander L. Berk, Executive Vice President Dated: September 29, 1997 By: /s/ Raymond E. Powers ---------------------------------- Raymond E. Powers, Executive Vice President, Treasurer and Assistant Secretary (Principal Financial Officer and Principal Accounting Officer) BARTON BRANDS OF CALIFORNIA, INC. Dated: September 29, 1997 By: /s/ Alexander L. Berk ---------------------------------- Alexander L. Berk, Executive Vice President Dated: September 29, 1997 By: /s/ Raymond E. Powers ---------------------------------- Raymond E. Powers, Executive Vice President, Treasurer and Assistant Secretary (Principal Financial Officer and Principal Accounting Officer) Page 17 BARTON BRANDS OF GEORGIA, INC. Dated: September 29, 1997 By: /s/ Alexander L. Berk ---------------------------------- Alexander L. Berk, Executive Vice President Dated: September 29, 1997 By: /s/ Raymond E. Powers ---------------------------------- Raymond E. Powers, Executive Vice President, Treasurer and Assistant Secretary (Principal Financial Officer and Principal Accounting Officer) BARTON DISTILLERS IMPORT CORP. Dated: September 29, 1997 By: /s/ Alexander L. Berk ---------------------------------- Alexander L. Berk, Executive Vice President Dated: September 29, 1997 By: /s/ Raymond E. Powers ---------------------------------- Raymond E. Powers, Executive Vice President, Treasurer and Assistant Secretary (Principal Financial Officer and Principal Accounting Officer) BARTON FINANCIAL CORPORATION Dated: September 29, 1997 By: /s/ Raymond E. Powers ---------------------------------- Raymond E. Powers, President and Secretary Dated: September 29, 1997 By: /s/ Charles T. Schlau ---------------------------------- Charles T. Schlau, Treasurer (Principal Financial Officer and Principal Accounting Officer) STEVENS POINT BEVERAGE CO. Dated: September 29, 1997 By: /s/ Alexander L. Berk ---------------------------------- Alexander L. Berk, Executive Vice President Dated: September 29, 1997 By: /s/ Raymond E. Powers ---------------------------------- Raymond E. Powers, Executive Vice President, Treasurer and Assistant Secretary (Principal Financial Officer and Principal Accounting Officer) Page 18 MONARCH IMPORT COMPANY Dated: September 29, 1997 By: /s/ Alexander L. Berk ---------------------------------- Alexander L. Berk, Executive Vice President Dated: September 29, 1997 By: /s/ Raymond E. Powers ---------------------------------- Raymond E. Powers, Executive Vice President, Treasurer and Assistant Secretary (Principal Financial Officer and Principal Accounting Officer) THE VIKING DISTILLERY, INC. Dated: September 29, 1997 By: /s/ Alexander L. Berk ---------------------------------- Alexander L. Berk, Executive Vice President Dated: September 29, 1997 By: /s/ Raymond E. Powers ---------------------------------- Raymond E. Powers, Executive Vice President, Treasurer and Assistant Secretary (Principal Financial Officer and Principal Accounting Officer) Page 19 INDEX TO EXHIBITS (2) PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR SUCCESSION. Not applicable. (3) ARTICLES OF INCORPORATION AND BY-LAWS. 3.1(a) Certificate of Amendment of the Certificate of Incorporation of Canandaigua Wine Company, Inc. (now known as Canandaigua Brands, Inc., hereinafter in this Index to Exhibits, the "Company") (filed herewith). 3.1(b) Restated Certificate of Incorporation of the Company (filed as Exhibit 3.1 to the Company's Transition Report on Form 10-K for the Transition Period from September 1, 1995 to February 29, 1996 and incorporated herein by reference). 3.2 Amended and Restated By-Laws of the Company (filed herewith; filed for the purpose of reflecting the Company's new name, Canandaigua Brands, Inc., in the title of the By-Laws). (4) INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES. 4.1 Specimen of Certificate of Class A Common Stock of the Company (filed as Exhibit 1.1 to the Company's Registration Statement on Form 8-A dated April 28, 1992 and incorporated herein by reference). 4.2 Specimen of Certificate of Class B Common Stock of the Company (filed as Exhibit 1.2 to the Company's Registration Statement on Form 8-A dated April 28, 1992 and incorporated herein by reference). 4.3 Indenture dated as of December 27, 1993 among the Company, its Subsidiaries and The Chase Manhattan Bank (as successor to Chemical Bank) (filed as Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended November 30, 1993 and incorporated herein by reference). 4.4 First Supplemental Indenture dated as of August 3, 1994 among the Company, Canandaigua West, Inc. and The Chase Manhattan Bank (as successor to Chemical Bank) (filed as Exhibit 4.5 to the Company's Registration Statement on Form S-8 (Registration No. 33-56557) and incorporated herein by reference). 4.5 Second Supplemental Indenture dated August 25, 1995, among the Company, V Acquisition Corp. (a subsidiary of the Company now known as The Viking Distillery, Inc.) and The Chase Manhattan Bank (as successor to Chemical Bank ) (filed as Exhibit 4.5 to the Company's Annual Report on Form 10-K for the fiscal year ended August 31, 1995 and incorporated herein by reference). 4.6 Indenture with respect to the 8 3/4% Series C Senior Subordinated Notes Due 2003 dated as of October 29, 1996 among the Company, its Subsidiaries and Harris Trust and Savings Bank (filed as Exhibit 4.2 to the Company's Registration Statement on Form S-4 (Registration No. 333-17673) and incorporated herein by reference). Page 20 (10) MATERIAL CONTRACTS. 10.1 Amendment Number One to the Long-Term Stock Incentive Plan of the Company (filed herewith). 10.2 Incentive Stock Option Plan of the Company (filed herewith). 10.3 Amendment Number One to the Incentive Stock Option Plan of the Company (filed herewith). 10.4 Annual Management Incentive Plan of the Company (filed herewith). (11) STATEMENT RE COMPUTATION OF PER SHARE EARNINGS. Computation of per share earnings (filed herewith). (15) LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION. Not applicable. (18) LETTER RE CHANGE IN ACCOUNTING PRINCIPLES. Not applicable. (19) REPORT FURNISHED TO SECURITY HOLDERS. Not applicable. (22) PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO A VOTE OF SECURITY HOLDERS. Not applicable. (23) CONSENTS OF EXPERTS AND COUNSEL. Not applicable. (24) POWER OF ATTORNEY. Not applicable. (27) FINANCIAL DATA SCHEDULE. Financial Data Schedule (filed herewith). (99) ADDITIONAL EXHIBITS. Not applicable. EX-3 2 EXHIBIT 3.1(a) -------------- CERTIFICATE OF AMENDMENT OF THE CERTIFICATE OF INCORPORATION OF CANANDAIGUA WINE COMPANY, INC. (Pursuant to Section 242 of the General Corporation Law) Canandaigua Wine Company, Inc. (the "Corporation"), a corporation duly organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY THAT: FIRST: The name of the Corporation is Canandaigua Wine Company, Inc. SECOND: The Certificate of Incorporation of the Corporation was filed on December 4, 1972. THIRD: By unanimous written consent of the Board of Directors, resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of the Corporation, declaring its advisability, and directing that the amendment be considered at the next annual meeting of stockholders of the Corporation. The resolution setting forth the proposed amendment is as follows: RESOLVED: That the name of the Company be changed to Canandaigua Brands, Inc. and that the officers of the Company are hereby authorized and directed to submit for the approval of the stockholders of the Company a proposal to amend the Restated Certificate of Incorporation of the Company (the "Restated Certificate") to effect the change of name, and upon such approval and completion of all formalities, to execute and file such Certificate of Amendment to the Restated Certificate and such other documents or instruments as may be necessary or desireable to effect or reflect the name change in the State of Delaware or in any other jurisdiction where the Company is registered or qualified. FOURTH: Thereafter, an annual meeting of stockholders of the Corporation was duly called and held, upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the Page 2 necessary number of shares required by statute were voted in favor of the amendment. FIFTH: The Certificate of Incorporation is hereby amended to change the name of the Corporation. Paragraph 1 of the Certificate of Incorporation, which sets forth the name of the Corporation, is amended to read, in its entirety, as follows: 1. Name. The name of the Corporation is Canandaigua Brands, Inc. SIXTH: This amendment shall be effective as of September 1, 1997. SEVENTH: This amendment was duly adopted in accordance with Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment of the Certificate of Incorporation to be executed by Richards Sands, its President and Chief Executive Officer, this 25 day of August, 1997. -- CANANDAIGUA WINE COMPANY, INC. By: /s/ Richard Sands ------------------------------------- Richard Sands, President and Chief Executive Officer EX-3 3 EXHIBIT 3.2 ----------- BY-LAWS OF CANANDAIGUA BRANDS, INC. (AS AMENDED AND RESTATED ON JANUARY 11, 1996) ARTICLE I STOCKHOLDERS ------------ SECTION 1.1 ANNUAL MEETINGS. An annual meeting of stockholders shall be held for the election of directors at such date, time and place, either within or without the State of Delaware, as may be designated by resolution of the Board of Directors from time to time. Any other proper business may be transacted at the annual meeting. SECTION 1.2 SPECIAL MEETINGS. Special meetings of stockholders for any purpose or purposes may be called at any time by the Board of Directors, or by a committee of the Board of Directors which has been duly designated by the Board of Directors, and whose powers and authority, as expressly provided in a resolution of the Board of Directors, include the power to call such meetings, but such special meetings may not be called by any other person or persons. SECTION 1.3 NOTICE OF MEETINGS. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, the written notice of any meeting shall be given not less than ten nor more than fifty days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, such notice shall be deemed to be given when deposited in the mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. SECTION 1.4 ADJOURNMENTS. Any meeting of stockholders, annual or special, may adjourn from time to time to reconvene at the same or some other place, and notice need not be given of any such adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. SECTION 1.5 QUORUM. The Corporation's authorized capital stock consists of 60,000,000 shares designated as Class A Common Stock (the "Class A Common") and 20,000,000 shares designated as Class B Common Stock (the "Class B Common"). At each meeting of stockholders, except as otherwise provided by law, the Corporation's Restated Certificate of Incorporation or these By-Laws, the holders of a majority of the outstanding aggregate voting power of the Class A Common and the Class B Common, present in person or by proxy, Page 2 shall constitute a quorum. In the absence of a quorum, the stockholders so present may, by majority vote of such stockholders voting together as a single class, adjourn the meeting from time to time in the manner provided in Section 1.4 of these By-Laws until a quorum shall attend. Shares of its own stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the Corporation, shall neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing shall not limit the right of any corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity. SECTION 1.6 VOTING. Except as otherwise provided by law, Section 2.2 of these By-Laws pertaining to the election of directors, or the Corporation's Restated Certificate of Incorporation, all elections and questions shall be decided by majority vote of all outstanding shares of stock entitled to vote thereon, present in person or by proxy, voting together as a single class, provided that the holders of the Class A Common shall have one (1) vote per share and the holders of the Class B Common shall have ten (10) votes per share. Except as otherwise required by law or by the Restated Certificate of Incorporation, the Board of Directors may require a larger vote upon any election or question. SECTION 1.7 ORGANIZATION. Meetings of stockholders shall be presided over by the Chairman of the Board, if any, or in his absence by the Vice Chairman of the Board, if any, or in his absence by the Chief Executive Officer, or in his absence by the President or in the absence of the foregoing persons by a chairman designated by the Board of Directors, or in the absence of such designation by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. SECTION 1.8 PROXIES. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by filing an instrument in writing revoking the proxy or another duly executed proxy bearing a later date with the Secretary of the Corporation. SECTION 1.9 FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. If no record date is fixed: (1) the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day Page 3 next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held; and (2) the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. SECTION 1.10 LIST OF STOCKHOLDERS ENTITLED TO VOTE. The Secretary shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the offices of the transfer agent. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof and may be inspected by any stockholder who is present. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list of stockholders or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders. SECTION 1.11 ACTION BY CONSENT OF STOCKHOLDERS. Unless otherwise restricted by the Restated Certificate of Incorporation, any action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE II BOARD OF DIRECTORS ------------------ SECTION 2.1 NUMBER; QUALIFICATIONS. The Board of Directors shall consist of one or more members, the number thereof to be determined from time to time by resolution of the Board of Directors. Directors shall be elected at the annual meeting of stockholders and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. SECTION 2.2 ELECTION; RESIGNATION; REMOVAL; VACANCIES. At every meeting of stockholders called for the election of directors, the holders of Class A Common, voting as a class, shall be entitled to elect one-fourth (1/4) of the number of directors to be elected at such meeting (rounded, if the total number of directors to be elected at such meeting is not divisible by four (4), to the next higher whole number), and the holders of Class B Common, Page 4 voting as a class, shall be entitled to elect the remaining number of directors to be elected at such meeting. A plurality of the votes cast shall be sufficient to elect. If the number of outstanding Class B Common shares is less than 12 1/2% of the total number of outstanding shares of Class A Common and Class B Common, then the holders of the Class A Common shall be entitled to elect one-fourth (1/4) of the number of directors to be elected at such meeting (rounded, if the total number of directors to be elected at such meeting is not divisible by four (4), to the next higher whole number) and shall be entitled to participate with the holders of the Class B Common voting as a single class in the election of the remaining number of directors to be elected at such meeting, provided that the holders of Class A Common shall have one (1) vote per share and the holders of Class B Common shall have ten (10) votes per share. If, during the interval between annual meetings for the election of directors, the number of directors who have been elected by either the holders of the Class A Common or the Class B Common shall, by reason of resignation, death, retirement, disqualification or removal, be reduced, the vacancy or vacancies in directors so created may be filled by a majority vote of the remaining directors then in office, even if less than a quorum, or by a sole remaining director. Any director so elected by the remaining directors to fill any such vacancy may be removed from office by the vote of the holders of the holders of a majority of the shares of the Class A Common and the Class B Common voting as a single class, provided that the holders of Class A Common shall have one (1) vote per share and the holders of Class B Common shall have ten (10) votes per share. SECTION 2.3 REGULAR MEETINGS. Regular meetings of the Board of Directors may be held at such places within or without the State of Delaware and at such times as the Board of Directors may from time to time determine, and if so determined notices thereof need not be given. SECTION 2.4 SPECIAL MEETINGS. Special meetings of the Board of Directors may be held at any time or place within or without the State of Delaware whenever called by the Chairman, Chief Executive Officer, the President, any Vice-President, the Secretary, or by any two members of the Board of Directors. At least one days' notice thereof shall be given by the person or persons calling the meeting, either personally, by mail or by telegram. SECTION 2.5 TELEPHONIC MEETINGS PERMITTED. Members of the Board of Directors, or any committee designated by the Board, may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this By-Law shall constitute presence in person at such meeting. SECTION 2.6 QUORUM; VOTE REQUIRED FOR ACTION. At all meetings of the Board of Directors a majority of the whole Board shall constitute a quorum for the transaction of business. Except in cases in which the Restated Certificate of Incorporation or these By-Laws otherwise provide, the vote of a majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. SECTION 2.7 ORGANIZATION. Meetings of the Board of Directors shall be presided over by the Chairman of the Board, if any, or in his absence by the Vice Chairman of the Board, if Page 5 any, or in his absence by the Chief Executive Officer, or in his absence by the President, or in their absence by a chairman chosen at the meeting. The Secretary shall act as secretary of the meeting, but in his absence the chairman of the meeting may appoint any person to act as secretary of the meeting. SECTION 2.8 INFORMAL ACTION BY DIRECTORS. Unless otherwise restricted by the Restated Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if all members of the Board or such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. ARTICLE III COMMITTEES ---------- SECTION 3.1 COMMITTEES. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of the committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have power or authority in reference to amending the Restated Certificate of Incorporation of the Corporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of dissolution, or amending these By-Laws; and, unless the resolution expressly so provides, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. SECTION 3.2 COMMITTEE RULES. Unless the Board of Directors otherwise provides, each committee designated by the Board may make, alter and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board of Directors conducts its business pursuant to Article II of these By-Laws. ARTICLE IV OFFICERS -------- SECTION 4.1 EXECUTIVE OFFICERS; ELECTION; QUALIFICATIONS; TERM OF OFFICE; RESIGNATION; REMOVAL; VACANCIES. The Board of Directors shall choose a President and Secretary, and it Page 6 may, if it so determines, choose a Chairman of the Board and a Vice Chairman of the Board from among its members. The Board of Directors may also choose a Chief Executive Officer, one or more Vice-Presidents, one or more Assistant Secretaries, a Treasurer and one or more Assistant Treasurers, and may choose such other officers as it may deem necessary, each of whom shall have such titles and duties as shall be determined by the Board of Directors. Each such officer shall hold office until the first meeting of the Board of Directors after the annual meeting of stockholders next succeeding this election, and until his successor is elected and qualified or until his earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. The Board of Directors may remove any officer with or without cause at any time, but such removal shall be without prejudice to the contractual rights of such officer, if any, with the Corporation. Any number of offices may be held by the same person. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Board of Directors at any regular or special meeting. SECTION 4.2 CHAIRMAN OF THE BOARD. The Chairman of the Board, if there be one, shall preside at all meetings of the Board of Directors and stockholders, and shall perform such other duties as the Board may direct. SECTION 4.3 CHIEF EXECUTIVE OFFICER. The Board of Directors may designate whether the Chairman of the Board, if one shall have been chosen, or the President shall be the Chief Executive Officer of the Corporation. If a Chairman of the Board has not been chosen, or if one has been chosen but not designated Chief Executive Officer, then the President shall be the Chief Executive Officer of the Corporation. The Chief Executive Officer shall be the principal executive officer of the Corporation and shall in general supervise and control all of the business and affairs of the Corporation, unless otherwise provided by the Board of Directors. He shall preside at all meetings of the stockholders and shall see that orders and resolutions of the Board of Directors are carried into effect. He shall have general powers of supervision and shall be the final arbiter of all differences among officers of the Corporation and his decision as to any matter affecting the Corporation shall be final and binding as between the officers of the Corporation subject only to the Board of Directors. SECTION 4.4 PRESIDENT. If the Chairman of the Board has not been chosen Chief Executive Officer or, if the Chairman of the Board has been so chosen, in the event of his inability or refusal to act, the President shall perform the duties of the Chief Executive Officer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. At all other times, the President shall have the active management of the business of the Corporation under the general supervision of the Chief Executive Officer. In general, he shall perform all duties incident to the office of President, and such other duties as the Chief Executive Officer or the Board of Directors may from time to time prescribe. SECTION 4.5 VICE-PRESIDENTS. In the absence of the President or in the event of his inability or refusal to act, the Vice-President (or in the event there be more than one Vice-President, the Vice-Presidents in the order designated, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and Page 7 when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice-Presidents shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. SECTION 4.6 SECRETARY. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the Corporation and of the Board of Directors in a book to be kept for that purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or Chief Executive Officer, under whose supervision he shall be. He shall have custody of the corporate seal of the Corporation and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. SECTION 4.7 ASSISTANT SECRETARY. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. SECTION 4.8 TREASURER. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, he shall give the Corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and property of whatever kind in his possession or under his control belonging to the Corporation. SECTION 4.9 ASSISTANT TREASURER. The Assistant Treasurer, or if there be more than one, the Assistant Treasurers in the order determined by the Board of Directors (or if there be no such determination, then in the order of their election), shall, in the absence of the Treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. Page 8 ARTICLE V STOCK ----- SECTION 5.1 CERTIFICATES. Every holder of stock shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, if any, or the President or a Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary, of the Corporation, certifying the class and number of shares of the Corporation owned by him. Any of or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent, or registrar at the date of issue. SECTION 5.2 LOST, STOLEN OR DESTROYED STOCK CERTIFICATES; ISSUANCE OF NEW CERTIFICATES. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate. SECTION 5.3 TRANSFERS OF STOCK. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 5.4 REGISTERED STOCKHOLDERS. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not he bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware. ARTICLE VI MISCELLANEOUS ------------- SECTION 6.1 FISCAL YEAR. The fiscal year of the Corporation shall be March 1 to the last day of February, unless otherwise determined by resolution of the Board of Directors. SECTION 6.2 SEAL. The corporate seal shall have the name of the Corporation inscribed thereon and shall be in such form as may be approved from time to time by the Board of Directors. Page 9 SECTION 6.3 WAIVER OF NOTICE OF MEETINGS OF STOCKHOLDERS, DIRECTORS AND COMMITTEES. Any written waiver of notice, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of any regular or special meeting of the stockholders, directors, or member of a committee of directors need be specified in any written waiver of notice. SECTION 6.4 INTERESTED DIRECTORS; QUORUM. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose, if: (1) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (2) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (3) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the stockholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction. SECTION 6.5 FORM OF RECORDS. Any records maintained by the Corporation in the regular course of its business, including its stock ledger, books of account, and minute books, may be kept on, or be in the form of, punch cards, magnetic tape, photographs, micro photographs, or any other information storage device, provided that the records so kept can be converted into clearly legible form within a reasonable time. The Corporation shall so convert any records so kept upon the request of any person entitled to inspect the same. SECTION 6.6 AMENDMENT OF BY-LAWS. These By-Laws may be altered or repealed, and new By-Laws made, by the Board of Directors, but the stockholders may make additional By-Laws and may alter and repeal any By-Laws whether adopted by them or otherwise. EX-10 4 EXHIBIT 10.1 ------------ AMENDMENT NUMBER ONE TO THE CANANDAIGUA WINE COMPANY, INC. LONG-TERM STOCK INCENTIVE PLAN This Amendment Number One to the Canandaigua Wine Company, Inc. Long-Term Stock Incentive Plan (the "Plan") was approved pursuant to Section 19 of the Plan by the Board of Directors of Canandaigua Brands, Inc. (f/k/a Canandaigua Wine Company, Inc., the "Company"), acting in its capacity as the Committee under the Plan. Capitalized terms used herein which are not otherwise defined shall have the meanings ascribed to them in the Plan and Annex A thereto. 1. NAME. The name of the Plan is hereby changed to "Canandaigua Brands, Inc. Long-Term Stock Incentive Plan." 2. DEFINITION OF COMMITTEE. The definition of the term "Committee" as used in the Plan and defined in Annex A to the Plan is hereby amended and restated to read in its entirety as follows: "COMMITTEE" means the committee appointed from time to time by the Company's Board of Directors to administer the Plan (the "Committee"). The full Board of Directors, in its discretion, may act as the Committee under the Plan, whether or not a Committee has been appointed, and shall do so with respect to grants of Awards to non-employee directors. The Committee may delegate to one or more members of the Committee or officers of the Company, individually or acting as a committee, any portion of its authority, except as otherwise expressly provided in the Plan. In the event of a delegation to a member of the Committee, officer or a committee thereof, the term "Committee" as used herein shall include the member of the Committee, officer or committee with respect to the delegated authority. Notwithstanding any such delegation of authority, the Committee comprised of members of the Board of Directors and appointed by the Board of Directors shall retain overall responsibility for the operation of the Plan. In witness whereof, Canandaigua Brands, Inc. has caused this instrument to be executed as of September 15, 1997. CANANDAIGUA BRANDS, INC. By: /s/ Richard Sands ------------------------ Richard Sands, President EX-10 5 EXHIBIT 10.2 ------------ CANANDAIGUA WINE COMPANY, INC. INCENTIVE STOCK OPTION PLAN This Incentive Stock Option Plan was approved by the Board of Directors of the Company by unanimous written consent as of June 23, 1997 and shall be effective upon approval by the stockholders of the Company. Certain capitalized terms used in the Plan are defined in Annex A. 1. PURPOSE The Plan is designed to enable the Company to attract and retain valued employees and to provide them with incentives to maintain and enhance the Company's long-term performance record by aligning the interests of the Participants and the stockholders of the Company through the grant of Incentive Stock Options. 2. ADMINISTRATION The Plan shall be administered by the Committee. The Committee shall possess the authority, in its discretion, (a) to determine the employees of the Company to whom Incentive Stock Options shall be granted and the time or times at which such Incentive Stock Options shall be granted; (b) to determine at the time of grant the number of shares to be subject to each Incentive Stock Option; (c) to prescribe the form of the instrument representing such Incentive Stock Option; (d) to establish any appropriate terms and conditions applicable to the Incentive Stock Options, including any limitations on grants, vesting or exercisability, and to make any amendments to such instruments or the Incentive Stock Options which may, without limitation, include any acceleration of vesting or exercisability, waiver of any condition or requirement or taking of other action consistent with the purposes of the Plan; (e) to interpret and construe the Plan; (f) to make and amend rules and regulations relating to the Plan; and (g) to make all other determinations necessary or advisable for the administration of the Plan. The Committee's determinations shall be conclusive and binding on all Participants and all persons claiming under or through any Participant. No member of the Committee shall be liable for any action taken or decision made in good faith relating to the Plan or any Incentive Stock Option granted under the Plan. No outstanding Incentive Stock Option may be exercised by any person if the Participant to whom the Incentive Stock Option is granted (x) is, or at any time after the date of grant has been, in competition with the Company or its affiliates or (y) has been terminated by the Company for Cause. The Committee shall determine, in its discretion, whether a Participant's actions constitute competition with the Company or its affiliates. 3. ELIGIBLE EMPLOYEES All employees of the Company are eligible to receive Incentive Stock Options under the Plan. 4. SHARES AVAILABLE The total number of shares of the Company's Common Stock available for Incentive Stock Options under the Plan in the aggregate shall be one million shares. The maximum number of Shares which may be subject to Incentive Stock Options granted to any individual Covered Employee in any fiscal year shall not exceed 2 1/2% of the outstanding Common Stock as of the date the Plan is approved by the Board of Directors. Shares subject to Incentive Stock Options may be authorized and unissued shares or may be treasury shares. If an Option expires, terminates or is cancelled without being exercised or becoming vested, new Incentive Stock Options may thereafter be granted under the Plan covering such shares unless the applicable Rules under Section 16(b) of the Exchange Act or Sections 162(m) or 422 of the Code require otherwise. Page 2 5. INCENTIVE STOCK OPTIONS The Committee shall make such awards of Incentive Stock Options as it shall, in its discretion, determine. Only employees of the Company shall be eligible to receive Incentive Stock Options. No Incentive Stock Options shall be granted more than ten years after the date the Plan is approved by the Board of Directors. Each Stock Option Award shall specify the following terms and conditions, as well as any other terms, conditions, limitations and restrictions specified by the Committee: (a) EXERCISE PRICE. The exercise price per Share for each Incentive Stock Option shall equal the Fair Market Value of the Common Stock on the date the Incentive Stock Option is granted. If any Incentive Stock Option is granted to a Participant who at the time of the Incentive Stock Option is a Ten-Percent Holder, the exercise price of the Incentive Stock Option shall be at least 110% of the Fair Market Value on the date the Incentive Stock Option is made. (b) DURATION OF OPTION. The duration of each Incentive Stock Option shall be specified. Each Incentive Stock Option shall specify that it shall not be exercisable after the expiration of ten years from the date such option is granted unless a longer term is permitted or a shorter term is required under Section 422 of the Code. In the case of an Incentive Stock Option granted to a Ten-Percent Holder, the Incentive Stock Option shall not, by its terms, be exercisable more than five years from its date of grant. (c) EXERCISE TERMS. Each Incentive Stock Option granted under the Plan shall become exercisable in five equal annual installments commencing on the first anniversary of the date of grant except as otherwise provided by the Committee. Stock Options may be partially exercised from time to time during the period extending from the time they first become exercisable in accordance with the terms of the Incentive Stock Option until the expiration of the exercise period specified in the Incentive Stock Option. Incentive Stock Options may only be exercised by the Participant (or his legal representative, if Participant is disabled) during Participant's lifetime. (d) PAYMENT OF EXERCISE PRICE. An Incentive Stock Option shall be exercised upon such notice as is required by the Committee accompanied by payment in full of the exercise price for the Shares being acquired in such form as the Committee may provide in accordance with Section 6 of the Plan, together with all applicable withholding taxes as provided in Section 7 of the Plan. (e) MAXIMUM VALUE OF INCENTIVE STOCK OPTIONS. The aggregate Fair Market Value (on the date of grant) of the Shares as to which all incentive stock options granted under the Plan or any other plan of the Company first become exercisable during any calendar year by a Participant shall not exceed $100,000. 6. PAYMENT FOR EXERCISE OF INCENTIVE STOCK OPTIONS The exercise price of Incentive Stock Options shall be paid to the Company upon exercise in the manner which the Committee may determine, which may include (a) delivery of cash or a check in the amount of the exercise price of the Shares to be acquired under the Incentive Stock Option, (b) tendering previously acquired Shares having a Fair Market Value at the time of delivery equal to the exercise price of the Shares to be acquired under the Incentive Stock Option, (c) delivery of irrevocable instructions to a broker or other agent acceptable to the Company to promptly sell Shares received under the Incentive Stock Option and to deliver to the Company the amount of proceeds to pay the exercise price related to the Shares to be acquired under the Incentive Stock Option, or (d) such other method of payment as the Committee in its discretion deems appropriate, in each case together with all applicable withholding taxes as provided in Section 7. Previously acquired Shares tendered in payment must have been owned by Participant for at least six months prior to the tender in payment of an Option. 7. WITHHOLDING TAXES Whenever required by law in connection with an Incentive Stock Option, the Company shall require the Participant to remit to the Company an amount sufficient to satisfy any federal, state and/or local income and Page 3 employment withholding tax requirements prior to the delivery of any certificate or certificates for Shares or to take any other appropriate action to satisfy such withholding requirements, including any method permitted for payment under Section 6 as determined by the Committee. To the extent permitted under such rules as the Committee may promulgate and in compliance with any requirements to avoid violations under Section 16(b) of the Exchange Act and related Rules, the Participant may satisfy such obligation in whole or in part by electing to have the Company withhold Shares from the Shares to which the Participant is otherwise entitled under the Incentive Stock Option. 8. INCENTIVE STOCK OPTIONS NOT TRANSFERABLE Unless transferability is permitted under certain conditions as determined by the Committee and applicable IRS Rules for incentive stock options, no Incentive Stock Option is transferable by the Participant other than by will or the laws of descent and distribution. An Incentive Stock Option shall be exercisable only by the Participant, the Participant's legal representative, or the Participant's permitted transferees. 9. GENERAL RESTRICTION ON ISSUANCE OF STOCK CERTIFICATES The Company shall not be required to deliver any certificate upon the exercise of any Incentive Stock Option until it has been furnished with such documents as it may deem necessary to insure compliance with any law or Rules of the SEC or any other governmental authority having jurisdiction under the Plan. Certificates for Shares delivered upon such grant or exercise shall bear legends restricting transfer or other restrictions or conditions to the extent required by law or determined by the Committee. Each Incentive Stock Option under the Plan is subject to the condition that, if at any time the Committee shall determine that the listing, registration or qualification of the Shares subject to such Incentive Stock Option under any state or federal law or other applicable Rule, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of the granting of such Incentive Stock Options or the issue or purchase of Shares thereunder, such Incentive Stock Options may not vest or be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Committee. 10. TERMINATION OF EMPLOYMENT If the employment of a Participant terminates by reason of the Participant's Disability or death, any Incentive Stock Option may be exercised by the Participant, the Participant's designated beneficiary or legal representative or permitted transferee at any time on or prior to the earlier of the expiration date of the Option or the expiration of one year after the date of Disability or death but only if, and to the extent that the Participant was entitled to exercise or receive the Incentive Stock Option at the date of Disability or death and subject to such other terms and conditions as may be specified in the Incentive Stock Option. In the event of the Participant's Retirement or other termination of employment, any Incentive Stock Option may be exercised by the Participant, the Participant's designated beneficiary or legal representative at any time on or prior to the earlier of the expiration date of the option or the expiration of thirty days after the date of Retirement or termination but only if, and to the extent that, the Participant was entitled to exercise the Incentive Stock Option at the date of Retirement or termination, subject to such other terms and conditions as may be specified in the Incentive Stock Option and the Plan. All Incentive Stock Options or any portion thereof not yet vested or exercisable on the date of Disability or death shall terminate immediately on the date of termination. All Incentive Stock Options or any portion thereof not yet vested or exercisable on the date of termination other than by reason of Disability or death shall terminate immediately on the date of termination. 11. ADJUSTMENT OF INCENTIVE STOCK OPTIONS In the event of any change in the Common Stock of the Company by reason of any stock dividend, stock split, recapitalization, reorganization, merger, consolidation, split-up, combination, or exchange of shares, or rights offering to purchase Common Stock at a price substantially below fair market value, or of any similar change affecting the Common Stock, the number and kind of shares authorized under Section 4 for the Plan, the number and kind of shares which thereafter are subject to Incentive Stock Options under the Plan and the number and kind of unexercised Incentive Stock Options and the exercise price per share shall be adjusted Page 4 automatically consistent with such change to prevent substantial dilution or enlargement of the rights granted to, or available for, Participants in the Plan. 12. NO EMPLOYMENT RIGHTS The Plan and any Incentive Stock Options granted under the Plan shall not confer upon any Participant any right with respect to continuance as an employee of the Company, nor shall the Plan or such Incentive Stock Options interfere in any way with the right of the Company to terminate the Participant's position as an employee or director at any time. 13. RIGHTS AS A SHAREHOLDER The recipient of any Incentive Stock Option under the Plan shall have no rights as a shareholder with respect thereto unless and until certificates for the underlying Shares are issued to the recipient, except as otherwise specifically provided by the Committee. 14. SECTION 162(m) CONDITIONS It is the intent of the Company that the Plan and Incentive Stock Options granted under the Plan satisfy and be interpreted in a manner that satisfies any applicable requirements of Code Section 162(m) as performance-based compensation. Any provision, application or interpretation of the Plan inconsistent with this intent to satisfy the standards in Code Section 162(m) shall be disregarded. Notwithstanding anything to the contrary in the Plan, the provisions of the Plan may at any time be bifurcated by the Committee in any manner so that certain provisions of the Plan or any Incentive Stock Option intended (or required in order) to satisfy the applicable requirements of Code Section 162(m) are applicable only to Covered Employees. 15. AMENDMENT AND DISCONTINUANCE The Plan and any Incentive Stock Option outstanding under the Plan may be amended, modified or terminated by the Committee at any time and all Incentive Stock Options shall be subject to the Plan as amended from time to time, except that the Committee may not, without approval of the Participant to whom the Incentive Stock Option was granted or his legal representative or permitted transferee adversely affect the rights of such person under such Incentive Stock Option. No amendment, modification, or termination of the Plan shall be effective without stockholder approval if such approval is required under applicable law or Rule or any regulation of the stock market on which the Common Stock is traded. 16. CHANGE IN CONTROL (a) Notwithstanding other provisions of the Plan, in the event of a Change in Control of the Company, all of a Participant's Incentive Stock Options shall become immediately vested and exercisable or fully earned at the maximum amount, except with respect to Covered Employees for "performance based compensation" as otherwise determined by the Committee. (b) In the event of a Change in Control, in the discretion of the Committee, each Participant who is a Section 16 insider with respect to whom the Change in Control might result in a violation under Section 16(b) of the Exchange Act, may receive, in exchange for the surrender of the Incentive Stock Option, an amount of cash equal to the difference between the fair market value (based on the kind and amount of any securities, cash, other property or other consideration to be received with respect to each Share in the Change in Control transaction as determined by the Committee) of the Common Stock covered by the Incentive Stock Option and the option price of such Common Stock under the Incentive Stock Option. (c) Notwithstanding the foregoing, the Plan and any Incentive Stock Options outstanding under the Plan shall be binding upon any successor to the Company, whether such successor is the result of a direct or indirect purchase, merger, consolidation or other acquisition of all or substantially all of the business and/or assets of the Company. Page 5 17. GOVERNING LAW The Plan and any Incentive Stock Option made pursuant to it shall be construed under the laws of the State of Delaware. Dated: June 23, 1997 CANANDAIGUA WINE COMPANY, INC. -- By: /s/ Richard Sands -------------------- Title: President -------------------- Date of Stockholder Approval July 22, 1997 ------------- Page 1 ANNEX A TO INCENTIVE STOCK OPTION PLAN CERTAIN DEFINITIONS Capitalized terms used in the Plan shall have the meanings set forth below: "CAUSE" means, solely for the purposes of the Plan, gross negligence or willful misconduct or commission of a felony or an act of moral turpitude determined by the Committee to be detrimental to the best interests of the Company or, if the Participant is subject to a written agreement with the Company "cause" shall have the meaning set forth in that agreement. "CHANGE IN CONTROL" means: (a) there shall be consummated: (i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which any Shares are to be converted into cash, securities or other property, provided that the consolidation or merger is not with a corporation which was a direct or indirect wholly-owned subsidiary of the Company or a parent of the Company immediately before the consolidation or merger; or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company; or (b) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; or (c) any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of 30% or more of the voting control of the Company's then outstanding common stock, provided that such person shall not be a wholly-owned subsidiary of the Company immediately before it becomes such 30% beneficial owner of voting control; or (d) individuals who constitute the Company's Board of Directors on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided, however, that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least three quarters of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be, for purposes of this clause (d), considered as though such person were a member of the Incumbent Board. "CODE" means the Internal Revenue Code of 1986, as amended. "COMPANY" means Canandaigua Wine Company, Inc. and its Subsidiaries, except where the context indicates that only the parent company is intended. "COMMITTEE" means the committee appointed by the Company's Board of Directors (the "Committee") consisting of not fewer than the number of members of the Board of Directors required under Code Section 162(m) and the Rules of the IRS thereunder for determining performance based compensation which is deductible by the Company who are "outside directors" as defined from time to time under the IRS Rules and, to the extent possible are also "Non-Employee Directors" as defined from time to time under the SEC Rules for approval of Incentive Stock Options exempt from Section 16(b). If any member of the Committee does not qualify as an "outside director", Incentive Stock Options under the Plan for Covered Employees shall be administered by a subcommittee of the Committee comprised solely of members who qualify as outside directors to the extent desireable to preserve the deductibility of such compensation under Section 162(m) of the Code and such subcommittee shall constitute the Committee for all purposes under the Plan. The full Board of Directors, Page 2 in its discretion, may act as the Committee under the Plan. The Committee may delegate to selected officers of the Company individually or acting as a committee any portion of its authority, except as otherwise expressly provided in the Plan. In the event of a delegation to management, the term "Committee" as used herein shall include the officer or committee with respect to the delegated authority. Notwithstanding any such delegation of authority, the Committee comprised of members of the Board of Directors shall retain overall responsibility for the operation of the Plan. Management acting pursuant to delegated authority shall not make awards under the Plan to any Covered Employees or other Section 16 insider. "COMMON STOCK" means the Class A Common Stock of the Company, par value $.01 per Share. "COVERED EMPLOYEE" means the Chief Executive Officer of the Company and the four other most highly compensated officers of the Company as such term is defined under the Rules promulgated under Section 162(m) of the Code and such other officers as may be designated by the Committee. "DISABILITY" means the inability of a Participant to perform his or her duties for a period in excess of the applicable statutory short-term disability coverage provided by the Company. The date of termination with respect to Disability shall be the day following the date such short term disability protection lapses. "FAIR MARKET VALUE" of a Share means the closing price of the Common Stock on the NASDAQ Stock Market or other national stock exchange on which the Common Stock is actively traded for the date as reported in the WALL STREET JOURNAL, Eastern Edition or such other standard reference service as the Committee may select. "IRS" means the Internal Revenue Service and, if the context permits, the courts interpreting the Code. "INCENTIVE STOCK OPTION" means any Stock Option granted under the Plan all of which are designated as "incentive stock options" within the meaning of Section 422 of the Code or any successor or replacement provision. "PARTICIPANT" means any employee of the Company who has received an Incentive Stock Option under the Plan. "PLAN" means the Incentive Stock Option Plan of the Company, as amended from time to time. "RETIREMENT" means a termination of employment by an employee who is at least 60 years of age and after at least 10 years of service with the Company (which shall include entities acquired by the Company, if the Committee so determines). "RULES" means rules, regulations and interpretations issued by the governmental authority charged with administering any law and any judicial interpretations applicable thereto. "SEC" means the Securities and Exchange Commission. "SHARES" means shares of the Company's Class A Common Stock, par value $.01 per share. "SUBSIDIARIES" means (a) all corporations of which at least fifty percent of the voting stock is owned by the Company directly or through one or more corporations at least fifty percent of whose voting stock is so owned, and (b) partnerships or other entities in which the Company has, either directly or indirectly, at least a fifty percent interest in the capital or profits. "TEN PERCENT HOLDER" means a Participant who owns stock possessing more than ten percent of the total combined voting power of all classes of capital stock outstanding on the date of determination. OTHER TERMS: Any other terms used in the Plan which are defined in Sections 83, 162(m) or 421 of the Internal Revenue Code as amended, or the Rules thereunder or corresponding provisions of subsequent laws and Rules in effect at the time Incentive Stock Options are granted under the Plan, shall have the meanings set forth in such laws or Rules. OTHER TERMS: Any other terms used in the Plan which are defined in Sections 83, 163(m) or 421 of the Internal Revenue Code as amended, or the Rules thereunder or corresponding provisions of subsequent laws and Rules in effect at the time Incentive Stock Options are granted under the Plan, shall have the meanings set forth in such laws or Rules. EX-10 6 EXHIBIT 10.3 ------------ AMENDMENT NUMBER ONE TO THE CANANDAIGUA WINE COMPANY, INC. INCENTIVE STOCK OPTION PLAN This Amendment Number One to the Canandaigua Wine Company, Inc. Incentive Stock Option Plan (the "Plan") was approved pursuant to Section 15 of the Plan by the Board of Directors of Canandaigua Brands, Inc. (f/k/a Canandaigua Wine Company, Inc., (the "Company"), acting in its capacity as the Committee under the Plan. Capitalized terms used herein which are not otherwise defined shall have the meanings ascribed to them in the Plan and Annex A thereto. 1. NAME. The name of the Plan is hereby changed to "Canandaigua Brands, Inc. Incentive Stock Option Plan." 2. DEFINITION OF COMMITTEE. The definition of the term "Committee" as used in the Plan and defined in Annex A to the Plan is hereby amended and restated to read in its entirety as follows: "COMMITTEE" means the committee appointed from time to time by the Company's Board of Directors to administer the Plan (the "Committee"). The full Board of Directors, in its discretion, may act as the Committee under the Plan, whether or not a Committee has been appointed. The Committee may delegate to one or more members of the Committee or officers of the Company, individually or acting as a committee, any portion of its authority, except as otherwise expressly provided in the Plan. In the event of a delegation to a member of the Committee, officer or a committee thereof, the term "Committee" as used herein shall include the member of the Committee, officer or committee with respect to the delegated authority. Notwithstanding any such delegation of authority, the Committee comprised of members of the Board of Directors and appointed by the Board of Directors shall retain overall responsibility for the operation of the Plan. In witness whereof, Canandaigua Brands, Inc. has caused this instrument to be executed as of September 15, 1997. CANANDAIGUA BRANDS, INC. By: /s/ Richard Sands ------------------------ Richard Sands, President EX-10 7 EXHIBIT 10.4 ------------ CANANDAIGUA WINE COMPANY, INC. ANNUAL MANAGEMENT INCENTIVE PLAN This Annual Management Incentive Plan was approved by the Board of Directors of the Company on June 23, 1997 and shall be effective upon approval by the stockholders. Certain capitalized terms used in the Plan are defined in Annex A. 1. PURPOSE The Plan is designed to enable the Company to attract and retain valued employees and to provide them with incentives to attain certain annual performance goals. 2. ADMINISTRATION The Plan shall be administered by a Committee of the Company's Board of Directors. This Committee shall consist of at least two members of the Company's Board of Directors, all of whom are (a) "outside directors" within the meaning of Section 162(m), and (b) not eligible to participate in the Plan. Subject to the Plan, the Committee shall possess the sole authority, in its discretion, to (i) establish and administer the Performance Criteria and Performance Targets, (ii) select the Participating Executives who will receive Bonuses under the Plan, (iii) determine the amount of such Bonuses and any terms, conditions or limitations on the payment of any Bonuses, (iv) interpret the Plan, (v) make and amend rules and regulations relating to the Plan, and (vi) make all other determinations necessary or advisable for the administration of the Plan. 3. TERMS AND CONDITIONS OF BONUSES For each Performance Period, the Committee shall select, at the time the Performance Criteria and Performance Targets are determined, the Participating Executives. Each Participating Executive may receive a Bonus if and only if the Performance Targets established by the Committee, relative to the applicable Performance Criteria, are attained. The applicable Performance Period and Performance Targets shall be determined by the Committee consistent with the terms of the Plan and Section 162(m). The Committee may adjust Performance Targets to take into account the effects of any Extraordinary Items equitably in a manner consistent with the determination of the original Bonus, provided, however, no such adjustment may be made with respect to any Bonus to a Participating Executive which is intended to qualify as "performance based compensation" unless such adjustment satisfies the requirements of Section 162(m) and the related Rules. The Performance Target with respect to the Performance Criteria must be established by the Committee in advance of the deadlines applicable under Section 162(m) and while the performance relating to the Performance Target remains substantially uncertain within the meaning of Section 162(m). At the time the Performance Target is established, the Committee shall provide, in terms of an objective formula or standard for each Participating Executive, the method of computing the specific amount that will represent the maximum amount of Bonus payable to the Participant if the Performance Target is attained. Notwithstanding any other provision hereof, no Participating Executive shall receive a Bonus under the Plan for any fiscal year or other Performance Period in excess of $2 million. Any Bonuses awarded by the Committee under the Plan shall be paid within 30 days after year-end financial results are reported or, if later, as soon as practicable following the Committee's determinations and certification under this Section. Any such payment shall be in cash or cash equivalent, subject to applicable withholding requirements. Notwithstanding the foregoing, the Committee may, in its sole discretion, defer the payout of any Bonus. In the case of the delay of a Bonus otherwise payable at or after the attainment and certification of the applicable Performance Target, any additional amount payable as a result of the delay shall be limited to the Moody's Average Corporate Bond Yield during the deferral period. No Participating Executive shall receive any payment under the Plan unless the Committee has certified, by resolution or other appropriate action in writing, that the amount thereof has been accurately Page 2 determined in accordance with the terms, conditions and limits of the Plan and that the Performance Target and any other material terms previously established by the Committee or set forth in the Plan were in fact satisfied. 4. TERMINATION OF EMPLOYMENT If the employment of a Participating Executive terminates by reason of such Participating Executive's Retirement, Disability, death or involuntary termination without Cause, a ratable portion of any applicable Bonus shall be paid, subject to the attainment of the applicable Performance Target, at or after the attainment and certification of the applicable Performance Target at the end of the fiscal year or other Performance Period. The ratable portion of the Bonus shall be determined by multiplying the bonus by a fraction, the numerator of which is the number of full or partial months during the Performance Period during which the Participating Executive was employed, and the denominator of which is the number of calendar months in the Performance Period. Upon termination of the Participating Executive's employment by voluntary resignation or for Cause, all Bonuses for which the Participating Executive may be eligible shall be forfeited unless the Committee otherwise expressly so provides in a written contract or other written instrument. 5. ADJUSTMENTS In the event of any change in the Company's applicable accounting principles or practices by reason of any stock dividend, stock split, recapitalization, reorganization, merger, consolidation, split-up, combination, exchange of shares, rights offering or other similar change which occurs after the Performance Targets are established for a given Performance Period, the amount of the Bonuses paid under the Plan for such Performance Period shall be automatically adjusted consistent with such change to prevent dilution or enlargement of the Bonuses under the Plan. 6. NO EMPLOYMENT RIGHTS The Plan shall not confer upon any Participating Executive any right with respect to continuance as an employee of the Company, nor shall it interfere in any way with the right of the Company to terminate the Participating Executive's position as an employee. 7. DISCRETION OF COMPANY Any decision made or action taken by the Company, the Committee or the Board of Directors in connection with the creation, amendment, construction, administration, interpretation or effect of the Plan shall be within the absolute discretion of such entity and shall be conclusive and binding upon all persons. No officer, director or member of the Committee shall have any liability for actions taken or omitted under the Plan by the member or by any other person. 8. AMENDMENT AND DISCONTINUANCE The Plan may be amended, modified or terminated by the Committee at any time, and all Bonuses shall be subject to the Plan as amended from time to time, except that the Committee may not, without the approval of a Participating Executive adversely affect any rights under the Plan. No amendment, modification or termination shall be effective without the approval of the Board of Directors and/or the stockholders if such approval is necessary to comply with the applicable provisions of Section 162(m). 9. CHANGE OF CONTROL Notwithstanding other provisions of the Plan, in the event of a Change of Control of the Company, the Performance Period for a Participating Executive shall end on the date of the Change of Control and the Performance Target shall be adjusted to reflect the early termination of the Performance Period. If the Performance Target, as adjusted, is deemed satisfied by the Committee, the Participating Executive may receive a ratable portion of the Bonus that would have been paid if the Performance Period had not been terminated early and the Performance Target had been satisfied. The ratable portion of the Bonus shall be determined by multiplying the original Bonus by a fraction, the numerator of which is the number of months from the first day Page 3 of the Performance Period to the date of the Change of Control (including any fractional month) and the denominator of which is the total number of months in the original Performance Period. The Plan shall be binding upon any successor to the Company, whether such successor is the result of a direct or indirect purchase, merger, consolidation or other acquisition of all or substantially all of the business and/or assets of the Company. 10. SECTION 162(m) CONDITIONS It is the intent of the Company that the Plan and Bonuses paid under the Plan satisfy and be interpreted in a manner that satisfies any applicable requirements of Section 162(m) as performance-based compensation. Any provision, application or interpretation of the Plan inconsistent with this intent to satisfy the standards in Section 162(m) shall be disregarded. Notwithstanding anything to the contrary in the Plan, the provisions of the Plan may at any time be bifurcated by the Committee in any manner so that certain provisions of the Plan or any Bonus intended (or required in order) to satisfy the applicable requirements of Section 162(m) are applicable only to persons whose compensation is subject to Section 162(m). 11. NO FUNDING OF THE PLAN The Company shall not be required to fund or otherwise segregate any cash or any other assets which may at any time be paid to any Participating Executive under the Plan. The Plan shall constitute an "unfunded" plan of the Company. The Company shall not, by any provisions of the Plan, be deemed to be a trustee of any property, and any rights of any Participating Executive shall be limited to those of a general unsecured creditor. 12. NON-TRANSFERABILITY Except as expressly provided by the Committee, no benefit payable under the Plan shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, and any such attempted action shall be void. This Section shall not apply to an assignment of a contingency or payment due after the death of a Participating Executive to such Participating Executive's legal representative or beneficiary. 13. EFFECTIVE DATE The effective date of the Plan shall be the date the Plan is approved by the Company's stockholders. 14. DEFINITIONS Any terms or provisions used herein which are defined in Section 162(m) shall have the meanings as therein defined. 15. GOVERNING LAW To the extent not inconsistent with the provisions of Section 162(m), the Plan shall be construed under the laws of the State of New York. Dated: June 23, 1997 CANANDAIGUA WINE COMPANY, INC. -- By: /s/ Richard Sands -------------------- Title: President -------------------- Date of Stockholder Approval: July 22, 1997 ------------- Page 1 ANNEX A TO ANNUAL MANAGEMENT INCENTIVE PLAN CERTAIN DEFINITIONS Capitalized terms used in the Plan shall have the meanings set forth below: "BONUS" means a cash payment or payment opportunity, as the context requires. "CAUSE" means, solely for the purposes of the Plan, gross negligence or willful misconduct or commission of a felony or an act of moral turpitude determined by the Committee to be detrimental to the best interests of the Company or, if the Participating Executive is subject to a written agreement with the Company "cause" shall have the meaning set forth in that agreement. "CHANGE OF CONTROL" means: (a) there shall be consummated (i) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which any Shares are to be converted into cash, securities or other property, provided that the consolidation or merger is not with a corporation which was a direct or indirect wholly-owned subsidiary of the Company or a parent of the Company immediately before the consolidation or merger; or (ii) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of the Company; or (b) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; or (c) any person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) shall become the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of 30% or more voting control of the Company's then outstanding common stock, provided that such person shall not be a wholly-owned subsidiary of the Company immediately before it becomes such 30% beneficial owner of voting control; or (d) individuals who constitute the Company's Board of Directors on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided, however, that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least three quarters of the directors comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director without objection to such nomination) shall be, for purposes of this clause (d), considered as though such person were a member of the Incumbent Board. "CODE" means the Internal Revenue Code of 1986, as amended. "COMPANY" means Canandaigua Wine Company, Inc. and its Subsidiaries, except when the context indicates that only the parent company is intended. "COMMITTEE" means the committee appointed by the Board of Directors of the Company to administer the Plan as provided in Section 2. "DISABILITY" means the inability of a Participant to perform his or her duties for a period in excess of the applicable statutory short-term disability coverage provided by the Company. The date of termination with respect to Disability shall be the day following the date such short-term disability protection lapses. Page 2 "EXTRAORDINARY ITEMS" means (a) items presented as such (or other comparable terms) on the Company's audited financial statements, (b) extraordinary, unusual or nonrecurring items of gain or loss, (c) changes in tax or accounting laws or Rules, and (d) the effects of mergers, acquisitions, divestitures, spin offs or significant transactions, each of which are identified in the audited financial statements and notes thereto or in the "management's discussion and analysis" of the financial statements in a period report filed with the SEC under the Exchange Act. "PARTICIPATING EXECUTIVE" means a key employee (including any officer) of the Company or one of its Subsidiaries selected by the Committee to participate in the Plan. "PERFORMANCE CRITERIA" means one or more of the following performance criteria selected by the Committee with respect to any performance-based Award: (a) increases in the Fair Market Value of a Share, (b) shareholder value added, (c) cash flow, (d) earnings per share, (e) earnings of the Company before deducting interest, taxes, depreciation and amortization, (f) return on equity, (g) return on capital, (h) return on assets or net assets, (i) cost reduction or control, (j) operating income or net operating income, (k) operating margins/sales in one or more business segments or product lines, (l) return on operating revenue, and (m) market share in one or more business segments or product lines. Performance criteria may be established on a corporate, divisional, business unit or consolidated basis and measured absolutely or relative to the Company's peers. "PERFORMANCE PERIOD" means the fiscal year or years or other period established by the Committee with respect to which the Performance Targets are set by the Committee. "PERFORMANCE TARGET" means one or more specific objective goal or goals (which may be cumulative or alternative) that are timely set in writing by the Committee for each Participant for the applicable Performance Period with respect to any one or more of the Performance Criteria. "PLAN" means the Annual Management Incentive Plan of the Company, as amended from time to time. "RETIREMENT" means a termination of employment by an employee who is at least 60 years of age and after at least 10 years of service with the Company (which shall include entities acquired by the Company, if the Committee so determines). "RULES" means rules, regulations and interpretations issued by the governmental authority charged with administering any law and any judicial interpretations applicable thereto. "SECTION 162(m)" means Section 162(m) of the Code, together with the regulations promulgated thereunder, all as amended from time to time. "SHARES" means shares of the Company's Class A Common Stock, par value $.01 per share. "SUBSIDIARIES" means (a) all corporations of which at least fifty percent of the voting stock is owned by the Company directly or through one or more corporations at least fifty percent of whose voting stock is so owned, and (b) partnerships or other entities in which the Company has, either directly or indirectly, at least a fifty percent interest in the capital or profits. EX-11 8 EXHIBIT 11 ---------- CANANDAIGUA BRANDS, INC. AND SUBSIDIARIES COMPUTATION OF NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE (in thousands, except per share data) (unaudited)
For the Six Months Ended August 31, --------------------------------------------------------------- 1997 1996 -------------------------- -------------------------- Fully Fully Net income per common and common equivalent share: Primary Diluted Primary Diluted ------- ------- ------- ------- Net income available to common and common equivalent shares $ 22,411 $ 22,411 $ 13,442 $ 13,442 Adjustments -- -- -- -- -------- -------- -------- -------- Net income available to common and common equivalent shares $ 22,411 $ 22,411 $ 13,442 $ 13,442 ======== ======== ======== ======== Shares: Weighted average common shares outstanding 18,665 18,665 19,553 19,553 Adjustments: (1) Assumed exercise of incentive stock options 571 750 204 204 (2) Assumed exercise of stock options -- 1 38 38 -------- -------- -------- -------- Weighted average common and common equivalent shares outstanding 19,236 19,416 19,795 19,795 ======== ======== ======== ======== Net income per common and common equivalent share $ 1.17 $ 1.15 $ 0.68 $ 0.68 ======== ======== ======== ======== For the Three Months Ended August 31, --------------------------------------------------------------- 1997 1996 -------------------------- -------------------------- Fully Fully Net income per common and common equivalent share: Primary Diluted Primary Diluted ------- ------- ------- ------- Net income available to common and common equivalent shares $ 12,365 $ 12,365 $ 4,941 $ 4,941 Adjustments -- -- -- -- -------- -------- -------- -------- Net income available to common and common equivalent shares $ 12,365 $ 12,365 $ 4,941 $ 4,941 ======== ======== ======== ======== Shares: Weighted average common shares outstanding 18,559 18,559 19,477 19,477 Adjustments: (1) Assumed exercise of incentive stock options 683 758 152 152 (2) Assumed exercise of stock options -- 1 24 24 -------- -------- -------- -------- Weighted average common and common equivalent shares outstanding 19,242 19,318 19,653 19,653 ======== ======== ======== ======== Net income per common and common equivalent share $ 0.64 $ 0.64 $ 0.25 $ 0.25 ======== ======== ======== ========
EX-27 9
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S AUGUST 31, 1997 FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000016918 CANANDAIGUA BRANDS, INC. 1,000 6-MOS FEB-28-1998 AUG-31-1997 4,278 0 160,885 0 334,756 520,481 357,630 110,918 1,032,950 283,270 298,995 0 0 215 379,198 1,032,950 607,535 607,535 442,044 553,527 0 0 16,024 37,984 15,573 22,411 0 0 0 22,411 1.17 1.15
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