<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
BROWN-FORMAN CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
[GRAPHIC]
Brown-Forman Corporation
P. O. BOX 1080 - LOUISVILLE, KENTUCKY 40201 - 1080 - USA
OWSLEY BROWN II
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
June 30, 1999
Dear Brown-Forman Stockholder:
It is my pleasure to invite you to attend the Annual Meeting of our
Stockholders:
Thursday, July 22, 1999
9:30 A.M. (Eastern Daylight Time)
Brown-Forman Conference Center
850 Dixie Highway
Louisville, Kentucky
By attending the meeting, you will have the opportunity to hear a discussion of
our business over the past year and to ask questions.
I hope to see you on July 22. Whether or not you can attend, all Class A
Stockholders are urged to fill in the attached voting card and return it to us.
Your vote is very important.
Sincerely,
/s/ Owsley Brown
<PAGE> 3
[GRAPHIC]
Brown-Forman Corporation
850 DIXIE HIGHWAY - LOUISVILLE, KENTUCKY 40210
NOTICE OF ANNUAL MEETING OF
STOCKHOLDERS
Brown-Forman Corporation will hold its annual meeting for holders of its Class A
Common Stock IN THE CONFERENCE CENTER AT OUR CORPORATE OFFICES, 850 DIXIE
HIGHWAY, LOUISVILLE, KENTUCKY, AT 9:30 A.M., LOUISVILLE TIME (EDT), ON THURSDAY,
JULY 22, 1999.
We are holding this meeting to:
- elect a board of eleven directors to hold office until the next annual
stockholders' meeting;
- approve additional shares for awards under the Omnibus Compensation
Plan and authorize the continued use of the Plan's performance
measures; and
- transact whatever other business may properly come before the meeting.
You can vote at the meeting if you held Class A Common Stock of record on our
books at the close of business on June 14, 1999. Holders of Class B Common Stock
may attend the meeting but may not vote. We will not close the stock transfer
books. Class A stockholders can vote either in person or by proxy, which means
you designate someone else to vote your shares.
FOR CLASS A STOCKHOLDERS, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE:
- SIGN AND DATE THE ENCLOSED PROXY CARD; AND
- RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
GIVING A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE YOUR SHARES IF YOU ATTEND THE
MEETING AND DECIDE TO VOTE DIFFERENTLY IN PERSON. ONLY HOLDERS OF CLASS A COMMON
STOCK MAY VOTE AT THE MEETING. WE ARE NOT ASKING FOR PROXY CARDS FROM HOLDERS OF
CLASS B COMMON STOCK.
We enclose a copy of our Annual Report for the fiscal year ended April 30, 1999,
for you to review.
Louisville, Kentucky
June 30, 1999
By Order of the Board of Directors
Michael B. Crutcher, Secretary
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS................................................................................................1
INTRODUCTION.........................................................................................................3
Purpose. ...................................................................................................3
Voting Stock................................................................................................3
Voting Rights...............................................................................................3
ELECTION OF DIRECTORS................................................................................................4
Standing Committees.........................................................................................5
Directors' Meetings.........................................................................................5
STOCK OWNERSHIP......................................................................................................6
Voting Stock Owned by "Beneficial Owners"...................................................................6
Stock Owned by Directors and Executive Officers.............................................................7
Section 16(a) Beneficial Ownership Reporting Compliance.....................................................7
EXECUTIVE COMPENSATION...............................................................................................8
Compensation Committee Report...............................................................................8
Summary Compensation Table.................................................................................10
Restricted Shares: Awarded, Vested, and Outstanding.......................................................11
Option Grants under the Omnibus Compensation Plan..........................................................12
Aggregated Option Values at End of Fiscal 1999.............................................................12
RETIREMENT PLAN DESCRIPTIONS........................................................................................13
DIRECTOR COMPENSATION...............................................................................................14
AMENDMENTS TO THE OMNIBUS COMPENSATION PLAN.........................................................................15
FIVE-YEAR PERFORMANCE GRAPH.........................................................................................17
OTHER INFORMATION...................................................................................................18
Transactions with Management...............................................................................18
Appointment of Independent Accountants.....................................................................18
Other Proposed Action......................................................................................18
Stockholder Proposals for 2000 Annual Meeting..............................................................18
Appendix to 1999 Proxy Statement...................................................................................A-1
Sections 8.1 and 8.4 of the Omnibus Compensation Plan
</TABLE>
<PAGE> 5
QUESTIONS AND ANSWERS
Q: WHAT IS THIS PROXY STATEMENT'S PURPOSE?
A: By law, we must give our stockholders certain basic information so they
can vote knowledgeably at our annual stockholder meeting.
Q: WHO CAN VOTE?
A: Holders of our Class A Common Stock as of June 14, 1999. Class B Common
stockholders cannot vote.
Q: WHAT AM I VOTING ON?
A: The election of all of our Board of Directors and one proposed action
dealing with our Omnibus Compensation Plan. You may also vote on any
other matter that is properly brought before the meeting.
Q: WHAT IS THE PROXY CARD FOR?
A: By completing and signing the Proxy Card, you authorize the individuals
named on the card to vote your shares for you.
Q: WHAT IF I SUBMIT A PROXY CARD AND THEN CHANGE MY MIND ON HOW I WANT TO
VOTE?
A: No problem. You can revoke your proxy by writing us or by attending the
meeting and casting your vote in person.
Q: WHO ARE THE NOMINEES FOR DIRECTORS?
A: We have eleven directors. All of them are running for re-election. We
describe each director briefly in this Proxy Statement.
Q: WHOM MAY I CALL WITH A QUESTION ABOUT THE ANNUAL MEETING?
A: For information about your stock ownership or for other stockholder
services, please call Linda Gering, our Stockholder Services Manager,
at 502-774-7690. For information about the meeting itself, please call
Michael B. Crutcher, our Corporate Secretary, at 502-774-7631.
<PAGE> 6
INTRODUCTION
- --------------------------------------------------------------------------------
This section describes the purpose of this Proxy Statement, who can vote, and
how to vote.
- --------------------------------------------------------------------------------
PURPOSE. The Board of Directors of Brown-Forman Corporation is sending you this
Proxy Statement in connection with the solicitation of proxies for use at the
annual stockholders' meeting to be held on Thursday, July 22, 1999, at
Brown-Forman Corporation, 850 Dixie Highway, Louisville, Kentucky, at 9:30 A.M.,
Louisville time (EDT). On the Board's behalf, we ask you to sign and return the
enclosed proxy.
Beginning on June 30, 1999, we will solicit proxies by mail. Our employees may
solicit proxies by mail, phone, fax or in person. We will pay all solicitation
costs. We will reimburse banks, brokers, nominees, and other fiduciaries for
their reasonable charges and expenses incurred in forwarding our proxy materials
to their principals.
VOTING STOCK. We have two classes of common stock, Class A and Class B. Only
holders of Class A Common Stock can vote, except in unusual cases as provided by
Delaware law. As of the record date, June 14, 1999, we had outstanding
28,988,091 shares of Class A Common Stock.
VOTING RIGHTS. If you were a Class A stockholder on June 14, 1999, and the books
of our transfer agent reflect your stock ownership, you may cast one vote for
each share recorded in your name. You may vote your shares either in person or
by proxy. To vote by proxy, please mark, date, sign, and mail the proxy card we
enclosed with this Proxy Statement.
Giving a proxy will not affect your right to vote your shares if you attend the
meeting and want to vote in person. You may revoke a proxy at any time before it
is voted, but only if our Secretary receives written notice of your revocation
before your proxy is voted. We will vote all shares represented by effective
proxies in accordance with the terms stated in the proxy.
A quorum to conduct business at the meeting consists of a majority of the
outstanding Class A shares. To be elected, a director must receive a majority of
the votes present at a meeting at which there is a quorum. Likewise, a majority
of the shares represented at the meeting must approve any other matters brought
to a vote at the meeting. We will treat shares voted as abstaining as present
for determining the number of shares present, but as shares withheld from
election of a director and against any other proposition coming before the
meeting. If a broker holding your shares in street name indicates to us on a
proxy card that he or she lacks discretionary authority to vote your shares, we
will not consider your shares as present or voting for any purpose.
3
<PAGE> 7
ELECTION OF DIRECTORS
- --------------------------------------------------------------------------------
THIS SECTION GIVES BIOGRAPHICAL INFORMATION ABOUT OUR DIRECTORS AND DESCRIBES
THE COMMITTEES THEY SERVE ON AND THEIR ATTENDANCE AT MEETINGS.
- --------------------------------------------------------------------------------
During the past year, the board voted to increase its size to eleven from nine
directors and elected Jerry E. Abramson and Dace Brown Stubbs to fill the new
positions. At the Annual Meeting, you and our other shareholders will elect
eleven directors. Once elected, a director holds office until the next annual
election of directors or until his or her successor has been elected and
qualified, unless he or she first resigns or reaches retirement age. All of our
current directors are standing for re-election to the Board. The people named as
proxies will vote the enclosed proxy FOR the election of all nominees below,
unless you direct them on the proxy to withhold your vote. If any nominee
becomes unable to serve before the meeting, the people named as proxies may vote
for a substitute.
Here are the director nominees, their ages as of April 30, 1999, the years they
began serving as directors, their business experience for the last five years,
and their other directorships:
JERRY E. ABRAMSON, age 52, director since 1999. Of Counsel, Brown Todd &
Heyburn, PLLC since January, 1999; Mayor of Louisville, Kentucky from
January, 1986 to December, 1998.
BARRY D. BRAMLEY, age 61, director since 1996. Chairman, Lenox, Incorporated (a
subsidiary of Brown- Forman) since July, 1998; Non-Executive Chairman
of Cornwell Parker, PLC (High Wycombe, England) since March, 1998;
Chairman and Chief Executive Officer of British-American Tobacco
Company Ltd. (London, England) from April, 1988 to April, 1996;
Director of BAT Industries, PLC (London, England) from April, 1988
until April, 1996. Other directorships: Anglia Maltings (Holdings),
Ltd. and Skandinavisk Tobakskompagni A/S.
GEO. GARVIN BROWN III*, age 55, director since 1971. Chairman of Trans-Tek, Inc.
since 1988.
OWSLEY BROWN II*, age 56, director since 1971. Our Chairman since July, 1995 and
our Chief Executive Officer since July, 1993; our President from 1987
to 1995. Other directorships: LG&E Energy Corp. and NACCO Industries,
Inc.
DONALD G. CALDER, age 61, director since 1995. President and CFO, G.L. Ohrstrom
& Co., Inc., a private investment firm, since March, 1997; Vice
President from October, 1996 to February, 1997; Partner of the
predecessor partnership, G.L. Ohrstrom & Co., from 1970 to 1996;
Chairman and CEO of Harrow Industries, Inc. from January, 1997 to
March, 1999 and director from 1978 to March, 1999; Vice President (from
1981 to 1996), and director (from 1981 to present) of Roper Industries,
Inc. Other directorships: Carlisle Companies Incorporated and Central
Securities Corporation.
OWSLEY BROWN FRAZIER*, age 63, director since 1964. Our Vice Chairman since
1983.
- -------------------
* Geo. Garvin Brown III and Dace Brown Stubbs are siblings. Dace
Brown Stubbs and Geo. Garvin Brown III are first cousins of
Owsley Brown II and Owsley Brown Frazier, who are themselves
first cousins. Due to their positions as directors, their
family relationships, and their beneficial ownership of our
Class A Common Stock, each may be deemed a "control person" of
Brown-Forman.
4
<PAGE> 8
RICHARD P. MAYER, age 59, director since 1994. Retired; former Chairman and
Chief Executive Officer of Kraft General Foods North America (now Kraft
Foods Inc.) from 1989 to 1995. Other directorships: Dean Foods Company.
STEPHEN E. O'NEIL, age 66, director since 1978. Principal, The O'Neil Group,
since May, 1991. Other directorships: Alger American Fund, Inc.; Alger
Fund, Inc.; Castle Convertible Fund, Inc.; NovaCare, Inc.; NovaCare
Employee Services, Inc.; and Spectra Fund, Inc.
WILLIAM M. STREET**, age 60, director since 1971. Our Vice Chairman since 1987.
Other director ship: National City Bank of Kentucky.
DACE BROWN STUBBS*, age 52, director since 1999. Private investor.
JAMES S. WELCH, age 69, director since 1976. Of Counsel, Ogden Newell & Welch,
Louisville, Kentucky, since 1998; Partner, Ogden Newell & Welch, 1959
to 1998. Other directorship: Hilliard-Lyons Trust Company.
STANDING COMMITTEES. The Board has an Audit Committee, which in fiscal 1999 was
composed of outside directors James S. Welch (chairman,) Richard P.
Mayer, and Stephen E. O'Neil. We also have a Compensation Committee,
which in fiscal 1999 was composed of outside directors Stephen E.
O'Neil (chairman,) Richard P. Mayer, and Donald G. Calder.
The Audit Committee:
- recommends to the Board the engagement of independent
accountants;
- considers and approves the range of audit and non-audit
services performed by independent accountants and the fees for
such services;
- reviews our policies and procedures on maintaining accounting
records and the adequacy of our internal controls; and
- reviews management's implementation of recommendations made by
the independent accountants and internal auditors.
It met twice during fiscal 1999.
The Compensation Committee sets the compensation of our most highly paid
officers and administers short and long term bonus awards to these officers
under the Omnibus Compensation Plan. It met twice in fiscal 1999.
The Board has no standing nominating committee.
DIRECTORS' MEETINGS. The Board met six times during fiscal 1999. Each current
director attended at least 75% of the aggregate number of Board and applicable
committee meetings held in fiscal 1999. Two of our directors were elected in
1999, and both attended all Board meetings since their elections.
- -------------------
** Because of Mr. Street's position as a director and executive
officer, as well as his beneficial ownership of our Class A
Common Stock, he may be considered a "control person" of
Brown-Forman.
5
<PAGE> 9
STOCK OWNERSHIP
- --------------------------------------------------------------------------------
THIS SECTION DESCRIBES (A) PEOPLE WHO OWN BENEFICIALLY 5% OR MORE OF OUR VOTING
STOCK AND (B) HOW MUCH STOCK OUR DIRECTORS AND EXECUTIVE OFFICERS OWN. UNDER THE
SEC'S DEFINITION OF "BENEFICIAL OWNERSHIP," SOME SHARES ARE SHOWN AS OWNED BY
MORE THAN ONE PERSON AND ARE THEREFORE COUNTED MORE THAN ONCE.
- --------------------------------------------------------------------------------
VOTING STOCK OWNED BY "BENEFICIAL OWNERS." This table shows each "beneficial
owner" of more than 5% of our Class A Common Stock, our only class of voting
stock, as of April 30, 1999. The Securities and Exchange Commission defines
"beneficial ownership" to include shares over which a person has sole or shared
voting or investment power, as well as all shares underlying options that are
exercisable within sixty days. Under this definition, "beneficial owners" may or
may not receive any economic benefit (such as receiving either dividends or sale
proceeds) from the shares attributed to them. USING THIS DEFINITION, SOME SHARES
SHOWN BELOW ARE OWNED BY MORE THAN ONE PERSON. Some "beneficial owners" share
voting and investment powers as members of advisory com mittees of certain
trusts of which corporate fiduciaries are the trustees. Counting each share only
once, the aggregate number of shares of Class A Common Stock beneficially owned
by the people in this table is 20,849,790 shares, or 71.9% of the outstanding
shares of that class.
<TABLE>
<CAPTION>
===========================================================================================================================
AMOUNT AND NATURE OF "BENEFICIAL OWNERSHIP"
--------------------------------------------------------------------
NAME AND ADDRESS SOLE VOTING AND SHARED VOTING AND TOTAL SOLE AND SHARED VOT- PERCENT OF
INVESTMENT POWER INVESTMENT POWER ING AND INVESTMENT POWER CLASS
===========================================================================================================================
<S> <C> <C> <C> <C>
W.L. LYONS BROWN, JR.
501 So. Fourth Avenue
Louisville, Kentucky 408,042 14,059,009 14,467,051 49.9%
OWSLEY BROWN FRAZIER
850 Dixie Highway
Louisville, Kentucky 584,362 11,560,978 12,145,340 41.9%
DACE BROWN STUBBS
135 Sago Palm Road
Vero Beach, Florida 1,000 9,444,864 9,445,864 32.6%
OWSLEY BROWN II
850 Dixie Highway
Louisville, Kentucky 467,094 5,328,196 5,795,290 19.9%
INA B. BOND
8215 West U.S. Highway 42
Skylight, Kentucky 979,149 3,348,381 4,327,530 14.9%
ROBINSON S. BROWN, JR.
5208 Avish Lane
Harrods Creek, Kentucky 200,915 2,861,286 3,062,201 10.6%
SANDRA A. FRAZIER
424 Pennington Lane
Louisville, Kentucky 166,728 2,116,314 2,283,042 7.9%
===========================================================================================================================
</TABLE>
6
<PAGE> 10
STOCK OWNED BY DIRECTORS AND EXECUTIVE OFFICERS. The following table shows the
"beneficial ownership" as of April 30, 1999, by each director nominee, by each
Named Executive Officer (as defined on page 8), and by all directors and
executive officers as a group, of our Class A and Class B Common Stock.
<TABLE>
<CAPTION>
==============================================================================================================================
CLASS A COMMON STOCK CLASS B COMMON STOCK
------------------------------------------------------------------------------------------------
VOTING & INVESTMENT POWER SOLE & SHARED VOTING INVESTMENT POWER SOLE & SHARED
& INVESTMENT POWER INVESTMENT POWER
------------------------------------------------------------------------------------------------
NAME SOLE SHARED TOTAL % OF SOLE SHARED TOTAL % OF
CLASS CLASS
==============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jerry E. Abramson 140 0 140 * 138 0 138 *
Barry D. Bramley 100 0 100 * 1,000 0 1,000 *
Geo. Garvin Brown III 52,009 1,298,251 1,350,260 4.7% 1,773 62,676 64,449 *
Owsley Brown II 467,094 5,328,196 5,795,290 19.9% 30,875 4,706,220 4,737,095 11.8%
Donald G. Calder 3,000 0 3,000 * 0 0 0 *
Owsley Brown Frazier 584,362 11,560,978 12,145,340 41.9% 56,384 7,842,965 7,899,349 19.7%
Stanley A. Krangel 0 0 0 * 1,627 0 1,627 *
Richard P. Mayer 3,000 0 3,000 * 3,000 0 3,000 *
Stephen E. O'Neil 0 0 0 * 0 500 1 500 *
Steven B. Ratoff 5,306 0 5,306 * 5,114 0 5,114 *
William M. Street 564,255 0 564,255 1.9% 4,051 0 4,051 *
Dace Brown Stubbs 1,000 9,444,864 9,445,864 32.6% 0 7,842,965 7,842,965 19.6%
James S. Welch 4,800 1,800(2) 6,600 * 0 0 0 *
All Directors and Executive
Officers as a Group(3) 1,695,404 16,890,225 18,585,629 64.1% 127,567 12,567,361 12,694,928 31.7%
==============================================================================================================================
</TABLE>
* Less than 1%.
(1) Owned by The O'Neil Foundation, of which Mr. O'Neil is President. Mr.
O'Neil disclaims beneficial ownership of these shares.
(2) Owned by Mr. Welch's wife. Mr. Welch disclaims beneficial ownership of
these shares.
(3) In computing the aggregate number of shares and percentages owned by
all directors and executive officers as a group, we counted each share
only once.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Executive officers,
directors, and "beneficial owners" of more than 10% of our Class A Common Stock
must file reports of changes in ownership of our stock pursuant to Section 16(a)
of the Securities Exchange Act of 1934. We have reviewed the reports and written
representations we received from these people. Based solely on this review, we
believe that during fiscal 1999 these persons reported all transactions on a
timely basis, except that Jerry E. Abramson was late in filing one report on
Form 4.
7
<PAGE> 11
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
THIS SECTION IS A REPORT FROM THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS. THEIR REPORT EXPLAINS OUR COMPENSATION PHILOSOPHY, HOW COMPENSATION
DECISIONS ARE MADE FOR OUR MOST SENIOR EXECUTIVES, AND HOW WE COMPLY WITH
SECTION 162(M) OF THE INTERNAL REVENUE CODE (WHICH GOVERNS OUR ABILITY TO DEDUCT
THE COMPENSATION OF OUR MOST HIGHLY PAID OFFICERS).
- --------------------------------------------------------------------------------
COMPENSATION COMMITTEE REPORT
FUNCTION. The Compensation Committee consists of three non-employee directors.
We met twice in fiscal 1999 to review and determine the compensation of the
company's senior leadership. We also reviewed compensation recommendations
prepared by the company's Management Compensation Review Committee, which
determines the compensation of the next tier of officers.
We administer the short and long term bonus plans for the company's eight senior
executives, who are referred to as Executive Officers. Within the Executive
Officer group we distinguish among three subgroups:
- - the Top Three, consisting of the Chairman/CEO and two Vice Chairmen who
comprise the Executive Committee of the Board of Directors;
- - the Next Two, who, together with the Top Three, constitute the five
most highly compensated Executive Officers; we refer to those five
collectively as Named Executive Officers; and
- - three additional Executive Officers.
Our committee sets the salaries for the Top Three. The management of the company
determines salaries for the remaining five Executive Officers.
COMPENSATION PHILOSOPHY. We set compensation targets for the eight Executive
Officers using the same philosophy the company uses in setting compensation for
all salaried employees: first, to offer sufficient compensation to attract,
motivate, and retain high-quality talent; and second, to tie bonus potential to
the company's successful financial performance.
TOP THREE OFFICERS. We rely in part on survey data to set the salary and bonuses
for the Top Three officers, including the CEO. We annually review the results of
two different surveys, one from Hay Management Consultants and the other from
Hewitt Associates. Hay surveys compensation of officers at companies that are
approximately the same size as Brown-Forman (examples would include Armstrong
World Industries, J. M. Huber Corporation, and Murphy Oil Corporation). Hewitt
surveys companies in the consumer products business, regardless of size; this
field is the one from which we typically recruit executives (examples would
include the Adolph Coors Company, Hershey Foods Corporation, and The Seagram
Company Ltd.). We blend this data (appropriately adjusted for the size of the
company) on a 50% - 50% basis to derive compensation levels that we believe are
representative of the market.
8
<PAGE> 12
The compensation mix of the Top Three officers consists of salary (37%), annual
bonus (26%), and long term compensation (37%). Salaries are set with respect to
the market data. We develop the targets for the annual bonus and long term cash
bonus based on Business Value Added (BVA), which is the after-tax income in
excess of the company's cost of capital. Long term compensation consists of
cash, which is paid based upon reaching BVA goals over three years, and stock
options, which vest after three years and are exercisable within ten years.
We set compensation targets that are somewhat above the mid-market level to
attract and retain the type of executives who will provide the fine leadership
our company needs for success.
In considering compensation for fiscal 1999, in addition to the survey data
discussed above, we looked at the company's performance last fiscal year and the
compensation increases (approximately 4.5%) for company employees who are not
eligible for bonuses. We decided that the aggregate compensation increase for
the Top Three officers should be 6.8%.
NEXT TWO; OTHER EXECUTIVE OFFICERS. We set the short and long term bonuses for:
(a) the Next Two most highly paid officers, Mr. Ratoff and Mr. Krangel; and (b)
the company's three other executive officers, in each case upon the
recommendation of the Management Compensation Review Committee, whose members
are Owsley Brown II, William M. Street, and Owsley Brown Frazier. After
consultation with the Chief Executive Officer and in Mr. Krangel's case, the
Chairman of Lenox, Incorporated, the Management Compensation Review Committee
set the fiscal 1999 salaries for Mr. Ratoff and Mr. Krangel and for the
company's other three executive officers.
COMPLIANCE WITH TAX LAW LIMITS ON DEDUCTIBILITY OF COMPENSATION. Section 162(m)
of the Internal Revenue Code limits to $1 million the amount of annual
compensation an employer may deduct when paid to a Named Executive Officer. The
law does, however, allow employers to deduct compensation over $1 million if it
is performance based and paid under a formal compensation plan that meets the
Code's requirements. We took appropriate steps in setting goals under the
Omnibus Compensation Plan in a manner designed to assure the deductibility of
all compensation paid to Named Executive Officers, and we expect the company to
be able to deduct all fiscal 1999 compensation.
CONCLUSION. Based upon the information available at the time we determined the
compensation for fiscal 1999 for our Named Executive Officers, we believe that
the levels of compensation were consistent with targeted levels and that the
modest compensation increases we granted during fiscal 1999 were prudent.
STEPHEN E. O'NEIL, CHAIRMAN RICHARD P. MAYER DONALD G. CALDER
9
<PAGE> 13
- --------------------------------------------------------------------------------
THE NEXT SECTION CONTAINS CHARTS THAT SHOW THE AMOUNT OF COMPENSATION EARNED BY
OUR NAMED EXECUTIVE OFFICERS.
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
===============================================================================================================================
ANNUAL LONG TERM
COMPENSATION COMPENSATION
---------------------------------------------------------
AWARDS: PAYOUTS:
CLASS B LONG TERM ALL OTHER
NAME AND PRINCIPAL POSITIONS FISCAL YEAR SALARY BONUS (1) SHARES INCENTIVE COMPEN-
ENDED ($) ($) UNDERLYING PAYMENTS (2) SATION (3)
APRIL 30, OPTIONS (#) ($) ($)
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
OWSLEY BROWN II 1999 719,160 654,835 25,361 325,920 8,400
Chairman of the Board and Chief 1998 689,440 714,337 27,153 116,432 8,400
Executive Officer 1997 669,582 590,594 30,347 114,487 18,260
WILLIAM M. STREET 1999 517,013 467,255 16,478 391,516 8,400
Vice Chairman; President and Chief 1998 497,117 510,074 3,857 74,072 8,400
Executive Officer, Brown-Forman 1997 486,491 421,715 4,051 72,815 14,944
Beverages Worldwide
OWSLEY BROWN FRAZIER 1999 425,623 214,813 8,204 170,694 291,550
Vice Chairman 1998 413,560 236,705 4,782 58,406 8,400
1997 404,932 192,095 5,298 57,430 12,101
STEVEN B. RATOFF 1999 400,008 155,150 6,527 178,022 8,400
Executive Vice President 1998 367,773 169,304 6,963 0 8,400
and Chief Financial Officer 1997 353,015 136,177 4,144 0 11,034
STANLEY A. KRANGEL 1999 350,955 225,146 1,967 164,520 6,000
President, Lenox Incorporated 1998 214,400 118,526 1,957 0 6,000
1997 195,700 101,351 1,627 0 618
===============================================================================================================================
</TABLE>
Explanatory Notes:
We now award up to 50% of long term bonus compensation as stock options, with
the balance in cash to be paid at the end of three-year performance periods
(when it will appear on this table as a long term compensation payout). Stock
option values can increase or decrease; the present values (as of the grant
date) of the stock option awards in the Long Term Compensation Awards column
appear in the table on page 12.
(1) Represents cash payments under the annual incentive plan. Bonuses shown
for fiscal 1999 are estimates; we finalize actual bonuses after each
year's proxy statement is printed.
(2) Represents Stock Appreciation Rights payouts, and cash payments under
the long-term incentive plan.
(3) Represents our contributions to the Savings Plan on behalf of the Named
Executive Officers, plus, for Mr. Frazier, a discounted current payment
under the SERP.
10
<PAGE> 14
RESTRICTED SHARES: AWARDED, VESTED, AND OUTSTANDING
We stopped awarding restricted stock in fiscal 1996, when the Omnibus
Compensation Plan superseded the Restricted Stock Plan. As of the end of fiscal
1999, all previous awards have vested. We pay dividends to holders of restricted
stock as we do on unrestricted shares.
<TABLE>
<CAPTION>
============================================================================================================================
CLASS A COMMON STOCK
--------------------------------------------------------------------------------------------
FISCAL AWARDED VESTED DURING OUTSTANDING AT
YEAR YEAR END OF YEAR
ENDED --------------------------------------------------------------------------------------------
NAME APRIL, 30, # $ # $ # $
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
BROWN 1999 0 0 4,465 300,829 0 0
1998 0 0 26,964 1,417,295 4,465 234,692
1997 0 0 14,015 707,757 31,429 1,587,165
STREET 1999 0 0 3,341 225,100 0 0
1998 0 0 18,787 987,492 3,341 175,611
1997 0 0 10,613 535,957 22,128 1,117,464
FRAZIER 1999 0 0 2,145 144,519 0 0
1998 0 0 10,690 561,893 2,145 112,747
1997 0 0 6,711 338,906 12,835 648,168
RATOFF 1999 0 0 625 42,109 0 0
1998 0 0 4,084 214,665 625 32,852
1997 0 0 626 31,613 4,709 237,805
KRANGEL 1999 0 0 0 0 0 0
1998 0 0 0 0 0 0
1997 0 0 0 0 0 0
============================================================================================================================
</TABLE>
Dollar values are based on the following fiscal year end closing prices (to the
nearest cent):
<TABLE>
<CAPTION>
================================
FISCAL YEAR CLASS A
END CLOSING PRICE
================================
<S> <C>
1999 $67.38
1998 $52.56
1997 $50.50
================================
</TABLE>
11
<PAGE> 15
OPTION GRANTS UNDER THE OMNIBUS COMPENSATION PLAN
The Omnibus Compensation Plan covers both short term and long term bonus. Stock
options awarded in fiscal 1999 under this plan are described below.
We grant options with an exercise price of the fair market value of the
underlying stock on the date of grant. Options vest and become exercisable three
years after grant and must be exercised within ten years of grant. This year, we
granted options for approximately 250,000 shares of our stock; the table below
summarizes the grants to the Named Executive Officers. As required by the
Omnibus Compensation Plan, we will buy all shares needed to exercise these
options on the open market, so there will be no dilution of the equity of
existing stockholders.
<TABLE>
<CAPTION>
====================================================================================================================================
NUMBER OF SHARES OF
CLASS B COMMON PERCENT OF TOTAL OPTIONS
STOCK UNDERLYING GRANTED TO EMPLOYEES PER SHARE EXPIRATION DATE: PRESENT VALUE AS
NAME OPTIONS GRANTED IN FISCAL YEAR EXERCISE PRICE APRIL 30, OF GRANT DATE *
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
BROWN 25,361 10% $61.25 2008 $425,558
STREET 16,478 7% $61.25 2008 $276,501
FRAZIER 8,204 3% $61.25 2008 $137,663
RATOFF 6,527 3% $61.25 2008 $109,523
KRANGEL 1,967 1% $61.25 2008 $ 33,006
====================================================================================================================================
</TABLE>
* We used the Black-Scholes option pricing model to determine
present value. We assumed a risk-free interest rate of 5.5%,
stock price volatility of 24%, a yield of 1.83%, and option
life of six years (to allow for voluntary early exercises and
exercises that may accelerate as a result of disability,
termination, retirement, or death).
AGGREGATED OPTION VALUES AT END OF FISCAL 1999
The following table summarizes all option grants that have been made through and
including fiscal 1999.
<TABLE>
<CAPTION>
===================================================================================================================================
NUMBER OF VALUE
SHARES REALIZED IN NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED OPTIONS AT END OF
ACQUIRED FISCAL 1999 UNEXERCISED OPTIONS FISCAL YEAR *
NAME IN FISCAL BY OPTION ------------------------------------------------------------------------------
1999 BY EXERCISE
OPTION EXERCISABLE EXERCISABLE
EXERCISE MAY 1, 1999 UNEXERCISABLE MAY 1, 1999 UNEXERCISABLE
===================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
BROWN 0 0 30,347 52,514 $1,139,909 $982,373
STREET 0 0 4,051 20,335 $ 152,166 $299,683
FRAZIER 0 0 5,298 12,986 $ 199,006 $219,495
RATOFF 0 0 4,144 13,490 $ 155,659 $252,208
KRANGEL 0 0 1,627 3,924 $ 61,114 $ 72,533
===================================================================================================================================
</TABLE>
* This value is the total difference between the outstanding
options' exercise price and $73.69, the closing price of our
Class B Common Stock on April 30, 1999.
12
<PAGE> 16
RETIREMENT PLAN DESCRIPTIONS
- --------------------------------------------------------------------------------
THIS SECTION DESCRIBES RETIREMENT AND SAVINGS PLANS WE CURRENTLY HAVE IN EFFECT
FOR OUR EXECUTIVES.
- --------------------------------------------------------------------------------
Our executives participate in several different retirement and savings plans:
(1) RETIREMENT PLANS: We maintain both tax-qualified retirement plans and
non-qualified supplemental excess retirement plans. Most salaried employees
participate in the Salaried Employees Retirement Plan. This plan provides
monthly retirement benefits based on age at retirement, years of service and the
average of the five highest consecutive years' compensation during the final ten
years of employment. Retirement benefits are not offset by Social Security
benefits and are normally payable at age 65. A participant's interest in plan
benefits vests after five years of service. The following table shows the
estimated annual benefits (straight life annuity) payable upon retirement at
normal retirement age to participants at specified levels of compensation and
years of service:
<TABLE>
<CAPTION>
===========================================================================
AVERAGE ANNUAL HIGHEST 5
CONSECUTIVE YEARS' YEARS OF SERVICE CLASSIFICATION
COMPENSATION DURING --------------------------------------------
FINAL 10 YEARS 10 YEARS 20 YEARS 30 YEARS
===========================================================================
<S> <C> <C> <C>
$ 400,000 $ 68,512 $137,025 $ 205,537
$ 800,000 $138,512 $277,025 $ 415,537
$1,200,000 $208,512 $417,025 $ 625,537
$1,600,000 $278,512 $557,025 $ 835,537
$2,000,000 $348,512 $697,025 $1,045,837
===========================================================================
</TABLE>
Federal tax law limits the benefits that we might otherwise pay to key employees
under "qualified" plans such as the Salaried Employees Retirement Plan.
Therefore, for certain key employees, we also maintain a non-qualified
Supplemental Excess Retirement Plan (SERP). The SERP provides retirement
benefits to make up the difference between a participant's accrued benefit
calculated under the Salaried Employees Retirement Plan and the ceiling imposed
by federal tax law. SERP participants may choose to get a discounted current
cash payment instead of a SERP retirement benefit. The SERP also provides
supplemental retirement benefits for certain key employees who join us in
mid-career, subject to special vesting requirements.
For the Named Executive Officers, covered compensation for fiscal 1999 for these
plans and service credited as of April 30, 1999, were as follows: Owsley Brown
II, $1,433,497 and 30 years; William M. Street, $1,027,087 and 30 years; Owsley
Brown Frazier, $662,328 and 30 years; Steven B. Ratoff, $569,312 and 5 years;
and Stanley A. Krangel, $469,481 and 4 years.
(2) SAVINGS PLAN: Subject to a maximum the IRS sets annually ($10,000 for
calendar 1999), most participants in our Savings Plan may contribute between 2%
and 15% of their compensation to their Savings Plan accounts. Our match of
participants' contributions is currently 4.25% (on the first 5% of the
employee's contribution), and vests fully after four years of service.
13
<PAGE> 17
DIRECTOR COMPENSATION
- --------------------------------------------------------------------------------
THIS SECTION DESCRIBES HOW WE COMPENSATE OUR DIRECTORS.
- --------------------------------------------------------------------------------
We do not pay our three employee directors additional compensation for serving
on our board or its committees. We compensate our directors who are not
employees at an annual rate of $23,000, payable in equal monthly installments,
plus $1,250 per Board meeting and $1,050 per committee meeting attended;
committee chairmen receive an additional $525 for chairing committee meetings.
Directors may elect in advance of their one year term to receive their retainer
(but not meeting fees) in the form of an equivalent value of stock options
issued at the start of their terms. In addition, under the Non-Employee Director
Compensation Plan, each director who is not an employee received options for
$15,000 worth of Class B Common Stock (894 options with a per share exercise
price of $61.25 each)(1). We reimburse all directors for reasonable and
necessary expenses they incur in performing their duties as directors, and we
provide an additional travel allowance to directors who must travel to Board
meetings from outside the United States.
- -------------
(1) The present value of the options was determined using the
Black-Scholes model described on page 12.
14
<PAGE> 18
AMENDMENTS TO THE OMNIBUS COMPENSATION PLAN
- --------------------------------------------------------------------------------
THIS SECTION DESCRIBES A PROPOSAL FOR TWO AMENDMENTS TO OUR OMNIBUS COMPENSATION
PLAN.
- --------------------------------------------------------------------------------
The Omnibus Compensation Plan covers both the short and long term bonus
compensation that we pay to our officers and employees. All of our officers and
key employees are eligible to participate. Actual participation in the Plan and
actual awards are determined by a Plan Administrator, which is composed of
either a committee of the Board or a committee appointed by the Board. Most
provisions of the Omnibus Compensation Plan may be amended by the Board. The
Plan Administrator determines performance measures for all participants. The
measures are based on a percentage of corporate, division, business unit, and/or
individual goals or financial measures. The Omnibus Compensation Plan contains
additional performance measures for awards to Designated Executive Officers
(DEOS) and limits the maximum awards that may be made to a DEO in any year to
110,000 shares, the maximum aggregate cash award with respect to Annual
Incentive Awards to $1,200,000, and the maximum cash payout to $700,000. Maximum
awards and payouts to Plan participants who are not DEOs are not limited by the
Plan.
- APPROVAL OF ADDITIONAL SHARES TO BE USED FOR FUTURE AWARDS
UNDER THE OMNIBUS COMPENSATION PLAN
At the meeting, we will ask stockholders to approve additional shares
so the Company can make future awards under the Omnibus Compensation Plan.
The Omnibus Compensation Plan was approved by our stockholders in 1995
and is the means by which senior employees earn their long-term performance
compensation. At the time the Omnibus Compensation Plan was approved, it
provided that up to 1,500,000 shares could be awarded based on the Company's
estimated needs for the initial period of operation. With the fiscal 1999 awards
described in this Proxy Statement, these shares have been depleted. Additional
shares must be approved so that the Company can continue to make awards under
the Omnibus Compensation Plan. Since the inception of the Omnibus Compensation
Plan, it has been the Company's practice to acquire sufficient shares in the
open market to eliminate dilution of stockholders' equity. A copy of the Omnibus
Compensation Plan was an exhibit to the 1995 Proxy Statement.
The proposed amendment to section 4.1 adds 1,900,000 shares to the
1,500,000 shares originally authorized, for a total of 3,400,000 shares. After
the amendment, section 4.1 would read:
"SHARES AVAILABLE FOR GRANTS: Subject to adjustment as provided in
Section 4.4, the number of Shares or share equivalents (award units
whose underlying value is based on Shares) reserved for issuance to
Participants under the Plan shall be 3,400,000."
- APPROVAL OF THE PERFORMANCE MEASURES USED FOR AWARDS UNDER THE
OMNIBUS COMPENSATION PLAN
At the meeting, we will also ask stockholders to readopt the
performance measures used for awards under the Omnibus Compensation Plan to our
DEOs. The measures are set forth in sections 8.1 and 8.4, which is reprinted in
the appendix to this Proxy Statement. Under Section 162(m) of the
15
<PAGE> 19
Internal Revenue Code, these performance measures must be approved by
stockholders every five years, whether changed or not, to permit continued
deduction of all executive compensation for federal income tax purposes. The
proposed performance measures are the same as those originally in the Omnibus
Compensation Plan, except that the term "Economic Value Added" has been changed
to "Business Value Added" to be consistent with our current usage of that term.
This involves no substantive change. We seek your approval of the following
resolution:
"RESOLVED, that the performance measures set forth in sections 8.1 and
8.4 of the Omnibus Compensation Plan are approved."
THE BOARD OF DIRECTORS HAS APPROVED THESE AMENDMENTS AND RECOMMENDS
THAT YOU VOTE FOR THEM.
16
<PAGE> 20
FIVE-YEAR PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
THIS CHART SHOWS HOW BROWN-FORMAN CLASS B COMMON STOCK HAS PERFORMED AGAINST
THREE STOCK INDEXES OVER THE LAST FIVE YEARS.
- --------------------------------------------------------------------------------
This graph compares the cumulative total stockholder return on our Class B
Common Stock against three indexes which include that stock: the Standard &
Poor's 500 Stock Index, the Dow Jones Consumer Non-Cyclical Index (82
companies), and the S&P Beverage Alcohol Index (4 companies). As a diversified
producer of both beverage alcohol products and consumer durables including
china, crystal, luggage, and silverware, our business does not easily fit into
specific industry indexes. We included the Dow Jones Consumer Non-Cyclical Index
as a diversified index, even though portions of our business are somewhat
cyclical. While the S&P Beverage Alcohol Index might appear to be a reasonable
one against which to measure our stock's performance, it contains only four
companies, and those are unevenly matched in relative market capitalization(1).
Overall, we believe it is best to compare the cumulative total stockholder
return on our Class B Common Stock not to a single index, but rather to trends
shown by a review of several indexes.
These numbers assume that $100 was invested in our Class B stock and in each
index on April 30, 1994, and that all quarterly dividends were reinvested at the
average of the closing stock prices at the beginning and end of the quarter. The
cumulative returns shown on the graph represent the value that these investments
would have had on April 30 in the years since 1994.
[GRAPH]
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Brown-Forman Class B $100 $114 $140 $184 $211 $279
- ------------------------------------------------------------------------------------------------------------
S&P 500 $100 $117 $153 $191 $270 $329
- ------------------------------------------------------------------------------------------------------------
S&P Beverage Alcohol $100 $104 $128 $159 $191 $268
- ------------------------------------------------------------------------------------------------------------
DJ Consumer Non-Cyclical $100 $131 $175 $238 $323 $364
- ------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------
(1) Relative capitalization shown in parentheses: Anheuser-Busch
Companies (56%); The Seagram Company Ltd. (34% -- and has
substantial holdings outside the beverage alcohol business);
Adolph Coors Company (3%); and Brown-Forman (7%).
17
<PAGE> 21
OTHER INFORMATION
- --------------------------------------------------------------------------------
THIS SECTION SETS OUT OTHER INFORMATION YOU SHOULD KNOW BEFORE YOU CAST YOUR
VOTE.
- --------------------------------------------------------------------------------
TRANSACTIONS WITH MANAGEMENT
One of our directors, James S. Welch, is Of Counsel to Ogden Newell & Welch, a
Louisville law firm that rendered services to us during fiscal 1999. We also
plan to use this firm's services in fiscal 2000. In addition, another of our
directors, Jerry E. Abramson, is Of Counsel with the Louisville law firm of
Brown, Todd & Heyburn, PLLC. Prior and subsequent to his election to the Board
in January, 1999, this firm rendered services to us. We may use this firm's
services again in fiscal 2000.
Mr. Barry D. Bramley also receives compensation for serving as the non-employee
Chairman of the Board of Directors of Lenox, Incorporated. For his first year as
Chairman, Mr. Bramley received an annualized retainer of $300,000, paid in
monthly installments, as well as reimbursement for all reasonable and necessary
expenses incurred in performing the duties of Chairman. The total payments made
to Mr. Bramley under this arrangement during fiscal 1999 were $252,503.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Our Board has appointed PricewaterhouseCoopers, LLP as the independent certified
public accountants to audit our consolidated financial statements for the fiscal
year ending April 30, 2000. Through its predecessor, Coopers & Lybrand L.L.P.,
PricewaterhouseCoopers, LLP has served us in this capacity continuously since
1933. We know of no direct or material indirect financial interest that
PricewaterhouseCoopers, LLP has in us or any of our subsidiaries, or of any
connection with us or any of our subsidiaries by PricewaterhouseCoopers, LLP in
the capacity of promoter, underwriter, voting trustee, director, officer, or
employee.
A PricewaterhouseCoopers, LLP representative will attend the annual meeting,
will be given the opportunity to make a statement if he wants to, and will be
available to respond to appropriate questions.
OTHER PROPOSED ACTION
As of June 30, 1999, we know of no business to come before the meeting other
than the election of directors and the proposal to amend the Omnibus
Compensation Plan and approve the plan performance measures. If any other
business should properly be presented to the meeting, however, the proxies will
be voted in accordance with the judgment of the persons holding them.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
If you have a proposal you want to be considered at the 2000 Annual Meeting of
Stockholders and to be included in the proxy materials for that meeting, we must
receive it in writing by March 4, 2000.
By Order of the Board of Directors
MICHAEL B. CRUTCHER
Secretary
Louisville, Kentucky
June 30, 1999
18
<PAGE> 22
APPENDIX TO 1999 PROXY STATEMENT
Sections 8.1 and 8.4
Brown-Forman Corporation Omnibus Compensation Plan
Sections 8.1 and 8.4 provide:
8.1 GENERALLY: As soon in each Fiscal Year as is necessary to
comply with Code Section 162(m), the Plan Administrator shall establish
performance goals for each Plan Year and Performance Period for each
type of Award to be awarded or granted under this Plan. The goals may
be expressed as a percentage of corporate, division, business unit,
and/or individuals goals or financial measures, or such other measures
as the Plan Administrator shall, from time to time, determine, unless
otherwise limited by the Plan - but all such goals applicable to
Designated Executive Officers shall qualify for the Performance-Based
Exception under Code Section 162(m) unless and until the Plan
Administrator determines that, pursuant to Section 12.3, one or more
Awards need not qualify for the Performance-Based Exception.
8.4 PERFORMANCE MEASURES FOR DESIGNATED EXECUTIVE OFFICERS: Unless
and until the Plan Administrator proposes for shareholder vote and
shareholders approve a change in the general performance measures set
out in this Article, the attainment of which may determine the degree
of payout and/or vesting with respect to Awards to Designated Executive
Officers which are designed to qualify for the Performance-Based
Exception, the performance measure(s) to be used for purposes of such
grants shall be based on one or more of the following alternatives, as
chosen by the Plan Administrator, except that, unless otherwise
required to satisfy the Performance-Based Exception, the Plan
Administrator shall not be required to establish performance measures
with respect to the grant of a stock option or SAR if the exercise
price equals or exceeds the Fair Market Value of the underlying Shares
on the date of grant:
(a) "Earnings per Share," as reported in the Company's
annual report, adjusted to reflect predetermined excluded items
pre-established pursuant to Code Section 162(m).
(b) "Business Value Added" is a measure based on Adjusted
Net Income, for the Plan Year or Performance Period, minus the cost of
Average Capital Employed. For the purposes of this definition:
(1) Adjusted Net Income is defined to mean
after-tax net income adjusted for after-tax interest income and expense
and any other predetermined excluded items pre-established pursuant to
Code Section 162(m); and
(2) Average Capital Employed is defined to mean
total assets, reduced by non-interest bearing liabilities and any other
predetermined excluded
A-1
<PAGE> 23
items pre-established pursuant to Code Section 162(m), averaged over an
appropriate period.
(c) "Return on Investment" is a measure based on Bonus
Operating Income, after tax, divided by Average Invested Capital. For
the purposes of this definition:
(1) Bonus Operating Income is defined to mean
operating income adjusted for managerial bonus expense and any other
predetermined excluded items pre-established pursuant to Code Section
162(m); and
(2) Average Invested Capital is defined to mean
total assets reduced by non-interest bearing liabilities and any other
predetermined excluded items pre-established pursuant to Code Section
162(m), averaged over an appropriate period.
Business Value Added and Return on Investment may be
based on the performance of the Company or on one or more of its
subsidiaries, divisions, or other business units.
A-2
<PAGE> 24
PROXY
BROWN-FORMAN CORPORATION
This Proxy Solicited on Behalf of the Board of Directors
For Use by Holders of Shares of Class A Common Stock
Annual Stockholders' Meeting, July 22, 1999
THE UNDERSIGNED hereby appoint(s) Owsley Brown II, Owsley Brown Frazier, and
William M. Street, and each of them attorneys and proxies, with power of
substitution, to vote all of the shares of Class A Common Stock of Brown-Forman
Corporation standing of record in the name of the undersigned at the close of
business on June 14, 1999, at the Annual Meeting of Stockholders of the
Corporation, to be held on July 22, 1999, and at all adjourned sessions
thereof, in accordance with the Notice and the Proxy Statement received, for
the election of directors of the Corporation, upon a proposal to approve
additional shares for awards and the performance measures in the Brown-Forman
Omnibus Compensation Plan, and upon such other matters as may properly come
before the meeting.
<TABLE>
<CAPTION>
Election of Directors, Nominees: Change of Address
<S> <C>
Jerry E. Abramson; Barry D. Bramley; Geo. Garvin Brown III;
Owsley Brown II; Donald G. Calder; Owsley Brown Frazier; -------------------------------------------------------
Richard P. Mayer; Stephen E. O'Neil; William M. Street;
Dace Brown Stubbs, James S. Welch --------------------------------------------------------
--------------------------------------------------------
--------------------------------------------------------
(If you have written in the above space, please mark the
corresponding box on the reverse side of this card.)
</TABLE>
<TABLE>
<S> <C>
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES, SEE
REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN ACCORDANCE
WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE YOUR
SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE
SIDE
</TABLE>
<PAGE> 25
[X] Please mark
your votes as in
this example.
This proxy, when properly executed will be voted in the manner directed
below by the undersigned stockholder(s). If no direction is made, this proxy
will be voted FOR the election of the directors named and FOR proposal 2.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
FOR WITHHELD FOR AGAINST ABSTAIN
1. Election of [ ] [ ] 2. Approval of additional shares for awards and of performance measures [ ] [ ] [ ]
Directors in Omnibus Compensation Plan as described in Proxy Statement
(see reverse) (The Board recommends a vote FOR)
*For all nominee(s), except vote 3. In their discretion, the Proxies are authorized to vote upon such
deferred from the following: other business as may properly come before the meeting.
________________________________
- ------------------------------------------------------------------------------------------------------------------------------------
[ ] Change of
Address on
Reverse Side
---------------------
</TABLE>
SIGNATURES(S) DATE , 1999
------------------------------------------ -------------
NOTE: Please mark, sign, date and return the proxy card promptly using the
enclosed envelope. This proxy must be signed exactly as the name or names appear
above. If you are signing as a trustee, executor, etc., please so indicate.
<PAGE> 26
BROWN-FORMAN OMNIBUS COMPENSATION PLAN
Brown-Forman Corporation
May 1, 1994
(As Amended June 15, 1999)
<PAGE> 27
BROWN-FORMAN OMNIBUS COMPENSATION PLAN
Unless the context clearly requires otherwise, references to "Sections" and
"Articles" are to sections and articles of this plan, and capitalized terms have
the meaning assigned to them below. All references to statutes or regulations
mean those statutes or regulations as amended from time to time, and any
successors to those statutes or regulations.
ARTICLE 1 - ESTABLISHMENT, OBJECTIVES, AND DURATION
1.1 ESTABLISHMENT: Brown-Forman Corporation, a Delaware corporation (the
"Company"), hereby establishes an incentive compensation plan to be
known as the "Brown-Forman Omnibus Compensation Plan" (the "Plan"), as
set out in this document. The Plan permits the Plan Administrator to
grant Awards (as defined below).
1.2 OBJECTIVES: The Plan's objectives are:
(a) to optimize the Company's profitability and growth through
incentives which are consistent with the Company's goals and
which link the personal interests of Participants to those of
the Company's shareholders;
(b) to provide Participants with an incentive for excellence in
individual performance;
(c) to promote teamwork among Participants;
(d) to provide flexibility to the Company in its ability to
motivate, attract, and retain the services of Participants who
make significant contributions to the Company's success; and
(e) to allow Participants to share in the Company's success.
1.3 DURATION: Subject to:
(a) approval by the Company's shareholders; and
(b) the Board's right to amend or terminate the Plan at any time
pursuant to Article 12,
the Plan shall take effect as of the Effective Date, and remain in
effect until Participants have bought or acquired all Shares subject to
the Plan. The Plan Administrator may not, however, grant any Awards
under the Plan on or after April 30, 2005.
<PAGE> 28
ARTICLE 2 - DEFINITIONS
Whenever used in the Plan, the following terms shall have the following
meanings:
2.1 "ADJUSTED MARKET VALUE" is defined in Section 11.3(b).
2.2 "ANNUAL INCENTIVE AWARD" means a short-term incentive Award granted
under Article 6.
2.3 "AWARD" means, individually or collectively, a grant under this Plan of
Annual Incentive Awards and/or Long Term Incentive Awards.
2.4 "AWARD AGREEMENT" means an agreement entered into by the Company and a
Participant setting forth the terms applicable to Awards granted under
this Plan.
2.5 "AWARD OPPORTUNITY" means the total Award that a Participant may earn
under the Plan, as established by the Plan Administrator.
2.6 "BASE PERIOD" means the three-month period ending three months prior to
the first date on which a Potential Change in Control occurs.
2.7 "BASE PERIOD FAIR MARKET VALUE" means, with respect to an Option (or
SAR), the average Fair Market Value per Share for each date on which
Shares were traded during the Base Period, or portion of the Base
Period, during which the Option (or SAR) was outstanding. If an Option
(or SAR) is granted during the Restricted Period prior to a Change in
Control, the Base Period Fair Market Value for the Option (or SAR)
shall be its exercise price (or grant price).
2.8 "BENEFICIAL OWNER" or "BENEFICIAL OWNERSHIP" shall have the meaning
ascribed to such term in Rule 13d-3 under the Exchange Act.
2.9 "BOARD" means the Company's board of directors.
2.10 "BOARD COMPENSATION COMMITTEE" means the members of the Board who are
serving as its Compensation Committee at the time of the action to be
taken, as that Committee is described in the Company's then-latest
proxy statement.
2.11 "CAUSE" means with respect to any Participant:
(a) the willful and continued failure of the Participant to
perform substantially the Participant's duties with the
Company (other than any such failure resulting from incapacity
due to physical or mental illness), after a written demand for
substantial performance is delivered to the Participant by the
Board, the chief executive officer of the Company or the
senior officer of the Company supervising the Participant,
which demand specifically identifies the manner in which the
Board, the chief executive officer of the Company or the
senior officer of the Company supervising the Participant
believes that the Participant has not substantially performed
the Participant's duties, or
<PAGE> 29
(b) the engaging by the Participant in illegal conduct or gross
misconduct that is materially and demonstrably injurious to
the Company.
For purposes of this definition, no act or failure to act on the part
of the Participant shall be considered "willful" unless it is done, or
omitted to be done, by the Participant in bad faith or without
reasonable belief that the Participant's action or omission was in the
best interests of the Company. Any act or failure to act based upon
authority given pursuant to a resolution duly adopted by the Board or
upon the instructions of the chief executive officer or a senior
officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be
done, by the Participant in good faith and in the best interests of the
Company.
2.12 "CHANGE IN CONTROL" of the Company means, and shall be deemed to have
occurred upon, any of the following events:
(a) individuals who, as of June 30, 1999, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming
a director after June 30, 1999 and whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least a majority of the Directors then comprising the Incumbent Board
shall be considered a member of the Incumbent Board, but excluding, for
this purpose, any individual whose initial assumption of office occurs
as a result of an actual or threatened election contest with respect to
the election or removal of Directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board;
(b) consummation by the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially
all of the assets of the Company or the acquisition of assets or
stock of another entity (a "Business Combination"), in each case,
unless, following the Business Combination,
(i) all or substantially all of the Beneficial Owners of
the combined voting power of the then Outstanding
Voting Securities of the Company immediately before
the Business Combination beneficially own, directly
or indirectly, more than 50% of the combined voting
power of the Outstanding Voting Securities of the
corporation resulting from the Business Combination
(including, without limitation, an entity that as a
result of such transaction owns the Company or all or
substantially all of the Company's assets either
directly or through one or more subsidiaries) in
substantially the same proportions that they owned
the Outstanding Voting Securities of the Company
immediately before the Business Combination,
(ii) no Person, excluding any employee benefit plan (or
related trust) of the Company or such corporation
resulting from the Business Combination, beneficially
owns, directly or indirectly, 20% or more of the
combined voting power of the Outstanding Voting
Securities of the corporation resulting from the
Business Combination except to the extent that such
ownership existed before the Business Combination,
and
<PAGE> 30
(iii) at least a majority of the directors of the
corporation resulting from the Business Combination
were Directors on the Incumbent Board at the time of
the execution of the initial agreement, or of the
action of the Board, providing for the Business
Combination; or
(c) the approval by the Company's shareholders of a plan of
liquidation and dissolution.
2.13 "CODE" means the Internal Revenue Code of 1986.
2.14 "COMPANY" means Brown-Forman Corporation, a Delaware corporation, and
to the extent it is appropriate in the context of the Plan provision,
the Company's Subsidiaries, as well as any successor to any of such
entities as provided in Section 15.4.
2.15 "CONSTRUCTIVE DISCHARGE" means, with respect to any Participant,
without the Participant's written consent:
(a) a reduction by more than 25%, in the aggregate, in the
Participant's annual salary and bonus opportunity, as in
effect as of the 120th day immediately preceding the Change in
Control; or
(b) the failure to pay the Participant his salary or bonus (if
any) according to the regular practices of the Company in
effect for its employees at the time.
;provided, however, that any of the foregoing events that is a result
of an isolated and inadvertent action not taken in bad faith and which
is remedied by the Company promptly after receipt of notice thereof
given by the Participant shall not constitute a Constructive Discharge.
2.16 "DESIGNATED EXECUTIVE OFFICERS" means those Executive Officers
designated by the Plan Administrator whose Awards will comply with Code
Section 162(m).
2.17 "DIRECTOR" means any individual who is a Board member.
2.18 "DISABILITY" shall have the meaning ascribed to such term in the
Participant's governing long-term disability plan.
2.19 "EFFECTIVE DATE" means May 1, 1994.
2.20 "EMPLOYEE" means any non-union employee of the Company.
2.21 "EXCHANGE ACT" means the Securities Exchange Act of 1934.
2.22 "EXECUTIVE OFFICER" means an Employee whom the Board has determined is
an "officer" as defined in Rule 16a-1(f) under the Exchange Act, as of
the date of vesting and/or payout of an Award, as applicable. Executive
Officers are those Employees who are required to file reports of
changes in beneficial ownership of Shares with the Securities and
Exchange Commission on Forms 4 and 5.
<PAGE> 31
2.23 "FAIR MARKET VALUE" means the closing sale price on the principal
securities exchange on which the Shares are traded on the relevant date
(or, if no Shares traded on the relevant date, the last previous day on
which a sale was reported).
2.24 "FREESTANDING SAR" means an SAR granted independently of any Options,
as described in Section 7.5.
2.25 "INCENTIVE STOCK OPTION" or "ISO" means an option to buy Shares granted
under Section 7.4 which is designated an Incentive Stock Option and
which is intended to meet the requirements of Code Section 422.
2.26 "INDEXED OPTION" means an Option with an exercise price which either
increases by a fixed percentage over time or changes by reference to a
published index.
2.27 "INSIDER" means an individual who is, on the relevant date, an officer,
Director or 10% beneficial owner of any class of the Company's equity
securities that is registered pursuant to Section 12 of the Exchange
Act, all as defined under Section 16 of the Exchange Act.
2.28 "LONG TERM INCENTIVE AWARD" means a long term incentive Award granted
under Article 7.
2.29 "MARKET VALUE UNIT" or "MVU" means an Award, designated as an MVU,
granted pursuant to Section 7.3.
2.30 "NON-EMPLOYEE DIRECTOR" means a Director who is not an Employee.
2.31 "NONQUALIFIED STOCK OPTION" or "NQSO" means an option to buy Shares
granted under Section 7.4 which is not intended to meet the
requirements of Code Section 422.
2.32 "OPTION" means an Incentive Stock Option, Indexed Option or a
Nonqualified Stock Option, as described in Section 7.4.
2.33 "OPTION PRICE" means the price at which a Participant may buy a Share
under an Option.
2.34 "OUTSTANDING VOTING SECURITIES" means, with respect to a corporation,
the then outstanding voting securities entitled to vote generally in
the election of directors of the corporation.
2.35 "PARTICIPANT" means an Employee who has outstanding an Award granted
under the Plan. The term "PARTICIPANT" shall not include Non-employee
Directors other than a Non-employee Director who has an outstanding
Award granted while an Employee.
2.36 "PERFORMANCE-BASED EXCEPTION" means the performance-based exception
from the tax deductibility limitations of Code Section 162(m).
2.37 "PERFORMANCE PERIOD" means such period of time as determined by the
Plan Administrator.
2.38 "PERFORMANCE UNIT" means an Award granted to a Participant as described
in Section 7.6.
<PAGE> 32
2.39 "PERIOD OF RESTRICTION" means the period during which the transfer of
Shares of Restricted Stock is limited in some way (based on the passage
of time, the achievement of performance goals, or upon the occurrence
of other events as determined by the Plan Administrator), and during
which the Shares are subject to a substantial risk of forfeiture, as
provided in Section 7.2.
2.40 "PERSON" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) thereof.
2.41 "PLAN ADMINISTRATOR" means:
(a) for Designated Executive Officers, the Board Compensation
Committee; and
(b) for all other Participants, such other persons or committees
appointed by the Board or the Compensation Committee, to
administer the Plan with respect to grants of Awards.
2.42 "PLAN YEAR" means the Company's Fiscal Year.
2.43 "POTENTIAL CHANGE IN CONTROL" of the Company means, and shall be deemed
to have occurred upon, any of the following events:
(a) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control of
the Company;
(b) any Person (including the Company) publicly announces an
intention to take or to consider taking actions which if
consummated would constitute a Change in Control of the
Company;
(c) any Person (other than the Company, a Person who as of July 1,
1999 is reporting its Outstanding Voting Securities on
Schedule 13D or who subsequently files a Schedule 13D solely
by virtue of acquiring Outstanding Voting Securities from such
a Person under the laws of descent and distribution or upon
liquidation of a trust, or a Person reporting its acquisition
of Outstanding Voting Securities on Schedule 13G) becomes the
beneficial owner, directly or indirectly, of securities of the
Company representing 5% or more of the combined voting power
of the Outstanding Voting Securities of the Company; or
(d) the Board adopts a resolution to the effect that, for purposes
of this Plan, a potential Change in Control of the Company has
occurred.
2.44 "RESTRICTED PERIOD" shall mean the period beginning upon the occurrence
of a Potential Change in Control and ending at the end of the twelfth
month following the month in which the Potential Change in Control
occurs, if a Change in Control has not occurred prior to the end of
such month. Notwithstanding the foregoing, in the event of a Potential
Change in Control described in Section 2.43(a), the Restricted Period
shall end upon the first to occur of the end of the period described in
the immediately preceding sentence or the sixtieth day following the
termination of the agreement described in Section 2.43(a). If a Change
in Control occurs before the end of the twelfth month following the
Potential Change in Control, the Restricted Period shall continue until
all Options (and SAR's) granted after June 30, 1999 have been exercised
or cancelled.
<PAGE> 33
2.45 "RESTRICTED STOCK" means an Award granted to a Participant pursuant to
Section 7.2.
2.46 "RETIREMENT" shall have the meaning ascribed to such term in the
Participant's governing Company sponsored retirement plan.
2.47 "SHARES" means the shares of the Company's Class A or Class B Common
Stock, or any combination of Class A or Class B Common Stock, as the
Plan Administrator determines.
2.48 "STOCK APPRECIATION RIGHT" or "SAR" means an Award, granted alone or in
connection with a related Option, designated as an SAR, pursuant to
Section 7.5.
2.49 "SUBSIDIARY" means any corporation, partnership, joint venture,
affiliate, or other entity in which the Company has a majority voting
interest, and which the Plan Administrator designates as a
participating entity in the Plan.
2.50 "TANDEM SAR" means an SAR granted in connection with a related Option
pursuant to Section 7.5. A holder exercising a Tandem SAR must forfeit
the right to buy a Share under the related Option; conversely, a holder
of a Tandem SAR buying a Share under the Option will have the Tandem
SAR canceled proportionately.
2.51 "TARGET INCENTIVE AWARD" is defined in Section 5.7(c).
Additional definitions related to performance measures appear in Section 8.4.
ARTICLE 3 - ADMINISTRATION
3.1 THE PLAN ADMINISTRATOR:
(a) Disinterested Administration: For Executive Officers, the Plan
Administrator shall be a committee comprising Directors who
are eligible to administer the Plan pursuant to Rule
16b-3(c)(2) under the Exchange Act. If for any reason such
committee does not qualify to administer the Plan as
contemplated by Rule 16b-3(c)(2) of the Exchange Act, however,
the Board may appoint a new committee so as to comply with
Rule 16b-3(c)(2).
(b) Code Compliance: Awards to Designated Executive Officers must
be administered by a committee that consists of members who
are "outside directors" under Code Section 162(m).
(c) Awards to Participants other than Executive Officers: For
Participants other than Executive Officers, the Plan
Administrator shall be the Board's Management Compensation
Review Committee, with the assistance of the Corporate
Compensation Department, or such other committees, corporate
departments, or persons as the Board may from time to time
determine.
3.2 AUTHORITY: Except as limited by law or by the Company's Certificate of
Incorporation or By-laws, and subject to the Plan's terms, the Plan
Administrator shall have full power to:
(a) select Participants;
<PAGE> 34
(b) name Designated Executive Officers;
(c) determine the sizes and types of Awards;
(d) determine the terms and conditions of Awards in a manner
consistent with the Plan;
(e) construe and interpret the Plan and any agreement or
instrument entered into under the Plan as they apply to
Employees;
(f) establish, amend, or waive rules and regulations for the
Plan's administration as they apply to Employees;
(g) (subject to Article 11 and Article 12) amend the terms and
conditions of any outstanding Award to the extent such terms
and conditions are within the Plan Administrator's discretion;
(h) determine the length of the Performance Period for Executive
Officers;
(i) determine the length of the Performance Period(s); and
(j) make all other determinations which may be necessary or
advisable to administer the Plan as it applies to Employees.
3.3 DECISIONS BINDING: All determinations and decisions made by the Plan
Administrator pursuant to the Plan and all related Board orders and
resolutions shall be final, conclusive, and binding on all persons,
including the Company, its shareholders, Employees, Participants, and
their estates and beneficiaries.
ARTICLE 4 - SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1 SHARES AVAILABLE FOR GRANTS: Subject to adjustment as provided in
Section 4.4, the number of Shares or share equivalents (Award units
whose underlying value is based on Shares) reserved for issuance to
Participants under the Plan shall be 3,400,000.
4.2 DESIGNATED EXECUTIVE OFFICER MAXIMUMS: Unless and until the Plan
Administrator determines that an Award to a Designated Executive
Officer shall not be designed to comply with the Performance-Based
Exception, the following rules shall apply to grants of such Awards:
(a) Shares: For any Plan Year, any Designated Executive Officer
may receive, pursuant to an Award, shares, MVU's, stock
options and/or SAR's for no more than 110,000 Shares in the
aggregate.
(b) Cash: The maximum aggregate cash award with respect to Annual
Incentive Awards in any Plan Year which may be made to any
Designated Executive Officer shall be $1,200,000. The maximum
aggregate cash award with respect to cash payouts of long term
Awards in any Plan Year which may be made to any Designated
Executive Officer shall be $700,000.
<PAGE> 35
4.3 LAPSED AWARDS: If any Award granted under this Plan is canceled,
terminates, expires, or lapses for any reason (except the termination
of a Tandem SAR upon exercise of the related Option, or the termination
of a related Option upon exercise of the corresponding Tandem SAR), any
Shares subject to such Award shall be available for the grant of
another Award under the Plan, except that this provision shall not be
executed to increase the maximum number of authorized shares under
Section 4.2(a).
4.4 ADJUSTMENTS IN SHARES AUTHORIZED: If the Company's capitalization
changes for a reason such as:
(a) a stock split;
(b) a corporate transaction such as a merger, consolidation,
separation (including a spin-off), or other distribution of
the Company's stock or property;
(c) a reorganization (whether or not such reorganization comes
within the definition of such term in Code Section 368); or
(d) a partial or complete liquidation of the Company,
the Plan Administrator shall then adjust the number and class of Shares
which may be delivered under Sections 4.1 and 4.2 and the number and
class of and/or price of Shares subject to outstanding Awards granted
under the Plan, as it deems appropriate and equitable to prevent
dilution or enlargement of rights -- but the number of Shares subject
to any Award shall always be a whole number.
ARTICLE 5 - ELIGIBILITY AND PARTICIPATION
5.1 EMPLOYEE ELIGIBILITY: Participation in this Plan is open to all
officers and key Employees of the Company, as the Plan Administrator
determines, including Employees who are Directors and Employees who
reside in countries other than the United States of America.
5.2 NON-EMPLOYEE ELIGIBILITY: Directors who are not Employees may elect to
defer compensation as described in Section 10.2, but may not otherwise
participate in the Plan.
5.3 ACTUAL PARTICIPATION: The Plan Administrator may from time to time
select, from all eligible Employees, those to whom Awards shall be
granted and shall determine the nature and amount of each Award
Opportunity and Award.
5.4 EMPLOYMENT:
(a) Rights Not Affected: Nothing in the Plan shall interfere with
or limit in any way the Company's right to terminate any
Participant's employment at any time, nor confer upon any
Participant any right to continue in the Company's employ.
(b) Transfer Not Termination: A transfer of a Participant's
employment between the Company and a Subsidiary, or between
Subsidiaries, shall not be deemed to be a termination of
employment. Upon such a transfer, the Plan Administrator may,
subject to Section 12.3, make such adjustments to outstanding
Awards as it deems appropriate to reflect the changed
reporting relationships.
<PAGE> 36
(c) No Right to Award: An Employee's status as an Employee confers
no right on that Employee to receive an Award under this Plan,
or, having received any Award, to receive a future Award.
5.5 PRO RATA PLAN YEAR OR PERFORMANCE PERIOD PARTICIPATION: The Plan
Administrator may allow Employees other than Designated Executive
Officers who become eligible after the Plan Year or Performance Period
begins to participate under this Article on a pro rata basis. Such
situations include, but are not limited to:
(a) new hires;
(b) the promotion of an Employee from a position which did not
previously meet the eligibility criteria; or
(c) the transfer of an Employee from an affiliate which does not
participate in the Plan.
5.6 CHANGE IN POSITION:
(a) If, during a Plan Year or Performance Period, a Participant
other than a Designated Executive Officer changes employment
positions to one which corresponds to a level of Award
Opportunity different than that existing on the first day of
such Plan Year or Performance Period, the Participant's Award
Opportunity may be adjusted by the Plan Administrator to
reasonably reflect the appropriate level of the Participant's
Award Opportunity for the entire Plan Year or Performance
Period.
(b) Except as provided in Section 12.3, the Plan Administrator may
not adjust the Award Opportunity of a Designated Executive
Officer.
5.7 AWARD OPPORTUNITIES:
(a) Timing: As soon as practicable in each Plan Year or
Performance Period, the Plan Administrator shall establish an
Award Opportunity for each Participant. As soon as is
necessary to comply with Code Section 162(m), the Plan
Administrator shall establish an Award Opportunity for each
Designated Executive Officer.
(b) Measures: An Award Opportunity shall be a function of one or
more performance measures and goals selected by the Plan
Administrator, and shall reflect the Participant's job
responsibilities and opportunity and authority to affect
overall financial results. For Designated Executive Officers,
the Plan Administrator can apply performance measures only as
set out in Article 8.
(c) Alignment: Except as provided by Section 12.3, the Plan
Administrator shall align the potential levels of achievement
of the performance goals with the Award Opportunities (the
"Target Incentive Award"), such that the level of achievement
of the pre-established performance goals at the end of the
Plan Year or Performance Period will determine the final Award
amounts.
<PAGE> 37
5.8 AWARD DETERMINATIONS:
(a) At the end of each Plan Year or Performance Period, the Plan
Administrator shall certify, in writing, the extent to which
the performance goals have been achieved for Designated
Executive Officers.
(b) After that, the final Award shall be computed for each
Participant as determined by the Plan Administrator according
to the pre-established performance measures and goals and the
requirements of this Plan.
(c) Award amounts may vary above or below the Target Incentive
Award based on the level of achievement of the applicable
pre-established corporate, division, business unit, and/or
individual goals or financial measures, or such other measures
as the Plan Administrator shall, from time to time, determine,
unless otherwise limited by the Plan.
(d) For Designated Executive Officers, the final Award
determination shall be solely a function of the degree to
which the pre-established performance measures and goals have
been achieved -- but the Plan Administrator may adjust such
final Award determinations downward.
ARTICLE 6 - ANNUAL INCENTIVE AWARDS
6.1 PAYMENT OF AWARDS:
(a) Awards shall be paid in cash within 90 calendar days after the
end of each Plan Year.
(b) No Participant or any other party claiming an interest in
amounts earned under the Plan shall have any interest
whatsoever in any specific Company asset. To the extent that
any party acquires a right to receive payments under the Plan,
such right shall be equivalent to that of an unsecured general
creditor of the Company.
6.2 TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, OR RETIREMENT:
(a) If a Participant's employment is terminated by reason of
Disability, Retirement, involuntary termination other than for
Cause, or death, the Plan Administrator may prorate the final
Award determination made pursuant to Section 5.8. The prorated
payout shall be based upon the length of time that the
Participant participated in the Plan during the Plan Year and
the level of achievement of applicable performance goals. Such
prorated Award shall be permitted for Designated Executive
Officers only to the extent permitted in Section 12.3.
(b) The final Award determined pursuant to this Section shall be
paid in cash, within 90 calendar days following the end of the
Plan Year in which employment termination occurs or such other
date as determined by the Plan Administrator.
6.3 TERMINATION OF EMPLOYMENT FOR OTHER REASONS: If a Participant's
employment is terminated before the end of the Plan Year for any reason
other than those reasons described in Section 6.2 (including for reason
of a leave of absence granted by the Company), the Participant shall
forfeit all of the Participant's rights to a final Award for the Plan
Year then in progress. The Plan Administrator may, however, pay a
prorated final Award for the portion of the Plan Year that the
Participant was employed by the
<PAGE> 38
Company, computed as determined by the Plan Administrator. Such
prorated Award shall be permitted for Designated Executive Officers
only to the extent permitted in Section 12.3.
ARTICLE 7 - LONG TERM INCENTIVE AWARDS
7.1 GENERALLY:
(a) Grant of Awards: Subject to Article 4, the Plan Administrator,
at any time and from time to time, may, in its discretion,
grant or award Options, MVU's, Restricted Stock, Freestanding
SAR's, Tandem SAR's, Performance Units, cash, or any
combination thereof to Participants in such amounts as the
Plan Administrator shall determine. The Plan Administrator may
apply Performance Periods and performance measures, and may
set threshold, target, and maximum goals for each type of
Award, as it chooses.
(b) Source of Shares: The source of Shares delivered to
Participants under this Plan shall be limited to Shares
purchased by the Company from time to time for the purpose of
funding the operation of this Plan. The Company shall maintain
a separate accounting of Shares purchased for this purpose.
(c) Termination of Employment: Each Participant's Award Agreement
shall set out the extent to which the Participant may (as the
case may be):
(1) receive unvested Restricted Shares;
(2) receive the value of MVU's or Performance Units;
(3) exercise Options;
(4) exercise SAR's; or
(5) receive payment in cash;
following termination of employment with the Company and/or
its Subsidiaries. If a Designated Executive Officer retires
holding Shares of Restricted Stock which qualify for the
Performance-Based Exception, however, those Shares shall vest
on the schedule set when they were granted and not sooner.
Such provisions shall be determined in the Plan
Administrator's sole discretion, shall be included in the
Award Agreement entered into with each Participant, need not
be uniform among all Awards granted or issued pursuant to this
Article, and may reflect distinctions based on the reasons for
termination of employment.
(d) Other Restrictions: Subject to Article 8, the Plan
Administrator may impose such other conditions and/or
restrictions on any Long-Term Incentive Awards granted
pursuant to the Plan as the Plan Administrator deems
advisable, including time-based restrictions on vesting
following the
<PAGE> 39
attainment of the performance goals, and/or restrictions under
applicable Federal or state securities laws.
7.2 RESTRICTED STOCK:
(a) Award Agreement: Each Restricted Stock grant shall be
evidenced by an Award Agreement that shall specify the
Period(s) of Restriction, the number of Shares of Restricted
Stock granted, and such other terms as the Plan Administrator
shall determine.
(b) Non-Transferability: Except as provided in this Article, the
Shares of Restricted Stock granted herein may not be sold,
transferred, pledged, assigned, or otherwise alienated until
the end of the applicable Period of Restriction established by
the Plan Administrator and specified in the Award Agreement,
or upon earlier satisfaction of any other conditions, as
specified by the Plan Administrator and set out in the Award
Agreement. During a Participant's lifetime, only that
Participant may exercise any rights with respect to the
Restricted Stock granted to that Participant.
(c) Other Restrictions on Restricted Stock:
(1) The Company shall keep custody of the certificates
representing Shares of Restricted Stock until all
conditions and/or restrictions applicable to such
Shares have been satisfied.
(2) Except as otherwise provided in this Article, Shares
of Restricted Stock covered by each Restricted Stock
grant made under the Plan shall become freely
transferable by the Participant after the last day of
the applicable Period of Restriction.
(3) For the Plan Year ending April 30, 1995, the number
of shares of Restricted Stock to be awarded under
this Section shall not exceed the maximum number that
could have been awarded under the Brown-Forman
Corporation Restricted Stock Plan in effect on April
30, 1994, and the conditions imposed with respect to
such shares shall not result in compensation payable
under any Award that exceeds the compensation that
would have been payable under the terms of the
Brown-Forman Corporation Restricted Stock Plan in
effect on April 30, 1994.
(d) Voting Rights: During the Period of Restriction, Participants
holding Shares of Restricted Stock may exercise full voting
rights with respect to those Shares.
(e) Dividends and Other Distributions:
(1) During the Period of Restriction, Participants
holding Shares of Restricted Stock may be credited
with regular cash dividends paid with respect to the
underlying Shares while they are so held. The Plan
Administrator may apply any restrictions to the
dividends that it deems appropriate.
(2) Without limiting the generality of the preceding
paragraph, if the grant or vesting of Restricted
Shares granted to a Designated Executive Officer is
designed to comply with the requirements of the
Performance-Based Exception, the Plan Administrator
may apply any restrictions it deems appropriate to
the payment of dividends declared with respect to
such
<PAGE> 40
Restricted Shares, such that the dividends and/or the
Restricted Shares maintain eligibility for the
Performance-Based Exception.
(3) If any dividend constitutes a "derivative security"
or an "equity security" pursuant to Rule 16(a) under
the Exchange Act, such dividend shall be subject to a
vesting period equal to the remaining vesting period
of the Shares of Restricted Stock with respect to
which the dividend is paid.
7.3 MARKET VALUE UNITS ("MVU'S"):
(a) Award Agreement: Each MVU grant shall be evidenced by an Award
Agreement that shall specify the duration of the MVU, the
number of Shares on which the MVU grant is based, and such
other terms as the Plan Administrator shall determine.
(b) Non-Transferability: Except as provided in this Article, the
MVU's granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated until specified in the Award
Agreement, or upon earlier satisfaction of any other
conditions, as specified by the Plan Administrator and set out
in the Award Agreement. During a Participant's lifetime, only
that Participant may exercise any rights with respect to the
MVU's granted to that Participant.
(c) Dividends and Other Distributions:
(1) During the MVU's duration, Participants holding MVU's
may be credited with regular cash dividends paid with
respect to the underlying Shares while they are so
held. The Plan Administrator may apply any
restrictions to the dividends that it deems
appropriate.
(2) Without limiting the generality of the preceding
paragraph, if the grant or vesting of MVU's granted
to a Designated Executive Officer is designed to
comply with the requirements of the Performance-Based
Exception, the Plan Administrator may apply any
restrictions it deems appropriate to the payment of
dividends declared with respect to such MVU's, such
that the dividends and/or the MVU's maintain
eligibility for the Performance-Based Exception.
(3) If any dividend constitutes a "derivative security"
or an "equity security" pursuant to Rule 16(a) under
the Exchange Act, such dividend shall be subject to a
vesting period equal to the duration of the MVU's
with respect to which the dividend is paid.
(d) Payment of MVU Amount:
(1) Upon vesting of MVU's, a Participant shall be
entitled to receive payment from the Company for the
Fair Market Value of a Share multiplied by the number
of MVU's vesting.
(2) The Plan Administrator may allow for payment upon MVU
vesting to be in cash, in Shares of equivalent value,
or in some combination of cash and Shares.
<PAGE> 41
7.4 STOCK OPTIONS:
(a) Award Agreement: Each Option grant shall be evidenced by an
Award Agreement that shall specify the Option Price, the
Option's duration, the number of Shares to which the Option
pertains, and such other terms as the Plan Administrator shall
determine. The Award Agreement shall also specify whether the
Option is intended to be an ISO, Indexed Option, or an NQSO,
and what Performance Period (if any) applies. Even if an
option is designated as an ISO, it shall be treated as an NQSO
to the extent the Fair Market Value of the Shares with respect
to which ISO's are exercisable for the first time by any
Participant exceeds $100,000.
(b) Option Price and Duration: The Option Price for each grant of
an Option under this Plan shall be at least 100% of the Fair
Market Value of a Share on the date the Option is granted.
Options may be Indexed Options. Each Option granted to an
Employee shall expire as the Plan Administrator shall
determine at the time of grant -- but no Option shall be
exercisable later than the tenth anniversary of its grant.
(c) Exercise of Options: Options granted under this Section shall
be exercisable at such times and be subject to such
restrictions and conditions as the Plan Administrator shall in
each instance approve, which need not be the same for each
grant or for each Participant.
(d) Payment:
(1) Options granted under this Section shall be exercised
by the delivery of a written notice of exercise to
the Company, setting forth the number of Shares with
respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
(2) The Option Price upon exercise of any Option shall be
payable to the Company in full either:
(A) in cash or its equivalent, or
(B) by tendering previously acquired Shares
having an aggregate Fair Market Value at the
time of exercise equal to the total Option
Price (but only if the Shares which are
tendered have been held by the Participant
for at least six months before their tender
to satisfy the Option Price); or
(C) by a combination of (A) and (B).
(3) The Plan Administrator also may allow cashless
exercise as permitted under Federal Reserve Board's
Regulation T, subject to applicable securities law
restrictions, or by any other means which the Plan
Administrator determines to be consistent with the
Plan's purpose and applicable law.
(4) As soon as practicable after receipt of a written
notification of exercise and full payment, the
Company shall deliver to the Participant, in the
Participant's name, Share certificates in an
appropriate amount based upon the number of Shares
bought under the Option(s).
(e) Restrictions on Share Transferability: The Plan Administrator
may impose such restrictions on any Shares acquired pursuant
to the exercise of an Option granted under this Section as it
may
<PAGE> 42
deem advisable, including, without limitation, restrictions
under applicable Federal securities laws, under the
requirements of any stock exchange or market upon which such
Shares are then listed and/or traded, and under any blue sky
or state securities laws applicable to such Shares.
(f) Non-transferability: Except as otherwise provided in an Award
Agreement, (1) During a Participant's lifetime, only the
Participant may exercise any Option granted to such
Participant, (2) Participants may not sell, pledge, assign, or
otherwise alienate their Options, and (3) Participants may
transfer Options only by will or by the laws of descent and
distribution.
7.5 STOCK APPRECIATION RIGHTS ("SAR'S"):
(a) Award Agreement: Each SAR grant shall be evidenced by an Award
Agreement specifying the grant price, the SAR's duration, and
such other terms as the Plan Administrator shall determine.
(b) Grant Prices and Duration of SAR's: The grant price of a
Freestanding SAR shall equal the Fair Market Value of a Share
on the date of the SAR grant. The grant price of Tandem SAR's
shall equal the Option Price of the related Option. The term
of an SAR granted under the Plan shall be determined by the
Plan Administrator -- but such term shall not exceed ten
years.
(c) Exercise of Tandem SAR's:
(1) Tandem SAR's may be exercised for all or part of the
Shares subject to the related Option upon the
surrender of the right to exercise the equivalent
portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which
its related Option is then exercisable.
(2) Notwithstanding any other contrary Plan provision,
with respect to a Tandem SAR granted in connection
with an ISO:
(A) the Tandem SAR will expire no later than the
expiration of the underlying ISO;
(B) the payout value with respect to the Tandem
SAR may not exceed 100% of the difference
between the Option Price of the underlying
ISO and the Fair Market Value of the Shares
subject to the underlying ISO at the time
the Tandem SAR is exercised; and
(C) the Tandem SAR may be exercised only when
the Fair Market Value of the Shares subject
to the ISO exceeds the Option Price of the
ISO.
(d) Exercise of Freestanding SAR's: Freestanding SAR's may be
exercised upon whatever terms and conditions the Plan
Administrator imposes upon them.
(e) Payment of SAR Amount:
(1) Upon exercise of an SAR, a Participant shall be
entitled to receive payment from the Company in an
amount determined by multiplying:
<PAGE> 43
(A) the difference between the Fair Market Value
of a Share on the date of exercise and the
grant price; by
(B) the number of Shares with respect to which
the SAR is exercised.
(2) The Plan Administrator may allow for payment upon SAR
exercise to be in cash, in Shares of equivalent
value, or in some combination of cash and Shares.
(f) Rule 16b-3 Requirements: Notwithstanding any other Plan term,
the Plan Administrator may impose such conditions on exercise
of an SAR (including limiting the exercise to specified
periods) as may be required to comply with Section 16 of the
Exchange Act.
(g) Non-transferability: Except as otherwise provided in an Award
Agreement:
(1) During a Participant's lifetime, only the Participant
may exercise any SAR granted to such Participant.
(2) Participants may not sell, pledge, assign, or
otherwise alienate their SAR's.
(3) Participants may transfer SAR's only by will or by
the laws of descent and distribution.
7.6 PERFORMANCE UNITS:
(a) Award Agreement: Each Performance Unit grant shall be
evidenced by an Award Agreement specifying an initial value
for each Performance Unit as of its grant date, as well as
performance goals which will determine the number and/or value
of Performance Units that will be paid out to the Participant
at the end of the Performance Period. Performance goals may be
based on the performance of: the Company; its Shares; any of
its divisions, subsidiaries, or other business units; or any
combination of such performance measures.
(b) Form and Timing of Payment of Performance Units:
(1) The Plan Administrator may allow for payment of
Performance Units to be in cash, in Shares of
equivalent value, or in some combination of cash and
Shares.
(2) Payment of earned Performance Units shall be made as
soon as practicable following the close of the
applicable Performance Period.
(3) The Plan Administrator may allow Participants to
elect to defer the receipt of Performance Unit
payouts upon such terms as the Plan Administrator
deems appropriate, as long as Participants make such
deferral elections before the relevant Performance
Period begins.
(c) Non-transferability: Except as otherwise provided in an Award
Agreement:
(1) During a Participant's lifetime, only the Participant
or the Participant's legal representative may
exercise any Plan rights related to Performance
Units.
<PAGE> 44
(2) Participants may not sell, pledge, assign, or
otherwise alienate their Performance Units.
(3) Participants may transfer Performance Units only by
will or by the laws of descent and distribution.
7.7 CASH PAYMENT OF AWARDS OTHERWISE PAYABLE IN SHARES: The Plan
Administrator may allow for payment of a Long Term Incentive Award
otherwise payable in Shares to be paid in cash. Such a cash equivalent
Award shall be:
(a) computed as the value of the Participant's long-term bonus
opportunity at the end of the Performance Period, adjusted for
the actual performance results; and
(b) paid to the Participant upon vesting after the end of the
Performance Period.
ARTICLE 8 - PERFORMANCE MEASURES
8.1 GENERALLY: As soon in each Fiscal Year as is necessary to comply with
Code Section 162(m), the Plan Administrator shall establish performance
goals for each Plan Year and Performance Period for each type of Award
to be awarded or granted under this Plan. The goals may be expressed as
a percentage of corporate, division, business unit, and/or individual
goals or financial measures, or such other measures as the Plan
Administrator shall, from time to time, determine, unless otherwise
limited by the Plan -- but all such goals applicable to Designated
Executive Officers shall qualify for the Performance-Based Exception
under Code Section 162(m) unless and until the Plan Administrator
determines that, pursuant to Section 12.3, one or more Award need not
qualify for the Performance-Based Exception.
8.2 PERFORMANCE THRESHOLD: The Plan Administrator may establish minimum
levels of performance which must be achieved during a Plan Year or
Performance Period before any Awards shall be paid to Participants.
Such minimum levels of performance may be expressed as a percentage of
corporate, division, business unit, and/or individual goals or
financial measures, or such other measures as the Plan Administrator
shall, from time to time, determine, unless otherwise limited by the
Plan. The Plan Administrator will certify in writing prior to grant or
payment of any Award to a Designated Executive Officer that the
performance goals and other material terms of the Award were satisfied,
to the extent such certification is required by the Performance-Based
Exception.
8.3 MAXIMUM AWARDS: Subject to Section 4.1, the Plan Administrator may
establish guidelines governing the maximum Awards that Participants may
earn (either in the aggregate, by employee class, or among individual
Participants) during each Plan Year or Performance Period. Such
guidelines may be expressed as a percentage of corporate, division,
business unit, and/or individual goals or financial measures, or such
other measures as the Plan Administrator shall, from time to time,
determine, unless otherwise limited by the Plan. Subject to Sections
4.1 and 4.2, the Plan Administrator will establish a Maximum Award for
each type of Award granted to a Designated Executive Officer for each
Plan Year or Performance Period.
8.4 PERFORMANCE MEASURES FOR DESIGNATED EXECUTIVE OFFICERS: Unless and
until the Plan Administrator proposes for shareholder vote and
shareholders approve a change in the general performance measures set
out in this Article, the attainment of which may determine the degree
of payout and/or vesting with
<PAGE> 45
respect to Awards to Designated Executive Officers which are designed
to qualify for the Performance-Based Exception, the performance
measure(s) to be used for purposes of such grants shall be based on one
or more of the following alternatives, as chosen by the Plan
Administrator, except that, unless otherwise required to satisfy the
Performance-Based Exception, the Plan Administrator shall not be
required to establish performance measures with respect to the grant of
a stock option or SAR if the exercise price equals or exceeds the Fair
Market Value of the underlying Shares on the date of grant:
(a) "EARNINGS PER SHARE," as reported in the Company's annual
report, adjusted to reflect predetermined excluded items
pre-established pursuant to Code Section 162(m).
(b) "BUSINESS VALUE ADDED" is a measure based on Adjusted Net
Income, for the Plan Year or Performance Period, minus the
cost of Average Capital Employed. For the purposes of this
definition:
(1) Adjusted Net Income is defined to mean after-tax net
income adjusted for after-tax interest income and
expense and any other predetermined excluded items
pre-established pursuant to Code Section 162(m); and
(2) Average Capital Employed is defined to mean total
assets, reduced by non-interest bearing liabilities
and any other predetermined excluded items
pre-established pursuant to Code Section 162(m),
averaged over an appropriate period.
(c) "RETURN ON INVESTMENT" is a measure based on Bonus Operating
Income, after tax, divided by Average Invested Capital. For
the purposes of this definition:
(1) Bonus Operating Income is defined to mean operating
income adjusted for managerial bonus expense and any
other predetermined excluded items pre-established
pursuant to Code Section 162(m); and
(2) Average Invested Capital is defined to mean total
assets reduced by non-interest bearing liabilities
and any other predetermined excluded items
pre-established pursuant to Code Section 162(m),
averaged over an appropriate period.
Business Value Added and Return on Investment may be based on
the performance of the Company or on one or more of its
subsidiaries, divisions, or other business units.
8.5 PERFORMANCE MEASURES FOR OTHER PARTICIPANTS: For Participants other
than Designated Executive Officers, the Plan Administrator may approve
and adopt either the performance measures set out in Section 8.4 or
other performance measures without obtaining shareholder approval.
8.6 ADJUSTMENTS: The Plan Administrator may adjust the compensation payable
upon the attainment of the pre-established performance goals, but the
Plan Administrator may not adjust upward any Awards which are designed
to qualify for the Performance-Based Exception, and which are held by
Designated Executive Officers.
8.7 OTHER CHANGES: If applicable tax and/or securities laws change to
permit Plan Administrator discretion to change the governing
performance measures without obtaining shareholder approval of such
<PAGE> 46
changes, the Plan Administrator may make such changes without obtaining
shareholder approval. In addition, if the Plan Administrator determines
that it is advisable to grant Awards which shall not qualify for the
Performance-Based Exception, the Plan Administrator may make such
grants without satisfying the requirements of Code Section 162(m).
ARTICLE 9 - BENEFICIARY DESIGNATION
9.1 Each Participant under the Plan may, from time to time, name any
beneficiary or beneficiaries (who may be named contingently or
successively) to whom any benefit under the Plan is to be paid if the
Participant dies before receiving any or all of such benefit.
9.2 Each such designation shall revoke all prior designations by the same
Participant, shall be in a form prescribed by the Company, and will be
effective only when filed by the Participant in writing with the
Company during the Participant's lifetime.
9.3 Absent such designation, benefits remaining unpaid at the Participant's
death shall be paid to the Participant's estate.
ARTICLE 10 - DEFERRALS AND SPECIAL AWARDS/GRANTS
10.1 BY EMPLOYEES: The Plan Administrator may permit a Participant to defer
receipt of the payment of cash or the delivery of Shares that would
otherwise be due to such Participant by virtue of the satisfaction of
any requirements or goals with respect to Awards, the exercise of an
Option or SAR, or the lapse or waiver of restrictions with respect to
Restricted Stock or MVU's. If any such deferral election is required or
permitted, the Plan Administrator shall establish rules and procedures
for such payment deferrals. Such rules and procedures shall be
consistent with the provisions of Code Section 162(m) where applicable.
10.2 BY NON-EMPLOYEE DIRECTORS: Each non-Employee Director may elect to
receive payment in Shares for all or any part of Director's retainer
and/or committee fees for service on the Board and any of its
committees. The amount of Shares then issuable shall be based on their
Fair Market Value on the dates such retainer fees are otherwise due and
payable to the non-Employee Director. The Company shall deliver
certificates evidencing such Shares promptly following such date. An
election under this Section must be delivered in writing to the
Company's Secretary at least six months before the payment date, and
must be irrevocable.
10.3 SPECIAL AWARDS/GRANTS: The Plan Administrator may, in its discretion,
approve a grant of Options, MVU's, Restricted Stock, Freestanding
SAR's, cash and/or Tandem SAR's to an employee as may be recommended,
from time to time.
<PAGE> 47
ARTICLE 11 - CHANGE IN CONTROL
11.1 TREATMENT OF OUTSTANDING AWARDS MADE BEFORE JULY 1, 1999: Upon the
occurrence of a Change in Control, unless otherwise specifically
prohibited under applicable laws, or by the rules and regulations of
any governing governmental agencies or national securities exchanges:
(a) Any and all Options and SAR's granted shall become immediately
exercisable, and shall remain exercisable throughout their
entire term.
(b) Any restriction periods and restrictions imposed on Restricted
Shares or MVU's shall lapse.
(c) The target payout opportunities attainable under all
outstanding Awards shall be deemed to have been earned through
the effective date of the Change in Control. The vesting of
all Awards shall be accelerated as of the effective date of
the Change in Control, and the Company shall pay out in cash
to Participants within 30 days following the effective date of
the Change in Control a pro rata portion of all targeted cash
payout opportunities associated with outstanding Awards, based
on the number of complete and partial calendar months within
the Performance Period which had elapsed as of such effective
date; provided, however, that no payouts will be accelerated
based on Awards granted less than six months before the
effective date of the Change in Control.
(d) Subject to Article 12, the Plan Administrator may modify the
Awards as determined by the Plan Administrator to be
appropriate before the effective date of the Change in
Control.
11.2 TREATMENT OF OUTSTANDING AWARDS MADE AFTER JUNE 30, 1999:
Notwithstanding anything in this Plan to the contrary, with respect to
Awards granted after June 30, 1999, upon the occurrence of a Change in
Control, unless otherwise specifically prohibited under applicable
laws, or by the rules and regulations of any governing governmental
agencies or national securities exchanges:
(a) Any and all Options and SAR's granted shall become
immediately vested and non-forfeitable upon the
occurrence of the Change in Control; provided, that
such Options and SAR's shall become exercisable
pursuant to their original vesting schedule,
notwithstanding any earlier termination of employment
of a Participant, except that if within one year
following a Change in Control, a Participant's
employment is terminated by the Company without Cause
or by the Participant within 60 days after the
Participant becomes aware of an event constituting a
Constructive Discharge, upon the effective date of
such employment termination, the Participant's
Options and SAR's shall become immediately
exercisable and shall remain exercisable until 30
days following the original scheduled vesting date of
such Options and SAR's. If a Participant is no longer
an Employee as of the original vesting date under the
vesting schedule for an Option or SAR, and has not
terminated employment under one of the circumstances
described in the immediately preceding sentence, the
Participant's Option and SAR shall nonetheless become
exercisable on the original vesting date and remain
exercisable for 30 days following the original
vesting date.
(b) If within one year following a Change in Control, a
Participant's employment is terminated by the Company
without Cause or by the Participant within 60 days
after the Participant becomes aware of an event
constituting a Constructive Discharge, upon the
effective date of such employment termination;
<PAGE> 48
(i) any restriction periods and restrictions imposed on
Restricted Shares or MVU's granted to a Participant
shall lapse,
(ii) the Target Incentive Awards attainable under all
outstanding Awards of the Participant shall be deemed
to have been earned, and
(iii) the vesting of all outstanding Awards of the
Participant shall be accelerated, and the Company
shall pay out in cash to the Participant within 30
days following the effective date of the employment
termination a pro rata portion of all Target
Incentive Award cash payout opportunities associated
with outstanding Awards, based on the number of
complete and partial calendar months within the
Performance Period which had elapsed as of such
effective date. This subparagraph (b) shall not apply
to Options and SAR's.
11.3 TREATMENT OF OUTSTANDING OPTION AND SAR AWARDS MADE AFTER JUNE 30, 1999
UPON A POTENTIAL CHANGE IN CONTROL. Notwithstanding anything in this
Plan to the contrary, with respect to Options and SAR's granted after
June 30, 1999, in the event of a Potential Change in Control, the
following restrictions shall apply to any such outstanding Options and
SAR's:
(a) Except as otherwise provided in this Section
11.3, any Option (or SAR) exercised by a Participant
during a Restricted Period shall be exercisable
solely for a lump sum cash payment from the Company
equal to the product of (i) the number of Shares for
which the Option (or SAR) is being exercised, times
(ii) the excess, if any, of (A) the "Adjusted Market
Value" per Share of the Shares subject to the Option
(or SAR), over (B) the exercise (or grant price) per
Share of such Option (or SAR). The Board Compensation
Committee may, in its discretion, provide the
Participant with Shares with a Fair Market Value
equal to the cash payment otherwise due upon exercise
pursuant to the immediately preceding sentence, in
lieu of the cash payment. This Section 11.3(a) shall
not be applicable if the Fair Market Value per Share
is less than the Adjusted Market Value per Share of
the Shares subject to an Option (or SAR) upon the
date a Participant exercises a Stock Option (or SAR),
unless the Board Compensation Committee specifically
determines it to be applicable in its sole
discretion.
(b) For purposes of this Section 11.3, "Adjusted
Market Value" shall mean the Base Period Fair Market
Value as adjusted, on a pro rata monthly basis at the
beginning of each month, from the end of the Base
Period (the date of grant for Options (and SAR's)
granted during the Restricted Period prior to a
Change in Control shall be the end of the Base Period
for such Options and SAR's) until the exercise date
of the Option (or SAR), by the greater of (i) 5% per
year or (ii) the percentage increase (or decrease) in
the S&P 500 composite index for the previous calendar
month.
(c) This Section 11.3 shall continue to apply
following a Change in Control; provided, that in the
event that in connection with a Change in Control,
Shares are converted into or exchanged for cash, or
for securities that are not publicly traded, the
Company shall, immediately before such Change in
Control, set aside in an escrow account for the
benefit of each Participant an amount equal to the
potential cash payment (under subparagraph (a) above)
for the Participant, with such escrow amount to be
adjusted
<PAGE> 49
on a quarterly basis following the Change in Control
to provide for sufficient funding to pay such amounts
to Participants.
11.4 ACCELERATION OF AWARD VESTING: Notwithstanding any provision of this
Plan or any Award Agreement provision to the contrary, other than
during a Restricted Period or in anticipation of the occurrence of a
Potential Change in Control or of a Change in Control, the Plan
Administrator may at any time accelerate the vesting of any Award
granted under the Plan to a Participant, including without limitation
acceleration to such a date that would result in said Awards becoming
immediately vested.
11.5 TERMINATION, AMENDMENT, AND MODIFICATIONS OF CHANGE IN CONTROL
PROVISIONS: Sections 11.2, 11.3, 11.4, 11.5, and any other provisions
of the Plan that would materially impact the operation or intent of
Sections 11.2, 11.3, 11.4 and 11.5, shall not be amended by the Board
or waived by the Company in a manner favorable to Participants without
approval by more than 75 percent of the combined voting power of the
Outstanding Voting Securities of Brown-Forman Corporation; provided,
that if following a Change in Control, Brown-Forman Corporation (or its
successor corporation) is not a publicly-traded corporation, and is a
direct or indirect subsidiary of a publicly-traded corporation, the
shareholder approval required by this Section 11.5 must be approval by
more than 75 percent of the combined voting power of the Outstanding
Voting Securities of the publicly-traded corporation that is the direct
or indirect parent of Brown-Forman Corporation (or its successor
corporation). Notwithstanding the foregoing, the Board Compensation
Committee may, in its discretion, waive the effect of Section 11.3
following a Potential Change in Control described in Section 2.43;
provided, that, the waiver must by approved by the Board Compensation
Committee prior to the occurrence of a Change in Control.
Notwithstanding any other Plan term or any Award Agreement term, this
Article may not be terminated, amended, or modified on or after the
date of a Change in Control to affect adversely any Award already
granted under the Plan without the prior written consent of the
Participant with respect to said Participant's outstanding Awards.
11.6 OPTIONAL GROSS-UP FOR EXCISE TAXES: If, for any reason, any part or all
of the amounts payable to a Participant pursuant to this Plan (or
otherwise, if the Company or any of its Subsidiaries pays amounts after
there has been a Change in Control) are deemed to be "excess parachute
payments" within the meaning of Code Section 280G(b)(1), the Plan
Administrator may, in its sole discretion, provide in the Award
Agreement that the Company shall pay to such Participant, in addition
to any other amounts the Participant may be entitled to receive
pursuant to this Plan, an amount which after all Federal, state, and
local taxes (of whatever kind) imposed on the Participant with respect
to such amount are subtracted therefrom, equals the excise taxes
imposed on such excess parachute payments under Code Section 4999.
ARTICLE 12 - AMENDMENT, MODIFICATION, AND TERMINATION
12.1 GENERALLY:
(a) Except as limited by the provisions of Section 11.5 above, the
Board may at any time and from time to time, alter, amend,
suspend, or terminate the Plan in whole or in part -- but no
amendment needing shareholder approval in order for the Plan
to continue to comply with Rule 16b-3 under
<PAGE> 50
the Exchange Act shall be effective unless such amendment
shall be approved by the requisite vote of Company
shareholders entitled to vote on it.
(b) Except as provided by the Plan or by the terms of an Award,
the Plan Administrator may not cancel outstanding Awards and
issue substitute Awards without the written consent of the
Participant holding such Award.
12.2 OUTSTANDING AWARDS: No termination, amendment, or modification of the
Plan shall adversely affect in any material way any outstanding Award
under the Plan without the written consent of the Participant holding
such Award.
12.3 COMPLIANCE WITH CODE SECTION 162(M): At all times when Code Section
162(m) applies, all Awards granted to Designated Executive Officers
under this Plan shall comply with its requirements, unless the Plan
Administrator expressly determines that compliance is not desired with
respect to any Award or Awards available for grant under the Plan. In
addition, such Award(s) need not comply if changes are made to Code
Section 162(m) to permit greater flexibility with respect to any Award
or Awards available under the Plan, in which case the Plan
Administrator may, subject to this Article, make any adjustments it
deems appropriate. However, an Award made available for grant to a
Designated Executive Officer as performance-based cannot be replaced by
a non-performance-based Award if performance goals are not achieved,
nor can the characterization of an Executive Officer as a Designated
Executive Officer, once made, be changed for a given Performance
Period.
ARTICLE 13 - WITHHOLDING
13.1 TAX WITHHOLDING: The Company may deduct or withhold, or require a
Participant to remit to the Company, an amount sufficient to satisfy
Federal, state, and local taxes, domestic or foreign, required by law
or regulation to be withheld with respect to any taxable event arising
as a result of this Plan.
13.2 SHARE WITHHOLDING: With respect to withholding required upon the
exercise of Options or SAR's, upon the lapse of restrictions on
Restricted Stock, the payment of MVU's, or upon any other taxable event
arising as a result of Awards granted hereunder, Participants may
elect, subject to the approval of the Plan Administrator, to satisfy
the withholding requirement, in whole or in part, by having the Company
withhold Shares having a Fair Market Value on the date the tax is to be
determined equal to the statutory total tax which could be imposed on
the transaction. All such elections shall be irrevocable, shall be made
in writing, shall be signed by the Participant, and shall be subject to
any restrictions or limitations that the Plan Administrator deems
appropriate.
ARTICLE 14 - INDEMNIFICATION
14.1 GENERALLY: The Company shall indemnify and hold harmless each current
and former Director against and from any loss, cost, liability, or
expense that may be imposed upon or reasonably incurred by such
Director in connection with or resulting from any claim, action, suit,
or proceeding to which such Director may be a party or in which such
Director may be involved by reason of any action taken or failure to
act under the Plan and against and from any and all amounts paid by
such Director in settlement thereof, with the Company's approval, or
paid by such Director in satisfaction of any judgment in
<PAGE> 51
any such action, suit, or proceeding against such Director -- but only
if such Director gives the Company an opportunity, at its own expense,
to handle and defend the same before such Director undertakes to handle
and defend it personally.
14.2 NON-EXCLUSIVITY: This right of indemnification shall not exclude any
other indemnification rights to which such persons may be entitled
under the Company's Certificate of Incorporation or Bylaws, as a matter
of law, or otherwise, or any power that the Company may have to
indemnify them or hold them harmless.
ARTICLE 15 - LEGAL CONSTRUCTION
15.1 SEVERABILITY: If any Plan section is held illegal or invalid for any
reason, the illegality or invalidity shall not affect the remaining
parts of the Plan, and the Plan shall be construed and enforced as if
the illegal or invalid provision had not been included.
15.2 REQUIREMENTS OF LAW: The granting of Awards and the issuance of Shares
under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
15.3 SECURITIES LAW COMPLIANCE: With respect to Insiders, transactions under
this Plan are intended to comply with all applicable conditions or Rule
16b-3. To the extent any Plan provision or action by the Plan
Administrator fails to so comply, it shall be deemed void, to the
extent permitted by law and deemed advisable by the Plan Administrator.
15.4 SUCCESSORS: All Company obligations under the Plan with respect to
Awards granted shall be binding on any successor to the Company,
whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or
substantially all of the Company's business and/or assets.
15.5 GOVERNING LAW: To the extent not preempted by Federal law, the Plan,
and all agreements made under it, shall be construed in accordance with
and governed by the laws of the State of Delaware.
