<PAGE>
United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended April 30, 1995
Commission file number 1-123
BROWN-FORMAN CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 61-0143150
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
850 DIXIE HIGHWAY 40210
LOUISVILLE, KENTUCKY (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (502) 585-1100
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ----------------
Preferred $.40 Cumulative Stock, $10.00 par value, New York Stock Exchange
redeemable at company's option at $10.25 per share
plus unpaid accrued dividends; liquidating value
$10.00 per share plus unpaid accrued dividends
Class A Common Stock (voting) $.15 par value New York Stock Exchange
Class B Common Stock (nonvoting) $.15 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) None
of the Act
Indicate by check mark whether the registrant (1) has 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 registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value, at April 30, 1995, of the voting stock held by
nonaffiliates of the registrant was $224,608,000.
The number of shares outstanding for each of the registrant's classes of Common
Stock on May 25, 1995 was:
Class A Common Stock (voting) 28,988,091
Class B Common Stock (nonvoting) 40,008,147
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the Registrant's 1995 Annual Report to Stockholders are incorporated
by reference into Parts I, II, and IV of this report. Portions of the Proxy
Statement of Registrant, dated July 3, 1995, for use in connection with the
Annual Meeting of Stockholders to be held July 27, 1995 are incorporated by
reference into Parts III and IV of this report.
<PAGE>
PART I
Item 1. Business
(a) General development of business:
Brown-Forman Corporation was incorporated under the laws of the State of
Delaware in 1933, successor to a business founded in 1870 as a partnership and
subsequently incorporated under the laws of Kentucky in 1901. Its principal
executive offices are located at 850 Dixie Highway, Louisville, Kentucky 40210
(mailing address: P.O. Box 1080, Louisville, Kentucky 40201-1080). Except as
the context may otherwise indicate, the terms "Brown-Forman" and "company" refer
to Brown-Forman Corporation and its subsidiaries.
(b) Financial information about industry segments:
Information regarding net sales, operating income, and total assets of each of
the company's business segments is in Note 11 of Notes to Consolidated Financial
Statements on page 37 of the company's 1995 Annual Report to Stockholders, which
information is incorporated herein by reference in response to Item 8.
(c) Narrative description of business:
The following is a description of the company's operations.
Wines and Spirits Segment
Wines and Spirits operations include manufacturing, bottling, importing,
exporting, and marketing a wide variety of alcoholic beverage brands. This
Segment also manufactures and markets new and used oak barrels, plastic
closures, and plastic bottles.
Brands are grouped into three categories: North American Spirits, Imported and
Specialty Items, and Wines.
North American Spirits consists of the following brands:
Jack Daniel's Tennessee Whiskey
Canadian Mist Canadian Whisky
Jack Daniel's Country Cocktails
Southern Comfort
Early Times Old Style Kentucky Whisky
Old Forester Kentucky Straight Bourbon Whisky
Gentlemen Jack Rare Tennessee Whiskey
Korbel California Brandies **
Pepe Lopez Tequila
Statistics based on case sales, published annually by a leading trade
publication, rank Jack Daniel's as the largest selling Tennessee whiskey in the
United States, Canadian Mist as the largest selling Canadian whisky in the
United States, and Southern Comfort as the largest selling domestic proprietary
liqueur in the United States.
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Imported and Specialty Items consists of the following brands:
Bushmills Irish Whiskies*
Black Bush Special Irish Whiskey*
Glenmorangie Single Highland Malt Scotch Whisky*
Usher's Scotch Whisky*
Tropical Freezes
Wines consists of the following brands:
Fetzer Vineyards California Wines
Korbel California Champagnes**
Korbel California Wines*
Bolla Italian Wines*
Jekel Vineyards California Wines
Bel Arbor California Wines
Fontana Candida Italian Wines*
Brolio Italian Wines*
Carmen Vineyards Chilean Wines*
Fontanafredda Italian Wines*
Armstrong Ridge California Champagne*
Noilly Prat Vermouths*
* Brands marketed by Brown-Forman in the U.S. and other select markets by
agency agreements.
** Brands marketed by Brown-Forman worldwide by agency agreement.
A leading industry trade publication reported Korbel California Champagnes as
the largest selling premium champagne in the United States. This trade
publication also reported that, among numerous imported wines, Bolla Italian
Wine is the leading premium imported table wine in the United States. Fetzer
was ranked seventeenth among all table wines.
Brown-Forman believes that statistics used to rank these products are reasonably
accurate.
Brown-Forman's strategy with respect to the Wines and Spirits Segment is to
market high quality products that satisfy consumer preferences and support them
with extensive international, national, and regional marketing programs. These
programs are intended to extend consumer brand recognition and brand loyalty.
Sales managers and representatives or brokers represent the Segment in all
states. The Segment distributes its spirits products domestically either
through state agencies or through wholesale distributors. The contracts which
Brown-Forman has with many of its distributors have formulas which determine
reimbursement to distributors if Brown-Forman terminates them; the amount of
reimbursement is based primarily on the distributor's length of service and a
percentage of its purchases over time. Some states have statutes which limit
Brown-Forman's ability to terminate distributor contracts.
Jack Daniel's Tennessee Whiskey and Southern Comfort are the principal products
exported by the Segment. These brands are sold through contracts with brokers
and distributors in most countries.
The principal raw materials used in manufacturing and packaging distilled
spirits are corn, rye, malted barley, glass, cartons, and wood for new white oak
barrels, which are used for storage of bourbon and Tennessee
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whiskey. None of these raw materials are in short supply, and there are
adequate sources from which they may be obtained.
Production of whiskies is scheduled to meet demand three to five years in the
future. Accordingly, inventories are larger in relation to sales and total
assets than would be normal for most other business segments.
The industry is highly competitive and there are many brands sold in the
consumer market. Trade information indicates that Brown-Forman is one of the
largest wine and spirit suppliers in the United States in terms of revenues.
The wine and spirits industry is regulated by the Bureau of Alcohol, Tobacco,
and Firearms of the United States Treasury Department with respect to
production, blending, bottling, sales, advertising, and transportation of its
products. Also, each state regulates advertising, promotion, transportation,
sale, and distribution of such products.
Under federal regulations, whisky must be aged for at least two years to be
designated "straight whisky." The Segment ages its straight whiskies for a
minimum of three to five years. Federal regulations also require that
"Canadian" whisky must be manufactured in Canada in compliance with Canadian
laws and must be aged in Canada for at least three years.
Consumer Durables Segment
The Consumer Durables Segment includes the manufacturing and/or marketing of the
following:
Fine China Dinnerware
Contemporary Dinnerware
Crystal Stemware
Crystal Barware
China and Crystal Giftware
China and Crystal Lamps
Collectibles and Jewelry
Sterling Silver, Pewter and Silver-Plated
Giftware
Sterling Silver and Stainless Steel Flatware
Fine Table Linens
Luggage
Business Cases and Folios
Personal Leather Accessories
All of the products of the Segment are sold by segment-employed sales
representatives under various compensation arrangements, and where appropriate
to the class of trade, by specialized independent commissioned sales
representatives.
The Segment's products are marketed domestically through authorized retail
stores consisting of department stores and specialty and jewelry shops and
through retail stores operated by the Segment. Products are also distributed
domestically through the institutional, incentive, premium, business gift and
military exchange classes of trade, and internationally through authorized
retailers and/or distributors in selected foreign markets. Specially created
collectible products are distributed both domestically and in selected foreign
markets through the Segment's direct response/mail-order division.
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Fine china and crystal products are marketed under both the Lenox and Gorham
trademarks. Contemporary dinnerware, glassware and flatware products are
marketed under the Dansk trademark. Sterling silver flatware and giftware and
stainless steel flatware products are marketed under both the Gorham and Kirk
Stieff trademarks. Kirk Stieff also markets pewter and silver-plated giftware.
Luggage, business cases, and personal accessories are marketed under the
Hartmann, Wings and Crouch & Fitzgerald trademarks. The direct response/mail-
order sales in the United States of specially designed collectibles are marketed
under the Lenox, Princeton Gallery and Gorham trademarks while such sales abroad
are marketed primarily under the Brooks & Bentley trademark.
The Lenox, Dansk, Gorham, and Hartmann brand names hold significant positions in
their industries. The Segment has granted to a producer of high quality table
linens a license for use of the Lenox trademarks on selective fine table linens,
subject to the terms of a licensing agreement.
The Segment believes that it is the largest domestic manufacturer and marketer
of fine china dinnerware, fine crystal stemware, and pewter giftware, and the
only significant domestic manufacturer of fine quality china giftware. The
Segment is also a leading manufacturer and distributor of fine quality luggage,
business cases, and personal leather accessories. The Segment competes with a
number of other companies and is subject to intense foreign competition in the
marketing of its fine china and contemporary dinnerware, crystal stemware and
giftware, and luggage products.
In the Segment's china and crystal businesses, competition is based primarily on
quality, design, brand, style, product appeal, consumer satisfaction, and price.
In its luggage, business case and personal leather accessories business,
competition is based primarily on brand awareness, quality, design, style, and
price. In its direct response/mail-order business, the most important
competitive factors are the brand, product appeal, design, sales/marketing
program, service, and price of the products. In its sterling silver, silver-
plated, and stainless steel business, competition is based primarily on price,
with quality, design, brand, style, product appeal, and consumer satisfaction
also being factors. In its pewter business, competition is based primarily on
quality, design, brand, and delivery, with price being a less significant
factor.
Clay is the principal raw material used to manufacture china products and silica
is the principal raw material used to manufacture crystal products. Leather and
nylon fabric are the principal raw materials used to manufacture luggage and
business cases. Fine silver is the principal raw material used to manufacture
sterling silver giftware and flatware products, and tin is the principal raw
material used to manufacture pewter products. It is anticipated that raw
materials used by the Segment will be in adequate supply. The acquisition price
of fine silver and tin is, however, influenced significantly by world-wide
economic events and commodity trading.
Sales of certain Segment products are traditionally greater in the second
quarter of the fiscal year, primarily because of seasonal holiday buying.
Other Segment
This segment was discontinued effective November 1, 1993.
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Other Information
As of April 30, 1995, the company employs approximately 7,300 persons, including
900 employed on a part-time basis.
The company is an equal opportunity employer and recruits and places employees
without regard to race, color, national origin, sex, age, religion, disability,
or veteran status.
The company believes its employee relations are good.
For information on the effects of compliance with federal, state, and local
environmental regulations, refer to Note 13, "Environmental," on page 37 of the
company's 1995 Annual Report to Stockholders, which information is incorporated
herein by reference in response to Item 8.
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Item 2. Properties
- ------- ----------
The corporate offices consist of office buildings, including renovated historic
structures, all located in Louisville, Kentucky.
Significant properties by business segments are as follows:
Wines and Spirits Segment
- -------------------------
The facilities of the Wines and Spirits Segment are shown below. The owned
facilities are held in fee simple.
Owned facilities:
. Production facilities:
- Distilled Spirits and Wines:
- Lynchburg, Tennessee
- Louisville, Kentucky
- Collingwood, Ontario
- Shively, Kentucky
- Frederiksted, St. Croix, U.S. Virgin Islands
- Mendocino County, California
- Monterey County, California
- Oak Barrels:
- Louisville, Kentucky
- Mendocino County, California
- Plastic Closures and Plastic Bottles:
- Louisville, Kentucky
. Bottling facilities:
- Lynchburg, Tennessee
- Louisville, Kentucky
- Frederiksted, St. Croix, U.S. Virgin Islands
- Monterey County, California
. Warehousing facilities:
- Lynchburg, Tennessee
- Louisville, Kentucky
- Collingwood, Ontario
- Shively, Kentucky
- Monterey County, California
- Mendocino County, California
Leased facilities:
. Production and bottling facility in Dublin, Ireland
. Wine production, warehousing and bottling facility in Mendocino County,
California
. Vineyards in Monterey County, California
The company believes that the productive capacities of the Wines and Spirits
Segment are adequate for the business, and such facilities are maintained in a
good state of repair.
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Consumer Durables Segment
- -------------------------
The facilities of the Consumer Durables Segment are shown below. The owned
facilities are held in fee simple.
Owned facilities:
. Office facilities:
- Lenox corporate - Lawrenceville, New Jersey
- Headquarters for Lenox Direct Response/Mail-Order
Division - Langhorne, Pennsylvania
. Production and office facilities:
- Lenox - Pomona, New Jersey (includes retail store); Oxford,
North Carolina;
Kinston, North Carolina; and Mt. Pleasant, Pennsylvania
(includes retail store)
- Gorham - Smithfield, Rhode Island
- Hartmann - Lebanon, Tennessee (includes retail store)
. Warehousing facilities:
- Lenox/Dansk/Gorham - Williamsport, Maryland
Leased facilities:
. Office facilities:
- Lenox Manufacturing - Egg Harbor Township, New Jersey
- Dansk headquarters - Harrison, New York
- Lenox corporate - Lawrenceville, New Jersey
. Production/Warehousing/Office facilities:
- Kirk Stieff - Baltimore City, Maryland (includes retail store)
. Warehousing facilities:
- Lenox - South Brunswick, New Jersey (includes retail stores);
Oxford, North Carolina; Kinston, North Carolina; and Mt.
Pleasant, Pennsylvania
- Hartmann - Lebanon, Tennessee
. Retail stores:
- The segment operates 22 Lenox China Outlet stores in 16 states. The
Segment also operates 48 Dansk Outlet stores in 29 states, 7 Dansk
Lifestyle stores in 6 states and 8 Gorham Outlet stores in 7 states.
In addition, the Segment operates 2 Crouch & Fitzgerald luggage stores
in 2 states.
The lease terms expire at various dates and are generally renewable, except for
the Crouch & Fitzgerald store leases.
The company is of the opinion that the Segment's facilities are in good
condition and are adequate for the business.
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Item 3. Legal Proceedings
- ------- -----------------
(a) Adams, et al. v. Brown-Forman Corporation (U.S. District Court, Middle
District of Florida, Tampa Division):
As previously reported, Brown-Forman Corporation was a defendant
in a number of cases, consolidated for trial in federal district court
in Tampa, Florida, alleging age discrimination as a result of a 1986
company reorganization. The case has been resolved in a manner that
will not have a material adverse effect on the company's financial
position or results of operations. As part of the resolution, all
claims against the company have been dismissed.
(b) Brune v. Brown-Forman Corporation (214th District Court, Neuces
County, Texas):
As previously reported, Brown-Forman Corporation was sued by the
estate of Marie Brinkmeyer, an 18 year old college student who died
after consuming massive quantities of beverage alcohol, including Pepe
Lopez Tequila (a Brown-Forman product.) A jury determined Brown-
Forman to be 35% responsible for Marie's death and Marie to be 65%
responsible.
The Texas Court of Appeals reversed the jury award against Brown-
Forman and dismissed the plaintiff's claims in their entirety, holding
that the Company had no legal duty to warn consumers of the well-known
risks of abusive overconsumption of beverage alcohol.
On April 27, 1995, the Texas Supreme Court denied the plaintiff's
petition for review. The judgment of the Texas Court of Appeals in
favor of Brown-Forman is now final and the case is concluded.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
None.
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<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF THE REGISTRANT
- ------------------------------------
Principal Occupation and
Name Age Business Experience Family Relationship
- ---------------------- --- ------------------------ --------------------
<S> <C> <C> <C>
W. L. Lyons Brown, Jr. 58 Chairman of the company Brother to Owsley
since July, 1993. Brown II;
Chairman and Chief Cousin to Owsley
Executive Officer of the Brown Frazier
company from May 1983 to
July 1993.
Owsley Brown II 52 President and Chief Brother to W. L.
Executive Officer Lyons Brown, Jr.;
of the company since Cousin to Owsley
July 1993. President Brown Frazier
of the company from July
1987 to July 1993.
Owsley Brown Frazier 59 Vice Chairman of the Cousin to W. L.
company since August Lyons Brown, Jr.
1983. and Owsley Brown II
William M. Street 56 Vice Chairman of the None
company since July
1987.
Steven B. Ratoff 52 Executive Vice None
President and Chief
Financial Officer of
the company since
December 1994. Private
investor in a number
of small privately-held
companies from February
1992 to November 1994.
Senior Vice President
and Chief Financial
Officer for
Pharmaceutical Group
of Bristol-Myers Squibb
from January 1990 to
January 1992.
John P. Bridendall 45 Senior Vice President None
and Director of
Corporate Development
since July 1987.
Russell C. Buzby 61 Senior Vice President None
and Executive Director
of Human Resources and
Information Services
since July 1987.
Michael B. Crutcher 51 Senior Vice President, None
General Counsel, and
Secretary since May 1989.
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C> <C>
Malcolm Jozoff (1) 55 Chairman and Chief Executive Officer None
of Lenox, Incorporated (a subsidiary of
the company) since October 1993.
Independent consultant on marketing
and strategic planning from June 1992
to October 1993. Group Vice President,,
The Procter & Gamble Company, from
1985 to 1992, and President -- Health
Care Products, Procter & Gamble USA,
from 1991 to 1992.
Lois A. Mateus 48 Senior Vice President of Corporate None
Communications and Corporate
Services since January 1988.
</TABLE>
(1) In 1993, in connection with a civil proceeding brought by the Securities and
Exchange Commission, Mr. Jozoff consented, without admitting or denying the
allegations, to the entry of an order enjoining him from violating Section 10(b)
of the Securities Exchange Act of 1934.
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PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
- ------------------------------------------------------------------------
Matters
- -------
Except as presented below, for the information required by this item refer to
the section entitled "Quarterly Financial Information" appearing on the
"Highlights" page of the 1995 Annual Report to Stockholders, which information
is incorporated herein by reference.
Holders of record of Common Stock at May 25, 1995:
Class A Common Stock (Voting) 2,870
Class B Common Stock (Nonvoting) 5,018
The principal market for Brown-Forman Corporation common shares is the New York
Stock Exchange.
Item 6. Selected Financial Data
- -------------------------------
For the information required by this item, refer to the section entitled
"Consolidated Selected Financial Data" appearing on pages 18 and 19 of the 1995
Annual Report to Stockholders, which information is incorporated herein by
reference in response to Item 8.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
- -------------------------------------------------------------------------------
of Operations
- -------------
For the information required by this item, refer to the section entitled
"Financial Review" appearing on pages 22 through 26 of the 1995 Annual Report to
Stockholders, which information is incorporated herein by reference in response
to Item 8.
Item 8. Financial Statements and Supplementary Data
- ---------------------------------------------------
For the information required by this item, refer to the Report of Management,
Consolidated Financial Statements, Notes to Consolidated Financial Statements,
and Report of Independent Accountants appearing on pages 17 and 27 through 38 of
the 1995 Annual Report to Stockholders, which information is incorporated herein
by reference. For selected quarterly financial information, refer to the
section entitled "Quarterly Financial Information" appearing on the "Highlights"
page of the 1995 Annual Report to Stockholders, which information is
incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants on Accounting and
- -----------------------------------------------------------------------
Financial Disclosure
- --------------------
None.
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PART III
Item 10. Directors and Executive Officers of the Registrant
- -----------------------------------------------------------
For the information required by this item, refer to the following sections of
the registrant's definitive proxy statement for the Annual Meeting of
Stockholders to be held July 27, 1995, which information is incorporated herein
by reference: (a) "Election of Directors" on page 1 through the footnote on
page 2 (for information on directors); and (b) the last paragraph on page 4 (for
information on delinquent filings). Also, see the information with respect to
"Executive Officers of the Registrant" under Part I hereof, which information is
incorporated herein by reference.
Item 11. Executive Compensation
- -------------------------------
For the information required by this item, refer to the section entitled
"Executive Compensation" on pages 5 through 16 of the registrant's definitive
proxy statement for the Annual Meeting of Stockholders to be held July 27, 1995,
which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
For the information required by this item, refer to the section entitled
"Security Ownership of Certain Beneficial Owners and Management" appearing on
pages 3 and 4 of the registrant's definitive proxy statement for the Annual
Meeting of Stockholders to be held July 27, 1995, which information is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
For the information required by this item, refer to the section entitled
"Transactions with Management" appearing on page 17 of the registrant's
definitive proxy statement for the Annual Meeting of Stockholders to be held
July 27, 1995, which information is incorporated herein by reference.
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- -------------------------------------------------------------------------
(a) 1 and 2 - Index to Consolidated Financial Statements and Schedules:
<TABLE>
<CAPTION>
Reference
------------------------------
Annual
Form 10-K Report to
Annual Report Stockholders
Page Page(s)
------------- ---------------
<S> <C> <C>
Incorporated by reference to the company's
Annual Report to Stockholders for the
year ended April 30, 1995:
Report of Management* -- 17
Consolidated Statement of Income
for the years ended April 30, 1995, 1994, and 1993* -- 27
Consolidated Balance Sheet at April 30, 1995, 1994, and 1993* -- 28 - 29
Consolidated Statement of Cash Flows for the years ended
April 30, 1995, 1994, and 1993* -- 30
Consolidated Statement of Stockholders' Equity
for the years ended April 30, 1995, 1994, and 1993* -- 31
Notes to Consolidated Financial Statements* -- 32 - 38
Report of Independent Accountants 38
Report of Independent Accountants S-1 --
Consolidated Financial Statement Schedule:
VIII - Valuation and Qualifying Accounts S-2 --
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission have been omitted either
because they are not required under the related instructions, because the
information required is included in the consolidated financial statements and
notes thereto, or because they are inapplicable.
* Incorporated by reference to Item 8 herein.
(a) 3 - Exhibits:
Filed Herewith:
Exhibit Index
- --------------
4(a) Credit agreement dated as of November 30, 1994, among the company and a
group of United States and international banks.
10(a) Description of compensation arrangement with W. L. Lyons Brown, Jr.
13 Company's Annual Report to Stockholders for the year ended April 30,
1995, but only to the extent set forth in Items 1, 3, 5, 6, 7, and 8 of
the company's Annual Report on Form 10-K for the year ended April 30,
1995.
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21 Subsidiaries of the Registrant.
23 Consent of Coopers & Lybrand L.L.P. independent accountants.
27 Financial Data Schedule (not considered to be filed).
Previously Filed:
Exhibit Index
- -------------
3(a) Restated Certificate of Incorporation of registrant which is incorporated
herein by reference to Brown-Forman Corporation's 10-K filed on July 19,
1994.
3(b) Certificate of Amendment to Restated Certificate of Incorporation of
registrant which is incorporated herein by reference to Brown-Forman
Corporation's 10-K filed on July 19, 1994.
3(c) Certificate of Ownership and Merger of Brown-Forman Corporation into
Brown-Forman, Inc. which is incorporated herein by reference to Brown-
Forman Corporation's 10-K filed on July 19, 1994.
3(d) Certificate of Amendment to Restated and Amended Certificate of
Incorporation of Brown-Forman Corporation which is incorporated herein by
reference to Brown-Forman Corporation's 10-K filed on July 19, 1994.
3(e) The by-laws of registrant, as amended on May 25, 1988, which is
incorporated herein by reference to Brown-Forman Corporation's 10-K filed
on July 26, 1993.
4(b) The Form of Indenture dated as of March 1, 1994 between the company and
The First National Bank of Chicago, as Trustee, which is incorporated
herein by reference to Brown-Forman Corporation's Form S-3 (Registration
No. 33-52551) filed on March 8, 1994.
10(b) Brown-Forman Management Incentive Compensation Plan which is
incorporated herein by reference to Brown-Forman Corporation's 10-K filed
on July 19, 1994.
10(c) Brown-Forman Corporation Restricted Stock Plan which is incorporated
herein by reference to
Brown-Forman Corporation's 10-K filed on July 19, 1994.
10(d) Brown-Forman Corporation Supplemental Excess Retirement Plan, which is
incorporated herein by reference to Brown-Forman Corporation's 10-K filed
on July 23, 1990.
10(e) Brown-Forman Corporation Stock Appreciation Rights Plan, which is
incorporated herein by reference to Brown-Forman Corporation's 10-K filed
on July 23, 1990.
10(f) A description of the Brown-Forman Savings Plan is incorporated herein
by reference to page 10 of the registrant's definitive proxy statement
for the Annual Meeting of Stockholders to be held on July 27, 1995.
10(g) A description of the Brown-Forman Flexible Reimbursement Plan is
incorporated herein by reference to page 11 of the registrant's
definitive proxy statement for the Annual Meeting of Stockholders to be
held on July 27, 1995.
(b) No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
BROWN-FORMAN CORPORATION
------------------------
(Registrant)
/s/ Owsley Brown II
-------------------
Date: May 25, 1995 By: Owsley Brown II
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities on May 25, 1995 as indicated:
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Geo. Garvin Brown III /s/ W. L. Lyons Brown, Jr. /s/ Owsley Brown Frazier
- ------------------------- -------------------------- ------------------------
By: Geo. Garvin Brown III By: W. L. Lyons Brown, Jr. By: Owsley Brown Frazier
Director Director and Chairman Director, Vice Chairman
of the Board of the Board
/s/ Richard P. Mayer /s/ Stephen E. O'Neil /s/ John S. Speed
- -------------------- --------------------- -----------------
By: Richard P. Mayer By: Stephen E. O'Neil By: John S. Speed
Director Director Director
/s/ William M. Street /s/ James S. Welch /s/ Owsley Brown II
- -------------------- ------------------ -------------------
By: William M. Street By: James S. Welch By: Owsley Brown II
Director, Vice Chairman Director Director, President and
of the Board Chief Executive Officer
/s/ Steven B. Ratoff /s/ Charles E. Muntan
- -------------------- ---------------------
By: Steven B. Ratoff By: Charles E. Muntan
Executive Vice President and Vice President and
Chief Financial Officer Controller (Principal
(Principal Financial Officer) Accounting Officer)
</TABLE>
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REPORT OF INDEPENDENT ACCOUNTANTS
Brown-Forman Corporation
Louisville, Kentucky
We have audited the consolidated financial statements of Brown-Forman
Corporation and Subsidiaries as of April 30, 1995, 1994, and 1993, and for the
years then ended, which financial statements are included on pages 27 through 38
of the 1995 Annual Report to Stockholders of Brown-Forman Corporation and
incorporated by reference herein. We have also audited the financial statement
schedule listed in the index on page 14 of this Form 10-K. These financial
statements and financial statement schedule are the responsibility of the
company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Brown-Forman
Corporation and Subsidiaries as of April 30, 1995, 1994, and 1993 and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles. In addition,
in our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
As discussed in Notes 2 and 15 to the consolidated financial statements, in 1994
the company adopted changes in its methods of accounting for postretirement
benefits other than pensions, postemployment benefits, and contributions.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Louisville, Kentucky
June 8, 1995
S-1
<PAGE>
BROWN-FORMAN CORPORATION AND SUBSIDIARIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended April 30, 1995, 1994, and 1993
(Expressed in thousands)
<TABLE>
<CAPTION>
Col. A Col. B Col. C Col. D Col. E
------ ------ ------ ------ ------
Additions
---------
<S> <C> <C> <C> <C> <C>
Balance at Charged to Balance at
Beginning Costs Charged to End
Description of Period and Expenses Other Accounts Deductions of Period
----------- --------- ------------ -------------- ---------- ----------
1995
Allowance for Doubtful Accounts $12,006 $ 9,343 $ -- $7,288/(2)/ $14,061
1994
Allowance for Doubtful Accounts $10,432 $10,538 $ -- $8,964/(2)/ $12,006
1993
Allowance for Doubtful Accounts $ 7,970 $ 8,889 $307/(1)/ $6,734/(2)/ $10,432
</TABLE>
/(1)/ Relates to businesses acquired during the year.
/(2)/ Doubtful accounts written off, net of recoveries.
S-2
<PAGE>
EXHIBIT 4(a)
EXECUTION COPY
CREDIT AGREEMENT
Dated as of November 30, 1994
Among
BROWN-FORMAN CORPORATION,
THE BANKS NAMED HEREIN,
THE FIRST NATIONAL BANK OF CHICAGO,
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
As Co-Agents,
And
THE FIRST NATIONAL BANK OF CHICAGO,
As Administrative Agent
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I DEFINITIONS.................................................................................. 1
ARTICLE II THE FACILITY................................................................................. 12
2.1. The Facility......................................................................... 12
2.1.1. Description of Facility.................................................... 12
2.1.2. Facility Amount............................................................ 13
2.1.3. Availability of Facility................................................... 13
2.2. Ratable Advances..................................................................... 13
2.2.1. Ratable Advances........................................................... 13
2.2.2. Ratable Advance Rate Options............................................... 13
2.2.3 Method of Selecting Rate Options and Interest Periods for
Ratable Advances........................................................... 13
2.2.4. Conversion and Continuation of Outstanding Ratable
Advances................................................................... 14
2.3. Competitive Bid Advances............................................................. 14
2.3.1. Competitive Bid Option..................................................... 14
2.3.2. Competitive Bid Quote Request.............................................. 15
2.3.3. Invitation for Competitive Bid Quotes...................................... 15
2.3.4. Submission and Contents of Competitive Bid Quotes.......................... 15
2.3.5. Notice to Company.......................................................... 17
2.3.6. Acceptance and Notice by Company........................................... 17
2.3.7. Allocation by Administrative Agent......................................... 18
2.3.8. Administration Fee......................................................... 18
2.4. General Facility Terms............................................................... 18
2.4.1. Method of Borrowing........................................................ 18
2.4.2. Minimum Amount of Each Advance............................................. 18
2.4.3. Required Payments; Termination............................................. 19
2.4.4. Optional Principal Payments................................................ 19
2.4.5. Fees; Pricing Schedule..................................................... 19
2.4.6. Reduction or Termination of the Aggregate Commitment....................... 20
2.4.7. Interest Periods........................................................... 21
2.4.8. Rate after Maturity........................................................ 21
2.4.9. Interest Payment Dates; Interest and Fee Basis............................. 21
2.4.10. Method of Payment.......................................................... 21
2.4.11. Notes; Telephonic Notices.................................................. 22
2.4.12. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions...................................................... 22
2.4.13. Lending Installations...................................................... 22
2.4.14. Non-Receipt of Funds by the Administrative Agent........................... 23
2.4.15. Withholding Tax Exemption.................................................. 23
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE III CHANGE IN CIRCUMSTANCES.................................. 24
3.1. Yield Protection................................... 24
3.2. Capital Adequacy................................... 24
3.3. Availability of Fixed Rate Options................. 25
3.4. Funding Indemnification............................ 26
3.5. Bank Certificates; Survival of Indemnity........... 26
ARTICLE IV CONDITIONS PRECEDENT..................................... 26
4.1. Initial Advance.................................... 26
4.2. Each Advance....................................... 27
ARTICLE V REPRESENTATIONS AND WARRANTIES........................... 28
5.1. Corporate Existence and Standing................... 28
5.2. Authorization and Validity......................... 28
5.3. No Conflict; Government Consent.................... 28
5.4. Financial Statements............................... 29
5.5. Material Adverse Change............................ 29
5.6. Taxes.............................................. 29
5.7. Litigation......................................... 29
5.8. Subsidiaries....................................... 29
5.9. ERISA.............................................. 29
5.l0. Accuracy of Information............................ 30
5.11. Compliance With Laws............................... 30
5.12. Regulations U and X................................ 30
5.13. Investment Company Act............................. 30
5.14. Public Utility Holding Company Act................. 30
ARTICLE VI COVENANTS................................................ 30
6.1. Financial Reporting................................ 30
6.2. Use of Proceeds.................................... 32
6.3. Notice of Default.................................. 32
6.4. Corporate Existence and Standing................... 32
6.5. Taxes.............................................. 32
6.6. Insurance.......................................... 32
6.7. Compliance with Laws............................... 32
6.8. Inspection......................................... 32
6.9. Merger............................................. 33
6.10. Sale and Leaseback................................. 33
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
6.11. Liens......................................................... 34
6.12. Affiliates.................................................... 35
6.13. Total Indebtedness Ratio...................................... 35
6.14. Net Worth..................................................... 35
6.15. Notification of Change in Ratings............................. 36
ARTICLE VII DEFAULTS.............................................................. 36
ARTICLE VIII ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES........................ 38
8.1. Acceleration.................................................. 38
8.2. Amendments.................................................... 38
8.3. Preservation of Rights........................................ 38
ARTICLE IX GENERAL PROVISIONS.................................................... 39
9.1. Survival of Representations................................... 39
9.2. Governmental Regulation....................................... 39
9.3. Taxes......................................................... 39
9.4. Headings...................................................... 39
9.5. Entire Agreement.............................................. 39
9.6. Several Obligations........................................... 39
9.7. Expenses; Indemnification..................................... 40
9.8. Number of Documents........................................... 40
9.9. Accounting.................................................... 40
9.10. Severability of Provisions.................................... 40
9.11. Nonliability of Banks......................................... 40
9.12. Nonreliance................................................... 41
9.13. Confidentiality............................................... 41
ARTICLE X THE AGENTS............................................................ 41
10.1. Appointment................................................... 41
10.2. Powers........................................................ 41
10.3. General Immunity.............................................. 41
10.4. No Responsibility for Loans, Recitals, Etc.................... 41
10.5. Action on Instructions of Banks............................... 42
10.6. Employment of Administrative Agent and Counsel................ 42
10.7. Reliance on Documents; Counsel................................ 42
10.8. Administrative Agent's Reimbursement and Indemnification...... 42
10.9. Rights as a Bank.............................................. 43
10.l0. Bank Credit Decision.......................................... 43
10.11. Successor Administrative Agent................................ 43
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE XI SETOFF; RATABLE PAYMENTS.................................... 44
11.1. Setoff.............................................. 44
11.2. Ratable Payments.................................... 44
ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS........... 45
12.1. Successors and Assigns.............................. 45
12.2. Participations...................................... 45
12.2.1. Permitted Participants; Effect........... 45
12.2.2. Voting Rights............................ 45
12.3. Dissemination of Information........................ 46
12.4. Tax Treatment....................................... 46
ARTICLE XIII NOTICES..................................................... 46
13.1. Giving Notice....................................... 46
13.2. Change of Address................................... 46
ARTICLE XIV COUNTERPARTS................................................ 47
ARTICLE XV CHOICE OF LAW; JURISDICTION; JURY TRIAL WAIVER.............. 47
15.1. CHOICE OF LAW....................................... 47
15.2. CONSENT TO JURISDICTION............................. 47
15.3. WAIVER OF JURY TRIAL................................ 48
</TABLE>
iv
<PAGE>
EXHIBIT "A" PROMISSORY NOTE (Ratable Loans)............................ 55
EXHIBIT "B" PROMISSORY NOTE (Competitive Bid Loans).................... 58
EXHIBIT "C" COMPETITIVE BID QUOTE REQUEST.............................. 61
EXHIBIT "D" INVITATION FOR COMPETITIVE BID QUOTES...................... 62
EXHIBIT "E" COMPETITIVE BID QUOTE...................................... 63
EXHIBIT "F" OPINION OF COUNSEL......................................... 64
EXHIBIT "G" LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION............. 66
SCHEDULE "1" SUBSIDIARIES............................................... 67
v
<PAGE>
CREDIT AGREEMENT
This Agreement, dated as of November 30, 1994 is among BROWN-FORMAN
CORPORATION, a Delaware corporation; THE BANKS NAMED HEREIN; MORGAN GUARANTY
TRUST COMPANY OF NEW YORK and THE FIRST NATIONAL BANK OF CHICAGO, as Co-Agents;
and THE FIRST NATIONAL BANK OF CHICAGO, as Administrative Agent. The parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Absolute Rate" means, with respect to an Absolute Rate Loan made by a
given Bank for the relevant Absolute Rate Interest Period, the rate of interest
per annum (rounded upwards to the next higher 1/100 of 1%) offered by such Bank
and accepted by the Company.
"Absolute Rate Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Absolute Rate Loans made by some or all of the
Banks to the Company at the same time and for the same Interest Period.
"Absolute Rate Auction" means a solicitation of Competitive Bid Quotes
setting forth Absolute Rates pursuant to Section 2.3.
"Absolute Rate Interest Period" means, with respect to an Absolute Rate
Advance, a period of not less than fourteen and not more than ninety days
commencing on a Business Day selected by the Company pursuant to this Agreement.
If such Absolute Rate Interest Period would end on a day which is not a Business
Day, such Absolute Rate Interest Period shall end on the next succeeding
Business Day.
"Absolute Rate Loan" means a Loan which bears interest at the Absolute
Rate.
"Acquisition" means any transaction, or any series of related transactions,
consummated on or after the date of this Agreement, by which the Company or any
of its Subsidiaries (i) acquires any going business or all or substantially all
of the assets of any firm, corporation or division thereof, whether through
purchase of assets, merger or otherwise or (ii) directly or indirectly acquires
(in one transaction or as the most recent transaction in a series of
transactions) at least a majority (in number of votes) of the securities of a
corporation which have ordinary voting power for the election of directors
(other than securities having such power only by reason of the happening of a
contingency), or a majority (by percentage or voting power) of the outstanding
partnership interests of a partnership, or a majority (by percentage or voting
power) of the outstanding equity interests of any other entity.
<PAGE>
"Administrative Agent" means The First National Bank of Chicago in its
capacity as administrative agent for the Banks pursuant to Article X, and not in
its individual capacity as a Bank, and any successor Administrative Agent
appointed pursuant to Article X.
"Advance" means a Ratable Advance or a Competitive Bid Advance, or both, as
the case may be.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under direct or indirect common control with such
Person. A Person shall be deemed to control another Person if the controlling
Person owns 10% or more of any class of voting securities (or other ownership
interests) of the controlled Person or possesses, directly or indirectly, the
power to direct or cause the direction of the management or policies of the
controlled Person, whether through ownership of stock, by contract or otherwise.
"Aggregate Commitment" means the aggregate of the Commitments of all the
Banks hereunder, as from time to time reduced pursuant to the terms hereof.
"Agreement" means this credit agreement, as it may be amended or modified
from time to time.
"Agreement Accounting Principles" means generally accepted accounting
principles in effect at the time of the preparation of the financial statements
referred to in Section 5.4, applied in a manner consistent with that used in
preparing such statements.
"Applicable Margin" means (i) for any day on which any Status Level other
than Level IV Status exists, 0.20 of 1% per annum and (ii) on any day on which
Level IV Status exists, 0.30 of 1% per annum. Reference is hereby made to the
Pricing Schedule set forth in Section 2.4.5(c) for an illustration of the
relationship between the Applicable Margin and the Status Levels.
"Article" means an article of this Agreement.
"Attributable Debt" means, with respect to any Sale and Lease-Back
Transaction, as of any particular time, the present value, discounted at the
rate of interest implicit in the terms of the lease, of the obligations of the
lessee under such lease for net rental payments during the remaining term of the
lease (including any period for which such lease has been extended or may, at
the option of the Company, be extended).
"Authorized Officer" means any of the Chairman of the Board, any Vice
Chairman, the President, any Senior Vice President, any Vice President, the
Secretary, the Treasurer, or any Assistant Treasurer of the Company, acting
singly.
"Banks" means the lending institutions listed on the signature pages of
this Agreement and their respective successors and assigns.
2
<PAGE>
"Borrowing Date" means a date on which an Advance is made hereunder.
"Borrowing Notice" means a Ratable Borrowing Notice or a Competitive Bid
Borrowing Notice, or both, as the case may be.
"Business Day" means (i) with respect to a borrowing, payment or rate
selection of Eurodollar Advances or Eurodollar Bid Rate Advances, a day other
than Saturday or Sunday on which banks generally are open in Chicago and New
York for the conduct of substantially all of their commercial lending activities
and on which dealings in U.S. dollars are carried on in the London interbank
market and (ii) for all other purposes, a day other than Saturday or Sunday on
which banks generally are open in Chicago and New York for the conduct of
substantially all of their commercial lending activities.
"Capitalized Lease" of a Person means any lease of Property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with Agreement Accounting Principles.
"Capitalized Lease Obligations" of a Person means the amount of the
obligations of such Person under Capitalized Leases which would be shown as a
liability on a balance sheet of such Person, prepared in accordance with
Agreement Accounting Principles.
"Change in Law" means (i) any change after the date of this Agreement in
the Risk-Based Capital Guidelines or (ii) any adoption of or change in any other
law, governmental or quasi-governmental rule, regulation, policy, guideline,
interpretation, or directive (whether or not having the force of law) after the
date of this Agreement which affects the amount of capital required or expected
to be maintained by any Bank or any Lending Installation or any corporation
controlling any Bank.
"Co-Agents" means, collectively, First Chicago and Morgan Guaranty Trust
Company of New York in their respective capacities as co-agents for the Banks
pursuant to Article X, and not in their individual capacities as Banks; "Co-
Agent" means any one of the Co-Agents.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" means, for each Bank, the obligation of the Bank to make Loans
not exceeding the amount set forth opposite its signature below, as such amount
may be modified from time to time pursuant to Articles II and VII hereunder.
"Company" means Brown-Forman Corporation, a Delaware corporation, and its
successors and assigns.
3
<PAGE>
"Competitive Bid Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Competitive Bid Loans made by some or all of the
Banks to the Company at the same time, at the same interest basis, and for the
same Interest Period.
"Competitive Bid Borrowing Notice" is defined in Section 2.3.6.
"Competitive Bid Loan" means a Eurodollar Bid Rate Loan or an Absolute Rate
Loan, or both, as the case may be.
"Competitive Bid Margin" means the margin above or below the applicable
Eurodollar Base Rate offered for a Eurodollar Bid Rate Loan, expressed as a
percentage (rounded upwards to the next higher 1/100 of 1%) to be added or
subtracted from such Eurodollar Base Rate.
"Competitive Bid Note" means a promissory note in substantially the form of
Exhibit "B" hereto, with appropriate insertions, duly executed and delivered to
the Administrative Agent by the Company and payable to the order of a Bank,
including any amendment, modification, renewal or replacement of such promissory
note.
"Competitive Bid Quote" means a Competitive Bid Quote substantially in the
form of Exhibit "E" hereto completed and delivered by a Bank to the
Administrative Agent in accordance with Section 2.3.4.
"Competitive Bid Quote Request" means a Competitive Bid Quote Request
substantially in the form of Exhibit "C" hereto completed and delivered by the
Company to the Administrative Agent in accordance with Section 2.3.2.
"Condemnation" is defined in Section 7.8.
"Consolidated Assets" means all of the assets of the Company and its
Subsidiaries which in accordance with Agreement Accounting Principles would be
shown as assets on a consolidated balance sheet of the Company and its
Subsidiaries.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Company or any of its Subsidiaries, are treated as a
single employer under Section 414 of the Code.
"Conversion/Continuation Notice" is defined in Section 2.2.4.
"Corporate Base Rate" means the rate per annum calculated by the
Administrative Agent to be the arithmetic average of the rates reported to the
Administrative Agent by each Reference Bank as its corporate base rate of
interest or prime rate of interest, changing when and as said corporate base
rate or prime rate changes.
4
<PAGE>
"Default" means an event described in Article VII.
"ERISA" means the Employee Retirement Income Security Act of l974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Advance" means a Ratable Advance which bears interest at a
Eurodollar Rate.
"Eurodollar Auction" means a solicitation of Competitive Bid Quotes setting
forth Eurodollar Bid Rates based on the Eurodollar Base Rate pursuant to Section
2.3.
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance or
Eurodollar Bid Rate Advance, as the case may be, for the relevant Eurodollar
Interest Period or Eurodollar Bid Rate Interest Period, as the case may be, the
rate determined by the Administrative Agent to be the arithmetic average of the
rates reported to the Administrative Agent by each Reference Bank as the rate at
which deposits in U.S. dollars are offered by such Reference Bank in the case of
a Eurodollar Advance, or in the case of a Eurodollar Bid Rate Loan, by a Bank(s)
submitting a Competitive Bid Quote, to first-class banks in the London interbank
market at approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Eurodollar Interest Period or Eurodollar Bid Rate Interest
Period, as the case may be, in the approximate amount of such Reference Bank's
or such Bank's, as the case may be, relevant Eurodollar Loan or Eurodollar Bid
Rate Loan, as the case may be, and having a maturity approximately equal to such
Eurodollar Interest Period or Eurodollar Bid Rate Interest Period, as the case
may be. If any Reference Bank fails to provide such quotation to the
Administrative Agent, then the Administrative Agent shall determine the
Eurodollar Base Rate on the basis of the quotations of the remaining Reference
Bank(s).
"Eurodollar Bid Rate" means, with respect to a Eurodollar Bid Rate Loan
made by a given Bank for the relevant Eurodollar Bid Rate Interest Period, the
sum of (a) the Eurodollar Base Rate and (b) the Competitive Bid Margin offered
by such Bank and accepted by the Company.
"Eurodollar Bid Rate Advance" means a Competitive Bid Advance which bears
interest at a Eurodollar Bid Rate.
"Eurodollar Bid Rate Interest Period" means, with respect to a Eurodollar
Bid Rate Advance, a period of one, two, three or six months commencing on a
Business Day selected by the Company pursuant to this Agreement. Such Eurodollar
Bid Rate Interest Period shall end on (but exclude) the day in the next, second,
third or sixth succeeding calendar month, as the case may be, which corresponds
numerically to the beginning day of such Eurodollar Bid Rate Interest Period;
provided, however, that if there is no such numerically corresponding day in
such succeeding month, such Eurodollar Bid Rate Interest Period shall end on the
last Business Day of such succeeding month. If a Eurodollar Bid Rate Interest
Period would
5
<PAGE>
otherwise end on a day which is not a Business Day, such Eurodollar Bid Rate
Interest Period shall end on the next succeeding Business Day; provided,
however, that if said next succeeding Business Day falls in a new month, such
Eurodollar Bid Rate Interest Period shall end on the immediately preceding
Business Day. Any Eurodollar Bid Rate Interest Period that begins before the
Termination Date and would otherwise end after the Termination Date shall end on
the Termination Date.
"Eurodollar Bid Rate Loan" means a Loan which bears interest at the
Eurodollar Bid Rate.
"Eurodollar Interest Period" means, with respect to a Eurodollar Advance, a
period of one, two, three or six months commencing on a Business Day selected by
the Company pursuant to this Agreement. Such Eurodollar Interest Period shall
end on (but exclude) the day in the next, second, third or sixth succeeding
calendar month, as the case may be, which corresponds numerically to the
beginning day of such Eurodollar Interest Period, provided, however, that if
there is no such numerically corresponding day in such succeeding month, such
Eurodollar Interest Period shall end on the last Business Day of such succeeding
month. If a Eurodollar Interest Period would otherwise end on a day which is not
a Business Day, such Eurodollar Interest Period shall end on the next succeeding
Business Day, provided, however, that if said next succeeding Business Day falls
in a new month, such Eurodollar Interest Period shall end on the immediately
preceding Business Day. Any Eurodollar Interest Period that begins before the
Termination Date and would otherwise end after the Termination Date shall end on
the Termination Date.
"Eurodollar Loan" means a Loan which bears interest at a Eurodollar Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Eurodollar Interest Period, the sum of (i) the quotient of (a) the
Eurodollar Base Rate applicable to that Eurodollar Interest Period, divided by
(b) one minus the Reserve Requirement (expressed as a decimal) applicable to
that Eurodollar Interest Period, plus (ii) the Applicable Margin per annum. The
Eurodollar Rate shall be rounded, if necessary, to the next higher 1/100 of 1%.
"Facility Fee" is defined in Section 2.4.5(a).
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 10:00 a.m. (Chicago
time) on such day on such transactions received by the Administrative Agent from
three Federal funds brokers of recognized standing selected by the
Administrative Agent in its sole discretion.
6
<PAGE>
"First Chicago" means The First National Bank of Chicago in its individual
capacity, and its successors and assigns.
"Fixed Rate" means the Eurodollar Rate, the Eurodollar Bid Rate or the
Absolute Rate, as the case may be.
"Fixed Rate Advance" means an Advance which bears interest at a Fixed Rate.
"Fixed Rate Loan" means a Loan which bears interest at a Fixed Rate.
"Floating Rate Advance" means a Ratable Advance which bears interest at the
Corporate Base Rate.
"Floating Rate Loan" means a Loan which bears interest at the Corporate
Base Rate.
"Form 10-K Report" is defined in Section 6.1(a).
"Form 10-Q Report" is defined in Section 6.1(b).
"Guaranties" of a Person means all guaranties and other contingent
obligations of such Person with respect to the liability of any other Person
which would be Indebtedness if the liability guaranteed by such guaranty were a
liability of such Person; provided, however, that (i) the endorsement by the
Company and the Subsidiaries of instruments for deposit or collection in the
ordinary course of its business, and (ii) Guaranties by the Company or any
Subsidiary of the Indebtedness of the Company or any other Subsidiary, as the
case may be, shall not be deemed to be a Guaranty as defined herein.
"Indebtedness" of a Person means such Person's (i) obligations for borrowed
money (including, without limitation, all notes payable and drafts accepted
representing extensions of credit and all obligations evidenced by bonds,
debentures, notes or other similar instruments), (ii) obligations representing
the deferred purchase price of property or services, other than accounts payable
arising in, and on terms customary in, the ordinary course of such Person's
business, (iii) obligations under conditional sales agreements, other title
retention agreements, and agreements creating a Lien on the property subject
thereto, (iv) Capitalized Lease Obligations, (v) obligations representing
Unfunded Liabilities, (vi) obligations that arise in connection with letters of
credit, other than commercial letters of credit arising in, and on terms
customary in, the ordinary course of such Person's business, (vii) Rate Hedging
Obligations in an aggregate amount exceeding $50,000,000 for all such Rate
Hedging Obligations, and (viii) Guaranties; excluding however, for purposes of
this definition, obligations of the Company or any Subsidiary to the Company or
any other Subsidiary.
"Interest Period" means a Eurodollar Interest Period, a Eurodollar Bid Rate
Interest Period, or an Absolute Rate Interest Period, as the case may be.
7
<PAGE>
"Invitation for Competitive Bid Quotes" means an Invitation for Competitive
Bid Quotes substantially in the form of Exhibit "D" hereto, completed and
delivered by the Administrative Agent to the Banks in accordance with Section
2.3.3.
"Lending Installation" means any office, branch, subsidiary or affiliate of
any Bank or the Administrative Agent.
"Level I Status" exists at any date if, at such date, the Company's
outstanding senior unsecured long-term debt securities are rated higher than A+
by S&P and higher than A1 by Moody's.
"Level II Status" exists at any date if, at such date, (i) the Company's
outstanding senior unsecured long-term debt securities are rated at least A+ by
S&P and A1 by Moody's and (ii) Level I Status does not exist.
"Level III Status" exists at any date if, at such date, (i) the Company's
outstanding senior unsecured long-term debt securities are rated A- or higher by
S&P and A3 or higher by Moody's and (ii) neither Level I Status nor Level II
Status exists.
"Level IV Status" exists at any date if, at such date, no other Status
Level exists.
"Lien" means any security interest, mortgage, pledge, lien, claim, charge,
encumbrance, title retention agreement, lessor's interest under a Capitalized
Lease or analogous instrument, in, of or on any Person's assets or properties in
favor of any other Person.
"Loan" means, with respect to a Bank, such Bank's portion of any Advance.
"Loan Documents" means this Agreement and the Notes.
"Material Adverse Effect" means a material adverse effect on (i) the
financial condition or results of operations of the Company and its Subsidiaries
taken as a whole, or (ii) the validity or enforceability of any of the Loan
Documents or the rights or remedies of the Administrative Agent or the Banks
thereunder.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Company or any member
of the Controlled Group is a party to which more than one employer is obligated
to make contributions.
"Net Worth" means, as of any date of determination, the consolidated net
worth of the Company and its Subsidiaries as determined in accordance with
Agreement Accounting Principles.
8
<PAGE>
"Notes" means, collectively, the Ratable Notes and the Competitive Bid
Notes; "Note" means any one of the Notes.
"Obligations" means all unpaid principal of and accrued and unpaid interest
on the Notes, all accrued and unpaid facility fees and all other obligations of
the Company to the Banks or to any Bank or to any Co-Agent or the Administrative
Agent arising under the Loan Documents.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the fifteenth day of each January, April, July and
October after the date hereof.
"PBGC" means the Pension Benefit Guaranty Corporation and its successors
and assigns.
"Person" means any corporation, natural person, firm, joint venture,
partnership, trust, unincorporated organization, enterprise, government or any
department or agency of any government.
"Plan" means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Company or any Subsidiary may have any liability.
"Principal Property" means all property located within the United States of
America directly engaged in the manufacturing activities of the Company and its
Subsidiaries, including manufacturing and processing facilities, except any such
property which the Board of Directors of the Company declares is not material to
the business of the Company and its Subsidiaries taken as a whole.
"Ratable Advance" means a borrowing hereunder consisting of the aggregate
amount of the several Ratable Loans made by the Banks to the Company at the same
time, at the same Rate Option and, in the case of Fixed Rate Advances, for the
same Interest Period.
"Ratable Borrowing Notice" is defined in Section 2.2.3.
"Ratable Loan" means a Loan made by a Bank pursuant to Section 2.2.
"Ratable Note" means a promissory note in substantially the form of Exhibit
"A" hereto, with appropriate insertions, duly executed and delivered to the
Administrative Agent by the Company for the account of a Bank and payable to the
order of such Bank in the amount of its Commitment, including any amendment,
modification, renewal or replacement of such promissory note.
9
<PAGE>
"Rate Hedging Obligations" of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (i) any and all
agreements, devices or arrangements designed to protect at least one of the
parties thereto from the fluctuations of interest rates, exchange rates or
forward rates applicable to such party's assets, liabilities or exchange
transactions, including, but not limited to, dollar-denominated or cross-
currency interest rate exchange agreements, forward currency exchange
agreements, interest rate cap or collar protection agreements, forward rate
currency or interest rate options, puts and warrants, and (ii) any and all
cancellations, buy backs, reversals, terminations or assignments of any of the
foregoing.
"Rate Option" means the Eurodollar Rate or the Corporate Base Rate.
"Reference Banks" means First Chicago and Morgan Guaranty Trust Company of
New York.
"Regulation D" means Regulation D of the Board of Governors of the Federal
Reserve System from time to time in effect and shall include any successor or
other regulation or official interpretation of said Board of Governors relating
to reserve requirements applicable to member banks of the Federal Reserve
System.
"Regulations U and X" means Regulations U and X of the Board of Governors
of the Federal Reserve System from time to time in effect and shall include any
successor or other regulation or official interpretation of said Board of
Governors relating to the extension of credit by banks for the purpose of
purchasing or carrying margin stocks applicable to member banks of the Federal
Reserve System.
"Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such Section with respect to a Plan that
would materially adversely affect the business, financial condition, or results
of operations of the Company or the ability of the Company to perform its
obligations under the Loan Documents, excluding, however, such events as to
which the PBGC by regulation waived the requirement of Section 4043(a) of ERISA
that it be notified within 30 days of the occurrence of such event; provided
that a failure to meet the minimum funding standard of Section 412 of the Code
and of Section 302 of ERISA shall be a reportable event regardless of the
issuance of any such waivers in accordance with Section 412(d) of the Code.
"Required Banks" means Banks in the aggregate having at least 67% of the
Aggregate Commitment, or, if the Aggregate Commitment shall have been terminated
pursuant to this Agreement, holding Notes evidencing at least 67% of the
aggregate outstanding principal amount of the Advances.
"Reserve Requirement" means, with respect to a Eurodollar Interest Period,
the maximum aggregate reserve requirement (including all basic, supplemental,
marginal and
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<PAGE>
other reserves) that is imposed under Regulation D on Eurocurrency liabilities
(in the case of Eurodollar Advances).
"Risk-Based Capital Guidelines" means (i) the risk-based capital guidelines
in effect in the United States on the date of this Agreement, including
transition rules, and (ii) the corresponding capital regulations promulgated by
regulatory authorities outside the United States implementing the July 1988
report of the Basle Committee on Banking Regulation and Supervisory Practices
Entitled "International Convergence of Capital Measurements and Capital
Standards," including transition rules, and any amendments to such regulations
adopted prior to the date of this Agreement.
"Sale and Lease-Back Transaction" is defined in Section 6.10.
"S&P" means Standard & Poor's Corporation.
"SEC" means the United States Securities and Exchange Commission, and any
successor thereto.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Significant Subsidiary" means each Subsidiary which is a "significant
subsidiary" as defined in Rule 1-02(v) of Regulation S-X of the SEC, as such
rule may be amended or modified and in effect from time to time.
"Single Employer Plan" means a Plan maintained by the Company or any member
of the Controlled Group for employees of the Company or any member of the
Controlled Group.
"Status Level" means any or all, as the case may be, of Level I Status,
Level II Status, Level III Status or Level IV Status.
"Subsidiary" means any corporation more than 50% of the outstanding voting
securities of which shall at the time be owned or controlled, directly or
indirectly, by the Company or by one or more Subsidiaries or by the Company and
one or more Subsidiaries, or any partnership, association, joint venture or
similar business organization which is so owned or controlled.
"Substantial Portion" means, with respect to the property of the Company
and the Subsidiaries, property which (i) represents more than 25% of the
Consolidated Assets of the Company and the Subsidiaries as would be shown in the
consolidated financial statements of the Company and the Subsidiaries as at the
beginning of the twelve-month period ending with the month in which such
determination is made, or (ii) is responsible for more than 25% of
11
<PAGE>
the consolidated net sales or of the consolidated net income of the Company and
the Subsidiaries as reflected in the financial statements referred to in clause
(i) above.
"Termination Date" means November 30, 1999 unless the Commitments are
earlier terminated pursuant to the terms of this Agreement.
"Total Indebtedness" means, at any date, the sum of all Indebtedness of the
Company and its Subsidiaries on a consolidated basis (including without
limitation the Loans).
"Transferee" is defined in Section 12.3.
"Unfunded Liabilities" means, (i) in the case of Single Employer Plans, the
amount (if any) by which the present value of all vested nonforfeitable benefits
under such Plan exceeds the fair market value of all Plan assets allocable to
such benefits, all determined as of the then most recent valuation date for such
Plan, and (ii) in the case of Multiemployer Plans, the withdrawal liability of
the Company and its Subsidiaries.
"Unmatured Default" means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.
"Usage Fee" is defined in Section 2.4.5(b).
"Wholly-Owned Subsidiary" means any Subsidiary all of the outstanding
voting securities of which shall at the time be owned or controlled, directly or
indirectly, by the Company or one or more Wholly-Owned Subsidiaries, or by the
Company and one or more Wholly-Owned Subsidiaries, or any similar business
organization which is so owned or controlled.
The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.
ARTICLE II
THE FACILITY
2.1. THE FACILITY.
2.1.1. DESCRIPTION OF FACILITY. Each Bank severally grants to the Company
a revolving credit facility pursuant to which, and upon the terms and subject to
the conditions herein set out:
(a) each Bank severally agrees to make Ratable Loans to the Company in
accordance with Section 2.2; and
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<PAGE>
(b) each Bank may, in its sole discretion, make bids to make Competitive
Bid Loans to the Company in accordance with Section 2.3.
2.1.2. FACILITY AMOUNT. Subject to cancellation and reduction in
accordance with the terms hereof, the Aggregate Commitment is $300,000,000.
Accordingly, in no event may the aggregate principal amount of all outstanding
Advances exceed the sum of $300,000,000 (less any amount by which the Aggregate
Commitment is so cancelled or reduced).
2.1.3. AVAILABILITY OF FACILITY. Subject to the terms hereof, the
Commitments to lend hereunder shall expire on the Termination Date. Subject to
the terms of this Agreement, the Company may borrow, repay and reborrow at any
time prior to the Termination Date.
2.2. RATABLE ADVANCES.
2.2.1. RATABLE ADVANCES. From and including the date of this Agreement
and prior to the Termination Date, each Bank severally agrees, on the terms and
conditions set forth in this Agreement, to make Ratable Loans to the Company
from time to time in amounts not to exceed in the aggregate at any one time
outstanding the amount of its Commitment. Each Ratable Advance hereunder shall
consist of borrowings made from several Banks ratably in proportion to the ratio
that their respective Commitments bear to the Aggregate Commitment. The Ratable
Advances shall be evidenced by the Ratable Notes.
2.2.2. RATABLE ADVANCE RATE OPTIONS. The Ratable Advances may be Floating
Rate Advances or Eurodollar Advances, or a combination thereof, selected by the
Company in accordance with Section 2.2.3.
2.2.3. METHOD OF SELECTING RATE OPTIONS AND INTEREST PERIODS FOR RATABLE
ADVANCES. The Company shall select the Rate Option and, in the case of each
Eurodollar Advance, Interest Period applicable to each Ratable Advance from time
to time. The Company shall give the Administrative Agent irrevocable notice (a
"Ratable Borrowing Notice") not later than 10:00 a.m. Chicago time on the
Borrowing Date of each Floating Rate Advance and 10:00 a.m. Chicago time on the
third Business Day prior to the Borrowing Date of each Eurodollar Advance,
specifying:
(a) the Borrowing Date, which shall be a Business Day, of such Ratable
Advance,
(b) the aggregate amount of such Ratable Advance,
(c) the Rate Option selected for such Ratable Advance, and
(d) in the case of each Fixed Rate Advance, the Interest Period
applicable thereto (which may not end after the Termination Date).
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<PAGE>
2.2.4. CONVERSION AND CONTINUATION OF OUTSTANDING RATABLE ADVANCES.
Floating Rate Advances shall continue as Floating Rate Advances unless and until
such Floating Rate Advances are converted into Eurodollar Advances. Each
Eurodollar Advance shall continue as a Eurodollar Advance until the end of the
then applicable Eurodollar Interest Period therefor, at which time such
Eurodollar Advance shall be automatically converted into a Floating Rate Advance
unless the Company shall have given the Administrative Agent a
Conversion/Continuation Notice requesting that, at the end of such Eurodollar
Interest Period, such Eurodollar Advance either continue as a Eurodollar Advance
for the same or another Eurodollar Interest Period or be converted into a
Floating Rate Advance. Subject to the terms of Section 2.4.2, the Company may
elect from time to time to convert all or any part of a Ratable Advance of one
Rate Option into a Ratable Advance of another Rate Option(s); provided that any
conversion of any Eurodollar Advance shall be made on, and only on, the last day
of the Eurodollar Interest Period applicable thereto and no portion of the
outstanding principal amount of any Ratable Advance may be continued as, or be
converted into, a Eurodollar Advance when any Default or Unmatured Default has
occurred and is continuing. The Company shall give the Administrative Agent
irrevocable notice (a "Conversion/ Continuation Notice") of each conversion of a
Ratable Advance or continuation of a Eurodollar Advance not later than 10:00
a.m. (Chicago time) at least one Business Day, in the case of a conversion into
a Floating Rate Advance, or three Business Days, in the case of a conversion
into or continuation of a Eurodollar Advance, prior to the date of the requested
conversion or continuation, specifying:
(i) the requested date which shall be a Business Day, of such
conversion or continuation;
(ii) the aggregate amount and Rate Option of the Ratable Advance which
is to be converted or continued; and
(iii) the amount and Rate Option(s) of Ratable Advance(s) into which
such Ratable Advance is to be converted or continued and, in the
case of a conversion into or continuation of a Eurodollar Advance,
the duration of the Eurodollar Interest Period applicable thereto.
2.3. COMPETITIVE BID ADVANCES.
2.3.1. COMPETITIVE BID OPTION. In addition to Ratable Advances pursuant to
Section 2.2, but subject to the terms and conditions of this Agreement
(including, without limitation, the limitation set forth in Section 2.1.2 as to
the maximum aggregate principal amount of all outstanding Advances hereunder),
the Company may, as set forth in this Section 2.3, request the Banks prior to
the Termination Date to make offers to make Competitive Bid Advances to the
Company. Each Bank may, but shall have no obligation to, make such offers and
the Company may, but shall have no obligation to, accept any such offers in the
manner set forth in this Section 2.3. Competitive Bid Advances shall be
evidenced by Competitive Bid Notes.
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<PAGE>
2.3.2. COMPETITIVE BID QUOTE REQUEST. When the Company wishes to request
offers to make Competitive Bid Loans under this Section 2.3, it shall transmit
to the Administrative Agent by telex or telecopy a Competitive Bid Quote Request
substantially in the form of Exhibit "C" hereto so as to be received no later
than (x) 10:00 a.m. Chicago time at least four Business Days prior to the
Borrowing Date proposed therein, in the case of a Eurodollar Auction or (y)
10:00 a.m. Chicago time at least one Business Day prior to the Borrowing Date
proposed therein, in the case of an Absolute Rate Auction (or, in either case
upon reasonable prior notice to the Banks, such other time and date as the
Company and the Administrative Agent may agree), specifying:
(a) the proposed Borrowing Date, which shall be a Business Day, for the
proposed Competitive Bid Advance,
(b) subject to Section 2.4.2 hereof, the aggregate principal amount of
such Competitive Bid Advance,
(c) whether the Competitive Bid Quotes requested are to set forth a
Competitive Bid Margin or an Absolute Rate, or both, and
(d) the Interest Period applicable thereto (which may not end after the
Termination Date).
The Company may request offers to make Competitive Bid Loans for more than one
Interest Period and for a Eurodollar Auction and an Absolute Auction in a single
Competitive Bid Quote Request. No Competitive Bid Quote Request shall be given
within five Business Days (or such other number of days as the Company and the
Administrative Agent may agree) of any other Competitive Bid Quote Request. A
Competitive Bid Quote Request that does not conform substantially to the format
of Exhibit "C" hereto shall be rejected, and the Administrative Agent shall
promptly notify the Company of such rejection by telex or telecopy.
2.3.3. INVITATION FOR COMPETITIVE BID QUOTES. Promptly upon receipt of a
Competitive Bid Quote Request that is not rejected pursuant to Section 2.3.2,
the Administrative Agent shall send to each of the Banks by telex or telecopy an
Invitation for Competitive Bid Quotes substantially in the form of Exhibit "D"
hereto, which shall constitute an invitation by the Company to each Bank to
submit Competitive Bid Quotes offering to make the Competitive Bid Loans to
which such Competitive Bid Quote Request relates in accordance with this Section
2.3.
2.3.4. SUBMISSION AND CONTENTS OF COMPETITIVE BID QUOTES.
(a) Each Bank may, in its sole discretion, submit a Competitive Bid
Quote containing an offer or offers to make Competitive Bid Loans in
response to any Invitation for Competitive Bid Quotes. Each Competitive
Bid Quote must comply
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<PAGE>
with the requirements of this Section 2.3.4 and must be submitted to the
Administrative Agent by telex or telecopy at its offices specified in or
pursuant to Article XIII not later than (x) 1:00 p.m. Chicago time at least
three Business Days prior to the proposed Borrowing Date, in the case of a
Eurodollar Auction or (y) 9:00 a.m. Chicago time on the proposed Borrowing
Date, in the case of an Absolute Rate Auction (or, in either case upon
reasonable prior notice to the Banks, such other time and date as the
Company and the Administrative Agent may agree); PROVIDED that Competitive
Bid Quotes submitted by First Chicago may be submitted, and may only be
submitted, if the Administrative Agent or First Chicago notifies the
Company of the terms of the offer or offers contained therein not later
than (x) 12:45 p.m. Chicago time at least three Business Days prior to the
proposed Borrowing Date, in the case of a Eurodollar Auction or (y) 8:45
a.m. Chicago time on the proposed Borrowing Date, in the case of an
Absolute Rate Auction. Subject to Articles IV and VII, any Competitive Bid
Quote so made shall be irrevocable except with the written consent of the
Administrative Agent given on the instructions of the Company.
(b) Each Competitive Bid Quote shall in any case specify:
(i) the proposed Borrowing Date, which shall be the same as that set
forth in the applicable Invitation for Competitive Bid Quotes;
(ii) the principal amount of the Competitive Bid Loan for which each
such offer is being made, which principal amount (1) may be greater than,
less than or equal to the Commitment of the quoting Bank, (2) must be at
least $10,000,000 and an integral multiple of $5,000,000, and (3) may not
exceed the principal amount of Competitive Bid Loans for which offers
were requested;
(iii) in the case of a Eurodollar Auction, the Eurodollar Bid Rate
offered for each such Competitive Bid Loan;
(iv) in the case of an Absolute Rate Auction, the Absolute Rate
offered for each such Competitive Bid Loan;
(v) the minimum amount, if any, of the Competitive Bid Loan that may
be accepted by the Company and/or the limit, if any, as to the aggregate
principal amount of the Competitive Bid Loans from such Bank that may be
accepted by the Company;
(vi) the applicable Eurodollar Bid Rate Interest Period or Absolute
Rate Interest Period, as the case may be; and
(vii) the identity of the quoting Bank.
(c) The Administrative Agent shall reject any Competitive Bid Quote that:
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<PAGE>
(i) is not substantially in the form of Exhibit "E" hereto or does not
specify all of the information required by Section 2.3.4(b);
(ii) contains qualifying, conditional or similar language, other than
any such language contained in Exhibit "E";
(iii) proposes terms other than or in addition to those set forth in the
applicable Invitation for Competitive Bid Quotes; or
(iv) arrives after the time set forth in Section 2.3.4(a).
If any Competitive Bid Quote shall be rejected pursuant to this Section
2.3.4(c), then the Administrative Agent shall notify the relevant Bank of such
rejection as soon as practical.
2.3.5. NOTICE TO COMPANY. The Administrative Agent shall promptly notify
the Company of the terms (i) of any Competitive Bid Quote submitted by a Bank
that is in accordance with Section 2.3.4 and (ii) of any Competitive Bid Quote
that amends, modifies or is otherwise inconsistent with a previous Competitive
Bid Quote submitted by such Bank with respect to the same Competitive Bid Quote
Request. Any such subsequent Competitive Bid Quote shall be disregarded by the
Administrative Agent unless such subsequent Competitive Bid Quote specifically
states that it is submitted solely to correct a manifest error in such former
Competitive Bid Quote. The Administrative Agent's notice to the Company shall
specify the aggregate principal amount of Competitive Bid Loans for which offers
have been received for each Interest Period specified in the related Competitive
Bid Quote Request and the respective principal amounts and Eurodollar Bid Rates
or Absolute Rates, as the case may be, so offered.
2.3.6. ACCEPTANCE AND NOTICE BY COMPANY. Not later than (x) 2:00 p.m.
Chicago time at least three Business Days prior to the proposed Borrowing Date,
in the case of a Eurodollar Auction or (y) 10:00 a.m. Chicago time on the
proposed Borrowing Date, in the case of an Absolute Rate Auction (or, in either
case upon reasonable prior notice to the Banks, such other time and date as the
Company and the Administrative Agent may agree), the Company shall notify the
Administrative Agent of its acceptance or non-acceptance of the offers so
notified to it pursuant to Section 2.3.5; PROVIDED, HOWEVER, that the failure by
the Company to give such notice to the Administrative Agent shall be deemed to
be a rejection of all such offers. In the case of acceptance, such notice (a
"Competitive Bid Borrowing Notice") shall specify the aggregate principal amount
of offers for each Interest Period that are accepted. The Company may accept any
Competitive Bid Quote in whole or in part; PROVIDED that:
(a) the aggregate principal amount of each Competitive Bid Advance may
not exceed the applicable amount set forth in the related Competitive Bid
Quote Request,
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<PAGE>
(b) acceptance of offers may only be made on the basis of ascending
Competitive Bid Margins or Absolute Rates, as the case may be, and
(c) the Company may not accept any offer of the type described in Section
2.3.4(c) or that otherwise fails to comply with the requirements of this
Agreement.
2.3.7. ALLOCATION BY ADMINISTRATIVE AGENT. If offers are made by two or
more Banks with the same Competitive Bid Margins or Absolute Rates, as the case
may be, for a greater aggregate principal amount than the amount in respect of
which offers are accepted for the related Interest Period, the principal amount
of Competitive Bid Loans in respect of which such offers are accepted shall be
allocated by the Administrative Agent among such Banks as nearly as possible (in
such multiples, not greater than $500,000, as the Administrative Agent may deem
appropriate) in proportion to the aggregate principal amount of such offers;
PROVIDED, HOWEVER, that no Bank shall be allocated a portion of any Competitive
Bid Advance that is less than the minimum amount that such Bank has indicated
that it is willing to accept. Allocations by the Administrative Agent of the
amounts of Competitive Bid Loans shall be conclusive in the absence of manifest
error. The Administrative Agent shall promptly, but in any event on the same
Business Day in the case of Eurodollar Bid Rate Advances and by 11:00 a.m.
(Chicago time) in the case of Absolute Rate Advances, notify each Bank of its
receipt of a Competitive Bid Borrowing Notice and the aggregate principal amount
of such Competitive Bid Advance allocated to each participating Bank.
2.3.8. ADMINISTRATION FEE. The Company hereby agrees to pay to the
Administrative Agent an administration fee of $200.00 per Bank for each
Competitive Bid Quote Request transmitted by the Company to the Administrative
Agent pursuant to Section 2.3.2. Such administration fee shall be payable in
arrears on each Payment Date (the first such payment, if any, to be made on
January 15, 1995) and on the Termination Date (or such earlier date on which the
Aggregate Commitment shall terminate) for any period then ending for which such
fee, if any, shall not have been theretofor paid.
2.4. GENERAL FACILITY TERMS.
2.4.1. METHOD OF BORROWING. Not later than 12:00 noon Chicago time on each
Borrowing Date, each Bank shall make available its Loan or Loans in funds
immediately available in Chicago, to the Administrative Agent at its address
specified pursuant to Article XIII. The Administrative Agent shall deposit the
funds so received from the Banks in the Company's account at the Administrative
Agent's main office in Chicago. Notwithstanding the foregoing provisions of this
Section 2.4.1, to the extent that a Loan made by a Bank matures on the Borrowing
Date of a requested Loan, such Bank shall apply the proceeds of the Loan it is
then making to the repayment of the maturing Loan.
2.4.2. MINIMUM AMOUNT OF EACH ADVANCE. Each Advance shall be in the minimum
amount of $10,000,000 (and in integral multiples of $5,000,000 if in excess
thereof);
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<PAGE>
PROVIDED, HOWEVER, that any Floating Rate Advance may be in the aggregate amount
of the unused Aggregate Commitment.
2.4.3. REQUIRED PAYMENTS; TERMINATION. (a) All outstanding Ratable Advances
and all other unpaid Obligations shall be paid in full by the Company on the
Termination Date.
(b) Each Competitive Bid Advance shall mature and be paid in full by the
Company on the last day of the Interest Period applicable thereto.
2.4.4. OPTIONAL PRINCIPAL PAYMENTS. The Company may from time to time pay
all outstanding Floating Rate Advances, or, in a minimum aggregate amount of
$1,000,000 (and in multiples of $1,000,000 if in excess thereof), any portion of
the outstanding Floating Rate Advances upon one Business Day's prior notice to
the Administrative Agent. A Fixed Rate Advance may not be paid prior to the last
day of the applicable Interest Period; PROVIDED, HOWEVER, that, if for any
reason Section 3.1 hereof is applicable to any Fixed Rate Advance, such Fixed
Rate Advance may be paid, subject to Section 3.4 hereof, prior to the last day
of the applicable Interest Period therefor upon five Business Days' prior notice
to the Administrative Agent.
2.4.5. FEES; PRICING SCHEDULE.
(a) FACILITY FEES. The Company hereby agrees to pay to the Administrative
Agent for the account of each Bank a facility fee (the "Facility Fee") of (a)
for any day on which Level I Status exists, 0.08 of 1% per annum, (b) for any
day on which Level II Status exists, 0.09 of 1% per annum, (c) for any day on
which Level III Status exists, 0.10 of 1% per annum, and (d) for any day on
which Level IV Status exists, 0.15 of 1% per annum, on the Aggregate Commitment
for the period from November 30, 1994 to but excluding the Termination Date (or
such earlier date on which the Aggregate Commitment shall terminate), payable in
arrears on each Payment Date (the first such payment to be made on January 15,
1995) and on the Termination Date (or such earlier date on which the Aggregate
Commitment shall terminate) for any period then ending for which such fee shall
not have been theretofor paid. The Company shall give prompt notice to the
Administrative Agent of any changes in the Status Level in accordance with
Section 6.15.
(b) USAGE FEES. If, on any day during the period from November 30, 1994 to
but excluding the Termination Date (or such earlier date on which the Aggregate
Commitment shall terminate), (a) the aggregate outstanding principal amount of
the Advances is greater than 50% of the Aggregate Commitment and (b) Level III
Status or Level IV Status exists, the Company hereby agrees to pay to the
Administrative Agent for the account of each Bank a usage fee of 0.05 of 1% per
annum (the "Usage Fee") on the aggregate outstanding principal amount of the
Advances, payable in arrears on each Payment Date and on the Termination Date
(or such earlier date on which the Aggregate Commitment shall terminate) for any
period then ending for which such fee shall not have been theretofor paid. The
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<PAGE>
Company shall give prompt notice to the Administrative Agent of any changes in
the Status Level in accordance with Section 6.15.
(c) The following schedule illustrates how the Applicable Margin, Facility
Fees, and Usage Fees, will apply to the Company in different Status Levels:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
PRICING SCHEDULE (expressed in basis points per annum)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Status Level Level I Level II Level III Level IV
- --------------------------------------------------------------------------------
At least equal to Lower than
A+ and A1 but not Level II and
Ratings Higher than higher than both higher than
S&P/Moody's A+ and A1 A+ and A1 or equal to Lower than
A- and A3 A- or A3
- --------------------------------------------------------------------------------
Facility Fee 8 9 10 15
- --------------------------------------------------------------------------------
Applicable Margin 20 20 20 30
- --------------------------------------------------------------------------------
Usage Fee (if 0 0 5 5
usage is greater
than 50%)
- --------------------------------------------------------------------------------
</TABLE>
2.4.6. REDUCTION OR TERMINATION OF THE AGGREGATE COMMITMENT.
(a) The Company may from time to time prior to the Termination Date
permanently reduce the Aggregate Commitment in whole (upon payment in full
of the Notes and other Obligations of the Company hereunder), or in part in
a minimum amount of $10,000,000 (and in multiples of $5,000,000 if in
excess thereof), upon at least ten Business Days' prior written notice to
the Administrative Agent, which notice shall specify the amount of any such
reduction.
(b) If, after giving effect to any reduction or termination of the
Aggregate Commitment pursuant to this Section 2.4.6, the aggregate
principal amount of all outstanding Advances would otherwise exceed the
aggregate amount of the Aggregate Commitment, the Company shall pay or
prepay the Loans in an aggregate principal amount equal to such excess,
together with all accrued and unpaid interest and fees and all other
amounts due and owing pursuant to Article III hereof to the date of payment
or prepayment, provided that the Company shall select the Loans to be paid
or prepaid, and the amounts to be paid or prepaid, so that any partial
payment or prepayment of the Loans of any type on any day shall be in an
aggregate principal amount at least equal to $1,000,000 and so that,
insofar as possible, no prepayment of a Loan shall be made other than on
the last day of an Interest Period therefor.
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2.4.7. INTEREST PERIODS. Subject to Sections 2.2.4 and 2.4.8, (a) each
Fixed Rate Advance shall bear interest from and including the first day of the
Interest Period applicable thereto to (but not including) the last day of such
Interest Period at the interest rate determined as applicable to such Fixed Rate
Advance, and (b) each Floating Rate Advance shall bear interest on the
outstanding principal amount thereof, for each day from the date such Floating
Rate Advance is made until it becomes due, at a rate per annum equal to the
Corporate Base Rate for such day.
2.4.8. RATE AFTER MATURITY. Except as provided in the next sentence, any
Advance not paid at maturity, whether by acceleration or otherwise, shall bear
interest until paid in full at a rate per annum equal to the Corporate Base Rate
plus 2% per annum. In the case of a Fixed Rate Advance the maturity of which is
accelerated, such Fixed Rate Advance shall bear interest for the remainder of
the applicable Interest Period, at the higher of the rate otherwise applicable
to such Interest Period plus 2% per annum or the Corporate Base Rate plus 2% per
annum.
2.4.9. INTEREST PAYMENT DATES; INTEREST AND FEE BASIS. Interest accrued on
each Floating Rate Advance shall be payable on each Payment Date, commencing
with the first such date to occur after the date hereof, on any date on which
the Floating Rate Advance is prepaid, whether due to acceleration or otherwise,
and at maturity. Interest accrued on that portion of the outstanding principal
amount of any Floating Rate Advance converted into a Fixed Rate Advance on a day
other than a Payment Date shall be payable on the date of conversion. Interest
accrued on each Fixed Rate Advance shall be payable on the last day of its
applicable Interest Period and on any date on which such Fixed Rate Advance is
prepaid, whether due to acceleration or otherwise. Interest accrued on each
Fixed Rate Advance having an Interest Period longer than three months shall also
be payable on the last day of each three-month interval during such Interest
Period. Interest on Fixed Rate Advances shall be calculated for the actual
number of days elapsed on the basis of a year consisting of 360 days. Interest
on Floating Rate Advances and all fees shall be calculated for the actual number
of days elapsed on the basis of a year consisting of 365, or when appropriate
366, days. Interest shall be payable for the day an Advance is made but not for
the day of any payment on the amount paid if payment is received prior to 1:00
p.m.(Chicago time) at the place of payment. If any payment of principal of or
interest on an Advance shall become due on a day which is not a Business Day,
such payment shall be made on the next succeeding Business Day and, in the case
of a principal payment, such extension of time shall be included in computing
interest in connection with such payment.
2.4.10. METHOD OF PAYMENT. Subject to the last sentence of Section 2.4.1,
all payments of principal, interest, and fees hereunder shall be made, without
setoff, deduction, counterclaim or withholding for taxes, in immediately
available funds to the Administrative Agent at the Administrative Agent's
address specified pursuant to Article XIII (or at any other Lending Installation
of the Administrative Agent specified in writing by the Administrative Agent to
the Company at least one Business Day prior to the date of any such payment) by
1:00 p.m. (Chicago time) on the date when due and shall be made ratably
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among all Banks in the case of fees and payments in respect of Ratable Advances
and ratably among the applicable Banks in respect of Competitive Bid Advances.
Each payment delivered to the Administrative Agent for the account of any Bank
shall be delivered promptly by the Administrative Agent to such Bank in the same
type of funds which the Administrative Agent received at its address specified
pursuant to Article XIII or at any Lending Installation specified in a notice
received by the Administrative Agent from such Bank. Upon two Business Days'
prior notice, by telephone or telecopy, to the Company, the Administrative Agent
is hereby authorized to charge the account of the Company for each payment of
principal, interest and fees as it becomes due hereunder.
2.4.11. NOTES; TELEPHONIC NOTICES. Each Bank is hereby authorized to record
on the schedule attached to each of its Notes, or otherwise record in accordance
with its usual practice, the date and amount of each of its Loans of the type
evidenced by such Note; PROVIDED, HOWEVER, that any such recordations shall be
conclusive and binding upon the Company, absent manifest error, and failure to
so record shall not affect the Company's obligations under any Note. The Company
hereby authorizes the Banks and the Administrative Agent to extend, convert or
continue Advances, effect Rate Option selections, transfer funds and submit
Competitive Bid Quotes based on telephonic notices made by any person or persons
the Administrative Agent or any Bank in good faith believes to be an Authorized
Officer. The Company agrees to deliver promptly to the Administrative Agent a
written confirmation of each telephonic notice signed by any two Authorized
Officers. If the written confirmation differs in any material respect from the
action taken by the Administrative Agent and the Banks, the records of the
Administrative Agent and the Banks shall govern absent manifest error.
2.4.12. NOTIFICATION OF ADVANCES, INTEREST RATES, PREPAYMENTS AND
COMMITMENT REDUCTIONS. Promptly after receipt thereof, the Administrative Agent
will notify each Bank of the contents of each Aggregate Commitment reduction
notice, Borrowing Notice and repayment notice received by it hereunder. The
Administrative Agent will notify each Bank of the interest rate applicable to
each Advance promptly upon determination of such interest rate and will give
each Bank prompt notice of each change in the Corporate Base Rate or the Status
Level. Each Reference Bank agrees to furnish timely information for the purpose
of determining the Eurodollar Base Rate and the Corporate Base Rate.
2.4.13. LENDING INSTALLATIONS. Each Bank may book its Loans at any Lending
Installation selected by such Bank and may change its Lending Installation from
time to time. All terms of this Agreement shall apply to any such Lending
Installation and the Notes shall be deemed held by each Bank for the benefit of
such Lending Installation. Each Bank may, by written telex or telecopy notice to
the Administrative Agent and the Company, designate a Lending Installation
through which Loans will be made by it and for whose account Loan payments are
to be made. Each notice given pursuant to this Section 2.4.13 shall be given
prior to the time the Loans or payments referred to in such notice are to be
made.
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2.4.14. NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. Unless the
Company or a Bank, as the case may be, notifies the Administrative Agent prior
to the date on which it is scheduled to make payment to the Administrative Agent
of (a) in the case of a Bank, the proceeds of a Loan or (b) in the case of the
Company, a payment of principal, interest or fees to the Administrative Agent
for the account of the Banks, that it does not intend to make such payment, the
Administrative Agent may assume that such payment has been made. The
Administrative Agent may, but shall not be obligated to, make the amount of such
payment available to the intended recipient in reliance upon such assumption. If
such Bank or the Company, as the case may be, has not in fact made such payment
to the Administrative Agent, the recipient of such payment shall, on demand by
the Administrative Agent, repay to the Administrative Agent the amount so made
available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to (i) in the case of payment by a Bank, the
Federal Funds Effective Rate for such day (as determined by the Administrative
Agent) or (ii) in the case of payment by the Company, the interest rate
applicable to the relevant Loan.
2.4.15. WITHHOLDING TAX EXEMPTION. At least five Business Days prior to
the first date on which interest or fees are payable hereunder for the account
of any Bank, each Bank that is not incorporated under the laws of the United
States of America, or a state thereof, agrees that it will deliver to each of
the Company and the Administrative Agent two duly completed copies of United
States Internal Revenue Service Form 1001 or 4224, certifying in either case
that such Bank is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States federal income
taxes. Each Bank which so delivers a Form 1001 or 4224 further undertakes to
deliver to each of the Company and the Administrative Agent two additional
copies of such form (or a successor form) on or before the date that such form
expires (currently, three successive calendar years for Form 1001 and one
calendar year for Form 4224) or becomes obsolete or after the occurrence of any
event requiring a change in the most recent forms so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Company or the Administrative Agent, in each case certifying
that such Bank is entitled to receive payments under this Agreement and the
Notes without deduction or withholding of any United States federal income
taxes, unless an event (including without limitation any change in treaty, law
or regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Bank from duly completing and delivering any such form with respect
to it and such Bank advises the Company and the Administrative Agent that it is
not capable of receiving payments without any deduction or withholding of United
States federal income tax.
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ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. YIELD PROTECTION. If any law or any governmental rule, regulation,
policy, guideline or directive (whether or not having the force of law), or any
interpretation thereof by any governmental authority or agency, or compliance of
any Bank with such,
(i) subjects any Bank or any applicable Lending Installation, directly
or indirectly, to any additional tax, duty, charge or withholding on or
from payments due from the Company (excluding taxation of the overall net
income of any Bank or applicable Lending Installation), or changes the
basis of taxation of payments to any Bank in respect of its Loans or other
amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve, assessment,
insurance charge, special deposit or similar requirement against assets
of, deposits with or for the account of, or credit extended by, any Bank
or any applicable Lending Installation (other than reserves and
assessments taken into account in determining the interest rate applicable
to Fixed Rate Advances), or
(iii) imposes any other condition the result of which is to increase
the cost to any Bank or any applicable Lending Installation of making,
funding or maintaining loans or reduces any amount receivable by any Bank
or any applicable Lending Installation in connection with loans,
then, within 15 days of demand by such Bank, the Company shall pay such Bank
that portion of such increased expense incurred or reduction in an amount
received which such Bank determines is attributable to making, funding and
maintaining its Loans and its Commitment. At the time of such demand, such Bank
shall provide the Company with a written statement setting forth the amount that
would adequately compensate such Bank for such increased expense or reduction
and setting forth in reasonable detail the assumptions and calculations upon
which such Bank determined such amount; provided, however, that the Company
shall maintain, at all times, the confidentiality of any such written statement,
including without limitation its content, delivered to the Company by any such
Bank.
3.2. CAPITAL ADEQUACY. If a Bank determines the amount of capital
required or expected to be maintained by such Bank, any Lending Installation of
such Bank or any corporation controlling such Bank is increased as a result of a
Change in Law, then, such affected Bank shall so notify the Company and the
Administrative Agent within ninety (90) days of such Change in Law. At the time
of such notification such affected Bank shall provide the Company with a written
statement setting forth the amount that would adequately compensate such
affected Bank for any shortfall in the rate of return on the portion of such
increased capital which such affected Bank determines is attributable to this
Agreement, its
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Loans or its obligation to make Loans hereunder (after taking into account such
affected Bank's policies as to capital adequacy) and setting forth in reasonable
detail the assumptions and calculations upon which such affected Bank determined
such amount; provided, however, that the Company shall maintain, at all times,
the confidentiality of any such written statement, including without limitation
its content, delivered to the Company by any such affected Bank. The Company and
such affected Bank shall thereafter negotiate in good faith an agreement to
increase the facility fee payable to the affected Bank under this Agreement,
which, in the opinion of such affected Bank, will adequately compensate such
affected Bank for such shortfall so long as such Change in Law is in effect. If
such increase is approved in writing by the Company within forty-five (45) days
from the date of the notice to the Company from such affected Bank, the facility
fee payable by the Company under this Agreement shall, effective from the date
of the effective date of such Change in Law, include the amount of such agreed
increase and the Company will so notify the Administrative Agent. If the Company
and such affected Bank are unable to agree on such an increase within forty-five
(45) days from the date of the notice to the Company from such affected Bank,
the Company shall, by written notice to such affected Bank within fifty (50)
days from the date of the aforesaid notice to the Company from such affected
Bank, elect either to (a) terminate the Commitment of, or replace, such affected
Bank; provided, however, that, prior to or concurrent with any such termination
or replacement, all amounts due and owing to but excluding the date of
termination or replacement by the Company to such affected Bank under this
Agreement (including without limitation all amounts due and owing under this
Section 3.2) shall have been paid in full, or (b) increase the facility fee
payable to such affected Bank by the amount requested by such affected Bank,
effective from the date of the effective date of such Change in Law. Without
limiting the foregoing, if the Company elects to take the action described in
clause (b) of the preceding sentence, it may simultaneously therewith reduce the
Commitment of such affected Bank by an amount chosen by the Company and if,
after giving effect to any such reduction, the aggregate principal amount of all
outstanding Loans of such affected Bank would otherwise exceed its Commitment,
the Company shall pay or prepay the Loans in an aggregate principal amount equal
to such excess, together with all accrued and unpaid interest and fees and all
amounts due and owing under Section 3.4 hereof to the date of payment or
prepayment. If the Company fails to provide notice to such affected Bank as
described in the second preceding sentence by such fiftieth day, the Company
shall be deemed to have taken the action described in clause (b) above. If the
Company elects to take the action with respect to replacement of such affected
Bank described in clause (a) above, it may, upon prior written notice to the
Administrative Agent and subject to the provisions hereof and of Section 12.1
hereof, simultaneously therewith replace such affected Bank with another bank
and instruct such affected Bank to assign all of its interests hereunder to such
replacement bank in accordance with Section 12.1 hereof.
3.3. AVAILABILITY OF FIXED RATE OPTIONS. If any Bank determines that
maintenance of any of its Fixed Rate Loans at a suitable Lending Installation
would violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, the Administrative Agent shall suspend the availability
of the affected Fixed Rate and require any Fixed Rate Advances outstanding under
an affected Fixed Rate to be repaid; or if the Required Banks
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determine that (i) deposits of a type and maturity appropriate to match fund
Fixed Rate Advances are not available, the Administrative Agent shall suspend
the availability of the affected Fixed Rate with respect to any Advances made
after the date of any such determination, or (ii) a Fixed Rate does not
accurately reflect the cost of making a Fixed Rate Advance at such Fixed Rate,
then, if for any reason whatsoever the provisions of Sections 3.1 or 3.2 hereof
are inapplicable, the Administrative Agent shall suspend the availability of the
affected Fixed Rate with respect to any Advances made after the date of any such
determination.
3.4. FUNDING INDEMNIFICATION. If any payment of a Fixed Rate Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Fixed Rate
Advance is not made or prepaid on the date specified by the Company for any
reason other than default by the Banks, the Company will indemnify each Bank for
any direct loss or cost incurred by it resulting therefrom, including, without
limitation, any loss or cost in liquidating or employing deposits acquired to
fund or maintain the Fixed Rate Advance.
3.5. BANK CERTIFICATES; SURVIVAL OF INDEMNITY. To the extent reasonably
possible, each Bank shall designate an alternate Lending Installation with
respect to its Fixed Rate Loans to reduce any liability of the Company to such
Bank under Sections 3.1 or 3.2 hereof or to avoid the unavailability of a Fixed
Rate under Section 3.3, so long as such designation is not disadvantageous to
such Bank, in such Bank's sole determination and discretion. Each Bank shall
deliver a certificate of such Bank as to the amount due, if any, under Sections
3.1 or 3.4 hereof. Determination of amounts payable under such Sections in
connection with a Fixed Rate Loan shall be calculated as though each Bank funded
its Fixed Rate Loan through the purchase of a deposit of the type and maturity
corresponding to the deposit used as a reference in determining the Fixed Rate
applicable to such Loan, whether in fact that is the case or not. Unless
otherwise provided herein, the amount specified in the certificate shall be
payable on demand after receipt by the Company of the certificate. The
obligations of the Company under Sections 3.1, 3.2 and 3.4 hereof shall survive
payment of the Obligations and termination of this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. INITIAL ADVANCE. The Banks shall not be required to make the
initial Advance hereunder unless, on or before the date of execution hereof, the
Company has furnished or caused to be furnished to the Administrative Agent with
sufficient copies for the Banks:
(a) Copies of the Certificate of Incorporation of the Company, together
with all amendments, and a certificate of good standing, both
certified by the appropriate governmental officer in its
jurisdiction of incorporation.
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(b) Copies, certified by the Secretary or Assistant Secretary of the
Company, of its By-Laws and of its Board of Directors' resolutions
(and resolutions of other bodies, if any are deemed necessary by
counsel for any Bank) authorizing the execution of the Loan
Documents.
(c) An incumbency certificate, executed by the Secretary or Assistant
Secretary of the Company, which shall identify by name and title and
bear the signature of the officers of the Company authorized to sign
the Loan Documents and to make borrowings hereunder, upon which
certificate the Banks shall be entitled to rely until informed of
any change in writing by the Company.
(d) A certificate, signed by the chief financial officer of the Company,
stating that on the date of execution hereof no Default or Unmatured
Default has occurred and is continuing.
(e) A written opinion of the Company's counsel, addressed to the Banks
in substantially the form of Exhibit "F" hereto.
(f) A Ratable Note payable to the order of each of the Banks and a
Competitive Bid Note payable to the order of each of the Banks.
(g) A duly completed Loan/Credit Related Money Transfer Instruction in
substantially the form of Exhibit "G" hereto.
(h) Evidence, in form and substance satisfactory to the Administrative
Agent and the Banks, of the termination by the Company of those
certain credit facilities evidenced by that certain Credit
Agreement, dated as of January 15, 1993 (as heretofore amended or
modified, the "Existing Credit Agreement"), among the Company, the
Banks named therein, and The First National Bank of Chicago, First
National Bank of Louisville, and Morgan Guaranty Trust Company of
New York, as Co-Agents, and The First National Bank of Chicago, as
Administrative Agent, and of the payment of all principal of and
interest on any loans outstanding under, and of all other amounts
payable under, the Existing Credit Agreement.
(i) Such other documents as the Administrative Agent, any Bank or their
respective counsel may have reasonably requested.
4.2. EACH ADVANCE. No Bank shall be required to make any Advance
(other than an Advance that, after giving effect thereto and to the application
of the proceeds thereof, does not increase the aggregate amount of outstanding
Advances), unless on the applicable Borrowing Date:
(a) There exists no Default or Unmatured Default.
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(b) The Company reaffirms the truth and correctness of the
representations and warranties contained in Article V, excluding (i)
Section 5.5; (ii) Section 5.8 as to Subsidiaries other than
Significant Subsidiaries; and (iii) changes in Schedule "1" hereto
reflecting transactions permitted by this Agreement.
(c) All legal matters incident to the making of such Advance shall be
satisfactory to the Administrative Agent and the Banks and their
respective counsel.
Each Borrowing Notice with respect to each such Advance shall constitute
a representation and warranty by the Company that the conditions contained in
Sections 4.2(a) and (b) have been satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Administrative Agent and the
Banks that:
5.1. CORPORATE EXISTENCE AND STANDING. Each of the Company and the
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and is duly
qualified and in good standing in each jurisdiction where, because of the nature
of its activities or properties, such qualification is required and the failure
so to qualify would have a Material Adverse Effect.
5.2. AUTHORIZATION AND VALIDITY. The Company has the corporate power,
authority and legal right to execute and deliver the Loan Documents and to
perform its obligations thereunder. The execution and delivery by the Company of
the Loan Documents and the performance of its obligations thereunder have been
duly authorized by proper corporate proceedings.
5.3. NO CONFLICT; GOVERNMENT CONSENT. Neither the execution and
delivery by the Company of the Loan Documents, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions thereof
will violate any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on the Company or any Subsidiary or the Company's or any
Subsidiary's certificate or articles of incorporation or by-laws or the
provisions of any indenture, instrument or agreement to which the Company or any
Subsidiary is a party or is subject, or by which it, or its property, is bound,
or conflict with or constitute a default thereunder, or result in the creation
or imposition of any Lien in, of or on the property of the Company or a
Subsidiary pursuant to the terms of any such indenture, instrument or agreement.
No order, consent, approval, license, authorization, or validation of, or
filing, recording or registration with, or exemption by, any governmental or
public body or authority, or any subdivision thereof, is required to authorize,
or is required in connection with the execution, delivery and performance of, or
the legality, validity, binding
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effect or enforceability of, any of the Loan Documents, or to the extent that
any of the foregoing is required, all such orders, consents, approvals,
licenses, authorizations, validations, filings, recordings, registrations, or
exemptions have been validly procured and have not been rescinded.
5.4. FINANCIAL STATEMENTS. The July 31, 1994 consolidated financial
statements of the Company and the Subsidiaries heretofore delivered to the Banks
were prepared in accordance with generally accepted accounting principles in
effect on the date such statements were prepared and fairly present the
consolidated financial condition and operations of the Company and the
Subsidiaries at such date and the consolidated results of their operations for
the period then ended.
5.5. MATERIAL ADVERSE CHANGE. Since July 31, 1994 through the date of
execution hereof, there has been no change in the business, property, prospects,
condition (financial or otherwise) or results of operations of the Company and
the Subsidiaries which would have a Material Adverse Effect.
5.6. TAXES. The Company and the Subsidiaries have filed all United
States federal tax returns and all other tax returns which are required to be
filed and have paid all taxes due pursuant to said returns or pursuant to any
assessment received by the Company or any Subsidiary, except such taxes, if any,
as are being contested in good faith and as to which adequate reserves have been
provided. The United States income tax returns of the Company and the
Subsidiaries have been audited by the Internal Revenue Service through the
fiscal year ended April 30, 1990. No tax liens have been filed and no claims are
being asserted with respect to any such taxes which would have a Material
Adverse Effect. The charges, accruals and reserves on the books of the Company
and the Subsidiaries in respect of any taxes or other governmental charges are
adequate.
5.7. LITIGATION. There is no litigation, arbitration, or proceeding
pending or, to the knowledge of any of their officers, threatened against or
affecting the Company or any Subsidiary which would have a Material Adverse
Effect.
5.8. SUBSIDIARIES. Schedule "1" hereto contains an accurate list of
all of the presently existing Subsidiaries of the Company, setting forth their
respective jurisdictions of incorporation and the percentage of their respective
capital stock owned by the Company or other Subsidiaries. All of the issued and
outstanding shares of capital stock of such Subsidiaries have been duly
authorized and issued and are fully paid and non-assessable.
5.9. ERISA. Each Plan complies in all material respects with all
applicable requirements of law and regulations, no Reportable Event has occurred
with respect to any Plan, and neither the Company nor any of its Subsidiaries
has withdrawn from any Plan or initiated steps to do so and no steps have been
taken to terminate any Plan where any such withdrawal or termination could have
a Material Adverse Effect.
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5.l0. ACCURACY OF INFORMATION. No information, exhibit or report
furnished by the Company or any Subsidiary to the Administrative Agent or to any
Co-Agent or Bank in connection with the negotiation of the Loan Documents
contains any material misstatement of fact or omits to state a material fact or
any fact necessary to make the statements contained therein not misleading.
5.11. COMPLIANCE WITH LAWS. The Company and its Subsidiaries have
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof having jurisdiction over the conduct of their respective
businesses or the ownership of their respective property, except where the
failure so to comply would not have a Material Adverse Effect. Neither the
Company nor any Subsidiary has received any notice to the effect that its
operations are not in material compliance with any of the requirements of
applicable federal, state and local environmental, health and safety statutes
and regulations, which non-compliance would have a Material Adverse Effect.
5.12. REGULATIONS U AND X. Margin Stock (as defined in Regulations U
and X) constitutes less than 25% of those assets of the Company and its
Subsidiaries that are subject to any limitation on sale, pledge or other
restriction hereunder.
5.13. INVESTMENT COMPANY ACT. Neither the Company nor any Subsidiary
thereof is an "investment company" or a company "controlled" by an "investment
company" within the meaning of Investment Company Act of 1940, as amended.
5.14. PUBLIC UTILITY HOLDING COMPANY ACT. Neither the Company nor any
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company", or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act of 1935, as amended.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Banks shall
otherwise consent in writing:
6.1. FINANCIAL REPORTING. The Company will maintain, for itself and
each Subsidiary, a system of accounting established and administered in
accordance with generally accepted accounting principles, and furnish to the
Banks:
(a) Within 120 days after the close of each of its fiscal years,
a copy of the then relevant Form 10-K report (such report, together
with any successor thereto, is hereinafter referred to as the "Form
10-K Report") regarding the
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Company and its Subsidiaries filed with the SEC; provided, however,
that, in any event, the Company shall furnish to the Banks financial
information that is, in form and substance, materially the same as that
which is required, as of the date hereof, by the SEC to appear in a Form
10-K report, and such Form 10-K Report shall be accompanied by a
certificate of independent certified public accountants (acceptable to
the Banks, which acceptance shall not be unreasonably withheld) to the
effect that, in the course of their examination necessary for their
certification of such financial information, they have obtained no
knowledge of any Default or Unmatured Default, or if, in the opinion of
such accountants, any Default or Unmatured Default shall exist, stating
the nature and status thereof. To the extent the Company already has
provided copies of the then relevant Form 10-K Report to the Banks
pursuant to Section 6.1(e) hereof, and, at that time the Company
notified each Bank that such Form 10-K Report was being furnished to
satisfy the requirements of Sections 6.1(a) and (e), then the Company
need not furnish additional copies of such Form 10-K Report to the Banks
in order to satisfy the requirements of this Section.
(b) Within 60 days after the close of the first three quarterly periods
of each of its fiscal years, for itself and the Subsidiaries, a copy of
the then relevant Form 10-Q report (such report, together with any
successor thereto, is hereinafter referred to as the "Form 10-Q Report")
regarding the Company and its Subsidiaries filed with the SEC; provided,
however, that, in any event, the Company shall furnish to the Banks
financial information that is, in form and substance, materially the
same as that which is required, as of the date hereof, by the SEC to
appear in a Form 10-Q report, and such Form 10-Q Report shall be
certified by its chief financial officer. To the extent the Company
already has provided copies of the then relevant Form 10-Q Report to the
Banks pursuant to Section 6.1(e) hereof, and, at that time the Company
notified each Bank that such Report was being furnished to satisfy the
requirements of Sections 6.1(b) and (e), then the Company need not
furnish additional copies of such Form 10-Q Report to the Banks in order
to satisfy the requirements of this Section.
(c) Together with the financial statements required hereunder, a
compliance certificate signed by its chief financial officer stating
that no Default or Unmatured Default exists, or if any Default or
Unmatured Default exists, stating the nature and status thereof.
(d) Within 15 days of the furnishing thereof to the shareholders of the
Company, copies of all financial statements, reports and proxy
statements so furnished.
(e) Within 15 days of the filing thereof, copies of all registration
statements and annual, quarterly, monthly or other regular reports which
the Company or
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any Subsidiary files with the SEC unless furnished by the Company
pursuant to Section 6.1(a) or (b) hereof.
(f) Such other information (including non-financial information) as the
Administrative Agent or any Bank may from time to time reasonably
request.
6.2. USE OF PROCEEDS. The Company will, and will cause each of its
Subsidiaries to, use the proceeds of the Advances for general corporate
purposes, including without limitation, Acquisitions, and to repay outstanding
Advances. The Company will not, nor will it permit any Subsidiary to, use the
proceeds of any Advance in violation of Regulations U and X.
6.3. NOTICE OF DEFAULT. The Company will, and will cause each of its
Subsidiaries to, give prompt notice in writing to the Banks of the occurrence of
any Default or Unmatured Default and of any other development, financial or
otherwise, which would have a Material Adverse Effect.
6.4. CORPORATE EXISTENCE AND STANDING. The Company will do all things
necessary to remain duly incorporated, validly existing and in good standing as
a domestic corporation in its jurisdiction of incorporation and maintain all
requisite authority to conduct its business in each jurisdiction where, because
of the nature of its activities or properties, failure to maintain such
authority would have a Material Adverse Effect.
6.5. TAXES. The Company will, and will cause each Subsidiary to, pay
when due all taxes, assessments and governmental charges and levies upon it or
its income, profits or property, except those which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves
have been set aside.
6.6. INSURANCE. The Company will, and will cause each Subsidiary to,
maintain with financially sound and reputable insurance companies insurance on
all their property in such amounts and covering such risks as is consistent with
sound business practice.
6.7. COMPLIANCE WITH LAWS. The Company will, and will cause each
Subsidiary to, comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which it may be subject, except
where the failure so to comply would not have a Material Adverse Effect.
6.8. INSPECTION. The Company will, and will cause each Subsidiary to,
permit the Administrative Agent and the Banks, by their respective
representatives and agents, to inspect any of the properties of the Company and
each Subsidiary and to discuss the affairs, finances and accounts of the Company
and each Subsidiary with, and to be advised as to the same by, their respective
officers at such reasonable times and intervals as the Administrative Agent or
the Banks may designate. Upon the request of the Administrative Agent or any
Bank, the Company will provide to the Administrative Agent and the Banks copies
of those corporate
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documents which the Banks reasonably believe to be relevant to this Agreement,
the other Loan Documents or the transactions contemplated hereby.
6.9. MERGER. The Company will not, nor will it permit any Subsidiary
to, merge or consolidate with or into any other Person, except (a) that a
Subsidiary may merge with the Company or a Wholly-Owned Subsidiary, and (b) that
the Company may merge or consolidate with or into any other Person, so long as
(i) immediately after giving effect to any such merger or consolidation, no
Default, or Unmatured Default shall have occurred and be continuing, (ii) the
Person surviving the merger or consolidation is a solvent corporation organized
and existing under the laws of the United States of America or any state
thereof, and (iii) such surviving Person executes and delivers to the
Administrative Agent an agreement in form and substance satisfactory to the
Banks, containing an assumption by such Person of the due and punctual payment
and observance of all Obligations of the Company hereunder and under the Notes
with the same effect as if such Person had originally been the Company hereunder
and thereunder. Any such surviving Person shall succeed to, and be substituted
for, and may exercise every right and power of, the Company under this Agreement
with the same effect as if such surviving Person had been named as the Company
herein. No such transaction shall have the effect of releasing (A) the Company
if the Company shall be the surviving Person, or (B) if the Company shall not be
the surviving Person, any successor Person that shall have become a successor
Person in the manner prescribed in this Section 6.9, from its liability
hereunder and under the Notes.
6.10. SALE AND LEASEBACK. The Company will not, nor will it permit any
Subsidiary to, enter into any arrangement with any Person providing for the
leasing by the Company or a Subsidiary of any Principal Property, acquired or
placed into service more than 180 days prior to such arrangement (except for
leases of five years or less), whereby such property has been or is to be sold
or transferred by the Company or any Subsidiary to such Person (herein referred
to as a "Sale and Lease-Back Transaction"), unless:
(a) the Company or any Subsidiary would, at the time of entering into such
transaction, be entitled to incur Indebtedness secured by a Lien on the
property to be leased in an amount at least equal to the Attributable Debt
in respect of such transaction without equally and ratably securing the
Obligations pursuant to Section 6.11 hereof, or
(b) the Company shall covenant that the Company will apply an amount equal
to the net proceeds from the sale of the Principal Property so leased to
the payment of the Obligations within ninety (90) days of the effective
date of any such Sale and Lease-Back Transaction,
provided, the covenant contained in this Section 6.10 shall not apply to, and
there shall be excluded from Attributable Debt in any computation under Section
6.11 hereof or this Section 6.10, Attributable Debt with respect to any Sale and
Lease-Back Transaction if:
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(i) such Sale and Lease-Back Transaction is entered into in connection
with transactions which are part of an industrial development or pollution
control financing or,
(ii) the only parties involved in such Sale and Lease-Back Transaction are
the Company and any Subsidiary.
6.11. LIENS. The Company will not, nor will it permit any Subsidiary
to, incur, issue, assume, or guarantee any Indebtedness, if such Indebtedness is
secured by a Lien upon or with respect to any Principal Property of the Company
or any Subsidiary, now owned or hereafter acquired, without in any such case
effectively providing, concurrently with the incurrence, issuance, assumption or
guarantee of any such Indebtedness, that the Obligations shall be secured
equally and ratably with (or prior to) such Indebtedness, for so long as such
other Indebtedness shall be so secured, except that this Section 6.11 shall not
apply to, and there shall be excluded from secured Indebtedness of the Company
and any Subsidiary in any computation under this Section, Indebtedness of the
Company or any Subsidiary secured by:
(a) Liens affecting property of any corporation existing at the time such
corporation becomes a Subsidiary or at the time it is acquired by the
Company or a Subsidiary or arising thereafter pursuant to contractual
commitments entered into prior to and not in contemplation of such
corporation's becoming a Subsidiary;
(b) Liens existing at the time of acquisition of the property affected
thereby, or Liens incurred to secure payment of all or part of the
purchase price of such property or to secure Indebtedness incurred prior
to, at the time of, or within 180 days after, the acquisition of such
property for the purpose of financing all or part of the purchase price
thereof (provided such Liens are limited to such property and improvements
thereto);
(c) Liens placed into effect prior to, at the time of or within 180 days
of completion of, construction of new facilities (or any improvements to
existing facilities) to secure all or part of the cost of construction (or
improvement) of such facilities, or to secure Indebtedness incurred to
provide funds for any such purpose (provided such Liens are limited to the
property or portion thereof upon which the construction being so financed
occurred and to improvements the cost of construction of which is being so
financed);
(d) Liens which secure only Indebtedness owing by a Subsidiary to the
Company or to a wholly-owned Subsidiary;
(e) Liens required by any contract or statute in order to permit the
Company or a Subsidiary to perform any contract or subcontract made by it
with or at the request of the United States of America or any state
thereof, or any department, agency, instrumentality or political
subdivision of any of the foregoing, and Liens in favor of
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such entities on property owned or leased by the Company or a Subsidiary
to secure (i) any Indebtedness incurred by the Company or such Subsidiary
for the purpose of financing (including any industrial development bond
financing) all or any part of the purchase price or the cost of
constructing, expanding or improving the property subject thereto
(provided such Liens are limited to the property or portion thereof upon
which the construction being so financed occurred and to the improvements,
the cost of construction of which is being so financed), or (ii) the cost
needed to permit the attachment or removal of any equipment designed
primarily for the purpose of air or water pollution control, provided that
such Liens shall not extend to other property of the Company or any
Subsidiary; or
(f) Any extension, renewal or replacement (or successive extensions,
renewals or replacements), in whole or in part, of any Lien referred to in
the foregoing clauses (a) through (e), inclusive of any Indebtedness
secured thereby, provided that the principal amount of Indebtedness
secured thereby shall not exceed the principal amount of Indebtedness so
secured at the time of such extension, renewal, or replacement.
Notwithstanding the foregoing provisions of this Section 6.11, the Company or
any of its Subsidiaries shall be entitled to incur, issue, assume or guarantee
Indebtedness secured by a Lien which is not excepted by clauses (a) through (f)
above without equally and ratably securing the Obligations, provided that the
aggregate amount of all Indebtedness then outstanding secured by such Lien and
all similar Liens, plus all Attributable Debt of the Company and its
Subsidiaries in respect of Sale and Lease-Back Transactions which, if treated as
a Lien would not be excepted under (a) through (f) above, does not exceed 10% of
the Consolidated Assets of the Company.
6.12. AFFILIATES. The Company will not, and will not permit any Subsidiary
to, enter into any transaction (including, without limitation, the purchase or
sale of any property or service) with, or make any payment or transfer to, any
Affiliate (other than the Company and its Subsidiaries) except in the ordinary
course of business and pursuant to the reasonable requirements of the Company's
or such Subsidiary's business and upon fair and reasonable terms no less
favorable to the Company than the Company or such Subsidiary would obtain in a
comparable arms-length transaction; provided that nothing contained in this
Section 6.12 shall prevent the Company or its Subsidiaries from paying a
dividend to its respective shareholders.
6.13. TOTAL INDEBTEDNESS RATIO. The Company will not permit at any time
the ratio of (a) Total Indebtedness to (b) Net Worth to exceed 2.0:1.
6.14. NET WORTH. The Company will maintain at all times a Net Worth equal
to or greater than $350,000,000; provided, however, that, in determining the Net
Worth of the Company for purposes of this Section 6.14, the Net Worth of the
Company shall be computed without giving effect to any reductions of Net Worth
made in accordance with generally accepted principles of accounting from time to
time with respect to the redemption,
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repurchase, acquisition or retirement by the Company after the date of this
Agreement of any of its capital stock at any time outstanding.
6.15. NOTIFICATION OF CHANGE IN RATINGS. The Company shall notify the
Administrative Agent in writing of any actual change in the ratings by S&P or
Moody's of the Company's senior unsecured long-term debt securities within 15
days after the Company becomes aware of such change.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events shall constitute
a Default:
7.1. Any representation or warranty made (including without limitation any
representations or warranties made pursuant to Section 4.2 hereof) by or on
behalf of the Company or any Subsidiary to the Banks or the Administrative Agent
under or in connection with this Agreement, any Advance, or any certificate or
information delivered in connection with this Agreement or any other Loan
Document shall be materially false as of the date on which made or deemed made.
7.2. Nonpayment of principal of any Note when due, or nonpayment of
interest upon any Note or of any facility fee or other obligations under any of
the Loan Documents within five days after the same becomes due.
7.3. The breach by the Company of any of the terms or provisions of
Sections 6.2, 6.3, 6.4, 6.9, 6.10, 6.11 or 6.12.
7.4. The breach by the Company (other than a breach which constitutes a
Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of this
Agreement which is not remedied within ten days after written notice from the
Administrative Agent or any Bank.
7.5. (a) Failure of the Company or any Subsidiary to pay when due (whether
by acceleration or otherwise) any other Indebtedness in an aggregate principal
amount greater than $25,000,000;
(b) any Indebtedness of the Company or any of its Subsidiaries in an
aggregate principal amount greater than $25,000,000 shall be declared to be due
and payable or required to be prepaid ( whether by redemption, purchase, offer
to purchase, or otherwise, but other than by a regularly scheduled payment)
prior to the stated maturity thereof; or
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(c) the Company or any Significant Subsidiary shall not pay, or
admit in writing its inability to pay, its debts generally as they become due.
7.6. The Company or any Significant Subsidiary shall (a) have an order for
relief entered with respect to it under the Federal Bankruptcy Code, (b) make an
assignment for the benefit of creditors, (c) apply for, seek, consent to, or
acquiesce in, the appointment of a receiver, custodian, trustee, examiner,
liquidator or similar official for it or any substantial part of its property,
(d) institute any proceeding seeking an order for relief under the Federal
Bankruptcy Code or seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement, adjustment or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed against
it, (e) take any corporate action to authorize or effect any of the foregoing
actions set forth in this Section 7.6 or (f) fail to contest in good faith any
appointment or proceeding described in Section 7.7.
7.7. Without the application, approval or consent of the Company or any
Significant Subsidiary, a receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Company or any Significant Subsidiary or any
substantial part of its property, or a proceeding described in Section 7.6(d)
shall be instituted against the Company or any Significant Subsidiary and such
appointment continues undischarged or such proceeding continues undismissed or
unstayed for a period of 30 consecutive days.
7.8. Any court, government or governmental agency shall condemn, seize or
otherwise appropriate, or take custody or control of (each a "Condemnation") all
or any portion of the property of the Company or any Subsidiary which, when
taken together with all other property of the Company and its Subsidiaries so
condemned, seized, appropriated, or taken custody or controlled of, during the
twelve-month period ending with the month in which any such Condemnation occurs,
constitutes a Substantial Portion.
7.9. The Company or any Subsidiary shall fail within 30 days to pay, bond
or otherwise discharge any judgment or orders for the payment of money in excess
of $25,000,000 in the aggregate, which is not stayed on appeal or otherwise
being appropriately contested in good faith.
7.10. Any Reportable Event shall occur in connection with any Plan.
7.11. The Company or any Subsidiary shall have had adversely and finally
determined against it any proceeding pertaining to the violation of any federal,
state or local environmental, health or safety law or regulation, which would
have a Material Adverse Effect.
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ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. ACCELERATION. If any Default described in Section 7.6 or 7.7 occurs,
the Commitments of the Banks shall automatically terminate and the Obligations
shall immediately become due and payable without any election or action on the
part of the Administrative Agent or any Bank. If any other Default occurs, the
Required Banks may terminate or suspend the Commitments of the Banks if still in
existence, or declare the Obligations to be due and payable, or both, whereupon
the Obligations shall become immediately due and payable, without presentment,
demand, protest or notice of any kind, all of which the Company hereby expressly
waives. Upon receipt of notice from the Required Banks, the Administrative Agent
shall promptly advise the Company and the other Banks of any such termination
and/or declaration by the Required Banks, but failure to do so shall not impair
the effect of such termination and/or declaration.
8.2. AMENDMENTS. Subject to this Article VIII, the Required Banks (or the
Administrative Agent with the consent in writing of the Required Banks) and the
Company may enter into agreements supplemental hereto for the purpose of adding
or modifying any provisions to the Loan Documents or changing in any manner the
rights of the Banks or the Company hereunder or waiving any Default hereunder;
PROVIDED, HOWEVER, that no such supplemental agreement shall, without the
consent of all of the Banks:
(a) Extend the maturity of any Loan or Note or forgive all or any
portion of the principal amount thereof, or reduce the rate or change
the time of payment of interest or fees thereon.
(b) Change the percentage specified in the definition of Required
Banks.
(c) Increase the amount of the Commitment of any Bank hereunder, or
permit the Company to assign its rights under this Agreement except as
permitted under Section 6.9 hereof.
(d) Amend this Section 8.2.
No amendment of any provision of this Agreement relating to the Administrative
Agent shall be effective without the written consent of the Administrative
Agent.
8.3. PRESERVATION OF RIGHTS. No delay or omission of the Banks or the
Administrative Agent to exercise any right under the Loan Documents shall impair
such right or be construed to be a waiver of any Default or an acquiescence
therein, and the making of a Loan notwithstanding the existence of a Default or
the inability of the Company to satisfy the conditions precedent to such Loan
shall not constitute any waiver or acquiescence. Any
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single or partial exercise of any such right shall not preclude other or further
exercise thereof or the exercise of any other right, and no waiver, amendment or
other variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in writing signed by the Banks required
pursuant to Section 8.2, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by law
afforded shall be cumulative and all shall be available to the Administrative
Agent and the Banks until the Obligations have been paid in full.
ARTICLE IX
GENERAL PROVISIONS
9.1. SURVIVAL OF REPRESENTATIONS. All representations and warranties of
the Company contained in this Agreement shall survive delivery of the Notes and
the making of the Loans herein contemplated.
9.2. GOVERNMENTAL REGULATION. Anything contained in this Agreement to the
contrary notwithstanding, no Bank shall be obligated to extend credit to the
Company in violation of any limitation or prohibition provided by any applicable
statute or regulation.
9.3. TAXES. Any taxes (excluding income taxes) payable or ruled payable by
Federal or State authority in respect of the Loan Documents shall be paid by the
Company, together with interest and penalties, if any.
9.4. HEADINGS. Section headings in the Loan Documents are for convenience
of reference only, and shall not govern the interpretation of any of the
provisions of the Loan Documents.
9.5. ENTIRE AGREEMENT. The Loan Documents embody the entire agreement and
understanding among the Company, the Administrative Agent and the Banks and
supersede all prior agreements and understandings among the Company, the
Administrative Agent and the Banks relating to the subject matter thereof.
9.6. SEVERAL OBLIGATIONS. The respective obligations of the Banks
hereunder are several and not joint and no Bank shall be the partner or agent of
any other (except to the extent to which the Administrative Agent is authorized
to act as such). The failure of any Bank to perform any of its obligations
hereunder shall not relieve any other Bank from any of its obligations
hereunder. This Agreement shall not be construed so as to confer any right or
benefit upon any Person other than the parties to this Agreement and their
respective successors and assigns.
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9.7. EXPENSES; INDEMNIFICATION. The Company shall reimburse the
Administrative Agent for any costs and out-of-pocket expenses (including
attorneys' fees and time charges of attorneys for the Administrative Agent,
which attorneys may be employees of the Administrative Agent) paid or incurred
by the Administrative Agent in connection with the administration, amendment,
and modification of the Loan Documents. The Company also agrees to reimburse the
Administrative Agent and the Banks for any costs and out-of-pocket expenses
(including attorneys' fees and time charges of the attorneys for the
Administrative Agent and the Banks, which attorneys may be employees of the
Adminstrative Agent or the Banks) paid or incurred by the Administrative Agent
or any Bank in connection with the collection and enforcement of the Loan
Documents. The Company further agrees to indemnify each of the Administrative
Agent and the Banks, and their respective directors, officers and employees,
against all losses, claims, damages, penalties, judgments, liabilities and
expenses (including, without limitation, all expenses of litigation or
preparation therefor whether or not the Administrative Agent or any Bank is a
party thereto) which any of them may pay or incur arising out of or relating to
this Agreement, the other Loan Documents, the transactions contemplated hereby
or the direct or indirect application or proposed application of the proceeds of
any Loan hereunder, except for any such losses, claims, damages, penalties,
judgments, liabilities or expenses arising on account of any such party's
negligence, bad faith or willful misconduct. The obligations of the Company
under this Section shall survive the termination of this Agreement.
9.8. NUMBER OF DOCUMENTS. All statements, notices, closing documents, and
requests hereunder shall be furnished to the Administrative Agent with
sufficient counterparts so that the Administrative Agent may furnish one to each
of the Banks.
9.9. ACCOUNTING. Except as provided to the contrary herein, all accounting
terms used herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with Agreement Accounting Principles,
except that any calculation or determination which is to be made on a
consolidated basis shall be made for the Company and all its Subsidiaries,
including those Subsidiaries, if any, which are unconsolidated on the Company's
audited financial statements.
9.10. SEVERABILITY OF PROVISIONS. Any provision in any Loan Document that
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.
9.11. NONLIABILITY OF BANKS. The relationship between the Company, the
Banks, the Co-Agents and the Administrative Agent shall be solely that of
borrower and lender. Neither the Administrative Agent nor any Bank shall have
any fiduciary responsibilities to the Company. Neither the Administrative Agent
nor any Co-Agent or Bank undertakes any
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responsibility to the Company to review or inform the Company of any matter in
connection with any phase of the Company's business or operations.
9.12. NONRELIANCE. Each Bank hereby represents that it is not relying on or
looking to any "margin stock" (as defined in Regulations U and X) for the
repayment of the Loans provided for herein.
9.13. CONFIDENTIALITY. Each Bank agrees to hold any confidential
information which it may receive from the Company pursuant to this Agreement in
confidence, except for disclosure (i) to other Banks, (ii) to legal counsel and
accountants to that Bank, (iii) to regulatory officials as required, (iv) to any
Person as required by law, regulation, or legal process, and (vi) permitted by
Section 12.3.
ARTICLE X
THE AGENTS
10.1. APPOINTMENT. The First National Bank of Chicago is hereby appointed
Administrative Agent hereunder, and each of the Banks irrevocably authorizes the
Administrative Agent to act as the administrative agent of such Bank. The
Administrative Agent agrees to act as such upon the express conditions contained
in this Article X. The Administrative Agent shall not have a fiduciary
relationship in respect of any Bank by reason of this Agreement. The First
National Bank of Chicago and Morgan Guaranty Trust Company of New York are each
hereby appointed to act as a Co-Agent hereunder. No Co-Agent shall have any
right, power, obligation, liability, responsibility or duty under this Agreement
in its capacity as Co-Agent.
10.2. POWERS. The Administrative Agent shall have and may exercise such
powers hereunder as are specifically delegated to the Administrative Agent by
the terms hereof, together with such powers as are reasonably incidental
thereto. The Administrative Agent shall have no implied duties to the Banks, or
any obligation to the Banks to take any action hereunder except any action
specifically provided by this Agreement to be taken by the Administrative Agent.
10.3. GENERAL IMMUNITY. Neither the Administrative Agent nor any of its
directors, officers, agents or employees shall be liable to the Banks or any
Bank for any action taken or omitted to be taken by it or them hereunder or in
connection herewith except for its or their own gross negligence or willful
misconduct.
10.4. NO RESPONSIBILITY FOR LOANS, RECITALS, ETC. Neither the
Administrative Agent nor any of its directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into, or verify
(i) any statement, warranty or representation made in
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connection with any Loan Document or any borrowing hereunder; (ii) the
performance or observance of any of the covenants or agreements of any obligor
under any Loan Document, including, without limitation, any agreement by an
obligor to furnish information directly to each Bank; (iii) the satisfaction of
any condition specified in Article IV, except receipt of items required to be
delivered to the Administrative Agent; or (iv) the validity, effectiveness or
genuineness of any Loan Document or any other instrument or writing furnished in
connection therewith. The Administrative Agent shall not have any duty to
disclose to the Banks information that is not required to be furnished by the
Company to the Administrative Agent at such time, but is voluntarily furnished
by the Company to the Administrative Agent (either in its capacity as
Administrative Agent or in its individual capacity).
10.5. ACTION ON INSTRUCTIONS OF BANKS. The Administrative Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
in accordance with written instructions signed by the Required Banks, and such
instructions and any action taken or failure to act pursuant thereto shall be
binding on all of the Banks and on all holders of the Notes. The Administrative
Agent shall be fully justified in failing or refusing to take any action
hereunder and under any other Loan Document unless it shall first be indemnified
to its satisfaction by the Banks pro rata against any and all liability, cost
and expense that it may incur by reason of taking or continuing to take any such
action.
10.6. EMPLOYMENT OF ADMINISTRATIVE AGENT AND COUNSEL. The Administrative
Agent may execute any of its respective duties as Administrative Agent hereunder
by or through employees, agents, and attorneys-in-fact and shall not be
answerable to the Banks, except as to money or securities received by it or its
authorized agents, for the default or misconduct of any such agents or
attorneys-in-fact selected by it with reasonable care. The Administrative Agent
shall be entitled to advice of counsel concerning all matters pertaining to the
agency hereby created and its respective duties hereunder and under any Loan
Document.
10.7. RELIANCE ON DOCUMENTS; COUNSEL. The Administrative Agent shall be
entitled to rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and, in respect
of legal matters, upon the opinion of counsel selected by the Administrative
Agent, which counsel may be employees of the Administrative Agent.
10.8. ADMINISTRATIVE AGENT'S REIMBURSEMENT AND INDEMNIFICATION. The Banks
agree to reimburse and indemnify the Administrative Agent, ratably in proportion
to its Commitment, upon demand (i) for any costs and out-of-pocket expenses
(including attorneys' fees and time charges of attorneys for the Administrative
Agent, which attorneys may be employees of the Administrative Agent) not
reimbursed by the Company for which the Administrative Agent is entitled to
reimbursement by the Company under the Loan Documents, (ii) for any other
expenses incurred by the Administrative Agent on behalf of the Banks, in
connection with the administration, amendment and enforcement of the Loan
Documents and (iii) for any liabilities, obligations, losses, damages,
penalties, actions,
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judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever which may be imposed on, incurred by or asserted against the
Administrative Agent or any of its directors, officers, and employees in any way
relating to or arising out of this Agreement or any other document delivered in
connection with this Agreement or the transactions contemplated hereby or the
enforcement of any of the terms hereof or of any such other documents, provided
that no Bank shall be liable for any of the foregoing to the extent they arise
from the gross negligence or willful misconduct of the Administrative Agent.
10.9. RIGHTS AS A BANK. With respect to its Commitment, Loans made by it
and the Note issued to it, the Administrative Agent shall have the same rights
and powers hereunder as any Bank and may exercise the same as though it were not
the Administrative Agent, and the term "Bank" or "Banks" shall, unless the
context otherwise indicates, include the Administrative Agent in its individual
capacity. The Administrative Agent may accept deposits from, lend money to, and
generally engage in any kind of banking or trust business with the Company or
any Subsidiary as if it were not the Administrative Agent.
10.l0. BANK CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon the Administrative Agent or any other
Bank and based on the financial statements prepared by the Company and such
other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Bank also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Bank and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.
10.11. SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign
at any time by giving written notice thereof to the Banks and the Company, such
resignation to be effective upon the appointment of the successor Administrative
Agent or, if no successor Administrative Agent has been appointed, forty-five
days after the retiring Administrative Agent gives notice of its intention to
resign. The Administrative Agent may be removed at any time with or without
cause by written notice received by the Administrative Agent from the Required
Banks, such removal to be effective on the date specified by the Required Banks.
Upon any such resignation or removal, the Company shall have the right to
appoint, on behalf of itself and the Banks, a successor Administrative Agent,
subject to the written approval of the Required Banks of such successor
Administrative Agent, which approval shall not be unreasonably withheld. If no
successor Administrative Agent (i) shall have been so appointed by the Company
and (ii) shall have accepted such appointment within thirty days after the
retiring Administrative Agent's giving notice of resignation, then the retiring
Administrative Agent may appoint, on behalf of the Company and the Banks, a
successor Administrative Agent. If the Administrative Agent has resigned or been
removed and no successor Administrative Agent has been appointed, the Banks may
perform all the duties of the Administrative Agent hereunder and the Company
shall make all payments in respect of the Obligations to the applicable Bank and
for all other purposes shall deal directly with the
43
<PAGE>
Banks. No successor Administrative Agent shall be deemed to be appointed
hereunder until such successor Administrative Agent has accepted the
appointment. Such successor Administrative Agent shall be a commercial bank
having capital and retained earnings of at least $50,000,000. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
Administrative Agent, such successor Administrative Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring or removed Administrative Agent. Upon the effectiveness of the
resignation or removal of the Administrative Agent, the resigning or removed
Administrative Agent shall be discharged from its duties and obligations
hereunder and under the Loan Documents. After the effectiveness of the
resignation or removal of an Administrative Agent, the provisions of this
Article X shall continue in effect for the benefit of such Administrative Agent
in respect of any actions taken or omitted to be taken by it while it was acting
as the Administrative Agent hereunder and under the other Loan Documents.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. SETOFF. In addition to, and without limitation of, any rights of the
Banks under applicable law, if the Company becomes insolvent, however evidenced,
or any Default or Unmatured Default occurs, any indebtedness from any Bank, or
any Affiliate thereof, to the Company (including all account balances, whether
provisional or final and whether or not collected or available) and any other
Indebtedness may be setoff and applied toward the payment of the Obligations
owing to such Bank, whether or not the Obligations, or any part hereof, shall
then be due.
11.2. RATABLE PAYMENTS. If any Bank, whether by setoff or otherwise, has
payment made to it upon its Loans (other than payments received pursuant to
Sections 3.1, 3.2 or 3.4) in a greater proportion than that received by any
other Bank, such Bank agrees, promptly upon demand, to purchase a portion of the
Loans held by the other Banks so that after such purchase each Bank will hold
its ratable proportion of Loans. If any Bank, whether in connection with setoff
or amounts which might be subject to setoff or otherwise, receives collateral or
other protection for its Obligations or such amounts which may be subject to
setoff, such Bank agrees, promptly upon demand, to take such action necessary
such that all Banks share in the benefits of such collateral ratably in
proportion to their Loans. In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made.
44
<PAGE>
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
-------------------------------------------------
12.1. SUCCESSORS AND ASSIGNS. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Company and the
Banks and their respective successors and assigns, except that (i) the Company
may not assign its rights or obligations under the Loan Documents, except as
provided in Section 6.9 hereof, and (ii) subject to Section 3.2 hereof, no
assignment by any Bank of all or any part of its rights or benefits under the
Loan Documents may be made without the prior written consent of the Company.
Notwithstanding clause (ii) of this Section, any Bank may at any time, without
the consent of the Company or the Administrative Agent, assign all or any
portion of its rights under this Agreement and its Notes to a Federal Reserve
Bank; provided, however, that no such assignment shall release the transferor
Bank from its obligations hereunder. The Administrative Agent may treat the
payee of any Note as the owner thereof for all purposes hereof unless and until
a written notice of assignment or transfer is filed with the Administrative
Agent. Any assignee or transferee of a Note agrees by acceptance thereof to be
bound by all the terms and provisions of the Loan Documents. Any request,
authority or consent of any Person, who at the time of making such request or
giving such authority or consent is the holder of any Note, shall be conclusive
and binding on any subsequent holder, transferee or assignee of such Note or of
any Note or Notes issued in exchange therefor.
12.2. PARTICIPATIONS.
12.2.1. PERMITTED PARTICIPANTS; EFFECT. Any Bank may, in the ordinary
course of its business and in accordance with applicable law, at any time sell
to one or more banks ("Participants") participating interests in any Loan owing
to such Bank, any Note held by such Bank, any Commitment of such Bank or any
other interest of such Bank under the Loan Documents. Prior written notice to
the Company of the sale of any such participation shall be required prior to a
participation becoming effective with respect to a Participant. In the event of
any such sale by a Bank of participating interests to a Participant, such Bank's
obligations under the Loan Documents shall remain unchanged, such Bank shall
remain solely responsible to the other parties hereto for the performance of
such obligations, such Bank shall remain the holder of any such Note for all
purposes under the Loan Documents, all amounts payable by the Company under this
Agreement shall be determined as if such Bank had not sold such participating
interests, and the Company and the Administrative Agent shall continue to deal
solely and directly with such Bank in connection with such Bank's rights and
obligations under the Loan Documents.
12.2.2. VOTING RIGHTS. Each Bank shall retain the sole right to approve,
without the consent of any Participant, any amendment, modification or waiver of
any provision of the Loan Documents other than any amendment, modification or
waiver with respect to any Loan or Commitment in which such Participant has an
interest which forgives principal, interest or
45
<PAGE>
fees or reduces the interest rate or fees payable with respect to any such Loan
or Commitment, postpones any date fixed for any regularly-scheduled payment of
principal of, or interest or fees on, any such Loan or Commitment, releases any
guarantor of any such Loan or releases any substantial portion of collateral, if
any, securing any such Loan.
12.3. DISSEMINATION OF INFORMATION. The Company authorizes each Bank to
disclose to (i) any Participant or assignee or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") any and
all financial or other information pertaining to the Company and its
Subsidiaries which the Company is required to furnish to the Banks in accordance
with this Agreement, and (ii) any prospective Transferee any and all financial
or other information pertaining to the Company and its Subsidiaries which the
Company is required to furnish to the Banks pursuant to Sections 6.1(a) through
6.1(e); provided that each Transferee and prospective Transferee agrees to be
bound by Section 9.13 of this Agreement.
12.4. TAX TREATMENT. If any interest in any Loan Document is transferred to
any Transferee which is organized under the laws of any jurisdiction other than
the United States or any State thereof, the transferor Bank shall cause such
Transferee, concurrently with the effectiveness of such transfer, to comply with
the provisions of Section 2.4.15.
ARTICLE XIII
NOTICES
-------
13.1. GIVING NOTICE. Except as otherwise permitted hereunder, all notices
and other communications provided to any party hereto under this Agreement or
any other Loan Document shall be in writing or by telex or by fascimile and
addressed or delivered to such party at its address set forth below its
signature hereto or at such other address as may be designated by such party in
a notice to the other parties. Any notice, if mailed and properly addressed with
postage prepaid, shall be deemed given when received; any notice, if transmitted
by telex or facsimile, shall be deemed given when transmitted (answerback
confirmed in the case of telexes).
13.2. CHANGE OF ADDRESS. The Company, the Administrative Agent and any Bank
may each change the address for service of notice upon it by a notice in writing
to the other parties hereto.
46
<PAGE>
ARTICLE XIV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto may
execute this Agreement by signing any such counterpart. This Agreement shall be
effective when it has been executed by the Company, the Administrative Agent and
the Banks and each party has notified the Administrative Agent by telex,
facsimile or telephone, that it has taken such action.
ARTICLE XV
CHOICE OF LAW; JURISDICTION; JURY TRIAL WAIVER
----------------------------------------------
15.1. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF ILLINOIS, BUT
GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
15.2. CONSENT TO JURISDICTION. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO
THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO ANY LOAN DOCUMENTS AND THE COMPANY HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO
THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE
ADMINISTRATIVE AGENT OR ANY BANK TO BRING PROCEEDINGS AGAINST THE COMPANY IN THE
COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY THE COMPANY AGAINST
THE ADMINISTRATIVE AGENT OR ANY BANK OR ANY AFFILIATE OF THE ADMINISTRATIVE
AGENT OR ANY BANK INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY
ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT
ONLY IN A COURT IN CHICAGO, ILLINOIS.
47
<PAGE>
15.3. WAIVER OF JURY TRIAL. THE COMPANY, THE ADMINISTRATIVE AGENT AND EACH
BANK HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
IN WITNESS WHEREOF, the Company, the Banks, the Co-Agents and the
Administrative Agent have executed this Agreement as of the date first above
written.
BROWN-FORMAN CORPORATION
/s/ Christopher A. Sailer
By: ______________________________
Title: Treasurer
/s/ Terry L. Lange
By: ______________________________
Title: Assistant Treasurer
850 Dixie Highway
Louisville, Kentucky 40210
Attention: Treasurer
Telephone: (502) 585-1100
Telecopy: (502) 774-7833
48
<PAGE>
COMMITMENTS
$22,500,000 THE FIRST NATIONAL BANK OF CHICAGO,
Individually, as Co-Agent and as Administrative
Agent
/s/ Steven R. Fercho
By: ______________________________
Title: Vice President
One First National Plaza
Suite 0324, 1-10
Chicago, IL 60670
Attention: Steven R. Fercho
Vice President
Telephone: (312) 732-6466
Telecopy: (312) 732-1712
For Competitive Bid Advances:
Telephone: (312) 732-7659
(Ernest Misiora)
Telecopy: (312) 732-4840
$22,500,000 MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, Individually and as Co-Agent
/s/ John M. Mikolay
By: _____________________________
Title: Vice President
Morgan Guaranty Trust Company of New York
60 Wall Street
New York, NY 10260-0060
Attention: Laura E. Reim
Vice President
Telephone: (212) 648-6793
Telecopy: (212) 648-5336
For all Advances and/or Repayment Instructions:
Telephone: (302) 634-1800
(Multi-Option Unit-Loan
Department)
Telecopy: (302) 634-1094
For Competitive Bid Advances:
Telephone: (212) 648-0760
(John R. Dougar)
Telecopy: (212) 648-5918
49
<PAGE>
$17,000,000 ABN AMRO BANK N.V.
/s/ James M. Janovsky
By: ______________________________
Title: Vice President
/s/ Craig P. Guinane
By: ______________________________
Title: Assistant Vice President
One PPG Place
Suite 2950
Pittsburgh, PA 15222-5400
Attention: James M. Janovsky
Vice President
Telephone: (412) 566-2269
Telecopy: (412) 566-2266
Craig P. Guinane
Asssistant Vice President
Telephone: (412) 566-2297
(412) 566-2266
$17,000,000 BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
/s/ Adam Balbach
By: _____________________________
Title: Vice President
231 South LaSalle Street
Chicago, IL 60697
Attention: Adam Balbach
Telephone: (312) 828-5520
Telecopy: (312) 987-5833
$17,000,000 BANK OF MONTREAL
/s/ Randall B. Becker
By: ______________________________
Title: Managing Director
115 S. LaSalle - 12 West
Chicago, IL 60603
Attention: Randall B. Becker
Managing Director
Telephone: (312) 750-3723
Telecopy: (312) 750-4314
50
<PAGE>
$17,000,000 CITIBANK N.A.
By: /s/ Barbara A. Cohen
----------------------------------
Title: Vice President
200 S. Wacker Drive, 31st Floor
Chicago, IL 60521
Attention: Daniel Penkar
Vice President
Telephone: (312) 993-3052
Telecopy: (312) 993-6840
$17,000,000 CORESTATES BANK, N.A.
By: /s/ Thomas J. McDonnell
---------------------------------
Title: Vice President
P.O. Box 7618
Philadelphia, PA 19101
Attention: Thomas J. McDonnell
Vice President
Telephone: (215) 973-7667
Telecopier:(215) 973-7820
$17,000,000 FIRST NATIONAL BANK OF BOSTON
By:
---------------------------------
Title: Managing Director
100 Federal Street
Internal Mail Code: MABOS 01-21-03
Boston, MA 02110
Attention: Janet R. Sullivan
Assistant Vice President
Telephone: (617) 434-3069
Telecopier (617) 434-0601
51
<PAGE>
$17,000,000 THE INDUSTRIAL BANK OF JAPAN TRUST COMPANY
By:
----------------------------------
Title:
245 Park Avenue
New York, NY 10167
Attention: Ken Biegen
Vice President
Telephone: (212) 309-6574
Telecopier:(212) 557-3581
$17,000,000 MELLON BANK, N.A.
By: /s/ F.W. Okie, Jr.
-----------------------------------
Title: Vice President
One Mellon Bank Center
Pittsburgh, PA 15258
Attention: F.W. Okie, Jr.
Telephone: (412) 234-4420
Telecopier:(412) 236-1914
$17,000,000 NATIONAL CITY BANK, KENTUCKY
By: /s/ Deroy Scott
-----------------------------------
Title: Vice President
101 South Fifth Street
P.O. Box 36000
Louisville, KY 40233
Attention: Deroy Scott
Vice President
Telephone: (502) 581-7821
Telecopier (502) 581-4424
52
<PAGE>
$17,000,000 PNC BANK, KENTUCKY, INC.
By: /s/ Alan J. Bailey
-----------------------------------
Title: Commercial Banking Officer
Citizens Plaza
Louisville, KY 40296
Attention: Alan J. Bailey
Commercial Banking Officer
Telephone: (502) 581-3022
Telecopier:(502) 581-3355
$17,000,000 SWISS BANK CORPORATION
By: /s/ T. David Dunkleman
-----------------------------------
Title: Associate Director
By: /s/ Nancy A. Russell
-----------------------------------
Title: Associate Director
141 West Jackson Blvd.
8th Floor
Chicago, IL 60604
Attention: T. David Dunkleman
Associate Director
Telephone: (312) 554-6421
Telecopy: (312) 554-6410
$17,000,000 THE SANWA BANK, LIMITED, ATLANTA AGENCY
By:
----------------------------------
Title: Vice President and Senior Manager
133 Peachtree Street
Suite 4750
Atlanta, GA 30303
Attention: P.J. Pawlak
Vice President and Sr. Manager
Telephone: (404) 586-6888
Telecopy: (404) 589-1629
53
<PAGE>
$17,000,000 THIRD NATIONAL BANK IN NASHVILLE
By: /s/ Robert W. Meyer
----------------------------------
Title: First Vice President
201 Fourth Avenue North
Nashville, TN 37219
Attention: Robert W. Meyer
First Vice President
Telephone: (615) 748-4396
Telecopy: (615) 259-4119
$17,000,000 WACHOVIA BANK OF GEORGIA, N.A.
By:
----------------------------------
Title: Senior Vice President
191 Peachtree St. N.E.
Atlanta, GA 30303
Attention: Henry H. Hagan
Telephone: (404) 332-5950
Telecopy: (404) 332-6898
$17,000,000 WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK AND CAYMAN ISLANDS BRANCHES
By:
-----------------------------------
Title:
By:
-----------------------------------
Title:
1211 Avenue of the Americas
New York, NY 10036
Attention: Thomas Lee
Telephone: (212) 852-6204
Telecopy: (212) 852-6148
__________________
Total $300,000,000
54
<PAGE>
EXHIBIT "A"
PROMISSORY NOTE
(Ratable Loans)
$ November 30, 1994
--------------
BROWN-FORMAN CORPORATION, a Delaware corporation (the "Company"), promises
to pay to the order of (the "Bank"), for the account of its
applicable Lending Installation, the lesser of the principal sum of
Dollars ($ ) or the aggregate unpaid principal amount of all Ratable
Loans made by the Bank to the Company pursuant to Sections 2.1 and 2.2 of the
Credit Agreement hereinafter referred to (as the same may be amended or
modified from time to time herein called the "Agreement"), in immediately
available funds at the main office of The First National Bank of Chicago, as
Administrative Agent, in Chicago, Illinois, together with interest on the unpaid
principal amount hereof at the rates and on the dates set forth in the
Agreement. The Company shall pay the principal of, and accrued and unpaid
interest on, the Ratable Loans in full on the Termination Date and shall make
such mandatory payments as are required to be made under the terms of Section
2.4.6 of the Agreement.
The Bank shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Ratable Loan and the date and amount of each
principal payment hereunder.
This Promissory Note (Ratable Loans) is one of the Notes issued pursuant
to, and is entitled to the benefits of, the Credit Agreement, dated as of
November 30, 1994, among the Company; The First National Bank of Chicago and
Morgan Guaranty Trust Company of New York, individually and as Co-Agents; The
First National Bank of Chicago, as Administrative Agent; and the banks named
therein, including the Bank, to which Agreement, as it may be amended from time
to time, reference is hereby made for a statement of the terms and conditions
under which this Promissory Note (Ratable Loans) may be prepaid or its maturity
date accelerated. Capitalized terms used herein and not otherwise defined herein
are used with the meanings attributed to them in the Agreement.
The Company expressly waives any presentment, demand, protest or notice in
connection with this Promissory Note (Ratable Loans).
55
<PAGE>
This Promissory Note (Ratable Loans) shall be construed in accordance with
the internal laws (and not the law of conflicts) of the State of Illinois, but
giving effect to Federal laws applicable to national banks.
BROWN-FORMAN CORPORATION
By:
---------------------------------------
Title:
-----------------------------------
By:
---------------------------------------
Title:
-----------------------------------
850 Dixie Highway
Louisville, Kentucky 40210
56
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
PROMISSORY NOTE (RATABLE LOANS) OF
BROWN-FORMAN CORPORATION,
DATED NOVEMBER 30, 1994
TO
-----------------
<TABLE>
<CAPTION>
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
- ---- --------- ----------- --------- -------
<S> <C> <C> <C> <C>
</TABLE>
57
<PAGE>
EXHIBIT "B"
PROMISSORY NOTE
(Competitive Bid Loans)
November 30, 1994
BROWN-FORMAN CORPORATION, a Delaware corporation (the "Company"), promises
to pay to the order of (the "Bank"), for the account of
its applicable Lending Installation, the aggregate unpaid principal amount of
all Competitive Bid Loans made by the Bank to the Company pursuant to Sections
2.1 and 2.3 of the Credit Agreement hereinafter referred to (as the same may be
amended or modified herein called the "Agreement"), in lawful money of the
United States in immediately available funds at the main office of The First
National Bank of Chicago, as Administrative Agent, in Chicago, Illinois,
together with interest on the unpaid principal amount hereof at the rates and on
the dates set forth in the Agreement. The Company shall pay each Competitive Bid
Loan in full on the last day of such Competitive Bid Loan's applicable Interest
Period and shall make such mandatory payments as are required to be made under
the terms of Section 2.4.6 of the Agreement.
The Bank shall, and is hereby authorized to, record on the schedule
attached hereto, or otherwise record in accordance with its usual practice, the
date and amount of each Competitive Bid Loan and the date and amount of each
principal payment hereunder.
This Promissory Note (Competitive Bid Loans) is one of the Notes issued
pursuant to, and is entitled to the benefits of, the Credit Agreement dated as
of November 30, 1994 among the Company; The First National Bank of Chicago and
Morgan Guaranty Trust Company of New York, individually and as Co-Agents; The
First National Bank of Chicago, as Administrative Agent; and the banks named
therein, including the Bank, to which Agreement, as it may be amended from time
to time, reference is hereby made for a statement of the terms and conditions
under which this Promissory Note (Competitive Bid Loans) may be prepaid or its
maturity date accelerated. Capitalized terms used herein and not otherwise
defined herein are used with the meanings attributed to them in the Agreement.
The Company expressly waives any presentment, demand, protest or notice in
connection with this Promissory Note (Competitive Bid Loans).
58
<PAGE>
This Promissory Note (Competitive Bid Loans) shall be construed in
accordance with the internal laws (and not the law of conflicts) of the State of
Illinois, but giving effect to Federal laws applicable to national banks.
BROWN-FORMAN CORPORATION
By:
----------------------------------
Title:
--------------------------------
By:
----------------------------------
Title:
--------------------------------
850 Dixie Highway
Louisville, Kentucky 40210
59
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
PROMISSORY NOTE (COMPETITIVE BID LOANS)
OF BROWN-FORMAN CORPORATION,
DATED NOVEMBER 30, 1994
TO ________________
Principal Maturity Principal
Amount of of Interest Amount Unpaid
Date Loan Period Paid Balance
- ---- --------- ----------- --------- -------
60
<PAGE>
EXHIBIT "C"
COMPETITIVE BID QUOTE REQUEST
(Section 2.3.2)
, 199
--------------- ----
To: The First National Bank of Chicago,
as Administrative Agent (the "Administrative Agent")
From: Brown-Forman Corporation
Re: Credit Agreement (as amended from time to time, the "Agreement"),
dated as of November 30, 1994 among Brown-Forman Corporation; The
First National Bank of Chicago and Morgan Guaranty Trust Company of
New York, individually and as Co-Agents; The First National Bank of
Chicago, as Administrative Agent; and the Banks listed on the
signature pages thereof
We hereby give notice pursuant to Section 2.3.2 of the Agreement that we
request Competitive Bid Quotes for the following proposed Competitive Bid
Advance(s):
Borrowing Date: , 19
------------- --
PRINCIPAL AMOUNT \1\ INTEREST PERIOD \2\
$
Such Competitive Bid Quotes should offer a [Competitive Bid Margin]
[Absolute Rate].
Upon acceptance by the undersigned of any or all of the Competitive Bid
Advances offered by Banks in response to this request, the undersigned shall be
deemed to affirm as of such date the representations and warranties made in the
Agreement to the extent specified in Article IV thereof. Capitalized terms used
herein have the meanings assigned to them in the Agreement.
BROWN-FORMAN CORPORATION
By:
----------------------------------
Title:
------------------------------
By:
----------------------------------
Title:
-------------------------------
850 Dixie Highway
Louisville, Kentucky 40210
- --------------
\1\ Amount must be at least $10,000,000 and an integral multiple of $5,000,000.
\2\ One, two or three months (Eurodollar Auction) or at least 14 and up to 90
days (Absolute Rate Auction), subject to the provisions of the definitions
of Eurodollar Bid Rate Interest Period and Absolute Rate Interest Period.
61
<PAGE>
EXHIBIT "D"
INVITATION FOR COMPETITIVE BID QUOTES
(Section 2.3.3)
________________, 199__
To: [Name of Bank]
Re: Invitation for Competitive Bid Quotes to
Brown-Forman Corporation (the "Company")
Pursuant to Section 2.3.3 of the Credit Agreement dated as of November 30,
1994 (as amended from time to time, the "Agreement") among the Company; the
Banks parties thereto; The First National Bank of Chicago and Morgan Guaranty
Trust Company of New York, individually and as Co-Agents; and the undersigned,
as Administrative Agent, we are pleased on behalf of the Company to invite you
to submit Competitive Bid Quotes to the Company for the following proposed
Competitive Bid Advance(s):
Borrowing Date: _____________, 19___
Principal Amount Interest Period
- ---------------- ---------------
$
Such Competitive Bid Quotes should offer a [Competitive Bid Margin]
[Absolute Rate]. Your Competitive Bid Quote must comply with Section 2.3.4 of
the Agreement and the foregoing terms in which the Competitive Bid Quote Request
was made. Capitalized terms used herein have the meanings assigned to them in
the Agreement.
Please respond to this invitation by no later than [1:00 p.m.] [9:00 a.m.]
Chicago time on ___________________, 19___.
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent
By: _______________________________
Authorized Officer
62
<PAGE>
EXHIBIT "E"
COMPETITIVE BID QUOTE
(Section 2.3.4)
___________________, 199__
To: The First National Bank of Chicago, as Administrative Agent
Attn: ____________________________
Re: Competitive Bid Quote to Brown-Forman Corporation (the "Company")
In response to your invitation on behalf of the Company dated
______________, 19___, we hereby make the following Competitive Bid Quote
pursuant to Section 2.3.4 of the Agreement hereinafter referred to and on the
following terms:
1. Quoting Bank: ______________________________
2. Person to contact at Quoting Bank: _________________________
3. Borrowing Date: ____________________, 19___ \1
4. We hereby offer to make Competitive Bid Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest [Competitive [Absolute Minimum
Amount \2 Period \3 Bid Margin \4] Rate \5] Amount \6
- --------- --------- -------------- --------- ---------
$
We understand and agree that the offer(s) set forth above, subject to the
satisfaction of the applicable conditions set forth in the Credit Agreement
dated as of November 30, 1994 among the Company, the Banks listed on the
signature pages thereof, The First National Bank of Chicago and Morgan Guaranty
Trust Company of New York, individually and as Co-Agents, and yourselves, as
Administrative Agent, irrevocably obligates us to make the Competitive Bid
Loan(s) for which any offer(s) are accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
By: ________________________
Authorized Officer
______________
\1 As specified in the related Invitation.
\2 Principal amount bid for each Interest Period may not exceed principal amount
requested. Bids must be made for $10,000,000 and an integral multiple of
$1,000,000.
\3 One, two or three months or at least 14 and up to 90 days, as specified in
the related Invitation.
\4 Competitive Bid Margin over or under the Eurodollar Base Rate determined for
the applicable Interest Period. Specify percentage (rounded upwards to the
next higher 1/100 of 1%) and specify whether "PLUS" or "MINUS".
\5 Specify rate of interest per annum (rounded upwards to the next higher 1/100
of 1%).
\6 Specify minimum amount, if any, which the Company may accept and/or the
limit, if any, as to the aggregate principal amount of the Competitive Bid
Loans of the quoting Bank which the Company may accept (see Section
2.3.4(b)(v)).
63
<PAGE>
EXHIBIT "F"
OPINION OF COUNSEL
(Section 4.1(e))
November 30, 1994
The Banks that are parties to the Credit
Agreement described below.
Gentlemen:
We are counsel for Brown-Forman Corporation, a Delaware corporation (the
"Company"), and have represented the Company in connection with its execution
and delivery of a Credit Agreement among the Company; The First National Bank of
Chicago and Morgan Guaranty Trust Company of New York, individually and as Co-
Agents; The First National Bank of Chicago, as Administrative Agent; and the
Banks named therein, providing for Advances in an aggregate principal amount not
exceeding $300,000,000 at any one time outstanding and dated as of November 30,
1994 (the "Agreement"). All capitalized terms used in this opinion shall have
the meanings attributed to them in the Agreement.
We have examined the Company's certificate of incorporation, by-laws,
resolutions, the Loan Documents, certificates of public officials and such other
matters of fact and law which we deem necessary in order to render this opinion.
Based upon the foregoing, it is our opinion that:
l. The Company and each Subsidiary which is a "significant subsidiary" (as
defined in Rule 1-02(v) of Regulation S-X of the SEC) are corporations duly
incorporated, validly existing and in good standing under the laws of their
states or countries of incorporation and are duly qualified and in good standing
in each jurisdiction where, because of the nature of their respective activities
or properties such qualification is required and the failure to so qualify would
have a Material Adverse Effect.
2. The execution and delivery of the Loan Documents by the Company and the
performance by the Company of the Obligations have been duly authorized by all
necessary corporate action and proceedings on the part of the Company and will
not:
(a) require any consent of the Company's shareholders;
(b) violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on the Company or any Subsidiary or the
Company's or any Subsidiary's certificate or articles of incorporation or
by-laws or any indenture, instrument or agreement binding upon the Company
or any Subsidiary; or
(c) result in, or require, the creation or imposition of any Lien
pursuant to the provisions of any indenture, instrument or agreement binding
upon the Company or any Subsidiary.
64
<PAGE>
3. The Loan Documents have been duly executed and delivered by the Company
and constitute legal, valid and binding obligations of the Company enforceable
in accordance with their terms except to the extent the enforcement thereof may
be limited by bankruptcy, insolvency or similar laws affecting the enforcement
of creditors' rights generally and subject also to the availability of equitable
remedies if equitable remedies are sough t.
4. There is no litigation, arbitration or proceeding pending or, to our
knowledge, threatened against or affecting the Company or any Subsidiary which
is reasonably likely to be decided against the Company or such Susidiary and, if
so decided, would have a Material Adverse Effect.
5. No approval, authorization, consent, adjudication or order of any
governmental authority, which has not been obtained by the Company or any
Subsidiary, is required to be obtained by the Company or any Subsidiary in
connection with the execution and delivery of the Loan Documents, the borrowings
under the Agreement or in connection with the payment by the Company of the
Obligations, or to the extent that any of the foregoing is required, all such
orders, consents, approvals, licenses, authorizations, validations, filings,
recordings, registrations, or exemptions have been validly procured.
This opinion is rendered solely for the benefit of the Banks and may not
be relied on by any other party, nor may copies be delivered to any other person
or filed with any governmental agency, without our prior written consent.
Very truly yours,
65
<PAGE>
EXHIBIT "G"
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To: The First National Bank of Chicago,
as Administrative Agent (the "Agent") under
the Credit Agreement Described Below.
Re: Credit Agreement, dated November 30, 1994 (as the same may be amended or
modified, the "Credit Agreement"), among Brown-Forman Corporation (the
"Borrower"); The First National Bank of Chicago and Morgan Guaranty Trust
Company of New York, individually and as Co-Agents; the Agent; and the
Banks named therein
Terms used herein and not otherwise defined shall have the meanings
assigned thereto in the Credit Agreement.
The Agent is specifically authorized and directed to act upon the following
standing money transfer instructions with respect to the proceeds of Advances or
other extensions of credit from time to time until receipt by the Agent of a
specific written revocation of such instructions by the Company; provided,
however, that the Agent may otherwise transfer funds as hereafter directed in
writing by the Company in accordance with Section 13.1 of the Credit Agreement
or based on any telephonic notice made in accordance with Section 2.4.11 of the
Credit Agreement.
Facility Identification Number(s): ABA No. 0830-0005-6
Customer/Account Name: Brown-Forman Corporation
Transfer Funds To: National City Bank, Kentucky
101 South Fifth Street
Louisville, Kentucky 40202
For Account No.: 704-9000-5
Reference/Attention To: Terry L. Lange
Authorized Officer (Customer
Representative) Date:
----------------------
- ------------------------------ ---------------------------------
(Please Print) Signature
Bank Officer Name Date:
------------------------
Steven R. Fercho
- ------------------------------ --------------------------------
(Please Print) Signature
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
66
<PAGE>
SCHEDULE "1"
SUBSIDIARIES
(See Section 5.8)
<TABLE>
<CAPTION>
Owned Percent Jurisdiction of
Subsidiary By Ownership Organization
- ---------- ----- --------- ---------------
<S> <C> <C> <C>
</TABLE>
See Attached Schedule Prepared by the Company.
67
<PAGE>
BROWN-FORMAN CORPORATION AND AFFILIATED COMPANIES
Schedule of Structure of Capital Stock, Date and State of Incorporation
November 1, 1994
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATION NAME STATE AND DATE OF FEDERAL NUMBER
AND ADDRESS INCORPORATION DOMICILE ID NUMBER STOCK TYPE AUTHORIZED ISSUED PAR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(1) Brown-Forman Corporation Delaware Kentucky 61-0143150 Common (A) 30,000,000 28,988,091 $.15
850 Dixie Highway 10/19/33 Common (B) 60,000,000 40,008,147 $.15
Louisville, Kentucky 40210-1091 Preferred 1,177,948 1,177,948 $10.00
- ------------------------------------------------------------------------------------------------------------------------------------
(3) Brown-Forman Industries, Inc. Delaware Kentucky 61-0623158 Common 500 500 $10.00
850 Dixie Highway 12/08/50
Louisville, Kentucky 40210-1091
- ------------------------------------------------------------------------------------------------------------------------------------
Brown-Forman International FSC, Ltd. Virgin Islands Virgin Islands 66-0411811 Common 1,000 800 Total Cap.
12 & 13 EST Mountain 11/13/84 $5,000.00
P.O. Box 887 No Par
Frederiksted, U.S.V.I. 00840
- ------------------------------------------------------------------------------------------------------------------------------------
Brown-Forman Worldwide, L.L.C. Delaware Kentucky 61-1270508 Capital N/A N/A $20,000
850 Dixie Highway 08/8/94 Contribution
Louisville, Kentucky 40210-1091
- ------------------------------------------------------------------------------------------------------------------------------------
Canadian Mist Distillers, Limited Canada Canada N/A Common 500,000 260,000 No Par
P.O. Box 217 08/27/65
Collingwood, Ontario, Canada
- ------------------------------------------------------------------------------------------------------------------------------------
(3) Cromwell Investments, Inc. Delaware Kentucky 61-1212290 Common 1,000 1,000 No Par
850 Dixie Highway 07/23/91
Louisville, Kentucky 40210-1091
- ------------------------------------------------------------------------------------------------------------------------------------
Early Times Distillers Company Delaware Kentucky 61-0623164 Common 500 500 $10.00
P.O. Box 1105 06/13/52
Louisville, Kentucky 40216-1105
- ------------------------------------------------------------------------------------------------------------------------------------
(5) Fetzer Vineyards California California 94-2458321 Common 10,000 601.19 No Par
P.O. Box 227 12/08/76
Redwood Valley, California 95470
- ------------------------------------------------------------------------------------------------------------------------------------
(2) Fratelli Bolla International
Wines, Inc. Kentucky New York 61-0926706 Common 1,000 10 No Par
New York, New York 06/24/77 Preferred 1,000 -0- No Par
- ------------------------------------------------------------------------------------------------------------------------------------
Jack Daniel Distillery, Kentucky Tennessee 61-0399125 Common 5,050 5,050 $100.00
Lem Motlow, Prop., Inc. 07/12/45
Lynchburg, Tennessee 37352
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BROWN-FORMAN CORPORATION AND AFFILIATED COMPANIES
Schedule of Structure of Capital Stock, Date and State of Incorporation 11-1-94
Page 2
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATION NAME STATE AND DATE OF FEDERAL NUMBER
AND ADDRESS INCORPORATION DOMICILE ID NUMBER STOCK TYPE AUTHORIZED ISSUED PAR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
L-H Limited United Kingdom United Kingdom N/A Common 1,000 10 1 English
Cavendish House 01/18/91 Pound
51/55 Mortimer Street - 4th Floor
London WIV 7DG, England
- ------------------------------------------------------------------------------------------------------------------------------------
Lenox, Incorporated New Jersey New Jersey 21-0498476 Common 2,000 1,000 $1.00
100 Lenox Drive 5/17/1889 Preferred 1,000 -0- $5.00
Lawrenceville, New Jersey 08648
- ------------------------------------------------------------------------------------------------------------------------------------
Longnorth Limited Ireland Ireland 66-1084770 Common 1,000 100 No Par
Robin Hood Road 06/17/81
Clondalkin County
Dublin, Ireland
- ------------------------------------------------------------------------------------------------------------------------------------
Mt. Eagle Corporation Delaware Virgin Islands 66-037113 Common 1,000 100 No Par
P.O. Box 887 02/28/79
Frederiksted, St. Croix
U.S.V.I. 00840
- ------------------------------------------------------------------------------------------------------------------------------------
(3) Quality Importers, Inc. Delaware Kentucky 61-6053196 Common 100 100 $10.00
850 Dixie Highway 07/26/67
Louisville, Kentucky 40210-1091
- ------------------------------------------------------------------------------------------------------------------------------------
(3) Sproti USA Limited Kentucky Kentucky 61-1141643 Common 1,000 Not Yet Issued No Par
(4) 850 Dixie Highway 05/17/88
Louisville, Kentucky 40210-1091
- ------------------------------------------------------------------------------------------------------------------------------------
(6) Swift and Moore Pty Limited Australia Australia N/A Ordinary 5,999,999 -0- $1.00
Ordinary A 1,400,000 1,400,000 $1.00
Ordinary B 1,200,000 1,200,000 $1.00
Ordinary C 800,000 800,000 $1.00
Ordinary D 1,000,000 1,000,000 $1.00
Ordinary E 1 1 $1.00
- ------------------------------------------------------------------------------------------------------------------------------------
(3) The Joseph Garneau Co., Inc. Delaware Kentucky 61-0623170 Common 500 500 $10.00
850 Dixie Highway 03/02/59
Louisville, Kentucky 40210-1091
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BROWN-FORMAN CORPORATION AND AFFILIATED COMPANIES
Schedule of Structure of Capital Stock, Date and State of Incorporation 11-1-94
Page 3
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATION NAME STATE AND DATE OF FEDERAL NUMBER
AND ADDRESS INCORPORATION DOMICILE ID NUMBER STOCK TYPE AUTHORIZED ISSUED PAR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
The Joseph Garneau Co., S.A. Switzerland Switzerland N/A Common 2,500 2,500 No Par
c/o Mr. Jurg Scheller 10/23/72
Atag Ernst & Young
Rle de Chantermerle 39
Case postale 301
CH-1701 Fribourg
Switzerland
- ------------------------------------------------------------------------------------------------------------------------------------
Thoroughbred Plastics Corporation Kentucky Kentucky 61-0983904 Common 1,000 231 No Par
11601 Electron Drive 01/15/81 Preferred 1,000 -0- No Par
Louisville, Kentucky 40299
- ------------------------------------------------------------------------------------------------------------------------------------
Subsidiary of Jack Daniel Distillery,
Lem Motlow, Prop., Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
(3) Drake Investments, Inc. Delaware Kentucky 62-1501971 Common 1,000 1,000 No Par
850 Dixie Highway 07/23/91
Louisville, Kentucky 40201-1091
- ------------------------------------------------------------------------------------------------------------------------------------
Subsidiary of Lenox, Incorporated
- ------------------------------------------------------------------------------------------------------------------------------------
(3) Samuel Kirk & Sons, Inc. Maryland Maryland 52-0376810 Common 5,000 1 $1.00
800 Wyman Park Drive 10/02/79
Baltimore, Maryland 21211
- ------------------------------------------------------------------------------------------------------------------------------------
(3) Kirk-Stieff Company Maryland New Jersey 52-1734944 Common 1,000 1,000 $1.00
100 Lenox Drive 03/19/90
Lawrenceville, New Jersey 08648
- ------------------------------------------------------------------------------------------------------------------------------------
(3) Norfolk Investments, Inc. Delaware New Jersey 22-3178646 Common 1,000 1,000 No Par
100 Lenox Drive 07/30/91
Lawrenceville, New Jersey 08648
- ------------------------------------------------------------------------------------------------------------------------------------
Dansk International Designs Ltd. New York New York 13-3250156 Common 500,000 368,627 $.10
100 Lenox Drive 03/15/85 Preferred 96,000 96,000 $100.00
Lawrenceville, New Jersey 08648
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BROWN-FORMAN CORPORATION AND AFFILIATED COMPANIES
Schedule of Structure of Capital Stock, Date and State of Incorporation 11-1-94
Page 4
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATION NAME STATE AND DATE OF FEDERAL NUMBER
AND ADDRESS INCORPORATION DOMICILE ID NUMBER STOCK TYPE AUTHORIZED ISSUED PAR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Brooks & Bentley Limited England England N/A Ordinary 1,000 1,000 1 English
Aldwych House 01/06/92 Pound
Aldwych, London WC2
England
- ------------------------------------------------------------------------------------------------------------------------------------
Brooks & Bentley S.A.R.L. Norway France N/A Ordinary 100 100 1000 French
6 Rue de Berri 07/29/92 Francs
Paris 75008, France
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Brooks & Bentley Norway Norway N/A Ordinary 1 1 50,000
Storg 2A 02/21/94 Korones
4890 Grimstead
South Norway
- ------------------------------------------------------------------------------------------------------------------------------------
Subsidiary of Dansk International Designs Ltd.
- ------------------------------------------------------------------------------------------------------------------------------------
P.N. International Delaware New York 06-1170055 Common 100,000 95,625(?) No Par
100 Lenox Drive 04/03/86 Preferred 20,000 19,999.8 No Par
Lawrenceville, New Jersey 08648
- ------------------------------------------------------------------------------------------------------------------------------------
Subsidiaries of Longnorth Limited
- ------------------------------------------------------------------------------------------------------------------------------------
Chissick Limited Ireland Ireland N/A Common 10,000 2 1 Irish
1 Earlsfort Centre 03/11/88 Pound
Lower Hatch Street
Dublin 2, Ireland
- ------------------------------------------------------------------------------------------------------------------------------------
Clintock Limited Ireland Ireland N/A Common 128,000 128,000 No Par
Robin Hood Road 06/17/81
Clondalkin County
Dublin, Ireland
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BROWN-FORMAN CORPORATION AND AFFILIATED COMPANIES
Schedule of Structure of Capital Stock, Date and State of Incorporation 11-1-94
Page 5
- ------------------------------------------------------------------------------------------------------------------------------------
CORPORATION NAME STATE AND DATE OF FEDERAL NUMBER
AND ADDRESS INCORPORATION DOMICILE ID NUMBER STOCK TYPE AUTHORIZED ISSUED PAR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
(3) Copthall Limited Ireland Ireland N/A Common 10,000 2 1 Irish
1 Earlsfort Centre 03/11/88 Pound
Lower Hatch Street
Dublin 2, Ireland
- ------------------------------------------------------------------------------------------------------------------------------------
Lantone Limited Channel Islands Channel Islands N/A Common 40,000 29,597 1 U.S. $
18 Greenville Street 12/06/89 Included (3)
St. Helier In nominie
Jersey, Channel Islands
- ------------------------------------------------------------------------------------------------------------------------------------
Lantone Delaware, Inc. Delaware Delaware 61-1261506 Common 450 100 No Par
300 Delaware Avenue 04/13/94
Wilmington, Delaware 19801
- ------------------------------------------------------------------------------------------------------------------------------------
Brown Forman - W.S. Greece Greece N/A ? ? ? ?
Karoulias S.A. 9/27/94
- ------------------------------------------------------------------------------------------------------------------------------------
(1) Common parent
(2) 40% owned only
(3) Inactive
(4) 90% owned by Brown-Forman Corporation; 10% owned by Sproti, h.f. (unrelated Icelandic Corporation)
(5) 541.67 shares owned by Brown-Forman Corporation
(6) 20% owned
(7) 99% owned by Brown-Forman Corporation and 1% owned by Early Times Distillers Company
</TABLE>
<PAGE>
Exhibit 10(a)
DESCRIPTION OF COMPENSATION ARRANGEMENT WITH W. L. LYONS BROWN, JR.
Effective August 1, 1993, the Company entered into a compensation arrangement
with W. L. Lyons Brown, Jr., the Company's Chairman of the Board. The
arrangement provides for a schedule of payments instead of traditional
compensation during a transition period which began when Mr. Brown stepped down
as the Company's Chief Executive Officer. The payments are structured on a
diminishing scale as Mr. Brown's executive duties are relinquished, and end at
his planned retirement from the Company on September 1, 1996.
While the scheduled payments were primarily fixed installments, payments instead
of bonus participation for a portion of fiscal year 1994 were left at risk. The
resulting payments were modestly larger than the targeted illustrated amounts
because the Company's financial performance exceeded financial goals for fiscal
year 1994. The following table shows the payments anticipated by the
arrangement for fiscal years 1994 through 1997:
<TABLE>
<CAPTION>
1994 1995 1996 1997
---- ---- ---- ----
<S> <C> <C> <C>
$1,195,000 $614,303* $242,144 $48,400
</TABLE>
* includes at risk bonus participation above target.
The arrangement also reaffirmed that various deferred bonuses awarded before
August 1, 1993, would vest in their normal cycle.
<PAGE>
EXHIBIT 13
HIGHLIGHTS
<TABLE>
<CAPTION>
(Expressed in thousands, except per share amounts and ratios)
- ---------------------------------------------------------------------------------------------------------
1995 1994 % Change
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Excluding unusual items
- ---------------------------------------------------------------------------------------------------------
Net Sales $1,679,630 $1,628,482 3%
- ---------------------------------------------------------------------------------------------------------
Operating Income $ 267,785 $ 248,541 8%
- ---------------------------------------------------------------------------------------------------------
Net Income $ 148,629 $ 151,649 (2%)
- ---------------------------------------------------------------------------------------------------------
Earnings Per Share $ 2.15 $ 1.92 12%
- ---------------------------------------------------------------------------------------------------------
Return on Average Invested Capital 19.5% 17.8%
- ---------------------------------------------------------------------------------------------------------
Return on Average Common Stockholders' Equity 30.1% 23.6%
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
Including unusual items
- ---------------------------------------------------------------------------------------------------------
Net Sales $1,679,630 $1,628,482 3%
- ---------------------------------------------------------------------------------------------------------
Operating Income $ 267,785 $ 240,361 11%
- ---------------------------------------------------------------------------------------------------------
Net Income $ 148,629 $ 128,527 16%
- ---------------------------------------------------------------------------------------------------------
Earnings Per Share $ 2.15 $ 1.63 32%
- ---------------------------------------------------------------------------------------------------------
Cash Dividends Per Share $ .97 $ .93 4%
- ---------------------------------------------------------------------------------------------------------
Return on Average Invested Capital 19.5% 15.4%
- ---------------------------------------------------------------------------------------------------------
Return on Average Common Stockholders' Equity 30.1% 20.4%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Regular cash dividends have been paid for the fiftieth consecutive year.
Fiscal 1994 was affected by unusual items discussed on page 22.
QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
(Expressed in thousands, except per share amounts)
- --------------------------------------------------------------------------------------------------------------
Per Share of Common Stock
----------------------------------------------------------
Cash Market Price (High-Low)
Net Gross Net Net Dividends ----------------------------------
Sales Profit Income Income Paid Class A Class B
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Fiscal 1995 $1,679,630 $823,904 $148,629 $2.15 $.9694 $34.13 - $26.75 $33.88 - $26.13
- --------------------------------------------------------------------------------------------------------------
Quarters
- --------------------------------------------------------------------------------------------------------------
Fourth 403,683 205,674 33,761 .49 .2480 34.13 - 30.75 33.88 - 30.38
- --------------------------------------------------------------------------------------------------------------
Third 431,112 211,141 37,692 .54 .2480 32.25 - 28.50 32.50 - 27.88
- --------------------------------------------------------------------------------------------------------------
Second 474,554 224,097 49,050 .71 .2367 30.88 - 26.75 31.38 - 26.13
- --------------------------------------------------------------------------------------------------------------
First 370,281 182,992 28,126 .41 .2367 30.08 - 26.75 30.29 - 26.38
- --------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------
Fiscal 1994 $1,628,482 $790,245 $128,527 $1.63 $.9267 $29.92 - $23.21 $30.50 - $24.33
- --------------------------------------------------------------------------------------------------------------
Quarters
- --------------------------------------------------------------------------------------------------------------
Fourth 386,014 187,686 30,327 .44 .2367 29.88 - 28.00 30.50 - 27.83
- --------------------------------------------------------------------------------------------------------------
Third 403,610 193,820 38,773 .48 .2367 29.92 - 23.21 29.79 - 24.33
- --------------------------------------------------------------------------------------------------------------
Second 458,120 222,983 62,515 .76 .2267 25.58 - 24.58 27.21 - 25.67
- --------------------------------------------------------------------------------------------------------------
First 380,738 185,756 (3,088) (.04) .2267 28.25 - 24.83 29.58 - 26.63
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
1. All per common share data reflect the three-for-one stock split on May 20,
1994.
2. Net sales and gross profit reflect the reclassification described in Note 1
to Consolidated Financial Statements.
3. Effective May 1, 1993, the company adopted Statements of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," No. 112, "Employers' Accounting for
Postemployment Benefits," and No. 116, "Accounting for Contributions
Received and Contributions Made." The cumulative effect of these accounting
changes reduced net income in the first quarter of 1994 by $32,542,000 or
$.39 per share.
4. Quarterly earnings per share amounts do not add to year-to-date earnings per
share for fiscal 1994 because of changes in the number of outstanding shares
during the year.
<PAGE>
FINANCIAL TABLE OF CONTENTS
17
Report of Management
18
Consolidated Selected Financial Data
20
Financial Review Charts
22
Financial Review
27
Consolidated Statement of Income
28
Consolidated Balance Sheet
30
Consolidated Statement of Cash Flows
31
Consolidated Statement of Stockholders' Equity
32
Notes to Consolidated Financial Statements
38
Report of Independent Accountants
<PAGE>
REPORT OF MANAGEMENT
We are responsible for the presentation of the information contained in the
consolidated financial statements and for its integrity and objectivity. Our
statements have been prepared in accordance with generally accepted accounting
principles and include amounts based on our best estimates and judgments with
appropriate consideration given to materiality. We also prepared the related
financial information and are responsible for its accuracy and consistency with
the financial statements.
The consolidated financial statements have been audited by Coopers & Lybrand,
L.L.P., independent certified public accountants. We have made available to
Coopers & Lybrand all the company's financial records and related data, as well
as the minutes of stockholders', directors', and other appropriate meetings.
Furthermore, we believe that all representations made to Coopers & Lybrand
during the audit were valid and appropriate.
We are responsible for establishing and maintaining a system of internal
control designed to provide reasonable assurance at reasonable costs that
financial records are reliable for preparing financial statements and that
assets are properly accounted for and safeguarded. The company has an internal
audit function that is intended to provide a review and monitoring process that
allows the company to be reasonably sure that the system of internal control
operates effectively. In addition, as part of the audit of the financial
statements, Coopers & Lybrand completed a study and evaluation of selected
internal accounting controls to establish a basis for reliance thereon in
determining the nature, timing, and extent of audit tests to be applied. We have
considered the internal auditors' and Coopers and Lybrand's recommendations
concerning the system of internal control and have taken actions that we believe
are cost-effective in the circumstances to respond appropriately to these
recommendations. We believe that as of April 30, 1995, the system of internal
control is adequate to accomplish the objectives discussed herein.
We also recognize our responsibility for fostering a strong ethical climate so
that the company's affairs are conducted according to the highest standards of
personal and corporate conduct. This responsibility is characterized and
reflected in the company's Code of Conduct, which is publicized throughout the
company. The Code of Conduct addresses, among other things, the necessity of
ensuring open communication within the company; disclosure of potential
conflicts of interests; compliance with all applicable domestic and foreign
laws, including those relating to financial disclosure; and maintaining the
confidentiality of proprietary information. The company has a systematic program
to assess compliance with the Code of Conduct.
The Board of Directors, through its Audit Committee, comprised solely of
directors who are not employees of the company, meets with management, the
internal auditors and the independent certified public accountants to ensure
that each is properly discharging its respective responsibilities. Both the
independent certified public accountants and the internal auditors have free
access to the Audit Committee, without management present, to discuss the
results of their work, including internal accounting controls and the quality
of financial reporting.
/s/ Owsley Brown II
Owsley Brown II
President and Chief
Executive Officer
/s/ Steven B. Ratoff
Steven B. Ratoff
Executive Vice President
and Chief Financial Officer
17
<PAGE>
CONSOLIDATED SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For Fiscal Year Ended April 30,
(Expressed in thousands, except per share amounts and ratios)
- ------------------------------------------------------------------------------------------------------------
OPERATIONS 1995 1994 1993
============================================================================================================
<S> <C> <C> <C>
Net Sales $1,679,630 1,628,482 1,658,426
- ------------------------------------------------------------------------------------------------------------
Excise Taxes $ 259,418 263,693 277,152
- ------------------------------------------------------------------------------------------------------------
Net Sales Less Excise Taxes $1,420,212 1,364,789 1,381,274
- ------------------------------------------------------------------------------------------------------------
Gross Profit $ 823,904 790,245 791,490
- ------------------------------------------------------------------------------------------------------------
Operating Income $ 267,785 240,361 255,382
- ------------------------------------------------------------------------------------------------------------
Interest Income $ 1,903 3,984 3,113
- ------------------------------------------------------------------------------------------------------------
Interest Expense $ 22,630 17,195 15,918
- ------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of Accounting Changes $ 148,629 161,069 156,190
- ------------------------------------------------------------------------------------------------------------
Cumulative Effect of Accounting Changes $ -- (32,542) --
- ------------------------------------------------------------------------------------------------------------
Net Income $ 148,629 128,527 156,190
- ------------------------------------------------------------------------------------------------------------
Weighted Average Common Shares Outstanding 68,996 78,657 82,664
- ------------------------------------------------------------------------------------------------------------
Earnings Per Common Share:
- ------------------------------------------------------------------------------------------------------------
Income Before Cumulative Effect of Accounting Changes $ 2.15 2.04 1.88
- ------------------------------------------------------------------------------------------------------------
Cumulative Effect of Accounting Changes $ -- (.41) --
- ------------------------------------------------------------------------------------------------------------
Net Income $ 2.15 1.63 1.88
- ------------------------------------------------------------------------------------------------------------
Cash Dividends Per Common Share $ .97 .93 .86
- ------------------------------------------------------------------------------------------------------------
Common Stock Splits 3-for-1
- ------------------------------------------------------------------------------------------------------------
INVESTED CAPITAL IN THE BUSINESS
- ------------------------------------------------------------------------------------------------------------
Current Debt $ 55,514 59,096 6,389
- ------------------------------------------------------------------------------------------------------------
Long-Term Debt $ 246,842 299,061 154,408
- ------------------------------------------------------------------------------------------------------------
Preferred Stock $ 11,779 11,779 11,779
- ------------------------------------------------------------------------------------------------------------
Common Stockholders' Equity $ 534,068 451,908 806,344
- ------------------------------------------------------------------------------------------------------------
Invested Capital $ 848,203 821,844 978,920
- ------------------------------------------------------------------------------------------------------------
Average Invested Capital $ 835,024 900,382 924,557
- ------------------------------------------------------------------------------------------------------------
Average Common Stockholders' Equity $ 492,988 629,126 764,862
- ------------------------------------------------------------------------------------------------------------
Net Working Capital $ 412,302 368,850 509,894
- ------------------------------------------------------------------------------------------------------------
Total Assets $1,285,559 1,233,849 1,310,998
- ------------------------------------------------------------------------------------------------------------
RATIOS
- ------------------------------------------------------------------------------------------------------------
Return on Average Invested Capital 19.5% 15.4% 18.0%
- ------------------------------------------------------------------------------------------------------------
Return on Average Common Stockholders' Equity 30.1% 20.4% 20.4%
- ------------------------------------------------------------------------------------------------------------
Total Long-Term Debt to Total Long-Term Capital 31.1% 39.2% 15.9%
- ------------------------------------------------------------------------------------------------------------
Total Cash Dividends Paid to Net Income 45.3% 57.5% 45.8%
- ------------------------------------------------------------------------------------------------------------
Current Assets to Current Liabilities 2.4:1 2.3:1 3.4:1
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
1. Net sales and gross profit reflect the reclassification described in Note 1
to Consolidated Financial Statements.
2. Average invested capital, return on average invested capital, return on
average common stockholders' equity, and total long-term debt to total
long-term capital are defined on page 21.
3. Includes the operations of Fetzer Vineyards, Dansk International Designs
Ltd., and California Cooler Co., since their acquisitions on August 31,
1992, July 2, 1991, and September 5, 1985, respectively.
4. On October 15, 1993, the company sold Brown-Forman Enterprises, its credit
card processing operations, resulting in an after-tax gain of $18,350,000.
18
<PAGE>
Brown-Forman Corporation
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987 1986 1985
======================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
1,495,601 1,366,028 1,279,097 1,261,741 1,329,667 1,374,644 1,264,372 1,184,534
- --------------------------------------------------------------------------------------
259,669 268,930 276,006 281,298 288,010 306,355 293,944 279,721
- --------------------------------------------------------------------------------------
1,235,932 1,097,098 1,003,091 980,443 1,041,657 1,068,289 970,428 904,813
- --------------------------------------------------------------------------------------
719,392 644,692 584,308 546,489 530,894 533,600 495,035 447,126
- --------------------------------------------------------------------------------------
233,818 223,467 224,944 208,480 191,684 182,126 190,080 188,088
- --------------------------------------------------------------------------------------
3,656 7,154 7,250 6,172 1,513 1,814 1,309 1,945
- --------------------------------------------------------------------------------------
13,782 11,075 16,654 24,821 18,399 22,125 28,145 35,749
- --------------------------------------------------------------------------------------
146,353 145,233 80,979 144,497 103,399 89,584 86,376 81,684
- --------------------------------------------------------------------------------------
-- -- 11,526 -- -- -- -- --
- --------------------------------------------------------------------------------------
146,353 145,233 92,505 144,497 103,399 89,584 86,376 81,684
- --------------------------------------------------------------------------------------
82,721 83,303 83,933 83,933 95,060 96,249 96,211 106,524
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
1.76 1.74 .96 1.72 1.08 .93 .89 .76
- --------------------------------------------------------------------------------------
-- -- .14 -- -- -- -- --
- --------------------------------------------------------------------------------------
1.76 1.74 1.10 1.72 1.08 .93 .89 .76
- --------------------------------------------------------------------------------------
.78 .72 .63 .51 .41 .30 .22 .20
- --------------------------------------------------------------------------------------
3-for-2
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
20,845 2,236 827 25,830 790 19,544 30,490 28,214
- --------------------------------------------------------------------------------------
114,191 112,278 114,484 115,281 190,973 199,454 235,919 266,162
- --------------------------------------------------------------------------------------
11,779 11,779 11,779 11,779 11,779 11,779 11,779 11,779
- --------------------------------------------------------------------------------------
723,379 648,788 583,521 543,900 442,601 577,938 516,365 454,053
======================================================================================
870,194 775,081 710,611 696,790 646,143 808,715 794,553 760,208
- --------------------------------------------------------------------------------------
822,638 742,846 703,701 671,467 727,429 801,634 777,381 793,258
- --------------------------------------------------------------------------------------
686,084 616,155 563,711 493,251 510,270 547,152 485,209 480,287
- --------------------------------------------------------------------------------------
437,333 431,347 388,197 313,153 287,371 336,657 309,894 325,845
- --------------------------------------------------------------------------------------
1,193,522 1,082,597 1,020,984 1,003,272 932,284 1,056,699 1,037,799 935,383
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
18.8% 20.5% 14.6% 23.8% 15.7% 12.6% 12.9% 12.6%
- --------------------------------------------------------------------------------------
21.3% 23.5% 16.3% 29.2% 20.2% 16.3% 17.7% 16.9%
- --------------------------------------------------------------------------------------
13.4% 14.5% 16.1% 17.2% 29.5% 25.3% 30.9% 36.4%
- --------------------------------------------------------------------------------------
44.4% 41.7% 57.4% 29.8% 38.9% 32.8% 25.3% 26.2%
- --------------------------------------------------------------------------------------
3.0:1 3.3:1 3.0:1 2.5:1 2.7:1 2.8:1 2.5:1 3.0:1
- --------------------------------------------------------------------------------------
</TABLE>
5. On January 31, 1989, the company sold the U.S. marketing rights for Martell
Cognacs resulting in an after-tax gain of $22,300,000.
6. On April 27, 1988, the company sold the ArtCarved jewelry division resulting
in an after-tax gain of $16,700,000.
7. Net income was reduced $59,900,000 and $33,000,000 to reflect the write-off
of the intangible assets of California Cooler in 1990 and 1988, respectively.
8. Earnings per common share are based on the weighted average number of common
shares outstanding during each year; both earnings and cash dividends per
common share have been appropriately adjusted for the 3-for-1 and 3-for-2
stock splits in fiscal 1994 and 1987, respectively.
19
<PAGE>
FINANCIAL REVIEW
This section supplements the consolidated financial statements
beginning on page 27 and will assist the reader in evaluating Brown-Forman's
fiscal 1995 results of operations and financial condition.
UNUSUAL ITEMS: There were no significant unusual items affecting net
income for fiscal 1995.
Net income for fiscal 1994 contains unusual income and expense items.
Note 2, on page 33, discusses a $33 million charge resulting from the adoption
of Statements of Financial Accounting Standards No. 106, No. 112, and No. 116.
The charge to net income from adopting these accounting standards was recorded
as the cumulative effect of changes in accounting principles. Note 11, on page
37, discusses a $5 million charge associated with the consumer durables segment
for the closing or reformatting of certain retail stores. Note 9, on page 35,
discusses an unusual charge of $3 million for the retroactive effect of a higher
tax rate on earnings from January 1, 1993 to April 30, 1993, and a noncash
charge to restate the deferred tax liability at the new corporate tax rate. Note
3, on page 33, discusses an $18 million gain from the sale of the company's
credit card processing business. The fiscal 1994 unusual items reflect a net $23
million reduction to net income.
Net income for fiscal 1993 was reduced $3 million from a write-down of
assets in the consumer durables segment.
The following earnings per share table is included to assist the reader
in understanding unusual items:
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
BEFORE UNUSUAL ITEMS $2.15 $1.92 $1.91
- --------------------------------------------------------------------------------
UNUSUAL ITEMS:
Gain on sale of business -- .23 --
- --------------------------------------------------------------------------------
Adoption of new
accounting standards -- (.41) --
- --------------------------------------------------------------------------------
Higher tax legislation -- (.04) --
- --------------------------------------------------------------------------------
Consumer durables charges -- (.07) (.03)
- --------------------------------------------------------------------------------
AS REPORTED $2.15 $1.63 $1.88
- --------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY: On January 14, 1994, the company concluded a Dutch
auction tender offer, acquiring 2,734,452 shares of Class A and 10,933,518
shares of Class B common stock at a total cost of $408 million. While interest
costs associated with the share purchase lowered net income, the purchase had a
positive effect on earnings per share, adding an incremental $.15 to fiscal 1995
results and $.07 to fiscal 1994.
On May 20, 1994, the company recorded a three-for-one stock split for
all shares of Class A and Class B common stock, distributed in the form of a
stock dividend. Also during 1994, the company retired its treasury stock. The
Consolidated Statement of Stockholders' Equity details the effect of this
retirement.
RESULTS OF CONSOLIDATED OPERATIONS
SALES:
1995 VERSUS 1994: Net sales increased moderately in fiscal 1995 with
sales gains registered by both the wines and spirits segment and the consumer
durables segment. Wines and spirits segment sales increased due to higher
worldwide sales of Jack Daniel's, Fetzer California wines, and Korbel
Champagnes. The national introduction of Tropical Freezes, a frozen cocktail in
a pouch, also contributed to the increase in sales. Net sales for the consumer
durables segment increased due to strong sales performance by Lenox China, Lenox
retail operations, Lenox Collections, and Dansk. The increase in net sales was
partially offset by the absence of revenues from the company's credit card
processing business which was sold in fiscal 1994. Excluding the credit card
processing business and brands acquired, developed internally, sold, or
eliminated, consolidated net sales increased 3% in fiscal 1995, were unchanged
in fiscal 1994, and increased 3% in fiscal 1993.
Sales outside the U.S. represent 13% of consolidated net sales for
fiscal 1995, 13% for fiscal 1994, and 11% for fiscal 1993. The effect of foreign
currency exchange rate fluctuations is immaterial on consolidated net sales.
1994 VERSUS 1993: Net sales decreased slightly in fiscal 1994 due to
lower first-half sales of Jack Daniel's Country Cocktails and lower sales of
consumer durables. The reduction in sales was partially offset by the full year
effect of Fetzer Vineyards and increased international wines and spirits sales.
Overseas sales in fiscal 1994 increased from the prior year due to double-digit
growth of both Jack Daniel's and Early Times. Consumer durables net sales in
fiscal 1994 declined due to significant reductions in sales at Lenox Collections
partially offset by increased sales at Lenox China and Hartmann Luggage.
OPERATING INCOME:
1995 VERSUS 1994: Operating income, excluding unusual items, increased
8% during fiscal 1995. Approximately $11 million of this growth was due to
strong sales performance and increased operational efficiencies in the consumer
durables segment. Additionally, the wines and spirits segment contributed $9
million of increased operating income as a result of increased sales coupled
with lower advertising expenses in the cocktail category.
1994 VERSUS 1993: Operating income during fiscal 1994 decreased largely
due to lower shipments of Jack Daniel's Country Cocktails in the first half of
the year. The consumer durables segment also contributed to the decrease.
Partially offsetting these decreases was a $2 million improvement in operating
income from venture businesses.
EARNINGS:
1995 VERSUS 1994: Earnings per share again reached record levels in
fiscal 1995. Fiscal 1995 earnings were reduced approximately $9 million by
higher net interest expense resulting from the full-year effect of the
aforementioned stock repurchase in fiscal 1994. The fiscal 1995 effective tax
rate increased due to a reduction of overseas tax benefits incorporated within
the 1993 tax act, benefits realized last year due to an adjustment of prior
years' tax accruals, and higher profits from the consumer
22
<PAGE>
Brown-Forman Corporation
durables business which bears relatively higher taxes. In addition, the fiscal
1995 and 1994 effective tax rate contains the higher statutory tax rate
incorporated within the 1993 tax act. Earnings per share computations were
positively affected by a reduction in the average number of common shares
outstanding due to the aforementioned stock purchase in fiscal 1994.
1994 VERSUS 1993: Fiscal 1994 earnings were reduced by higher net interest
expense resulting from the previously mentioned stock purchase. The fiscal 1994
and 1993 effective tax rates contain benefits from adjustment of prior years'
tax accruals.
<TABLE>
<CAPTION>
SUMMARY OF CONSOLIDATED OPERATING PERFORMANCE
(Expressed in thousands, except percentage amounts and earnings per common share)
- ----------------------------------------------------------------------------------------------------------
1995 1994 1993
==========================================================================================================
<S> <C> <C> <C>
NET SALES $1,679,630 $1,628,482 $1,658,426
- ----------------------------------------------------------------------------------------------------------
% Change 3.1% (1.8%) 10.9%
- ----------------------------------------------------------------------------------------------------------
OPERATING INCOME
- ----------------------------------------------------------------------------------------------------------
As Reported $ 267,785 $ 240,361 $ 255,382
- ----------------------------------------------------------------------------------------------------------
% Change 11.4% (5.9%) 9.2%
- ----------------------------------------------------------------------------------------------------------
Excluding Unusual Items $ 267,785 $ 248,541 $ 259,212
- ----------------------------------------------------------------------------------------------------------
% Change 7.7% (4.1%) 10.9%
- ----------------------------------------------------------------------------------------------------------
NET INCOME
- ----------------------------------------------------------------------------------------------------------
As Reported $ 148,629 $ 128,527 $ 156,190
- ----------------------------------------------------------------------------------------------------------
% Change 15.6% (17.7%) 6.7%
- ----------------------------------------------------------------------------------------------------------
Excluding Unusual Items $ 148,629 $ 151,649 $ 158,690
- ----------------------------------------------------------------------------------------------------------
% Change (2.0%) (4.4%) 8.4%
- ----------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE
- ----------------------------------------------------------------------------------------------------------
As Reported $ 2.15 $ 1.63 $ 1.88
- ----------------------------------------------------------------------------------------------------------
% Change 31.9% (13.3%) 6.8%
- ----------------------------------------------------------------------------------------------------------
Excluding Unusual Items $ 2.15 $ 1.92 $ 1.91
- ----------------------------------------------------------------------------------------------------------
% Change 12.0% .5% 8.5%
- ----------------------------------------------------------------------------------------------------------
EFFECTIVE TAX RATE
- ----------------------------------------------------------------------------------------------------------
As Reported 39.8% 37.4% 35.6%
- ----------------------------------------------------------------------------------------------------------
Excluding Unusual Items 39.8% 35.6% 35.6%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
RETURNS ON INVESTED CAPITAL AND EQUITY
- ----------------------------------------------------------------------------------------------------------
1995 1994 1993
==========================================================================================================
<S> <C> <C> <C>
RETURN ON AVERAGE INVESTED CAPITAL
- ----------------------------------------------------------------------------------------------------------
As Reported 19.5% 15.4% 18.0%
- ----------------------------------------------------------------------------------------------------------
Five-Year Average 18.4% 17.5% 19.1%
- ----------------------------------------------------------------------------------------------------------
Excluding Unusual Items 19.5% 17.8% 18.2%
- ----------------------------------------------------------------------------------------------------------
Five-Year Average 19.0% 19.2% 19.9%
- ----------------------------------------------------------------------------------------------------------
RETURN ON AVERAGE COMMON STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------
As Reported 30.1% 20.4% 20.4%
- ----------------------------------------------------------------------------------------------------------
Five-Year Average 23.1% 20.4% 22.1%
- ----------------------------------------------------------------------------------------------------------
Excluding Unusual Items 30.1% 23.6% 20.7%
- ----------------------------------------------------------------------------------------------------------
Five-Year Average 23.8% 22.5% 23.1%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
FINANCIAL REVIEW
Brown-Forman's most important financial objective is to increase the value
of its stockholders' investment. Financial strategies have been developed for
managing assets and include return on investment targets which have enabled the
company to invest in brands and projects that promise the most favorable return.
The long-term growth in the market value of the company's stock is a good
indication of the total return to shareholders. A $100 investment in Brown-
Forman's Class B stock ten years ago would have grown to more than $580 by the
end of fiscal 1995, assuming reinvestment of all dividends and ignoring personal
taxes and transaction costs. This is a market value increase in excess of 19%
annually over the ten year period. In fiscal 1995 and 1994, the company
experienced an increase in its return on average common stockholders' equity,
excluding unusual items, in part due to the purchase of its common stock.
WINES AND SPIRITS SEGMENT
Summary of Operating Performance
(Expressed in thousands, except percentage amounts)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
1995 1994 1993
=================================================================
<S> <C> <C> <C>
NET SALES $1,137,834 $1,104,817 $1,121,292
- -----------------------------------------------------------------
% Change 3.0% (1.4%) 13.2%
- -----------------------------------------------------------------
NET SALES LESS
EXCISE TAXES $ 878,416 $ 841,124 $ 844,140
- -----------------------------------------------------------------
% Change 4.4% (.4%) 15.4%
- -----------------------------------------------------------------
OPERATING INCOME $ 243,713 $ 235,004 $ 245,693
- -----------------------------------------------------------------
% Change 3.7% (4.4%) 11.2%
- -----------------------------------------------------------------
</TABLE>
The wines and spirits business is Brown-Forman's largest segment
representing 68% of net sales in 1995, 69% in 1994, and 68% in 1993. Net sales,
excluding brands which have been sold, discontinued, acquired, or developed
internally during the periods reported, increased 2% in fiscal 1995, 1% in
fiscal 1994, and 3% in fiscal 1993.
SALES:
1995 VERSUS 1994: Sales in fiscal 1995 were higher due to increased sales
of Jack Daniel's, Korbel Champagne, Fetzer California wines, and the national
introduction of Tropical Freezes. Country Cocktails sales continued a decline
from fiscal 1994; however, it continues to provide high margins, while
broadening the consumer franchise for Jack Daniel's Tennessee Whiskey. Canadian
Mist, Southern Comfort, and Early Times continued to experience sales declines
in the U.S. market in fiscal 1995. However, these declines moderated from
declines registered in fiscal 1994. The sales declines primarily reflect
consumption trends as well as a reduction in trade inventory levels. Domestic
volume declines were more than offset by price increases on most major brands.
Sales outside the U.S. continue to grow to record levels. The major
overseas brands, Jack Daniel's, Southern Comfort, and Fetzer, experienced sales
growth with increases registered in most major overseas markets. Jack Daniel's
continues to grow at double-digit rates in most overseas markets, although
volume declines in Japan and Germany slowed the brand's worldwide growth rate.
1994 VERSUS 1993: In fiscal 1994, Jack Daniel's and Early Times experienced
double-digit sales volume growth internationally with increases registered in
most major overseas markets. Southern Comfort sales volume overseas was
unchanged from 1993. Sales in fiscal 1994 were lower due to the very successful
introduction of Jack Daniel's Country Cocktails in fiscal 1993. Typical of most
successful new products, introductory sales of Country Cocktails in 1993 were
enhanced by high rates of initial consumer trial and the establishment of trade
inventory levels. Volumes for Country Cocktails moderated in fiscal 1994. Sales
for the wines and spirits segment were increased by the full-year effect of
Fetzer Vineyards acquired in August 1992. Canadian Mist, Southern Comfort, and
Early Times all experienced sales volume declines in the U.S. market in fiscal
1994, following growth in fiscal 1993. The declines in volume primarily
reflected consumption trends as well as a reduction of trade inventory levels.
OPERATING INCOME:
1995 VERSUS 1994: Wines and spirits segment operating income improved in
fiscal 1995 due to increased worldwide sales of Jack Daniel's, lower advertising
expense in the cocktails category, and higher gross margins. The increase was
partially offset by higher selling, general, and administrative expenses, which
are primarily the result of investments required to achieve the full benefit of
international sales opportunities.
1994 VERSUS 1993: In 1994 the decline in operating income was due to lower
shipments of Jack Daniel's Country Cocktails in the first half of the year,
partially offset by the full-year effect of Fetzer Vineyards and increased
worldwide sales of Jack Daniel's.
ORGANIZATION: In May 1994, the company created Brown-Forman Beverages
Worldwide, a new global beverage organization designed to accelerate overseas
growth for the company's beverage brands. This organization began achieving its
objectives in fiscal 1995 by strengthening its existing domestic and non-U.S.
distribution channels, establishing business opportunities in advancing overseas
markets, and building brand awareness and loyalty throughout the domestic and
international markets. The investments required to realize the full potential of
this new company will moderate near-term earnings growth. However, these
investments are expected to help the company achieve even greater long-term
results than would be possible without them.
BUSINESS ENVIRONMENT: The sale of beverage alcohol both in the U.S. and
abroad takes place in the context of long-standing public debate over the role
of drinking in society. The public, especially in the U.S., is concerned over
alcohol abuse, especially drunk driving and teenage drinking. Brown-Forman, with
other beverage alcohol companies, strongly opposes abusive drinking and
contributes significant amounts of money to programs aimed at curbing alcohol
abuse.
Critics of beverage alcohol, however, seek to restrict overall alcohol
consumption, not just alcohol abuse. Brown-Forman strongly defends the
traditional freedom of adults to choose whether or not to drink and opposes
efforts to restrict sales, through punitive taxation, advertising restrictions,
or otherwise.
24
<PAGE>
Brown-Forman Corporation
Beverage alcohol sales are sensitive to higher rates of tax, which increase the
shelf price to the consumer. If such taxes were imposed, they would adversely
affect the U.S. wines and spirits business. However, higher taxes on distilled
spirits are a proven failure as a device to increase federal collections. In
1991, the federal government increased the excise tax rate on distilled spirits
by 8%, only to see tax collections from distilled spirits decline by almost $90
million from the prior year. While there are periodic efforts to raise the
federal excise tax on beverage alcohol, the company is not aware of any such
legislative proposal currently pending in Congress.
CONSUMER DURABLES SEGMENT
<TABLE>
<CAPTION>
Summary of Operating Performance
(Expressed in thousands, except percentage amounts)
- -----------------------------------------------------------
1995 1994 1993
===========================================================
<S> <C> <C> <C>
Net Sales $541,796 $513,612 $519,038
- -----------------------------------------------------------
% Change 5.5% (1.0%) 5.5%
- -----------------------------------------------------------
Operating Income
- -----------------------------------------------------------
As Reported $ 38,206 $ 18,953 $ 24,454
- -----------------------------------------------------------
% Change 101.6% (22.5%) (39.4%)
- -----------------------------------------------------------
Excluding
Unusual Items $ 38,206 $ 27,133 $ 28,284
- -----------------------------------------------------------
% Change 40.8% (4.1%) (29.9%)
- -----------------------------------------------------------
</TABLE>
The consumer durables segment represented 32% of net sales in fiscal 1995,
and 31% in both fiscal 1994 and fiscal 1993. Excluding divisions acquired or
divested, net sales increased 5% in fiscal 1995, decreased 1% in fiscal 1994 and
increased 2% in fiscal 1993.
Sales:
1995 versus 1994: Net sales for fiscal 1995 increased due to strong sales
performance from Lenox China, Lenox retail operations, Lenox Collectibles, and
Dansk. These increases were the result of successful new product introductions,
primarily in the Home Decor section of Lenox Collections and Lenox China, and a
significant increase in retail same-store sales. Net sales for the segment
benefited from significant increases in volume, as major divisions shifted sales
mix to a lower priced product line. This trend positively affected sales as it
broadened many consumer markets.
1994 versus 1993: Net sales for fiscal 1994 decreased due primarily to
significantly lower sales at Lenox Collections, partially offset by increased
sales at Lenox China and Hartmann Luggage.
Operating Income:
1995 versus 1994: Operating income increased in fiscal 1995 due to lower
per-unit manufacturing costs for Lenox wholesale and retail operations and lower
selling, general, and administrative cost throughout the consumer durables
segment in addition to the strong sales performance. These gains are the result
of productivity programs placed in service during fiscal 1994 which should
continue to provide competitive benefits for this segment in the future.
1994 versus 1993: Operating income for fiscal 1994, excluding the $8.2
million charge associated with closing or reformatting certain retail stores,
decreased slightly due largely to lower sales at Lenox Collections and
investments to improve communications and logistics at Lenox.
OTHER SEGMENT
<TABLE>
<CAPTION>
Summary of Operating Performance
(Expressed in thousands, except percentage amounts)
1995 1994 1993
==========================================================
<S> <C> <C> <C>
Net Sales (N/A) $10,053 $18,096
- ----------------------------------------------------------
% Change (44.4%) 44.1%
- ----------------------------------------------------------
Operating Income/(Loss) (N/A) $ 453 $(1,917)
- ----------------------------------------------------------
% Change (N/A) 87.0%
- ----------------------------------------------------------
</TABLE>
Effective November 1, 1993, the company discontinued the use of this
segment. See Note 3, on page 33, for information related to the sale of the
company's credit card processing business during fiscal 1994.
The increase in operating income in fiscal 1994 and the significant
decline in the operating loss for fiscal 1993 was primarily due to a reduction
in the scope of the company's aquaculture business and increased operating
revenues from the company's credit card processing business.
CONSOLIDATED FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES
Brown-Forman's cash flow continues to provide more than adequate capital to
meet operating and capital expenditure requirements, to pay record dividends,
and to fund acquisition opportunities. The following table is included to assist
the reader in understanding the cash flows.
<TABLE>
<CAPTION>
(Expressed in thousands; amounts in brackets are reductions of cash)
- -------------------------------------------------------------------------
1995 1994 1993
=========================================================================
<S> <C> <C> <C>
Cash Provided by
(Used for)
- -------------------------------------------------------------------------
Operating Activities $197,295 $220,853 $192,855
- -------------------------------------------------------------------------
Cash Outlays for
Acquisitions & Investments
in Businesses -- -- (14,125)
- -------------------------------------------------------------------------
Gross Proceeds from
Sale of Business -- 31,837 --
- -------------------------------------------------------------------------
Gross Additions to Property,
Plant, and Equipment (51,056) (27,433) (33,616)
- -------------------------------------------------------------------------
Other Investing Activities 8,852 14,508 408
- -------------------------------------------------------------------------
Dividends paid (67,356) (73,838) (71,562)
- -------------------------------------------------------------------------
Acquisition of Treasury Stock -- (407,659) --
- -------------------------------------------------------------------------
Debt & Other
Financing Activities (55,801) 197,360 (49,078)
- -------------------------------------====================================
Increase (Decrease) in Cash
and Cash Equivalents $ 31,934 $(44,372) $ 24,882
- -------------------------------------====================================
Short-term Investments $ -- -- $ 18,146
- -------------------------------------====================================
Net Working Capital $412,302 $368,850 $509,894
- -------------------------------------====================================
</TABLE>
25
<PAGE>
FINANCIAL REVIEW
Cash generated from operating activities for the combined three-year period
of 1995, 1994, and 1993 has been higher than amounts needed for ongoing capital
expenditure requirements, dividends, and debt repayments. Cash requirements have
increased over the past three years reflecting the company's common stock
repurchase in fiscal 1994, acquisition activity, investments in production
facilities, and increases in dividend payments. Cash generated by operations
decreased 11% in fiscal 1995 and increased 15% and 23% in fiscal 1994 and fiscal
1993, respectively.
Net working capital increased $43 million in fiscal 1995 due to increased
inventory and cash and cash equivalents in addition to lower commercial paper
and accrued taxes on income. Inventories increased in anticipation of expected
demand as the company continues its expansion into overseas markets. Working
capital increases were partially offset by lower accounts receivable resulting
from fewer days sales outstanding. Fiscal 1994 net working capital, excluding
the sale of the company's credit card processing business, decreased $160
million primarily from a reduction in cash and cash equivalents resulting from
the stock repurchase, lower finished goods inventory, and increased accounts
payable and commercial paper. These reductions were partially offset by an
increase in barreled whisky. Fiscal 1993 net working capital, excluding
acquisitions of businesses, increased $92 million, reflecting an increase in
cash and cash equivalents, higher accounts receivable, a reduction in short-term
debt and accrued taxes on income, partially offset by a reduction in
inventories.
During fiscal 1995, the company entered into a $300 million revolving
credit agreement that expires in fiscal 2000. This agreement replaces a $150
million revolving credit agreement that was scheduled to expire in fiscal 1998.
At April 30, 1995, the company had no outstanding borrowings under this
agreement. Also, at April 30, 1995, the company had available for issuance $250
million of debt securities under a shelf registration filing with the Securities
and Exchange Commission.
The company uses derivative financial instruments for the purpose of
reducing its exposure to adverse fluctuations in interest and foreign exchange
rates. While these hedging instruments are subject to fluctuations in value,
such fluctuations are generally offset by the value of the underlying exposures
being hedged. The company is not a party to leveraged derivatives and does not
hold or issue financial instruments for speculative purposes. The company sold
an option to swap interest rates that effectively eliminated the call feature on
the $100,000,000 9 3/8% notes for the period April 1, 1995 to April 1, 1998.
This option was exercised April 1, 1995 effectively converting $100,000,000
commercial paper from floating interest rate obligations to 9 3/8% fixed rate
obligations from April 1, 1995 to April 1, 1998. The option on this swap was
sold in order to manage the level of fixed and floating rate debt. The premium
received on the sale of this option is being amortized as a reduction of
interest expense through April 1, 1998.
The U.S. dollar is the functional currency for substantially all of the
company's consolidated operations. For these operations, all gains and losses
from currency transactions are included in income currently. For certain foreign
equity investments, the functional currency is the local currency. The
cumulative translation effects for the few equity investments using functional
currencies other than the U.S. dollar are included in the cumulative translation
adjustment in stockholders' equity.
Foreign currency forwards and options, which typically expire within one
year, are used to hedge payments and receipts of foreign currencies related to
the purchase and sale of goods overseas. Realized gains and losses on these
contracts are recognized in the same period as the hedged transactions. While
these hedges are subject to the risk of loss from fluctuations in exchange
rates, these losses would be offset by gains on the transactions being hedged.
The effect of foreign currency transactions on fiscal 1995, 1994, and 1993
results of operations and financial condition were immaterial. The company had
foreign exchange contracts on hand at April 30, 1995 and 1994, primarily hedging
German Mark, British Pound and Japanese Yen revenues, totaling $11 million and
$27 million, respectively.
CAPITAL EXPENDITURES
Brown-Forman invested $51 million in property, plant, and equipment in
fiscal 1995, $27 million in fiscal 1994, and $34 million in fiscal 1993. These
expenditures primarily reflect the modernization of company-wide production
facilities.
Capital expenditures for fiscal 1996 are expected to be approximately $60
million, primarily for upgrading and expansion of production facilities in the
wines and spirits segment and relocating the Fetzer winery. In fiscal 1996,
capital expenditure requirements are expected to be met with internally
generated funds.
DIVIDENDS
Fiscal 1995 dividends per common share were at record levels and increased
4% to $.97 from $.93 in fiscal 1994. The increase is based on the expectations
of continued strong and stable cash flow. Quarterly dividends were increased in
fiscal 1995 from $.237 to $.248, which results in an indicated annual dividend
of $.992 per common share. Cash dividends per common share increased from $.86
in fiscal 1993 to $.927 in fiscal 1994, an increase of 8%. The percentage of
cash dividends paid to net income was 45% in fiscal 1995, compared to 58% and
46% for fiscal 1994 and fiscal 1993, respectively. Brown-Forman has paid regular
cash dividends for 50 consecutive years.
ENVIRONMENTAL
The company, along with other responsible parties, faces environmental
claims resulting from the cleanup of several waste deposit sites. The company
has accrued its estimated portion of cleanup costs and expects other responsible
parties and insurance coverage to cover the remaining costs. The company
believes that any additional costs incurred by the company will not have a
material adverse effect on the company's financial condition or results of
operations.
26
<PAGE>
<TABLE>
<CAPTION>
Brown-Forman Corporation
CONSOLIDATED STATEMENT OF INCOME
(Expressed in thousands, except per share amounts)
- -------------------------------------------------------------------------------------------------------------------
Year Ended April 30, 1995 1994 1993
===================================================================================================================
<S> <C> <C> <C>
Net sales $1,679,630 $1,628,482 $1,658,426
- -------------------------------------------------------------------------------------------------------------------
Excise taxes 259,418 263,693 277,152
- -------------------------------------------------------------------------------------------------------------------
Cost of sales 596,308 574,544 589,784
- -----------------------------------------------------------------------------======================================
- -------------------------------------------------------------------------------------------------------------------
Gross profit 823,904 790,245 791,490
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Selling, general, and administrative expenses 355,185 347,638 331,409
- -------------------------------------------------------------------------------------------------------------------
Advertising expenses 200,934 202,246 204,699
- -----------------------------------------------------------------------------======================================
Operating income 267,785 240,361 255,382
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Gain on sale of business before income taxes -- 30,077 --
- -------------------------------------------------------------------------------------------------------------------
Interest income 1,903 3,984 3,113
- -------------------------------------------------------------------------------------------------------------------
Interest expense 22,630 17,195 15,918
- -----------------------------------------------------------------------------======================================
- -------------------------------------------------------------------------------------------------------------------
Income before income taxes and cumulative effect of accounting changes 247,058 257,227 242,577
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
Taxes on income 98,429 96,158 86,387
- -----------------------------------------------------------------------------======================================
- -------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting changes 148,629 161,069 156,190
- -------------------------------------------------------------------------------------------------------------------
Cumulative effect of accounting changes -- (32,542) --
- -------------------------------------------------------------------------------------------------------------------
Net income $ 148,629 $ 128,527 $ 156,190
- -----------------------------------------------------------------------------======================================
- -------------------------------------------------------------------------------------------------------------------
Earnings per common share:
- -------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting changes $ 2.15 $ 2.04 $ 1.88
- -------------------------------------------------------------------------------------------------------------------
Cumulative effect of accounting changes -- (.41) --
- -------------------------------------------------------------------------------------------------------------------
Net income $ 2.15 $ 1.63 $ 1.88
- -----------------------------------------------------------------------------======================================
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET
(Expressed in thousands, except per share amounts)
- -------------------------------------------------------------------------------------------------------------
April 30, 1995 1994 1993
=============================================================================================================
<S> <C> <C> <C>
Assets
- -------------------------------------------------------------------------------------------------------------
Cash and cash equivalents $ 62,474 $ 30,540 $ 74,912
- -------------------------------------------------------------------------------------------------------------
Short-term investments -- -- 18,146
- -------------------------------------------------------------------------------------------------------------
Accounts receivable, less allowance for doubtful accounts
of $14,061 in 1995, $12,006 in 1994, and $10,432 in 1993 234,165 240,580 238,921
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Inventories:
- -------------------------------------------------------------------------------------------------------------
Barreled whisky 163,200 143,785 137,880
- -------------------------------------------------------------------------------------------------------------
Finished goods 122,690 122,976 142,640
- -------------------------------------------------------------------------------------------------------------
Work in process 58,991 59,984 56,857
- -------------------------------------------------------------------------------------------------------------
Raw materials and supplies 37,042 31,697 28,139
- ---------------------------------------------------------------------========================================
Total inventories 381,923 358,442 365,516
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Other current assets 19,348 20,344 22,759
- ---------------------------------------------------------------------========================================
Total Current Assets 697,910 649,906 720,254
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Property, plant, and equipment, at cost:
- -------------------------------------------------------------------------------------------------------------
Land 16,552 17,604 17,466
- -------------------------------------------------------------------------------------------------------------
Buildings 163,719 167,500 164,134
- -------------------------------------------------------------------------------------------------------------
Equipment 350,336 325,271 309,647
- ---------------------------------------------------------------------========================================
530,607 510,375 491,247
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Less accumulated depreciation (278,390) (264,397) (233,807)
- ---------------------------------------------------------------------========================================
Net property, plant, and equipment 252,217 245,978 257,440
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Intangible assets, less accumulated amortization
of $97,894 in 1995, $89,471 in 1994, and $80,036 in 1993 262,475 276,358 279,681
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Other assets 72,957 61,607 53,623
- ---------------------------------------------------------------------========================================
Total Assets $1,285,559 $1,233,849 $1,310,998
- ---------------------------------------------------------------------========================================
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
28
<PAGE>
Brown-Forman Corporation
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
April 30, 1995 1994 1993
=====================================================================================================
<S> <C> <C> <C>
Liabilities
- -----------------------------------------------------------------------------------------------------
Commercial paper $ 50,000 $ 54,229 --
- -----------------------------------------------------------------------------------------------------
Accounts payable and accrued expenses 221,347 216,175 $ 180,664
- -----------------------------------------------------------------------------------------------------
Current portion of long-term debt 5,514 4,867 6,389
- -----------------------------------------------------------------------------------------------------
Accrued taxes on income -- 3,815 7,424
- -----------------------------------------------------------------------------------------------------
Deferred income taxes 8,747 1,970 15,883
- -----------------------------------------------------------------====================================
Total Current Liabilities 285,608 281,056 210,360
- -----------------------------------------------------------------------------------------------------
Long-term debt 246,842 299,061 154,408
- -----------------------------------------------------------------------------------------------------
Deferred income taxes 114,420 102,267 108,971
- -----------------------------------------------------------------------------------------------------
Accrued postretirement benefits 50,776 47,223 --
- -----------------------------------------------------------------------------------------------------
Other liabilities and deferred income 42,066 40,555 19,136
- -----------------------------------------------------------------====================================
Total Liabilities 739,712 770,162 492,875
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Stockholders' Equity
- -----------------------------------------------------------------------------------------------------
Capital Stock:
- -----------------------------------------------------------------------------------------------------
Preferred $.40 cumulative, $10 par value,
redeemable at company's option at $10.25
per share plus unpaid accrued dividends;
1,177,948 shares authorized and outstanding 11,779 11,779 11,779
- -----------------------------------------------------------------====================================
Class A common stock, voting, $.15 par value;
authorized shares, 30,000,000; issued shares, 28,988,091 4,348 4,348 1,809
- -----------------------------------------------------------------------------------------------------
Class B common stock, nonvoting, $.15 par value;
authorized shares, 60,000,000; issued shares, 40,008,147 6,001 6,001 4,000
- -----------------------------------------------------------------------------------------------------
Capital in excess of par value of common stock -- -- 89,735
- -----------------------------------------------------------------------------------------------------
Retained earnings 526,877 445,643 1,057,461
- -----------------------------------------------------------------------------------------------------
Cumulative translation adjustment (3,158) (4,084) (2,421)
- -----------------------------------------------------------------------------------------------------
Less common treasury stock, at cost:
(1993: Class A, 4,463,163 shares; Class B,
29,051,280 shares) -- -- (344,240)
- -----------------------------------------------------------------====================================
Common Stockholders' Equity 534,068 451,908 806,344
- -----------------------------------------------------------------====================================
Total Stockholders' Equity 545,847 463,687 818,123
- -----------------------------------------------------------------====================================
Total Liabilities and Stockholders' Equity $1,285,559 $1,233,849 $1,310,998
- -----------------------------------------------------------------====================================
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Brown-Forman Corporation
CONSOLIDATED STATEMENT OF CASH FLOWS
(Expressed in thousands; amounts in brackets are reductions of cash)
- -------------------------------------------------------------------------------------------------------------------------------
Year Ended April 30, 1995 1994 1993
===============================================================================================================================
<S> <C> <C> <C>
Cash flows from operating activities:
- -------------------------------------------------------------------------------------------------------------------------------
Net income $ 148,629 $ 128,527 $ 156,190
- -------------------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash provided by (used for) operations:
- -------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of changes in accounting principles -- 32,542 --
- -------------------------------------------------------------------------------------------------------------------------------
Depreciation 34,589 36,588 35,114
- -------------------------------------------------------------------------------------------------------------------------------
Amortization of intangible assets 8,903 9,435 8,641
- -------------------------------------------------------------------------------------------------------------------------------
Deferred income taxes 18,930 6,405 587
- -------------------------------------------------------------------------------------------------------------------------------
Gain on sale of business, net of income taxes -- (18,350) --
- -------------------------------------------------------------------------------------------------------------------------------
Other 957 384 (3,510)
- -------------------------------------------------------------------------------------------------------------------------------
Change in assets and liabilities, excluding the effects of businesses acquired and sold:
- -------------------------------------------------------------------------------------------------------------------------------
Accounts receivable 6,415 (1,659) (21,033)
- -------------------------------------------------------------------------------------------------------------------------------
Inventories (23,481) 7,073 18,234
- -------------------------------------------------------------------------------------------------------------------------------
Other current assets 996 3,715 1,419
- -------------------------------------------------------------------------------------------------------------------------------
Accounts payable and accrued expenses 5,172 31,528 6,491
- -------------------------------------------------------------------------------------------------------------------------------
Accrued taxes on income (3,815) (15,335) (9,278)
- ----------------------------------------------------------------------------------------------=================================
Cash provided by operating activities 197,295 220,853 192,855
- ----------------------------------------------------------------------------------------------=================================
Cash flows from investing activities:
- -------------------------------------------------------------------------------------------------------------------------------
Proceeds from sale of business -- 31,837 --
- -------------------------------------------------------------------------------------------------------------------------------
Investments in businesses -- -- (14,125)
- -------------------------------------------------------------------------------------------------------------------------------
Additions to property, plant, and equipment (51,056) (27,433) (33,616)
- -------------------------------------------------------------------------------------------------------------------------------
Disposals of property, plant, and equipment 10,228 1,788 2,045
- -------------------------------------------------------------------------------------------------------------------------------
Net sales (purchases) of short-term investments -- 18,146 (1,241)
- -------------------------------------------------------------------------------------------------------------------------------
Other (1,376) (5,426) (396)
- ----------------------------------------------------------------------------------------------=================================
Cash provided by (used for) investing activities (42,204) 18,912 (47,333)
- ----------------------------------------------------------------------------------------------=================================
Cash flows from financing activities:
- -------------------------------------------------------------------------------------------------------------------------------
Commercial paper 50,045 204,229 (20,772)
- -------------------------------------------------------------------------------------------------------------------------------
Proceeds from long-term debt 200 -- 2,744
- -------------------------------------------------------------------------------------------------------------------------------
Reduction of long-term debt (106,046) (6,869) (5,317)
- -------------------------------------------------------------------------------------------------------------------------------
Reduction of debt assumed in acquisition of business -- -- (17,708)
- -------------------------------------------------------------------------------------------------------------------------------
Retirement of notes payable -- -- (8,025)
- -------------------------------------------------------------------------------------------------------------------------------
Acquisition of treasury stock -- (407,659) --
- -------------------------------------------------------------------------------------------------------------------------------
Dividends paid (67,356) (73,838) (71,562)
- ----------------------------------------------------------------------------------------------=================================
Cash (used for) financing activities (123,157) (284,137) (120,640)
- ----------------------------------------------------------------------------------------------=================================
Net increase (decrease) in cash and cash equivalents 31,934 (44,372) 24,882
- -------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, beginning of year 30,540 74,912 50,030
- ----------------------------------------------------------------------------------------------=================================
Cash and cash equivalents, end of year $ 62,474 $ 30,540 $ 74,912
- ----------------------------------------------------------------------------------------------=================================
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
30
<PAGE>
Brown-Forman Corporation
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
For the years Ended April 30, 1995, 1994, and 1993 (Expressed in thousands, except per share amounts)
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Common Stock
---------------- Capital in Cumulative
Preferred Class Class Excess of Retained Translation Treasury
Total Stock A B Par Value Earnings Adjustment Stock
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, April 30, 1992 $ 735,158 $11,779 $1,809 $ 4,000 $89,717 $ 972,833 $ (740) $(344,240)
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 156,190 156,190
- -----------------------------------------------------------------------------------------------------------------------------------
Cash dividends
Preferred, per share $.40 (471) (471)
Common, per share $.86 (71,091) (71,091)
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation
adjustment (1,681) (1,681)
- -----------------------------------------------------------------------------------------------------------------------------------
Other 18 18
- ------------------------------------===============================================================================================
Balance, April 30, 1993 818,123 11,779 1,809 4,000 89,735 1,057,461 (2,421) (344,240)
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 128,527 128,527
- -----------------------------------------------------------------------------------------------------------------------------------
Cash dividends
Preferred, per share $.40 (471) (471)
Common, per share $.93 (73,367) (73,367)
- -----------------------------------------------------------------------------------------------------------------------------------
Acquisition of treasury stock
(Class A, 2,734,452 shares
and Class B, 10,933,518 shares (407,659) (407,659)
- -----------------------------------------------------------------------------------------------------------------------------------
Retirement of treasury stock
(Class A, 7,197,615 shares
and Class B, 39,984,798 shares) -- (360) (1,999) (89,822) (659,718) 751,899
- -----------------------------------------------------------------------------------------------------------------------------------
Issuance of shares in connection
with 3-for-1 stock split -- 2,899 4,000 (6,899)
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation
adjustment (1,663) (1,663)
- -----------------------------------------------------------------------------------------------------------------------------------
Other 197 87 110
- ------------------------------------===============================================================================================
Balance, April 30, 1994 463,687 11,779 4,348 6,001 -- 445,643 (4,084) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net income 148,629 148,629
- -----------------------------------------------------------------------------------------------------------------------------------
Cash dividends
Preferred, per share $.40 (471) (471)
Common, per share $.97 (66,885) (66,885)
- -----------------------------------------------------------------------------------------------------------------------------------
Foreign currency translation
adjustment 926 926
- -----------------------------------------------------------------------------------------------------------------------------------
Other (39) (39)
- ------------------------------------===============================================================================================
Balance, April 30, 1995 $ 545,847 $11,779 $4,348 $ 6,001 $ -- $ 526,877 $(3,158) $ --
- ------------------------------------===============================================================================================
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of all
subsidiaries.
Cash Equivalents
Cash equivalents include demand deposits with banks and all highly liquid
investments with original maturities of three months or less.
Short-Term Investments
Short-term interest bearing investments are those with maturities of less than
one year, but greater than three months, when purchased. These investments are
readily convertible to cash and are stated at cost, which approximates fair
value.
Inventories
Inventories are stated at the lower of cost or market. Approximately 84% at
April 30, 1995 and 1994, and 83% at April 30, 1993 of the total amount of
consolidated inventories are stated on the basis of the last-in, first-out
(LIFO) method. All remaining inventories are valued using the first-in, first-
out and average cost methods.
If the LIFO method had not been used, inventories would have been
$70,497,000, $71,626,000, and $62,347,000 higher than reported at April 30,
1995, 1994, and 1993, respectively.
A substantial portion of barreled whisky will not be sold within one year
because of the duration of the aging process. All barreled whisky is classified
in current assets in accordance with industry practice. Bulk wine inventories
are classified as work in process.
Warehousing, insurance, ad valorem taxes, and other carrying charges
applicable to barreled whisky held for aging are included in inventory costs.
Depreciation
Provision for depreciation is made on the basis of estimated useful lives of
depreciable assets, principally using the straight-line method.
Deferred Income
Deferred income represents proceeds received from a multi-year agreement for the
distribution rights of certain of the company's spirits brands in the export
market. These proceeds are being recognized over a ten-year period.
Revenue Recognition
The company recognizes revenue when goods are shipped or services are
performed.
Intangible Assets
Intangible assets, principally the excess of purchase price over the fair
value of identifiable net assets of acquired businesses, are stated at cost
less accumulated amortization. These assets are amortized using the
straight-line method over their estimated useful lives, not exceeding forty
years.
Subsequent to its acquisition, the company continually evaluates whether
events and changes in circumstances have occurred that indicate the remaining
estimated useful life of an intangible asset may warrant revision or that the
remaining balance of an intangible asset may not be fully recoverable. When
factors indicate that an intangible asset should be evaluated for possible
impairment, the company uses an estimate of the related business' undiscounted
future cash flows over the remaining life of the asset in measuring whether the
intangible asset has been impaired.
Foreign Currency and Hedging Activities
The U.S. dollar is the functional currency for substantially all of the
company's consolidated operations. For these operations, all gains and losses
from currency transactions are included in income currently. For certain foreign
equity investments, the functional currency is the local currency. The
cumulative translation effects for the few equity investments using functional
currencies other than the U.S. dollar are included in the cumulative translation
adjustment in stockholders' equity.
The company uses foreign currency forwards and options to hedge payments
and receipts of foreign currencies related to the purchase and sale of goods
overseas. The purpose of these hedges is to protect against the risk that
currency movements would adversely affect the company's revenues and product
costs. While these hedges are subject to the risk of loss from fluctuations in
exchange rates, these losses would be offset by gains on the transactions being
hedged. Realized gains and losses on these hedging instruments are recognized in
income in the same period as the underlying transaction. The company does not
engage in currency speculation.
Earnings Per Common Share
Earnings per common share are based upon the weighted average common shares
outstanding of 68,996,238 in 1995, 78,657,432 in 1994, and 82,664,208 in 1993,
after recognition of dividend requirements on preferred stock.
Reclassifications
Discounts related to promotional programs in the wines and spirits segment,
which were previously included in the consolidated income statement under the
caption "Selling, general, and administrative expenses," have been reclassified
as a reduction of "Net sales" for all periods presented. This reclassification
conforms the company's presentation to industry practice.
32
<PAGE>
2. ACCOUNTING CHANGES
Effective May 1, 1993, the company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits," and Statement of Financial
Accounting Standards No. 116, "Accounting for Contributions Received and
Contributions Made."
The cumulative effect of these changes in accounting principles was
recognized in 1994 as follows (in thousands):
<TABLE>
<CAPTION>
FAS Statement No.
============================================================
106 112 116 Total
- ------------------------------------------------------------
<S> <C> <C> <C> <C>
Pretax charge $43,684 $2,817 $6,721 $53,222
- ------------------------------------------------------------
Income taxes 16,955 1,104 2,621 20,680
- -------------------=========================================
Net charge $26,729 $1,713 $4,100 $32,542
- -------------------=========================================
Net charge per
common share $ .34 $ .02 $ .05 $ .41
- -------------------=========================================
</TABLE>
Effective January 31, 1994, the company adopted Statement of Position 93-7,
"Reporting on Advertising Costs." This statement was issued by the American
Institute of Certified Public Accountants and requires the company to
prospectively capitalize and amortize direct-response advertising to better
match revenues with expenses. The company continues to expense other advertising
costs as incurred.
On May 1, 1993, the company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes."
The adoption of these standards did not materially affect 1994 earnings
before the cumulative effect of accounting changes.
3. CHANGES IN OPERATIONS
Acquisition of Fetzer Vineyards
On August 31, 1992, the company purchased all of the outstanding stock of Fetzer
Vineyards of Mendocino County, California. The cost of acquiring the stock was
approximately $64,200,000 and included, among other costs, $4,600,000 in cash,
$47,500,000 in notes to the previous owners and four annual payments of
$2,800,000 per year beginning fiscal 1996. In addition, the company assumed
approximately $27,000,000 of Fetzer Vineyards debt. The acquisition has been
accounted for as a purchase, and accordingly, the operating results of Fetzer
have been consolidated with the company since the acquisition date. The excess
of the acquisition cost over the fair value of the net assets acquired is
approximately $47,000,000 which is being amortized over forty years.
Swift and Moore
During 1993, the company acquired a 20% interest in Swift and Moore Pty.
Limited, an importer and marketer of spirits and wines in Australia for
$9,512,000.
Sale of Credit Card Operations
On October 15, 1993, the company sold substantially all the assets of its credit
card processing operations. The sale resulted in a pretax gain of approximately
$30,077,000 ($18,350,000 after-tax or $.23 per share).
4. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses are composed of the following (in
thousands):
<TABLE>
<CAPTION>
April 30, 1995 1994 1993
=================================================================
<S> <C> <C> <C>
Accounts payable, trade $ 67,775 $ 55,084 $ 38,725
- -----------------------------====================================
Accrued expenses:
- -----------------------------------------------------------------
Compensation and
commissions 45,561 37,840 35,453
- -----------------------------------------------------------------
Excise and other non-
income taxes 20,702 16,183 17,576
- -----------------------------------------------------------------
Interest 6,777 9,042 8,476
- -----------------------------------------------------------------
Advertising 31,384 39,356 35,401
- -----------------------------------------------------------------
Other 49,148 58,670 45,033
- -----------------------------====================================
153,572 161,091 141,939
- -----------------------------====================================
$221,347 $216,175 $180,664
- -----------------------------====================================
</TABLE>
5. CREDIT FACILITIES
The company has a $300,000,000 revolving credit agreement with various domestic
and international banks that expires in fiscal 2000. The most restrictive of the
agreement's covenants requires the company to maintain a minimum level of net
worth. At April 30, 1995, net worth exceeded the required level, as defined in
the agreement, by $195,847,000. At April 30, 1995, the company had no
outstanding borrowings under this agreement. At April 30, 1995, the company also
had available for issuance $250,000,000 of debt securities under a shelf
registration filing with the Securities and Exchange Commission.
33
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. DEBT
At April 30, the company's long-term debt consisted of the following
(in thousands, except percentage amounts):
<TABLE>
<CAPTION>
April 30, 1995 1994 1993
=====================================================================
<S> <C> <C> <C>
Commercial paper $204,274 $150,000 --
- ---------------------------------------------------------------------
9.375% notes -- 99,880 $ 99,850
- ---------------------------------------------------------------------
11.25% notes, due through 1999 33,886 38,753 44,632
- ---------------------------------------------------------------------
Variable rate industrial
revenue bonds, due through 2026 13,840 13,840 13,840
- ---------------------------------------------------------------------
Other 356 1,455 2,475
- -------------------------------------================================
252,356 303,928 160,797
Less current portion 5,514 4,867 6,389
- -------------------------------------================================
$246,842 $299,061 $154,408
- -------------------------------------================================
</TABLE>
At April 30, 1995, the company had an interest rate agreement to convert
$100,000,000 of its commercial paper from variable rates to a fixed rate of 9
3/8%. This contract matures in 1998. See Note 7 for a description of the
financial instrument.
At April 30, 1995 and 1994, $204,274,000 and $150,000,000, respectively, of
commercial paper is classified as long-term debt due to the credit available
under the long-term credit facilities discussed in Note 5 on page 33 and the
company's intent to refinance these borrowings on a long-term basis. Long-term
debt payment requirements for the five fiscal years after April 30, 1995 are as
follows: 1996 - $5,514,000; 1997 - $6,023,000; 1998 - $6,701,000; 1999 -
$7,455,000; 2000 - $212,567,000. Cash paid for interest was $24,895,000 in
1995, $16,629,000 in 1994, and $17,771,000 in 1993. Excluding the effect of
the interest rate agreement discussed above, the weighted average interest
rates on commercial paper were 4.9% and 3.8% at April 30, 1995 and 1994,
respectively. The weighted average interest rates on the variable rate
industrial revenue bonds were 4.9% and 3.4% at April 30, 1995 and 1994,
respectively.
7. FINANCIAL INSTRUMENTS
The company uses derivative financial instruments for the purpose of reducing
its exposure to adverse fluctuations in interest and foreign exchange rates.
While these hedging instruments are subject to fluctuations in value, such
fluctuations are generally offset by the value of the underlying exposures being
hedged. The company is not a party to leveraged derivatives and does not hold or
issue financial instruments for speculative purposes.
Interest Rate Management
The company sold an option to swap interest rates that effectively eliminated
the call feature on the $100,000,000 9 3/8% notes for the period April 1, 1995
to April 1, 1998. This option was exercised April 1, 1995 effectively converting
$100,000,000 commercial paper from floating interest rate obligations to 9 3/8%
fixed rate obligations from April 1, 1995 to April 1, 1998. The option on this
swap was sold in order to manage the level of fixed and floating rate debt. The
premium received on the sale of this option is being amortized as a reduction of
interest expense through April 1, 1998.
Foreign Currency Management
The U.S. dollar is the functional currency for substantially all of the
company's consolidated operations. For these operations, all gains and losses
from currency transactions are included in income currently. For certain foreign
equity investments, the functional currency is the local currency. The
cumulative translation effects for equity investments using functional
currencies other than the U.S. dollar are included in the cumulative translation
adjustment in stockholders' equity.
The company uses foreign currency forwards and options, which typically expire
within one year, to hedge payments and receipts of foreign currencies related to
the purchase and sale of goods overseas. Realized gains and losses on these
contracts are recognized in the same period as the hedged transactions. The
company had foreign exchange forward contracts on hand at April 30, 1995 and
1994, primarily hedging German Mark, British Pound, and Japanese Yen revenues,
totaling $10,600,000 and $26,500,000, respectively.
Carrying Amount and Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, short-term investments, and
commercial paper approximates fair value due to the short maturities of these
instruments. The value of long-term debt is estimated using discounted cash
flows based on the company's incremental borrowing rates for similar types of
borrowings. The value of interest rate and foreign currency contracts are based
on quoted market prices. A comparison of the carrying value and fair value of
these instruments is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
- ---------------------------------------------------------------------------
Cash and
cash equivalents $ 62,474 $ 62,474 $ 30,540 $ 30,540
- ---------------------------------------------------------------------------
Liabilities:
- ---------------------------------------------------------------------------
Commercial paper 50,000 50,000 54,229 54,229
- ---------------------------------------------------------------------------
Long-term debt 252,356 252,356 303,928 308,248
- ---------------------------------------------------------------------------
Interest rate instrument 680 6,500 913 5,650
- ---------------------------------------------------------------------------
Foreign currency
instruments -- 1,048 -- 813
- ---------------------------------------------------------------------------
</TABLE>
34
<PAGE>
Brown-Forman Corporation
8. COMMITMENTS
Rentals of real estate, office and data processing equipment, vehicles, and
manufacturing equipment under operating leases amounted to approximately
$20,800,000, $20,700,000, and $19,200,000, for 1995, 1994, and 1993,
respectively. The company has commitments related primarily to minimum lease
payments totaling $23,400,000 in 1996; $18,400,000 in 1997; $14,100,000 in
1998; $11,200,000 in 1999; $8,900,000 in 2000; and $7,600,000 after 2000.
9. TAXES ON INCOME
The provision for taxes on income is composed of the following (in thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------
1995 1994 1993
============================================================
<S> <C> <C> <C>
Currently payable:
- ------------------------------------------------------------
Federal $62,707 $69,539 $64,667
- ------------------------------------------------------------
Foreign 1,705 3,877 4,222
- ------------------------------------------------------------
State and Local 15,087 16,594 14,688
- ------------------------------==============================
79,499 90,010 83,577
- ------------------------------==============================
- ------------------------------------------------------------
Deferred:
- ------------------------------------------------------------
Federal 14,757 6,401 3,659
- ------------------------------------------------------------
Foreign 1,373 (27) (699)
- ------------------------------------------------------------
State and Local 2,800 (226) (150)
- ------------------------------==============================
18,930 6,148 2,810
- ------------------------------==============================
$98,429 $96,158 $86,387
- ------------------------------==============================
</TABLE>
United States and foreign components of income before income taxes and the
cumulative effect of accounting changes are as follows (in thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------
1995 1994 1993
============================================================
<S> <C> <C> <C>
United States $227,107 $236,226 $222,124
- ------------------------------------------------------------
Foreign 19,951 21,001 20,453
- ------------------------------------------------------------
$247,058 $257,227 $242,577
- ------------------------------==============================
</TABLE>
Taxes on income for fiscal 1994 includes a $5,300,000 charge resulting from an
increase in the corporate income tax rate. Included in this amount is a charge
of $3,580,000 for the retroactive effect of a higher tax rate on earnings from
January 1, 1993 to April 30, 1993, and a noncash charge to restate the deferred
tax liability at the new corporate tax rate.
The following is a reconciliation of the effective tax rates with the United
States statutory rates
<TABLE>
<CAPTION>
Percent of Income Before Taxes
- ------------------------------------------------------------
1995 1994 1993
============================================================
<S> <C> <C> <C>
Statutory rate 35.0% 35.0% 34.0%
- ------------------------------------------------------------
State taxes, net of U.S.
Federal tax benefit 4.6 4.1 4.0
- ------------------------------------------------------------
Income taxed at other than U.S.
Federal statutory rate (.7) (1.5) (1.2)
- ------------------------------------------------------------
Tax benefit of Foreign Sales
Corporation (1.1) (1.3) (.9)
- ------------------------------------------------------------
Nondeductible amortization 1.2 1.1 1.2
- ------------------------------------------------------------
Adjustment of prior years' accruals (.3) (2.1) (1.7)
- ------------------------------------------------------------
Adjustment of prior years' rate -- 1.2 --
- ------------------------------------------------------------
Other, net 1.1 .9 .2
- ------------------------------------------------------------
39.8% 37.4% 35.6%
- ------------------------------------------------------------
</TABLE>
Deferred tax assets and liabilities for 1995 and 1994 are composed of the
following (in thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------
April 30, 1995 1994
============================================================
<S> <C> <C>
Deferred tax assets:
- ------------------------------------------------------------
Postretirement and other benefits $ 31,988 $ 30,527
- ------------------------------------------------------------
Accrued liabilities and other 19,591 31,400
- ---------------------------------------=====================
Total deferred tax assets 51,579 61,927
- ------------------------------------------------------------
Deferred tax liabilities:
- ------------------------------------------------------------
Intercompany transactions 120,449 112,116
- ------------------------------------------------------------
Depreciation 19,802 22,068
- ------------------------------------------------------------
Undistributed foreign earnings 17,318 17,318
- ------------------------------------------------------------
Pension plans 16,278 13,857
- ------------------------------------------------------------
Other 899 805
- ---------------------------------------=====================
Total deferred tax liabilities 174,746 166,164
- ---------------------------------------=====================
Net deferred tax liability $123,167 $104,237
- ---------------------------------------=====================
</TABLE>
The 1993 deferred provision arose principally from $3,473,000 related to
undistributed foreign earnings, $677,000 related to deferred income, partially
offset by $2,396,000 related to intercompany transactions. Deferred income taxes
were not provided on certain undistributed earnings ($58,980,000 at April 30,
1995) of certain foreign subsidiaries because such undistributed earnings are
expected to be reinvested indefinitely overseas. If these amounts were not
considered permanently reinvested, additional deferred taxes of approximately
$20,173,000 would have been provided.
Cash paid for income taxes was $85,852,000 in 1995, $93,618,000 in 1994, and
$73,055,000 in 1993.
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. PENSION PLANS
The company has defined benefit pension plans covering certain employees. The
benefits for these plans are based primarily on years of service and employees'
pay near retirement for the salaried employees and stated amounts for each year
of service for the union and hourly employees. The company also has unfunded
plans that provide retirement benefits in excess of qualified plan formulas or
regulatory limitations for certain employees.
Net pension income (expense) for 1995, 1994, and 1993 includes the
following components (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
1995 1994 1993
======================================================================================
<S> <C> <C> <C>
Benefit cost for service
during the year $ (8,176) $ (7,775) $ (6,187)
- --------------------------------------------------------------------------------------
Interest cost on projected
benefit obligation (14,546) (14,555) (13,668)
- --------------------------------------------------------------------------------------
Actual return (loss) on plan assets (4,597) 33,580 23,293
- --------------------------------------------------------------------------------------
Net amortization and deferral 27,253 (12,346) (3,091)
- --------------------------------------------==========================================
Net pension income (expense) $ (66) $ (1,096) $ 347
- --------------------------------------------==========================================
</TABLE>
The amounts included in the accompanying consolidated balance sheet were
based on the funded status of the plans at January 31, 1995 and 1994 and are as
follows (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
1995 1994
================================================================================================================================
Plan Assets Obligations Plan Assets Obligations
Exceed Exceed Exceed Exceed
Obligations Plan Assets Obligations Plan Assets
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
- --------------------------------------------------------------------------------------------------------------------------------
Vested benefit obligations $140,764 $ 13,767 $152,849 $ 16,280
- --------------------------------------------------------------------------------------------------------------------------------
Nonvested benefit obligations 8,593 1,105 10,243 1,475
- ---------------------------------------------------------------------------=====================================================
Accumulated benefit obligations 149,357 14,872 163,092 17,755
- --------------------------------------------------------------------------------------------------------------------------------
Additional amounts related to assumed pay increases 31,069 5,965 29,123 2,944
- ---------------------------------------------------------------------------=====================================================
Projected benefit obligations 180,426 20,837 192,215 20,699
- --------------------------------------------------------------------------------------------------------------------------------
Plan assets at fair value 232,337 3,327 246,793 2,873
- ---------------------------------------------------------------------------=====================================================
Plan assets in excess of (less than) benefit obligations 51,911 (17,510) 54,578 (17,826)
- --------------------------------------------------------------------------------------------------------------------------------
Unamortized net (assets) obligations at date of adoption (28,310) 3,045 (31,900) 3,462
- --------------------------------------------------------------------------------------------------------------------------------
Unrecognized net (gain) loss resulting from experience
different from that assumed and changes in actuarial assumptions 16,400 (2,476) 13,888 (1,484)
- --------------------------------------------------------------------------------------------------------------------------------
Unrecognized prior service cost 2,374 5,468 2,879 5,684
- --------------------------------------------------------------------------------------------------------------------------------
Adjustment required to recognize minimum liability -- (2,006) -- (5,458)
- --------------------------------------------------------------------------------------------------------------------------------
Contributions subsequent to measurement date -- 331 -- 270
- ---------------------------------------------------------------------------=====================================================
Prepaid (accrued) pension cost $ 42,375 $(13,148) $ 39,445 $(15,352)
- ---------------------------------------------------------------------------=====================================================
</TABLE>
The projected benefit obligation was determined using a weighted average
discount rate of 8.5% for 1995, 7% for 1994, and 8% for 1993. The weighted
average rate of future compensation increases was 5.5% for 1995, 4% for 1994,
and 5% for 1993. The expected rate of return on plan assets was 9.5% for these
years. The plans' assets consist primarily of stocks and bonds.
The company's policy for funded plans is to make contributions equal to or
greater than the requirements prescribed by the Employee Retirement Income
Security Act (ERISA).
36
<PAGE>
11. BUSINESS SEGMENT INFORMATION
The company's operations have been classified into three business segments:
wines and spirits, consumer durables, and other. The wines and spirits segment
includes the production, importing, and marketing of wines and distilled
spirits. The consumer durables segment includes the manufacture and sale of
china, crystal, ceramic and crystal collectibles, silver, pewter, and luggage.
Through October 1993, the other segment included a credit card transaction
processing business and an aquaculture business. The credit card transaction
processing business was sold in October 1993 and the use of this segment was
discontinued.
Summarized financial information by business segment for 1995, 1994, and
1993 is as follows (in thousands):
1995 1994 1993
- --------------------------------------------------------------------------------
Net sales:
- --------------------------------------------------------------------------------
Wines and Spirits $1,137,834 $1,104,817 $1,121,292
- --------------------------------------------------------------------------------
Consumer Durables 541,796 513,612 519,038
- --------------------------------------------------------------------------------
Other -- 10,053 18,096
- --------------------------------------------------------------------------------
$1,679,630 $1,628,482 $1,658,426
- --------------------------------------------------------------------------------
Operating income:
- --------------------------------------------------------------------------------
Wines and Spirits $ 243,713 $ 235,004 $ 245,693
- --------------------------------------------------------------------------------
Consumer Durables 38,206 18,953 24,454
- --------------------------------------------------------------------------------
Other -- 453 (1,917)
- --------------------------------------------------------------------------------
Corporate (14,134) (14,049) (12,848)
- --------------------------------------------------------------------------------
$ 267,785 $ 240,361 $ 255,382
- --------------------------------------------------------------------------------
Total assets:
- --------------------------------------------------------------------------------
Wines and Spirits $ 715,394 $ 676,086 $ 659,911
- --------------------------------------------------------------------------------
Consumer Durables 480,322 500,707 539,682
- --------------------------------------------------------------------------------
Other -- -- 8,536
- --------------------------------------------------------------------------------
Corporate 89,843 57,056 102,869
- --------------------------------------------------------------------------------
$1,285,559 $1,233,849 $1,310,998
- --------------------------------------------------------------------------------
Depreciation and amortization:
- --------------------------------------------------------------------------------
Wines and Spirits $ 22,865 $ 22,108 $ 19,981
- --------------------------------------------------------------------------------
Consumer Durables 20,398 23,436 22,982
- --------------------------------------------------------------------------------
Other -- 271 597
- --------------------------------------------------------------------------------
Corporate 229 208 195
- --------------------------------------------------------------------------------
$ 43,492 $ 46,023 $ 43,755
- --------------------------------------------------------------------------------
Capital expenditures:
- --------------------------------------------------------------------------------
Wines and Spirits $ 38,330 $ 19,699 $ 15,968
- --------------------------------------------------------------------------------
Consumer Durables 12,627 7,464 17,148
- --------------------------------------------------------------------------------
Other -- 168 355
- --------------------------------------------------------------------------------
Corporate 99 102 145
- --------------------------------------------------------------------------------
$ 51,056 $ 27,433 $ 33,616
- --------------------------------------------------------------------------------
Consumer durables' operating income was reduced by $8,180,000
($5,350,000 after-tax) for the closing or reformatting of seven retail stores in
1994 and reduced by $3,830,000 ($2,500,000 after-tax) for the write-down of
slow-moving and obsolete assets in 1993.
There were no significant intersegment sales or transfers during 1995,
1994, and 1993. Operating income by business segment excludes interest income,
interest expense, and net unallocated corporate expenses. Corporate assets
consist principally of cash and cash equivalents, short-term investments,
certain corporate receivables, and other assets.
Sales outside the United States, consisting principally of exports of
wines and spirits, amounted to approximately $221,389,000, $212,897,000, and
$190,026,000 in 1995, 1994, and 1993, respectively.
12. CONTINGENCIES
In the normal course of business, various suits and claims are brought
against the company, some of which seek significant damages. Many of these
suits and claims take years to adjudicate and it is difficult to predict their
outcome. In the opinion of management, based on advice from legal counsel,
none of these suits or claims will have a material adverse effect on the
company's financial position or results of operations.
13. ENVIRONMENTAL
The company, along with other responsible parties, faces environmental
claims resulting from the cleanup of several waste deposit sites. The company
has accrued its estimated portion of cleanup costs and expects other
responsible parties and insurance coverage to cover the remaining costs. The
company believes that any additional costs incurred by the company will not
have a material adverse effect on the company's financial condition or results
of operations.
14. QUARTERLY RESULTS (UNAUDITED)
The 1995 and 1994 unaudited quarterly results are presented on the
highlights page.
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The company provides certain health care and life insurance benefits for
eligible retirees. Effective May 1, 1993, the company adopted
Statement of Financial Accounting Standards No. 106, "Employers' Accounting
for Postretirement Benefits Other Than Pensions." Under SFAS No. 106, the
company accrues the cost of these benefits over employees' active service
periods.
The company elected to recognize this change in accounting on the immediate
recognition basis. The adoption of this standard resulted in a one-time pretax
charge totaling $43,684,000 ($26,729,000 after-tax or $.34 per share).
The postretirement benefit expense for 1995 and 1994 includes the following
components (in thousands):
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------------
<S> <C> <C>
Service cost of benefits earned $1,902 $1,898
- ---------------------------------------------------------------
Interest cost on accumulated postretirement
benefit obligation 3,370 3,495
- -----------------------------------------------================
Postretirement benefit expense $5,272 $5,393
- -----------------------------------------------================
</TABLE>
The 1995 and 1994 postretirement benefit liability includes the following
components (in thousands):
<TABLE>
<CAPTION>
1995 1994
- ------------------------------------------------------------------
Actuarial present value of accumulated postretirement obligation:
- ------------------------------------------------------------------
<S> <C> <C>
Retirees $20,612 $25,525
- ------------------------------------------------------------------
Fully eligible active plan participants 693 3,878
- ------------------------------------------------------------------
Other active plan participants 15,543 20,040
- -----------------------------------------------===================
36,848 49,443
- ------------------------------------------------------------------
Unrecognized net gain (loss) 13,929 (2,220)
- -----------------------------------------------===================
Accrued postretirement benefit liability $50,777 $47,223
- -----------------------------------------------===================
Assumptions:
- ------------------------------------------------------------------
Discount Rate 8.5% 7.0%
- ------------------------------------------------------------------
Healthcare cost trend rates:
- ------------------------------------------------------------------
Present rate before age 65 8.0% 13.5%
- ------------------------------------------------------------------
Present rate age 65 and after 7.0% 12.5%
- ------------------------------------------------------------------
Ultimate rate in ten years 5.0% 5.0%
- ------------------------------------------------------------------
</TABLE>
A one-percentage point increase in the assumed health care cost trend rate
would have increased the accumulated postretirement benefit obligation as of
April 30, 1995 by $5,026,000 and the postretirement benefit expense by
$758,000. For 1993, retiree health care and life insurance benefits were
expensed as paid and totaled $1,950,000.
==============================================================================
REPORT OF INDEPENDENT ACCOUNTANTS
BROWN-FORMAN CORPORATION
We have audited the accompanying consolidated balance sheets of Brown-Forman
Corporation and Subsidiaries as of April 30, 1995, 1994, and 1993, and the
related consolidated statements of income, stockholders' equity and cash flows
for the years then ended. These financial statements are the responsibility of
the company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Brown-Forman
Corporation and Subsidiaries at April 30, 1995, 1994, and 1993, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
As discussed in Notes 2 and 15 to the consolidated financial statements, in
1994 the company adopted changes in its methods of accounting for postretirement
benefits other than pensions, postemployment benefits, and contributions.
/s/ Coopers & Lybrand LLP
Louisville, Kentucky
June 8, 1995
38
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
________________
SUBSIDIARIES
<TABLE>
<CAPTION>
Percentage of
Voting State or
Securities Jurisdiction
Name Owned of Incorporation
---- ------------- ----------------
<S> <C> <C>
Brown-Forman International F.S.C., Ltd. 100% U.S. Virgin Islands
Canadian Mist Distillers, Limited 100% Ontario, Canada
Early Times Distillers Company 100% Delaware
Fetzer Vineyards 90.1% California
Jack Daniel Distillery,
Lem Motlow, Prop., Inc. 100% Kentucky
Lenox, Incorporated 100% New Jersey
Dansk International Designs Ltd. 100%/(1)/ New York
Brooks & Bentley Limited 100%/(1)/ United Kingdom
Brooks & Bentley S.A.R.L. 100%/(1)/ France
Brooks & Bentley A.F. 100%/(1)/ Norway
Longnorth, Limited 100%/(2)/ Ireland
Brown-Forman - W.S. Karoulias S.A. 75%/(3)/ Greece
Chissick Limited 100%/(2)(3)/ Ireland
Clintock, Limited 100%/(2)(3)/ Ireland
Lantone, Limited 100%/(2)(3)/ Ireland
Pitts Bay Trading Limited 75%/(3)/ Bermuda
Lantone Delaware, Inc. 100%/(4)/ Delaware
L-H Limited 100% United Kingdom
Mt. Eagle Corporation 100% Delaware
The Jos. Garneau Co., S.A. 100%/(2)/ Switzerland
Thoroughbred Plastics Corporation 100% Kentucky
Brown-Forman Beverages Worldwide, Comercio
de Bebidas Ltd. 100%/(5)/ Brazil
Brown-Forman Worldwide, L.L.C. 100%/(5)/ Delaware
</TABLE>
The above companies are included in the consolidated financial statements. The
names of certain subsidiaries have been omitted which, if considered in the
aggregate as a single subsidiary, would not constitute a significant subsidiary.
/(1)/ Owned by Lenox, Incorporated.
/(2)/ Includes qualifying shares assigned to Brown-Forman Corporation.
/(3)/ Owned by Longnorth, Limited.
/(4)/ Owned by Lantone Limited.
/(5)/ Owned 99% by Brown-Forman Corporation and 1% by Early Times Distillery
Company.
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement of
Brown-Forman Corporation on Form S-3, (File No. 33-52551) of our report which
includes an explanatory paragraph for the company's adoption of changes in its
methods of accounting for postretirement benefits other than pensions,
postemployment benefits, and contributions, dated June 8, 1995, on our audits of
the consolidated financial statements and financial statement schedules of
Brown-Forman Corporation as of April 30, 1995, 1994, and 1993, and for the years
ended April 30, 1995, 1994, and 1993, which report is included in this Annual
Report on Form 10-K.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Louisville, Kentucky
July 17, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
company's April 30, 1995 Annual Report and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-END> APR-30-1995
<CASH> 62,474
<SECURITIES> 0
<RECEIVABLES> 234,165
<ALLOWANCES> 14,061
<INVENTORY> 381,923
<CURRENT-ASSETS> 697,910
<PP&E> 530,607
<DEPRECIATION> 278,390
<TOTAL-ASSETS> 1,285,559
<CURRENT-LIABILITIES> 285,608
<BONDS> 246,842
<COMMON> 534,068
0
11,779
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,285,559
<SALES> 1,679,630
<TOTAL-REVENUES> 1,679,630
<CGS> 855,726<F1>
<TOTAL-COSTS> 855,726<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,630
<INCOME-PRETAX> 247,058
<INCOME-TAX> 98,429
<INCOME-CONTINUING> 148,629
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 148,629
<EPS-PRIMARY> 2.15
<EPS-DILUTED> 2.15
<FN>
<F1> Cost of goods sold and total costs include excise taxes of $259.418
million.
</FN>
</TABLE>
