<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
[BROWN-FORMAN CORPORATION LOGO]
P. O. BOX 1080 - LOUISVILLE, KENTUCKY 40201 - 1080 - USA
OWSLEY BROWN II
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
June 30, 2000
Dear Brown-Forman Stockholder:
It is my pleasure to invite you to attend the Annual Meeting of our
Stockholders:
Thursday, July 27, 2000
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 27. Whether or not you can attend, all Class A
Stockholders are urged to fill in the attached proxy (voting) card and return it
to us. Your vote is very important.
Sincerely,
/s/ Owsley Brown II
<PAGE> 3
[BROWN-FORMAN CORPORATION LOGO]
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 27, 2000.
We are holding this meeting to:
- elect a board of ten directors to hold office until the next annual
stockholders' meeting; 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 19, 2000. 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 IN PERSON AND DECIDE TO VOTE DIFFERENTLY. 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, 2000,
for you to review.
Louisville, Kentucky
June 30, 2000
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
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
Option Grants under the Omnibus Compensation Plan.....................11
Aggregated Option Values at End of Fiscal 2000........................11
RETIREMENT PLAN DESCRIPTIONS..................................................12
DIRECTOR COMPENSATION.........................................................13
FIVE-YEAR PERFORMANCE GRAPH...................................................14
OTHER INFORMATION.............................................................15
Transactions with Management..........................................15
Appointment of Independent Accountants................................15
Other Proposed Action.................................................15
Stockholder Proposals for 2001 Annual Meeting.........................15
</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 19, 2000. Class B
Common stockholders cannot vote.
--------------------------------------------------------------------------------
Q: WHAT AM I VOTING ON?
A: The election of all members of our Board of Directors. 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 ten 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
[THIS PAGE INTENTIONALLY LEFT BLANK.]
<PAGE> 7
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, which will be held Thursday, July 27, 2000, at
9:30 Louisville time (EDT) at Brown-Forman Corporation, 850 Dixie Highway,
Louisville, Kentucky. The Board requests you to sign and return the enclosed
proxy.
Beginning on June 30, 2000, we will solicit proxies by mail. Our employees may
solicit proxies by mail, phone, fax, the Internet 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 19, 2000, we had outstanding
28,988,091 shares of Class A Common Stock.
VOTING RIGHTS. If you were a Class A stockholder on June 19, 2000, 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
enclose 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 count shares voted as "abstaining" as present
for purposes of determining the number of shares represented at the meeting, but
as votes withheld in the election of a director or on any other matter 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> 8
ELECTION OF DIRECTORS
--------------------------------------------------------------------------------
THIS SECTION GIVES BIOGRAPHICAL INFORMATION ABOUT OUR DIRECTORS AND DESCRIBES
THE COMMITTEES ON WHICH THEY SERVE AND THEIR ATTENDANCE AT MEETINGS.
--------------------------------------------------------------------------------
James S. Welch, a director since 1971, left the board in November, 1999 upon
reaching age 70, the mandatory retirement age for outside directors. All of our
other directors are standing for re-election. At the Annual Meeting, you and our
other shareholders will elect ten 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. The persons 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 persons named as proxies may vote for a substitute.
Here are the director nominees, their ages as of April 30, 2000, the years they
began serving as directors, their business experience for the last five years,
and their other directorships:
JERRY E. ABRAMSON, age 53, director since 1999. Of Counsel, Brown Todd &
Heyburn, PLLC since January, 1999; Mayor of Louisville, Kentucky (1986 to
1998).
BARRY D. BRAMLEY, age 62, director since 1996. Non-Executive Chairman, Lenox,
Incorporated (a subsidiary of Brown-Forman) since 1998; Non-Executive
Chairman of Cornwell Parker, PLC High Wycombe, England (1998 to April 2000);
Chairman and Chief Executive Officer of British-American Tobacco Company
Ltd., London, England (1988 to 1996); Director of BAT Industries, PLC,
London, England (1988 to 1996). Other directorships: Anglia Maltings
(Holdings), Ltd. and Skandinavisk Tobakskompagni A/S.
GEO. GARVIN BROWN III*, age 56, director since 1971. Chairman of Trans-Tek, Inc.
since 1988.
OWSLEY BROWN II*, age 57, 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 62, director since 1995. President and CFO, G.L. Ohrstrom
& Co., Inc., a private investment firm, since 1997; Vice President (1996 to
1997); Partner of predecessor partnership, G.L. Ohrstrom & Co. (1970 to
1996). Chairman and CEO of Harrow Industries (1997 to 1999). Other
directorships include Carlisle Companies Incorporated, Roper Industries,
Inc. and Central Securities Corporation.
OWSLEY BROWN FRAZIER*, age 64, director since 1964. Our former Vice Chairman
(1983 to May 2000).
-------------------
* 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
considered a "control person" of Brown-Forman.
4
<PAGE> 9
RICHARD P. MAYER, age 60, director since 1994. Retired; former Chairman and
Chief Executive Officer of Kraft General Foods North America (now Kraft
Foods Inc.) (1989 to 1995). Other directorships: Dean Foods Company.
STEPHEN E. O'NEIL, age 67, director since 1978. Principal, The O'Neil Group
(1991 to present). Other directorships: Alger American Fund, Inc.; Alger
Fund, Inc.; Castle Convertible Fund, Inc.; NAHC, Inc.; and Spectra Fund,
Inc.
WILLIAM M. STREET**, age 61, director since 1971. Our Vice Chairman since 1987.
Other directorship: National City Bank of Kentucky.
DACE BROWN STUBBS*, age 53, director since 1999. Private investor.
COMMITTEES. The Board has an Audit Committee, which in fiscal 2000 was composed
of outside directors Richard P. Mayer (chairman), Jerry E. Abramson and
Stephen E. O'Neil. We also have a Compensation Committee, which in fiscal
2000 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;
- reviews the range of audit and non-audit services performed by independent
accountants and the fees for such services;
- assesses our policies and procedures on maintaining accounting records and
the adequacy of our internal controls;
- evaluates management's implementation of recommendations made by the
independent accountants and internal auditors; and
- oversees the company's corporate compliance program.
It met twice during fiscal 2000.
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 2000.
The Board has no standing nominating committee.
DIRECTORS' MEETINGS. The Board met six times during fiscal 2000. Each current
director attended at least 75% of the aggregate number of Board and applicable
committee meetings held in fiscal 2000.
-------------------
** 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> 10
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, 2000. 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 committees 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 20,881,991 shares, or 72% 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 PERCENT OF
INVESTMENT POWER INVESTMENT POWER VOTING AND INVESTMENT POWER CLASS
=============================================================================================================================
<S> <C> <C> <C> <C>
W.L. LYONS BROWN, JR.
501 So. Fourth Avenue 406,279 13,379,453 13,785,732 47.6%
Louisville, Kentucky
OWSLEY BROWN FRAZIER
850 Dixie Highway 580,601 11,560,978 12,141,579 41.9%
Louisville, Kentucky
DACE BROWN STUBBS
135 Sago Palm Road 1,000 9,444,864 9,445,864 32.6%
Vero Beach, Florida
OWSLEY BROWN II
850 Dixie Highway 476,792 5,312,939 6,089,731 21.0%
Louisville, Kentucky
INA B. BOND
8215 West U.S. Highway 42 979,149 3,348,381 4,327,530 14.9%
Skylight, Kentucky
ROBINSON S. BROWN, JR.
5208 Avish Lane 200,915 2,881,286 3,082,201 10.6%
Harrods Creek, Kentucky
SANDRA A. FRAZIER
424 Pennington Lane 166,728 2,116,314 2,283,042 7.9%
Louisville, Kentucky
==============================================================================================================================
</TABLE>
6
<PAGE> 11
STOCK OWNED BY DIRECTORS AND EXECUTIVE OFFICERS. The following table shows the
"beneficial ownership" as of April 30, 2000, 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
----------------------------------------------------------
VOTING & INVESTMENT POWER SOLE & SHARED VOTING
& INVESTMENT POWER
---------------------------- ------------------------
NAME SOLE SHARED TOTAL % OF
CLASS
=============================================================================================
<S> <C> <C> <C> <C>
Jerry E. Abramson 140 0 140 *
Barry D. Bramley 100 0 100 *
Geo. Garvin Brown III 52,009 1,298,251 1,350,260 4.7%
Owsley Brown II 476,792 5,312,939 5,789,731 19.9%
Donald G. Calder 6,000 0 6,000 *
Owsley Brown Frazier 580,601 11,560,978 12,141,579 41.9%
Stanley A. Krangel 0 0 0 *
Richard P. Mayer 3,000 0 3,000 *
Stephen E. O'Neil 0 0 0 *
Steven B. Ratoff 5,306 0 5,306 *
William M. Street 560,714 0 560,714 1.9%
Dace Brown Stubbs 1,000 9,444,864 9,445,864 32.6%
All Directors and Executive 1,681,997 16,874,968 18,556,965 64%
Officers as a Group(2)
<CAPTION>
=============================================================================================
CLASS B COMMON STOCK
----------------------------------------------------------
INVESTMENT POWER SOLE & SHARED
INVESTMENT POWER
---------------------------- ------------------------
NAME SOLE SHARED TOTAL % OF
CLASS
=============================================================================================
<S> <C> <C> <C> <C>
Jerry E. Abramson 2,796 0 2,796 *
Barry D. Bramley 3,902 0 3,902 *
Geo. Garvin Brown III 4,675 60,776 65,451 *
Owsley Brown II 58,028 4,675,270 4,733,298 11.9%
Donald G. Calder 1,502 0 1,502 *
Owsley Brown Frazier 55,878 7,842,965 7,898,843 20%
Stanley A. Krangel 3,584 0 3,584 *
Richard P. Mayer 4,502 0 4,502 *
Stephen E. O'Neil 1,502 500(1) 2,002 *
Steven B. Ratoff 12,107 0 12,107 *
William M. Street 7,908 0 7,908 *
Dace Brown Stubbs 0 7,842,965 7,842,965 20%
All Directors and Executive 192,068 12,534,580 12,726,648 32.2%
Officers as a Group(2)
=============================================================================================
</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) 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 persons. Based solely on this review, we
believe that during fiscal 2000 these persons reported all transactions on a
timely basis.
7
<PAGE> 12
EXECUTIVE COMPENSATION
--------------------------------------------------------------------------------
THIS SECTION IS A REPORT FROM THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS. THE 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 2000 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. During fiscal 2000,
the Management Compensation Review Committee consisted of Owsley Brown II,
Owsley B. Frazier and William M. Street, all directors.
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, Owsley Brown II, and two
Vice Chairmen, Owsley B. Frazier and William M. Street, who in fiscal 2000
comprised the Executive Committee of the Board of Directors;
- the Next Two, Steven B. Ratoff, our Chief Financial Officer, and Stanley A.
Krangel, President of Lenox, Incorporated. These individuals, together with
the Top Three, constitute the five most highly compensated Executive
Officers. This subgroup of five is referred to as Named Executive Officers;
and
- three additional Executive Officers.
Our committee sets the salaries for the Top Three. The Management Compensation
Review Committee sets 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 achievement
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 in the
manufacturing business (examples would include Armstrong World Industries, H. J.
Heinz, and Wm. Wrigley Jr. Corporation). Hewitt surveys companies in the
consumer products
8
<PAGE> 13
business; this is the field from which we typically recruit executives (examples
would include Fortune Brands, 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.
The compensation mix of the Top Three officers consists of salary (36%), annual
bonus (25%), and long term compensation (39%). Salaries are set with respect to
the market data. We develop targets for annual and long term bonuses based on
Business Value Added ("BVA"), which is the after-tax income in excess of a proxy
for 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 2000, in addition to the survey data
discussed above, we looked at the compensation increases (approximately 4.5%)
for company employees who are not eligible for bonuses and the company's
performance last fiscal year. We decided that the aggregate compensation
increase for the Top Three officers should be 8.7%.
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. The Management
Compensation Review Committee sets the 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 $1 million if it
is performance based and paid under a formal compensation plan that meets the
Code's requirements. We took appropriate steps in setting goals under the
Omnibus Plan to assure the deductibility of all compensation paid to Named
Executive Officers. We expect the company to be able to deduct all fiscal 2000
compensation.
CONCLUSION. Based upon the information available at the time we determined the
compensation for fiscal 2000 for our Named Executive Officers, we believe that
the levels of compensation were consistent with targeted levels and that the
compensation increases we granted during fiscal 2000 were prudent.
STEPHEN E. O'NEIL, CHAIRMAN RICHARD P. MAYER DONALD G. CALDER
9
<PAGE> 14
--------------------------------------------------------------------------------
THE NEXT SECTION CONTAINS CHARTS THAT SHOW THE AMOUNT OF COMPENSATION EARNED BY
OUR NAMED EXECUTIVE OFFICERS.
--------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
=================================================================================================================================
ANNUAL LONG TERM
COMPENSATION COMPENSATION
------------------------- -------------------------
AWARDS: PAYOUTS:
CLASS B LONG TERM ALL OTHER
NAME AND PRINCIPAL POSITIONS FISCAL YEAR SALARY BONUS(1) SHARES INCENTIVE COMPEN-
ENDED ($) ($) UNDERLYING PAYMENTS(2) SATION(3)
APRIL 30, OPTIONS (#) ($) ($)
==================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
OWSLEY BROWN II 2000 779,021 792,000 27,557 415,846 12,960
Chairman of the Board and Chief 1999 719,160 654,835 25,361 325,920 8,400
Executive Officer 1998 689,440 714,337 27,153 116,432 8,400
==================================================================================================================================
WILLIAM M. STREET 2000 542,390 564,960 18,321 531,523 12,926
Vice Chairman; President and Chief 1999 517,013 467,255 16,478 391,516 8,400
Executive Officer, Brown-Forman 1998 497,117 510,074 3,857 74,072 8,400
BeveragesWorldwide
==================================================================================================================================
OWSLEY BROWN FRAZIER 2000 443,864 264,000 6,773 219,683 247,614
Vice Chairman (retired May 2000) 1999 425,623 214,813 8,204 170,694 291,550
1998 413,560 236,705 4,782 58,406 8,400
==================================================================================================================================
STEVEN B. RATOFF 2000 417,583 196,152 8,844 248,804 10,944
Executive Vice President 1999 400,008 155,150 6,527 178,022 8,400
and Chief Financial Officer 1998 367,773 169,304 6,963 0 8,400
==================================================================================================================================
STANLEY A. KRANGEL 2000 387,000 253,703 1,848 193,692 7,710
President, Lenox Incorporated 1999 350,955 225,147 1,967 164,520 6,000
1998 214,400 118,526 1,957 0 6,000
==================================================================================================================================
</TABLE>
Explanatory Notes:
We award up to 50% of long term bonus compensation as stock options, with the
balance in cash to be paid at the end of each three-year performance period (it
will then 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 11.
(1) Represents cash payments under the annual incentive plan.
(2) Represents Stock Appreciation Rights payouts, and cash payments under the
long-term incentive plan.
(3) Represents our contributions to the Savings Plan and our payment of group
term life insurance premiums on behalf of the Named Executive Officers,
plus, for Mr. Frazier, a discounted current payment under the SERP for
fiscal 1999 and 2000.
10
<PAGE> 15
OPTION GRANTS UNDER THE OMNIBUS COMPENSATION PLAN
The Omnibus Compensation Plan covers both short term and long term bonuses.
Stock options awarded in fiscal 2000 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. Generally, options become exercisable
three years after grant and must be exercised within ten years of grant. This
year, we granted options for approximately 320,000 shares of our stock for
long-term bonus awards to management participants. 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. We also granted options for approximately 490,000 shares to our
salaried and hourly employees (as of September 1, 1999) involved in the beverage
segment, including the Named Executive Officers, at a premium exercise price as
a broad-based incentive plan. These options are not exercisable until May 1,
2006. The table below summarizes the grants to the Named Executive Officers.
<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(1)
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
BROWN 27,257 9% 62.25 04/30/09 486,810
300 * 100.00 08/31/07 5,358
STREET 18,021 6% 62.25 04/30/09 321,855
300 * 100.00 08/31/07 5,358
FRAZIER 6,473 2% 62.25 04/30/09 115,608
300 * 100.00 08/31/07 5,358
RATOFF 8,544 3% 62.25 04/30/09 152,596
300 * 100.00 08/31/07 5,358
KRANGEL 1,848 1% 62.25 04/30/09 33,005
====================================================================================================================================
</TABLE>
* Less than 1%.
(1) We used the Black-Scholes option pricing model to determine present
value. We assumed a risk-free interest rate of 5.9%, stock price
volatility of 26%, a yield of 1.9%, 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 2000
The following table summarizes all option grants that have been made to the
Named Executive Officers through and including fiscal 2000.
<TABLE>
<CAPTION>
====================================================================================================================================
NUMBER OF VALUE
SHARES REALIZED IN NUMBER OF SHARES UNDERLYING VALUE OF UNEXERCISED OPTIONS AT END OF
NAME ACQUIRED FISCAL 2000 UNEXERCISED OPTIONS FISCAL YEAR *
IN FISCAL BY OPTION ------------------------------------ --------------------------------------
2000 BY EXERCISE
OPTION EXERCISABLE EXERCISABLE
EXERCISE MAY 1, 2000 UNEXERCISABLE MAY 1, 2000 UNEXERCISABLE
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
BROWN 0 0 57,500 52,918 707,167 0
STREET 0 0 7,908 34,799 95,663 0
FRAZIER 0 0 10,080 14,977 123,684 0
RATOFF 0 0 11,107 15,371 114,266 0
KRANGEL 0 0 3,584 3,815 40,639 0
====================================================================================================================================
</TABLE>
* This value is the total difference between the outstanding options'
exercise price and $54.5625, the closing price of our Class B Common
Stock on April 30, 2000.
11
<PAGE> 16
RETIREMENT PLAN DESCRIPTIONS
--------------------------------------------------------------------------------
THIS SECTION DESCRIBES RETIREMENT AND SAVINGS PLANS 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 $ 68,421 $136,841 $ 205,262
$ 800,000 $138,421 $276,841 $ 415,262
$1,200,000 $208,421 $416,841 $ 625,262
$1,600,000 $278,421 $556,841 $ 835,262
$2,000,000 $348,421 $696,841 $1,045,262
============================================================================
</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 2000 for these
plans and service credited as of April 30, 2000, were as follows: Owsley Brown
II, $1,433,856 and 30 years; William M. Street, $1,009,645 and 30 years; Owsley
Brown Frazier, $658,677 and 30 years; Steven B. Ratoff, $572,733 and 6 years;
and Stanley A. Krangel, $612,144 and 5 years.
(2) SAVINGS PLAN: Subject to a maximum the IRS sets annually ($10,500 for
calendar 2000), 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.
12
<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 $25,000, payable in equal periodic installments,
plus $1,300 per board meeting and $1,300 per committee meeting attended;
committee chairmen receive an additional $650 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. n addition, under the Non-Employee Director
Compensation Plan, each director who is not an employee received options for
$20,000 worth of Class B Common Stock (1,120 options with a per share exercise
price of $62.25 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 11.
13
<PAGE> 18
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, 1995, 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 1995.
[GRAPH]
<TABLE>
<CAPTION>
----------------------------------------------------
1995 1996 1997 1998 1999 2000
=================================================================================
<S> <C> <C> <C> <C> <C> <C>
Brown-Forman Class B $100 $123 $161 $185 $245 $185
---------------------------------------------------------------------------------
S&P 500 $100 $130 $163 $230 $280 $308
---------------------------------------------------------------------------------
S&P Beverage Alcohol $100 $123 $153 $184 $258 $246
---------------------------------------------------------------------------------
DJ Consumer Non-Cyclical $100 $134 $182 $247 $278 $222
---------------------------------------------------------------------------------
</TABLE>
--------
(1) Relative capitalization shown in parentheses: Anheuser-Busch Companies
(59%); The Seagram Company Ltd. (31% -- and has substantial holdings
outside the beverage alcohol business); Adolph Coors Company (4%); and
Brown-Forman (6%).
14
<PAGE> 19
OTHER INFORMATION
--------------------------------------------------------------------------------
THIS SECTION SETS OUT OTHER INFORMATION YOU SHOULD KNOW BEFORE YOU CAST YOUR
VOTE.
--------------------------------------------------------------------------------
TRANSACTIONS WITH MANAGEMENT
James S. Welch, a director through November 18, 1999, is Of Counsel to Ogden
Newell & Welch, a Louisville law firm that rendered services to us during fiscal
2000. We also plan to use this firm's services in fiscal 2001. In addition,
another of our directors, Jerry E. Abramson, is Of Counsel with the Louisville
law firm of Brown, Todd & Heyburn, PLLC. We may use this firm's services in
fiscal 2001.
Mr. Barry D. Bramley receives compensation for serving as the non-executive
Chairman of the Board of Directors of Lenox, Incorporated. As Chairman, Mr.
Bramley received an annualized retainer of $218,000, paid in monthly
installments, as well as reimbursement for all reasonable and necessary expenses
incurred in performing the duties of Chairman. The total retainer paid to Mr.
Bramley under this arrangement during fiscal 2000 was $229,013.
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, 2001. 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, 2000, we know of no business to come before the meeting other
than the election of directors. 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 2001 ANNUAL MEETING
If you have a proposal you want to be considered at the 2001 Annual Meeting of
Stockholders and to be included in the proxy materials for that meeting, we must
receive it in writing by March 5, 2001.
By Order of the Board of Directors
MICHAEL B. CRUTCHER
Secretary
Louisville, Kentucky
June 30, 2000
15
<PAGE> 20
P
R
O
X
Y
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 27, 2000
THE UNDERSIGNED hereby appoint(s) Owsley Brown II, Michael B. Crutcher, 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 19, 2000, at the Annual Meeting of Stockholders of the
Corporation, to be held on July 27, 2000, and at all adjourned sessions thereof,
in accordance with the Notice and the Proxy Statement received, for the election
of directors of the Corporation, and upon such other matters as may properly
come before the meeting.
Election of Directors, Nominees: Change of Address
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 --------------------------
--------------------------
(If you have written in
the above space, please
mark the corresponding
box on the reverse side
of this card.)
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
----------------
<PAGE> 21
--- PLEASE MARK
X YOUR VOTES AS IN
--- THIS EXAMPLE
The 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.
--------------------------------------------------------------------------------
FOR* WITHHELD
1. Election of ------ ------ 2. In their discretion, the Proxies
Directors are authorized to vote upon such
(see reverse) ------ ------ other business as may properly
come before the meeting
--------- Change of
Address on
--------- Reverse Side
* For all nominee(s), except vote withheld from the following:
--------------------------------------
--------------------------------------------------------------------------------
SIGNATURE(S) DATE , 2000
------------------------------------ --------------------
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.
