1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the fiscal year ended December 31, 1997.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from _______ to _______.
Commission File Number 001-04710
WHITMAN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-6076573
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
3501 Algonquin Road, Rolling Meadows, Illinois 60008
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code(847) 818-5000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
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Common Stock, without par value New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of February 27, 1998, the aggregate market value of the registrant's
common stock held by non-affiliates was $1,792.3 million. The number of shares
of common stock outstanding at that date was 100,621,718 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Part Item
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1. Whitman Corporation definitive proxy statement
dated March 20, 1998 for the 1998 Annual Meeting
of Shareholders. III 10, 11, 12
PART I
Item 1. BUSINESS.
GENERAL
Whitman Corporation ("Whitman" or the "Company") through its principal
operating company, Pepsi-Cola General Bottlers, Inc. ("General Bottlers"), is
engaged in the production and distribution of Pepsi-Cola brand products and a
variety of other non-alcoholic beverage products. General Bottlers is the
world's largest independent franchised Pepsi-Cola bottler, accounting for about
12 percent of all Pepsi-Cola products sold in the U.S. It serves a significant
portion of a twelve state region, primarily in the Midwest, with a customer base
of approximately 25 million people. In the last three years, General Bottlers
has more than doubled its potential market by signing exclusive franchise
agreements with PepsiCo, Inc. ("PepsiCo") for the northern and western half of
Poland during 1994, for the northwest portion of Russia, including St.
Petersburg, at the end of 1996, and for Belarus and the Baltic states (Estonia,
Latvia and Lithuania) in 1997. In 1987, Whitman entered into an agreement with
PepsiCo whereby PepsiCo contributed cash and assets in exchange for a 20 percent
interest in General Bottlers. While General Bottlers manages all phases of its
operations, including pricing of its products, General Bottlers and PepsiCo
exchange production, marketing and distribution information, benefiting both
companies' respective efforts to lower costs, improve productivity and increase
product sales. The Company was previously engaged in the refrigeration systems
and equipment business conducted through Hussmann International, Inc.
("Hussmann") and in the automotive services business through Midas, Inc.
("Midas"). On January 30, 1998, the Company distributed to shareholders all of
the common stock of Hussmann and Midas in tax-free spin-offs.
Forward-Looking Statements
This annual report on Form 10-K contains forward-looking information which
reflects management's expectations, estimates and assumptions, which were based
on information available at the time this Form 10-K was prepared. Future
results, performance or achievements of the Company may vary significantly from
such information and are subject to future events and uncertainties, including,
among other factors, weather, economic and market conditions, currency exchange
rates, cost and availability of raw materials and competitive activities or
other business conditions.
Marketing and Distribution
General Bottlers' business is seasonal and subject to weather conditions,
which have a significant impact on sales. In the United States, General Bottlers
sells its products across a significant portion of a twelve state region,
including: Illinois, Indiana, Iowa, Kansas, Kentucky, Michigan, Missouri, Ohio,
Tennessee, Virginia, West Virginia and Wisconsin. As part of its long-term
strategy, General Bottlers will look to acquire additional domestic franchises,
principally in the Midwest.
In 1997, approximately 87 percent of General Bottlers' domestic volume was
from Pepsi-Cola brand products, including: Pepsi, Diet Pepsi, Caffeine Free
Pepsi, Caffeine Free Diet Pepsi, Wild Cherry Pepsi, Diet Wild Cherry Pepsi,
Mountain Dew, Diet Mountain Dew, Caffeine Free Mountain Dew, Slice products, Mug
Root Beer, Mug Cream Soda, All-Sport and Aquafina still water. General Bottlers
also distributes other brands, including: Dr Pepper, 7-Up, Sunny Delight,
Hawaiian Punch, Seagram's mixers, Ocean Spray, Lipton Tea, Frappuccino and
Avalon spring water, which account for the remaining 13 percent of volume.
In each market, General Bottlers sells approximately 320 different
brand/package combinations through its three major channels: take-home, cold
drink and fountain. The take-home segment includes supermarkets/grocery stores,
convenience stores, gas stations, mass merchandisers, membership clubs and drug
stores. The supermarkets/grocery stores channel, where General Bottlers is the
market share leader in its territories, accounts for more than 45 percent of
total domestic volume, but is also the most price competitive channel. The cold
drink segment includes vending machines and coolers. The full service vending
machines have the highest margin of any distribution channel, because it
eliminates the middleman and enables General Bottlers to establish the retail
price. General Bottlers owns a majority of the vending machines used to dispense
its products and will continue to invest extensively in vending machines,
specifically those dispensing 20 ounce non-returnable ("NR") bottles. The
fountain segment includes fast-food accounts and other restaurants, hotels,
hospitals, movie theaters and other commercial accounts. With PepsiCo's spin-off
of its restaurant businesses, General Bottlers has been pursuing and will
continue to aggressively pursue fountain opportunities.
Volume growth has historically come from the supermarkets sector, where
competition is intense. General Bottlers has recently begun to focus on
obtaining more of its growth from higher margin channels, such as convenience
stores, gas stations, vending machines and food service providers.
The majority of General Bottlers' products are distributed by route sales
people to retail outlets by truck. General Bottlers operates more than 1,300
routes in its 11 domestic sales divisions, 112 routes in Poland, and 37 routes
in Russia and the Baltics. General Bottlers fleet includes more than 3,000
vehicles, the majority of which are owned. For several years, General Bottlers
has been expanding its bulk distribution system, Pepsi Express, for larger
customers in an effort to improve productivity. In Poland, General Bottlers
continues to improve the efficiency of its delivery system by reducing routes
(from 160 in 1996 down to the current 112) and implementing a pre-sell
distribution system.
General Bottlers pioneered the use of hand-held computers for route sales
people and this system enables General Bottlers to process sales and orders more
efficiently, allows for better inventory and discount controls, and enables
sales personnel to handle a wider range of products more efficiently.
New Products
During 1997, General Bottlers continued to expand its product lines by
adding Sunny Delight from Proctor and Gamble and Frappuccino from Starbucks.
Both products were very successful during their first year of introduction and
will be rolled out in all divisions during 1998. In addition, General Bottlers
added Aquafina, a new Pepsi brand still water product, to compliment its other
bottled water product lines currently being distributed.
As part of its long-term strategic goal to transform itself to a total
beverage company and grow faster than the industry, General Bottlers will
continue to look for products in the non-carbonated alternative beverage
category to compliment its existing product offerings.
International Expansion
In May, 1994, General Bottlers established a joint venture with PepsiCo's
existing manufacturing operations and entered into a franchise agreement giving
it the exclusive right to distribute products in the northern and western
regions of Poland. These distribution rights cover 40 percent of the population,
a market of approximately 16 million people.
On December 31, 1996, General Bottlers acquired the assets of the St.
Petersburg, Russia franchise from PepsiCo, which permits General Bottlers to
produce and distribute Pepsi-Cola brand products in St. Petersburg, as well as
the surrounding area in the northwest region of Russia, including Kaliningrad.
In 1997, General Bottlers also acquired franchise rights for Belarus and the
Baltic countries of Estonia, Latvia and Lithuania. Distribution in the Baltic
countries began during the first quarter of 1997. These combined markets have a
total population of approximately 30 million.
By the end of 1997, General Bottlers had invested approximately $145
million in Eastern Europe, including Russia and the Baltics. Investments in
these franchise territories during the next three years are expected to be
approximately $75 million.
The Company has experienced operating losses in Poland each year since
beginning operations in 1994. In 1997, General Bottlers reduced its losses in
Poland by one-third from $12 million to $8 million as it cut costs, introduced
new products and changed its distribution system to a pre-sell system. General
Bottlers expects to have additional operating losses during the next two years,
but at levels below those incurred in 1997. Despite continued expansion in
Russia and the Baltics, it is expected total international operating losses will
be slightly lower in 1998, compared with operating losses of $15 million in
1997. General Bottlers expects to reach break-even in its international
operations by as early as the year 2000. General Bottlers expects to find its
best opportunity for long-term growth in these markets. The current industry per
capita consumption in Russia and the Baltics is estimated to be approximately
100 8-ounce equivalents per year compared with approximately 400 in Western
Europe and about 800 in the United States.
Bottling Contracts
General Bottlers conducts its business primarily under bottling agreements
with PepsiCo. These contracts give General Bottlers exclusive rights to produce,
market and distribute Pepsi-Cola products in authorized containers and to use
the related trade names and trademarks in the specified territories. These
franchises require General Bottlers, among other things, to purchase its
concentrate requirements solely from PepsiCo, at prices established by PepsiCo,
and to promote diligently the sale and distribution of Pepsi brand products.
Pepsi franchise agreements in the United States are issued in perpetuity,
subject to termination only upon failure to comply with their terms. General
Bottlers has similar arrangements with other companies whose brands it produces
and distributes.
Pepsi franchise agreements outside the United States are for fifteen years
in duration. General Bottlers expects these agreements to be renewed prior to
their termination.
Advertising
General Bottlers benefits greatly from national advertising campaigns
conducted by PepsiCo and the other beverage companies whose products it sells.
General Bottlers also makes substantial advertising expenditures in its local
markets, including the use of television, radio, print and billboards. General
Bottlers also makes extensive use of in-store point-of-sale displays to
reinforce the national and local advertising and to stimulate impulse purchases.
Raw Materials
Excluding the water products, virtually all of General Bottlers' products
use concentrates, which are supplied by the franchisors. In addition to
concentrates, General Bottlers purchases sweeteners (e.g., fructose), cans,
plastic bottles, closures, carbon dioxide and other packaging materials,
including cardboard, for use in the production and packaging of Pepsi-Cola and
other non-alcoholic beverages. All raw materials and supplies, excluding
concentrates, are purchased from multiple suppliers. The packaging materials
(bottles, cans, caps, closures, cartons and cases) are obtained from suppliers
approved by the franchisors. General Bottlers obtains water for use in the
domestic production process from publicly available sources.
General Bottlers negotiates contracts for its sweetener and packaging
material requirements to minimize fluctuations in costs and ensure the
availability of those materials and supplies. The Company has entered into
contracts, which include a significant portion of its expected requirements in
1998, for cans, plastic bottles and cardboard. During the first quarter of 1998,
the Company was still in negotiations, which would cover substantially all of
its 1998 fructose requirements. A final agreement is expected during the first
or second quarter of 1998.
In 1997, General Bottlers experienced lower costs for aluminum cans,
plastic bottles and sweeteners, but it is expected that such costs will increase
during 1998.
The inability of suppliers to deliver concentrates or other products to
General Bottlers could adversely affect operating results. None of the raw
materials or supplies currently in use are in short supply, although factors
outside of the control of General Bottlers could adversely impact the future
availability of these supplies.
Competition
Americans consume more soft drinks than any other beverage, including
water. Competition among soft drinks of all kinds is intense, particularly in
the principal cola drink market which accounts for approximately 60 percent of
the total soft drink market. The carbonated soft drink market is dominated by
Pepsi-Cola and Coca-Cola with a combined estimated market share of nearly 75
percent in 1997. Other major participants include Dr Pepper, 7-Up, Canada Dry
and Royal Crown Cola.
The non-alcoholic beverage business is also extremely competitive. General
Bottlers competes with many forms of commercial beverages in addition to
carbonated soft drinks, such as coffee, coffee drinks, tea, tea drinks, juices,
juice drinks, milk, milk drinks and bottled water. The principal competitive
factors in the carbonated soft drink industry are price, brand recognition and
brand image. In the carbonated soft drink category the principal competition is
Coca-Cola brand products.
Employees
Whitman's continuing operations employed 6,381 people worldwide as of
December 31, 1997. This included 5,340 people employed in the domestic
operations and 1,041 people employed in the foreign operations. The Company is a
party to collective bargaining agreements covering approximately 2,800
employees. Ten agreements covering approximately 800 employees will be
renegotiated in 1998. Whitman regards its employee relations as generally
satisfactory.
Government Regulations
General Bottlers' domestic production and marketing, including container
labeling, are subject to the rules and regulations of the United States Food and
Drug Administration and other federal, state and local governmental agencies.
State rules and regulations include beverage container deposit laws in Michigan,
Iowa and the city of Columbia, Missouri. While the Company actively supports
environmental and anti-litter programs, it also attempts to mitigate any impact
resulting from the enactment of rules and regulations regarding deposits and
restrictive packaging which could adversely affect the operating results of the
Company. Such rules and regulations, if enacted, could adversely affect the
operations of the Company.
Environmental Matters
Whitman maintains a continuous program to facilitate compliance with
federal, state and local laws and regulations relating to the discharge or
emission of materials into, and other laws and regulations relating to the
protection of, the environment. The capital costs of such compliance, including
the costs of the modification of existing plants and the installation of new
manufacturing processes incorporating pollution control technology, are not
material.
Under the agreement pursuant to which Whitman sold Pneumo Abex Corporation
in 1988 and a subsequent settlement agreement entered into with Pneumo Abex in
September, 1991, Whitman has assumed indemnification obligations for certain
environmental liabilities of Pneumo Abex, net of any insurance recoveries.
Pneumo Abex has been and is subject to a number of federal, state and local
environmental cleanup proceedings, including proceedings under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 ("CERCLA") at
off-site locations involving other major corporations which have also been named
as potentially responsible parties ("PRPs"). Pneumo Abex also has been and is
subject to private claims and several lawsuits for remediation of properties
currently or previously owned by Pneumo Abex, and Whitman is subject to two such
suits.
There is significant uncertainty in assessing the total cost of remediating
a given site and in determining any individual party's share in that cost. This
is due to the fact that the Pneumo Abex liabilities are at different stages in
terms of their ultimate resolution, and any assessment and determination are
inherently speculative during the early stages, depending upon a number of
variables beyond the control of any party. Additionally, the settlement of
governmental proceedings or private claims for remediation invariably involves
negotiations within broad cost ranges of possible remediation alternatives.
Furthermore, there are significant timing considerations in that a portion of
the expense involved and any resulting obligation of Whitman to indemnify Pneumo
Abex may not be incurred for a number of years.
In 1992, the United States Environmental Protection Agency ("EPA") issued a
Record of Decision ("ROD") under the provisions of CERCLA setting forth the
scope of expected remedial action at a Pneumo Abex facility in Portsmouth,
Virginia. The EPA has estimated that the cost of the remedial action necessary
to comply with an Amended ROD, issued in 1994, will total $31 million. In
January, 1996, Pneumo Abex executed a Consent Decree with the EPA agreeing to
implement remediation of areas associated with the former Portsmouth facility
operations. Whitman management is optimistic that the cost of implementation of
the remedy required by the Consent Decree will be less than the estimated cost
set forth in the Amended ROD. Additionally, in a lawsuit brought against other
PRPs that did not execute the Consent Decree, Pneumo Abex and Whitman have
recovered approximately $3.1 million in settlements and have obtained a
judgment, currently being appealed, against other financially viable PRPs for
more than 40 percent of the past and future response costs at the Portsmouth
site.
Management believes that potential insurance recoveries may defray a
portion of the expenses involved in meeting Pneumo Abex environmental
liabilities. In November, 1992, Jensen-Kelly Corporation, a Pneumo Abex
subsidiary, Pneumo Abex and certain other of its affiliates, and Whitman and
certain of its affiliates, filed a lawsuit against numerous insurance companies
in the Superior Court of California, Los Angeles County, seeking damages and
declaratory relief for insurance coverage and defense costs for environmental
claims. In 1997, Whitman and Pneumo Abex achieved settlements with several
carriers, and although optimistic it will receive additional recoveries, Whitman
is otherwise unable to predict the outcome of this litigation.
In the opinion of management, the eventual resolution of these claims and
litigation, considering amounts accrued, but excluding potential insurance
recoveries, will not have a material adverse effect on Whitman's financial
condition or the results of operations.
Item 2. PROPERTIES.
General Bottlers' facilities include five bottling plants, four combination
bottling/canning plants and four canning plants with a total manufacturing
capacity of approximately 550,000 square feet. In addition, General Bottlers
operates from 72 distribution facilities, including 16 distribution facilities
located in Eastern Europe, with five new facilities added in portions of
northwest Russia and the Baltics during 1997. Sixteen of the distribution
facilities are leased and approximately 13 percent of General Bottlers'
production is from its one leased domestic plant. The Company believes all
facilities are adequately equipped and maintained and capacity is sufficient for
its current needs. General Bottlers currently operates a fleet of more than
3,000 vehicles in the U.S. and nearly 700 vehicles in its international
operations to service its existing routes.
In addition, Whitman owns various industrial, commercial and residential
real estate properties in the United States and a leasing company, which leases
approximately 2,000 railcars, comprised of locomotives, flatcars and hopper
cars, to the Illinois Central Railroad Company.
Item 3. LEGAL PROCEEDINGS.
Whitman and its subsidiaries are defendants in numerous lawsuits, none of
which, in the opinion of management, are expected to have a material adverse
effect on Whitman's results of operations or financial condition.
See also "Environmental Matters" in Item 1.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The common stock of the Company is listed and traded on the New York,
Chicago and Pacific stock exchanges. The table below sets forth the reported
high and low sales prices as reported for New York Stock Exchange Composite
Transactions for Whitman common stock and indicates the Whitman dividends for
each quarterly period for the years 1997 and 1996.
Common
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High Low Dividend
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1997:
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1st quarter $ 24.625 $ 21.625 $ 0.105
2nd quarter 26.750 22.625 0.115
3rd quarter 27.250 24.125 0.115
4th quarter 28.125 24.250 0.115
1996:
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1st quarter $ 25.000 $ 21.750 $ 0.095
2nd quarter 25.750 22.875 0.105
3rd quarter 24.625 21.875 0.105
4th quarter 25.125 22.375 0.105
There were 16,948 shareholders of record at December 31, 1997.
Item 6. SELECTED FINANCIAL DATA.
Included in Note 17 to the Consolidated Financial Statements.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Liquidity and Capital Resources
The Company's net cash from operating activities increased by $133.0
million in 1997 to $270.2 million.
Net cash provided by continuing operations remained strong, increasing by
$7.0 million to $152.9 million. Income from continuing operations declined by
$32.0 million, principally due to the impact of special charges, which reduced
income by $31.6 million after income taxes and minority interest. The special
charges required only a minimal use of cash during 1997, reducing cash by $2.4
million. Changes in primary working capital (defined as receivables and
inventories less payables) required a net additional investment of $13.8 million
in 1997 compared with a net reduction of $6.0 million in the prior year. Changes
in the individual working capital accounts were not significant. A significant
portion of the change in other assets and liabilities resulted from a recently
settled audit with the Internal Revenue Service ("IRS") for the years 1988
through 1991. This settlement resulted in refunds of $44.7 million in 1997, of
which $10.7 million was related to continuing operations.
Net cash provided by discontinued operations improved by $126.0 million in
1997. The sharp increase principally resulted from the positive net cash flows
from Hussmann and Midas, which were reclassified to discontinued operations in
1997, due in part to strong improvements in the management of working capital.
The cash provided by discontinued operations in 1997 also included the remaining
portion of the IRS audit settlement, discussed above, for the years 1988 through
1991. In addition, net cash provided by discontinued operations reflected
environmental expenditures, net of insurance recoveries, related to previously
sold subsidiaries.
The Company invested $81.5 million, net of proceeds, in its operations
during 1997 compared with a net investment of $85.6 million in the previous
year. Included was $83.4 million for capital expenditure programs in 1997
compared with $87.2 million in the prior year. It is expected that capital
spending in 1998, excluding acquisitions, will surpass 1997 levels due, in part,
to planned increased investment in vending equipment, additional investment in
information technology systems, as well as other anticipated capital programs.
In 1997, General Bottlers acquired the Pepsi-Cola bottler in St. Petersburg from
PepsiCo for $20.2 million. To support its international expansion, General
Bottlers also invested $2.2 million and $30.6 million in its joint venture
manufacturing operations in Poland in 1997 and 1996, respectively. The
investment in the joint venture in 1996 included a new manufacturing facility
near Poznan, Poland. Purchases and sales of investments principally relate to
the Company's insurance subsidiary, which provides certain levels of insurance
for General Bottlers and the now discontinued operations of Hussmann and Midas.
Funds provided through premiums are invested by the insurance subsidiary and
proceeds from the sale of investments are used by the insurance subsidiary to
pay claims to the extent required. A substantial portion of the purchases and
sales of such investments are reinvested as the investments mature. In 1997, the
Company liquidated $10.0 million of the insurance subsidiary's investment
portfolio, compared with a liquidation of $70.0 million in the previous year;
the funds were used to reduce outside indebtedness and for general corporate
purposes.
During 1997, financing activities resulted in a net use of funds totaling
$136.4 million compared with a net use of $113.3 million in 1996. The Company
issued $75.0 million of long-term debt (see Note 6 to the Consolidated Financial
Statements) during 1997, of which $25.0 million related to the acquisition and
ongoing operating requirements of the newly acquired franchise in Russia. The
remaining $50.0 million of debt issued in 1997 replaced debt which matured
during the year. A total of $95.5 million of debt was repaid in 1997, including
a $30.0 term loan scheduled to mature in 2000. As part of its ongoing share
repurchase program, the Company repurchased 3.3 million shares of its stock for
$82.1 million. During the previous year it used $93.2 million to acquire nearly
4.0 million shares. The Company paid dividends of $45.6 million in 1997, based
on an annual cash dividend level of $0.45 per share compared with $42.9 million
(annually $0.41 per share) in the previous year. The issuance of common stock
from the exercise of stock options resulted in cash inflows of $11.8 million in
1997, compared with $14.6 million in 1996.
At December 31, 1997, the Company had $300 million available under a
contractual revolving credit facility and $200 million available under its
commercial paper program. Neither facility was in use at December 31, 1997. The
Company believes that with strong operating cash flows, its available lines of
credit, cash received from Hussmann and Midas in connection with the spin-offs,
and the potential for additional debt and equity offerings, it will have
sufficient resources to fund its future growth and expansion, including funds
for capital expenditures and possible acquisitions.
Operating Results - 1997 compared with 1996
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For a description of the Company's major products and its principal
markets, reference is made to Part I, Item 1, Business, and to Note 16, Segment
Reporting, to the Consolidated Financial Statements.
Sales
Sales increased by $56.1 million, or 3.7 percent, in 1997 to $1,557.5
million.
Domestic sales increased by $12.9 million, or 0.9 percent, in 1997 to
$1,464.0 million. Unit case volume (which represented approximately 88 percent
of total sales) in the U.S. increased by 4.8 percent. The increase in volume
principally reflected growth in Mountain Dew, Dr Pepper, Mug Root Beer and Sunny
Delight, with Pepsi brand product sales volume being essentially flat with 1996.
This increase in volume was offset to a large degree by lower average net
selling prices. The average net selling price on this unit case volume fell 4.2
percent below the prior year, reflecting the extremely competitive pricing
environment throughout General Bottlers' domestic markets, particularly in the
supermarket channel.
International sales increased by $43.2 million to $93.5 million. The
increase principally reflected General Bottlers' expansion into newly acquired
territories in Russia and the Baltics.
Gross Profit
The Company's consolidated gross profit increased by $7.9 million, or 1.4
percent, to $584.9 million. The gross profit margin declined to 37.6 percent of
sales in 1997 from 38.4 percent in 1996. This reduction principally reflected
the adverse effects of the competitive pricing pressures in General Bottlers'
domestic markets. The domestic gross profit margin declined by 0.4 percentage
points to 38.7 percent. Contributing to the decline in the consolidated margin
were lower margin sales in the newly acquired territories in Russia and the
Baltics, reflecting an extremely competitive pricing environment and certain
inefficiencies related to the start-up of these operations. Margins in Poland
improved, reflecting the benefits of increased volume and manufacturing
efficiencies. Internationally, the gross profit margin decreased by 0.7
percentage points to 19.1 percent from 19.8 percent in the previous year.
Selling, General and Administrative
Selling, general and administrative (S,G&A) expenses increased by $22.9
million, or 6.2 percent, compared with the 3.7 percent increase in sales. As a
result, S,G&A expenses increased to 25.0 percent of sales, compared with 24.4
percent in 1996. The higher level of expenses reflected, among other items, the
start-up of operations in Russia and the Baltics, which accounted for more than
half of the increase in S,G&A expenses. The increase in S,G&A expenses as a
percent of sales also reflected the competitive pricing environment during 1997.
Corporate administrative expenses, excluding special charges of $34.5
million, declined slightly from $17.5 million in 1996 to $16.9 million in 1997.
The increase in amortization expense primarily resulted from the
amortization of goodwill related to the acquisition in Russia.
Operating Income
Operating income declined by $64.6 million, or 33.2 percent, to $130.2
million. The decrease was primarily the result of special charges incurred
during the third and fourth quarters of 1997 totaling $49.3 million (see Note 3
to the Consolidated Financial Statements).
General Bottlers' domestic operating income was down $24.1 million in 1997,
or 10.7 percent, from the previous year to $200.3 million. Included in these
results were special charges of $11.1 million, primarily related to the
consolidation of its divisions. The lower earnings also reflected the effects of
lower gross profit margins and higher distribution costs which were caused, in
part, by higher unit case volumes.
General Bottlers' international operating loss increased by $6.6 million
from the previous year to $18.7 million, including special charges of $3.7
million in 1997. The increased operating losses also reflected start-up losses
of $6.9 million in Russia and the Baltics, offset by improved results in Poland,
which reduced its operating losses by approximately one-third.
Interest and Other Expenses
Interest expense, net, did not change significantly on a year over year
basis. Other expenses, net, decreased by $7.6 million, which was primarily
attributable to an $8.7 million charge recorded in 1996, principally relating to
asset write-downs at General Bottlers' joint venture in Poland.
Technology Systems and Year 2000 Issues
As the year 2000 approaches, the Company recognizes customers' and
shareholders' concerns regarding its systems and its ability to produce and
distribute its products in an effective manner. The Company has identified which
systems are not presently ready for the new millennium and has identified
options available to make such systems ready for this change. In 1998, the
Company will begin implementation of an integrated enterprise-wide resource
planning ("ERP") system. The ERP implementation, while upgrading and expanding
the capacity of existing systems, will make all financial systems year 2000
compliant. The Company expects to have system changes which address year 2000
exposures, including ERP financial systems implementation, in place and ready
prior to January 1, 2000, with no significant disruption to its operations. The
Company does not believe that the financial impact of making its systems year
2000 compliant will be material to the Company's financial position or results
of operations.
The Company recognizes the impact third parties have on its ability to
achieve readiness for the year 2000. The Company is discussing year 2000
readiness with its key customers, suppliers and financial institutions.
Operating Results - 1996 compared with 1995
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Sales
Sales increased by $52.7 million, or 3.6 percent, in 1996 to $1,501.4
million.
Domestic sales increased by $37.2 million, or 2.6 percent, in 1996 to
$1,451.1 million. Unit case volume (which represented approximately 88 percent
of total sales) in the U.S. increased by 3.8 percent. The average net selling
price on such volume fell approximately one percent below the prior year,
reflecting the competitive pricing environment throughout the domestic markets
during the latter half of the year.
International sales increased by $15.5 million in 1996, or 44.5 percent, to
$50.3 million. The increase in sales principally resulted from General Bottlers'
continued expansion in Poland and reflected an increase in case volume, which
rose 33.6 percent during 1996, as well as improved pricing.
Gross Profit
The Company's consolidated gross profit increased by $38.8 million, or 7.2
percent, to $577.0 million. The gross profit margin improved to 38.4 percent of
sales in 1996 from 37.2 percent in 1995. This improvement reflected the benefits
of lower ingredient and packaging costs in General Bottlers' domestic
operations, where the margin improved by 1.5 percentage points to 39.1 percent.
Additionally, General Bottlers' international operations improved their gross
profit margins by 2.3 percentage points to 19.8 percent, reflecting the benefits
of higher volumes and pricing.
Selling, General and Administrative
S,G&A expenses increased by $24.3 million, or 7.1 percent, compared with
the 3.6 percent increase in sales. As a result, S,G&A expenses increased to 24.4
percent of sales, compared with 23.6 percent in 1995. The higher level of
expenses included, among other items, the continued expansion of operations in
Poland, which accounted for $4.7 million of the total increase in S,G&A expenses
in 1996. The remaining increase principally resulted from higher selling
expenses, including costs associated with the "Pepsi Stuff" program, which
represented the largest promotion ever sponsored by PepsiCo. The increase in
S,G&A expenses, as a percent of sales, also reflects the effects of the
competitive pricing environment during the latter half of 1996. Corporate
administrative expenses increased by $0.9 million to $17.5 million. There were
no significant items which caused the increase.
The increase in amortization expense was primarily attributable to a full
year's impact of goodwill amortization related to the Cedar Rapids franchise
acquisition made during 1995.
Operating Income
Operating income increased by $13.7 million, or 7.6 percent, to $194.8
million.
Domestically, General Bottlers' operating income increased $15.4 million,
or 7.4 percent, to $224.4 million. The operating margin, as a percent of sales,
increased to 15.5 percent from 14.8 percent in 1995. The improved domestic
results reflected the benefits of higher sales volume, together with lower
ingredient and packaging costs.
Internationally, operating losses increased by $0.8 million to $12.1
million, as General Bottlers continued to expand and build its market position
in Poland.
Interest and Other Expenses
Interest expense declined by $2.1 million in 1996 to $68.2 million,
resulting from lower average interest rates. Interest income increased by $2.1
million in 1996 to $3.0 million, due in part to loans made to General Bottlers'
joint venture in Poland, as well as an increase in temporary funds available for
short-term investment. The remaining decrease in interest expense, net, related
to increased interest income on loans and advances to Hussmann and Midas, which
were reclassified to discontinued operations in December, 1997. Other expenses,
net, increased by $10.3 million, which was primarily attributable to an $8.7
million charge recorded in 1996, principally relating to asset write-downs at
General Bottlers' joint venture in Poland.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Index to Financial Information.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Whitman incorporates by reference the information contained under the
caption "Election of Directors" in its definitive proxy statement dated March
20, 1998, filed pursuant to Section 14(a) of the Securities Exchange Act of
1934, as amended.
The executive officers of Whitman and their ages as of March 1, 1998 were
as follows:
Age Position
--- --------
Bruce S. Chelberg 63 Chairman and Chief Executive Officer
Thomas L. Bindley 54 Executive Vice President
Robert C. Cushing 45 Corporate Vice President and President,
Pepsi-Cola General Bottlers, Inc.
Frank T. Westover 59 Senior Vice President-Controller
Lawrence J. Pilon 49 Senior Vice President-Human Resources
Charles H. Connolly 63 Vice President-Corporate Affairs and Investor
Relations
William B. Moore 56 Vice President, Secretary and General Counsel
Except as described in the following paragraph or as incorporated by
reference to the Registrant's definitive proxy statement, all of the executive
officers of Whitman have held positions which are the same or which involve
substantially similar functions as indicated above during the past five years.
Mr. Pilon joined Whitman Corporation as Senior Vice President-Human
Resources in February, 1994. Prior to joining Whitman Corporation, Mr. Pilon
served as Vice President-Human Resources and Secretary of National Intergroup,
Inc. from June, 1986 to January, 1994. In 1997, Mr. Cushing became President of
Pepsi-Cola General Bottlers, Inc. and Corporate Vice President of Whitman
Corporation. Mr. Cushing joined General Bottlers in 1984 and has subsequently
held various executive positions, serving as Executive Vice President-Marketing
and Strategic Planning from 1996-1997.
Item 11. EXECUTIVE COMPENSATION.
Whitman incorporates by reference the information contained under the
caption "Executive Compensation" and the last paragraph under the caption
"General Information" in its definitive proxy statement dated March 20, 1998,
filed pursuant to Section 14(a) of the Securities Exchange Act of 1934, as
amended.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Whitman incorporates by reference the information contained under the
captions "Principal Shareholders" and "Securities Ownership of Directors and
Executive Officers" in its definitive proxy statement dated March 20, 1998,
filed pursuant to Section 14(a) of the Securities Exchange Act of 1934, as
amended.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) See Index to Financial Information and Exhibit Index.
(b) Through December 31, 1997, no reports on Form 8-K were filed subsequent
to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 20th day of
March, 1998.
WHITMAN CORPORATION
By: /s/ FRANK T. WESTOVER
--------------------------------
Frank T. Westover
Senior Vice President-Controller
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities
indicated on the 20th day of March, 1998.
Signature Title
* Bruce S. Chelberg Chairman and Chief
------------------------ Executive Officer and Director
BRUCE S. CHELBERG (principal executive officer)
* Thomas L. Bindley Executive Vice President
------------------------ (principal financial officer)
THOMAS L. BINDLEY
/s/ FRANK T. WESTOVER Senior Vice President-Controller
------------------------ (principal accounting officer)
FRANK T. WESTOVER
* Herbert M. Baum Director
------------------------
HERBERT M. BAUM
* Richard G. Cline Director *By: /s/ FRANK T. WESTOVER
------------------------ ---------------------
RICHARD G. CLINE Frank T. Westover
Attorney-in-Fact
* Pierre S. duPont Director March 20, 1998
------------------------
PIERRE S. du PONT
* Archie R. Dykes Director
------------------------
ARCHIE R. DYKES
* Charles W. Gaillard Director
------------------------
CHARLES W. GAILLARD
* Jarobin Gilbert, Jr. Director
------------------------
JAROBIN GILBERT, JR.
* Victoria J. Gregoricus Director
------------------------
VICTORIA J. GREGORICUS
* Donald P. Jacobs Director
------------------------
DONALD P. JACOBS
* Charles S. Locke Director
------------------------
CHARLES S. LOCKE
<PAGE>
WHITMAN CORPORATION AND SUBSIDIARIES
----------------------
FINANCIAL INFORMATION
FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1997
<PAGE>
WHITMAN CORPORATION AND SUBSIDIARIES
INDEX TO FINANCIAL INFORMATION
Statement of Financial Responsibility
Independent Auditors' Report
Consolidated Statements of Income for the years ended December 31, 1997, 1996
and 1995
Consolidated Balance Sheets as of December 31, 1997 and December 31, 1996
Consolidated Statements of Cash Flows for the years ended December 31, 1997,
1996 and 1995
Consolidated Statements of Shareholders' Equity for the years ended December 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements
Selected Financial Data
Financial Statement Schedules:
Financial statement schedules have been omitted because they are not
applicable or the required information is shown in the financial statements
or related notes.
<PAGE>
STATEMENT OF FINANCIAL RESPONSIBILITY
The consolidated financial statements of Whitman Corporation and
subsidiaries have been prepared by management which is responsible for their
integrity and content. These statements have been prepared in accordance with
generally accepted accounting principles and include amounts which reflect
certain estimates and judgments by management. Actual results could differ from
these estimates.
The Board of Directors, acting through the Audit Committee of the Board,
has responsibility for determining that management fulfills its duties in
connection with the preparation of these consolidated financial statements. The
Audit Committee meets periodically and privately with the Independent Auditors
and with the internal auditors to review matters relating to the quality of the
financial reporting of the Company, the related internal controls and the scope
and results of their audits. The Committee also meets with management and the
internal audit staff to review the affairs of the Company.
To meet management's responsibility for the fair and objective reporting of
the results of operations and financial condition, the Company maintains systems
of internal controls and procedures to provide reasonable assurance of the
reliability of its accounting records. These systems include written policies
and procedures, a substantial program of internal audit and the careful
selection and training of its financial staff.
The Company's Independent Auditors, KPMG Peat Marwick LLP, are engaged to
audit the consolidated financial statements of the Company and to issue their
report thereon. Their audit has been conducted in accordance with generally
accepted auditing standards. Their report appears on the following page.
<PAGE>
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND SHAREHOLDERS
OF WHITMAN CORPORATION:
We have audited the accompanying consolidated balance sheets of Whitman
Corporation and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the years in the three-year period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Whitman
Corporation and subsidiaries at December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Chicago, Illinois
January 16, 1998
<PAGE>
Whitman Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the years ended December 31
(in millions, except for earnings per share) 1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Sales $ 1,557.5 $ 1,501.4 $ 1,448.7
Cost of goods sold 972.6 924.4 910.5
---------- ---------- ----------
Gross profit 584.9 577.0 538.2
Selling, general and administrative expenses 389.7 366.8 342.5
Amortization expense 15.7 15.4 14.6
Special charges (Note 3) 49.3 -- --
---------- ---------- ----------
Operating income 130.2 194.8 181.1
Interest expense, net (Note 4) (42.3) (41.5) (47.6)
Other expense, net (18.0) (25.6) (15.3)
---------- ---------- ----------
Income before income taxes 69.9 127.7 118.2
Income taxes (Note 5) 37.9 61.1 52.8
---------- ---------- ----------
Income from continuing operations before minority interest 32.0 66.6 65.4
Minority interest 16.2 18.8 18.6
---------- ---------- ----------
Income from continuing operations 15.8 47.8 46.8
Income (loss) from discontinued operations after taxes (Note 2) (11.7) 91.6 86.7
---------- ---------- ----------
Net income $ 4.1 $ 139.4 $ 133.5
========== ========== ==========
Average number of common shares outstanding - Basic 101.6 104.8 104.9
========== ========== ==========
Average number of common shares outstanding - Diluted 102.9 106.0 106.0
========== ========== ==========
Income (Loss) Per Common Share - Basic:
Continuing operations $ 0.16 $ 0.46 $ 0.44
Discontinued operations (0.12) 0.87 0.83
---------- ---------- ----------
Net income $ 0.04 $ 1.33 $ 1.27
========== ========== ==========
Income (Loss) Per Common Share - Diluted:
Continuing operations $ 0.15 $ 0.45 $ 0.44
Discontinued operations (0.11) 0.87 0.82
---------- ---------- ----------
Net income $ 0.04 $ 1.32 $ 1.26
========== ========== ==========
Cash dividends per common share $ 0.45 $ 0.41 $ 0.37
========== ========== ==========
</TABLE>
The following notes are an integral part of these statements.
<PAGE>
Whitman Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of December 31
(in millions) 1997 1996
---------- ----------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents $ 52.4 $ 4.7
Receivables, net of allowance for doubtful accounts of $3.4 million in 1997 and
$1.7 million in 1996 131.7 125.4
Inventories:
Raw materials and supplies 28.1 23.8
Finished goods 41.8 40.2
---------- ----------
Total inventories 69.9 64.0
Other current assets 36.3 47.9
Net current assets of companies held for disposition 270.5 356.1
---------- ----------
Total current assets 560.8 598.1
---------- ----------
Investments 157.0 176.6
Property (at cost):
Land 14.9 15.7
Buildings and improvements 161.3 148.4
Machinery and equipment 702.0 666.5
---------- ----------
Total property 878.2 830.6
Accumulated depreciation and amortization (471.6) (447.0)
---------- ----------
Net property 406.6 383.6
---------- ----------
Goodwill, net of accumulated amortization of $140.8 million in 1997 and
$125.1 million in 1996 462.6 469.2
Other assets 49.5 33.8
Net non-current assets of companies held for disposition 393.2 419.3
---------- ----------
Total assets $ 2,029.7 $ 2,080.6
========== ==========
</TABLE>
The following notes are an integral part of these statements.
<PAGE>
Whitman Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
As of December 31
(in millions) 1997 1996
---------- ----------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Short-term debt, including current maturities of long-term debt $ 282.5 $ 85.5
Accounts and dividends payable 97.8 100.8
Income taxes payable 2.9 3.0
Accrued expenses:
Salaries and wages 16.1 18.3
Interest 20.7 21.0
Other 70.0 41.2
---------- ----------
Total current liabilities 490.0 269.8
---------- ----------
Long-term debt 604.7 821.7
Deferred income taxes 75.4 30.7
Other liabilities 98.4 85.2
Minority interest 221.5 231.0
Shareholders' equity:
Common stock (without par, 250.0 million shares authorized; 111.7 million
issued at December 31, 1997 and 110.6 million issued at December 31, 1996) 478.2 456.3
Retained income 363.4 402.0
Cumulative translation adjustment (78.8) (57.8)
Unrealized investment gain 0.2 1.8
Treasury stock (10.6 million shares at December 31, 1997 and 8.0 million shares at
December 31, 1996) (223.3) (160.1)
---------- ----------
Total shareholders' equity 539.7 642.2
---------- ----------
Total liabilities and shareholders' equity $ 2,029.7 $ 2,080.6
========== ==========
</TABLE>
The following notes are an integral part of these statements.
<PAGE>
Whitman Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31
(in millions) 1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations $ 15.8 $ 47.8 $ 46.8
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization 73.8 75.2 70.6
Special charges not affecting cash 46.9 -- --
Other 16.5 25.3 13.4
Changes in assets and liabilities, exclusive of acquisitions:
(Increase) decrease in receivables (5.8) 2.4 6.9
(Increase) decrease in inventories (2.4) 1.8 (8.8)
Increase (decrease) in payables (5.6) 1.8 7.6
Net change in other assets and liabilities 13.7 (8.4) (19.7)
--------- --------- ---------
Net cash provided by continuing operations 152.9 145.9 116.8
Net cash provided by (used in) discontinued operations 117.3 (8.7) 1.5
--------- --------- ---------
Net cash provided by operating activities 270.2 137.2 118.3
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital investments (83.4) (87.2) (111.1)
Proceeds from sales of property 1.9 1.6 7.8
Companies acquired, net of cash acquired (20.2) -- (52.7)
Investments in joint ventures, net (2.2) (30.8) (18.6)
Purchases of investments (38.8) (92.1) (221.2)
Proceeds from sales of investments 57.1 176.1 213.4
--------- --------- ---------
Net cash used in investing activities (85.6) (32.4) (182.4)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayment of bank lines of credit and commercial paper -- (15.0) (27.5)
Proceeds from issuance of long-term debt 75.0 124.2 277.6
Repayment of long-term debt (95.5) (101.0) (144.1)
Issuance of common stock 11.8 14.6 12.8
Treasury stock purchases (82.1) (93.2) (18.8)
Common dividends (45.6) (42.9) (38.8)
--------- --------- ---------
Net cash provided by (used in) financing activities (136.4) (113.3) 61.2
--------- --------- ---------
Effects of exchange rate changes on cash and cash equivalents (0.5) (0.3) (0.2)
---------- --------- ---------
Change in cash and cash equivalents 47.7 (8.8) (3.1)
Cash and cash equivalents at beginning of year 4.7 13.5 16.6
--------- --------- ---------
Cash and cash equivalents at end of year $ 52.4 $ 4.7 $ 13.5
========= ========= =========
</TABLE>
The following notes are an integral part of these statements.
<PAGE>
Whitman Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
For the years ended
December 31, 1997,
1996 and 1995 Common Stock Cumulative Unrealized Treasury Stock
----------------------- Retained Translation Investment --------------------
(dollars in millions) Shares Amount Income Adjustment Gain/(Loss) Shares Amount
----------- ------- ------- ----------- ----------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1995 108,104,990 $ 413.2 $ 215.2 $ (27.1) $ 1.3 (3,073,316) $ (50.0)
----------- ------- ------- ----------- ----------- ---------- -------
Net income 133.5
Treasury stock purchases (1,034,726) (18.8)
Stock compensation plans 1,094,844 14.6 2.0 (19,564) 0.1
Common stock issued for
acquisitions 126,700 2.7
Translation adjustments (28.5)
Unrealized investment gain 8.4
Dividends declared (38.8)
----------- ------- ------- ----------- ----------- ---------- -------
Balance, December 31, 1995 109,199,834 427.8 311.9 (55.6) 9.7 (4,000,906) (66.0)
----------- ------- ------- ----------- ----------- ---------- -------
Net income 139.4
Treasury stock purchases (3,989,894) (93.2)
Stock compensation plans 1,395,959 28.5 (6.4) (29,188) (1.2)
Common stock issued for
acquisitions 11,614 0.3
Translation adjustments (2.2)
Unrealized investment loss (7.9)
Dividends declared (42.9)
----------- ------- ------- ----------- ----------- ---------- -------
Balance, December 31, 1996 110,595,793 456.3 402.0 (57.8) 1.8 (8,008,374) (160.1)
----------- ------- ------- ----------- ----------- ---------- -------
Net income 4.1
Treasury stock purchases (3,323,200) (82.1)
Stock compensation plans 1,123,903 21.9 2.9 (63,743) (1.5)
Common stock issued for
outstanding General Bottlers
non-voting preferred stock
(Note 12) 794,115 20.4
Translation adjustments (21.0)
Unrealized investment loss (1.6)
Dividends declared (45.6)
----------- ------- ------- ----------- ----------- ----------- -------
Balance, December 31, 1997 111,719,696 $ 478.2 $ 363.4 $ (78.8) $ 0.2 (10,601,202) $(223.3)
=========== ======= ======= =========== =========== =========== =======
</TABLE>
The following notes are an integral part of these statements.
<PAGE>
Whitman Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of Whitman Corporation and all of its significant subsidiaries (the
"Company"). The Company's financial statements have been restated to classify
the results of operations and net assets of Hussmann International, Inc.
("Hussmann") and Midas, Inc. ("Midas") as discontinued operations. Accordingly,
all amounts included in the Notes to Consolidated Financial Statements pertain
to continuing operations except where otherwise noted. See further discussion in
Note 2. Operations outside the United States and its territories are included in
the consolidated financial statements on the basis of fiscal years ending
October 31.
CASH AND CASH EQUIVALENTS. Cash and cash equivalents consist of deposits with
banks and financial institutions which are unrestricted as to withdrawal or use,
and which have original maturities of three months or less.
INVENTORIES. Inventories are valued at the lower of cost (principally determined
on the average method) or net realizable value.
INVESTMENTS. Investments include real estate held for sale, principally at
Illinois Center, a large single location, mixed use development located on the
Chicago lakefront. The investments in real estate are carried at cost which
management believes is lower than net realizable value. When real estate is
sold, the net proceeds are deducted from the carrying value. Investments include
General Bottlers' minority interest in a manufacturing joint venture in Poland.
Also included are domestic and U.S. dollar-denominated foreign government
securities and securities guaranteed by such governments or their agencies, bank
obligations and corporate obligations (which are recorded at fair market value)
and other miscellaneous investments.
PROPERTY. Depreciation is computed on the straight-line method. When property is
sold or retired, the cost and accumulated depreciation are eliminated from the
accounts and gains or losses are recorded in other expense, net. Expenditures
for maintenance and repairs are expensed as incurred. The approximate ranges of
annual depreciation rates are 2.5 percent to 6.7 percent for buildings and
improvements and 8 percent to 20 percent for machinery and equipment.
GOODWILL. Goodwill principally represents the excess of cost over fair market
value of tangible assets of acquired businesses. Such amounts generally are
being amortized on straight-line bases over 40 years. Goodwill associated with
foreign operations is not significant.
CARRYING VALUES OF LONG-LIVED ASSETS. The Company evaluates the carrying values
of its long-lived assets by reviewing undiscounted cash flows by operating unit.
Such evaluations are performed whenever events and circumstances indicate that
the carrying value of an asset may not be recoverable. If the sum of the
projected undiscounted cash flows over the estimated remaining lives of the
related assets does not exceed the carrying value, the carrying value would be
adjusted for the difference between the fair value and the carrying value.
REVENUE RECOGNITION. Revenue is recognized when title to a product is
transferred to the customer.
ADVERTISING. Advertising expenditures are expensed in the year incurred.
STOCK-BASED COMPENSATION. The Company has elected to continue to apply the
provisions of Accounting Principles Board (APB) Opinion No. 25 and to display
the estimated pro forma effects measured under Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation", in the
Notes to the Consolidated Financial Statements (see Note 10).
INTEREST RATE AND CURRENCY SWAPS. The Company has entered into a variety of
interest rate and currency swaps in its management of interest rate and foreign
currency exposures (see Note 7). The differential to be paid or received is
accrued as interest rates change and is recognized over the lives of the
agreements. Realized and unrealized gains and losses on foreign currency
transactions are recognized in other expense, net. The Company periodically
monitors its financial instrument positions and the credit ratings of its
counterparties and limits the amount of exposure with any one counterparty.
INCOME PER SHARE. Per share earnings have been calculated in accordance with
SFAS No. 128, "Earnings Per Share". Basic earnings per share are based upon the
weighted-average number of common shares outstanding. Diluted earnings per share
assumes the exercise of all options which are dilutive, whether exercisable or
not. The adoption of this new Standard did not have a material effect on per
share earnings as previously reported.
PRIOR PERIOD RESTATEMENT. In the third quarter of 1997, the Company determined
that certain transactions related to periods prior to 1992 had been recorded in
such a manner that there was a misclassification between certain components of
shareholders' equity. The retained income and cumulative translation adjustment
accounts have been adjusted by equivalent amounts to correct this
misclassification.
2. DISCONTINUED OPERATIONS
In December, 1997, the Board of Directors authorized the spin-offs of
Hussmann and Midas to Whitman shareholders on January 30, 1998 (see Note 15 -
"Subsequent Events"). The consolidated financial statements and related notes
thereto have been restated to classify these businesses as discontinued
operations.
Selected financial information for Hussmann and Midas for the years ended
December 31, 1997, 1996 and 1995 is shown below (in millions):
Hussmann: 1997 1996 1995
- --------- --------- --------- ---------
Sales and revenues $ 1,096.2 $ 1,005.7 $ 921.7
Operating income 43.0 93.8 78.7
Midas:
- ------
Sales and revenues $ 596.4 $ 604.2 $ 576.1
Operating income (loss) (0.8) 78.0 82.5
Included in the 1997 operating income (loss) for Hussmann and Midas were
special charges of $56.3 million and $67.6 million, respectively. The special
charges at Hussmann primarily related to the write-off of goodwill in its U.K.
operations, a restructuring of the U.K. operations and a reorganization of
certain manufacturing operations in the U.S. The special charges at Midas
principally related to its decision to franchise or close substantially all
company-operated stores in the U.S., to enhance certain franchise programs and
to reflect the impairment of certain assets.
The results of tax settlements with the IRS in 1997 for the years 1988
through 1991, which related to previously discontinued operations, amounted to a
net expense of $2.9 million, which was recorded in the third quarter of 1997.
During the fourth quarter of 1997, the Company recorded $1.3 million of
additional tax expense resulting from the refinement of deferred tax balances
related to discontinued operations.
Results from discontinued operations were reported net of income taxes of
$39.1 million, $56.1 million and $54.6 million in 1997, 1996 and 1995,
respectively.
3. SPECIAL CHARGES
In the third and fourth quarters of 1997, the Company recorded special
charges totaling $49.3 million. General Bottlers recorded special charges of
$14.8 million to consolidate the number of its domestic divisions, including
reductions in staffing levels, and to write-down certain assets in its domestic
and foreign operations. Whitman Corporate recorded special charges of $34.5
million, principally relating to the elimination of essentially all of the
Whitman Corporate management and staff and for expenses associated with the
spin-offs.
The following table summarizes the special charges recorded during 1997,
utilization through December 31, 1997, and the remaining accrued liabilities at
December 31, 1997 (in millions):
General Whitman
Special charges: Bottlers Corporate Total
- --------------- --------- --------- ---------
Employee related costs $ 9.1 $ 27.0 $ 36.1
Asset writedowns 4.7 0.7 5.4
Spin-off related costs and other 1.0 6.8 7.8
--------- --------- ---------
Total 14.8 34.5 49.3
--------- --------- ---------
Utilization:
- -----------
Employee related costs (0.9) (2.6) (3.5)
Asset writedowns (4.7) (0.7) (5.4)
Spin-off related costs and other -- (1.5) (1.5)
--------- --------- ---------
Total (5.6) (4.8) (10.4)
--------- --------- ---------
Accrued liabilities at December 31, 1997 $ 9.2 $ 29.7 $ 38.9
========= ========= ==========
Employee related costs include severance payments for the management and
staff affected by the changes in the organizational structure, as well as other
headcount reduction programs. The total number of employees affected was
approximately 125 at General Bottlers and essentially all employees at Whitman
Corporate. As of December 31, 1997, 87 employees were terminated by General
Bottlers. The reduction of management and staff at Whitman Corporate is expected
to occur in 1998 and 1999.
It is expected that approximately $28.1 million of the charges accrued at
December 31, 1997, will be paid during the subsequent twelve months. Such
amounts are classified in other current liabilities. The remaining $10.8
million, principally related to severance and other employee costs, are expected
to be paid in 1999 and are classified in other non-current liabilities.
4. INTEREST EXPENSE, NET
Interest expense, net, consisted of the following (in millions):
1997 1996 1995
------ ------ ------
Interest expense $(69.0) $(68.2) $(70.3)
Interest income from Hussmann and Midas 23.1 23.7 21.8
Other interest income 3.6 3.0 0.9
------ ------ ------
Interest expense, net $(42.3) $(41.5) $(47.6)
====== ====== ======
Interest income from Hussmann and Midas related to intercompany loans and
advances. The related interest expense recorded by Hussmann and Midas is
included in income (loss) from discontinued operations.
The loans and advances to Hussmann and Midas were repaid to Whitman prior
to the spin-offs of Hussmann and Midas on January 30, 1998 (see Note 15 -
"Subsequent Events").
5. INCOME TAXES
Income taxes consisted of:
(in millions) 1997 1996 1995
------- ------- -------
Current:
Federal $ 33.3 $ 39.0 $ 37.6
Foreign -- -- --
State and local 7.2 8.3 5.9
------- ------- -------
Total current 40.5 47.3 43.5
------- ------- -------
Deferred:
Federal (3.2) 12.8 6.6
Foreign (0.7) (0.3) --
State and local 1.3 1.3 2.7
------- ------- -------
Total deferred (2.6) 13.8 9.3
------- ------- -------
Total income taxes $ 37.9 $ 61.1 $ 52.8
======== ======= =======
The items which gave rise to differences between the income taxes in the
income statements and income taxes computed at the U.S. statutory rate are
summarized below:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
(dollars in millions) Amount % Amount % Amount %
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Income tax expenses computed at the U.S. statutory rate $ 24.5 35.0 $ 44.7 35.0 $ 41.4 35.0
State income taxes, net of federal income tax benefit 5.6 8.0 6.2 4.9 5.6 4.7
Foreign losses with no foreign tax benefits 6.5 9.3 7.2 5.6 4.0 3.4
Non-deductible goodwill amortization 4.3 6.2 4.5 3.5 4.8 4.1
Other items, net (3.0) (4.3) (1.5) (1.2) (3.0) (2.5)
------ ---- ------ ---- ------ ----
Income tax provisions $ 37.9 54.2 $ 61.1 47.8 $ 52.8 44.7
====== ==== ====== ==== ====== ====
</TABLE>
In 1997, the Company settled Federal income tax audits with the IRS for the
years 1988 through 1991. Accruals no longer required were credited to income and
were reflected in "other items, net" in the table above.
Deferred income taxes are created by "temporary differences" which exist
between amounts of assets and liabilities recorded for financial reporting
purposes and such amounts as reported under income tax regulations. These
temporary differences, which gave rise to deferred tax assets and liabilities at
December 31, are attributable to:
<TABLE>
<CAPTION>
(in millions) 1997 1996
--------- ---------
<S> <C> <C>
Deferred tax assets:
Provision for special charges and previously sold businesses $ 21.5 $ 28.8
Foreign net operating loss carryforwards 18.8 12.4
Lease transactions 14.1 15.5
Unrealized losses on investments 8.3 7.5
Pension and post-retirement benefits 6.2 4.8
Self-insurance provisions 2.5 13.8
Deferred compensation 4.5 5.4
Other 8.4 15.5
--------- ---------
Gross deferred tax assets 84.3 103.7
Valuation allowance - foreign net operating loss carryforwards (17.8) (12.1)
--------- ---------
Net deferred tax assets $ 66.5 $ 91.6
--------- ---------
Deferred tax liabilities:
Property, plant and equipment $ 63.4 $ 57.9
Foreign branch activity 20.6 10.1
Goodwill 8.4 7.2
Deferred state taxes 6.2 2.7
Other 26.7 30.1
--------- ---------
Total deferred tax liabilities $ 125.3 $ 108.0
--------- ---------
Net deferred tax liability $ 58.8 $ 16.4
========= =========
Net deferred tax liability (asset) included in:
"Other current assets" $ (16.6) $ (14.3)
"Deferred income taxes" 75.4 30.7
--------- ---------
Net deferred tax liability $ 58.8 $ 16.4
========= =========
</TABLE>
There currently is no undistributed foreign income because General Bottlers'
foreign operations have generated pretax losses of $20.4 million, $21.3 million
and $11.3 million in 1997, 1996 and 1995, respectively. At December 31, 1997,
estimated potential future tax benefits of net operating losses were $18.8
million, for which a valuation allowance of $17.8 million has been provided.
This valuation allowance reflects the uncertainty of the Company's ability to
fully utilize these benefits given the limited carryforward periods permitted by
the foreign taxing jurisdictions. The change in the valuation allowance of $5.7
million during 1997 principally reflects allowances provided on foreign losses
incurred during 1997, offset by changes in foreign tax rates.
6. DEBT
Debt at December 31 consisted of the following:
<TABLE>
<CAPTION>
(in millions) 1997 1996
--------- ---------
<S> <C> <C>
6.25% to 6.90% notes due 2000 and 2005 $ 136.5 $ 136.5
7.5% notes due 2003 125.0 125.0
7.29% and 7.44% notes due 2026 ($100 million and $25 million due 2004 and 2008,
respectively, at option of note holder) 125.0 125.0
6.5% notes due 2006 100.0 100.0
7.625% notes due 2015 100.0 100.0
8.25% notes due 2007 100.0 100.0
7.5% notes due 2001 75.0 75.0
Notes due 2002, effective interest rate 6.2% 50.0 --
8.11% and 8.12% notes due 1997 -- 50.5
Term loan and note due 1998 through 1999, effective interest rates 6.5% to 6.9% 50.0 95.0
Foreign revolving credit borrowings, effective interest rate 6.3% 25.0 --
Various other debt 5.1 5.1
--------- ---------
Total debt 891.6 912.1
Less: Amount classified as short-term debt 282.5 85.5
Unamortized discount 4.4 4.9
--------- ---------
Total long-term debt $ 604.7 $ 821.7
========= =========
</TABLE>
The Company maintains a $200 million commercial paper program. There were
no borrowings under this program at either December 31, 1997 or 1996. The
Company also has a contractual revolving credit facility which permits it to
borrow up to $300 million. The interest rates on the revolving credit facility,
expiring in 2000, may be floating or fixed, and are based on domestic rates or
the London Interbank Offered Rate ("LIBOR"), at the option of the Company. There
were no borrowings under the revolving credit facility at either December 31,
1997 or 1996. As such, the entire $300 million of the revolving credit facility
remained unused and available to back the Company's commercial paper borrowings.
The weighted-average borrowings under the revolving credit facility and
commercial paper program during 1997 and 1996 were not significant and fees
payable on the unused portion of such commitments were not material.
General Bottlers, in connection with its acquisition of the franchise in
northwest Russia, including St. Petersburg, entered into a contractual revolving
credit facility which permits it to borrow up to $40 million. The facility
expires in 1998, but the Company expects to renew it before it expires. Interest
rates on the facility are floating, based on LIBOR, and fees payable on the
unused portion are not significant. Borrowing under the facility totaled $25.0
million at December 31, 1997.
During December, 1997, the Company repaid a term loan with a principal
amount of $30.0 million scheduled to mature in 2000. There were no fees
associated with this redemption.
During January, 1998, the Company made a tender offer for any and all
outstanding 7.625% and 8.25% notes maturing June 15, 2015, and February 15,
2007, respectively. Notes with principal amounts of $91.0 million and $88.5
million of the 7.625% and the 8.25% notes, respectively, were tendered to and
purchased by the Company. The Company also repaid a term loan and note with
principal amounts of $50.0 million scheduled to mature in 1998 and 1999, notes
due in 2002 with principal amounts of $50.0 million and industrial revenue bonds
of $5.0 million due 2013. All debt repaid during January, 1998, was classified
as short-term debt at December 31, 1997. The tender offer results and other
repayments are discussed further in Note 15 "Subsequent Events".
The amounts of long-term debt maturing in 1999 through 2001 are: $25.0
million, $75.5 million and $75.0 million, respectively. No long-term debt is
scheduled to mature in 2002.
The Company has pledged certain buildings as collateral for various
long-term loan agreements. However, the net book value of such assets was not
material at December 31, 1997. Certain of the Company's financing arrangements
contain a restriction requiring the maintenance of a specific financial ratio
related to interest coverage. The Company is in compliance with this debt
covenant.
7. FINANCIAL INSTRUMENTS
The Company has used financial derivative instruments to manage its
interest rate risk. Interest rate swap transactions and forward rate contracts
generally involve the exchange of fixed and floating rate interest payment
obligations without the exchange of the underlying notional amounts.
The Company had entered into certain interest rate swap agreements with
commercial and investment banks in which it paid a floating interest rate and
received a fixed interest rate.
The notional amounts related to the Company's interest rate swap
transactions and forward rate agreements activity for 1996 and 1997 are
summarized as follows (in millions):
<TABLE>
<CAPTION>
Interest Rate Swaps Forward Rate Agreements
---------------------------- ----------------------------
Pay Fixed Pay Variable Pay Fixed Pay Variable
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance, January 1, 1996 $ -- $ 165.0 $ 165.0 $ --
Expired contracts -- (125.0) (165.0) --
------------ ------------ ------------ ------------
Balance, December 31, 1996 -- 40.0 -- --
Expired contracts -- (40.0) -- --
------------ ------------ ------------ ------------
Balance, December 31, 1997 $ -- $ -- $ -- $ --
============ ============ ============ ============
</TABLE>
Whitman's interest rate and foreign currency hedging programs had no
significant impact on the annual weighted-average cost of debt in 1997 or 1996
and increased it from 7.9 percent to 8.1 percent in 1995. Interest expense was
increased by $1.5 million in 1995, principally as a result of Whitman's interest
rate hedging programs.
The Company previously entered into foreign currency swap agreements to
reduce the effect of changes in foreign exchange rates on its debt denominated
in foreign currencies. Under the hedge agreements, in January, 1995, the Company
repaid the 138.2 million Swiss franc debt at an effective exchange rate of 2.764
Swiss francs per U.S. dollar ($50.0 million), compared to the actual exchange
rate of 1.288 Swiss francs per U.S. dollar ($107.3 million). Additionally, in
February, 1995, the Company repaid the 50 million Canadian dollar debt at an
effective exchange rate of 1.312 Canadian dollars per U.S. dollar ($38.1
million), compared to the actual exchange rate of 1.403 Canadian dollars per
U.S. dollar ($35.6 million). Assuming the Company had left the interest payments
payable in foreign currency (i.e., unhedged), the Company's interest expense
would have decreased by less than $0.1 million in 1995.
At December 31, 1997, the Company had $80.1 million in floating rate debt
exposure. Substantially all of the floating rate exposure is related to six
month LIBOR rates. If the six month LIBOR rates increased by 50 basis points
(0.50 percent), the Company's 1997 interest expense related to the floating rate
debt outstanding during 1997 would have increased by an additional $0.6 million.
As of the end of each of the last two years, the Company had no deferred
gains or losses related to terminated interest rate swap agreements.
The fair market value of the Company's floating rate debt as of December
31, 1997 approximated its carrying value. The fixed rate debt of the Company had
a carrying value of $807.1 million and an estimated fair market value of $847.4
million at December 31, 1997. The fair market value of the fixed rate debt was
based on quotes from financial institutions for instruments with similar
characteristics or upon discounting future cash flows.
8. PENSION AND OTHER POSTRETIREMENT PLANS
COMPANY-SPONSORED DEFINED BENEFIT PENSION PLANS. Substantially all of the
Company's U.S. employees are covered under various defined benefit pension plans
sponsored and funded by the Company. Plans covering salaried employees provide
pension benefits based on years of service and generally are limited to a
maximum of 20 percent of the employees' average annual compensation during the
five years preceding retirement. Plans covering hourly employees generally
provide benefits of stated amounts for each year of service. Plan assets are
invested primarily in common stocks, corporate bonds and government securities.
Net periodic pension cost for 1997, 1996 and 1995 included the following
components:
<TABLE>
<CAPTION>
(in millions) 1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits earned during period $ 3.4 $ 3.3 $ 2.8
Interest cost on projected benefit obligation 6.5 6.1 5.7
Actual return on assets (21.8) (10.2) (12.4)
Net amortization and deferral 15.3 4.3 6.8
-------- -------- --------
Total net periodic pension cost $ 3.4 $ 3.5 $ 2.9
======== ======== ========
</TABLE>
The following table reconciles the pension plans' funded status to the
amounts recognized in the Company's balance sheets as of December 31, 1997 and
1996:
<TABLE>
<CAPTION>
1997 1996
----------------------------- -----------------------------
Assets Exceed Accumulated Assets Exceed Accumulated
Accumulated Benefits Accumulated Benefits
(in millions) Benefits Exceed Assets Benefits Exceed Assets
-------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligation
(measured as of September 30):
Vested benefit obligation $ (77.4) $ (3.1) $ (68.2) $ (1.7)
======= ======= ======= =======
Accumulated benefit obligation $ (83.2) $ (3.5) $ (72.9) $ (2.7)
======= ======= ======= =======
Projected benefit obligation $ (93.3) $ (5.2) $ (82.2) $ (4.2)
Plan assets at fair market value (measured as of September 30) 103.0 -- 83.7 --
------- ------- ------- -------
Plan assets in excess of (less than) projected benefit obligation 9.7 (5.2) 1.5 (4.2)
Unrecognized net asset at transition to SFAS No. 87 (0.8) -- (1.0) --
Unrecognized prior service cost 4.1 0.8 4.3 1.0
Unrecognized net loss (gain) (10.3) 1.2 (0.8) 0.7
Additional liability required to recognize minimum liability -- (0.5) -- (0.4)
------- ------- ------- -------
Prepaid (accrued) pension cost recognized on balance sheets $ 2.7 $ (3.7) $ 4.0 $ (2.9)
======= ======= ======= =======
</TABLE>
Pension costs are funded in amounts not less than minimum levels required
by regulation. The principal economic assumptions used in the determination of
net periodic pension cost and benefit obligations were as follows:
<TABLE>
<CAPTION>
Net periodic pension cost: 1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Discount rates 7.5% 7.5% 8.5%
Expected long-term rates of return on assets 9.5% 9.5% 9.5%
Rates of increase in future compensation levels 5.0% 5.0% 6.0%
</TABLE>
Benefit obligations: 1997 1996
---- ----
Discount rates 7.0% 7.5%
Rates of increase in future compensation levels 4.5% 5.0%
COMPANY-SPONSORED DEFINED CONTRIBUTION PLANS. Substantially all U.S. salaried
employees and certain U.S. hourly employees participate in voluntary,
contributory defined contribution plans to which the Company makes partial
matching contributions. Company contributions to these plans amounted to $5.6
million, $5.5 million and $5.2 million in 1997, 1996 and 1995, respectively.
MULTI-EMPLOYER PENSION PLANS. The Company's subsidiaries participate in a number
of multi-employer pension plans which provide benefits to certain union employee
groups of the Company. Amounts contributed to the plans totaled $2.8 million,
$2.5 million and $2.4 million in 1997, 1996 and 1995, respectively.
POST-RETIREMENT BENEFITS OTHER THAN PENSIONS. The Company provides substantially
all former U.S. salaried employees who retired prior to July 1, 1989 and certain
other employees in the U.S. with certain life and health care benefits. U.S.
salaried employees retiring after July 1, 1989 generally are required to pay the
full cost of these benefits. Eligibility for these benefits varies with the
employee's classification prior to retirement. Benefits are provided through
insurance contracts or welfare trust funds. The insurance plans generally are
financed by monthly insurance premiums and are based upon the prior year's
experience. Benefits paid from the welfare trust are financed by monthly
deposits which approximate the amount of current claims and expenses. The
Company has the right to modify or terminate these benefits.
Net periodic cost of post-retirement benefits other than pensions for 1997,
1996 and 1995 amounted to $0.2 million, $0.4 million and $0.4 million,
respectively. The Company's post-retirement life and health benefits are not
funded. The unfunded accrued post-retirement benefits amounted to $15.7 million
at December 31, 1997, and $15.8 million at December 31, 1996.
MULTI-EMPLOYER POST-RETIREMENT MEDICAL AND LIFE INSURANCE. The Company's
subsidiaries participate in a number of multi-employer plans which provide
health care and survivor benefits to union employees during their working lives
and after retirement. Portions of the benefit contributions, which cannot be
disaggregated, related to post-retirement benefits for plan participants. Total
amounts charged against income and contributed to the plans (including benefit
coverage during their working lives) amounted to $4.0 million, $3.7 million and
$2.0 million in 1997, 1996 and 1995, respectively.
9. LEASES
At December 31, 1997, annual minimum rental payments under operating leases
that have initial noncancellable terms in excess of one year were $11.9 million,
$7.9 million, $6.0 million, $2.9 million, $0.5 million and $0.1 million in 1998,
1999, 2000, 2001, 2002 and thereafter, respectively. The future payments have
not been reduced by $0.3 million of sublease rental receipts which are due in
the future under noncancellable subleases.
Total rent expense applicable to operating leases amounted to $14.7
million, $14.1 million and $15.1 million in 1997, 1996 and 1995, respectively. A
majority of the Company's leases provide that the Company pays taxes,
maintenance, insurance and certain other operating expenses.
10. STOCK OPTIONS AND SHARES RESERVED
The Company's Stock Incentive Plan (the "Plan"), originally approved by
shareholders in 1982 and subsequently amended from time to time, provides for
granting incentive stock options, nonqualified stock options, related stock
appreciation rights (SARs), restricted stock awards, and performance awards or
any combination of the foregoing. Incentive stock options and nonqualified stock
options are exercisable during a ten-year period beginning six months to three
years after the date of grant. Stock appreciation rights have been granted with
respect to certain nonqualified and incentive stock options. All options were
granted at fair market value at the date of grant.
Changes in options outstanding are summarized as follows:
<TABLE>
<CAPTION>
Options Outstanding
------------------------------------------------------------------
Range of Weighted-Average
Options Exercise Prices Exercise Price
--------------- ---------------- ----------------
<S> <C> <C> <C>
Balance, January 1, 1995 5,704,193 $ 6.94 - $ 17.25 $ 13.22
----------
Granted 926,400 18.25 - 19.44 18.25
Exercised or surrendered for SARs (1,014,328) 6.94 - 18.25 12.90
Recaptured or terminated (14,500) 12.88 - 18.25 15.75
----------
Balance, December 31, 1995 5,601,765 10.29 - 19.44 14.10
----------
Granted 2,408,600 22.66 - 25.31 25.27
Exercised or surrendered for SAR's (1,174,244) 10.29 - 18.25 13.36
Recaptured or terminated (29,034) 15.69 - 25.31 22.07
----------
Balance, December 31, 1996 6,807,087 11.23 - 25.31 18.15
----------
Granted 2,244,300 23.06 - 27.81 23.13
Exercised or surrendered for SAR's (912,426) 11.23 - 25.31 10.80
Recaptured or terminated (123,734) 18.25 - 25.31 12.43
----------
Balance, December 31, 1997 8,015,227 11.23 - 27.81 19.81
==========
</TABLE>
The number of options exercisable at December 31, 1997 was 4,442,759, with
a weighted-average exercise price of $16.76, compared with options exercisable
of 3,577,553 at December 31, 1996 and 4,009,931 at December 31, 1995 with
weighted-average exercise prices of $13.52 and $13.02, respectively. At December
31, 1997, there were 5,510,112 shares available for future grants, including
5,000,000 shares provided for by the adoption of the Revised Stock Incentive
Plan in November, 1997. The following table summarizes information regarding
stock options outstanding and exercisable at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------- ---------------------------------
Weighted-Average
Range of Options Remaining Life Weighted-Average Options Weighted-Average
Exercise Prices Outstanding (in years) Exercise Price Exercisable Exercise Price
- ----------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$11.23 - $16.31 2,824,557 4.1 $ 13.34 2,824,557 $ 13.34
$17.25 - $23.06 2,909,170 8.8 21.78 699,406 19.33
$24.13 - $27.81 2,281,500 8.4 25.32 918,796 25.31
--------- ---------
Total Options 8,015,227 7.0 19.81 4,442,759 16.76
========= =========
</TABLE>
SFAS No. 123, "Accounting for Stock-Based Compensation" requires, among
other items, the Company to disclose either in the Consolidated Statements of
Income or in the Notes to the Consolidated Financial Statements an estimate of
the cost of stock options granted to employees. The Company has elected to
continue to account for stock options granted to employees under APB Opinion No.
25. However, using the Black-Scholes model and the following assumptions, the
estimated fair value of an option at the dates of grant in 1997, 1996 and 1995
was $5.62, $5.72 and $4.78, respectively.
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Risk-free interest rate 6.2% 6.5% 6.9%
Expected dividend yield 1.7% 1.9% 1.9%
Expected volatility 16.0% 16.7% 17.7%
Estimated lives of options (in years) 5.0 5.0 5.0
</TABLE>
Based upon the above assumptions, the Company's pro forma net income (loss) and
income (loss) per share would have been:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Pro forma net income (in millions):
Income from continuing operations $ 13.5 $ 46.5 $ 46.5
Income (loss) from discontinued operations (14.5) 90.1 86.4
------- ------- -------
Net income (loss) $ (1.0) $ 136.6 $ 132.9
======= ======= =======
Pro forma basic income (loss) per share:
Continuing operations $ 0.13 $ 0.44 $ 0.44
Discontinued operations (0.14) 0.86 0.83
------- ------- -------
Net income (loss) $ (0.01) $ 1.30 $ 1.27
======= ======= =======
Pro forma diluted income (loss) per share:
Continuing operations $ 0.13 $ 0.44 $ 0.44
Discontinued operations (0.14) 0.85 0.81
------- ------- -------
Net income (loss) $ (0.01) $ 1.29 $ 1.25
======= ======= =======
</TABLE>
Options granted in 1997, 1996 and 1995 vest equally each year over a three
year period. As a result, the estimated costs indicated above reflect only a
partial vesting of such options and do not consider the pro forma costs for
options granted before 1995. If full vesting were assumed, the estimated pro
forma compensation costs for each year would have been higher than indicated
above. See further discussion of options forfeited by Hussmann and Midas
employees in connection with the spin-offs in Note 15 - "Subsequent Events".
The Company granted 233,600, 271,700 and 98,900 restricted shares of stock
at a weighted-average fair value (at the dates of grant) of $23.06, $25.25 and
$18.18 in 1997, 1996 and 1995, respectively, to key members of management under
the Plan. The Company recognized compensation expense in continuing operations
of $2.8 million, $1.7 million and $1.5 million in 1997, 1996 and 1995,
respectively, relating to these grants. Compensation expense recorded in
discontinued operations related to these grants was $2.7 million and $1.2
million in 1997 and 1996, respectively. No compensation expense was allocated to
discontinued operations for these grants prior to 1996. At December 31, 1997,
there were 353,583 restricted shares of stock outstanding under the Plan.
11. SHAREHOLDER RIGHTS PLAN AND SECOND PREFERRED STOCK
In 1989, the Company adopted a Shareholder Rights Plan and declared a
dividend of one preferred share purchase right (a "Right") for each outstanding
share of common stock, without par value, of the Company. Each Right entitles
the registered holder to purchase from the Company one one-hundredth of a share
of Junior Participating Second Preferred Stock (Series 1), without par value, of
the Company at a price of $120 per one one-hundredth of a share of such Second
Preferred Stock, subject to adjustment. The Rights will become exercisable if
someone buys 15 percent or more of the Company's common stock. In addition, if
someone buys 15 percent or more of the Company's common stock, each right will
entitle its holder (other than that buyer) to purchase a number of shares of the
Company's common stock having a market value of twice the Right's $120 exercise
price. If the Company is acquired in a merger, each Right will entitle its
holder to purchase a number of the acquiring company's common shares having a
market value at the time of twice the Right's exercise price.
Prior to the acquisition of 15 percent or more of the Company's stock, the
Rights can be redeemed by the Board of Directors for one cent per Right. The
Company's Board of Directors also is authorized to reduce the threshold to 10
percent or increase it to not more than 20 percent. The Rights will expire on
January 30, 1999. The Rights do not have voting or dividend rights, and until
they become exercisable, have no dilutive effect on the per-share earnings of
the Company.
The Company has 10 million authorized shares of Second Preferred Stock. In
January, 1989, the Company's Board of Directors designated 2.5 million shares of
the Second Preferred Stock as Junior Participating Second Preferred Stock
(Series 1) in conjunction with the Shareholder Rights Plan. There is no Second
Preferred Stock issued or outstanding.
12. GENERAL BOTTLERS NON-VOTING PREFERRED STOCK
In December, 1997, Whitman issued 794,115 shares of its common stock valued
at $20.4 million to an affiliate of PepsiCo, Inc. in exchange for 2,025 shares
of non-voting preferred stock of General Bottlers (including accrued dividends).
The non-voting preferred stock held by PepsiCo, Inc. had been classified as a
component of minority interest.
13. SUPPLEMENTAL CASH FLOW INFORMATION
Net cash provided by continuing operations reflects cash payments and cash
receipts as follows:
(in millions) 1997 1996 1995
-------- -------- --------
Interest paid $ 68.8 $ 67.0 $ 74.8
Interest received 3.3 2.8 1.1
Income taxes paid 53.8 68.9 62.1
Income tax refunds 11.2 5.7 25.4
The Company also received interest from Hussmann and Midas related to their
intercompany account balances. Net interest received from Hussmann and Midas was
$23.1 million, $23.7 million and $21.8 million in 1997, 1996 and 1995,
respectively.
On December 31, 1996, the Company acquired the St. Petersburg, Russia
franchise from PepsiCo. Due to the time lag in financial reporting by the
Company's foreign operations, this acquisition was reported in the first quarter
of 1997. The total cost of this acquisition was $20.2 million (fair value of
assets acquired of $23.5 million, net of assumed liabilities, excluding
long-term debt, of $3.3 million), which was net of acquired cash of $2.3 million
and included $15.7 million of long-term debt assumed. The acquisition was
accounted for as a purchase, and the operating results include the acquisition
from the date of purchase. There were no other significant acquisitions in 1996
or 1997. The Company acquired a Pepsi-Cola franchise in Cedar Rapids, Iowa in
1995, at a cost of $52.7 million (fair value of assets acquired of $54.1
million, net of assumed liabilities of $1.4 million). The acquisition was
accounted for as a purchase, and the operating results include the acquisition
from the date of purchase. The effect of these acquisitions, had they been made
as of January 1, 1995, would not have been significant to the operating results
of the Company.
Common stock issuances for other acquisitions in 1995 and 1996 in the
Consolidated Statements of Shareholders' Equity were related to discontinued
operations.
14. ENVIRONMENTAL AND OTHER CONTINGENCIES
The Company is subject to certain indemnification obligations under
agreements with previously sold subsidiaries for potential environmental
liabilities. There is significant uncertainty in assessing the Company's share
of the potential liability for such claims. The assessment and determination for
cleanup at the various sites involved is inherently speculative during the early
stages, and the Company's share of such costs is subject to various factors,
including possible insurance recoveries and the allocation of liabilities among
many other potentially responsible and financially viable parties.
Using the latest evaluations from outside advisors and consultants, the
Company believes that its potential future environmental liabilities, before
possible insurance recoveries, range from $25 million to $40 million. At
December 31, 1997, the Company had $30.1 million accrued to cover these
potential liabilities. During 1997, the Company recorded recoveries of $14.1
million from insurance companies and other responsible parties related to these
environmental liabilities, a portion of which will be received in future
periods. Such recoveries were credited to the accruals for related liabilities.
These estimated liabilities include expenses for the remediation of
identified sites, payments to third parties for claims and expenses, and the
expenses of on-going evaluation and litigation. The estimates are based upon
current technology and remediation techniques, and do not take into
consideration any inflationary trends upon such claims or expenses, nor do they
reflect the possible benefits of continuing improvements in remediation methods.
The accruals also do not provide for any claims for environmental liabilities or
other potential issues which may be filed against the Company in the future.
The Company also has other contingent liabilities from various pending
claims and litigation on a number of matters, for which the ultimate liability
for each claim, if any, cannot be determined. In the opinion of management, and
based upon information currently available, the ultimate resolution of these
claims and litigation, including potential environmental exposures, and
considering amounts already accrued, will not have a material effect on the
Company's financial condition or the results of operations. While additional
claims and liabilities may develop and may result in additional charges to
income, principally through discontinued operations, the Company does not
believe that such charges, if any, would have a material effect upon the
Company's financial condition or the results of operations.
15. SUBSEQUENT EVENTS (UNAUDITED)
On December 17, 1997, the Board of Directors authorized the spin-offs of
Hussmann and Midas to Whitman shareholders on January 30, 1998. Prior to the
spin-offs, Hussmann and Midas paid Whitman $240.0 million and $194.3 million,
respectively, to settle intercompany indebtedness and to pay special dividends.
Prior to these payments, Midas' foreign operations paid $15.7 million to Whitman
Netherlands B.V. during 1998 as a special dividend. Whitman Netherlands B.V. was
contributed to Hussmann prior to the spin-offs and the amounts paid by Midas'
foreign operations to Whitman Netherlands B.V. were considered in determining
the amount to be received from Hussmann. The spin-offs will result in a
reduction of shareholders' equity of approximately $233.3 million.
In anticipation of the funds to be received from Hussmann and Midas,
Whitman made a tender offer on January 13, 1998, for any and all of the
outstanding 7.625% and 8.25% notes maturing June 15, 2015, and February 15,
2007, respectively. On January 22, 1998, Whitman terminated its debt tender
offer. In connection with the tender offer, Whitman repurchased 7.625% and 8.25%
notes with principal amounts of $91.0 million $88.5 million, respectively. The
Company paid total premiums in connection with the tender offer of $26.4 million
and the remaining unamortized discount and issue costs related to repurchased
notes were $2.1 million. The Company also repaid a term loan and notes with
principal amounts of $50.0 million scheduled to mature in 1998 and 1999, notes
due in 2002 with principal amounts of $50.0 million and industrial revenue bonds
of $5.0 million due 2013. Costs associated with these repayments and the
remaining unamortized issue costs were not significant. The Company expects to
record an extraordinary charge of approximately $18 million after-tax in the
first quarter of 1998 related to these early extinguishments of debt.
In January, 1998, the Company issued 92,400 options to certain Whitman and
General Bottlers employees to purchase Whitman common stock at a price of
$25.03. The Black Scholes valuation for these options was $5.64. In addition,
the Company issued 319,700 options to employees of Hussmann and Midas. As a
result of the spin-offs, options to purchase Whitman common stock held by
Hussmann and Midas employees were forfeited and new options to purchase shares
of the separate companies were issued to employees of each respective company.
The total number of options forfeited, including options granted in January,
1998, were 3,041,268, of which 889,793 were exercisable. In addition, the
remaining option agreements were modified to adjust the number of shares and
relevant exercise prices pursuant to an IRS formula to equalize the option
values before and after the spin-offs. Subsequent to the spin-offs in January,
1998, the Company issued 600,000 options to purchase Whitman common stock at a
price of $16.13 to the senior management of General Bottlers. The Black Scholes
value for these options was $4.59. The following table summarizes information
regarding stock options outstanding and exercisable as of January 30, 1998:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------- ---------------------------------
Weighted-Average
Range of Options Remaining Life Weighted-Average Options Weighted-Average
Exercise Prices Outstanding (in years) Exercise Price Exercisable Exercise Price
- ----------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$7.04 - $10.23 2,969,490 4.3 $ 8.38 2,969,492 $ 8.38
$10.82 - $14.46 2,585,583 8.8 13.60 929,620 12.59
$15.29 - $17.44 2,690,001 8.8 15.93 1,035,502 15.87
--------- ---------
Total Options 8,246,074 7.2 12.48 4,934,614 10.74
========= =========
</TABLE>
Holders of restricted shares of Whitman common stock received shares of
Hussmann and Midas in the spin-offs, free of restrictions. A total of 132,707
Whitman restricted shares were forfeited by Hussmann and Midas executives, which
were subsequently replaced by restricted shares of equivalent value in each
respective company.
<PAGE>
16. SEGMENT REPORTING
Selected financial information related to the Company's business segments
is shown below:
<TABLE>
<CAPTION>
Sales Operating income
------------------------------ --------------------------------
(in millions) 1997 1996 1995 1997 1996 1995
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Domestic $1,464.0 $1,451.1 $1,413.9 $ 200.3 $ 224.4 $ 209.0
Foreign 93.5 50.3 34.8 (18.7) (12.1) (11.3)
-------- -------- -------- -------- -------- --------
Total before corporate administrative expenses $1,557.5 $1,501.4 $1,448.7 181.6 212.3 197.7
======== ======== ======== -------- -------- --------
Corporate administrative expenses (51.4) (17.5) (16.6)
Total operating income 130.2 194.8 181.1
Interest expense, net (42.3) (41.5) (47.6)
Other expense, net ` (18.0) (25.6) (15.3)
-------- -------- --------
Pretax income $ 69.9 $ 127.7 $ 118.2
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Depreciation and
Identifiable Assets Amortization Capital Investments
------------------------------ ------------------------------ ------------------------------
(in millions) 1997 1996 1995 1997 1996 1995 1997 1996 1995
-------- -------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Domestic $1,005.0 $ 979.7 $ 980.9 $ 64.5 $ 62.5 $ 57.3 $ 71.5 $ 77.1 $ 84.3
Foreign 127.1 97.7 74.8 5.9 4.0 2.7 11.8 9.8 26.1
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total General Bottlers 1,132.1 1,077.4 1,055.7 70.4 66.5 60.0 83.3 86.9 110.4
Other 37.8 40.9 50.0 3.4 8.7 10.6 0.1 0.3 0.7
-------- -------- -------- -------- -------- -------- -------- -------- --------
Total before corporate
assets 1,169.9 1,118.3 1,105.7 $ 73.8 $ 75.2 $ 70.6 $ 83.4 $ 87.2 $ 111.1
======== ======== ======== ======== ======== ========
Corporate assets 196.1 186.9 265.4
Net assets of companies
held for disposition 663.7 775.4 679.4
-------- -------- --------
Total assets $2,029.7 $2,080.6 $2,050.5
======== ======== ========
</TABLE>
<PAGE>
Operating income is exclusive of net interest expense, equity in net income
or losses of affiliates, other miscellaneous income and expense items, and
income taxes. During the third and fourth quarters of 1997, the Company recorded
special charges of $49.3 million (see Note 3). These charges reduced the
reported operating income for the domestic and foreign operations of General
Bottlers by $11.1 million and $3.7 million, respectively, in 1997. In addition,
corporate administrative expenses in 1997 included special charges of $34.5
million. Other expense, net, in 1996 included an $8.7 million charge,
principally related to asset write-downs at General Bottlers' joint venture in
Poland. Foreign currency gains or losses were not significant. There were no
sales between geographical areas or export sales. Sales to any single customer
and sales to domestic or foreign governments were individually less than ten
percent of consolidated sales and revenues.
Equity in net losses and net assets of the Company's foreign operations
amounted to $20.4 million and $67.9 million, respectively, in 1997, $21.3
million and $74.0 million in 1996, and $11.3 million and $68.3 million in 1995.
Corporate assets are principally cash or cash equivalents, investments and
miscellaneous other assets, including $92.1 million, $94.3 million and $96.8
million of real estate investments at December 31, 1997, 1996 and 1995,
respectively.
<PAGE>
17. SELECTED QUARTERLY FINANCIAL DATA
(unaudited and in millions, except for earnings per share)
<TABLE>
<CAPTION>
First Second Third Fourth Full
Quarter Quarter Quarter Quarter Year
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1997:
- ----
Sales $ 333.5 $ 392.5 $ 452.9 $ 378.6 $ 1,557.5
--------- --------- --------- --------- ---------
Gross profit $ 126.7 $ 148.9 $ 169.8 $ 139.5 $ 584.9
--------- --------- --------- --------- ---------
Income (loss) from continuing operations $ 5.8 $ 11.2 $ 14.1 $ (15.3) $ 15.8
Income (loss) from discontinued operations 9.7 22.5 (47.9) 4.0 (11.7)
--------- --------- --------- --------- ---------
Net income (loss) $ 15.5 $ 33.7 $ (33.8) $ (11.3) $ 4.1
========= ========= ========= ========= =========
AVERAGE SHARES:
Basic EPS - weighted-average common shares 102.2 101.6 101.5 101.2 101.6
Incremental effect of stock options 1.1 1.1 1.3 -- 1.3
--------- --------- --------- --------- ---------
Diluted EPS - adjusted weighted-average
common shares 103.3 102.7 102.8 101.2 102.9
========= ========= ========= ========= =========
BASIC EARNINGS (LOSS) PER SHARE:
Continuing operations $ 0.06 $ 0.11 $ 0.14 $ (0.15) $ 0.16
Discontinued operations 0.09 0.22 (0.47) 0.04 (0.12)
-------- --------- --------- --------- ---------
Net income (loss) $ 0.15 $ 0.33 $ (0.33) $ (0.11) $ 0.04
======== ========= ========= ========= =========
DILUTED EARNINGS (LOSS) PER SHARE:
Continuing operations $ 0.06 $ 0.11 $ 0.14 $ (0.15) $ 0.15
Discontinued operations 0.09 0.22 (0.47) 0.04 (0.11)
-------- --------- --------- --------- ---------
Net income (loss) $ 0.15 $ 0.33 $ (0.33) $ (0.11) $ 0.04
======== ========= ========= ========= =========
<PAGE>
1996:
- ----
Sales $ 332.7 $ 384.5 $ 426.5 $ 357.7 $ 1,501.4
--------- --------- --------- --------- ---------
Gross profit $ 124.9 $ 148.4 $ 162.0 $ 141.7 $ 577.0
--------- --------- --------- --------- ---------
Income from continuing operations $ 7.2 $ 15.0 $ 22.2 $ 3.4 $ 47.8
Income from discontinued operations 8.8 26.7 30.7 25.4 91.6
--------- --------- --------- --------- ---------
Net income $ 16.0 $ 41.7 $ 52.9 $ 28.8 $ 139.4
========= ========= ========= ========= =========
AVERAGE SHARES:
Basic EPS - weighted-average common shares 105.5 105.6 104.6 103.5 104.8
Incremental effect of stock options 1.3 1.3 1.1 1.1 1.2
--------- --------- --------- --------- ---------
Diluted EPS - adjusted weighted-average
common shares 106.8 106.9 105.7 104.6 106.0
========= ========= ========= ========= =========
BASIC EARNINGS PER SHARE:
Continuing operations $ 0.07 $ 0.14 $ 0.21 $ 0.03 $ 0.46
Discontinued operations 0.08 0.25 0.30 0.25 0.87
-------- --------- --------- --------- ---------
Net income $ 0.15 $ 0.39 $ 0.51 $ 0.28 $ 1.33
======== ========= ========= ========= =========
DILUTED EARNINGS PER SHARE:
Continuing operations $ 0.07 $ 0.14 $ 0.21 $ 0.03 $ 0.45
Discontinued operations 0.08 0.25 0.29 0.25 0.87
-------- --------- --------- --------- ---------
Net income $ 0.15 $ 0.39 $ 0.50 $ 0.28 $ 1.32
======== ========= ========= ========= =========
</TABLE>
The earnings per share may not be additive due to changes in average shares
outstanding during the periods or rounding.
<PAGE>
In the third and fourth quarters of 1997, the Company recorded special
charges related to the spin-offs, the restructuring of General Bottlers'
organization and the elimination of a significant portion of Whitman Corporate
management and staff (see Note 3). In addition, special charges were also
recorded by Hussmann and Midas, which were reclassified to discontinued
operations in December, 1997 (see Note 2). The effects on net income and
earnings per share (after income taxes and minority interest) for the third
quarter, fourth quarter and full year of 1997 were as follows:
<TABLE>
<CAPTION>
Third Fourth Full
Quarter Quarter Year
------- -------- -------
<S> <C> <C> <C>
SPECIAL CHARGES AFTER TAXES AND MINORITY INTEREST:
(in millions)
Continuing operations $ (7.5) $ (24.1) $ (31.6)
Discontinued operations (76.0) (17.4) (93.4)
------- ------- -------
Net income $ (83.5) $ (41.5) $(125.0)
======= ======= =======
BASIC EARNINGS PER SHARE:
Continuing operations $ (0.07) $ (0.24) $ (0.31)
Discontinued operations (0.75) (0.17) (0.92)
------- ------- -------
Net income $ (0.82) $ (0.41) $ (1.23)
======= ======= =======
DILUTED EARNINGS PER SHARE:
Continuing operations $ (0.07) $ (0.24) $ (0.31)
Discontinued operations (0.74) (0.17) (0.91)
------- ------- -------
Net income $ (0.81) $ (0.41) $ (1.22)
======= ======= =======
</TABLE>
In the fourth quarter of 1996, the Company recorded an after-tax charge of
$8.7 million ($7.0 million after minority interest) in "other expense, net",
principally related to asset write-downs at General Bottlers' joint venture in
Poland. The charge reduced basic and diluted earnings per share by $0.07 for the
fourth quarter and year ended December 31, 1996.
Due to the loss from continuing operations in the fourth quarter of 1997,
no potential common shares were included in the computation of average diluted
shares. The effect of potential common shares, assuming they were not
anti-dilutive, would have resulted in average diluted shares of 102.6 million.
There were no adjustments to the income (loss) amounts, shown in the table
in Note 17 in calculating the numerator for the basic and diluted earnings per
share.
<PAGE>
Whitman Corporation
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the years ended December 31 1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(in millions, except for earnings per share)
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS:
Sales:
Domestic $1,464.0 $1,451.1 $1,413.9 $1,255.4 $1,179.6
Foreign 93.5 50.3 34.8 0.7 --
-------- -------- -------- -------- --------
Total $1,557.5 $1,501.4 $1,448.7 $1,256.1 $1,179.6
======== ======== ======== ======== ========
Operating income:
Domestic $ 200.3 (A) $ 224.4 $ 209.0 $ 187.7 $ 170.5
Foreign (18.7)(A) (12.1) (11.3) (2.2) --
-------- -------- -------- -------- --------
Total before corporate administrative
expenses 181.6 212.3 197.7 185.5 170.5
Corporate administrative expenses 51.4 (A) 17.5 16.6 16.4 15.9
-------- -------- -------- -------- --------
Total operating income 130.2 194.8 181.1 169.1 154.6
Interest expense, net (42.3) (41.5) (47.6) (45.4) (69.0)
Other income (expense), net (18.0) (25.6)(B) (15.3) (43.4)(C) (4.5)
-------- -------- -------- -------- --------
Income before income taxes 69.9 127.7 118.2 80.3 81.1
Income tax provisions 37.9 61.1 52.8 35.6 36.3
Minority interest 16.2 18.8 (B) 18.6 18.2 15.1
-------- -------- -------- -------- --------
Income from continuing operations 15.8 47.8 46.8 26.5 29.7
Income (loss) from discontinued operations (11.7)(D) 91.6 86.7 76.7 62.1
Extraordinary loss on early debt retirement -- -- -- -- (4.2)
Cumulative effect of accounting change -- -- -- -- (9.4)
-------- -------- -------- -------- --------
Net income $ 4.1 $ 139.4 $ 133.5 $ 103.2 $ 78.2
======== ======== ======== ======== ========
Cash dividends per common share $ 0.45 $ 0.41 $ 0.37 $ 0.33 $ 0.29
======== ======== ======== ======== ========
AVERAGE SHARES:
Basic EPS - weighted-average common shares 101.6 104.8 104.9 105.5 107.1
Incremental effect of stock options 1.3 1.2 1.1 0.7 0.5
-------- -------- -------- -------- --------
Diluted EPS - adjusted weighted-average
common shares 102.9 106.0 106.0 106.2 107.6
======== ======== ======== ======== ========
BASIC EARNINGS (LOSS) PER SHARE (E):
Continuing operations $ 0.16 $ 0.46 $ 0.44 $ 0.25 $ 0.28
Discontinued operations (0.12) 0.87 0.83 0.73 0.58
Extraordinary loss on early debt retirement -- -- -- -- (0.04)
Cumulative effect of accounting change -- -- -- -- (0.09)
-------- -------- -------- -------- --------
Net income $ 0.04 $ 1.33 $ 1.27 $ 0.98 $ 0.73
======== ======== ======== ======== ========
DILUTED EARNINGS (LOSS) PER SHARE (E):
Continuing operations $ 0.15 $ 0.45 $ 0.44 $ 0.25 $ 0.28
Discontinued operations (0.11) 0.87 0.82 0.72 0.58
Extraordinary loss on early debt retirement -- -- -- -- (0.04)
Cumulative effect of accounting change -- -- -- -- (0.09)
-------- -------- -------- -------- --------
Net income $ 0.04 $ 1.32 $ 1.26 $ 0.97 $ 0.73
======== ======== ======== ======== ========
<PAGE>
OTHER STATISTICS:
Total assets $2,029.7 $2,080.6 $2,050.5 $1,853.8 $1,817.4
Long-term debt $ 604.7 $ 821.7 $ 810.3 $ 704.0 $ 731.3
Capital investments $ 83.4 $ 87.2 $ 111.1 $ 66.0 $ 45.1
Depreciation and amortization $ 73.8 $ 75.2 $ 70.6 $ 64.3 $ 63.5
Number of employees at December 31 6,381 5,863 5,739 5,044 4,671
</TABLE>
(A) In 1997, the Company recorded special charges of $49.3 million related
to the spin-offs, the restructuring of General Bottlers' organization
and the elimination of a significant portion of the Whitman Corporate
management and staff (see Note 3). These charges reduced operating
income for domestic and foreign operations of General Bottlers by $11.1
million and $3.7 million, respectively. In addition, corporate
administrative expenses in 1997 included special charges of $34.5
million. The full year impact of these charges is disclosed in Note 17.
(B) Includes an $8.7 million charge, principally for asset write-downs at
General Bottlers' joint venture in Poland. The charge reduced minority
interest by $1.7 million.
(C) Includes a $24.2 million unrealized loss on investment in Northfield
Laboratories Inc.
(D) In 1997, Hussmann and Midas, which were reclassified to discontinued
operations in December, 1997, recorded special charges with an after-tax
cost of $93.4 million (see Notes 2 and 17).
(E) There were no adjustments to the income (loss) amounts, shown in the
operating results section of this table, in calculating the numerator
for the basic and diluted earnings per share.
<PAGE>
WHITMAN CORPORATION AND SUBSIDIARIES
----------------------
EXHIBITS
FOR INCLUSION IN ANNUAL REPORT ON FORM 10-K
FISCAL YEAR ENDED DECEMBER 31, 1997
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description of Exhibit
- ------- ----------------------
(3)a# Certificate of Incorporation as Restated April 30, 1987, and
subsequently amended through June 24, 1992.
(3)b+ By-Laws, as amended September 20, 1996.
(4)# Indenture dated as of January 15, 1993, between Whitman
Corporation and The First National Bank of Chicago, Trustee. The
Registrant will furnish to the Securities and Exchange Commission,
upon request, copies of the forms of the debt securities issued
from time to time pursuant to the Indenture dated as of
January 15, 1993.
(10)a# **1982 Stock Option, Restricted Stock Award and Performance Award
Plan (as amended through June 16, 1989).
(10)b# **Amendment No. 2 to 1982 Stock Option, Restricted Stock Award and
Performance Award Plan made as of September 1, 1992.
(10)c# **Form of Nonqualified Stock Option Agreement.
(10)d# **Amendment to 1982 Stock Option, Restricted Stock Award and
Performance Award Plan made as of February 19, 1993.
(10)e@ **Form of Change in Control Agreement dated November 17, 1995.
(10)g# **Management Incentive Compensation Plan.
(10)h# **Long Term Performance Compensation Program.
(10)i **Whitman Corporation Executive Retirement Plan, as Amended and
Restated Effective January 1, 1998.
(10)j **Pepsi-Cola General Bottlers, Inc. Executive Retirement Plan, as
Amended and Restated Effective January 1, 1998.
(10)k# **Deferred Compensation Plan for Directors, as Amended November
18, 1988.
(10)l+ **Amendment to Stock Incentive Plan dated September 20, 1996.
(10)m* **Form of Restricted Stock Award Agreement.
(10)n **Revised Stock Incentive Plan (adopted November 21, 1997).
(12) Statement of Calculation of Ratio of Earnings to Fixed Charges.
(21) Subsidiaries of the Registrant.
(23) Consent of Independent Auditors.
(24) Powers of Attorney.
(27) Financial Data Schedule.
Exhibit Reference Explanations
** Exhibit constitutes a management contract or compensatory plan, contract
or arrangement described under Item 601(b) (10)(iii) (A) of Regulation
S-K.
# Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992 under the indicated Exhibit number.
* Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1993 under the indicated Exhibit number.
& Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1994 under the indicated Exhibit number.
@ Incorporated by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1995 under the indicated Exhibit number.
+ Incorporated by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996 under the indicated
Exhibit number.
EXHIBIT 10(i)
WHITMAN CORPORATION
EXECUTIVE RETIREMENT PLAN
As Amended and Restated Effective January 1, 1998
WHITMAN CORPORATION EXECUTIVE RETIREMENT PLAN
Whitman Corporation amends and restates, effective as of January 1, 1998, an
unfunded, deferred compensation plan on behalf of certain designated management
or highly compensated employees of Whitman Corporation. This document defines
the provisions of such plan and shall be known as the "Whitman Corporation
Executive Retirement Plan."
This plan is intended in part to be an unfunded, deferred compensation plan for
a select group of management or highly compensated employees, as described in
sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income
Security Act of 1974 ("ERISA") and in part to be an excess benefit plan
described in section 3(36) of ERISA.
Table of Contents
- -----------------
ARTICLE I
DEFINITIONS
1.1 "Accounting Period"
1.2 "Accounts"
1.3 "Actuarial Equivalent"
1.4 "Appendix"
1.5 "Beneficiary"
1.6 "Benefit Trust Committee"
1.7 "Board of Directors"
1.8 "Change of Control"
1.9 "Company"
1.10 "Company Stock"
1.11 "Compensation"
1.12 "Compensation Committee"
1.13 "Compensation Limit"
1.14 "Contribution Dollar Limit"
1.15 "Conversion Election"
1.16 "Death Benefit"
1.17 "Deferrals"
1.18 "Deferral Election" or "Election"
1.19 "Deferral Percentage"
1.20 "Designated Participant"
1.21 "Effective Date"
1.22 "Eligible Employee"
1.23 "Employee"
1.24 "Enrollment Election"
1.25 "ERISA"
1.26 "Exchange Act"
1.27 "Insider"
1.28 "Installment Form of Payment"
1.29 "Internal Revenue Code" or "Code"
1.30 "Investment Election"
1.31 "Investment Fund" or "Fund"
1.32 "Investment Grade Rating"
1.33 "Maximum Annual Additions Limitation"
1.34 "Maximum Annual Benefit Limitation"
1.35 "MIC Award"
1.36 "Notice Date"
1.37 "Parent"
1.38 "Participant"
1.39 "Payment Date"
1.40 "Pension Plan"
1.41 "Plan"
1.42 "Plan Year"
1.43 "Retirement Benefit"
1.44 "RSP"
1.45 "Section 401(m) Limitation"
1.46 "Settlement Date"
1.47 "Spouse"
1.48 "Successor Plan"
1.49 "Sweep Date"
1.50 "Termination of Employment"
1.51 "Trade Date"
1.52 "Trust"
ARTICLE II
PARTICIPATION
2.1 Eligibility
2.2 Enrollment Election
ARTICLE III
PARTICIPANT DEFERRAL ELECTIONS
3.1 Employee Deferral Election
3.2 Election Procedures
3.3 Coordination with RSP
ARTICLE IV
DEFERRALS AND POSTINGS
4.1 Replacement RSP Employer Deferral
4.2 MIC Deferral
4.3 Pay Based Deferral
4.4 Replacement RSP Employee Deferral
4.5 RSP Employer Deferral
4.6 RSP Employee Deferral
ARTICLE V
EXCESS RETIREMENT AND DEATH BENEFITS
5.1 Amount of Pension Benefits
5.2 Amount of Death Benefit
5.3 Pre-1994 Benefits
ARTICLE VI
ACCOUNTING FOR PARTICIPANTS'
ACCOUNTS AND FOR INVESTMENT FUNDS
6.1 Individual Participant Accounting
6.2 Accounting for Investment Funds
ARTICLE VII
INVESTMENT FUNDS AND ELECTIONS
7.1 General
7.2 Investment of Deferrals
7.3 Investment of Accounts
7.4 Insiders
7.5 Investment Returns on MIC Deferrals
7.6 Restrictions on Measurement
7.7 Procedures
ARTICLE VIII
VESTING AND FORFEITURES
8.1 Fully Vested Deferral Accounts
ARTICLE IX
WITHDRAWALS
9.1 Withdrawals for Hardship
9.2 Withdrawal Processing
ARTICLE X
DISTRIBUTIONS
10.1 Retirement Benefit
10.2 Pension Death Benefit
10.3 Accounts
10.4 MIC Account
10.5 Death Benefit of Accounts
10.6 Prior to 1994
10.7 Payments of Retirement and Death Benefit Due to an Investment
Grade Rating Change
10.8 Payment of Accounts Due to an Investment Grade Rating Change
10.9 Payment of Retirement and Death Benefits Due to a Change of
Control
10.10 Payment of Accounts Due to a Change of Control
ARTICLE XI
AMENDMENT
11.1 Prior to a Change of Control
11.2 After a Change of Control
ARTICLE XII
TERMINATION
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Administration
13.2 Finality of Determination
13.3 Expenses
13.4 Indemnification and Exculpation
13.5 Funding
13.6 Corporate Action
13.7 Interests not Transferable
13.8 Effect on Other Benefit Plans
13.9 Legal Fees and Expenses
13.10 Deduction of Taxes from Amounts Payable
13.11 Facility of Payment
13.12 Merger
13.13 Gender and Number
13.14 Invalidity of Certain Provisions
13.15 Headings
13.16 Notice and Information Requirements
13.17 Governing Law
ARTICLE I
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DEFINITIONS
The following sections of this Article I provide basic definitions of terms
used throughout this Plan, and whenever used herein in a capitalized form,
except as otherwise expressly provided, the terms shall be deemed to have the
following meanings:
I.1 "Accounting Period" means each business day.
I.2 "Accounts" means the record of a Participant's interest in this Plan
represented by his or her:
(a) "MIC Deferral Account" which means a Participant's interest in
this Plan composed of MIC Deferrals posted for each Plan Year on or after
January 1, 1994 to the Participant under this Plan, if any (as identified
by the Benefit Trust Committee) for such Plan Year, plus all interest
deemed credited to and minus all withdrawals and distributions actually
charged to such account.
(b) "Pay Based Account" which means a Participant's interest in this
Plan composed of Pay Based Deferrals posted for each Plan Year on or after
January 1, 1994 to the Participant under this Plan, plus all income and
gains deemed credited to and minus all losses deemed charged to such
account, as measured by the investment returns of each Investment Fund
designated by the Participant, and minus all withdrawals and distributions
actually charged to such account.
(c) "Replacement RSP Accounts" which consists of the following two
accounts:
(1) "Replacement RSP Employee Account" which means a
Participant's interest in this Plan composed of Replacement RSP
Employee Deferrals posted for each Plan Year on or after January 1,
1994 to the Participant under this Plan, if any (as identified by the
Benefit Trust Committee) for such Plan Year, plus all income and gains
deemed credited to and minus all losses deemed charged to such
account, as measured by the investment returns of each Investment Fund
designated by the Participant, and minus all withdrawals and
distributions actually charged to such account; and
(2) "Replacement RSP Employer Account" which means a
Participant's interest in this Plan composed of Replacement RSP
Employer Deferrals posted for each Plan Year on or after January 1,
1994 to the Participant under this Plan (as identified by the Benefit
Trust Committee) for such Plan Year, plus all income and gains deemed
credited to and minus all losses deemed charged to such account, as
measured by the investment returns of each Investment Fund designated
by the Participant, and minus all withdrawals and distributions
actually charged to such account.
(d) "RSP Employee Account" which means a Participant's interest in
this Plan composed of RSP Employee Deferrals posted under this Plan prior
to January 1, 1994, if any (as identified by the Benefit Trust Committee),
plus all income and gains deemed credited to and minus all losses deemed
charged to such account, as measured by the investment returns of each
Investment Fund designated by the Participant, and minus all withdrawals
and distributions actually charged to such account.
(e) "RSP Employer Account" which means a Participant's interest in
this Plan composed of RSP Employer Deferrals posted under this Plan prior
to January 1, 1994, if any (as identified by the Benefit Trust Committee),
plus all income and gains deemed credited to and minus all losses deemed
charged to such account, as measured by the investment returns of each
Investment Fund designated by the Participant, and minus all withdrawals
and distributions actually charged to such account.
I.3 "Actuarial Equivalent" means an amount equal in value to the benefit
replaced as determined (i) in accordance with the terms of the Pension Plan with
respect to the determination of any form of benefit other than a single sum, or
(ii) with respect to a single sum distribution, by: (A) using an assumed annual
discount rate equal to the weekly average, as of the last full week of the
fourth calendar month prior to the month containing the date the single sum will
be paid, of the Bond Buyer's Average of 20 Municipal Bonds, rounded to the
nearest 1/4%, as published weekly by the Federal Reserve Bank of St. Louis and
(B) assuming the payee lives for the duration of his life expectancy where such
life expectancy is calculated according to the UP94 Mortality Table.
I.4 "Appendix" means a written supplement attached to this Plan and made a
part hereof which has been added in accordance with the provisions of this Plan.
I.5 "Beneficiary" means
(a) with respect to the Death Benefit payable upon the death of a
Participant, any person designated by the Participant (actually or by
default) to receive any retirement benefits which are payable with respect
to the death of a Participant under the Pension Plan; and
(b) with respect to the balance of a Participant's Accounts as of the
death of such Participant, each person designated by the Participant on his
or her most recent Enrollment Election form approved by the Benefit Trust
Committee; provided that if a Participant fails to designate a Beneficiary
on an Enrollment Election form or if all such designated persons predecease
the Participant without the Participant completing a new, approved
Enrollment Election form, then Beneficiary means any person designated by
the Participant (actually or by default) to receive the balance of any of
his or her accounts which are payable with respect to the death of such
Participant under the RSP.
An individual who is entitled to receive a Death Benefit on and after the
death of a Participant will remain a Beneficiary until the latest of (a) receipt
of the balance of all of such Accounts to which he or she is entitled to
receive; or (b) receipt of such Beneficiary's Death Benefit, if any, is
completed (or made in a single sum).
I.6 "Benefit Trust Committee" means the Benefit Trust Committee appointed
pursuant to the terms of the Trust which will have the power to manage and
control the operation and administration of this Plan.
I.7 "Board of Directors" means the board of directors of the Company or the
Parent.
I.8 "Change of Control" means an event which shall be deemed to have
occurred if (i) there shall be consummated (A) any consolidation or merger of
the Parent, if one exists, or the Company in which either the Parent or the
Company, respectively, is not the continuing or surviving corporation or
pursuant to which shares of the Parent's or the Company's common stock are
converted into cash, securities or other property, other than a merger in which
the holders of the Parent's or the Company's common stock, respectively,
immediately prior to the merger have substantially the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger, or (B) any sale, lease, exchange or other transfer (in one transaction
or in a series of related transactions) of all or substantially all the assets
of either the Parent or the Company, or (ii) the shareholders of either the
Parent or the Company shall approve any plan or proposal for such corporation's
liquidation or dissolution, or (iii) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act, other than the Parent, Company
or its subsidiaries, or any employee benefit plan sponsored by the Company or
its subsidiaries, shall become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of securities of either the Parent or the Company
representing twenty-five percent (25%) or more of the combined voting power of
the Parent's or the Company's, respectively, then outstanding securities
ordinarily (and apart from rights accruing in special circumstances) having the
right to vote in the election of directors, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or otherwise, or
(iv) at any time during a period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors shall cease for
any reason to constitute at least a majority thereof, unless the election or the
nomination for election by the Parent's or the Company's shareholders,
respectively, of each new director during such two-year period was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such two-year period.
I.9 "Company" means Whitman Corporation or any successor entity by
operation of law or any successor entity which affirmatively adopts the Plan,
the Trust and the obligations of Whitman Corporation with respect to the Plan
and the Trust.
I.10 "Company Stock" means common stock issued by the Parent, or if none,
then by the Company.
I.11 "Compensation" means
(a) for purposes of Replacement RSP Employee Deferrals, Replacement
RSP Employer Deferrals and Pay Based Deferrals for any Plan Year, a
Participant's "Compensation", as defined in the RSP (disregarding any
provision having the effect of excluding Replacement RSP Employee Deferrals
and MIC Deferrals), for a Plan Year to the Participant;
(b) for purposes of RSP Employee Deferrals and RSP Employer Deferrals,
a Participant's Compensation, as defined in the RSP (disregarding any
provision having the effect of excluding RSP Employee Deferrals), for a
Plan Year;
(c) for purposes of MIC Deferrals, a Participant's MIC Award (other
than that portion of the MIC Award which is a Replacement RSP Employee
Deferral and excluding an amount equal to the sum of (i) the Employee's
portion of taxes imposed by the Federal Insurance Contributions Act with
respect to the MIC Award, with respect to the Replacement RSP Employer
Deferrals on the portion of the MIC Award which is a Replacement RSP
Employee Deferral, and if needed, with respect to the Retirement Benefit
accrual, for that Plan Year plus, if needed, (ii) other applicable
withholding amounts); and
(d) for purposes of computing the Retirement Benefit, a Participant's
"Compensation," as defined in the Pension Plan (disregarding any provision
having the effect of excluding RSP Employee Deferrals, Replacement RSP
Employee Deferrals and MIC Deferrals), for a Plan Year, as adjusted by the
Benefit Trust Committee from Plan Year to Plan Year, and effective January
1, 1994, Compensation shall include a Participant's MIC Award earned for
services rendered during such Plan Year, but shall not include an MIC Award
paid during the same Plan Year for services rendered during the prior Plan
Year.
Notwithstanding the above, the definition of "Compensation" in the RSP and
the Pension Plan shall not include the Compensation Limit.
I.12 "Compensation Committee" means the Compensation Committee of the Board
of Directors.
I.13 "Compensation Limit" means the limitation on the amount of
Compensation which may be considered after application of Code section
401(a)(17).
I.14 "Contribution Dollar Limit" means the annual limit imposed on each
Participant pursuant to section 402(g) of the Code, which is seven thousand
dollars ($7,000) per Plan Year (as indexed for cost of living adjustments
pursuant to Code section 402(g)(5) and 415(d)).
I.15 "Conversion Election" means, effective on or after January 1, 1994, an
election, on such form that may be required by the Benefit Trust Committee, by a
Participant to change the method of measuring the investment return on all or
some specified portion of such Participant's Accounts. No Conversion Election
shall be deemed to have been given to the Benefit Trust Committee unless it is
complete and delivered in accordance with the procedures established by such
Benefit Trust Committee for this purpose.
I.16 "Death Benefit" means a monthly (or single sum) benefit payable to a
Beneficiary and determined in accordance with this Plan.
I.17 "Deferrals" means amounts posted to this Plan by the Company or an
Eligible Employee. Specific types of deferrals include:
(a) "MIC". An amount posted after 1993 based upon the Participant's
Deferral Election to defer some or all of his or her Compensation.
(b) "Pay Based". An amount posted and allocated on a pay based formula
to an eligible Participant's Accounts.
(c) "Replacement RSP Employee". An amount posted after 1993 based upon
the Participant's Deferral Election to defer some of his or her
Compensation.
(d) "Replacement RSP Employer". An amount posted after 1993 based upon
the Replacement RSP Employee Deferral made by the eligible Participant.
(e) "RSP Employee". An amount posted prior to 1994 on a pre-tax basis
which the Participant could have elected if he or she were participating
actively in the RSP.
(f) "RSP Employer". An amount posted prior to January 1, 1994 related
to pre-tax contributions which the Participant could not make to the RSP or
which are made on behalf of Designated Participants without regard to such
pre-tax contributions.
I.18 "Deferral Election" or "Election" means irrevocable elections made by
a Participant (a) to reduce his or her Compensation for a Plan Year by an amount
equal to the product of his or her Deferral Percentage and such Compensation
subject to the Deferral Election; (b) to select whether Deferrals for that Plan
Year will be paid in an Installment Form of Payment; and (c) to select a Payment
Date for the MIC Deferrals for that Plan Year.
I.19 "Deferral Percentage" means (a) with respect to Replacement RSP
Employee Deferrals, the percentage of a Participant's Compensation for a Plan
Year which is to be deferred and posted to this Plan; and (b) with respect to
MIC Deferrals, the percentage of a Participant's Compensation for a Plan Year
which is to be deferred and posted to this Plan.
I.20 "Designated Participant" means an individual on the list of Employees
set forth in an Appendix to the Pension Plan as not being an eligible employee
for the purpose of the Pension Plan.
I.21 "Effective Date" means generally January 1, 1991 and, where noted,
January 1, 1994, the dates upon which certain provisions of this document become
effective.
I.22 "Eligible Employee" means with respect to each Plan Year:
(a) with respect to the Retirement Benefit, each Employee who is a
participant in the Pension Plan or would be a participant in the Pension
Plan if they were not a Designated Participant.
(b) prior to 1994 with respect to Deferrals:
(1) each Employee who is a Participant in the RSP for that Plan
Year and whose pre-tax contributions which would otherwise have been
made for that Plan Year to the RSP are limited by the Contribution
Dollar Limit; or
(2) each Employee who is a Designated Participant for that Plan
Year.
(c) after 1993 with respect to Deferrals, each Employee who is
participating in the Whitman Corporation Management Incentive Compensation
Plan during that Plan Year.
I.23 "Employee" means any person who is considered to be an employee of the
Company pursuant to the personnel policies of the Company; and on and after a
Change of Control, who renders services as a common law employee to the Company.
I.24 "Enrollment Election" means irrevocable elections made by a
Participant (a) to select the term of his or her Installment Form of Payment;
(b) to select the Payment Date of his or her Accounts following Termination of
Employment; and (c) to select the form of payment of his or her Accounts as of
December 31, 1993.
I.25 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
I.26 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
I.27 "Insider" means for a Plan Year, or any portion thereof, the
Participant is subject to the reporting requirements of Section 16 of the
Exchange Act.
I.28 "Installment Form of Payment" means separately with respect to (a) his
or her Accounts (other than his or her MIC Account) or (b) his or her MIC
Account, the term of years selected by the Participant in his or her Enrollment
Election form over which to pay such Accounts in annual installments commencing
as of what would otherwise have been the Payment Date of such Accounts and
payable on each January 1 thereafter over a period of not less than two (2) nor
more than fifteen (15) years (stated as a number of whole integers), with each
installment being an amount equal to the amount determined by dividing the
applicable balance of such Accounts as of the date of payment by the number of
dates of payment remaining in the installment period (including the current date
of payment).
I.29 "Internal Revenue Code" or "Code" means the Internal Revenue Code of
1986, as amended, any subsequent Internal Revenue Code and final Treasury
Regulations. If there is a subsequent Internal Revenue Code, any references
herein to Internal Revenue Code sections shall be deemed to refer to comparable
sections of any subsequent Internal Revenue Code.
I.30 "Investment Election" means, effective on and after January 1, 1994,
an election, on such form that may be required by the Benefit Trust Committee,
made by a Participant to direct the method of measuring the investment return on
his or her Deferrals (other than MIC Deferrals). No Investment Election shall be
deemed to have been given to the Benefit Trust Committee unless it is complete
and delivered in accordance with the procedures established by such Benefit
Trust Committee for this purpose.
I.31 "Investment Fund" or "Fund" means one or more of the investment
alternatives which are available under the RSP at any determination date unless
designated otherwise by the Benefit Trust Committee, and which are used by this
Plan as a measurement of investment return on Accounts other than the MIC
Account.
I.32 "Investment Grade Rating" means a rating either (a) at or above Baa3
by Moody's Investors Service, Inc. or (b) at or above BBB by Standard & Poor's
Corporation, or the prevailing equivalent ratings at the time.
I.33 "Maximum Annual Additions Limitation" means the limitation imposed by
Code section 415 on benefits payable by defined contribution plans qualified
under Code section 401(a).
I.34 "Maximum Annual Benefit Limitation" means the limitation imposed by
Code section 415 on benefits payable by defined benefit pension plans qualified
under Code sections 401(a) including application of the combination limitations
of Code section 415(e) to cause a further reduction, if any, of such benefits.
I.35 "MIC Award" means the amount of award payable to a Participant under
the Whitman Corporation Management Incentive Compensation Plan.
I.36 "Notice Date" means the date established by the Benefit Trust
Committee as the deadline for it to receive a Deferral Election or any other
notification with respect to an administrative matter in order to be effective
under this Plan.
I.37 "Parent" means any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), other than any employee benefit plan sponsored by
the Parent or the Company, (i) having directly or indirectly a beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of the Company's then outstanding securities ordinarily
(and apart from rights accruing in special circumstances) having the right to
vote in the election of directors; and (ii) with an Investment Grade Rating.
I.38 "Participant" means an Eligible Employee who begins to participate in
this Plan after completing the eligibility requirements. An individual will
remain a Participant until the latest of (a) distribution of the balance of all
of his or her Accounts; or (b) payment of his or her Retirement Benefit, if any,
is completed (or made in a single sum).
I.39 "Payment Date" means:
(a) with respect to Accounts, the date payment is made in accordance
with Article X or the first day of the fifteenth (15th) month following a
Participant's Termination of Employment unless such Participant has
selected an earlier Payment Date for (1) his or her Accounts on an
Enrollment Election form or (2) his or her MIC Accounts on a Deferral
Election Form; or
(b) the date a Participant's Retirement Benefit is distributed or
commences to be distributed as described in Article X.
I.40 "Pension Plan" means the Whitman Corporation Pension Plan; effective
January 1, 1992, the Pepsi-Cola General Bottlers, Inc. Pension Plan for Salaried
Employees and any Successor Plan.
I.41 "Plan" means the Whitman Corporation Executive Retirement Plan, as it
may be validly amended from time to time.
I.42 "Plan Year" means the annual accounting period of this Plan which ends
on each December 31.
I.43 "Retirement Benefit" means a monthly (or single sum) pension benefit
payable to a Participant and determined in accordance with Article V.
I.44 "RSP" means the Whitman Corporation Retirement Savings Plan, as
amended from time to time and any Successor Plan.
I.45 "Section 401(m) Limitation" means the limit imposed by Code section
401(m).
I.46 "Settlement Date" means the date on which financial transactions from
a Trade Date are considered to be settled which is deemed to be the same date as
of which such transaction would have settled under the RSP with respect to the
same type of financial transaction (e.g. Investment Election, Conversion
Election, Payment Date).
I.47 "Spouse" means a person who is considered the Participant's spouse
under the RSP and Pension Plan, whichever is applicable.
I.48 "Successor Plan" means a tax-qualified, retirement plan described in
section 401(a) of the Code into which the assets and liabilities have been
merged or transferred in accordance with section 414(l) of the Code and section
208 of ERISA from the Pension Plan or the RSP, respectively, and which provides
benefits, options, features and rights, each comparable in material respects to
those available in the Pension Plan or RSP, whichever is applicable.
I.49 "Sweep Date" means the date established by the Benefit Trust Committee
as the cutoff date and time for the Benefit Trust Committee to receive
notification with respect to a financial transaction in order to be processed
with respect to such Trade Date.
I.50 "Termination of Employment" occurs when a person ceases to be an
Employee as determined by the personnel policies of the Company; provided
however, transfer of employment from the Company, or from one affiliate of the
Company, to another affiliate of the Company shall not constitute a Termination
of Employment for purposes of this Plan. If a person would cease to be an
Employee because of a Change of Control, solely for the purpose of this Plan,
such person will not be considered to have incurred a Termination of Employment
if the person's successor employer, either expressly or by operation of law,
assumes the Plan and Trust, the obligations and liabilities of the Plan and
Trust, and agrees to the responsibilities of the Company under the Plan and
Trust.
I.51 "Trade Date" means the date as of which a financial transaction is
considered by this Plan to have occurred which is deemed to be the same date as
of which such transaction would have occurred under the RSP with respect to the
same type of financial transaction (e.g. Investment Election, Conversion
Election, Payment Date).
I.52 "Trust" means the trust created by the Whitman Corporation Benefit
Trust Agreement as it may be validly amended from time to time.
ARTICLE II
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PARTICIPATION
II.1 Eligibility. On or after the Effective Date:
(a) Participant on January 1, 1991. Each person who has a balance in
his or her Accounts, or who has accrued a Retirement Benefit, as of January
1, 1991 shall be a Participant as of January 1, 1991.
(b) Other Eligible Employee. Each other Eligible Employee shall become
a Participant with respect to the Plan Year in which he or she becomes an
Eligible Employee; provided however, on or after January 1, 1994, a person
who was an Employee prior to becoming an Eligible Employee shall become a
Participant as of the first day of the Plan Year commencing on or after the
date he or she became an Eligible Employee.
II.2 Enrollment Election.
(a) Participant on January 1, 1994. Each person who is a Participant
on January 1, 1994 shall complete, sign and return an Enrollment Election
form provided for that purpose by the Benefit Trust Committee, to the
Benefit Trust Committee no later than the designated Notice Date.
(b) Other Eligible Employees. Each person first eligible to become a
Participant shall complete, sign and return an Enrollment Election form
provided for that purpose by the Benefit Trust Committee, to the Benefit
Trust Committee no later than the designated Notice Date.
ARTICLE III
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PARTICIPANT DEFERRAL ELECTIONS
III.1 Employee Deferral Election. Prior to the date payments of Accounts
are accelerated under Section 10.8, the following shall apply; after such date,
no Deferral Elections will be effective.
(a) For each Plan Year commencing on or after January 1, 1994, a
Participant who is an Eligible Employee and who desires to have Replacement
RSP Employee Deferrals made on his or her behalf shall file a Deferral
Election pursuant to procedures specified by the Benefit Trust Committee
specifying (1) his or her Deferral Percentage of not less than two percent
(2%) nor more than ten percent (10%) (stated as a whole integer percentage)
and authorizing the Compensation otherwise payable to him or her for a Plan
Year to be reduced and deferred hereunder to such Participant's Payment
Date; and (2) whether or not the Replacement RSP Employee Account created
with respect to such Plan Year will be distributed in the Installment Form
of Payment.
(b) For each Plan Year commencing on or after January 1, 1994, a
Participant who is an Eligible Employee and who desires to have an MIC
Deferral made on his or her behalf shall file a Deferral Election pursuant
to procedures specified by the Benefit Trust Committee specifying (1) his
or her Deferral Percentage of not less than 5% nor more than 100% (stated
as a whole integer percentage) and authorizing his or her Compensation
payable for a Plan Year to be reduced and deferred hereunder to a fixed
Payment Date not earlier than two (2) full Plan Years after the date the
Deferral Election is received by the Benefit Trust Committee; and (2)
whether or not the MIC Account created with respect to such Plan Year will
be distributed in the Installment Form of Payment.
(c) Notwithstanding Subsection (a) hereof, for any Plan Year the
Benefit Trust Committee may, without amending this Plan, determine that the
maximum Deferral Percentage shall be greater or lesser than the percentages
set forth in Subsection (a) hereof. Otherwise, the maximum Deferral
Percentage as provided in Subsection (a) hereof shall apply.
(d) Any Replacement RSP Employee Deferral Election which has not been
properly completed, or which is submitted at a time when the Participant
does not have outstanding a properly completed Investment Election, will be
deemed not to have been received and be void. A Participant's Deferral
Election shall be effective only if received by the Benefit Trust Committee
on or before the Notice Date for a Plan Year.
III.2 Election Procedures. If properly received by the Benefit Trust
Committee, a Deferral Election may be effective only with respect to
Compensation paid in a Plan Year to which the Deferral Election applies and only
with respect to Compensation paid after the Notice Date for the Deferral
Election. Consistent with the above, the Benefit Trust Committee may establish
rules and procedures governing when a Deferral Election will be effective and
what Compensation will be deferred by the Deferral Election; provided such rules
and procedures are not more permissive than the terms and provisions of this
Plan.
III.3 Coordination with RSP. Notwithstanding a Participant's Deferral
Election, if a Participant makes a "401(k) Hardship" withdrawal from the RSP
during a Plan Year, the "401(k) Hardship" withdrawal rules of the RSP, which are
intended to be applicable to this Plan, are incorporated by reference herein and
made a part hereof, but only to the extent required by Treas. Reg. '1.401(k)-1,
in order for the RSP to be a qualified cash or deferred arrangement.
ARTICLE IV
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DEFERRALS AND POSTINGS
IV.1 Replacement RSP Employer Deferral.
(a) Frequency and Eligibility. For each period after 1993 for which a
Participant makes a Replacement RSP Employee Deferral, the Company shall
post to this Plan on behalf of such Participant an Replacement RSP Employer
Deferral as described in the following Posting and Allocation Method
paragraph.
(b) Posting and Allocation Method. The Replacement RSP Employer
Deferral for each period shall total one hundred percent (100%) of each
eligible Participant's Replacement RSP Employee Deferral for the period,
provided that no Replacement RSP Employer Deferral shall be made based upon
a Participant's Replacement RSP Employee Deferral in excess of six percent
(6%) of his or her Compensation. The Replacement RSP Employer Deferral
shall be posted to the Replacement RSP Employer Account of such Participant
as of the same date the Replacement RSP Employee Deferral which it matches
is posted.
IV.2 MIC Deferral.
(a) Frequency and Eligibility. For each period after 1993 for which a
Deferral Election is in effect, the Company shall post to this Plan on
behalf of each Participant an amount equal to the amount designated by the
Participant as an MIC Deferral on his or her Deferral Election.
(b) Posting. The MIC Deferral shall be posted to the MIC Deferral
Account of such Participant as of the date his or her MIC Award would
otherwise have been paid to the Participant.
IV.3 Pay Based Deferral.
(a) Frequency and Eligibility. For each Plan Year, the Company may
make a Pay Based Deferral in an amount determined by the Company on behalf
of each Participant who is an Eligible Employee and who would have
qualified for a similar deferral in the RSP had such person been eligible
to participate in the RSP and in an amount determined in the Posting and
Allocation Method paragraph.
(b) Posting and Allocation Method. The Pay Based Deferral for each
period shall be posted as of the date determined by the Benefit Trust
Committee (but not later than the tax filing deadline for the Company's
federal income tax return for the Plan Year with respect to which the Pay
Based Deferral relates, including extensions) to the Pay Based Account of
each of the Participants for the Plan Year in direct proportion to their
Compensation.
IV.4 Replacement RSP Employee Deferral.
(a) Frequency and Eligibility. For each period for which a Deferral
Election is in effect, the Company shall post to this Plan on behalf of
each Participant an amount equal to the amount designated by the
Participant as an Replacement RSP Employee Deferral on his or her Deferral
Election.
(b) Posting. The Replacement RSP Employee Deferral shall be posted to
the Replacement RSP Employee Account of such Participant as of the date
such Compensation amount would otherwise have been paid to the Participant.
IV.5 RSP Employer Deferral.
(a) Frequency and Eligibility.
(1) Pre-1991. Amounts posted to a Participant's Accounts for each
Plan Year prior to 1991 are determined under the terms and provisions
of this Plan as it existed during any such Plan Year.
(2) Post-1990 and Pre-1994. For each Plan Year after 1990 and
prior to 1994, the Company shall post to this Plan on behalf of each
Participant whose pre-tax contribution to the RSP was limited by the
Contribution Dollar Limit for that Plan Year, and who is not a
Designated Participant for that Plan Year, an RSP Employer Deferral as
described in (b)(2) of the following Posting and Allocation Method
paragraph.
(3) Designated Participant. For each Plan Year after 1990 and
prior to 1994, the Company shall post to this Plan on behalf of each
Participant who is a Designated Participant and an Employee for that
Plan Year, an RSP Employer Deferral as described in (b)(3) of the
following Allocation Method paragraph.
(b) Posting and Allocation Method.
(1) Pre-1991. RSP Employer Deferrals for Plan Years prior to 1991
shall be posted as of January 1, 1991, to the RSP Employer Account.
(2) Post-1990 and Pre-1994. The RSP Employer Deferral for each
Plan Year after 1990 and prior to 1994 shall be an amount equal to (A)
minus (B) where:
(A) is equal to the amount of matching contribution which
would have been made to the RSP for the Plan Year based on the
assumptions that (i) the Participant has made pre-tax
contributions to the RSP at the rate of six percent (6%) of his
or her compensation as defined in the RSP, without regard to the
Maximum Annual Additions Limitation, the Contribution Dollar
Limit and the Compensation Limit; and (ii) matching contributions
to the RSP were made with respect to such amounts in accordance
with the terms of the RSP without regard to the Maximum Annual
Additions Limitation and the Section 401(m) Limitation; and
(B) is equal to the actual amount of matching contribution
made on behalf of the Participant to the RSP for the Plan Year.
The RSP Employer Deferral after 1990 shall be posted to the RSP
Employer Account as of the same date it would have been made as a
matching contribution to the RSP, if it could have been made (or as a
pay based contribution to the RSP in 1991, if it could have been
made).
(3) Designated Participant. The RSP Employer Deferral for each
Plan Year after 1990 and prior to 1994 shall be an amount equal to six
percent (6%) of the Participant's Compensation, without regard to the
Maximum Annual Benefit Limitation. For the 1991 Plan Year, an amount
shall be posted equal to 2% of such Participant's Compensation. The
RSP Employer Deferral after 1990 shall be posted to the RSP Employer
Account as of the same date it would have been made as a matching
contribution to the RSP, if it could have been made (or as a pay based
contribution to the RSP in 1991, if it could have been made).
IV.6 RSP Employee Deferral.
(a) Frequency and Eligibility. Amounts posted to a Participant's
Accounts for each Plan Year prior to 1994 are determined under the terms
and provisions of this Plan as it existed during any such Plan Year.
(b) Allocation Method. RSP Employee Deferrals for Plan Years prior to
1994 shall be posted to the RSP Employee Account in accordance with the
terms of the Plan at that time.
ARTICLE V
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EXCESS RETIREMENT AND DEATH BENEFITS
V.1 Amount of Pension Benefits. Effective on and after January 1, 1994, a
Retirement Benefit will be paid under this Plan, only as provided in Article X,
to a Participant in an annual amount payable monthly equal to the amount by
which (a) exceeds (b).
(a) The amount of the annual retirement benefit payable in the form of
a single life annuity the Participant would have been entitled to receive
under the Pension Plan (1) had the Pension Plan (and any other plan
referenced by the Pension Plan for the purpose of determining an "Offset
Benefit" as defined in the Pension Plan) not applied the Maximum Annual
Benefit Limitation in determining benefits payable from the Pension Plan;
and (2) had the Participant not been excluded from being an "Eligible
Employee" by being listed on an Appendix to the Pension Plan (and any other
plan referenced by the Pension Plan for the purpose of determining an
"Offset Benefit" as defined in the Pension Plan). For purposes of this
Section 5.1(a), the compensation used for determining retirement benefits
payable from the Pension Plan (and any other plan referenced by the Pension
Plan for the purpose of determining an "Offset Benefit" as defined in the
Pension Plan) shall mean Compensation as defined in this Plan for a Plan
Year.
(b) The Actuarial Equivalent of the amount of the annual retirement
benefit payable monthly which the Participant is entitled to receive under
the Pension Plan if it were to commence on the Payment Date and to be paid
in the form elected by such Participant under the Pension Plan, or if the
Participant has not made such an election under the Pension Plan, then in
the form of either a joint and 100% contingent annuity, if married, or a
single life annuity, if not married.
V.2 Amount of Death Benefit. Effective on and after January 1, 1994, a
Death Benefit will be paid under this Plan, only as provided in Article X, to a
Beneficiary of a deceased Participant in an annual amount payable monthly equal
to the amount by which (a) exceeds (b):
(a) The amount of the annual death benefit payable in the form of a
single life annuity the Beneficiary of a deceased Participant would have
been entitled to receive under the Pension Plan (1) had the Pension Plan
not applied the Maximum Annual Benefit Limitation in determining benefits
payable from the Pension Plan; and (2) had the Participant not been
excluded from being an "Eligible Employee" by being listed on an Appendix
to the Pension Plan. For purposes of this Section 5.3(a), the compensation
used for determining death benefits payable from the Pension Plan means
Compensation as defined in this Plan for a Plan Year.
(b) The Actuarial Equivalent of the amount of the annual death benefit
payable monthly which the Beneficiary of a deceased Participant is entitled
to receive under the Pension Plan if it were to commence on the same date
as the Death Benefit under this Plan and to be paid in the form of single
life annuity.
V.3 Pre-1994 Benefits. Any Retirement Benefit accrued by a Participant
prior to 1994, who is never an Eligible Employee after 1993, shall be determined
and paid solely under the terms of this Plan as it existed prior to 1991.
ARTICLE VI
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ACCOUNTING FOR PARTICIPANTS'
ACCOUNTS AND FOR INVESTMENT FUNDS
VI.1 Individual Participant Accounting.
(a) Account Maintenance. The Benefit Trust Committee shall cause the
Accounts for each Participant to reflect transactions involving amounts
posted to the Accounts and the measurement of investment returns on
Accounts in accordance with this Plan. Investment returns during or with
respect to an Accounting Period shall be accounted for at the individual
account level by "posting" such returns to each of the appropriate Accounts
of each affected Participant. Account values shall be maintained in shares,
units or dollars.
(b) Trade Date Accounting and Investment Cycle. For any financial
transaction involving a change in the measurement of investment returns,
withdrawals or distributions to be processed as of a Trade Date, the
Benefit Trust Committee must receive instructions by the Sweep Date and
such instructions shall apply only to amounts posted to the Accounts as of
the Trade Date. Such financial transactions in an Investment Fund shall be
posted to a Participant's Accounts as of the Trade Date and based upon the
Trade Date values. All such transactions shall be effected on the
Settlement Date (or as soon as is administratively feasible) relating to
the Trade Date as of which the transaction occurs.
(c) Suspension of Transactions. Whenever the Benefit Trust Committee
considers such action to be appropriate, the Benefit Trust Committee, in
its discretion, may suspend from time to time the Trade Date.
(d) Error Correction. The Benefit Trust Committee may correct any
errors or omissions in the administration of this Plan by restoring or
charging any Participant's Accounts with the amount that would be credited
or charged to the Accounts had no error or omission been made.
VI.2 Accounting for Investment Funds. The investment returns of each
Investment Fund shall be tracked in the same manner as such Investment Funds are
tracked under the RSP. Investment income, earnings, and losses charged against
the Accounts shall be based solely upon the actual performance (net of expenses
and charges allowed under the RSP) of each of the Investment Funds for the
period of time all or some portion of each of the Accounts has been designated
to use such Investment Fund as a measurement of investment returns. A change of
measurement of returns from one Investment Fund to another, or a distribution or
withdrawal, shall be determined as of the same dates and in the same manner as
if amounts posted in Accounts were actually invested in the RSP and such
financial transactions were being implemented in the RSP.
ARTICLE VII
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INVESTMENT FUNDS AND ELECTIONS
VII.1 General. Prior to January 1, 1994, a Participant's Investment
Election and Conversion Election (except as provided in Section 7.4) with
respect to this Plan were deemed to be identical to each comparable investment
direction made by the Participant under the RSP. Effective January 1, 1994, this
Plan will no longer use a Participant's RSP investment directions, and other
than as provided in Section 7.5, a separate Investment Election and Conversion
Election must be made with respect to the Deferrals and Accounts; provided
however, if no Investment Election or Conversion Election is received from a
Participant on or after January 1, 1994, such Participant will be deemed to have
submitted a Conversion Election, effective January 1, 1994 with respect to his
or her Accounts as of December 31, 1993, which designates a percentage of such
Accounts to have its investment returns measured by an Investment Fund which is
the same percentage and investment fund in the RSP that such Participant had
previously been deemed to have designated prior to January 1, 1994, with the
exception that any amounts designated to measure the investment returns of the
Windsor Fund shall instead use the Large Company Fund.
VII.2 Investment of Deferrals.
(a) Investment Election. Each Participant may direct, by submission to
the Benefit Trust Committee of a completed Investment Election form
provided for that purpose by the Benefit Trust Committee, to select a
measurement of investment returns for Deferrals (other than MIC Deferrals)
posted to his or her Accounts (and the portion of such Accounts
attributable to such Deferrals) in one or more Investment Funds. Each
Investment Election shall apply proportionately to all Deferrals (other
than MIC Deferrals) based upon the relative amount of each.
(b) Effective Date of Investment Election; Change of Investment
Election. A Participant's initial Investment Election will be effective
with respect to a Fund on the Trade Date which relates to the Sweep Date on
which or prior to which the Investment Election is received pursuant to
procedures specified by the Benefit Trust Committee. Any Investment
Election which has not been properly completed will be deemed not to have
been received. A Participant's Investment Election shall continue in
effect, notwithstanding any change in his or her Compensation or his or her
Deferral Percentage, until the effective date of a new Investment Election.
A change in Investment Election shall be effective with respect to a Fund
on the Trade Date which relates to the Sweep Date on which or prior to
which the Benefit Trust Committee receives the Participant's new Investment
Election.
VII.3 Investment of Accounts.
(a) Conversion Election. Notwithstanding a Participant's Investment
Election, a Participant or Beneficiary may direct the Benefit Trust
Committee, by submission of a completed Conversion Election form provided
for that purpose to the Benefit Trust Committee, to change the measurement
of investment returns of his or her Accounts (other than the MIC Deferral
Account). Each Conversion Election shall apply proportionately to all
affected Accounts based upon the relative balance of each.
(b) Effective Date of Conversion Election. A Conversion Election to
change a Participant's measurement of investment returns of his or her
Accounts in one Investment Fund to another Fund shall be effective with
respect to such Funds on and after the Trade Date which relates to the
Sweep Date on which or prior to which the Election is received pursuant to
procedures specified by the Benefit Trust Committee. Notwithstanding the
foregoing, to the extent required by any provisions of an Investment Fund,
the effective date of any Conversion Election may be delayed or the amount
of any permissible Conversion Election may be reduced. Any Investment
Election which has not been properly completed will be deemed not to have
been received.
VII.4 Insiders.
Prior to January 1, 1994, and as of the later of May 5, 1992 or the date on
which such Participant becomes an Insider (as determined by the Benefit Trust
Committee) ("Transfer Date"):
(a) The measurement of investment returns for an RSP Employer Deferral
hereunder shall initially be assumed to be the same as the Investment Funds
in which the Insider's pre-tax contributions are initially invested in the
RSP; and if the Insider does not make pre-tax contributions to the RSP,
then it shall be assumed to be that of the Investment Fund primarily
invested in Company Stock.
(b) Each Insider's change in investment directions under the RSP shall
be disregarded for purposes of this Plan:
(1) if such change would cause any portion of the Insider's
Deferral or Accounts to use the Fund invested primarily in Company
Stock as a measurement of investment return; or
(2) if such change is not in amounts and effective as of such
dates as are determined by the Benefit Trust Committee under a set of
rules applicable to all Insiders.
VII.5 Investment Returns on MIC Deferrals. All MIC Deferral Accounts shall
have interest as a measurement of investment return. The rate of interest deemed
to be earned on such Accounts on any day during a 6-month period shall be the
stated prime rate of interest charged by Bank of America, Illinois, N.A. on the
first business day in January or July of such period.
VII.6 Restrictions on Measurement. The following additional restrictions
shall apply to the measurement of investment return of Deferrals and Accounts
other than those described in Section 7.5:
(a) Effective after January 1, 1994, no Investment Election shall be
permitted which results in a measurement of investment return for Deferrals
to be an Investment Fund invested primarily in Company Stock and no
Conversion Election shall be permitted which results in a measurement of
investment return for Accounts into or out of an Investment Fund invested
primarily in Company Stock;
(b) Any limitations, conditions or restrictions which may be imposed
by the Benefit Trust Committee; and
(c) Any limitation, condition or restriction which is imposed on the
measurement of investment returns in or the liquidation of funds out of any
Investment Fund in the RSP.
VII.7 Procedures. The procedures, frequency and time deadlines for making
an Investment Election or Conversion Election shall be the same as the
applicable procedures, frequency and time deadlines in the RSP, except to the
extent provided otherwise in this Plan or by the Benefit Trust Committee.
ARTICLE VIII
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VESTING AND FORFEITURES
VIII.1 Fully Vested Deferral Accounts.
A Participant shall be fully vested and have a nonforfeitable right to his
or her Accounts at all times.
ARTICLE IX
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WITHDRAWALS
IX.1 Withdrawals for Hardship.
(a) Requirements. A Participant may request the withdrawal of any
amount from the portion of his or her Accounts (not in excess of the
balance of such Accounts) needed to satisfy a financial need by making a
withdrawal request in accordance with a procedure established by the
Benefit Trust Committee. A financial need for this purpose is a severe,
unanticipated hardship, the occurrence of which is beyond the Participant's
control and for which the amount needed to satisfy the hardship is
determined only after the Participant has used other readily available
funds or resources (other than this Plan and the RSP).
(b) Account Sources for Withdrawal. The withdrawal amount shall come
only from the following Accounts, in the following priority order:
RSP Employee Account
RSP Employer Account
Replacement RSP Employer Account
Replacement RSP Employee Account
Pay Based Account
MIC Deferral Account
IX.2 Withdrawal Processing.
(a) Minimum Amount. There is no minimum payment for any type of
withdrawal.
(b) Application by Participant. A Participant must submit a withdrawal
request, in accordance with a procedure established by the Benefit Trust
Committee, to the Benefit Trust Committee to apply for any type of
withdrawal.
(c) Approval by Benefit Trust Committee. The Benefit Trust Committee
is responsible for determining that a withdrawal request conforms to the
requirements described in this Section and notifying the Company of any
payments to be made in a timely manner. Any request to make a withdrawal by
a member of the Benefit Trust Committee may be approved only by
disinterested members of the Benefit Trust Committee, or if none, the
Compensation Committee.
(d) Time of Processing. The Company shall process all withdrawal
requests which it receives by a Sweep Date, based on the value as of the
Trade Date to which it relates, and fund them on the next Settlement Date.
The Company shall then make payment to the Participant as soon thereafter
as is administratively feasible; provided however, if such payment will
result in any portion of the payment (or any other amount paid to such
Participant during the same Plan Year) not being deductible by reason of
Code section 162(m), the Compensation Committee may defer payment to a
later Payment Date designated by it.
(e) Medium and Form of Payment. The medium of payment for withdrawals
is cash. The form of payment for withdrawals shall be a single installment.
(f) Investment Fund Sources. Within each Account used for funding a
withdrawal, amounts shall be taken by type of investment measurement in
direct proportion to the value of the Participant's Accounts in each
Investment Fund at the time the withdrawal is made.
ARTICLE X
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DISTRIBUTIONS
Benefits payable under this Plan shall be paid in the form and time
prescribed below.
X.1 Retirement Benefit. A Participant who has a nonforfeitable right to
receive a retirement benefit from the Pension Plan (or would have a
nonforfeitable right if such Participant were eligible to participate in the
Pension Plan) shall receive a Retirement Benefit (less any amounts previously
paid to the Participant under Section 10.7) in the following Actuarial
Equivalent form of payment and as of the following Payment Date:
(a) Form of Payment. The Participant may elect a form of payment of
the Retirement Benefit in the same manner and form as permitted under the
Pension Plan (other than the Social Security Leveling Option) without the
necessity of spousal consent; provided, however, (1) the Compensation
Committee in its discretion, or (2) such Participant by irrevocably
electing in writing on a form delivered to the Benefit Trust Committee on
or prior to his or her Termination of Employment, and if a voluntary
Termination of Employment by delivering such form to the Benefit Trust
Committee at least six (6) months prior to the Payment Date, may convert
the Retirement Benefit payable under this Plan into an Actuarial Equivalent
single sum form of payment.
(b) Time of Payment. The Payment Date of a Participant's Retirement
Benefit shall be the earliest date on or after the Participant's
Termination of Employment as of which he or she could have commenced
payment of his or her retirement benefits from the Pension Plan; provided
however, if payment is made in a single sum and will result in any portion
of the payment (or any other amount paid to such Participant during the
same Plan Year) not being deductible by reason of Code section 162(m), the
Benefit Trust Committee may defer such Actuarial Equivalent single sum
payment to a later Payment Date designated by it.
X.2 Pension Death Benefit.
(a) Form of Payment. The Death Benefit payable to the Beneficiary of a
Participant who is entitled to a Retirement Benefit (less any amounts
previously paid to the Participant under Section 10.7) and who dies on or
after his or her Payment Date shall be in the form selected by the
Participant commencing as of such Payment Date. Where a Participant who is
entitled to a Retirement Benefit (less any amounts previously paid to the
Participant under Section 10.7) dies prior to his Payment Date, the form of
payment of his or her Beneficiary's Death Benefit shall be the same as the
form of payment of any death benefit payable under the Pension Plan;
provided however, the Compensation Committee in its discretion, or such
Participant by electing in writing on a form delivered to the Benefit Trust
Committee prior to his or her Payment Date, may convert the Death Benefit
payable under this Plan into an Actuarial Equivalent single sum form of
payment.
(b) Time of Payment. A Beneficiary's Death Benefit shall commence to
be paid as of the earliest date as of which he or she could have commenced
payment of a death benefit from the Pension Plan; provided however, if
payment is made in a single sum and will result in any portion of the
payment (or any other amount paid to such Beneficiary during the same Plan
Year) not being deductible by reason of Code section 162(m), the Benefit
Trust Committee may defer such Actuarial Equivalent single sum payment to a
later Payment Date designated by it.
X.3 Accounts.
(a) Form of Payment. The form of payment of the balance of a
Participant's Accounts (other than his or her MIC Account for each Plan
Year) will be a single sum payment except with respect to those Accounts
for which the Participant has selected the Installment Form of Payment on
his or her Deferral Election Form, in which case such Accounts will be paid
in the Installment Form of Payment.
(b) Time of Payment. The Payment Date of the balance of a
Participant's Accounts (other than his or her MIC Account) shall be the
Payment Date following Termination of Employment selected by the
Participant on his or her Enrollment Election form; provided however, if
such payment will result in any portion of the payment (or any other amount
paid to such Participant during the same Plan Year) not being deductible by
reason of Code section 162(m), the Benefit Trust Committee may defer
payment to a later Payment Date designated by it and such Accounts shall
continue to have investment returns measured under this Plan.
X.4 MIC Account.
(a) Form of Payment. The form of payment of the balance of a
Participant's MIC Account for each Plan Year will be a single sum payment
except with respect to those MIC Accounts for which the Participant has
selected the Installment Form of Payment on his or her Deferral Election
Form, in which case such MIC Accounts will be paid in the Installment Form
of Payment.
(b) Time of Payment. The Payment Date of the balance of a
Participant's MIC Account for each Plan Year shall be the earlier of the
fixed Payment Date selected by the Participant on the Deferral Election
Form for the Plan Year or the Payment Date following a Termination of
Employment selected in his or her Enrollment Election form; provided
however, if payment is made in a single sum and will result in any portion
of the payment (or any other amount paid to such Participant during the
same Plan Year) not being deductible by reason of Code section 162(m), the
Benefit Trust Committee may defer payment to a later Payment Date
designated by it and such Accounts shall continue to have investment
returns measured under this Plan.
X.5 Death Benefit of Accounts. Upon the death of a Participant, the
remaining balance in his or her Accounts shall be paid to the Participant's
Beneficiary in a single sum as soon as administratively possible after the
Participant's death; provided however, if such payment will result in any
portion of the payment (or any other amount paid to such Beneficiary during the
same Plan Year) not being deductible by reason of Code section 162(m), the
Benefit Trust Committee may defer payment to a later Payment Date designated by
it and such Accounts shall continue to have investment returns measured under
this Plan.
X.6 Prior to 1994. The timing and form of payment of a Retirement Benefit,
Death Benefit and balance of Accounts with respect to a Participant or
Beneficiary as of any date of determination prior to 1994 shall be determined by
the terms and provisions of this Plan as of such date.
X.7 Payments of Retirement and Death Benefit Due to an Investment Grade
Rating Change. Notwithstanding Sections 10.1, 10.2 or 10.6, the following shall
apply:
(a) Retirement Benefit. If, prior to a Change of Control or more than
three (3) years after a Change of Control, either (1) the Company or (2)
the Parent is rated below an Investment Grade Rating, then on such date,
and on each December 31 after such date and prior to the date the Company
and the Parent both have an Investment Grade Rating, a single sum payment
shall be made immediately to such Participant of the amount by which the
Actuarial Equivalent of (1) exceeds the sum of (2) plus (3):
(1) the amount determined in Section 5.1(a) based upon the
assumption that (A) the Participant has a nonforfeitable right to his
benefit from the Pension Plan, (B) the Participant incurs a
Termination of Employment as of the date of determination, and (C)
benefits payable from the Pension Plan would commence upon the
earliest payment date allowed under the Pension Plan immediately
following such Termination of Employment.
(2) the Actuarial Equivalent of the amount determined in Section
5.1(b) based upon the same assumptions as those in Section 10.7(a)(1).
(3) the Actuarial Equivalent of amounts paid to such Participant
based on any prior determination date pursuant to this Section
10.7(a).
(b) Retirement Benefit After Payment Date. On or after the Payment
Date of a Participant's Retirement Benefit, if either (1) the Company or
(2) the Parent is rated below an Investment Grade Rating, then an Actuarial
Equivalent single sum payment of such unpaid Retirement Benefit shall be
made immediately to such Participant.
(c) Death Benefit. If either (1) the Company or (2) the Parent is
rated below an Investment Grade Rating, then a Beneficiary who is
receiving, or would as of such date otherwise be eligible to commence to
receive a Death Benefit shall be paid immediately an Actuarial Equivalent
single sum payment of such unpaid Death Benefit.
X.8 Payment of Accounts Due to an Investment Grade Rating Change.
Notwithstanding Sections 10.3, 10.4 or 10.5, if either (1) the Company or (2)
the Parent is rated below an Investment Grade Rating, then the balance of his or
her Accounts shall be paid immediately in a single sum to such Participant as if
such Participant had incurred a Termination of Employment as of such date the
rating drops below an Investment Grade Rating.
X.9 Payment of Retirement and Death Benefits Due to a Change of Control. On
and after a Change of Control and notwithstanding Sections 10.1, 10.2 or 10.6,
the following shall apply:
(a) Termination of Employment. Upon Termination of Employment of a
Participant within three (3) years following a Change of Control, a single
sum payment shall be made immediately to such Participant of the amount by
which the Actuarial Equivalent of (1) exceeds (2) plus (3):
(1) the amount determined in Section 5.1(a) based upon the
assumption that (A) the Participant has a nonforfeitable right to his
benefit from the Pension Plan, (B) the Participant's early retirement
benefit under the Pension Plan is determined using the Table of
reduction factors that would have been available to such Participant
had he or she not incurred a Termination of Employment until the third
(3rd) anniversary of the Change of Control date and based upon the
Participant's age as of the Payment Date, and (C) benefits payable
from the Pension Plan would commence upon the earliest payment date
allowed under the Pension Plan.
(2) the Actuarial Equivalent of the amount determined in Section
5.1(b) based upon the same assumptions as those in Section 10.9(a)(1)
except (A).
(3) the Actuarial Equivalent of any amounts previously paid to
the Participant under Section 10.7.
(b) Investment Grade Rating Within Three Years. If, within three (3)
years following a Change of Control, either (1) the Company or (2) the
Parent, if any, is rated below an Investment Grade Rating, then a single
sum payment shall be made immediately to such Participant of an amount
determined in Section 10.9(a) hereof as if such Participant had incurred a
Termination of Employment as of such date the rating drops below an
Investment Grade Rating.
X.10 Payment of Accounts Due to a Change of Control. On and after a Change
of Control and notwithstanding Sections 10.3, 10.4 or 10.5, in the event of a
Participant's Termination of Employment within three (3) years following a
Change of Control, the balances of his or her Accounts shall be paid immediately
in a single sum.
ARTICLE XI
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AMENDMENT
XI.1 Prior to a Change of Control. The Company reserves the right to amend
this Plan from time to time by action of the Board of Directors, but without the
written consent of each Participant and Beneficiary of a deceased Participant,
no such action may reduce or relieve the Company of any obligation with respect
to any Retirement Benefit (or Death Benefit) accrued or balance of Accounts
maintained under this Plan by such Participant (or Beneficiary) as of the date
of such amendment, except to the extent such amendment is required by written
opinion of counsel to the Company to avoid recognition of income by a
Participant or Beneficiary subject to federal income taxation.
XI.2 After a Change of Control. This Plan may not be amended following a
Change of Control.
ARTICLE XII
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TERMINATION
The Company, by action of the Board of Directors, reserves the right to
terminate this Plan, provided the Company pays to each Participant and
Beneficiary, on such date of termination of this Plan, the Actuarial Equivalent
single sum value of a Participant's unpaid Retirement Benefit (or of a
Beneficiary's unpaid Death Benefit) and the balance of Accounts maintained for
such Participant (or for a Beneficiary) as of the date of termination shall be
paid as soon as administratively possible; provided however, for this purpose a
Participant's Retirement Benefit shall be equal to the amount by which the
Actuarial Equivalent of (1) exceeds (2) plus (3):
(1) the amount determined in Section 5.1(a) based upon the
assumption that (A) the Participant has a nonforfeitable right to his
benefit from the Pension Plan, (B) the Participant's early retirement
benefit under the Pension Plan is determined using the Table of
reduction factors that would have been available to such Participant
had he or she not incurred a Termination of Employment until the day
preceding his or her sixty-fifth (65th) birthday and based upon the
Participant's age as of the Payment Date, and (C) benefits payable
from the Pension Plan would commence upon the earliest payment date
allowed under the Pension Plan.
(2) the Actuarial Equivalent of the amount determined in Section
5.1(b) based upon the same assumptions as those in subsection (a)(1)
above except (A).
(3) the Actuarial Equivalent of any amounts previously paid to
the Participant under Section 10.7.
If within ten (10) days after a Change of Control, the requirements of
Sections 10.9(b), (d), (e) and 10.10(b) hereof are not satisfied, the Plan shall
automatically terminate upon final payment of all amounts due in accordance with
Sections 10.9(b), (d), (e), 10.10, 13.3, 13.4 and 13.9 of this Plan.
ARTICLE XIII
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MISCELLANEOUS PROVISIONS
XIII.1 Administration. This Plan shall be administered by the Benefit Trust
Committee. The Benefit Trust Committee shall have, to the extent appropriate,
the same powers, rights, duties, and obligations with respect to this Plan as
the committee of the Trust has under the Trust document (other than the power to
amend this Plan).
XIII.2 Finality of Determination. The determination of the Benefit Trust
Committee as to any disputed questions arising under this Plan, including
questions of construction and interpretation shall be final, binding, and
conclusive upon all persons.
XIII.3 Expenses. The expenses of administering this Plan shall be borne by
the Company.
XIII.4 Indemnification and Exculpation. The members of the Benefit Trust
Committee, its agents and officers, directors and employees of the Company shall
be indemnified and held harmless by the Company against and from any and all
loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by them in connection with or resulting from any claim, action, suit,
or proceeding to which they may be a party or in which they may be involved by
reason of any action taken or failure to act under this Plan and against and
from any and all amounts paid by them in settlement (with the Company's written
approval) or paid by them in satisfaction of a judgment in any such action,
suit, or proceeding. The foregoing provision shall not be applicable to any
person if the loss, cost, liability, or expense is due to such person's gross
negligence or willful misconduct.
XIII.5 Funding. While all benefits payable under this Plan constitute
general corporate obligations, the Company may establish a separate irrevocable
grantor trust for the benefit of all Participants, which trust shall be subject
to the claims of the general creditors of the Company in the event of such
corporation's insolvency, to be used as a reserve for the discharge of the
Company's obligations under this Plan to such Participants. Any payments made to
a Participant under the separate trust for his benefit shall reduce dollar for
dollar the amount payable to the Participant from the general assets of the
Company. The amounts payable under this Plan shall be reflected on the
accounting records of the Company but shall not be construed to create or
require the creation of a trust, custodial, or escrow account, except as
described above in this section. No Participant (or Beneficiary of a
Participant) shall have any right, title, or interest whatever in or to any
investment reserves, accounts, or funds that the Company may purchase,
establish, or accumulate to aid in providing benefits under this Plan. Nothing
contained in this Plan, and no action taken pursuant to its provisions, shall
create a trust or fiduciary relationship of any kind between the Company, the
Parent or Compensation Committee and a Participant, Beneficiary or any other
person. Neither a Participant nor Beneficiary shall acquire any interest greater
than that of an unsecured, general creditor.
XIII.6 Corporate Action. Any action required of or permitted by the Company
under this Plan shall be by resolution of its Board of Directors, the
Compensation Committee or any person or persons authorized by resolution of such
Compensation Committee.
XIII.7 Interests not Transferable. The interests of the Participants and
their Beneficiaries under this Plan are not subject to the claims of their
creditors and may not be voluntarily or involuntarily transferred, assigned,
alienated, or encumbered by them.
XIII.8 Effect on Other Benefit Plans. Amounts credited or paid under this
Plan shall not be considered to be compensation for the purposes of a qualified
pension plan maintained by the Company or the Parent. The treatment of such
amounts under other employee benefits plans shall be determined pursuant to the
provisions of such plans.
XIII.9 Legal Fees and Expenses. After a Change of Control, the Company
shall pay all reasonable legal fees and expenses which the Participant or a
Beneficiary may incur as a result of the Company's contesting the validity,
enforceability or the Participant's interpretation of, or determinations made
under, this Plan or the Trust.
XIII.10 Deduction of Taxes from Amounts Payable.
(a) Distribution. The Company shall deduct from the amount to be
distributed such amount as the Company, in its sole discretion, deems
proper to protect the Company against liability for the payment of death,
succession, inheritance, income, or other taxes, and out of money so
deducted, the Company may discharge any such liability and pay the amount
remaining to the Participant, the Beneficiary or the deceased Participant's
estate, as the case may be.
(b) Withholding. The Company may withhold whatever taxes (including
FICA, state or federal taxes) it, in its sole discretion, deems proper to
protect the Company against liability for the payment of such withholding
taxes and out of the money so deducted, the Company may discharge any such
liability. Withholding for this purpose may come from any wages due to the
Participant, or if none, from the Participant's Accounts hereunder.
XIII.11 Facility of Payment. If a Participant or Beneficiary is declared an
incompetent or is a minor and a conservator, guardian, or other person legally
charged with his or her care has been appointed, any benefits to which such
Participant or Beneficiary is entitled shall be payable to such conservator,
guardian, or other person legally charged with his or her care. The decision of
the Benefit Trust Committee in such matters shall be final, binding, and
conclusive upon the Company and upon each Participant, Beneficiary, and every
other person or party interested or concerned. The Company and the Benefit Trust
Committee shall not be under any duty to see to the proper application of such
payments.
XIII.12 Merger. This Plan shall be binding and enforceable with respect to
the obligation of the Company against any successor to the Company by operation
of law or by express assumption of the Plan, and such successor shall be
substituted hereunder for the Company.
XIII.13 Gender and Number. Except when the context indicates to the
contrary, when used herein, masculine terms shall be deemed to include the
feminine, and singular the plural.
XIII.14 Invalidity of Certain Provisions. If any provision of this Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof and this Plan shall be construed
and enforced as if such provisions, to the extent invalid or unenforceable, had
not been included.
XIII.15 Headings. The headings or articles are included solely for
convenience of reference, and if there is any conflict between such headings and
the text of this Plan, the text shall control.
XIII.16 Notice and Information Requirements. Except as otherwise provided
in this Plan or as otherwise required by law, the Company shall have no duty or
obligation to affirmatively disclose to any Participant or Beneficiary, nor
shall any Participant or Beneficiary have any right to be advised of, any
material information regarding the Company, or at any time prior to, upon or in
connection with the Company's purchase, or any other distribution or transfer
(or decision to defer any such distribution) of any Company Stock or any other
stock held under this Plan.
XIII.17 Governing Law. This Plan shall be governed by the laws of the State
of Delaware.
Adopted on the ______ day of _______________ by the Board of Directors of
the Company as to its obligations.
By:
-------------------------------------------------------
Title:
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EXHIBIT 10(j)
Pepsi-Cola General Bottlers, Inc.
Executive Retirement Plan
As Amended and Restated Effective January 1, 1998
PEPSI-COLA GENERAL BOTTLERS, INC. EXECUTIVE RETIREMENT PLAN
- ------------------------------------------------------------
Pepsi-Cola General Bottlers, Inc. amends and restates, effective as of January
1, 1998, an unfunded, deferred compensation plan on behalf of certain designated
management or highly compensated employees of Pepsi-Cola General Bottlers, Inc.
This document defines the provisions of such plan and shall be known as the
"Pepsi-Cola General Bottlers, Inc. Executive Retirement Plan."
This plan is intended in part to be an unfunded, deferred compensation plan for
a select group of management or highly compensated employees, as described in
sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement Income
Security Act of 1974 ("ERISA") and in part to be an excess benefit plan
described in section
3(36) of ERISA.
Table of Contents
- -----------------
ARTICLE I
DEFINITIONS
1.1 "Accounting Period"
1.2 "Accounts"
1.3 "Actuarial Equivalent"
1.4 "Appendix"
1.5 "Beneficiary"
1.6 "Benefit Trust Committee"
1.7 "Board of Directors"
1.8 "Change of Control"
1.9 "Company"
1.10 "Company Stock"
1.11 "Compensation"
1.12 "Compensation Committee"
1.13 "Compensation Limit"
1.14 "Contribution Dollar Limit"
1.15 "Conversion Election"
1.16 "Death Benefit"
1.17 "Deferrals"
1.18 "Deferral Election" or "Election"
1.19 "Deferral Percentage"
1.20 "Designated Participant"
1.21 "Effective Date"
1.22 "Eligible Employee"
1.23 "Employee"
1.24 "Enrollment Election"
1.25 "ERISA"
1.26 "Exchange Act"
1.27 "Insider"
1.28 "Installment Form of Payment"
1.29 "Internal Revenue Code" or "Code"
1.30 "Investment Election"
1.31 "Investment Fund" or "Fund"
1.32 "Investment Grade Rating"
1.33 "Maximum Annual Additions Limitation"
1.34 "Maximum Annual Benefit Limitation"
1.35 "MIC Award"
1.36 "Notice Date"
1.37 "Parent"
1.38 "Participant"
1.39 "Payment Date"
1.40 "Pension Plan"
1.41 "Plan"
1.42 "Plan Year"
1.43 "Retirement Benefit"
1.44 "RSP"
1.45 "Section 401(m) Limitation"
1.46 "Settlement Date"
1.47 "Spouse"
1.48 "Successor Plan"
1.49 "Sweep Date"
1.50 "Termination of Employment"
1.51 "Trade Date"
1.52 "Trust"
ARTICLE II
PARTICIPATION
2.1 Eligibility
2.2 Enrollment Election
ARTICLE III
PARTICIPANT DEFERRAL ELECTIONS
3.1 Employee Deferral Election
3.2 Election Procedures
3.3 Coordination with RSP
ARTICLE IV
DEFERRALS AND POSTINGS
4.1 Replacement RSP Employer Deferral
4.2 MIC Deferral
4.3 Pay Based Deferral
4.4 Replacement RSP Employee Deferral
4.5 RSP Employer Deferral
4.6 RSP Employee Deferral
ARTICLE V
EXCESS RETIREMENT AND DEATH BENEFITS
5.1 Amount of Pension Benefits
5.2 Amount of Death Benefit
5.3 Pre-1994 Benefits
ARTICLE VI
ACCOUNTING FOR PARTICIPANTS'
ACCOUNTS AND FOR INVESTMENT FUNDS
6.1 Individual Participant Accounting
6.2 Accounting for Investment Funds
ARTICLE VII
INVESTMENT FUNDS AND ELECTIONS
7.1 General
7.2 Investment of Deferrals
7.3 Investment of Accounts
7.4 Insiders
7.5 Investment Returns on MIC Deferrals
7.6 Restrictions on Measurement
7.7 Procedures
ARTICLE VIII
VESTING AND FORFEITURES
8.1 Fully Vested Deferral Accounts
ARTICLE IX
WITHDRAWALS
9.1 Withdrawals for Hardship
9.2 Withdrawal Processing
ARTICLE X
DISTRIBUTIONS
10.1 Retirement Benefit
10.2 Pension Death Benefit
10.3 Accounts
10.4 MIC Account
10.5 Death Benefit of Accounts
10.6 Prior to 1994
10.7 Payments of Retirement and Death Benefit Due to an
Investment Grade Rating Change
10.8 Payment of Accounts Due to an Investment Grade Rating
Change
10.9 Payment of Retirement and Death Benefits Due to a
Change of Control
10.10 Payment of Accounts Due to a Change of Control
ARTICLE XI
AMENDMENT
11.1 Prior to a Change of Control
11.2 After a Change of Control
ARTICLE XII
TERMINATION
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 Administration
13.2 Finality of Determination
13.3 Expenses
13.4 Indemnification and Exculpation
13.5 Funding
13.6 Corporate Action
13.7 Interests not Transferable
13.8 Effect on Other Benefit Plans
13.9 Legal Fees and Expenses
13.10 Deduction of Taxes from Amounts Payable
13.11 Facility of Payment
13.12 Merger
13.13 Gender and Number
13.14 Invalidity of Certain Provisions
13.15 Headings
13.16 Notice and Information Requirements
13.17 Governing Law
ARTICLE I
- ----------
DEFINITIONS
The following sections of this Article I provide basic definitions of terms
used throughout this Plan, and whenever used herein in a capitalized form,
except as otherwise expressly provided, the terms shall be deemed to have the
following meanings:
I.1 "Accounting Period" means each business day.
I.2 "Accounts" means the record of a Participant's interest in this
Plan represented by his or her:
(a) "MIC Deferral Account" which means a Participant's interest in
this Plan composed of MIC Deferrals posted for each Plan Year on or after
January 1, 1994 to the Participant under this Plan, if any (as identified
by the Benefit Trust Committee) for such Plan Year, plus all interest
deemed credited to and minus all withdrawals and distributions actually
charged to such account.
(b) "Pay Based Account" which means a Participant's interest in this
Plan composed of Pay Based Deferrals posted for each Plan Year on or after
January 1, 1994 to the Participant under this Plan, plus all income and
gains deemed credited to and minus all losses deemed charged to such
account, as measured by the investment returns of each Investment Fund
designated by the Participant, and minus all withdrawals and distributions
actually charged to such account.
(c) "Replacement RSP Accounts" which consists of the following two
accounts:
(1) "Replacement RSP Employee Account" which means a
Participant's interest in this Plan composed of Replacement RSP
Employee Deferrals posted for each Plan Year on or after January 1,
1994 to the Participant under this Plan, if any (as identified by the
Benefit Trust Committee) for such Plan Year, plus all income and gains
deemed credited to and minus all losses deemed charged to such
account, as measured by the investment returns of each Investment Fund
designated by the Participant, and minus all withdrawals and
distributions actually charged to such account; and
(2) "Replacement RSP Employer Account" which means a
Participant's interest in this Plan composed of Replacement RSP
Employer Deferrals posted for each Plan Year on or after January 1,
1994 to the Participant under this Plan (as identified by the Benefit
Trust Committee) for such Plan Year, plus all income and gains deemed
credited to and minus all losses deemed charged to such account, as
measured by the investment returns of each Investment Fund designated
by the Participant, and minus all withdrawals and distributions
actually charged to such account.
(d) "RSP Employee Account" which means a Participant's interest in
this Plan composed of RSP Employee Deferrals posted under this Plan prior
to January 1, 1994, if any (as identified by the Benefit Trust Committee),
plus all income and gains deemed credited to and minus all losses deemed
charged to such account, as measured by the investment returns of each
Investment Fund designated by the Participant, and minus all withdrawals
and distributions actually charged to such account.
(e) "RSP Employer Account" which means a Participant's interest in
this Plan composed of RSP Employer Deferrals posted under this Plan prior
to January 1, 1994, if any (as identified by the Benefit Trust Committee),
plus all income and gains deemed credited to and minus all losses deemed
charged to such account, as measured by the investment returns of each
Investment Fund designated by the Participant, and minus all withdrawals
and distributions actually charged to such account.
I.3 "Actuarial Equivalent" means an amount equal in value to the benefit
replaced as determined (i) in accordance with the terms of the Pension Plan with
respect to the determination of any form of benefit other than a single sum, or
(ii) with respect to a single sum distribution, by: (A) using an assumed annual
discount rate equal to the weekly average, as of the last full week of the
fourth calendar month prior to the month containing the date the single sum will
be paid, of the Bond Buyer's Average of 20 Municipal Bonds, rounded to the
nearest 1/4%, as published weekly by the Federal Reserve Bank of St. Louis and
(B) assuming the payee lives for the duration of his life expectancy where such
life expectancy is calculated according to the UP94 Mortality Table.
I.4 "Appendix" means a written supplement attached to this Plan and made a
part hereof which has been added in accordance with the provisions of this Plan.
I.5 "Beneficiary" means
(a) with respect to the Death Benefit payable upon the death of a
Participant, any person designated by the Participant (actually or by
default) to receive any retirement benefits which are payable with respect
to the death of a Participant under the Pension Plan; and
(b) with respect to the balance of a Participant's Accounts as of the
death of such Participant, each person designated by the Participant on his
or her most recent Enrollment Election form approved by the Benefit Trust
Committee; provided that if a Participant fails to designate a Beneficiary
on an Enrollment Election form or if all such designated persons predecease
the Participant without the Participant completing a new, approved
Enrollment Election form, then Beneficiary means any person designated by
the Participant (actually or by default) to receive the balance of any of
his or her accounts which are payable with respect to the death of such
Participant under the RSP.
An individual who is entitled to receive a Death Benefit on and after the
death of a Participant will remain a Beneficiary until the latest of (a) receipt
of the balance of all of such Accounts to which he or she is entitled to
receive; or (b) receipt of such Beneficiary's Death Benefit, if any, is
completed (or made in a single sum).
I.6 "Benefit Trust Committee" means the Benefit Trust Committee appointed
pursuant to the terms of the Trust which will have the power to manage and
control the operation and administration of this Plan.
I.7 "Board of Directors" means the board of directors of the Company or the
Parent.
I.8 "Change of Control" means an event which shall be deemed to have
occurred if (i) there shall be consummated (A) any consolidation or merger of
the Parent, if one exists, or the Company in which either the Parent or the
Company, respectively, is not the continuing or surviving corporation or
pursuant to which shares of the Parent's or the Company's common stock are
converted into cash, securities or other property, other than a merger in which
the holders of the Parent's or the Company's common stock, respectively,
immediately prior to the merger have substantially the same proportionate
ownership of common stock of the surviving corporation immediately after the
merger, or (B) any sale, lease, exchange or other transfer (in one transaction
or in a series of related transactions) of all or substantially all the assets
of either the Parent or the Company, or (ii) the shareholders of either the
Parent or the Company shall approve any plan or proposal for such corporation's
liquidation or dissolution, or (iii) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act, other than the Parent, Company
or its subsidiaries, or any employee benefit plan sponsored by the Company or
its subsidiaries, shall become the beneficial owner (within the meaning of Rule
13d-3 under the Exchange Act) of securities of either the Parent or the Company
representing twenty-five percent (25%) or more of the combined voting power of
the Parent's or the Company's, respectively, then outstanding securities
ordinarily (and apart from rights accruing in special circumstances) having the
right to vote in the election of directors, as a result of a tender or exchange
offer, open market purchases, privately negotiated purchases or otherwise, or
(iv) at any time during a period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors shall cease for
any reason to constitute at least a majority thereof, unless the election or the
nomination for election by the Parent's or the Company's shareholders,
respectively, of each new director during such two-year period was approved by a
vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such two-year period.
I.9 "Company" means Pepsi-Cola General Bottlers, Inc. or any successor
entity by operation of law or any successor entity which affirmatively adopts
the Plan, the Trust and the obligations of Pepsi-Cola General Bottlers, Inc.
with respect to the Plan and the Trust.
I.10 "Company Stock" means common stock issued by the Parent, or if none,
then by the Company.
I.11 "Compensation" means
(a) for purposes of Replacement RSP Employee Deferrals, Replacement
RSP Employer Deferrals and Pay Based Deferrals for any Plan Year, a
Participant's "Compensation", as defined in the RSP (disregarding any
provision having the effect of excluding Replacement RSP Employee Deferrals
and MIC Deferrals), for a Plan Year to the Participant;
(b) for purposes of RSP Employee Deferrals and RSP Employer Deferrals,
a Participant's Compensation, as defined in the RSP (disregarding any
provision having the effect of excluding RSP Employee Deferrals), for a
Plan Year;
(c) for purposes of MIC Deferrals, a Participant's MIC Award (other
than that portion of the MIC Award which is a Replacement RSP Employee
Deferral and excluding an amount equal to the sum of (i) the Employee's
portion of taxes imposed by the Federal Insurance Contributions Act with
respect to the MIC Award, with respect to the Replacement RSP Employer
Deferrals on the portion of the MIC Award which is a Replacement RSP
Employee Deferral, and if needed, with respect to the Retirement Benefit
accrual, for that Plan Year plus, if needed, (ii) other applicable
withholding amounts); and
(d) for purposes of computing the Retirement Benefit, a Participant's
"Compensation," as defined in the Pension Plan (disregarding any provision
having the effect of excluding RSP Employee Deferrals, Replacement RSP
Employee Deferrals and MIC Deferrals), for a Plan Year, as adjusted by the
Benefit Trust Committee from Plan Year to Plan Year, and effective January
1, 1994, Compensation shall include a Participant's MIC Award earned for
services rendered during such Plan Year, but shall not include an MIC Award
paid during the same Plan Year for services rendered during the prior Plan
Year.
Notwithstanding the above, the definition of "Compensation" in the RSP and
the Pension Plan shall not include the Compensation Limit.
I.12 "Compensation Committee" means the Compensation Committee of the Board
of Directors.
I.13 "Compensation Limit" means the limitation on the amount of
Compensation which may be considered after application of Code section
401(a)(17).
I.14 "Contribution Dollar Limit" means the annual limit imposed on each
Participant pursuant to section 402(g) of the Code, which is seven thousand
dollars ($7,000) per Plan Year (as indexed for cost of living adjustments
pursuant to Code section 402(g)(5) and 415(d)).
I.15 "Conversion Election" means, effective on or after January 1,
1994, an election, on such form that may be required by the Benefit Trust
Committee, by a Participant to change the method of measuring the investment
return on all or some specified portion of such Participant's Accounts. No
Conversion Election shall be deemed to have been given to the Benefit Trust
Committee unless it is complete and delivered in accordance with the procedures
established by such Benefit Trust Committee for this purpose.
I.16 "Death Benefit" means a monthly (or single sum) benefit payable to a
Beneficiary and determined in accordance with this Plan.
I.17 "Deferrals" means amounts posted to this Plan by the Company or an
Eligible Employee. Specific types of deferrals include:
(a) "MIC". An amount posted after 1993 based upon the
Participant's Deferral Election to defer some or all of his or her
Compensation.
(b) "Pay Based". An amount posted and allocated on a pay based formula
to an eligible Participant's Accounts.
(c) "Replacement RSP Employee". An amount posted after 1993 based upon
the Participant's Deferral Election to defer some of his or her
Compensation.
(d) "Replacement RSP Employer". An amount posted after 1993 based upon
the Replacement RSP Employee Deferral made by the eligible Participant.
(e) "RSP Employee". An amount posted prior to 1994 on a pre-tax basis
which the Participant could have elected if he or she were participating
actively in the RSP.
(f) "RSP Employer". An amount posted prior to January 1, 1994 related
to pre-tax contributions which the Participant could not make to the RSP or
which are made on behalf of Designated Participants without regard to such
pre-tax contributions.
I.18 "Deferral Election" or "Election" means irrevocable elections made by
a Participant (a) to reduce his or her Compensation for a Plan Year by an amount
equal to the product of his or her Deferral Percentage and such Compensation
subject to the Deferral Election; (b) to select whether Deferrals for that Plan
Year will be paid in an Installment Form of Payment; and (c) to select a Payment
Date for the MIC Deferrals for that Plan Year.
I.19 "Deferral Percentage" means (a) with respect to Replacement RSP
Employee Deferrals, the percentage of a Participant's Compensation for a Plan
Year which is to be deferred and posted to this Plan; and (b) with respect to
MIC Deferrals, the percentage of a Participant's Compensation for a Plan Year
which is to be deferred and posted to this Plan.
I.20 "Designated Participant" means an individual on the list of Employees
set forth in an Appendix to the Pension Plan as not being an eligible employee
for the purpose of the Pension Plan.
I.21 "Effective Date" means generally January 1, 1991 and, where noted,
January 1, 1994, the dates upon which certain provisions of this document become
effective.
I.22 "Eligible Employee" means with respect to each Plan Year:
(a) with respect to the Retirement Benefit, each Employee who is a
participant in the Pension Plan or would be a participant in the Pension
Plan if they were not a Designated Participant.
(b) prior to 1994 with respect to Deferrals:
(1) each Employee who is a Participant in the RSP for that Plan
Year and whose pre-tax contributions which would otherwise have been
made for that Plan Year to the RSP are limited by the Contribution
Dollar Limit; or
(2) each Employee who is a Designated Participant for that Plan
Year.
(c) after 1993 with respect to Deferrals, each Employee who is
participating in the Whitman Corporation Management Incentive Compensation
Plan during that Plan Year.
I.23 "Employee" means any person who is considered to be an employee of the
Company pursuant to the personnel policies of the Company; and on and after a
Change of Control, who renders services as a common law employee to the Company.
I.24 "Enrollment Election" means irrevocable elections made by a
Participant (a) to select the term of his or her Installment Form of Payment;
(b) to select the Payment Date of his or her Accounts following Termination of
Employment; and (c) to select the form of payment of his or her Accounts as of
December 31, 1993.
I.25 "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
I.26 "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
I.27 "Insider" means for a Plan Year, or any portion thereof, the
Participant is subject to the reporting requirements of Section 16 of the
Exchange Act.
I.28 "Installment Form of Payment" means separately with respect to (a) his
or her Accounts (other than his or her MIC Account) or (b) his or her MIC
Account, the term of years selected by the Participant in his or her Enrollment
Election form over which to pay such Accounts in annual installments commencing
as of what would otherwise have been the Payment Date of such Accounts and
payable on each January 1 thereafter over a period of not less than two (2) nor
more than fifteen (15) years (stated as a number of whole integers), with each
installment being an amount equal to the amount determined by dividing the
applicable balance of such Accounts as of the date of payment by the number of
dates of payment remaining in the installment period (including the current date
of payment).
I.29 "Internal Revenue Code" or "Code" means the Internal Revenue Code of
1986, as amended, any subsequent Internal Revenue Code and final Treasury
Regulations. If there is a subsequent Internal Revenue Code, any references
herein to Internal Revenue Code sections shall be deemed to refer to comparable
sections of any subsequent Internal Revenue Code.
I.30 "Investment Election" means, effective on and after January 1, 1994,
an election, on such form that may be required by the Benefit Trust Committee,
made by a Participant to direct the method of measuring the investment return on
his or her Deferrals (other than MIC Deferrals). No Investment Election shall be
deemed to have been given to the Benefit Trust Committee unless it is complete
and delivered in accordance with the procedures established by such Benefit
Trust Committee for this purpose.
I.31 "Investment Fund" or "Fund" means one or more of the investment
alternatives which are available under the RSP at any determination date unless
designated otherwise by the Benefit Trust Committee, and which are used by this
Plan as a measurement of investment return on Accounts other than the MIC
Account.
I.32 "Investment Grade Rating" means a rating either (a) at or above Baa3
by Moody's Investors Service, Inc. or (b) at or above BBB by Standard & Poor's
Corporation, or the prevailing equivalent ratings at the time.
I.33 "Maximum Annual Additions Limitation" means the limitation imposed by
Code section 415 on benefits payable by defined contribution plans qualified
under Code section 401(a).
I.34 "Maximum Annual Benefit Limitation" means the limitation imposed by
Code section 415 on benefits payable by defined benefit pension plans qualified
under Code sections 401(a) including application of the combination limitations
of Code section 415(e) to cause a further reduction, if any, of such benefits.
I.35 "MIC Award" means the amount of award payable to a Participant under
the Whitman Corporation Management Incentive Compensation Plan.
I.36 "Notice Date" means the date established by the Benefit Trust
Committee as the deadline for it to receive a Deferral Election or any other
notification with respect to an administrative matter in order to be effective
under this Plan.
I.37 "Parent" means any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act), other than any employee benefit plan sponsored by
the Parent or the Company, (i) having directly or indirectly a beneficial
ownership (within the meaning of Rule 13d-3 under the Exchange Act) of
securities of the Company representing twenty-five percent (25%) or more of the
combined voting power of the Company's then outstanding securities ordinarily
(and apart from rights accruing in special circumstances) having the right to
vote in the election of directors; and (ii) with an Investment Grade Rating.
I.38 "Participant" means an Eligible Employee who begins to participate in
this Plan after completing the eligibility requirements. An individual will
remain a Participant until the latest of (a) distribution of the balance of all
of his or her Accounts; or (b) payment of his or her Retirement Benefit, if any,
is completed (or made in a single sum).
I.39 "Payment Date" means:
(a) with respect to Accounts, the date payment is made in accordance
with Article X or the first day of the fifteenth (15th) month following a
Participant's Termination of Employment unless such Participant has
selected an earlier Payment Date for (1) his or her Accounts on an
Enrollment Election form or (2) his or her MIC Accounts on a Deferral
Election Form; or
(b) the date a Participant's Retirement Benefit is distributed or
commences to be distributed as described in Article X.
I.40 "Pension Plan" means the Pepsi-Cola General Bottlers, Inc. Pension
Plan for Salaried Employees and any Successor Plan.
I.41 "Plan" means the Pepsi-Cola General Bottlers, Inc. Executive
Retirement Plan, as it may be validly amended from time to time.
I.42 "Plan Year" means the annual accounting period of this Plan which ends
on each December 31.
I.43 "Retirement Benefit" means a monthly (or single sum) pension benefit
payable to a Participant and determined in accordance with Article V.
I.44 "RSP" means the Whitman Corporation Retirement Savings Plan, as
amended from time to time and any Successor Plan.
I.45 "Section 401(m) Limitation" means the limit imposed by Code section
401(m).
I.46 "Settlement Date" means the date on which financial transactions from
a Trade Date are considered to be settled which is deemed to be the same date as
of which such transaction would have settled under the RSP with respect to the
same type of financial transaction (e.g. Investment Election, Conversion
Election, Payment Date).
I.47 "Spouse" means a person who is considered the Participant's spouse
under the RSP and Pension Plan, whichever is applicable.
I.48 "Successor Plan" means a tax-qualified, retirement plan described in
section 401(a) of the Code into which the assets and liabilities have been
merged or transferred in accordance with section 414(l) of the Code and section
208 of ERISA from the Pension Plan or the RSP, respectively, and which provides
benefits, options, features and rights, each comparable in material respects to
those available in the Pension Plan or RSP, whichever is applicable.
I.49 "Sweep Date" means the date established by the Benefit Trust Committee
as the cutoff date and time for the Benefit Trust Committee to receive
notification with respect to a financial transaction in order to be processed
with respect to such Trade Date.
I.50 "Termination of Employment" occurs when a person ceases to be an
Employee as determined by the personnel policies of the Company; provided
however, transfer of employment from the Company, or from one affiliate of the
Company, to another affiliate of the Company shall not constitute a Termination
of Employment for purposes of this Plan. If a person would cease to be an
Employee because of a Change of Control, solely for the purpose of this Plan,
such person will not be considered to have incurred a Termination of Employment
if the person's successor employer, either expressly or by operation of law,
assumes the Plan and Trust, the obligations and liabilities of the Plan and
Trust, and agrees to the responsibilities of the Company under the Plan and
Trust.
I.51 "Trade Date" means the date as of which a financial transaction is
considered by this Plan to have occurred which is deemed to be the same date as
of which such transaction would have occurred under the RSP with respect to the
same type of financial transaction (e.g. Investment Election, Conversion
Election, Payment Date).
I.52 "Trust" means the trust created by the Pepsi-Cola General Bottlers,
Inc. Benefit Trust Agreement as it may be validly amended from time to time.
ARTICLE II
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PARTICIPATION
II.1 Eligibility. On or after the Effective Date:
(a) Participant on January 1, 1991. Each person who has a balance in
his or her Accounts, or who has accrued a Retirement Benefit, as of January
1, 1991 shall be a Participant as of January 1, 1991.
(b) Other Eligible Employee. Each other Eligible Employee shall become
a Participant with respect to the Plan Year in which he or she becomes an
Eligible Employee; provided however, on or after January 1, 1994, a person
who was an Employee prior to becoming an Eligible Employee shall become a
Participant as of the first day of the Plan Year commencing on or after the
date he or she became an Eligible Employee.
II.2 Enrollment Election.
(a) Participant on January 1, 1994. Each person who is a Participant
on January 1, 1994 shall complete, sign and return an Enrollment Election
form provided for that purpose by the Benefit Trust Committee, to the
Benefit Trust Committee no later than the designated Notice Date.
(b) Other Eligible Employees. Each person first eligible to become a
Participant shall complete, sign and return an Enrollment Election form
provided for that purpose by the Benefit Trust Committee, to the Benefit
Trust Committee no later than the designated Notice Date.
ARTICLE III
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PARTICIPANT DEFERRAL ELECTIONS
III.1 Employee Deferral Election. Prior to the date payments of Accounts
are accelerated under Section 10.8, the following shall apply; after such date,
no Deferral Elections will be effective.
(a) For each Plan Year commencing on or after January 1, 1994, a
Participant who is an Eligible Employee and who desires to have Replacement
RSP Employee Deferrals made on his or her behalf shall file a Deferral
Election pursuant to procedures specified by the Benefit Trust Committee
specifying (1) his or her Deferral Percentage of not less than two percent
(2%) nor more than ten percent (10%) (stated as a whole integer percentage)
and authorizing the Compensation otherwise payable to him or her for a Plan
Year to be reduced and deferred hereunder to such Participant's Payment
Date; and (2) whether or not the Replacement RSP Employee Account created
with respect to such Plan Year will be distributed in the Installment Form
of Payment.
(b) For each Plan Year commencing on or after January 1, 1994, a
Participant who is an Eligible Employee and who desires to have an MIC
Deferral made on his or her behalf shall file a Deferral Election pursuant
to procedures specified by the Benefit Trust Committee specifying (1) his
or her Deferral Percentage of not less than 5% nor more than 100% (stated
as a whole integer percentage) and authorizing his or her Compensation
payable for a Plan Year to be reduced and deferred hereunder to a fixed
Payment Date not earlier than two (2) full Plan Years after the date the
Deferral Election is received by the Benefit Trust Committee; and (2)
whether or not the MIC Account created with respect to such Plan Year will
be distributed in the Installment Form of Payment.
(c) Notwithstanding Subsection (a) hereof, for any Plan Year the
Benefit Trust Committee may, without amending this Plan, determine that the
maximum Deferral Percentage shall be greater or lesser than the percentages
set forth in Subsection (a) hereof. Otherwise, the maximum Deferral
Percentage as provided in Subsection (a) hereof shall apply.
(d) Any Replacement RSP Employee Deferral Election which has not been
properly completed, or which is submitted at a time when the Participant
does not have outstanding a properly completed Investment Election, will be
deemed not to have been received and be void. A Participant's Deferral
Election shall be effective only if received by the Benefit Trust Committee
on or before the Notice Date for a Plan Year.
III.2 Election Procedures. If properly received by the Benefit Trust
Committee, a Deferral Election may be effective only with respect to
Compensation paid in a Plan Year to which the Deferral Election applies and only
with respect to Compensation paid after the Notice Date for the Deferral
Election. Consistent with the above, the Benefit Trust Committee may establish
rules and procedures governing when a Deferral Election will be effective and
what Compensation will be deferred by the Deferral Election; provided such rules
and procedures are not more permissive than the terms and provisions of this
Plan.
III.3 Coordination with RSP. Notwithstanding a Participant's Deferral
Election, if a Participant makes a "401(k) Hardship" withdrawal from the RSP
during a Plan Year, the "401(k) Hardship" withdrawal rules of the RSP, which are
intended to be applicable to this Plan, are incorporated by reference herein and
made a part hereof, but only to the extent required by Treas. Reg. '1.401(k)-1,
in order for the RSP to be a qualified cash or deferred arrangement.
ARTICLE IV
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DEFERRALS AND POSTINGS
IV.1 Replacement RSP Employer Deferral.
(a) Frequency and Eligibility. For each period after 1993 for which a
Participant makes a Replacement RSP Employee Deferral, the Company shall
post to this Plan on behalf of such Participant an Replacement RSP Employer
Deferral as described in the following Posting and Allocation Method
paragraph.
(b) Posting and Allocation Method. The Replacement RSP Employer
Deferral for each period shall total one hundred percent (100%) of each
eligible Participant's Replacement RSP Employee Deferral for the period,
provided that no Replacement RSP Employer Deferral shall be made based upon
a Participant's Replacement RSP Employee Deferral in excess of six percent
(6%) of his or her Compensation. The Replacement RSP Employer Deferral
shall be posted to the Replacement RSP Employer Account of such Participant
as of the same date the Replacement RSP Employee Deferral which it matches
is posted.
IV.2 MIC Deferral.
(a) Frequency and Eligibility. For each period after 1993 for which a
Deferral Election is in effect, the Company shall post to this Plan on
behalf of each Participant an amount equal to the amount designated by the
Participant as an MIC Deferral on his or her Deferral Election.
(b) Posting. The MIC Deferral shall be posted to the MIC Deferral
Account of such Participant as of the date his or her MIC Award would
otherwise have been paid to the Participant.
IV.3 Pay Based Deferral.
(a) Frequency and Eligibility. For each Plan Year, the Company may
make a Pay Based Deferral in an amount determined by the Company on behalf
of each Participant who is an Eligible Employee and who would have
qualified for a similar deferral in the RSP had such person been eligible
to participate in the RSP and in an amount determined in the Posting and
Allocation Method paragraph.
(b) Posting and Allocation Method. The Pay Based Deferral for each
period shall be posted as of the date determined by the Benefit Trust
Committee (but not later than the tax filing deadline for the Company's
federal income tax return for the Plan Year with respect to which the Pay
Based Deferral relates, including extensions) to the Pay Based Account of
each of the Participants for the Plan Year in direct proportion to their
Compensation.
IV.4 Replacement RSP Employee Deferral.
(a) Frequency and Eligibility. For each period for which a Deferral
Election is in effect, the Company shall post to this Plan on behalf of
each Participant an amount equal to the amount designated by the
Participant as an Replacement RSP Employee Deferral on his or her Deferral
Election.
(b) Posting. The Replacement RSP Employee Deferral shall be posted to
the Replacement RSP Employee Account of such Participant as of the date
such Compensation amount would otherwise have been paid to the Participant.
IV.5 RSP Employer Deferral.
(a) Frequency and Eligibility.
(1) Pre-1991. Amounts posted to a Participant's Accounts for each
Plan Year prior to 1991 are determined under the terms and provisions
of this Plan as it existed during any such Plan Year.
(2) Post-1990 and Pre-1994. For each Plan Year after 1990 and
prior to 1994, the Company shall post to this Plan on behalf of each
Participant whose pre-tax contribution to the RSP was limited by the
Contribution Dollar Limit for that Plan Year, and who is not a
Designated Participant for that Plan Year, an RSP Employer Deferral as
described in (b)(2) of the following Posting and Allocation Method
paragraph.
(3) Designated Participant. For each Plan Year after 1990 and
prior to 1994, the Company shall post to this Plan on behalf of each
Participant who is a Designated Participant and an Employee for that
Plan Year, an RSP Employer Deferral as described in (b)(3) of the
following Allocation Method paragraph.
(b) Posting and Allocation Method.
(1) Pre-1991. RSP Employer Deferrals for Plan Years prior to 1991
shall be posted as of January 1, 1991, to the RSP Employer Account.
(2) Post-1990 and Pre-1994. The RSP Employer Deferral for each
Plan Year after 1990 and prior to 1994 shall be an amount equal to (A)
minus (B) where:
(A) is equal to the amount of matching contribution which
would have been made to the RSP for the Plan Year based on the
assumptions that (i) the Participant has made pre-tax
contributions to the RSP at the rate of six percent (6%) of his
or her compensation as defined in the RSP, without regard to the
Maximum Annual Additions Limitation, the Contribution Dollar
Limit and the Compensation Limit; and (ii) matching contributions
to the RSP were made with respect to such amounts in accordance
with the terms of the RSP without regard to the Maximum Annual
Additions Limitation and the Section 401(m) Limitation; and
(B) is equal to the actual amount of matching contribution
made on behalf of the Participant to the RSP for the Plan Year.
The RSP Employer Deferral after 1990 shall be posted to the RSP
Employer Account as of the same date it would have been made as a
matching contribution to the RSP, if it could have been made (or as a
pay based contribution to the RSP in 1991, if it could have been
made).
(3) Designated Participant. The RSP Employer Deferral for each
Plan Year after 1990 and prior to 1994 shall be an amount equal to six
percent (6%) of the Participant's Compensation, without regard to the
Maximum Annual Benefit Limitation. For the 1991 Plan Year, an amount
shall be posted equal to 2% of such Participant's Compensation. The
RSP Employer Deferral after 1990 shall be posted to the RSP Employer
Account as of the same date it would have been made as a matching
contribution to the RSP, if it could have been made (or as a pay based
contribution to the RSP in 1991, if it could have been made).
IV.6 RSP Employee Deferral.
(a) Frequency and Eligibility. Amounts posted to a Participant's
Accounts for each Plan Year prior to 1994 are determined under the terms
and provisions of this Plan as it existed during any such Plan Year.
(b) Allocation Method. RSP Employee Deferrals for Plan Years prior to
1994 shall be posted to the RSP Employee Account in accordance with the
terms of the Plan at that time.
ARTICLE V
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EXCESS RETIREMENT AND DEATH BENEFITS
V.1 Amount of Pension Benefits. Effective on and after January 1, 1994, a
Retirement Benefit will be paid under this Plan, only as provided in Article X,
to a Participant in an annual amount payable monthly equal to the amount by
which (a) exceeds (b):
(a) The amount of the annual retirement benefit payable in the form of
a single life annuity the Participant would have been entitled to receive
under the Pension Plan (1) had the Pension Plan (and any other plan
referenced by the Pension Plan for the purpose of determining an "Offset
Benefit" as defined in the Pension Plan) not applied the Maximum Annual
Benefit Limitation in determining benefits payable from the Pension Plan;
and (2) had the Participant not been excluded from being an "Eligible
Employee" by being listed on an Appendix to the Pension Plan (and any other
plan referenced by the Pension Plan for the purpose of determining an
"Offset Benefit" as defined in the Pension Plan). For purposes of this
Section 5.1(a), the compensation used for determining retirement benefits
payable from the Pension Plan (and any other plan referenced by the Pension
Plan for the purpose of determining an "Offset Benefit" as defined in the
Pension Plan) shall mean Compensation as defined in this Plan for a Plan
Year.
(b) The Actuarial Equivalent of the amount of the annual retirement
benefit payable monthly which the Participant is entitled to receive under
the Pension Plan if it were to commence on the Payment Date and to be paid
in the form elected by such Participant under the Pension Plan, or if the
Participant has not made such an election under the Pension Plan, then in
the form of either a joint and 100% contingent annuity, if married, or a
single life annuity, if not married.
V.2 Amount of Death Benefit. Effective on and after January 1, 1994, a
Death Benefit will be paid under this Plan, only as provided in Article X, to a
Beneficiary of a deceased Participant in an annual amount payable monthly equal
to the amount by which (a) exceeds (b):
(a) The amount of the annual death benefit payable in the form of a
single life annuity the Beneficiary of a deceased Participant would have
been entitled to receive under the Pension Plan (1) had the Pension Plan
not applied the Maximum Annual Benefit Limitation in determining benefits
payable from the Pension Plan; and (2) had the Participant not been
excluded from being an "Eligible Employee" by being listed on an Appendix
to the Pension Plan. For purposes of this Section 5.3(a), the compensation
used for determining death benefits payable from the Pension Plan means
Compensation as defined in this Plan for a Plan Year.
(b) The Actuarial Equivalent of the amount of the annual death benefit
payable monthly which the Beneficiary of a deceased Participant is entitled
to receive under the Pension Plan if it were to commence on the same date
as the Death Benefit under this Plan and to be paid in the form of single
life annuity.
V.3 Pre-1994 Benefits. Any Retirement Benefit accrued by a Participant
prior to 1994, who is never an Eligible Employee after 1993, shall be determined
and paid solely under the terms of this Plan as it existed prior to 1991.
ARTICLE VI
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ACCOUNTING FOR PARTICIPANTS'
ACCOUNTS AND FOR INVESTMENT FUNDS
VI.1 Individual Participant Accounting.
(a) Account Maintenance. The Benefit Trust Committee shall cause the
Accounts for each Participant to reflect transactions involving amounts
posted to the Accounts and the measurement of investment returns on
Accounts in accordance with this Plan. Investment returns during or with
respect to an Accounting Period shall be accounted for at the individual
account level by "posting" such returns to each of the appropriate Accounts
of each affected Participant. Account values shall be maintained in shares,
units or dollars.
(b) Trade Date Accounting and Investment Cycle. For any financial
transaction involving a change in the measurement of investment returns,
withdrawals or distributions to be processed as of a Trade Date, the
Benefit Trust Committee must receive instructions by the Sweep Date and
such instructions shall apply only to amounts posted to the Accounts as of
the Trade Date. Such financial transactions in an Investment Fund shall be
posted to a Participant's Accounts as of the Trade Date and based upon the
Trade Date values. All such transactions shall be effected on the
Settlement Date (or as soon as is administratively feasible) relating to
the Trade Date as of which the transaction occurs.
(c) Suspension of Transactions. Whenever the Benefit Trust Committee
considers such action to be appropriate, the Benefit Trust Committee, in
its discretion, may suspend from time to time the Trade Date.
(d) Error Correction. The Benefit Trust Committee may correct any
errors or omissions in the administration of this Plan by restoring or
charging any Participant's Accounts with the amount that would be credited
or charged to the Accounts had no error or omission been made.
VI.2 Accounting for Investment Funds. The investment returns of each
Investment Fund shall be tracked in the same manner as such Investment Funds are
tracked under the RSP. Investment income, earnings, and losses charged against
the Accounts shall be based solely upon the actual performance (net of expenses
and charges allowed under the RSP) of each of the Investment Funds for the
period of time all or some portion of each of the Accounts has been designated
to use such Investment Fund as a measurement of investment returns. A change of
measurement of returns from one Investment Fund to another, or a distribution or
withdrawal, shall be determined as of the same dates and in the same manner as
if amounts posted in Accounts were actually invested in the RSP and such
financial transactions were being implemented in the RSP.
ARTICLE VII
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INVESTMENT FUNDS AND ELECTIONS
VII.1 General. Prior to January 1, 1994, a Participant's Investment
Election and Conversion Election (except as provided in Section 7.4) with
respect to this Plan were deemed to be identical to each comparable investment
direction made by the Participant under the RSP. Effective January 1, 1994, this
Plan will no longer use a Participant's RSP investment directions, and other
than as provided in Section 7.5, a separate Investment Election and Conversion
Election must be made with respect to the Deferrals and Accounts; provided
however, if no Investment Election or Conversion Election is received from a
Participant on or after January 1, 1994, such Participant will be deemed to have
submitted a Conversion Election, effective January 1, 1994 with respect to his
or her Accounts as of December 31, 1993, which designates a percentage of such
Accounts to have its investment returns measured by an Investment Fund which is
the same percentage and investment fund in the RSP that such Participant had
previously been deemed to have designated prior to January 1, 1994, with the
exception that any amounts designated to measure the investment returns of the
Windsor Fund shall instead use the Large Company Fund.
VII.2 Investment of Deferrals.
(a) Investment Election. Each Participant may direct, by submission to
the Benefit Trust Committee of a completed Investment Election form
provided for that purpose by the Benefit Trust Committee, to select a
measurement of investment returns for Deferrals (other than MIC Deferrals)
posted to his or her Accounts (and the portion of such Accounts
attributable to such Deferrals) in one or more Investment Funds. Each
Investment Election shall apply proportionately to all Deferrals (other
than MIC Deferrals) based upon the relative amount of each.
(b) Effective Date of Investment Election; Change of Investment
Election. A Participant's initial Investment Election will be effective
with respect to a Fund on the Trade Date which relates to the Sweep Date on
which or prior to which the Investment Election is received pursuant to
procedures specified by the Benefit Trust Committee. Any Investment
Election which has not been properly completed will be deemed not to have
been received. A Participant's Investment Election shall continue in
effect, notwithstanding any change in his or her Compensation or his or her
Deferral Percentage, until the effective date of a new Investment Election.
A change in Investment Election shall be effective with respect to a Fund
on the Trade Date which relates to the Sweep Date on which or prior to
which the Benefit Trust Committee receives the Participant's new Investment
Election.
VII.3 Investment of Accounts.
(a) Conversion Election. Notwithstanding a Participant's Investment
Election, a Participant or Beneficiary may direct the Benefit Trust
Committee, by submission of a completed Conversion Election form provided
for that purpose to the Benefit Trust Committee, to change the measurement
of investment returns of his or her Accounts (other than the MIC Deferral
Account). Each Conversion Election shall apply proportionately to all
affected Accounts based upon the relative balance of each.
(b) Effective Date of Conversion Election. A Conversion Election to
change a Participant's measurement of investment returns of his or her
Accounts in one Investment Fund to another Fund shall be effective with
respect to such Funds on and after the Trade Date which relates to the
Sweep Date on which or prior to which the Election is received pursuant to
procedures specified by the Benefit Trust Committee. Notwithstanding the
foregoing, to the extent required by any provisions of an Investment Fund,
the effective date of any Conversion Election may be delayed or the amount
of any permissible Conversion Election may be reduced. Any Investment
Election which has not been properly completed will be deemed not to have
been received.
VII.4 Insiders.
Prior to January 1, 1994, and as of the later of May 5, 1992 or the date on
which such Participant becomes an Insider (as determined by the Benefit Trust
Committee) ("Transfer Date"):
(a) The measurement of investment returns for an RSP Employer Deferral
hereunder shall initially be assumed to be the same as the Investment Funds
in which the Insider's pre-tax contributions are initially invested in the
RSP; and if the Insider does not make pre-tax contributions to the RSP,
then it shall be assumed to be that of the Investment Fund primarily
invested in Company Stock.
(b) Each Insider's change in investment directions under the RSP shall
be disregarded for purposes of this Plan:
(1) if such change would cause any portion of the Insider's
Deferral or Accounts to use the Fund invested primarily in Company
Stock as a measurement of investment return; or
(2) if such change is not in amounts and effective as of such
dates as are determined by the Benefit Trust Committee under a set of
rules applicable to all Insiders.
VII.5 Investment Returns on MIC Deferrals. All MIC Deferral Accounts shall
have interest as a measurement of investment return. The rate of interest deemed
to be earned on such Accounts on any day during a 6-month period shall be the
stated prime rate of interest charged by Bank of America, Illinois, N.A. on the
first business day in January or July of such period.
VII.6 Restrictions on Measurement. The following additional restrictions
shall apply to the measurement of investment return of Deferrals and Accounts
other than those described in Section 7.5:
(a) Effective after January 1, 1994, no Investment Election shall be
permitted which results in a measurement of investment return for Deferrals
to be an Investment Fund invested primarily in Company Stock and no
Conversion Election shall be permitted which results in a measurement of
investment return for Accounts into or out of an Investment Fund invested
primarily in Company Stock;
(b) Any limitations, conditions or restrictions which may be imposed
by the Benefit Trust Committee; and
(c) Any limitation, condition or restriction which is imposed
on the measurement of investment returns in or the liquidation of funds
out of any Investment Fund in the RSP.
VII.7 Procedures. The procedures, frequency and time deadlines for making
an Investment Election or Conversion Election shall be the same as the
applicable procedures, frequency and time deadlines in the RSP, except to the
extent provided otherwise in this Plan or by the Benefit Trust Committee.
ARTICLE VIII
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VESTING AND FORFEITURES
VIII.1 Fully Vested Deferral Accounts.
A Participant shall be fully vested and have a nonforfeitable right to his
or her Accounts at all times.
ARTICLE IX
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WITHDRAWALS
IX.1 Withdrawals for Hardship.
(a) Requirements. A Participant may request the withdrawal of any
amount from the portion of his or her Accounts (not in excess of the
balance of such Accounts) needed to satisfy a financial need by making a
withdrawal request in accordance with a procedure established by the
Benefit Trust Committee. A financial need for this purpose is a severe,
unanticipated hardship, the occurrence of which is beyond the Participant's
control and for which the amount needed to satisfy the hardship is
determined only after the Participant has used other readily available
funds or resources (other than this Plan and the RSP).
(b) Account Sources for Withdrawal. The withdrawal amount shall come
only from the following Accounts, in the following priority order:
RSP Employee Account
RSP Employer Account
Replacement RSP Employer Account
Replacement RSP Employee Account
Pay Based Account
MIC Deferral Account
IX.2 Withdrawal Processing.
(a) Minimum Amount. There is no minimum payment for any type of
withdrawal.
(b) Application by Participant. A Participant must submit a withdrawal
request, in accordance with a procedure established by the Benefit Trust
Committee, to the Benefit Trust Committee to apply for any type of
withdrawal.
(c) Approval by Benefit Trust Committee. The Benefit Trust Committee
is responsible for determining that a withdrawal request conforms to the
requirements described in this Section and notifying the Company of any
payments to be made in a timely manner. Any request to make a withdrawal by
a member of the Benefit Trust Committee may be approved only by
disinterested members of the Benefit Trust Committee, or if none, the
Compensation Committee.
(d) Time of Processing. The Company shall process all withdrawal
requests which it receives by a Sweep Date, based on the value as of the
Trade Date to which it relates, and fund them on the next Settlement Date.
The Company shall then make payment to the Participant as soon thereafter
as is administratively feasible; provided however, if such payment will
result in any portion of the payment (or any other amount paid to such
Participant during the same Plan Year) not being deductible by reason of
Code section 162(m), the Compensation Committee may defer payment to a
later Payment Date designated by it.
(e) Medium and Form of Payment. The medium of payment for withdrawals
is cash. The form of payment for withdrawals shall be a single installment.
(f) Investment Fund Sources. Within each Account used for funding a
withdrawal, amounts shall be taken by type of investment measurement in
direct proportion to the value of the Participant's Accounts in each
Investment Fund at the time the withdrawal is made.
ARTICLE X
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DISTRIBUTIONS
Benefits payable under this Plan shall be paid in the form and time
prescribed below.
X.1 Retirement Benefit. A Participant who has a nonforfeitable right to
receive a retirement benefit from the Pension Plan (or would have a
nonforfeitable right if such Participant were eligible to participate in the
Pension Plan) shall receive a Retirement Benefit (less any amounts previously
paid to the Participant under Section 10.7) in the following Actuarial
Equivalent form of payment and as of the following Payment Date:
(a) Form of Payment. The Participant may elect a form of payment of
the Retirement Benefit in the same manner and form as permitted under the
Pension Plan (other than the Social Security Leveling Option) without the
necessity of spousal consent; provided, however, (1) the Compensation
Committee in its discretion, or (2) such Participant by irrevocably
electing in writing on a form delivered to the Benefit Trust Committee on
or prior to his or her Termination of Employment, and if a voluntary
Termination of Employment by delivering such form to the Benefit Trust
Committee at least six (6) months prior to the Payment Date, may convert
the Retirement Benefit payable under this Plan into an Actuarial Equivalent
single sum form of payment.
(b) Time of Payment. The Payment Date of a Participant's Retirement
Benefit shall be the earliest date on or after the Participant's
Termination of Employment as of which he or she could have commenced
payment of his or her retirement benefits from the Pension Plan; provided
however, if payment is made in a single sum and will result in any portion
of the payment (or any other amount paid to such Participant during the
same Plan Year) not being deductible by reason of Code section 162(m), the
Benefit Trust Committee may defer such Actuarial Equivalent single sum
payment to a later Payment Date designated by it.
X.2 Pension Death Benefit.
(a) Form of Payment. The Death Benefit payable to the Beneficiary of a
Participant who is entitled to a Retirement Benefit (less any amounts
previously paid to the Participant under Section 10.7) and who dies on or
after his or her Payment Date shall be in the form selected by the
Participant commencing as of such Payment Date. Where a Participant who is
entitled to a Retirement Benefit (less any amounts previously paid to the
Participant under Section 10.7) dies prior to his Payment Date, the form of
payment of his or her Beneficiary's Death Benefit shall be the same as the
form of payment of any death benefit payable under the Pension Plan;
provided however, the Compensation Committee in its discretion, or such
Participant by electing in writing on a form delivered to the Benefit Trust
Committee prior to his or her Payment Date, may convert the Death Benefit
payable under this Plan into an Actuarial Equivalent single sum form of
payment.
(b) Time of Payment. A Beneficiary's Death Benefit shall commence to
be paid as of the earliest date as of which he or she could have commenced
payment of a death benefit from the Pension Plan; provided however, if
payment is made in a single sum and will result in any portion of the
payment (or any other amount paid to such Beneficiary during the same Plan
Year) not being deductible by reason of Code section 162(m), the Benefit
Trust Committee may defer such Actuarial Equivalent single sum payment to a
later Payment Date designated by it.
X.3 Accounts.
(a) Form of Payment. The form of payment of the balance of a
Participant's Accounts (other than his or her MIC Account for each Plan
Year) will be a single sum payment except with respect to those Accounts
for which the Participant has selected the Installment Form of Payment on
his or her Deferral Election Form, in which case such Accounts will be paid
in the Installment Form of Payment.
(b) Time of Payment. The Payment Date of the balance of a
Participant's Accounts (other than his or her MIC Account) shall be the
Payment Date following Termination of Employment selected by the
Participant on his or her Enrollment Election form; provided however, if
such payment will result in any portion of the payment (or any other amount
paid to such Participant during the same Plan Year) not being deductible by
reason of Code section 162(m), the Benefit Trust Committee may defer
payment to a later Payment Date designated by it and such Accounts shall
continue to have investment returns measured under this Plan.
X.4 MIC Account.
(a) Form of Payment. The form of payment of the balance of a
Participant's MIC Account for each Plan Year will be a single sum payment
except with respect to those MIC Accounts for which the Participant has
selected the Installment Form of Payment on his or her Deferral Election
Form, in which case such MIC Accounts will be paid in the Installment Form
of Payment.
(b) Time of Payment. The Payment Date of the balance of a
Participant's MIC Account for each Plan Year shall be the earlier of the
fixed Payment Date selected by the Participant on the Deferral Election
Form for the Plan Year or the Payment Date following a Termination of
Employment selected in his or her Enrollment Election form; provided
however, if payment is made in a single sum and will result in any portion
of the payment (or any other amount paid to such Participant during the
same Plan Year) not being deductible by reason of Code section 162(m), the
Benefit Trust Committee may defer payment to a later Payment Date
designated by it and such Accounts shall continue to have investment
returns measured under this Plan.
X.5 Death Benefit of Accounts. Upon the death of a Participant, the
remaining balance in his or her Accounts shall be paid to the Participant's
Beneficiary in a single sum as soon as administratively possible after the
Participant's death; provided however, if such payment will result in any
portion of the payment (or any other amount paid to such Beneficiary during the
same Plan Year) not being deductible by reason of Code section 162(m), the
Benefit Trust Committee may defer payment to a later Payment Date designated by
it and such Accounts shall continue to have investment returns measured under
this Plan.
X.6 Prior to 1994. The timing and form of payment of a Retirement Benefit,
Death Benefit and balance of Accounts with respect to a Participant or
Beneficiary as of any date of determination prior to 1994 shall be determined by
the terms and provisions of this Plan as of such date.
X.7 Payments of Retirement and Death Benefit Due to an Investment Grade
Rating Change. Notwithstanding Sections 10.1, 10.2 or 10.6, the following shall
apply:
(a) Retirement Benefit. If, prior to a Change of Control or more than
three (3) years after a Change of Control, either (1) the Company or (2)
the Parent is rated below an Investment Grade Rating, then on such date,
and on each December 31 after such date and prior to the date the Company
and the Parent both have an Investment Grade Rating, a single sum payment
shall be made immediately to such Participant of the amount by which the
Actuarial Equivalent of (1) exceeds the sum of (2) plus (3):
(1) the amount determined in Section 5.1(a) based upon the
assumption that (A) the Participant has a nonforfeitable right to his
benefit from the Pension Plan, (B) the Participant incurs a
Termination of Employment as of the date of determination, and (C)
benefits payable from the Pension Plan would commence upon the
earliest payment date allowed under the Pension Plan immediately
following such Termination of Employment.
(2) the Actuarial Equivalent of the amount determined in Section
5.1(b) based upon the same assumptions as those in Section 10.7(a)(1).
(3) the Actuarial Equivalent of amounts paid to such Participant
based on any prior determination date pursuant to this Section
10.7(a).
(b) Retirement Benefit After Payment Date. On or after the Payment
Date of a Participant's Retirement Benefit, if either (1) the Company or
(2) the Parent is rated below an Investment Grade Rating, then an Actuarial
Equivalent single sum payment of such unpaid Retirement Benefit shall be
made immediately to such Participant.
(c) Death Benefit. If either (1) the Company or (2) the Parent is
rated below an Investment Grade Rating, then a Beneficiary who is
receiving, or would as of such date otherwise be eligible to commence to
receive a Death Benefit shall be paid immediately an Actuarial Equivalent
single sum payment of such unpaid Death Benefit.
X.8 Payment of Accounts Due to an Investment Grade Rating Change.
Notwithstanding Sections 10.3, 10.4 or 10.5, if either (1) the Company or (2)
the Parent is rated below an Investment Grade Rating, then the balance of his or
her Accounts shall be paid immediately in a single sum to such Participant as if
such Participant had incurred a Termination of Employment as of such date the
rating drops below an Investment Grade Rating.
X.9 Payment of Retirement and Death Benefits Due to a Change of Control. On
and after a Change of Control and notwithstanding Sections 10.1, 10.2 or 10.6,
the following shall apply:
(a) Termination of Employment. Upon Termination of Employment of a
Participant within three (3) years following a Change of Control, a single
sum payment shall be made immediately to such Participant of the amount by
which the Actuarial Equivalent of (1) exceeds (2) plus (3):
(1) the amount determined in Section 5.1(a) based upon the
assumption that (A) the Participant has a nonforfeitable right to his
benefit from the Pension Plan, (B) the Participant's early retirement
benefit under the Pension Plan is determined using the Table of
reduction factors that would have been available to such Participant
had he or she not incurred a Termination of Employment until the third
(3rd) anniversary of the Change of Control date and based upon the
Participant's age as of the Payment Date, and (C) benefits payable
from the Pension Plan would commence upon the earliest payment date
allowed under the Pension Plan.
(2) the Actuarial Equivalent of the amount determined in Section
5.1(b) based upon the same assumptions as those in Section 10.9(a)(1)
except (A).
(3) the Actuarial Equivalent of any amounts previously paid to
the Participant under Section 10.7.
(b) Investment Grade Rating Within Three Years. If, within three (3)
years following a Change of Control, either (1) the Company or (2) the
Parent, if any, is rated below an Investment Grade Rating, then a single
sum payment shall be made immediately to such Participant of an amount
determined in Section 10.9(a) hereof as if such Participant had incurred a
Termination of Employment as of such date the rating drops below an
Investment Grade Rating.
X.10 Payment of Accounts Due to a Change of Control. On and after a Change
of Control and notwithstanding Sections 10.3, 10.4 or 10.5, in the event of a
Participant's Termination of Employment within three (3) years following a
Change of Control, the balances of his or her Accounts shall be paid immediately
in a single sum.
ARTICLE XI
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AMENDMENT
XI.1 Prior to a Change of Control. The Company reserves the right to amend
this Plan from time to time by action of the Board of Directors, but without the
written consent of each Participant and Beneficiary of a deceased Participant,
no such action may reduce or relieve the Company of any obligation with respect
to any Retirement Benefit (or Death Benefit) accrued or balance of Accounts
maintained under this Plan by such Participant (or Beneficiary) as of the date
of such amendment, except to the extent such amendment is required by written
opinion of counsel to the Company to avoid recognition of income by a
Participant or Beneficiary subject to federal income taxation.
XI.2 After a Change of Control. This Plan may not be amended following a
Change of Control.
ARTICLE XII
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TERMINATION
The Company, by action of the Board of Directors, reserves the right to
terminate this Plan, provided the Company pays to each Participant and
Beneficiary, on such date of termination of this Plan, the Actuarial Equivalent
single sum value of a Participant's unpaid Retirement Benefit (or of a
Beneficiary's unpaid Death Benefit) and the balance of Accounts maintained for
such Participant (or for a Beneficiary) as of the date of termination shall be
paid as soon as administratively possible; provided however, for this purpose a
Participant's Retirement Benefit shall be equal to the amount by which the
Actuarial Equivalent of (1) exceeds (2) plus (3):
(1) the amount determined in Section 5.1(a) based upon the
assumption that (A) the Participant has a nonforfeitable right to his
benefit from the Pension Plan, (B) the Participant's early retirement
benefit under the Pension Plan is determined using the Table of
reduction factors that would have been available to such Participant
had he or she not incurred a Termination of Employment until the day
preceding his or her sixty-fifth (65th) birthday and based upon the
Participant's age as of the Payment Date, and (C) benefits payable
from the Pension Plan would commence upon the earliest payment date
allowed under the Pension Plan.
(2) the Actuarial Equivalent of the amount determined in Section
5.1(b) based upon the same assumptions as those in subsection (a)(1)
above except (A).
(3) the Actuarial Equivalent of any amounts previously paid to
the Participant under Section 10.7.
If within ten (10) days after a Change of Control, the requirements of
Sections 10.9(b), (d), (e) and 10.10(b) hereof are not satisfied, the Plan shall
automatically terminate upon final payment of all amounts due in accordance with
Sections 10.9(b), (d), (e), 10.10, 13.3, 13.4 and 13.9 of this Plan.
ARTICLE XIII
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MISCELLANEOUS PROVISIONS
XIII.1 Administration. This Plan shall be administered by the Benefit Trust
Committee. The Benefit Trust Committee shall have, to the extent appropriate,
the same powers, rights, duties, and obligations with respect to this Plan as
the committee of the Trust has under the Trust document (other than the power to
amend this Plan).
XIII.2 Finality of Determination. The determination of the Benefit Trust
Committee as to any disputed questions arising under this Plan, including
questions of construction and interpretation shall be final, binding, and
conclusive upon all persons.
XIII.3 Expenses. The expenses of administering this Plan shall be borne by
the Company.
XIII.4 Indemnification and Exculpation. The members of the Benefit Trust
Committee, its agents and officers, directors and employees of the Company shall
be indemnified and held harmless by the Company against and from any and all
loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by them in connection with or resulting from any claim, action, suit,
or proceeding to which they may be a party or in which they may be involved by
reason of any action taken or failure to act under this Plan and against and
from any and all amounts paid by them in settlement (with the Company's written
approval) or paid by them in satisfaction of a judgment in any such action,
suit, or proceeding. The foregoing provision shall not be applicable to any
person if the loss, cost, liability, or expense is due to such person's gross
negligence or willful misconduct.
XIII.5 Funding. While all benefits payable under this Plan constitute
general corporate obligations, the Company may establish a separate irrevocable
grantor trust for the benefit of all Participants, which trust shall be subject
to the claims of the general creditors of the Company in the event of such
corporation's insolvency, to be used as a reserve for the discharge of the
Company's obligations under this Plan to such Participants. Any payments made to
a Participant under the separate trust for his benefit shall reduce dollar for
dollar the amount payable to the Participant from the general assets of the
Company. The amounts payable under this Plan shall be reflected on the
accounting records of the Company but shall not be construed to create or
require the creation of a trust, custodial, or escrow account, except as
described above in this section. No Participant (or Beneficiary of a
Participant) shall have any right, title, or interest whatever in or to any
investment reserves, accounts, or funds that the Company may purchase,
establish, or accumulate to aid in providing benefits under this Plan. Nothing
contained in this Plan, and no action taken pursuant to its provisions, shall
create a trust or fiduciary relationship of any kind between the Company, the
Parent or Compensation Committee and a Participant, Beneficiary or any other
person. Neither a Participant nor Beneficiary shall acquire any interest greater
than that of an unsecured, general creditor.
XIII.6 Corporate Action. Any action required of or permitted by the Company
under this Plan shall be by resolution of its Board of Directors, the
Compensation Committee or any person or persons authorized by resolution of such
Compensation Committee.
XIII.7 Interests not Transferable. The interests of the Participants and
their Beneficiaries under this Plan are not subject to the claims of their
creditors and may not be voluntarily or involuntarily transferred, assigned,
alienated, or encumbered by them.
XIII.8 Effect on Other Benefit Plans. Amounts credited or paid under this
Plan shall not be considered to be compensation for the purposes of a qualified
pension plan maintained by the Company or the Parent. The treatment of such
amounts under other employee benefits plans shall be determined pursuant to the
provisions of such plans.
XIII.9 Legal Fees and Expenses. After a Change of Control, the Company
shall pay all reasonable legal fees and expenses which the Participant or a
Beneficiary may incur as a result of the Company's contesting the validity,
enforceability or the Participant's interpretation of, or determinations made
under, this Plan or the Trust.
XIII.10 Deduction of Taxes from Amounts Payable.
(a) Distribution. The Company shall deduct from the amount to be
distributed such amount as the Company, in its sole discretion, deems
proper to protect the Company against liability for the payment of death,
succession, inheritance, income, or other taxes, and out of money so
deducted, the Company may discharge any such liability and pay the amount
remaining to the Participant, the Beneficiary or the deceased Participant's
estate, as the case may be.
(b) Withholding. The Company may withhold whatever taxes (including
FICA, state or federal taxes) it, in its sole discretion, deems proper to
protect the Company against liability for the payment of such withholding
taxes and out of the money so deducted, the Company may discharge any such
liability. Withholding for this purpose may come from any wages due to the
Participant, or if none, from the Participant's Accounts hereunder.
XIII.11 Facility of Payment. If a Participant or Beneficiary is declared an
incompetent or is a minor and a conservator, guardian, or other person legally
charged with his or her care has been appointed, any benefits to which such
Participant or Beneficiary is entitled shall be payable to such conservator,
guardian, or other person legally charged with his or her care. The decision of
the Benefit Trust Committee in such matters shall be final, binding, and
conclusive upon the Company and upon each Participant, Beneficiary, and every
other person or party interested or concerned. The Company and the Benefit Trust
Committee shall not be under any duty to see to the proper application of such
payments.
XIII.12 Merger. This Plan shall be binding and enforceable with respect to
the obligation of the Company against any successor to the Company by operation
of law or by express assumption of the Plan, and such successor shall be
substituted hereunder for the Company.
XIII.13 Gender and Number. Except when the context indicates to the
contrary, when used herein, masculine terms shall be deemed to include the
feminine, and singular the plural.
XIII.14 Invalidity of Certain Provisions. If any provision of this
Plan shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions hereof and this Plan shall be construed
and enforced as if such provisions, to the extent invalid or unenforceable, had
not been included.
XIII.15 Headings. The headings or articles are included solely for
convenience of reference, and if there is any conflict between such headings and
the text of this Plan, the text shall control.
XIII.16 Notice and Information Requirements. Except as otherwise provided
in this Plan or as otherwise required by law, the Company shall have no duty or
obligation to affirmatively disclose to any Participant or Beneficiary, nor
shall any Participant or Beneficiary have any right to be advised of, any
material information regarding the Company, or at any time prior to, upon or in
connection with the Company's purchase, or any other distribution or transfer
(or decision to defer any such distribution) of any Company Stock or any other
stock held under this Plan.
XIII.17 Governing Law. This Plan shall be governed by the laws of the State
of Delaware.
Adopted on the ______ day of _______________ by the Board of Directors
of the Company as to its obligations.
By:
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Title:
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EXHIBIT 10(n)
WHITMAN CORPORATION
REVISED STOCK INCENTIVE PLAN
(Adopted November 21, 1997)
1. Definitions
The following definitions shall be applicable throughout this Plan:
(a) "Code" shall mean the Internal Revenue Code of 1986, as the same
may be amended from time to time. Reference in the Plan to any section of
the Code shall be deemed to include any amendments or successor provision
to such section and any regulations under such section.
(b) "Committee" shall mean the Committee selected by the Board of
Directors as provided in Paragraph 4, consisting of two or more members of
the Board of Directors, each of whom shall be (i) a "Non-Employee Director"
within the meaning of Rule 16b-3 under the Exchange Act, and (ii) an
"outside director" within the meaning of Section 162(m) of the Code.
(c) "Common Stock" shall mean common stock of the Corporation, without
par value.
(d) "Corporation" shall mean Whitman Corporation, a Delaware
corporation.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(f) "Holder" shall mean an individual who has been granted an Option,
Restricted Stock Award or Performance Award.
(g) "Option" shall mean any option granted under the Plan for the
purchase of Common Stock.
(h) "Performance Award" shall mean an award granted under the
Performance Award provisions of the Plan.
(i) "Plan" shall mean the Corporation's Revised Stock Incentive Plan,
as amended from time to time.
(j) "Restricted Stock Award" shall mean an award of Common Stock
granted under the Restricted Stock Award provisions of the Plan.
(k) "Retirement" shall mean cessation of active employment or service
with the Corporation or a subsidiary pursuant to the Corporation's
retirement policies and programs.
(1) "SAR" shall mean a stock appreciation right which is issued in
tandem with, or by reference to, an Option, which entitles the Holder
thereof to receive, upon exercise of such SAR and surrender for
cancellation of all or a portion of such Option, shares of Common Stock,
cash or a combination thereof with an aggregate value equal to the excess
of the fair market value of one share of Common Stock on the date of
exercise over the purchase price specified in such Option, multiplied by
the number of shares of Common Stock subject to such Option, or portion
thereof, which is surrendered.
2. Purpose
It is the purpose of the Plan to provide a means through which the
Corporation may attract able persons to enter its employ and the employ of its
subsidiaries, to serve as directors and to provide a means whereby those persons
upon whom the responsibilities of the successful administration and management
of the Corporation or its subsidiaries rest, and whose present and potential
contributions to the welfare of the Corporation or its subsidiaries are of
importance, can acquire and maintain stock ownership. Such persons should thus
have a greater than ordinary concern for the welfare of the Corporation and/or
its subsidiaries and would be expected to strengthen and maintain a desire to
remain in the employ or service of the Corporation or its subsidiaries. It is a
further purpose of the Plan to provide such persons with additional incentive
and reward opportunities designed to enhance the profitable growth of the
Corporation. So that the maximum incentive can be provided each participant in
the Plan by granting such participant an Option or award best suited to such
participant's circumstances, the Plan provides for granting "incentive stock
options" (as defined in Section 422 of the Code) and nonqualified stock options
(with or without SARS), Restricted Stock Awards and Performance Awards, or any
combination of the foregoing.
3. Effective Date and Duration of the Plan
The Plan shall become effective upon adoption by the Board of Directors of
the Corporation. The Plan shall remain in effect until all Options granted under
the Plan have been exercised, all restrictions imposed upon Restricted Stock
Awards have been eliminated and all Performance Awards have been satisfied.
4. Administration
The members of the Committee shall be selected by the Board of Directors to
administer the Plan. A majority of the Committee shall constitute a quorum.
Subject to the express provisions of the Plan, the Committee shall have
authority, in its discretion, to determine the individuals to receive Options
(with or without SARS), Restricted Stock Awards and Performance Awards, the time
or times when they shall receive them, whether an "incentive stock option" under
Section 422 of the Code or nonqualified option shall be granted, the number of
shares to be subject to each Option and Restricted Stock Award and the value of
each Performance Award. In making such determinations the Committee shall take
into account the nature of the services rendered by each individual, such
individual's present and potential contribution to the Corporation's success,
and such other factors as the Committee shall deem relevant.
The Committee shall have such additional powers as are delegated to it by
the other provisions of the Plan and, subject to the express provisions of the
Plan, to construe the respective Option, Restricted Stock Award and Performance
Award agreements and the Plan, to prescribe, amend and rescind rules and
regulations relating to the Plan and to determine the terms, restrictions and
provisions of the Option, Restricted Stock Award and Performance Award
agreements (which need not be identical) including such terms, restrictions and
provisions as shall be requisite in the judgment of the Committee to cause
certain Options to qualify as "incentive stock options" under Section 422 of the
Code, and to make all other determinations necessary or advisable for
administering the Plan. The Committee may, in its sole discretion and for any
reason at any time, subject to the requirements imposed under Section 162(m) of
the Code and regulations promulgated thereunder in the case of an award intended
to be qualified performance-based compensation, take action such that (i) any or
all outstanding Options shall become exercisable in part or in full, (ii) all or
some of the restrictions applicable to any outstanding Restricted Stock Award
shall lapse and (iii) all or a portion of any outstanding Performance Award
shall be satisfied. The Committee may correct any defect or supply any omission
or reconcile any inconsistency in the Plan or in any Option, Restricted Stock
Award or Performance Award agreement in the manner and to the extent it shall
deem expedient to carry it into effect, and it shall be the sole and final judge
of such expediency. The determinations of the Committee on matters referred to
in this Paragraph 4 shall be conclusive.
The Committee shall act by majority action at a meeting, except that action
permitted to be taken at a meeting may be taken without a meeting if written
consent thereto is given by all members of the Committee.
5. Grants of Options, Restricted Stock Awards and Performance Awards; Shares
Subject to the Plan
The Committee may from time to time grant both "incentive stock options"
under Section 422 of the Code and nonqualified options to purchase shares of
Common Stock (with or without SARS), Restricted Stock Awards and Performance
Awards to one or more officers, key employees or directors determined by it to
be eligible for participation in accordance with the provisions of Paragraph 6
and providing for the issuance of such number of shares and, in the case of
Performance Awards, having such value as in the discretion of the Committee may
be fitting and proper. Subject to Paragraph 10, not more than 5,000,000 shares
of Common Stock may be issued upon exercise of Options or SARs or pursuant to
Restricted Stock Awards or Performance Awards granted under the Plan, plus the
number of shares of Common Stock remaining available for grant under the
Corporation's former Stock Incentive Plan as of November 21, 1997. Performance
Awards which may be exercised or paid only in cash shall not affect the number
of shares of Common Stock available for issuance under the Plan.
The Common Stock to be offered under the Plan pursuant to Options, SARS,
Restricted Stock Awards and Performance Awards may be authorized but unissued
Common Stock or Common Stock previously issued and outstanding and reacquired by
the Corporation.
The number of shares of Common Stock available for issuance under the Plan
shall be reduced by the sum of the aggregate number of shares of Common Stock
then subject to outstanding Options, Restricted Stock Awards and outstanding
Performance Awards which may be paid solely in shares of Common Stock or in
either shares of Common Stock or cash. To the extent (i) that an outstanding
Option expires or terminates unexercised or is canceled or forfeited (other than
in connection with the exercise of an SAR for Common Stock as set forth in the
immediately following sentence) or (ii) that an outstanding Restricted Stock
Award or outstanding Performance Award which may be paid solely in shares of
Common Stock or in either shares of Common Stock or cash expires or terminates
without vesting or is canceled or forfeited or (iii) shares of Common Stock are
withheld or delivered pursuant to the provisions on Share Withholding set forth
in Paragraph 11 (A), then the shares of Common Stock subject to such expired,
terminated, unexercised, canceled or forfeited portion of such Option,
Restricted Stock Award or Performance Award, or the shares of Common Stock so
withheld or delivered, shall again be available for issuance under the Plan. In
the event all or a portion of an SAR is exercised, the number of shares of
Common Stock subject to the related Option (or portion thereof) shall again be
available for issuance under the Plan, except to the extent that shares of
Common Stock were actually issued upon exercise of the SAR.
To the extent necessary for an award hereunder to be qualified
performance-based compensation under Section 162(m) of the Code and the rules
and regulations thereunder, the maximum number of shares of Common Stock with
respect to which Options, SARs or Restricted Stock Awards or a combination
thereof may be granted during any calendar year to any person shall be 500,000,
subject to adjustment as provided in Paragraph 10. Grants of Options, Restricted
Stock Awards or Performance Awards that are canceled shall count toward the
maximum stated in the preceding sentence.
6. Eligibility
Options, Restricted Stock Awards and Performance Awards may be granted only
to persons who, at the time of the grant or award, are officers, other key
employees or directors of the Corporation or any of its present and future
subsidiaries within the meaning of Section 424(f) of the Code (herein called
subsidiaries). Options, Restricted Stock Awards or Performance Awards, or any
combination thereof, may be granted on more than one occasion to the same
person. A person who has received or is eligible to receive options to purchase
stock of any subsidiary of the Corporation or incentive awards from any
subsidiary of the Corporation will not, by reason thereof, be ineligible to
receive Options, Restricted Stock Awards or Performance Awards under the Plan
unless prohibited by the plan of such subsidiary.
Nothing in the Plan or any Option, Restricted Stock Award or Performance
Award agreement shall be construed to constitute or be evidence of an agreement
or understanding, expressed or implied, on the part of the Corporation or its
subsidiaries to employ any person for any specific period of time.
7. Options and SARs
(A) Number of Shares. The Committee may, in its discretion, grant
Options to such eligible persons as may be selected by the Committee. With
respect to each Option, the Committee shall determine the number of shares
subject to the Option and the manner and the time of exercise of such
Option. The Committee shall make such other determinations which in its
discretion appear to be fitting and proper.
(B) Stock Option Agreement. Each Option shall be evidenced by a stock
option agreement in such form containing such provisions not inconsistent
with the provisions of the Plan as the Committee from time to time shall
approve, including, without limitation, provisions to qualify certain
Options as "incentive stock options" under Section 422 of the Code. An
incentive stock option may not be granted to any person who is not an
employee of the Corporation or any parent or subsidiary (as defined in
Section 424 of the Code). Each incentive stock option shall be granted
within ten years of the earlier of the date the Plan is adopted by the
Corporation's Board of Directors and the date the Plan is approved by
Whitman as the sole shareholder of the Corporation. To the extent that the
aggregate fair market value (determined as of the date of grant) of shares
of Common Stock with respect to which Options designated as incentive stock
options are exercisable for the first time by a person during any calendar
year exceeds the amount (currently $100,000) established by the Code, such
Options shall be deemed to be non-qualified stock options.
(C) Option Price and Term of Option. The purchase price per share of
the Common Stock under each Option shall be determined by the Committee;
provided, however, that the purchase price per share of Common Stock
purchasable upon exercise of an incentive stock option shall not be less
than 100% of the fair market value of the Common Stock at the date such
Option is granted; provided, further, that if an incentive stock option
shall be granted to any person who, at the time such Option is granted,
owns capital stock of the Corporation possessing more than ten percent of
the total combined voting power of all classes of capital stock of the
Corporation (or of any parent or subsidiary of the Corporation) (a "Ten
Percent Holder"), such purchase price shall be the price (currently 110% of
fair market value) required by the Code in order to constitute an incentive
stock option.
The period during which an Option may be exercised shall be determined
by the Committee; provided, however, that no incentive stock option shall
be exercised later than ten years after its date of grant; provided
further, that if an incentive stock option shall be granted to a Ten
Percent Holder, such option shall not be exercised later than five years
after its date of grant. The Committee shall determine whether an Option
shall become exercisable in cumulative or non-cumulative installments and
in part or in full at any time. An exercisable Option, or portion thereof,
may be exercised only with respect to whole shares of Common Stock.
(D) Payment. An Option may be exercised by giving written notice to
the Corporation specifying the number of shares of Common Stock to be
purchased and accompanied by payment of the purchase price in full (or
arrangement made for such payment to the Corporation's satisfaction). As
determined by the Committee at the time of grant of an Option and set forth
in the agreement evidencing the Option, the purchase price may be paid (a)
in cash or (b) by delivery (either actual delivery or by attestation
procedures established by the Corporation) of previously-owned whole shares
of Common Stock (for which the holder has good title, free and clear of all
liens and encumbrances and which such holder either (i) has held for at
least six months or (ii) has purchased on the open market) valued at their
fair market value on the date of exercise. If applicable, a person
exercising an Option shall surrender to the Corporation any SARs which are
canceled by reason of the exercise of such Option.
(E) Termination of Employment or Service or Death of Holder. In the
event of any termination of the employment or service of a Holder with the
Corporation or one of its subsidiaries, other than by reason of death or,
in the case of a Holder of a nonqualified option, Retirement, the Holder
may (unless otherwise provided in the Option agreement) exercise each
Option held by such Holder at any time within three months (or one year if
the Holder is permanently and totally disabled within the meaning of
Section 22(e)(3) of the Code) after such termination of employment or
service, but only if and to the extent such Option is exercisable at the
date of such termination of employment or service, and in no event after
the date on which such Option would otherwise terminate; provided, however,
that if such termination of employment or service is for cause or voluntary
on the part of the Holder without the written consent of the Corporation,
any Option held by such Holder under the Plan shall terminate unless
otherwise provided in the Option agreement.
In the event of the termination of employment or service of a Holder
of a nonqualified option by reason of Retirement, then each nonqualified
option held by the Holder shall be fully exercisable, and, subject to the
following paragraph, such nonqualified option shall be exercisable by the
Holder at any time up to and including (but not after) the date on which
the nonqualified option would otherwise terminate (unless otherwise
provided in the Option Agreement).
In the event of the death of a Holder (i) while employed by or
providing service to the Corporation or one of its subsidiaries or after
Retirement, (ii) within three months after termination of the Holder's
employment, other than a termination by reason of permanent and total
disability within the meaning of Section 22(e)(3) of the Code, or (iii)
within one year after termination of the Holder's employment by reason of
such disability, then each Option held by such Holder may be exercised by
the legatees of the Holder under his last will, or by his personal
representatives or distributees, at any time within a period of nine months
after the Holder's death, but only if and to the extent such Option is
exercisable at the date of death (unless death occurs while the Holder is
employed by or providing service to the Corporation or one of its
subsidiaries, in which case each Option held by the Holder shall be fully
exercisable), and in no event after the date on which such Option would
otherwise terminate.
(F) Privileges of the Holder as Shareholder. The Holder shall be
entitled to all the privileges and rights of a shareholder with respect
only to such shares of Common Stock as have been actually purchased under
the Option and registered in the Holder's name.
(G) SARS. The Committee may, in its sole discretion, grant an SAR
(concurrently with the grant of the Option or, in the case of a
nonqualified option which is not intended to be qualified performance-based
compensation under Section 162(m) of the Code and the rules and regulations
thereunder, subsequent to such grant) to any Holder of any Option granted
under the Plan (or such Holder's legatees, personal representatives or
distributees then entitled to exercise such Option). An SAR may be
exercised (i) by giving written notice to the Corporation specifying the
number of SARs which are being exercised and (ii) by surrendering to the
Corporation any Options which are canceled by reason of the exercise of the
SAR. An SAR shall be exercisable upon such additional terms and conditions
as may from time to time be prescribed by the Committee. No fractional
share shall be issued upon the exercise of any SAR.
(H) Non-Transferability. Unless otherwise specified in the agreement
evidencing an Option or SAR, no Option or SAR hereunder shall be
transferable other than by will or the laws of descent and distribution or
pursuant to beneficiary designation procedures approved by the Corporation.
Except to the extent permitted by the foregoing sentence, each Option or
SAR may be exercised during the Holder's lifetime only by the Holder or the
Holder's legal representative or similar person. Except as permitted by the
second preceding sentence, no Option or SAR hereunder shall be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise
disposed of (whether by operation of law or otherwise) or be subject to
execution, attachment or similar process. Upon any attempt to so sell,
transfer, assign, pledge, hypothecate, encumber or otherwise dispose of any
Option or SAR hereunder, such Option or SAR and all rights thereunder shall
immediately become null and void.
8. Restricted Stock Awards
(A) Restriction Period to Be Established by the Committee. At the time
of the making of a Restricted Stock Award, the Committee shall establish a
period of time (the "Restriction Period") applicable to such award. The
Committee may establish different Restriction Periods from time to time and
each Restricted Stock Award may have a different Restriction Period, in the
discretion of the Committee.
(B) Other Terms and Conditions. Common Stock, when awarded pursuant to
a Restricted Stock Award, shall be represented by a stock certificate or
book-entry credits registered in the name of the Holder who receives the
Restricted Stock Award or a nominee for the benefit of the Holder. The
Holder shall have the right to receive dividends (or the cash equivalent
thereof) during the Restriction Period and shall also have the right to
vote such Common Stock and all other shareholder's rights (in each case
unless otherwise provided in the agreement evidencing the Restricted Stock
Award), with the exception that (i) the Holder shall not be entitled to
delivery of the stock certificate (or the removal of restrictions in the
Corporation's books and records) until the Restriction Period established
by the Committee pursuant to Paragraph 8(A) shall have expired, (ii) the
Corporation shall retain custody of the stock certificate during the
Restriction Period, (iii) the Holder may not sell, transfer, pledge,
exchange, hypothecate or dispose of such Common Stock during the
Restriction Period, and (iv) a breach of restriction or breach of terms and
conditions established by the Committee pursuant to the Restricted Stock
Award shall cause a forfeiture of the Restricted Stock Award. If requested
by the Corporation, a Holder of a Restricted Stock Award shall deposit with
the Corporation stock powers or other instruments of assignment (including
a power of attorney), each endorsed in blank with a guarantee of signature
if deemed necessary or appropriate by the Corporation, which would permit
transfer to the Corporation of all or a portion of the shares of Common
Stock subject to the Restricted Stock Award in the event such award is
forfeited in whole or in part. A distribution with respect to shares of
Common Stock, other than a distribution in cash, shall be subject to the
same restrictions as the shares of Common Stock with respect to which such
distribution was made, unless otherwise determined by the Committee. The
Committee may, in addition, prescribe additional restrictions, terms or
conditions upon or to the Restricted Stock Award in the manner prescribed
by Paragraph 4. The Committee may, in its sole discretion, also establish
rules pertaining to the Restricted Stock Award in the event of termination
of employment or service (by Retirement, disability, death or otherwise) of
a Holder of such award prior to the expiration of the Restriction Period.
(C) Restricted Stock Award Agreement. Each Restricted Stock Award
shall be evidenced by an agreement in such form and containing such
provisions not inconsistent with the provisions of the Plan as the
Committee from time to time shall approve.
(D) Payment for Restricted Stock. Restricted Stock Awards may be made
by the Committee whereby the Holder receives Common Stock subject to those
terms, conditions and restrictions established by the Committee but is not
required to make any payment for said Common Stock. The Committee may also
establish terms as to each Holder whereby such Holder, as a condition to
the Restricted Stock Award, is required to pay, in cash or other
consideration, all (or any lesser amount than all) of the fair market value
of the Common Stock, determined as of the date the Restricted Stock Award
is made.
(E) Termination of Employment or Service or Death of Holder. A
Restricted Stock Award shall terminate for all purposes if the Holder does
not remain continuously in the employ or service of the Corporation or a
subsidiary at all times during the applicable Restriction Period, except as
may otherwise be determined by the Committee.
9. Performance Awards
(A) Performance Period. The Committee shall establish with respect to
each Performance Award a performance period over which the performance of
the Holder shall be measured. The performance period shall be established
at the time of such award.
(B) Performance Awards. Each Performance Award shall have a maximum
value established by the Committee at the time of such award.
(C) Performance Measures. Performance Awards shall be awarded to an
eligible person contingent upon future performance of the Corporation
and/or the Corporation's subsidiary, division or department in which such
person is employed over the performance period. The Committee shall
establish the performance measures applicable to such performance. The
performance measures determined by the Committee shall be established prior
to the beginning of each performance period but, except as necessary to
qualify a Performance Award as "performance-based compensation" under
Section 162(m) of the Code and the rules and regulations thereunder, may be
subject to such later revisions to reflect significant, unforeseen events
or changes, as the Committee shall deem appropriate.
(D) Award Criteria. In determining the value of Performance Awards,
the Committee shall take into account an eligible person's responsibility
level, performance, potential, cash compensation level, unexercised stock
options, other incentive awards and such other considerations as it deems
appropriate. Notwithstanding the preceding sentence, to the extent
necessary for a Performance Award to be qualified performance-based
compensation under Section 162(m) of the Code and the rules and regulations
thereunder, the performance period shall be not less than three years and,
if a Performance Award is payable in shares of Common Stock, the maximum
number of shares that may be paid under the Performance Award during such
performance period shall be 500,000 and, if a Performance Award is payable
in cash, the maximum amount that may be paid under the Performance Award
during such performance period shall be $10,000,000.
(E) Payment. Following the end of each performance period, the Holder
of each Performance Award shall be entitled to receive payment of an
amount, not exceeding the maximum value of the Performance Award, based on
the achievement of the performance measures for such performance period, as
determined by the Committee. Payment of Performance Awards may be made
wholly in cash, wholly in shares of Common Stock or a combination thereof,
all at the discretion of the Committee. Payment shall be made in a lump sum
or in installments, and shall be subject to such vesting and other terms
and conditions as may be prescribed by the Committee for such purpose.
Notwithstanding anything contained herein to the contrary, in the case of a
Performance Award intended to be qualified performance-based compensation
under Section 162(m) and the rules and regulations thereunder, no payment
shall be made under any such Performance Award until the Committee
certifies in writing that the performance measures for the performance
period have in fact been achieved.
(F) Termination of Employment or Service or Death of Holder. A
Performance Award shall terminate for all purposes if the Holder does not
remain continuously in the employ or service of the Corporation or a
subsidiary at all times during the applicable performance period, except as
may otherwise be determined by the Committee.
In the event that a Holder of a Performance Award ceases to be an
employee or director of the Corporation following the end of the applicable
performance period but prior to full payment according to the terms of the
Performance Award, payment shall be made in accordance with terms
established by the Committee for the payment of such Performance Award.
(G) Other Terms and Conditions. When a Performance Award is payable in
installments in Common Stock, if determined by the Committee, one or more
stock certificates or book-entry credits registered in the name of the
Holder representing shares of Common Stock which would have been issuable
to the Holder of the Performance Award if such payment had been made in
full on the day following the end of the applicable performance period may
be registered in the name of such Holder, and during the period until such
installment becomes due such Holder shall have the right to receive
dividends (or the cash equivalent thereof) and shall also have the right to
vote such Common Stock and all other shareholder's rights (in each case
unless otherwise provided in the agreement evidencing the Performance
Award), with the exception that (i) the Holder shall not be entitled to
delivery of any stock certificate until the installment payable in shares
becomes due, (ii) the Corporation shall retain custody of any stock
certificates until such time and (iii) the Holder may not sell, transfer,
pledge, exchange, hypothecate or dispose of such Common Stock until such
time. A distribution with respect to shares of Common Stock payable in
installments which has not become due, other than a distribution in cash,
shall be subject to the same restrictions as the shares of Common Stock
with respect to which such distribution was made, unless otherwise
determined by the Committee.
(H) Performance Award Agreements. Each Performance Award shall be
evidenced by an agreement in such form and containing such provisions not
inconsistent with the provisions of the Plan as the Committee from time to
time shall approve.
10. Adjustments Upon Changes in Capitalization; Change in Control
(A) Notwithstanding any other provision of the Plan, each Option,
Restricted Stock Award or Performance Award agreement may contain such
provisions as the Committee shall determine to be appropriate for the
adjustment of (i) the number and class of shares or other consideration
subject to any Option or to be delivered pursuant to any Restricted Stock
Award or Performance Award and (ii) the Option or Restricted Stock Award
price, in the event of a stock dividend, spin-off, split-up,
recapitalization, merger, consolidation, combination or exchange of shares,
or the like. In such event, the maximum number and class of shares
available under the Plan, and the number and class of shares subject to
Options, SARS, Restricted Stock Awards or Performance Awards, shall be
appropriately adjusted by the Committee, whose determination shall be
conclusive.
(B)(i) In the event of a "change in control" (as hereinafter defined)
pursuant to subparagraph (C)(i) or (ii) below, or in the event of a change
in control pursuant to subparagraph (C)(iii) or (iv) below in connection
with which the holders of Common Stock receive consideration other than
shares of common stock that are registered under Section 12 of the Exchange
Act:
(1)(x) each Option granted under the Plan shall be exercisable in
full, (y) each Holder of an Option shall receive from the Corporation
within 60 days after the change in control, in exchange for the
surrender of the Option or any portion thereof to the extent the
Option is then exercisable in accordance with clause (x), an amount in
cash equal to the difference between the fair market value (as
determined by the Committee) on the date of the change in control of
the Common Stock covered by the Option or portion thereof which is so
surrendered and the purchase price of such Common Stock under the
Option and (z) each SAR shall be surrendered by the Holder thereof and
shall be canceled simultaneously with the cancellation of the related
Option;
(2) each Holder of a Restricted Stock Award shall receive from
the Corporation within 60 days after the change in control, in
exchange for the surrender of the Restricted Stock Award, an amount in
cash equal to the fair market value (as determined by the Committee)
on the date of the change in control of the Common Stock subject to
the Restricted Stock Award;
(3) each Holder of a Performance Award for which the performance
period has not expired shall receive from the Corporation within 60
days after the change in control, in exchange for the surrender of the
Performance Award, an amount in cash equal to the product of the value
of the Performance Award and a fraction the numerator of which is the
number of whole months which have elapsed from the beginning of the
performance period to the date of the change in control and the
denominator of which is the number of whole months in the performance
period; and
(4) each Holder of a Performance Award that has been earned but
not yet paid shall receive an amount in cash equal to the value of the
Performance Award.
(ii) Notwithstanding any other provision of the Plan or any agreement
relating to an Option, Restricted Stock Award or Performance Award, in the
event of a change in control pursuant to subparagraph (C)(iii) or (iv)
below in connection with which the holders of Common Stock receive shares
of common stock that are registered under Section 12 of the Exchange Act:
(1) each Option and SAR granted under the Plan shall be
exercisable in full;
(2) the Restriction Period applicable to any outstanding
Restricted Stock Award shall lapse and, if applicable, any other
restrictions, terms or conditions shall lapse and/or be deemed to be
satisfied at the maximum value or level;
(3) the performance measures applicable to any outstanding
Performance Award shall be deemed to be satisfied at the maximum
value; and
(4) there shall be substituted for each share of Common Stock
remaining available for issuance under the Plan, whether or not then
subject to an outstanding Option (and SAR), Restricted Stock Award or
Performance Award, the number and class of shares into which each
outstanding share of Common Stock shall be converted pursuant to such
Change in Control. In the event of any such substitution, the purchase
price per share in the case of an Option shall be appropriately
adjusted by the Committee (whose determination shall be conclusive),
such adjustments to be made without any increase in the aggregate
purchase price.
(C) For purposes of this paragraph, the term "change in control" shall
mean:
(i) the acquisition by any individual, entity or group (a
"Person"), including any "person" within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act, of beneficial ownership
within the meaning of Rule 13d-3 promulgated under the Exchange Act,
of 25% or more of either (x) the then outstanding shares of common
stock of the Corporation (the "Outstanding Common Stock") or (y) the
combined voting power of the then outstanding securities of the
Corporation entitled to vote generally in the election of directors
(the "Outstanding Voting Securities"); excluding, however, the
following: (1) any acquisition directly from the Corporation
(excluding any acquisition resulting from the exercise of an exercise,
conversion or exchange privilege unless the security being so
exercised, converted or exchanged was acquired directly from the
Corporation), (2) any acquisition by the Corporation, (3) any
acquisition by an employee benefit plan (or related trust) sponsored
or maintained by the Corporation or any corporation controlled by the
Corporation or (4) any acquisition by any corporation pursuant to a
transaction which complies with clauses (1), (2) and (3) of clause
(iii) in this definition of change in control;
(ii) individuals who, as of the effective date of the Plan,
constitute the Board of Directors of the Corporation (the "Incumbent
Board") cease for any reason to constitute at least a majority of such
Board; provided, however, that any individual who becomes a director
of the Corporation subsequent to such effective date whose election,
or nomination for election by the Corporation's shareholders, was
approved by the vote of at least a majority of the directors then
comprising the Incumbent Board shall be deemed a member of the
Incumbent Board; and provided further, that any individual who was
initially elected as a director of the Corporation as a result of an
actual or threatened election contest, as such terms are used in Rule
14a-11 of Regulation 14A promulgated under the Exchange Act, or any
other actual or threatened solicitation of proxies or consents by or
on behalf of any Person other than the Board of Directors shall not be
deemed a member of the Incumbent Board;
(iii) the consummation of a reorganization, merger or
consolidation of the Corporation or sale or other disposition of all
or substantially all of the assets of the Corporation (a "Corporate
Transaction"); excluding, however, a Corporate Transaction pursuant to
which (1) all or substantially all of the individuals or entities who
are the beneficial owners, respectively, of the Outstanding Common
Stock and the Outstanding Voting Securities immediately prior to such
Corporate Transaction will beneficially own, directly or indirectly,
more than 66-2/3% of, respectively, the outstanding shares of common
stock, and the combined voting power of the outstanding securities of
such corporation entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such
Corporate Transaction (including, without limitation, a corporation
which as a result of such transaction owns the Corporation or all or
substantially all of the Corporation's assets either directly or
indirectly) in substantially the same proportions relative to each
other as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding Common Stock and the Outstanding
Voting Securities, as the case may be, (2) no Person (other than: the
Corporation; any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by the
Corporation; the corporation resulting from such Corporate
Transaction; and any Person which beneficially owned, immediately
prior to such Corporate Transaction, directly or indirectly, 25% or
more of the Outstanding Common Stock or the Outstanding Voting
Securities, as the case may be) will beneficially own, directly or
indirectly, 25% or more of, respectively, the outstanding shares of
common stock of the corporation resulting from such Corporate
Transaction or the combined voting power of the outstanding securities
of such corporation entitled to vote generally in the election of
directors and (3) individuals who were members of the Incumbent Board
will constitute at least a majority of the members of the board of
directors of the corporation resulting from such Corporate
Transaction; or
(iv) the consummation of a plan of complete liquidation or
dissolution of the Corporation.
(D) With respect to any Holder of an Option or SAR who is subject to
Section 16 of the Exchange Act, (i) notwithstanding the exercise periods
set forth in Paragraph 7(E) or as set forth pursuant to Paragraph 7(E) in
any agreement evidencing such Option or SAR and (ii) notwithstanding the
expiration date of the term of such Option or SAR, in the event the
Corporation is involved in a business combination which is intended to be
treated as a pooling of interests for financial accounting purposes (a
"Pooling Transaction") or pursuant to which such Holder receives a
substitute option to purchase securities of any entity, including an entity
directly or indirectly acquiring the Corporation, then each Option or SAR
(or option or stock appreciation right in substitution thereof) held by
such Holder shall be exercisable to the extent set forth in the agreement
evidencing such Option or SAR until and including the latest of (x) the
expiration date of the term of the Option or SAR or, in the event of such
Holder's termination of employment or service, the date determined pursuant
to Paragraph 7(E), (y) the date which is six months and ten business days
after the consummation of such business combination and (z) the date which
is ten business days after the date of expiration of any period during
which such Holder may not dispose of a security issued in the Pooling
Transaction in order for the Pooling Transaction to be accounted for as a
pooling of interests.
11. Withholding Taxes
(A) If provided in the agreement evidencing an Option, SAR, Restricted
Stock Award or Performance Award, the Holder thereof may elect, by written
notice to the Corporation at the office of the Corporation designated for
that purpose, to pay through withholding by the Corporation all or a
portion of the estimated federal, state, local and other taxes arising from
(1) the exercise of an Option or SAR and (2) the vesting or distribution of
shares of Common Stock pursuant to a Restricted Stock Award or Performance
Award (a) by having the Corporation withhold shares of Common Stock or (b)
by delivering previously-owned shares (collectively, "Share Withholding"),
in each case being such number of shares of Common Stock as shall have a
fair market value equal to the amount of taxes to be withheld, rounded up
to the nearest whole share.
(B) A Share Withholding election shall be subject to disapproval by
the Corporation.
(C) If the date as of which the amount of tax to be withheld is
determined (the "Tax Date") is deferred until after the exercise of an
Option or SAR, the expiration of the Restriction Period applicable to a
Restricted Stock Award or the payment of a Performance Award, and if the
Holder elects Share Withholding, the Corporation shall issue to the Holder
the full number of shares of Common Stock, if any, resulting from such
exercise, expiration or payment and the Holder shall be unconditionally
obligated to deliver to the Corporation on the Tax Date such number of
shares of Common Stock as shall have an aggregate fair market value equal
to the amount to be withheld on the Tax Date, rounded up to the nearest
whole share.
(D) The fair market value of shares of Common Stock used for payment
of taxes, as provided in this Paragraph 11, shall be the mean sale price
per share, as reported for New York Stock Exchange Composite Transactions,
on the Tax Date.
12. Termination of Plan
The Plan may be terminated at any time by the Board of Directors, except
with respect to any Options, SARS, Restricted Stock Awards or Performance Awards
then outstanding. The Corporation reserves the right to restrict, in whole or in
part, the exercise of any Options or SARs or the delivery of Common Stock
pursuant to any Restricted Stock Awards or Performance Awards granted under the
Plan until such time as,
(A) any legal requirements or regulations have been met relating to
the issuance of the shares covered thereby or to their registration under
the Securities Act of 1933 or to any applicable State laws; and
(B) satisfactory assurances are received that the shares when issued
will be duly listed on the New York Stock Exchange, Inc.
13. Amendment of the Plan
The Board of Directors may amend the Plan; provided, however, that without
approval of the shareholders the Board of Directors may not amend the Plan,
subject to Paragraph 10, to (a) increase the maximum number of shares which may
be issued on exercise of Options or SARs or pursuant to Restricted Stock Awards
or Performance Awards granted under the Plan or (b) effect any change
inconsistent with Section 422 of the Code.
14. Effect of the Plan
Neither the adoption of the Plan nor any action of the Board of Directors
or of the Committee shall be deemed to give any person any right to be granted
an Option, a right to a Restricted Stock Award or a right to a Performance Award
or any rights hereunder except as may be evidenced by an Option agreement,
Restricted Stock Award agreement or Performance Award agreement, duly executed
on behalf of the Corporation, and then only to the extent and on the terms and
conditions expressly set forth therein.
EXHIBIT 12
WHITMAN CORPORATION
STATEMENT OF CALCULATION
OF RATIO OF EARNINGS TO FIXED CHARGES
(in millions, except ratios)
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings:
Income from Continuing Operations before Taxes $ 69.9 $ 127.7 $ 118.2 $ 80.3 $ 81.1
Fixed Charges 75.6 74.4 76.7 72.2 96.4
-------- -------- -------- -------- --------
Earnings as Adjusted $ 145.5 $ 202.1 $ 194.9 $ 152.5 $ 177.5
======== ======== ======== ======== ========
Fixed Charges:
Interest Expense $ 69.0 $ 68.2 $ 70.3 $ 67.0 $ 93.0
Preferred Stock Dividend Requirements of
Majority Owned Subsidiary 1.7 1.5 1.4 1.1 --
Portion of Rents Representative of Interest Factor 4.9 4.7 5.0 4.1 3.4
-------- -------- -------- -------- --------
Total Fixed Charges $ 75.6 $ 74.4 $ 76.7 $ 72.2 $ 96.4
======== ======== ======== ======== ========
Ratio of Earnings to Fixed Charges* 1.9x 2.7x 2.5x 2.1x 1.8x
======== ======== ======== ======== ========
</TABLE>
* Intercompany interest income from Hussmann and Midas was $23.1 million, $23.7
million, $21.8 million, $20.6 million and $16.2 million in 1997, 1996, 1995,
1994 and 1993, respectively. If the fixed charges had been reduced by this
intercompany interest income, the ratio of earnings to fixed charges for
1997, 1996, 1995, 1994 and 1993 would have been 2.3x, 3.5x, 3.2x, 2.6x and
2.0x, respectively.
Whitman Corporation also recorded special charges of $49.3 million during
1997. Excluding these special charges, the 1997 ratio of earnings to fixed
charges would have been 2.6x. Additionally, if the fixed charges for 1997
were adjusted for the intercompany interest income noted above, the ratio of
earnings to fixed charges would have been 3.3x.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
As of March 1, 1998
Percentage Of
Voting Stock
Owned Or
Place of Controlled By
Name Incorporation The Registrant
------------- ------------- --------------
Whitman Corporation (Registrant)......................Delaware
Pepsi-Cola General Bottlers, Inc...................Delaware 80%
GB Baltics LLC...................................Delaware 80
GB Estonia LLC.................................Delaware 80
Pepsi-Cola General Bottlers Estonia U/O......Estonia 80
GB International, Inc............................Delaware 80
GB Latvia LLC....................................Delaware 80
Pepsi-Cola General Bottlers Latvia LTD.........Latvia 80
GB Lithuania LLC.................................Delaware 80
UBA Pepsi-Cola General Bottlers................Lithuania 80
Genadco Advertising Agency, Inc..................Illinois 80
General Bottlers, Inc............................Delaware 80
General Bottlers Sp.z.o.o........................Poland 80
Iowa Vending, Inc................................Delaware 80
Kolmar Products Corporation......................Wisconsin 80
Marquette Bottling Works, Inc....................Michigan 80
Neva Holdings LLC................................Delaware 80
GB Russia LLC..................................Delaware 80
O.O.O. Pepsi-Cola General Bottlers...........Russia 80
Northern Michigan Vending, Inc...................Michigan 80
PCGB, Inc........................................Illinois 80
Pepsi-Cola Bottling Company of Bloomington, Inc..Delaware 80
Pepsi-Cola General Bottlers of Wisconsin, Inc... Wisconsin 80
Pepsi-Cola General Bottlers of Indiana, Inc......Delaware 80
Pepsi-Cola General Bottlers of Iowa, Inc.........Iowa 80
Pepsi-Cola General Bottlers of Ohio, Inc.........Delaware 80
Pepsi-Cola General Bottlers of Princeton, Inc....West Virginia 80
Pepsi-Cola General Bottlers of Virginia, Inc.....Virginia 80
IC Equities, Inc...................................Delaware 100
Illinois Center Corporation........................Delaware 100
Mid-America Improvement Corporation................Illinois 100
South Properties, Inc..............................Illinois 100
Environ of Inverrary, Inc........................Florida 100
S&T of Mississippi, Inc..........................Mississippi 100
Whitman Insurance Co., Ltd.........................Bermuda 100
Whitman Leasing, Inc...............................Delaware 100
The names of certain subsidiaries are omitted because such subsidiaries,
considered in the aggregate as a single subsidiary, would not constitute a
significant subsidiary.
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders of
Whitman Corporation:
We consent to incorporation by reference in Registration Statements Nos. 33-
58209 and 333-16355 on Forms S-3, Registration Statement No. 33-62113 on Form
S-4, and Registration Statement Nos. 33-65006, 33-28238 and 33-53427 on Forms
S-8 of Whitman Corporation of our report dated January 16, 1998, relating to the
consolidated balance sheets of Whitman Corporation and subsidiaries as of
December 31, 1997 and 1996 and the related consolidated statements of income,
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 1997, which report appears in this annual report on
Form 10-K.
KPMG Peat Marwick LLP
Chicago, Illinois
March 16, 1998
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned Director and/or
Officer of Whitman Corporation, a Delaware corporation (the "Company"), hereby
constitutes and appoints BRUCE S. CHELBERG, THOMAS L. BINDLEY and FRANK T.
WESTOVER, and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1997, and any and all
amendments thereto, and to file the same, with all exhibits and schedules
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully and to
all intents and purposes as he might or could do if personally present, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal
this 20th day of March, 1998.
Date Date
------- -------
/s/ Bruce S. Chelberg 3/20/98 /s/ Archie R. Dykes 3/20/98
- ------------------------ --------------------------
Bruce S. Chelberg Archie R. Dykes
/s/ Thomas L. Bindley 3/20/98 /s/ Charles W. Gaillard 3/20/98
- ------------------------ --------------------------
Thomas L. Bindley Charles W. Gaillard
/s/ Frank T. Westover 3/20/98 /s/ Jarobin Gilbert, Jr. 3/20/98
- ------------------------ --------------------------
Frank T. Westover Jarobin Gilbert, Jr.
/s/ Herbert M. Baum 3/20/98 /s/ Victoria J. Gregoricus 3/20/98
- ------------------------ --------------------------
Herbert M. Baum Victoria J. Gregoricus
/s/ Richard G. Cline 3/20/98 /s/ Donald P. Jacobs 3/20/98
- ------------------------ --------------------------
Richard G. Cline Donald P. Jacobs
/s/ Pierre S. DuPont 3/20/98 /s/ Charles S. Locke 3/20/98
- ------------------------ --------------------------
Pierre S. DuPont Charles S. Locke
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
WHITMAN CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000049573
<NAME> WHITMAN CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 52,400
<SECURITIES> 0
<RECEIVABLES> 135,100
<ALLOWANCES> 3,400
<INVENTORY> 69,900
<CURRENT-ASSETS> 560,800<F1>
<PP&E> 878,200
<DEPRECIATION> 471,600
<TOTAL-ASSETS> 2,029,700<F2>
<CURRENT-LIABILITIES> 490,000<F3>
<BONDS> 604,700
0
0
<COMMON> 478,200
<OTHER-SE> 61,500
<TOTAL-LIABILITY-AND-EQUITY> 2,029,700
<SALES> 1,557,500
<TOTAL-REVENUES> 1,557,500
<CGS> 972,600
<TOTAL-COSTS> 1,427,300<F4>
<OTHER-EXPENSES> 18,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,300<F5>
<INCOME-PRETAX> 69,900
<INCOME-TAX> 37,900
<INCOME-CONTINUING> 15,800<F6>
<DISCONTINUED> (11,700)<F7>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,100
<EPS-PRIMARY> 0.04<F8>
<EPS-DILUTED> 0.04<F9>
<FN>
<F1>
CURRENT ASSETS INCLUDE $270,500 OF NET CURRENT ASSETS OF COMPANIES HELD FOR
DISPOSITION.
<F2>
TOTAL ASSETS INCLUDE $663,700 OF NET ASSETS OF COMPANIES HELD FOR DISPOSITION,
INCLUDING $393,200 OF NET NON-CURRENT ASSETS, IN ADDITION TO THE NET CURRENT
ASSETS NOTED IN FOOTNOTE 1, ABOVE.
<F3>
CURRENT LIABILITES INCLUDE $282,500 OF SHORT-TERM DEBT, INCLUDING CURRENT
MATURITIES OF LONG-TERM DEBT. THIS AMOUNT WAS REPAID IN JANUARY, 1998, USING
FUNDS RECEIVED FROM SUBSIDIARIES WHICH WERE SUBSEQUENTLY SPUN-OFF.
<F4>
TOTAL COSTS INCLUDE COST OF GOODS SOLD, S,G&A EXPENSES, AMORTIZATION EXPENSE
AND SPECIAL CHARGES OF $972,600, $389,700, $15,700, AND $49,300, RESPECTIVELY.
THE SPECIAL CHARGES OF $49,300 RECORDED IN 1997 RELATED TO THE SPIN-OFFS, THE
RESTRUCTURING OF GENERAL BOTTLERS' ORGANIZATION AND THE ELIMINATION OF A
SIGNIFICANT PORTION OF THE WHITMAN CORPORATE MANAGEMENT AND STAFF.
<F5>
INTEREST EXPENSE, NET, INCLUDES INTEREST EXPENSE, INTEREST INCOME FROM HUSSMANN
INTERNATIONAL, INC. ("HUSSMANN") AND MIDAS, INC.("MIDAS") AND OTHER INTEREST
INCOME OF $69,000, $23,100 AND $3,600, RESPECTIVELY. INTEREST INCOME FROM
HUSSMANN AND MIDAS RELATED TO INTERCOMPANY LOANS AND ADVANCES. THE RELATED
INTEREST EXPENSE RECORDED BY HUSSMANN AND MIDAS IS INCLUDED IN INCOME (LOSS)
FROM DISCONTINUED OPERATIONS.
<F6>
INCOME FROM CONTINUING OPERATIONS IS REDUCED BY MINORITY INTEREST OF $16,200.
THE EFFECT OF THE SPECIAL CHARGES ON INCOME FROM CONTINUING OPERATIONS IN 1997,
AFTER INCOME TAXES AND MINORITY INTEREST, WAS $31,600.
<F7>
IN 1997, HUSSMANN AND MIDAS, WHICH WERE RECLASSIFIED TO DISCONTINUED OPERATIONS
IN DECEMBER, 1997, RECORDED SPECIAL CHARGES OF $56,300 AND $67,600,
RESPECTIVELY. THE AFTER-TAX AFFECT OF THESE SPECIAL CHARGES WAS $93,400. THE
LOSS FROM DISCONTINUED OPERATIONS WAS REPORTED NET OF INCOME TAX PROVISIONS OF
$39,100.
<F8>
BASIC EARNINGS (LOSS) PER SHARE:
CONTINUING OPERATIONS $ 0.16
DISCONTINUED OPERATIONS (0.12)
NET INCOME $ 0.04
<F9>
DILUTED EARNINGS (LOSS) PER SHARE:
CONTINUING OPERATIONS $ 0.15
DISCONTINUED OPERATIONS (0.11)
NET INCOME $ 0.04
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
WHITMAN CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000049573
<NAME> WHITMAN CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 4,700
<SECURITIES> 0
<RECEIVABLES> 127,100
<ALLOWANCES> 1,700
<INVENTORY> 64,000
<CURRENT-ASSETS> 598,100<F1>
<PP&E> 830,600
<DEPRECIATION> 447,000
<TOTAL-ASSETS> 2,080,600<F2>
<CURRENT-LIABILITIES> 269,800<F3>
<BONDS> 821,700
0
0
<COMMON> 456,300
<OTHER-SE> 185,900
<TOTAL-LIABILITY-AND-EQUITY> 2,080,600
<SALES> 1,501,400
<TOTAL-REVENUES> 1,501,400
<CGS> 924,400
<TOTAL-COSTS> 1,306,600<F4>
<OTHER-EXPENSES> 25,600<F5>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41,500<F6>
<INCOME-PRETAX> 127,700
<INCOME-TAX> 61,100
<INCOME-CONTINUING> 47,800<F7>
<DISCONTINUED> 91,600<F8>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 139,400
<EPS-PRIMARY> 1.33<F9>
<EPS-DILUTED> 1.32<F10>
<FN>
<F1>
CURRENT ASSETS INCLUDE $356,100 OF NET CURRENT ASSETS OF COMPANIES HELD FOR
DISPOSITION.
<F2>
TOTAL ASSETS INCLUDE $775,400 OF NET ASSETS OF COMPANIES HELD FOR DISPOSITION,
INCLUDING $419,300 OF NET NON-CURRENT ASSETS, IN ADDITION TO THE NET CURRENT
ASSETS NOTED IN FOOTNOTE 1, ABOVE.
<F3>
CURRENT LIABILITES INCLUDE $85,500 OF SHORT-TERM DEBT, INCLUDING CURRENT
MATURITIES OF LONG-TERM DEBT.
<F4>
TOTAL COSTS INCLUDE COST OF GOODS SOLD, S,G&A EXPENSES AND AMORTIZATION EXPENSE
OF $924,400, $366,800 AND $15,400, RESPECTIVELY.
<F5>
OTHER EXPENSES INCLUDE AN $8,700 CHARGE, PRINCIPALLY FOR ASSET WRITE-DOWNS
AT GENERAL BOTTLERS' JOINT VENTURE IN POLAND. THE CHARGE REDUCED MINORITY
INTEREST BY $1,700.
<F6>
INTEREST EXPENSE, NET, INCLUDES INTEREST EXPENSE, INTEREST INCOME FROM HUSSMANN
INTERNATIONAL, INC. ("HUSSMANN") AND MIDAS, INC.("MIDAS") AND OTHER INTEREST
INCOME OF $68,200, $23,700 AND $3,000, RESPECTIVELY. INTEREST INCOME FROM
HUSSMANN AND MIDAS RELATED TO INTERCOMPANY LOANS AND ADVANCES. THE RELATED
INTEREST EXPENSE RECORDED BY HUSSMANN AND MIDAS IS INCLUDED IN INCOME (LOSS)
FROM DISCONTINUED OPERATIONS.
<F7>
INCOME FROM CONTINUING OPERATIONS IS REDUCED BY MINORITY INTEREST OF $18,800.
<F8>
IN DECEMBER 1997, HUSSMANN AND MIDAS WERE RECLASSIFIED TO DISCONTINUED
OPERATIONS. INCOME FROM DISCONTINUED OPERATIONS WAS REPORTED NET OF INCOME
TAX PROVISIONS OF $56,100.
<F9>
BASIC EARNINGS PER SHARE:
CONTINUING OPERATIONS $ 0.46
DISCONTINUED OPERATIONS 0.87
NET INCOME $ 1.33
<F10>
DILUTED EARNINGS PER SHARE:
CONTINUING OPERATIONS $ 0.45
DISCONTINUED OPERATIONS 0.87
NET INCOME $ 1.32
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
WHITMAN CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000049573
<NAME> WHITMAN CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 1,448,700
<TOTAL-REVENUES> 1,448,700
<CGS> 910,500
<TOTAL-COSTS> 1,267,600<F1>
<OTHER-EXPENSES> 15,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,600<F2>
<INCOME-PRETAX> 118,200
<INCOME-TAX> 52,800
<INCOME-CONTINUING> 46,800<F3>
<DISCONTINUED> 86,700<F4>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 133,500
<EPS-PRIMARY> 1.27<F5>
<EPS-DILUTED> 1.26<F6>
<FN>
<F1>
TOTAL COSTS INCLUDE COST OF GOODS SOLD, S,G&A EXPENSES AND AMORTIZATION EXPENSE
OF $910,500, $342,500 AND $14,600, RESPECTIVELY.
<F2>
INTEREST EXPENSE, NET, INCLUDES INTEREST EXPENSE, INTEREST INCOME FROM HUSSMANN
INTERNATIONAL, INC. ("HUSSMANN") AND MIDAS, INC.("MIDAS") AND OTHER INTEREST
INCOME OF $70,300, $21,800 AND $900, RESPECTIVELY. INTEREST INCOME FROM
HUSSMANN AND MIDAS RELATED TO INTERCOMPANY LOANS AND ADVANCES. THE RELATED
INTEREST EXPENSE RECORDED BY HUSSMANN AND MIDAS IS INCLUDED IN INCOME (LOSS)
FROM DISCONTINUED OPERATIONS.
<F3>
INCOME FROM CONTINUING OPERATIONS IS REDUCED BY MINORITY INTEREST OF $18,600.
<F4>
IN DECEMBER 1997, HUSSMANN AND MIDAS WERE RECLASSIFIED TO DISCONTINUED
OPERATIONS. INCOME FROM DISCONTINUED OPERATIONS WAS REPORTED NET OF INCOME
TAX PROVISIONS OF $54,600.
<F5>
BASIC EARNINGS PER SHARE:
CONTINUING OPERATIONS $ 0.44
DISCONTINUED OPERATIONS 0.83
NET INCOME $ 1.27
<F6>
DILUTED EARNINGS PER SHARE:
CONTINUING OPERATIONS $ 0.44
DISCONTINUED OPERATIONS 0.82
NET INCOME $ 1.26
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
WHITMAN CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000049573
<NAME> WHITMAN CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 1,256,100
<TOTAL-REVENUES> 1,256,100
<CGS> 762,800
<TOTAL-COSTS> 1,087,000<F1>
<OTHER-EXPENSES> 43,400<F2>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45,400<F3>
<INCOME-PRETAX> 80,300
<INCOME-TAX> 35,600
<INCOME-CONTINUING> 26,500<F4>
<DISCONTINUED> 76,700<F5>
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 103,200
<EPS-PRIMARY> 0.98<F6>
<EPS-DILUTED> 0.97<F7>
<FN>
<F1>
TOTAL COSTS INCLUDE COST OF GOODS SOLD, S,G&A EXPENSES AND AMORTIZATION EXPENSE
OF $762,800, $310,300 AND $13,900, RESPECTIVELY.
<F2>
OTHER EXPENSES INCLUDE A $24,200 UNREALIZED LOSS ON THE INVESTMENT IN
NORTHFIELD LABORATORIES INC.
<F3>
INTEREST EXPENSE, NET, INCLUDES INTEREST EXPENSE, INTEREST INCOME FROM HUSSMANN
INTERNATIONAL, INC. ("HUSSMANN") AND MIDAS, INC.("MIDAS") AND OTHER INTEREST
INCOME OF $67,000, $20,600 AND $1,000, RESPECTIVELY. INTEREST INCOME FROM
HUSSMANN AND MIDAS RELATED TO INTERCOMPANY LOANS AND ADVANCES. THE RELATED
INTEREST EXPENSE RECORDED BY HUSSMANN AND MIDAS IS INCLUDED IN INCOME (LOSS)
FROM DISCONTINUED OPERATIONS.
<F4>
INCOME FROM CONTINUING OPERATIONS IS REDUCED BY MINORITY INTEREST OF $18,200.
<F5>
IN DECEMBER 1997, HUSSMANN AND MIDAS WERE RECLASSIFIED TO DISCONTINUED
OPERATIONS. INCOME FROM DISCONTINUED OPERATIONS WAS REPORTED NET OF INCOME
TAX PROVISIONS OF $8,900.
<F6>
BASIC EARNINGS PER SHARE:
CONTINUING OPERATIONS $ 0.25
DISCONTINUED OPERATIONS 0.73
NET INCOME $ 0.98
<F7>
DILUTED EARNINGS PER SHARE:
CONTINUING OPERATIONS $ 0.25
DISCONTINUED OPERATIONS 0.72
NET INCOME $ 0.97
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
WHITMAN CORPORATION'S CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000049573
<NAME> WHITMAN CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1993
<PERIOD-END> DEC-31-1993
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 1,179,600
<TOTAL-REVENUES> 1,179,600
<CGS> 719,000
<TOTAL-COSTS> 1,025,000<F1>
<OTHER-EXPENSES> 4,500
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 69,000<F2>
<INCOME-PRETAX> 81,100
<INCOME-TAX> 36,300
<INCOME-CONTINUING> 29,700<F3>
<DISCONTINUED> 62,100<F4>
<EXTRAORDINARY> (4,200)
<CHANGES> (9,400)
<NET-INCOME> 78,200
<EPS-PRIMARY> 0.73<F5>
<EPS-DILUTED> 0.73<F6>
<FN>
<F1>
TOTAL COSTS INCLUDE COST OF GOODS SOLD, S,G&A EXPENSES AND AMORTIZATION EXPENSE
OF $719,000, $292,500 AND $13,500, RESPECTIVELY.
<F2>
INTEREST EXPENSE, NET, INCLUDES INTEREST EXPENSE, INTEREST INCOME FROM HUSSMANN
INTERNATIONAL, INC. ("HUSSMANN") AND MIDAS, INC.("MIDAS") AND OTHER INTEREST
INCOME OF $93,000, $16,200 AND $7,800, RESPECTIVELY. INTEREST INCOME FROM
HUSSMANN AND MIDAS RELATED TO INTERCOMPANY LOANS AND ADVANCES. THE RELATED
INTEREST EXPENSE RECORDED BY HUSSMANN AND MIDAS IS INCLUDED IN INCOME (LOSS)
FROM DISCONTINUED OPERATIONS.
<F3>
INCOME FROM CONTINUING OPERATIONS IS REDUCED BY MINORITY INTEREST OF $15,100.
<F4>
IN DECEMBER 1997, HUSSMANN AND MIDAS WERE RECLASSIFIED TO DISCONTINUED
OPERATIONS. INCOME FROM DISCONTINUED OPERATIONS WAS REPORTED NET OF INCOME
TAX PROVISIONS OF $54,400.
<F5>
BASIC EARNINGS PER SHARE:
CONTINUING OPERATIONS $ 0.28
DISCONTINUED OPERATIONS 0.58
EXTRAORDINARY LOSS (0.04)
CUMULATIVE EFFECT (0.09)
NET INCOME $ 0.73
<F6>
DILUTED EARNINGS PER SHARE:
CONTINUING OPERATIONS $ 0.28
DISCONTINUED OPERATIONS 0.58
EXTRAORDINARY LOSS (0.04)
CUMULATIVE EFFECT (0.09)
NET INCOME $ 0.73
</FN>
</TABLE>
