UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended December 31, 1994 Commission file number 1-9076
AMERICAN BRANDS, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 13-3295276
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1700 East Putnam Avenue, Old Greenwich, Connecticut 06870-0811
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 698-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, par value $3.125 per share New York Stock Exchange, Inc.
$2.67 Convertible Preferred Stock,
without par value New York Stock Exchange, Inc.
9 1/8% Debentures Due 2016 New York Stock Exchange, Inc.
9% Notes Due 1999 New York Stock Exchange, Inc.
8 5/8% Debentures Due 2021 New York Stock Exchange, Inc.
8 1/2% Notes Due 2003 New York Stock Exchange, Inc.
7 7/8% Debentures Due 2023 New York Stock Exchange, Inc.
7 1/2% Notes Due 1999 New York Stock Exchange, Inc.
5 1/4% Notes Due 1995 New York Stock Exchange, Inc.
Preferred Share Purchase Rights New York Stock Exchange, Inc.
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes(X) No( )
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
The aggregate market value of Registrant's voting stock held by non-
affiliates of Registrant, at February 8, 1995, was $7,388,131,586. The
number of shares outstanding of Registrant's Common Stock, par value $3.125
per share, at March 17, 1995, was 190,870,006.
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DOCUMENTS INCORPORATED BY REFERENCE
(1) Certain information contained in the Annual Report to Stockholders of
Registrant for the fiscal year ended December 31, 1994 is incorporated
by reference into Part I, Part II and Part IV hereof.
(2) Certain information contained in the Proxy Statement for the Annual
Meeting of Stockholders of Registrant to be held on May 2, 1995 is
incorporated by reference into Part III hereof.
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PART I
Item 1. Business.
(a) General development of business.
Registrant is a holding company with subsidiaries engaged in
various businesses. Subsidiaries of Registrant are engaged in the
manufacture and sale of cigarettes, cigars and smoking tobaccos,
principally in the United Kingdom ("U.K."), the distilled spirits business,
and the manufacture and sale of various types of hardware and home
improvement products, office products, supplies and accessories, golf
products and, principally in the U.K., the businesses of retail
distribution and houseware products.
Registrant was incorporated under the laws of Delaware in 1985
and until 1986 conducted no business. Prior to 1986, the businesses of
Registrant's subsidiaries were conducted by American Brands, Inc., a New
Jersey corporation organized in 1904 ("American New Jersey"), and its
subsidiaries. American New Jersey was merged into The American Tobacco
Company on December 31, 1985, and the shares of the principal first-tier
subsidiaries formerly held by American New Jersey were transferred to
Registrant. In addition, Registrant assumed all liabilities and
obligations in respect of the public debt securities of American New Jersey
outstanding immediately prior to the merger. Unless the context otherwise
indicates, references herein to American Brands, Inc. and to Registrant for
all periods prior to January 1, 1986 are to American New Jersey.
As a holding company, Registrant is a legal entity separate and
distinct from its subsidiaries. Accordingly, the right of Registrant, and
thus the right of Registrant's creditors (including holders of its debt
securities and other obligations) and stockholders, to participate in any
distribution of the assets or earnings of any subsidiary is subject to the
claims of creditors of the subsidiary, except to the extent that claims of
Registrant itself as a creditor of such subsidiary may be recognized, in
which event Registrant's claims may in certain circumstances be subordinate
to certain claims of others. In addition, as a holding company, a
principal source of Registrant's unconsolidated revenues and funds is
dividends and other payments from its subsidiaries. Registrant's principal
subsidiaries currently are not limited by long-term debt or other
agreements in their abilities to pay cash dividends or to make other
distributions with respect to their capital stock or other payments to
Registrant.
In recent years Registrant has been engaged in a strategy seeking
to enhance the operations of its subsidiaries in certain major businesses.
Pursuant to such strategy Registrant has made acquisitions in the distilled
spirits business, the office products business and the hardware and home
improvement products business, which acquisitions were financed at least in
part by debt or debt securities convertible into Common Stock. In
addition, Registrant has been making dispositions of businesses considered
to be nonstrategic to its long-term operations. Since January 1, 1994,
these dispositions have included the sale of American Franklin Company,
Registrant's life insurance business, to American General Corporation for
$1.17 billion on January 31, 1995, the sale of The American Tobacco Company
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("ATCO"), Registrant's domestic tobacco subsidiary, to Brown & Williamson
Tobacco Corporation, a subsidiary of B.A.T Industries p.l.c., for $1
billion on December 22, 1994, and the sale of Dollond & Aitchison Group
PLC, a subsidiary of Gallaher Limited ("Gallaher"), for total consideration
of $146 million on July 12, 1994. Registrant has announced that it is
planning to dispose of a number of other non-strategic business and product
lines, including U.K.-based Prestige and Forbuoys, for total consideration
anticipated to be in the range of $150 - $175 million.
Registrant continues to pursue this strategy and in furtherance
thereof explores other possible acquisitions in fields related to its major
businesses. Registrant also cannot exclude the possibility of acquisitions
in other fields or further dispositions. Although no assurance can be
given as to whether or when any acquisitions or dispositions will be
consummated, if agreement with respect to any acquisitions were to be
reached, Registrant might finance such acquisitions by issuance of
additional debt or equity securities. The additional debt from any
acquisitions, if consummated, would increase Registrant's debt-to-equity
ratio and such debt or equity securities might, at least in the near term,
have a dilutive effect on earnings per share. Registrant also continues to
consider other corporate strategies intended to enhance stockholder value.
It cannot be predicted whether or when any such strategies might be
implemented or what the financial effect thereof might be upon Registrant's
debt or equity securities.
(b) Financial information about industry segments.
See the table captioned "Information on Business Segments" in the
Notes to Consolidated Financial Statements contained in the 1994 Annual
Report to Stockholders of Registrant, which table is incorporated herein by
reference.
(c) Narrative description of business.
The following is a description of the business of the
subsidiaries of Registrant in the industry segments of International
Tobacco, Distilled Spirits, Hardware and Home Improvement Products, Office
Products and Golf and Leisure Products, as well as in other industries as
discussed under "Other Businesses" below. For financial information about
the above industry segments, see the table captioned "Information on
Business Segments" in the Notes to Consolidated Financial Statements
contained in the 1994 Annual Report to Stockholders of Registrant, which
table is incorporated herein by reference.
International Tobacco
Gallaher is engaged primarily in the manufacture of tobacco
products in the U.K. and the Republic of Ireland and sells these products
principally in the European Community and the Commonwealth of Independent
States ("C.I.S."). Its sales of tobacco products are the largest in the
U.K. Gallaher's share of consumer sales of cigarettes was 39.7% in 1994,
as compared with 40.6% in 1993. For 1994, Gallaher held approximately
38.8% of the cigarette market (measured by sales to the trade) in the U.K.,
compared with approximately 41.7% and 41.5% for 1993 and 1992,
respectively. Total unit sales of cigarettes to retail outlets and
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wholesalers in that country by foreign and domestic manufacturers decreased
by 3.8% in 1994, increased by 1.9% in 1993 and decreased by 6.7% in 1992.
Gallaher's total unit sales of cigarettes to retail outlets and wholesalers
decreased by 10.4% in 1994, increased by 2.3% in 1993 and decreased by
10.9% in 1992. Year to year comparisons are distorted by changes in the
timing of the U.K. budget. It is estimated that consumer demand declined
about 3% in 1994. It is likely that unit sales will decline in 1995. In
1994, approximately 21.5% of Gallaher's total cigarette unit sales were to
export markets, compared with 12.5% and 10% in 1993 and 1992, respectively.
The 1994 increase in export sales reflects a full year's shipments of
Benson and Hedges to Europe and increased shipments of other cigarette
products to the C.I.S. Gallaher's principal export markets in 1994 were
Greece, France, Germany and the C.I.S.
Gallaher's principal cigarette brands in the U.K. are Benson and
Hedges Special Filter, Silk Cut, Berkeley Superkings, Benson and Hedges
Superkings, Kensitas Club and Mayfair. Rights to some of these brands in
various other countries are claimed by others. Gallaher also markets other
tobacco products, among which are Hamlet cigars, Condor and Benson and
Hedges Mellow Virginia smoking tobaccos and Old Holborn roll-your-own
cigarette tobacco. Sales are made to retail outlets and wholesalers.
On June 30, 1993, ATCO acquired the Benson and Hedges cigarette
trademark in Europe (other than the U.K. and Republic of Ireland, where
Gallaher already owned the trademark) in exchange for the assignment of the
Lucky Strike and Pall Mall overseas cigarette trademarks, $107.2 million in
cash and future payments based on volumes. Immediately following the
acquisition, Gallaher entered into an exclusive trademark license agreement
with ATCO pursuant to which Gallaher manufactures and sells Benson and
Hedges products in tax-paid European markets (other than the U.K. and the
Republic of Ireland) and pays a royalty based on volumes. In May 1994, the
above described Benson and Hedges trademark rights acquired by ATCO and
related license agreement were transferred from ATCO to another subsidiary
of Registrant.
Gallaher's principal competitors in the U.K. are Imperial Tobacco
and Rothmans, the latter also distributing Philip Morris brands, and there
is also competition from imported brands, which include those of R.J.
Reynolds. Gallaher competes on the basis of the quality of its products
and price and its responsiveness to consumer preferences.
Gallaher buys its leaf tobacco from foreign sources, including
the United States ("U.S."). In accordance with industry practice, large
inventories of leaf tobacco are maintained by Gallaher. Sufficient
inventories of finished product are maintained by Gallaher to respond
promptly to orders.
There has been social and political unrest in Northern Ireland
for many years. Notwithstanding this situation, there has been no
consequential damage to Gallaher's manufacturing facilities there.
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Increases in the U.K. excise duties on tobacco products in recent
years have resulted in increases in the price of a typical pack of
cigarettes as follows:
Effective Amount of
Date Increase
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March 16, 1993 10 pence
November 30, 1993 11 pence
November 29, 1994 10 pence
January 1, 1995 6 pence
It is believed that the continuing impact of price increases,
principally due to substantial excise tax increases in recent years, has
led to an overall reduction in unit sales, greater price competition and
increased trading down by consumers to lower priced brands. In addition,
the U.K. Chancellor has announced that he intends to increase tobacco
duties on average by at least 3% a year in excess of the inflation rate in
future budgets. The effect of any further excise duty increases cannot be
determined, but such increases and any new duties or taxes, if enacted,
will likely add to the overall industry declines and the shift to lower
priced brands.
An agreement took effect in January 1995 between representatives
of the U.K. tobacco industry and the United Kingdom Health Ministers with
respect to tobacco products and advertising and promotion. Among other
things, the agreement provides for limitations on expenditures on cigarette
brand poster advertisements, and for the removal of external cigarette
advertising signs at retail premises by the end of 1996. Specified warning
statements are required to be printed on cigarette packages and to appear
in advertisements. Regulations promulgated in the U.K. in July 1991 to
implement a Council Directive of the European Community require, effective
January 1, 1992, that all tobacco product packaging bear the warning
statement "Tobacco Seriously Damages Health", and that cigarette packaging
bear additional warning statements and carry an indication of tar and
nicotine yield. In addition, the Independent Television Commission Code of
Advertising Standards and Practice of December 1990, implementing a Council
Directive of the European Community, prohibits, effective October 1991, the
advertising of all tobacco products on television in the U.K. Television
and radio advertising of cigarettes has been prohibited in the U.K. for
many years. Also, a Council Directive of the European Community has been
proposed by the Commission of the European Community to provide for a total
ban on tobacco advertising and sponsorship throughout the European
Community and to restrict the use of tobacco brand names on non-tobacco
products. In February 1992 the European Parliament, an advisory body,
approved such a total ban. Any such Council Directive, even though
approved by the European Parliament and the Commission, must be adopted by
the Council of Ministers of the member states of the Community by a
qualified majority of the member states prior to becoming effective and may
be adopted so as to be binding or non-binding on individual member states.
A Council Directive of the European Community adopted in May 1990
required that the tar yield of cigarettes marketed in the European
Community should not be greater than 15 milligrams per cigarette after
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December 31, 1992, and 12 milligrams per cigarette after December 31, 1997.
None of Gallaher's cigarette brands has had a tar yield in excess of 15
milligrams per cigarette since December 31, 1992.
The Treaty of Rome has as an objective the removal of certain
restrictions on trading among the member states of the European Community,
and since January 1, 1993 trading barriers within the Community have been
eliminated in accordance with the Single European Act. Actions taken by
the Community effective January 1, 1993 in connection with the
implementation of the Single European Act include the removal of
constraints on quantities of tobacco products for personal consumption that
may be purchased duty-paid in one member state and carried to another
without payment of additional duty. The Treaty of Rome, including
implementation of the Single European Act and other actions taken by the
Community, has resulted in increased competition in the market for tobacco
products in the U.K. and in other member states and caused a shift in sales
of tobacco products brands, particularly roll-your-own cigarette tobacco,
from certain member states, such as the U.K., to other member states in
which prices of those brands are lower, mainly as a result of excise taxes.
On July 18, 1989 the Council of Ministers enacted a non-binding
Council Resolution, as part of its on-going "Europe Against Cancer"
program, inviting member states to introduce legislation that would ban
smoking in most public places. In addition, various member states have
adopted legislation or non-binding guidelines that address smoking in
public places.
It is not possible to state whether additional legislation,
directives, regulations or action will be enacted, promulgated or taken in
or by the U.K. or the European Community or the nature of any such
legislation, directives, regulations or action, nor is it possible to
predict the effect any such legislation, directives, regulations or action
may have on the industry generally or on Gallaher.
Gallaher's subsidiary, Gallaher (Dublin) Limited ("Dublin"),
manufactures and sells tobacco products in the Republic of Ireland. Dublin
has the leading position with approximately 40% of the cigarette market
(measured by sales to the trade) in 1994, compared with approximately 38.2%
and 36.3% for 1993 and 1992, respectively. Dublin's principal cigarette
brands are Benson and Hedges Special Filter and Silk Cut.
See Item 3, "Legal Proceedings".
For a description of the business of other subsidiaries of
Gallaher, see "Distilled Spirits" and "Other Businesses - Retail
distribution - Housewares".
Distilled Spirits
Jim Beam Brands Co. ("Beam") and its predecessors have been
distillers of bourbon whiskey since 1795. Beam, together with its
subsidiaries, currently produces, or imports, and markets a broad line of
distilled spirits, including bourbon and other whiskeys, cordials, gin,
vodka and rum.
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Beam's nine leading brand names are Jim Beam bourbon, Windsor
Canadian Supreme Whisky, Lord Calvert Canadian Whisky, DeKuyper cordials,
Gilbey's gin, Gilbey's vodka, Kamchatka vodka, Wolfschmidt vodka and
Kessler American Blended Whiskey. Principal bourbon brand names are Jim
Beam, the largest-selling bourbon whiskey in the U.S. and in the world, Old
Grand-Dad, the largest-selling bonded bourbon in the U.S. and in the world,
Booker's, a super-premium bourbon whiskey, Old Taylor and Old Crow. Beam
also produces Jim Beam Bourbon Whiskey and Cola, which combines bourbon
with a cola soft drink. DeKuyper is the top-selling domestically-produced
cordial line in the U.S. Beam also produces Chateaux and Leroux cordials,
Beam's 8-Star Blend and Calvert Extra blended whiskeys, Dark Eyes vodka and
Calvert Gin, and imports, in bottle or in bulk, Canada House Canadian
whisky, The Dalmore and The Claymore scotch whiskies, Kamora coffee
liqueur, Ronrico, Pusser's and San Tropique rums, Molinari Sambuca and
Aalborg Akvavit.
Beam's products are bottled in the U.S. and are sold through
various distributors and, in the 18 "control" states (and one county) which
have established government control of the purchase and distribution of
alcoholic beverages, through state (or county, as the case may be) liquor
authorities. Beam products are also bottled in ten foreign countries.
Beam's international volume, which accounted for approximately 23% and 20%
of its total unit sales in 1994 and 1993, respectively, is exported to over
80 foreign markets for sale through distributors and brokers.
The distilled spirits business is highly competitive, with many
brands sold in the consumer market. Registrant believes there are
approximately ten major competitors worldwide and many smaller distillers
and bottlers. Registrant also believes that, based on unit sales, Beam is
the second largest producer and marketer of distilled spirits in the U.S.,
with six million-case-selling brands, and is among the ten major
competitors worldwide. Beam competes on the basis of the quality and price
of its products and its responsiveness to consumer preferences.
The U.S. market for beverage alcohol has in recent years demanded
an increasingly broad variety of products. Demand for distilled spirits,
particularly for bourbon and other whiskeys, generally has declined
resulting in increased price competition as competitors vie for market
share. It is estimated that unit sales of distilled spirits (which do not
include bulk sales) in the U.S. declined by approximately 3% in 1992, 2.2%
in 1993 and 3% in 1994. Total unit sales of Beam's brands in the U.S.
increased by approximately 35% in 1992, primarily due to an acquisition of
trademarks for seven brands, decreased 4.6% in 1993 and decreased 5.7% in
1994. Total unit sales of Beam's brands, including export sales, increased
29% in 1992, primarily due to the trademark acquisition, decreased 1.7% in
1993 and decreased 2.4% in 1994. In 1994 and 1993, bourbon accounted for
approximately 26% and 25% and other whiskeys for approximately 27% and 28%
of Beam's total unit sales in the U.S., respectively.
Beam's leading brands are owned by Beam and its subsidiaries,
except that DeKuyper cordials are produced and sold by Beam in the U.S.
under a perpetual license and Gilbey's gin and Gilbey's vodka are produced
and sold by Beam in the U.S. under a long-term license and the Kamchatka
brand is claimed by another entity in California.
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Raw materials for the production, storage and aging of Beam's
products are principally corn, rye, barley malt and white oak barrels and
are readily available from a number of sources, except that white oak
barrels are available from only two major sources, one of which is owned by
a competitor of Beam. Because whiskeys are aged for various periods,
generally from four to eight years, Beam maintains, in accordance with
industry practice, substantial inventories of bulk whiskey in warehouse
facilities. In addition, whiskey production is generally scheduled to meet
demand for four to eight years in the future, and production schedules are
adjusted from time to time to bring inventories into balance with estimated
future demand.
In Canada, a line of distilled spirits, including Windsor
Canadian Supreme Whisky, is produced by a subsidiary, Alberta Distillers
Limited. In Australia, a subsidiary, Fortune Brands Pty. Ltd., markets and
distributes Beam's products as well as several brands under agency
agreements.
The production, storage, transportation, distribution and sale of
Beam's products are subject to regulation by federal, state and local
authorities. Various local jurisdictions prohibit or restrict the sale of
distilled spirits in whole or in part.
In the U.S., Canada and many other countries, distilled spirits
are subject to excise taxes and/or customs duties. State, local and other
governmental authorities in such countries also impose taxes on distilled
spirits. On January 1, 1991, the U.S. federal excise tax on distilled
spirits was increased by one dollar per proof gallon, and proposals were
made in 1994 to increase the federal excise tax on distilled spirits to
help offset the cost of the Clinton Administration's health care proposals.
In addition, there are proposals pending to increase or impose new
distilled spirits taxes in various jurisdictions. It is believed that the
federal excise tax increase in 1991 contributed to the decline in distilled
spirits unit sales for the industry, including Beam. The effect of any
future excise tax increases cannot be determined, but it is possible that
any future tax increases would have an adverse effect on unit sales and add
to continuing industry declines.
The Alcoholic Beverage Labeling Act of 1988 and regulations
promulgated thereunder by the Bureau of Alcohol, Tobacco and Firearms of
the Department of the Treasury (the "Bureau") require that containers of
alcoholic beverages bottled on or after November 18, 1989 for sale or
distribution in the U.S. or for sale, distribution or shipment to members
of the United States Armed Forces abroad bear the statement: "GOVERNMENT
WARNING: (1) According to the Surgeon General, women should not drink
alcoholic beverages during pregnancy because of the risk of birth defects.
(2) Consumption of alcoholic beverages impairs your ability to drive a car
or operate machinery, and may cause health problems." The Alcoholic
Beverage Labeling Act of 1988 and the regulations prohibit any other
requirement of a statement relating to alcoholic beverages and health on
any beverage alcohol container or package containing such a container. If
the Secretary of the Treasury, after appropriate investigation and
consultation with the Surgeon General, finds available scientific
information justifying a change in, addition to or deletion of all or part
of the required statement, he is required to report such information to the
United States Congress together with specific recommendations with respect
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thereto. On March 8, 1991, the Bureau issued a request for information to
"enable the agency to determine whether the wording . . . should be
amended." Registrant understands that the Bureau has recommended that the
current warning statements are sufficient and has reported its findings to
the United States Congress. It is not possible to state whether any
legislation or additional regulations or action imposing additional
labeling or other warning statement requirements will be enacted,
promulgated or taken in the U.S. or export markets served by Beam, nor is
it possible to predict the effect, if any, that the existing labeling
requirement or any additional labeling or other warning statement
requirements may have on the industry generally or on Beam.
See Item 3, "Legal Proceedings".
The Whyte & Mackay Group PLC ("Whyte & Mackay"), a subsidiary of
Gallaher, has its origins as a distiller of scotch whisky in 1844. During
the fourth quarter of 1993, Whyte & Mackay completed the acquisition of
Invergordon Distillers Group PLC ("Invergordon"), another distiller,
blender and marketer of scotch whisky. Whyte & Mackay produces, bottles,
markets and sells blended and single malt scotch whiskies, markets and
sells vodka and sells scotch whisky in bulk. The principal brand names are
Whyte & Mackay Special Reserve, The Claymore, The Dalmore, Cluny,
Mackinlay, Isle of Jura and Bruichladdich scotch whiskies, Glayva scotch
whisky liqueur and Vladivar vodka. Whyte & Mackay believes that in both
1993 and 1992, its shares of the U.K. scotch whisky and vodka markets were
approximately 14% and 11%, respectively. In 1994, its shares were
approximately 25% of the U.K. whisky market, reflecting the inclusion of
Invergordon, and 10% of the U.K. vodka market. Whyte & Mackay's products
are sold in the U.K. through its own sales force and outside the U.K.,
through independent distributors.
It is estimated that total case sales of scotch whisky in the
U.K. decreased by approximately 5% in 1992, increased by approximately 5%
in 1993, and decreased by approximately 1% in 1994. Worldwide scotch
whisky sales increased by approximately 1% and 7% in 1992 and 1993,
respectively, and by approximately 4% in 1994. Whyte & Mackay's total case
sales of scotch whisky in the U.K. declined by approximately 3% in 1992,
and increased by approximately 20% and 38% in 1993 and 1994, respectively,
reflecting the inclusion of Invergordon. Whyte & Mackay's total case sales
of scotch whisky worldwide (including shipments of bulk whisky exported for
bottling) increased by approximately 1% in 1992, and increased by
approximately 24% and 68% in 1993 and 1994, respectively, reflecting the
inclusion of Invergordon. During 1994, 73% of Whyte & Mackay's total case
sales were derived from scotch whisky. In addition, 53% of Whyte &
Mackay's total scotch whisky case sales were made in the U.K. in 1994.
Blended scotch whiskies comprise a variety of grain and malt
whiskies blended to provide a consistent product. The industry is
therefore dependent on a high level of trading of whiskies between whisky
companies. Whyte & Mackay owns and operates seven malt whisky distilleries
and one grain whisky distillery in Scotland whose products are used in the
production of Whyte & Mackay's blended whiskies and for trading purposes.
Production is also bottled as malt whiskies and as a single grain whisky
from individual distilleries.
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Whyte & Mackay has recently discontinued its production at three
distilleries - Tamnavulin, Tullibardine and Bruichladdich - for a prolonged
period. The single malt whiskies from these three distilleries will
continue to be available for sale as there are sufficient inventories to
meet several years' requirements. These distilleries will also continue to
provide warehousing facilities.
Whyte & Mackay imports and markets in the U.K. a number of
brands, including Jim Beam bourbon, under agency arrangements. In the
U.S., Beam is an importer and distributor of Whyte & Mackay's brands.
The United Kingdom Finance Acts, 1993 and 1994 did not provide
for any increase in the excise duties on distilled spirits. A
supplementary U.K. budget introduced on December 8, 1994, effective January
1, 1995, provided for an increase in the excise duties on distilled spirits
equivalent to 26 pence on the price of a typical 700 milliliter bottle of
scotch whisky. The effect of the recent and any future U.K. or other
excise duty increases cannot be determined, but it is possible that any tax
increases would have an adverse effect on unit sales, add to the continuing
industry decline and lead to an increase in already competitive pricing
pressures.
Hardware and Home Improvement Products
MasterBrand Industries, Inc. ("MasterBrand") is a holding
company for subsidiaries in the Hardware and Home Improvement Products
business. Subsidiaries include Moen Incorporated ("Moen"), Master Lock
Company ("Master Lock"), Aristokraft, Inc. ("Aristokraft") and Waterloo
Industries, Inc. ("Waterloo").
Moen manufactures and packages single- and two-handle faucets,
sinks and plumbing accessories and parts and a wide variety of plumbing
supply and repair products in the U.S. and East Asia. Faucets are sold
under a variety of tradenames, including Moen, Moentrol, Touch Control,
One-Touch, Riser, Monticello, Concentrix, Chateau, Legend, Pulsation and
Sani-Stream, and other products are sold under the Moen, Chicago Specialty,
Dearborn Brass, Wrightway, Anchor Brass and Hoov-R-Line brand names. Some
of the plumbing parts and repair products are purchased from other
manufacturers. Products are sold principally in the U.S. and also in
Canada, East Asia and Mexico. Sales are made through Moen's own sales
force and independent manufacturers' representatives primarily to
wholesalers, mass merchandisers and home centers and also to industrial
distributors, repackagers and original equipment manufacturers.
Legislation has been introduced in the U.S. Congress that would
if enacted endorse a voluntary industry standard that establishes maximum
allowable leachate levels of certain substances, including lead from
plumbing fittings and pumps, and which would require EPA to evaluate the
effectiveness of the standard within twelve months of enactment.
Legislation that was introduced previously in the Congress and is expected
to be introduced in the current session of the Congress would if enacted
require a reduction in the lead content of plumbing fittings and pumps used
for drinking water, if an appropriate maximum leachate standard for lead is
not voluntarily adopted. In September 1994, the EPA endorsed a voluntary
standard that establishes maximum leachate levels of those substances,
including lead from new plumbing fittings and fixtures. It is not
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possible to predict whether federal, state or local legislation,
regulations or action will be enacted, promulgated or taken or the nature
of any such legislation, regulations or action, nor is it possible to
predict the effect any such legislation, regulations or action may have on
the industry generally or on Moen.
Master Lock manufactures key-controlled and combination padlocks,
chain and cable locks, bicycle locks, built-in locker locks and other
specialty security devices, and also manufactures door lock sets and door
hardware. Sales of products designed for consumer use are made to
wholesale distributors and to hardware and other retail outlets, while
sales of lock systems are made to industrial and institutional users,
original equipment manufacturers and retail outlets. Most sales are
brokered through independent manufacturers' representatives, primarily in
the U.S. and Canada.
Aristokraft manufactures kitchen cabinets and bathroom vanities.
Stock and semi-custom cabinets are sold under the brand names of
Aristokraft and Decora, respectively. Sales under the Aristokraft brand
name are made in the U.S. primarily through stocking distributors for
resale to kitchen and bath specialty dealers, lumber and building material
dealers, remodelers and builders. Decora products are sold primarily to
kitchen and bath specialty dealers and regional home centers.
Waterloo is the world's leading manufacturer of tool storage
products, consisting primarily of high quality steel tool boxes, tool
chests, workbenches and related products manufactured for private label
sale by one of the largest national retailers in the U.S. Similar products
are sold under the Waterloo and All American brand names to specialty
industrial and automotive dealers, mass merchandisers, home centers and
hardware stores. Waterloo also manufactures hospital carts and storage
units and sells such products to institutional users.
See Item 3, "Legal Proceedings".
Office Products
ACCO World Corporation ("ACCO") and its subsidiaries are engaged
worldwide in designing, developing, manufacturing and marketing a wide
variety of traditional and computer-related office products and supplies,
time management products, presentation aids, workstation furniture and
accessories. Products are manufactured by subsidiaries, joint ventures and
licensees of ACCO, or manufactured to such subsidiaries' specification,
throughout the world, principally in the U.S., Canada, Western Europe and
Australia.
ACCO USA, Inc., a subsidiary of ACCO, manufactures binders,
fasteners, paper clips, punches, staples, stapling equipment and storage
products, as well as computer binders, supplies and accessories, in the
U.S. ACCO Canada Inc., a subsidiary of ACCO, manufactures and distributes
a similar range of office products in Canada. Principal brands include
ACCO products, Swingline staples and stapling equipment, Wilson Jones
binders and columnar pads and Perma Products corrugated board storage
products. Products are sold throughout the U.S. and Canada by their
respective sales forces to office products wholesalers, retailers and
10
<PAGE>
dealers and are sold to mass merchandisers either directly or brokered
through independent manufacturers' representatives.
Subsidiaries of ACCO Europe PLC, a subsidiary of ACCO,
manufacture and distribute a wide range of office supplies and machines and
storage and retrieval filing systems. Their products are sold primarily in
the U.K., Ireland, Western Europe and Australia through their own sales
forces and distributors.
Day-Timers, Inc., a subsidiary of ACCO, manufactures personal
organizers and planners in the U.S. and is estimated by management to be
the leading direct marketer of time management aids in North America.
Products are sold in the U.S. by Day-Timers, and in Canada, Australia and
Europe by subsidiaries, through direct mail advertising and catalogs to
consumers and businesses. In addition, products are sold through ACCO USA,
Inc. to retailers and mass merchandisers. A subsidiary also conducts time
management seminars for personnel of corporations, as well as other
entities throughout the U.S., Canada, Australia and Europe. Another
subsidiary markets, principally in the U.S., art and craft supplies
primarily to schools.
Vogel Peterson Furniture Company, a subsidiary of ACCO,
manufactures in the U.S. and distributes chairs, workstation components,
office coat racks and partitions. Products are sold in the U.S. and Canada
to office product and furniture dealers.
Kensington Microware Limited, a subsidiary of ACCO, designs,
develops and markets a range of computer accessories and supplies,
principally in the U.S.
Golf and Leisure Products
Acushnet Company ("Acushnet") is comprised of the Titleist and
Foot-Joy Worldwide Division and the Acushnet Golf Division. The Titleist
and Foot-Joy Worldwide Division is a leading manufacturer and distributor
of golf balls, golf shoes, golf clubs, and golf gloves. Other products
include bags, carts, dress and athletic shoes as well as socks and
accessories. Acushnet's leading brands are Titleist and Pinnacle golf
balls, DCI and Bulls Eye golf clubs, Classics and DryJoys golf shoes and
Sta-Sof and Weather-Sof golf gloves. Acushnet products are sold primarily
to golf pro shops throughout the U.S. by the Titleist and Foot-Joy
Worldwide sales force and to sporting goods stores and mass merchants
through the Acushnet Golf Division. Sales are made in the U.K., Canada,
Germany, Austria, Denmark, France, Sweden and The Netherlands through
subsidiaries, in Japan through a majority-owned joint venture, in Ireland
through a U.K. branch and outside these areas through distributors or
agents.
Other Businesses
Other businesses includes the retail distribution and houseware
products businesses of Gallaher subsidiaries. Registrant has announced
that it plans to dispose of the houseware products business and a
significant portion of its retail distribution business in 1995.
11
<PAGE>
Retail Distribution
Forbuoys PLC, a subsidiary of Gallaher, operates approximately
700 retail newspaper, tobacco, confectionery and stationery outlets in the
U.K. TM Group PLC, a subsidiary of Gallaher, is the largest vending
machine operator in the U.K., and also operates in France and Germany; the
company dispenses cigarettes, snack foods and hot drinks through
approximately 41,500 on-site machines. Another subsidiary of Gallaher,
Marshell Group Limited, operates approximately 165 kiosks that sell tobacco
products primarily in large stores in the U.K.
Housewares
The Prestige Group PLC ("Prestige"), a subsidiary of Gallaher,
manufactures and sells houseware products, including cookware, bakeware,
kitchen tools and carpet sweepers, in the U.K. and elsewhere. Its
principal brand names are Prestige, Skyline and Ewbank. A subsidiary of
Registrant is operated in conjunction with Prestige and manufactures and
sells kitchen utensils in the U.S.
Other Matters
Employees
Registrant and its subsidiaries had, as of December 31, 1994, the
following number of employees, a substantial number of whom were covered by
collective bargaining agreements with various unions:
Registrant and subsidiaries
excluding Gallaher:
---------------------------
Distilled Spirits 1,430
Hardware and Home Improvement Products 8,560
Office Products 8,700
Golf and Leisure Products 3,200
Corporate Headquarters 200
------
22,090
------
Gallaher Limited:
----------------
Tobacco Products 3,990
Distilled Spirits 1,100
Other Businesses:
Retail Distribution 6,610
Housewares 930
Other 100
------
12,730
------
Total 34,820
======
12
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Environmental matters
Registrant and its subsidiaries are subject to federal, state and
local laws and regulations concerning the discharge of materials into the
environment and the handling, disposal and clean-up of waste materials and
otherwise relating to the protection of the environment. While it is not
possible to quantify with certainty the potential impact of actions
regarding environmental matters, particularly remediation and other
compliance efforts that Registrant's subsidiaries may undertake in the
future, in the opinion of management of Registrant, compliance with the
present environmental protection laws, before taking into account estimated
recoveries from third parties, will not have a material adverse effect upon
the capital expenditures, financial condition, results of operations or
competitive position of Registrant and its subsidiaries.
See Item 3, "Legal Proceedings".
(d) Financial information about foreign and domestic operations
and export sales.
Registrant's subsidiaries operate in the United States, Europe
(principally the U.K.) and other areas (principally Canada and Australia).
See the table captioned "Information on Business Segments" contained in the
1994 Annual Report to Stockholders of Registrant, which table is
incorporated herein by reference. As is disclosed in such table,
Registrant has sizable investments in, and derives substantial income from,
Europe (principally the U.K.), and, therefore, changes in the value of
foreign currencies (principally sterling) can have a material effect on
Registrant's financial statements when expressed in dollars.
Item 2. Properties.
Registrant leases its principal executive offices in Old
Greenwich, Connecticut. The following is a description of properties of
Registrant's subsidiaries.
International Tobacco
The principal properties of Gallaher and its subsidiaries include
Gallaher's head office in Weybridge, Surrey, England, a distribution
facility in Crewe, Cheshire, England, office and warehouse facilities in
Northolt, Middlesex, England, a factory in Northern Ireland for the
manufacture of cigarettes and smoking tobaccos, a factory in England for
the manufacture of cigarettes and a factory in Wales for the manufacture of
cigars. Each of these properties is owned by Gallaher or one of its
subsidiaries. The principal properties of Gallaher and its subsidiaries
also include a factory in the Republic of Ireland, owned and operated by
Gallaher (Dublin) Limited, for the manufacture of cigarettes and smoking
tobaccos. Gallaher also has a research laboratory in the Northern Ireland
factory complex. For a description of properties of other subsidiaries of
Gallaher, see "Distilled Spirits" and "Other Businesses".
13
<PAGE>
Distilled Spirits
Beam leases its executive offices in Deerfield, Illinois, and a
subsidiary leases an office in Burnaby, British Columbia. Beam and its
subsidiaries own and operate four bottling plants, three distilleries and
93 warehouses for the aging of bulk whiskies, and lease and operate 16
regional sales offices and several warehouses for the storage of
promotional material, all located in the U.S., Australia and Canada. Beam
also owns and operates approximately 70 U.S. bonded warehouses. Whyte &
Mackay leases its head office in Glasgow, Scotland and a subsidiary,
Invergordon, owns its head office in Edinburgh, Scotland. Whyte & Mackay
and its subsidiaries own and operate seven malt distilleries, one grain
distillery and three blending and bottling plants in Scotland.
Hardware and Home Improvement Products
MasterBrand leases its executive offices in Deerfield, Illinois
and a subsidiary, Moen, owns its executive offices in North Olmsted, Ohio.
Principal properties of subsidiaries of MasterBrand include eighteen
plants, three distribution centers and one warehouse owned and operated in
the U.S. A 50%-owned joint venture in Taiwan owns and operates one plant.
In addition, subsidiaries of MasterBrand lease and operate three plants and
four warehouses in the U.S. and eleven distribution centers, of which eight
are in the U.S. and one is in each of Canada, Japan and Mexico.
Office Products
ACCO leases its executive offices in Deerfield, Illinois.
Principal properties of subsidiaries of ACCO include eight plants owned and
operated in the U.S., seven in the U.K., and one in each of Germany, Italy,
France, Australia, The Netherlands, the Republic of Ireland and Mexico. In
addition, subsidiaries of ACCO lease and operate eleven facilities in the
U.S., five in the U.K., three in Canada, two in Australia and one in each
of France, Germany and Italy. Of these leased facilities, (i) four in the
U.S., two in the U.K., three in Canada and one in each of Australia,
Germany and France, are combined manufacturing and distribution facilities,
(ii) five in the U.S., three in the U.K. and one in each of Italy and
Australia, are distribution facilities and (iii) two in the U.S. are
manufacturing facilities.
Golf and Leisure Products
Acushnet owns a combined executive office and research and
development facility and a warehouse in Fairhaven, Massachusetts. In
addition, it owns and operates four plants, a warehouse and a test
facility, all located in the U.S. Acushnet also leases three warehouses, a
test facility, a retail store, and a research and development facility, all
located in the U.S. Acushnet also leases an office in Taiwan. A
subsidiary of Acushnet leases two combined sales office and warehouse
facilities in Canada. Other Acushnet subsidiaries own and operate a plant
and a warehouse in England, lease a sales office and warehouse in each of
Germany, France and Sweden and lease a sales office in each of Austria,
Denmark, The Netherlands and the Republic of Ireland. Acushnet's majority-
owned joint venture in Japan leases two sales offices and a warehouse
facility there. Acushnet's majority-owned joint ventures in Thailand lease
and operate two plants there.
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<PAGE>
Other Businesses
Prestige leases its head office in Egham, England and owns and
operates a plant in Burnley, England. Prestige also owns and operates a
plant in each of Spain and Australia. A subsidiary of Registrant, which is
operated in conjunction with Prestige, leases one plant in North Carolina.
Registrant and its subsidiaries are of the opinion that their
properties are suitable to their respective businesses and have productive
capacities adequate to the needs of such businesses.
Item 3. Legal Proceedings.
(a) (i) Registrant's former subsidiary, The American Tobacco
Company ("ATCO"), and other leading tobacco manufacturers have been sued by
parties seeking damages for cancer and other ailments claimed to have
resulted from tobacco use and by certain asbestos manufacturers seeking
unspecified amounts in indemnity or contribution in third-party actions
against all or most of the major domestic tobacco manufacturers. Although
there was a jury award which was overturned on appeal against a tobacco
manufacturer in one case, there has been no actual recovery of damages to
date in any such action against the tobacco manufacturers. Registrant has
been named as a defendant in some of the cases brought against ATCO and is
currently named as a defendant in six of these cases, two of which are
brought by individuals, one alleging health ailments caused by the
inhalation of environmental tobacco smoke (Dunn, described below) and the
other alleging chronic lung disease and other medical and psychological
problems associated with addiction to cigarettes (Michener, described
below); three of which are brought by the attorneys general of Mississippi
(Moore, described below), West Virginia (McGraw, described below) and
Florida (State of Florida, described below), respectively, seeking
unspecified compensatory and punitive damages and various forms of
equitable relief, including restitution of the expenditures by the state
for the cost of medical care provided by the state to its citizens for
numerous diseases allegedly caused by cigarettes and other tobacco
products; and one of which is an alleged class action on behalf of all
members of the class allegedly addicted to cigarettes through the
manipulation of nicotine levels (Castano, described below).
The following sets forth the principal parties to the above-
described six pending proceedings in which Registrant is currently named as
a defendant, the court in which such proceedings are pending and the date
such proceedings were instituted against Registrant: Castano v. The
American Tobacco Company, Inc., et al., United States District Court for
the Eastern District of Louisiana, March 29, 1994; Dunn v. RJR Nabisco
Holdings Corporation, et al., Superior Court State of Indiana, County of
Delaware, August 23, 1993; McGraw v. The American Tobacco Company, et al.,
Circuit Court of Kanawha County, State of West Virginia, November 1, 1994;
Michener v. The American Tobacco Company, et al., District Court of
Oklahoma County, State of Oklahoma, December 16, 1994; Moore v. The
American Tobacco Company, et al., Chancery Court of Jackson County, State
of Mississippi, June 1, 1994; and State of Florida v. The American Tobacco
Company, et al., Circuit Court of Palm Beach County, State of Florida,
March 5, 1995.
15
<PAGE>
It has been reported that certain groups of attorneys, and
attorneys general of various states, are interested in promoting product
liability and other suits against the tobacco manufacturers. It has also
been reported that other claims against the tobacco manufacturers may be
made seeking damages for alleged injuries claimed to have resulted from
exposure to tobacco smoking of others.
On December 22, 1994, Registrant sold ATCO to Brown & Williamson
Tobacco Corporation, a wholly-owned subsidiary of B.A.T Industries p.l.c.
Brown & Williamson Tobacco Corporation and ATCO have agreed to indemnify
Registrant against claims arising from smoking and health and fire safe
cigarette matters relating to the tobacco business of ATCO.
Registrant's counsel have advised that, in their opinion, on the
basis of their investigations generally with respect to suits and claims of
this character, Registrant has meritorious defenses to the above-mentioned
actions and threatened actions. The actions will be vigorously contested.
(ii)(A) Dean v. Gallaher Limited is an action commenced in the
High Court of Justice in Northern Ireland in which plaintiff seeks
unspecified damages including lost income for claimed personal injuries
allegedly related to cigarette smoking. In March 1988, plaintiff obtained
Legal Aid to proceed up to the point of trial. He served his Writ of
Summons in August 1988 and his Statement of Claim in August 1989.
Plaintiff filed an amended Statement of Claim on October 6, 1993. Gallaher
subsequently filed a motion to strike from the amended Statement of Claim a
predecessor to Gallaher, Hergall (1981) Limited (In Liquidation)
("Hergall"), as a second defendant in the action. The motion was heard on
November 30, 1993 and was granted on March 9, 1994. Plaintiff served a
Writ of Summons on Hergall on December 1, 1993 and a Statement of Claim
against Hergall on February 22, 1994. Plaintiff's lawyers also purported
to re-amend the Statement of Claim against Gallaher. On March 11, 1994,
Gallaher and Hergall filed applications to strike certain parts of
plaintiff's Statements of Claim in both actions as irrelevant, which were
referred to the High Court for decision. These applications were denied by
Mr. Justice Nicholson on May 31, 1994, with leave to appeal. Gallaher's
and Hergall's appeal of this decision was heard in December, 1994, and
refused by a unanimous panel of the Court of Appeal. After the Court of
Appeal denied Gallaher and Hergall leave to appeal, Gallaher and Hergall
filed a petition for leave to appeal with the House of Lords on March 17,
1995. A decision on this appeal is now pending. In addition, the
companies obtained orders extending the time in which their defenses must
be served until after the hearing of the "strike-out" applications.
(B) On January 31, 1995, the English Legal Aid Board granted
limited legal aid certificates to approximately 200 claimants seeking to
bring proceedings against tobacco manufacturers for the harm they have
allegedly suffered through smoking cigarettes. This is the first time that
English legal aid has been granted to support a significant number of
claims of this type. These applications were first filed with the
Newcastle Legal Aid Board in England in the summer of 1992, and were
originally denied on September 2, 1992. Thereafter, applicants
successfully petitioned for judicial review of that decision, and on June
24, 1994, the High Court ruled that the Legal Aid Board had applied
inconsistent procedural standards in refusing applicants' legal aid, and
ordered that the applications be remanded for reconsideration. The Legal
16
<PAGE>
Aid Board began considering the remanded applications on December 22, 1994,
and announced its decision on January 31, 1995.
(C) In Brennan v. Gallaher Limited, pending in the High Court of
Justice in Northern Ireland, plaintiff, a former employee of Gallaher,
seeks unspecified damages for claimed personal injuries from the alleged
"provision of cigarettes for [sic] the plaintiff". Plaintiff served her
Writ of Summons in October 1990, and no Statement of Claim has been
received. On March 22, 1994, plaintiff served a summons seeking leave to
substitute Hergall as the named defendant in the action. This motion was
granted on March 24, 1995.
(D) Further, Gallaher has received a letter before action dated
October 11, 1994, from a solicitor in Scotland stating that a client,
Edward Havelin, has instructed him to make a claim against Gallaher for
Buerger's disease claimed to have been caused by smoking. No formal claim
has been received. Mr. Havelin recently applied to the Scottish Legal Aid
Board for legal aid to pursue this claim against Gallaher and another
tobacco manufacturer. On February 21, 1995, Gallaher submitted
representations in opposition to this application, and the matter is now
pending review by the Scottish Legal Aid Board.
(E) Registrant's counsel have advised that, in their opinion, on
the basis of their investigations generally with respect to suits and
claims of this character, Gallaher has meritorious defenses to these
actions and claims, and they will be vigorously defended on the merits.
(b) People of the State of California ex rel. Daniel E. Lungren,
Attorney General of the State of California v. American Standard, et al.,
is an action commenced on December 15, 1992 against Moen and 15 other
faucet manufacturers and distributors in the Superior Court of the State of
California, County of San Francisco. The Attorney General of California
alleges violations of California Health and Safety Code Sections 25249.5
and 25249.6 (Proposition 65), as well as two violations of the California
Business and Professions Code Section 17200, for alleged intentional
discharge of lead from faucets to sources of drinking water and failure to
provide clear and reasonable warnings to consumers, and seeks civil
penalties of up to $2,500 per day per violation on each cause of action.
The Attorney General also seeks injunctive relief prohibiting further
discharges of lead from faucets into drinking water sources or, in the
alternative, requiring clear and reasonable warnings regarding lead in
faucets, restitution to consumers and other relief. A related action
against these companies and others, including Moen, MasterBrand and
Registrant, has also been brought by environmental groups in the same
court, Natural Resources Defense Council, et al., v. Price Pfister, Inc.,
et al. In that case, plaintiffs allege the same claims as the Attorney
General's action and also allege certain other violations, including
violation of the Consumer Legal Remedies Act, Civil Code Section 1750. The
plaintiffs seek similar injunctive relief and establishment of a public
information campaign concerning lead from faucets, restitution and
disgorgement of funds obtained from California consumers by unlawful or
unfair business practices and establishment of a fund for medical
monitoring of infants exposed to lead from faucets. The plaintiffs also
seek compensatory damages, statutory penalties, punitive damages,
reasonable attorneys' fees and costs. On July 26, 1993, an Order was filed
whereby plaintiffs in Natural Resources Defense Council dismissed without
17
<PAGE>
prejudice the action as to MasterBrand and Registrant. The plaintiffs in
both actions moved for injunctive relief to require certain of the
defendants to post prescribed warnings. In Natural Resources Defense
Council, the court refused to issue any order regarding the motion pending
resolution of defendants' demurrer challenging plaintiffs' standing to
bring the action, which demurrer was filed on April 16, 1993. By order
dated May 10, 1994, the court denied defendants' demurrer based on standing
but ruled plaintiffs are not entitled to restitution or compensatory
damages. Defendants' motion to dismiss or stay this case was denied on
October 21, 1994. In Lungren, on May 17, 1993, the court issued an order
requiring certain of the defendants in the action, including Moen, to
provide warnings in accordance with the protocol voluntarily proposed by
the defendants. The court made no finding of liability for failure to
warn. On April 16, 1993, defendants filed a demurrer in respect of
plaintiffs' claims based on defendants' alleged intentional discharge of
lead from faucets to sources of drinking water. A hearing on the demurrer
has been scheduled for March 30, 1995. A trial date of January 2, 1996 has
been set in the Lungren matter; a trial date of March 4, 1996 has been set
in the Natural Resources Defense Council matter. These actions are being
vigorously contested.
(c) It is not possible to predict the outcome of the pending
litigation, but management believes that there are meritorious defenses to
the pending actions and that the pending actions will not have a material
adverse effect upon the results of operations, cash flow or financial
condition of the Registrant. See the note captioned "Pending Litigation"
in the Notes to Consolidated Financial Statements contained in the 1994
Annual Report to Stockholders of Registrant, which note is incorporated
herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 4a. Executive Officers of the Registrant.
The name, present positions and offices with Registrant,
principal occupations during the past five years and age of each of
Registrant's present executive officers are as follows:
Present positions and offices with
Registrant and principal occupations
Name during the past five years Age
---- ------------------------------------ ---
Thomas C. Hays Chairman of the Board and Chief Executive 59
Officer of Registrant since January 1995;
President and Chief Operating Officer of
Registrant prior thereto
John T. Ludes President and Chief Operating Officer of 58
Registrant since January 1995; Group
Vice President of Registrant, President
and Chief Executive Officer of Acushnet
prior thereto
18
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Present positions and offices with
Registrant and principal occupations
Name during the past five years Age
---- ------------------------------------ ---
Robert L. Plancher Senior Vice President and Chief Accounting 63
Officer of Registrant
Robert J. Rukeyser Senior Vice President -- Corporate Affairs 52
of Registrant since 1990; Vice President --
Operations of Registrant prior thereto
Gilbert L. Klemann, II Senior Vice President and General Counsel 44
of Registrant since 1991; Vice President
and Associate General Counsel of Registrant
during 1991; Partner, Chadbourne & Parke
(law firm) prior thereto
Dudley L. Bauerlein, Jr. Senior Vice President and Chief Financial 48
Officer since January 1995; Vice President
and Treasurer of Registrant prior thereto
Steven C. Mendenhall Senior Vice President and Chief 46
Administrative Officer of Registrant since
January 1995; Vice President and Chief
Administrative Officer from 1993 through
1994; Vice President -- Human Resources
prior thereto
Randall W. Larrimore Vice President -- Hardware and Home 47
Improvement Products of Registrant;
President and Chief Executive Officer
of MasterBrand
Barry M. Berish Vice President -- Distilled Spirits of 62
Registrant since 1990; Chairman of the
Board and Chief Executive Officer of
Beam since 1993; President and Chief
Executive Officer of Beam prior thereto
Norman H. Wesley Vice President -- Office Products of 45
Registrant since 1990; President and Chief
Executive Officer of ACCO since 1990;
President and Chief Operating Officer of
ACCO prior thereto
Charles H. McGill Vice President -- Corporate Development 53
since February 1995; Corporate Vice
President -- Acquisitions of The Dun &
Bradstreet Corporation prior thereto
Mr. Peter M. Wilson, who has been a member of the Executive
Committee of the Board of Directors of Registrant and Chairman and Chief
Executive of Gallaher since February 1, 1994, is deemed to be an executive
officer of Registrant for the purposes of this Item 4a. Mr. Wilson was
19
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Deputy Chairman of Gallaher and Chairman and Chief Executive of Gallaher
Tobacco Limited prior thereto. His age is 53.
In the case of each of the above-listed executive officers, the
occupation or occupations given were his principal occupation and
employment during the period or periods indicated. None of such executive
officers is related to any other such executive officer. None was selected
pursuant to any arrangement or understanding between him and any other
person. All executive officers are elected annually.
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters.
See the information in the tables captioned "Quarterly Common
Stock Dividend Payments" and "Quarterly Composite Common Stock Prices" and
the discussion relating thereto contained in the 1994 Annual Report to
Stockholders of Registrant, which information and discussion are
incorporated herein by reference. On March 17, 1995, there were 59,740
record holders of Registrant's Common Stock, par value $3.125 per share.
Item 6. Selected Financial Data.
See the information in the table captioned "Eleven-Year
Consolidated Selected Financial Data" contained in the 1994 Annual Report
to Stockholders of Registrant, which information is incorporated herein by
reference.
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
See the discussion and analysis under the captions "Results of
Operations" and "Financial Condition" contained in the 1994 Annual Report
to Stockholders of Registrant, which discussion and analysis are
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
See the information in the Consolidated Balance Sheet,
Consolidated Statement of Income, Consolidated Statement of Cash Flows,
Consolidated Statement of Common Stockholders' Equity, Notes to
Consolidated Financial Statements and Report of Independent Accountants
contained in the 1994 Annual Report to Stockholders of Registrant, which
information is incorporated herein by reference. For unaudited selected
quarterly financial data, see the table captioned "Quarterly Financial
Data" contained in the 1994 Annual Report to Stockholders of Registrant,
which table is incorporated herein by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
None.
20
<PAGE>
PART III
Item 10. Directors and Executive Officers of Registrant.
See the information under the caption "Election of Directors"
contained in the Proxy Statement for the Annual Meeting of Stockholders of
Registrant to be held on May 2, 1995, which information is incorporated
herein by reference. See also the information with respect to executive
officers of Registrant under Item 4a of Part I hereof, which information is
incorporated herein by reference.
Item 11. Executive Compensation.
See the information up to but not including the subcaption
"Report of the Compensation and Stock Option Committee on Executive
Compensation" under the caption "Executive Compensation" contained in the
Proxy Statement for the Annual Meeting of Stockholders of Registrant to be
held on May 2, 1995, which information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
See the information in the table and notes related thereto and in
the third to last paragraph under the caption "Election of Directors" and
the information under the caption "Certain Information Regarding Security
Holdings" contained in the Proxy Statement for the Annual Meeting of
Stockholders of Registrant to be held on May 2, 1995, which information is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
See the information in the second to last paragraph under the
caption "Election of Directors" contained in the Proxy Statement for the
Annual Meeting of Stockholders of Registrant to be held on May 2, 1995,
which information is incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K.
(a) Financial Statements, Financial Statement Schedules and
Exhibits.
(1) Financial Statements (all financial statements listed below are of
Registrant and its consolidated subsidiaries)
Consolidated Balance Sheet as of December 31, 1994 and 1993
contained in the 1994 Annual Report to Stockholders of Registrant is
incorporated herein by reference.
Consolidated Statement of Income for the years ended December 31,
1994, 1993 and 1992 contained in the 1994 Annual Report to
Stockholders of Registrant is incorporated herein by reference.
21
<PAGE>
Consolidated Statement of Cash Flows for the years ended December
31, 1994, 1993 and 1992 contained in the 1994 Annual Report to
Stockholders of Registrant is incorporated herein by reference.
Consolidated Statement of Common Stockholders' Equity for the
years ended December 31, 1994, 1993 and 1992 contained in the 1994
Annual Report to Stockholders of Registrant is incorporated herein
by reference.
Notes to Consolidated Financial Statements contained in the 1994
Annual Report to Stockholders of Registrant are incorporated herein
by reference.
Report of Independent Accountants contained in the 1994 Annual
Report to Stockholders of Registrant is incorporated herein by
reference.
(2) Financial Statement Schedules
See Index to Financial Statement Schedules of Registrant and
subsidiaries at page F-1, which Index is incorporated herein by
reference.
(3) Exhibits
3(i). Certificate of Incorporation of Registrant as in effect on the
date hereof is incorporated herein by reference to Exhibit 3a2 to
the Quarterly Report on Form 10-Q of Registrant dated May 14,
1990.
3(ii). By-laws of Registrant as in effect on the date hereof are
incorporated herein by reference to Exhibit 3(ii)b to the Current
Report on Form 8-K of Registrant dated February 8, 1995.
10a1. Article XII ("Incentive Compensation") of the By-laws of
Registrant is incorporated herein by reference to Exhibit 3(ii)b
to the Current Report on Form 8-K of Registrant dated February 8,
1995.*
10b1. Stock Option Plan of American Brands, Inc., as amended is
incorporated herein by reference to Exhibit 10b1 to the Annual
Report on Form 10-K of Registrant for the Fiscal Year ended
December 31, 1992.*
10b2. Amendment to Stock Option Plan of American Brands, Inc.
constituting Exhibit 10b1 hereto is incorporated herein by
reference to Exhibit 10a to the Quarterly Report on Form 10-Q of
Registrant dated November 11, 1993.*
10b3. 1986 Stock Option Plan of American Brands, Inc. and amendments
thereto is incorporated herein by reference to Exhibit 10b2 to
the Annual Report on Form 10-K of Registrant for the Fiscal Year
ended December 31, 1992.*
22
<PAGE>
10b4. Amendment to 1986 Stock Option Plan of American Brands, Inc.
constituting Exhibit 10b3 hereto is incorporated herein by
reference to Exhibit 10b to the Quarterly Report on Form 10-Q of
Registrant dated November 11, 1993.*
10b5. Amendment to 1986 Stock Option Plan of American Brands, Inc.
constituting Exhibits 10b3 and 10b4 hereto is incorporated herein
by reference to Exhibit 10b to the Quarterly Report on Form 10-Q
of Registrant dated August 11, 1994.*
10b6. 1990 Long-Term Incentive Plan of American Brands, Inc. (As
Amended and Restated as of January 1, 1994) is incorporated
herein by reference to Exhibit 10a to the Quarterly Report on
Form 10-Q of Registrant dated August 11, 1994.*
10c1. Amended Supplemental Retirement Plan of American Brands, Inc.*
10c2. Trust Agreement, made as of the 1st day of February, 1989, among
Registrant, The Chase Manhattan Bank (National Association)
("Chase"), et al. establishing a trust in favor of William J.
Alley for purposes of paying amounts under the Amended
Supplemental Retirement Plan constituting Exhibit 10c1 hereto is
incorporated herein by reference to Exhibit 10c2 to the Annual
Report on Form 10-K of Registrant for the Fiscal Year ended
December 31, 1988 maintained in Commission File No. 1-9076.*
10c3. Amendment made as of the 1st day of November, 1993 to Trust
Agreement constituting Exhibit 10c2 hereto is incorporated herein
by reference to Exhibit 10c3 to the Annual Report on Form 10-K of
Registrant for the Fiscal Year ended December 31, 1993.*
10c4. Amendment made as of the 1st day of January, 1995, to the Trust
Agreement constituting Exhibits 10c2 and 10c3 hereto.*
10c5. Schedule identifying substantially identical agreements to the
Trust Agreement and the Amendments thereto constituting Exhibits
10c2, 10c3 and 10c4 hereto, respectively, in favor of Thomas C.
Hays, Arnold Henson, John T. Ludes, Robert L. Plancher, Gilbert
L. Klemann, II, Robert J. Rukeyser, Randall W. Larrimore, Steven
C. Mendenhall and Dudley L. Bauerlein, Jr.*
10c6. Trust Agreement, made as of the 1st day of November, 1993, among
William J. Alley, Registrant and Chase establishing a grantor
trust in favor of William J. Alley for purposes of paying amounts
under the Amended Supplemental Retirement Plan constituting
Exhibit 10c1 hereto is incorporated herein by reference to
Exhibit 10c5 to the Annual Report on Form 10-K of Registrant for
the Fiscal Year ended December 31, 1993.*
10c7. Schedule identifying substantially identical agreements to the
Trust Agreement constituting Exhibit 10c6 hereto in favor of
Thomas C. Hays, Arnold Henson, John T. Ludes, Robert L. Plancher,
Gilbert L. Klemann, II, Robert J. Rukeyser, Randall W. Larrimore,
Steven C. Mendenhall and Dudley L. Bauerlein, Jr.*
23
<PAGE>
10d1. Executive mortgage program of Registrant in connection with
relocation of corporate headquarters is incorporated herein by
reference to Exhibit 10d1 to the Annual Report on Form 10-K of
Registrant for the Fiscal Year ended December 31, 1991.*
10e1. Resolutions of the Board of Directors of Registrant adopted on
October 28, 1986 and July 26, 1988 adopting and amending a
retirement plan for directors of Registrant who are not officers
or employees of Registrant or a subsidiary thereof are
incorporated herein by reference to Exhibit 10e1 to the Annual
Report on Form 10-K of Registrant for the Fiscal Year ended
December 31, 1991.*
10e2. Resolutions of the Board of Directors of Registrant adopted on
July 26, 1994 amending the resolutions constituting Exhibit 10e1
hereto.*
10f1. Retirement Agreement, made as of January 1, 1995, between
Registrant and Thomas C. Hays.*
10g1. Gallaher Limited Executive Incentive Plan adopted on October 20,
1994.*
10g2. Trust Deed dated March 24, 1983 between Gallaher Limited
("Gallaher") and Gallaher Pensions Limited, and amendments
thereto, providing supplemental retirement benefits to certain
executives of Gallaher are incorporated herein by reference to
Exhibits 10g2 and 10g3 to the Annual Report on Form 10-K of
Registrant for the Fiscal Year ended December 31, 1989 maintained
in Commission File No. 1-9076.*
10g3. Trust Deed dated June 3, 1992 further amending Exhibit 10g2
hereto is incorporated herein by reference to Exhibit 10g3 to the
Annual Report on Form 10-K of Registrant for the Fiscal Year
ended December 31, 1992.*
10g4. Trust Deed dated January 24, 1994 further amending Exhibits 10g2
and 10g3 hereto is incorporated herein by reference to Exhibit
10g4 to the Annual Report on Form 10-K of Registrant for the
Fiscal Year ended December 31, 1993.*
10h1. ACCO World Corporation Management Incentive Plan is incorporated
herein by reference to Exhibit 10h1 to the Annual Report on Form
10-K of Registrant for the Fiscal Year ended December 31, 1991.*
10i1. ACCO World Corporation Supplemental Benefit Plan for Key
Employees is incorporated herein by reference to Exhibit 10k1 to
the Annual Report on Form 10-K of Registrant for the Fiscal Year
ended December 31, 1989 maintained in Commission File No. 1-
9076.*
10j1. Jim Beam Brands Co. Senior Executive and Key Manager Incentive
Plan is incorporated herein by reference to Exhibit 10m4 to the
Annual Report on Form 10-K of Registrant for the Fiscal Year
ended December 31, 1991.*
24
<PAGE>
10j2. Jim Beam Brands Co. Amended Excess Benefit Plan.*
10j3. Trust Agreement, made as of December 24, 1991, among Jim Beam
Brands Co. ("Beam"), Chase and Hewitt Associates, establishing a
trust in favor of Barry M. Berish for purposes of paying amounts
under the Amended Excess Benefit Plan constituting Exhibit 10j2
hereto is incorporated herein by reference to Exhibit 10m3 to the
Annual Report on Form 10-K of Registrant for the Fiscal Year
ended December 31, 1991.*
10j4. Amendment made as of the 17th day of November, 1993 to Trust
Agreement constituting Exhibit 10j3 hereto is incorporated herein
by reference to Exhibit 10k4 to the Annual Report on Form 10-K of
Registrant for the Fiscal Year ended December 31, 1993.*
10j5. Trust Agreement, made as of the 15th day of December, 1993, among
Barry M. Berish, Beam and Chase establishing a grantor trust in
favor of Barry M. Berish for purposes of paying amounts under the
Amended Excess Benefit Plan constituting Exhibit 10j2 hereto is
incorporated herein by reference to Exhibit 10k5 to the Annual
Report on Form 10-K of Registrant for the Fiscal Year ended
December 31, 1993.*
10k1. Resolution of the Board of Directors of Registrant adopted on
December 11, 1985 with respect to retirement and health benefits
provided to William J. Alley is incorporated herein by reference
to Exhibit 10e2 to the Registration Statement on Form 8-B of
Registrant dated January 27, 1986.*
10k2. Agreement dated as of March 1, 1988 between Registrant and
William J. Alley and amendments thereto providing certain
retirement benefits is incorporated herein by reference to
Exhibit 10l2 to the Annual Report on Form 10-K of Registrant for
the Fiscal Year ended December 31, 1992.*
10l1. Resolutions of the Board of Directors of Registrant adopted on
December 11, 1985 and February 23, 1988 with respect to
retirement and health benefits provided to Arnold Henson is
incorporated herein by reference to Exhibit 10m1 to the Annual
Report on Form 10-K of Registrant for the Fiscal Year ended
December 31, 1992.*
10m1. Resolution of the Board of Directors of Registrant adopted on
November 27, 1990 with respect to retirement and health benefits
provided to Gilbert L. Klemann, II is incorporated herein by
reference to Exhibit 10p1 to the Annual Report on Form 10-K of
Registrant for the Fiscal Year ended December 31, 1991.*
10n1. Service Agreement dated November 9, 1994 between Gallaher and
Peter M. Wilson.*
10n2. Letter dated September 20, 1991 from Gallaher in respect of
retirement benefits provided to Peter M. Wilson is incorporated
herein by reference to Exhibit 10o2 to the Annual Report on Form
10-K of Registrant for the Fiscal Year ended December 31, 1993.*
25
<PAGE>
10n3. Letter dated March 15, 1994 amending Exhibit 10n2 hereto is
incorporated herein by reference to Exhibit 10o3 to the Annual
Report on Form 10-K of Registrant for the Fiscal Year ended
December 31, 1993.*
10o1. ACCO World Corporation Supplemental Retirement Plan.*
10o2. Trust Agreement, made as of the 1st day of July, 1994, among ACCO
World Corporation, Chase, et al. establishing a trust in favor of
Norman H. Wesley for purposes of paying amounts under the ACCO
World Corporation Supplemental Retirement Plan constituting
Exhibit 10o1 hereto.*
10o3. Trust Agreement, made as of the 1st day of July, 1994, among
Norman H. Wesley, ACCO World Corporation and Chase establishing a
grantor trust in favor of Norman H. Wesley for purposes of paying
amounts under the ACCO World Corporation Supplemental Retirement
Plan constituting Exhibit 10o1 hereto.*
10p1. Employment Agreement entered into as of June 8, 1987 by and
between ACCO International Inc. (a predecessor of ACCO USA, Inc.)
and Norman H. Wesley is incorporated herein by reference to
Exhibit 10r1 to the Annual Report on Form 10-K of Registrant for
the Fiscal Year ended December 31, 1990.*
10q1. Letters dated July 31, 1984 and February 26, 1990 from Registrant
with respect to deferred payment of fees to Eugene R. Anderson
are incorporated herein by reference to Exhibit 10t1 to the
Annual Report on Form 10-K of Registrant for the Fiscal Year
ended December 31, 1991.*
10r1. Agreement dated January 2, 1991 between Registrant and Gilbert L.
Klemann, II is incorporated herein by reference to Exhibit 10s1
to the Annual Report on Form 10-K of Registrant for the Fiscal
Year ended December 31, 1992.*
10r2. Amendment dated November 28, 1994 to the Agreement constituting
Exhibit 10r1 hereto.*
10r3. Schedule identifying substantially identical agreements to the
Agreement and the Amendment thereto constituting Exhibits 10r1
and 10r2 hereto, respectively, entered into by Registrant with
Thomas C. Hays, John T. Ludes, Robert L. Plancher, Robert J.
Rukeyser, Randall W. Larrimore, Steven C. Mendenhall, Dudley L.
Bauerlein, Jr., and Charles H. McGill.*
10s1. Trust Agreement, made as of the 2nd day of January, 1991, among
Registrant, Chase, et al. establishing a trust in favor of
Gilbert L. Klemann, II for purposes of paying amounts under the
Agreement constituting Exhibits 10r1 and 10r2 hereto.*
10s2. Amendment made as of the 1st day of November, 1993 to Trust
Agreement constituting Exhibit 10s1 hereto.*
26
<PAGE>
10s3. Schedule identifying substantially identical agreements to the
Trust Agreement and Amendment thereto constituting Exhibits 10s1
and 10s2 hereto, respectively, in favor of Thomas C. Hays, John
T. Ludes, Robert L. Plancher, Robert J. Rukeyser, Randall W.
Larrimore, Steven C. Mendenhall and Dudley L. Bauerlein, Jr.*
10t1. Agreement dated as of March 1, 1988 and amendments thereto
between Registrant and Thomas C. Hays are incorporated herein by
reference to Exhibit 10v1 to the Annual Report on Form 10-K of
Registrant for the Fiscal Year ended December 31, 1992.*
10t2. Amendment effective as of January 1, 1995 to the Agreement
constituting Exhibit 10t1 hereto.*
10t3. Amendment effective as of January 1, 1995 to the Agreement and
Amendment thereto constituting Exhibits 10t1 and 10t2 hereto,
respectively.*
10u1. Agreement dated as of January 2, 1991 between Registrant and
Gilbert L. Klemann, II and amendment thereto is incorporated
herein by reference to Exhibit 10y1 to the Annual Report on Form
10-K of Registrant for the Fiscal Year ended December 31, 1991.*
10u2. Agreement dated as of October 28, 1991 amending the Agreement
constituting Exhibit 10u1 hereto is incorporated herein by
reference to Exhibit 10w2 to the Annual Report on Form 10-K of
Registrant for the Fiscal Year ended December 31, 1992.*
10u3. Amendment effective as of January 1, 1995 to the Agreement and
Amendment thereto constituting Exhibits 10u1 and 10u2 hereto,
respectively.*
10u4. Schedule identifying substantially identical agreements to the
Agreement and Amendments thereto constituting Exhibits 10u1, 10u2
and 10u3 hereto entered into by Registrant with John T. Ludes,
Robert L. Plancher, Robert J. Rukeyser, Steven C. Mendenhall and
Dudley L. Bauerlein, Jr.*
10v1. Agreement dated March 7, 1988 between Registrant and Randall W.
Larrimore and amendments thereto is incorporated herein by
reference to Exhibit 10x1 to the Annual Report on Form 10-K of
Registrant for the Fiscal Year ended December 31, 1992.*
10v2. Amendment effective as of January 1, 1995 to the Agreement
constituting Exhibit 10v1 hereto.*
10w1. Agreement dated February 24, 1995 between Registrant and Charles
H. McGill.*
l0x1. Agreement dated as of February 1, 1990 between Beam and Barry M.
Berish is incorporated herein by reference to Exhibit 10pp1 to
the Annual Report on Form 10-K of Registrant for the Fiscal Year
ended December 31, 1990.*
27
<PAGE>
l0y1. Rights Agreement dated as of December 13, 1987 between Registrant
and First Chicago Trust Company of New York, as Rights Agent, and
amendments thereto is incorporated herein by reference to Exhibit
10aa1 to the Annual Report on Form 10-K of Registrant for the
Fiscal Year ended December 31, 1992.*
11. Statement setting forth net income for computation of earnings
per Common share, primary and fully diluted, and statement
setting forth computation of weighted average number of Common
shares outstanding on a fully diluted basis.
12. Statement re computation of ratio of earnings to fixed charges.
13. 1994 Annual Report to Stockholders of Registrant.
21. Subsidiaries of Registrant.
23(i)a. Consent of Independent Accountants, Coopers & Lybrand L.L.P.
23(i)b. Consent of Counsel, Chadbourne & Parke.
24. Powers of Attorney relating to execution of this Annual Report on
Form 10-K.
27. Financial Data Schedule (Article 5).
* Indicates that exhibit is a management contract or compensatory
plan or arrangement.
In lieu of filing certain instruments with respect to long-term
debt of the kind described in Item 601(b)(4) of Regulation S-K, Registrant
agrees to furnish a copy of such instruments to the Securities and Exchange
Commission upon request.
(b) Reports on Form 8-K.
Registrant filed a Current Report on Form 8-K, dated October 21, 1994,
in respect of Registrant's press release dated October 21, 1994
announcing Registrant's financial results for the three-month and
nine-month periods ended September 30, 1994 (Items 5 and 7(c)).
Registrant filed a Current Report on Form 8-K, dated October 28, 1994,
in respect of Registrant's press release dated October 27, 1994
announcing that the Federal Trade Commission would challenge the sale
of The American Tobacco Company (Items 5 and 7(c)).
Registrant filed a Current Report on Form 8-K, dated November 30,
1994, in respect of Registrant's press release dated November 30, 1994
announcing that Registrant had executed a definitive agreement for the
sale of Registrant's Franklin Life Insurance business to American
General Corporation for $1.17 billion in cash (Items 5 and 7(c)).
Registrant filed a Current Report on Form 8-K, dated December 22, 1994
in respect of Registrant's press releases dated December 22, 1994
announcing that the Federal Trade Commission ("FTC") approved a
28
<PAGE>
settlement with B.A.T Industries p.l.c. that removed the FTC's
opposition to the sale of Registrant's subsidiary, The American
Tobacco Company, to B.A.T and that Registrant and B.A.T had completed
such sale that day and the simultaneous transfer by Registrant's U.K.-
based subsidiary, Gallaher Limited, of the Silk Cut trademark to B.A.T
in exchange for a long-term manufacturing arrangement (Items 5 and
7(c)).
Registrant filed a Current Report on Form 8-K, dated January 5, 1995,
in respect of Registrant's pro forma financial information in
connection with the sale of Registrant's subsidiary, The American
Tobacco Company, on December 22, 1994 (Items 2 and 7(b) and (c)).
Registrant filed a Current Report on Form 8-K, dated January 24, 1995,
in respect of Registrant's press release dated January 24, 1995
announcing Registrant's financial results for the three-month and
twelve-month periods ended December 31, 1994 (Items 5 and 7(c)).
Registrant filed a Current Report on Form 8-K, dated January 31, 1995,
announcing that the sale of Registrant's Franklin Life Insurance
business to American General Corporation for $1.17 billion in cash was
completed on January 31, 1995 (Items 5 and 7(c)).
Registrant filed a Current Report on Form 8-K, dated February 8, 1995,
in respect of (i) Registrant's pro forma financial information in
connection with the sale of Registrant's Franklin Life Insurance
business on January 31, 1995 and (ii) amendments to Registrant's By-
laws adopted on January 31, 1995 (Items 2 and 7(b) and (c)).
Registrant filed a Current Report on Form 8-K, dated February 16,
1995, in respect of certain statements by Registrant to a consumer
analyst group (Items 5 and 7(c)).
This annual report shall not be construed as a waiver of the
right to contest the validity or scope of any or all of the provisions of
the Securities Exchange Act of 1934, as amended, under the Constitution of
the United States, or the validity of any rule or regulation made or to be
made under such Act.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN BRANDS, INC.
(Registrant)
By Thomas C. Hays
Thomas C. Hays
Chairman of the Board and
Date: March 28, 1995 Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this report has been signed below by the following
persons on behalf of Registrant and in the capacities and on the dates
indicated.
Thomas C. Hays
Thomas C. Hays, Chairman of the Board and
Chief Executive Officer (principal executive
officer) and Director
Date: March 28, 1995
John T. Ludes*
John T. Ludes, President and Chief
Operating Officer and Director
Date: March 28, 1995
Robert L. Plancher*
Robert L. Plancher, Senior Vice President and
Chief Accounting Officer (principal
accounting officer)
Date: March 28, 1995
Dudley L. Bauerlein, Jr.
Dudley L. Bauerlein, Jr., Senior Vice President and
Chief Financial Officer (principal
financial officer)
Date: March 28, 1995
30
<PAGE>
William J. Alley*
William J. Alley, Director
Date: March 28, 1995
Eugene R. Anderson*
Eugene R. Anderson, Director
Date: March 28, 1995
Patricia O. Ewers*
Patricia O. Ewers, Director
Date: March 28, 1995
John W. Johnstone, Jr.*
John W. Johnstone, Jr., Director
Date: March 28, 1995
Wendell J. Kelley*
Wendell J. Kelley, Director
Date: March 28, 1995
Sidney Kirschner*
Sidney Kirschner, Director
Date: March 28, 1995
Gordon R. Lohman*
Gordon R. Lohman, Director
Date: March 28, 1995
Charles H. Pistor, Jr.*
Charles H. Pistor, Jr., Director
Date: March 28, 1995
Peter M. Wilson*
Peter M. Wilson, Director
Date: March 28, 1995
*By A. Robert Colby
A. Robert Colby, Attorney-in-Fact
31
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
Pages
-----
AMERICAN BRANDS, INC. AND SUBSIDIARIES
Report of Independent Accountants F-2
Schedules
---------
I Condensed Financial Information of Registrant
As of December 31, 1994 and 1993 and for
the years ended December 31, 1994, 1993
and 1992 F-3
II Valuation and qualifying accounts
For the years ended December 31,
1994, 1993 and 1992 F-8
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
American Brands, Inc.:
Our report on the consolidated financial statements of American
Brands, Inc. and Subsidiaries has been incorporated by reference in this
Form 10-K from the 1994 Annual Report to Stockholders of American Brands,
Inc. In connection with our audits of such financial statements, we have
also audited the related financial statement schedules listed in the index
on page F-1 of this Form 10-K.
In our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial statements taken
as a whole, present fairly, in all material respects, the information
required to be included therein.
COOPERS & LYBRAND L.L.P.
1301 Avenue of the Americas
New York, New York
February 1, 1995
F-2
<PAGE>
AMERICAN BRANDS, INC. (PARENT COMPANY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
(In millions)
December 31,
-----------------------
1994 1993
---- ----
(Restated)
Assets
Current assets
Cash and cash equivalents $ 3.4 $ -
Receivables from affiliated companies 579.7 565.8
Net assets of discontinued operations 1,170.0 -
Other current assets 32.0 51.4
-------- --------
Total current assets 1,785.1 617.2
-------- --------
Investment in subsidiaries 2,382.4 2,222.5
Long-term receivables from affiliated companies 3,143.0 3,724.8
Net assets of discontinued operations - 1,344.0
Other assets 138.5 141.2
-------- --------
Total assets $7,449.0 $8,049.7
======== ========
Liabilities and stockholders' equity
Current liabilities
Commercial paper $ 103.3 $ 711.3
Payables to affiliated companies 128.9 113.2
Other current liabilities 477.2 265.9
Current portion of long-term debt 485.4 156.5
-------- --------
Total current liabilities 1,194.8 1,246.9
Long-term debt 1,493.6 2,438.4
Postretirement and other liabilities 123.1 93.0
-------- --------
Total liabilities 2,811.5 3,778.3
-------- --------
Convertible preferred stock - redeemable at
Company's option 15.7 17.1
-------- --------
Common stockholders' equity 4,621.8 4,254.3
-------- --------
Total liabilities and stockholders' equity $7,449.0 $8,049.7
======== ========
The "Notes to Consolidated Financial Statements of American Brands, Inc.
and Subsidiaries" contained in the 1994 Annual Report to Stockholders of
Registrant are an integral part of these statements.
See accompanying "Notes to Condensed Financial Information of Registrant."
F-3
<PAGE>
AMERICAN BRANDS, INC. (PARENT COMPANY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF INCOME
(In millions)
For the Years Ended
December 31,
-------------------------------
1994 1993 1992
---- ---- ----
(Restated)(Restated)
Interest from affiliates $ 296.5 $332.6 $357.8
Expenses:
Corporate administrative expenses 69.9 78.1 80.7
Interest: affiliates 10.0 12.9 8.2
non-affiliates 191.6 203.7 219.8
Other expenses, net 16.3 12.9 12.1
------- ------ ------
Total expenses 287.8 307.6 320.8
Gain on disposal of business 577.9 - -
------- ------ ------
Income from continuing operations
before income taxes and other items 586.6 25.0 37.0
Income tax expense (benefit) 54.2 4.1 (3.1)
------- ------ ------
Income from continuing operations
before equity in net income of
subsidiaries and cumulative effect
of accounting changes 532.4 20.9 40.1
Equity in net income of subsidiaries 352.7 349.5 746.8
------- ------ ------
Income from continuing operations
before cumulative effect of
accounting changes 885.1 370.4 786.9
Income (loss) from discontinued
operations (151.0) 127.0 96.9
Cumulative effect of accounting changes
(net of income taxes of $16.9) - (27.6) -
------- ------ ------
Net income $ 734.1 $469.8 $883.8
======= ====== ======
The "Notes to Consolidated Financial Statements of American Brands, Inc.
and Subsidiaries" contained in the 1994 Annual Report to Stockholders of
Registrant are an integral part of these statements.
See accompanying "Notes to Condensed Financial Information of Registrant."
F-4
<PAGE>
AMERICAN BRANDS, INC. (PARENT COMPANY)
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
(In millions)
For the Years Ended
December 31,
---------------------------------
1994 1993 1992
---- ---- ----
(Restated)(Restated)
Net cash provided from operating activities $ 390.7 $ 618.4 $ 625.1
--------- ------- -------
Investing activities
Proceeds from the disposition of
operations 989.4 - -
Additional investment in subsidiary - - (1.8)
Other, net (0.8) 4.4 (4.0)
--------- ------- -------
Net cash provided (used) by investing
activities 988.6 4.4 (5.8)
--------- ------- -------
Financing activities
(Decrease) increase in short-term debt (908.0) 278.0 261.6
Issuance of long-term debt 32.6 473.0 351.4
Repayment of long-term debt (359.5) (364.7) (672.6)
Dividends to stockholders (403.1) (399.1) (377.8)
Cash purchases of Common stock for treasury (20.1) (57.9) (100.4)
Change in intercompany balances, net 242.5 (592.3) (14.2)
Redemption and purchases of $2.75
Preferred stock - - (134.4)
Other financing activities, net 1.9 (4.9) 12.0
--------- ------- -------
Net cash used by financing activities (1,413.7) (667.9) (674.4)
--------- ------- -------
Cash provided by discontinued operations 37.8 45.1 55.1
--------- ------- -------
Net increase in cash and cash
equivalents $ 3.4 $ - $ -
========= ======= =======
Cash and cash equivalents at
Beginning of year $ - $ - $ -
End of year $ 3.4 $ - $ -
========= ======= =======
Cash paid during the year for
Interest $ 207.7 $ 220.2 $ 233.6
========= ======= =======
Income taxes $ 195.3 $ 238.5 $ 280.8
========= ======= =======
The "Notes to Consolidated Financial Statements of American Brands, Inc.
and Subsidiaries" contained in the 1994 Annual Report to Stockholders of
Registrant are an integral part of these statements.
See accompanying "Notes to Condensed Financial Information of Registrant."
F-5
<PAGE>
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT
------------------------------------------------------
1. Basis of Presentation
Pursuant to the rules and regulations of the Securities and Exchange
Commission, the Condensed Financial Statements of the Registrant do not
include all of the information and notes normally included with
financial statements prepared in accordance with generally accepted
accounting principles. Therefore, these Condensed Financial Statements
should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included in the Annual Report to
Stockholders of Registrant as referenced in Form 10-K, Part II, Item 8.
The financial statements have been restated for discontinued
operations. The accompanying notes present amounts related only to
continuing operations.
2. Dispositions
On December 22, 1994, the Registrant sold The American Tobacco
Company, its domestic tobacco business, for $1 billion in cash, before
related expenses. The gain on this disposal increased income from
continuing operations before income taxes by $577.9 million or $508.3
million after applicable income taxes of $69.6 million.
3. Discontinued Operations
On November 30, 1994, the Registrant entered into an agreement to
sell The Franklin Life Insurance business ("Franklin") for $1.17
billion in cash, before related expenses. The sale was completed on
January 31, 1995. The net assets and results of operations of Franklin
have been reclassified to identify them as discontinued operations.
4. Accounting Changes
On January 1, 1993, Registrant adopted FAS Statement No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
and FAS No. 112, "Employers' Accounting for Postemployment Benefits."
The initial effects of adopting these statements were recorded as
cumulative changes in accounting principles.
5. Investment in Subsidiaries
During 1994, $361 million of long-term receivables from affiliated
companies was contributed to the capital of subsidiaries by Registrant.
During 1993, $134.8 million of receivables from affiliated companies
was contributed to the capital of a subsidiary by Registrant.
6. Cash Dividends from Subsidiaries
Dividends of $374.6 million in 1994, $634.7 million in 1993, and
$593 million in 1992 were paid to Registrant by its subsidiaries,
excluding Franklin.
F-6
<PAGE>
NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT (Concluded)
7. Debt
The components of long-term debt are as follows (In millions):
1994 1993
---- ----
Notes payable $ - $ 300.0
Revolving credit notes 26.4 195.8
Other notes 274.0 356.5
5 3/4% Eurodollar Convertible Debentures,
Due 2005 200.0 200.0
7 5/8% Eurodollar Convertible Debentures,
Due 2001 150.0 150.0
Other Eurodollar Convertible Debentures 40.7 41.0
8 1/2% Notes, Due 2003 200.0 200.0
5 1/4% Notes, Due 1995 200.0 200.0
8 5/8% Debentures, Due 2021 150.0 150.0
9 1/8% Debentures, Due 2016 150.0 150.0
7 7/8% Debentures, Due 2023 150.0 150.0
7 1/2% Notes, Due 1999 150.0 150.0
9% Notes, Due 1999 100.0 100.0
9 1/2% Eurosterling Notes, Due 1994 - 74.0
9 1/4% Eurosterling Notes, Due 1998 78.3 74.0
12% Eurosterling Notes, Due 1995 62.6 59.2
12 1/2% Sterling Loan Stock, Due 2009 47.0 44.4
-------- --------
1,979.0 2,594.9
Less current portion 485.4 156.5
-------- --------
$1,493.6 $2,438.4
======== ========
Estimated payments for maturing debt and sinking fund requirements
during the next five years, assuming the one-time put option on the
5 3/4% Eurodollar Convertible Debentures is exercised in 1995, are as
follows: 1995, $485.4 million; 1996, $101 million; 1997, $53.8 million;
1998, $172.8 million; and 1999, $280.9 million.
At December 31, 1994, the Registrant guaranteed short-term committed
credit facilities of a U.K.-based subsidiary which provided for
unsecured borrowings of up to $513 million, of which $57.8 million was
outstanding.
F-7
<PAGE>
AMERICAN BRANDS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1994, 1993 and 1992
(In millions)
---------------------------------------------------------------------------
Col. A Col. B Col. C Col. D Col. E
------ ------ ------ ------ ------
Additions
---------
Charged Balance
Balance at to Costs at End
Beginning and of
Description of Period Expenses Deductions Period
---------------------------------------------------------------------------
1994:
Allowance for cash
discounts $ 6.3 $ 93.0 $ 92.7 (1) $ 5.3
1.3 (4)
Allowance for
returns 21.9 90.9 93.2 (1) 12.6
7.0 (4)
Allowance for
doubtful accounts 34.3 11.3 (0.9)(2) 34.1
9.5 (3)
2.9 (4)
----- ------ ------ -----
$62.5 $195.2 $205.7 $52.0
===== ====== ====== =====
1993:
Allowance for cash
discounts $ 7.9 $ 87.3 $ 88.9 (1) $ 6.3
Allowance for
returns 17.3 150.6 146.0 (1) 21.9
Allowance for
doubtful accounts 34.8 11.7 11.7 (3) 34.3
0.5 (2)
----- ------ ------ -----
$60.0 $249.6 $247.1 $62.5
===== ====== ====== =====
1992:
Allowance for cash
discounts $ 7.5 $ 88.6 $ 88.2 (1) $ 7.9
Allowance for
returns 9.3 114.3 106.0 (1) 17.3
0.3 (2)
Allowance for
doubtful accounts 39.3 11.9 13.1 (3) 34.8
3.3 (2)
----- ------ ------ -----
$56.1 $214.8 $210.9 $60.0
----------------------------- ===== ====== ====== =====
(1) Cash discounts and returns allowed customers.
(2) Effect of changes in foreign exchange rates.
(3) Doubtful accounts written off, net of recoveries.
(4) Balance at disposal date of subsidiaries.
F-8
<PAGE>
EXHIBIT INDEX
3(i). Certificate of Incorporation of Registrant as in effect on the
date hereof is incorporated herein by reference to Exhibit 3a2 to
the Quarterly Report on Form 10-Q of Registrant dated May 14,
1990.
3(ii). By-laws of Registrant as in effect on the date hereof are
incorporated herein by reference to Exhibit 3(ii)b to the Current
Report on Form 8-K of Registrant dated February 8, 1995.
10a1. Article XII ("Incentive Compensation") of the By-laws of
Registrant is incorporated herein by reference to Exhibit 3(ii)b
to the Current Report on Form 8-K of Registrant dated February 8,
1995.*
10b1. Stock Option Plan of American Brands, Inc., as amended is
incorporated herein by reference to Exhibit 10b1 to the Annual
Report on Form 10-K of Registrant for the Fiscal Year ended
December 31, 1992.*
10b2. Amendment to Stock Option Plan of American Brands, Inc.
constituting Exhibit 10b1 hereto is incorporated herein by
reference to Exhibit 10a to the Quarterly Report on Form 10-Q of
Registrant dated November 11, 1993.*
10b3. 1986 Stock Option Plan of American Brands, Inc. and amendments
thereto is incorporated herein by reference to Exhibit 10b2 to
the Annual Report on Form 10-K of Registrant for the Fiscal Year
ended December 31, 1992.*
10b4. Amendment to 1986 Stock Option Plan of American Brands, Inc.
constituting Exhibit 10b3 hereto is incorporated herein by
reference to Exhibit 10b to the Quarterly Report on Form 10-Q of
Registrant dated November 11, 1993.*
10b5. Amendment to 1986 Stock Option Plan of American Brands, Inc.
constituting Exhibits 10b3 and 10b4 hereto is incorporated herein
by reference to Exhibit 10b to the Quarterly Report on Form 10-Q
of Registrant dated August 11, 1994.*
10b6. 1990 Long-Term Incentive Plan of American Brands, Inc. (As
Amended and Restated as of January 1, 1994) is incorporated
herein by reference to Exhibit 10a to the Quarterly Report on
Form 10-Q of Registrant dated August 11, 1994.*
10c1. Amended Supplemental Retirement Plan of American Brands, Inc.*
10c2. Trust Agreement, made as of the 1st day of February, 1989, among
Registrant, The Chase Manhattan Bank (National Association)
("Chase"), et al. establishing a trust in favor of William J.
Alley for purposes of paying amounts under the Amended
Supplemental Retirement Plan constituting Exhibit 10c1 hereto is
1
<PAGE>
incorporated herein by reference to Exhibit 10c2 to the Annual
Report on Form 10-K of Registrant for the Fiscal Year ended
December 31, 1988 maintained in Commission File No. 1-9076.*
10c3. Amendment made as of the 1st day of November, 1993 to Trust
Agreement constituting Exhibit 10c2 hereto is incorporated herein
by reference to Exhibit 10c3 to the Annual Report on Form 10-K of
Registrant for the Fiscal Year ended December 31, 1993.*
10c4. Amendment made as of the 1st day of January, 1995, to the Trust
Agreement constituting Exhibits 10c2 and 10c3 hereto.*
10c5. Schedule identifying substantially identical agreements to the
Trust Agreement and the Amendments thereto constituting Exhibits
10c2, 10c3 and 10c4 hereto, respectively, in favor of Thomas C.
Hays, Arnold Henson, John T. Ludes, Robert L. Plancher, Gilbert
L. Klemann, II, Robert J. Rukeyser, Randall W. Larrimore, Steven
C. Mendenhall and Dudley L. Bauerlein, Jr.*
10c6. Trust Agreement, made as of the 1st day of November, 1993, among
William J. Alley, Registrant and Chase establishing a grantor
trust in favor of William J. Alley for purposes of paying amounts
under the Amended Supplemental Retirement Plan constituting
Exhibit 10c1 hereto is incorporated herein by reference to
Exhibit 10c5 to the Annual Report on Form 10-K of Registrant for
the Fiscal Year ended December 31, 1993.*
10c7. Schedule identifying substantially identical agreements to the
Trust Agreement constituting Exhibit 10c6 hereto in favor of
Thomas C. Hays, Arnold Henson, John T. Ludes, Robert L. Plancher,
Gilbert L. Klemann, II, Robert J. Rukeyser, Randall W. Larrimore,
Steven C. Mendenhall and Dudley L. Bauerlein, Jr.*
10d1. Executive mortgage program of Registrant in connection with
relocation of corporate headquarters is incorporated herein by
reference to Exhibit 10d1 to the Annual Report on Form 10-K of
Registrant for the Fiscal Year ended December 31, 1991.*
10e1. Resolutions of the Board of Directors of Registrant adopted on
October 28, 1986 and July 26, 1988 adopting and amending a
retirement plan for directors of Registrant who are not officers
or employees of Registrant or a subsidiary thereof are
incorporated herein by reference to Exhibit 10e1 to the Annual
Report on Form 10-K of Registrant for the Fiscal Year ended
December 31, 1991.*
10e2. Resolutions of the Board of Directors of Registrant adopted on
July 26, 1994 amending the resolutions constituting Exhibit 10e1
hereto.*
10f1. Retirement Agreement, made as of January 1, 1995, between
Registrant and Thomas C. Hays.*
10g1. Gallaher Limited Executive Incentive Plan adopted on October 20,
1994.*
2
<PAGE>
10g2. Trust Deed dated March 24, 1983 between Gallaher Limited
("Gallaher") and Gallaher Pensions Limited, and amendments
thereto, providing supplemental retirement benefits to certain
executives of Gallaher are incorporated herein by reference to
Exhibits 10g2 and 10g3 to the Annual Report on Form 10-K of
Registrant for the Fiscal Year ended December 31, 1989 maintained
in Commission File No. 1-9076.*
10g3. Trust Deed dated June 3, 1992 further amending Exhibit 10g2
hereto is incorporated herein by reference to Exhibit 10g3 to the
Annual Report on Form 10-K of Registrant for the Fiscal Year
ended December 31, 1992.*
10g4. Trust Deed dated January 24, 1994 further amending Exhibits 10g2
and 10g3 hereto is incorporated herein by reference to Exhibit
10g4 to the Annual Report on Form 10-K of Registrant for the
Fiscal Year ended December 31, 1993.*
10h1. ACCO World Corporation Management Incentive Plan is incorporated
herein by reference to Exhibit 10h1 to the Annual Report on Form
10-K of Registrant for the Fiscal Year ended December 31, 1991.*
10i1. ACCO World Corporation Supplemental Benefit Plan for Key
Employees is incorporated herein by reference to Exhibit 10k1 to
the Annual Report on Form 10-K of Registrant for the Fiscal Year
ended December 31, 1989 maintained in Commission File No. 1-
9076.*
10j1. Jim Beam Brands Co. Senior Executive and Key Manager Incentive
Plan is incorporated herein by reference to Exhibit 10m4 to the
Annual Report on Form 10-K of Registrant for the Fiscal Year
ended December 31, 1991.*
10j2. Jim Beam Brands Co. Amended Excess Benefit Plan.*
10j3. Trust Agreement, made as of December 24, 1991, among Jim Beam
Brands Co. ("Beam"), Chase and Hewitt Associates, establishing a
trust in favor of Barry M. Berish for purposes of paying amounts
under the Amended Excess Benefit Plan constituting Exhibit 10j2
hereto is incorporated herein by reference to Exhibit 10m3 to the
Annual Report on Form 10-K of Registrant for the Fiscal Year
ended December 31, 1991.*
10j4. Amendment made as of the 17th day of November, 1993 to Trust
Agreement constituting Exhibit 10j3 hereto is incorporated herein
by reference to Exhibit 10k4 to the Annual Report on Form 10-K of
Registrant for the Fiscal Year ended December 31, 1993.*
10j5. Trust Agreement, made as of the 15th day of December, 1993, among
Barry M. Berish, Beam and Chase establishing a grantor trust in
favor of Barry M. Berish for purposes of paying amounts under the
Amended Excess Benefit Plan constituting Exhibit 10j2 hereto is
incorporated herein by reference to Exhibit 10k5 to the Annual
Report on Form 10-K of Registrant for the Fiscal Year ended
December 31, 1993.*
3
<PAGE>
10k1. Resolution of the Board of Directors of Registrant adopted on
December 11, 1985 with respect to retirement and health benefits
provided to William J. Alley is incorporated herein by reference
to Exhibit 10e2 to the Registration Statement on Form 8-B of
Registrant dated January 27, 1986.*
10k2. Agreement dated as of March 1, 1988 between Registrant and
William J. Alley and amendments thereto providing certain
retirement benefits is incorporated herein by reference to
Exhibit 10l2 to the Annual Report on Form 10-K of Registrant for
the Fiscal Year ended December 31, 1992.*
10l1. Resolutions of the Board of Directors of Registrant adopted on
December 11, 1985 and February 23, 1988 with respect to
retirement and health benefits provided to Arnold Henson is
incorporated herein by reference to Exhibit 10m1 to the Annual
Report on Form 10-K of Registrant for the Fiscal Year ended
December 31, 1992.*
10m1. Resolution of the Board of Directors of Registrant adopted on
November 27, 1990 with respect to retirement and health benefits
provided to Gilbert L. Klemann, II is incorporated herein by
reference to Exhibit 10p1 to the Annual Report on Form 10-K of
Registrant for the Fiscal Year ended December 31, 1991.*
10n1. Service Agreement dated November 9, 1994 between Gallaher and
Peter M. Wilson.*
10n2. Letter dated September 20, 1991 from Gallaher in respect of
retirement benefits provided to Peter M. Wilson is incorporated
herein by reference to Exhibit 10o2 to the Annual Report on Form
10-K of Registrant for the Fiscal Year ended December 31, 1993.*
10n3. Letter dated March 15, 1994 amending Exhibit 10n2 hereto is
incorporated herein by reference to Exhibit 10o3 to the Annual
Report on Form 10-K of Registrant for the Fiscal Year ended
December 31, 1993.*
10o1. ACCO World Corporation Supplemental Retirement Plan.*
10o2. Trust Agreement, made as of the 1st day of July, 1994, among ACCO
World Corporation, Chase, et al. establishing a trust in favor of
Norman H. Wesley for purposes of paying amounts under the ACCO
World Corporation Supplemental Retirement Plan constituting
Exhibit 10o1 hereto.*
10o3. Trust Agreement, made as of the 1st day of July, 1994, among
Norman H. Wesley, ACCO World Corporation and Chase establishing a
grantor trust in favor of Norman H. Wesley for purposes of paying
amounts under the ACCO World Corporation Supplemental Retirement
Plan constituting Exhibit 10o1 hereto.*
4
<PAGE>
10p1. Employment Agreement entered into as of June 8, 1987 by and
between ACCO International Inc. (a predecessor of ACCO USA, Inc.)
and Norman H. Wesley is incorporated herein by reference to
Exhibit 10r1 to the Annual Report on Form 10-K of Registrant for
the Fiscal Year ended December 31, 1990.*
10q1. Letters dated July 31, 1984 and February 26, 1990 from Registrant
with respect to deferred payment of fees to Eugene R. Anderson
are incorporated herein by reference to Exhibit 10t1 to the
Annual Report on Form 10-K of Registrant for the Fiscal Year
ended December 31, 1991.*
10r1. Agreement dated January 2, 1991 between Registrant and Gilbert L.
Klemann, II is incorporated herein by reference to Exhibit 10s1
to the Annual Report on Form 10-K of Registrant for the Fiscal
Year ended December 31, 1992.*
10r2. Amendment dated November 28, 1994 to the Agreement constituting
Exhibit 10r1 hereto.*
10r3. Schedule identifying substantially identical agreements to the
Agreement and the Amendment thereto constituting Exhibits 10r1
and 10r2 hereto, respectively, entered into by Registrant with
Thomas C. Hays, John T. Ludes, Robert L. Plancher, Robert J.
Rukeyser, Randall W. Larrimore, Steven C. Mendenhall, Dudley L.
Bauerlein, Jr., and Charles H. McGill.*
10s1. Trust Agreement, made as of the 2nd day of January, 1991, among
Registrant, Chase, et al. establishing a trust in favor of
Gilbert L. Klemann, II for purposes of paying amounts under the
Agreement constituting Exhibits 10r1 and 10r2 hereto.*
10s2. Amendment made as of the 1st day of November, 1993 to Trust
Agreement constituting Exhibit 10s1 hereto.*
10s3. Schedule identifying substantially identical agreements to the
Trust Agreement and Amendment thereto constituting Exhibits 10s1
and 10s2 hereto, respectively, in favor of Thomas C. Hays, John
T. Ludes, Robert L. Plancher, Robert J. Rukeyser, Randall W.
Larrimore, Steven C. Mendenhall and Dudley L. Bauerlein, Jr.*
10t1. Agreement dated as of March 1, 1988 and amendments thereto
between Registrant and Thomas C. Hays are incorporated herein by
reference to Exhibit 10v1 to the Annual Report on Form 10-K of
Registrant for the Fiscal Year ended December 31, 1992.*
10t2. Amendment effective as of January 1, 1995 to the Agreement
constituting Exhibit 10t1 hereto.*
10t3. Amendment effective as of January 1, 1995 to the Agreement and
Amendment thereto constituting Exhibits 10t1 and 10t2 hereto,
respectively.*
5
<PAGE>
10u1. Agreement dated as of January 2, 1991 between Registrant and
Gilbert L. Klemann, II and amendment thereto is incorporated
herein by reference to Exhibit 10y1 to the Annual Report on Form
10-K of Registrant for the Fiscal Year ended December 31, 1991.*
10u2. Agreement dated as of October 28, 1991 amending the Agreement
constituting Exhibit 10u1 hereto is incorporated herein by
reference to Exhibit 10w2 to the Annual Report on Form 10-K of
Registrant for the Fiscal Year ended December 31, 1992.*
10u3. Amendment effective as of January 1, 1995 to the Agreement and
Amendment thereto constituting Exhibits 10u1 and 10u2 hereto,
respectively.*
10u4. Schedule identifying substantially identical agreements to the
Agreement and Amendments thereto constituting Exhibits 10u1, 10u2
and 10u3 hereto entered into by Registrant with John T. Ludes,
Robert L. Plancher, Robert J. Rukeyser, Steven C. Mendenhall and
Dudley L. Bauerlein, Jr.*
10v1. Agreement dated March 7, 1988 between Registrant and Randall W.
Larrimore and amendments thereto is incorporated herein by
reference to Exhibit 10x1 to the Annual Report on Form 10-K of
Registrant for the Fiscal Year ended December 31, 1992.*
10v2. Amendment effective as of January 1, 1995 to the Agreement
constituting Exhibit 10v1 hereto.*
10w1. Agreement dated February 24, 1995 between Registrant and Charles
H. McGill.*
l0x1. Agreement dated as of February 1, 1990 between Beam and Barry M.
Berish is incorporated herein by reference to Exhibit 10pp1 to
the Annual Report on Form 10-K of Registrant for the Fiscal Year
ended December 31, 1990.*
l0y1. Rights Agreement dated as of December 13, 1987 between Registrant
and First Chicago Trust Company of New York, as Rights Agent, and
amendments thereto is incorporated herein by reference to Exhibit
10aa1 to the Annual Report on Form 10-K of Registrant for the
Fiscal Year ended December 31, 1992.*
11. Statement setting forth net income for computation of earnings
per Common share, primary and fully diluted, and statement
setting forth computation of weighted average number of Common
shares outstanding on a fully diluted basis.
12. Statement re computation of ratio of earnings to fixed charges.
13. 1994 Annual Report to Stockholders of Registrant.
21. Subsidiaries of Registrant.
23(i)a. Consent of Independent Accountants, Coopers & Lybrand L.L.P.
23(i)b. Consent of Counsel, Chadbourne & Parke.
6
<PAGE>
24. Powers of Attorney relating to execution of this Annual Report on
Form 10-K.
27. Financial Data Schedule (Article 5).
* Indicates that exhibit is a management contract or compensatory
plan or arrangement.
In lieu of filing certain instruments with respect to long-term
debt of the kind described in Item 601(b)(4) of Regulation S-K, Registrant
agrees to furnish a copy of such instruments to the Securities and Exchange
Commission upon request.
7
EXHIBIT 10c1
AMERICAN BRANDS, INC.
AMENDED SUPPLEMENTAL RETIREMENT PLAN
Section 1. PURPOSE. This Plan is an amendment and restatement,
effective as of January 1, 1987, by American Brands, Inc. (the "Company")
of its Supplemental Retirement Plan. The Supplemental Retirement Plan is
established in order to induce employees of outstanding ability to join or
continue in the employ of the Company and to increase their efforts for its
welfare by providing them with supplemental retirement and profit-sharing
benefits notwithstanding the limitations imposed by the Internal Revenue
Code on retirement and profit-sharing benefits from tax qualified plans.
Section 2. DEFINITIONS. As used in this Plan, the following
words shall have the following meanings:
(a) "Actual Earnings" means all earnings of an employee in any
Plan Year for Qualifying Employment including overtime and extra shift pay,
holiday and vacation pay, amounts paid for periods of approved absence,
back pay which has been either awarded or agreed to by the Company,
earnings elected to be deferred by the Employee as tax deferred
contributions under the Company's Profit-Sharing Plan, supplemental tax
deferred amounts under this Plan, or as contributions under a plan
established pursuant to Section 125 of the Internal Revenue Code, and all
compensation under the Management Incentive Plan and Article XII of the
By-laws of American paid during such Plan Year, but excluding (1) Worker's
Compensation payments, (2) amounts paid by the Company for insurance,
retirement or other benefits and bonuses, and (3) contributions to or
allocations under any profit-sharing plan and benefits under this Plan or
other benefits. The Actual Earnings of an employee covered under a
disability income plan of the Company shall be deemed to continue as
provided in the Retirement Plan.
(b) "Affiliated Employment" means employment by any corporation
which, at the time of such employment, is or was an affiliate of the
Company or the Prior Company, or thereafter becomes or became an affiliate
of the Company or the Prior Company. "Affiliated Plan" means a defined
benefit pension plan by which an employee of the Company had been covered
during Affiliated Employment.
(c) "Allocation" means the sum of the Company contribution, tax
deferred contribution elected by a Profit-Sharing Plan member and the
related matching contribution allocated to the accounts of a Profit-Sharing
Plan member under the Profit-Sharing Plan for a Plan Year, but shall not
include any tax deferred contribution to the Profit-Sharing Plan elected by
a Profit-Sharing Plan member for any Plan Year in excess of $7,000 (or such
greater amount permitted for such Plan Year in accordance with regulations
promulgated by the Secretary of the Treasury or his delegate with respect
to arrangements qualified under Section 401(k) of the Internal Revenue
Code).
(d) "Average Actual Earnings" means the total Actual Earnings of
an employee in the five consecutive Plan Years of Qualifying Employment
that provide the highest aggregate of Actual Earnings, divided by five. If
an employee's consecutive Plan Years of Qualifying Employment within such
period are less than five, "Average Actual Earnings" means his total Actual
<PAGE>
Earnings during the five Plan Years (or fewer) of Qualifying Employment
that provide the highest aggregate of Actual Earnings, divided by the
number of such Plan Years of Qualifying Employment and fractions thereof.
(e) "Committee" means the Corporate Employee Benefits Committee
of the Company.
(f) "Company" means American Brands, Inc., a Delaware
corporation, its successors and assigns. "Prior Company" means American
Brands, Inc., a New Jersey corporation organized under an Agreement of
Consolidation in 1904.
(g) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(h) "Executive Participant" means an employee of the Company who
is within the category of a select group of management or highly
compensated employees as referred to in Sections 201(a)(2), 301(a)(3) and
401(a)(1) of ERISA and who either holds or held the office of a Vice
President of the Company or any office senior thereto or, during the
current Plan Year or the prior Plan Year, was covered under Article XII of
the Company's By-laws or the Company's Management Incentive Plan or any
successor programs.
(i) "415 Limitations" means the Retirement Plan and Profit-
Sharing Plan provisions adopted pursuant to Section 415 of the Internal
Revenue Code to limit (i) annual Retirement Plan benefits pursuant to
Section 415(b) thereof, (ii) annual additions to the Profit-Sharing Plan
pursuant to Section 415(c) thereof and (iii) the aggregate of annual
Retirement Plan benefits and additions to the Profit-Sharing Plan pursuant
to Section 415(e) thereof.
(j) "401(a)(17) Limitations" means the Retirement Plan and
Profit-Sharing Plan provisions adopted pursuant to Section 401(a)(17) of
the Internal Revenue Code to limit compensation considered for purposes of
computing Retirement Plan benefits and Profit-Sharing Plan contributions to
$150,000 (or such greater amount permitted for such year in accordance with
regulations promulgated by the Secretary of the Treasury or his delegate).
(k) "404(l) Limitation" means the limitation imposed by Section
404(l) of the Internal Revenue Code on the maximum tax deductible
contribution to the Profit-Sharing Plan.
(l) "Grantor Trust" means a trust for the benefit of an
Executive Participant established pursuant to Section 6 to provide for the
payment of benefits under this Plan.
(m) "Highly Compensated Employee" means an employee or former
employee of the Company who comes within the definition of a highly
compensated employee set forth in Section 414(q) of the Internal Revenue
Code (or any successor provision) for any Plan Year.
(n) "Normal Retirement Date" means the last day of the calendar
month in which a person's 65th birthday occurs.
2
<PAGE>
(o) "Qualifying Employment" means the sum of Service and
Affiliated Employment.
(p) "Plan Year" means the calendar year.
(q) "Profit-Sharing Plan" means the Profit-Sharing Plan of
American Brands, Inc., as amended from time to time.
(r) "Retirement Plan" means the Retirement Plan for Employees
and Former Employees of American Brands, Inc., as amended from time to
time.
(s) "Segregated Account" means an account established with a
bank or other financial institution approved by the Company, or other form
of segregated account approved by the Company, established pursuant to
Section 6 by or for the benefit of an Executive Participant to provide for
the payment of benefits under this Plan.
(t) "Service" means employment by the Company or the Prior
Company.
(u) "Surviving Spouse" means the surviving husband or wife of an
employee of the Company who has been married to the employee throughout the
one-year period ending on the date of the death of such employee.
(v) "Tax Deferred Contributions" means salary reduction
contributions elected to be made to the Profit-Sharing Plan pursuant to
Section 401(k) of the Internal Revenue Code.
Section 3. SUPPLEMENTAL RETIREMENT BENEFITS. (a) Each person
who was at any time a Highly Compensated Employee and to whom benefits
become payable under the Retirement Plan shall be paid a supplemental
annual retirement benefit under this Plan equal in amount to the difference
between (i) the benefit paid under the Retirement Plan and the Affiliated
Plans and (ii) the benefit that would be payable if the 401(a)(17)
Limitations and the 415 Limitations were not contained therein; provided,
however, that for purposes of computing the amount of benefit under this
Plan, years of Qualifying Employment shall not exceed 35. If such a Highly
Compensated Employee's Surviving Spouse is entitled to a pre-retirement
spouse's benefit under the Retirement Plan and subject to Section 6, the
Surviving Spouse shall be paid a benefit hereunder equal to the difference
between (i) the spouse's benefit payable under the Retirement Plan and the
Affiliated Plans and (ii) the spouse's benefit that would be payable if the
401(a)(17) Limitations and the 415 Limitations were not contained therein.
(b) Each Executive Participant who at any time held the office
of Vice President of the Company, or any office senior thereto, shall
retire hereunder at the date of his termination of employment and be paid a
supplemental annual retirement benefit under this Plan equal to 52 1/2% of
the Executive Participant's Average Actual Earnings reduced (i) for an
Executive Participant who retires prior to Normal Retirement Date with less
than 35 years of Qualifying Employment by 1 1/2% of Average Actual Earnings
for each year and fraction thereof that the Executive Participant's
retirement date precedes Normal Retirement Date and further reduced (ii) by
benefits payable under the Retirement Plan, the Affiliated Plans and the
defined benefit pension plans of any other prior employer and supplemental
3
<PAGE>
retirement benefits payable under paragraph (a) of this Section 3. If a
pre-retirement spouse's benefit is payable under the Retirement Plan to the
Surviving Spouse of an Executive Participant who at any time before death
held the office of Vice President of the Company, or any office senior
thereto, or if an Executive Participant who held such office dies before
supplemental retirement benefits commence with a Surviving Spouse eligible
for a spouse's benefit under the Retirement Plan, the Surviving Spouse
shall be paid a benefit hereunder, subject to Section 6, equal to the
difference between (i) the spouse's benefit payable under the Retirement
Plan and the Affiliated Plans and (ii) the spouse's benefit that would have
been payable if the Participant's benefit had been calculated in accordance
with the formula set forth in the first sentence of this paragraph (b) of
this Section 3 (prior to any reduction for calculating the spouse's
benefit).
(c) Subject to Section 6, the supplemental retirement benefits
provided by this Plan shall be paid to the Executive Participant or Highly
Compensated Employee (or to any beneficiary designated by him in accordance
with the Retirement Plan, or to his Surviving Spouse if eligible for a
spouse's benefit under the Retirement Plan) concurrently with the payment
of the benefits payable under the Retirement Plan and in a form permitted
thereby. In the event the supplemental retirement benefit commences prior
to Normal Retirement Date or is payable in a form other than an annuity for
the life of the former employee only, the supplemental retirement benefit
shall be adjusted to the same extent as under the Retirement Plan. The
Committee may, however, direct that the supplemental retirement benefit
payable with respect to a former employee be paid as an actuarially
equivalent single sum payment (and shall direct that any supplemental
retirement benefit with a present value of less than $3,500 shall be paid
as an actuarially equivalent single sum payment), provided that (except for
a distribution to pay taxes as provided in Section 5 and except as provided
in Section 6) no such payment may be made prior to termination of
Qualifying Employment or prior to the date that benefits may become payable
under the Retirement Plan. In determining actuarial equivalency of a
single sum payment in cash, there shall be used 120% of the applicable
monthly immediate annuity purchase interest rate which would be used by the
Pension Benefit Guaranty Corporation for the purpose of determining the
present value of a single sum distribution on plan termination and the
mortality table used at the time under the Retirement Plan for funding
purposes.
Section 4. SUPPLEMENTAL PROFIT-SHARING BENEFITS. (a) In the
event that the Allocation under the Profit-Sharing Plan is limited by the
401(a)(17) Limitations and the 415 Limitations for 1987 or any subsequent
Plan Year for a Highly Compensated Employee, the Highly Compensated
Employee shall receive a supplemental profit-sharing award under this Plan
for such Plan Year equal to the difference between (i) the Allocation
actually made to the Highly Compensated Employee and (ii) the Allocation
that would have been made to the Profit-Sharing Plan for such Plan Year if
the 401(a)(17) Limitations and the 415 Limitations were not contained
therein. In addition, in the event the contribution to the Profit-Sharing
Plan for any Plan Year is limited by the 404(l) Limitation, each Highly
Compensated Employee shall receive a supplemental profit-sharing award
under this Plan for such Plan Year equal to the difference between (i) the
Allocation actually made to the Highly Compensated Employee and (ii) the
Allocation that would have been made to the Profit-Sharing Plan for such
4
<PAGE>
Plan Year for such Highly Compensated Employee if the contribution to the
Profit-Sharing Plan was not limited by the 404(l) Limitation.
(b) Except as provided in Section 6, the award for any Plan Year
shall be made as of the first day of the following year and shall be deemed
to be thereafter invested in an interest bearing investment selected by the
Trusts Investment Committee (or successor committee) of the Company. The
amount of a Highly Compensated Employee's or Executive Participant's
supplemental profit-sharing benefits under this Plan shall be the aggregate
amount of such awards together with any deemed investment gain thereon and
less any deemed investment loss.
(c) Supplemental profit-sharing awards and deemed investment
gain thereon shall be fully vested and nonforfeitable.
(d) Supplemental profit-sharing plan benefits shall be paid by a
single sum payment as soon as practicable following termination of
Qualifying Employment, subject to Section 6.
(e) Subject to Section 6, a Highly Compensated Employee may
designate a beneficiary to receive the unpaid portion of his supplemental
profit-sharing benefits in the event of his death. The designation shall
be made in a writing filed with the Committee on a form approved by it
signed by the Highly Compensated Employee. If no effective designation of
beneficiary shall be on file with the Committee when supplemental profit-
sharing benefits would otherwise be distributable to a beneficiary, then
such benefits shall be distributed to the spouse of the Highly Compensated
Employee or, if there is no spouse, to the executor of the will or the
administrator of his estate or, if no such executor or administrator shall
be appointed within six months after his death, the Committee shall direct
that distribution be made, in such shares as the Committee shall determine,
to the child, parent or other blood relative of such Highly Compensated
Employee or to such other person or persons as the Committee may determine.
Section 5. FUNDING. Benefits under this Plan shall not
initially be funded in order that the Plan may be exempt from the
provisions of Parts 2, 3 and 4 of Title I of ERISA. The Committee shall
maintain records of supplemental profit-sharing awards and supplemental tax
deferred amounts and related Company matching awards pursuant to Section 7
and the assumed investment thereof and records for the calculation of
supplemental retirement benefits. The Company may, however, segregate
assets which are intended to be a source for payment of benefits hereunder
for Executive Participants. In the event benefits are hereafter determined
to be taxable for Executive Participants prior to actual receipt thereof
and subject to Section 6, a payment shall be made to such Executive
Participants in an amount sufficient to pay such taxes notwithstanding that
the Executive Participant may not then have terminated Qualifying
Employment or that the payment is being made prior to the date that
benefits would otherwise be paid under the Retirement Plan. Amounts so
paid shall then be used as an offset to the supplemental retirement and
profit-sharing benefits, if any, thereafter payable which shall also be
paid in an actuarially equivalent lump sum (calculated as set forth in
Section 3(d)) promptly upon the later of termination of Qualifying
Employment or attainment of age 55.
5
<PAGE>
Section 6. GRANTOR TRUSTS AND SEGREGATED ACCOUNTS.
Notwithstanding Section 5 of this Plan, the Company may provide for the
establishment of Grantor Trusts and Segregated Accounts by or for the
benefit of individual Executive Participants to provide for the payment of
benefits (other than supplemental tax deferred amounts and related Company
matching awards pursuant to Section 7) under this Plan, consistent with the
following provisions:
(a) The Trustee of the Grantor Trusts shall be a bank or trust
company approved by the Company and established under the laws of the
United States or a state within the United States and having either total
assets of at least $15 billion or trust assets of at least $25 billion.
Each Grantor Trust shall be established pursuant to a trust agreement
having terms and provisions approved by the Company and consistent with
this Section. The Grantor Trust shall be solely for the purpose of
providing benefits under the Plan with respect to the Executive
Participant, and neither the Company nor any creditors of the Company shall
have any interest in the assets of the Grantor Trust. The Company shall be
the administrator of the Grantor Trust, and shall have such powers as are
granted by the trust agreement.
(b) The Company shall pay the fees and expenses of the Trustee
and all the expenses for the management and administration of each Grantor
Trust and Segregated Account for all periods prior to the Executive
Participant's termination of employment, and for a period of sixty (60)
days thereafter and for any further period as may be authorized by the
Company, and shall indemnify the Executive Participant against any
liability or cost in respect thereof, including any tax liabilities or
costs.
(c) Each Segregated Account shall be a savings or other type of
account approved by the Company established with a bank or trust company
approved by the Company and established under the laws of the United States
or a state within the United States and having either total assets of at
least $15 billion or trust assets of at least $25 billion, or other form of
segregated account with such a bank or trust company or other financial
institution approved by the Company, in each case with such terms and
provisions as are approved by the Company and consistent with this Section.
(d) The Company may from time to time make contributions to
either the Grantor Trust, or Segregated Account if directed by an Executive
Participant, in amounts which when added to the existing balances in the
Executive Participant's Grantor Trust and Segregated Account will be
approximately equal to the present value of the after tax equivalent of the
Executive Participant's accrued benefits under Sections 3 and 4.
(e) Unless the Grantor Trust has previously been terminated as a
result of the Executive Participant's actual or deemed withdrawal of all
amounts in his Grantor Trust and Segregated Account, as provided in
paragraph (l) of this Section 6, as promptly as practicable after the
Executive Participant's termination of employment, whether by retirement,
death or otherwise, the Company may make a final contribution to the
Executive Participant's Grantor Trust, or Segregated Account if directed by
the Executive Participant, in an amount which when added to the existing
balances in the Executive Participant's Grantor Trust and Segregated
Account, except for any balances which are attributable to amounts deemed
6
<PAGE>
withdrawn previously and the income earned thereon, will be equal to (i)
the sum of the present value of the after tax equivalent of (A) if the
termination of employment is not by reason of the death of the Executive
Participant, the Executive Participant's benefit under Section 3, or if the
termination of employment is by reason of the death of the Executive
Participant, the Executive Participant's benefit under Section 3
immediately prior to his death and (B) the Executive Participant's
supplemental profit-sharing benefit under Section 4, offset by (ii) any
amounts previously actually withdrawn by the Executive Participant from his
Grantor Trust or Segregated Account and income which would have been earned
thereon, calculated as provided in paragraph (k) of this Section 6. If
prior to the Executive Participant's termination of employment his Grantor
Trust has previously been terminated as a result of the Executive
Participant's actual or deemed withdrawal of all amounts in his Grantor
Trust and Segregated Account, as promptly as practicable following such
termination of employment the Company may make a final payment to the
Executive Participant, or in the event of the death of the Executive
Participant his personal representative, in an amount equal to (i) the sum
of the present value of the after tax equivalent of (A) if the termination
of employment is not by reason of the death of the Executive Participant,
the Executive Participant's benefit under Section 3, or if the termination
of employment is by reason of the death of the Executive Participant, the
Executive Participant's benefit under Section 3 immediately prior to his
death and (B) the Executive Participant's supplemental profit-sharing
benefit under Section 4, offset by (ii) the amounts previously withdrawn or
deemed withdrawn by the Executive Participant from his Grantor Trust and
Segregated Account and income which would have been earned thereon,
calculated as provided in paragraph (k) of this Section 6.
(f) Amounts in a Grantor Trust or Segregated Account shall be
invested separately as to amounts representing the Executive Participant's
supplemental retirement benefit under Section 3 and the Executive
Participant's supplemental profit-sharing benefit under Section 4.
Supplemental retirement benefit amounts invested in a Grantor Trust shall
be invested solely in the Chase Manhattan Fixed Income Fund to the extent
practicable and otherwise in the Chase Manhattan Personal Trust Market Rate
Account. Supplemental profit-sharing benefit amounts invested in a Grantor
Trust shall be invested in one or more of (i) the Vista U.S. Government
Income Fund, (ii) the Vista Balanced Fund, (iii) the Chase Manhattan
Personal Trust Market Rate Account or (iv) the Chase Manhattan Equity
Income Fund, in such portions as are elected by the Executive Participant
on a written election form approved by and filed with the Committee, all to
the extent practicable and otherwise in the Chase Manhattan Personal Trust
Market Rate Account. The Executive Participant may change such election at
any time by filing a new written election form with the Committee. The
Committee shall promptly notify the Trustee as to any such elections or
changes therein. Supplemental retirement benefit amounts and supplemental
profit-sharing benefit amounts invested in a Segregated Account shall be
invested solely in the Chase Manhattan Personal Trust Market Rate Account.
In lieu of the calculation of investment gain or loss on supplemental
profit-sharing awards prescribed by Section 4(b), an Executive
Participant's profit-sharing benefit under Section 4 shall include the
actual investment gain or loss on supplemental profit-sharing benefit
amounts invested in accordance with this paragraph (f) (and not deemed
withdrawn pursuant to paragraph (j) of this Section 6).
7
<PAGE>
(g) The Executive Participant may designate a beneficiary to
receive amounts held in his Grantor Trust in the event of his death. The
designation shall be made in a writing filed with the Committee on a form
approved by it and signed by the Executive Participant. The Committee
shall notify the Trustee as to any such designation or changes therein.
The provisions of Section 3(a), (b) and (c) and Section 4(e), providing for
the payment of benefits to the Surviving Spouse of the Executive
Participant, or other person designated by the Executive Participant or the
Committee, in the event of the death of the Executive Participant, shall
not apply to amounts in the Executive Participant's Grantor Trust or
Segregated Account.
(h) The Company shall make payments to the Executive Participant
(or his beneficiary) from time to time in the approximate amounts required
to compensate the Executive Participant (or his beneficiary) for additional
federal, state and local taxes on income resulting from the inclusion in
the Executive Participant's or beneficiary's taxable income of
contributions to the Executive Participant's Grantor Trust and Segregated
Account, the final payment pursuant to paragraph (e) of this Section 6 if
the Grantor Trust has been terminated prior to the Executive Participant's
termination of employment, and the income of the Grantor Trust and
Segregated Account for periods prior to termination of employment
(including amounts paid by the Company pursuant to paragraphs (b) and (e))
of this Section 6.
(i) An Executive Participant may elect to transfer all or any
portion of the funds in his Grantor Trust to his Segregated Account, or to
transfer all or any portion of the funds in his Segregated Account to his
Grantor Trust, upon written notice of not less than sixty (60) days to the
Company and the Trustee and the financial institution with which the
Segregated Account is established.
(j) An Executive Participant may withdraw all or any portion of
the funds in his Grantor Trust or Segregated Account at any time upon not
less than sixty (60) days' written notice to the Company and to the
Trustee, or the financial institution with which the Segregated Account is
established, as the case may be. In the event of any such withdrawal,
subject to the last sentence of this paragraph (j), (i) for purposes of
paragraphs (e), (f), (h), (k) and (l) of this Section 6 the Executive
Participant shall be deemed to have made a complete withdrawal of the funds
in his Grantor Trust and Segregated Account at such time, (ii) no further
contributions shall be made thereafter by the Company to the Executive
Participant's Grantor Trust or Segregated Account until the time of the
Executive Participant's termination of employment, at which time the final
contribution or payment described in paragraph (e) of this Section 6 may be
made by the Company, and (iii) no further payments pursuant to paragraph
(h) of this Section 6 shall be made with respect to income of the Grantor
Trust or Segregated Account. The Compensation and Stock Option Committee
of the Company may determine, however, that, on the basis of hardship, (A)
the Executive Participant shall not be deemed to have withdrawn any amounts
not actually withdrawn, and payments pursuant to paragraph (h) of this
Section 6 shall continue to be made with respect to income of the Executive
Participant's Grantor Trust or Segregated Account on amounts so determined
not deemed to have been withdrawn, and also may determine (independently of
any determination pursuant to clause (A) of this sentence) that (B)
notwithstanding such withdrawal, contributions by the Company to the
8
<PAGE>
Executive Participant's Grantor Trust or Segregated Account shall continue
to be made thereafter, as provided in paragraph (e) of this Section 6,
until the time of the Executive Participant's termination of employment.
(k) Benefits payable to an Executive Participant or Surviving
Spouse or other beneficiary under Sections 3 and 4 shall be offset by the
pre-tax equivalent of amounts in the Executive Participant's Grantor Trust
and Segregated Account at the time of the Executive Participant's
termination of employment (except for any amounts which are attributable to
amounts deemed withdrawn previously pursuant to paragraph (j) of this
Section 6 and the income earned thereon), including any final contribution
or payment pursuant to paragraph (e) of this Section 6, and by the present
value of the pre-tax equivalent of any amounts withdrawn or deemed
withdrawn by the Executive Participant from his Grantor Trust or Segregated
Account, plus the amounts of income which would have been earned on such
withdrawn amounts from the time of withdrawal until the time of termination
of employment, calculated by applying an earnings rate equal to the
after-tax equivalent of 120% of the applicable monthly immediate annuity
purchase interest rate which would be used by the Pension Benefit Guaranty
Corporation from time to time during such periods for the purpose of
determining the present value of a single sum distribution on plan
termination.
(l) The Grantor Trust of an Executive Participant shall
terminate upon the actual or deemed withdrawal by the Executive Participant
of all amounts in the Grantor Trust and in his Segregated Account. The
Grantor Trust also shall terminate upon the expiration of sixty (60) days
following the termination of employment of the Executive Participant,
unless continued by agreement between the Executive Participant and the
Trustee.
(m) Upon the making of the final contribution or other payment
pursuant to paragraph (e) of this Section 6, and the payment pursuant to
paragraph (h) of this Section 6 in respect of additional taxes resulting
from such final contribution or payment, the Company shall have no further
liability for benefits otherwise payable under Sections 3 and 4 to the
Executive Participant or his Surviving Spouse, estate or other
beneficiaries.
(n) The provisions of this Section 6 shall supersede the
provisions of any other Section of this Plan to the extent such other
provisions might be considered to conflict with the provisions of this
Section 6.
SECTION 7. SUPPLEMENTAL TAX DEFERRED AMOUNTS AND RELATED COMPANY
MATCHING AWARDS. (a) A Highly Compensated Employee who is a participant
in the Profit-Sharing Plan and whose Tax Deferred Contributions are limited
by the 40l(a)(17) Limitations may elect that the Company reduce his
compensation and credit him with a supplemental tax deferred amount under
this Plan for any Plan Year equal to the difference between (i) an amount
up to the maximum Tax Deferred Contribution that the Highly Compensated
Employee could have elected to be made to the Profit-Sharing Plan but for
the 40l(a)(17) Limitations and (ii) the maximum Tax Deferred Contribution
that the Highly Compensated Employee could have elected to be made to the
Profit-Sharing Plan with his compensation subject to the 40l(a)(17)
Limitations; provided that the sum of the Tax Deferred Contributions to the
9
<PAGE>
Profit-Sharing Plan and the supplemental tax deferred amount credited under
this Plan for a Highly Compensated Employee for any Plan Year shall not
exceed the limitation set forth in Section 402(g) of the Internal Revenue
Code, or any successor provision, for such Plan Year.
(b) A Highly Compensated Employee who is credited with a
supplemental tax deferred amount under Section 7(a) shall also be credited
with a related Company matching award equal to his supplemental tax
deferred amount for any Plan Year provided that the sum of the Company
Matching Contribution (as defined in the Profit-Sharing Plan) to the
Profit-Sharing Plan and such related Company matching award hereunder for
any Plan Year shall not exceed 50% of the limitation set forth in Section
402(g) of the Internal Revenue Code, or any successor provision, for such
Plan Year.
(c) An election by a Highly Compensated Employee pursuant to
paragraph (a) must be made by filing a form approved by the Committee with
the Committee no later than the beginning of the Plan Year for which the
election is to be effective specifying the amount of the supplemental tax
deferred amount elected; provided that if a Highly Compensated Employee
does not become eligible to elect Tax Deferred Contributions to the Profit-
Sharing Plan until after the first day of a Plan Year, the Highly
Compensated Employee may file his election pursuant to paragraph (a) for
such Plan Year with the Committee no later than the effective date of the
Highly Compensated Employee's eligibility to make Tax Deferred
Contributions. An election pursuant to this paragraph will continue in
effect for subsequent Plan Years unless changed by the Highly Compensated
Employee by filing a form approved by the Committee with the Committee
prior to the beginning of the Plan Year for which such change is to be
effective. The election shall be irrevocable for any Plan Year.
(d) The supplemental tax deferred amounts and Company matching
awards pursuant to this Section 7 shall be deemed to have been made as of
the first day of the Plan Year for which the election made pursuant to
paragraph (c) is effective and shall be deemed to be thereafter invested in
an interest bearing investment selected by the Trusts Investment Committee
(or successor committee) of the Company. The amount of a Highly
Compensated Employee's supplemental tax deferred amounts and related
Company matching award benefits under this Plan shall be the aggregate
amount of such awards together with any deemed investment gain thereon and
less any deemed investment loss.
(e) Supplemental tax deferred amounts and related Company
matching awards under this Plan and deemed investment gain thereon shall be
fully vested and nonforfeitable.
(f) Benefits under this Section 7 shall be paid by a single sum
cash payment as soon as practicable following termination of Qualifying
Employment.
(g) A Highly Compensated Employee may designate a beneficiary to
receive the unpaid portion of his supplemental tax deferred contribution
amounts and related Company matching award benefits in the event of his
death. The designation shall be made in a writing filed with the Committee
on a form approved by it and signed by the Highly Compensated Employee. If
no effective designation of beneficiary shall be on file with the Committee
10
<PAGE>
when benefits under this Section 7 would otherwise be distributable to a
beneficiary, then such benefits shall be distributed to the spouse of the
Highly Compensated Employee or if there is no spouse, to the executor of
the will or the administrator of his estate or, if no such executor or
administrator shall be appointed within six months after his death, the
Committee shall direct that distribution be made, in such shares as the
Committee shall determine, to the child, parent or other blood relative of
such Highly Compensated Employee or to such other person or persons as the
Committee may determine.
Section 8. ADMINISTRATION. This Plan shall be administered by
the Committee. All decisions and interpretations of the Committee shall be
conclusive and binding on the Company and Highly Compensated Employees and
Executive Participants. The Plan may be amended or terminated by the Board
of Directors of the Company at any time; provided, however, that no such
amendment or termination shall deprive any Highly Compensated Employee or
Executive Participant of supplemental retirement or profit-sharing plan
benefits accrued to the date of such amendment or termination or modify the
last two sentences of Section 5 in a manner adverse to any Executive
Participant; and provided further, however, that the Plan shall not be
amended without approval of the stockholders of the Company if such
amendment would materially increase the cost of the Plan to the Company.
Section 9. NONASSIGNABILITY. Subject to Section 6, no Highly
Compensated Employee or Executive Participant shall have the right to
assign, pledge or otherwise dispose of any benefits payable to him
hereunder nor shall any benefit hereunder be subject to garnishment,
attachment, transfer by operation of law, or any legal process.
11
EXHIBIT 10c4
AMENDMENT TO TRUST AGREEMENT
THIS AMENDMENT, made as of the 1st day of January, 1995, among
AMERICAN BRANDS, INC., a Delaware corporation (the "Company"), THE CHASE
MANHATTAN BANK (National Association), incorporated under the laws of the
United States of America (the "Trustee") and HEWITT ASSOCIATES LLC, a
limited liability company formed under the laws of Illinois ("Hewitt").
W I T N E S S E T H :
WHEREAS, the Company and the Trustee have entered into a Trust
Agreement made as of February 1, 1989 as amended (the "Trust Agreement")
for the purpose of establishing a trust in order to provide a source of
benefits under the terms of the Company's Supplemental Retirement Plan (the
"Plan") for the benefit of THOMAS C. HAYS (the "Executive") and Hewitt is
designated as Trustee's Contractor thereunder; and
WHEREAS, the Plan has recently been amended to provide for
supplemental tax deferred amounts and related Company matching awards; and
WHEREAS, the parties desire to amend the Trust Agreement in order
to clarify that the trust might be used as a source of providing the
supplemental tax deferred amounts and related Company matching awards under
the Plan as well as the supplemental retirement and profit-sharing
provisions thereunder;
NOW, THEREFORE, in consideration of the premises, the parties
agree that the Trust Agreement is hereby amended so that the trust
established thereby may be used as a source of providing benefits under the
supplemental tax deferred and related Company matching award provisions of
the Plan as well as the supplemental retirement and profit-sharing
provisions therein and references to the Plan in the Trust Agreement shall
be deemed to include references to the supplemental tax deferred and
related Company matching award provisions thereof.
IN WITNESS WHEREOF, the parties have caused this AMENDMENT to be
duly executed as of the day and year first written above.
AMERICAN BRANDS, INC.
Attest:
Louis F. Fernous, Jr. Steven C. Mendenhall
--------------------------- By--------------------------------
Secretary Steven C. Mendenhall
Vice President and
Chief Administrative
Officer
<PAGE>
THE CHASE MANHATTAN BANK
Attest:
Carl P. Pierleoni Mark J. Altschuler
----------------------------- By--------------------------------
Vice President
HEWITT ASSOCIATES LLC
Attest:
Barbara C. Checkin C.L. Connolly, III
----------------------------- By--------------------------------
I hereby consent to the foregoing AMENDMENT.
Witness:
Diane Cuomo Thomas C. Hays
----------------------------- --------------------------------
THOMAS C. HAYS
2
<PAGE>
STATE OF CONNECTICUT )
: ss.: Old Greenwich, CT-December 27, 1994
COUNTY OF FAIRFIELD )
Personally appeared Steven C. Mendenhall, Vice President and
Chief Administrative Officer of AMERICAN BRANDS, INC., signer and sealer of
the foregoing instrument, and acknowledged the same to be his free act and
deed as such Vice President and Chief Administrative Officer and the free
act and deed of said Corporation, before me.
Gail D. Morgan
-----------------------------------
Notary Public
STATE OF NEW YORK )
: ss.: New York, NY-February 6, 1995
COUNTY OF NEW YORK )
Personally appeared Mark J. Altschuler, Vice President of THE
CHASE MANHATTAN BANK, signer and sealer of the foregoing instrument, and
acknowledged the same to be his free act and deed as such Vice President
and the free act and deed of said Company, before me.
Richard G. Friedman
-----------------------------------
Notary Public
3
<PAGE>
STATE OF ILLINOIS )
: ss.: Lincolnshire, IL-January 11, 1995
COUNTY OF LAKE )
Personally appeared C.L. Connolly, III, of HEWITT ASSOCIATES LLC,
signer and sealer of the foregoing instrument, and acknowledged the same to
be his free act and deed as such principal and the free act and deed of
said limited liability company, before me.
Barbara L. Stern
-----------------------------------
Notary Public
STATE OF CONNECTICUT )
: ss.: Old Greenwich, CT-December 27, 1994
COUNTY OF FAIRFIELD )
Personally appeared THOMAS C. HAYS, signer of the foregoing
instrument, and acknowledged the same to be his free act and deed, before
me.
Gail D. Morgan
-----------------------------------
Notary Public
4
EXHIBIT 10c5
Schedule identifying substantially identical
agreements, among American Brands, Inc. ("American")
and The Chase Manhattan Bank (National Association), et
al. establishing a trust in favor of each of the
following persons, to the Trust Agreement and
Amendments thereto constituting Exhibits 10c2, 10c3 and
10c4, respectively, to the Annual Report on Form 10-K
of American for the Fiscal Year ended December 31, 1994
-------------------------------------------------------
Name
----
Thomas C. Hays
Arnold Henson
John T. Ludes
Robert L. Plancher
Gilbert L. Klemann, II
Robert J. Rukeyser
Randall W. Larrimore
Steven C. Mendenhall
Dudley L. Bauerlein, Jr.
EXHIBIT 10c7
Schedule identifying substantially identical agreements,
among American Brands, Inc. ("American") and The Chase
Manhattan Bank (National Association), et al.
establishing a grantor trust in favor of each of the
following persons, to the Trust Agreement constituting
Exhibit 10c6 to the Annual Report on Form 10-K of
American for the Fiscal Year ended December 31, 1994
-------------------------------------------------------
Name
----
Thomas C. Hays
Arnold Henson
John T. Ludes
Robert L. Plancher
Gilbert L. Klemann, II
Robert J. Rukeyser
Randall W. Larrimore
Steven C. Mendenhall
Dudley L. Bauerlein, Jr.
EXHIBIT 10e2
Resolutions Adopted by the Board of Directors of
American Brands, Inc. on July 26, 1994
------------------------------------------------
RESOLVED, that each director who is not an employee of this
Company or any of its subsidiaries ("Independent Director") who hereafter
voluntarily retires or decides not to stand for reelection be and is hereby
awarded an annual retirement benefit equal to the annual director's fee
(exclusive of fees for committee memberships and fees for services on
boards of directors of subsidiaries) in effect at the time of retirement
from this Board to be paid for the year of retirement and for each year
thereafter until the total number of annual retirement benefit payments
equals the number of full years as an Independent Director; and further
RESOLVED, that the first annual retirement benefit payment shall
be made in the year in which the Independent Director retires or attains
age 65, whichever last occurs, and subsequent payments shall be made on
January 2 of each succeeding year until the retirement benefits are fully
paid; and further
RESOLVED, that if the full number of annual retirement payments
to be made to a retired director, whether pursuant to the foregoing
resolutions or by separate resolution of this Board, have not been made at
the time of the retired director's death, the amount of annual retirement
payments that have not been made shall continue to be paid to the designee
or designees specified by the retired director in writing to the Secretary
of the Company and, if there is no surviving designee, to the surviving
spouse of the retired director and, if there is no surviving spouse, to the
estate of the retired director; and further
RESOLVED, that, if an Independent Director dies while a member of
the Board prior to retirement but after completion of at least three full
years of service as a director, there shall be paid to the designee or
designees specified by the deceased director prior to death in writing to
the Secretary of the Company (and, if there is no surviving designee, to
the surviving spouse of the deceased director and, if there is no surviving
spouse, to the estate of the deceased director) a benefit equal to the
director's fee (exclusive of fees for committee memberships and fees for
services on boards of directors of subsidiaries) in effect at the time of
death, such benefit to be paid in the year in which death occurs and on
January 2 of each succeeding year until the total number of annual payments
equals the number of full years as an Independent Director.
EXHIBIT 10f1
AGREEMENT
AGREEMENT made as of January 1, 1995 between AMERICAN BRANDS,
INC., a Delaware corporation (the "Company"), and THOMAS C. HAYS (the
"Executive")
W I T N E S S E T H :
The parties hereto do hereby agree as follows:
Section 1. PURPOSE. The Executive is currently employed by the
Company and has throughout his period of employment rendered valuable service to
the Company. The Company desires to continue to have the benefits of the
Executive's knowledge and experience as a full-time employee of the Company and
considers the continued employment of the Executive to be a vital element in
protecting and enhancing the best interests of the Company and its stockholders.
The purpose of this Agreement is to provide the supplemental retirement benefits
set forth in this Agreement as an added inducement to the Executive to remain in
the employ of the Company.
Section 2. RETIREMENT BENEFITS. If the Executive's employment
is terminated by death or disability, or if the Company shall terminate the
Executive's employment other than for Cause, or if the Executive shall terminate
his employment for Good Reason, then in addition to the retirement benefits to
which the Executive is entitled under the Pension Plans, the Company shall pay
to or on behalf of the Executive, monthly beginning at the date payments
commence under the Supplemental Plan an amount equal to the excess of (i) over
(ii) below where
(i) equals the sum of the aggregate monthly amounts of
pension payments (determined as a straight life annuity) to which the
Executive would have been entitled under the terms of each of the
Pension Plans (without regard to any termination or amendment made
subsequent to the date hereof which adversely affects in any manner the
computation of the Executive's benefits) determined as if he were fully
vested thereunder and had accumulated an additional period of Service
thereunder (subsequent to his Termination Date) to his Normal
Retirement Date at his rate of Actual Earnings in effect on the date
hereof plus any increases subsequent thereto,
and where
(ii) equals the sum of the aggregate monthly amounts of
pension payments (determined as a straight life annuity) to which the
Executive is entitled under the terms of each of the Pension Plans.
For purposes of clause (i) there shall be considered as part of the Executive's
Actual Earnings for the period from his Termination Date to his Normal
Retirement Date for purposes of determining his highest consecutive calendar
five-year average rate of Actual Earnings the sum of (A) the Executive's annual
base salary at the rate in effect on the date hereof plus any increases
subsequent thereto plus (B) the amount awarded to the Executive under the
Incentive Compensation Plans for the year immediately prior to his Termination
Date (whether or not paid) but not less than the amount the Executive would have
received for such year if the Executive had been awarded the same percentage of
the total amount available for allotment for such year as the percentage awarded
to him for the last year prior to his Termination Date for which an award was
actually paid. The supplemental pension benefits determined under this Section 2
shall be payable by the Company to the Executive and his contingent annuitant,
if any, or as a spouse's benefit to the Executive's spouse if the Executive dies
prior to commencement of benefits under this Agreement, in the same manner and
for the same period as his pension benefits under the Supplemental Plan and
shall be adjusted actuarially to reflect payment in a form other than a straight
life annuity. Benefits hereunder which commence prior to age 60 shall be
actuarially reduced to reflect early commencement to the extent, if any,
provided in the Supplemental Plan as if the Executive's Termination Date were an
Early Retirement Date. In the event that the Corporate Employee Benefits
Committee (or successor thereto) of the Company directs that the Executive's
benefits under the Supplemental Plan are to be paid as a single sum, such
Committee may also direct that an actuarially equivalent single sum payment be
made of the retirement benefits payable under this Agreement. In the event the
Company segregates assets which are intended to be a source for payment of
benefits under this Agreement and the benefits are determined to be taxable to
the Executive prior to actual receipt thereof, a single sum payment shall be
made to the Executive in an amount sufficient to pay such taxes and any interest
and penalties notwithstanding that the Executive may not then have terminated
employment, which payment for taxes shall then be used as an offset to the
benefits thereafter payable pursuant to this Agreement which shall also be paid
in an actuarially equivalent single sum payment promptly upon termination of
employment. Actuarial equivalence of a single sum payment in cash shall be
determined using 120% of the applicable monthly immediate annuity purchase
interest rate which would be used by the Pension Benefit Guaranty Corporation
for the purposes of determining the present value of a single sum distribution
on plan termination and the mortality table used at the time under the
Retirement Plan for funding purposes.
Section 3. OTHER COMPENSATION AND BENEFITS. This Agreement and
the obligations of the Company hereunder shall not be in derogation of any other
obligations of the Company not set forth herein to pay any compensation or to
pay or provide any benefit to the Executive; provided that (a) any amount
otherwise payable to the Executive pursuant to Section 2(d) of the Agreement
dated October 27, 1987 between the Company and the Executive, as amended (the
"Compensation Agreement"), shall be reduced by the amount of any payments under
this Agreement and (b) any amount otherwise payable to the Executive pursuant to
this Agreement shall be reduced by the amount of any payments made by the
Company to the Executive under Section 2(d) of the Severance Agreement dated as
of March 1, 1988 between the Company and the Executive, as amended.
Section 4. DEFINITIONS. The following words shall have the
following meanings in this Agreement:
(i) ACTUAL EARNINGS. Actual Earnings shall have the same
meaning as set forth in the Retirement Plan on the date hereof or any
amendment thereto which has the effect of increasing Actual Earnings.
(ii) CAUSE. Termination of employment by the Company for
Cause shall be deemed to have occurred only if (A) termination shall
have been the result of (I) an act or acts of dishonesty on the
Executive's part constituting a felony and intended to result directly
or indirectly in substantial gain or personal enrichment to him at the
expense of the Company, or (II) the Executive's willful and continued
failure substantially to perform his duties and responsibilities (other
than any such failure resulting from his incapacity due to physical or
mental illness) after a demand for substantial performance is delivered
to the Executive by the Board of Directors of the Company which
specifically identifies the manner in which such Board believes that
the Executive has not substantially performed his duties and the
Executive is given a reasonable time after such demand substantially to
perform his duties, and (B) there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative vote
of not less than three-quarters of the members of the Board of
Directors of the Company at a meeting thereof called and held for the
purpose (after reasonable notice to the Executive and an opportunity
for him, together with his counsel, to be heard before such Board),
finding that in the good faith opinion of the Board of Directors of the
Company the Executive was guilty of conduct set forth above in clause
(A)(I) or (A)(II) of this paragraph and specifying the particulars
thereof in detail. The Executive's employment shall in no event be
considered to have been terminated by the Company for Cause if the act
or failure to act upon which such termination is based (x) was done or
omitted to be done (1) as a result of bad judgment or negligence on his
part, or (2) without intent of gaining therefrom directly or indirectly
a profit to which the Executive was not legally entitled or (3) as a
result of his good faith belief that such act or failure to act was in
or was not opposed to the interests of the Company, or (y) is an act or
failure to act in respect of which the Executive meets the applicable
standard of conduct prescribed for indemnification or reimbursement of
payment of expenses under the By-laws of the Company or the laws of the
state of its incorporation or the directors' or officers' liability
insurance of the Company, in each case as in effect at the time of such
act or failure to act.
(iii) GOOD REASON. Termination of employment by the
Executive for Good Reason shall be deemed to have occurred only if the
Executive terminates his employment for any of
the following reasons:
(A) without the Executive's express written consent,
any material reduction in the aggregate duties,
responsibilities and authority assigned to him as of the date
hereof, or the assignment to him of any duties,
responsibilities or authority inconsistent with the duties,
responsibilities and authority assigned to him as of the date
hereof, or a change in his reporting responsibilities, titles,
offices or other positions as in effect on the date hereof, or
any removal of the Executive from, or any failure to re-elect
the Executive to, any of such positions, except in connection
with the termination of his employment as a result of his
death or by the Company for disability or Cause or by the
Executive other than for Good Reason;
(B) a reduction by the Company in the Executive's
base salary as in effect on the date hereof plus all increases
therein subsequent thereto;
(C) the failure of the Company substantially to
maintain and to continue the Executive's participation in the
Company's benefit plans as in effect on the date hereof and
with all improvements therein subsequent thereto (other than
those plans or improvements that have expired thereafter in
accordance with their original terms), or the taking of any
action which would materially reduce the Executive's benefits
under any of such plans or deprive the Executive of any
material fringe benefit enjoyed by him on the date hereof or
subsequently. For the purposes hereof such benefit plans shall
include, but not be limited to, the Incentive Compensation
Plans, the Pension Plans, the Profit-Sharing Plan and the
Company's Long-Term Incentive Plan;
(D) the sum of the Executive's base salary and the
amount paid to the Executive as incentive compensation under
the Incentive Compensation Plans for any calendar year during
the term hereof is less than 90% of the sum of the Executive's
base salary and the amount paid to the Executive under the
Incentive Compensation Plans for 1993 or any subsequent year
during the term hereof for which the sum of such amounts was
greater; provided, however, that this paragraph shall not be
applicable if the cause of the reduction of the sum of the
Executive's base salary and incentive compensation is a
reduction in the income of the Company available to be awarded
to participants under the Incentive Compensation Plans;
(E) the relocation of the Company's principal
executive offices to a location more than 35 miles from their
location on the date hereof or the Company's requiring the
Executive to be based anywhere other than the Company's
principal executive offices, except for required travel on the
Company's business to an extent substantially consistent with
his business travel obligations on the date hereof;
(F) the failure of the Company to provide the
Executive during each calendar year with a number of paid
vacation days at least equal to the number of paid vacation
days to which he was entitled at the date hereof plus any
increases therein subsequent thereto; or
(G) any failure of the Company to comply with and
satisfy Section 5. (iv) INCENTIVE COMPENSATION PLANS.
Incentive Compensation Plans means the
incentive compensation provisions of Article XII of the By-laws of the
Company and any other plans and arrangements of the Company and its
affiliates.
(v) NORMAL RETIREMENT DATE. Normal Retirement Date means
the last day of the month in which the Executive attains age 65.
(vi) PENSION PLANS. Pension Plans means the Retirement Plan,
the Supplemental Plan and any other program, practice or arrangement
(other than this Agreement) of the Company or any affiliate thereof to
provide the Executive with a defined pension benefit after termination
of employment and in effect on the date hereof or hereafter adopted.
(vii) RETIREMENT PLAN. Retirement Plan means the Retirement
Plan for Employees and Former Employees of American Brands, Inc.
(viii) SERVICE. Service has the meaning set forth in the
Retirement Plan on the date hereof.
(ix) SUPPLEMENTAL PLAN. Supplemental Plan means the
Supplemental Retirement Plan of American Brands, Inc.
(x) TERMINATION DATE. Termination Date means the date the
Executive's employment is terminated whether for Good Reason, death,
disability, Cause or any other reason.
Section 5. SUCCESSORS; BINDING AGREEMENT. The Company shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company, and any parent company thereof, by agreement or
agreements in form and substance satisfactory to the Executive, expressly to
assume and agree to perform this Agreement, and in the case of any such parent
company expressly to guarantee and agree to cause the performance of this
Agreement, in the same manner and to the same extent as the Company would be
required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as defined in the first sentence of
this Agreement and any successor to all or substantially all its business or
assets or which otherwise becomes bound by all the terms and provisions of this
Agreement, whether by the terms hereof, by operation of law or otherwise.
This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive and, in the
event of his death, his spouse or contingent annuitant, if any, and his personal
or legal representatives.
Section 6. FUNDING. The Company may, but shall not be
obligated to, set aside any funds to fulfill its obligations under this
Agreement. Benefits hereunder may also be funded in accordance with the terms of
the employee grantor trust arrangement set forth in the Trust Agreement made as
of November 1, 1993 among the Executive, the Company and The Chase Manhattan
Bank (National Association) or the Segregated Account referred to in such Trust
Agreement.
Section 7. MISCELLANEOUS. This Agreement shall be governed by
and construed in accordance with the laws of the State of Delaware. This
Agreement cannot be modified or any term or condition waived in whole or in part
except by a writing signed by the party against whom enforcement of the
modification or waiver is sought. No waiver by either party hereto at any time
of any beach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. The headings in this Agreement are included for
convenience of reference only and shall not in any way affect the meaning or
interpretation of this Agreement.
Section 8. SEPARABILITY. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
Section 9. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, and such counterparts will together constitute but one Agreement.
Section 10. WITHHOLDING OF TAXES. The Company may withhold
from any benefits payable under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or governmental regulation or
ruling.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its officer thereunto duly authorized and its seal to be hereunto
affixed and attested and the Executive has hereunto set his hand as of the 28th
day of November, 1994.
[Seal] AMERICAN BRANDS, INC.
Attest:
Louis F. Fernous, Jr. By Steven C. Mendenhall
--------------------- --------------------
Vice President and Steven C. Mendenhall
Secretary Vice President and
Chief Administrative Officer
Thomas C. Hays
--------------
Thomas C. Hays
Subscribed and sworn to before me, a Notary Public in and for the County of
Fairfield and State of Connecticut, this 27th day of December 1994.
GAIL D. MORGAN
--------------
Notary Public
NY2: 25203.01
EXHIBIT 10g1
GALLAHER LIMITED
EXECUTIVE INCENTIVE PLAN
PURPOSE
The purpose of the Plan is to provide an extra immediate incentive to key
executives of Gallaher Limited to increase the earnings of Gallaher Limited and
its subsidiaries (all of which, where the context so admits, are hereinafter
called "Gallaher").
1 Available Amount
As soon as practicable after the end of the year 1994 and of each year
thereafter, and after receipt from Coopers & Lybrand (herein called the
"Accountants") of the letter required by the paragraph 4, the contents
of which letter shall be binding and conclusive on all persons, there
shall be made available for allotment as hereinafter provided an amount
equal to 0.389% of Gallaher's adjusted profit from continuing
operations.
2 Allotment
(a) Except as otherwise provided in paragraph 2(c), of the
amount made available for allotment for any year, 18 1/2%
shall be allotted to the person (or persons) who during such
year held the position of Chairman of Gallaher and 13 1/2% to
the person (or persons) who during such year held the position
of Deputy Chairman of Gallaher, in each case subject to
reduction as permitted by paragraph 2(e). If either such
position shall have been vacant at any time during the year,
the amount to be allotted to the incumbent or incumbents of
such position for such year shall be reduced proportionately.
If either such position shall have had more than one incumbent
during the year, the amount to be allotted in respect of such
position shall be divided among the different incumbents in
the proportion of their respective periods of incumbency
during the year.
Except as otherwise provided in paragraph 2(c), of the amount
made available for allotment for any year, 68% (except for any
part thereof that the Committee determines shall not be
allotted) shall be allotted to such individuals among the
Eligible Employees (including the surviving spouses or estates
of any of them who have died during the said year) and in such
amounts as to individuals as the Committee in each case in its
sole discretion shall determine, after considering the
recommendations of the Chairman and Deputy Chairman of
Gallaher with respect thereto. In addition there shall be
allottable to Eligible Employees any amount which is not
allotted in such year to the Chairman or Deputy Chairman of
Gallaher by reason of vacancy at any time during such year in
either or both of such positions.
(b) If the Chairman or Deputy Chairman of Gallaher shall have
been an Eligible Employee for any portion of a year for which
they are making recommendations with respect to Eligible
Employees, they shall recommend that there be allotted to such
person for such a period the same percentage of the total
allottable to Eligible Employees, adjusted proportionately on
the basis of the period of year for which the allotment is
being made, as the allotment made to him for the preceding
year was of the total allottable to Eligible Employees for
that year. If any such person was not an Eligible Employee
during such preceding year or if no allotments were made for
such year, the amount allottable to him for such period shall
be determined by the Committee.
(c) No amount shall be allotted under this paragraph 2 to any
person for any period for which such person is eligible to
participate in Incentive Compensation under Article XII of the
Bye-Laws of American Brands, Inc. No part of the amount made
available for allotment for any year that shall not have been
allotted under this paragraph 2 within 60 days after receipt
of the letter required by paragraph 4 may be allotted at any
subsequent time.
(d) If at any time there shall be two or more Deputy Chairmen of
Gallaher, each such Deputy Chairman shall be regarded as an
Eligible Employee and not as a Deputy Chairman for the
purposes of the Plan.
(e) The Committee shall have authority to reduce the amount of any
allotment to the Chairman and Deputy Chairman or either of
them pursuant to paragraph 2(a) if and to the extent that the
Committee deems it appropriate. No part of any such reduction
in any allotment shall be available for allotment to any other
person.
3 Payment
Payment of amounts allotted shall be remitted in sterling by Gallaher
as soon as practicable.
4 Accountants' Letter
As soon as practicable after the end of each fiscal year of Gallaher
and before distribution of the amounts allotted, the Committee shall
obtain a letter from the Accountants who have examined to consolidated
financial statements of Gallaher and subsidiaries for such year to the
effect that in connection with such examination they have reviewed the
determination of the amount available for allotment under the Plan, and
that in their opinion such determination has been made in accordance
with the provisions of paragraphs 1 and 6(a). The review made by the
Accountants shall include comparison of the elements entering into the
computation of adjusted profit from continuing operations with the
books and records of Gallaher.
5 Duration and Amendment
The Plan shall be applicable for the year 1994 and subsequent years,
provided that the Plan may be amended or terminated by the board of
Directors of Gallaher at any time except as to any completed year.
6 Definitions
(a) "Adjusted profit from continuing operations" for any year
means the profit from continuing operations, before taxes on
profit, as reflected in Gallaher's annual report and
consolidated financial statements for such year, but adjusted
to (i) exclude the deduction for incentive compensation made
available for allotment under this Executive Incentive Plan,
(ii) exclude unrealized gains and losses on securities, and
adjust realized gains and losses on trading securities to
reflect cost, (iii) exclude restructuring charges or credits,
and charges for impaired assets other than those sold in the
ordinary course of business, (iv) include the results of
operations for such year from businesses classified as
"discontinued operations" prior to the disposition dates, and
(v) to the extent not adjusted pursuant to items (ii), (iii)
or (iv) above, exclude gains or losses included in continuing
operations resulting from the sale or writedown of intangible
assets, land or buildings, investments in business units and
securities resulting from the sale of business units.
(b) "Committee" means the Incentive Compensation Committee of
American Brands, Inc.
(c) "Eligible Employees" means those key executives of Gallaher
designated by the Chairman and Deputy Chairman of Gallaher to
participate in the Plan for any year. An employee may not be
designated and Eligible Employee as to any period for which he
participates in any other bonus or incentive plan of Gallaher.
EXHIBIT 10j2
JIM BEAM BRANDS CO.
AMENDED EXCESS BENEFIT PLAN
Section 1. Purpose. This Plan is an amendment and restatement,
effective as of January 1, 1987, by Jim Beam Brands Co. (the "Company") of
its Excess Benefit Plan. The Excess Benefit Plan is an unfunded excess
benefit plan established pursuant to Section 4(5) of ERISA as well as an
unfunded plan established for the purpose of providing deferred
compensation for a select group of management or highly compensated
employees as referred to in Sections 201(a)(2), 301(a)(3) and 401(a)(1) of
ERISA in order to induce employees of outstanding ability to join or
continue in the employ of the Company and to increase their efforts for its
welfare by providing them with supplemental retirement and profit-sharing
benefits notwithstanding the limitations imposed by the Internal Revenue
Code on retirement and profit-sharing benefits from tax qualified plans.
Section 2. Definitions. As used in this Plan, the following
words shall have the following meanings:
(a) "Affiliated Employment" means employment by any corporation
which, at the time of such employment, is or was an affiliate of the
Company, or thereafter becomes or became an affiliate of the Company.
"Affiliated Plan" means a defined benefit pension plan by which an employee
of the Company had been covered during Affiliated Employment.
(b) "Allocation" means the Company contribution allocated to the
accounts of a Profit-Sharing Plan member under the Profit-Sharing Plan for
a Plan Year.
(c) "Committee" means the Retirement Committee of the Company.
(d) "Company" means Jim Beam Brands Co., a Delaware corporation,
its successors and assigns.
(e) "Credited Service" means the period of an employee's
employment with the Company.
(f) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(g) "Executive Participant" means an employee of the Company who
is within the category of a select group of management or highly
compensated employees as referred to in Sections 201(a)(2), 301(a)(3) and
40l(a)(l) of ERISA and who either holds or held the office of a Vice
President of the Company or any office senior thereto or, during the
current Plan Year or the prior Plan Year, was covered under the Jim Beam
Brands Co. Executive Incentive Plan.
(h) "415 Limitations" means the Retirement Plan and Profit-
Sharing Plan provisions adopted pursuant to Section 415 of the Internal
Revenue Code to limit (i) annual Retirement Plan benefits pursuant to
Section 415(b) thereof, (ii) annual additions to the Profit-Sharing Plan
pursuant to Section 415(c) thereof and (iii) the aggregate of annual
Retirement Plan benefits and additions to the Profit-Sharing Plan pursuant
to Section 415(e) thereof.
<PAGE>
(i) "401(a)(17) Limitations" means the Retirement Plan and
Profit-Sharing Plan provisions adopted pursuant to Section 401(a)(17) of
the Internal Revenue Code to limit compensation considered for purposes of
computing Retirement Plan benefits and Profit-Sharing Plan contributions to
$150,000, effective as of January 1, 1994 (or such greater amount permitted
for such year in accordance with Section 401(a)(17) of the Internal Revenue
Code or the regulations promulgated by the Secretary of the Treasury or his
delegate).
(j) "Grantor Trust" means a trust for the benefit of an
Executive Participant established pursuant to Section 6 to provide for the
payment of benefits under this Plan.
(k) "Highly Compensated Employee" means an employee or former
employee of the Company who comes within the definition of a highly
compensated employee set forth in Section 414(q) of the Internal Revenue
Code (or any successor provision) for any Plan Year.
(l) "Highest Three-Year Average Earnings" means the total
compensation of an employee paid in the three consecutive Plan Years within
such employee's period of Service considered for purposes of computing his
benefits hereunder that provide the highest aggregate of compensation
divided by three.
(m) "Normal Retirement Date" means the last day of the calendar
month in which a person's 65th birthday occurs.
(n) "Plan Year" means the calendar year.
(o) "Profit-Sharing Plan" means, effective as of January 1,
1994, the Jim Beam Brands Co. Profit-Sharing and 401(k) Savings Plan as
amended from time to time.
(p) "Retirement Plan" means the Jim Beam Brands Co. Salaried
(Non-Union) Employees' Pension Plan as amended from time to time.
(q) "Segregated Account" means an account established with a bank or other
financial institution approved by the Company, or other form of segregated
account approved by the Company, established pursuant to Section 6 by or
for the benefit of an Executive Participant to provide for the payment of
benefits under this Plan.
(r) "Service" means the period of employment with the Company
and Affiliated Employment.
(s) "Surviving Spouse" means the surviving husband or wife of an
employee of the Company who has been married to the employee throughout the
one-year period ending on the date of the death of such employee.
Section 3. Retirement Benefits.
(a) Each person who is a Highly Compensated Employee or
Executive Participant at the date of termination of employment or during
the prior Plan Year to whom benefits become payable under the Retirement
Plan shall be paid a supplemental annual retirement benefit under this Plan
equal in amount to the difference between (i) the benefit paid under the
Retirement Plan and the Affiliated Plans and (ii) the benefit that would be
payable if the 401(a)(17) Limitations and the 415 Limitations were not
2
<PAGE>
contained therein; provided, however, that the aggregate annual retirement
benefits payable under this Plan, the Retirement Plan and the Affiliated
Plans shall not exceed the lesser of $225,000 or the Highly Compensated
Employee's or Executive Participant's Highest Three-Year Average Earnings;
and provided further, however, that for purposes of computing the amount of
benefit under this Plan, years of Credited Service shall not exceed 35. If
such a Highly Compensated Employee's or Executive Participant's Surviving
Spouse is entitled to a pre-retirement spouse's benefit under the
Retirement Plan and subject to Section 6, the Surviving Spouse shall be
paid a benefit hereunder equal to the difference between (i) the spouse's
benefit payable under the Retirement Plan and the Affiliated Plans and (ii)
the spouse's benefit that would be payable if the 401(a)(17) Limitations
and the 415 Limitations were not contained therein.
(b) Subject to Section 6, the supplemental retirement benefits
provided by this Plan shall be paid to the Highly Compensated Employee or
Executive Participant (or to any beneficiary designated by him in
accordance with the Retirement Plan, or to his Surviving Spouse if eligible
for a spouse's benefit under the Retirement Plan) concurrently with the
payment of the benefits payable under the Retirement Plan and in a form
permitted thereby. In the event the supplemental retirement benefit
commences prior to Normal Retirement Date or is payable in a form other
than an annuity for the life of the former employee only, the supplemental
retirement benefit shall be adjusted to the same extent as under the
Retirement Plan. The Committee may, however, direct that the supplemental
retirement benefit payable with respect to a former employee be paid as an
actuarially equivalent single sum payment (and shall direct that any
supplemental retirement benefit with a present value of less than $3,500
shall be paid as an actuarially equivalent single sum payment), provided
that (except for a distribution to pay taxes as provided in Section 5 and
except as provided in Section 6) no such payment may be made prior to
termination of Service or prior to the date that benefits may become
payable under the Retirement Plan. In determining actuarial equivalency of
a single sum payment in cash, there shall be used the interest rate which
would be used by the Pension Benefit Guaranty Corporation for the month
preceding the month for which the determination is required for the purpose
of determining the present value of a single sum distribution on plan
termination and the UP-1984 unisex mortality table.
Section 4. Supplemental Profit-Sharing Benefits.
(a) In the event that the Allocation under the Profit-Sharing
Plan is limited by the 401(a)(17) Limitations and the 415 Limitations for
1987 or any subsequent Plan Year for a Highly Compensated Employee or
Executive Participant, the Highly Compensated Employee or Executive
Participant shall receive a supplemental profit-sharing award under this
Plan for such Plan Year equal to the difference between (i) the Allocation
actually made to the Highly Compensated Employee or Executive Participant
and (ii) the Allocation that would have been made to the Profit-Sharing
Plan for such Plan Year if the 401(a)(17) Limitations and the 415
Limitations were not contained therein.
(b) Except as provided in Section 6, the award for any Plan Year
shall be made as of the first day of the following year and shall be deemed
to be thereafter invested in an interest bearing investment selected by the
Committee. The amount of a Highly Compensated Employee's or Executive
Participant's supplemental profit-sharing benefits under this Plan shall be
3
<PAGE>
the aggregate amount of such awards together with any deemed investment
gain thereon and less any deemed investment loss.
(c) Supplemental profit-sharing awards and deemed investment
gain thereon shall be fully vested and nonforfeitable.
(d) Supplemental profit-sharing plan benefits shall be paid by a
single sum payment as soon as practicable following termination of
employment, subject to Section 6.
(e) Except as provided in Section 6, a Highly Compensated
Employee or Executive Participant may designate a beneficiary to receive
the unpaid portion of his supplemental profit-sharing benefits in the event
of his death. The designation shall be made in a writing filed with the
Committee on a form approved by it signed by the Highly Compensated
Employee or Executive Participant. If no effective designation of
beneficiary shall be on file with the Committee when supplemental profit-
sharing benefits would otherwise be distributable to a beneficiary, then
such benefits shall be distributed to the spouse of the Highly Compensated
Employee or Executive Participant or, if there is no spouse, to the
executor of the will or the administrator of his estate or, if no such
executor or administrator shall be appointed within six months after his
death, the Committee shall direct that distribution be made, in such shares
as the Committee shall determine, to the child, parent or other blood
relative of such Highly Compensated Employee or Executive Participant or to
such other person or persons as the Committee may determine.
Section 5. Funding. Benefits under this Plan shall not be funded in order
that the Plan may be exempt from the provisions of Parts 2, 3 and 4 of
Title I of ERISA. The Committee shall maintain records of supplemental
profit-sharing awards and the assumed investment thereof and records for
the calculation of supplemental retirement benefits. The Company may,
however, segregate assets which are intended to be a source for payment of
benefits hereunder for Executive Participants. In the event benefits are
hereafter determined to be taxable for Executive Participants prior to
actual receipt thereof, a payment shall be made to such Executive
Participants in an amount sufficient to pay such taxes notwithstanding that
the Executive Participant may not then have terminated Service or that the
payment is being made prior to the date that benefits would otherwise be
paid under the Retirement Plan. Amounts so paid shall then be used as an
offset to the supplemental retirement and profit-sharing benefits, if any,
thereafter payable which shall also be paid in an actuarially equivalent
lump sum (calculated as set forth in Section 3(c)) promptly upon the later
of termination of Service or attainment of age 55.
Section 6. Grantor Trusts and Segregated Accounts.
Notwithstanding Section 5 of this Plan, the Company may provide for the
establishment of Grantor Trusts and Segregated Accounts by or for the
benefit of individual Executive Participants to provide for the payment of
benefits under this Plan, consistent with the following provisions:
(a) The Trustee of the Grantor Trusts shall be a bank or trust
company approved by the Company and established under the laws of the
United States or a state within the United States and having either total
assets of at least $15 billion or trust assets of at least $25 billion.
Each Grantor Trust shall be established pursuant to a trust agreement
having terms and provisions approved by the Company and consistent with
this Section. The Grantor Trust shall be solely for the purpose of
4
<PAGE>
providing benefits under the Plan with respect to the Executive
Participant, and neither the Company nor any creditors of the Company shall
have any interest in the assets of the Grantor Trust. The Company shall be
the administrator of the Grantor Trust, and shall have such powers as are
granted by the trust agreement.
(b) The Company shall pay the fees and expenses of the Trustee
and all the expenses for the management and administration of each Grantor
Trust and Segregated Account for all periods prior to the Executive
Participant's termination of employment, and for a period of sixty (60)
days thereafter and for any further period as may be authorized by the
Company, and shall indemnify the Executive Participant against any
liability or cost in respect thereof, including any tax liabilities or
costs.
(c) Each Segregated Account shall be a savings or other type of
account approved by the Company established with a bank or trust company
approved by the Company and established under the laws of the United States
or a state within the United States and having either total assets of at
least $15 billion or trust assets of at least $25 billion, or other form of
segregated account with such a bank or trust company or other financial
institution approved by the Company, in each case with such terms and
provisions as are approved by the Company and consistent with this Section.
(d) The Company may from time to time make contributions to
either the Grantor Trust, or Segregated Account if directed by an Executive
Participant, in amounts which when added to the existing balances in the
Executive Participant's Grantor Trust and Segregated Account will be
approximately equal to the present value of the after tax equivalent of the
Executive Participant's accrued benefits under Sections 3 and 4.
(e) Unless the Grantor Trust has previously been terminated as a
result of the Executive Participant's actual or deemed withdrawal of all
amounts in his Grantor Trust and Segregated Account, as provided in
paragraph (l) of this Section 6, as promptly as practicable after the
Executive Participant's termination of employment, whether by retirement,
death or otherwise, the Company may make a final contribution to the
Executive Participant's Grantor Trust, or Segregated Account if directed by
the Executive Participant, in an amount which when added to the existing
balances in the Executive Participant's Grantor Trust and Segregated
Account, except for any balances which are attributable to amounts deemed
withdrawn previously and the income earned thereon, will be equal to (i)
the sum of the present value of the after tax equivalent of (A) if the
termination of employment is not by reason of the death of the Executive
Participant, the Executive Participant's benefit under Section 3, or if the
termination of employment is by reason of the death of the Executive
Participant, the Executive Participant's benefit under Section 3
immediately prior to his death and (B) the Executive Participant's
supplemental profit-sharing benefit under Section 4, offset by (ii) any
amounts previously actually withdrawn by the Executive Participant from his
Grantor Trust or Segregated Account and income which would have been earned
thereon, calculated as provided in paragraph (k) of this Section 6. If
prior to the Executive Participant's termination of employment his Grantor
Trust has previously been terminated as a result of the Executive
Participant's actual or deemed withdrawal of all amounts in his Grantor
Trust and Segregated Account, as promptly as practicable following such
termination of employment the Company may make a final payment to the
5
<PAGE>
Executive Participant, or in the event of the death of the Executive
Participant his personal representative, in an amount equal to (i) the sum
of the present value of the after tax equivalent of (A) if the termination
of employment is not by reason of the death of the Executive Participant,
the Executive Participant's benefit under Section 3, or if the termination
of employment is by reason of the death of the Executive Participant, the
Executive Participant's benefit under Section 3 immediately prior to his
death and (B) the Executive Participant's supplemental profit-sharing
benefit under Section 4, offset by (ii) the amounts previously withdrawn or
deemed withdrawn by the Executive Participant from his Grantor Trust and
Segregated Account and income which would have been earned thereon,
calculated as provided in paragraph (k) of this Section 6.
(f) Amounts in a Grantor Trust or Segregated Account shall be
invested separately as to amounts representing the Executive Participant's
supplemental retirement benefit under Section 3 and the Executive
Participant's supplemental profit-sharing benefit under Section 4.
Supplemental retirement benefit amounts invested in a Grantor Trust shall
be invested solely in the Chase Manhattan Fixed Income Fund to the extent
practicable and otherwise in the Chase Manhattan Personal Trust Market Rate
Account. Supplemental profit-sharing benefit amounts invested in a Grantor
Trust shall be invested in one or more of (i) the Vista U.S. Government
Income Fund, (ii) the Vista Balanced Fund, (iii) the Chase Manhattan
Personal Trust Market Rate Account or (iv) the Chase Manhattan Equity
Income Fund, in such portions as are elected by the Executive Participant
on a written election form approved by and filed with the Committee, all to
the extent practicable and otherwise in the Chase Manhattan Personal Trust
Market Rate Account. The Executive Participant may change such election at
any time by filing a new written election form with the Committee. The
Committee shall promptly notify the Trustee as to any such elections or
changes therein. Supplemental retirement benefit amounts and supplemental
profit-sharing benefit amounts invested in a Segregated Account shall be
invested solely in the Chase Manhattan Personal Trust Market Rate Account.
In lieu of the calculation of investment gain or loss on supplemental
profit-sharing awards prescribed by Section 4(b), an Executive
Participant's profit-sharing benefit under Section 4 shall include the
actual investment gain or loss on supplemental profit-sharing benefit
amounts invested in accordance with this paragraph (f) (and not deemed
withdrawn pursuant to paragraph (j) of this Section 6).
(g) The Executive Participant may designate a beneficiary to
receive amounts held in his Grantor Trust in the event of his death. The
designation shall be made in a writing filed with the Committee on a form
approved by it and signed by the Executive Participant. The Committee
shall notify the Trustee as to any such designation or changes therein.
The provisions of Section 3(a) and (b) and Section 4(e), providing for the
payment of benefits to the Surviving Spouse of the Executive Participant,
or other person designated by the Executive Participant or the Committee,
in the event of the death of the Executive Participant, shall not apply to
amounts in the Executive Participant's Grantor Trust or Segregated Account.
(h) The Company shall make payments to the Executive Participant
(or his beneficiary) from time to time in the approximate amounts required
to compensate the Executive Participant (or his beneficiary) for additional
federal, state and local taxes on income resulting from the inclusion in
the Executive Participant's or beneficiary's taxable income of
contributions to the Executive Participant's Grantor Trust and Segregated
6
<PAGE>
Account, the final payment pursuant to paragraph (e) of this Section 6 if
the Grantor Trust has been terminated prior to the Executive Participant's
termination of employment, and the income of the Grantor Trust and
Segregated Account for periods prior to termination of employment
(including amounts paid by the Company pursuant to paragraphs (b) and (e))
of this Section 6.
(i) An Executive Participant may elect to transfer all or any
portion of the funds in his Grantor Trust to his Segregated Account, or to
transfer all or any portion of the funds in his Segregated Account to his
Grantor Trust, upon written notice of not less than sixty (60) days to the
Company and the Trustee and the financial institution with which the
Segregated Account is established.
(j) An Executive Participant may withdraw all or any portion of
the funds in his Grantor Trust or Segregated Account at any time upon not
less than sixty (60) days written notice to the Company and to the Trustee,
or the financial institution with which the Segregated Account is
established, as the case may be. In the event of any such withdrawal,
subject to the last sentence of this paragraph (j), (i) for purposes of
paragraphs (e), (f), (h), (k) and (l) of this Section 6 the Executive
Participant shall be deemed to have made a complete withdrawal of the funds
in his Grantor Trust and Segregated Account at such time, (ii) no further
contributions shall be made thereafter by the Company to the Executive
Participant's Grantor Trust or Segregated Account until the time of the
Executive Participant's termination of employment, at which time the final
contribution or payment described in paragraph (e) of this Section 6 may be
made by the Company, and (iii) no further payments pursuant to paragraph
(h) of this Section 6 shall be made with respect to income of the Grantor
Trust or Segregated Account. The Compensation and Stock Option Committee
of American Brands, Inc., in the case of a Participant who is the Chief
Executive Officer of the Company, and the Corporate Employee Benefits
Committee of American Brands, Inc. in the case of all other Participants,
may determine, however, that, on the basis of hardship, (A) the Executive
Participant shall not be deemed to have withdrawn any amounts not actually
withdrawn, and payments pursuant to paragraph (h) of this Section 6 shall
continue to be made with respect to income of the Executive Participant's
Grantor Trust or Segregated Account on amounts so determined not deemed to
have been withdrawn, and also may determine (independently of any
determination pursuant to clause (A) of this sentence) that (B)
notwithstanding such withdrawal, contributions by the Company to the
Executive Participant's Grantor Trust or Segregated Account shall continue
to be made thereafter, as provided in paragraph (e) of this Section 6,
until the time of the Executive Participant's termination of employment.
(k) Benefits payable to an Executive Participant or Surviving
Spouse or other beneficiary under Sections 3 and 4 shall be offset by the
pre-tax equivalent of amounts in the Executive Participant's Grantor Trust
and Segregated Account at the time of the Executive Participant's
termination of employment (except for any amounts which are attributable to
amounts deemed withdrawn previously pursuant to paragraph (j) of this
Section 6 and the income earned thereon), including any final contribution
or payment pursuant to paragraph (e) of this Section 6, and by the present
value of the pre-tax equivalent of any amounts withdrawn or deemed
withdrawn by the Executive Participant from his Grantor Trust or Segregated
Account, plus the amounts of income which would have been earned on such
withdrawn amounts from the time of withdrawal until the time of termination
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<PAGE>
of employment, calculated by applying an earnings rate equal to the after
tax equivalent of l20% of the applicable monthly immediate annuity purchase
interest rate which would be used by the Pension Benefit Guaranty
Corporation from time to time during such periods for the purpose of
determining the present value of a single sum distribution on plan
termination.
(l) The Grantor Trust of an Executive Participant shall
terminate upon the actual or deemed withdrawal by the Executive Participant
of all amounts in the Grantor Trust and in his Segregated Account. The
Grantor Trust also shall terminate upon the expiration of sixty (60) days
following the termination of employment of the Executive Participant,
unless continued by agreement between the Executive Participant and the
Trustee.
(m) Upon the making of the final contribution or other payment
pursuant to paragraph (e) of this Section 6, and the payment pursuant to
paragraph (h) of this Section 6 in respect of additional taxes resulting
from such final contribution or payment, the Company shall have no further
liability for benefits otherwise payable under Sections 3 and 4 to the
Executive Participant or his Surviving Spouse, estate or other
beneficiaries.
(n) The provisions of this Section 6 shall supersede the
provisions of any other Section of this Plan to the extent such other
provisions might be considered to conflict with the provisions of this
Section 6.
Section 7. Administration. This Plan shall be administered by
the Committee. All decisions and interpretations of the Committee shall be
conclusive and binding on the Company and Highly Compensated Employees and
Executive Participants. The Plan may be amended or terminated by the Board
of Directors of the Company at any time; provided, however, that no such
amendment or termination shall deprive any Highly Compensated Employee or
Executive Participant of supplemental retirement or profit-sharing plan
benefits accrued to the date of such amendment or termination or modify the
last two sentences of Section 5 in a manner adverse to any Executive
Participant.
Section 8. Nonassignability. No Highly Compensated Employee or
Executive Participant shall have the right to assign, pledge or otherwise
dispose of any benefits payable to him hereunder nor shall any benefit
hereunder be subject to garnishment, attachment, transfer by operation of
law, or any legal process.
8
EXHIBIT 10n1
T H I S A G R E E M E N T is made the 9 day of November 1994
--------------------------
B E T W E E N:-
-------------
(1) GALLAHER LIMITED a company incorporated in England under number
1501573 whose registered office is at Members Hill Brooklands Road,
Weybridge, Surrey ("the Company") and
(2) PETER MICHAEL WILSON of 191 Sycamore Road, Farnborough, Hampshire
("the Executive")
WHEREBY IT IS AGREED as follows:-
--------------------
INTERPRETATION
--------------
1. (A) DEFINITIONS
--------------------
UNLESS the context otherwise requires, in this Agreement and in the
Schedule hereto the following words and phrases shall have the meanings
given below:-
(1) "subsidiary" or "subsidiary company" and "holding company" shall have
the meanings ascribed to them in Part XXVI of the Companies Act 1985;
(2) "Group" means the Company, American Brands Inc and all its
subsidiaries and "Group Company" shall be construed accordingly;
(3) "the Board" means the Board of Directors of the Company;
(4) "the Business" means (taken together) the business of the Company and
the business of any other Group Company with which the Executive is
required by the Board under Clause 3 of this Agreement to be
concerned;
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(5) "Contractual Retirement Date" means the date specified in paragraph 8
of the Schedule hereto;
(6) "the Effective Date" means the date specified in paragraph 2 of the
Schedule hereto; and
(7) "month" means a calendar month.
Other words and phrases the definition of which is contained or referred to
in Part XXVI of the Companies Act 1985 shall be construed as having the
meanings thereby attributed to them.
(B) CONSTRUCTION OF CERTAIN REFERENCES
---------------------------------------
Unless the context otherwise requires any references in this Agreement to:-
(1) a "person" shall include any individual company corporation firm
partnership joint venture association organisation or trust (in each
case whether or not having separate legal personality) and references
to any of the same shall include a reference to the others;
(2) "writing" or "written" shall include any means of visible
reproduction;
(3) words denoting the singular shall include the plural and vice versa;
(4) sub-clauses are references to sub-clauses of the Clause in which the
reference appears;
(5) statutory provisions shall be construed as references to those
provisions as respectively amended or re-enacted or as their
application is modified by other provisions (whether before or after
the date hereof) from time to time and shall include any provisions of
which they are re-enactments (whether with or without modification);
and
(6) the masculine gender shall be deemed to include the feminine gender.
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<PAGE>
(C) CLAUSE HEADINGS
---------------------
Clause headings are inserted for convenience only and shall not affect the
construction of this Agreement.
(D) REASONABLENESS OF RESTRICTIONS
-----------------------------------
The restrictions contained in Clause 13 hereof are considered reasonable by
the parties hereto. In particular, the Executive agrees that the
restrictions are reasonable and necessary for the protection of the
Business of the Company and any Group Company as appropriate.
APPOINTMENT
-----------
2. THE Company shall employ the Executive and the Executive agrees to
serve the Company in the capacity specified in paragraph l of the Schedule
hereto as at and with effect from the Effective Date and continuing
thereafter (subject to termination as hereinafter provided) unless and
until terminated by the Executive giving to the Company not less than two
years written notice or the Company giving to the Executive not less than
the period of prior notice in writing specified in paragraph 3 of the
Schedule hereto but so that the employment of the Executive hereunder shall
terminate in any event on the Contractual Retirement Date.
DUTIES, POWERS AND MOBILITY
---------------------------
3. (A) THE Executive shall exercise such powers perform such duties (if
any) and comply with such directions in relation to the Business of the
Company and any other Group Company or Group Companies consistent with his
employment hereunder as the Board or any person authorised by the Board for
the purpose may from time to time confer upon or assign or give to him.
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<PAGE>
(B) The Executive shall during the continuance of his employment
hereunder (unless prevented by ill health or accident) devote so much of
his time and attention and abilities to the Business as the Board may
reasonably require for the proper performance of his duties hereunder and
shall use his best endeavors to promote and protect the general interests
and welfare of the Company.
(C) The Executive shall at all times promptly give to the Board (in
writing if so requested) all such information explanations and assistance
as it may require in connection with the Business and his employment
hereunder.
(D) The Executive may be required to travel on the Business of the
Company or any other Group Company both inside and outside the United
Kingdom in the proper performance of his duties hereunder.
(E) The Executive shall work in such place or places (whether within
or outside the United Kingdom) as the Board may reasonably require for the
proper performance of his duties hereunder.
REMUNERATION
------------
4. (A) THE Company shall pay to the Executive during the continuance of
his employment hereunder as remuneration for his services a salary at the
annual rate specified in paragraph 4 of the Schedule hereto payable in
arrear by equal instalments on or before the last day of each month which
said salary shall be deemed to accrue from day to day. Such salary shall
include any sum receivable by the Executive as Director's fees from the
Company or any other Group Company.
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<PAGE>
(B) The remuneration payable to the Executive by the Company pursuant
to sub-clause (A) shall be subject to upward review in accordance with the
Company's practice from time to time.
(C) The Executive shall be designated an eligible employee for the
purposes of the Company's Executive Incentive Plan and shall participate in
the Plan.
(D) If the Company ceases to be beneficially owned (directly or
indirectly) to the extent of at least 50% by American Brands Inc or if 20%
or more of the common stock of American Brands Inc shall come within the
beneficial ownership of one person or one concerted group of persons ("the
New Circumstances") the Executive shall be entitled to receive incentive
payments in respect of the financial year of the Company in which the New
Circumstances occur and in respect of the next following three financial
years of the Company (such three financial years being referred to as "the
Guarantee Period") each such payment to be made within 4 months of the end
of the relevant financial year of the Company and each such payment to be
not less than the greater of (a) the last full year's incentive payment
received by or due to the Executive under the Company's Executive Incentive
Plan in respect of the financial year of the Company prior to that in which
the New Circumstances occurred and (b) the amount that would have been
required to be awarded to the Executive for the said last year if the
Executive were to receive the same percentage of the total amount available
for allotment under the said Plan as he received for the year prior to the
said last year provided that if the Executive achieves his Contractual
Retirement Date during the course of the Guarantee Period that Executive
shall only be entitled to such incentive payments for that part of the
5
<PAGE>
Guarantee Period ending at the end of the month in which he achieves his
Contractual Retirement Date calculated on a pro rata basis.
EXPENSES
--------
5. THE Company shall pay or refund or procure to be paid or refunded to
the Executive all reasonable travelling entertainment and other similar out
of pocket expenses necessarily and wholly incurred by him in the
performance of his duties hereunder but the Company shall be entitled as a
condition of reimbursement to such evidence from the Executive as to such
expenses as the Board may reasonably require (including without limitation
proper accounts with vouchers).
COMPANY CAR
-----------
6. THE Company will provide a suitable car ("the Car") for the use of the
Executive during the continuance of his employment and will pay all costs
relating to it (including the cost of fuel license insurance and
maintenance) except that the Executive will pay all costs relating to the
Car when it is being used for private purposes outside the United Kingdom.
HOLIDAYS
--------
7. (A) IN addition to statutory and bank holidays the Executive shall be
entitled to paid holiday in each calendar year of the period specified in
paragraph 5 of the Schedule hereto at such time or times as the Business
may permit.
(B) Holidays may not be carried forward from one year to the next and
the Executive will not be entitled to any payment (whether during the
6
<PAGE>
continuance or on termination of this Agreement) in lieu of holidays not
taken.
SICKNESS AND INCAPACITY
-----------------------
8. (A) IF the Executive is absent from work as a result of sickness or
injury he will
(1) if the period of absence is less than eight consecutive
calendar days, submit to the Company on his return a certificate of
sickness completed by himself;
(2) if it is eight consecutive calendar days or more submit to
the Company without delay a medical certificate signed by a practicing
medical practitioner in respect of each week of absence after the
first.
(B) Subject to Clause 18 below and subject to compliance with sub-
clause (A) above the Executive will be entitled to payment of his salary at
the full rate (less any social security or other benefits payable to him)
during any periods of absence from work as a result of sickness or injury.
(C) The Company will pay Statutory Sick Pay, where appropriate, in
accordance with the legislation in force at the time of absence and any
payment of salary in accordance with this Clause will go towards
discharging its liability to pay Statutory Sick Pay.
(D) If the Executive is absent from work due to the act or default
of a third party, any claim for damages, if made, shall include a claim for
"loss of earnings". Any sum recovered under this head shall subsequently
be refunded to the Company.
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<PAGE>
(E) The Executive shall submit himself to a medical examination at
the request and reasonable expense of the Board at any time during the
continuance of his employment hereunder whether or not the Executive is
absent by reason of sickness injury or other incapacity.
PENSION
-------
9. (A) SUBJECT to satisfying the eligibility conditions under the rules
of the Schemes the Executive shall be entitled to be a member of the
Pension Schemes specified in paragraph 6 of the Schedule hereto as amended
from time to time.
(B) A contracting out certificate is in force in relation to The
Gallaher 'M' Pension Scheme for the purposes of the Social Security
Pensions Act 1975.
PRIVATE HEALTH INSURANCE AND OTHER INSURANCE
--------------------------------------------
10. THE Company shall pay all premiums and make all necessary payments to
provide the Executive with medical insurance under the provisions of the
Company's membership of such medical insurance as the Board may from time
to time determine and of which the Executive is or may become during the
continuance of his employment hereunder a member.
EXCLUSIVE SERVICE
-----------------
11. DURING the continuance of his employment hereunder the Executive shall
not (save with the prior consent of the Board communicated in writing by
the Secretary of the Company to the Executive) either as principal servant
or agent carry on or be engaged concerned or interested directly or
indirectly whether alone or on his behalf or on behalf of or in association
or conjunction with any other person and whether as an employee or in any
capacity in any trade business or occupation whatsoever other than that of
8
<PAGE>
the Company or of any other Group Company (otherwise than as a holder for
investment purposes only of any units of an authorised unit trust and as a
holder directly or through nominees of not more than 5 per cent of the
shares or debentures in any company or companies).
INVENTIONS AND IMPROVEMENTS
---------------------------
12. (A) IN the event that the Executive shall during the continuance of
his employment by the Company either make or discover any literary work
computer program invention process development or design or make any
improvement upon any existing literary work computer program invention
process development or design whether or not the same is capable of patent
registered design design right copyright or other like protection and
whether alone or in conjunction with any other employee or employees of the
Company or of any other Group Company or other persons he shall immediately
disclose the same to the Secretary of the Company and the rights in the
same shall subject to any applicable provisions of the Patents Act 1977
become the property of the Company or its nominee and the Executive shall
at the Company's request and expense do all such acts and execute all such
documents as may be necessary to confirm or vest the rights of any such
literary work computer program invention process development design or
improvement in the name of the Company.
(B) The Executive irrevocably appoints the Company as his attorney in
his name and on his behalf to execute all documents and do all things
required in order to give full effect to the provisions of this Clause.
(C) The Executive will if and when required to do so by the Company
(whether during the continuance of his employment or afterwards) and at its
expense:-
9
<PAGE>
(a) apply or join with the Company in applying for letters patent or
other protection in any part of the world for any literary work
computer program invention process development design or
improvement to which sub-clause (A) above applies;
(b) execute or procure to be executed all instruments and do or
procure to be done all things which are necessary for renewing or
maintaining such letters patent or other protection in the name
of the Company;
(c) assist in prosecuting or defending any proceedings relating to or
to any application for such letters patent or other protection.
PROTECTION OF INTERESTS OF COMPANY: Confidentiality
----------------------------------------------------
Non-enticement and Non-solicitation
-----------------------------------
13. (A) THE Executive shall not at any time either before or after the
termination of his employment with the Company use disclose or communicate
to any person whatsoever any confidential information relating to the
Business of the Company or any Group Company or any customers suppliers or
agents thereof or their affairs or any trade secrets of which he may have
become possessed during the continuance of his employment with the Company
or supply the names or addresses of any customers or agents of the Company
or any Group Company to any person except in the proper course of his
duties hereunder or as authorised in writing by the Board or as ordered by
a Court of competent jurisdiction.
(B) The Executive shall not at any time during the continuance of his
employment with the Company make otherwise than for the benefit of the
Company or any Group Company any notes or memoranda relating to any matter
10
<PAGE>
within the scope of the Business or concerning any of the dealings or
affairs of any Group Company.
(C) The Executive shall not utter any statement (whether written or
oral) to any representative of television radio film or other similar media
and shall not write any article for the press or otherwise for publication
on any matter connected with or relating to the Business of any Group
Company except in the proper course of his duties or with the approval of
the Board.
(D) The Executive hereby covenants that he shall not without the
consent in writing of the Board during the continuance of his employment by
the Company or during the period after termination of his employment by the
Company specified in paragraph 9 of the Schedule hereto either on his own
account or in conjunction with or on behalf of any other person solicit or
entice away or endeavor to solicit or to entice away from the Company or
any Group Company any individual who was during the Executive's employment
by the Company an employee director or consultant of the Company or any
Group Company whether or not any such person would commit a breach of
contract by reason of his leaving service.
(E) The Executive hereby covenants that he shall not during the
period after the termination of his employment by the Company specified in
paragraph 10 of the Schedule hereto on his own behalf or on behalf of or in
conjunction with any other person solicit interfere with or entice away or
attempt to solicit interfere with or entice away any person who on the date
of the Executive ceasing to be employed by the Company or at any time
during the period prior to that date specified in paragraph 11 of the
Schedule hereto to the knowledge of the Executive was provided with goods
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<PAGE>
or services by the Company provided always that nothing contained in this
Clause shall be deemed to prohibit the seeking or doing of business not in
direct or indirect competition to the Business.
(F) The Executive hereby covenants with the Company in terms
identical to those contained in sub-clause (E) save that the reference to a
person who was provided with goods or services shall refer only to a person
who is or was during the period specified therein a person who was provided
with goods or services by any Group Company (other than the Company) and
with whom in the course of his employment with the Company within the
twelve months prior to the termination of his employment the Executive
shall have had dealings.
SCOPE OF RESTRICTIONS AND APPLICATION
-------------------------------------
14. THE Executive agrees that in the event of his receiving from any
person an offer of employment either during the continuance of this
Agreement or during the continuance in force of all or any of the
restrictions set out in Clause 13 of this Agreement he shall forthwith
inform the Company Secretary.
TERMINATION UPON AMALGAMATION OR RECONSTRUCTION
-----------------------------------------------
15. IF the employment of the Executive with the Company shall be
terminated either by reason of the liquidation of the Company for the
purpose of reconstruction or amalgamation or as part of any arrangement for
the amalgamation or reconstruction of the Company not involving insolvency
and the Executive shall be offered employment with any concern or
undertaking resulting from such amalgamation or reconstruction on terms and
conditions which taken as a whole are not less favourable than the terms of
12
<PAGE>
this Agreement then the Executive shall have no claim against the Company
in respect of such termination of his employment with the Company.
PROTECTION OF INTERESTS OF EXECUTIVE
------------------------------------
16. THIS Clause shall have effect only in the event of the New
Circumstances (as defined in Clause 4(D)) arising and no part of this
Clause shall be relevant for any other purpose whatsoever. In particular,
without limitation to the foregoing, the definition of termination for Good
Reason in sub-clause (E) of this Clause shall apply only to termination of
employment by the Executive within two years after the New Circumstances
and not to termination of employment by the Executive on any other
occasion.
(A) The Company believes that it is necessary, and in the interests
of the Company, for the Company to afford to the Executive the protection
given by the following provisions of this Clause 16, taking into account
the fact that the Company is presently a wholly owned subsidiary of
American Brands Inc but may in the future cease (for whatever reason) to be
such wholly owned subsidiary and the fact that American Brands Inc has been
and may well in the future be subject to hostile take-over bids, and also
taking into account the fact that executives of American Brands Inc and
companies within the American Brands group are given similar protection in
their contracts of service.
(B) If within two years after the New Circumstances (as defined in
Clause 4(D) of this Agreement) arise, either
(i) the Executive is dismissed by the Company (otherwise than under
Clause 18) or
13
<PAGE>
(ii) the Executive terminates his employment under this Agreement for
Good Reason (as defined in sub-clause (E) of this Clause)
then in the case of either such event (in this Clause hereinafter called
"the Event") the Company shall pay to the Executive, subject only to sub-
clause (C) of this Clause, as severance pay the following amounts (which
amounts are in substitution for any other entitlement or remedy either
under this Agreement or arising from the breach thereof):-
(1) three times his annual salary at the rate prevailing at the time
of the Event
(2) three times the incentive payment to which the Executive is
entitled under Clause 4(D) in respect of the first financial
year within the Guarantee Period
(3) salary and incentive payment accrued due up to the date of the
Event to the extent not already received by the Executive
(4) three times the tax value of benefits in kind received by the
Executive in respect of the twelve month period preceding the
Event.
(C) If the Executive's sixtieth birthday would fall within the
period of three years immediately following the Event then the amounts
referred to in (1) (2) and (4) of sub-clause (B) shall be reduced by the
fraction whose numerator is 36 less the number of complete calendar months
between the Event and the sixtieth anniversary of the Executive's birthday
and whose denominator is 36.
14
<PAGE>
(D) The Executive shall not be required to mitigate the amount of
any payment provided for in sub-clause (B) by seeking other employment or
otherwise nor shall the amount of any payment so provided for be reduced by
any compensation earned by the Executive as the result of employment by
another employer following termination of this Agreement or by any other
compensation.
(E) Termination of employment by the Executive for Good Reason shall
be deemed to have occurred only if the Executive terminates his employment
without notice for any of the following reasons occurring since the New
Circumstances arose:-
(1) without the Executive's express written consent any material
reduction in the aggregate duties responsibilities and authority
assigned to him pursuant to Clause 3(A) of this Agreement or the
assignment to him of any duties responsibilities or authority
inconsistent with the duties responsibilities and authority
previously assigned to him pursuant to Clause 3(A) of this
Agreement or a change in his title or position below that in
effect on the date hereof;
(2) a reduction by the Company in the Executive's salary in effect on
the date hereof as increased subsequently pursuant to Clause
4(B);
(3) the failure of the Company or of American Brands Inc
substantially to maintain and to continue the Executive's
participation in the benefit plans as in effect on the date
hereof as increased by improvements made subsequent thereto or
the taking of any action which would materially reduce the
15
<PAGE>
Executive's benefits under any of such plans or deprive the
Executive of any material fringe benefit enjoyed by him on the
date hereof or subsequently. For the purposes hereof such
benefit plans shall include but not be limited to the Company's
Executive Incentive Plan and pension plans and stock option plans
of American Brands Inc. The substituting for any existing
benefit plan of a similar plan providing no less favourable
benefits shall be deemed not to be a failure by the Company to
maintain or continue the Executive's participation in any such
benefit plan and any reference in this sub-clause to any benefit
plan shall be deemed to include a reference to any such
substituted benefit plan;
(4) the sum of the Executive's salary and the amount paid to the
Executive under the Executive Incentive Plan for a calendar year
is less than the sum of the Executive's salary and the amount
awarded (whether or not fully paid) to the Executive under the
Executive Incentive Plan for 1993 or any subsequent year in which
the sum of such amounts was greater;
(5) notwithstanding Clause 3(E) the relocation of the offices at
which the Executive was required to work at the time of the New
Circumstances arising to a location more than 35 miles away
except for required travel on the Company's business to an extent
substantially consistent with his business travel obligations on
the date hereof;
(6) the failure of the Company to provide the Executive during a
calendar year with a number of paid holidays at least equal to
16
<PAGE>
the number of paid holidays to which he was entitled at the date
hereof pursuant to Clause 7 of this Agreement as increased
subsequent thereto;
(7) circumstances arise which entitle the Executive to terminate this
Agreement without notice because of the Company's conduct (i.e.
the circumstances of constructive dismissal).
DIRECTORSHIPS
-------------
17. (A) THE Executive shall accept appointment as a Director of any such
Group Company as the Board may require in connection with his appointment
hereunder and as a Director of any other company as the Board may
reasonably so require and he shall resign without claim for compensation
from office as a Director of any such company (other than the Company) at
any time on request by the Company which resignation shall not affect the
continuance in any way of this Agreement. The Executive shall forthwith
account to the Company for any Director's fees or other emoluments
remuneration or payments either receivable or received by him by virtue of
his holding office as such Director as aforesaid (or waive any right to the
same if so required by the Company).
(B) Upon the termination of the Executive's employment with the
Company for whatsoever reason the Executive shall unless requested by the
Board not to do so resign promptly from
(1) office as a Director of the Company or of any Group Company or of any
other company as is referred to in sub-clause (A) of which he is a
Director and
(2) from all offices held by him in any or all of such companies and
17
<PAGE>
(3) all trusteeships held by him of any pension schemes or other trusts
established by the Company or any other Group Company or any other
company with which the Executive has had dealings as a consequence of
his employment by the Company.
(C) Should the Executive fail to resign from office as a Director or
from any other office or trusteeship as is referred to in sub-clauses (A)
or (B) either during his employment when requested by the Company so to do
or on termination thereof the Company is hereby irrevocably authorised to
appoint some person in his name and on his behalf to execute any documents
and to do all things requisite to give effect thereto.
(D) Save with the prior agreement in writing of the Board the
Executive shall not during the continuance of his employment hereunder
resign office as a Director of the Company or any Group Company or any
other company as is referred to in sub-clause (A) or do anything that would
cause him to be disqualified from continuing to hold office as a Director.
TERMINATION
-----------
18. (A) THE Executive's employment with the Company may be terminated
forthwith by the Company without prior notice if the Executive shall at any
time:-
(1) commit any serious breach or repeated or continual breach of any of
his obligations hereunder; or
(2) be guilty of any serious misconduct or serious neglect in the
discharge of his duties hereunder; or
(3) have a bankruptcy order made against him or if he shall make any
arrangement or composition with his creditors or have an interim order
18
<PAGE>
made against him pursuant to Section 252 of the Insolvency Act 1986;
or
(4) tend by his actions or omissions to bring the name or reputation of
the Company or any Group Company into serious disrepute or prejudice
the interests of the Business of the Company or any other Group
Company (bearing in mind the nature of the duties he is engaged in
hereunder and the capacity in which he is employed); or
(5) be or become of unsound mind or shall be or become a patient for the
purpose of any statute relating to mental health; or
(6) be convicted of an offence under any present or future statutory
enactment or regulation relating to insider dealing; or
(7) be or become prohibited by law from being a director.
(B) In the event of termination pursuant to sub-clause (A) the
Company shall not be obliged to make any further payment to the Executive
beyond the amount of any remuneration actually accrued due to the date of
such termination and the Company shall be entitled to deduct from such
remuneration any sums owing to it or to any other Group Company by the
Executive.
(C) In the event of the termination of the employment of the
Executive hereunder for whatever reason and whether by notice or in any
other manner whatsoever the Executive agrees that he will not at any time
after such termination represent himself as still having any connection
with the Company or any Group Company.
19
<PAGE>
(D) In the event that the Executive is incapacitated by ill health
accident or any other cause from performing his duties hereunder for an
aggregate of 125 working days or more (whether consecutive or not) in any
twelve consecutive months then the Company may terminate this Agreement by
giving to the Executive not less than six months' notice in writing given
within three months after the end of the 125 working days.
(E) In the event of the termination of the employment of the
Executive hereunder by notice given pursuant to Clause 2 of this Agreement
by either party, the Executive agrees that the Company may in its absolute
discretion require the Executive not to render all or any of his duties
hereunder or to exclude him from any premises of the Company (without
providing any reason therefor) during the relevant notice period or (if the
date of termination is disputed) at any time after the disputed date of
termination and that such action (if taken) on the part of the Company
shall not constitute a breach of this Agreement of any kind whatsoever in
respect of which the Executive has any claim against the Company provided
always that throughout the period of any such action the Executive's salary
and contractual benefits shall not cease to be payable by reason thereof.
STATUTORY PARTICULARS
---------------------
19. THE following particulars are set forth in compliance with the
requirements of the Employment Protection (Consolidation) Act 1978 as
amended by the Trade Union Reform and Employment Rights Act 1993 and the
Wages Act 1986:-
(A) The employment of the Executive by the Company and his continuous
period of employment with the Company began on the respective dates
specified in paragraphs 13 and 7 of the Schedule hereto.
20
<PAGE>
(B) Save as contained herein or otherwise notified to the Executive in
writing there are no terms or conditions of employment relating to
hours of work or to normal working hours or to holidays or to holiday
pay or to incapacity for work due to sickness or injury or to sick pay
or to 18 pensions or pension schemes or to collective agreements or to
work outside the United Kingdom or to disciplinary rules and
procedures.
(C) If the Executive is dissatisfied with any disciplinary decision
relating to him or if he has any grievance arising from his employment
hereunder he may refer any such matter to the Board which will deal
with the matter by discussion and by a decision of those present at
the relevant Board Meeting at which the matter is discussed.
(D) The Executive's hours of work shall be such as may be requisite for
the proper discharge of his duties hereunder.
(E) The Executive hereby authorizes the Company to deduct and to retain
from any remuneration accrued due to him under the terms of this
Agreement (whether or not actually paid during the continuance of his
employment hereunder) those sums set out in paragraph 12 of the
Schedule hereto.
RETURN OF PROPERTY ON TERMINATION
---------------------------------
20. (A) UPON the termination of his employment with the Company for
whatsoever cause the Executive shall forthwith deliver up to the Company or
its authorised representative any property of the Company or any other
Group Company which may be in his possession custody or under his control
including without limitation the Car and the keys relating thereto minutes
memoranda correspondence notes records reports sketches plans or other
21
<PAGE>
documents and any copies thereof, whether or not the same were originally
supplied to him by the Company or any other Group Company.
(B) If so requested the Executive shall provide to the Board a signed
statement confirming that he has fully complied with sub-clause (A).
NOTICES
-------
21. ANY notice to be given hereunder shall be given in writing
and may be given either personally or may be sent addressed in the case of
the Company to its registered office for the time being and in the case of
the Executive to him at his last known place of residence and any notice
given by post shall be deemed to have been served on the day which is three
days following that on which it was posted.
CONSTRUCTION
------------
22. (A) THE provisions of the Schedule hereto and any special terms
endorsed in writing by or on behalf of the parties hereto shall be read and
construed as part of this Agreement and shall be enforceable accordingly.
(B) The benefit of each agreement and obligation of the Executive
under Clause 13 of the Agreement may be assigned to successors for the time
being carrying on the Business and enforced by such assignees for the time
being carrying on the Business and such agreements and obligations shall
operate and remain binding notwithstanding the termination of this
Agreement.
LAW OF AGREEMENT
----------------
23. THIS Agreement shall be governed by and interpreted according to the
Law of England.
22
<PAGE>
PRIOR AGREEMENTS
----------------
24. SAVE for the letter dated 20th September 1991 (whose terms remain in
full force and effect) in respect of retirement benefits this Agreement
shall be in substitution for any subsisting service agreement or contract
of employment (oral or otherwise) made between the Company and the
Executive or between any other Group Company and the Executive which shall
be deemed to have been terminated by mutual consent with effect from the
Effective Date.
23
<PAGE>
I N W I T N E S S whereof this Agreement has been entered into the
day and year first above written.
The Common Seal of ) [Common Seal of Gallaher
GALLAHER LIMITED was hereinto ) Limited]
affixed in the presence of )
Director P.R. Burchell
Secretary B. Rudd
SIGNED and DELIVERED by the )
EXECUTIVE as a deed in the ) P.M. Wilson
presence of:- )
B. Rudd
Solicitor
Weybridge
24
<PAGE>
THE SCHEDULE above referred to
------------------------------
1. Capacity of the Executive: Chairman and Chief Executive
(Clause 2) of Gallaher Limited
2. The Effective Date: 1st February 1994
(Clause 2)
3. Minimum Notice Period: Three years
(Clause 2)
4. Remuneration: (L)314,000
(Clause 4)
5. Holidays: 25 working days
(Clause 7)
6. Pension Schemes: The Gallaher 'S' Pension Scheme and
Gallaher 'M' Pension Scheme
(Clause 9)
7. The continuous period of employment of the Executive with the Company
for statutory purposes began on: 6th October 1969
(Clause 19(A))
8. Contractual Retirement Date: 9th June 2001
The Executive's 60th
birthday
(Clause 2)
9. Period of Non-Enticement: Twelve months
(Sub-clause 13(D))
10. Period of Non-solicitation: Twelve months
(Sub-clause 13(E))
11. Period of dealing: Twelve months
(Sub-clause 13(E))
12. Deductions authorised pursuant to the Wages Act 1986: any debt owed
by the Executive to the Company; any pension or other similar
contribution owed by the Executive as a consequence of the Executive's
membership of the pension schemes referred to in paragraph 6 above;
any deduction from remuneration the Executive's consent to which has
previously been signified to the Company in writing and the deduction
of any other sum or sums which may from time to time be required or
authorised pursuant to subsection 1(1) (a) of the Wages Act 1986.
(Sub-clause 19(E))
13. The employment of the Executive by the Company began on: 1st January
1981
(Clause 19(A))
25
EXHIBIT 10o1
ACCO WORLD CORPORATION
SUPPLEMENTAL RETIREMENT PLAN
Section 1. Purpose. This ACCO World Corporation Supplemental
Retirement Plan is an unfunded excess benefit plan established by ACCO
World Corporation pursuant to Section 4(5) of ERISA as well as an unfunded
plan established for the purpose of providing deferred compensation for a
select group of management or highly compensated employees as referred to
in Sections 201(a)(2), 301(a)(3) and 401(a)(1) of ERISA in order to induce
employees of outstanding ability to join or continue in the employ of the
Company and to increase their efforts for its welfare by providing them
with supplemental retirement and profit-sharing benefits notwithstanding
the limitations imposed by the Internal Revenue Code on retirement and
profit-sharing benefits from tax qualified plans.
Section 2. Definitions. As used in this Plan, the following
words shall have the following meanings:
(a) "Affiliated Employment" means employment by any corporation
which, at the time of such employment, is or was an affiliate of the
Company, or thereafter becomes or became an affiliate of the Company.
"Affiliated Plan" means a defined benefit pension plan by which an employee
of the Company had been covered during Affiliated Employment.
(b) "Allocation" means the Company contribution allocated to the
accounts of a Profit-Sharing Plan participant under the Profit-Sharing Plan
for a Plan Year.
(c) "Committee" means the Administrative Committee administering
the Retirement Plan.
(d) "Company" means ACCO World Corporation, a Delaware
corporation, and its successors and assigns, and ACCO USA, Inc., and its
successors and assigns.
(e) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(f) "Executive Participant" means an employee of the Company who
is within the category of a select group of management or highly
compensated employees as referred to in Sections 201(a)(2), 301(a)(3) and
401(a)(1) of ERISA and who either holds or held the office of a Vice
President of the Company or any office senior thereto or, during the
current Plan Year or the prior Plan Year, was covered under the Management
Incentive Plan covering executives of the Company.
(g) "415 Limitations" means the Retirement Plan and Profit-
Sharing Plan provisions adopted pursuant to Section 415 of the Internal
Revenue Code to limit (i) annual Retirement Plan benefits pursuant to
Section 415(b) thereof, (ii) annual additions to the Profit-Sharing Plan
pursuant to Section 415(c) thereof and (iii) the aggregate of annual
Retirement Plan benefits and additions to the Profit-Sharing Plan pursuant
to Section 415(e) thereof.
<PAGE>
(h) "401(a)(17) Limitations" means the Retirement Plan and
Profit-Sharing Plan provisions adopted pursuant to Section 401(a)(17) of
the Internal Revenue Code to limit compensation considered for purposes of
computing Retirement Plan benefits and Profit-Sharing Plan contributions to
$150,000, effective as of January 1, 1994 (or such greater amount permitted
for such year in accordance with regulations promulgated by the Secretary
of the Treasury or his delegate).
(i) "402(g) Limitations" means the Profit-Sharing Plan
provisions adopted pursuant to Section 402(g) of the Internal Revenue Code
to limit Employee Salary Reduction Contributions and Cash Option
Contributions (as such terms are defined in the Profit-Sharing Plan) to
$7,000 annually (or such greater amount permitted in accordance with
regulations promulgated by the Secretary of the Treasury or his delegate).
(j) "Grantor Trust" means a trust for the benefit of an
Executive Participant established pursuant to Section 6 to provide for the
payment of benefits under this Plan.
(k) "Highly Compensated Employee" means an employee or former
employee of the Company who comes within the definition of a highly
compensated employee set forth in Section 414(q) of the Internal Revenue
Code (or any successor provision) for any Plan Year.
(l) "Highest Three-Year Average Earnings" means the total
compensation of an employee paid in the three consecutive Plan Years within
such employee's period of service considered for purposes of computing his
benefits hereunder that provide the highest aggregate of compensation
divided by three.
(m) "Normal Retirement Date" means the last day of the calendar
month in which a person's 65th birthday occurs.
(n) "Plan Year" means the calendar year.
(o) "Profit-Sharing Plan" means the ACCO World Corporation
Profit-Sharing Plan as amended from time to time.
(p) "Retirement Plan" means the ACCO World Corporation Pension
Plan for Salaried and Certain Hourly Paid Employees as amended from time to
time.
(q) "Surviving Spouse" means the surviving husband or wife of an
employee of the Company who has been married to the employee throughout the
one-year period ending on the date of the death of such employee.
(r) "Segregated Account" means an account established with a
bank or other financial institution approved by the Company, or other form
of segregated account approved by the Company, established pursuant to
Section 6 by or for the benefit of an Executive Participant to provide for
the payment of benefits under this Plan.
(s) "Tax Deferred Contributions" means salary reduction
contributions elected to be made to the Profit-Sharing Plan pursuant to
Section 401(k) of the Internal Revenue Code.
2
<PAGE>
Section 3. Retirement Benefits.
(a) Each person who is a Highly Compensated Employee or
Executive Participant at the date of termination of employment or during
the prior Plan Year and to whom benefits become payable under the
Retirement Plan shall be paid a supplemental annual retirement benefit
under this Plan equal in amount to the difference between (i) the benefit
paid under the Retirement Plan and the Affiliated Plans and (ii) the
benefit that would be payable if the 401(a)(17) Limitations and the 415
Limitations were not contained therein; provided, however, that the
aggregate annual retirement benefits payable under this Plan, the
Retirement Plan and the Affiliated Plans shall not exceed the lesser of
$225,000 or the Highly Compensated Employee's or Executive Participant's
Highest Three-Year Average Earnings. If such a Highly Compensated
Employee's or Executive Participant's Surviving Spouse is entitled to a
pre-retirement spouse's benefit under the Retirement Plan, subject to
Section 6, the Surviving Spouse shall be paid a benefit hereunder equal to
the difference between (i) the spouse's benefit payable under the
Retirement Plan and the Affiliated Plans and (ii) the spouse's benefit that
would be payable if the 401(a)(17) Limitations and the 415 Limitations were
not contained therein.
(b) Subject to Section 6, the supplemental retirement benefits
provided by this Plan shall be paid to the Executive Participant or Highly
Compensated Employee (or to any beneficiary designated by him in accordance
with the Retirement Plan, or to his Surviving Spouse if eligible for a
spouse's benefit under the Retirement Plan) concurrently with and in the
same manner as the payment of the benefits payable under the Retirement
Plan. In the event the supplemental retirement benefit commences prior to
Normal Retirement Date or is payable in a form other than an annuity for
the life of the former employee only, the supplemental retirement benefit
shall be adjusted to the same extent as under the Retirement Plan. The
Committee shall, however, direct that the supplemental retirement benefit
payable with respect to a former employee be paid as an actuarially
equivalent single sum payment if such supplemental retirement benefit has a
present value of less than $3,500. In determining actuarial equivalency of
a single sum payment in cash, there shall be used 120% of the applicable
monthly immediate annuity purchase interest rate which would be used by the
Pension Benefit Guaranty Corporation for the purpose of determining the
present value of a single sum distribution on plan termination and the
mortality table used at the time under the Retirement Plan for funding
purposes.
Section 4. Supplemental Profit-Sharing Benefits.
(a) In the event that the Allocation under the Profit-Sharing
Plan is limited by the 401(a)(17) Limitations and the 415 Limitations for
1989 or any subsequent Plan Year for a Highly Compensated Employee or
Executive Participant, the Highly Compensated Employee or Executive
Participant shall receive a supplemental profit-sharing award under this
Plan for such Plan Year equal to the difference between (i) the Allocation
actually made to the Highly Compensated Employee or Executive Participant
and (ii) the Allocation that would have been made to the Profit-Sharing
Plan for such Plan Year if the 401(a)(17) Limitations and the 415
Limitations were not contained therein.
3
<PAGE>
(b) In the event that, in addition to the limitations specified
in (a) of this Section 4, all or any part of the Cash Option Contribution
(as such term is defined in the Profit-Sharing Plan) cannot be maintained
in the Profit-Sharing Plan for any Plan Year as a result of the 402(g)
Limitations for any eligible Executive Participant as described in the next
sentence, the Executive Participant shall receive a supplemental profit-
sharing award under this Plan equal to the Cash Option Contribution or part
thereof which would have been allocated to the respective Executive
Participant under the Profit-Sharing Plan for such Plan Year but for the
402(g) Limitation. In order to be eligible for the benefit described in
this paragraph (c) for any Plan Year, the Executive Participant must has a
base salary rate and target bonus salary rate and target bonus at the
beginning of such Plan Year projected to provide earnings of at least three
times the Social Security wage base for the Plan Year.
(c) Except as provided in Section 6, the award for any Plan Year
shall be made as of the first day of the following year and shall be deemed
to be thereafter invested in an interest bearing investment selected by the
Committee. The amount of a Highly Compensated Employee's or Executive
Participant's supplemental profit-sharing benefits under this Plan shall be
the aggregate amount of such awards together with any deemed investment
gain thereon and less any deemed investment loss.
(d) Supplemental profit-sharing awards and deemed investment
gain thereon shall be fully vested and nonforfeitable.
(e) Supplemental profit-sharing plan benefits shall be paid by a
single sum payment as soon as practicable following termination of
employment, subject to Section 6.
(f) Subject to Section 6, a Highly Compensated Employee or
Executive Participant may designate a beneficiary to receive the unpaid
portion of his supplemental profit-sharing benefits in the event of his
death. The designation shall be made in a writing filed with the Committee
on a form approved by it signed by the Highly Compensated Employee or
Executive Participant. If no effective designation of beneficiary shall be
on file with the Committee when supplemental profit-sharing benefits would
otherwise be distributable to a beneficiary, then such benefits shall be
distributed to the spouse of the Highly Compensated Employee or Executive
Participant or, if there is no spouse, to the executor of the will or the
administrator of his estate or, if no such executor or administrator shall
be appointed within six months after his death, the Committee shall direct
that distribution be made, in such shares as the Committee shall determine,
to the child, parent or other blood relative of such Highly Compensated
Employee or Executive participant or to such other person or persons as the
Committee may determine.
Section 5. Funding. Benefits under this Plan shall not
initially be funded in order that the Plan may be exempt from the
provisions of Parts 2, 3 and 4 of Title I of ERISA. The Company may,
however, segregate assets which are intended to be a source for payment of
benefits hereunder for Executive Participants. In the event benefits
hereafter determined to be taxable for Executive Participants prior to
actual receipt thereof and subject to Section 6, a payment shall be made to
such Executive Participants in an amount sufficient to pay such taxes
4
<PAGE>
notwithstanding that an Executive Participant may not then have terminated
service or that the payment is being made prior to the date that benefits
would otherwise be paid under the Retirement Plan. Amounts so paid shall
then be used as an offset to the supplemental retirement benefits, if any,
thereafter payable which shall also be paid in an actuarially equivalent
lump sum promptly upon the later of termination of service or attainment of
age 55. In determining actuarial equivalence of a single sum payment in
cash, there shall be used the interest rate which would be used by the
Pension Benefit Guaranty Corporation for the month preceding the month for
which the determination is required for the purpose of determining the
present value of a single sum distribution on plan termination and the UP-
1984 unisex mortality table.
Section 6. Grantor Trusts and Segregated Accounts.
Notwithstanding Section 5 of this Plan, the Company may provide for the
establishment of Grantor Trusts and Segregated Accounts by or for the
benefit of individual Executive Participants to provide for the payment of
benefits (other than supplemental tax deferred amounts and related Company
matching awards pursuant to Section 7) under this Plan, consistent with the
following provisions:
(a) The Trustee of the Grantor Trusts shall be a bank or trust
company approved by the Company and established under the laws of the
United States or a state within the United States and having either total
assets of at least $15 billion or trust assets of at least $25 billion.
Each Grantor Trust shall be established pursuant to a trust agreement
having terms and provisions approved by the Company and consistent with
this Section. The Grantor Trust shall be solely for the purpose of
providing benefits under the Plan with respect to the Executive
Participant, and neither the Company nor any creditors of the Company shall
have any interest in the assets of the Grantor Trust. The Company shall be
the administrator of the Grantor Trust, and shall have such powers as are
granted by the trust agreement.
(b) The Company shall pay the fees and expenses of the Trustee
and all the expenses for the management and administration of each Grantor
Trust and Segregated Account for all periods prior to the Executive
Participant's termination of employment, and for a period of sixty (60)
days thereafter and for any further period as may be authorized by the
Company, and shall indemnify the Executive Participant against any
liability or cost in respect thereof, including any tax liabilities or
costs.
(c) Each Segregated Account shall be a savings or other type of
account approved by the Company established with a bank or trust company
approved by the Company and established under the laws of the United States
or a state within the United States and having either total assets of at
least $15 billion or trust assets of at least $25 billion, or other form of
segregated account with such a bank or trust company or other financial
institution approved by the Company, in each case with such terms and
provisions as are approved by the Company and consistent with this Section.
(d) The Company may from time to time make contributions to
either the Grantor Trust, or Segregated Account if directed by an Executive
Participant, in amounts which when added to the existing balances in the
Executive Participant's Grantor Trust and Segregated Account will be
5
<PAGE>
approximately equal to the present value of the after tax equivalent of the
Executive Participant's accrued benefits under Sections 3 and 4.
(e) Unless the Grantor Trust has previously been terminated as a
result of the Executive Participant's actual or deemed withdrawal of all
amounts in his Grantor Trust and Segregated Account, as provided in
paragraph (l) of this Section 6, as promptly as practicable after the
Executive Participant's termination of employment, whether by retirement,
death or otherwise, the Company may make a final contribution to the
Executive Participant's Grantor Trust, or Segregated Account if directed by
the Executive Participant, in an amount which when added to the existing
balances in the Executive Participant's Grantor Trust and Segregated
Account, except for any balances which are attributable to amounts deemed
withdrawn previously and the income earned thereon, will be equal to (i)
the sum of the present value of the after tax equivalent of (A) if the
termination of employment is not by reason of the death of the Executive
Participant, the Executive Participant's benefit under Section 3, or if the
termination of employment is by reason of the death of the Executive
Participant, the Executive Participant's benefit under Section 3
immediately prior to his death and (B) the Executive Participant's
supplemental profit-sharing benefit under Section 4, offset by (ii) any
amounts previously actually withdrawn by the Executive Participant from his
Grantor Trust or Segregated Account and income which would have been earned
thereon, calculated as provided in paragraph (k) of this Section 6. If
prior to the Executive Participant's termination of employment his Grantor
Trust has previously been terminated as a result of the Executive
Participant's actual or deemed withdrawal of all amounts in his Grantor
Trust and Segregated Account, as promptly as practicable following such
termination of employment the Company may make a final payment to the
Executive Participant, or in the event of the death of the Executive
Participant his personal representative, in an amount equal to (i) the sum
of the present value of the after tax equivalent of (A) if the termination
of employment is not by reason of the death of the Executive Participant,
the Executive Participant's benefit under Section 3, or if the termination
of employment is by reason of the death of the Executive Participant, the
Executive Participant's benefit under Section 3 immediately prior to his
death and (B) the Executive Participant's supplemental profit-sharing
benefit under Section 4, offset by (ii) the amounts previously withdrawn or
deemed withdrawn by the Executive Participant from his Grantor Trust and
Segregated Account and income which would have been earned thereon,
calculated as provided in paragraph (k) of this Section 6.
(f) Amounts in a Grantor Trust or Segregated Account shall be
invested separately as to amounts representing the Executive Participant's
supplemental retirement benefit under Section 3 and the Executive
Participant's supplemental profit-sharing benefit under Section 4.
Supplemental retirement benefit amounts invested in a Grantor Trust shall
be invested solely in the Chase Manhattan Fixed Income Fund to the extent
practicable and otherwise in the Chase Manhattan Personal Trust Market Rate
Account. Supplemental profit-sharing benefit amounts invested in a Grantor
Trust shall be invested in one or more of (i) the Vista U.S. Government
Income Fund, (ii) the Vista Balanced Fund, (iii) the Chase Manhattan
Personal Trust Market Rate Account or (iv) the Chase Manhattan Equity
Income Fund, in such portions as are elected by the Executive Participant
on a written election form approved by and filed with the Committee, all to
the extent practicable and otherwise in the Chase Manhattan Personal Trust
6
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Market Rate Account. The Executive Participant may change such election at
any time by filing a new written election form with the Committee. The
Committee shall promptly notify the Trustee as to any such elections or
changes therein. Supplemental retirement benefit amounts and supplemental
profit-sharing benefit amounts invested in a Segregated Account shall be
invested solely in the Chase Manhattan Personal Trust Market Rate Account.
In lieu of the calculation of investment gain or loss on supplemental
profit-sharing awards prescribed by Section 4(c), an Executive
Participant's profit-sharing benefit under Section 4 shall include the
actual investment gain or loss on supplemental profit-sharing benefit
amounts invested in accordance with this paragraph (f) (and not deemed
withdrawn pursuant to paragraph (j) of this Section 6).
(g) The Executive Participant may designate a beneficiary to
receive amounts held in his Grantor Trust in the event of his death. The
designation shall be made in a writing filed with the Committee on a form
approved by it and signed by the Executive Participant. The Committee
shall notify the Trustee as to any such designation or changes therein.
The provisions of Section 3(a) and (b) and Section 4(f), providing for the
payment of benefits to the Surviving Spouse of the Executive Participant,
or other person designated by the Executive Participant or the Committee,
in the event of the death of the Executive Participant, shall not apply to
amounts in the Executive Participant's Grantor Trust or Segregated Account.
(h) The Company shall make payments to the Executive Participant
(or his beneficiary) from time to time in the approximate amounts required
to compensate the Executive Participant (or his beneficiary) for additional
federal, state and local taxes on income resulting from the inclusion in
the Executive Participant's or beneficiary's taxable income of
contributions to the Executive Participant's Grantor Trust and Segregated
Account, the final payment pursuant to paragraph (e) of this Section 6 if
the Grantor Trust has been terminated prior to the Executive Participant's
termination of employment, and the income of the Grantor Trust and
Segregated Account for periods prior to termination of employment
(including amounts paid by the Company pursuant to paragraphs (b) and (e)
of this Section 6).
(i) An Executive Participant may elect to transfer all or any
portion of the funds in his Grantor Trust to his Segregated Account, or to
transfer all or any portion of the funds in his Segregated Account to his
Grantor Trust, upon written notice of not less than sixty (60) days to the
Company and the Trustee and the financial institution with which the
Segregated Account is established.
(j) An Executive Participant may withdraw all or any portion of
the funds in his Grantor Trust or Segregated Account at any time upon not
less than sixty (60) days written notice to the Company and to the Trustee,
or the financial institution with which the Segregated Account is
established, as the case may be. In the event of any such withdrawal,
subject to the last sentence of this paragraph (j), (i) for purposes of
paragraphs (e), (f), (h), (k) and (l) of this Section 6 the Executive
Participant shall be deemed to have made a complete withdrawal of the funds
in his Grantor Trust and Segregated Account at such time, (ii) no further
contributions shall be made thereafter by the Company to the Executive
Participant's Grantor Trust or Segregated Account until the time of the
Executive Participant's termination of employment, at which time the final
7
<PAGE>
contribution or payment described in paragraph (e) of this Section 6 may be
made by the Company, and (iii) no further payments pursuant to paragraph
(h) of this Section 6 shall be made with respect to income of the Grantor
Trust or Segregated Account. The Compensation and Stock Option Committee
of American Brands, Inc. in the case of an Executive Participant who is the
Chief Executive Officer of the Company, and the Corporate Employee Benefits
Committee of American Brands, Inc. in the case of all other Executive
Participants, may determine, however, that, on the basis of hardship, (A)
the Executive Participant shall not be deemed to have withdrawn any amounts
not actually withdrawn, and payments pursuant to paragraph (h) of this
Section 6 shall continue to be made with respect to income of the Executive
Participant's Grantor Trust or Segregated Account on amounts so determined
not deemed to have been withdrawn, and also may determine (independently of
any determination pursuant to clause (A) of this sentence) that (B)
notwithstanding such withdrawal, contributions by the Company to the
Executive Participant's Grantor Trust or Segregated Account shall continue
to be made thereafter, as provided in paragraph (e) of this Section 6,
until the time of the Executive Participant's termination of employment.
(k) Benefits payable to an Executive Participant or Surviving
Spouse or other beneficiary under Sections 3 and 4 shall be offset by the
pre-tax equivalent of amounts in the Executive Participant's Grantor Trust
and Segregated Account at the time of the Executive Participant's
termination of employment (except for any amounts which are attributable to
amounts deemed withdrawn previously pursuant to paragraph (j) of this
Section 6 and the income earned thereon), including any final contribution
or payment pursuant to paragraph (e) of this Section 6, and by the present
value of the pre-tax equivalent of any amounts withdrawn or deemed
withdrawn by the Executive Participant from his Grantor Trust or Segregated
Account, plus the amounts of income which would have been earned on such
withdrawn amounts from the time of withdrawal until the time of termination
of employment, calculated by applying an earnings rate equal to the after
tax equivalent of l20% of the applicable monthly immediate annuity purchase
interest rate which would be used by the Pension Benefit Guaranty
Corporation from time to time during such periods for the purpose of
determining the present value of a single sum distribution on plan
termination.
(l) The Grantor Trust of an Executive Participant shall
terminate upon the actual or deemed withdrawal by the Executive Participant
of all amounts in the Grantor Trust and in his Segregated Account. The
Grantor Trust also shall terminate upon the expiration of sixty (60) days
following the termination of employment of the Executive Participant,
unless continued by agreement between the Executive Participant and the
Trustee.
(m) Upon the making of the final contribution or other payment
pursuant to paragraph (e) of this Section 6, and the payment pursuant to
paragraph (h) of this Section 6 in respect of additional taxes resulting
from such final contribution or payment, the Company shall have no further
liability for benefits otherwise payable under Sections 3 and 4 to the
Executive Participant or his Surviving Spouse, estate or other
beneficiaries.
(n) The provisions of this Section 6 shall supersede the
provisions of any other Section of this Plan to the extent such other
8
<PAGE>
provisions might be considered to conflict with the provisions of this
Section 6.
Section 7. Supplemental Tax Deferred Amounts And Related Company
Matching Awards.
(a) A Highly Compensated Employee or Executive Participant who
is a participant in the Profit-Sharing Plan and whose Tax Deferred
Contributions are limited by the 40l(a)(17) Limitations may elect that the
Company reduce his compensation and credit him with a supplemental tax
deferred amount under this Plan for any Plan Year equal to the difference
between (i) an amount up to the maximum Tax Deferred Contribution that the
Highly Compensated Employee or Executive Participant could have elected to
be made to the Profit-Sharing Plan but for the 40l(a)(17) Limitations and
(ii) the maximum Tax Deferred Contribution that the Highly Compensated
Employee or Executive Participant could have elected to be made to the
Profit-Sharing Plan with his compensation subject to the 40l(a)(17)
Limitations; provided that the sum of the Tax Deferred Contributions to the
Profit-Sharing Plan and the supplemental tax deferred amount credited under
this Plan for a Highly Compensated Employee or Executive Participant for
any Plan Year shall not exceed the 402(g) Limitation for such Plan Year.
(b) A Highly Compensated Employee or Executive Participant who
is credited with a supplemental tax deferred amount under Section 7(a)
shall also be credited with a related Company matching award equal to his
supplemental tax deferred amount for any Plan Year.
(c) An election by a Highly Compensated Employee or Executive
Participant pursuant to paragraph (a) must be made by filing a form
approved by the Committee with the Committee no later than the beginning of
the Plan Year for which the election is to be effective specifying the
supplemental tax deferred amount elected; provided that if a Highly
Compensated Employee or Executive Participant does not become eligible to
elect Tax Deferred Contributions to the Profit-Sharing Plan until after the
first day of a Plan Year, the Highly Compensated Employee or Executive
Participant may file his election pursuant to paragraph (a) for such Plan
Year with the Committee no later than the effective date of the Highly
Compensated Employee's or Executive Participant's eligibility to make Tax
Deferred Contributions. An election pursuant to this paragraph will
continue in effect for subsequent Plan Years unless changed by the Highly
Compensated Employee or Executive Participant by filing a form approved by
the Committee with the Committee prior to the beginning of the Plan Year
for which such change is to be effective. The election shall be
irrevocable for any Plan Year.
(d) The supplemental tax deferred amounts and Company matching
awards pursuant to this Section 7 shall be deemed to have been made as of
the first day of the Plan Year for which the election made pursuant to
paragraph (c) is effective and shall be deemed to be thereafter invested in
an interest bearing investment selected by the Committee. The amount of a
Highly Compensated Employee's or Executive Participant's supplemental tax
deferred amounts and related Company matching award benefits under this
Plan shall be the aggregate amount of such awards together with any deemed
investment gain thereon and less any deemed investment loss.
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(e) Supplemental tax deferred amounts and related Company
matching awards under this Plan and deemed investment gain thereon shall be
fully vested and nonforfeitable.
(f) Benefits under this Section 7 shall be paid by a single sum
cash payment as soon as practicable following termination of employment.
(g) A Highly Compensated Employee or Executive Participant may
designate a beneficiary to receive the unpaid portion of his supplemental
tax deferred contribution amounts and related Company matching award
benefits in the event of his death. The designation shall be made in a
writing filed with the Committee on a form approved by it and signed by the
Highly Compensated Employee or Executive Participant. If no effective
designation of beneficiary shall be on file with the Committee when
benefits under this Section 7 would otherwise be distributable to a
beneficiary, then such benefits shall be distributed to the spouse of the
Highly Compensated Employee or Executive Participant or if there is no
spouse, to the executor of the will or the administrator of his estate or,
if no such executor or administrator shall be appointed within six months
after his death, the Committee shall direct that distribution be made, in
such shares as the Committee shall determine, to the child, parent or other
blood relative of such Highly Compensated Employee or Executive Participant
or to such other person or persons as the Committee may determine.
Section 8. Administration. This Plan shall be administered by
the Committee. All decisions and interpretations of the Committee shall be
conclusive and binding on the Company and Highly Compensated Employees and
Executive Participants. The Plan may be amended or terminated by the Board
of Directors of ACCO World Corporation at any time; provided, however, that
no such amendment or termination shall deprive any Highly Compensated
Employee or Executive Participant of supplemental retirement benefits
accrued to the date of such amendment or termination or modify the last
three sentences of Section 5 in a manner adverse to any Executive
Participant. The Committee shall maintain records of supplemental profit-
sharing awards and supplemental tax deferred amounts and related Company
matching awards pursuant to Section 7 and the assumed investment thereof
and records for the calculation of supplemental retirement benefits.
Section 9. Nonassignability. No Highly Compensated Employee or
Executive Participant or Surviving Spouse or beneficiary shall have the
right to assign, pledge or otherwise dispose of any benefits payable to him
hereunder nor shall any benefit hereunder be subject to garnishment,
attachment, transfer by operation of law, or any legal process.
10
EXHIBIT 10o2
ACCO WORLD CORPORATION
TRUST AGREEMENT
THIS AGREEMENT, made as of the 1st day of July, 1994, among
ACCO WORLD CORPORATION, a Delaware corporation (the "Company"), THE
CHASE MANHATTAN BANK (National Association), incorporated under the
laws of the United States of America (the "Trustee") and HEWITT
ASSOCIATES LLC, a limited liability company formed under the laws of
Illinois (the "Trustee's Contractor").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company has incurred and expects to continue to
incur certain unfunded retirement income liability to or with respect
to NORMAN H. WESLEY (the "Executive") pursuant to the terms of the
Company's Supplemental Retirement Plan (including the supplemental
profit-sharing provisions therein) (herein referred to as the "Plan");
and
WHEREAS, the Company desires to provide additional assurance
to the Executive and his surviving spouse, if any, beneficiaries or
estate under the Plan (collectively, the "Beneficiaries") that their
unfunded rights under the Plan will in the future be met or
substantially met by application of the procedures set forth herein;
and
WHEREAS, the Company wishes to establish a trust with respect
to the Executive in order to provide a source of payments as such
payments are required under the terms of the Plan;
NOW, THEREFORE, in consideration of the premises and mutual
and independent promises herein, the parties hereto covenant and agree
as follows:
ARTICLE I
1.1 The Company hereby establishes with the Trustee a Trust
consisting of such sums of money and such property acceptable to the
Trustee as shall from time to time be paid or delivered to the Trustee
and the earnings and profits thereon. All such money and property, all
investments made therewith and proceeds thereof, less the payments or
other distributions which, at the time of reference, shall have been
made by the Trustee, as authorized herein, are referred to herein as
the "Fund" and shall be held by the Trustee, IN TRUST, in accordance
with the provisions of this Agreement.
1.2 The Trustee shall hold, manage, invest and otherwise
administer the Fund pursuant to the terms of this Agreement. The
Trustee shall be responsible only for contributions actually received
by it hereunder and shall have no responsibility for the correctness of
the amount thereof. Upon the establishment of this Trust, and from
time to time thereafter, the Company shall contribute to the Trust such
<PAGE>
amount in cash as the Company shall determine to be appropriate to
provide a source of the payments required under the terms of the Plan.
It is contemplated that the initial contribution by the Company shall
be in an amount not less than (i) the present value of the aggregate
maximum benefits that would be due to the Executive or his
Beneficiaries as of such date under the retirement provisions of the
Plan and (ii) the amount to which the Executive or his Beneficiaries
would then be entitled under the supplemental profit-sharing provisions
of the Plan. It is further contemplated that the Company will make
additional contributions to the Trust upon the furnishing to the
Trustee's Contractor of the annual updated benefit information
specified in Section 3.3 in amounts such that the amount of the Fund at
such time is not less than the amounts set forth in (i) and (ii) of the
preceding sentence. However, the amounts and timing of all such
contributions shall be at the discretion of the Company, and the
Company shall have no obligation to make such contributions in any
specific amount or at any specific time.
1.3 The Company shall certify to the Trustee, the Trustee's
Contractor and the Executive at the time of each contribution to the
Fund the amount of such contribution being made in respect of the
Executive. The Fund shall be revalued by the Trustee semiannually as
of the last business day of each June and December at current market
values, as determined by the Trustee, which shall promptly deliver a
copy of such semiannual valuation to the Trustee's Contractor. The
Trustee's Contractor shall deliver to the Company and the Executive or
Beneficiary of the Executive the semiannual statement of the Fund
reflecting such revised valuation.
ARTICLE II
2.1 Notwithstanding any provision in this Agreement to the
contrary, if at any time while the Trust is still in existence the
Company becomes insolvent (as defined herein), the Trustee shall upon
written notice thereof suspend the payment of all benefits from the
Fund and shall thereafter hold the Fund in suspense until it receives a
court order directing the disposition of the Fund; provided, however,
the Trustee may deduct or continue to deduct its fees and expenses and
other expenses of the Trust, including taxes and the Trustee's
Contractor's fees and expenses, pending the receipt of such court
order. The Company shall be considered to be insolvent if (a) it is
unable to pay its debts as they fall due or (b) bankruptcy or
insolvency proceedings are initiated by its creditors or the Company or
any third party under the Bankruptcy Act of the United States or the
bankruptcy laws of any state alleging that the Company is insolvent or
bankrupt. By its approval and execution of this Agreement, the Company
represents and agrees that its Board of Directors and Chief Executive
Officer, as from time to time acting, shall have the responsibility to
give to the Trustee prompt written notice of any event of the Company's
insolvency and the Trustee shall be entitled to rely thereon to the
exclusion of all directions or claims to pay benefits thereafter made.
Absent such notice, the Trustee shall have no responsibility for
determining whether the Company has become insolvent. If after an
event of insolvency, the Company later becomes solvent without the
entry of a court order concerning the disposition of the Fund, the
2
<PAGE>
Company shall by written notice so inform the Trustee and the Trustee
shall thereupon resume all its duties and responsibilities under this
Agreement without regard to this Section 2.1 until and unless the
Company again becomes insolvent as such term is defined herein. If the
Trustee has suspended payments pursuant to this Section 2.1 and
thereafter resumes payments pursuant to a court order or notice from
the Company as set forth in the preceding sentence, any benefits
payable with respect to the Executive that have not been paid during
the period of suspension shall then immediately be paid together with
interest thereon calculated on the basis of the return earned during
such period of suspension by The Chase Market Rate Account (or similar
investment vehicle of The Chase Manhattan Bank if The Chase Market Rate
Account is changed).
2.2 The Company represents and agrees that the Trust
established under this Agreement does not fund and is not intended to
fund the Plan, or any other employee benefit plan or program of the
Company. Such Trust is and is intended to be a depository arrangement
with the Trustee for the setting aside of cash and other assets of the
Company for the meeting of part or all of its future obligations to the
Executive and his Beneficiaries under the Plan. Contributions by the
Company to this Trust shall be in respect of only the Executive. The
purpose of this Trust is to provide a fund from which benefits may be
payable under the Plan and as to which the Executive and his
Beneficiaries may, by exercising the procedures set forth herein, have
access to some or all of their benefits as such become due without
having the payment of such benefits subject to the administrative
control of the Company unless the Company becomes insolvent as defined
in Section 2.1. The Company further represents that the Plan is a
deferred compensation plan for a select group of management and highly
compensated employees and as such is exempt from the application of the
Employee Retirement Income Security Act of 1974 ("ERISA") except for
the disclosure requirements applicable to such plan for which the
Company bears full responsibility as to compliance. The Company
further represents that the Plan is not qualified under Section 401 of
the United States Internal Revenue Code and therefore is not subject to
any of the Code requirements applicable to tax-qualified plans.
ARTICLE III
3.1 By its acceptance of this Trust the Trustee hereby
agrees to the designation by the Company of Hewitt Associates LLC as
the contractor of the Trustee ("Trustee's Contractor") under this
Agreement. It is herein recognized that said Trustee's Contractor is
also acting as the independent consulting actuary of the Company with
respect to the Plan and that the Trustee shall have no responsibility
hereunder for the continued retention of Hewitt Associates LLC, or any
responsibility assigned to the Trustee's Contractor or its performance
thereof so long as said firm continues to be the Company's independent
consulting actuary. In the event the Company replaces or no longer
uses said firm as its independent consulting actuary, the Trustee in
its sole discretion may, but need not, designate a new Trustee's
Contractor or may continue to use the same Trustee's Contractor; or in
the event said firm does not accept its designation as Trustee's
Contractor or accepts said designation and subsequently resigns, the
3
<PAGE>
Trustee shall designate the Trustee's Contractor or a new Trustee's
Contractor; provided, however, any Trustee's Contractor appointed by
the Trustee shall be independent of the Company. A Trustee's
Contractor appointed by the Trustee must be a national actuarial
consulting firm or a "Big 6" accounting firm or other national
accounting firm. In the event any such firm refuses to act as the
Trustee's Contractor, the Trustee shall appoint as the Trustee's
Contractor a law firm of at least l00 lawyers. The Company shall pay
to the Trustee's Contractor all fees and expenses of the Trustee's
Contractor and shall indemnify and hold the Trustee harmless for any
actions or omissions of said Trustee's Contractor and shall indemnify
and hold the Trustee's Contractor harmless for any actions or omissions
of the Trustee. Such fees and expenses shall be a charge on the Fund
and shall constitute a lien in favor of the Trustee's Contractor until
paid by the Company. The Trustee's Contractor shall be paid for its
services at rates comparable to the rates the Trustee's Contractor
charges for comparable services to its other clients.
3.2 Except for the records dealing solely with the Fund and
its investment, which shall be maintained by the Trustee, the Trustee's
Contractor shall maintain all the Executive's records contemplated by
this Agreement, including records of the Executive's compensation and
benefits from the Company, the amount of his benefits accrued under the
Plan, the Executive's Beneficiary designation, the Company's
contributions to the Fund and such other records as may be necessary
for determining the amount payable to the Executive or his Beneficiary
under the Plan. All such records shall be made available promptly upon
the request of the Trustee, the Executive or his Beneficiary or the
Company. The Trustee's Contractor shall also prepare and distribute
the Executive's annual estimated benefit statements specified in
Section 3.3 and shall be responsible for information with respect to
payments to the Executive and his Beneficiaries and shall perform such
other duties and responsibilities as the Company or the Trustee
determines is necessary or advisable to achieve the objectives of this
Agreement.
3.3 Upon the establishment of this Trust or as soon
thereafter as practicable, the Company shall furnish to the Trustee's
Contractor all the information necessary in order for the Trustee's
Contractor to determine the benefits payable to or with respect to the
Executive including any benefits payable after the Executive's death
and the recipient of same and the amount of any applicable federal,
state or local withholding taxes with respect thereto. The Company
shall regularly, at least annually by March 3l of each year, furnish
revised updated information to the Trustee's Contractor. Based on the
foregoing information the Trustee's Contractor shall prepare an annual
estimated benefits statement in respect of the Executive and shall
furnish a copy of same to the Executive or his Beneficiary and to the
Company by no later than May 15 of each year. In the event the Company
refuses or neglects to provide updated Executive information, as
contemplated herein, the Trustee's Contractor shall be entitled to rely
upon information furnished to it by the Executive.
3.4 Upon the direction of the Company or upon the
application of the Executive or Beneficiary of a deceased Executive by
submission of a Payment Demand Notice in the form attached hereto as
4
<PAGE>
Schedule A, a copy of which shall be delivered by the Trustee's
Contractor to the Company, the Trustee's Contractor shall prepare and
deliver to the Trustee within thirty days of receipt of such direction
or application a certification to the Trustee that the Executive's
benefits under the Plan have become payable, and shall deliver a copy
of such certification to the Company and to the Executive or
Beneficiary. In preparing such certification, the Trustee's Contractor
shall obtain updated information from the Company for calculating
benefits under the Plan. In the event the Company refuses or neglects
to provide updated information, the Trustee's Contractor shall be
entitled to rely upon information furnished to it by the Executive.
Such certification shall include the amount of such benefits, including
benefits referred to in Section 11.8, the manner of payment and the
name, address and social security number of the recipient. No later
than five days after the receipt of such certification from the
Trustee's Contractor and appropriate federal, state and local tax
withholding information provided by the Company, the Trustee shall
commence cash distributions from the Fund in accordance therewith to
the person or persons so indicated and shall distribute to the Company
for remittance to the appropriate taxing authority the amounts of any
taxes required to be withheld, and the Trustee's Contractor shall
charge the Fund therefor. The Company shall have full responsibility
for the proper remittance of all withholding taxes to the appropriate
taxing authority and shall furnish the Executive or his Beneficiary,
the Trustee's Contractor and the Trustee with the appropriate tax
information form reporting the amounts of such distributions and any
withholding taxes. The certification by the Trustee's Contractor shall
also be updated annually upon receipt by the Trustee's Contractor of
updated benefit information from the Company (or the Executive in the
event of the failure of the Company to provide such information) and
the annual updated certification shall be delivered to the Company and
the Executive or his Beneficiary. The benefits payable in respect of
the updated certificate shall be adjusted to the extent, if any, set
forth in the certificate.
3.5 Upon the payment of all Company liabilities under the
Plan to the Executive and Beneficiaries, the Trustee's Contractor shall
prepare a certification to the Trustee, the Executive or his
Beneficiary and to the Company, and the Trustee shall thereupon hold or
distribute the Fund in accordance with the written instructions of the
Company. At no time prior to the Company's insolvency, as defined in
Section 2.1, or the payment of all liabilities of the Company under the
Plan in respect of the Executive and his Beneficiaries shall any part
of the Fund revert to the Company. The Trustee and the Trustee's
Contractor shall have no responsibility for determining whether the
Executive or his Beneficiary has died and shall be entitled to rely
upon information furnished by the Company or, in the absence of such
information from the Company, from the Beneficiary.
3.6 Nothing provided in this Agreement shall relieve the
Company of its liabilities to pay the benefits provided under the Plan
except to the extent such liabilities are met by application of Fund
assets. The Company, therefore, agrees that all income, deductions and
credits of the Fund belong to it as owner for income tax purposes and
will be included on the Company's income tax returns.
5
<PAGE>
ARTICLE IV
4.1 The Company shall provide the Trustee's Contractor with
a complete copy of the Plan and all amendments thereto and of the
resolutions of the Board of Directors of the Company approving the Plan
and all amendments thereto, promptly upon their adoption. After the
execution of this Agreement, the Company shall promptly file with the
Trustee and the Trustee's Contractor a certified list of the names and
specimen signatures of the officers of the Company and any delegee
authorized to act for it. The Company shall promptly notify the
Trustee and the Trustee's Contractor of the addition or deletion of any
person's name to or from such list, respectively. Until receipt by the
Trustee or the Trustee's Contractor of notice that any person is no
longer authorized so to act, the Trustee or the Trustee's Contractor
may continue to rely on the authority of the person. All
certifications, notices and directions by any such person or persons to
the Trustee or the Trustee's Contractor shall be in writing signed by
such person or persons. The Trustee and the Trustee's Contractor may
rely on any such certification, notice or direction purporting to have
been signed by or on behalf of such person or persons that the Trustee
or the Trustee's Contractor believes to have been signed thereby. The
Trustee and the Trustee's Contractor may rely on any certification,
notice or direction of the Company that the Trustee or the Trustee's
Contractor believes to have been signed by a duly authorized officer or
agent of the Company. The Trustee and the Trustee's Contractor shall
have no responsibility for acting or not acting in reliance upon any
notification believed by the Trustee or the Trustee's Contractor to
have been so signed by a duly authorized officer or agent of the
Company. The Company shall be responsible for keeping accurate books
and records with respect to the Executive, his compensation and his
rights and interests in the Fund under the Plan.
4.2 The Company shall indemnify and hold harmless the
Trustee for any liability or expenses, including without limitation
advances for or prompt reimbursement of reasonable fees and expenses of
counsel and other agents retained by it, incurred by the Trustee with
respect to holding, managing, investing or otherwise administering the
Fund, other than by its negligence or willful misconduct.
4.3 The Company shall indemnify and hold harmless the
Trustee's Contractor for any liability or expenses, including without
limitation advances for or prompt reimbursement of reasonable fees and
expenses of counsel and other agents retained by it, incurred by the
Trustee's Contractor with respect to keeping the records for the
Executive's benefit calculations, reporting thereon to the Executive,
certifying benefit information to the Trustee, determining the status
of the Fund and benefits hereunder and otherwise carrying out its
obligations under this Agreement, other than those resulting from the
Trustee's Contractor's negligence or willful misconduct.
ARTICLE V
5.1 The Trustee shall not be liable in discharging its
duties hereunder, including without limitation its duty to invest and
6
<PAGE>
reinvest the Fund, if it acts in good faith and in accordance with the
terms of this Agreement and any applicable federal or state laws, rules
or regulations.
5.2 The Trustee is hereby appointed as the investment
manager of the Fund. In the event that the Trustee cannot serve as
investment manager of the Fund, the Trustee shall then select Pacific
Investment Management Company as investment manager; provided that if
Pacific Investment Management Company is unwilling or unable to act as
investment manager, the Trustee shall select J.P. Morgan Investment
Management Inc. as investment manager. The investment manager shall
invest the assets of the Fund solely in The Chase Manhattan Bank Fixed
Income Fund to the extent practicable and otherwise in The Chase
Manhattan Bank Personal Trust Market Rate Account. Subject to such
investment restrictions, the Trustee shall have the power and right:
(a) To receive and hold all contributions made to it by the
Company;
(b) To invest and reinvest all or any portion of the Fund
collectively through the medium of any common, collective or
commingled trust fund that may be established and maintained by
the Trustee, subject to the instrument or instruments establishing
such trust fund or funds and with the terms of such instrument or
instruments, as from time to time amended, being incorporated into
this Agreement to the extent of the equitable share of the Fund in
any such common, collective or commingled trust fund;
(c) To participate in and use a book-entry system for the
deposit and transfer of securities;
(d) To sell or exchange any property held by it at public or
private sale, for cash or on credit, to grant and exercise options
for the purchase or exchange thereof, to exercise all conversion
or subscription
rights pertaining to any such property and to enter into any
covenant or agreement to purchase any property in the future;
(e) To participate in any plan of reorganization,
consolidation, merger, combination, liquidation or other similar
plan relating to property held by it and to consent to or oppose
any such plan or any action thereunder or any contract, lease,
mortgage, purchase, sale or other action by any person;
(f) To deposit any property held by it with any protective,
reorganization or similar committee, to delegate discretionary
power thereto, and to pay part of the expenses and compensation
thereof and any assessments levied with respect to any such
property so deposited;
(g) To extend the time of payment of any obligation held by
it;
(h) To hold uninvested any moneys received by it, without
liability for interest thereon, until such moneys shall be
invested, reinvested or disbursed;
7
<PAGE>
(i) To exercise all voting or other rights with respect to
any property held by it and to grant proxies, discretionary or
otherwise;
(j) For the purposes of the Trust, to borrow money from
others, including The Chase Manhattan Bank, to issue its
promissory note or notes therefor, and to secure the repayment
thereof by pledging any property held by it;
(k) To furnish the Company, the Trustee's Contractor and the
Executive or his Beneficiaries with such information as may be
needed for tax or other purposes;
(l) To employ suitable agents and counsel, who may be
counsel to the Company or the Trustee, including, without
limitation, Hewitt Associates LLC and Coopers & Lybrand, and to
pay their reasonable expenses and compensation from the Fund to
the extent not paid by the Company;
(m) To cause any property held by it to be registered and
held in the name of one or more nominees, with or without the
addition of words indicating that such securities are held in a
fiduciary capacity, and to hold securities in bearer form;
(n) To settle, compromise or submit to arbitration any
claims, debts or damages due or owing to or from the Trust,
respectively, to commence or defend suits or legal proceedings to
protect any interest of the Trust, and to represent the Trust in
all suits or legal proceedings in any court or before any other
body or tribunal; provided, however, that the Trustee shall not be
required to take any such action unless it shall have been
indemnified by the Company to its reasonable satisfaction against
liability or expenses it might incur therefrom;
(o) To organize under the laws of any state a corporation or
trust for the purpose of acquiring and holding title to any
property which it is authorized to acquire hereunder and to
exercise with respect thereto any or all of the powers set forth
herein; and
(p) Generally, to do all acts, whether or not expressly
authorized, that the Trustee may deem necessary or desirable for
the protection of the Fund.
5.3 No person dealing with the Trustee shall be under any
obligation to see to the proper application of any money paid or
property delivered to the Trustee or to inquire into the Trustee's
authority as to any transaction. The Trustee's Contractor's
obligations are limited solely to those explicitly set forth herein and
the Trustee's Contractor shall have no responsibility, authority or
control, direct or indirect, over the maintenance or investment of the
Fund and shall have no obligation in respect of the Trustee or the
Trustee's compliance with the Trustee's Contractor's certifications to
the Trustee.
8
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5.4 The Trustee shall distribute cash from the Fund in
accordance with Article III hereof.
The Trustee may make any distribution required hereunder by
mailing its check for the specified amount to the person to whom such
distribution or payment is to be made, at such address as may be
specified pursuant to Section 11.7, or if no such address shall have
been so furnished, to such person in care of the Company, or (if so
directed by the recipient) by crediting the account of such person or
by transferring funds to such person's account by bank or wire
transfer.
5.5 If at any time there is no person authorized to act under
this Agreement on behalf of the Company, the Board of Directors of the
Company shall have the authority to act hereunder.
ARTICLE VI
6.1 The Company shall pay any federal, state or local taxes
on the Fund, or any part thereof, and on the income therefrom.
6.2 The Company shall pay to the Trustee its reasonable
expenses for the management and administration of the Fund, including
without limitation advances for or prompt reimbursement of reasonable
expenses of counsel and other agents employed by the Trustee, and
reasonable compensation for its services as Trustee hereunder, the
amount of which shall be agreed upon from time to time by the Company
and the Trustee in writing; provided, however, that if the Trustee
forwards an amended fee schedule to the Company requesting its
agreement thereto and the Company fails to object thereto within thirty
(30) days of its receipt, the amended fee schedule shall be deemed to
be agreed upon by the Company and the Trustee. Such expenses and
compensation shall be a charge on the Fund and shall constitute a lien
in favor of the Trustee until paid by the Company. In the event that
such expenses and compensation of the Trustee, and any fees and
expenses of the Trustee's Contractor as provided in Section 3.1, under
this Trust and under similar Trusts established by the Company in
respect of other Executives of the Company are to be satisfied out of
assets of any or all of the several Funds under all such Trusts, such
satisfaction shall be in proportion to the assets of each Fund.
ARTICLE VII
7.1 The Trustee shall maintain records with respect to the
Fund that show all its receipts and disbursements hereunder. The
records of the Trustee with respect to the Fund shall be open to
inspection by the Company or its representatives, and the Trustee's
Contractor, at all reasonable times during normal business hours of the
Trustee and may be audited not more frequently than once each fiscal
year by an independent certified public accountant engaged by the
Company; provided, however, the Trustee shall be entitled to additional
compensation from the Company in respect of audits or auditors'
requests which the Trustee determines to exceed the ordinary course of
the usual scope of such examinations of its records.
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<PAGE>
7.2 Within a reasonable time after the close of each fiscal
year of the Company (or, in the Trustee's discretion, at more frequent
intervals), or of any termination of the duties of the Trustee
hereunder, the Trustee shall prepare and deliver to the Company and the
Trustee's Contractor a statement of transactions reflecting its acts
and transactions as Trustee during such fiscal year, portion thereof or
during such period from the close of the last fiscal year or last
statement period to the termination of the Trustee's duties,
respectively, including a statement of the then current value of the
Fund. Any such statement shall be deemed an account stated and
accepted and approved by the Company, and the Trustee shall be relieved
and discharged, as if such account had been settled and allowed by a
judgment or decree of a court of competent jurisdiction, unless
protested by written notice to the Trustee within sixty (60) days of
receipt thereof by the Company.
The Trustee shall have the right to apply at any time to a
court of competent jurisdiction for judicial settlement of any account
of the Trustee not previously settled as herein provided or for the
determination of any question of construction or for instructions. In
any such action or proceeding it shall be necessary to join as parties
only the Trustee and the Company (although the Trustee may also join
such other parties as it may deem appropriate), and any judgment or
decree entered therein shall be conclusive.
ARTICLE VIII
8.1 The Trustee may resign at any time by delivering written
notice thereof to the Company; provided, however, that no such
resignation shall take effect until the earlier of (i) sixty (60) days
from the date of delivery of such notice to the Company or (ii) the
appointment of a successor trustee.
8.2 The Trustee may be removed at any time, pursuant to a
resolution of the Board of Directors of the Company, upon delivery to
the Trustee of a certified copy of such resolution and sixty (60) days'
written notice of (i) such removal and (ii) the appointment of a
successor trustee, unless such notice period is waived in whole or in
part by the Trustee.
8.3 Upon the resignation or removal of the Trustee, a
successor trustee shall be appointed by the Company. Such successor
trustee shall be a bank or trust company established under the laws of
the United States or a state within the United States and having either
total assets of at least $15 billion or trust assets of at least $25
billion. Such appointment shall take effect upon the delivery to the
Trustee of (a) a written appointment of such successor trustee, duly
executed, by the Company and (b) a written acceptance by such successor
trustee, duly executed thereby. Any successor trustee shall have all
the rights, powers and duties granted the Trustee hereunder.
8.4 If, within sixty (60) days of the delivery of the
Trustee's written notice of resignation, a successor trustee shall not
10
<PAGE>
have been appointed, the Trustee shall apply to any court of competent
jurisdiction for the appointment of a successor trustee.
8.5 Upon the resignation or removal of the Trustee and the
appointment of a successor trustee, and after the acceptance and
approval of its account, the Trustee shall transfer and deliver the
Fund to such successor trustee. Under no circumstances shall the
Trustee transfer or deliver the Fund to any successor trustee which is
not a bank or trust company having either total assets of at least $15
billion or trust assets of at least $25 billion.
ARTICLE IX
9.1 The Trust established pursuant to this Agreement may not
be terminated by the Company prior to the payment of all liabilities
with respect to the Executive and his Beneficiaries. Upon receipt by
the Company and the Executive or his Beneficiaries of a written
certification from the Trustee's Contractor that all liabilities have
been paid with respect to the Executive or his Beneficiaries under the
Plan, the Company pursuant to a resolution of its Board of Directors
may terminate the Trust upon delivery to the Trustee and the Executive
or his Beneficiaries of (a) a certified copy of such resolution, (b) an
original certification of the Trustee's Contractor that all such
liabilities have been paid and (c) a written instrument of termination
duly executed and acknowledged in the same form as this Agreement.
9.2 Upon the termination of the Trust in accordance with
Section 9.1, the Trustee shall, after the acceptance and approval of
its account, distribute any remaining portion of the Fund to the
Company. Upon completing such distribution, the Trustee shall be
relieved and discharged. The powers of the Trustee shall continue as
long as any part of the Fund remains in its possession.
ARTICLE X
10.1 This Agreement may be amended, in whole or in part, at
any time and from time to time, by the Company with the written consent
of the Executive (or the Executive's Beneficiary in the event of the
death or incapacity of the Executive) and the Trustee. Any such
amendment by the Company shall be pursuant to a resolution of the Board
of Directors by delivery to the Trustee of a certified copy of such
resolution and a written instrument duly executed and acknowledged by
the Company and the Executive (or the Executive's Beneficiary in the
event of the death or incapacity of the Executive) in the same form as
this Agreement.
ARTICLE XI
11.1 This Agreement shall be construed and interpreted
under, and the Trust hereby created shall be governed by, the laws of
the State of New York insofar as such laws do not contravene any
applicable federal laws, rules or regulations.
11
<PAGE>
11.2 Neither the gender nor the number (singular or plural)
of any word shall be construed to exclude another gender or number when
a different gender or number would be appropriate.
11.3 No right or interest of the Executive or his
Beneficiary under the Plan or in the Fund shall be transferable or
assignable or shall be subject to alienation, anticipation or
encumbrance, and no right or interest of the Executive or Beneficiary
in the Plan or in the Fund shall be subject to any garnishment,
attachment or execution. Notwithstanding the foregoing, the Fund shall
at all times remain subject to claims of creditors of the Company in
the event the Company becomes insolvent as provided in Section 2.1.
11.4 The Company agrees that by the establishment of this
Trust it hereby foregoes any judicial review of certifications by the
Trustee's Contractor as to the benefits payable to any persons
hereunder. If a dispute arises as to the amounts or timing of any such
benefits or the persons entitled thereto under this Agreement, the
Company agrees that such dispute shall be resolved by binding
arbitration proceedings initiated in accordance with the rules of the
American Arbitration Association and that the results of such
proceedings shall be conclusive and shall not be subject to judicial
review. It is expressly understood that pending the resolution of any
such dispute, payment of benefits shall be made and continued by the
Trustee in accordance with the certification of the Trustee's
Contractor and that the Trustee and the Trustee's Contractor shall have
no liability with respect to such payments. The Company also agrees to
pay the entire cost of any arbitration or legal proceeding with respect
to the Fund initiated by the Company, the Trustee or the Executive or
his Beneficiary in the event the Executive is deceased, including the
legal fees of the Trustee or the Executive or his Beneficiary,
regardless of the outcome of such proceeding and until so paid the
expenses thereof shall be a charge on and lien against the Fund.
11.5 This Agreement shall be binding upon and inure to the
benefit of any successor to the Company or its business as the result
of merger, consolidation, reorganization, transfer of assets or
otherwise and any subsequent successor thereto. In the event of any
such merger, consolidation, reorganization, transfer of assets or other
similar transaction, the successor to the Company or its business or
any subsequent successor thereto shall promptly notify the Trustee in
writing of its successorship and furnish the Trustee and the Trustee's
Contractor with the information specified in Section 4.1 of this
Agreement. In no event shall any such transaction described herein
suspend or delay the rights of the Executive or his Beneficiary in the
event the Executive is deceased to receive benefits hereunder.
11.6 This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all
of which shall together constitute only one Agreement.
11.7 All notices and other communications provided for in
this Agreement shall be in writing and shall be deemed to have been
duly given when actually delivered to the respective addresses set
forth below:
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Company: ACCO World Corporation
Suite 150
500 Lake Cook Road
Deerfield, Illinois 60015-0818
Attn: Director of Human Resources
Trustee: The Chase Manhattan Bank
1211 Avenue of the Americas
New York, New York 10036
Attn: Trusts and Estates
Management Division, 34th Floor
Trustee's Hewitt Associates LLC
Contractor: 40 Highland Avenue
Rowayton, Connecticut 06853
Attn: Thomas Hughey
Executive: Norman H. Wesley
110 Honeysuckle Street
Lake Forest, Illinois 60045
or at such other address as such person may specify in writing by
notice as set forth above to the other persons listed above.
11.8 As and to the extent provided under the Plan, in the
event the Executive or his Beneficiary is determined to be taxable on
any amount in the Fund prior to the time of actual receipt thereof, a
distribution shall be made by the Trustee, as directed by the Trustee's
Contractor, to the Executive or his Beneficiary in an amount sufficient
to pay such tax. An amount in the Fund shall be determined to be
taxable upon the receipt of: (a) a final determination by the United
States Internal Revenue Service or state or local taxing authority
which is not appealed to the courts; (b) a final determination by a
court of competent jurisdiction; or (c) an opinion of Chadbourne &
Parke, addressed to the Company, the Trustee and the Executive or his
Beneficiary, that amounts in the Fund are taxable to the Executive or a
Beneficiary prior to actual receipt thereof. The amount to be
distributed shall be the amounts of tax as determined by such taxing
authority or court, or as calculated by Chadbourne & Parke in
connection with its opinion, as the case may be. Any distributions
from the Fund to the Executive or his Beneficiary under this Section
13
<PAGE>
11.8 shall be applied in accordance with the Plan as an offset to the
benefits, if any, thereafter payable under the Plan.
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed as of the 1st day of
July, 1994.
Attest: ACCO WORLD CORPORATION
Mark S. Lyon Norman H. Wesley
----------------------- By-------------------------------
Corporate Secretary
Attest: THE CHASE MANHATTAN BANK
Yvonne E. Richards Mark J. Altschuler
----------------------- By-------------------------------
Second Vice President
Witness: HEWITT ASSOCIATES LLC
Barbara C. Checkin C.L. Connolly, III
----------------------- By-------------------------------
14
<PAGE>
STATE OF ILLINOIS )
: ss.: -
COUNTY OF Lake )
Personally appeared Norman H. Wesley, President of ACCO WORLD
CORPORATION, signer and sealer of the foregoing instrument, and
acknowledged the same to be his free act and deed as such and
the free act and deed of said Corporation, before me.
Kathleen D. Hulfachor 11/23/94
-------------------------------
Notary Public
STATE OF NEW YORK )
: ss.: New York, New York
COUNTY OF NEW YORK )
Personally appeared Mark J. Altschuler, Vice-President of THE
CHASE MANHATTAN BANK, signer and sealer of the foregoing instrument,
and acknowledged the same to be his free act and deed as such Vice-
President and the free act and deed of said Company, before me.
Richard D. Friedman 12/19/94
-------------------------------
Notary Public
<PAGE>
STATE OF ILLINOIS )
: ss.:
COUNTY OF LAKE )
Personally appeared C.L. Connolly, III, Principal of HEWITT
ASSOCIATES LLC, signer and sealer of the foregoing instrument, and
acknowledged the same to be his free act and deed as such and
the free act and deed of said HEWITT ASSOCIATES LLC, before me.
Barbara L. Stern
--------------------------------
Notary Public
December 9, 1994
<PAGE>
Schedule A
----------
Hewitt Associates LLC
40 Highland Avenue
Rowayton, Connecticut 06853
Attn: Thomas Hughey
PAYMENT DEMAND NOTICE
---------------------
NAME OF EXECUTIVE: NORMAN H. WESLEY
ADDRESS: 110 Honeysuckle Street
Lake Forest, Illinois 60045
PHONE: (708) 295-8552
The undersigned hereby demands payment of the amount to which he is
entitled under the Plan pursuant to the Trust Agreement dated as of the
July 1, 1994 among ACCO WORLD CORPORATION, THE CHASE MANHATTAN BANK and
HEWITT ASSOCIATES LLC.
-----------------------------
NORMAN H. WESLEY
EXHIBIT 10o3
ACCO WORLD CORPORATION
NORMAN H. WESLEY
TRUST AGREEMENT
THIS AGREEMENT, made as of the 1st day of July, 1994, among
NORMAN H. WESLEY, ACCO WORLD CORPORATION, a Delaware corporation (the
"Company"), and THE CHASE MANHATTAN BANK (National Association),
incorporated under the laws of the United States of America (the
"Trustee").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company has incurred and expects to continue to
incur certain retirement income liability to or with respect to NORMAN
H. WESLEY (the "Executive") pursuant to the terms of the Company's
Supplemental Retirement Plan (including the supplemental profit-sharing
provisions therein) (herein referred to as the "Plan"); and
WHEREAS, the Company desires to provide additional assurance
to the Executive that his rights under the Plan will in the future be
met or substantially met by application of the procedures set forth
herein; and
WHEREAS, the Executive and the Company wish to establish with
the Trustee a trust for the benefit of the Executive in order to
provide a source of payments of the benefits payable to the Executive
under the terms of the Plan;
NOW, THEREFORE, in consideration of the premises and mutual
and independent promises herein, the parties hereto covenant and agree
as follows:
<PAGE>
ARTICLE I
---------
1.1 The Executive and the Company hereby establish with the
Trustee a Trust consisting of such sums of money and such property
acceptable to the Trustee as shall from time to time be paid or
delivered to the Trustee by the Company and the earnings and profits
thereon. All such money and property, all investments made therewith
and proceeds thereof, less the payments or other distributions which,
at the time of reference, shall have been made by the Trustee, as
authorized herein, are referred to herein as the "Fund" and shall be
held by the Trustee, IN TRUST, in accordance with the provisions of
this Agreement. The Trust shall be solely for the purpose of providing
benefits under the Plan with respect to the Executive, and neither the
Company nor any creditors of the Company shall have any interest in the
Fund.
1.2 The Trustee shall hold, manage, invest and otherwise
administer the Fund pursuant to the terms of this Agreement. The
Trustee shall be responsible only for contributions actually received
by it hereunder and shall have no responsibility for the correctness of
the amount thereof. Upon the establishment of this Trust, and from
time to time thereafter, the Company may contribute to the Trust,
unless otherwise directed by the Executive to make such contributions
to a segregated account established with the Trustee or other bank,
trust company or other financial institution by or for the benefit of
the Executive pursuant to the Plan ("Segregated Account"), such amount
in cash as the Company shall determine to be appropriate to provide a
source of the payments required under the terms of the Plan. Prior to
the making of any contribution to the Trust, the Company shall have
2
<PAGE>
approved the establishment of a Segregated Account of the Executive,
the terms and provisions thereof, and the bank, trust company or other
financial institution with which such Segregated Account may be
established. The initial contribution by the Company shall be in an
amount approximately equal to the present value of the after tax
equivalent of the aggregate maximum benefits that would be due to the
Executive as of such date under the retirement and profit-sharing
provisions of the Plan, or such lesser amount as the Company shall
determine. Unless there has been a withdrawal by the Executive from
the Trust as provided in Section 2.4, or from the Executive's
Segregated Account, as to which the Compensation and Stock Option
Committee of American Brands, Inc. has not determined otherwise, the
Company will make additional annual contributions to the Trust or
Segregated Account in amounts such that the amount of the Fund,
together with the amount in the Executive's Segregated Account, at such
time will be approximately equal to the present value of the after tax
equivalent of the Executive's accrued benefits under the Plan at that
time, or in such lesser amounts as the Company shall determine. Unless
the Trust has previously been terminated as a result of the Executive's
actual or deemed withdrawal of all amounts in the Fund, as provided in
Section 8.1, and in his Segregated Account, the Company also may make a
final contribution to the Trust as promptly as practicable after the
Executive's termination of employment in an amount such that the amount
of the Fund, together with the amount, if any, in the Executive's
Segregated Account, except for any amounts which are attributable to
amounts deemed withdrawn previously and the income earned thereon, will
be equal to (i) the sum of the present value of the after tax
equivalent of (x) the Executive's benefit under the supplemental
3
<PAGE>
retirement provisions of the Plan or, if the termination of employment
is by reason of the death of the Executive, the Executive's benefit
under the supplemental retirement provisions of the Plan immediately
prior to his death and (y) the Executive's supplemental profit-sharing
benefit under the Plan, reduced by (ii) the amounts of any actual
withdrawals from the Fund or from the Executive's Segregated Account by
the Executive as provided in Section 2.4 plus the income which would
have been earned on such withdrawn amounts from the time of withdrawal
to the time of the Executive's termination of employment, at a rate
equal to the after tax equivalent of 120% of the applicable monthly
immediate annuity interest purchase rate which would be used by the
Pension Benefit Guaranty Corporation from time to time during such
period for the purpose of determining the present value of a single sum
distribution on plan termination.
1.3 The Company shall certify to the Trustee and the
Executive at the time of each contribution to the Fund the amount of
such contribution being made in respect of the Executive's supplemental
retirement benefit under the Plan and the amount being made in respect
of the Executive's supplemental profit-sharing benefit. The Fund shall
be revalued by the Trustee quarterly as of the last business day of
each March, June, September and December, or at such other times as
agreed to by the Company and the Trustee, at current market values, as
determined by the Trustee, which shall deliver as soon as practicable a
copy of such quarterly valuation to the Company and the Executive.
ARTICLE II
----------
2.1 The Company shall act as Administrator of the Trust.
Except for the records dealing solely with the Fund and its investment,
4
<PAGE>
which shall be maintained by the Trustee, the Company as Administrator
shall maintain all the Executive's records contemplated by this
Agreement, including records of the Executive's compensation and
benefits from the Company, the amount of his benefits accrued under the
Plan, the Company's contributions to the Fund, withdrawals from the
Fund as provided in Section 2.4 or from the Executive's Segregated
Account, the Executive's beneficiary designation and such other records
as may be necessary for determining the amount payable to the Executive
or his Surviving Spouse or other beneficiary under the Plan. All such
records shall be made available promptly upon the request of the
Executive. In the event that the Executive's Segregated Account is not
maintained with the Trustee, the Company shall give written notice to
the Trustee as to the identity of the bank, trust company or other
financial institution with which the Segregated Account is maintained.
In such case, the Company also shall give notice to the Trustee in the
event of a withdrawal by the Executive of any or all of the funds in
his Segregated Account. Unless the Trust has previously been
terminated as provided in Section 8.1, the Company shall give written
notice to the Trustee of the Executive's termination of employment, and
as to whether such termination is by reason of the death of the
Executive. The Company as Administrator shall also prepare and
distribute the Executive's annual estimated benefit statements
specified in Section 2.2 and shall perform such other duties and
responsibilities in connection with the administration of the Trust as
the Company or the Trustee determines is necessary or advisable to
achieve the objectives of this Agreement.
5
<PAGE>
2.2 The Company as Administrator shall prepare an annual
estimated benefits statement in respect of the Executive and shall
furnish a copy of same to the Executive by no later than May 15 of each
year.
2.3 The Company shall have full responsibility for the
proper remittance of all withholding taxes on contributions by the
Company to the Trust to the appropriate taxing authority and shall
furnish the Executive with the appropriate tax information form
reporting the amounts of such contributions and any withholding taxes.
The Trustee shall have the responsibility for the preparation and
filing with the appropriate taxing authorities of all tax returns
required to be filed for the Trust.
2.4 Subject to the next to the last sentence of Section 5.2,
the Executive may withdraw all or any portion of the Fund, in cash or,
to the extent practicable, in kind at any time upon written notice of
not less than sixty (60) days to the Company and the Trustee. Prior to
any such withdrawal, the Trustee shall notify the Company in writing of
such withdrawal and the amount thereof, and as to whether or not such
withdrawal is a complete withdrawal of all amounts in the Fund. In the
event of any withdrawal by the Executive from his Segregated Account,
the Company shall promptly notify the Trustee in writing of such
withdrawal and the amount thereof, and as to whether or not such
withdrawal is a complete withdrawal of all amounts in the Segregated
Account. In the event of any such withdrawal from the Fund, or from
the Executive's Segregated Account, for purposes of Sections 1.2 and
8.1 the Executive shall be deemed to have made a complete withdrawal of
all amounts in the Fund and in his Segregated Account, unless the
Compensation and Stock Option Committee of American Brands, Inc. shall
6
<PAGE>
determine that the Executive shall not be deemed to have made such a
complete withdrawal. The Company shall promptly notify the Trustee in
writing of any such determination. Except as otherwise determined by
the Compensation and Stock Option Committee of American Brands, Inc.,
in the event of any such withdrawal from the Fund, or from the
Executive's Segregated Account, no further contributions shall be made
thereafter by the Company to the Trust until the Executive's
termination of employment, at which time if the Trust has not
previously been terminated as a result of the Executive's actual or
deemed withdrawal of all amounts in the Fund and in his Segregated
Account a final contribution by the Company may be made as provided in
Section 1.2.
2.5 The Executive may elect to transfer all or any portion
of the Fund to his Segregated Account, in cash or, to the extent
practicable, in kind, at any time upon written notice of not less than
sixty (60) days to the Company and the Trustee and the financial
institution with which the Segregated Account is established. The
Executive also may elect to transfer funds, in cash, from his
Segregated Account to the Trust upon written notice of not less than
sixty (60) days to the Company and the Trustee, and funds so
transferred shall be held by the Trustee as part of the Fund. Such
transfers between the Fund and the Executive's Segregated Account shall
not constitute withdrawals for purposes of Section 2.4.
2.6 The Executive may designate a beneficiary to receive all
or any portion of the Fund in the event of his death. Such designation
shall be in writing filed with the Company as Administrator on a form
approved by it and signed by the Executive. The Company shall promptly
7
<PAGE>
notify the Trustee of any such beneficiary designation and any changes
therein.
ARTICLE III
-----------
3.1 After the execution of this Agreement, the Company shall
promptly file with the Trustee a certified list of the names and
specimen signatures of the officers of the Company and any delegate
authorized to act for it. The Company shall promptly notify the
Trustee of the addition or deletion of any person's name to or from
such list, respectively. Until receipt by the Trustee of notice that
any person is no longer authorized so to act, the Trustee may continue
to rely on the authority of the person. All certifications, notices
and directions by any such person or persons to the Trustee shall be in
writing signed by such person or persons. The Trustee may rely on any
such certification, notice or direction purporting to have been signed
by or on behalf of such person or persons that the Trustee believes to
have been signed thereby. The Trustee may rely on any certification,
notice or direction of the Company that the Trustee believes to have
been signed by a duly authorized officer or agent of the Company. The
Trustee shall have no responsibility for acting or not acting in
reliance upon any notification believed by the Trustee to have been so
signed by a duly authorized officer or agent of the Company. The
Company shall be responsible for keeping accurate books and records
with respect to the Executive, his compensation and his rights and
interests in the Fund under the Plan.
3.2 The Company shall indemnify and hold harmless the
Trustee for any liability or expenses, including without limitation
advances for or prompt reimbursement of reasonable fees and expenses of
8
<PAGE>
counsel and other agents retained by it, incurred by the Trustee with
respect to holding, managing, investing or otherwise administering the
Fund, other than by reason of its negligence or willful misconduct.
ARTICLE IV
----------
4.1 The Trustee shall not be liable in discharging its
duties hereunder, including without limitation its duty to invest and
reinvest the Fund, if it acts in good faith and in accordance with the
terms of this Agreement including, without limitation, the making of
any investment directed by the Executive, the Company or an investment
manager other than the Trustee, and any applicable federal or state
laws, rules or regulations.
4.2 The Trustee is hereby appointed as the investment
manager of the Fund. In the event that the Trustee cannot serve as
investment manager of the Fund, the Trustee shall then select Pacific
Investment Management Company as investment manager; provided that if
Pacific Investment Management Company is unwilling or unable to act as
investment manager, the Trustee shall select J.P. Morgan Investment
Management Inc. as investment manager. The investment manager shall
invest the assets of the Fund separately as to amounts representing the
Executive's supplemental retirement benefit under the Plan and amounts
representing the Executive's supplemental profit-sharing benefit.
Supplemental retirement benefit amounts shall be invested solely in the
Chase Manhattan Fixed Income Fund to the extent practicable and
otherwise in the Chase Manhattan Personal Trust Market Rate Account.
Supplemental profit-sharing benefit amounts shall be invested in one or
more of (i) the Vista U.S. Government Income Fund, (ii) the Vista
Balanced Fund, (iii) the Chase Manhattan Personal Trust Market Rate
9
<PAGE>
Account or (iv) the Chase Manhattan Equity Income Fund, in such
portions as are elected by the Executive by written election filed with
the Company and notified to the Trustee by the Company, all to the
extent practicable and otherwise in the Chase Manhattan Personal Trust
Market Rate Account, and all without liability of the Trustee for such
election. The Executive may change such election at any time by filing
a new written election with the Company, which shall promptly notify
the Trustee thereof, and all without liability of the Trustee for such
new election. Subject to such investment restrictions, the Trustee
shall have the power and right:
(a) To receive and hold all contributions made to it by the
Company;
(b) To invest and reinvest all or any portion of the Fund
collectively through the medium of any common, collective,
commingled trust or mutual fund that may be established and
maintained by the Trustee or any affiliate thereof, subject to the
instrument or instruments establishing such trust fund or funds
and with the terms of such instrument or instruments, as from time
to time amended, being incorporated into this Agreement to the
extent of the equitable share of the Fund in any such common,
collective, commingled trust or mutual fund;
(c) To participate in and use a book-entry system for the
deposit and transfer of securities;
(d) To sell or exchange any property held by it at public or
private sale, for cash or on credit, to grant and exercise options for
the purchase or exchange thereof, to exercise all conversion or
subscription rights pertaining to any such property and to enter into
any covenant or agreement to purchase any property in the future;
10
<PAGE>
(e) To participate in any plan of reorganization, consolidation,
merger, combination, liquidation or other similar plan relating to
property held by it and to consent to or oppose any such plan or any
action thereunder or any contract, lease, mortgage, purchase, sale or
other action by any person;
(f) To deposit any property held by it with any protective,
reorganization or similar committee, to delegate discretionary power
thereto, and to pay part of the expenses and compensation thereof and
any assessments levied with respect to any such property so deposited;
(g) To extend the time of payment of any obligation held by it;
(h) To hold uninvested any moneys received by it, without
liability for interest thereon, until such moneys shall be invested,
reinvested or disbursed;
(i) To exercise all voting or other rights with respect to any
property held by it and to grant proxies, discretionary or otherwise;
(j) For the purposes of the Trust, to borrow money from others,
including The Chase Manhattan Bank (National Association), to issue
its promissory note or notes therefor, and to secure the repayment
thereof by pledging any property held by it;
(k) To furnish the Company and the Executive with such
information as may be needed for tax or other purposes;
(l) To employ suitable agents and counsel, who may be counsel to
the Company or the Trustee, and to pay their reasonable expenses and
compensation from the Fund to the extent not paid by the Company;
(m) To cause any property held by it to be registered and held
in the name of one or more nominees, with or without the addition of
words indicating that such securities are held in a fiduciary
capacity, and to hold securities in bearer form;
11
<PAGE>
(n) To settle, compromise or submit to arbitration any claims,
debts or damages due or owing to or from the Trust, respectively, to
commence or defend suits or legal proceedings to protect any interest
of the Trust, and to represent the Trust in all suits or legal
proceedings in any court or before any other body or tribunal;
provided, however, that the Trustee shall not be required to take any
such action unless it shall have been indemnified by the Company to
its reasonable satisfaction against liability or expenses it might
incur therefrom;
(o) To organize under the laws of any state a corporation or
trust for the purpose of acquiring and holding title to any property
which it is authorized to acquire hereunder and to exercise with
respect thereto any or all of the powers set forth herein; and
(p) Generally, to do all acts, whether or not expressly
authorized, that the Trustee may deem necessary or desirable for the
protection of the Fund.
4.3 No person dealing with the Trustee shall be under any
obligation to see to the proper application of any money paid or
property delivered to the Trustee or to inquire into the Trustee's
authority as to any transaction.
4.4 The Trustee shall distribute cash or other assets from
the Fund in accordance with Articles II and VIII hereof.
The Trustee may make any distribution required hereunder by
mailing its check for the specified amount or, if distribution is to be
made in kind, by making other appropriate distribution, to the person
to whom such distribution or payment is to be made, at such address as
may be specified pursuant to Section 10.5, or if no such address shall
have been so furnished, to such person in care of the Company, or (if
12
<PAGE>
so directed by the recipient) by crediting the account of such person
or by transferring funds to such person's account by bank or wire
transfer.
4.5 If at any time there is no person authorized to act
under this Agreement on behalf of the Company, the Board of Directors
of the Company or the Compensation and Stock Option Committee of
American Brands, Inc. shall have the authority to act hereunder.
ARTICLE V
---------
5.1 The Executive, or in the event of the Executive's death
the Executive's personal representative, shall be responsible for the
payment of any federal, state or local taxes on the Fund, or any part
thereof, and on the income therefrom, subject to the Company's
obligation under the Plan to reimburse the Executive in respect of such
taxes.
5.2 For all periods prior to the Executive's termination of
employment, and for a period of sixty (60) days thereafter and for any
further period as may be authorized by the Company, the Company shall
pay to the Trustee its reasonable expenses for the management and
administration of the Fund, including without limitation advances for
or prompt reimbursement of reasonable expenses of counsel and other
agents employed by the Trustee, and reasonable compensation for its
services as Trustee hereunder, the amount of which shall be agreed upon
from time to time by the Company and the Trustee in writing; provided,
however, that if the Trustee forwards an amended fee schedule to the
Company requesting its agreement thereto and the Company fails to
object thereto within thirty (30) days of its receipt, the amended fee
schedule shall be deemed to be agreed upon by the Company and the
13
<PAGE>
Trustee. Such expenses and compensation shall be a charge on the Fund
and shall constitute a lien in favor of the Trustee until paid by the
Company. The Company and the Executive acknowledge that the Trustee,
or an affiliate thereof, will, in addition to the compensation provided
by this Article 5.2, receive compensation with regard to the
administration and investment of certain funds referred to in Article
4.2 hereof, and the Company and the Executive agree that the Trustee,
or any affiliate thereof, shall receive such compensation in addition
to the compensation provided by this Article 5.2.
ARTICLE VI
----------
6.1 The Trustee shall maintain records with respect to the
Fund that show all its receipts and disbursements hereunder. The
records of the Trustee with respect to the Fund shall be open to
inspection by the Company or its representatives and by the Executive
at all reasonable times during normal business hours of the Trustee and
may be audited not more frequently than once each fiscal year by an
independent certified public accountant engaged by the Company;
provided, however, the Trustee shall be entitled to additional
compensation from the Company in respect of audits or auditors'
requests which the Trustee determines to exceed the ordinary course of
the usual scope of such examinations of its records.
6.2 Within a reasonable time after the close of each fiscal
year of the Company (or, in the Trustee's discretion, at more frequent
intervals), or of any termination of the duties of the Trustee
hereunder, the Trustee shall prepare and deliver to the Company and the
Executive a statement of transactions reflecting its acts and
transactions as Trustee during such fiscal year, portion thereof or
14
<PAGE>
during such period from the close of the last fiscal year or last
statement period to the termination of the Trustee's duties,
respectively, including a statement of the then current value of the
Fund. Any such statement shall be deemed an account stated and
accepted and approved by the Company and the Executive, and the Trustee
shall be relieved and discharged, as if such account had been settled
and allowed by a judgment or decree of a court of competent
jurisdiction, unless protested by written notice to the Trustee within
sixty (60) days of receipt thereof by the Company or the Executive.
The Trustee shall have the right to apply at any time to a
court of competent jurisdiction for judicial settlement of any account
of the Trustee not previously settled as herein provided or for the
determination of any question of construction or for instructions. In
any such action or proceeding it shall be necessary to join as parties
only the Trustee, the Company and the Executive (although the Trustee
may also join such other parties as it may deem appropriate), and any
judgment or decree entered therein shall be conclusive.
ARTICLE VII
-----------
7.1 The Trustee may resign at any time by delivering written
notice thereof to the Company and the Executive; provided, however,
that no such resignation shall take effect until the earlier of (i)
sixty (60) days from the date of delivery of such notice to the Company
and the Executive or (ii) the appointment of a successor trustee.
7.2 The Trustee may be removed at any time by the Company,
pursuant to a resolution of the Board of Directors of the Company, upon
delivery to the Trustee of a certified copy of such resolution and
sixty (60) days' written notice to the Trustee and the Executive of (i)
15
<PAGE>
such removal and (ii) the appointment of a successor trustee, unless
such notice period is waived in whole or in part by the Trustee and the
Executive.
7.3 Upon the resignation or removal of the Trustee, a
successor trustee shall be appointed by the Company. Such successor
trustee shall be a bank or trust company established under the laws of
the United States or a state within the United States and having either
total assets of at least $15 billion or trust assets of at least $25
billion. Such appointment shall take effect upon the delivery to the
Trustee and the Executive of (a) a written appointment of such
successor trustee, duly executed, by the Company and (b) a written
acceptance by such successor trustee, duly executed thereby. Any
successor trustee shall have all the rights, powers and duties granted
the Trustee hereunder.
7.4 If, within sixty (60) days of the delivery of the
Trustee's written notice of resignation, a successor trustee shall not
have been appointed, the Trustee shall apply to any court of competent
jurisdiction for the appointment of a successor trustee.
7.5 Upon the resignation or removal of the Trustee and the
appointment of a successor trustee, and after the acceptance and
approval of its account, the Trustee shall transfer and deliver the
Fund to such successor trustee. Under no circumstances shall the
Trustee transfer or deliver the Fund to any successor trustee which is
not a bank or trust company having either total assets of at least $15
billion or trust assets of at least $25 billion.
16
<PAGE>
ARTICLE VIII
------------
8.1 The Trust established pursuant to this Agreement shall
terminate upon the actual or deemed withdrawal by the Executive of all
amounts in the Fund, as provided in Section 2.4, and in the Executive's
Segregated Account. The Trust also shall terminate upon the expiration
of sixty (60) days following the Executive's termination of employment
(by retirement or otherwise), unless the Trustee and the Executive
agree to continue the Trust thereafter upon such terms as they may
agree, but in the event of such continuation the Company shall have no
further obligations under this Agreement with respect to matters
relating to such continuation, including expenses and compensation of
the Trustee, as provided in Section 5.2, and indemnification of the
Trustee as provided in Section 3.2.
8.2 Upon the termination of the Trust by reason of the death
of the Executive, or by reason of the Executive's termination of
employment other than by death if the Trust has not been continued by
agreement between the Trustee and the Executive, the Trustee shall
distribute the Fund as directed by the Executive or, in the absence of
such direction, shall distribute all of the Fund to the Executive's
Segregated Account, if any, or if there is no such Segregated Account
to the Executive, or in the event of the Executive's death his personal
representative, after deducting therefrom any amounts owing to the
Trustee under this Agreement which have not been paid by the Company.
Upon any termination of the Trust in accordance with Article VIII, the
Trustee shall, after the acceptance and approval of its account, be
relieved and discharged. The powers of the Trustee, including the
right to receive compensation for services and payment of expenses, as
17
<PAGE>
provided in Section 5.2, shall continue as long as any part of the Fund
remains in its possession.
ARTICLE IX
----------
9.1 This Agreement may be amended, in whole or in part, at
any time and from time to time, by the Company with the written consent
of the Executive and the Trustee. Any such amendment by the Company
shall be pursuant to a resolution of the Board of Directors of the
Company by delivery to the Trustee of a certified copy of such
resolution and a written instrument duly executed and acknowledged by
the Company and the Executive in the same form as this Agreement.
ARTICLE X
---------
10.1 This Agreement shall be construed and interpreted
under, and the Trust hereby created shall be governed by, the laws of
the State of New York insofar as such laws do not contravene any
applicable federal laws, rules or regulations.
10.2 Neither the gender nor the number (singular or plural)
of any word shall be construed to exclude another gender or number when
a different gender or number would be appropriate.
10.3 This Agreement shall be binding upon and inure to the
benefit of the Executive, his estate, personal representative,
beneficiary, heirs and assigns. This Agreement also shall be binding
upon and inure to the benefit of any successor to the Company or its
business as the result of merger, consolidation, reorganization,
transfer of assets or otherwise and any subsequent successor thereto.
In the event of any such merger, consolidation, reorganization,
transfer of assets or other similar transaction, the successor to the
Company or its business or any subsequent successor thereto shall
18
<PAGE>
promptly notify the Trustee in writing of its successorship and furnish
the Trustee with the information specified in Section 3.1 of this
Agreement. In no event shall any such transaction described herein
suspend or delay the rights of the Executive to receive benefits
hereunder.
10.4 This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all
of which shall together constitute only one Agreement.
10.5 All notices and other communications provided for in
this Agreement shall be in writing and shall be deemed to have been
duly given when actually delivered to the respective addresses set
forth below:
Company: ACCO World Corporation
Suite 150
500 Lake Cook Road
Deerfield, Illinois 60015-0818
Attn: Director of Human Resources
Trustee: The Chase Manhattan Bank, N.A.
1211 Avenue of the Americas
New York, New York 10036
Attn: Trusts and Estates
Services Division, 34th Floor
Executive: Norman H. Wesley
110 Honeysuckle Street
Lake Forest, Illinois 60045
or at such other address as such person may specify in writing by
notice as set forth above to the other persons listed above.
ARTICLE XI
----------
11.1 In consideration of the establishment of the Fund, the
Executive consents to the distribution from time to time of assets of
the trust established pursuant to the Trust Agreement made as of the
19
<PAGE>
1st day of July, 1994, among ACCO World Corporation, The Chase
Manhattan Bank (National Association) and Hewitt Associates LLC
established to provide a source of the Executive's benefits under the
Plan, in amounts to be used for the making of contributions to the
Trust or Segregated Account of the Executive as provided in Section
1.2, or the making of payments to the Executive (or beneficiary)
pursuant to the Plan.
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed as of the 1st day of July, 1994.
Attest: ACCO WORLD CORPORATION
Mark S. Lyon Allan J. Snape
-------------------- By------------------------------
Secretary Corporate Vice President,
Finance and Administration
Attest: THE CHASE MANHATTAN BANK
Yvonne E. Richards Mark J. Altschuler
-------------------- By--------------------------------
Second Vice President
Witness: NORMAN H. WESLEY
Mark S. Lyon Norman H. Wesley
-------------------- ----------------------------------
Secretary
20
<PAGE>
STATE OF ILLINOIS )
: ss.:
COUNTY OF LAKE )
Personally appeared Allan J. Snape, Vice President Finance &
Admin. of ACCO WORLD CORPORATION, signer and sealer of the foregoing
instrument, and acknowledged the same to be his free act and deed as
such and the free act and deed of said
Corporation, before me.
Kathleen D. Hulfachor 11/11/94
------------------------------
Notary Public
STATE OF NEW YORK )
: ss.: New York, New York -
COUNTY OF NEW YORK )
Personally appeared Mark J. Altschuler, Vice-President of THE
CHASE MANHATTAN BANK, signer and sealer of the foregoing instrument,
and acknowledged the same to be his free act and deed as such Vice-
President and the free act and deed of said Company, before me.
Richard G. Friedman 12/19/94
------------------------------
Notary Public
<PAGE>
STATE OF ILLINOIS )
: ss.:
COUNTY OF LAKE )
Personally appeared NORMAN H. WESLEY, signer of the foregoing
instrument, and acknowledged the same to be his free act and deed, before
me.
Kathleen D. Hulfachor 11/11/94
------------------------------
Notary Public
EXHIBIT 10r2
[Letterhead of American Brands, Inc.]
November 28, 1994
Mr. Gilbert L. Klemann, II
25 Hope Farm Road
Greenwich, Connecticut 06830
Dear Mr. Klemann:
Reference is made to the agreement dated January 2, 1991
American Brands, Inc. (the "Company") and you covering the Company's obligation
to make certain payments and provide certain benefits in the event of a
termination of your employment following a change in control of the Company, as
amended (the "Agreement").
It was the parties' intent in the Agreement that, following a
change in control of the Company, your entitlement to all benefits being
provided to you under the Company's benefit programs immediately prior to the
change in control be protected. Because of the recent adoption of the
supplemental tax deferred and related Company matching award provisions to the
Company's Supplemental Retirement Plan, the adoption of amendments to the
Company's l990 Long-Term Incentive Plan and in order to provide for a prorated
incentive compensation award for the year in which your termination of
employment might occur, and to further reflect the intent of the parties to the
Agreement, it is hereby agreed that the Agreement is amended as follows:
1. Section 1(c)(iii) of the Agreement is amended by changing
the last sentence thereof as follows:
"For the purposes hereof such benefit plans shall include, but
not be limited to, the provisions for incentive compensation
under Article XII of the By-laws of the Company and the
Company's Retirement Plan, Supplemental Retirement Plan
(including the supplemental profit-sharing and supplemental
tax deferred and related Company matching award provisions
thereof), Profit-Sharing Plan (including the tax deferred and
related Company matching contributions thereof) and Long-Term
Incentive Plan."
2. Section 2(b)(ii)(A)(2) and (3) is hereby amended as
follows:
"(2) the greater of the amount that was awarded to you under
Article XII of the Company's By-laws as in effect at the time
of a Change in Control for the year immediately preceding the
year in which the Change in Control occurs (but, for any such
immediately preceding year as to which the award has not been
determined and paid at the time of the Change in Control, not
less than the amount that you would have received if you had
been allotted the same percentage of the total amount
available for allotment for the year immediately preceding the
year in which the Change in Control occurs as the percentage
allotted to you for the last year prior to the Change in
Control for which an award was actually paid) and the amount
awarded to you under such Article XII for the year immediately
preceding the year in which a Notice of Termination is given,
plus (3) the greater of the amount that was allocated to your
account under the Company's Profit-Sharing Plan (including the
Company 401(k) matching contribution thereunder) and the
supplemental profit-sharing provisions (including the Company
matching award related to the supplemental tax deferred
amounts therein) of the Supplemental Plan (as defined in
Section 2(d)), each as in effect at the time of a Change in
Control, for the year immediately preceding the year in which
the Change in Control occurs and that amount that would have
been required to be so allocated to you under each such plan
for the year immediately preceding the year in which a Notice
of Termination is given . . ."
3. Section 2 is hereby amended by adding a new last paragraph
thereto as follows:
"If the Company shall terminate your employment other than for
Disability or Cause or if you shall terminate your employment
for Good Reason subsequent to a Change in Control, the Company
shall pay to you as incentive compensation for the period
through the Termination Date:
(i) the unpaid portion of the amount awarded to you
as incentive compensation under Article XII of the
Company's By-laws for the calendar year immediately
preceding the year in which the Termination Date occurs
(but, for any such immediately preceding year as to
which the award has not been determined and paid at the
time of the Change in Control, not less than the amount
that you would have received if you had been allotted
the same percentage of the total amount available for
allotment for such year as the percentage awarded to you
for the most recent year for which an award was actually
paid) in a lump sum on the fifth day following the
Termination Date; and
(ii) incentive compensation under Article XII of
the Company's By-laws as in effect at the time of a
Change in Control for the calendar year in which the
Termination Date occurs, in an amount equal to the
amount you would have received thereunder if you had
been allotted a percentage of the total amount available
for allotment for the year in which your Termination
Date occurs equal to the same percentage of the total
amount available for allotment as had been allotted to
you for the year immediately preceding the year in which
the Change in Control occurs (but, for any such
immediately preceding year as to which the award has not
been determined and paid at the time of the Change in
Control, not less than the amount that you would have
received if you had been allotted the same percentage of
the total amount available for allotment for the year
immediately preceding the year in which the Change in
Control occurs as the percentage allotted to you for the
last year prior to the Change in Control for which an
award was actually paid) or, if greater, the same
percentage as allotted to you for the year immediately
preceding the year in which a Notice of Termination is
given, with such incentive compensation amount prorated
for the portion of the year through the Termination Date
and paid at the time awards thereunder are paid under
the terms of such Article XII as in effect immediately
prior to the Change in Control."
Except as amended hereby, all provisions of the Agreement
remain in full force and effect.
Sincerely,
AMERICAN BRANDS, INC.
By Steven C. Mendenhall
--------------------
Steven C. Mendenhall
Vice President and
Chief Administrative
Officer
Agreed to this 4th day of
January, l995
Gilbert L. Klemann, II
----------------------
Gilbert L. Klemann, II
NY2:32618.01
EXHIBIT 10r3
Schedule identifying substantially identical agreements,
among American Brands, Inc. ("American") and each of the
following persons, to the Agreement and the Amendment
thereto constituting Exhibits 10r1 and 10r2,
respectively, to the Annual Report on Form 10-K of
American for the Fiscal Year ended December 31, 1994
-------------------------------------------------------
Name
----
Thomas C. Hays
John T. Ludes
Robert L. Plancher
Robert J. Rukeyser
Randall W. Larrimore
Steven C. Mendenhall
Dudley L. Bauerlein, Jr.
Charles H. McGill
EXHIBIT 10s1
AMERICAN BRANDS, INC.
TRUST AGREEMENT
THIS AGREEMENT, made as of the second day of January, 1991,
among AMERICAN BRANDS, INC., a Delaware corporation (the "Company"), THE CHASE
MANHATTAN BANK (National Association), incorporated under the laws of the United
States of America (the "Trustee"), and HEWITT ASSOCIATES, a partnership formed
under the laws of Illinois (the "Trustee's Contractor").
W I T N E S S E T H :
WHEREAS, the Company entered an agreement with GILBERT L.
KLEMANN, II (the "Executive") as of the second day of January, 1991 (such
agreement being herein referred to as the "Compensation Agreement") to provide
benefits in the event of the termination of employment of the Executive under
certain circumstances following a change in control of the Company; and
WHEREAS, the Company desires to provide additional assurance
to the Executive and his surviving spouse, if any, beneficiaries or estate under
the Compensation Agreement (collectively, the "Beneficiaries") that their
unfunded rights under the Compensation Agreement will in the future be met or
substantially met by application of the procedures set forth herein; and
WHEREAS, the Company wishes to establish a trust with respect
to the Executive in order to provide a source of payments as such payments are
required under the terms of the Compensation Agreement,
NOW, THEREFORE, in consideration of the premises and mutual
and independent promises herein, the parties hereto covenant and agree as
follows:
ARTICLE I
1.1 The Company hereby establishes with the Trustee a Trust
consisting of such sums of money and such property acceptable to the Trustee as
shall from time to time be paid or delivered to the Trustee and the earnings and
profits thereon. All such money and property, all investments made therewith and
proceeds thereof, less the payments or other distributions which, at the time of
reference, shall have been made by the Trustee, as authorized herein, are
referred to herein as the "Fund" and shall be held by the Trustee, IN TRUST, in
accordance with the provisions of this Agreement.
1.2 The Trustee shall hold, manage, invest and otherwise
administer the Fund pursuant to the terms of this Agreement. The Trustee shall
be responsible only for contributions actually received by it hereunder and
shall have no responsibility for the correctness of the amount thereof. Upon the
establishment of this Trust, or from time to time thereafter, the Company shall
contribute to the Trust such amount in cash as the Company shall determine to be
appropriate to provide a source of the payments required under the terms of the
Compensation Agreement. It is contemplated that the initial contribution by the
Company shall be in an amount not less than the amount to which the Executive or
his Beneficiaries would be entitled under Section 2 of the Compensation
Agreement (other than Sections 2(c) and (f) thereof). It is further contemplated
that the Company will make additional contributions to the Trust upon the
furnishing to the Trustee's Contractor of the annual updated benefit information
specified in Section 3.3 in amounts such that the amount of the Fund at such
time is not less than the amount described in the preceding sentence. However,
the amounts and timing of all such contributions shall be at the discretion of
the Company, and the Company shall have no obligation to make such contributions
in any specific amount or at any specific time.
1.3 The Company shall certify to the Trustee, the Trustee's
Contractor and the Executive at the time of each contribution to the Fund the
amount of such contribution being made in respect of the Executive. The Fund
shall be revalued by the Trustee semiannually as of the last business day of
each June and December at current market values, as determined by the Trustee,
which shall promptly deliver a copy of such semiannual valuation to the
Trustee's Contractor. The Trustee's Contractor shall deliver to the Company and
the Executive or Beneficiary of the Executive the semiannual statement of the
Fund reflecting such revised valuation.
ARTICLE II
2.1 Notwithstanding any provision in this Agreement to the
contrary, if at any time while the Trust is still in existence the Company
becomes insolvent (as defined herein), the Trustee shall upon written notice
thereof suspend the payment of all benefits from the Fund and shall thereafter
hold the Fund in suspense until it receives a court order directing the
disposition of the Fund; provided, however, the Trustee may deduct or continue
to deduct its fees and expenses and other expenses of the Trust, including taxes
and the Trustee's Contractor's fees and expenses, pending the receipt of such
court order. The Company shall be considered to be insolvent if (a) it is unable
to pay its debts as they fall due or (b) bankruptcy or insolvency proceedings
are initiated by its creditors or the Company or any third party under the
Bankruptcy Act of the United States or the bankruptcy laws of any state alleging
that the Company is insolvent or bankrupt. By its approval and execution of this
Agreement, the Company represents and agrees that its Board of Directors and
Chief Executive Officer, as from time to time acting, shall have the
responsibility to give to the Trustee prompt written notice of any event of the
Company's insolvency and the Trustee shall be entitled to rely thereon to the
exclusion of all directions or claims to pay benefits thereafter made. Absent
such notice, the Trustee shall have no responsibility for determining whether
the Company has become insolvent. If after an event of insolvency, the Company
later becomes solvent without the entry of a court order concerning the
disposition of the Fund, the Company shall by written notice so inform the
Trustee and the Trustee shall thereupon resume all its duties and
responsibilities under this Agreement without regard to this Section 2.1 until
and unless the Company again becomes insolvent as such term is defined herein.
If the Trustee has suspended payments pursuant to this Section 2.1 and
thereafter resumes payments pursuant to a court order or notice from the Company
as set forth in the preceding sentence, any benefits payable with respect to the
Executive that have not been paid during the period of suspension shall then
immediately be paid together with interest thereon calculated on the basis of
the return earned during such period of suspension by The Chase Market Rate
Account (or similar investment vehicle of The Chase Manhattan Bank if The Chase
Market Rate Account is changed).
2.2 The Company represents and agrees that the Trust
established under this Agreement does not fund and is not intended to fund the
Compensation Agreement, or any other employee benefit plan or program of the
Company. Such Trust is and is intended to be a depository arrangement with the
Trustee for the setting aside of cash and other assets of the Company for the
meeting of part or all of its future obligations to the Executive and his
Beneficiaries under the Compensation Agreement. Contributions by the Company to
this Trust shall be in respect of only the Executive. The purpose of this Trust
is to provide a fund from which benefits may be payable under the Compensation
Agreement and as to which the Executive and his Beneficiaries may, by exercising
the procedures set forth herein, have access to some or all of their benefits as
such become due without having the payment of such benefits subject to the
administrative control of the Company unless the Company becomes insolvent as
defined in Section 2.1.
ARTICLE III
3.1 By its acceptance of this Trust the Trustee hereby agrees
to the designation by the Company of Hewitt Associates as the contractor of the
Trustee ("Trustee's Contractor") under this Agreement. It is herein recognized
that said Trustee's Contractor is also acting as the independent consulting
actuary of the Company and that the Trustee shall have no responsibility
hereunder for the continued retention of Hewitt Associates or any responsibility
assigned to the Trustee's Contractor or its performance thereof so long as said
firm continues to be the Company's independent consulting actuary. In the event
the Company replaces or no longer uses said firm as its independent consulting
actuary, the Trustee in its sole discretion may, but need not, designate a new
Trustee's Contractor or may continue to use the same Trustee's Contractor; or in
the event said firm does not accept its designation as Trustee's Contractor or
accepts said designation and subsequently resigns, the Trustee shall designate
the Trustee's Contractor or a new Trustee's Contractor; provided, however, any
Trustee's Contractor appointed by the Trustee shall be independent of the
Company. A Trustee's Contractor appointed by the Trustee must be a national
actuarial consulting firm or a "Big 6" accounting firm or other national
accounting firm. In the event any such firm refuses to act as the Trustee's
Contractor, the Trustee shall appoint as the Trustee's Contractor a law firm of
at least 100 lawyers. The Company shall pay to the Trustee's Contractor all fees
and expenses of the Trustee's Contractor and shall indemnify and hold the
Trustee harmless for any actions or omissions of said Trustee's Contractor and
shall indemnify and hold the Trustee's Contractor harmless for any actions or
omissions of the Trustee. Such fees and expenses shall be a charge on the Fund
and shall constitute a lien in favor of the Trustee's Contractor until paid by
the Company. The Trustee's Contractor shall be paid for its services at rates
comparable to the rates the Trustee's Contractor charges for comparable services
to its other clients.
3.2 Except for the records dealing solely with the Fund and
its investment, which shall be maintained by the Trustee, the Trustee's
Contractor shall maintain all the Executive's records contemplated by this
Agreement, including records of the Executive's compensation and benefits from
the Company, any amounts accrued under the Compensation Agreement, the
Executive's Beneficiary designation, the Company's contributions to the Fund and
such other records as may be necessary for determining the amount payable to the
Executive or his Beneficiary under the Compensation Agreement. All such records
shall be made available promptly upon the request of the Trustee, the Executive
or his Beneficiary or the Company. The Trustee's Contractor shall also prepare
and distribute the Executive's annual estimated statements specified in Section
3.3 and shall be responsible for information with respect to payments to the
Executive and his Beneficiaries and shall perform such other duties and
responsibilities as the Company or the Trustee determines is necessary or
advisable to achieve the objectives of this Agreement.
3.3 Upon the establishment of this Trust or as soon thereafter
as practicable, the Company shall furnish to the Trustee's Contractor all the
information necessary in order for the Trustee's Contractor to determine the
amounts payable to or with respect to the Executive under the Compensation
Agreement including any amounts payable after the Executive's death and the
recipient of same and the amount of any applicable federal, state or local
withholding taxes with respect thereto. The Company shall regularly, at least
annually by March 31 of each year, furnish revised updated information to the
Trustee's Contractor. Based on the foregoing information the Trustee's
Contractor shall prepare an annual estimated statement in respect of the
Executive and shall furnish a copy of same to the Executive or his Beneficiary
and to the Company by no later than May 15 of each year. In the event the
Company refuses or neglects to provide updated Executive information, as
contemplated herein, the Trustee's Contractor shall be entitled to rely upon
information furnished to it by the Executive.
3.4 Upon the direction of the Company or upon the application
of the Executive or Beneficiary of a deceased Executive by submission of a
Payment Demand Notice in the form attached hereto as Schedule A, a copy of which
shall be delivered by the Trustee's Contractor to the Company, the Trustee's
Contractor shall prepare and deliver to the Trustee within thirty days of
receipt of such direction or application a certification to the Trustee that the
Executive's benefits under the Compensation Agreement have become payable, and
shall deliver a copy of such certification to the Company and to the Executive
or Beneficiary. In preparing such certification, the Trustee's Contractor shall
obtain updated information from the Company for calculating amounts payable
under the Compensation Agreement. In the event the Company refuses or neglects
to provide updated information, the Trustee's Contractor shall be entitled to
rely upon information furnished to it by the Executive. Such certification shall
include the amount of such payments to be made under the Compensation Agreement,
the manner of payment and the name, address and social security number of the
recipient. No later than five days after the receipt of such certification from
the Trustee's Contractor and appropriate federal, state and local tax
withholding information provided by the Company, the Trustee shall commence cash
distributions from the Fund in accordance therewith to the person or persons so
indicated and shall distribute to the Company for remittance to the appropriate
taxing authority the amounts of any taxes required to be withheld, and the
Trustee's Contractor shall charge the Fund therefor. The Company shall have full
responsibility for the proper remittance of all withholding taxes to the
appropriate taxing authority and shall furnish the Executive or his Beneficiary,
the Trustee's Contractor and the Trustee with the appropriate tax information
form reporting the amounts of such distributions and any withholding taxes. The
certification by the Trustee's Contractor shall also be updated annually upon
receipt by the Trustee's Contractor of updated compensation and service
information from the Company (or the Executive in the event of the failure of
the Company to provide such information) and the annual updated certification
shall be delivered to the Company and the Executive or his Beneficiary. The
amounts payable in respect of the updated certificate shall be adjusted to the
extent, if any, set forth in the certificate.
3.5 Upon the payment of all Company liabilities under the
Compensation Agreement to the Executive and Beneficiaries, the Trustee's
Contractor shall prepare a certification to the Trustee, the Executive or his
Beneficiary and to the Company, and the Trustee shall thereupon hold or
distribute the Fund in accordance with the written instructions of the Company.
At no time prior to the Company's insolvency, as defined in Section 2.1, or the
payment of all liabilities of the Company under the Compensation Agreement in
respect of the Executive and his Beneficiaries shall any part of the Fund revert
to the Company. The Trustee and the Trustee's Contractor shall have no
responsibility for determining whether the Executive or his Beneficiary has died
and shall be entitled to rely upon information furnished by the Company or, in
the absence of such information from the Company, from the Beneficiary.
3.6 Nothing provided in this Agreement shall relieve the
Company of its liabilities to pay the benefits provided under the Compensation
Agreement except to the extent such liabilities are met by application of Fund
assets. The Company, therefore, agrees that all income, deductions and credits
of the Fund belong to it as owner for income tax purposes and will be included
on the Company's income tax returns.
ARTICLE IV
4.1 The Company shall provide the Trustee's Contractor with a
complete copy of the Compensation Agreement and all amendments thereto and of
the resolutions of the Board of Directors of the Company approving the
Compensation Agreement and all amendments thereto, promptly upon their adoption.
After the execution of this Agreement, the Company shall promptly file with the
Trustee and the Trustee's Contractor a certified list of the names and specimen
signatures of the officers of the Company and any delegee authorized to act for
it. The Company shall promptly notify the Trustee and the Trustee's Contractor
of the addition or deletion of any person's name to or from such list,
respectively. Until receipt by the Trustee or the Trustee's Contractor of notice
that any person is no longer authorized so to act, the Trustee or the Trustee's
Contractor may continue to rely on the authority of the person. All
certifications, notices and directions by any such person or persons to the
Trustee or the Trustee's Contractor shall be in writing signed by such person or
persons. The Trustee and the Trustee's Contractor may rely on any such
certification, notice or direction purporting to have been signed by or on
behalf of such person or persons that the Trustee or the Trustee's Contractor
believes to have been signed thereby. The Trustee and the Trustee's Contractor
may rely on any certification, notice or direction of the Company that the
Trustee or the Trustee's Contractor believes to have been signed by a duly
authorized officer or agent of the Company. The Trustee and the Trustee's
Contractor shall have no responsibility for acting or not acting in reliance
upon any notification believed by the Trustee or the Trustee's Contractor to
have been so signed by a duly authorized officer or agent of the Company. The
Company shall be responsible for keeping accurate books and records with respect
to the Executive, his compensation and his rights and interests in the Fund
under the Compensation Agreement.
4.2 The Company shall indemnify and hold harmless the Trustee
for any liability or expenses, including without limitation advances for or
prompt reimbursement of reasonable fees and expenses of counsel and other agents
retained by it, incurred by the Trustee with respect to holding, managing,
investing or otherwise administering the Fund, other than by its negligence or
willful misconduct.
4.3 The Company shall indemnify and hold harmless the
Trustee's Contractor for any liability or expenses, including without limitation
advances for or prompt reimbursement of reasonable fees and expenses of counsel
and other agents retained by it, incurred by the Trustee's Contractor with
respect to keeping the records for the Executive's benefit calculations,
reporting thereon to the Executive, certifying benefit information to the
Trustee, determining the status of the Fund and benefits hereunder and otherwise
carrying out its obligations under this Agreement, other than those resulting
from the Trustee's Contractor's negligence or willful misconduct.
ARTICLE V
5.1 The Trustee shall not be liable in discharging its duties
hereunder, including without limitation its duty to invest and reinvest the
Fund, if it acts in good faith and in accordance with the terms of this
Agreement and any applicable federal or state laws, rules or regulations.
5.2 The Trustee is hereby appointed as the investment manager
of the Fund. In the event that the Trustee cannot serve as investment manager of
the Fund, the Trustee shall then select Pacific Investment Management Company as
investment manager; provided that if Pacific Investment Management Company is
unwilling or unable to act as investment manager, the Trustee shall select J.P.
Morgan Investment Management Inc. as investment manager. The investment manager
shall invest the assets of the Fund solely in liquid short-term debt instruments
which are (a) direct obligations of the United States (but limited to maturities
which do not exceed one year from date of purchase), (b) securities guaranteed
as to principal and interest by the United States (but limited to maturities
which do not exceed six months from date of purchase), (c) certificates of
deposit of banks, including The Chase Manhattan Bank, having total assets of at
least $15 billion and having a certificate of deposit or commercial paper rating
of A-1 from Standard & Poor's Corporation or P-1 from Moody's investment
Services, Inc. (but limited to maturities of less than 100 days from date of
purchase), (d) commercial paper having a rating of A-1 from Standard and Poor's
Corporation or P-1 from Moody's Investment Services, Inc. (but limited to
maturities of less than 100 days from date of purchase) or (e) any money market
vehicle of similar quality managed by the Trustee. Subject to such investment
restrictions, the Trustee shall have the power and right:
(a) To receive and hold all contributions made to it by the
Company;
(b) To invest and reinvest all or any portion of the Fund
collectively through the medium of any common, collective or commingled
trust fund that may be established and maintained by the Trustee,
subject to the instrument or instruments establishing such trust fund
or funds and with the terms of such instrument or instruments, as from
time to time amended, being incorporated into this Agreement to the
extent of the equitable share of the Fund in any such common,
collective or commingled trust fund;
(c) To participate in and use a book-entry system for the
deposit and transfer of securities;
(d) To sell or exchange any property held by it at public or
private sale, for cash or on credit, to grant and exercise options for
the purchase or exchange thereof, to exercise all conversion or
subscription rights pertaining to any such property and to enter into
any covenant or agreement to purchase any property in the future;
(e) To participate in any plan of reorganization,
consolidation, merger, combination, liquidation or other similar plan
relating to property held by it and to consent to or oppose any such
plan or any action thereunder or any contract, lease, mortgage,
purchase, sale or other action by any person;
(f) To deposit any property held by it with any protective,
reorganization or similar committee, to delegate discretionary power
thereto, and to pay part of the expenses and compensation thereof and
any assessments levied with respect to any such property so deposited;
(g) To extend the time of payment of any obligation held by
it;
(h) To hold uninvested any moneys received by it, without
liability for interest thereon, until such moneys shall be invested,
reinvested or disbursed;
(i) To exercise all voting or other rights with respect to any
property held by it and to grant proxies, discretionary or otherwise;
(j) For the purposes of the Trust, to borrow money from
others, including The Chase Manhattan Bank, to issue its promissory
note or notes therefor, and to secure the repayment thereof by pledging
any property held by it;
(k) To furnish the Company, the Trustee's Contractor and the
Executive or his Beneficiaries with such information as may be needed
for tax or other purposes;
(l) To employ suitable agents and counsel, who may be counsel
to the Company or the Trustee, including, without limitation, Hewitt
Associates and Coopers & Lybrand, and to pay their reasonable expenses
and compensation from the Fund to the extent not paid by the Company;
(m) To cause any property held by it to be registered and held
in the name of one or more nominees, with or without the addition of
words indicating that such securities are held in a fiduciary capacity,
and to hold securities in bearer form;
(n) To settle, compromise or submit to arbitration any claims,
debts or damages due or owing to or from the Trust, respectively, to
commence or defend suits or legal proceedings to protect any interest
of the Trust, and to represent the Trust in all suits or legal
proceedings in any court or before any other body or tribunal;
provided, however, that the Trustee shall not be required to take any
such action unless it shall have been indemnified by the Company to its
reasonable satisfaction against liability or expenses it might incur
therefrom;
(o) To organize under the laws of any state a corporation or
trust for the purpose of acquiring and holding title to any property
which it is authorized to acquire hereunder and to exercise with
respect thereto any or all of the powers set forth herein; and
(p) Generally, to do all acts, whether or not expressly
authorized, that the Trustee may deem necessary or desirable for the
protection of the Fund.
5.3 No person dealing with the Trustee shall be under any
obligation to see to the proper application of any money paid or property
delivered to the Trustee or to inquire into the Trustee's authority as to any
transaction. The Trustee's Contractor's obligations are limited solely to those
explicitly set forth herein and the Trustee's Contractor shall have no
responsibility, authority or control, direct or indirect, over the maintenance
or investment of the Fund and shall have no obligation in respect of the Trustee
or the Trustee's compliance with the Trustee's Contractor's certifications to
the Trustee.
5.4 The Trustee shall distribute cash from the Fund in
accordance with Article III hereof.
The Trustee may make any distribution required hereunder by
mailing its check for the specified amount to the person to whom such
distribution or payment is to be made, at such address as may be specified
pursuant to Section 11.7, or if no such address shall have been so furnished, to
such person in care of the Company, or (if so directed by the recipient) by
crediting the account of such person or by transferring funds to such person's
account by bank or wire transfer.
5.5 If at any time there is no person authorized to act under
this Agreement on behalf of the Company, the Board of Directors or the
Compensation and Stock Option Committee of the Company shall have the authority
to act hereunder.
ARTICLE VI
6.1 The Company shall pay any federal, state or local taxes on
the Fund, or any part thereof, and on the income therefrom.
6.2 The Company shall pay to the Trustee its reasonable
expenses for the management and administration of the Fund, including without
limitation advances for or prompt reimbursement of reasonable expenses of
counsel and other agents employed by the Trustee, and reasonable compensation
for its services as Trustee hereunder, the amount of which shall be agreed upon
from time to time by the Company and the Trustee in writing; provided, however,
that if the Trustee forwards an amended fee schedule to the Company requesting
its agreement thereto and the Company fails to object thereto within thirty (30)
days of its receipt, the amended fee schedule shall be deemed to be agreed upon
by the Company and the Trustee. Such expenses and compensation shall be a charge
on the Fund and shall constitute a lien in favor of the Trustee until paid by
the Company. In the event that such expenses and compensation of the Trustee,
and any fees and expenses of the Trustee's Contractor as provided in Section
3.1, under this Trust and under similar Trusts established by the Company in
respect of other Executives of the Company are to be satisfied out of assets of
any or all of the several Funds under all such Trusts, such satisfaction shall
be in proportion to the assets of each Fund.
ARTICLE VII
7.1 The Trustee shall maintain records with respect to the
Fund that show all its receipts and disbursements hereunder. The records of the
Trustee with respect to the Fund shall be open to inspection by the Company or
its representatives, and the Trustee's Contractor, at all reasonable times
during normal business hours of the Trustee and may be audited not more
frequently than once each fiscal year by an independent certified public
accountant engaged by the Company; provided, however, the Trustee shall be
entitled to additional compensation from the Company in respect of audits or
auditors' requests which the Trustee determines to exceed the ordinary course of
the usual scope of such examinations of its records.
7.2 Within a reasonable time after the close of each fiscal
year of the Company (or, in the Trustee's discretion, at more frequent
intervals), or of any termination of the duties of the Trustee hereunder, the
Trustee shall prepare and deliver to the Company and the Trustee's Contractor a
statement of transactions reflecting its acts and transactions as Trustee during
such fiscal year, portion thereof or during such period from the close of the
last fiscal year or last statement period to the termination of the Trustee's
duties, respectively, including a statement of the then current value of the
Fund. Any such statement shall be deemed an account stated and accepted and
approved by the Company, and the Trustee shall be relieved and discharged, as if
such account had been settled and allowed by a judgment or decree of a court of
competent jurisdiction, unless protested by written notice to the Trustee within
sixty (60) days of receipt thereof by the Company.
The Trustee shall have the right to apply at any time to a
court of competent jurisdiction for judicial settlement of any account of the
Trustee not previously settled as herein provided or for the determination of
any question of construction or for instructions. In any such action or
proceeding it shall be necessary to join as parties only the Trustee and the
Company (although the Trustee may also join such other parties as it may deem
appropriate), and any judgment or decree entered therein shall be conclusive.
ARTICLE VIII
8.1 The Trustee may resign at any time by delivering written
notice thereof to the Company; provided, however, that no such resignation shall
take effect until the earlier of (i) sixty (60) days from the date of delivery
of such notice to the Company or (ii) the appointment of a successor trustee.
8.2 The Trustee may be removed at any time by the Company,
pursuant to a resolution of the Board of Directors of the Company or its
Compensation and Stock Option Committee, upon delivery to the Trustee of a
certified copy of such resolution and sixty (60) days' written notice of (i)
such removal and (ii) the appointment of a successor trustee, unless such notice
period is waived in whole or in part by the Trustee.
8.3 Upon the resignation or removal of the Trustee, a
successor trustee shall be appointed by the Company. Such successor trustee
shall be a bank or trust company established under the laws of the United States
or a state within the United States and having either total assets of at least
$15 billion or trust assets of at least $25 billion. Such appointment shall take
effect upon the delivery to the Trustee of (a) a written appointment of such
successor trustee, duly executed, by the Company and (b) a written acceptance by
such successor trustee, duly executed thereby. Any successor trustee shall have
all the rights, powers and duties granted the Trustee hereunder.
8.4 If, within sixty (60) days of the delivery of the
Trustee's written notice of resignation, a successor trustee shall not have been
appointed, the Trustee shall apply to any court of competent jurisdiction for
the appointment of a successor trustee.
8.5 Upon the resignation or removal of the Trustee and the
appointment of a successor trustee, and after the acceptance and approval of its
account, the Trustee shall transfer and deliver the Fund to such successor
trustee. Under no circumstances shall the Trustee transfer or deliver the Fund
to any successor trustee which is not a bank or trust company having either
total assets of at least $15 billion or trust assets of at least $25 billion.
ARTICLE IX
9.1 The Trust established pursuant to this Agreement may not
be terminated by the Company prior to the payment of all liabilities with
respect to the Executive and his Beneficiaries. Upon receipt by the Company and
the Executive or his Beneficiaries of a written certification from the Trustee's
Contractor that all liabilities have been paid with respect to the Executive or
his Beneficiaries under the Compensation Agreement, the Company pursuant to a
resolution of its Board of Directors or Compensation and Stock Option Committee
may terminate the Trust upon delivery to the Trustee and the Executive or his
Beneficiaries of (a) a certified copy of such resolution, (b) an original
certification of the Trustee's Contractor that all such liabilities have been
paid and (c) a written instrument of termination duly executed and acknowledged
in the same form as this Agreement.
9.2 Upon the termination of the Trust in accordance with
Section 9.1, the Trustee shall, after the acceptance and approval of its
account, distribute any remaining portion of the Fund to the Company. Upon
completing such distribution, the Trustee shall be relieved and discharged. The
powers of the Trustee shall continue as long as any part of the Fund remains in
its possession.
ARTICLE X
10.1 This Agreement may be amended, in whole or in part, at
any time and from time to time, by the Company with the written consent of the
Executive (or the Executive's Beneficiary in the event of the death or
incapacity of the Executive) and the Trustee. Any such amendment by the Company
shall be pursuant to a resolution of the Board of Directors or its Compensation
and Stock Option Committee by delivery to the Trustee of a certified copy of
such resolution and a written instrument duly executed and acknowledged by the
Company and the Executive (or the Executive's Beneficiary in the event of the
death or incapacity of the Executive) in the same form as this Agreement.
ARTICLE XI
11.1 This Agreement shall be construed and interpreted under,
and the Trust hereby created shall be governed by, the laws of the State of New
York insofar as such laws do not contravene any applicable federal laws, rules
or regulations.
11.2 Neither the gender nor the number (singular or plural) of
any word shall be construed to exclude another gender or number when a different
gender or number would be appropriate.
11.3 No right or interest of the Executive or his Beneficiary
under the Compensation Agreement or in the Fund shall be transferable or
assignable or shall be subject to alienation, anticipation or encumbrance, and
no right or interest of the Executive or Beneficiary in the Compensation
Agreement or in the Fund shall be subject to any garnishment, attachment or
execution. Notwithstanding the foregoing, the Fund shall at all times remain
subject to claims of creditors of the Company in the event the Company becomes
insolvent as provided in Section 2.1.
11.4 The Company agrees that by the establishment of this
Trust it hereby foregoes any judicial review of certifications by the Trustee's
Contractor as to the benefits payable to any persons hereunder. If a dispute
arises as to the amounts or timing of any such benefits or the persons entitled
thereto under this Agreement, the Company agrees that such dispute shall be
resolved by binding arbitration proceedings initiated in accordance with the
rules of the American Arbitration Association and that the results of such
proceedings shall be conclusive and shall not be subject to judicial review. It
is expressly understood that pending the resolution of any such dispute, payment
of benefits shall be made and continued by the Trustee in accordance with the
certification of the Trustee's Contractor and that the Trustee and the Trustee's
Contractor shall have no liability with respect to such payments. The Company
also agrees to pay the entire cost of any arbitration or legal proceeding with
respect to the Fund initiated by the Company, the Trustee or the Executive or
his Beneficiary in the event the Executive is deceased, including the legal fees
of the Trustee or the Executive or his Beneficiary, regardless of the outcome of
such proceeding and until so paid the expenses thereof shall be a charge on and
lien against the Fund.
11.5 This Agreement shall be binding upon and inure to the
benefit of any successor to the Company or its business as the result of merger,
consolidation, reorganization, transfer of assets or otherwise and any
subsequent successor thereto. In the event of any such merger, consolidation,
reorganization, transfer of assets or other similar transaction, the successor
to the Company or its business or any subsequent successor thereto shall
promptly notify the Trustee in writing of its successorship and furnish the
Trustee and the Trustee's Contractor with the information specified in Section
4.1 of this Agreement. In no event shall any such transaction described herein
suspend or delay the rights of the Executive or his Beneficiary in the event the
Executive is deceased to receive benefits hereunder.
11.6 This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
shall together constitute only one Agreement.
11.7 All notices and other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when
actually delivered to the respective addresses set forth below:
Company: American Brands, Inc.
1700 East Putnam Avenue Old Greenwich,
Connecticut 06870-0819 Attn: Secretary
Trustee: The Chase Manhattan Bank
1211 Avenue of the Americas
New York, New York 10036
Attn: Trusts and Estates
Management Division, 34th Floor
Trustee's Hewitt Associates
Contractor: 40 Highland Avenue
Rowayton, Connecticut 06853
Attn: Michael Jones
Executive: Gilbert L. Klemann, II
25 Hope Farm Road
Greenwich, Connecticut 06830
or at such other address as such person may specify in writing by notice as set
forth above to the other persons listed above.
IN WITNESS WHEREOF, the parties hereto have caused this Trust
Agreement to be duly executed this second day of January, 1991.
Attest: AMERICAN BRANDS, INC.
Louis F. Fernous, Jr. By: Robert L. Austin
--------------------- -------------------------
Secretary Robert L. Austin
Senior Vice President and
Chief Administrative Officer
Attest: THE CHASE MANHATTAN BANK
Joshua G. Mellon By: William P. Barbeosch
---------------- -------------------------
Assistant Treasurer Its Vice President
Witness: HEWITT ASSOCIATES
Margaret A. Sisson By: Michael B. Jones
------------------ -------------------------
STATE OF CONNECTICUT )
: ss.: Old Geenwich
COUNTY OF FAIRFIELD )
Personally appeared Robert L. Austin, Senior Vice President
and Chief Administrative Officer of AMERICAN BRANDS, INC., signer and sealer of
the foregoing instrument, and acknowledged the same to be his free act and deed
as such and the free act and deed of said Corporation, before me.
Christine P. Burns
-----------------------------
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF NEW YORK )
Personally appeared Williab B. Barbeosch, V.P. of THE CHASE
MANHATTAN BANK, signer and sealer of the foregoing instrument, and acknowledged
the same to be his free act and deed as such Vice President and the free act
and deed of said Company, before me.
Digna Rosa
-----------------------------
Notary Public
STATE OF CONNECTICUT )
: ss.:
COUNTY OF FAIRFIELD )
Personally appeared William B. Jones, Partner of HEWITT
ASSOCIATES, signer and sealer of the foregoing instrument, and acknowledged the
same to be his free act and deed as such and the free act and deed of said
HEWITT ASSOCIATES, before me.
Margaret A. Simon
-----------------------------
Notary Public
<PAGE>
SCHEDULE A
Hewitt Associates
40 Highland Avenue
Rowayton, Connecticut 06853
Attn: Michael Jones
PAYMENT DEMAND NOTICE
NAME OF EXECUTIVE: Gilbert L. Klemann, II
ADDRESS: 25 Hope Farm Road
Greenwich, Connecticut 06830
PHONE: (203) 869-0853
The undersigned hereby demands payment of the amount to which he is entitled
under the Compensation Agreement pursuant to the Trust Agreement dated as of
January 2, 1991 among AMERICAN BRANDS, INC., THE CHASE MANHATTAN BANK and HEWITT
ASSOCIATES.
-------------------------------
GILBERT L. KLEMANN, II
EXHIBIT 10s2
AMENDMENT TO TRUST AGREEMENT
THIS AGREEMENT, made as of the 1st day of November, 1993,
among AMERICAN BRANDS, INC., a Delaware corporation (the "Company"), THE CHASE
MANHATTAN BANK (National Association), incorporated under the laws of the United
States of America (the "Trustee") and HEWITT ASSOCIATES, a partnership formed
under the laws of Illinois ("Hewitt")
W I T N E S S E T H :
WHEREAS, the Company and the Trustee have entered into a Trust
Agreement for the purpose of establishing a trust in order to provide a source
of payments under the terms of a Compensation Agreement with Gilbert L. Klemann,
II and Hewitt is designated as Trustee's Contractor thereunder; and
WHEREAS, the Trust Agreement sets forth the permitted
investments of the assets held thereunder and it is desired to change the
permitted investments;
NOW, THEREFORE, in consideration of the premises, the parties
agree that the third sentence of Section 5.2 of the Trust Agreement is hereby
amended to read as follows:
"The investment manager shall invest the assets of the Fund solely in
The Chase Manhattan Bank Fixed Income Fund to the extent practicable
and otherwise in The Chase Manhattan Bank Personal Trust Market Rate
Account."
IN WITNESS WHEREOF, the parties have caused this AMENDMENT to
be duly executed as of the day and year first written above.
AMERICAN BRANDS, INC.
Attest:
Theresa B. Fealey By Steven C. Mendenhall
----------------------- ----------------------
Assistant Secretary Steven C. Mendenhall
Vice President and
Chief Administrative
Officer
THE CHASE MANHATTAN BANK
Attest:
Mark W. Moore By William P. Barbeosch
----------------------- -----------------------
Assistant Treasurer William P. Barbeosch
Vice President
HEWITT ASSOCIATES
Witness:
Barbara C. Checkin By C.L. Connolly, III
----------------------- -----------------------
<PAGE>
I hereby consent to the foregoing AMENDMENT.
Witness:
Dianne J. Ebner By Gilbert L. Klemann, II
----------------------- -----------------------
Gilbert L. Klemann, II
<PAGE>
STATE OF CONNECTICUT )
: ss.: Old Greenwich, CT-November 9, 1993
COUNTY OF FAIRFIELD )
Personally appeared Steven C. Mendenhall, Vice President and
Chief Administrative Officer of AMERICAN BRANDS, INC., signer and sealer of the
foregoing instrument, and acknowledged the same to be his free act and deed as
such Vice President and Chief Administrative Officer and the free act and deed
of said Corporation, before me.
Louis F. Fernous, Jr.
--------------------------
Notary Public
STATE OF NEW YORK )
: ss.: New York, NY-November 24, 1993
COUNTY OF NEW YORK )
Personally appeared William P. Barbeosch, Vice President of
THE CHASE MANHATTAN BANK, signer and sealer of the foregoing instrument, and
acknowledged the same to be his free act and deed as such Vice President and the
free act and deed of said Corporation, before me.
Peggy J. Swarzman
--------------------------
Notary Public
<PAGE>
STATE OF CONNECTICUT )
: ss.: Old Greenwich, CT-November 10, 1993
COUNTY OF FAIRFIELD )
Personally appeared Gilbert L. Klemann, II, signer of the
foregoing instrument, and acknowledged the same to be his free act and deed,
before me.
Dianne J. Ebner
--------------------------
Notary Public
STATE OF ILLINOIS )
: ss.: Lincolnshire, IL-November 19, 1993
COUNTY OF LAKE )
Personally appeared C.L. Connolly, III, Partner of HEWITT
ASSOCIATES, signer and sealer of the foregoing instrument, and acknowledged the
same to be his free act and deed as such Partner and the free act and deed of
said Partnership before me.
Gail K. Nelson
--------------------------
Notary Public
EXHIBIT 10s3
Schedule identifying substantially identical
agreements, among American Brands, Inc. ("American")
and The Chase Manhattan Bank (National Association), et
al. establishing a trust in favor of each of the
following persons, to the Trust Agreement and Amendment
thereto constituting Exhibits 10sl and 10s2,
respectively, to the Annual Report on Form 10-K of
American for the Fiscal Year ended December 31, 1994
-------------------------------------------------------
Name
----
Thomas C. Hays
John T. Ludes
Robert L. Plancher
Robert J. Rukeyser
Randall W. Larrimore
Steven C. Mendenhall
Dudley L. Bauerlein, Jr.
EXHIBIT 10t2
AMENDMENT TO SEVERANCE AGREEMENT
This AMENDMENT effective as of January 1, 1995 to the
Severance Agreement (the "Agreement") dated as of March 1, 1988 between AMERICAN
BRANDS, INC., a Delaware corporation (the "Company"), and THOMAS C. HAYS (the
"Executive")
W I T N E S S E T H :
WHEREAS, the Company and the Executive entered into the
Agreement in order to provide severance benefits in the event of termination of
employment; and
WHEREAS, the Company and the Executive desire to amend the
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and to
further assure the retention of the Executive in the employ of the Company after
the date of this Amendment to Severance Agreement, the parties hereto do hereby
agree as follows:
1. Section 2(b)(ii)(B) of the Agreement is hereby amended in
its entirety as follows:
"(B) the lesser of the number three and the number of years (and
fraction thereof) from the Termination Date to the Executive's Normal
Retirement Date (as defined in the Retirement Plan for Employees and
Former Employees of American Brands, Inc. (the "Retirement Plan"))."
2. Section 2(c) of the Agreement is hereby amended by changing
"two-year period" in each place it appears therein to "three-year period".
3. Section 2(d) of the Agreement is hereby amended in its
entirety as follows:
"(d) If the Company shall terminate the Executive's employment
other than for Disability or Cause, then in addition to the retirement
benefits to which the Executive is entitled under the Retirement Plan,
the Supplemental Plan and any other defined benefit pension plan
maintained by the Company or any affiliate, and any other program,
practice or arrangement of the Company or any affiliate to provide the
Executive with a defined pension benefit after termination of
employment, and any successor plans thereto (all such plans being
collectively referred to herein as the "Pension Plans"), the Company
shall pay the Executive monthly beginning at the date that payments
commence under the Retirement Plan an amount equal to the excess of (i)
over (ii) below where
(i) equals the sum of the aggregate monthly amounts
of pension payments (determined as a straight life annuity) to
which the Executive would have been entitled under the terms
of each of the Pension Plans in which he was an active
participant (without regard to any amendment made subsequent
to the date hereof which adversely affects in any manner the
computation of the Executive's benefits) determined as if he
were fully vested thereunder and had accumulated three
additional years (or, if less, the number of years (and
fraction thereof) from the Termination Date to the Executive's
Normal Retirement Date) of Service thereunder (subsequent to
his Termination Date) at his rate of Actual Earnings in effect
on the date hereof plus any increases subsequent thereto,
and where
(ii) equals the sum of the aggregate monthly amounts
of pension payments (determined as a straight life annuity) to
which the Executive is entitled under the terms of each of the
Pension Plans in which he was an active participant at the
date hereof or subsequently.
For purposes of clause (i), the amounts payable pursuant to Sections
2(b)(ii)(A)(1) and (2) and (2)(b)(ii)(B) shall be considered as part of
the Executive's Actual Earnings and such amounts shall be deemed to
represent three years (or, if less, the number of years (and fraction
thereof) from the Termination Date to the Executive's Normal Retirement
Date) of Actual Earnings for purposes of determining his highest
consecutive five year average rate of Actual Earnings. The supplemental
pension benefits determined under this Section 2(d) shall be payable by
the Company to the Executive and his contingent annuitant, if any, or
to the Executive's Surviving Spouse as a spouse's benefit if the
Executive dies prior to commencement of benefits under this Agreement,
in the same manner and for the same period as his pension benefits
under the Supplemental Plan and shall be adjusted actuarially to
reflect payment in a form other than a straight life annuity. Benefits
hereunder which commence prior to age 60 shall be actuarially reduced
to reflect early commencement to the extent, if any, provided in the
Retirement Plan as if the Executive's Termination Date were an Early
Retirement Date. All capitalized terms used in this Section 2(d) shall
have the same meaning as in the Retirement Plan as in effect on the
date hereof, unless otherwise defined herein or otherwise required by
the context."
4. Section 2(j) of the Agreement is hereby amended in its
entirety as follows:
"(j) Notwithstanding any other provision of this Agreement,
(a) any amount otherwise payable to the Executive pursuant to the
agreement dated October 27, 1987 between the Company and the Executive,
as amended, shall be reduced by the amount of any payments made by the
Company to the Executive under this Section 2, (b) any amount otherwise
payable to the Executive pursuant to the agreement effective as of
January 1, 1995 between the Company and the Executive providing for
additional retirement benefits in the event of termination of the
Executive's employment under certain circumstances shall be reduced by
the amount of any payments made by the Company to the Executive under
Section 2(d) of this Agreement, and (c) any benefits to which the
Executive is entitled under the Company's severance pay program
covering salaried employees generally shall be reduced by benefits paid
under Section 2(b)(ii) of this Agreement."
IN WITNESS WHEREOF, the Company has caused this Amendment to
Severance Agreement to be signed by its officer thereunto duly authorized and
its seal to be hereunto affixed and attested and the Executive has hereunto set
his hand as of the 28th day of November, 1994.
AMERICAN BRANDS, INC.
By Steven C. Mendenhall
--------------------
(Corporate Seal) Steven C. Mendenhall
Vice President and
ATTEST: Chief Administrative
Officer
Louis F. Fernous, Jr.
---------------------
Secretary
Thomas C. Hays
--------------
Thomas C. Hays
Subscribed and sworn to before me, a Notary Public in and for the County of
Fairfield and the State of Connecticut, this 27th day of December 1994.
Gail D. Morgan
--------------
Notary Public
NY2:25128.01
EXHIBIT 10t3
AMENDMENT TO SEVERANCE AGREEMENT
This AMENDMENT effective as of January 1, 1995 to the
Severance Agreement (the "Agreement") dated as of March 1, 1988 between AMERICAN
BRANDS, INC., a Delaware corporation (the "Company"), and THOMAS C. HAYS (the
"Executive")
WHEREAS, the Company and the Executive entered into the
Agreement in order to provide severance benefits in the event of termination of
employment of the Executive under certain circumstances; and
WHEREAS, the Company and the Executive desire to amend the
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and to
further assure the retention of the Executive in the employ of the Company after
the date of this Amendment to Severance Agreement, the parties hereto do hereby
agree that Section 2(b)(ii)(A)(3) of the Agreement is hereby amended as follows:
"(3) the greater of the amount that was allocated to the
Executive's account under the Profit-Sharing Plan of American
Brands, Inc. (the "Profit-Sharing Plan"), including the
Company 401(k) matching contribution thereto, the
profit-sharing provisions of the Supplemental Retirement Plan
of American Brands, Inc. (the "Supplemental Plan"), including
the Company matching award related to the supplemental tax
deferred amounts therein, and any other defined contribution
plan of the Company or an affiliate thereof for 1987 and the
amount that would have been required to be so allocated to him
for the year immediately preceding the year in which the
Termination Date occurs, multiplied by . . ."
IN WITNESS WHEREOF, the Company has caused this Amendment to
Severance Agreement to be signed by its officer thereunto duly authorized and
its seal to be hereunto affixed and attested and the Executive has hereunto set
his hand as of the 28th day of November, 1994.
AMERICAN BRANDS, INC.
By Steven C. Mendenhall
--------------------
(Corporate Seal) Steven C. Mendenhall
Vice President and Chief
Administrative Officer
ATTEST:
Louis F. Fernous
----------------
Secretary Thomas C. Hays
--------------
THOMAS C. HAYS
Subscribed and sworn to before me, a Notary Public in and for the County of
Fairfield and State of Connecticut, this 27th day of December 1994.
Gail D. Morgan
--------------
Notary Public
NY2:32718.02
EXHIBIT 10u3
AMENDMENT TO SEVERANCE AGREEMENT
This AMENDMENT effective as of January 1, 1995 to the
Severance Agreement (the "Agreement") dated as of January 2, 1991 between
AMERICAN BRANDS, INC., a Delaware corporation (the "Company"), and GILBERT L.
KLEMANN, II (the "Executive")
WHEREAS, the Company and the Executive entered into the
Agreement in order to provide severance benefits in the event of termination of
employment of the Executive under certain circumstances; and
WHEREAS, the Company and the Executive desire to amend the
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and to
further assure the retention of the Executive in the employ of the Company after
the date of this Amendment to Severance Agreement, the parties hereto do hereby
agree that Section 2(b)(ii)(A)(3) of the Agreement is hereby amended as follows:
"(3) the greater of the amount that was allocated to the
Executive's account under the Profit-Sharing Plan of American
Brands, Inc. (the "Profit-Sharing Plan"), including the
Company 401(k) matching contribution thereto, the
profit-sharing provisions of the Supplemental Retirement Plan
of American Brands, Inc. (the "Supplemental Plan"), including
the Company matching award related to the supplemental tax
deferred amounts therein, and any other defined contribution
plan of the Company or an affiliate thereof for 1991 and the
amount that would have been required to be so allocated to him
for the year immediately preceding the year in which the
Termination Date occurs, multiplied by . . ."
IN WITNESS WHEREOF, the Company has caused this Amendment to
Severance Agreement to be signed by its officer thereunto duly authorized and
its seal to be hereunto affixed and attested and the Executive has hereunto set
his hand as of the 28th day of November, 1994.
AMERICAN BRANDS, INC.
By Steven C. Mendenhall
--------------------
(Corporate Seal) Steven C. Mendenhall
Vice President and Chief
ATTEST: Administrative Officer
Louis F. Fernous, Jr.
---------------------
Secretary
Gilbert L. Klemann, II
----------------------
GILBERT L. KLEMANN, II
NY2:32620.02
EXHIBIT 10u4
Schedule identifying substantially identical agreements,
among American Brands, Inc. ("American") and each of the
following persons, to the Agreement and the Amendments
thereto constituting Exhibits 10ul, 10u2 and 10u3,
respectively, to the Annual Report on Form 10-K of
American for the Fiscal Year ended December 31, 1994
--------------------------------------------------------
Name
----
John T. Ludes
Robert L. Plancher
Robert J. Rukeyser
Steven C. Mendenhall
Dudley L. Bauerlein, Jr.
EXHIBIT 10v2
AMENDMENT TO SEVERANCE AGREEMENT
This AMENDMENT effective as of January 1, 1995 to the
Severance Agreement (the "Agreement") dated as of March 7, 1988 between AMERICAN
BRANDS, INC., a Delaware corporation (the "Company"), and RANDALL W. LARRIMORE
(the "Executive")
WHEREAS, the Company and the Executive entered into the
Agreement in order to provide severance benefits in the event of termination of
employment of the Executive under certain circumstances; and
WHEREAS, the Company and the Executive desire to amend the
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the premises and to
further assure the retention of the Executive in the employ of the Company after
the date of this Amendment to Severance Agreement, the parties hereto do hereby
agree that Section 2(b)(ii)(A)(3) of the Agreement is hereby amended as follows:
"(3) the greater of the amount that was allocated to the
Executive's account under the Profit-Sharing Plan of American
Brands, Inc. (the "Profit-Sharing Plan"), including the
Company 401(k) matching contribution thereto, the
profit-sharing provisions of the Supplemental Retirement Plan
of American Brands, Inc. (the "Supplemental Plan"), including
the Company matching award related to the supplemental tax
deferred amounts therein, and any other defined contribution
plan of the Company or an affiliate thereof for 1988 and the
amount that would have been required to be so allocated to him
for the year immediately preceding the year in which the
Termination Date occurs, multiplied by . . ."
IN WITNESS WHEREOF, the Company has caused this Amendment to
Severance Agreement to be signed by its officer thereunto duly authorized and
its seal to be hereunto affixed and attested and the Executive has hereunto set
his hand as of the 28th day of November, 1994.
AMERICAN BRANDS, INC.
By Steven C. Mendenhall
--------------------
(Corporate Seal) Steven C. Mendenhall
Vice President and Chief
ATTEST: Administrative Officer
Louis F. Fernous, Jr.
---------------------
Secretary
Randall W. Larrimore
--------------------
RANDALL W. LARRIMORE
NY2:32355.02
EXHIBIT 10w1
SEVERANCE AGREEMENT
AGREEMENT dated as of February 24, 1995 between AMERICAN
BRANDS, INC., a Delaware corporation (the "Company"), and CHARLES H. McGILL (the
"Executive"),
W I T N E S S E T H :
WHEREAS, the Company has offered full-time employment to the
Executive and the Executive desires to accept such offer, but to be provided
with the assurance of receiving certain severance benefits in the event the
Company were to take certain actions resulting in the termination of his
employment; and
WHEREAS, the Company desires to induce the Executive to join
its full-time employ by providing him with the assurance of receiving certain
severance benefits; and
WHEREAS, the Company and the Executive desire to enter into
this Agreement to set forth the terms and conditions of such severance benefits;
NOW, THEREFORE, in consideration of the premises and of the
mutual agreements hereinafter contained, the parties do hereby agree as follows:
1. Termination of Employment.
(a) Entitlement to Benefits. If and only if during the term of
this Agreement the Executive's employment with the Company is terminated by the
Company other than for Disability or Cause (each as defined in this Section l),
the Executive shall be entitled to benefits as provided in Section 2. The
Executive shall not be entitled to any benefits hereunder in the event his
employment with the Company is terminated as a result of his death, by the
Company for Disability or Cause or by the Executive for any reason.
(b) Disability. Termination of employment by the Company for
Disability hereunder shall be deemed to have occurred only if, as a result of
the Executive's incapacity due to physical or mental illness, the Executive
shall have been absent from his duties with the Company on a full-time basis for
180 consecutive days and, within 30 days after Notice of Termination (as defined
in Section 1(d)) is given to the Executive by the Company, the Executive shall
not have returned to the full-time performance of his duties.
(c) Cause. Termination of employment by the Company for Cause
shall be deemed to have occurred only if (i) termination shall have been the
result of (A) an act or acts of dishonesty on the Executive's part constituting
a felony and intended to result directly or indirectly in substantial gain or
personal enrichment to him at the expense of the Company, or (B) the Executive's
willful and continued failure substantially to perform his duties and
responsibilities as an officer of the Company (other than any such failure
resulting from his incapacity due to physical or mental illness) after a demand
for substantial performance is delivered to the Executive by the Board of
Directors of the Company which specifically identifies the manner in which such
Board believes that the Executive has not substantially performed his duties and
the Executive is given a reasonable time after such demand substantially to
perform his duties, and (ii) there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the members of the Board of Directors of the Company at a
meeting thereof called and held for the purpose (after reasonable notice to the
Executive and an opportunity for him, together with his counsel, to be heard
before such Board), finding that in the good faith opinion of the Board of
Directors of the Company the Executive was guilty of conduct set forth above in
clause (i)(A) or (i)(B) of this Section 1(c) and specifying the particulars
thereof in detail. The Executive's employment shall in no event be considered to
have been terminated by the Company for Cause if the act or failure to act upon
which such termination is based (x) was done or omitted to be done (l) as a
result of bad judgment or negligence on his part, or (2) without intent of
gaining therefrom directly or indirectly a profit to which the Executive was not
legally entitled or (3) as a result of his good faith belief that such act or
failure to act was in or was not opposed to the interests of the Company, or (y)
is an act or failure to act in respect of which the Executive meets the
applicable standard of conduct prescribed for indemnification or reimbursement
or payment of expenses under the By-laws of the Company or the laws of the state
of its incorporation or the directors' and officers' liability insurance of the
Company, in each case as in effect at the time of such act or failure to act.
(d) Notice of Termination. Any termination by the Company for
Disability or Cause shall be communicated by Notice of Termination to the
Executive. For purposes of this Agreement, a "Notice of Termination" shall mean
a notice in writing which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated.
(e) Termination Date. As used herein, "Termination Date" shall
mean (i) if employment is terminated by the Company for Disability, 30 days
after Notice of Termination is given (provided that the Executive shall not have
returned to the performance of his duties on a full-time basis during such
30-day period), (ii) if employment is terminated by the Company for Cause, the
date on which a Notice of Termination is given and (iii) if employment is
terminated for any other reason, the date on which the Executive ceases to
perform his duties as an officer of the Company; provided, however, that, in the
case of any termination by the Company, if within 30 days after any required
Notice of Termination is given the Executive, the Executive notifies the Company
that a dispute exists concerning the termination, the Termination Date shall be
the date on which the dispute is finally determined, either by written agreement
of the parties or by a final judgment, order or decree of court of competent
jurisdiction (the time for appeal therefrom having expired and no appeal having
been perfected); provided further, however, that if the dispute is resolved in
favor of the Company, the Termination Date shall not be so extended but shall be
the date determined under clauses (i) and (ii) of this Section 1(e).
2. Compensation Upon Termination.
(a) If the Executive's employment is terminated by the Company
for Disability or Cause or by the Executive for any reason, the Company shall
have no obligation to pay any compensation to the Executive under this Agreement
in respect of periods beginning on and after the Termination Date, but this
Agreement shall have no effect on any other obligation the Company may have to
pay the Executive compensation to which he may otherwise be entitled.
(b) If the Company shall terminate the Executive's employment
other than for Disability or Cause, then the Company shall pay to the Executive
as severance pay in a lump sum on the fifth day following the Termination Date
the following amounts:
(i) his full base salary through the Termination Date at the
rate in effect on the date hereof plus any increases therein subsequent
thereto;
(ii) in lieu of any further salary payments, incentive
compensation awards or profit-sharing plan allocations to the Executive
for periods subsequent to the Termination Date, an amount equal to the
product of (A) the sum of (1) his annual base salary at the rate in
effect on the date hereof plus any increases therein subsequent
thereto, plus (2) the greater of $150,000 and the amount awarded to him
under Article XII of the By-laws of the Company and any other plans or
any arrangements of the Company and its affiliates (the "Incentive
Compensation Plans") for the calendar year immediately preceding the
year in which the Termination Date occurs (whether or not fully paid),
but (if the Termination Date occurs in 1996 or a later year) not less
than the amount the Executive would have received if the Executive had
received the same percentage of the total amount available for
allotment as he receives for 1995, plus (3) the greater of the amount
that was allocated to the Executive's account under the Profit-Sharing
Plan of American Brands, Inc. (the "Profit-Sharing Plan"), including
the Company 401(k) matching contribution thereto, the profit-sharing
provisions of the Supplemental Retirement Plan of American Brands, Inc.
(the "Supplemental Plan"), including the Company matching award related
to the supplemental tax deferred amounts therein, and any other defined
contribution plan of the Company or an affiliate thereof for 1995 and
the amount that would have been required to be so allocated to him for
the year immediately preceding the year in which the Termination Date
occurs, multiplied by (B) the lesser of the number one and the fraction
of a year from the Termination Date to the Executive's Normal
Retirement Date (as defined in the Retirement Plan for Employees and
Former Employees of American Brands, Inc. (the "Retirement Plan")); and
(iii) all legal fees and expenses incurred by the Executive as
a result of such termination (including, but not limited to, all such
fees and expenses, if any, incurred in contesting or disputing any such
termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement).
In the event the Termination Date occurs prior to the first full year's
allocation under the Company's Profit-Sharing Plan, the amount in (ii)(A)(3)
above shall be $30,000.
(c) If the Company shall terminate the Executive's employment
other than for Disability or Cause, the Company shall maintain in full force and
effect, for the Executive's continued benefit for a one-year period (or, if
shorter, the period until his Normal Retirement Date) after the Termination
Date, all employee life, health, accident, disability, medical and other
employee welfare benefit plans, programs or arrangements in which he was
participating immediately prior to the date hereof plus all improvements therein
subsequent thereto, provided that his continued participation is possible under
the terms and provisions of such plans, programs and arrangements. In the event
that the Executive's participation in any such plan, program or arrangement is
barred, the Company shall arrange to provide him with benefits substantially
similar to those which he would have been entitled to receive under such plan,
program or arrangement if he had remained a participant for such additional
one-year period (or, if shorter, such additional period until his Normal
Retirement Date) after the Termination Date.
(d) If the Company shall terminate the Executive's employment
other than for Disability or Cause, then in addition to the retirement benefits
to which the Executive is entitled under the Retirement Plan, the Supplemental
Plan and any other defined benefit pension plan maintained by the Company or any
affiliate, and any other program, practice or arrangement of the Company or any
affiliate to provide the Executive with a defined pension benefit after
termination of employment, and any successor plans thereto (all such plans being
collectively referred to herein as the "Pension Plans"), the Company shall pay
the Executive monthly beginning at the earliest date that payments commence
under any of the Pension Plans an amount equal to the excess of (i) over (ii)
below where
(i) equals the sum of the aggregate monthly amounts of
pension payments (determined as a straight life annuity) to which the
Executive would have been entitled under the terms of each of the
Pension Plans in which he was an active participant (without regard to
any amendment made subsequent to the date hereof which adversely
affects in any manner the computation of the Executive's benefits)
determined as if he were fully vested thereunder and had accumulated
one additional year (or, if less, the fraction of a year from the
Termination Date to the Executive's Normal Retirement Date) of Service
thereunder (subsequent to his Termination Date) at his rate of Actual
Earnings in effect on the date hereof plus any increases subsequent
thereto,
and where
(ii) equals the sum of the aggregate monthly amounts of
pension payments (determined as a straight life annuity) to which the
Executive is entitled under the terms of each of the Pension Plans in
which he was an active participant at the date hereof or subsequently.
For purposes of clause (i), the amounts payable pursuant to Sections
2(b)(ii)(A)(l) and (2) and (2)(b)(ii)(B) shall be considered as part of the
Executive's Actual Earnings and such amounts shall be deemed to represent one
year (or, if less, the fraction of a year from the Termination Date to the
Executive's Normal Retirement Date) of Actual Earnings for purposes of
determining his highest consecutive five year average rate of Actual Earnings.
The supplemental pension benefits determined under this Section 2(d) shall be
payable by the Company to the Executive and his contingent annuitant, if any, or
to the Executive's surviving spouse as a spouse's benefit if the Executive dies
prior to commencement of benefits under this Agreement, in the same manner and
for as long as his pension benefits under the Supplemental Plan and shall be
adjusted actuarially to reflect payment in a form other than a straight life
annuity. Benefits hereunder which commence prior to age 60 shall be actuarially
reduced to reflect early commencement to the extent, if any, provided in the
Retirement Plan as if the Executive's Termination Date were an Early Retirement
Date. All capitalized terms used in this Section 2(d) shall have the same
meaning as in the Retirement Plan as in effect on the date hereof, unless
otherwise defined herein or otherwise required by the context.
(e) If the Company shall terminate the Executive's employment
other than for Disability or Cause, the Company shall pay to the Executive as
additional severance pay in a lump sum on the fifth day following the
Termination Date an amount, if any, equal to the nonvested portion of his
account balances under the Profit-Sharing Plan and the defined contribution plan
of any affiliate of the Company in which there is maintained for him an account
balance which is not fully vested.
(f) If the Company shall terminate the Executive's employment
other than for Disability or Cause, the Executive shall be entitled to the
following as incentive compensation through the Termination Date:
(i) the unpaid portion of the amount awarded to him as
incentive compensation under the Incentive Compensation Plans for the
calendar year immediately preceding the year in which the Termination
Date occurs, payable at the time awards thereunder are normally paid;
and
(ii) incentive compensation under the Incentive Compensation
Plans for the calendar year in which the Termination Date occurs,
payable at the time awards thereunder are normally paid, in an amount
equal to the amount the Executive would have received thereunder for
such period if he had been allocated a percentage of the total amount
available for allotment equal to the same percentage of the total
amount available for allotment as he is allocated for 1995 or, if
higher, the percentage for the calendar year immediately preceding the
year in which the Termination Date occurs (provided that such incentive
compensation shall be $150,000 if the Termination Date occurs in 1995),
with such incentive compensation amount prorated for the portion of the
year through the Termination Date.
(g) If the Company shall terminate the Executive's employment
other than for Disability or Cause and a dispute exists concerning the
termination as set forth in Section 1(e), the Company shall continue to pay the
Executive's full base salary through the date the dispute is finally resolved as
provided in Section 1(e).
(h) The Executive shall not be required to mitigate the amount
of any payment provided for in this Section 2 by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this Section 2 be
reduced by any compensation earned by the Executive as the result of employment
by another employer after the Termination Date or by any other compensation.
(i) Subject to Section 2(j), this Agreement and the
obligations of the Company hereunder shall not be in derogation of any other
obligations of the Company not set forth herein to pay any compensation or to
pay or provide any benefit to the Executive.
(j) Notwithstanding any other provision of this Agreement, (a)
any amount otherwise payable to the Executive pursuant to the agreement dated as
of February 24, 1995 between the Company and the Executive providing
compensation after termination of employment following a change in control of
the Company shall be reduced by the amount of any payments made by the Company
to the Executive under this Section 2, and (b) any benefits to which the
Executive is entitled under the Company's severance pay program covering
salaried employees generally shall be reduced by benefits paid under Section
2(b)(ii) of this Agreement.
3. Successors; Binding Agreement.
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, and any parent
company thereof, by agreement or agreements in form and substance satisfactory
to the Executive, expressly to assume and agree to perform this Agreement, and
in the case of any such parent company expressly to guarantee and agree to cause
the performance of this Agreement, in the same manner and to the same extent as
the Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the Company as defined in
the first sentence of this Agreement and any successor to all or substantially
all its business or assets or which otherwise becomes bound by all the terms and
provisions of this Agreement, whether by the terms hereof, by operation of law
or otherwise.
(b) This Agreement is personal to the Executive and without
the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive and
his personal or legal representatives and successors in interest under this
Agreement.
4. Term. This Agreement shall continue in full force and
effect until the third anniversary of the date that notice of termination of
this Agreement is given by the Company to the Executive or by the Executive to
the Company.
5. Notice. Any notice, demand or other communication required
or permitted under this Agreement shall be effective only if it is in writing
and delivered personally or sent by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Company:
American Brands, Inc.
1700 East Putnam Avenue
Old Greenwich, Connecticut 06870
Attention: Secretary
If to the Executive:
Charles H. McGill
580 Park Avenue, Apt. 2C
New York, New York 10021
or to such other address as either party may designate by notice to the other
and shall be deemed to have been given as of the date so personally delivered or
mailed.
6. Miscellaneous. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware. This Agreement
cannot be modified or any term or condition waived in whole or in part except by
a writing signed by the party against whom enforcement of the modification or
waiver is sought. No waiver by either party hereto at any time of any breach by
the other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. The headings in this Agreement are included for convenience of
reference only and shall not in any way affect the meaning or interpretation of
this Agreement.
7. Separability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
8. Counterparts. This Agreement may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original,
and such counterparts will together constitute but one Agreement.
9. Withholding of Taxes. The Company may withhold from any
benefits payable under this Agreement all federal, state, city or other taxes as
shall be required pursuant to any law or governmental regulation or ruling.
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its officer thereunto duly authorized and its seal to be hereunto
affixed and attested and the Executive has hereunto set his hand as of the date
first above written.
[Seal] AMERICAN BRANDS, INC.
By Steven C. Mendenhall
-----------------------
Senior Vice President and
Chief Administrative
Officer
Charles H. McGill
-----------------
Charles H. McGill
[NY1: 35154.01]
EXHIBIT 11
AMERICAN BRANDS, INC.
Statement setting forth net income for computation of earnings per
Common share - primary and fully diluted:
Years Ended December 31,
--------------------------
1994 1993 1992
---- ---- ----
(Restated)(Restated)
(In millions)
Income from continuing operations
before cumulative effect of
accounting changes $885.1 $541.2 $786.9
Preferred stock dividend requirements 1.4 1.6 9.1
------ ------ ------
Income from continuing operations
before cumulative effect of
accounting changes for
computing earnings per
Common share - Primary 883.7 539.6 777.8
(Loss) income from discontinued operations (151.0) 127.0 96.9
Cumulative effect of accounting changes - (198.4) -
------ ------ ------
Net income for computing earnings per
Common share - Primary 732.7 468.2 874.7
Interest expense and related charges on
Convertible debentures, net of income
taxes 21.5 21.3 22.1
Convertible Preferred stock dividend
requirements 1.4 1.6 1.8
------ ------ ------
Net Income for computing earnings per
Common share - Fully diluted $755.6 $491.1 $898.6
====== ====== ======
<PAGE>
Statement setting forth computation of weighted average number of Common
shares outstanding on a fully diluted basis:
Years Ended December 31,
--------------------------
1994 1993 1992
---- ---- ----
(Restated)(Restated)
(In millions, except
per share amounts)
Weighted average number of Common shares
outstanding during each year - Primary 201.6 201.8 204.0
Addition from assumed conversion as of
the beginning of each year of the
Convertible Preferred stock outstanding
at the end of each year 2.1 2.3 2.5
Addition from assumed conversion of
Convertible debentures 9.3 9.3 9.4
Other additions 0.7 0.3 1.5
----- ----- -----
Weighted average number of Common shares
outstanding during each year on a
Fully diluted basis 213.7 213.7 217.4
===== ===== =====
EARNINGS PER COMMON SHARE
Primary
Income from continuing operations $4.38 $2.67 $3.81
(Loss) income from discontinued
operations (.75) .63 .48
Cumulative effect of accounting
changes - (.98) -
----- ----- -----
Net income $3.63 $2.32 $4.29
----- ----- -----
Fully diluted
Income from continuing operations $4.24 $2.63 $3.69
(Loss) income from discontinued
operations (.71) .60 .44
Cumulative effect of accounting
changes - (.94) -
----- ----- -----
Net income $3.53 $2.29 $4.13
===== ===== =====
-2-
EXHIBIT 12
AMERICAN BRANDS, INC.
Statement Re Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in millions)
Years Ended December 31,
--------------------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
(Restated) (Restated)(Restated)(Restated)
Continuing Operations
---------------------
Earnings Available:
Income before provision
for taxes on income
and minority interest $ 923.5 $1,107.0 $1,255.1 $ 878.9 $1,354.0
Less: Excess of earnings
over dividends of
less than fifty
percent owned
companies 0.1 0.1 0.3 0.8 0.4
Capitalized interest 1.5 1.0 1.0 2.5 1.4
-------- -------- -------- -------- --------
921.9 1,105.9 1,253.8 875.6 1,352.2
-------- -------- -------- -------- --------
Fixed Charges:
Interest expense (including
capitalized interest) and
amortization of debt
discount and expenses 290.2 276.6 283.4 258.7 224.9
Portion of rentals represent-
ative of an interest
factor 27.4 30.4 32.3 29.8 27.1
-------- -------- -------- -------- --------
Total Fixed Charges 317.6 307.0 315.7 288.5 252.0
-------- -------- -------- -------- --------
Total Earnings Available $1,239.5 $1,412.9 $1,569.5 $1,164.1 $1,604.2
======== ======== ======== ======== ========
Ratio of Earnings to Fixed
Charges 3.90 4.60 4.97 4.04 6.37
======== ======== ======== ======== ========
<PAGE>
EXHIBIT 13
FINANCIAL SECTION
American Brands, Inc. and Subsidiaries
CONTENTS
Results of Operations 16
Financial Condition 23
Consolidated Balance Sheet 26
Consolidated Statement of Income 28
Consolidated Statement of Cash Flows 29
Consolidated Statement of
Common Stockholders' Equity 30
Notes to Consolidated Financial Statements 31
Report of Independent Accountants 43
Report of Management 43
Eleven-Year Consolidated Selected Financial Data 44
Information on Business Segments 46
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Net Sales Operating Income
----------------------------------- --------------------------------
$(In millions) 1994 1993(1) 1992(1) 1994 1993(1) 1992(1)
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
International tobacco $ 6,168.9 $ 5,940.0 $ 6,376.6 $ 517.2 $ 486.5 $ 554.4
Distilled spirits 1,268.2 1,194.6 1,268.3 221.2 214.7 195.8
Hardware and home
improvement products 1,270.6 1,119.5 1,014.8 176.5 155.5 159.0
Office products 1,049.7 977.2 1,003.5 74.5 63.2 58.1
Golf and leisure products 507.1 452.7 416.2 73.3 63.6 53.3
Other businesses(2) 1,287.3 1,445.0 1,798.4 2.1 27.9 33.0
--------------------------------------------------------------------------------------------------
Ongoing operations 11,551.8 11,129.0 11,877.8 1,064.8 1,011.4 1,053.6
Domestic tobacco(2) 1,594.7 1,501.5 1,780.3 247.6 169.2 536.1
--------------------------------------------------------------------------------------------------
Total $13,146.5 $12,630.5 $13,658.1 $1,312.4 $1,180.6 $1,589.7
--------------------------------------------------------------------------------------------------
<FN>
(1) Restated for discontinued life insurance operations. See page 33 for Discontinued Operations.
(2) See page 32 for Dispositions.
</TABLE>
16
<PAGE>
CONSOLIDATED
1994 COMPARED TO 1993
Net sales and operating income from ongoing operations (which excludes
domestic tobacco and life insurance) increased 4% and 5%, respectively.
Translation of foreign currencies at higher average exchange rates favorably
affected net sales and operating income by $186 million and $19.1 million,
respectively. Excluding the effect of foreign exchange, net sales from ongoing
operations were up 2% on price increases (including international tobacco
excise tax increases), new products and inclusion of Invergordon for a full
year, partly offset by an unfavorable product mix in international tobacco, and
the sale of optical goods and services in July 1994. Operating income from
ongoing operations, excluding the effect of foreign exchange and restructuring
charges in 1993, was up 1% as increases in all five major business segments
were offset by a decline in "other businesses", principally reflecting the sale
of optical.
Consolidated net sales and operating income from continuing operations (which
includes domestic tobacco) rose 4% and 11%, respectively.
The net gain on disposal of businesses reflected a $577.9 million pretax gain
on the sale of domestic tobacco, partly offset by a $245 million non-cash
pretax loss on the expected sale of a number of nonstrategic businesses and
product lines, including U.K.-based Prestige and Forbuoys. The loss is based on
the anticipated sale of these operations for proceeds in the range of $150-$175
million. The operations to be disposed of had net sales of $752 million and a
small operating loss in 1994.
Interest and related expenses decreased $15.5 million (7%) on lower average
borrowings.
The effective income tax rate of 34.5% decreased from 38.2% last year,
principally as a result of a low effective rate on this year's disposal of
businesses and the proportionately lower impact of nondeductible goodwill on
higher income, partly offset by this year's lower reversal of tax provisions no
longer required.
Earnings per Common share from continuing operations of $4.38, compared with
$2.67 last year, was up $1.71, or 64%, reflecting a $1.32 net gain on the
disposal of businesses.
The loss from discontinued operations in 1994 of $151 million, or 75 cents
per share, compared with income from discontinued operations in 1993 of $127
million, or 63 cents per share.
Net income of $734.1 million, or $3.63 per share, compared with $469.8
million, or $2.32 per share in 1993, which reflected a non-cash charge of $198.4
million, or 98 cents per share, due to adoption of FAS Statements No. 106, 112
and 115 as described on page 31.
The Company's 1995 goal is for continued profit growth from its operating
companies, although distilled spirits and international tobacco continue to
contend with highly competitive environments. Reported income from continuing
operations in 1995 will be negatively affected, when compared to 1994, by the
absence of the results of domestic tobacco and the net gain on disposal of
businesses, partly offset by lower interest expense based on existing lower
levels of borrowings. In connection with the sale of American Tobacco and
Franklin, the Board of Directors authorized the purchase of up to 20 million
shares of the Company's Common stock in the open market and in privately
negotiated transactions from time to time, subject to market conditions.
Earnings per Common share in 1995 will benefit from the Company's purchase of
shares of its Common stock.
The Company derived 45% of its operating income in 1994 from Europe, primarily
the United Kingdom. The proportion of the Company's income derived from foreign
sources in 1995 will increase significantly due to the absence of businesses
sold. As a result, fluctuations in foreign currencies, principally sterling,
will increase the volatility of dollar results in future periods.
The Company currently uses forward foreign exchange contracts solely to offset
the impact of changes in foreign exchange rates on known transactions or
balances denominated in foreign currencies. See pages 24 and 39 for additional
information on Financial Instruments.
For a description of certain pending litigation, see page 42. As stated
therein, it is not possible to predict the outcome of such litigation, but
management believes that there are meritorious defenses to the pending actions
and that the pending actions will not have a material adverse effect upon the
results of operations, cash flow or financial condition of the Company.
17
<PAGE>
Results of Operations (continued)
The Company is involved in proceedings concerning the discharge of materials
into the environment and the handling, disposal and clean-up of waste materials
and otherwise relating to the protection of the environment. As of February 1,
1995 various subsidiaries of the Company had been designated as potentially
responsible parties under "Superfund" or similar state laws with respect to 40
sites. While it is not possible to quantify with certainty the potential impact
of actions regarding environmental matters, particularly remediation and other
compliance efforts that the Company's subsidiaries may undertake in the future,
in the opinion of management compliance with the present environmental
protection laws, before taking into account estimated recoveries from third
parties, will not have a material adverse effect upon the results of
operations, cash flow or financial condition of the Company.
1993 COMPARED TO 1992
Net sales and operating income from ongoing operations declined 6% and 4%,
respectively. Translation of foreign currencies at substantially lower average
exchange rates adversely affected net sales and operating income by $1.4
billion and $100.3 million, respectively. Excluding the effect of foreign
exchange, net sales from ongoing operations would have been up 5% on price
increases (including international tobacco excise tax increases) and new
products. Operating income from ongoing operations, excluding the effect of
foreign exchange and restructuring charges, would have been up 9% on price
increases, partly offset by higher marketing expenses.
Consolidated net sales and operating income from continuing operations (which
includes domestic tobacco) were down 8% and 26%, respectively.
Interest and related expenses decreased $24 million (10%) on lower average
interest and foreign exchange rates.
Earnings per Common share from continuing operations of $2.67 compared with
$3.81 in 1992.
Income from discontinued operations of $127 million, or 63 cents per share
compared with $96.9 million, or 48 cents per share in 1992.
Net income of $469.8 million, or $2.32 per share, which reflected a non-cash
charge of $198.4 million, or 98 cents per share, due to adoption of FAS
Statements No. 106, 112 and 115, compared with $883.8 million, or $4.29 per
share, in 1992.
INTERNATIONAL TOBACCO
1994 COMPARED TO 1993
Net sales in sterling were up slightly on price increases, principally
resulting from higher U.K. tobacco taxes, and a total cigarette volume increase
of 0.6%, largely offset by an unfavorable product mix and a 10.9% total cigar
volume decline. The total cigarette volume increase reflected export volume
gains of 70.3% from a full year's shipments of Benson and Hedges to Europe and
increased shipments to the C.I.S. and a 6.8% Gallaher (Dublin) volume gain. The
increase was largely offset by a 10.4% U.K. cigarette volume decline, primarily
resulting from a change in the timing of the U.K. budget during 1993. This
change resulted in two budget announcements in 1993, one in March and another
in November, the latter drawing significant sales into the fourth quarter of
1993 from the first quarter of 1994. The effects of the U.K. cigarette volume
decline were partly offset by manufacturers' price increases in August 1993 and
April 1994.
Operating income in sterling increased 2%, primarily on price increases and
the favorable comparison to 1993's workforce reduction provisions, partly
offset by an unfavorable product mix and increased marketing costs associated
with export expansion and support for Benson and Hedges Special Filter. On a
comparable basis, excluding 1993 restructuring charges, operating income in
sterling would have decreased 3%. In dollars, net sales and operating income as
reported increased 4% and 6%, respectively, reflecting translation at higher
average exchange rates.
Continuing the trend of tax increases in recent years, the U.K. budget
announcement in November 1994 resulted in a 10 pence increase in the tax on a
typical pack of cigarettes. A supplemental budget announcement in December 1994
resulted in a further increase of 6 pence in the tax on a typical pack of
cigarettes effective January 1, 1995. The U.K. budgets announced in March and
November 1993 and March 1992 resulted in an increase in the tax on a typical
pack of cigarettes of 10 pence, 11 pence and 13 pence, respectively. The
continuing impact of price increases, principally due to substantial excise tax
increases in recent years, has reduced annual industry volumes, led to greater
price competition and accelerated trading down by con-
18
<PAGE>
sumers to lower priced brands. These changes are particularly affecting
Gallaher, the majority of whose sales are in the premium sector.
Despite these factors, Gallaher maintained its position as the number one
tobacco company in the U.K. Its share of consumer sales was 39.7% in 1994, as
compared with 40.6% in 1993. Consumer demand is estimated to have declined
about 3% as compared with 5.5% in 1993. The U.K. cigarette industry volume is
estimated to have declined 3.8%. Gallaher's U.K. cigarette market share was
estimated to be 38.8% for the year, as compared with 41.7% in 1993.
Voluntary agreements with the U.K. government have been entered into that
restrict the marketing of tobacco products, and proposed legislation has been
introduced in the U.K. and the European Community that might further restrict
advertising, labeling, sponsorship and the use of tobacco products in the U.K.
and elsewhere. It is possible that these and other restrictions, as well as any
future tax increases, would have an adverse effect on unit sales and add to
continuing industry declines.
1993 COMPARED TO 1992
Net sales in sterling increased 11% on price increases, which principally
resulted from higher U.K. tobacco taxes, and a 5.4% increase in total cigarette
volume (including exports and line extensions), partly offset by an unfavorable
product mix. U.K. cigarette volume increased 2.3% as compared with an estimated
industry volume increase of 1.9%. Consumer demand is estimated to have declined
in the area of 5.5%. Results benefited from substantial buying by the trade in
anticipation of the November 1993 U.K. budget increase. Gallaher's cigarette
market share in 1993 was 41.7%, as compared with 41.5% in 1992, and its share
of consumer sales increased.
Operating income in sterling increased 4%, resulting from price increases and
the 5.4% total volume increase, partly offset by higher advertising costs
associated with the launch of Benson and Hedges Superkings, and restructuring
charges. On a comparable basis with 1992, excluding restructuring charges,
operating income in sterling would have increased 8%. To control costs,
Gallaher closed a plant and instituted workforce reductions totaling over 16%
of its 1992 employment. Translated at substantially lower average exchange
rates, net sales and operating income in dollars declined 7% and 12%,
respectively.
DISTILLED SPIRITS
1994 COMPARED TO 1993
Worldwide net sales and operating income increased 6% and 3%, respectively.
Beam's net sales were down 3%, principally on lower domestic volume. Estimated
depletions of Beam's major brands from distributors to retailers declined 3% in
the U.S., in line with industry trends. Beam's international net sales
increased 25%. Total branded case sales were down 2.4% reflecting a 5.7%
decline in domestic branded case sales tempered by a 14.8% increase in
international branded case sales. Operating income increased 2% as a result of
lower media advertising and increased international shipments at higher
margins, largely offset by reduced domestic volume and margins and higher
international selling costs related to market development.
U.S. distilled spirits consumption continued its long-term decline. With
continuing heavy price competition and consumer rebates, margins may be under
further pressure as the intensifying competitive situation may continue to
limit future price increases.
Whyte & Mackay's net sales in sterling increased 38% on a total unit volume
increase of 151.8% due to the inclusion of Invergordon, consolidated beginning
December 1, 1993, and one-time bulk sales in 1994. Operating income in sterling
increased 9% on inclusion of Invergordon for a full year and benefits from
one-time bulk sales and other nonrecurring items in 1994, partly offset by
widespread and intense competitive activity, primarily in Whyte & Mackay's U.K.
branded business. Operating income in 1993 benefited from the application of
the equity method to prior periods for Invergordon. The intense price
competition in Whyte & Mackay's U.K. branded business is expected to continue
in 1995.
The supplemental 1994 U.K. budget resulted in a 26 pence tax increase on a
typical bottle effective January 1, 1995. The 1993 U.K. budgets did not result
in a tax increase on distilled spirits as compared with a 31 pence tax
increase
19
<PAGE>
Results of Operations (continued)
on a typical bottle announced in March 1992. It is possible that these and any
future U.K. and U.S. tax increases, as well as any restrictions on advertising,
would have an adverse effect on unit sales and add to continuing industry
declines.
1993 COMPARED TO 1992
Net sales decreased 6% while record operating income in 1993 rose 10%.
Beam's net sales were down 5% on lower domestic volume, principally reflecting
competitive pricing pressures, the effect of lower foreign exchange rates and a
domestic bulk sale in 1992. Worldwide branded case sales were down 1.7% due to
a domestic decline of 4.6%. Record operating income was up slightly on the
timing of operating expenses and higher margins, partly offset by higher
international selling costs.
Whyte & Mackay's net sales in sterling were up 6% on inclusion of Invergordon
for one month and higher volume, mainly in export markets, partly offset by a
significant level of bulk sales in 1992. Excluding Invergordon, worldwide case
sales were up 10.4% and U.K. case sales were up 6.5%. Translated at
substantially lower average foreign exchange rates, net sales were down 9% in
dollars. Operating income in sterling and dollars was up with continuing profit
improvement from higher margins, despite the lingering effects of the U.K.
recession and competitive pricing pressures, partly offset by higher general
and administrative expenses. Operating income included a $6.7 million benefit
resulting from the application of the equity method to prior periods for
Invergordon.
HARDWARE AND HOME IMPROVEMENT PRODUCTS
1994 COMPARED TO 1993
Record net sales increased 13% on new products and line extensions, price
increases and volume gains. All four companies in the group achieved record net
sales. Moen was up on new products, volume gains and price increases;
Aristokraft was up on line extensions and price increases; Master Lock was up
on higher volume, new products and line extensions; and Waterloo was up
principally on new products. Record operating income was up 14% with
increases in each company. The increase reflected net sales gains, partly
offset by higher raw material costs at Aristokraft and higher marketing and
other operating expenses at Moen.
1993 COMPARED TO 1992
Net sales were up 10%, reaching record levels in all companies, on new
products, price increases and volume gains. Operating income was down 2%.
Excluding a one-time gain from a change in an employee benefit program in 1992,
operating income would have been up 2%, reflecting price and volume gains,
partly offset by higher manufacturing costs associated with the introduction of
several new faucet lines, unfavorable product mix and higher marketing and
administrative expenses.
OFFICE PRODUCTS
1994 COMPARED TO 1993
Record net sales increased 7% on new products and volume gains despite
continuing pricing pressures. ACCO continued to increase penetration in the
fastest growing distribution channels. Operating income increased 18% on the
record net sales and improved margins, partly offset by increased operating
expenses. The net sales and operating income increases reflected improvements
in both domestic and international businesses.
1993 COMPARED TO 1992
Net sales declined 3% reflecting the absence of two nonstrategic businesses
sold in 1992 and substantially lower average foreign exchange rates. Excluding
these items, net sales would have been up 8%. Net sales benefited from new
products and volume gains resulting in an increase in market share,
particularly in the faster growing channels of distribution, despite continuing
pricing pressures. Operating income was up 9%, principally reflecting volume
gains and the benefits of ongoing cost reductions, partly offset by translation
at substantially lower average foreign exchange rates and the continuing
effects of pricing pressures. On a comparable basis, principally excluding the
effects of the two businesses sold and the lower average foreign exchange
rates, operating income would have been up 24%.
20
<PAGE>
GOLF AND LEISURE PRODUCTS
1994 COMPARED TO 1993
Record net sales and operating income were up 12% and 15%, respectively. The
increases primarily resulted from new golf balls and golf shoes and strong
volume gains in all lines. Operating income was also impacted by increased
marketing and other operating expenses.
1993 COMPARED TO 1992
Record net sales were up 9% on new products, volume gains and price increases,
partly offset by unfavorable exchange rates. Record operating income increased
19% on record net sales, partly offset by higher advertising costs to meet
competitive activity.
OTHER BUSINESSES
1994 COMPARED TO 1993
Net sales declined $157.7 million (11%) and operating income decreased $25.8
million (92%). Excluding optical goods and services and Acushnet's rubber
division, both sold in 1994, net sales of $1,026.7 million increased $2.9
million, and an operating loss of $5.2 million compared with operating income
of $1.2 million in 1993. The unfavorable change in operating income reflected
volume declines in retail distribution.
Other businesses principally includes a number of nonstrategic businesses
which are expected to be sold in 1995, including U.K.-based Prestige and
Forbuoys.
1993 COMPARED TO 1992
Net sales declined $353.4 million (20%) and operating income decreased $5.1
million (15%). In sterling, net sales from foreign businesses declined 5%
primarily on retail distribution's volume declines and fewer outlets, partly
offset by price increases. In sterling, operating income from foreign
businesses increased 9%, principally due to optical. Retail distribution
declined 29% in sterling on volume decreases and higher selling and other
expenses. In dollars, net sales and operating income from foreign businesses
declined 19% and 5%, respectively, due to translation at substantially lower
average foreign exchange rates.
DOMESTIC TOBACCO
1994 COMPARED TO 1993
Domestic tobacco represents the results of operations of The American Tobacco
Company and its subsidiaries, sold on December 22, 1994. Net sales increased 6%
reflecting increased volume and favorable comparison with a $29.9 million trade
inventory buydown charge in 1993, partly offset by the effects of the August
1993 list price reductions. Operating income increased 46% as 1994 benefited
from lower expenses reflecting reversals of accruals relating to returned
goods, coupon redemption and other marketing programs and volume gains, partly
offset by lower prices and a less favorable product mix. Operating income in
1993 was adversely affected by restructuring provisions and trade inventory
buydown costs, partly offset by a gain on the assignment of trademarks.
1993 COMPARED TO 1992
Net sales declined 16% on substantial volume declines, price decreases and a
$29.9 million trade inventory buydown, partly offset by new products. The
effects of list price reductions were partly offset by a federal excise tax
increase on January 1, 1993. Operating income declined 68% on volume declines,
lower prices (including buydown costs), a less favorable product mix, higher
promotional expenses to meet intense competitive activity and $44 million in
restructuring provisions (principally for voluntary early retirement programs),
partly offset by a $25.5 million gain on the assignment of trademarks.
21
<PAGE>
Results of Operations (concluded)
DISCONTINUED OPERATIONS
1994 COMPARED TO 1993
Income from discontinued life insurance operations for 1994, excluding the
$206.8 million loss on the disposal, was $55.8 million as compared with $127
million in 1993. The decline reflects an unfavorable $104.7 million pretax
change in investment gains/losses and the unfavorable comparison of eleven
months of operations due to the November 30, 1994 measurement date on the
disposal.
1993 Compared to 1992
Income from discontinued operations of $127 million was up $30.1 million, or
31%, on higher net investment income, principally reflecting the $51.8 million
higher pretax realized investment gains, mainly due to bond redemptions.
QUARTERLY FINANCIAL DATA unaudited
(In millions, except per share amounts)
<TABLE>
<CAPTION>
1994 1st 2nd 3rd 4th
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Continuing operations
Net sales $3,000.9 $3,040.9 $3,354.6 $3,750.1
Gross profit 874.4 910.1 924.1 1,016.0
Operating income 290.9 296.6 310.7 414.2
Income from continuing operations 129.5 151.9 131.8 471.9
Income (loss) from discontinued operations 19.7 12.0 20.1 (202.8)
--------------------------------------------------------------------------------------------
Net income $ 149.2 $ 163.9 $ 151.9 $ 269.1
--------------------------------------------------------------------------------------------
Earnings per Common share
Primary
Continuing operations $.64 $.75 $.65 $2.34
Discontinued operations .10 .06 .10 (1.01)
--------------------------------------------------------------------------------------------
Net income $.74 $.81 $.75 $1.33
--------------------------------------------------------------------------------------------
Fully diluted
Continuing operations $.63 $.74 $.64 $2.23
Discontinued operations .09 .06 .09 (.95)
--------------------------------------------------------------------------------------------
Net income $.72 $.80 $.73 $1.28
--------------------------------------------------------------------------------------------
<CAPTION>
1993 1st 2nd 3rd 4th
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Continuing operations
Net sales $3,495.7 $2,578.7 $3,046.2 $3,509.9
Gross profit 969.2 876.3 819.6 963.9
Operating income 379.7 263.7 203.2 334.0
Income from continuing operations 216.3 119.3 61.7 143.9
Income from discontinued operations 30.8 32.0 23.3 40.9
Accounting changes (201.0) -- -- 2.6
--------------------------------------------------------------------------------------------
Net income $ 46.1 $ 151.3 $ 85.0 $ 187.4
--------------------------------------------------------------------------------------------
Earnings per Common share
Primary
Continuing operations $1.07 $.59 $.30 $.71
Discontinued operations .15 .16 .12 .20
Accounting changes (.99) -- -- .01
--------------------------------------------------------------------------------------------
Net income $.23 $.75 $.42 $.92
--------------------------------------------------------------------------------------------
Fully diluted
Continuing operations $1.04 $.58 $.31 $.70
Discontinued operations .14 .15 .11 .20
Accounting changes (.95) -- -- .01
--------------------------------------------------------------------------------------------
Net income $.23 $.73 $.42 $.91
--------------------------------------------------------------------------------------------
</TABLE>
All previously published quarterly financial data have been restated for
discontinued operations. See page 33 for Discontinued Operations. Income from
continuing operations in the fourth quarter of 1994 includes a net gain of $267
million on the disposal of businesses, or $1.32 and $1.25 per Common share
primary and fully diluted, respectively. See page 32 for Dispositions.
22
<PAGE>
FINANCIAL CONDITION
American Brands, Inc. and Subsidiaries
CASH FLOW
NET CASH PROVIDED FROM CONTINUING OPERATING ACTIVITIES
Net cash provided from continuing operating activities during 1994 of $996.4
million, as compared with $668.3 million in 1993, exceeded the funds required
for capital expenditures and dividends by $391.9 million. The increase was
principally attributable to international tobacco. Fluctuations in accounts
receivable, inventories and accrued taxes were the result of changes in the
timing of the 1993 U.K. budgets and the supplemental budget announcement on
December 8, 1994.
Net cash provided included American Tobacco's cash flows of $150 million,
$234.7 million and $284.5 million for 1994, 1993 and 1992, respectively. The
absence of American Tobacco's cash flow in 1995 will be partially offset by the
use of the proceeds from its sale.
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES
Net cash provided by investing activities of $921.1 million compared with a
use of $666.3 million in 1993. The increase is principally due to the sale of
American Tobacco and the absence of acquisitions in 1994.
Capital expenditures. Capital spending is focused on the operating companies
becoming the lowest cost producers of the highest quality products. Capital
expenditures for 1994 of $201.4 million decreased 17% compared with 1993
expenditures of $243.4 million, reflecting a reduction in expenditures in
hardware and home improvement, domestic tobacco, international tobacco and
other businesses, as shown on page 42. Funds for 1995 capital expenditures,
estimated at $225 million, are expected to be generated internally.
Dispositions. On December 22, 1994, the Company sold American Tobacco for $1
billion. On July 12, 1994, Dollond & Aitchison, a U.K.-based subsidiary of
Gallaher Limited, was sold for a total consideration of $146 million.
On January 31, 1995, the Company sold its life insurance business for $1.17
billion.
The Company plans to dispose of a number of nonstrategic businesses and
product lines. Proceeds in the range of $150-$175 million are anticipated
during 1995.
Acquisitions. On June 30, 1993, the Benson and Hedges cigarette trademark in
Europe was acquired in exchange for the Lucky Strike and Pall Mall trademarks
overseas and $107.2 million in cash and contingent payments based on future
volume. During the fourth quarter 1993, Whyte & Mackay purchased the remaining
outstanding ordinary shares of Invergordon for $343.6 million.
NET CASH USED BY FINANCING ACTIVITIES
Net cash used by financing activities of $1.9 billion in 1994 compared with
$41 million in 1993. The increased use of cash resulted from the reduction of
short and long-term debt principally with proceeds received from the sale of
American Tobacco.
CASH PROVIDED BY DISCONTINUED OPERATIONS
Franklin provided $37.8 million in dividends during 1994 as compared with
$45.1 million in 1993.
DIVIDENDS
Dividends paid on Common stock in 1994 rose to $401.7 million, or $1.9925 per
share, from $397.5 million, or $1.97 per share in 1993.
With the June 1, 1994 payment, the quarterly dividend on Common stock was
increased 1.5% to 50 cents per share, or an indicated annual rate of $2.00 per
share.
The sale of American Tobacco and the life insurance business will have no
material impact on the Company's ability to pay dividends. Although the
dividend payout ratio is currently higher than it has been in the past, the
ratio may be brought down over time with future growth in earnings per share.
23
<PAGE>
Financial Condition (continued)
FINANCIAL POSITION
At year end, total debt decreased $1.5 billion to $2.2 billion. Short-term
debt decreased $477.1 million to $705.8 million and long-term debt decreased
$980.3 million to $1.5 billion. The ratio of total debt to total capital
decreased from 46.2% in 1993 to 32.4% at year end 1994. The decrease was
principally the result of the sale of American Tobacco late in the year.
Proceeds from the sale of Franklin will be used for debt reduction, share
purchases, and, as opportunities arise, strategic acquisitions. The ultimate
use of the funds, or combination of uses, may alter the debt to capital ratio.
During 1994, $74 million of 91/2% Eurosterling Notes and $82.5 million in
Medium Term Notes matured.
At December 31, 1994, the Company had $850 million of debt securities
(including Medium Term Notes) available for sale under its shelf registration
with the Securities and Exchange Commission.
At year end, the Company had $4 billion of longterm credit facilities,
substantially all of which remained unused. During the year, the Company
extended the expiration dates of these credit facilities to June 15, 1999.
These facilities are available for general corporate purposes, including
acquisitions and support for the Company's short-term borrowings in the
commercial paper market. In addition, Gallaher has Pounds Sterling 300 million
(approximately $470 million) in committed, short-term revolving credit
agreements available for general corporate purposes, including acquisitions.
Management believes that the Company's internally generated funds, together
with its access to global credit markets, are more than adequate to meet the
Company's capital needs.
Working capital increased from $575.4 million in 1993 to $1.6 billion in
1994, principally reflecting the reclassification of the expected proceeds from
the sale of Franklin as well as the use of proceeds from the sale of American
Tobacco. Management believes that the 1994 level, excluding the Franklin
reclassification, was adequate to support continued growth.
FOREIGN EXCHANGE
The Company has sizeable investments in Europe, primarily the U.K. Therefore,
changes in the value of foreign currencies, principally sterling, can affect
the Company's balance sheet and cash flow statements when translated into
dollars. As a result of the sale of American Tobacco and Franklin, changes in
the sterling exchange rate will have a greater effect on these statements.
FINANCIAL INSTRUMENTS
The Company does not enter into financial instruments for trading or
speculative purposes. Financial instruments, principally forward foreign
exchange contracts, are used to reduce the impact of changes in foreign
currency exchange rates with respect to short-term loans, dividends declared by
foreign subsidiaries and a portion of the Company's investment in Gallaher.
Interest rate swaps are used to reduce the impact of changes in interest rates.
The counterparties are major financial institutions. Although the Company's
theoretical risk is the replacement cost at the then estimated fair value of
these instruments, management believes that the risk of incurring losses is
remote and that such losses, if any, would be immaterial.
The Company enters into forward foreign exchange contracts principally to
hedge the currency fluctuations in transactions denominated in foreign
currencies, principally short-term loans to Gallaher, thereby limiting the
Company's risk that would otherwise result from changes in exchange rates. The
periods of the forward foreign exchange contracts correspond to the periods of
the hedged transactions. Gains and losses on forward foreign exchange contracts
and the offsetting losses and gains on hedged transactions are reflected in the
income statement. During the year, the Company also enters into forward foreign
exchange contracts to hedge a portion of its net investment in Gallaher. The
gains or losses on these contracts effectively offset losses and gains on the
portion of the net investment being hedged, which are reflected in Common
stockholders' equity.
24
<PAGE>
Financial Condition (concluded)
At December 31, 1994, the Company had outstanding forward foreign exchange
contracts to purchase $24 million and sell $557 million of various foreign
currencies (principally sterling), with a weighted average maturity of 13 days.
At December 31, 1993, the Company had outstanding forward foreign exchange
contracts to purchase $106 million and sell $658 million of various foreign
currencies (principally sterling), with a weighted average maturity of 37 days.
The Company enters into interest rate swap agreements to manage its exposure
to interest rate changes. The swaps involve the exchange of fixed and variable
interest rate payments without exchanging the notional principal amount.
Payments or receipts on the agreements are recorded as adjustments to interest
expense, and did not have a significant effect on interest expense for 1994,
1993 or 1992. At December 31, 1994 and 1993, the Company had outstanding
interest rate swap agreements denominated in dollars and sterling, maturing at
various dates through 1999, with aggregate notional principal amounts of $406.6
million and $342.4 million, respectively. See page 39 for additional
information on Financial Instruments.
TAXES
Total international and domestic excise taxes were $5.7 billion and income
taxes amounted to $466.1 million. Including Social Security and other taxes,
the Company's total taxes amounted to $6.3 billion, as compared with $6 billion
in 1993.
COMMON STOCKHOLDERS' EQUITY
Common stockholders' equity at year end increased $367.5 million to $4.6
billion primarily due to net income, partly offset by dividends to stockholders
and the purchase of 900,000 shares for the treasury. In 1994, Common
stockholders' equity also reflected an increase of $68.4 million due to foreign
currency translation adjustments.
Return on average Common stockholders' equity was 16.6%, reflecting the gain
on sale of American Tobacco partially offset by the loss on discontinued
operations, as compared with 11.1% in 1993. Excluding the impact of the
one-time charge due to the adoption of the FAS Statements, 1993 return on
equity would have been 15.2%.
At year end, the Company had 28.4 million treasury shares, an amount
sufficient to cover future requirements of shares deliverable upon conversions
of outstanding preferred stock and debentures, the exercise of outstanding
stock options and grants of other stock-based awards.
In connection with the sale of American Tobacco and Franklin, the Board of
Directors authorized the purchase of up to 20 million shares of Common stock of
which in excess of 9 million shares had been purchased by February 28, 1995.
During the year, the Common stock traded within a range of $29.375 to
$38.375. The Common stock generated a total return of 271.8%, or 14% compounded
annually, over the ten-year period ended December 31, 1994.
Book value per Common share was $22.97 at year end.
QUARTERLY COMMON STOCK
DIVIDEND PAYMENTS
<TABLE>
<CAPTION>
1994 1993
--------------------------------------------------------------------------
Payment Amount Amount
Date per Share per Share
--------------------------------------------------------------------------
<S> <C> <C>
March 1 $ .4925 $ .4925
June 1 .50 .4925
September 1 .50 .4925
December 1 .50 .4925
--------------------------------------------------------------------------
$1.9925 $1.97
--------------------------------------------------------------------------
</TABLE>
QUARTERLY COMPOSITE COMMON
STOCK PRICES
<TABLE>
<CAPTION>
1994 1994 1993 1993
--------------------------------------------------------------------------
High Low High Low
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First 35-7/8 29-7/8 40-5/8 31-7/8
Second 34-3/4 29-3/8 34-1/4 28-1/2
Third 37-1/8 31-1/2 34-3/8 29-7/8
Fourth 38-3/8 32-7/8 35-3/4 32
--------------------------------------------------------------------------
</TABLE>
The Common stock is listed on the New York Stock Exchange, which is the
principal market for this security. The high and low prices are as reported in
the consolidated transaction reporting system.
25
<PAGE>
CONSOLIDATED BALANCE SHEET
American Brands, Inc. and Subsidiaries
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
December 31 (In millions, except per share amounts) 1994 1993
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 110.1 $ 62.5
Accounts receivable less allowances for discounts, doubtful accounts and returns, 1994 $52; 1993 $62.5 1,067.9 1,241.6
Inventories
Leaf tobacco 132.2 477.7
Bulk whiskey 351.4 359.3
Other raw materials, supplies and work in process 266.8 306.9
Finished products 1,265.3 899.3
-------- --------
2,015.7 2,043.2
Net assets of discontinued operations 1,170.0 --
Other current assets 307.2 385.8
----------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 4,670.9 3,733.1
----------------------------------------------------------------------------------------------------------------------------------
Property, plant and equipment
Land and improvements 77.0 92.3
Buildings and improvements to leaseholds 558.7 636.9
Machinery and equipment 1,540.7 1,847.2
Construction in progress 52.3 114.3
-------- --------
2,228.7 2,690.7
Less accumulated depreciation 1,016.0 1,218.6
-------- --------
Property, plant and equipment, net 1,212.7 1,472.1
Intangibles resulting from business acquisitions, net 3,549.1 3,637.9
Net assets of discontinued operations -- 1,344.0
Other assets 361.7 379.4
----------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $9,794.4 $10,566.5
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
26
<PAGE>
<TABLE>
<CAPTION>
December 31 1994 1993
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Liabilities and Stockholders' Equity
Current liabilities
Notes payable to banks $ 77.3 $ 298.9
Commercial paper 103.3 711.3
Accounts payable 471.4 454.1
Accrued excise and other taxes 1,082.1 726.3
Accrued expenses and other liabilities 856.2 794.4
Current portion of long-term debt 525.2 172.7
----------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,115.5 3,157.7
----------------------------------------------------------------------------------------------------------------------------------
Long-term debt 1,512.1 2,492.4
Deferred income taxes 133.0 124.7
Postretirement and other liabilities 396.3 520.3
----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 5,156.9 6,295.1
----------------------------------------------------------------------------------------------------------------------------------
Convertible preferred stock--redeemable at Company's option
$2.67 Convertible Preferred stock, without par value, stated value $30.50 per share 15.7 17.1
----------------------------------------------------------------------------------------------------------------------------------
Common stockholders' equity
Common stock, par value $3.125 per share, 229.6 shares issued 717.4 717.4
Paid-in capital 174.6 173.3
Unrealized appreciation on investments -- 5.3
Foreign currency adjustments (249.0) (317.4)
Retained earnings 4,724.4 4,393.4
Treasury stock, at cost (745.6) (717.7)
----------------------------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKHOLDERS' EQUITY 4,621.8 4,254.3
----------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $9,794.4 $10,566.5
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
American Brands, Inc. and Subsidiaries
<TABLE>
<CAPTION>
For years ended December 31 (In millions, except per share amounts) 1994 1993 1992
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales $13,146.5 $12,630.5 $13,658.1
--------------------------------------------------------------------------------------------------------------------
Cost of products sold 3,765.1 3,587.6 3,823.5
Excise taxes on products sold 5,656.8 5,413.9 5,783.3
--------- --------- ---------
9,421.9 9,001.5 9,606.8
--------------------------------------------------------------------------------------------------------------------
Gross Profit 3,724.6 3,629.0 4,051.3
--------------------------------------------------------------------------------------------------------------------
Advertising, selling and administrative expenses 2,315.9 2,315.2 2,388.5
Amortization of intangibles 96.3 92.4 81.6
Restructuring charges (credits), net -- 40.8 (8.5)
--------- --------- ---------
2,412.2 2,448.4 2,461.6
--------------------------------------------------------------------------------------------------------------------
Operating Income 1,312.4 1,180.6 1,589.7
--------------------------------------------------------------------------------------------------------------------
Interest and related expenses 212.1 227.6 251.6
Corporate administrative expenses 69.9 78.1 80.7
Other (income) expenses, net 12.1 (0.5) 6.1
--------- --------- ---------
294.1 305.2 338.4
--------------------------------------------------------------------------------------------------------------------
1,018.3 875.4 1,251.3
--------------------------------------------------------------------------------------------------------------------
Gain on disposal of businesses, net 332.9 -- --
--------------------------------------------------------------------------------------------------------------------
Income From Continuing Operations Before Income Taxes 1,351.2 875.4 1,251.3
Income taxes 466.1 334.2 464.4
--------------------------------------------------------------------------------------------------------------------
Income From Continuing Operations Before Cumulative Effect of
Accounting Changes 885.1 541.2 786.9
Income (loss) from discontinued operations (151.0) 127.0 96.9
Cumulative effect of accounting changes -- (198.4) --
--------------------------------------------------------------------------------------------------------------------
Net Income $ 734.1 $ 469.8 $ 883.8
--------------------------------------------------------------------------------------------------------------------
Earnings Per Common Share
Primary
Income from continuing operations $4.38 $2.67 $3.81
Income (loss) from discontinued operations (.75) .63 .48
Cumulative effect of accounting changes -- (.98) --
--------------------------------------------------------------------------------------------------------------------
Net income $3.63 $2.32 $4.29
--------------------------------------------------------------------------------------------------------------------
Fully diluted
Income from continuing operations $4.24 $2.63 $3.69
Income (loss) from discontinued operations (.71) .60 .44
Cumulative effect of accounting changes -- (.94) --
--------------------------------------------------------------------------------------------------------------------
Net income $3.53 $2.29 $4.13
--------------------------------------------------------------------------------------------------------------------
Dividends Paid Per Common Share $1.9925 $1.97 $1.805
--------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
28
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
American Brands, Inc. and Subsidiaries
<TABLE>
<CAPTION>
For years ended December 31 (In millions) 1994 1993 1992
--------------------------------------------------------------------------------------------------------------------
(Restated) (Restated)
<S> <C> <C> <C>
Operating Activities
Net income $ 734.1 $ 469.8 $ 883.8
Loss (income) from discontinued operations 151.0 (127.0) (96.9)
Changes in accounting principles -- 198.4 --
Gain on disposals, net (331.5) (28.3) (2.3)
Depreciation and amortization 314.4 293.9 289.0
Decrease (increase) in accounts receivable 168.4 40.1 (64.6)
(Increase) decrease in inventories (425.5) (147.9) 150.6
(Increase) decrease in other assets (19.1) 15.1 (56.9)
Increase (decrease) in accrued excise and other taxes 362.8 (179.7) (344.9)
Increase in accounts payable, accrued expenses and other liabilities 10.4 184.4 29.6
Increase in deferred income taxes 38.0 26.1 27.3
Other operating activities, net (6.6) (76.6) (69.0)
--------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED FROM CONTINUING OPERATING ACTIVITIES 996.4 668.3 745.7
--------------------------------------------------------------------------------------------------------------------
Investing Activities
Additions to property, plant and equipment (201.4) (243.4) (285.7)
Proceeds from the disposition of property, plant and equipment 21.1 19.3 18.9
Proceeds from the disposition of operations, net of cash 1,121.8 9.6 13.7
Acquisitions, net of cash acquired (19.9) (456.7) --
Other investing activities, net (0.5) 4.9 (3.5)
--------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES 921.1 (666.3) (256.6)
--------------------------------------------------------------------------------------------------------------------
Financing Activities
(Decrease) increase in short-term debt (1,147.3) 296.9 399.8
Issuance of long-term debt 35.9 511.2 357.7
Repayment of long-term debt (376.6) (387.3) (689.1)
Dividends to stockholders (403.1) (399.1) (377.8)
Cash purchases of Common stock for treasury (20.1) (57.9) (100.4)
Redemption and purchases of $2.75 Preferred stock -- -- (134.4)
Other financing activities, net 1.9 (4.8) 11.2
--------------------------------------------------------------------------------------------------------------------
NET CASH USED BY FINANCING ACTIVITIES (1,909.3) (41.0) (533.0)
--------------------------------------------------------------------------------------------------------------------
Effect of foreign exchange rate changes on cash 1.6 1.6 (38.7)
--------------------------------------------------------------------------------------------------------------------
Cash provided by discontinued operations 37.8 45.1 55.1
--------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 47.6 $ 7.7 $ (27.5)
--------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at beginning of year $ 62.5 $54.8 $82.3
Cash and cash equivalents at end of year $110.1 $62.5 $54.8
--------------------------------------------------------------------------------------------------------------------
Cash paid during the year for
Interest, net of capitalized amount $226.1 $245.1 $265.5
Income taxes $354.2 $470.5 $502.6
--------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
29
<PAGE>
CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY
American Brands, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Unrealized
appreciation Foreign Treasury
Common Paid-in (depreciation) currency Retained stock,
(In millions) stock capital on investments adjustments earnings at cost
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1992 $717.4 $182.3 $ 27.4 $ 19.0 $3,816.7 $(599.5)
Net income -- -- -- -- 883.8 --
Cash dividends -- -- -- -- (377.8) --
Translation adjustments -- -- -- (279.9) -- --
Net unrealized depreciation -- -- (16.9) -- -- --
Purchases -- -- -- -- -- (122.5)
Conversion of securities and
delivery of stock plan shares -- (0.2) -- -- -- 36.9
Redemption of $2.75 Preferred stock -- (4.2) -- -- -- --
-----------------------------------------------------------------------------------------------------------------
Balance at December 31, 1992 717.4 177.9 10.5 (260.9) 4,322.7 (685.1)
Net income -- -- -- -- 469.8 --
Cash dividends -- -- -- -- (399.1) --
Translation adjustments -- -- -- (56.5) -- --
Net unrealized depreciation -- -- (5.2) -- -- --
Purchases -- -- -- -- -- (40.3)
Conversion of securities and
delivery of stock plan shares -- (4.6) -- -- -- 7.7
-----------------------------------------------------------------------------------------------------------------
Balance at December 31, 1993 717.4 173.3 5.3 (317.4) 4,393.4 (717.7)
Net income -- -- -- -- 734.1 --
Cash dividends -- -- -- -- (403.1) --
Translation adjustments -- -- -- 68.4 -- --
Net unrealized depreciation -- -- (5.3) -- -- --
Purchases -- -- -- -- -- (32.5)
Conversion of securities and
delivery of stock plan shares -- 1.3 -- -- -- 4.6
-----------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 $717.4 $174.6 $ -- $(249.0) $4,724.4 $(745.6)
-----------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Consolidated Financial Statements.
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
American Brands, Inc. and Subsidiaries
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all majority-owned subsidiaries, other than the Franklin Life Insurance
business which is accounted for as a discontinued operation. Fiscal year ends
of certain subsidiaries of Gallaher Limited and ACCO World Corporation are
November 30 to facilitate year-end closing.
Consolidated financial statements have been restated for discontinued
operations. The accompanying notes present amounts related only to continuing
operations.
ACCOUNTING CHANGES
On January 1, 1993, the Company adopted FAS Statement No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and FAS Statement
No. 112, "Employers' Accounting for Postemployment Benefits." On December 31,
1993, the Company adopted FAS Statement No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." The initial effects of adopting
these statements were recorded as cumulative changes in accounting principles
as follows:
<TABLE>
<CAPTION>
FAS Statements No.
(In millions, except -----------------------------------
per share amounts) 106 112 115 Total
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Pretax charge (credit) $310.0 $15.0 $(4.1) $320.9
Income taxes 119.0 5.0 (1.5) 122.5
--------------------------------------------------------------
Net loss (income) $191.0 $10.0 $(2.6) $198.4
--------------------------------------------------------------
Earnings per Common share $.94 $.05 $(.01) $.98
--------------------------------------------------------------
</TABLE>
CASH AND CASH EQUIVALENTS
Highly liquid investments with original maturities of three months or less
are included in cash and cash equivalents.
INVENTORIES
Inventories are priced at the lower of cost (principally average and
first-in, first-out and minor amounts at last-in, first-out) or market. In
accordance with generally recognized trade practice, the leaf tobacco and bulk
whiskey inventories are classified as current assets, although part of such
inventories, due to the duration of aging processes, ordinarily will not be
sold within one year.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are carried at cost. Depreciation is provided,
principally on a straight-line basis, over the estimated useful lives of the
assets. Gains or losses resulting from dispositions are included in income.
Betterments and renewals which improve and extend the life of an asset are
capitalized; maintenance and repair costs are expensed.
INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS
Intangibles resulting from business acquisitions, comprising cost in excess
of net assets of businesses acquired, and brands and trademarks, are being
amortized on a straight-line basis over 40 years, except for intangibles
acquired prior to 1971, which are not being amortized because they are
considered to have a continuing value over an indefinite period. The Company
periodically evaluates the recoverability of intangibles resulting from
business acquisitions and measures the amount of impairment, if any, by
assessing current and future levels of income and cash flows as well as other
factors, such as business trends and prospects and market and economic
conditions. Amortization amounted to $96.3 million, $92.4 million and $81.6
million in 1994, 1993 and 1992, respectively. The cumulative amortization
amounted to $512 million and $429 million at December 31, 1994 and 1993,
respectively.
INCOME TAXES
Deferred tax liabilities or assets are established for temporary differences
between financial and tax reporting bases and are subsequently adjusted to
reflect changes in tax rates expected to be in effect when the temporary
differences reverse. A valuation allowance is established for any deferred tax
asset for which realization is not likely.
Deferred income taxes are not provided on undistributed earnings of foreign
subsidiaries, aggregating approximately $1.4 billion at December 31, 1994, as
such earnings are expected to be permanently reinvested in these companies.
31
<PAGE>
Notes (continued)
EARNINGS PER SHARE
Earnings per Common share are based on the weighted average number of Common
shares outstanding in each year and after preferred stock dividend
requirements.
Fully diluted earnings per Common share assume that any convertible
debentures and convertible preferred shares outstanding at the beginning of
each year or at their date of issuance, if later, were converted at those
dates, with related interest, preferred stock dividend requirements and
outstanding Common shares adjusted accordingly. It also assumes that
outstanding Common shares were increased by shares issuable upon exercise of
those stock options for which market price exceeds exercise price, less shares
which could have been purchased by the Company with related proceeds.
ACQUISITIONS
In 1991, Whyte & Mackay acquired 41.3% of the outstanding shares of
Invergordon Distillers Group PLC ("Invergordon") for a cost, including fees and
expenses, of $255.5 million, which was accounted for under the cost method. In
December 1993, Whyte & Mackay completed its acquisition of Invergordon by
purchasing the remaining 58.7% of the outstanding shares of Invergordon for a
cost, including fees and expenses, of $343.6 million. The aggregate cost of
Invergordon of $599.1 million exceeded the fair value of net assets acquired by
$492.9 million. Operations, including the effect of the application of the
equity method to prior periods, were consolidated from December 1, 1993. Had
operations been consolidated from January 1, 1992, they would not have
materially affected the periods being reported. In connection with the
acquisition of Invergordon, liabilities amounting to $108.4 million were
recorded at date of acquisition.
On June 30, 1993, the Benson and Hedges cigarette trademark in Europe was
acquired in exchange for assignment of the Lucky Strike and Pall Mall overseas
cigarette trademarks and $107.2 million in cash, including expenses, and
contingent future payments based on volumes. Results from the Benson and Hedges
trademark were included in international tobacco from the date of acquisition.
A pretax gain of $25.5 million was recognized in domestic tobacco as a result
of the assignment of the Lucky Strike and Pall Mall trademarks. Certain of the
contingent payments were guaranteed and, accordingly, their present value was
included in the initial $183 million of intangibles recorded. Any payments in
excess of the guarantees will also be amortized over periods not to exceed 40
years.
DISPOSITIONS
On December 22, 1994, the Company sold The American Tobacco Company, its
domestic tobacco business, for $1 billion in cash, before related expenses.
The Company plans to dispose of a number of nonstrategic businesses and
product lines, including U.K.-based Prestige and Forbuoys, and recorded a loss,
substantially non-cash, based on the anticipated sale of these businesses for
proceeds in the range of $150-$175 million. The operations to be disposed of
had net sales of $752 million and a small operating loss in 1994.
The components of the gain on the disposal of businesses, net are as follows:
<TABLE>
<CAPTION>
Earnings per
(In millions, except Pretax Income Net Common
per share amounts) Gain (Loss) Taxes Income share
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Domestic tobacco $577.9 $69.6 $508.3 $2.52
Other businesses (245.0) (3.7) (241.3) (1.20)
-------------------------------------------------------------------
$332.9 $65.9 $267.0 $1.32
-------------------------------------------------------------------
</TABLE>
On July 12, 1994, the Company sold the Dollond & Aitchison Group PLC, a
subsidiary of Gallaher Limited, for total consideration of $146 million which
approximated the carrying value of the company.
32
<PAGE>
DISCONTINUED OPERATIONS
On November 30, 1994, the Company entered into an agreement to sell Franklin
for $1.17 billion in cash, before related expenses. The sale was completed on
January 31, 1995.
The net assets and results of operations of Franklin have been reclassified
to identify them as discontinued operations.
Summarized data for Franklin, net of allocation of total interest expense
based on a normal debt to equity ratio for a life insurance company, is as
follows:
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
-------------------------------------------------------------
<S> <C> <C> <C>
Revenues $951.8 $1,070.9 $965.5
-------------------------------------------------------------
Income from operations
Income before taxes $ 91.3 $200.7 $146.8
Income taxes 35.5 73.7 49.9
-------------------------------------------------------------
Net income from operations 55.8 127.0 96.9
-------------------------------------------------------------
Loss on disposal of operations
Income during the phase-out
period, net of $4.2 million
of income taxes 4.2 -- --
Loss on disposal (211.0) -- --
-------------------------------------------------------------
Net loss on disposal (206.8) -- --
-------------------------------------------------------------
Net income (loss) from
discontinued operations $(151.0) $127.0 $96.9
-------------------------------------------------------------
</TABLE>
NET ASSETS OF DISCONTINUED OPERATIONS
<TABLE>
<CAPTION>
(In millions) 1994 1993
-------------------------------------------------------------
<S> <C> <C>
Revenues $1,070.9 $965.5
Investments $6,268.8 $5,808.8
Other assets 1,206.2 1,307.7
Policy reserves and claims (2,772.4) (2,553.4)
Investment-type contract deposits (2,897.3) (2,732.3)
Other liabilities (424.3) (486.8)
Write-down to estimated realizable value (211.0) --
-------------------------------------------------------------
Net assets of discontinued operations $1,170.0 $1,344.0
-------------------------------------------------------------
</TABLE>
SHORT-TERM BORROWINGS
AND CREDIT FACILITIES
At December 31, 1994 and 1993, there were $180.6 million and $1,010.2 million
of short-term borrowings outstanding, respectively, comprised of notes payable
to banks and commercial paper. The weighted average interest rate on these
borrowings was 6% and 4.1%, respectively.
At December 31, 1994, there was $57.8 million outstanding under committed
bank credit agreements which provide for unsecured borrowings of up to $513
million for general corporate purposes, including acquisitions. Fees of 1/8%
per annum are paid.
In addition, the Company had uncommitted bank lines of credit which provide
for unsecured borrowings for working capital of up to $799.1 million, of which
$18.2 million was outstanding at year end.
For a description of the Company's use of financial instruments, see page 39.
33
<PAGE>
Notes (continued)
LONG-TERM DEBT
The components of long-term debt are as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993
--------------------------------------------------------------
<S> <C> <C>
Notes payable(a) $ -- $ 300.0
Revolving credit notes(a) 32.5 211.2
Other notes(b) 274.0 356.5
5-3/4% Eurodollar Convertible Debentures,
Due 2005(c) 200.0 200.0
7-5/8% Eurodollar Convertible Debentures,
Due 2001(d) 150.0 150.0
Other Eurodollar Convertible Debentures(e) 40.7 41.0
8-1/2% Notes, Due 2003 200.0 200.0
5-1/4% Notes, Due 1995 200.0 200.0
8-5/8% Debentures, Due 2021 150.0 150.0
9-1/8% Debentures, Due 2016 150.0 150.0
7-7/8% Debentures, Due 2023 150.0 150.0
7-1/2% Notes, Due 1999 150.0 150.0
9% Notes, Due 1999 100.0 100.0
9-1/2% Eurosterling Notes, Due 1994 -- 74.0
9-1/4% Eurosterling Notes, Due 1998 78.3 74.0
12% Eurosterling Notes, Due 1995 62.6 59.2
12-1/2% Sterling Loan Stock, Due 2009 47.0 44.4
Miscellaneous 52.2 54.8
--------------------------------------------------------------
2,037.3 2,665.1
Less current portion 525.2 172.7
--------------------------------------------------------------
$1,512.1 $2,492.4
--------------------------------------------------------------
<FN>
(a) The Company maintains revolving credit agreements expiring in 1999 with
various banks which provide for unsecured borrowings of up to $4 billion,
including $1 billion in various Eurocurrencies. The interest rate is set at the
time of each borrowing, and a commitment fee of 1/4% per annum is paid.
Borrowings under these agreements may be made for general corporate purposes,
including acquisitions and support for the Company's short-term borrowings in
the commercial paper market.
At December 31, 1993, $300 million of short-term notes payable were
reclassified as long-term debt since the Company intended to exercise its
rights under these arrangements to refinance these notes, in the event that it
became advisable. There was no reclassification at December 31, 1994.
(b) The Other notes have maturity dates ranging from one to seven years, with
a weighted average coupon of 8.5%.
(c) The 5-3/4% Eurodollar Convertible Debentures, Due 2005, are convertible
into Common shares at a conversion price of $39.50 per share. Each debenture
holder will have a one-time put on April 11, 1995, at a price of 114.74%, plus
accrued interest, and if there is a fundamental change in the Common stock
prior to April 11, 1995, at a price of 105.75%, or thereafter prior to April
11, 2000 at par, plus accrued interest. The Company may redeem all or part of
the debentures at its option any time after April 11, 1995 at par, plus accrued
interest.
(d) The 7-5/8% Eurodollar Convertible Debentures, Due 2001, are convertible
into Common shares at a conversion price of $53.19 per share. If a fundamental
change in the Common stock occurs, each debenture holder will have the right to
repayment at a price of 105.3375% declining to par at maturity, plus accrued
interest. The Company may redeem all or part of the debentures at its option at
a price of 105.3375% declining to par at maturity, plus accrued interest.
(e) The Other Eurodollar Convertible Debentures include 7-3/4% Debentures,
Due 2002, of $39.6 million and $39.9 million in 1994 and 1993, respectively,
and 5-3/8% Debentures, Due 2003, of $1.1 million, in each of 1994 and 1993.
These debentures are convertible into Common shares based on conversion prices
of $28.35 and $29 per share, respectively.
</TABLE>
Estimated payments for maturing debt and sinking fund requirements, assuming
the one-time put option on the 5-3/4% Eurodollar Convertible Debentures is
exercised in 1995, during the next five years are as follows: 1995, $525.2
million; 1996, $113.5 million; 1997, $57 million; 1998, $173.9 million; and
1999, $281.7 million.
REDEEMABLE PREFERRED STOCK
On August 17, 1992, the Company redeemed its outstanding $2.75 Preferred
stock at a redemption price of $31.46 per share, plus an amount representing
accrued dividends of 52 cents per share. The aggregate redemption payment
including accrued dividends was $133.9 million.
A cash dividend of $2.75 per share in the aggregate amount of $8 million was
paid in the year ended December 31, 1992.
CONVERTIBLE PREFERRED STOCK--
REDEEMABLE AT COMPANY'S OPTION
Shares of the $2.67 Convertible Preferred stock issued and outstanding at
December 31, 1994, 1993 and 1992 were 516,186 shares, 561,286 shares and
624,933 shares, respectively. Reacquired, redeemed or converted authorized
shares that are not outstanding are required to be retired or restored to the
status of authorized but unissued shares
34
<PAGE>
of preferred stock without series designation. The holders of $2.67 Convertible
Preferred stock are entitled to cumulative dividends, to three-tenths of a vote
per share (in certain events, to the exclusion of the Common shares), to
preference in liquidation over holders of Common stock of $30.50 per share plus
accrued dividends and to convert each share of such stock into 4.08 shares of
Common stock. Authorized but unissued Common shares are reserved for issuance
upon such conversions, but treasury shares may be and are delivered. 45,100
shares, 63,647 shares and 117,634 shares were converted during 1994, 1993 and
1992, respectively. The Company may redeem such Preferred stock at a price of
$30.50 per share, plus accrued dividends.
A cash dividend of $2.67 per share in the aggregate amounts of $1.4 million,
$1.6 million and $1.8 million was paid in each of the years ended December 31,
1994, 1993 and 1992, respectively.
CAPITAL STOCK
The Company has 750 million authorized shares of Common stock and 60 million
authorized shares of preferred stock.
There were 201,210,623 Common shares outstanding at December 31, 1994.
The cash dividends paid on the Common stock for the years ended December 31,
1994, 1993 and 1992 aggregated $401.7 million, $397.5 million and $368 million,
respectively.
Treasury shares purchased as well as those received as consideration for
stock options exercised amounted to 950,220 shares in 1994, 1,159,262 shares in
1993 and 2,882,362 shares in 1992. Treasury shares delivered in connection with
exercise of stock options and grants of other stock awards and conversion of
preferred stock and debentures amounted to 416,795 shares in 1994, 326,494
shares in 1993 and 1,541,437 shares in 1992. At December 31, 1994, there were
28,359,401 treasury shares.
PREFERRED SHARE PURCHASE RIGHTS
Each outstanding share of Common stock also evidences one Preferred Share
Purchase Right ("Right"). The Rights will generally become exercisable only in
the event of an acquisition of or a tender offer for 10% or more of the Common
stock. If exercisable, each Right is exercisable for one two-hundredth of a
share of Series A Junior Participating Preferred Stock at an exercise price of
$52.50. Also, upon an acquisition of 10% or more of the Common stock, or upon
an acquisition of the Company or the transfer of 50% or more of its assets or
earning power, each Right (other than Rights held by the 10% acquiror, if
applicable), if exercisable, will generally be exercisable for common shares of
the Company or the acquiring company, as the case may be, having a market value
of twice the exercise price. In certain events, however, Rights may be
exchanged by the Company for Common stock at a rate of one share per Right. The
Rights may be redeemed at any time prior to an acquisition of 10% or more of
the Common stock at a redemption price of $.005 per Right. Until a Right is
exercised, the holder, as such, will have no voting, dividend or other rights
as a stockholder of the Company. Unless either redeemed or exchanged, the
Rights will expire on December 24, 1997.
All 1.4 million of the authorized Series A Preferred shares are reserved for
issuance upon exercise of Rights, and at December 31, 1994, outstanding Rights
were exercisable as described above in the aggregate for 1,006,053 of such
shares.
STOCK PLANS
The 1990 Long-Term Incentive Plan, as amended, authorizes the granting to key
employees of the Company and its subsidiaries of incentive and nonqualified
stock options, stock appreciation rights, restricted stock, performance awards
and other stock-based awards, any of which may be granted alone or in
combination with other types of awards
35
<PAGE>
Notes (continued)
or dividend equivalents. Such grants may be made after December 31, 1993 and on
or before December 31, 1999 for up to 12 million shares of Common stock. The
Company's Long-Term Incentive Plan for Key Employees of Subsidiaries also
authorizes the granting to key employees of the Company's subsidiaries of
similar types of awards other than stock options and stock appreciation rights,
and one million shares have been reserved for issuance upon payment of any
awards granted thereunder after December 31, 1990. Stock options and stock
appreciation rights may no longer be granted under the Company's 1981 or 1986
Stock Option Plans, but outstanding awards may continue to be exercised until
their expiration dates.
Stock options under the Plans have exercise prices of fair market values at
dates of grant. Options generally may not be exercised prior to one year or
more than ten years from the date of grant. Stock appreciation rights, which
may be granted in conjunction with option grants, permit the optionees to
receive shares of Common stock, cash or a combination of shares and cash
measured by the difference between the option exercise price and the fair
market value of the Common stock at the time of exercise of such right.
Changes during the three years ended December 31, 1994 in shares under option
were as follows:
<TABLE>
<CAPTION>
Option Prices Shares
-----------------------------------------------------
<S> <C> <C>
Under option at
January 1, 1992 $11.83 to $46.63 6,129,950
Options granted 44.38 to $46.81 1,554,550
Options exercised 11.83 to $44.56 (1,034,090)
Options lapsed -- (60,500)
-----------------------------------------------------
Under option at
December 31, 1992 $14.44 to $46.81 6,589,910
Options granted 33.75 to $34.25 2,358,600
Options exercised 14.44 to $33.91 (73,150)
Options lapsed -- (96,300)
-----------------------------------------------------
Under option at
December 31, 1993 $15.03 to $46.81 8,779,060
Options granted $34.13 to $35.13 2,562,200
Options exercised $15.77 to $34.59 (239,650)
Options lapsed -- (953,880)
Options cancelled -- (472,890)
-----------------------------------------------------
UNDER OPTION AT
DECEMBER 31, 1994 $15.03 to $46.81 9,674,840
-----------------------------------------------------
</TABLE>
At December 31, 1994, options for 7,464,240 shares were exercisable.
At December 31, 1994, the restriction period had ended on the 93,000
restricted and deferred shares awarded under the Long-Term Incentive Plans in
1991 and 1990. In 1994, 16,320 restricted shares were awarded. At December 31,
1994, performance awards were outstanding pursuant to which up to 142,120
shares, 107,605 shares and 107,605 shares may be issued in 1995, 1996 and 1997,
respectively, depending on the extent to which certain specified performance
objectives are met. 14,135 shares, 9,048 shares and 838 shares were issued
pursuant to performance awards during 1994, 1993 and 1992, respectively. The
costs of restricted and deferred shares and performance awards are expensed
over the restriction or performance period.
Shares available in connection with future awards under the Company's stock
plans at January 1 and December 31, 1994 were 1.2 million and 10.6 million,
respectively. Authorized but unissued shares are reserved for issuance in
connection with awards, but treasury shares may be and are delivered.
PENSION AND OTHER RETIREE BENEFITS
The Company has a number of pension plans covering substantially all
employees. The plans provide for payment of retirement benefits, mainly
commencing between the ages of 60 and 65, and also for payment of certain
disability and severance benefits. After meeting certain qualifications, an
employee acquires a vested right to future benefits. The benefits payable under
the plans are generally determined on the basis of an employee's length of
service and earnings. Annual contributions to the plans are sufficient to
satisfy legal funding requirements.
U.S. PENSION PLANS
The components of net pension costs are as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
-------------------------------------------------------
<S> <C> <C> <C>
Service cost $24.3 $21.0 $18.8
Interest cost 67.6 65.7 63.7
Actual return on plan assets (48.8) (86.4) (49.7)
Net amortization and deferral (23.9) 10.8 (24.7)
-------------------------------------------------------
$19.2 $11.1 $ 8.1
-------------------------------------------------------
</TABLE>
36
<PAGE>
The funded status of the plans as of December 31 was
as follows:
<TABLE>
<CAPTION>
1994 1993
------------------------- -------------------------
Assets Accumulated Assets Accumulated
exceed benefits exceed benefits
accumulated exceed accumulated exceed
(In millions) benefits assets benefits assets
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accumulated benefit
obligation
Vested $194.9 $87.3 $704.2 $100.8
Nonvested 8.0 1.9 29.2 2.6
-----------------------------------------------------------------------------
$202.9 $89.2 $733.4 $103.4
-----------------------------------------------------------------------------
Projected benefit
obligation $246.7 $97.6 $843.6 $113.6
Fair value of plan
assets, principally
equity securities
and corporate bonds 270.0 61.4 833.1 66.5
-----------------------------------------------------------------------------
Excess (deficiency) of
assets over projected
benefit obligation 23.3 (36.2) (10.5) (47.1)
Unrecognized net
transition (gain) loss (10.8) 1.6 (2.8) 2.0
Unrecognized net loss from
experience differences 10.4 11.7 66.3 24.1
Unrecognized prior
service cost (1.1) 21.5 8.2 25.5
Adjustment needed to
recognize minimum
liability -- (24.3) -- (26.2)
-----------------------------------------------------------------------------
Prepaid pension cost
(pension liability) $21.8 $(25.7) $61.2 $(21.7)
-----------------------------------------------------------------------------
Actuarial assumptions:
Discount rate 8.75% 8.75% 7.25% 7.25%
-----------------------------------------------------------------------------
Weighted average rate of
compensation increase 5.2% 5.1% 5.0% 5.1%
-----------------------------------------------------------------------------
Expected long-term rate
of return on plan assets 9.5% 9.5% 9.5% 9.5%
-----------------------------------------------------------------------------
</TABLE>
NON-U.S. PENSION PLANS
The components of net pension costs are as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
---------------------------------------------------------
<S> <C> <C> <C>
Service cost $38.8 $ 27.1 $29.1
Interest cost 68.7 62.3 66.5
Actual return on plan assets (61.0) (222.0) (32.1)
Net amortization and deferral (32.7) 144.4 (61.2)
---------------------------------------------------------
$13.8 $ 11.8 $ 2.3
---------------------------------------------------------
</TABLE>
The funded status (assets exceed accumulated benefits) of the plans as of
December 31 was as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993
----------------------------------------------------------
<S> <C> <C>
Accumulated benefit obligation
Vested $670.6 $720.1
Nonvested 3.7 3.8
----------------------------------------------------------
$674.3 $723.9
----------------------------------------------------------
Projected benefit obligation $ 773.4 $ 857.8
Fair value of plan assets, principally
equity securities and corporate bonds 1,017.6 1,021.8
----------------------------------------------------------
Excess of assets over projected
benefit obligation(a) 244.2 164.0
Unrecognized net transition gain (29.3) (35.1)
Unrecognized net (gain) loss from
experience differences (66.2) 3.3
Unrecognized prior service cost 45.0 49.9
----------------------------------------------------------
Prepaid pension cost $193.7 $182.1
----------------------------------------------------------
Actuarial assumptions:
Weighted average discount rate 9.0% 8.0%
----------------------------------------------------------
Weighted average rate of compensation
increase 7.0% 7.0%
----------------------------------------------------------
Expected long-term rate of return
on plan assets 9.5% 9.5%
----------------------------------------------------------
<FN>
(a) The excess of assets over the projected benefit obligation, calculated
under the valuation method mandated by FAS Statement No. 87, "Employers'
Accounting for Pensions," arises principally in the U.K. Under current U.K.
legislation, no part of this excess could be repaid to the Company from the
U.K. plans.
</TABLE>
DEFINED CONTRIBUTION PLANS
The Company sponsors a number of defined contribution plans. Contributions
are determined under various formulas. Costs related to such plans amounted to
$26.2 million, $23.8 million and $29.7 million in 1994, 1993 and 1992,
respectively.
OTHER RETIREE BENEFITS
The Company provides postretirement health care and life insurance benefits
to certain employees and retirees in the United States and certain employee
groups outside the United States. Most employees and retirees outside the
United States are covered by government health care programs.
37
<PAGE>
Notes (continued)
Effective January 1, 1993, the Company adopted FAS Statement No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," for
its retiree benefit plans. Under FAS No. 106, the Company is required to accrue
the estimated cost of these benefits during employees' active service periods.
The Company previously expensed the cost of these benefits as incurred.
The Company elected to recognize the one-time transition obligation charge
resulting from this change in accounting on the immediate recognition basis.
The transition obligation at January 1, 1993 was $310 million, net of $41.3
million of liabilities previously recorded. The cumulative change in accounting
principle, net of $119 million of deferred income taxes, was $191 million, or
94 cents per Common share. The increase in pretax expense for these benefits
for 1993 was $17.3 million.
The components of the postretirement benefit costs are as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993
--------------------------------------------------------------
<S> <C> <C>
Service cost $ 8.1 $ 6.7
Interest cost 26.9 26.3
--------------------------------------------------------------
$35.0 $33.0
--------------------------------------------------------------
</TABLE>
The status of the plans as of December 31 was as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993
--------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees $122.1 $247.5
Fully eligible active plan participants 18.1 36.5
Other active plan participants 36.0 83.2
--------------------------------------------------------------
176.2 367.2
Unrecognized prior service costs 3.0 1.6
Unrecognized net gain (loss) from
experience differences 15.1 (31.3)
--------------------------------------------------------------
Accrued postretirement costs $194.3 $337.5
--------------------------------------------------------------
Assumed weighted average discount rate 8.8% 7.4%
--------------------------------------------------------------
</TABLE>
The assumed health care cost trend rate used in measuring the health care
portion of the accumulated benefit obligation was 11.75% for 1994, gradually
declining to 6% by the year 2007 and remaining at that level thereafter. A 1%
increase in the assumed health care cost trend rate for each year would
increase the accumulated benefit obligation as of December 31, 1994 and
postretirement benefit costs for 1994 by approximately 10% and 13%,
respectively.
Postretirement health and life insurance benefits prior to January 1, 1993
were expensed as incurred and amounted to $13.5 million in 1992.
POSTEMPLOYMENT BENEFITS
The Company provides certain postemployment benefits to former or inactive
employees after employment but before retirement. Effective January 1, 1993,
the Company adopted FAS Statement No. 112, "Employers' Accounting for
Postemployment Benefits," which required a change from the cash basis to the
accrual basis for these postemployment benefits. Accordingly, the cumulative
effect of the accounting change as of January 1, 1993 of adopting FAS No. 112,
net of $5 million of income taxes, was a charge of $10 million, or five cents
per Common share.
INCOME TAXES
The components of income from continuing operations before income taxes are
as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
Domestic operations $ 924.7 $295.1 $ 646.4
Foreign operations 426.5 580.3 604.9
--------------------------------------------------------
$1,351.2 $875.4 $1,251.3
--------------------------------------------------------
</TABLE>
A reconciliation of income taxes at the 35% federal statutory income tax rate
for 1994 and 1993, and 34% for 1992 to income taxes as reported is as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
Income taxes computed
at federal statutory
income tax rate $472.9 $306.4 $425.5
Other income taxes, net
of federal tax benefit 22.3 19.7 36.0
Lower effective rate on
disposal of businesses (50.6) -- --
Realization of capital loss
carryforwards -- (0.9) (20.8)
Goodwill not deductible
for income tax purposes 28.4 28.3 27.7
Tax differential relating
to foreign operations -- 11.0 (1.0)
Miscellaneous, including
reversals of tax provisions
no longer required (6.9) (30.3) (3.0)
--------------------------------------------------------
Income taxes as reported $466.1 $334.2 $464.4
--------------------------------------------------------
</TABLE>
38
<PAGE>
Income taxes are as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
Currently payable
Federal $208.9 $120.4 $207.6
Foreign 186.0 187.2 181.2
Other 26.2 0.4 47.3
Deferred
Federal and other 39.8 39.3 22.8
Foreign 5.2 (13.1) 5.5
--------------------------------------------------------
$466.1 $334.2 $464.4
--------------------------------------------------------
</TABLE>
The components of net deferred tax assets (liabilities)
are as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993
--------------------------------------------------------
<S> <C> <C>
Current assets
Compensation and benefits $ 14.7 $ 14.0
Other reserves 28.5 37.1
Product coupons 3.7 21.7
Capitalized interest-inventory 12.7 26.9
Restructuring 14.4 29.0
Interest 9.9 6.6
Accounts receivable 11.9 12.4
Miscellaneous 29.8 39.2
--------------------------------------------------------
125.6 186.9
--------------------------------------------------------
Current liabilities
Inventories (25.4) (27.9)
Miscellaneous (23.4) (18.0)
--------------------------------------------------------
(48.8) (45.9)
--------------------------------------------------------
Deferred income taxes included in
Other current assets 76.8 141.0
--------------------------------------------------------
Noncurrent assets
Compensation and benefits 16.2 22.8
Other retiree benefits 73.3 132.7
Other reserves 13.2 11.7
Foreign exchange 3.7 --
Miscellaneous 12.9 15.7
--------------------------------------------------------
119.3 182.9
--------------------------------------------------------
Noncurrent liabilities
Depreciation (115.5) (145.8)
Pensions (70.5) (96.7)
Trademark amortization (42.9) (30.8)
Miscellaneous (23.4) (34.3)
--------------------------------------------------------
(252.3) (307.6)
--------------------------------------------------------
Deferred income taxes (133.0) (124.7)
--------------------------------------------------------
Net deferred tax (liability) asset $(56.2) $16.3
--------------------------------------------------------
</TABLE>
LEASE COMMITMENTS
Future minimum rental payments under noncancelable operating leases as of
December 31, 1994 are as follows:
<TABLE>
<CAPTION>
(In millions)
--------------------------------------------
<S> <C>
1995 $61.9
1996 55.4
1997 50.1
1998 45.5
1999 41.6
Remainder 332.5
--------------------------------------------
Total minimum rental payments 587.0
Less minimum rentals to be received
under noncancelable subleases 24.9
--------------------------------------------
$562.1
--------------------------------------------
</TABLE>
Total rental expense for all operating leases (reduced by minor amounts from
subleases) amounted to $81.3 million, $88.7 million and $96.3 million in 1994,
1993 and 1992, respectively.
FINANCIAL INSTRUMENTS
The Company does not enter into financial instruments for trading or
speculative purposes. Financial instruments are used to reduce the impact of
changes in foreign currency exchange rates and interest rates. The principal
financial instruments used are forward foreign exchange contracts and interest
rate swaps. The counterparties are major financial institutions. Although the
Company's theoretical risk is the replacement cost at the then estimated fair
value of these instruments, management believes that the risk of incurring
losses is remote and that such losses, if any, would be immaterial.
39
<PAGE>
Notes (continued)
The Company enters into forward foreign exchange contracts principally to
hedge the currency fluctuations in transactions denominated in foreign
currencies, principally short-term loans to Gallaher, thereby limiting the
Company's risk that would otherwise result from changes in exchange rates. The
periods of the forward foreign exchange contracts correspond to the periods of
the hedged transactions. Gains and losses on forward foreign exchange contracts
and the offsetting losses and gains on hedged transactions are recorded in the
"Other (income) expenses, net" caption. During the year, the Company also
enters into forward foreign exchange contracts which are treated as a hedge of
a portion of its net investment in Gallaher. The gains or losses on these
contracts, which effectively offset losses and gains on the portion of the net
investment being hedged, are included in the "Foreign currency adjustments"
caption in Common stockholders' equity.
At December 31, 1994, the Company had outstanding forward foreign exchange
contracts to purchase $24 million and sell $557 million of various foreign
currencies (principally sterling), with maturities ranging from January 3, 1995
to December 29, 1995, with a weighted average maturity of 13 days. At December
31, 1993, the Company had outstanding forward foreign exchange contracts to
purchase $106 million and sell $658 million of various foreign currencies
(principally sterling), with maturities ranging from January 3, 1994 to
December 31, 1994, with a weighted average maturity of 37 days.
The estimated fair value of foreign currency contracts represents the amount
required to enter into like contracts with similar remaining maturities based
on quoted market prices. At December 31, 1994 and 1993, the difference between
the contract amounts and fair values was immaterial.
The Company enters into interest rate swap agreements to manage its exposure
to interest rate changes. The swaps involve the exchange of fixed and variable
interest rate payments without exchanging the notional principal amount.
Payments or receipts on the agreements are recorded as adjustments to interest
expense.
At December 31, 1994 and 1993, the Company had outstanding interest rate swap
agreements denominated in dollars and sterling, maturing at various dates
through 1999, with aggregate notional principal amounts of $328.3 million and
$342.4 million, respectively. Under these agreements the Company receives a
floating rate principally based on thirty day commercial paper rates, or a
weighted average rate of 6.1% at December 31, 1994 and 3.9% at December 31,
1993, and pays a weighted average fixed interest rate of 7.7% and 7.8% for 1994
and 1993, respectively.
At December 31, 1994, the Company also had outstanding interest rate swap
agreements denominated in sterling, maturing in 1998, with an aggregate
notional principal amount of $78.3 million. Under these agreements, the Company
receives a fixed interest rate of 6.7% and pays a floating interest rate based
on the three month London Interbank Offered Rate (LIBOR), or a weighted average
rate of 6% at December 31, 1994.
The fair value of these interest rate swap agreements represents the
estimated receipts or payments that would be made to terminate the agreements.
At December 31, 1994, the Company would have received $2 million and at
December 31, 1993 would have paid $29 million to terminate the agreements. The
fair value is based on dealer quotes, considering current interest rates.
The estimated fair value of the Company's cash and cash equivalents, notes
payable to banks and commercial paper, approximates the carrying amounts due
principally to their short maturities.
The estimated fair value of the Company's $2,037.3 million and $2,665.1
million total long-term debt (including current portion) at December 31, 1994
and 1993 was approximately $2,072.6 million and $2,880 million, respectively.
The fair value is determined from quoted market prices, where available, and
from investment bankers using current interest rates considering credit ratings
and the remaining terms to maturity.
The Company's accounts receivable represents amounts due from customers,
principally in the tobacco products segment. At December 31, 1994 and 1993,
approximately 38% and 45% of accounts receivable were related to U.K.
operations, and 5% and 6% were due from a U.K. tobacco distributor,
respectively.
40
<PAGE>
SUPPLEMENTARY PROFIT AND
LOSS INFORMATION
Supplementary profit and loss information is as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
----------------------------------------------------------------
<S> <C> <C> <C>
Federal and foreign excise
taxes included in net sales:
International tobacco $4,742.6 $4,548.0 $4,894.1
Domestic tobacco 425.3 360.9 337.0
Distilled spirits 488.9 505.0 552.2
----------------------------------------------------------------
$5,656.8 $5,413.9 $5,783.3
----------------------------------------------------------------
Research and development
expense $43.5 $39.7 $33.7
----------------------------------------------------------------
</TABLE>
Corporate administrative expenses in 1993 included a $5 million provision for
staff reduction at the corporate headquarters.
INFORMATION ON BUSINESS SEGMENTS
The Company's subsidiaries operate principally in the following business
segments:
International tobacco includes cigarettes and other tobacco products
manufactured by Gallaher.
Distilled spirits includes products produced or imported by Jim Beam and
Whyte & Mackay.
Hardware and home improvement products includes kitchen and bathroom faucets,
plumbing supply and repair products manufactured, packaged or distributed by
Moen, locks manufactured by Master Lock, kitchen cabinets and bathroom vanities
manufactured by Aristokraft, and tool storage products manufactured by
Waterloo.
Office products includes office supplies, computer-related supplies and other
office products manufactured by ACCO World subsidiaries.
Golf and leisure products includes golf balls, shoes, gloves and clubs
manufactured and marketed by Titleist and Foot-Joy Worldwide.
Other businesses includes optical goods and services, sold in July 1994,
rubber products of Acushnet, sold in December 1994, and retail distribution and
housewares products of Gallaher subsidiaries. The Company plans to dispose of
the housewares products business and a significant portion of its retail
distribution business in 1995.
Domestic tobacco included cigarettes manufactured by American Tobacco, sold
on December 22, 1994.
The Company operates in the United States, Europe (principally the U.K.) and
other areas (principally Canada and Australia).
Restructuring charges (credits), net by industry segments are as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992
--------------------------------------------------------------
<S> <C> <C>
International tobacco $29.8 $ --
Distilled spirits (15.8) --
Hardware and home improvement products 4.7 --
Office products 3.6 (8.5)
--------------------------------------------------------------
Ongoing operations 22.3 (8.5)
Domestic tobacco 18.5 --
--------------------------------------------------------------
$40.8 $(8.5)
--------------------------------------------------------------
</TABLE>
Net sales and operating income for the years 1994, 1993 and 1992, and
identifiable assets for the related year ends by industry segments and by
geographic areas, are shown on page 46.
Reconciliation of identifiable assets to consolidated total assets is as
follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
----------------------------------------------------------------
<S> <C> <C> <C>
Identifiable assets $8,452.0 $ 9,029.3 $8,364.8
Corporate 172.4 193.2 229.8
Net assets of discontinued
operations 1,170.0 1,344.0 1,274.2
----------------------------------------------------------------
$9,794.4 $10,566.5 $9,868.8
----------------------------------------------------------------
</TABLE>
41
<PAGE>
Notes (concluded)
Depreciation by industry segments is as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
International tobacco $ 41.1 $ 29.2 $ 29.8
Distilled spirits 36.2 31.6 29.5
Hardware and home
improvement products 34.4 30.7 29.3
Office products 36.7 35.4 37.6
Golf and leisure products 8.9 8.0 7.5
Other businesses 36.9 44.6 49.9
--------------------------------------------------------
Ongoing operations 194.2 179.5 183.6
Domestic tobacco 23.9 22.0 23.8
--------------------------------------------------------
$218.1 $201.5 $207.4
--------------------------------------------------------
</TABLE>
Amortization of intangibles by industry segments is as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
------------------------------------------------------
<S> <C> <C> <C>
International tobacco $ 5.1 $ 2.3 $ --
Distilled spirits 33.9 32.2 23.0
Hardware and home
improvement products 30.1 30.1 30.2
Office products 20.5 20.9 21.0
Golf and leisure products 1.1 1.0 1.0
Other businesses 5.6 5.9 6.4
------------------------------------------------------
$96.3 $92.4 $81.6
------------------------------------------------------
</TABLE>
Capital expenditures by industry segments are as follows:
<TABLE>
<CAPTION>
(In millions) 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C>
International tobacco $ 33.0 $ 43.1 $ 42.9
Distilled spirits 34.3 29.8 41.4
Hardware and home
improvement products 45.3 62.7 53.9
Office products 33.5 26.0 24.2
Golf and leisure products 15.5 12.1 22.6
Other businesses 29.0 47.9 67.7
--------------------------------------------------------
Ongoing operations 190.6 221.6 252.7
Domestic tobacco 10.8 21.8 33.0
--------------------------------------------------------
$201.4 $243.4 $285.7
--------------------------------------------------------
</TABLE>
PENDING LITIGATION
The Company and its subsidiaries are defendants in various lawsuits
associated with their business and operations, including actions based upon
allegations that human ailments have resulted from tobacco use. It is not
possible to predict the outcome of the pending litigation, but management
believes that there are meritorious defenses to the pending actions and that
the pending actions will not have a material adverse effect upon the results of
operations, cash flow or financial condition of the Company. These actions are
being vigorously contested.
On December 22, 1994, the Company sold The American Tobacco Company
subsidiary to Brown & Williamson Tobacco Corporation, a wholly-owned subsidiary
of B.A.T Industries p.l.c. Brown & Williamson Tobacco Corporation and The
American Tobacco Company have agreed to indemnify the Company against claims
arising from smoking and health and fire safe cigarette matters relating to the
tobacco business of The American Tobacco Company.
ENVIRONMENTAL
The Company is subject to laws and regulations relating to the protection of
the environment. While it is not possible to quantify with certainty the
potential impact of actions regarding environmental matters, particularly
remediation and other compliance efforts that the Company's subsidiaries may
undertake in the future, in the opinion of management, compliance with the
present environmental protection laws, before taking into account estimated
recoveries from third parties, will not have a material adverse effect upon the
results of operations, cash flow or financial condition of the Company.
42
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF AMERICAN BRANDS, INC.:
We have audited the accompanying consolidated balance sheet of American
Brands, Inc. and Subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of income, cash flows and Common stockholders' equity
for the years ended December 31, 1994, 1993 and 1992. These financial
statements are the responsibility of the management of American Brands, Inc.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of American Brands,
Inc. and Subsidiaries at December 31, 1994 and 1993, and the consolidated
results of their operations and their cash flows for the years ended December
31, 1994, 1993 and 1992, in conformity with generally accepted accounting
principles.
As discussed in Notes to Consolidated Financial Statements, in 1993 the
Company changed its methods of accounting for postretirement benefits other
than pensions, postemployment benefits and certain investments in debt and
equity securities.
Coopers & Lybrand L.L.P.
1301 Avenue of the Americas
New York, New York
February 1, 1995
REPORT OF MANAGEMENT
TO THE STOCKHOLDERS OF AMERICAN BRANDS, INC.:
We have prepared the consolidated balance sheet of American Brands, Inc. and
Subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income, cash flows and Common stockholders' equity for the years
ended December 31, 1994, 1993 and 1992. The financial statements have been
prepared in accordance with generally accepted accounting principles. Financial
information elsewhere in the Annual Report is consistent with that in the
financial statements.
The system of internal controls of the Company and its subsidiaries is
designed to provide reasonable assurances that the financial records are
adequate and can be relied upon to provide information for the preparation of
financial statements and that established policies and procedures are carefully
followed.
Independent accountants are elected annually by the stockholders of the
Company to audit the financial statements. Coopers & Lybrand L.L.P.,
independent accountants, are currently engaged to perform such audit. Their
audit is in accordance with generally accepted auditing standards and includes
tests of transactions and selective tests of internal accounting controls.
The Audit Committee of the Board of Directors, consisting solely of outside
directors, meets periodically with the independent accountants, internal
auditors and management to review accounting, auditing, and financial reporting
matters. The auditors have direct access to the Audit Committee.
43
<PAGE>
ELEVEN-YEAR CONSOLIDATED SELECTED FINANCIAL DATA(1)(2)
American Brands, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(In millions, except per share amounts
and number of Common stockholders) 1994 1993(3) 1992 1991(3)
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Data
Net sales $13,146.5 $12,630.5 $13,658.1 $13,193.4
Gross profit 3,724.6 3,629.0 4,051.3 3,823.0
Depreciation and amortization 314.4 293.9 289.0 266.2
Operating income from continuing operations 1,312.4 1,180.6 1,589.7 1,479.0
Interest and related expenses 212.1 227.6 251.6 246.6
Income taxes 466.1 334.2 464.4 387.4
Income from continuing operations 885.1 541.2 786.9 716.2
Income (loss) from discontinued operations (151.0) 127.0 96.9 89.9
Cumulative effect of accounting changes -- (198.4) -- --
Net income 734.1(4) 469.8 883.8 806.1
Earnings per Common share
Primary
Continuing operations $4.38(4) $2.67 $3.81 $3.47
Discontinued operations (.75) .63 .48 .44
Cumulative effect of accounting changes -- (.98) -- --
-------------------------------------------------------------------------------------------------
Net income $3.63 $2.32 $4.29 $3.91
-------------------------------------------------------------------------------------------------
Fully diluted
Continuing operations $4.24(4) $2.63 $3.69 $3.33
Discontinued operations (.71) .60 .44 .41
Cumulative effect of accounting changes -- (.94) -- --
-------------------------------------------------------------------------------------------------
Net income $3.53 $2.29 $4.13 $3.74
-------------------------------------------------------------------------------------------------
Common Share Data
Dividends paid $401.7 $397.5 $368.0 $323.7
Dividends paid per share $1.9925 $1.97 $1.805 $1.5925
Average number of shares outstanding 201.6 201.8 204.0 202.6
Book value per share $22.97 $21.09 $21.14 $20.42
Number of stockholders, December 31 (5) 60,611 63,537 63,929 66,950
-------------------------------------------------------------------------------------------------
Balance Sheet Data
Inventories $2,015.7 $2,043.2 $1,810.2 $2,141.5
Current assets 4,670.9(6) 3,733.1 3,453.1 3,869.8
Working capital 1,555.4(6) 575.4 664.4 609.4
Property, plant and equipment, net 1,212.7 1,472.1 1,406.4 1,472.4
Intangibles, net 3,549.1 3,637.9 3,104.0 3,284.0
Net assets of discontinued operations -- 1,344.0 1,274.2 1,239.0
Total assets 9,794.4 10,566.5 9,868.8 10,521.9
Short-term debt 705.8 1,182.9 824.7 730.6
Long-term debt 1,512.1 2,492.4 2,406.8 2,551.9
Redeemable preferred stock -- -- -- 130.1
Common stockholders' equity 4,621.8 4,254.3 4,282.5 4,163.3
Capital expenditures 201.4 243.4 285.7 232.0
<FN>
(1) See pages 16 through 25 for Financial Section.
(2) Years prior to 1994 have been restated for discontinued operations. See page 33 for Discontinued Operations.
(3) See page 32 for Acquisitions. 1991 includes the acquisition in December by Jim Beam Brands Co. of certain distilled
spirits trademarks. 1990 includes the acquisitions of The Moen Group, Inc. in August and Whyte & Mackay in February.
1988 includes the acquisition in February of Aristokraft, Waterloo Industries, Twentieth Century Companies, Day-Timers
and Vogel Peterson. 1987 includes acquisitions in August of ACCO World Corporation and in May of National Distillers and
Chemical Corporation's distilled spirits business.
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
(In millions, except per share amounts
and number of Common stockholders) 1990(3) 1989(3) 1988(3) 1987(3)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Data
Net sales $12,975.4 $11,090.4 $11,056.6 $9,152.9
Gross profit 3,702.5 3,085.1 2,906.2 2,212.5
Depreciation and amortization 244.1 198.7 201.4 141.3
Operating income from continuing operations 1,462.1 1,242.9 1,120.6 901.5
Interest and related expenses 259.3 261.7 244.6 131.1
Income taxes 414.7 383.5 332.9 313.4
Income from continuing operations 507.1 543.4 480.0 391.3
Income (loss) from discontinued operations 81.5 89.9 85.9 121.3
Cumulative effect of accounting changes -- -- -- --
Net income 588.6(4) 633.3 565.9 512.6
Earnings per Common share
Primary
Continuing operations $2.53(4) $2.79 $2.40 $1.71
Discontinued operations .42 .48 .45 .54
Cumulative effect of accounting changes -- -- -- --
--------------------------------------------------------------------------------------------------------------------------------
Net income $2.95 $3.27 $2.85 $2.25
--------------------------------------------------------------------------------------------------------------------------------
Fully diluted
Continuing operations $2.43(4) $2.63 $2.29 $1.67
Discontinued operations .37 .42 .40 .51
Cumulative effect of accounting changes -- -- -- --
--------------------------------------------------------------------------------------------------------------------------------
Net income $2.80 $3.05 $2.69 $2.18
--------------------------------------------------------------------------------------------------------------------------------
Common Share Data
Dividends paid $274.3 $238.0 $221.9 $232.4
Dividends paid per share $1.405 $1.255 $1.13 $1.055
Average number of shares outstanding 194.5 189.2 193.4 220.3
Book value per share $17.98 $15.21 $13.20 $13.24
Number of stockholders, December 31 (5) 69,378 72,404 77,106 83,004
--------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data
Inventories $2,043.8 $1,675.0 $1,815.9 $1,693.4
Current assets 3,829.4 3,005.4 3,080.2 3,414.0
Working capital 622.3 440.2 434.5 1,006.6
Property, plant and equipment, net 1,488.3 1,201.7 1,179.6 1,078.7
Intangibles, net 2,975.3 1,831.4 1,911.2 1,381.6
Net assets of discontinued operations 1,143.4 1,114.0 1,273.3 1,249.8
Total assets 9,759.8 7,625.7 7,879.7 7,330.3
Short-term debt 845.4 740.0 829.3 751.4
Long-term debt 2,433.8 1,717.4 2,359.2 1,631.5
Redeemable preferred stock 131.9 135.6 137.5 137.5
Common stockholders' equity 3,602.0 2,912.4 2,466.4 2,915.3
Capital expenditures 293.1 253.8 226.7 181.7
--------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
(In millions, except per share amounts
and number of Common stockholders) 1986 1985 1984
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Data
Net sales $7,252.9 $6,205.6 $5,916.1
Gross profit 1,754.1 1,493.6 1,410.7
Depreciation and amortization 98.5 86.3 80.9
Operating income from continuing operations 627.4 675.3 659.8
Interest and related expenses 77.1 81.0 82.0
Income taxes 235.3 262.5 240.6
Income from continuing operations 254.0 301.3 307.8
Income (loss) from discontinued operations 107.8 123.1 156.5
Cumulative effect of accounting changes -- -- --
Net income 361.8 424.4 464.3
Earnings per Common share
Primary
Continuing operations $1.08 $1.29 $1.32
Discontinued operations .49 .56 .71
Cumulative effect of accounting changes -- -- --
-------------------------------------------------------------------------------------------------------------
Net income $1.57 $1.85 $2.03
-------------------------------------------------------------------------------------------------------------
Fully diluted
Continuing operations $1.07 $1.27 $1.29
Discontinued operations .47 .54 .69
Cumulative effect of accounting changes -- -- --
-------------------------------------------------------------------------------------------------------------
Net income $1.54 $1.81 $1.98
-------------------------------------------------------------------------------------------------------------
Common Share Data
Dividends paid $224.1 $214.9 $204.4
Dividends paid per share $1.019 $.975 $.928
Average number of shares outstanding 219.7 220.4 220.2
Book value per share $11.51 $10.82 $9.52
Number of stockholders, December 31 (5) 86,477 94,862 101,303
-------------------------------------------------------------------------------------------------------------
Balance Sheet Data
Inventories $1,264.4 $1,254.8 $1,180.4
Current assets 2,052.3 1,975.6 1,750.0
Working capital 415.6 660.0 621.3
Property, plant and equipment, net 745.1 637.1 532.1
Intangibles, net 532.1 453.5 407.1
Net assets of discontinued operations 1,710.9 1,607.6 1,529.3
Total assets 5,145.6 4,735.0 4,257.1
Short-term debt 465.0 375.6 397.7
Long-term debt 671.1 735.5 727.7
Redeemable preferred stock 137.5 137.5 137.5
Common stockholders' equity 2,529.1 2,369.2 2,098.2
Capital expenditures 199.2 133.2 143.0
-------------------------------------------------------------------------------------------------------------
<FN>
(4) Net income and primary and fully diluted earnings per Common share in 1994 include $267 million and $1.32 and $1.25,
respectively, on the net gain on disposal of businesses (see page 32 for Dispositions) and in 1990 include $179.9
million and 93 cents and 83 cents, respectively, relating to a write-down of an investment.
(5) On January 31, 1995, there were 60,279 Common stockholders of record, not necessarily reflecting beneficial ownership.
(6) Includes $1,170 million of net assets of discontinued operations.
</TABLE>
45
<PAGE>
INFORMATION ON BUSINESS SEGMENTS(1)(2)
American Brands, Inc. and Subsidiaries
<TABLE>
<CAPTION>
$(In millions) 1994 1993 1992 1991 1990 1989
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Business by Industry Segments
NET SALES
International tobacco $ 6,168.9 $ 5,940.0 $ 6,376.6 $ 6,373.7 $ 6,394.8 $ 5,402.8
Distilled spirits 1,268.2 1,194.6 1,268.3 1,061.2 1,005.3 735.4
Hardware and home improvement products 1,270.6 1,119.5 1,014.8 902.3 632.6 503.7
Office products 1,049.7 977.2 1,003.5 982.3 1,024.6 968.3
Golf and leisure products 507.1 452.7 416.2 391.0 359.5 325.4
Other businesses 1,287.3 1,445.0 1,798.4 1,756.5 1,962.0 1,584.1
----------------------------------------------------------------------------------------------------------------------------------
Ongoing operations 11,551.8 11,129.0 11,877.8 11,467.0 11,378.8 9,519.7
Domestic tobacco 1,594.7 1,501.5 1,780.3 1,726.4 1,596.6 1,570.7
----------------------------------------------------------------------------------------------------------------------------------
$13,146.5 $12,630.5 $13,658.1 $13,193.4 $12,975.4 $11,090.4
----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME
International tobacco $ 517.2 $ 486.5 $ 554.4 $ 528.4 $ 580.6 $ 418.2
Distilled spirits 221.2 214.7 195.8 151.6 135.5 106.8
Hardware and home improvement products 176.5 155.5 159.0 141.5 78.1 69.7
Office products 74.5 63.2 58.1 37.7 87.2 96.5
Golf and leisure products 73.3 63.6 53.3 45.9 41.6 27.2
Other businesses 2.1 27.9 33.0 33.1 32.3 43.0
----------------------------------------------------------------------------------------------------------------------------------
Ongoing operations 1,064.8 1,011.4 1,053.6 938.2 955.3 761.4
Domestic tobacco 247.6 169.2 536.1 540.8 506.8 481.5
----------------------------------------------------------------------------------------------------------------------------------
$1,312.4 $1,180.6 $1,589.7 $1,479.0 $1,462.1 $1,242.9
----------------------------------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
International tobacco $1,893.2 $1,540.2 $1,251.0 $1,690.2 $1,733.6 $1,426.1
Distilled spirits 2,208.1 2,229.7 1,830.9 1,947.4 1,295.2 806.6
Hardware and home improvement products 1,806.6 1,809.0 1,786.4 1,734.6 1,720.4 633.1
Office products 1,540.4 1,465.7 1,510.5 1,588.4 1,692.9 1,542.8
Golf and leisure products 336.2 308.9 264.0 240.6 248.4 228.1
Other businesses 667.5 973.7 916.0 1,088.7 1,101.1 879.6
----------------------------------------------------------------------------------------------------------------------------------
Ongoing operations 8,452.0 8,327.2 7,558.8 8,289.9 7,791.6 5,516.3
Domestic tobacco -- 702.1 806.0 762.9 654.8 648.3
----------------------------------------------------------------------------------------------------------------------------------
$8,452.0 $9,029.3 $8,364.8 $9,052.8 $8,446.4 $6,164.6
Business by Geographic Areas
NET SALES
United States $4,676.4 $4,415.2 $4,591.2 $4,206.8 $3,880.9 $3,690.7
Europe 8,073.9 7,881.8 8,740.9 8,736.3 8,948.6 7,263.2
Other countries 396.2 333.5 326.0 250.3 145.9 136.5
----------------------------------------------------------------------------------------------------------------------------------
$13,146.5 $12,630.5 $13,658.1 $13,193.4 $12,975.4 $11,090.4
----------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME
United States $ 671.4 $ 558.1 $ 914.5 $ 843.8 $ 765.0 $ 725.7
Europe 585.8 578.4 633.7 594.7 679.9 503.3
Other countries 55.2 44.1 41.5 40.5 17.2 13.9
----------------------------------------------------------------------------------------------------------------------------------
$1,312.4 $1,180.6 $1,589.7 $1,479.0 $1,462.1 $1,242.9
----------------------------------------------------------------------------------------------------------------------------------
IDENTIFIABLE ASSETS
United States $4,494.1 $5,043.7 $5,150.4 $5,030.2 $4,645.7 $3,478.4
Europe 3,709.4 3,767.3 3,019.8 3,840.1 3,648.9 2,545.1
Other countries 248.5 218.3 194.6 182.5 151.8 141.1
----------------------------------------------------------------------------------------------------------------------------------
$8,452.0 $9,029.3 $8,364.8 $9,052.8 $8,446.4 $6,164.6
----------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) See page 41 for further Information on Business Segments.
(2) Years prior to 1994 have been restated for discontinued operations. See page 33 for Discontinued Operations.
</TABLE>
46
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
The following is a list of subsidiaries of Registrant as of the date
hereof and the state or other jurisdiction of incorporation of each.
Except as indicated below, each subsidiary does business under its own
name. Indentations indicate that the voting securities of a subsidiary are
wholly owned by the subsidiary immediately preceding the indentation,
unless otherwise indicated.
The names of certain subsidiaries are omitted. Such subsidiaries would
not, if considered in the aggregate as a single subsidiary, constitute a
significant subsidiary within the meaning of Item 601(b)(21)(ii) of
Regulation S-K.
State or Other
Jurisdiction
Subsidiary of Incorporation
---------- ----------------
ABCO, Inc. Delaware
Bonny Products, Inc. New York
ACCO World Corporation Delaware
ACCO Canada Inc. Ontario, Canada
Plymouth Tool & Stamping Limited Ontario, Canada
ACCO Europe PLC England
ACCO-Rexel France S.A. France
Val-Rex S.A.R.L. France
ACCO-Rexel Group Services PLC England
ACCO Company Limited England
ACCO-Rexel Limited England
Hetzel GmbH Germany
Eastlight Limited England
Marbig Rexel Pty. Limited Australia
Office Products International Limited Australia
ACCO-Rexel Limited 1 Republic of Ireland
Don Gresswell Ltd. England
ACCO USA, Inc. Delaware
Day-Timers, Inc. Delaware
Day-Timers of Canada, Ltd. Canada
Day-Timers Pty. Limited Australia
Sax Arts and Crafts, Inc. Delaware
International Business Controls, B.V. 2 Netherlands
King-Mec S.p.A. Italy
Kensington Microware Limited Delaware
Vogel Peterson Furniture Company Delaware
--------------------
1 66.67% owned by ACCO-Rexel Group Services PLC and 33.33% owned by ACCO
World Corporation.
2 Does business in the Republic of Ireland through a branch named "ACCO
Ireland."
<PAGE>
State or Other
Jurisdiction
Subsidiary of Incorporation
---------- ----------------
Acushnet Company Delaware
Acushnet Foreign Sales Corporation Barbados
Acushnet International Inc. Delaware
Acushnet Limited England
Acushnet Canada Inc. Canada
Acushnet GmbH Germany
Acushnet-Danmark ApS Denmark
Acushnet Osterreich GmbH Austria
Acushnet France S.A. France
Acushnet Sverige A.B. Sweden
Acushnet Nederland B.V. Netherlands
Titleist Japan, Inc. 3 Japan
Foot-Joy, Inc. Massachusetts
Foot-Joy (Thailand) Limited 4 Thailand
Titleist & Foot-Joy (Thailand) Limited 4 Thailand
AmeriBrands Finance Canada Ltd. Ontario, Canada
American Brands Finance Europe B.V. Netherlands
American Brands International Corporation Delaware
ATIC Group, Inc. Delaware
Gallaher Limited England
Benson & Hedges Limited England
Forbuoys PLC England
Gallaher (Dublin) Limited Republic of Ireland
Gallaher Hellas S.A. Greece
Gallaher International Limited England
Gallaher Tobacco Limited England
The Galleon Insurance Company Limited Isle of Man
J. R. Freeman & Son Limited England
Marshell Group Limited England
The Prestige Group PLC England
Fabricados Inoxidables S.A. Spain
Prestige France S.A. France
Prestige Group (Australia) Pty. Limited Australia
Prestige Group UK PLC England
Prestige Haushaltswaren GmbH Germany
Prestige Italiana SpA Italy
The Schooner Insurance Company Limited Isle of Man
TM Group PLC England
The Whyte & Mackay Group PLC Scotland
Invergordon Distillers Group PLC Scotland
Invergordon Distillers (Holdings) Limited England
The Invergordon Distillers Limited Scotland
William Muir Limited Scotland
The Scotch Whisky Heritage Centre Limited 5 Scotland
--------------------
3 80% owned by Acushnet International Inc.
4 70% owned by Foot-Joy, Inc.
5 49.41% owned by William Muir Limited, 3.53% owned by The Whyte & Mackay
Group PLC and 3.53% owned by Invergordon Distillers Limited.
-2-
<PAGE>
State or Other
Jurisdiction
Subsidiary of Incorporation
---------- ----------------
Jim Beam Brands Co. Delaware
Alberta Distillers Limited Alberta, Canada
Carrington Distillers Limited Ontario, Canada
Societe Commerciale La Verendrye Inc. Quebec, Canada
Featherstone & Co. Limited Ontario, Canada
Bourbon Warehouse Receipts, Inc. Delaware
Fortune Brands Pty. Ltd. 6 Australia
James B. Beam Distilling International Co., Inc. Barbados
JBB Spirits (New York) Inc. New York
John de Kuyper & Son, Incorporated New York
Wood Terminal Company Delaware
MasterBrand Industries, Inc. Delaware
Aristokraft, Inc. Delaware
Master Lock Company Delaware
Master Lock Europe, S.A. 7 France
Milwaukee Lock Company Delaware
Moen Incorporated Delaware
HCG-MOEN Corporation 8 Taiwan
Moen, Inc. Ontario, Canada
Moen International, Inc. Connecticut
Moen of Pennsylvania, Inc. Delaware
Moen de Mexico, S.A. de C.V. Mexico
Moen Japan K.K. Japan
21st Century Companies, Inc. Delaware
Waterloo Industries, Inc. Delaware
1700 Insurance Company Ltd. Bermuda
--------------------
6 299,999 shares owned by Jim Beam Brands Co.; 1 share owned by James B.
Beam Distilling International Co., Inc.
7 99.68% owned by Master Lock Company.
8 50% owned by Moen Incorporated.
-3-
EXHIBIT 23(i)a
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference into (a) Post-
Effective Amendment No. 4 to the Registration Statement on Form S-8
(Registration No. 33-13363) relating to the Profit-Sharing Plan of American
Brands, Inc., and the Registration Statement on Form S-8 (Registration No.
33-39855) relating to the 1990 Long-Term Incentive Plan of American Brands,
Inc., and the prospectuses related thereto, and (b) the prospectuses
related to the Registration Statements on Form S-3 (Registration Nos. 33-
50832, 33-42397, 33-23039 and 33-3985) of American Brands, Inc. of:
(1) our report dated February 1, 1995, accompanying the
consolidated financial statements of American Brands, Inc.
and its subsidiaries as of December 31, 1994 and 1993, and
for the years ended December 31, 1994, 1993 and 1992,
incorporated by reference into this Annual Report on Form
10-K of American Brands, Inc., and
(2) our report dated February 1, 1995, accompanying the
consolidated financial statement schedules of American
Brands, Inc. and its subsidiaries, included in this Annual
Report on Form 10-K.
We also consent to the references to our firm as experts in the
prospectuses related to the Registration Statements on Form S-3 referred to
above.
COOPERS & LYBRAND L.L.P.
1301 Avenue of the Americas
New York, New York 10019
March 28, 1995
EXHIBIT 23(i)b
CONSENT OF COUNSEL
We consent to the incorporation by reference of our opinions
contained in Item 3, "Legal proceedings," of this Annual Report on Form 10-
K of American Brands, Inc. into (a) Post-Effective Amendment No. 4 to the
Registration Statement on Form S-8 (Registration No. 33-13363) relating to
the Profit-Sharing Plan of American Brands, Inc., and the Registration
Statement on Form S-8 (Registration No. 33-39855) relating to the 1990
Long-Term Incentive Plan of American Brands, Inc., and the prospectuses
related thereto, and (b) the prospectuses related to the Registration
Statements on Form S-3 (Registration Nos. 33-50832, 33-42397, 33-23039 and
33-3985) of American Brands, Inc.
CHADBOURNE & PARKE
30 Rockefeller Plaza
New York, New York 10112
March 28, 1995
EXHIBIT 24
POWER OF ATTORNEY
The undersigned, acting in the capacity or capacities stated with
their respective names below, hereby constitute and appoint GILBERT L.
KLEMANN, II, EDWARD P. SMITH and A. ROBERT COLBY, and each of them
severally, the attorneys-in-fact of the undersigned with full power to them
and each of them to sign for and in the name of the undersigned in the
capacities indicated below the Annual Report on Form 10-K of American
Brands, Inc. for the fiscal year ended December 31, 1994, and any and all
amendments thereto:
Signature Title Date
Thomas C. Hays
---------------------- Chairman of the Board February 24, 1995
Thomas C. Hays and Chief Executive
Officer (principal
executive officer) and
Director
John T. Ludes
---------------------- President and Chief February 24, 1995
John T. Ludes Operating Officer and
Director
Robert L. Plancher
---------------------- Senior Vice President February 27, 1995
Robert L. Plancher and Chief Accounting
Officer (principal
accounting officer)
D.L. Bauerlein, Jr.
---------------------- Senior Vice President February 27, 1995
Dudley L. Bauerlein, Jr. and Chief Financial
Officer (principal
financial officer)
William J. Alley
---------------------- Director February 28, 1995
William J. Alley
<PAGE>
Eugene R. Anderson
---------------------- Director February 27, 1995
Eugene R. Anderson
Patricia O. Ewers
---------------------- Director February 28, 1995
Patricia O. Ewers
John W. Johnstone, Jr.
---------------------- Director February 27, 1995
John W. Johnstone, Jr.
Wendell J. Kelley
---------------------- Director February 27, 1995
Wendell J. Kelley
Sidney Kirschner
---------------------- Director February 28, 1995
Sidney Kirschner
G.R. Lohman
---------------------- Director February 28, 1995
Gordon R. Lohman
Charles H. Pistor, Jr.
---------------------- Director February 27, 1995
Charles H. Pistor, Jr.
Peter M. Wilson
---------------------- Director February 27, 1995
Peter M. Wilson
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND RELATED STATEMENT
OF INCOME AS OF DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> $110
<SECURITIES> 0
<RECEIVABLES> 1,120
<ALLOWANCES> 52
<INVENTORY> 2,016
<CURRENT-ASSETS> 4,671
<PP&E> 2,229
<DEPRECIATION> 1,016
<TOTAL-ASSETS> 9,794
<CURRENT-LIABILITIES> 3,116
<BONDS> 1,512
<COMMON> 717
0
16
<OTHER-SE> 3,904
<TOTAL-LIABILITY-AND-EQUITY> 9,794
<SALES> 13,146
<TOTAL-REVENUES> 13,146
<CGS> 3,765
<TOTAL-COSTS> 3,765
<OTHER-EXPENSES> 5,657
<LOSS-PROVISION> 11
<INTEREST-EXPENSE> 212
<INCOME-PRETAX> 1,351
<INCOME-TAX> 466
<INCOME-CONTINUING> 885
<DISCONTINUED> (151)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 734
<EPS-PRIMARY> $3.63
<EPS-DILUTED> $3.53
</TABLE>
