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<SEC-DOCUMENT>0000950137-02-001860.txt : 20020415
<SEC-HEADER>0000950137-02-001860.hdr.sgml : 20020415
ACCESSION NUMBER: 0000950137-02-001860
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 24
CONFORMED PERIOD OF REPORT: 20011231
FILED AS OF DATE: 20020329
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: FORTUNE BRANDS INC
CENTRAL INDEX KEY: 0000789073
STANDARD INDUSTRIAL CLASSIFICATION: HEATING EQUIP, EXCEPT ELEC & WARM AIR & PLUMBING FIXTURES [3430]
IRS NUMBER: 133295276
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-09076
FILM NUMBER: 02594794
BUSINESS ADDRESS:
STREET 1: 300 TOWER PARKWAY
CITY: LINCOLNSHIRE
STATE: IL
ZIP: 60069
BUSINESS PHONE: 2036985000
FORMER COMPANY:
FORMER CONFORMED NAME: AMERICAN BRANDS INC /DE/
DATE OF NAME CHANGE: 19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>c68345e10-k405.txt
<DESCRIPTION>ANNUAL REPORT
<TEXT>
<PAGE>
[Conformed]
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
<TABLE>
<S> <C>
For the fiscal year ended December 31, 2001 Commission file number 1-9076
</TABLE>
FORTUNE BRANDS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3295276
---------------- ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Tower Parkway, Lincolnshire, IL 60069-3640
--------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 484-4400
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
--------------------- ---------------------
<S> <C>
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.
8 1/2% Notes Due 2003 New York Stock Exchange, Inc.
8 5/8% Debentures Due 2021 New York Stock Exchange, Inc.
7 7/8% Debentures Due 2023 New York Stock Exchange, Inc.
Preferred Share Purchase Rights New York Stock Exchange, Inc.
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
--------------
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 4, 2002, was $6,429,244,478. The
number of shares outstanding of Registrant's common stock, par value $3.125 per
share, at March 1, 2002, were 149,601,999.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
(1) Certain information contained in the Annual Report to Stockholders of
Registrant for the fiscal year ended December 31, 2001 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 April 30, 2002 (to
be filed not later than 120 days after the end of Registrant's fiscal
year) is incorporated by reference into Part III hereof.
2
<PAGE>
PART I
Item 1. Business.
(a) General development of business.
Registrant is a holding company with subsidiaries engaged in
the manufacture, production and sale of home products, spirits and wine, golf
products and office 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. On May 30,
1997, Registrant's name was changed from American Brands, Inc. to Fortune
Brands, Inc.
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 of
seeking to enhance the operations of its principal operating companies. Pursuant
to this strategy, on May 31, 2001, Registrant's spirits and wine business
completed transactions with V&S Vin & Sprit AB ("V&S"), maker of Absolut Vodka,
creating a joint venture, named Future Brands LLC (the "LLC"), to distribute
both companies' spirits and wine brands in the United States. V&S paid $270
million to gain access to our spirits and wine business' U.S. distribution
network and to acquire a 49% interest in the LLC, and paid $375 million to
purchase a 10% equity interest in Registrant's spirits and wine subsidiary, Jim
Beam Brands Worldwide, Inc. ("JBBW"), in the form of convertible preferred
stock. V&S also received a 3-year option to increase its equity stake in JBBW by
up to an additional 9.9%. V&S may require the Registrant to purchase the JBBW
preferred stock in whole or in part at any time after May 31, 2004 or upon a
change in control of JBBW, Jim Beam Brands Co. ("Beam"), or certain other
events.
3
<PAGE>
In 1999, JBBW formed an international sales and distribution
joint venture, Maxxium Worldwide B.V. ("Maxxium"), with Remy-Cointreau and
Highland Distillers, to distribute and sell spirits in key markets outside the
United States. JBBW agreed to contribute assets related to its international
distribution network and periodic cash payments with a total estimated value of
$110 million in return for a one-third interest in the venture. JBBW's
investment of $110 million is contingent upon achievement of certain contractual
performance measures, which were not met in 2001. During 1999 and 2000, JBBW
made cash investments of approximately $30 million and $25 million in Maxxium.
The investments of JBBW in Maxxium were recorded at the book value of assets
contributed plus cash invested.
Also in 1999, subsidiaries of Registrant completed two
acquisitions, one in Registrant's home products business and another in the
office products business, for an aggregate cost of $103.6 million in cash,
including fees and expenses. In 1998, Registrant's subsidiaries completed three
acquisitions of home products, office products and spirits and wine businesses
for an aggregate cost of $271.8 million in cash, including fees and expenses. In
1997, Registrant's subsidiaries completed five acquisitions of office products,
golf clubs and home products businesses for an aggregate cost of $92 million,
including fees and expenses. In 1996, Registrant acquired Cobra Golf
Incorporated ("Cobra"), a leading manufacturer of golf clubs, for an aggregate
cost of $712 million in cash, including fees and expenses.
Registrant has also disposed of subsidiaries having
significant revenues but engaged in businesses considered by Registrant to be
nonstrategic to its long-term operations. For example, in 1997 Registrant
completed the spin-off of Gallaher Group Plc ("Gallaher Group") to Registrant's
stockholders. Subsidiaries of Gallaher Group compete in the international
tobacco business.
In addition, a number of other nonstrategic businesses and
product lines have been sold. In 2001, Registrant's spirits and wine business
sold its U.K.-based Scotch whisky business for $280 million in cash. The sale of
the business consisted of the Invergordon private-label and bulk Scotch
operations and several regional brands in the U.K. In 1998, one of Registrant's
home products subsidiaries sold assets relating to the manufacture of door locks
and related hardware. In 1997, one of Registrant's office products subsidiaries
sold Sax Arts & Crafts, a marketer to schools of arts and crafts supplies.
Registrant continues to pursue its strategy to enhance the
operations of its principal operating companies. Registrant actively explores
possible acquisitions in fields related to its principal operating companies.
Registrant also cannot exclude the possibility of acquisitions in other fields
or further dispositions. On October 9, 2000, Registrant announced that it was
exploring strategic options for its office products business. The Registrant
decided, in April 2001, not to divest its office products business due to
weakness in the overall economy particularly impacting the office products
industry. Registrant is currently repositioning and restructuring the business
to improve both financial results and the long-term value of the business. Under
this plan, Registrant's office products business is realigning and streamlining
its worldwide operations, intensifying its focus on growing profitable core
product categories, divesting or discontinuing non-strategic and low-return
product categories and reducing overhead expenses and excess capacity.
4
<PAGE>
Registrant reviews on an ongoing basis the portfolio of brands
owned by its operating companies and evaluates its options for increasing
shareholder value. 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 issuing additional debt or equity securities. The possible 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, including share repurchases. Registrant cannot predict whether or when
any such strategies might be implemented or what the financial effect thereof
might be upon Registrant's debt or equity securities.
Another aspect of Registrant's strategy to enhance the
operations of its principal operating companies has been to continuously
evaluate the productivity of their product lines and existing asset base and
actively seek to identify opportunities to improve Registrant's and its
subsidiaries cost structure. This strategy led Registrant to record
restructuring and other non-recurring charges totaling $98.1 million in 2001. In
2000, Registrant recorded $73 million in pre-tax restructuring and other
nonrecurring charges across all segments of its business other than spirits and
wine. In 1999, Registrant recorded $196 million in pre-tax restructuring and
other nonrecurring charges across all segments of its business. Additionally, in
1997, Registrant recorded $298.2 million in pre-tax restructuring and other
nonrecurring charges across all of its principal operating companies.
Cautionary Statement
Except for the historical information contained in this Annual
Report on Form 10-K, certain statements in this document, including without
limitation, certain matters discussed in Part I, Item 1 -- Business and Item 3
- -- Legal Proceedings and in Part II, Item 7 -- Management's Discussion and
Analysis of Financial Condition and Results of Operations, are forward-looking
statements, as defined in the Private Securities Litigation Reform Act of 1995,
that involve a number of risks and uncertainties. Readers are cautioned that
these forward-looking statements speak only as of the date hereof. Actual
results may differ materially from those projected as a result of certain risks
and uncertainties including, but not limited to:
- changes in general economic conditions,
- foreign exchange rate fluctuations,
- changes in interest rates,
- competitive product and pricing pressures,
- trade consolidations,
- the impact of excise tax increases with respect to distilled spirits,
- regulatory developments,
- the uncertainties of litigation,
- changes in golf equipment regulatory standards,
- the impact of weather, particularly on the home and golf products
groups,
5
<PAGE>
- expenses and disruptions related to shifts in manufacturing to
different locations and sources,
- challenges in the integration of acquisitions and joint ventures, and
other risks and uncertainties detailed from time to time in Registrant's
Securities and Exchange Commission filings.
(b) Financial information about industry segments.
See Note 15 "Information on Business Segments" in the Notes to
Consolidated Financial Statements contained in the 2001 Annual Report to
Stockholders of Registrant, which Note 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 Home Products, Spirits
and Wine, Golf Products and Office Products. For financial information about the
above industry segments, see Note 15 "Information on Business Segments" in the
Notes to Consolidated Financial Statements contained in the 2001 Annual Report
to Stockholders of Registrant, which Note is incorporated herein by reference.
Home Products
MasterBrand Industries, Inc. ("MasterBrand") is a holding
company for subsidiaries in the home products business. Subsidiaries include
Moen Incorporated ("Moen"), MasterBrand Cabinets, Inc. ("MasterBrand Cabinets"),
Master Lock Company ("Master Lock") and Waterloo Industries, Inc. ("Waterloo").
The home products business is highly competitive. MasterBrand's operating
companies compete on the basis of product quality, price, service and
responsiveness to distributor and retailer needs and end-user consumer
preferences. Factors that affect MasterBrand's results of operations include the
levels of home improvement and residential construction activity, principally in
the U.S. (including repair and remodeling and new construction).
Moen manufactures and packages faucets, sinks, bath
furnishings and plumbing accessories and parts and a wide variety of plumbing
supply and repair products in the U.S. and East Asia. Moen branded faucets are
sold under a variety of trade names, including Villeta, extensa, Boutique,
Traditional, Touch Control, One-Touch, Monticello, PureTouch, Concentrix,
Chateau and Legend, and other products are sold under the Moen, Chicago
Specialty, Dearborn Brass, Wrightway, Hoov-R-Line and CSI Donner brand names.
Composite kitchen sinks are sold under the MoenStone brand name. 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. Some
plumbing parts and repair products are purchased from other manufacturers and
repackaged for resale. Products are sold principally in the U.S. and Canada and
also in East Asia, Mexico and Latin America. Moen's chief competitors include
Masco's Delta/Peerless, Black & Decker's Price Pfister, Kohler and American
Standard.
MasterBrand Cabinets is engaged in manufacturing
ready-to-assemble, stock and semi-custom kitchen cabinets and bathroom vanities.
6
<PAGE>
MasterBrand Cabinets sells under the brand names Aristokraft, Decora', Schrock,
Diamond, Kemper and NHB. Sales under the Aristokraft brand name are made in the
U.S. primarily direct to large home builders and through stocking distributors
for resale to kitchen and bath specialty dealers, lumber and building material
dealers, remodelers and builders. Decora' brands are sold primarily in the U.S.
to kitchen and bath specialty dealers. The Schrock, Diamond and Kemper brands
are primarily sold in the U.S. to home centers and kitchen and bath specialty
dealers. NHB markets its products under the brand names Kitchen Classics, The
Georgetown Collection, Parkhill and NHB through home centers and kitchen and
bath specialty dealers in the U.S. and Canada. MasterBrand Cabinets' competitors
include Masco's Merillat, KraftMaid and Mills Pride brands, Armstrong World
Industries' Triangle Pacific brand, American Woodmark Corporation and The Omega
Group's HomeCrest, KitchenCraft and Omega brands.
Master Lock manufactures key-controlled and combination
padlocks, bicycle and cable locks, built-in locker locks, automotive locks and
other specialty security devices. Sales of products designed for consumer use
are made to wholesale distributors, home centers and hardware and other retail
outlets. Sales of lock systems are made to industrial and institutional users,
original equipment manufacturers and retail outlets. Master Lock competes with
Abus, Kryptonite, Hampton, American Lock, Winner and various imports in the
padlock segment.
Waterloo manufactures tool storage products, principally high
quality steel toolboxes, tool chests, workbenches and related products. Waterloo
sells to Sears for resale under the Craftsman brand owned by Sears and under the
Waterloo brand name to specialty industrial and automotive dealers, mass
merchandisers, home centers and hardware stores. Waterloo competes with Snap-On,
Kennedy, Stanley, Stack-On, and others in the metal storage segment, and with
Contico, Zag, Rubbermaid and others in the plastic hand box category.
Raw materials used for the manufacture of products offered by
MasterBrand's operating companies are primarily red oak and maple lumber,
particleboard, rolled steel, brass, zinc, copper, nickel, and various plastic
resins. These materials are available from a number of sources.
The continued consolidation of the customer base in the home
products industry, for example among home centers and large homebuilders, and
increased price competition will continue to present MasterBrand and its
competitors with pricing challenges. Customer consolidation will also present
opportunities for the most efficient manufacturers and skilled marketers.
Our home products business may be impacted in 2002 by the
continued uncertain U.S. economic outlook and its potential impact on the U.S.
housing and remodeling markets.
Spirits and Wine
Jim Beam Brands Worldwide, Inc. is a holding company for
subsidiaries in the distilled spirits and wine business. Principal subsidiaries
include Jim Beam Brands Co., Jim Beam Brands Greater Europe Limited ("JBBGE")
and Jim Beam Brands Australia Pty. Limited.
7
<PAGE>
On October 16, 2001, Registrant's spirits and wine business
announced that it had sold its U.K.-based Scotch whisky business for $280
million in cash. The sale of the business consisted of the Invergordon
private-label and bulk Scotch operations and several regional brands in the U.K.
The business that was sold generated sales of approximately $235 million
(including excise taxes) and operating company contribution of approximately $38
million in 2000. The Company recorded an after-tax gain of $21.8 million related
to the sale.
On May 31, 2001, Registrant's spirits and wine business
completed transactions with V&S, maker of Absolut Vodka, creating a joint
venture, named Future Brands LLC, to distribute both companies' spirits and wine
brands in the United States. V&S paid $270 million to gain access to Beam's U.S.
distribution network and to acquire a 49% interest in the LLC and paid $375
million to purchase a 10% equity interest in JBBW in the form of convertible
preferred stock. V&S also received a 3-year option to increase its equity stake
in JBBW by up to an additional 9.9%. V&S may require the Registrant to purchase
the JBBW preferred stock in whole or in part at any time after May 31, 2004 or
upon a change in control of JBBW, Beam, or certain other events.
In August 1999, JBBW formed an international sales and
distribution joint venture, named Maxxium Worldwide B.V., to distribute and sell
premium wines and spirits in key markets outside the United States. At the same
time as the formation of the U.S. joint venture announced on May 31, 2001, V&S
invested 107 million Euros (approximately $90 million) to acquire a 25% interest
in Maxxium.
In addition, in August 1998, JBBW purchased the Geyser Peak
wine business and adjacent vineyard property. The winery is located in Alexander
Valley, Sonoma County, California. Geyser Peak wine brands include Geyser Peak
Reserve, Geyser Peak and Canyon Road. In February 1998, JBBW formed a joint
venture to distribute the Barwang brand of Australian wines on a global basis,
except in Australia and New Zealand.
Principal markets for the products of JBBW's subsidiaries are
the U.S., the U.K. and Australia. Approximately 91% of JBBW subsidiary sales are
to these three markets, with the U.S. and the U.K. representing 76% and 9% of
sales, respectively.
JBBW's leading brands are owned by its subsidiaries, except
that DeKuyper cordials are produced and sold in the U.S. under a perpetual
license, Gilbey's gin and Gilbey's vodka are produced and sold in the U.S. under
a license expiring September 30, 2007 and the rights to the Kamchatka vodka
brand in California are claimed by another entity.
Beam, whose operations are located in the U.S., currently
produces, or imports, and markets a broad line of distilled spirits, including
bourbon and other whiskeys, cordials, gin, vodka and rum. Beam and its
predecessors have been distillers of bourbon whiskey since 1795. Beam's nine
leading brand names are Jim Beam Bourbon Whiskey, DeKuyper cordials, Windsor
Canadian Supreme Whisky, Kessler American Blended Whiskey, Wolfschmidt Vodka,
Lord Calvert Canadian Whisky, Kamchatka vodka, Gilbey's vodka and Gilbey's gin.
As discussed above, in 1998 Beam also added wines to its product offerings.
Products of JBBW's subsidiaries are sold through various distributors and, in
the 18
8
<PAGE>
"control" states (and one county) in the U.S. that have established government
control over certain aspects of the purchase and distribution of alcoholic
beverages, through government-controlled liquor authorities.
The distilled spirits business is highly competitive, with
many brands sold in the consumer market. Management believes that, based on
units and sales value, the JBBW group, with four brands that each sell over one
million cases worldwide, is the second or third largest producer and marketer of
distilled spirits in the U.S. and is among the major competitors worldwide.
JBBW's subsidiaries compete on the basis of product quality, price, service and
responsiveness to consumer preferences.
The Maxxium joint venture, the merger of Grand Metropolitan
and Guinness to create Diageo in late 1997 and the sale of the Seagram brands to
Diageo and Pernod-Ricard in 2001, and the JBBW-V&S joint venture reflect a trend
toward consolidation in the highly competitive global spirits and wine business.
The creation of Diageo, and the breadth of its portfolio, as well as the
continued consolidation of the supplier, distributor and retailer tiers, may
present pricing and service challenges for our subsidiaries and their
competitors. It may also present opportunities, particularly for the most
efficient and innovative competitors.
For many years through 1995, consumption of distilled spirits
declined in many countries, including our major market, the U.S. However, since
1996, consumption in the U.S. has been steady or increased slightly, indicating
that the historic decline may be reversing. From 1996 through 2001, cases of our
spirits products sold by distributors to retailers declined, although the rate
of decline has slowed since 1998 to a decrease of 1% in 2001. The number of
cases sold may have been affected by our spirits and wine business's historic
strength in mid-to-low priced products that may not be fully benefiting from the
factors influencing the recent industry trends. Our spirits and wine business
has introduced and developed several premium brands in recent years and is
focusing on the introduction of additional premium products to its portfolio to
capitalize on the fastest growing segment of the spirits and wine industry. The
number of cases sold may also have been affected by price increases our spirits
and wine business has implemented in recent years to increase profits as
compared to unit sales.
The principal raw materials for the production, storage and
aging of distilled products are primarily corn, other grains, and new oak
barrels, and are readily available from a number of sources except that new oak
barrels are available from only two major sources, one of which is owned by a
competitor. Beam has entered into a long-term supply agreement for new oak
barrels.
The principal raw materials used in the production of wines
are grapes, barrels and packaging materials. Grapes are primarily purchased from
independent growers under long-term supply contracts and, from time to time, are
adversely affected by weather and other forces that may limit production. In
fiscal 2001, approximately 5-10% of Geyser Peak's total grape supply came from
company-owned land.
Because whiskeys are aged for various periods, generally from
three to eight years, subsidiaries of JBBW maintain, in accordance with industry
practice, substantial inventories of bulk whiskey in warehouse facilities.
9
<PAGE>
Whiskey production is generally scheduled to meet demand years into the future,
and production schedules are adjusted from time to time to bring inventories
into balance with estimated future demand.
The production, storage, transportation, distribution and sale
of the products of JBBW's subsidiaries are subject to regulation by federal,
state, local and foreign authorities. Various local jurisdictions prohibit or
restrict the sale of distilled spirits and wine in whole or in part. As a result
of the publicity surrounding litigation against manufacturers of tobacco
products and other class action litigation, some commentators have suggested
that other industries, including beverage alcohol, may be the targets of
litigation. Registrant believes, and counsel has advised generally, that in the
event such actions are commenced, Registrant and its subsidiaries would have
meritorious defenses to such suits and they would be vigorously contested.
In the U.S., U.K. and many other countries, distilled spirits
and wine are subject to federal excise taxes and/or customs duties as well as
state, local and other taxes. Beverage alcohol sales are particularly sensitive
to higher excise tax rates. Although no federal excise tax increase is presently
pending in the U.S., our largest market, the possibility of future increases
cannot be ruled out. The effect of any future excise tax increases in any
jurisdiction cannot be determined, but it is possible that any future excise tax
increases would have an adverse effect on unit sales and increase existing
competitive pressures.
At various times in prior years, there has been discussion
and legislation introduced to ban U.S. television advertising of spirits.
Although no legislation has been enacted, only one broadcast network in the U.S.
has recently accepted distilled spirits advertising, and that network imposed
substantial conditions to its acceptance. On March 20, 2002, that network
announced that it was reversing its decision to accept distilled spirits
advertising. (Some local cable stations accept distilled spirits advertising.)
JBBW's operating subsidiaries outside the U.S. have conducted broadcast
advertising in markets where legal.
Golf Products
Acushnet Company ("Acushnet"), together with its subsidiaries,
is a leading manufacturer and distributor of golf balls, golf clubs, golf shoes
and golf gloves. Other products include bags, dress and athletic shoes as well
as socks, accessories and apparel outerwear. Acushnet's leading brands are
Titleist and Pinnacle golf balls; Titleist and Cobra golf clubs; Scotty Cameron
by Titleist and Bulls Eye putters; FootJoy golf shoes; and FootJoy and Titleist
golf gloves. Acushnet products are sold primarily to on-course golf pro shops
and selected off-course specialty stores, sporting goods stores and mass
merchants throughout the United States. Sales are made in the U.K., Canada,
Germany, Austria, Denmark, Ireland, France, Sweden, The Netherlands, South
Africa, Thailand and Japan through subsidiaries and outside these areas through
distributors or agents.
Acushnet and its subsidiaries compete on the basis of product
quality, price, service and responsiveness to consumer preferences. In golf
balls, Acushnet's main competitors are Spalding, Bridgestone, Wilson and
10
<PAGE>
Dunlop/Slazenger and new entrants such as Callaway and Nike. In golf clubs,
Callaway, Taylor Made, Ping, Adams, Orlimar, Cleveland, Wilson, Spalding and
Mizuno are the main competitors. In golf shoes, Nike, Adidas, Etonic, Dexter,
Reebok, Mizuno and Stylo are the main competitors. In golf gloves, Nike, Etonic,
Wilson, Dunlop/Maxfli, Kasco, Slazenger, Taylor Made, Mizuno and Bridgestone are
the main competitors.
In 2001 and 2000, the golf club market was adversely affected
by lower customer demand, leading to volume declines and price discounting. The
Cobra brand was adversely affected by the competition's aggressive introduction
of new products. Acushnet is introducing several new Cobra club models in 2002.
Titleist clubs posted sales and profit growth. Conditions in the club market
remain very competitive, with major competitors introducing new products and
consumers becoming more price conscious. In 2000, aggressive actions were
undertaken, including field sales force consolidation and programs to bring
Cobra expenses in line with lower demand and to identify further synergies
between Titleist and Cobra.
In 2001, the golf ball product lines posted record sales and
increased market share through the introduction of new products.
The golf ball business experienced a product mix shift as
Titleist branded golf balls increased 16% while lower-priced Pinnacle golf balls
decreased 17%.
Competitors with significant brand awareness have introduced
golf balls into their product offerings in the past three years and the golf
ball industry has experienced price competition, partially as a result of such
introductions. Although our golf products business's share of the domestic golf
ball market fell slightly during 2000, our golf ball business recovered that
market share by the end of 2001, largely as a result of the introduction of the
Pro V1 and the recently introduced NXT.
The United States Golf Association ("USGA") establishes
standards for golf equipment used in competitive play in the United States. On
November 2, 1998, the USGA announced the immediate implementation of a new golf
club performance rule that established a rebound velocity standard for driving
clubs. The Royal and Ancient Golf Club ("R&A") establishes standards for golf
equipment used in competitive play outside the United States and Mexico. On
September 21, 2000, the R&A issued a Notice to Manufacturers announcing its
decision not to adopt the USGA's rebound velocity standard or any new rule or
test protocol for driving clubs. The R&A's decision not to adopt the rule
implemented by the USGA has resulted in conflicting conformance standards for
driving clubs in the United States and the rest of the world. The divergence
between the USGA and the R&A on this issue may cause confusion to consumers and
could be disruptive to the United States and world markets for driving clubs. In
addition, the USGA rule could hamper innovation and make it more difficult to
use technological advances to produce USGA conforming products. However, it is
not possible to determine whether in the long term the USGA rule or the
divergence in rules will have a material effect on the golf club industry and
our golf products business.
Each of the USGA and the R&A has announced its intention to
propose new rules addressing the overall distance standards for golf balls, golf
club
11
<PAGE>
head size and golf club shaft length. Until more details regarding such
potential rule changes become available, we cannot determine whether they would
have a material effect on our golf products business and/or the golf industry.
However, the new rules being considered could incorporate rules that would
shorten the overall distance that golf balls are allowed to travel and that
could hamper innovation in the design and manufacture of golf balls and golf
clubs. The adoption of any such rules could materially impact our golf products
business and/or the golf industry.
There has been considerable recent discussion in the golf
trade press regarding the use of a standardized golf ball for professional
tournament play and/or the establishment of separate equipment standards for
tournament play. The adoption of either concept by one of golf's ruling bodies,
a professional tour or individual tournaments could materially impact our golf
products business and/or the golf industry.
Acushnet's advertising and promotional campaigns rely in part
on a large number of touring professionals and club professionals using and
endorsing its products. Acushnet has been competing for the endorsement and
promotional services of touring professionals. As a result, these costs have
risen and may continue to rise.
There is currently a substantial market in "knock-off" and
counterfeit golf clubs which imitate or copy the protected features of original
equipment manufacturers' golf club products. Acushnet has an active program of
enforcing its intellectual property rights against those who make or sell such
products.
Office Products
ACCO World Corporation ("ACCO") is a holding company for
subsidiaries engaged in designing, developing, manufacturing and marketing a
wide variety of traditional and computer-related office products, supplies,
personal computer accessory products, time management products, presentation
aids and label products. Products are manufactured by subsidiaries, joint
ventures and licensees of ACCO, or manufactured to such subsidiaries'
specifications by third-party suppliers throughout the world, principally in the
U.S., Mexico, Canada, Western Europe, Australia, Taiwan and China.
ACCO Brands, Inc. ("ACCO Brands"), ACCO's primary U.S.
operating company, manufactures or sources and sells binders, fasteners, paper
clips, punches, staples, stapling equipment and storage products, computer
supplies and accessories, labels and presentation products. ACCO Canada Inc.
("ACCO Canada"), a subsidiary of ACCO, manufactures binders and distributes in
Canada a range of office products similar to that distributed by ACCO Brands in
the U.S. Principal office products brands include ACCO fastener products,
Swingline staples and stapling equipment, Wilson Jones binders and columnar
pads, Perma Products corrugated storage products, Kensington computer
accessories and supplies, MACO and Wilson Jones labels and Apollo and Boone
presentation products. Products are sold throughout the U.S. and Canada by an
in-house sales force and independent representatives to office and computer
products wholesalers, retailers, dealers, mail order companies and mass
merchandisers. Sales are concentrated in the U.S., Canada and Australia.
12
<PAGE>
Subsidiaries of ACCO Europe PLC ("ACCO Europe"), another
subsidiary of ACCO, manufacture or source and distribute a wide range of office
supplies and machines, storage and retrieval filing systems and presentation
products. ACCO Europe's products are sold primarily in the U.K., Ireland,
Western Europe and Australia through its subsidiaries' sales forces and through
distributors. Principal brands sold by ACCO Europe's subsidiaries include ACCO
fastening products, Kensington and ACCO Data computer accessories, Rexel
stapling products, Nyrex and Twinlock filing products, Nobo and Sasco
presentation products and, in Australia, Marbig, Twinlock, Kensington and Boone
products.
Day-Timers, Inc. ("Day-Timers"), a subsidiary of ACCO,
manufactures personal organizers and planners in the U.S. Management believes
Day-Timers is one of the leading direct marketers 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 of Day-Timers, through direct mail
advertising, catalogs to consumers and businesses, and electronic commerce. In
addition, products are sold through ACCO Brands and ACCO Canada to retailers and
mass merchandisers. Day-Timers's subsidiary in Australia also conducts time
management seminars for personnel of corporations.
The office products business is increasingly concentrated in a
small number of major customers, principally office products superstores, large
retailers, wholesalers and contract stationers. The continuing consolidation of
both competitors and customers is causing increased pricing pressures and
rebates that negatively affect results. Pricing pressures were compounded by the
decision of several customers to continue to reduce inventory levels. These
conditions persisted throughout 2001 and continue to present challenges for
Registrant's office products business and its competitors. Customer rebates, in
particular, are expected to increase in 2002.
U.S. and European economic softness and demand weakness caused
by corporate layoffs coupled with ongoing inventory reductions by major
customers have prolonged industry-wide volume challenges. These factors, in
combination with an uncertain U.S. economic outlook, may continue to further
impact sales of our office products business in future quarters.
In October 2000, Registrant announced that it was exploring
strategic options, including the potential sale of its office products business.
Registrant decided, in April 2001, not to divest its office products business
due to weakness in the overall economy particularly impacting the office
products industry. Registrant is currently repositioning and restructuring the
business to improve both financial results and the long-term value of the
business. Under this plan, Registrant's office products business is realigning
and streamlining its worldwide operations, intensifying its focus on growing
profitable core product categories, divesting or discontinuing non-strategic and
low-return product categories and reducing overhead expenses and excess
capacity. As a result of this plan, Registrant recorded total pre-tax
restructuring and other nonrecurring charges for its office products business of
$69.7 million during the year ended December 31, 2001. These initiatives created
net positive cash flow and improved use of working capital in 2001. Registrant
expects that these restructuring initiatives will generate incremental savings
of $15 to $20 million in 2002, and that potential
13
<PAGE>
initiatives to reduce the business's manufacturing capacity and distribution
infrastructure may result in additional charges.
During the fourth quarter of 2000, Registrant recorded a
non-cash write-down of goodwill of $502.6 million ($487.3 million after tax, or
$3.09 per share) in its office products business. This action resulted from the
significant shortfall in office products earnings, the softening conditions in
the office products industry and the ongoing strategic review process, which led
to the implementation of additional restructuring actions.
Management believes that manufacturing within the office
products industry remains highly fragmented. Due to local market preferences for
product design and paper sizes, many office product manufacturers supply on a
regional basis only. Many manufacturers supply a relatively narrow range of
products. ACCO's key competitors on a worldwide basis include Avery Dennison,
Esselte, Newell Rubbermaid, Fellowes, 3-M, Eagle OPG Inc. and GBC. Primary
competitors for personal organizers in the North American market are Franklin
Quest and Day-Runner, and key competitors in the international market for
personal organizers, although less developed than in the North American market,
include Day-Runner in the U.K. and Quo Vadis in France. In computer accessories,
ACCO competes against Logitech, Fellowes, Microsoft, Targus and others. ACCO's
operating companies compete on the basis of product quality, price, service and
responsiveness to consumer preferences.
ACCO's subsidiaries purchase raw materials, components and
products from a variety of sources, including non-U.S. vendors, on competitively
available terms that fluctuate based on market conditions. ACCO has established
substantial and growing production operations in Mexico, helping to reduce its
cost base.
Other Matters
Employees
Registrant and its subsidiaries had approximately, as of
December 31, 2001, the following number of employees:
Home Products 12,239
Spirits and Wine 1,212
Golf Products 4,461
Office Products 6,967
Corporate Office 119
------
Total 24,998
======
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
14
<PAGE>
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.
(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 2001
Annual Report to Stockholders of Registrant, which table is incorporated herein.
Registrant has investments in various foreign countries, principally the United
Kingdom, as well as Australia and Canada, and, therefore, changes in the value
of the currencies of these countries can have an effect on Registrant's
financial statements when translated into U.S. dollars.
Item 2. Properties.
Registrant leases its principal executive offices in
Lincolnshire, Illinois. Additionally, Registrant continues to lease and has
sublet a portion of its premises in Old Greenwich, Connecticut that formerly
served as its executive offices. The following table indicates the principal
properties of Registrant's subsidiaries:
15
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Segment Manufacturing Distribution Warehouses Other
Plants Centers
- ------------------------------------------------------------------------------------------------------------------------
Owned Leased Owned Leased Owned Leased Owned Leased
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Home
- ------------------------------------------------------------------------------------------------------------------------
U.S. 26 2 1 14 7 2 12
- ------------------------------------------------------------------------------------------------------------------------
Asia 1(JV)
- ------------------------------------------------------------------------------------------------------------------------
Canada 1 1 1
- ------------------------------------------------------------------------------------------------------------------------
Mexico 3 1
- ------------------------------------------------------------------------------------------------------------------------
Brazil 1
- ------------------------------------------------------------------------------------------------------------------------
Guatemala 1
- ------------------------------------------------------------------------------------------------------------------------
Europe 1
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Spirits and Wine
- ------------------------------------------------------------------------------------------------------------------------
U.S. 7 1 9 14
- ------------------------------------------------------------------------------------------------------------------------
Europe 1
- ------------------------------------------------------------------------------------------------------------------------
Canada 1 1
- ------------------------------------------------------------------------------------------------------------------------
Australia 1
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Golf
- ------------------------------------------------------------------------------------------------------------------------
U.S. 5 1 1 1 3 5
- ------------------------------------------------------------------------------------------------------------------------
Europe 1 1 1 1 1 5
- ------------------------------------------------------------------------------------------------------------------------
Canada 1
- ------------------------------------------------------------------------------------------------------------------------
Asia 2(1 JV) 2 1 1 1 1 9
- ------------------------------------------------------------------------------------------------------------------------
Africa 1
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Office
- ------------------------------------------------------------------------------------------------------------------------
U.S. 4 5 2 1 3
- ------------------------------------------------------------------------------------------------------------------------
Europe 10 3 2 4 3
- ------------------------------------------------------------------------------------------------------------------------
Canada 2 1
- ------------------------------------------------------------------------------------------------------------------------
Mexico 2 1 1
- ------------------------------------------------------------------------------------------------------------------------
Australia 1
- ------------------------------------------------------------------------------------------------------------------------
New Zealand 1
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Total U.S. 42 8 5 15 10 10 7 29
- ------------------------------------------------------------------------------------------------------------------------
Total Non-U.S. 22 10 4 11 3 2 3 20
- ------------------------------------------------------------------------------------------------------------------------
TOTAL 66 18 9 26 13 12 10 49
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
JV = Joint Venture
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.
Overview
On December 22, 1994, Registrant sold The American Tobacco
Company ("ATCO") to Brown & Williamson Tobacco Corporation ("B&W"), at the time
a wholly owned subsidiary of B.A.T Industries p.l.c. In connection with the
16
<PAGE>
sale, B&W and ATCO ("the Indemnitors") agreed to indemnify Registrant against
claims including legal expenses arising from smoking and health and fire safe
cigarette matters relating to the tobacco business of ATCO.
Numerous legal actions, proceedings and claims are pending in
various jurisdictions against leading tobacco manufacturers, including B&W both
individually and as successor by merger to ATCO, based upon allegations that
cancer and other ailments have resulted from tobacco use. Registrant has been
named as a defendant in some of these cases. These claims generally fall within
three categories: (i) smoking and health cases alleging personal injury brought
on behalf of individual plaintiffs, (ii) smoking and health cases alleging
personal injury and other damages and purporting to be brought on behalf of
classes of individual plaintiffs, and (iii) health care cost recovery cases,
including class actions, brought by foreign governments, unions, health trusts,
federal and state taxpayers and others seeking reimbursement for health care
expenditures allegedly caused by cigarette smoking. As noted below, in 1998,
certain United States tobacco companies, including B&W, entered into a Master
Settlement Agreement that resolved all remaining health care cost recovery cases
brought by the various States, U.S. territories, and the District of Columbia.
Damages claimed in some of the smoking and health class actions and remaining
health care cost recovery cases range into the billions of dollars.
Certain former asbestos manufacturers and asbestos
manufacturers' personal injury settlement trusts have also sought unspecified
amounts in indemnity or contribution in third party actions against all or most
of the major domestic tobacco manufacturers. It has also been reported that
civil and criminal investigations of tobacco manufacturers are pending before
certain prosecutorial and other authorities.
Individual Cases
As of March 1, 2002, there were approximately 76 smoking and
health cases pending on behalf of individual plaintiffs in which Registrant has
been named as one of the defendants, compared with approximately 93 such cases
as of March 1, 2001. See "List of Pending Cases" below.
Class Actions
As of March 1, 2002, there were approximately 13 purported
smoking and health class actions pending in which Registrant has been named as
one of the defendants compared with approximately 18 such cases as of March 1,
2001. See "List of Pending Cases" below.
Health Care Cost Recovery Actions
As of March 1, 2002, there were approximately 2 health care
recovery actions pending in which Registrant has been named as one of the
defendants, compared with approximately 4 such cases as of March 1, 2001. See
"List of Pending Cases" below.
17
<PAGE>
Certain Developments Affecting The Indemnitors
In July of 1998, trial began in a Florida action against B&W
(individually and as successor by merger to ATCO) and other U.S. tobacco
manufacturer defendants brought on behalf of a class of Florida residents
allegedly injured as a result of their alleged addiction to cigarettes
containing nicotine (Engle v. R. J. Reynolds tobacco Company, et al.). The jury
in Phase I of the trial found for the plaintiffs and against certain tobacco
manufacturers (including B&W individually and as successor by merger to ATCO).
In Phase II of the trial, the same jury addressed the individual claims of the
named class representatives. The trial court judge ruled that the jury in Phase
II could award an aggregate classwide lump-sum amount of punitive damages. This
ruling is being challenged by the defendants in Florida's appellate courts. On
April 17, 2000, the jury awarded an approximate aggregate amount of $12.7
million to three of the named class representatives, although it also found that
the claims of one of the three class representatives may have been barred by the
statute of limitations. On July 14, 2000, the jury awarded a total of $144.87
billion in punitive damages against the defendants, including $17.59 billion
against Brown and Williamson. On November 6, 2000, Florida Circuit Judge Robert
Kaye upheld this jury award, and held that the class of plaintiffs eligible to
recover damages should be extended to smokers with illnesses diagnosed more than
four years before the lawsuit was filed in 1994. Defendants' appeal is pending.
Florida law sets a cap of $100 million on the bond that companies must pay while
the appeals process is under way. Plaintiffs have argued that this cap is
unconstitutional. Registrant is not a party to the Engle litigation.
In September of 1999, the United States government filed a
recoupment lawsuit in Federal Court in Washington, D.C. against the leading
tobacco manufacturers (including B&W individually and as a successor to ATCO)
seeking recovery of costs paid by the Federal government for claimed
smoking-related illness. In September 2000, the U.S. District Court for the
District of Columbia ruled that the government could not use the Medical Care
Recovery Act ("MCRA") or Medicare Secondary Payor ("MSP") insurance provisions
as a basis to try to recover government expenses relating to tobacco smokers,
and dismissed the counts of the lawsuit relating to these laws. The court ruled
that the government could proceed with two counts under the federal RICO statute
under which the government seeks disgorgement of all of defendants' profits from
the sale of tobacco. In October 2000, the United States Government filed a
motion for reconsideration seeking a partial reinstatement of the MCRA claim,
and, in February 2001, filed an amended complaint repleading the MSP claim. By
orders dated July 27, 2001, the Court denied the motion for reconsideration and
dismissed with prejudice the MSP claim. A tentative trial date of July 15, 2003
has been set with respect to all remaining claims. Registrant is not a party to
this action.
Resolution of Health Care Cost Recovery Actions By States,
U.S. Territories and the District of Columbia.
On November 23, 1998, certain U.S. tobacco companies,
including B&W, entered into a Master Settlement Agreement (the "MSA") with
certain state attorneys general that would result in the dismissal of all
remaining health care reimbursement lawsuits brought by the various States, U.S.
territories,
18
<PAGE>
and the District of Columbia. Registrant is not a party to the MSA and is not
bound by any of the payment obligations or other restrictions of the MSA.
Under the MSA, the settling States agreed to dismiss their
current health care reimbursement lawsuits and not to refile such suits in the
future. The MSA provides for the release by the settling States of claims for
past conduct, acts or omissions (including future damages resulting from past
conduct, acts or omissions) in any way related, in whole or in part, to the use,
sale, distribution, manufacture, development, advertising, marketing or health
effects of, the exposure to, or research, statements or warnings about, tobacco
products. The release includes any claim that was brought or comparable claims
that could have been brought by the States in their health care cost recovery
actions. It also includes claims for future conduct, acts or omissions, or
claims in any way related, in whole or in part, to the use of or exposure to
tobacco products manufactured in the ordinary course of business, including
future claims for reimbursement of health care costs allegedly associated with
the use of or exposure to tobacco products. All 52 government entities permitted
to participate in the MSA, including 46 States, American Samoa, Guam, Puerto
Rico, the U.S. Virgin Islands, the Northern Mariana Islands and the District of
Columbia, have dismissed their health care reimbursement suits pursuant to the
MSA.
The MSA provides for the release of claims against
participating manufacturers, as well as their predecessors, successors, and
past, present, and future affiliates. "Affiliate" is defined to include past or
present persons or entities who own or control, are owned by or controlled by,
or are under common ownership of a 10% or more equity interest. Registrant
understands that it is a released party under the terms of the MSA.
Under the MSA, participating manufacturers are required to
make initial "upfront" payments totaling nearly $13 billion between 1998 and
2003 to the settling States. Additional annual payments must be made beginning
in 2000 in perpetuity (starting at $4.5 billion in 2000 and increasing to $9
billion in 2018 and thereafter), and payments to several funds (a "strategic
contribution" fund to reward individual States for their contributions to the
settlement, a public health foundation, and a public advertising and awareness
fund) are also required. Further payments of $300 million per year will also be
required, if the market share of the participating manufacturers in the
preceding year was at least 99.05%. These payments are subject to various
credits and adjustments, depending on industry volume, inflation, and other
factors. The initial up front payment will be allocated among the participating
manufacturers according to market capitalizations; all other payments are to be
allocated according to market share. Moreover, participating manufacturers have
agreed to a variety of additional restrictions and limitations, including, for
example, restrictions on advertising, marketing and lobbying. The MSA also calls
for the participating manufacturers to pay attorneys' fees for the States'
attorneys in the settled litigation.
Prior to the MSA, health care cost recovery actions filed by
the states of Minnesota, Texas, Florida and Mississippi were settled separately
on terms which included monetary payments of several billion dollars. Registrant
was not a party to the Minnesota or Texas action and was voluntarily dismissed
from the Florida and Mississippi actions. Registrant is not a party to any of
the settlements nor is it required to pay any money under these settlements.
19
<PAGE>
List of Pending Cases
For a list of pending cases, see Exhibit 99 to this Form 10-K
and, for a discussion of other pending litigation, see Note 19 "Pending
Litigation" in the Notes to Consolidated Financial Statements contained in the
2001 Annual Report to Stockholders of Registrant, which Note is incorporated
herein by reference.
List of Terminated Cases
For a list of terminated cases, see Exhibit 99 to this Form
10-K.
Conclusion
Management believes that there are meritorious defenses to the
pending actions referred to in Exhibit 99 of this Form 10-K, including the fact
that the Registrant never made or sold tobacco, and these actions are being
vigorously contested. However, it is not possible to predict the outcome of the
pending litigation, and it is possible that some of these actions could be
decided unfavorably. Management is unable to make a meaningful estimate of the
amount or range of loss that could result from an unfavorable outcome of the
pending litigation. Management believes that the pending actions will not have a
material adverse effect upon the results of operations, cash flows or financial
condition of Registrant as long as the Indemnitors continue to fulfill their
obligations to indemnify Registrant under the aforementioned indemnification
agreement (see "Overview" on page 16).
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:
<TABLE>
<CAPTION>
Present positions and offices with
Registrant and principal
Name occupations during the past five years Age
---- -------------------------------------- ---
<S> <C> <C>
Norman H. Wesley Chairman of the Board and Chief Executive Officer of Registrant since 52
December 1999; President and Chief Operating Officer of Registrant during
1999; Chairman of the Board and Chief Executive Officer of Fortune Brands
Home & Office, Inc. from December 1997 to December 1999; President and
Chief Executive Officer of ACCO World Corporation prior thereto.
Thomas J. Flocco Senior Vice President - Strategy & Corporate Development of Registrant 39
since January 2000; Partner, McKinsey & Company, a management
</TABLE>
20
<PAGE>
<TABLE>
<S> <C> <C>
consulting firm, from 1998 to 1999; Engagement Manager, McKinsey & Company,
specializing in the consumer products area, prior thereto.
Mark Hausberg Senior Vice President - Finance and Treasurer of Registrant since January 52
2000; Vice President and Treasurer prior thereto.
Craig P. Omtvedt Senior Vice President and Chief Financial Officer of Registrant since 52
January 2000; Senior Vice President and Chief Accounting Officer of
Registrant during 1998 and 1999; Vice President and Chief Accounting
Officer of Registrant during 1997; Vice President - Deputy Controller and
Chief Internal Auditor of Registrant prior thereto.
Mark A. Roche Senior Vice President, General Counsel and Secretary of Registrant since 47
January 2000; Senior Vice President and General Counsel of Registrant
during 1999; Vice President and General Counsel during 1998; Vice President
and Associate General Counsel of Registrant prior thereto.
Nadine A. Heidrich Vice President and Corporate Controller of Registrant since September 2001; 47
Chief Financial Officer of Specialty Elastomers Group, Inc. from 2000 to
2001; Vice President - Finance for John Crane, Inc. prior thereto.
</TABLE>
In the case of each of the above-listed executive officers,
the occupation or occupations given were the 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 the executive officer 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 Cash Dividend Payments" and "Quarterly Composite Common Stock Prices" and
the discussion relating thereto contained in the 2001 Annual Report to
Stockholders of Registrant, which information and discussion are incorporated
herein by reference. On March 1, 2002, there were 29,867 record holders of
Registrant's common stock, par value $3.125 per share.
21
<PAGE>
Item 6. Selected Financial Data.
See the information for 1996 through 2001 in the table
captioned "Six-Year Consolidated Selected Financial Data" contained in the 2001
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
"Management's Discussion and Analysis of Results" and "Financial Condition"
contained in the 2001 Annual Report to Stockholders of Registrant, which
discussion and analysis are incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
See the discussion and analysis under "Market Risk," "Foreign
Exchange Contracts" and "Interest Rates" under the caption "Financial Condition"
in the 2001 Annual Report to Stockholders of Registrant, which discussion is
incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data.
See the information in the Consolidated Statement of Income,
Consolidated Balance Sheet, Consolidated Statement of Cash Flows, Consolidated
Statement of Stockholders' Equity, Notes to Consolidated Financial Statements
and Report of Independent Accountants contained in the 2001 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 2001 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.
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 April 30, 2002 (to be filed not later than 120 days
after the end of Registrant's fiscal year), 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.
22
<PAGE>
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
April 30, 2002 (to be filed not later than 120 days after the end of
Registrant's fiscal year), which information is incorporated herein by
reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
See 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 April 30, 2002 (to be filed
not later than 120 days after the end of Registrant's fiscal year), which
information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
None.
23
<PAGE>
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 Statement of Income for the years ended
December 31, 2001, 2000 and 1999 contained in the 2001 Annual
Report to Stockholders of Registrant is incorporated herein by
reference.
Consolidated Balance Sheet as of December 31, 2001
and 2000 contained in the 2001 Annual Report to Stockholders
of Registrant is incorporated herein by reference.
Consolidated Statement of Cash Flows for the years
ended December 31, 2001, 2000, and 1999 contained in the 2001
Annual Report to Stockholders of Registrant is incorporated
herein by reference.
Consolidated Statement of Stockholders' Equity for
the years ended December 31, 2001, 2000, and 1999 contained in
the 2001 Annual Report to Stockholders of Registrant is
incorporated herein by reference.
Notes to Consolidated Financial Statements contained
in the 2001 Annual Report to Stockholders of Registrant are
incorporated herein by reference.
Report of Independent Accountants contained in the
2001 Annual Report to Stockholders of Registrant is
incorporated herein by reference.
(2) Financial Statement Schedules
See Index to Financial Statement Schedule of
Registrant and subsidiaries at page F-1, which Index is
incorporated herein by reference.
(3) Exhibits
3(i). Restated Certificate of Incorporation of Registrant as in
effect on the date hereof is incorporated herein by reference
to Exhibit 3(i) to the Annual Report on Form 10-K of
Registrant for the fiscal year ended December 31, 1998.
3(ii)a. Amendment to By-laws of Registrant.
3(ii)b. By-laws of Registrant as in effect on the date hereof.
4a1. Rights Agreement dated as of November 19, 1997 between
Registrant and First Chicago Trust Company of New York as
24
<PAGE>
Rights Agent is incorporated herein by reference to Exhibit 4a
to the Current Report on Form 8-K of Registrant dated December
2, 1997.
4b1. Indenture dated as of July 15, 1988 between Registrant and
Chemical Bank (as successor by merger to Manufacturers Hanover
Trust Company) as Trustee ("Chemical") is incorporated herein
by reference to Exhibit 4a to the Current Report on Form 8-K
of Registrant dated June 27, 1989 maintained in Commission
File No. 1-9076.
4b2. First Supplemental Indenture dated as of November 14, 1990
between Registrant and Chemical, amending and supplementing
the Indenture constituting Exhibit 4b1 hereto, is incorporated
herein by reference to Exhibit 4b to the Current Report on
Form 8-K of Registrant dated November 19, 1990 maintained in
Commission File No. 1-9076.
4b3. Second Supplemental Indenture dated as of September 1, 1991
between Registrant and Chemical, further amending and
supplementing the Indenture constituting Exhibits 4b1 and 4b2
hereto, is incorporated herein by reference to Exhibit 4c to
the Current Report on Form 8-K of Registrant dated October 10,
1991 maintained in Commission File No. 1-9076.
4c1. Indenture dated as of April 15, 1999 between Registrant and
The Chase Manhattan Bank ("Chase") as Trustee is incorporated
herein by reference to Exhibit 4 to the Current Report on Form
8-K of Registrant dated December 10, 1999.
10a1. Fortune Brands, Inc. Annual Executive Incentive Compensation
Plan is incorporated herein by reference to Exhibit 10a1 to
the Quarterly Report on Form 10-Q of Registrant dated August
12, 1997.*
10b1. Fortune Brands, Inc. 1990 Long-Term Incentive Plan (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 maintained in Commission
File No. 1-9076.*
10b2. Amendment to Fortune Brands, Inc. 1990 Long-Term Incentive
Plan constituting Exhibit 10b1 hereto is incorporated herein
by reference to Exhibit 10a1 to the Quarterly Report on Form
10-Q of Registrant dated November 11, 1997.*
10b3. Amendment to Fortune Brands, Inc. 1990 Long-Term Incentive
Plan and Amendment thereto constituting Exhibits 10b1 and 10b2
hereto is incorporated herein by reference to Exhibit 10a1 to
the Quarterly Report on Form 10-Q of Registrant dated November
13, 2001.*
10c1. Fortune Brands, Inc. 1999 Long-Term Incentive Plan is
incorporated herein by reference to Exhibit 4e1 to the
Registration Statement on Form S-8 of Registrant, dated
February 1, 2000, for the Fortune Brands, Inc. 1999 Long-Term
Incentive Plan.*
25
<PAGE>
10c2. Amendment to Fortune Brands, Inc. 1999 Long-Term Incentive
Plan constituting Exhibit 10c1 hereto is incorporated herein
by reference to Exhibit 10b1 to the Quarterly Report on Form
10-Q of Registrant dated November 13, 2001.*
10d1. Fortune Brands, Inc. Non-Employee Director Stock Option Plan
is incorporated herein by reference to Exhibit 10b1 to the
Quarterly Report on Form 10-Q of Registrant dated August 12,
1997.*
10d2. Amendment to Fortune Brands, Inc. Non-Employee Director Stock
Option Plan constituting Exhibit 10d1 hereto is incorporated
herein by reference to Exhibit 10a1 to the Quarterly Report on
Form 10-Q of Registrant dated August 12, 1998.*
10d3. Amendment to Fortune Brands Inc. Non-Employee Director Stock
Option Plan and Amendment thereto constituting Exhibits 10d1
and 10d2 hereto is incorporated herein by reference to Exhibit
10b9 to the Annual Report on Form 10-K of Registrant for the
fiscal year ended December 31, 1999.*
10d4. Amendment to Fortune Brands, Inc. Non-Employee Director Stock
Option Plan and Amendments thereto constituting Exhibits 10d1,
10d2 and 10d3 hereto is incorporated herein by reference to
Exhibit 10a1 to the Quarterly Report on Form 10-Q of
Registrant dated May 15, 2001.*
10e1. Fortune Brands, Inc. 2002 Non-Employee Director Stock Option
Plan is incorporated by reference to Exhibit B to the
Definitive Schedule 14A of Registrant filed on March 19,
2001.*
10f1. Fortune Brands, Inc. Stock Plan for Non-employee Directors is
incorporated by reference to Exhibit 10b9 to the Annual Report
on Form 10-K of Registrant for the Fiscal Year ended December
31, 1998.*
10f2. Fortune Brands, Inc. Stock Plan for Non-employee Directors is
incorporated by reference to Exhibit A to the Definitive
Schedule 14A of Registrant filed on March 14, 2000.*
10g1. Fortune Brands, Inc. Supplemental Plan, as Amended.*
10h1. Form of Trust Agreement among Registrant, The Chase Manhattan
Bank ("Chase"), et al. establishing a trust in favor of each
of certain executive officers for purposes of paying amounts
under the Supplemental Plan constituting Exhibit 10g1 hereto.*
10h2. Schedule identifying substantially identical agreements to
Trust Agreement constituting Exhibit 10h1 hereto in favor of
Mark Hausberg, Craig P. Omtvedt, Mark A. Roche and Norman H.
Wesley.*
10h3. Amendment, made as of the 1st day of January, 2000 to Trust
Agreement constituting Exhibit 10h1 hereto relating to the
Trust in favor of Norman H. Wesley, is incorporated herein by
reference to Exhibit 10a1 of the Quarterly Report on Form 10-Q
of Registrant dated May 12, 2000.*
26
<PAGE>
10i1. Form of Trust Agreement among each of certain executive
officers, Registrant and Chase establishing a grantor trust in
favor of each of such officers for purposes of paying amounts
under the Supplemental Plan constituting Exhibit 10g1 hereto.*
10i2. Schedule identifying substantially identical agreements to the
Trust Agreement constituting Exhibit 10i1 hereto in favor of
Mark Hausberg, Craig P. Omtvedt, Mark A. Roche and Norman H.
Wesley.*
10j1. 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 maintained in Commission File No.
1-9076.*
10j2. Resolution of the Board of Directors of Registrant adopted on
July 26, 1994 amending the resolutions constituting Exhibit
10j1 hereto is incorporated herein by reference to Exhibit
10e2 to the Annual Report on Form 10-K of Registrant for the
Fiscal Year ended December 31, 1994 maintained in Commission
File No. 1-9076.*
10k1. Resolution of the Board of Directors of Registrant adopted on
July 26, 1988 with respect to retirement and health benefits
provided to Mark A. Roche is incorporated herein by reference
to Exhibit 10f2 to the Annual Report on Form 10-K of
Registrant for the fiscal year ended December 31, 1998.*
10l1. Letter dated August 11, 1995 from Registrant with respect to
deferred payment of fees to Gordon R. Lohman is incorporated
herein by reference to Exhibit 10b to the Quarterly Report on
Form 10-Q of Registrant dated November 9, 1995 maintained in
Commission File No. 1-9076.*
10m1. Form of Agreement between Registrant and each of certain
executive officers.*
10m2. Schedule identifying substantially identical agreements to the
Agreement constituting Exhibit 10m1 hereto entered into by
Registrant with Thomas J. Flocco, Mark Hausberg, Craig P.
Omtvedt, Mark A. Roche and Norman H. Wesley.*
10m3. Form of amendment dated December 1, 2000 to the Agreement
constituting Exhibit 10m1 hereto between Registrant and each
of certain executive officers.*
10m4. Schedule identifying substantially identical agreements to the
Agreement constituting Exhibit 10m3 hereto entered into by
Registrant with Mark Hausberg and Mark A. Roche.*
10n1. Form of Trust Agreement among Registrant, Chase, et al.
establishing a trust in favor of each of certain executive
officers for purposes of paying amounts under the Agreement
constituting Exhibit 10m1 hereto.*
10n2. Schedule identifying substantially identical agreements to the
Trust Agreement constituting Exhibit 10n1 hereto in favor of
Mark Hausberg, Craig P. Omtvedt, Mark A. Roche and Norman H.
Wesley.*
10o1. Severance and Retirement Agreement dated as of January 1, 2000
between Registrant and Norman H. Wesley is incorporated herein
by reference to Exhibit 10c1 to the Quarterly Report on Form
27
<PAGE>
10-Q of Registrant dated May 12, 2000.*
10p1. Severance Agreement dated as of January 29, 1996 between
Registrant and Craig P. Omtvedt.*
10p2. Amendment effective as of January 27, 1997 to the Agreement
constituting Exhibit 10p1 hereto between Registrant and Craig
P. Omtvedt.*
10p3. Amendment dated as of August 1, 1998 to the Agreement and
Amendment thereto constituting Exhibits 10p1 and 10p2 hereto
between Registrant and Craig P. Omtvedt is incorporated by
reference to Exhibit 10j8 to the Annual Report on Form 10-K
for the Fiscal Year ended December 31, 1998.*
10p4. Schedule identifying substantially identical agreements to the
Agreement and Amendments thereto constituting Exhibits 10p1,
10p2 and 10p3 hereto entered into by Registrant with Mark A.
Roche.*
10p5. Amendment dated as of December 18, 2000 to the Agreement and
Amendments thereto constituting Exhibits 10p1, 10p2 and 10p3
hereto between Registrant and Mark A. Roche is incorporated by
reference to Exhibit 10j15 to the Annual Report on Form 10-K
for the Fiscal Year ended December 31, 2001.*
10p6. Schedule identifying substantially identical agreement to the
Amendment constituting Exhibit 10p5 hereto entered into by
Registrant with Mark Hausberg.*
10q1. Severance Agreement dated as of January 1, 2000 between
Registrant and Thomas J. Flocco is incorporated by reference
to Exhibit 10a1 to the Quarterly Report on Form 10-Q of
Registrant dated November 13, 2000.*
10r1. Fortune Brands, Inc. Severance Plan for Vice Presidents,
adopted as of January 1, 2000, is incorporated by reference to
Exhibit 10a1 to the Quarterly Report on Form 10-Q of
Registrant dated August 11, 2000.*
10s1. Indemnification Agreement dated as of December 22, 1994 among
Registrant, The American Tobacco Company and Brown &
Williamson Tobacco Corporation 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, 1997.
10t1. Five-Year Revolving Credit Agreement, dated as of July 12,
2001 among Registrant and Fortune Brands Finance UK, plc as
Borrowers, Chase as Administrative Agent, Citibank, N.A. as
Syndication Agent and 14 financial institutions as Lenders is
incorporated herein by reference to Exhibit 10a1 to the
Quarterly Report on Form 10-Q of Registrant dated August 14,
2001.
10u1. 364-Day Revolving Credit Agreement, dated as of July 12, 2001
among Registrant as Borrower, Chase as Administrative Agent,
Citibank, N.A. as Syndication Agent and 14 financial
institutions as Lenders is incorporated herein by reference to
Exhibit 10b1 to the Quarterly Report on Form 10-Q of
Registrant dated August 14, 2001.
10v1. Master Transaction Agreement dated March 20, 2001 by and among
V&S Vin & Sprit AB, The Absolut Spirits Company, Incorporated,
28
<PAGE>
Jim Beam Brands Worldwide, Inc., Jim Beam Brands Co. and
Registrant is incorporated herein by reference to Exhibit 10b1
to the Quarterly Report on Form 10-Q of Registrant dated May
15, 2001.
12. Statement re computation of ratio of earnings to fixed
charges.
13. 2001 Annual Report to Stockholders of Registrant.
21. Subsidiaries of Registrant.
23(i). Consent of Independent Accountants, PricewaterhouseCoopers
LLP.
24. Powers of Attorney relating to execution of this Annual Report
on Form 10-K.
99. List of Pending/Terminated Cases.
* 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
16, 2001, in respect of Registrant's press release dated
October 16, 2001 announcing that Registrant had sold its
U.K.-based Scotch whisky business (Items 5 and 7(c)).
Registrant filed a Current Report on Form 8-K, dated October
18, 2001, in respect of Registrant's press release dated
October 18, 2001 announcing Registrant's financial results for
the three-month and nine-month periods ended September 30,
2001 (Items 5 and 7(c)).
Registrant furnished a Current Report on Form 8-K, dated
November 6, 2001, for the purpose of furnishing an investment
brochure pursuant to Regulation FD (Items 7(c) and 9).
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.
FORTUNE BRANDS, INC.
(Registrant)
By /s/ Norman H. Wesley
---------------------
Norman H. Wesley
Chairman of the Board and
Date: March 29, 2002 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.
/s/ Norman H. Wesley
-----------------------
Norman H. Wesley, Chairman of the Board and
Chief Executive Officer (principal executive officer)
Date: March 29, 2002
/s/ Craig P. Omtvedt
-----------------------
Craig P. Omtvedt, Senior Vice President and
Chief Financial Officer (principal financial officer)
Date: March 29, 2002
/s/ Nadine A. Heidrich
-------------------------
Nadine A. Heidrich, Vice President and
Corporate Controller (principal accounting officer)
Date: March 29, 2002
/s/ Patricia O. Ewers*
-------------------------
Patricia O. Ewers, Director
Date: March 29, 2002
/s/ Thomas C. Hays*
----------------------
Thomas C. Hays, Director
Date: March 29, 2002
/s/ John W. Johnstone, Jr.*
------------------------------
John W. Johnstone, Jr., Director
Date: March 29, 2002
30
<PAGE>
/s/ Gordon R. Lohman*
------------------------
Gordon R. Lohman, Director
Date: March 29, 2002
/s/ Charles H. Pistor, Jr.*
------------------------------
Charles H. Pistor, Jr., Director
Date: March 29, 2002
/s/ Eugene A. Renna*
-----------------------
Eugene A. Renna, Director
Date: March 29, 2002
/s/ Anne M. Tatlock*
-----------------------
Anne M. Tatlock, Director
Date: March 29, 2002
/s/ David M. Thomas*
-----------------------
David M. Thomas, Director
Date: March 29, 2002
/s/ Peter M. Wilson*
-----------------------
Peter M. Wilson, Director
Date: March 29, 2002
*By Mark A. Roche
-----------------------------
Mark A. Roche, Attorney-in-Fact
31
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
FORTUNE BRANDS, INC. AND SUBSIDIARIES
Report of Independent Accountants F-2
Schedule
--------
II Valuation and qualifying accounts
For the years ended December 31,
2001, 2000 and 1999 F-3
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of Fortune Brands, Inc.:
Our audits of the consolidated financial statements referred to in our report
dated January 22, 2002 appearing in the 2001 Annual Report to Shareholders of
Fortune Brands, Inc. and Subsidiaries (which report and consolidated financial
statements are incorporated by reference in this Form 10-K) also included an
audit of the financial statement schedule listed in Item 14(a)(2)of this Form
10-K. In our opinion, the financial statement schedule presents fairly, in all
material respects, the information set forth therein when read in conjunction
with the related consolidated financial statements.
PricewaterhouseCoopers LLP
Chicago, Illinois
January 22, 2002
F-2
<PAGE>
FORTUNE BRANDS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 2001, 2000 and 1999 (In millions)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Col. A Col. B Col. C Col. D Col. E
------ ------ ------ ------ ------
Additions
---------
Balance at Charged Balance
Beginning to Costs at End
Description of Period and Expenses Deductions of Period
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2001:
Allowance for cash
discounts $ 9.0 $ 71.4 $71.6 (1) $8.8
Allowance for
returns 20.4 198.2 194.3 (1) 23.4
0.9 (4)
Allowance for
doubtful accounts 30.5 11.8 12.4 (2) 28.8
0.9 (3)
0.2 (4)
----- ------ ------ -----
$59.9 $281.4 $280.3 $61.0
===== ====== ====== =====
2000:
Allowance for cash
discounts $ 8.8 $ 72.4 $ 72.1 (1) $ 9.0
0.1 (4)
Allowance for
returns 19.2 173.0 171.5 (1) 20.4
0.3 (4)
Allowance for
doubtful accounts 35.4 8.6 12.4 (2) 30.5
1.1 (4)
----- ------ ------ -----
$63.4 $254.0 $257.5 $59.9
===== ====== ====== =====
1999:
Allowance for cash
discounts $ 8.9 $ 76.3 $ 76.4 (1) $ 8.8
Allowance for
returns 19.1 156.4 157.1 (1) 19.2
(0.8)(3)
Allowance for
doubtful accounts 33.4 15.0 14.6 (2) 35.4
(1.6)(3)
----- ------ ------ -----
$61.4 $247.7 $245.7 $63.4
===== ====== ====== =====
</TABLE>
(1) Cash discounts and returns allowed customers.
(2) Doubtful accounts written off, net of recoveries.
(3) Balance at disposition date of subsidiaries.
(4) Foreign exchange rate changes.
F-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<Caption>
Exhibit Numbered Page
- ------- -------------
<S> <C> <C>
3(i). Restated Certificate of Incorporation of Registrant as in
effect on the date hereof is incorporated herein by reference
to Exhibit 3(i) to the Annual Report on Form 10-K of
Registrant for the fiscal year ended December 31, 1998.
3(ii)a. Amendment to By-laws of Registrant.
3(ii)b. By-laws of Registrant as in effect on the date hereof.
4a1. Rights Agreement dated as of November 19, 1997 between
Registrant and First Chicago Trust Company of New York as
Rights Agent is incorporated herein by reference to Exhibit 4a
to the Current Report on Form 8-K of Registrant dated December
2, 1997.
4b1. Indenture dated as of July 15, 1988 between Registrant and
Chemical Bank (as successor by merger to Manufacturers Hanover
Trust Company) as Trustee ("Chemical") is incorporated herein
by reference to Exhibit 4a to the Current Report on Form 8-K
of Registrant dated June 27, 1989 maintained in Commission
File No. 1-9076.
4b2. First Supplemental Indenture dated as of November 14, 1990
between Registrant and Chemical, amending and supplementing
the Indenture constituting Exhibit 4b1 hereto, is incorporated
herein by reference to Exhibit 4b to the Current Report on
Form 8-K of Registrant dated November 19, 1990 maintained in
Commission File No. 1-9076.
4b3. Second Supplemental Indenture dated as of September 1, 1991
between Registrant and Chemical, further amending and
supplementing the Indenture constituting Exhibits 4b1 and 4b2
hereto, is incorporated herein by reference to Exhibit 4c to
the Current Report on Form 8-K of Registrant dated October 10,
1991 maintained in Commission File No. 1-9076.
4c1. Indenture dated as of April 15, 1999 between Registrant and
The Chase Manhattan Bank ("Chase") as Trustee is incorporated
herein by reference to Exhibit 4 to the Current Report on Form
8-K of Registrant dated December 10, 1999.
10a1. Fortune Brands, Inc. Annual Executive Incentive Compensation
Plan is incorporated herein by reference to Exhibit 10a1 to
the Quarterly Report on Form 10-Q of Registrant dated August
12, 1997.*
</Table>
<PAGE>
<TABLE>
<S> <C> <C>
10b1. Fortune Brands, Inc. 1990 Long-Term Incentive Plan (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
maintained in Commission File No. 1-9076.*
10b2. Amendment to Fortune Brands, Inc. 1990 Long-Term Incentive
Plan constituting Exhibit 10b1 hereto is incorporated herein
by reference to Exhibit 10a1 to the Quarterly Report on Form
10-Q of Registrant dated November 11, 1997.*
10b3. Amendment to Fortune Brands, Inc. 1990 Long-Term Incentive
Plan and Amendment thereto constituting Exhibits 10b1 and 10b2
hereto is incorporated herein by reference to Exhibit 10a1 to
the Quarterly Report on Form 10-Q of Registrant dated November
13, 2001.*
10c1. Fortune Brands, Inc. 1999 Long-Term Incentive Plan is
incorporated herein by reference to Exhibit 4e1 to the
Registration Statement on Form S-8 of Registrant, dated
February 1, 2000, for the Fortune Brands, Inc. 1999 Long-Term
Incentive Plan.*
10c2. Amendment to Fortune Brands, Inc. 1999 Long-Term Incentive
Plan constituting Exhibit 10c1 hereto is incorporated herein
by reference to Exhibit 10b1 to the Quarterly Report on Form
10-Q of Registrant dated November 13, 2001.*
10d1. Fortune Brands, Inc. Non-Employee Director Stock Option Plan
is incorporated herein by reference to Exhibit 10b1 to the
Quarterly Report on Form 10-Q of Registrant dated August 12,
1997.*
10d2. Amendment to Fortune Brands, Inc. Non-Employee Director Stock
Option Plan constituting Exhibit 10d1 hereto is incorporated
herein by reference to Exhibit 10a1 to the Quarterly Report on
Form 10-Q of Registrant dated August 12, 1998.*
10d3. Amendment to Fortune Brands Inc. Non-Employee Director Stock
Option Plan and Amendment thereto constituting Exhibits 10d1
and 10d2 hereto is incorporated herein by reference to Exhibit
10b9 to the Annual Report on Form 10-K of Registrant for the
fiscal year ended December 31, 1999.*
10d4. Amendment to Fortune Brands, Inc. Non-Employee Director Stock
Option Plan and Amendments thereto constituting Exhibits 10d1,
10d2 and 10d3 hereto is incorporated herein by reference to
Exhibit 10a1 to the Quarterly Report on Form 10-Q of
Registrant dated May 15, 2001.*
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10e1. Fortune Brands, Inc. 2002 Non-Employee Director Stock Option
Plan is incorporated by reference to Exhibit B to the
Definitive Schedule 14A of Registrant filed on March 19,
2001.*
10f1. Fortune Brands, Inc. Stock Plan for Non-employee Directors is
incorporated by reference to Exhibit 10b9 to the Annual Report
on Form 10-K of Registrant for the Fiscal Year ended December
31, 1998.*
10f2. Fortune Brands, Inc. Stock Plan for Non-employee Directors is
incorporated by reference to Exhibit A to the Definitive
Schedule 14A of Registrant filed on March 14, 2000.*
10g1. Fortune Brands, Inc. Supplemental Plan, as Amended.*
10h1. Form of Trust Agreement among Registrant, The Chase Manhattan
Bank ("Chase"), et al. establishing a trust in favor of each
of certain executive officers for purposes of paying amounts
under the Supplemental Plan constituting Exhibit 10g1 hereto.*
10h2. Schedule identifying substantially identical agreements to
Trust Agreement constituting Exhibit 10h1 hereto in favor of
Mark Hausberg, Craig P. Omtvedt, Mark A. Roche and Norman H.
Wesley.*
10h3. Amendment, made as of the 1st day of January, 2000 to Trust
Agreement constituting Exhibit 10h1 hereto relating to the
Trust in favor of Norman H. Wesley, is incorporated herein by
reference to Exhibit 10a1 of the Quarterly Report on Form 10-Q
of Registrant dated May 12, 2000.*
10i1. Form of Trust Agreement among each of certain executive
officers, Registrant and Chase establishing a grantor trust in
favor of each of such officers for purposes of paying amounts
under the Supplemental Plan constituting Exhibit 10g1 hereto.*
10i2. Schedule identifying substantially identical agreements to the
Trust Agreement constituting Exhibit 10i1 hereto in favor of
Mark Hausberg, Craig P. Omtvedt, Mark A. Roche and Norman H.
Wesley.*
10j1. 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
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
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 maintained in Commission File No. 1-9076.*
10j2. Resolution of the Board of Directors of Registrant adopted on
July 26, 1994 amending the resolutions constituting Exhibit
10j1 hereto is incorporated herein by reference to Exhibit
10e2 to the Annual Report on Form 10-K of Registrant for the
Fiscal Year ended December 31, 1994 maintained in Commission
File No. 1-9076.*
10k1. Resolution of the Board of Directors of Registrant adopted on
July 26, 1988 with respect to retirement and health benefits
provided to Mark A. Roche is incorporated herein by reference
to Exhibit 10f2 to the Annual Report on Form 10-K of
Registrant for the fiscal year ended December 31, 1998.*
10l1. Letter dated August 11, 1995 from Registrant with respect to
deferred payment of fees to Gordon R. Lohman is incorporated
herein by reference to Exhibit 10b to the Quarterly Report on
Form 10-Q of Registrant dated November 9, 1995 maintained in
Commission File No. 1-9076.*
10m1. Form of Agreement between Registrant and each of certain
executive officers.*
10m2. Schedule identifying substantially identical agreements to the
Agreement constituting Exhibit 10m1 hereto entered into by
Registrant with Thomas J. Flocco, Mark Hausberg, Craig P.
Omtvedt, Mark A. Roche and Norman H. Wesley.*
10m3. Form of amendment dated December 1, 2000 to the Agreement
constituting Exhibit 10m1 hereto between Registrant and each
of certain executive officers.*
10m4. Schedule identifying substantially identical agreements to the
Agreement constituting Exhibit 10m3 hereto entered into by
Registrant with Mark Hausberg and Mark A. Roche.*
10n1. Form of Trust Agreement among Registrant, Chase, et al.
establishing a trust in favor of each of certain executive
officers for purposes of paying amounts under the Agreement
constituting Exhibit 10m1 hereto.*
10n2. Schedule identifying substantially identical agreements to the
Trust Agreement constituting Exhibit 10n1 hereto in favor of
Mark Hausberg, Craig P. Omtvedt, Mark A. Roche and Norman H.
Wesley.*
10o1. Severance and Retirement Agreement dated as of January 1, 2000
between Registrant and Norman H. Wesley is incorporated herein
by reference to Exhibit 10c1 to the Quarterly Report on Form
10-Q of Registrant dated May 12, 2000.*
</Table>
<PAGE>
<TABLE>
<S> <C> <C>
10p1. Severance Agreement dated as of January 29, 1996 between
Registrant and Craig P. Omtvedt.*
10p2. Amendment effective as of January 27, 1997 to the Agreement
constituting Exhibit 10p1 hereto between Registrant and Craig
P. Omtvedt.*
10p3. Amendment dated as of August 1, 1998 to the Agreement and
Amendment thereto constituting Exhibits 10p1 and 10p2 hereto
between Registrant and Craig P. Omtvedt is incorporated by
reference to Exhibit 10j8 to the Annual Report on Form 10-K
for the Fiscal Year ended December 31, 1998.*
10p4. Schedule identifying substantially identical agreements to the
Agreement and Amendments thereto constituting Exhibits 10p1,
10p2 and 10p3 hereto entered into by Registrant with Mark A.
Roche.*
10p5. Amendment dated as of December 18, 2000 to the Agreement and
Amendments thereto constituting Exhibits 10p1, 10p2 and 10p3
hereto between Registrant and Mark A. Roche is incorporated by
reference to Exhibit 10j15 to the Annual Report on Form 10-K
for the Fiscal Year ended December 31, 2001.*
10p6. Schedule identifying substantially identical agreement to the
Amendment constituting Exhibit 10p5 hereto entered into by
Registrant with Mark Hausberg.*
10q1. Severance Agreement dated as of January 1, 2000 between
Registrant and Thomas J. Flocco is incorporated by reference
to Exhibit 10a1 to the Quarterly Report on Form 10-Q of
Registrant dated November 13, 2000.*
10r1. Fortune Brands, Inc. Severance Plan for Vice Presidents,
adopted as of January 1, 2000, is incorporated by reference to
Exhibit 10a1 to the Quarterly Report on Form 10-Q of
Registrant dated August 11, 2000.*
10s1. Indemnification Agreement dated as of December 22, 1994 among
Registrant, The American Tobacco Company and Brown &
Williamson Tobacco Corporation 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, 1997.
10t1. Five-Year Revolving Credit Agreement, dated as of July 12,
2001 among Registrant and Fortune Brands Finance UK, plc as
Borrowers, Chase as Administrative Agent, Citibank, N.A. as
Syndication Agent and 14 financial institutions as Lenders is
incorporated herein by reference to Exhibit 10a1 to the
Quarterly Report on Form
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10-Q of Registrant dated August 14, 2001.
10u1. 364-Day Revolving Credit Agreement, dated as of July 12, 2001
among Registrant as Borrower, Chase as Administrative Agent,
Citibank, N.A. as Syndication Agent and 14 financial
institutions as Lenders is incorporated herein by reference to
Exhibit 10b1 to the Quarterly Report on Form 10-Q of
Registrant dated August 14, 2001.
10v1. Master Transaction Agreement dated March 20, 2001 by and among
V&S Vin & Sprit AB, The Absolut Spirits Company, Incorporated,
Jim Beam Brands Worldwide, Inc., Jim Beam Brands Co. and
Registrant is incorporated herein by reference to Exhibit 10b1
to the Quarterly Report on Form 10-Q of Registrant dated May
15, 2001.
12. Statement re computation of ratio of earnings to fixed
charges.
13. 2001 Annual Report to Stockholders of Registrant.
21. Subsidiaries of Registrant.
23(i). Consent of Independent Accountants, PricewaterhouseCoopers
LLP.
24. Powers of Attorney relating to execution of this Annual Report
on Form 10-K.
99. List of Pending/Terminated Cases.
</TABLE>
* Indicates that exhibit is a management contract or compensatory plan or
arrangement.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.(II)(A)
<SEQUENCE>3
<FILENAME>c68345ex3-iia.txt
<DESCRIPTION>AMENDMENT OF REGISTRANT
<TEXT>
<PAGE>
EXHIBIT 3(ii)a
FORTUNE BRANDS, INC.
BY-LAW AMENDMENT
ADOPTED ON FEBRUARY 26, 2002
EFFECTIVE FEBRUARY 26, 2002
Article I, Section 1 was amended to read in its entirety as follows:
SECTION 1. The number of directors constituting the entire Board of
Directors of the Company, which shall be no fewer than seven and no greater than
twenty, shall be determined by action of the Board of Directors adopted at any
regular or special meeting of the Board of Directors by the affirmative vote of
at least two-thirds of all the directors then in office, provided notice of the
proposed change in the number of directors shall be given in writing to each of
the directors then in office. Any amendment to this Section 1 of these By-laws
may be adopted at any regular or special meeting of the Board of Directors by
the affirmative vote of at least two-thirds of all the directors then in office.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-3.(II)(B)
<SEQUENCE>4
<FILENAME>c68345ex3-iib.txt
<DESCRIPTION>BY-LAWS OF REGISTRANT
<TEXT>
<PAGE>
EXHIBIT 3(ii)b
BY-LAWS
of
FORTUNE BRANDS, INC.
(As Amended)
ARTICLE I
Directors
Section 1. The number of directors constituting the entire
Board of Directors of the Company, which shall be no fewer than seven and no
greater than twenty, shall be determined by action of the Board of Directors
adopted at any regular or special meeting of the Board of Directors by the
affirmative vote of at least two-thirds of all directors then in office,
provided notice of the proposed change in the number of directors shall be given
in writing to each of the directors then in office. Any amendment to this
Section 1 of these By-laws may be adopted at any regular or special meeting of
the Board of Directors by the affirmative vote of at least two-thirds of all the
directors then in office.
Section 2. Each director shall hold office until his successor
is elected and qualified or until his earlier resignation or removal. Any
director of the Company may resign at any time upon written notice to the
Company. Except as otherwise provided for, or fixed by, or pursuant to the
provisions of Article IV of the Certificate of Incorporation relating to the
rights of the holders of any class or series of stock having a preference over
the Common Stock, newly created directorships resulting from any increase in the
number of directors or any vacancy on the Board of Directors resulting from
death, resignation, disqualification, removal or other cause shall be filled
solely by the affirmative vote of a majority of the remaining directors then in
office, even though less than a quorum of the Board of Directors, or by a sole
remaining director.
Section 3. In order to qualify to hold office as a director of
the Company, a person must hold at least one share of stock of the Company.
Section 4. The directors may hold their meetings and have an
office and keep the books of the Company in Old Greenwich, Connecticut, or
elsewhere outside of the State of Delaware.
Section 5. The Board of Directors, by resolution adopted by a
majority of the entire Board, may appoint from among its members an Executive
Committee which shall have at least three members. To the extent provided in
such resolution, such committee shall have and may exercise all the powers and
authority of the Board, including the power to authorize the seal of the Company
to be affixed to all papers that require it, except that such committee shall
not have such power and authority in reference to
(1) amending the Certificate of
Incorporation (except that such committee may, to the extent
authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board of Directors
as provided in Section 151(a) of the General Corporation Law
of Delaware, fix the designations and any of
1
<PAGE>
the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets
of the Company or the conversion into, or the exchange of such
shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of
the Company or fix the number of shares of any series of stock
or authorize the increase or decrease of the shares of any
series);
(2) adopting an agreement of merger or
consolidation under Sections 251 or 252 of the General
Corporation Law of Delaware;
(3) recommending to the stockholders any
action that requires stockholders' approval;
(4) making, amending or repealing any By-law
of the Company;
(5) electing or appointing any director, or
removing any officer or director;
(6) amending or repealing any resolution
theretofore adopted by the Board of Directors;
(7) fixing compensation of the directors for
serving on the Board of Directors or on any committee; or
(8) unless the resolution shall expressly so
provide, declaring a dividend, authorizing the issuance of
stock or adopting a certificate of ownership and merger
pursuant to Section 253 of the General Corporation Law of
Delaware.
Actions taken at a meeting of such committee shall be reported
to the Board of Directors at its next meeting following such committee meeting;
except that, when the meeting of the Board is held within two days after the
committee meeting, such report shall be made to the Board at either its first or
second meeting following such committee meeting.
ARTICLE II
Meetings of Stockholders
Section l. The annual meeting of the stockholders of the
Company for the election of directors, and such other business as may properly
come before the meeting, shall be held at such place as may from time to time be
designated by the directors, on the first Wednesday of May, at ten o'clock in
the forenoon, or at such other hour as the directors may designate, or on such
other day and at such hour as the directors may designate. If the day fixed for
the meeting is a legal holiday, the meeting shall be held at the same hour on
the next business day which is not a legal holiday.
Section 2. Special meetings of the stockholders, to be held at
such place as may from time to time be designated by the directors, may be
called only by the Chairman of the Board, the President or the Board of
Directors, by
2
<PAGE>
resolution adopted by a majority of the entire Board, for such purposes as shall
be specified in the call.
Section 3. Except as otherwise provided by law, due notice of
each annual meeting of the stockholders shall be given by a written or printed
notice signed by the Secretary or an Assistant Secretary of the Company and
mailed, postage prepaid, at least ten days prior to such meeting to each
stockholder of record entitled to vote thereat appearing on the books of the
Company at the address given thereon.
Due notice of each special meeting shall be given also in the
manner above provided. The notice shall state the object of the special meeting,
and no other business shall be transacted at such meeting.
Section 4. The holders of a majority in voting power of the
outstanding shares of capital stock entitled to vote, present in person or
represented by proxy, shall constitute a quorum at a meeting of stockholders.
Except as otherwise required by law or the Certificate of Incorporation, the
affirmative vote of shares representing a majority in voting power of the shares
present in person or represented by proxy at a meeting at which a quorum is
present and entitled to vote on the subject matter shall be the act of the
stockholders, and except that directors shall be elected by a plurality of votes
cast at an election. The stockholders present at a duly convened meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
Section 5. Each meeting of the stockholders, whether annual or
special, shall be presided over by the Chairman of the Board if present, and if
he is not present by the President if present. If neither officer specified in
the preceding sentence is present, the meeting shall be presided over by the
person designated in writing by the Chairman of the Board, or if the Chairman of
the Board has made no designation, by the person designated by the President, or
if the President has made no designation, by the person designated by the Board
of Directors. If neither officer specified in the first sentence of this section
is present, and no one designated by the Chairman of the Board or the President
or the Board of Directors is present, the meeting may elect any stockholder of
record who is entitled to vote for directors, or any person present holding a
proxy for such a stockholder, to preside. The Secretary of the Company (or in
his absence any Assistant Secretary) shall be the Secretary of any such meeting;
in the absence of the Secretary and Assistant Secretaries, any person may be
elected by the meeting to act as Secretary of the meeting.
Section 6. Any voting proxy given by a stockholder must be in
writing, executed by the stockholder, or, in lieu thereof, to the extent
permitted by law, may be transmitted in a telegram, cablegram or other means of
electronic transmission setting forth or submitted with information from which
it can be determined that the telegram, cablegram or other electronic
transmission was authorized by the stockholder. A copy, facsimile transmission
or other reliable reproduction of a written or electronically-transmitted proxy
authorized by this Section 6 may be substituted for or used in lieu of the
original writing or electronic transmission to the extent permitted by law.
Section 7. Any previously scheduled annual or special meeting
of stockholders may, by resolution of the Board of Directors, be postponed upon
public announcement made prior to the date previously scheduled for such
3
<PAGE>
meeting of stockholders. For purposes of this Article II, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Company with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Securities Exchange Act of 1934, as amended. The
person presiding over any meeting of stockholders, or a majority of the voting
power of the shares entitled to vote, present in person or represented by proxy,
even if less than a quorum, may adjourn the meeting from time to time. No notice
of the time and 10-30-90 place of adjourned meetings need be given except as
required by law.
Section 8. The directors shall appoint one or more inspectors
of election and of the vote at any time prior to the date of any meeting of
stockholders at which an election is to be held or a vote is to be taken. In the
event any inspector so appointed is absent from such meeting or for any other
reason fails to act as such at the meeting, the person presiding pursuant to
these By-laws may appoint a substitute who shall have all the powers and duties
of such inspector. The inspector or inspectors so appointed shall act at such
meeting, make such reports thereof and take such other action as shall be
provided by law and as may be directed by the person presiding over the meeting.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector with strict
impartiality and according to the best of his ability.
Section 9. The directors may, at any time prior to any annual
or special meeting of the stockholders, adopt an order of business for such
meeting which shall be the order of business to be followed at such meeting. The
date and time of the opening and the closing of the polls for each matter upon
which the stockholders will vote at such meeting shall be announced at such
meeting by the person presiding over such meeting.
Section l0. At any meeting of stockholders a stock vote shall
be taken on any resolution or other matter presented to the meeting for action
if so ordered by the person presiding over the meeting or on the demand of any
stockholder of record entitled to vote at the meeting or any person present
holding a proxy for such a stockholder. Such order or demand for a stock vote
may be made either before or after a vote has been taken on such resolution or
other matter in a manner other than by stock vote and before or after the result
of the vote taken otherwise than by stock vote has been announced. The result of
a stock vote taken in accordance with this By-law shall supersede the result of
any vote previously taken in any manner other than by stock vote.
Section 11. (A) Nominations of persons for election to the
Board of Directors of the Company may be made as provided in the Certificate of
Incorporation. The proposal of other business to be considered by the
stockholders may be made at an annual meeting of stockholders (1) pursuant to
the Company's notice of meeting, (2) by or at the direction of the Board of
Directors or (3) by any stockholder of the Company who was a stockholder of
record at the time of giving of the notice provided for in this Section 11, who
is entitled to vote thereon at the meeting and who complies with the notice
procedures set forth in this Section 11.
(B) For business (other than the nomination of persons for
election to the Board of Directors) to be properly brought before an annual
meeting by a stockholder pursuant to clause (3) of paragraph (A) of this Section
11, the stockholder must have given timely notice thereof in writing to the
Secretary
4
<PAGE>
of the Company. To be timely, a stockholder's notice shall be delivered, either
by personal delivery or by United States mail, postage prepaid, to the Secretary
not later than one hundred twenty (120) days in advance of such meeting. Such
stockholder's notice shall set forth (1) a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made and (2) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the proposal is made (a) the name and address of such
stockholder, as they appear on the Company's books, and of such beneficial owner
and (b) the class and number of shares of the Company which are owned
beneficially and of record by such stockholder and such beneficial owner.
(C) The person presiding over an annual meeting of
stockholders shall have the power and duty to determine whether any business
proposed by any stockholder to be brought before the meeting was made in
accordance with the procedures set forth in this Section 11 and, if any proposed
business is not in compliance with this Section 11, to declare that such
defective proposal shall be disregarded.
(D) In addition to the foregoing provisions of this Section
11, a stockholder shall comply with all applicable requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder with respect to the matters set forth in this Section 11. Nothing in
this Section 11 shall be deemed to affect any rights of stockholders to request
inclusion of proposals in the Company's proxy statement pursuant to Rule l4a-8
under such Act.
ARTICLE III
Meetings of Directors
Section 1. Regular meetings of the Board of Directors shall be
held at such places and on such dates and times as may from time to time be
designated by the directors, the Chairman of the Board, or the President.
Special meetings may be called at any time by the Chairman of the Board or upon
the request of any three directors.
Section 2. No notice need be given of regular meetings of the
directors, except that at least one day's notice shall be given of any place
other than the office of the Company in Lincolnshire, Illinois at which any such
meeting is to be held, but such notice need not be given to any director who
signs a written waiver of notice before or after the meeting. Attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
except when the director attends a meeting for the express purpose of objecting,
at the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
Section 3. At any meeting six directors shall constitute a
quorum unless otherwise provided for in these By-laws or in the Certificate of
Incorporation or in any applicable statute, but in no case less than one-third
of all the directors then in office.
5
<PAGE>
Section 4. Members of the Board of Directors or of any
Committee thereof may participate in meetings of the Board of Directors or of
such committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation shall constitute presence in person at such
meeting.
Section 5. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee thereof may be taken
without a meeting if all members of the Board of Directors or of such committee,
as the case may be, consent thereto in writing and the writing or writings are
filed with the minutes of proceedings of the Board of Directors or of such
committee.
ARTICLE IV
Officers
Section 1. The Board of Directors shall annually choose from
amongst its members a Chairman of the Board. The Board shall also annually
choose a Vice Chairman (if any), a President (if any), one or more Executive
Vice Presidents (if any), one or more Senior Vice Presidents (if any), a
principal financial officer, a principal accounting officer, such other Vice
Presidents (if any) as it shall determine, a Secretary, a Treasurer and a
Controller (if any), who need not be directors.
Section 2. The Board of Directors may elect other officers and
define their powers and duties.
Section 3. Any two offices not inconsistent with each other
may be held by the same person.
Section 4. All officers elected by the Board of Directors
shall hold office, subject to removal by the Board, until their successors are
chosen and qualified. The affirmative vote of at least two-thirds of all of the
directors then in office shall be required to remove or reduce the salary of any
officer elected by the Board of Directors.
Section 5. All agents and employees shall be appointed and may
be removed by the Chairman of the Board, subject to the control of the Board of
Directors.
Section 6. Vacancies among officers of the Company shall be
filled as, and to the extent that, the Board of Directors shall determine by
vote of a majority of the directors present at any regular or special meeting at
which not less than a majority of all the directors then in office are present.
Section 7. The Chairman of the Board shall be the Chief
Executive Officer of the Company and shall have general direction of its
business affairs, subject, however, to the control of the Board of Directors. He
shall, if present, preside at all meetings of the Board of Directors and shall
perform such other duties and have such responsibilities as the Board may from
time to time determine.
6
<PAGE>
Section 8. The Vice Chairman (if any), the President (if any),
the Executive Vice Presidents (if any), the Senior Vice Presidents (if any) and
such other Vice Presidents as shall have been chosen shall have such powers and
perform such duties as shall at any time be delegated to them by the Board of
Directors. At the request of the Chairman of the Board, or in case of his
absence or disability, the President (if any), or if there is no President such
other elected officer designated by the Chairman of the Board in a writing filed
with the records of the Secretary, shall perform the duties of the Chairman of
the Board, subject to the control of the Board of Directors.
Section 9. The Secretary shall give the requisite notice of
meetings of stockholders and directors and shall record the proceedings of such
meetings, shall have the custody of the seal of the Company and shall affix it
or cause it to be affixed to such instruments as require the seal and attest it
and, besides his powers and duties prescribed by law, shall have such other
powers and perform such other duties as shall at any time be required of him by
the Board of Directors.
Section 10. The Assistant Secretaries shall assist the
Secretary in the discharge of his duties and shall have such powers and perform
such other duties as shall at any time be delegated to them by the Board of
Directors, and in the absence or disability of the Secretary, shall perform the
duties of his office, subject to the control of the Board.
Section 11. The Treasurer shall have charge of the funds and
securities of the Company and shall have such powers and perform such duties as
shall at any time be delegated to him by the Board of Directors.
Section 12. The Assistant Treasurers shall assist the
Treasurer in the discharge of his duties and shall have such powers and perform
such other duties as shall at any time be delegated to them by the Board of
Directors, and in the absence or disability of the Treasurer, shall perform the
duties of his office subject to the control of the Board.
Section 13. Any other officer, agent or employee of the
Company may be required to give such security for the faithful performance of
his duties as shall be determined by the Board of Directors, who shall also
determine the custody of any security given.
ARTICLE V
Salaries
Section 1. The salaries of all officers elected by the Board
of Directors who hold offices of a rank of Vice President or above shall be
fixed by the Compensation and Stock Option Committee.
Section 2. Salaries of all other officers elected by the Board
and all other agents and employees shall be fixed by or in the manner determined
by the Board.
Section 3. The Board of Directors, by the affirmative vote of
a majority of directors in office and irrespective of any personal interest of
any directors, shall have authority to establish reasonable compensation of
directors for services to the Company as directors, officers or otherwise,
7
<PAGE>
except that the Compensation and Stock Option Committee, by the affirmative vote
of a majority of Committee members in office and irrespective of any personal
interest of any Committee members or other directors, shall have authority to
establish such compensation of directors who also are officers elected by the
Board and hold offices of a rank of Vice President or above.
ARTICLE VI
Seal
Section 1. The Seal of the Company shall be in such form as
the Board of Directors may from time to time prescribe and it may be used by
causing it or a facsimile thereof to be impressed or affixed or in any other
manner reproduced.
ARTICLE VII
Signatures on Commercial
Instruments and Contracts
Section 1. All checks or bank drafts shall be signed by any
two of the following named officers: Chairman of the Board, Vice Chairman,
President, the principal financial officer, the principal accounting officer,
any Vice President, Secretary, any Assistant Secretary, Treasurer, any Assistant
Treasurer, Controller, any Assistant Controller; and in such other manner as the
Board of Directors may from time to time designate.
Section 2. All notes or other obligations or contracts shall
be signed by the Chairman of the Board, the Vice Chairman, the President, the
principal financial officer, the principal accounting officer, or any Vice
President and also by one of the following officers: the Secretary, an Assistant
Secretary, the Treasurer, an Assistant Treasurer, the Controller, or an
Assistant Controller (provided that no individual shall sign the instrument in
two capacities), or shall be signed by the Chairman of the Board, the Vice
Chairman, the President, the principal financial officer, the principal
accounting officer, or any Vice President, with the corporate seal or a
facsimile thereof affixed thereto or imprinted thereon, attested by the
Secretary or an Assistant Secretary; or such notes, obligations or contracts
shall be signed in such manner and by one or more of such officers or other
persons on behalf of the Company as the Board of Directors may from time to time
authorize or direct. When and as authorized or directed by the Board of
Directors, the signatures of such officers or other persons or any of them
signing on behalf of the Company may be facsimiles.
8
<PAGE>
ARTICLE VIII
Capital Stock
Section 1. Certificates of the capital stock of the Company
shall be issued for shares duly numbered and registered in the order of their
issue, and shall be in the form the directors shall prescribe.
Section 2. The capital stock shall be transferable on the
transfer books of the Company, subject to these By-laws, by the owner in person,
or by attorney or legal representative, written evidence of whose authority
shall be filed with the Company.
Section 3. No transfer of capital stock can be required except
upon surrender and cancellation of the certificate representing the same.
Section 4. The Board of Directors may at any time, in its
discretion, appoint one or more transfer agents or registrars of the shares of
stock of the Company and terminate the appointment of any transfer agent or
registrar. The Board of Directors may also designate the Company to perform such
functions alone or in conjunction with one or more other transfer agents or
registrars.
Section 5. (A) For the purpose of determining the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or for the purpose of determining stockholders entitled to
receive payment of any dividend or allotment of any right, or for the purpose of
any other action, the Board of Directors may fix, in advance, a date as the
record date for any such determination of stockholders. Such date shall be not
more than 60 nor less than 10 days before the date of such meeting, nor more
than 60 days prior to any other action.
(B) When a determination of stockholders of record entitled to
notice of or to vote at any meeting of stockholders has been made as provided in
this Section 5, such determination shall apply to any adjournment thereof,
unless the Board of Directors fixes a new record date under this Section 5 for
the adjourned meeting.
ARTICLE IX
Committee on Conflicts of Interests
Section 1. The Board of Directors, by resolution adopted by a
majority of the entire Board, shall appoint a Committee on Conflicts of
Interests which shall have at least three members. To the extent provided by
resolution of the Board, such committee shall have the power to interpret,
administer and apply the policies of the Company as established by the Board
from time to time with respect to conflicts of interests.
ARTICLE X
Dividends
Section 1. Dividends on the Preferred Stock and the Common
Stock of the Company may be declared by the Board of Directors, at any regular
or special meeting, as provided by law and the Certificate of Incorporation.
9
<PAGE>
ARTICLE XI
Amendments
Section 1. The Board of Directors shall, except as otherwise
provided in these By-laws or the Certificate of Incorporation, have the power to
alter, amend or repeal these By-laws at any meeting by the affirmative vote of
two-thirds of the directors then in office, provided notice of the proposed
alteration, amendment or repeal be given in writing to each of the directors,
and provided also that no alteration, amendment or repeal of a specification in
any section of these By-laws of a stated fraction of directors as the minimum
number whose presence or vote is requisite for action under such section may be
made without the presence or vote or both, as the case may be, of the minimum
number so specified.
ARTICLE XII
[Repealed effective April 30, 1997.]
ARTICLE XIII
Indemnification
Section 1. (A) Each person (an "indemnitee") who was or is
made or threatened to be made a party to or was or is involved (as a witness or
otherwise) in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she or a person of whom he or she is the legal representative
was or is a director, officer or employee of the Company or was or is serving at
the request of the Company as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding was or is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless by the
Company to the fullest extent permitted by the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Company to provide broader indemnification rights than said law permitted the
Company to provide prior to such amendment), against all expense, liability and
loss (including attorneys' fees and retainers therefor, judgments, fines, excise
taxes or penalties under the Employee Retirement Income Security Act of 1974, as
amended, and amounts paid in settlement) reasonably incurred or suffered by such
person in connection therewith and such indemnification shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of his or her heirs, executors and administrators;
provided, however, that except as provided in Section 3 of this Article XIII
with respect to proceedings seeking to enforce rights to indemnification, the
Company shall indemnify any such person seeking indemnification in connection
with a proceeding (or part thereof) initiated by such person only if such
proceeding (or part thereof) was authorized by the Board of Directors of the
Company.
10
<PAGE>
(B) The right to indemnification conferred in this Article
XIII is and shall be a contract right. The right to indemnification conferred in
this Article XIII shall include the right to be paid by the Company the expenses
(including attorneys' fees and retainers therefor) reasonably incurred in
connection with any such proceeding in advance of its final disposition, such
advances to be paid by the Company within 20 days after the receipt by the
Company of a statement or statements from the indemnitee requesting such advance
or advances from time to time; provided, however, that if the General
Corporation Law of the State of Delaware requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a director or
officer (and not in any other capacity in which service was or is rendered by
such person while a director or officer, including, without limitation, service
to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Company of an undertaking by
or on behalf of such director or officer, to repay all amounts so advanced if it
shall ultimately be determined that such director or officer is not entitled to
be indemnified under this Article XIII or otherwise.
Section 2. (A) To obtain indemnification under this Article
XIII, an indemnitee shall submit to the Company a written request, including
therein or therewith such documentation and information as is reasonably
available to the indemnitee and is reasonably necessary to determine whether and
to what extent the indemnitee is entitled to indemnification. Upon written
request by an indemnitee for indemnification pursuant to the first sentence of
this Section 2(A), a determination, if required by applicable law, with respect
to the indemnitee's entitlement thereto shall be made as follows: (1) if
requested by the indemnitee, by Independent Counsel (as hereinafter defined), or
(2) if no request is made by the indemnitee for a determination by Independent
Counsel, (a) by the Board of Directors by a majority vote of a quorum consisting
of Disinterested Directors (as hereinafter defined), or (b) if a quorum of the
Board of Directors consisting of Disinterested Directors is not obtainable or,
even if obtainable, such quorum of Disinterested Directors so directs, by
Independent Counsel in a written opinion to the Board of Directors, a copy of
which shall be delivered to the indemnitee, or (c) by the stockholders of the
Company. In the event the determination of entitlement to indemnification is to
be made by Independent Counsel at the request of the indemnitee, the Independent
Counsel shall be selected by the indemnitee unless the indemnitee shall request
that such selection be made by the Board of Directors, in which event the
Independent Counsel shall be selected by the Board of Directors. If it is so
determined that the indemnitee is entitled to indemnification, payment to the
indemnitee shall be made within 10 days after such determination.
(B) In making a determination with respect to entitlement to
indemnification hereunder, the person, persons or entity making such
determination shall presume that the indemnitee is entitled to indemnification
under this Article XIII, and the Company shall have the burden of proof to
overcome that presumption in connection with the making by any person, persons
or entity of any determination contrary to that presumption.
Section 3. (A) If a claim under Section 1 of this Article XIII
is not paid in full by the Company within 30 days after a written claim pursuant
to Section 2(A) of this Article XIII has been received by the Company, or if an
advance is not made within 20 days after a request therefor pursuant to Section
1(B) of this Article XIII has been received by the Company, the indemnitee may
at any time thereafter bring suit (or, at the indemnitee's option, an
arbitration proceeding before a single arbitrator pursuant to the rules of the
11
<PAGE>
American Arbitration Association) against the Company to recover the unpaid
amount of the claim or the advance and, if successful in whole or in part, the
indemnitee shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such suit or proceeding (other than a suit
or proceeding brought to enforce a claim for expenses incurred in connection
with any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Company) that the
indemnitee has not met the standards of conduct which make it permissible under
the General Corporation Law of the State of Delaware for the Company to
indemnify the indemnitee for the amount claimed or that such indemnification
otherwise is not permitted under the General Corporation Law of the State of
Delaware, but the burden of proving such defense shall be on the Company.
(B) Neither the failure of the Company (including its Board of
Directors, Independent Counsel or stockholders) to have made a determination
prior to the commencement of such action that indemnification of the indemnitee
is proper in the circumstances because he or she has met the applicable standard
of conduct set forth in the General Corporation Law of the State of Delaware,
nor an actual determination by the Company (including its Board of Directors,
Independent Counsel or stockholders) that the indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the indemnitee has not met the applicable standard of conduct.
(C) If a determination shall have been made pursuant to
Section 2(A) of this Article XIII that the indemnitee is entitled to
indemnification, the Company shall be bound by such determination in any
judicial proceeding or arbitration commenced pursuant to paragraph (A) of this
Section 3.
(D) The Company shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to paragraph (A) of this
Section 3 that the procedures and presumptions of this Article XIII are not
valid, binding and enforceable and shall stipulate in any such court or before
any such arbitrator that the Company is bound by all the provisions of this
Article XIII.
Section 4. The right to indemnification and the payment of
expenses incurred in connection with a proceeding in advance of its final
disposition conferred in this Article XIII shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute,
provision of the Certificate of Incorporation, By-laws, agreement, vote of
stockholders or Disinterested Directors or otherwise.
Section 5. The Company may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the Company or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the Company would have
the power to indemnify such person against such expense, liability or loss under
the General Corporation Law of the State of Delaware. To the extent that the
Company maintains any policy or policies providing such insurance, each such
director, officer or employee, and each such agent to which rights to
indemnification have been granted as provided in Section 6 of this Article XIII,
shall be covered by such policy or policies in accordance with its or their
terms to the maximum extent of the coverage thereunder for any such director,
officer, employee or agent.
12
<PAGE>
Section 6. The Company may, to the extent authorized from time
to time by the Board of Directors, grant rights to indemnification, and rights
to be paid by the Company the expenses incurred in connection with any
proceeding in advance of its final disposition, to any agent of the Company to
the fullest extent of the provisions of this Article XIII with respect to the
indemnification and advancement of expenses of directors, officers and employees
of the Company.
Section 7. If any provision or provisions of this Article XIII
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(A) the validity, legality and enforceability of the remaining provisions of
this Article XIII (including without limitation, each portion of any Section of
this Article XIII containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (B) to the fullest extent
possible, the provisions of this Article XIII (including, without limitation,
each portion of any Section of this Article XIII containing any such provision
held to be invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
Section 8. For purposes of this Article XIII:
(A) "Disinterested Director" means a director of the Company
who is not and was not a party to the matter in respect of which indemnification
is sought by the indemnitee.
(B) "Independent Counsel" means a law firm, or a member of a
law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent: (1)
the Company or the indemnitee in any matter material to either such party, or
(2) any other party to the matter giving rise to a claim for indemnification.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or the indemnitee in an action to determine the indemnitee's rights under this
Article XIII.
Section 9. Any notice, request or other communication required
or permitted to be given to the Company under this Article XIII shall be in
writing and either delivered in person or sent by telecopy, telex, telegram or
certified or registered mail, postage prepaid, return receipt requested, to the
Secretary of the Company and shall be effective only upon receipt by the
Secretary.
13
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.G1
<SEQUENCE>5
<FILENAME>c68345ex10-g1.txt
<DESCRIPTION>SUPPLEMENTAL PLAN, AS AMENDED
<TEXT>
<PAGE>
EXHIBIT 10g1
FORTUNE BRANDS, INC. SUPPLEMENTAL PLAN
Section 1. PURPOSE. This Supplemental 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 benefits that cannot be provided by the Company's tax
qualified defined benefit and defined contribution plans as a result of
Internal Revenue Code limitations.
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, or under Section 119 of the Internal Revenue Code, and all
compensation under the Management Incentive Plan and the Fortune Brands, Inc.
Annual Executive Incentive Compensation Plan 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"
<PAGE>
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 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 Fortune 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.
2
<PAGE>
(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 a
prior Plan Year, was covered under the Fortune Brands, Inc. Annual Executive
Incentive Compensation Plan or the Company's Management Incentive Plan or any
successor programs and is in salary grade 9 or higher.
(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 and which is intended to result in income to
3
<PAGE>
the Executive Participant subject to tax for the period during which the
contributions are made.
(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.
(o) "Qualifying Employment" means the sum of Service and Affiliated
Employment.
(p) "Plan Year" means the calendar year.
(q) "Profit-Sharing Plan" means the Fortune Brands Retirement Savings
Plan, as amended from time to time.
(r) "Retirement Plan" means the Retirement Plan for Employees and Former
Employees of Fortune 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.
4
<PAGE>
(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 holds the office of Vice President of
the Company, or any office senior thereto on April 27, 1999, or any Executive
Participant who is thereafter elected to the office of Vice President of the
Company, or any office senior thereto, and is designated by the Compensation
and Stock Option Committee of the Company to receive the benefit set forth in
this Section 3(b), 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
5
<PAGE>
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 retirement benefits payable under
paragraphs (a) and (d) 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 is entitled to receive the benefit set forth in this Section
3(b), or if an Executive Participant who is entitled to receive the benefit set
forth in this Section 3(b) 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 Executive 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
6
<PAGE>
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, the interest rate used
shall be equal to the average monthly yield on ten year coupon U.S. Treasury
bonds (as published by the Federal Reserve) for the month of termination of
Qualifying Employment and the prior five months and the mortality table used at
the time under the Retirement Plan for funding purposes. For any Executive
Participant who terminates Qualifying Employment between May 1 and December 31,
1997, however, the interest rate used shall be whichever of the following
results in the greater benefit: (i) 120% of the applicable monthly immediate
annuity purchase rate which would be used by the Pension Benefit Guaranty
Corporation for the month of termination of Qualifying Employment, for the
purpose of determining the present value of a single sum distribution on plan
termination, (ii) 120% of the average of the applicable monthly annuity
purchase rates which would be used by the Pension Benefit Guaranty Corporation
for the month of termination of Qualifying Employment and the prior five months
and (iii) the average monthly yield on ten year coupon U.S. Treasury bonds (as
published by the Federal Reserve) for the month of termination of Qualifying
Employment and the prior five months.
(d) Each Executive Participant in salary grade 9 or higher on December
31, 2001 and who commenced Qualifying Employment prior to April 27, 1999 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, any Affiliated Plan and any other provisions of this Plan and (ii) the
benefit that would have been payable under the Retirement Plan provisions as in
effect immediately prior to January 1, 2002 if the Executive Participant had
accrued
7
<PAGE>
a benefit thereunder for his full period of Service (not in excess of 35
years). For purposes of calculating the benefit under this Section 3(d) based
on the Retirement Plan provisions as in effect immediately prior to January 1,
2002, there shall be used the assumptions set forth in the Retirement Plan as
in effect immediately prior to January 1, 2002 for adjusting the benefit for
commencement of payments at a time other than Normal Retirement Date or in a
form other than an annuity for the life of the Executive Participant only and
the benefit shall not be limited by the 401(a)(17) Limitations and the 415
Limitations. If a pre-retirement spouse's benefit is payable under the
Retirement Plan to the Surviving Spouse of an Executive Participant entitled to
a supplemental benefit under this Section 3(d), or if such an Executive
Participant dies before the benefits payable hereunder 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 (ii) the spouse's benefit that would have been payable if the
Participant's benefit had been calculated in accordance with this paragraph (d)
of this Section 3 (prior to any reduction for calculating the spouse's
benefit). The benefit provided by this paragraph (d) of this Section 3 shall
be forfeitable if the Participant's Retirement Plan benefit is forfeitable.
(e) An Executive Participant (1) who has attained age 50 and who has
completed at least nine years of Qualifying Employment as of December 31, 1999,
(2) who is classified by the Company as being actively at work on April 27,
1999, (3) who is not a Vice President or a more senior officer of the Company
and (4) who has elected on or before June 11, 1999 to voluntarily retire and
does retire between June 30, 1999 and December 31, 1999 pursuant to the
Company's Voluntary Early Retirement Incentive Program and who executes a
Waiver and Release substantially in the form of Exhibit A attached hereto shall
be eligible for a retirement benefit hereunder that is not reduced for early
payment pursuant to the second
8
<PAGE>
sentence of Section 3(c). An Executive Participant who meets the requirements
of clauses (2), (3) and (4) and does not meet the requirements of clause (1)
but is within one year of meeting such requirements shall also be eligible for
the enhanced retirement pension provided by this Section 3(e). Each such
Executive Participant shall be credited with additional Service of three years,
provided, however, that no Executive Participant shall be credited with more
than 38 years of Service. In addition, an employee of the Company in pay grade
M008 who meets the eligibility requirements set forth in this Section 3(e)
except for not being an Executive Participant shall be eligible to elect the
enhanced early retirement benefit and be paid an amount under this Plan equal
to the difference between (i) the benefit paid under the Retirement Plan and
(ii) the benefit that would have been payable under the Retirement Plan if the
enhanced retirement benefit provided for herein were paid under the Retirement
Plan. Notwithstanding anything else in this Plan to the contrary, the amount
set forth in the preceding sentence shall be paid in a single sum in cash and
shall be calculated using the interest rate equal to the average monthly yield
on ten year coupon U.S. Treasury bonds (as published by the Federal Reserve)
for the month of termination of Qualifying Employment and the prior five months
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
9
<PAGE>
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 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
10
<PAGE>
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.
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
11
<PAGE>
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.
12
<PAGE>
(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) 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, 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.
(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 Vista
Select Bond Fund to the extent practicable and otherwise in the Chase Manhattan
Personal Trust Market Rate Account. As soon as practicable after the Executive
13
<PAGE>
Participant's 60th birthday, one-half of the amounts held in the Vista Select
Bond Fund attributable to supplemental retirement benefits, and as soon as
practicable after the Executive Participant's 63rd birthday, the remainder of
the amounts held in the Vista Select Bond Fund attributable to supplemental
retirement benefits, shall be invested solely in the Chase Manhattan Personal
Trust Market Rate Account, provided that supplemental retirement benefit
amounts shall not be transferred from the Vista Select Bond Fund to the Chase
Manhattan Personal Trust Market Rate Account after the Executive Participant's
60th birthday or the Executive Participant's 63rd birthday if the amount held
in the Vista Select Bond Fund attributable to supplemental retirement benefits
is in a "loss position". The amount held in the Vista Select Bond Fund
attributable to supplemental retirement benefits shall be in a "loss position"
on the Executive Participant's 60th birthday if the current market value
thereof at the Executive Participant's 60th birthday is less than 95% of the
actuarial present value of the Executive Participant's supplemental retirement
benefit calculated as of the end of the prior calendar year. The amount held
in the Vista Select Bond Fund attributable to supplemental retirement benefits
shall be in a "loss position" on the Executive Participant's 63rd birthday if
the current market value thereof at the Executive Participant's 63rd birthday
is less than 50% of 95% of the actuarial present value of the Executive
Participant's supplemental retirement benefit calculated as of the end of the
prior calendar year. The Company shall notify the Trustee promptly after the
end of each calendar year of the actuarial present value of the Executive
Participant's supplemental retirement benefit. In the event that transfers
cannot be made as soon as practicable after the Executive Participant's 60th or
63rd birthday because the amount of the Vista Select Bond Fund attributable to
supplemental retirement benefits is then in a "loss position", the amounts
attributable to supplemental retirement benefits shall be transferred as soon
as practicable after the amount of the Vista Select Bond Fund attributable to
supplemental retirement benefits is no longer in a "loss
14
<PAGE>
position". Supplemental profit-sharing benefit amounts invested in a Grantor
Trust shall be invested in one or more of the (i) Vista Balanced Fund, (ii)
Chase Manhattan Personal Trust Market Rate Account, (iii) Dodge & Cox Stock
Fund, (iv) MFS Institutional Emerging Equities Fund, (v) Vanguard International
Growth Portfolio or (vi) PIMCO Total Return 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).
(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), (c) and (d) 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.
15
<PAGE>
(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, 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.
(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, 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 by the Executive Participant from his Grantor Trust or
Segregated Account, plus the amounts of income which
16
<PAGE>
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 an interest rate equal to the average
monthly yield on ten year coupon U.S. Treasury bonds (as published by the
Federal Reserve) for the month of termination of Qualifying Employment and the
prior five months.
(l) The Grantor Trust 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)
17
<PAGE>
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 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 50% of his supplemental tax deferred amount for
any 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
18
<PAGE>
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 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.
19
<PAGE>
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.
20
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.H1
<SEQUENCE>6
<FILENAME>c68345ex10-h1.txt
<DESCRIPTION>FORM OF TRUST AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10h1
FORTUNE BRANDS, INC.
TRUST AGREEMENT
THIS AGREEMENT, made as of the________ day of_______,______, among FORTUNE
BRANDS, INC., a Delaware corporation (the "Company"), THE CHASE MANHATTAN BANK,
a New York banking corporation (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 offered full-time employment to____________ (the
"Executive"), and the Executive has accepted such offer with the assurance of
receiving benefits pursuant to the terms of the Company's Supplemental Plan
(including the supplemental profit-sharing and supplemental tax-deferred and
related Company matching award provisions therein) (herein referred to as the
"Plan"); and
WHEREAS, the Company has induced the Executive to join its full-time
employ by offering assurance to the Executive and his surviving spouse, if any,
beneficiaries or estate under the Plan (collectively, the "Beneficiaries")
<PAGE>
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.
2
<PAGE>
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 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 and supplemental tax deferred
and related Company matching award 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
3
<PAGE>
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
4
<PAGE>
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
5
<PAGE>
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
6
<PAGE>
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
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
7
<PAGE>
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 5" 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
8
<PAGE>
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
9
<PAGE>
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 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
10
<PAGE>
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
11
<PAGE>
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
12
<PAGE>
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.
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
13
<PAGE>
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.
14
<PAGE>
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
15
<PAGE>
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 the Vista Select Bond
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 participate in and use a book-entry system for the deposit
and transfer of securities;
(c) To sell or exchange any property held by it at public or
private sale, for cash or on credit, to grant
16
<PAGE>
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;
(d) 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;
(e) 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;
(f) To extend the time of payment of any obligation held by it;
(g) To hold uninvested any moneys received by it, without liability
for interest thereon, until such moneys shall be invested, reinvested or
disbursed;
17
<PAGE>
(h) To exercise all voting or other rights with respect to any
property held by it and to grant proxies, discretionary or otherwise;
(i) 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;
(j) 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;
(k) To employ suitable agents and counsel, who may be counsel to
the Company or the Trustee, including, without limitation, Hewitt
Associates LLC and PricewaterhouseCoopers LLP, and to pay their reasonable
expenses and compensation from the Fund to the extent not paid by the
Company;
(l) 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;
(m) To settle, compromise or submit to arbitration any claims,
debts or damages due or owing to or from the
18
<PAGE>
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;
(n) 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
(o) 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
19
<PAGE>
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 of the Company or
its Executive Committee or Compensation and Stock Option Committee shall have
the authority to act hereunder.
20
<PAGE>
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
21
<PAGE>
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
22
<PAGE>
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
23
<PAGE>
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 or its Executive Committee
or 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.
24
<PAGE>
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 Plan, the Company pursuant to a resolution of
the Board of Directors
25
<PAGE>
of the Company or its Executive Committee 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 of
26
<PAGE>
the Company or its Executive Committee or 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 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
27
<PAGE>
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
28
<PAGE>
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
29
<PAGE>
to have been duly given when actually delivered to the respective addresses
set forth below:
Company: Fortune Brands, Inc.
300 Tower Parkway
Lincolnshire, Illinois 60069
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 LLC
Contractor: 40 Highland Avenue
Rowayton, Connecticut 06853
Attn:
Executive:
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
30
<PAGE>
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 LLP,
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 LLP in connection with its opinion, as the case may be. Any
distributions from the Fund to the Executive or his Beneficiary under this
Section 11.8 shall be applied in accordance with the Plan as an offset to the
benefits, if any, thereafter payable under the Plan.
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed as of the_____day of_____,_____.
Attest: FORTUNE BRANDS, INC.
By_______________________________
Attest: THE CHASE MANHATTAN BANK
By_______________________________
Attest: HEWITT ASSOCIATES LLC
By_______________________________
<PAGE>
STATE OF ILLINOIS )
: ss.: Lincolnshire, IL - ______,
COUNTY OF LAKE )
Personally appeared______________________________,__________
_____________________________________ of FORTUNE BRANDS, INC.,
signer and sealer of the foregoing instrument, and acknowledged
the same to be his/her free act and deed as such_________________
_________________________ and the free act and deed of said
Corporation, before me.
________________________________________
Notary Public
STATE OF NEW YORK )
: ss.: New York, NY-_______,
COUNTY OF NEW YORK )
Personally appeared______________________________,___________________________
________________________________________ of THE CHASE MANHATTAN
BANK, signer and sealer of the foregoing instrument, and acknowledged the same
to be his/her free act and deed as such_____and the free act and deed of said
Company, before me.
_____________________________________
Notary Public
<PAGE>
STATE OF ILLINOIS )
: ss.: Lincolnshire, IL -_________,
COUNTY OF LAKE )
Personally appeared_________,________________________________________
_________________________________________ of HEWITT ASSOCIATES LLC,
signer and sealer of the foregoing instrument, and acknowledged the same to be
his/her free act and deed as such_____________________________________________
________________________________ and the free act and deed of said Limited
Liability Company, before me.
____________________________________
Notary Public
<PAGE>
Schedule A
Hewitt Associates LLC
40 Highland Avenue
Rowayton, Connecticut 06853
Attn:
PAYMENT DEMAND NOTICE
NAME OF EXECUTIVE:
ADDRESS:
PHONE:
The undersigned hereby demands payment of the amount to which he he entitled
under the Plan pursuant to the Trust Agreement dated as of the_____,_____among
FORTUNE BRANDS, INC., THE CHASE MANHATTAN BANK and HEWITT ASSOCIATES LLC.
___________________________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.H2
<SEQUENCE>7
<FILENAME>c68345ex10-h2.txt
<DESCRIPTION>SCHEDULE
<TEXT>
<PAGE>
EXHIBIT 10h2
Schedule identifying substantially identical agreements, among Fortune Brands,
Inc. ("Fortune") and The Chase Manhattan Bank, et al., establishing a trust in
favor of each of the following persons, to the Agreement constituting Exhibit
10h1 to the Annual Report on Form 10-K of Fortune for the Fiscal Year ended
December 31, 2001.
Name
Mark Hausberg
Craig P. Omtvedt
Mark A. Roche
Norman H. Wesley
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.I1
<SEQUENCE>8
<FILENAME>c68345ex10-i1.txt
<DESCRIPTION>FORM OF TRUST AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10i1
FORTUNE BRANDS, INC.
TRUST AGREEMENT
THIS AGREEMENT, made as of the______day of______,______,______among_______
______, FORTUNE BRANDS, INC., a Delaware corporation (the "Company"), and THE
CHASE MANHATTAN BANK, a New York banking corporation (the "Trustee").
W I T N E S S E T H :
WHEREAS, the Company has offered full-time employment to______(the
"Executive") with assurance of receiving benefits pursuant to the terms of the
Company's Supplemental Plan (including the supplemental profit-sharing
provisions therein) as well as pension benefits under the Severance Agreement
between the Company and the Executive dated as of______,______(the "Severance
Agreement"), the Compensation Agreement between the Company and the Executive
dated as of______,______(the "Compensation Agreement") and any other agreements
or arrangements for the payment of additional pension or other deferred
compensation benefits to or on behalf of the Executive (the Supplemental Plan,
the Severance Agreement, the Compensation Agreement and such other agreements
or arrangements are herein collectively referred to as the "Plan"); and
<PAGE>
WHEREAS, the Company has induced the Executive to join its full-time
employ by establishing with the Trustee a trust for the Executive in order to
provide a source of payment 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:
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.
2
<PAGE>
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 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. The Company will
3
<PAGE>
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. 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 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 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, (y) the Executive's supplemental profit-sharing benefit under the
Plan and (z) any other benefits payable to the Executive, 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, assuming
earnings
4
<PAGE>
at an interest rate equal to the after tax equivalent of the average monthly
yield on ten year coupon U.S. Treasury bonds (as published by the Federal
Reserve) for the month of termination of Qualifying Employment and the prior
five months.
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,
the amount being made in respect of the Executive's supplemental profit-sharing
benefit, and other benefits, under the Plan. 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, 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
5
<PAGE>
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. 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
6
<PAGE>
or the Trustee determines is necessary or advisable to achieve the objectives
of this Agreement.
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. In the event of any withdrawal by the
7
<PAGE>
Executive from his Segregated Account, the Company shall promptly notify the
Trustee in writing of such withdrawal and the amount thereof.
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.
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 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
8
<PAGE>
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.
9
<PAGE>
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 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
10
<PAGE>
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 and any other
benefits under the Plan and amounts representing the Executive's supplemental
profit-sharing benefit.
Supplemental retirement benefit amounts shall be invested solely in the
Vista Select Bond Fund to the extent practicable and otherwise in the Chase
Manhattan Personal Trust Market Rate Account. As soon as practicable after the
Executive's 60th birthday, at the direction of the Company, the investment
manager shall cause one-half of the amounts held in the Vista Select Bond Fund
attributable to supplemental retirement benefits, and as soon as practicable
after the Executive's 63rd birthday, at the direction of the Company, the
investment manager shall cause the remainder of the amounts held in the Vista
Select Bond Fund attributable to supplemental retirement benefits, to be
invested solely in the Chase Manhattan Personal Trust Market Rate Account,
provided that supplemental retirement benefit amounts shall not be transferred
from the Vista Select Bond Fund to the Chase Manhattan Personal Trust Market
Rate Account after the Executive's 60th birthday or the Executive's 63rd
birthday if the amount held in the Vista Select Bond Fund attributable to
supplemental retirement benefits is in a "loss position". The
11
<PAGE>
amount held in the Vista Select Bond Fund attributable to supplemental
retirement benefits shall be in a "loss position" on the Executive's 60th
birthday if the current market value thereof at the Executive's 60th birthday
is less than 95% of the actuarial present value of the Executive's supplemental
retirement benefit calculated as of the end of the prior calendar year. The
amount held in the Vista Select Bond Fund attributable to supplemental
retirement benefits shall be in a "loss position" on the Executive's 63rd
birthday if the current market value thereof at the Executive's 63rd birthday
is less than 50% of 95% of the actuarial present value of the Executive's
supplemental retirement benefit calculated as of the end of the prior calendar
year. The Company shall notify the Trustee promptly after the end of each
calendar year of the actuarial present value of the Executive's supplemental
retirement benefit. In the event that transfers cannot be made as soon as
practicable after the Executive's 60th or 63rd birthday because the amount held
in the Vista Select Bond Fund attributable to supplemental retirement benefits
is then in a "loss position", the amounts attributable to supplemental
retirement benefits shall be transferred as soon as practicable after such Fund
is no longer in such "loss position".
Supplemental profit-sharing benefit amounts shall be invested in one or
more of the (i) Vista Balanced Fund, (ii)
12
<PAGE>
Chase Manhattan Personal Trust Market Rate Account, (iii) Dodge & Cox Stock
Fund, (iv) MFS Institutional Emerging Equities Fund, (v) Vanguard International
Growth Portfolio or (vi) PIMCO Total Return 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 participate in and use a book-entry system for the deposit
and transfer of securities;
(c) 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
13
<PAGE>
covenant or agreement to purchase any property in the future;
(d) 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;
(e) 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;
(f) To extend the time of payment of any obligation held by it;
(g) To hold uninvested any moneys received by it, without liability
for interest thereon, until such moneys shall be invested, reinvested or
disbursed;
(h) To exercise all voting or other rights with respect to any
property held by it and to grant proxies, discretionary or otherwise;
(i) For the purposes of the Trust, to borrow money from others,
including The Chase Manhattan Bank, to issue
14
<PAGE>
its promissory note or notes therefor, and to secure the repayment thereof
by pledging any property held by it;
(j) To furnish the Company and the Executive with such information
as may be needed for tax or other purposes;
(k) 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;
(l) 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;
(m) 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;
15
<PAGE>
(n) 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
(o) 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 so directed by the recipient) by
crediting the account of such
16
<PAGE>
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
its Executive Committee or Compensation and Stock Option Committee 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
17
<PAGE>
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. 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
18
<PAGE>
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 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
19
<PAGE>
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 or its Executive Committee
or Compensation and Stock Option Committee, upon delivery to the Trustee of a
20
<PAGE>
certified copy of such resolution and sixty (60) days' written notice to the
Trustee and the Executive 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 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.
21
<PAGE>
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.
ARTICLE VIII
8.1 The Trust 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
22
<PAGE>
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 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 or its Executive Committee
or Compensation and Stock Option Committee by delivery to the Trustee of a
certified copy of such resolution
23
<PAGE>
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
24
<PAGE>
shall 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: Fortune Brands, Inc.
300 Tower Parkway
Lincolnshire, Illinois 60069
Attn: Secretary
Trustee: The Chase Manhattan Bank
1211 Avenue of the Americas
New York, New York 10036
Attn: Trusts and Estates
Services Division, 34th Floor
Executive:
SS#
or at such other address as such person may specify in writing by notice as set
forth above to the other persons listed above.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement
to be duly executed as of the______day of______,______.
Attest: FORTUNE BRANDS, INC.
By ______________________________________
Attest: THE CHASE MANHATTAN BANK
By ______________________________________
Witness:
______________________________________
26
<PAGE>
STATE OF ILLINOIS )
: ss.: Lincolnshire, IL -______,
COUNTY OF LAKE )
Personally appeared______,______of FORTUNE BRANDS, INC., signer and sealer
of the foregoing instrument, and acknowledged the same to be his/her free act
and deed as such _______ and the free act and deed of said Corporation, before
me.
_________________________________
Notary Public
STATE OF NEW YORK )
: ss.: New York, NY-_____,
COUNTY OF NEW YORK )
Personally appeared______,______of THE CHASE MANHATTAN BANK, signer and sealer
of the foregoing instrument, and acknowledged the same to be his/her free act
and deed as such_______and the free act and deed of said Company, before me.
_________________________________
Notary Public
27
<PAGE>
STATE OF ILLINOIS )
: ss.: Lincolnshire, IL -______,
COUNTY OF LAKE )
Personally appeared______, signer of the foregoing instrument, and
acknowledged the same to be his/her free act and deed, before me.
_________________________________
Notary Public
28
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.I2
<SEQUENCE>9
<FILENAME>c68345ex10-i2.txt
<DESCRIPTION>SCHEDULE
<TEXT>
<PAGE>
EXHIBIT 10i2
Schedule identifying substantially identical agreements, among Fortune Brands,
Inc. ("Fortune") and The Chase Manhattan Bank, et al., establishing a trust in
favor of each of the following persons, to the Agreement constituting Exhibit
10i1 to the Annual Report on Form 10-K of Fortune for the Fiscal Year ended
December 31, 2001.
Name
Mark Hausberg
Craig P. Omtvedt
Mark A. Roche
Norman H. Wesley
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.M1
<SEQUENCE>10
<FILENAME>c68345ex10-m1.txt
<DESCRIPTION>FORM OF AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10m1
[Letterhead of Fortune Brands, Inc.]
September 1, 2000
Re: Compensation Agreement
Dear _____________:
This letter will evidence the agreement of Fortune Brands, Inc. (the
"Company") to make the payments and provide the benefits hereafter described in
the event of a termination of your employment following a change in control of
the Company. The Company considers the establishment and maintenance of a
sound and vital management to be essential to protecting and enhancing its best
interests and those of its stockholders. In this connection, the Company
recognizes that, as is the case with many publicly held corporations, the
possibility of a change in control may exist and that, in the event action is
taken to bring about a change in control, uncertainty and questions may arise
among management that could result in the distraction or departure of
management personnel to the detriment of the Company and its stockholders.
Accordingly, the Company has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of senior
members of the Company's management, including yourself, to their assigned
duties without distraction in the face of the potentially disruptive
circumstances arising from the possibility of a change in control.
The Company must, of course, remain free to effect changes in
management and terminate employment. However, in order to induce you to join
and remain in the
<PAGE>
2 September 1, 2000
employ of the Company, this letter agreement sets forth the severance benefits
which the Company agrees will be provided to you in the event your employment
with the Company is terminated subsequent to a Change in Control (as defined
below) under the circumstances described below. You shall also be entitled to
any Gross-Up Payment provided by the last section hereof with respect to the
exercise of stock options, performance awards, limited rights and other awards
under the Company's Long-Term Incentive Plan and any successor plans whether or
not your employment is terminated. For purposes of this Agreement, a "Change
in Control" shall be deemed to have occurred if (i) any person (as that term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), as in effect on February 28, 2000) is or becomes
the beneficial owner (as that term is used in Section 13(d) of the Exchange
Act, and the rules and regulations promulgated thereunder, as in effect on
February 28, 2000) of 20% or more of the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors ("Voting Securities") of the Company, excluding, however, the
following: (A) any acquisition directly from the Company, other than an
acquisition by virtue of the exercise of a conversion privilege unless the
security being so converted was itself acquired directly from the Company, (B)
any acquisition by the Company, (C) any acquisition by an employee benefit plan
(or related trust) sponsored or maintained by the Company or entity controlled
by the Company, or (D) any acquisition pursuant to a transaction that complies
with clauses (A), (B) and (C) of clause (iii) below, (ii) more than 50% of the
members of the Board of Directors of the Company shall not be Continuing
Directors (which term, as used herein, means the directors of the Company (A)
who were members of the Board of Directors of the Company on February 28, 2000
or (B) who subsequently became directors of the Company and who were elected or
designated to be candidates for election as nominees of the Board of Directors,
or whose election or nomination for election by the Company's stockholders was
otherwise approved, by a vote of a majority of the Continuing Directors then on
the Board of Directors but shall not include, in any event, any individual
whose initial assumption of office occurs as a result of either an actual or
threatened election contest (as such terms are used in Rule 14(a)-11 of
Regulation 14A promulgated under
<PAGE>
3 September 1, 2000
the Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board of Directors), (iii)
the Company shall be merged or consolidated with, or, in any transaction or
series of transactions, substantially all of the business or assets of the
Company shall be sold or otherwise acquired by, another corporation or entity
unless, as a result thereof, (A) the stockholders of the Company immediately
prior thereto shall beneficially own, directly or indirectly, at least 60% of
the combined Voting Securities of the surviving, resulting or transferee
corporation or entity (including, without limitation, a corporation that as a
result of such transaction owns the Company or all or substantially all of the
Company's assets either directly or through one or more subsidiaries) ("Newco")
immediately thereafter in substantially the same proportions as their ownership
immediately prior to such corporate transaction, (B) no person beneficially
owns (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act,
and the rules and regulations promulgated thereunder (as in effect on February
28, 2000)), directly or indirectly, 20% or more of the combined Voting
Securities of Newco immediately after such corporate transaction except to the
extent that such ownership of the Company existed prior to such corporate
transaction and (C) more than 50% of the members of the Board of Directors of
Newco shall be Continuing Directors or (iv) the stockholders of the Company
approve a complete liquidation or dissolution of the Company.
1. Termination Following Change in Control. If and only if a Change
in Control of the Company shall have occurred and if at the time of the Change
in Control you shall be an officer of the Company, you shall be entitled to the
benefits provided in Section 2 hereof upon the subsequent termination of your
employment after such Change in Control, unless such termination is as a result
of your death or by the Company for Disability or Cause or by you other than
for Good Reason, as set forth below.
(a) Disability. Termination of employment by the Company for
Disability hereunder shall be deemed to have occurred only if, as a result of
your incapacity due to physical or mental illness, you shall have been absent
from your duties with the Company on a full-time basis
<PAGE>
4 September 1, 2000
for 180 consecutive days and, within 30 days after Notice of Termination (as
hereinafter defined) is given to you by the Company, you shall not have
returned to the full-time performance of your duties.
(b) 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 your part constituting a felony
and intended to result directly or indirectly in substantial gain or personal
enrichment to you at the expense of the Company, or (B) your willful and
continued failure substantially to perform your duties as an officer of the
Company as such duties exist at the time of a Change in Control (other than any
such failure resulting from your incapacity due to physical or mental illness),
after a demand for substantial performance is delivered to you by the Board of
Directors which specifically identifies the manner in which the Board believes
that you have not substantially performed your duties and you are given a
reasonable time after such demand substantially to perform your duties, and
(ii) there shall have been delivered to you a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire
membership of the Board of Directors at a meeting of the Board called and held
for the purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
good faith opinion of the Board you were guilty of conduct set forth above in
clause (i)(A) or (i)(B) of this sentence and specifying the particulars thereof
in detail. Your 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 (i) was done or omitted to be done (A) as a result of
bad judgment or negligence on your part, or (B) without intent of gaining
therefrom directly or indirectly a profit to which you were not legally
entitled or (C) as a result of your good faith belief that such act or failure
to act was not opposed to the interests of the Company, or (ii) is an act or
failure to act in respect of which you meet 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'
<PAGE>
5 September 1, 2000
liability insurance of the Company, in each case as in effect at the time of
such act or failure to act.
(c) Good Reason. Termination of employment by you for Good Reason
shall be deemed to have occurred only if you terminate your employment for any
of the following reasons:
(i) without your express written consent, the assignment to you of
any duties inconsistent with your positions, duties, responsibilities and
status with the Company at the time of a Change in Control, or a change in
your reporting responsibilities, titles or offices as in effect at the
time of a Change in Control, or any removal of you from, or any failure to
re-elect you to, any of such positions, except in connection with the
termination of your employment as a result of your death or by the Company
for Disability or Cause or by you other than for Good Reason;
(ii) a reduction by the Company in your base salary as in effect at
the time of a Change in Control plus all increases therein subsequent
thereto;
(iii) the failure of the Company substantially to maintain and to
continue your participation in the Company's benefit plans as in effect at
the time of a Change in Control 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 your benefits under any of
such plans or deprive you of any material fringe benefit enjoyed by you at
the time of a Change in Control. For the purposes hereof such benefit
plans shall include, but not be limited to, the provisions for incentive
compensation under the Annual Executive Incentive Compensation Plan of the
Company and the Company's Retirement Plan, Supplemental Plan (as defined
in Section 2(d)) (including the supplemental profit-sharing and
supplemental tax deferred and related Company
<PAGE>
6 September 1, 2000
matching award provisions thereof), Retirement Savings Plan (as defined in
Section 2(e)) (including the tax deferred and related Company matching
contributions thereof) and Long-Term Incentive Plan;
(iv) the target bonus awarded by the Compensation and Stock Option
Committee of the Company to you under the Annual Executive Incentive
Compensation Plan of the Company subsequent to a Change in Control is less
than such amount last awarded to you prior to a Change in Control ($ if a
Change in Control occurs prior to your first award under the Annual
Executive Incentive Compensation Plan of the Company);
(v) the sum of your base salary and amount paid to you as incentive
compensation under the Annual Executive Incentive Compensation Plan of the
Company for the calendar year in which the Change in Control occurs or any
subsequent year is less than the sum of your base salary and the amount
awarded (whether or not fully paid) to you as incentive compensation under
the Annual Executive Incentive Compensation Plan of the Company for the
calendar year prior to the Change in Control or any subsequent calendar
year in which the sum of such amounts was greater (your incentive
compensation for this purpose shall be deemed to be $ prior to the first
payment of incentive compensation to you under the Annual Executive
Incentive Compensation Plan of the Company);
(vi) the relocation of the offices at which you are employed to a
location more than 35 miles from their location at the time of a Change in
Control or the Company's requiring you to be based anywhere other than at
such offices, except for required travel on the Company's business to an
extent substantially consistent with your business travel obligations at
the time of a Change in Control;
(vii) the failure of the Company to provide you with a number of
paid vacation days at least equal to the number of paid vacation days to
which you were entitled at the time of a Change in Control plus any
increases therein subsequent thereto;
(viii) any purported termination of your employment which is not
effected pursuant to a
<PAGE>
7 September 1, 2000
Notice of Termination satisfying the requirements of subsection (d) of
this Section 1 (and, if applicable, subsection (b) of this Section 1), and
for purposes of this Agreement, no such purported termination shall be
effective; or
(ix) your good faith determination that due to a Change in Control
you are not able effectively to discharge your duties.
(d) Notice of Termination. Any termination by the Company pursuant
to subsections (a) or (b) of this Section 1 or by you pursuant to subsection
(c) of this Section 1 shall be communicated by Notice of Termination to the
other party hereto. 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 your employment under the provision so indicated.
(e) Termination Date. "Termination Date" shall mean (i) if
employment is terminated because of your death, the date of your death, (ii) if
employment is terminated for Disability, 30 days after Notice of Termination is
given (provided that you shall not have returned to the performance of your
duties on a full-time basis during such 30-day period), (iii) if employment is
terminated for Good Reason, the date specified in the Notice of Termination,
and (iv) if employment is terminated for Cause or any other reason, the date on
which a Notice of Termination is given; provided, however, that if within 30
days after any Notice of Termination is given the party receiving such Notice
of Termination notifies the other party 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) through (iv) of this subsection 1(e).
<PAGE>
8 September 1, 2000
2. Compensation Upon Termination.
(a) If your employment is terminated as a result of your death or
for Disability or Cause subsequent to a Change in Control, the Company shall
have no obligation to pay any compensation to you under this Agreement, but
this Agreement shall have no effect on any other obligation the Company may
have to pay you compensation to which you may otherwise be entitled.
(b) 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, then the Company shall pay to you as
severance pay in a lump sum on the fifth day following the Termination Date the
following amounts:
(i) your full base salary and your accrued but unpaid vacation pay
through the Termination Date at the rate in effect at the time of a Change
in Control plus any increases therein subsequent thereto; and
(ii) in lieu of any further salary payments, annual incentive
compensation awards or defined contribution plan allocations to you for
periods subsequent to the Termination Date, an amount equal to the product
of (A) the sum of (1) your annual base salary at the rate in effect at the
time of a Change in Control plus any increases therein subsequent thereto,
plus (2) the greatest of $_____, the amount that was paid to you under the
Annual Executive Incentive Compensation Plan of the Company (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 paid the same amount as for the last year
prior to the Change in Control for which an award was actually paid) and
the amount paid to you under such Annual Executive Incentive Compensation
Plan 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 from contributions
<PAGE>
9 September 1, 2000
made by the Company under the Retirement Savings Plan (as defined in
Section 2(e)) (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 (assuming that you
elected the maximum employee contribution) under each such plan for the
year immediately preceding the year in which a Notice of Termination is
given, multiplied by (B) the number three.
In the event the Notice of Termination is given prior to your first full year's
allocation under the Retirement Savings Plan, the amount in (ii)(A)(3) above
shall be $ __________.
(c) 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 maintain in full force and
effect, for your continued benefit for a three year period after the
Termination Date, all employee life, health, accident, disability, medical and
other employee welfare benefit plans, programs or arrangements in which you
were participating immediately prior to the date of the Change in Control plus
all improvements therein subsequent thereto, provided that your continued
participation is possible under the terms and provisions of such plans,
programs, and arrangements. In the event that your participation in any such
plan, program or arrangement is barred, the Company shall arrange to provide
you with benefits substantially similar to those which you would have been
entitled to receive under such plan, program or arrangement if you had remained
a participant for such additional three year period. At the end of the period
of coverage, you shall have the option to have assigned to you at no cost and
with no apportionment of prepaid premiums any assignable insurance policy owned
by the Company which relates specifically to you. In the event a Change in
Control occurs prior to your eligibility to
<PAGE>
10 September 1, 2000
participate in any such plan, you shall be deemed for purposes of this
paragraph to be participating in those plans that cover Senior Vice Presidents
of this Company generally.
(d) 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, then in addition to the retirement benefits
to which you are entitled under the Retirement Plan for Employees and Former
Employees of Fortune Brands, Inc. (the "Qualified Plan"), if any, the
Supplemental Plan of Fortune Brands, Inc. (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 you 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 you monthly beginning at
the earliest date payments commence under 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 you would have
been entitled under the terms of each of the Pension Plans in which you
were an active participant at the date of a Change in Control (without
regard to any amendment made subsequent to a Change in Control which
adversely affects in any manner the computation of your benefits)
determined as if you were fully vested thereunder and had accumulated
three additional years of Service thereunder (subsequent to your
Termination Date) at your rate of Actual Earnings in effect on the date of
a Change in Control 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 you are entitled
under the terms of each of the Pension Plans in
<PAGE>
11 September 1, 2000
which you were an active participant at the date of a Change in Control.
For purposes of clause (i), the term "Actual Earnings" as used with reference
to any of such Pension Plans shall include amounts paid to you pursuant to
subsections (b)(ii)(A)(1) and (2) and (b)(ii)(B) of this Section 2 and such
amounts shall be deemed to represent three years of Actual Earnings for
purposes of determining your highest consecutive five year average rate of
Actual Earnings. The supplemental pension benefits determined under this
subsection 2(d) shall be payable by the Company to you and your contingent
annuitant, if any, in the same manner and as long as your 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 reduced to reflect early commencement to the
extent, if any, provided in the Qualified Plan. All defined terms used in this
subsection 2(d) shall have the same meaning as in the Qualified Plan, unless
otherwise defined herein or otherwise required by the context.
(e) 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 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 your account balances under
the Fortune Brands Retirement Savings Plan (the "Retirement Savings Plan").
(f) 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 and a dispute exists concerning the
termination as set forth in subsection (e) of Section 1, the Company shall
continue to pay your full base salary through the date the dispute is finally
resolved as provided in subsection (e) of Section 1.
(g) You 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
<PAGE>
12 September 1, 2000
reduced by any compensation earned by you as the result of employment by
another employer after the Termination Date or by any other compensation.
(h) In the event the Termination Date occurs within less than three
years prior to your Normal Retirement Date (as defined in the Qualified Plan),
the multiplier "three" in subsection (b)(ii)(B) of this Section 2 and the three
year period referred to in subsections (c) and (d) of this Section 2 shall be
changed so that they shall each equal the number of whole years and fraction
thereof or fraction of a year that will elapse between the Termination Date and
Normal Retirement Date.
(i) Any benefits to which you are entitled under any Company
severance pay program covering salaried employees shall be reduced by benefits
paid under Section 2(b)(ii). Any benefits to which you are entitled under
Section 2 shall be reduced by the amount of any payments made to you pursuant
to the Severance Agreement dated as of January 1, 2000 between you and the
Company.
(j) 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 the Company's Annual Executive
Incentive Compensation Plan 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, not less than the amount that
you would have received if you had been awarded the same amount
paid 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 the Company's Annual
Executive Incentive
<PAGE>
13 September 1, 2000
Compensation Plan (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 awarded an amount for the year in
which your Termination Date occurs equal to the amount paid 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, not less than the amount that you would have received if
you had been paid the same amount for the year immediately
preceding the year in which the Change in Control occurs as the
amount awarded to you for the last year prior to the Change in
Control for which an award was actually paid) or, if greater,
the amount awarded 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 Annual Executive
Incentive Compensation Plan as in effect immediately prior to
the Change in Control. In the event the Notice of Termination
is given prior to your first full year's award under the Annual
Executive Incentive Compensation Plan, the incentive
compensation amount in this clause (ii) shall be $________,
which amount shall then be subject to proration as set forth in
the immediately preceding sentence.
The payments under this Section 2(j)(ii) shall be reduced by the amount
actually paid to you under the Annual Executive Incentive Compensation Plan for
the calendar year in which the Termination Date occurs.
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
<PAGE>
14 September 1, 2000
of the business or assets of the Company, by agreement in form and substance
satisfactory to you, expressly to assume and agree to perform 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. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall
be a breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled to
hereunder if you had given Notice of Termination for Good Reason as of the day
immediately before such succession became effective and had specified that day
in the Notice of Termination. 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 shall inure to the benefit of and be enforceable
by you and your personal or legal representatives and successors in interest
under this Agreement.
4. Termination. This Agreement may be terminated by the Company as
of a date set forth in a notice to you given at any time at least six months
prior to a Change in Control, provided that if a Change in Control occurs
within such six month period subsequent to the delivery of the notice of
termination of this Agreement by the Company, then this Agreement shall
continue in effect in accordance with its terms notwithstanding such notice.
This Agreement shall terminate on the third anniversary of any Change in
Control unless a Notice of Termination shall have been given prior thereto and
provided further that, notwithstanding anything to the contrary in this
Agreement, the provisions of this Agreement shall also continue in effect
notwithstanding such notice or your ceasing to have at the time of a Change in
Control the status as an officer of the Company required by Section 1 hereof
(whether by change of title, termination of employment or otherwise) if the
notice is given or you cease to have such status at the instance or suggestion
of a third party following commencement of discussions
<PAGE>
15 September 1, 2000
with the Company that ultimately result in a Change in Control.
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 to the respective addresses set forth on
the first page of this Agreement, provided that all notices to the Company
shall be directed to the Secretary of the Company, 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 constitutes the entire
understanding of the parties relating to the subject matter hereof and
supersedes all prior agreements, understandings and representations, whether
oral or written, relating to the subject matter hereof. 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.
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.
<PAGE>
16 September 1, 2000
10. Non-assignability. This Agreement is personal in nature and
neither of the parties hereto shall, without the consent of the other, assign
or transfer this Agreement or any rights or obligations hereunder, except as
provided in Section 3 hereof. Without limiting the foregoing, your right to
receive payments hereunder shall not be assignable or transferable, whether by
pledge, creation of a security interest or otherwise, other than a transfer by
your will or by the laws of descent or distribution, and in the event of any
attempted assignment or transfer contrary to this Section 10 the Company shall
have no liability to pay any amount so attempted to be assigned or transferred.
11. Excise Taxes. In the event that you become entitled to
payments under Section 2 of this Agreement, or as a result of the exercise, or
acceleration of the exercisability, of stock options or performance awards, or
the exercise of limited rights or other awards under the Company's Long-Term
Incentive Plan or any successor plan, or any other payments or benefits
received or treated as having been received by you in connection with a change
in the ownership or effective control of the Company or in the ownership of a
substantial portion of its assets within the meaning of Section 280G(b)(2)(A)
of the Internal Revenue Code of 1986, as amended (the "Code") (whether pursuant
to the terms of this Agreement or any other plan, arrangement or agreement with
the Company, any person whose actions result in such a change or any person
affiliated with the Company or such person) ("the Agreement Payments"), if any
of the Agreement Payments will be subject to the tax (the "Excise Tax") imposed
by Section 4999 of the Code, the Company shall pay to you on the fifth day
following the Termination Date (or if your employment has not terminated, on
the fifth day following the receipt of the Agreement Payment) an additional
amount (the "Gross-Up Payment") such that the net amount retained by you after
deduction of any Excise Tax on the Agreement Payments and any federal, state
and local income tax and Excise Tax upon the payment provided for by this
Section 11, shall be equal to the Agreement Payments. For purposes of
determining whether payments or benefits of the types referred to in the
preceding sentence are Agreement Payments and whether any of the Agreement
Payments will be subject to the Excise Tax and the amount of such
<PAGE>
17 September 1, 2000
Excise Tax, (i) any such payments or benefits received or to be received by you
shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within the meaning
of Section 280G(b)(1) of the Code shall be treated as subject to the Excise
Tax, unless in the opinion of tax counsel selected by PricewaterhouseCoopers
LLP and acceptable to you such other payments or benefits (in whole or in part)
do not constitute parachute payments, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b)(4) of the Code in excess of the
base amount within the meaning of Section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax, (ii) the amount of the Agreement
Payments which shall be treated as subject to the Excise Tax shall be equal to
the lesser of (A) the total amount of the Agreement Payments or (B) the amount
of excess parachute payments within the meaning of Section 280G(b)(1) of the
Code (after applying clause (i), above), and (iii) the value of any non-cash
benefits or any deferred payment or benefit shall be determined by
PricewaterhouseCoopers LLP in accordance with the principles of Sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, you shall be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of your residence
on the Termination Date, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes. The
Gross-Up Payment required in respect of Agreement Payments other than under
Section 2 of this Agreement shall be payable whether or not your employment
terminates. In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of your
termination of employment, you shall repay to the Company at the time that the
amount of such reduction in Excise Tax is finally determined the portion of the
Gross-Up Payment attributable to such reduction (plus the portion of the
Gross-Up Payment attributable to the Excise Tax and federal and state and local
income tax imposed on the Gross-Up Payment being repaid by you if such
repayment results in a reduction in Excise Tax and/or a federal and
<PAGE>
18 September 1, 2000
state and local income tax deduction) plus interest on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax and any interest or penalties in respect thereof is
determined to exceed the amount taken into account hereunder (including by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall make an additional
gross-up payment in respect of such excess (plus any interest or penalties
payable with respect to such excess) at the time that the amount of such excess
is finally determined.
If this letter correctly sets forth our agreement on the subject
matter hereof, please sign and return to the Company the enclosed copy of this
letter which will then constitute our agreement on this subject.
Sincerely,
FORTUNE BRANDS, INC.
By________________________________
Anne C. Linsdau
Vice President-Human Resources
Agree to this ______ day of
_____________, 2000.
_____________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.M2
<SEQUENCE>11
<FILENAME>c68345ex10-m2.txt
<DESCRIPTION>SCHEDULE
<TEXT>
<PAGE>
EXHIBIT 10m2
Schedule identifying substantially identical agreements, among Fortune Brands,
Inc. ("Fortune") and each of the following persons, to the Agreement
constituting Exhibit 10m1 to the Annual Report on Form 10-K of Fortune for the
Fiscal Year ended December 31, 2001.
Name
Thomas J. Flocco
Mark Hausberg
Craig P. Omtvedt
Mark A. Roche
Norman H. Wesley
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.M3
<SEQUENCE>12
<FILENAME>c68345ex10-m3.txt
<DESCRIPTION>EHIBIT 10.M3
<TEXT>
<PAGE>
EXHIBIT 10m3
[Letterhead of Fortune Brands, Inc.]
December 1, 2000
Dear :
Reference is made to the agreement dated January 29, 1996
between American Brands, Inc., now called Fortune 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 (the "Agreement").
In order to more precisely define the circumstances under which
a change in control of the Company would occur and the amounts payable in lieu
of an incentive bonus in the event of termination of your employment following a
change in control, as well as to reflect a change in names and addresses to
which notices may be sent under the Agreement, it is hereby agreed that the
Agreement is amended as follows:
1. The second paragraph of the Agreement containing the
definition of "Change in Control" is amended in its entirety as
follows:
The Company must, of course, remain free to effect changes
in management and terminate employment. However, in order
to induce you to remain in the employ of the Company, this
letter agreement sets forth the severance benefits which
the Company agrees will be provided to you in the event
your employment with the Company is terminated subsequent
to a Change in Control (as defined below) under the
circumstances described below. You shall also be entitled
to any Gross-Up Payment provided by the last section hereof
with respect to the exercise of stock options, performance
awards, limited rights and other awards under the Company's
Long-Term Incentive Plan and any successor plans whether or
not your employment is terminated. For purposes of this
Agreement, a "Change in Control" shall be deemed to have
occurred if (i) any person (as that term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") as in effect on
February 28, 2000) is or becomes the beneficial owner (as
that term is used in Section 13(d) of the Exchange Act, and
the rules and regulations promulgated thereunder, as in
effect on February 28, 2000) of 20% or more of the combined
voting power of the then outstanding voting securities
entitled to vote generally in the election of directors
("Voting Securities") of the Company, excluding, however,
the following: (A) any acquisition directly from the
Company, other than an acquisition by virtue of the
exercise of a conversion privilege unless the security
being so converted was itself acquired directly from the
Company, (B) any acquisition by the Company, (C) any
acquisition by an employee benefit plan (or related trust)
sponsored or maintained
<PAGE>
by the Company or entity controlled by the Company, or (D)
any acquisition pursuant to a transaction that complies
with clauses (A), (B) and (C) of clause (iii) below, (ii)
more than 50% of the members of the Board of Directors of
the Company shall not be Continuing Directors (which term,
as used herein, means the directors of the Company (A) who
were members of the Board of Directors of the Company on
February 28, 2000 or (B) who subsequently became directors
of the Company and who were elected or designated to be
candidates for election as nominees of the Board of
Directors, or whose election or nomination for election by
the Company's stockholders was otherwise approved, by a
vote of a majority of the Continuing Directors then on the
Board of Directors but shall not include, in any event, any
individual whose initial assumption of office occurs as a
result of either an actual or threatened election contest
(as such terms are used in Rule 14(a)-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or
threatened solicitation of proxies or consents by or on
behalf of a person other than the Board of Directors),
(iii) the Company shall be merged or consolidated with, or,
in any transaction or series of transactions, substantially
all of the business or assets of the Company shall be sold
or otherwise acquired by, another corporation or entity
unless, as a result thereof, (A) the stockholders of the
Company immediately prior thereto shall beneficially own,
directly or indirectly, at least 60% of the combined Voting
Securities of the surviving, resulting or transferee
corporation or entity (including, without limitation, a
corporation that as a result of such transaction owns the
Company or all or substantially all of the Company's assets
either directly or through one or more subsidiaries)
("Newco") immediately thereafter in substantially the same
proportions as their ownership immediately prior to such
corporate transaction, (B) no person beneficially owns (as
such terms are used in Sections 13(d) and 14(d) of the
Exchange Act, and the rules and regulations promulgated
thereunder (as in effect on February 28, 2000)), directly
or indirectly, 20% or more of the combined Voting
Securities of Newco immediately after such corporate
transaction except to the extent that such ownership of the
Company existed prior to such corporate transaction and (C)
more than 50% of the members of the Board of Directors of
Newco shall be Continuing Directors or (iv) the
stockholders of the Company approve a complete liquidation
or dissolution of the Company.
2. Sections 1(c)(iii), (iv) and (v) of the Agreement are
amended in their entirety as follows:
(iii) the failure of the Company substantially to
maintain and to continue your participation in
the Company's benefit plans as in effect at
the time of a Change in Control and with all
improvements therein subsequent thereto (other
than those plans or improvement that have
expired thereafter in accordance with their
original terms), or the taking of any action
which would materially reduce your benefits
under any of such plans or deprive you of any
material fringe benefit enjoyed by you at the
time of a Change in Control. For the purposes
hereof such benefit plans shall include, but
not be limited to, the provisions for
incentive compensation under the Annual
Executive Incentive Compensation Plan of the
Company and the
2
<PAGE>
Company's Retirement Plan, Supplemental Plan
(as defined in Section 2(d)) (including the
supplemental profit-sharing and supplemental
tax deferred and related Company matching
award provisions thereof), Profit Sharing Plan
(as defined in Section 2(e)) (including the
tax deferred and related Company matching
contributions thereof) and Long-Term Incentive
Plan;
(iv) the target bonus awarded by the Compensation
and Stock Option Committee of the Company to
you under the Annual Executive Incentive
Compensation Plan of the Company subsequent to
a Change in Control is less than such amount
last awarded to you prior to a Change in
Control (or, if greater, 45% of your annual
base salary in effect in 1996);
(v) the sum of your base salary and amount paid to
you as incentive compensation under the Annual
Executive Incentive Compensation Plan of the
Company for the calendar year in which the
Change in Control occurs or any subsequent
year is less than the sum of your base salary
and the amount awarded (whether or not fully
paid) to you as incentive compensation under
the Annual Executive Incentive Compensation
Plan of the Company for the calendar year
prior to the Change in Control or any
subsequent calendar year in which the sum of
such amounts was greater;
3. Section 2(b)(ii) of the Agreement is amended in its
entirety as follows:
(ii) in lieu of any further salary payments, annual
incentive compensation awards or
profit-sharing allocations to you for periods
subsequent to the Termination Date, an amount
equal to the product of (A) the sum of (1)
your annual base salary at the rate in effect
at the time of a Change in Control plus any
increases therein subsequent thereto, plus (2)
the greater of 45% of your annual base salary
in effect in 1996, the amount that was awarded
to you under the Annual Executive Compensation
Plan of the Company 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 awarded the same amount as 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 Annual
Executive Incentive Compensation Plan 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 Profit-Sharing Plan (as
defined in Section 2(e)) (including the
Company 401(k) matching contribution
thereunder) and the supplemental
profit-sharing provisions (including the
Company 401(k) matching award related to the
supplemental tax
3
<PAGE>
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, multiplied by
(B) the number three; and"
4. Section 2(e) of the Agreement is hereby amended by changing
the reference "Defined Contribution Plan of Fortune Brands, Inc. and
Participating Operating Companies" to "Fortune Brands Retirement
Savings Plan".
5. Sections 2(j)(i) and (ii) of the Agreement are hereby
amended in their entirety as follows:
(i) the unpaid portion of the amount awarded to
you as incentive compensation under the
Company's Annual Executive Incentive
Compensation Plan 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, not
less than the amount that you would have
received if you had been awarded the same
amount paid to you for the most recent year
for which an award was actually paid) in a
lump sum of the fifth day following the
Termination Date; and
(ii) incentive compensation under the Company's
Annual Executive Incentive Compensation Plan
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 awarded an amount for the year
in which your Termination Date occurs equal to
the amount awarded 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 awarded the same amount for the year
immediately preceding the year in which the
Change in Control occurs as the amount awarded
to you for the last year prior to the Change
in Control for which an award was actually
paid) or, if greater, the amount awarded 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 Annual Executive Incentive Compensation
Plan as in effect immediately prior to the
Change in Control. In the event the Notice of
Termination is given prior to your first full
year's award under the Annual Executive
Incentive Compensation Plan, the incentive
4
<PAGE>
compensation amount in this clause (ii) shall
be no less than 45% of your annual base salary
in 1996, which amount shall then be subject to
proration as set forth in the immediately
preceding sentence. The payments under this
Section 2(j)(ii) shall be reduced by the
amount actually paid to you under the
Company's Annual Executive Incentive
Compensation Plan for the calendar year in
which the Termination Date occurs.
6. All notices under this Agreement shall be delivered or sent
to the respective addresses set forth on the first page of this
letter instead of the addresses on the first page of the January 29,
1996 letter.
7. All references to "American Brands, Inc." in the Agreement
be and they are hereby changed to references to "Fortune Brands,
Inc.".
Except as amended hereby, all provisions of the Agreement
remain in full force and effect.
Sincerely,
FORTUNE BRANDS, INC.
By______________________________
Vice President-Human Resources
Accepted this _______ day of December, 2000.
____________________________________________
5
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.M4
<SEQUENCE>13
<FILENAME>c68345ex10-m4.txt
<DESCRIPTION>EXHIBIT 10.M4
<TEXT>
<PAGE>
EXHIBIT 10m4
Schedule identifying substantially identical agreements, among Fortune Brands,
Inc. ("Fortune") and each of the following persons, to the Agreement
constituting Exhibit 10m3 to the Annual Report on Form 10-K of Fortune for the
Fiscal Year ended December 31, 2001.
________________________________________________________________________________
Name
----
Mark Hausberg
Mark A. Roche
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.N1
<SEQUENCE>14
<FILENAME>c68345ex10-n1.txt
<DESCRIPTION>FORM OF TRUST AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10n1
FORTUNE BRANDS, INC.
TRUST AGREEMENT
THIS AGREEMENT, made as of the______day of______,______,______among
FORTUNE BRANDS,INC., a Delaware corporation (the "Company"), THE CHASE
MANHATTAN BANK, a New York banking corporation (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 entered an agreement with (the "Executive") as of the
______day of______,______(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
<PAGE>
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.
2
<PAGE>
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
3
<PAGE>
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.
4
<PAGE>
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
5
<PAGE>
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 LLC as the contractor of the
Trustee ("Trustee's
6
<PAGE>
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 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 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 5" 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
7
<PAGE>
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
8
<PAGE>
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 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 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
9
<PAGE>
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
10
<PAGE>
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
11
<PAGE>
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 or its Compensation
and Stock Option Committee approving the Compensation Agreement and all
amendments thereto, promptly upon their adoption. After the
12
<PAGE>
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
13
<PAGE>
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.
14
<PAGE>
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 the Vista Select Bond 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 participate in and use a book-entry system for the deposit
and transfer of securities;
15
<PAGE>
(c) 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;
(d) 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;
(e) 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;
(f) To extend the time of payment of any obligation held by it;
(g) To hold uninvested any moneys received by it, without liability
for interest thereon, until such moneys shall be invested, reinvested or
disbursed;
16
<PAGE>
(h) To exercise all voting or other rights with respect to any
property held by it and to grant proxies, discretionary or otherwise;
(i) 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;
(j) 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;
(k) To employ suitable agents and counsel, who may be counsel to the
Company or the Trustee, including, without limitation, Hewitt Associates
LLC and PricewaterhouseCoopers LLP, and to pay their reasonable expenses
and compensation from the Fund to the extent not paid by the Company;
(l) 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;
(m) To settle, compromise or submit to arbitration any claims, debts
or damages due or owing to or from the
17
<PAGE>
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;
(n) 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
(o) 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
18
<PAGE>
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
ll.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
19
<PAGE>
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
20
<PAGE>
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
21
<PAGE>
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
22
<PAGE>
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
23
<PAGE>
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
24
<PAGE>
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.
25
<PAGE>
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
26
<PAGE>
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
27
<PAGE>
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: Fortune Brands, Inc.
300 Tower Parkway
Lincolnshire, Illinois 60069
Attn: Secretary
EIN: 13-3295276
Trustee: The Chase Manhattan Bank
1211 Avenue of the Americas
New York, New York 10036
Attn: Trusts and Estates
Management Division, 34th Floor
28
<PAGE>
Trustee's Hewitt Associates LLC
Contractor: 40 Highland Avenue
Rowayton, Connecticut 06853
Attn:
Executive:
SSN:
or at such other address as such person may specify in writing by notice as set
forth above to the other persons listed above.
29
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed as of the________ day of_________,________.
Attest: FORTUNE BRANDS, INC.
By_____________________________________
Attest: THE CHASE MANHATTAN BANK
By_____________________________________
Attest: HEWITT ASSOCIATES LLC
By_____________________________________
<PAGE>
Schedule A
Hewitt Associates LLC
40 Highland Avenue
Rowayton, Connecticut 06853
Attn:
PAYMENT DEMAND NOTICE
NAME OF EXECUTIVE:
ADDRESS:
PHONE:
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
______,______among FORTUNE BRANDS, INC., THE CHASE MANHATTAN BANK and HEWITT
ASSOCIATES LLC.
_____________________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.N2
<SEQUENCE>15
<FILENAME>c68345ex10-n2.txt
<DESCRIPTION>SCHEDULE
<TEXT>
<PAGE>
EXHIBIT 10n2
Schedule identifying substantially identical agreements, among Fortune Brands,
Inc. ("Fortune") and The Chase Manhattan Bank, et al., establishing a trust in
favor of each of the following persons, to the Agreement thereto constituting
Exhibit 10n1 to the Annual Report on Form 10-K of Fortune for the Fiscal Year
ended December 31, 2001.
Name
Mark Hausberg
Craig P. Omtvedt
Mark A. Roche
Norman H. Wesley
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.P1
<SEQUENCE>16
<FILENAME>c68345ex10-p1.txt
<DESCRIPTION>SEVERANCE AGREEMENT
<TEXT>
<PAGE>
EXHIBIT 10p1
SEVERANCE AGREEMENT
AGREEMENT dated as of January 29, 1996 between AMERICAN BRANDS, INC., a
Delaware corporation (the "Company"), and CRAIG P. OMTVEDT (the "Executive"),
W I T N E S S E T H :
WHEREAS, the Executive is currently employed by the Company and has
throughout his period of employment rendered valuable service to the Company;
and
WHEREAS, the Executive desires to continue in full-time employment with
the Company, 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 continue to have the benefits of the
Executive's knowledge and experience as a full-time employee of the Company and
considers encouraging the continued employment of the Executive by providing
him with the assurance of receiving severance benefits to be a vital element in
protecting and enhancing the best interests of the Company and its
stockholders; and
<PAGE>
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 1),
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
2
<PAGE>
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
3
<PAGE>
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
4
<PAGE>
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
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
5
<PAGE>
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).
6
<PAGE>
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
7
<PAGE>
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 45% of his annual base salary in effect in 1996 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 1997 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 1996, plus (3) the greater of the amount
that was allocated to the Executive's account under the Defined
Contribution Plan of American Brands, Inc. and Participating Operating
Companies (the "Profit-Sharing Plan"), including the Company 401(k)
matching contribution thereto, the profit-sharing provisions of the
Supplemental Plan of
8
<PAGE>
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 1996 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).
(c) If the Company shall terminate the Executive's employment other
than for Disability or Cause, the Company
9
<PAGE>
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
10
<PAGE>
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
11
<PAGE>
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 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
12
<PAGE>
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
13
<PAGE>
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
14
<PAGE>
available for allotment equal to the same percentage of the total
amount available for allotment as he is allocated for 1996 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 45% of his annual base salary in
effect in 1996 if the Termination Date occurs in 1996), with such
incentive compensation amount prorated for the portion of the year
(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
15
<PAGE>
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
January 29, 1996 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.
16
<PAGE>
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
17
<PAGE>
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:
Craig P. Omtvedt
8 Sylvan Lane
Old Greenwich, Connecticut 06870
18
<PAGE>
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
19
<PAGE>
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.
20
<PAGE>
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_________________________________
SRUPANO CHIEF
ADMINISTRATIVE
OFFICER
ATTEST:
__________________________
Secretary
__________________________________
Craig P. Omtvedt
21
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.P2
<SEQUENCE>17
<FILENAME>c68345ex10-p2.txt
<DESCRIPTION>AMENDMENT
<TEXT>
<PAGE>
EXHIBIT 10p2
AMENDMENT TO SEVERANCE AGREEMENT
This AMENDMENT effective as of January 27, 1997 to the Severance
Agreement (the "Agreement") dated as of January 29, 1996 between AMERICAN
BRANDS, INC., a Delaware corporation (the "Company"), and CRAIG P. OMTVEDT (the
"Executive");
WITNESSETH:
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 two and the number of years (and fraction
thereof) from the Termination
<PAGE>
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
"one-year period" in each place it appears therein to "two-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
2
<PAGE>
and had accumulated two 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 two 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
3
<PAGE>
meaning as in the Retirement Plan as in effect on the date hereof, unless
otherwise defined herein or otherwise required by the context."
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 day of_________, 1997.
AMERICAN BRANDS, INC.
By___________________________
Senior Vice President
and Chief Administrative
Officer
(Corporate Seal)
ATTEST:
________________________
Secretary
____________________________
Craig P. Omtvedt
4
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.P4
<SEQUENCE>18
<FILENAME>c68345ex10-p4.txt
<DESCRIPTION>SCHEDULE
<TEXT>
<PAGE>
EXHIBIT 10p4
Schedule identifying substantially identical agreements, among Fortune Brands,
Inc. ("Fortune") and each of the following persons, to the Agreement and
Amendments thereto constituting Exhibits 10p1, 10p2 and 10p3 to the Annual
Report on Form 10-K of Fortune for the Fiscal Year ended December 31, 2001.
Name
Mark A. Roche
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.P6
<SEQUENCE>19
<FILENAME>c68345ex10-p6.txt
<DESCRIPTION>SCHEDULE
<TEXT>
<PAGE>
EXHIBIT 10p6
Schedule identifying substantially identical agreement, among Fortune Brands,
Inc. ("Fortune") and each of the following persons, to the Amendment
constituting Exhibit 10p5 to the Annual Report on Form 10-K of Fortune for the
Fiscal Year ended December 31, 2001.
Name
Mark Hausberg
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12
<SEQUENCE>20
<FILENAME>c68345ex12.txt
<DESCRIPTION>STMT RE: COMP OF RATIO OF EARNINGS TO FIXED CHRGS
<TEXT>
<PAGE>
EXHIBIT 12
FORTUNE BRANDS, INC.
Statement Re Computation of Ratio of Earnings to Fixed Charges
(Dollar amounts in millions)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------
1997 1998 1999 2000 2001
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Continuing Operations
Earnings Available:
Income before
provision for
taxes on income
and minority interest $ 145.2 $ 516.4 ($ 725.2) $ 44.0 $ 491.9
Less: Excess of
earnings over
dividends of less
than fifty percent
owned companies 0.2 0.2 0.2 0.2 --
Capitalized interest -- -- 4.1 0.6 0.1
-------- -------- -------- -------- --------
145.0 516.2 (720.9) 43.2 491.8
-------- -------- -------- -------- --------
Fixed Charges:
Interest expense
(including capitalized
interest) and amortization
of debt discount and expenses 122.4 105.4 113.9 135.6 100.5
Portion of rentals
representative of
an interest factor 14.7 17.0 19.0 18.0 17.0
-------- -------- -------- -------- --------
Total Fixed Charges 137.1 122.4 132.9 153.6 117.5
-------- -------- -------- -------- --------
Total Earnings
Available $ 282.1 $ 638.6 $ (588.0) $ 196.8 609.3
======== ======== ======== ======== ========
Ratio of Earnings to
Fixed Charges 2.06 5.22 (A) 1.28 5.19
======== ======== ======== ======== ========
</TABLE>
(A) As a result of the loss reported for the year ended December 31, 1999,
the Company was unable to cover the fixed charges as indicated.
Included in earnings for 1999 was a second quarter goodwill write-down
of $1,126 million as disclosed in Note 1 to the Company's consolidated
financial statements. If the write-down was excluded from earnings, the
ratio of earnings to fixed charges for the year ended December 31, 1999
would have been 4.05.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13
<SEQUENCE>21
<FILENAME>c68345ex13.txt
<DESCRIPTION>2001 ANNUAL REPORT TO STOCKHOLDERS
<TEXT>
<PAGE>
Exhibit 13
FINANCIAL HIGHLIGHTS
FORTUNE BRANDS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
(In millions, except per-share amounts) 2001 2000 Change 1999
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET SALES(1)
Home products $2,106.8 $2,122.5 $1,872.3
Spirits and wine 1,369.3 1,228.9 1,269.6
Golf products 946.5 965.2 977.7
Office products 1,256.1 1,435.4 1,381.0
- ----------------------------------------------------------------------------------------
$5,678.7 $5,752.0 (1.3%) $5,500.6
========================================================================================
OPERATING COMPANY CONTRIBUTION(2)
Home products $ 318.1 $ 340.4 $ 300.2
Spirits and wine 306.0 309.1 293.6
Golf products 131.3 145.2 147.0
Office products 50.1 79.5 88.5
- ----------------------------------------------------------------------------------------
$ 805.5 $ 874.2 (7.9%) $ 829.3
========================================================================================
Net income (loss) $ 386.0 $ (137.7) - $ (890.6)
- ----------------------------------------------------------------------------------------
Earnings per common share
Basic $ 2.55 $ (0.88) - $ (5.35)
Diluted $ 2.49 $ (0.88) - $ (5.35)
========================================================================================
Net income before one-time items(3) $ 373.4 $ 366.2 2.0% $ 339.8
- ----------------------------------------------------------------------------------------
Earnings per common share before one-time items
Basic $ 2.46 $ 2.32 6.0% $ 2.03
Diluted $ 2.41 $ 2.29 5.2% $ 1.99
========================================================================================
EBITDA(4) $ 933.6 $ 990.1 (6%) $ 911.5
========================================================================================
Dividends paid per common share $ .97 $ .93 4% $ .89
========================================================================================
Actual number of common shares outstanding 148.0 153.5 163.2
Average number of common shares outstanding 155.3 157.6 166.6
========================================================================================
</TABLE>
(1) Net sales have been restated for 1999 to conform to the 2000 and 2001
presentation due to the reclassification of shipping and handling in
accordance with Emerging Issues Task Force Issue No. 00-10.
Net sales have been restated for 2000 and 1999 to conform to the 2001
presentation due to the reclassification of customer rebates in
accordance with Emerging Issues Task Force Issue No. 00-22.
(2) Operating company contribution is net sales less all costs and expenses
other than restructuring and other nonrecurring charges, write-downs of
identifiable intangibles and goodwill, amortization of intangibles,
corporate administrative expenses, interest and related expenses, other
(income) expenses, net, income taxes and minority interests.
(3) Income from operations before one-time items was $373.4 million, or $2.46
basic and $2.41 diluted per share for 2001, compared with $366.2
million or $2.32 basic and $2.29 diluted per share for 2000. The
one-time items for 2001 represent: the $98.1 million ($63.3 million
after tax, or 42 cents basic and 41 cents diluted per share)
restructuring and other nonrecurring charges, a $73.3 million ($67.1
million after tax, or 44 cents basic and 43 cents diluted per share)
write-down of identifiable intangibles, a $72.9 million net tax benefit
recognized as a result of the recapitalization of the office products
business, a $31.0 million tax reserve reversal, the $28.5 million ($17.3
million after tax, or 11 cents per share) interest income on the tax
refund and the $16.6 million ($21.8 million after tax, or 15 cents basic
and 14 cents diluted per share) gain on the sale of the U.K.
private-label Scotch business.
We reported a net loss in 2000 and 1999. Because of this, the
calculation of reported earnings per share on a diluted basis excludes
the impact of the convertible preferred stock and stock options. For
comparative purposes, however, the impact of the convertible preferred
stock and stock options are considered.
(4) EBITDA is defined as income from continuing operations before
extraordinary items and net charges, interest expense, income taxes,
minority interests and depreciation and amortization. EBITDA, which is
earnings before interest, taxes, depreciation and amortization, is a
measure commonly used by analysts and investors. Accordingly, this
information has been presented to permit a more complete analysis of the
Company's operating performance. EBITDA should not be considered a
substitute for net income or cash flow prepared in accordance with
generally accepted accounting principles as a measure of the
profitability or liquidity of the Company.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
FORTUNE BRANDS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Net Sales Operating Company Contribution(a)
=======================================================================================
(In millions) 2001 2000 1999 2001 2000 1999
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Home products $2,106.8 $ 2,122.5 $1,872.3 $ 318.1 $340.4 $300.2
Spirits and wine 1,369.3 1,228.9 1,269.6 306.0 309.1 293.6
Golf products 946.5 965.2 977.7 131.3 145.2 147.0
Office products 1,256.1 1,435.4 1,381.0 50.1 79.5 88.5
- ---------------------------------------------------------------------------------------
Continuing operations $5,678.7 $ 5,752.0 $5,500.6 $ 805.5 $874.2 $829.3
- ---------------------------------------------------------------------------------------
</TABLE>
(a) Operating company contribution (OCC) is net sales less all costs and
expenses other than restructuring and other nonrecurring charges,
write-downs of identifiable intangibles and goodwill, amortization of
intangibles, corporate administrative expenses, interest and related
expenses, other (income) expenses, net, income taxes and minority
interests. (See Note 15.)
Consolidated
2001 COMPARED TO 2000 Net sales decreased $73.3 million, or 1%. The decrease
was principally caused by volume declines in certain existing product lines,
primarily in the office, home and golf segments, the sale of the U.K.-based
private-label Scotch business in October 2001, as well as unfavorable foreign
exchange ($72 million). These factors were partly offset by the introduction of
new products and line extensions and higher average selling prices. On a
comparable basis to the prior year period, excluding the impact of the revenues
recorded under the interim distribution agreement with Vin & Sprit, revenues
for the U.K. private-label Scotch business for the fourth quarter of 2000 and
the impact of excise taxes and foreign exchange, net sales would have decreased
$139.7 million, or 3%. Additionally, as a result of the establishment of Vin &
Sprit's new U.S. subsidiary as the exclusive importer of Vin & Sprit's
products, revenues under the interim distribution agreement will no longer be
recorded by our spirits and wine business as of January 1, 2002.
Operating company contribution decreased $68.7 million, or 8%, on the lower
volumes in certain existing product lines that were spread across our existing
fixed cost base, lower margins, particularly in the golf segment, and
unfavorable foreign exchange rates ($13 million), partially offset by savings
achieved as a result of our restructuring actions and the lower selling costs
as a result of the Future Brands joint venture. On a comparable basis,
excluding the impact of the U.K. private-label Scotch business in the fourth
quarter of 2000 and foreign exchange, operating company contribution would have
decreased 4%.
As a result of an uncertain U.S. economic outlook, it is difficult to predict
consumer spending trends and the effect they may have on our businesses in 2002.
During the fourth quarter of 2001, we recorded a non-cash write-down of
identifiable intangibles of $73.3 million ($67.1 million after tax, or 44 cents
per basic and 43 cents per diluted share). The write-down recognized the
diminished fair values of select identifiable intangibles resulting from the
restructuring of office products and the consolidation of tradenames in home
products. The write-downs by business segment were: office products -- $64.4
million and home products -- $8.9 million.
We reported increases in deferred income and minority interest in consolidated
subsidiaries as of December 31, 2001 as compared with December 31, 2000. The
change in deferred income arose from the payment of $270 million from Vin &
Sprit, the maker of Absolut vodka, to gain access to our spirits and wine
business's U.S. distribution network and to acquire a 49% interest in Future
Brands LLC. This amount will be amortized to other (income) expenses, net on a
straight-line basis over the next ten years as Jim Beam Brands Co. ("JBB Co.")
has, in the event of a default of Future Brands LLC, continuing operating
obligations including, but not limited to, making payments to suppliers,
employees and other parties with which the joint venture has contracts. The
change in minority interest resulted from the payment of $375 million from Vin
& Sprit to acquire a 10% equity interest in our spirits and wine business in
the form of convertible preferred stock.
In December 2001, we recapitalized our office products business through the
sale of a minority interest of less than 1% of our common shares in the
business to a passive investor. The transaction allowed us to access a capital
tax loss that offset other gains, resulting in a net tax benefit of $72.9
million, or 48 cents per basic and 47 cents per diluted share. An additional
sale of our common shares in this business was completed in January 2002.
Coupled with common shares sold in December, we will recognize a minority
interest of less than 2% in the business. Additionally, the transaction
resulted in a substantial capital tax loss which carries forward and will be
realized in the event that the Company has qualified taxable capital gains.
On October 16, 2001, the Company announced that its spirits and wine business
sold its U.K.-based Scotch whisky business for $280 million in cash. The sale
of the business consisted of the Invergordon private-label and bulk Scotch
operations and several regional brands in the U.K. The products included in the
agreement generated sales of approximately $235 million (including excise
taxes) and operating company contribution of approximately $38 million in 2000.
The Company also recorded an after-tax gain of $21.8 million, or 15 cents per
basic and 14 cents per diluted share.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
FORTUNE BRANDS, INC. AND SUBSIDIARIES
During 2001, we recorded aggregate pre-tax restructuring and other nonrecurring
charges of $98.1 million ($63.3 million after-tax, or 42 cents per basic and 41
cents per diluted share). (See Note 14.) These charges principally related to
product line discontinuances, relocation of operations and expenses associated
with the exploration of strategic options in the office segment, inventory
write-offs and lease cancellation costs in the home segment, reductions in
wound golf ball capacity and inventory write-offs in the golf segment, and
other workforce reduction initiatives across these segments.
Interest and related expenses decreased $37 million, or 28%. This decline
primarily reflected lower interest rates in 2001 and the repayment of debt
using proceeds received from Vin & Sprit and from the sale of the U.K.
private-label Scotch business.
The effective income tax rate comparison was distorted primarily by the absence
of tax benefits on the write-down of goodwill, lower pre-tax income due to the
impact of the restructuring and other nonrecurring charges taken in 2001 and
the recognition of a net tax benefit due to the sale of a minority interest in
our office products business and the benefit of reversal of prior year tax
reserves no longer required. Excluding these charges and reversals, the
effective income tax rates were 38.1% for 2001 and 40.4% for 2000.
Net income in 2001 of $386.0 million, or $2.55 basic and $2.49 diluted per
share, compared with a net loss of $137.7 million, or 88 cents per share, for
2000.
Income from operations before one-time items was $373.4 million, or $2.46 basic
and $2.41 diluted per share, for 2001, compared with $366.2 million, or $2.32
basic and $2.29 diluted per share, for 2000. Income from operations before
one-time items for the year ended December 31, 2001 represented income before
the $98.1 million ($63.3 million after tax, or 42 cents basic and 41 cents
diluted per share) restructuring and other nonrecurring charges, a $73.3
million ($67.1 million after tax, or 44 cents basic and 43 cents diluted per
share) write-down of identifiable intangibles, a $72.9 million net tax benefit
recognized as a result of the recapitalization of the office products business,
a $31.0 million tax reserve reversal, the $28.5 million ($17.3 million after
tax, or 11 cents per share) interest income on the tax refund and the $16.6
million ($21.8 million after tax, or 15 cents basic and 14 cents diluted per
share) gain on the sale of the U.K. private-label Scotch business. Income from
operations before one-time items for the year ended December 31, 2000
represented income before the $502.6 million ($487.3 million after tax, or
$3.09 per share) goodwill write-down, the $73.0 million ($46.6 million after
tax, or 30 cents per share) restructuring and other nonrecurring charges and a
$30.0 million reversal of a tax reserve that was no longer required.
We derived approximately 22% of our 2001 and 23% of our 2000 operating company
contribution from international markets, principally the United Kingdom,
Australia and Canada. Fluctuations in the exchange rates of foreign currencies
may affect results in future periods. Fluctuations in average foreign exchange
reduced 2001 operating company contribution by approximately 2%. We cannot
accurately predict fluctuations in foreign exchange rates. A 10% change in
average exchange rates for the foreign currencies from 2001 average rates would
have resulted in a change in operating company contribution of approximately $18
million, or about 2%.
PENDING LITIGATION 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. In connection with the sale, Brown &
Williamson Tobacco Corporation and The American Tobacco Company (the
"Indemnitors") agreed to indemnify the Company against claims including legal
expenses arising from smoking and health and fire safe cigarette matters
relating to the tobacco business of The American Tobacco Company.
The Company is a defendant in numerous actions based upon allegations that
human ailments have resulted from tobacco use. Management believes that there
are meritorious defenses to the pending actions, including the fact that the
Company never made or sold tobacco, and these actions are being vigorously
contested. However, it is not possible to predict the outcome of the pending
litigation, and it is possible that some of these actions could be decided
unfavorably. Management is unable to make a meaningful estimate of the amount
or range of loss that could result from an unfavorable outcome of the pending
litigation. Management believes that the pending actions will not have a
material adverse effect upon the results of operations, cash flows or financial
condition of the Company as long as the Indemnitors continue to fulfill their
obligations to indemnify the Company under the aforementioned indemnification
agreement.
In addition to the lawsuits described above, the Company and its subsidiaries
are defendants in lawsuits associated with their businesses and operations. It
is not possible to predict the outcome of the pending actions, but management
believes that there are meritorious defenses to these actions and that these
actions will not have a material adverse effect upon the results of operations,
cash flows or financial condition of the Company. These actions are being
vigorously contested.
ENVIRONMENTAL MATTERS Along with other responsible parties, our subsidiaries
face claims relating to the protection of the environment. As of February 12,
2002, various of our subsidiaries had been designated as potentially
responsible parties under "Superfund" or similar state
24
<PAGE>
laws in 54 instances. We have reached settlements in 40 of these instances. We
believe that the cost of complying with the present environmental protection
laws, before considering estimated recoveries either from other responsible
parties or insurance, will not have a material adverse effect upon our results
of operations, cash flows or financial condition. At December 31, 2001 and
2000, we have accrued $51.7 million and $55.9 million, respectively, to cover
these matters.
RELATED PARTY TRANSACTIONS
FUTURE BRANDS LLC In 2001, the Company's spirits and wine business completed
transactions with Vin & Sprit AB of Sweden ("V&S") creating a joint venture,
named Future Brands LLC (the "LLC"), to distribute both companies' spirits and
wine brands in the United States. As part of forming this joint venture, our
spirits and wine business has, in the event of a default of the LLC, a
continuing obligation to satisfy any financial obligations of the LLC that may
arise in the event that the LLC fails to fulfill its operating obligations and
which results in a claim. These financial obligations include, but are not
limited to, making payments to suppliers, employees and other parties with
which the LLC has contracts. At December 31, 2001, JBB Co. did not have any
outstanding obligations as a result of this arrangement. JBB Co.'s
transactions with the LLC amounted to: sales of $498.7 million in 2001,
accounts receivable of $92.0 million, accounts payable of $23.7 million and an
investment of $9.4 million as of December 31, 2001.
MAXXIUM WORLDWIDE BV In 1999, the spirits and wine business formed an
international sales and distribution joint venture named Maxxium Worldwide B.V.
("Maxxium") with Remy-Cointreau and Highland Distillers, which began operating
in August 1999, to distribute and sell spirits in key markets outside the
United States. As a result of forming this joint venture, the Company has
guaranteed certain credit facilities and bank loans entered into by Maxxium up
to an amount totaling $55 million, of which $48 million was outstanding as of
December 31, 2001. At December 31, 2000, the guarantees totaled $77 million, of
which $68 million was outstanding. Jim Beam Brands Worldwide ("JBBW") has also
executed a Shareholder Loan Facility ("Loan Facility") with Maxxium. There are
no amounts outstanding under this Loan Facility as of December 31, 2001. As of
December 31, 2000, the outstanding balance under the Loan Facility was $18.6
million. This Loan Facility expires December 31, 2003. JBB Co.'s transactions
with Maxxium included the following: sales of $168.2 million, $160.0 million
and $84.3 million for the years ended December 31, 2001, 2000 and 1999,
respectively, accounts receivable of $39.5 million, $57.6 million and $55.0
million as of December 31, 2001, 2000 and 1999, respectively, and accounts
payable of $6.1 million, $22.4 million and $20.0 million as of December 31,
2001, 2000 and 1999, respectively, and an investment of $63.0 million, $66.9
million and $68.6 million as of December 31, 2001, 2000 and 1999, respectively.
CRITICAL ACCOUNTING POLICIES Financial Reporting Release No. 60, which was
recently issued by the Securities and Exchange Commission ("SEC"), requires all
registrants, including the Company, to include a discussion of "critical"
accounting policies or methods used in the preparation of financial statements.
We believe the following critical accounting policies affect our more
significant judgements and estimates used in the preparation of our
consolidated financial statements.
Inventories
Inventories are priced at the lower of cost (principally first-in, first-out
and average, with minor amounts at last-in, first-out) or market. In accordance
with generally recognized trade practice, bulk whiskey inventories are
classified as current assets, although the majority of such inventories, due to
the duration of aging processes, ordinarily will not be sold within one year.
Intangibles
Goodwill is amortized on a straight-line basis over its estimated useful life,
principally over a forty year period, except for certain amounts related to
businesses acquired prior to 1971, which are not being amortized because they
have been determined to have continuing value over an indefinite period.
The Company evaluates the recoverability of goodwill by estimating the future
discounted cash flows of the businesses to which the goodwill relates. The rate
used in determining discounted cash flows is a rate corresponding to the
Company's cost of capital, risk adjusted where necessary. Estimated cash flows
are then determined by disaggregating the Company's business segments to an
operational and organizational level for which meaningful identifiable cash
flows can be determined. When estimated future discounted cash flows are less
than the carrying value of the net assets (tangible and identifiable
intangibles) and related goodwill, impairment losses of goodwill are charged to
operations. Impairment losses, limited to the carrying value of goodwill,
represent the excess of the sum of the carrying value of the net assets
(tangible and identifiable intangible) and goodwill over the discounted cash
flows of the business being evaluated. In determining the estimated future cash
flows, the Company considers current and projected future levels of income as
well as business trends, prospects and market
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
FORTUNE BRANDS, INC. AND SUBSIDIARIES
and economic conditions. Prior to April 1, 1999, the assessment of
recoverability and measurement of impairment of goodwill was based on
undiscounted cash flows.
The assessment of recoverability and measurement of impairment of identifiable
intangibles is based on an undiscounted cash flow basis.
Net Sales
The Company generally recognizes revenue as products are shipped to customers,
net of applicable provisions for discounts, returns and allowances. The Company
provides for its estimate of potential bad debt and warranty expense at the
time of revenue recognition.
Customer Program Costs
The Company generally recognizes customer program costs in either net sales or
the category "advertising, selling and general and administrative costs" at the
time the program is initiated and/or the revenue is recognized. These costs
include competitor product buy-backs, cooperative advertising programs, shared
media programs, product buy-downs and other miscellaneous programs. These
costs totaled $392.8 million, $408.6 million, and $345.9 million for the years
ended December 31, 2001, 2000 and 1999, respectively.
Derivative Financial Instruments
Effective January 1, 2001, the Company adopted FAS Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," and its related
amendment FAS Statement No. 138, "Accounting for Certain Derivative Instruments
and Certain Hedging Activities." These statements establish accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. They
require recognition of all derivatives as either assets or liabilities on the
balance sheet and the measurement of those instruments at fair value. If the
derivative is designated as a fair value hedge and is effective, the changes in
the fair value of the derivative and of the hedged item attributable to the
hedged risk are recognized in earnings in the same period. If the derivative is
designated as a cash flow hedge, the effective portions of changes in the fair
value of the derivative are recorded in other comprehensive income and are
recognized in the income statement when the hedged item affects earnings.
Ineffective portions of changes in the fair value of cash flow hedges are
recognized in earnings.
RECENTLY ISSUED ACCOUNTING STANDARDS The Emerging Issues Task Force ("EITF")
issued EITF No. 00-14, "Accounting for Certain Sales Incentives," which
addresses the recognition, measurement and statement of earnings classification
for certain sales incentives, and will be effective in the first quarter of
2002. As a result, certain items previously included in cost of sales and in
selling and administrative costs on the consolidated statement of operations
will be recorded as a reduction of sales. Upon adoption, prior period amounts
will be reclassified to conform to the new requirements. In April 2001, the
EITF reached a consensus on Issue EITF No. 00-25, "Vendor Income Statement
Characterization of Consideration to a Purchase of the Vendor's Products or
Services." EITF Issue No. 00-25 requires that certain expenses included in cost
of sales and in selling and administrative costs be recorded as a reduction of
sales and will be effective in the first quarter of 2002. In total, the impact
of these two issues will result in a reclassification to sales of $117.6
million and $115.7 million for the years ended December 31, 2001 and 2000,
respectively, which were previously recorded in the category "advertising,
selling, general and administrative expenses."
Additionally, in July 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations," and No. 142, "Goodwill and Other Intangible Assets." Effective
January 1, 2002, we will no longer be required to amortize goodwill and certain
intangible assets as a charge to earnings. In addition, we will be required to
review goodwill and other intangible assets for potential impairment on an
annual basis. As a result of adopting this new standard, we currently
anticipate that intangible amortization will be reduced by approximately $50
million, which will result in an earnings per share benefit of approximately 31
cents in 2002.
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets,"
was issued in August 2001. SFAS No. 144 is effective for fiscal years beginning
after December 15, 2001, and addresses financial accounting and reporting for
the impairment or disposal of long-lived assets. This statement supersedes SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," and the accounting and reporting provisions of APB
Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions," for the disposal of a segment
of a business. We plan to adopt the standard at the beginning of 2002.
CONVERSION TO THE EURO Certain of our subsidiaries are engaged in business in
some of the countries that participate in the European monetary union. We do
not expect the conversion to the Euro to have a material effect on our results
of operations, cash flows or financial conditions.
26
<PAGE>
COST INITIATIVES We continuously evaluate the productivity of our product lines
and existing asset base and actively seek to identify opportunities to improve
our cost structure. Future opportunities may involve, among other things, the
reorganization of operations or the relocation of manufacturing or assembly to
locations generally having lower costs. Implementing any significant cost
reduction and efficiency opportunities could result in charges.
2000 COMPARED TO 1999 Net sales grew $251.4 million, an increase of 5%. The
increase was primarily due to the introduction of new products, line
extensions, and the full-year benefit of acquisitions made in 1999 in the home
and office products segments. These increases were partly offset by lower
average foreign exchange rates, volume declines in some existing products and
increased rebates and allowances in the United States in our office products
segment. In addition, reported sales of spirits and wine were lower because
sales through the Maxxium joint venture are net of excise taxes and
distribution costs, which are now incurred by the venture. Absent this change,
sales would have increased 6%. Operating company contribution, our key measure
by which we gauge performance, increased $44.9 million, or 5%, on the benefit
of the higher sales, improved product mix and savings resulting from our
restructuring initiatives.
During the fourth quarter of 2000, we recorded a non-cash write-down of
goodwill of $502.6 million, ($487.3 million after tax, or $3.09 per share).
This action resulted from the significant shortfall in office products
earnings, the softening conditions in the office products industry and the
ongoing strategic review process, which led to the implementation of additional
restructuring plans.
During 2000, we recorded aggregate pre-tax restructuring and other nonrecurring
charges of $73.0 million ($46.6 million after-tax, or 30 cents per share). (See
Note 14.) These charges principally related to relocation costs for
manufacturing facilities in the office segment, rationalization of operations
in the home segment, product line discontinuances and manufacturing
consolidation in the golf segment, and other workforce reduction initiatives
across these segments and downsizing and relocation of the Corporate office.
Interest and related expenses increased 25%. This increase reflected higher
average borrowings resulting primarily from share repurchases, an investment in
a joint venture and higher average interest rates. Corporate administrative
expense decreased $22.5 million, or 36%, due to the restructuring program
initiated in 1999.
The effective income tax rate comparison was distorted primarily by the absence
of tax benefits on the write-down of goodwill, lower pre-tax income due to the
impact of the restructuring and other nonrecurring charges taken in 2000 and
the benefit of reversal of prior year tax reserves no longer required.
Excluding these charges and reversals, the effective income tax rate was 40.4%
for 2000 and 1999.
Net loss was $137.7 million, or 88 cents per share, in 2000 compared with a net
loss of $890.6 million, or $5.35 per share, for 1999.
Income from operations before net charges was $366.2 million, or $2.32 basic
and $2.29 diluted per share for 2000, compared with $339.8 million, or $2.03
basic and $1.99 diluted per share for 1999. Income from operations before net
charges for the year ended December 31, 2000 represented income before the
$502.6 million ($487.3 million after tax, or $3.09 per share) goodwill
write-down, the $73.0 million ($46.6 million after tax, or 30 cents per share)
restructuring and other nonrecurring charges and a $30.0 million reversal of a
tax reserve that was no longer required. Income from operations before net
charges for the year ended December 31, 1999 represented income before the
$1,126 million, or $6.76 per share, goodwill write-down, the $196.0 million
($125.6 million after tax, or 75 cents per share) of restructuring and other
nonrecurring charges and the $31.6 million ($21.2 million after tax, or 13
cents per share) gain on the sale of a financing subsidiary.
Home Products
2001 COMPARED TO 2000 Net sales decreased $15.7 million, or 1%, on lower
volumes in certain existing product lines, particularly tool storage, higher
rebates as well as unfavorable foreign exchange rates ($6 million). These
factors were largely offset by the introduction of new products and line
extensions and higher average selling prices. Our results were tempered by the
events of September 11 and the weak economy, including wholesale inventory
reductions in the faucet segment.
Operating company contribution decreased $22.3 million, or 7%. The decrease in
operating company contribution resulted from adverse operating leverage,
specifically associated with the specialty plumbing parts unit, which is
exiting a significant portion of its low-margin retail business, higher
operating expenses and unfavorable product mix. This decrease was partly offset
by higher average selling prices and savings from outsourcing initiatives.
The continued consolidation of the customer base in the home products industry,
for example among home centers and large homebuilders, and increased price
competition will continue to present us and our competitors with pricing
challenges. Customer consolidation will also present opportunities for the most
efficient manufacturers and skilled marketers.
Our home products business may be impacted by the continued uncertain U.S.
economic outlook and its potential impact on the U.S. housing and remodeling
markets.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
FORTUNE BRANDS, INC. AND SUBSIDIARIES
2000 COMPARED TO 1999 Net sales increased $250.2 million, or 13%. The increase
was primarily attributable to overall volume increases, the acquisition of NHB
Group in October 1999 and price increases. The overall volume increases
reflected line extensions, higher volume in some existing products and the
introduction of new products.
Operating company contribution increased $40.2 million, or 13%. The operating
company contribution increase resulted from the higher sales, improved product
mix and a reduction in administrative expenses, partly offset by increased
operating expenses. The increased operating expenses were primarily due to
higher selling expenses and increased distribution and research and development
expenses.
Spirits and Wine
2001 COMPARED TO 2000 Net sales increased $140.4 million, or 11%, principally
as a result of Absolut vodka revenues recorded by the spirits and wine business
on an interim basis until Vin & Sprit's U.S. subsidiary is fully operational,
as well as volume increases in certain existing product lines and an increase
in average selling prices in our Jim Beam bourbon and DeKuyper product lines.
The volume increases included gains in our Jim Beam pre-mix product in
Australia, cordials in the United Kingdom and premium and super-premium product
lines in the United States. These benefits were partially offset by lower
average foreign exchange rates during the year ($21 million). On a comparable
basis with the prior year period, excluding the revenues recorded under the
interim distribution agreement with Vin & Sprit and the U.K. private-label
Scotch business for the fourth quarter of 2000 and the impact of excise taxes
and foreign exchange, net sales would have increased $22.8 million, or 3%.
Additionally, as a result of the establishment of Vin & Sprit's new U.S.
subsidiary as the exclusive importer of Vin & Sprit's products, revenues under
the interim distribution agreement will no longer be recorded by our spirits
and wine business as of January 1, 2002.
Operating company contribution decreased $3.1 million, or 1%, due to the sale
of the U.K. private-label Scotch business in October 2001 and unfavorable
foreign exchange rates ($8 million). This decrease was partly offset by the
higher average selling prices and volume increases in certain existing product
lines (as noted above) and lower selling costs as a result of the Future Brands
joint venture, as discussed below. On a comparable basis, excluding the impact
of the U.K. private-label Scotch business in the fourth quarter of 2000 and
foreign exchange, operating company contribution would have improved 8%.
On October 15, 2001, our spirits and wine business sold its U.K.-based Scotch
whisky business for $280 million in cash. The sale of the business consisted of
the Invergordon private-label and bulk Scotch operations and several regional
brands in the U.K. The products included in the agreement generated sales of
approximately $235 million (including excise taxes) and operating company
contribution of approximately $38 million in 2000. The Company also recorded an
after-tax gain of $21.8 million.
On May 31, 2001, the Company's spirits and wine business completed transactions
with Vin & Sprit creating a joint venture, named Future Brands LLC, to
distribute both companies' spirits and wine brands in the United States. Vin &
Sprit paid $270 million to gain access to Beam's U.S. distribution network and
to acquire a 49% interest in the LLC and paid $375 million to purchase a 10%
equity interest in JBBW in the form of convertible preferred stock. The shares
of JBBW convertible preferred stock issued to Vin & Sprit are convertible into
10% of the JBBW common stock and voting power equivalent to a 10% interest in
JBBW common stock. The preferred stock is entitled to a dividend equal to the
greater of 10% of the dividend paid upon JBBW common stock or 3% of the
preferred stock's face value ($375 million) plus unpaid accrued dividends; no
dividends may be paid on common stock unless all unpaid accrued JBBW preferred
stock dividends have been paid. Vin & Sprit also received a 3-year option to
increase its equity stake in JBBW by up to an additional 9.9%. Vin & Sprit may
require the Company to purchase the JBBW preferred stock in whole or in part at
any time after May 31, 2004, or upon a change in control of JBBW, Jim Beam
Brands Co., or certain other events. The Company has accounted for the $270
million gain on the sale of 49% of the LLC as deferred income and the resulting
tax on sale as a deferred income tax asset due to certain continuing
obligations of JBB Co. including, but not limited to, making payments to
suppliers, employees and other parties with which the LLC has contracts in the
event of a default of the LLC. In June 2001, we started to amortize these
amounts to other (income) expenses, net on a straight-line basis over the next
ten years.
In addition, Vin & Sprit invested 107 million Euros (approximately $90 million)
to acquire a 25% interest in our international sales and distribution joint
venture, named Maxxium Worldwide B.V. Maxxium was formed in 1999 by JBBW,
Remy-Cointreau and Highland Distillers to distribute and sell premium wines and
spirits in key markets outside the United States.
The Maxxium joint venture, the merger of Grand Metropolitan and Guinness to
create Diageo in late 1997, the sale of the Seagram brands to Diageo and
Pernod-Ricard, and the Jim Beam-Absolut joint venture reflect a trend towards
consolidation in the highly competitive global spirits and wine business. The
creation of Diageo and the breadth of its portfolio, as well as continued
consolidation of the supplier, distributor and retailer tiers,
28
<PAGE>
may present pricing and service challenges for our subsidiaries and their
competitors. It may also present opportunities, particularly for the most
efficient competitors.
Beverage alcohol sales are particularly sensitive to higher excise tax rates.
Although no federal excise tax increase is presently pending in the U.S., our
largest market, the possibility of future increases cannot be ruled out. It is
impossible to predict whether any future excise tax increases will occur, and
whether they may have an adverse effect on unit sales, profitability and
industry trends if they occur.
For many years through 1995, consumption of distilled spirits decreased in many
countries, including our major market, the U.S. However, since 1996,
consumption in the U.S. has been steady or increased slightly, indicating that
the historic decline may be reversing. From 1996 through 2000, aggregate U.S.
cases of our spirits products sold by distributors to retailers decreased,
although the rate of decline has slowed since 1998 to a decrease of 1% in 2001.
The number of cases sold may have been affected by our spirits and wine
business's historic strength in mid-to-low priced products that may not be
fully benefiting from the factors influencing the recent industry trends. Our
spirits and wine business has introduced and developed several premium brands
in recent years and is focusing on the introduction of additional premium
products to its portfolio to capitalize on the fastest-growing segment of the
spirits and wine industry. The number of cases sold may have been affected by
price increases our spirits and wine business has implemented in recent years
to increase profits as compared to unit sales.
2000 COMPARED TO 1999 Net sales decreased $40.7 million, or 3%, principally on
the effect of the Maxxium joint venture and lower average foreign exchange
rates. Product is sold to Maxxium, net of excise taxes in certain markets, at a
lower price since the related distribution costs are now incurred by Maxxium.
On a comparable basis to prior periods, excluding the impact of Maxxium, net
sales would have been $52.0 million higher, or 1% higher than 1999. This
underlying increase in net sales was led by volume increases and higher prices.
The volume increases primarily reflected increased volumes in existing premium,
super-premium and wine products, line extensions and introductions of new
products, principally in the United States, partially offset by volume declines
in lower margin U.S. and Scotch whiskey brands.
Operating company contribution increased $15.5 million, or 5%. The increase
resulted primarily from favorable price and volume changes for some brands in
the United States, as well as reduced costs from the Maxxium distribution joint
venture, partly offset by adverse foreign exchange rates.
Golf Products
2001 COMPARED TO 2000 Net sales decreased $18.7 million, or 2%, principally due
to unfavorable foreign exchange rates ($18 million). In addition, the business
experienced lower volumes in certain existing golf club, golf shoe and golf
glove product lines and price competition largely offset by an increase in golf
ball volumes and the introduction of new products across all product lines.
Sales were adversely affected by a 1% decline in rounds played, soft economic
conditions and a decline in destination travel after the events of September 11.
Operating company contribution decreased $13.9 million, or 10% on the lower
sales, the discontinuance of certain product lines and unfavorable foreign
exchange ($3 million). These conditions were partially offset by reduced
operating expenses.
Competitors whose products have significant brand awareness have introduced
golf balls into their product offerings in the past three years and the golf
ball industry has experienced increased price competition, partially as a
result of such introductions. Although our share of the domestic golf ball
market fell slightly during 2000, our golf ball business recovered that market
share by the end of 2001, largely as a result of the introduction of the Pro V1
and the recently introduced NXT.
The United States Golf Association ("USGA") establishes standards for golf
equipment used in competitive play in the United States. On November 2, 1998,
the USGA announced the immediate implementation of a new golf club performance
rule that established a rebound velocity standard for driving clubs. The Royal
and Ancient Golf Club ("R&A") establishes standards for golf equipment used in
competitive play outside the United States and Mexico. On September 21, 2000,
the R&A issued a Notice to Manufacturers announcing its decision not to adopt
the USGA's rebound velocity standard or any new rule or test protocol for
driving clubs. The R&A's decision not to adopt the rule implemented by the USGA
has resulted in conflicting conformance standards for driving clubs in the
United States and the rest of the world. The divergence between the USGA and
the R&A on this issue may cause confusion to consumers and could be disruptive
to the United States and world markets for driving clubs. In addition, the USGA
rule could hamper innovation and make it more difficult to use technological
advances to produce USGA conforming products. However, it is not possible to
determine whether in the long term the USGA rule or the divergence in rules
will have a material effect on the golf club industry and our golf products
business.
Each of the USGA and the R&A has announced its intention to propose new rules
addressing the overall distance standard for golf balls, golf club head size
and golf club shaft length. Until more details regarding such potential rule
changes become available, we cannot
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
FORTUNE BRANDS, INC. AND SUBSIDIARIES
determine whether they would have a material effect on our golf products
business and/or the golf industry. However, the new rules being considered
could incorporate rules that would shorten the overall distance that golf balls
are allowed to travel and that could hamper innovation in the design and
manufacture of golf balls and golf clubs. The adoption of any such rules could
materially impact our golf products business and/or the golf industry.
2000 COMPARED TO 1999 Net sales decreased $12.5 million on sales declines in
some existing products, principally Cobra golf clubs, partly offset by line
extensions and the introduction of new Titleist and FootJoy brands products.
Operating company contribution decreased $1.8 million, or 1%, on the lower
sales and higher operating expenses partially offset by improved gross margins
across all product categories. The increase in operating expenses was primarily
due to higher advertising and volume-related selling expenses, partially offset
by lower freight and distribution expenses.
Office Products
2001 COMPARED TO 2000 Sales decreased $179.3 million, or 12%, principally
resulting from lower volumes in the United States across all product
categories, including discontinuing certain unprofitable product lines and
lower average foreign exchange rates ($27 million). In addition, U.S. and
European economic softness and demand weakness caused by corporate layoffs
coupled with ongoing inventory reductions by major customers have prolonged
industry-wide volume challenges. These factors were partially offset by the
introduction of new products, higher selling prices for select products,
favorable product mix and reduced customer rebates due to the lower volumes.
Operating company contribution decreased $29.4 million, or 37%. The lower
operating company contribution was primarily attributable to the lower sales,
substantial adverse operating leverage as well as unfavorable foreign exchange
rates ($2 million). In addition, unfavorable foreign exchange adversely
impacted gross margins due to higher purchase costs. This decrease was partly
offset by reduced operating expenses and savings achieved as a result of
restructuring initiatives. These restructuring initiatives have resulted in a
one-third reduction in headcount over the past two years, including 1,200
positions in 2001.
The factors that affected our 2001 results, as discussed above, in combination
with an uncertain U.S. economic outlook, may continue to further impact sales
of our office products business in future quarters.
The office products business is increasingly concentrated in a small number of
major customers, principally office products superstores, large retailers,
wholesalers and contract stationers. The continuing consolidation of both
competitors and customers is causing increased pricing pressures and rebates
that negatively affect results. Pricing pressures were compounded by the
decision of several customers to continue to reduce inventory levels. These
conditions persisted throughout 2001 and continue to present challenges for our
office products group and its competitors. Customer rebates, in particular, are
expected to increase in 2002.
In October 2000, we announced that we were exploring strategic options,
including the potential sale of our office products business. We decided, in
April 2001, not to divest our office products business due to weakness in the
overall economy particularly impacting the office products industry. We are
currently repositioning and restructuring the business to improve both
financial results and the long-term value of the business. Under this plan, our
office products group is realigning and streamlining its worldwide operations,
intensifying its focus on growing profitable core product categories, divesting
or discontinuing non-strategic and low-return product categories and reducing
overhead expenses and excess capacity. As a result of this plan, the Company
recorded total pre-tax restructuring and other nonrecurring charges of $69.7
million during the year ended December 31, 2001. These initiatives created net
positive cash flow and improved use of working capital in 2001. We expect that
these restructuring initiatives will generate incremental savings of $15 to $20
million in 2002, and that potential initiatives to reduce the business's
manufacturing capacity and distribution infrastructure may result in additional
charges.
2000 Compared to 1999 Net sales increased $54.4 million, or 4%. The increase
resulted primarily from the acquisition of Boone in October 1999 partly offset
by lower average foreign exchange rates, volume declines in some existing
products and weak volumes in the direct mail channel for time management
products and in certain computer accessory product lines.
Operating company contribution decreased $9 million, or 10%. The decrease
reflected lower gross margin, higher operating expenses and lower average
foreign exchange rates, partly offset by savings achieved as a result of our
restructuring program initiated in 1999. The gross margin decreased due to
higher rebates and allowances in the United States and increased material
costs. The higher operating expenses reflected increased selling expenses,
higher freight costs due primarily to increased fuel prices, and increased
distribution and general and administrative expenses, partly offset by reduced
information technology related expenses.
30
<PAGE>
QUARTERLY FINANCIAL DATA UNAUDITED
FORTUNE BRANDS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
(In millions, except per-share amounts)
2001 1st 2nd 3rd 4th
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $1,301.0 $1,433.4 $1,472.3 $1,472.0
Gross profit 529.3 559.0 552.5 549.2
Operating company contribution (1) 161.1 217.5 199.4 227.5
Net income 61.5 102.9 92.8 128.8
Earnings per common share
Basic (2)
Net income $ .40 $ .67 $ .61 $ .87
- ----------------------------------------------------------------------------------
Diluted(2)
Net income $ .39 $ .66 $ .60 $ .84
==================================================================================
2000 1st 2nd 3rd 4th
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales(3) $1,357.4 $1,496.6 $1,397.5 $1,500.5
Gross profit(3) 549.7 615.2 559.2 586.2
Operating company contribution 182.5 238.5 204.0 249.2
Net income (loss) 64.3 97.4 73.3 (372.7)
Earnings per common share
Basic(4)
Net income (loss) $ .40 $ .61 $ .47 $ (2.41)
- ----------------------------------------------------------------------------------
Diluted(4)
Net income (loss) $ .39 $ .61 $ .46 $ (2.41)
==================================================================================
</TABLE>
(1) Operating company contribution (OCC) is net sales less all costs and
expenses other than restructuring and other nonrecurring charges,
write-downs of identifiable intangibles and goodwill, amortization of
intangibles, corporate administrative expenses, interest and related
expenses, other (income) expense, net, income taxes and minority
interests. (See Note 15.)
(2) In 2001, net income and basic and diluted earnings per common share
reflected restructuring and other nonrecurring charges of $42.3 million
($27.8 million after tax, or 18 cents) (See Note 14) and a $31.0 million
tax reserve reversal, or 20 cents, in the second quarter (See Note 12);
and restructuring and other nonrecurring charges of $55.8 million ($35.5
million after tax, or 24 cents basic and 23 cents diluted per share), a
net tax benefit of $72.9 million recognized as a result of the
recapitalization of the office products business (49 cents basic and 48
cents diluted per share) (See Note 2), a write-down of identifiable
intangibles of $73.3 million ($67.1 million after tax or 45 cents basic
and 44 cents diluted per share) (See Note 1), interest income of $28.5
million on a tax refund ($17.3 million after tax, or 12 cents basic and
11 cents diluted per share) (See Note 12) and the gain from the sale of
the U.K. private-label Scotch business of $16.6 million ($21.8 million
after tax, or 15 cents basic and 14 cents diluted per share), in the
fourth quarter. (See Note 3.)
(3) Net sales and gross profit have been restated due to the reclassification
of billed shipping and handling amounts in accordance with Emerging
Issues Task Force Issue No. 00-10.
In 2000, billed shipping and handling amounted to $14.1 million in the
first quarter;$18.0 million in the second quarter; $17.9 million in the
third quarter; and $18.7 million in the fourth quarter. (See Note 1.)
Net sales and gross profit have been restated to conform to the 2001
presentation due to the reclassification of customer rebates in
accordance with Emerging Issues Task Force Issue No. 00-22.
In 2000, customer rebates amounted to $20.5 million in the first quarter;
$22.0 million in the second quarter; $23.7 million in the third quarter;
and $26.3 million in the fourth quarter. (See Note 1.)
(4) In 2000, net income (loss) and basic and diluted earnings per common
share reflected restructuring and other nonrecurring charges of $7.0
million ($4.5 million after tax, or 3 cents), in the first quarter (See
Note 14); restructuring and other nonrecurring charges of $11.1 million
($7.0 million after tax, or 4 cents), in the second quarter;
restructuring and other nonrecurring charges of $12.3 million ($7.7
million after tax, or 5 cents), in the third quarter; and restructuring
and other nonrecurring charges of $42.6 million ($27.4 million after tax,
or 17 cents) and a write-down of goodwill of $502.6 million ($487.4
million after tax, or $3.09), in the fourth quarter. (See Note 1.)
The sum of the quarterly earnings per common share will not necessarily
equal the amount shown for the year since the computations are performed
independently and assumed conversion of preferred stock and exercise of
stock options is not considered in loss periods due to it being
antidilutive.
31
<PAGE>
FINANCIAL CONDITION
FORTUNE BRANDS, INC. AND SUBSIDIARIES
NET CASH PROVIDED FROM CONTINUING OPERATING ACTIVITIES Net cash provided from
continuing operating activities in 2001 was $643.1 million compared with $472.4
million in 2000. The principal reasons for the increase were: the net income in
2001 and improvements in working capital management. These improvements
resulted primarily from inventory reductions across all of our segments
stemming from concerted efforts in inventory management.
Free cash flow of $311 million represents cash provided from continuing
operating activities plus the tax on the sale of 49% of Future Brands LLC to
Vin & Sprit less capital expenditures, dividends to stockholders, the tax
benefit recognized as a result of the recapitalization of the office products
business, the cash spend on restructuring activities, the receipt of a tax
refund and interest income on the tax refund. Free cash flow is expected to be
in the range of $225 to $250 million in 2002.
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES Investing activities provided
cash of $339.7 million in 2001, and used net cash of $238.0 million in 2000.
The change resulted from proceeds received from Vin & Sprit and from the sale
of the U.K. private-label Scotch business.
CAPITAL EXPENDITURES. We focus our capital spending on growth initiatives and
becoming the lowest cost producers of the highest quality products. Capital
expenditures in 2001 were $207.3 million as compared with $227.2 million in
2000. This includes $19.9 million in 2000 related to restructuring activities
(principally land and buildings related to relocation of certain operations to
Mexico). See Note 15 for capital expenditures by segment. We currently estimate
2002 capital expenditures to be approximately $200 million. We expect to
generate these funds internally.
ACQUISITIONS, DISPOSITIONS AND JOINT VENTURES. In 2001, our spirits and wine
business entered into the Future Brands joint venture and received proceeds
totaling $270 million from Vin & Sprit for the assets contributed and proceeds
totaling $280 million from the sale of the U.K. private-label Scotch business.
In addition, the spirits and wine business acquired long-term distribution
rights for its super-premium tequila brands in 2001 ($6.5 million). In 2000,
our spirits and wine business invested $25.6 million in its Maxxium joint
venture toward its total investment of $110 million. (See Note 3.)
NET CASH USED BY FINANCING ACTIVITIES Net cash used by financing activities in
2001 was $957.2 million compared with $284.0 million in 2000. During the year,
purchases of our common stock amounted to $272.8 million and proceeds received
from the exercise of stock options increased as options exercises were higher
than in the previous year. We used excess cash to pay down short-term debt of
$950.9 million. In addition, the sale of a 10% equity interest in our
wholly-owned spirits and wine subsidiary provided net cash of $373.0 million.
CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS
The following tables represent our obligations and commitments to make future
payments under contracts, such as debt and lease agreements, and under
contingent commitments, such as debt guarantees, as of December 31, 2001.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Payments Due by Period as of December 31, 2001
(In millions)
- ------------------------------------------------------------------------------------------------------------------------------
Less than 1-3 4-5 After 5
Contractual Obligations Total 1 year years years years
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Short-term Borrowings (See Note 4) $ 37.8 $ 37.8 $ - $ - $ -
Long-term Debt (See Note 5) 947.8 $ - 306.9 - 640.9
Capital Lease Obligations (See Note 5) 2.9 1.1 1.7 0.1 -
Operating Leases (See Note 11) 217.0 49.0 95.2 19.7 53.1
Other Long-Term Obligations (See Note 5) 1.0 0.3 0.7 - -
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL $ 1,206.5 $ 88.2 $404.5 $ 19.8 $ 694.0
==============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Amount of Commitment Expiration Per Period as of December 31, 2001
(In millions)
- ---------------------------------------------------------------------------------------------------------------------------------
Less than 1-3 4-5 After 5
Other Commercial Commitments Total 1 year years years years
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Maximum Loan Commitment (See Note 3) $ 13.3 $ - $ 13.3 $ - $ -
Standby Letters of Credit 14.4 14.4 - - -
Maximum Guarantees (See Note 3) 55.0 15.0 40.0 - -
Surety Bonds 28.4 28.4 - - -
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL $111.1 $ 57.8 $ 53.3 $ - $ -
=================================================================================================================================
</TABLE>
32
<PAGE>
Dividends
We paid common dividends in 2001 of $0.97 per share. Dividends paid to common
stockholders in 2001 increased to $147.2 million from $146.9 million in 2000 as
the increase in our dividend offset the lower shares outstanding. With the
December 3rd, 2001 dividend payment, we increased the common stock quarterly
dividend by 4% to $.25 per share, or an indicated annual rate of $1.00 per
share.
Financial Position
At December 31, 2001, total debt decreased $968.3 million to $989.5 million.
Short-term debt decreased $766.8 million and long-term decreased $201.5
million. Our total debt-to-total-capital ratio decreased to 28.4% at December
31, 2001 from 47.8% at December 31, 2000. The decrease was primarily a result
of the repayment of debt using the proceeds received from Vin & Sprit and from
the sale of the U.K. private-label Scotch business.
At December 31, 2001, $1 billion of debt securities were available for public
sale under our shelf registration with the Securities and Exchange Commission.
At December 31, 2001, we maintained two credit facilities, including a $750
million 5-year revolving credit agreement and a $500 million 364-day revolving
credit agreement with a one-year option, which remained unused. These
facilities are available for general corporate purposes, including acquisitions
and share repurchases, and to support our short-term borrowings in the
commercial paper market.
We believe that our internally generated funds, together with access to global
credit markets, are adequate to meet our capital needs.
Working capital increased to $711.2 million at December 31, 2001 from $224.6
million at December 31, 2000. Decreased short-term debt (reflecting increased
operating cash flows, the repayment of debt using the proceeds received from
Vin & Sprit and from the sale of the U.K. private-label Scotch business) was
the principal reason for the improvement, partly offset by the reduction in
inventory levels across all our segments and a decline in accounts receivable.
We believe that our 2001 working capital level was adequate to support
continued growth.
Foreign Exchange
Our subsidiaries have investments in various foreign countries, principally the
United Kingdom, as well as Australia and Canada. Therefore, changes in the
value of the currencies of these countries affect our balance sheet and cash
flow statements when translated into U.S. dollars.
Market Risk
We are exposed to various market risks, including changes in foreign currency
exchange rates and interest rates. Market risk is the potential loss arising
from adverse changes in market rates and prices, such as foreign currency
exchange and interest rates. We do not enter into derivatives or other
financial instruments for trading or speculative purposes. We enter into
financial instruments to manage and reduce the impact of changes in foreign
currency exchange rates and interest rates. The counterparties are major
financial institutions.
FOREIGN EXCHANGE CONTRACTS We enter into forward foreign exchange contracts
principally to hedge the currency fluctuations in transactions denominated in
foreign currencies. These contracts limit the risk that would otherwise result
from changes in exchange rates. We primarily hedged short-term intercompany
loans, intercompany purchases and dividends declared by foreign operating
companies. The periods of the forward foreign exchange contracts correspond to
the periods of the hedged transactions. We reflect any gains and losses on
forward foreign exchange contracts and the offsetting losses and gains on
hedged transactions in the income statement.
At December 31, 2001, we had outstanding forward foreign exchange contracts to
purchase $23 million and sell $114 million of various currencies (principally
pound sterling and Euro) with a weighted average maturity of 73 days. At
December 31, 2000, we had outstanding forward foreign exchange contracts to
purchase $78 million and sell $81 million of various currencies (principally
pound sterling) with a weighted average maturity of 41 days.
The estimated fair value of foreign currency contracts represents the amount
required to enter into offsetting contracts with similar remaining maturities
based on quoted market prices. At December 31, 2001 and 2000, the fair value of
all outstanding contracts and the contract amounts was essentially the same. A
10% fluctuation in exchange rates for these currencies would change the fair
value by approximately $5.5 million and $0.4 million, respectively. However,
since these contracts hedge foreign currency denominated transactions, any
change in the fair value of the contracts would offset the changes in the
underlying value of the transactions being hedged.
INTEREST RATES We may, from time to time, enter into interest rate swap
agreements to manage our exposure to interest rate changes. The swaps involve
the exchange of fixed and variable interest rate payments without exchanging
the notional principal amount. We record the payments or receipts on the
agreements as adjustments to interest expense. At December 31, 2001 and 2000,
we did not have any outstanding interest rate swap agreements.
33
<PAGE>
FINANCIAL CONDITION
FORTUNE BRANDS, INC. AND SUBSIDIARIES
The fair market value of long-term fixed interest rate debt is subject to
interest rate risk. Generally, the fair market value of fixed interest rate
debt will increase as interest rates fall and decrease as interest rates rise.
The estimated fair value of our total long-term debt (including current
portion) at December 31, 2001 and 2000 was $980.3 million and $1,138.5 million,
respectively. If the prevailing interest rates at December 31, 2001 and 2000
had increased by 1%, the fair value of our total long-term debt would have
decreased by approximately $62 million and $61 million, respectively. We based
fair values on quoted market prices, where available, and on investment
bankers' quotes using current interest rates, considering credit ratings and
the remaining terms to maturity.
See Notes 1 and 13 for a discussion of the accounting policies for Derivative
Financial Instruments and information on Financial Instruments, respectively.
Minority Interest in Consolidated Subsidiaries
Minority interest in consolidated subsidiaries increased $376.4 million
principally due to the sale of a 10% equity interest in our wholly-owned spirits
and wine subsidiary, Jim Beam Brands Worldwide, to Vin & Sprit.
Stockholders' Equity
Stockholders' equity at year end 2001 decreased $33.2 million. We purchased,
through open market purchases, 7.5 million and 10 million shares of common
stock during 2001 and 2000, respectively.
Cautionary Statement
This annual report contains statements relating to future results. They are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. We caution readers that these forward-looking
statements speak only as of the date hereof. Actual results may differ
materially from those projected as a result of certain risks and uncertainties,
including but not limited to:
- - changes in general economic conditions,
- - foreign exchange rate fluctuations,
- - changes in interest rates,
- - competitive product and pricing pressures,
- - trade consolidations,
- - the impact of excise tax increases with respect to distilled spirits,
- - regulatory developments,
- - the uncertainties of litigation,
- - changes in golf equipment regulatory standards,
- - the impact of weather, particularly on the home and golf brand groups,
- - expenses and disruptions related to shifts in manufacturing to different
locations and sources,
- - challenges in the integration of acquisitions and joint ventures, as well as
- - other risks and uncertainties detailed from time to time in the Company's
Securities and Exchange Commission filings.
Quarterly Common Stock Cash Dividend Payments
<TABLE>
<CAPTION>
- ------------------------------------
2001 2000
- ------------------------------------
Payment date Per share Per share
- ------------------------------------
<S> <C> <C>
March $ .24 $ .23
June .24 .23
September .24 .23
December .25 .24
- ------------------------------------
$ .97 $ .93
====================================
</TABLE>
Quarterly Composite Common Stock Prices
<TABLE>
<CAPTION>
- --------------------------------------
2001 2000
- --------------------------------------
High Low High Low
- --------------------------------------
<S> <C> <C> <C> <C>
First $35.19 $28.38 $33.25 $21.25
Second $38.40 $30.71 $29.00 $22.69
Third $39.00 $30.25 $26.50 $19.19
Fourth $40.54 $33.00 $30.94 $24.06
======================================
</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.
34
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
FORTUNE BRANDS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
For years ended December 31 (In millions, except per-share amounts) 2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $5,678.7 $5,752.0 $5,500.6
Cost of products sold 3,128.3 3,089.0 2,873.1
Excise taxes on spirits and wine 360.4 352.7 401.8
Advertising, selling, general and administrative expenses 1,475.9 1,529.8 1,518.5
Amortization of intangibles 62.7 79.6 85.5
Write-down of identifiable intangibles and goodwill 73.3 502.6 1,126.0
Restructuring charges 45.4 19.7 136.8
Interest and related expenses 96.8 133.8 106.8
Other (income) expenses, net (56.0) 0.8 (31.8)
- ----------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS 491.9 44.0 (716.1)
Income taxes 94.4 176.6 169.9
Minority interests 11.5 5.1 4.6
- ----------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) $ 386.0 $ (137.7) $ (890.6)
================================================================================================================
EARNINGS PER COMMON SHARE
Basic
Net income (loss) $ 2.55 $ (0.88) $ (5.35)
- ----------------------------------------------------------------------------------------------------------------
Diluted
Net income (loss) $ 2.49 $ (0.88) $ (5.35)
================================================================================================================
DIVIDENDS PAID PER COMMON SHARE $ .97 $ .93 $ .89
================================================================================================================
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
Basic 151.7 157.6 166.6
- ----------------------------------------------------------------------------------------------------------------
Diluted 155.3 157.6 166.6
================================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
35
<PAGE>
CONSOLIDATED BALANCE SHEET
FORTUNE BRANDS, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
December 31 (In millions, except per-share amounts) 2001 2000
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 48.7 $ 20.9
Accounts receivable less allowances for discounts,
doubtful accounts and returns, 2001 $61.0; 2000 $60.0 860.6 952.1
Inventories
Bulk whiskey 180.8 297.9
Other raw materials, supplies and work in process 249.6 303.7
Finished products 426.2 477.6
=======================================================================================================
Total inventories 856.6 1,079.2
Other current assets 203.7 212.3
=======================================================================================================
TOTAL CURRENT ASSETS