SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
BROWN-FORMAN CORPORATION
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(Name of Registrant as Specified In Its Charter)
BROWN-FORMAN CORPORATION
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
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Notes:
[LETTERHEAD OF BROWN-FORMAN CORPORATION APPEARS HERE]
OWSLEY BROWN II
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
June 30, 1997
Dear Brown-Forman Stockholder:
It is my pleasure to invite you to attend our Annual Meeting of Stockholders:
Thursday, July 24, 1997
9:30 A.M. (Eastern Daylight Time)
Brown-Forman Conference Center
850 Dixie Highway
Louisville, Kentucky
By attending the meeting, you will have the opportunity to hear a discussion
of our business over the past year and to ask questions.
You will notice some changes in this year's Proxy Statement, which has been
redesigned to use "plain English" (at least as much as possible). We hope you
like the change and we welcome your comments.
I hope to see you on July 24. Whether or not you can attend, please fill in
the attached voting card and return it to us. Your vote is important.
Sincerely,
/s/ Owsley Brown
[LETTERHEAD OF BROWN-FORMAN CORPORATION APPEARS HERE]
850 DIXIE HIGHWAY LOUISVILLE, KENTUCKY 40210
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Brown-Forman Corporation will hold its annual meeting for holders of its Class A
Common Stock IN THE CONFERENCE CENTER AT OUR CORPORATE OFFICES, 850 DIXIE
HIGHWAY, LOUISVILLE, KENTUCKY, AT 9:30 A.M., LOUISVILLE TIME (EDT), ON JULY 24,
1997.
We are holding this meeting to:
. elect a board of nine directors to hold office until the next annual
stockholders' meeting; and
. transact whatever other business may properly come before the meeting.
You can vote at the meeting if you held Class A Common Stock of record on our
books at the close of business on June 12, 1997. Holders of Class B Common
Stock may attend the meeting but may not vote. We will not close the stock
transfer books.
Class A stockholders can vote either in person or "by proxy," which means you
are designating someone else to vote your shares.
FOR CLASS A STOCKHOLDERS, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE:
. SIGN AND DATE THE ENCLOSED PROXY CARD; AND
. RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE.
GIVING A PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE YOUR SHARES IF YOU ATTEND THE
MEETING AND DECIDE TO VOTE DIFFERENTLY IN PERSON.
ONLY HOLDERS OF CLASS A COMMON STOCK MAY VOTE AT THE MEETING. WE ARE NOT ASKING
FOR PROXY CARDS FROM HOLDERS OF CLASS B COMMON STOCK.
We are enclosing a copy of our Annual Report for the fiscal year ended April 30,
1997, for you to review.
Louisville, Kentucky
June 30, 1997
by Order of the Board of Directors
Michael B. Crutcher, Secretary
TABLE OF CONTENTS
Questions and Answers 1
Introduction 3
Purpose 3
Voting Stock 3
Voting Rights 3
Election of Directors 4
Standing Committees 5
Directors' Meetings 5
Stock Ownership 6
Voting Stock Owned by "Beneficial Owners" 6
Stock Owned by Directors and Executive Officers 7
Section 16(a) Beneficial Ownership Reporting Compliance 7
Executive Compensation 8
Compensation Committee Report 8
Summary Compensation Table 11
Restricted Shares: Awarded, Vested, and Outstanding 12
Value of Stock Appreciation Rights Vested During Fiscal 1997 13
Option Grants under the Omnibus Plan 13
Retirement Plan Descriptions 14
Director Compensation 15
Five-Year Performance Graph 16
Other Information 17
Transactions with Management 17
Appointment of Independent Accountants 17
Other Proposed Action 17
Stockholder Proposals for 1998 Annual Meeting 17
QUESTIONS AND ANSWERS
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Q: WHAT IS THIS PROXY STATEMENT'S PURPOSE?
A: By law, we must give our stockholders certain basic information so they can
vote intelligently at our annual stockholder meeting.
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Q: WHO CAN VOTE?
A: Holders of our Class A Common Stock as of June 12, 1997. Neither Class B
Common Stockholders nor Preferred Stockholders can vote.
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Q: WHAT AM I VOTING ON?
A: The election of all of our Board of Directors. You may also vote on any
other matter that is properly brought before the meeting.
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Q: WHAT IS THE "PROXY CARD" FOR?
A: By completing and signing the Proxy Card, you authorize the individuals
named on the card to vote your shares for you.
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Q: WHAT IF I SUBMIT A PROXY CARD AND THEN CHANGE MY MIND ON HOW I WANT TO
VOTE?
A: No problem. You can revoke your proxy by writing us or by attending the
meeting and casting your vote in person.
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Q: WHO ARE YOUR NOMINEES FOR DIRECTORS?
A: We have nine directors. All of them are running for re-election. Each
director is described briefly later in this Proxy Statement.
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Q: WHO CAN I CALL WITH A QUESTION ABOUT THE ANNUAL MEETING?
A: For information about your stock ownership, or for other shareholder
services, please call Linda Gering, our Stockholder Services Manager, at
502-774-7690. For information about the meeting itself, please call Michael
Crutcher, our corporate Secretary, at 502-774-7631.
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[THIS PAGE INTENTIONALLY LEFT BLANK.]
2
INTRODUCTION
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THIS SECTION DESCRIBES THE PURPOSE FOR THIS PROXY STATEMENT, WHO CAN VOTE, AND
HOW TO VOTE.
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PURPOSE. The Board of Directors (the "Board") of Brown-Forman Corporation
("we," "us," or "our" below) is sending you this proxy statement in connection
with the solicitation of proxies for use at the annual stockholders' meeting to
be held on July 24, 1997, in the Conference Center at our corporate offices, 850
Dixie Highway, Louisville, Kentucky, at 9:30 A.M., Louisville time (EDT). We are
asking for the enclosed proxy relating to this meeting on the Board's behalf; we
will pay all solicitation costs.
Beginning on or near June 30, 1997, we will solicit proxies by mail. Our
employees may solicit proxies by mail, phone, fax, or in person. We will
reimburse banks, brokers, nominees, and other fiduciaries for their reasonable
charges and expenses incurred in forwarding our proxy materials to their
principals.
VOTING STOCK. We have two classes of common stock, Class A and Class B. Only
holders of shares of Class A Common Stock can vote, except in unusual cases as
provided by Delaware law. As of the record date, June 12, 1997, we had
28,988,091 shares of $.15 par value Class A Common Stock outstanding.
VOTING RIGHTS. If you were a Class A stockholder on the June 12 record date,
you get one vote for each share of record in your name. You may vote your shares
either in person or by proxy. To vote by proxy, please mark, date, sign, and
mail the proxy card we enclosed with this Proxy Statement.
Giving a proxy will not affect your right to vote your shares if you attend the
meeting and want to vote in person. You may revoke a proxy at any time before it
is voted -- but only if our Secretary gets written notice of your revocation
before your proxy is voted. All shares represented by effective proxies we
receive will be voted at the meeting (or any adjourned meeting) in accordance
with the proxies' terms.
Directors need the affirmative vote of the holders of a majority of shares
represented at the meeting to be re-elected. The same majority must approve any
other matters brought to a vote at the meeting. We will treat shares voted as
"abstaining" as present for determining the number of shares present, but as
shares withheld from election of a director. If a broker holding your shares in
"street" name indicates to us on a proxy card that he or she lacks discretionary
authority to vote your shares, we will not consider your shares as present or
entitled to vote for any purpose.
3
ELECTION OF DIRECTORS
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THIS SECTION GIVES BIOGRAPHICAL INFORMATION ABOUT OUR DIRECTORS AND DESCRIBES
THE COMMITTEES THEY SERVE ON AND THEIR ATTENDANCE AT MEETINGS.
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At the Annual Meeting, you and our other shareholders will elect nine directors.
Each will hold office until the next annual election of directors, or until his
successor has been elected and qualified. All our current directors are standing
for re-election to the Board. The people named as proxies will vote the enclosed
proxy FOR the election of all nominees below, unless you direct them on the
proxy to withhold such vote. If any nominee becomes unable to serve before the
meeting, the people named as proxies may vote for a substitute.
Here are the director nominees, their ages as of April 30, 1997, the years they
began serving as directors, their business experience for the last five years,
and their other directorships:
BARRY D. BRAMLEY, age 59, director since 1996. From April 1988 to April 1996,
Chairman and Chief Executive Officer of British-American Tobacco Company Ltd.
in London, England. Other directorships: Premier-Farnell PLC and Skandinavisk
Tobakskompagni A/S.
GEO. GARVIN BROWN III*, age 53, director since 1971. Chairman of Trans-Tek, Inc.
since 1988.
OWSLEY BROWN II*, age 54, director since 1971. Our Chairman since July, 1995 and
our Chief Executive Officer since July, 1993; our President from 1987 to 1995.
Other directorships: LG&E Energy Corp.; Louisville Gas and Electric Company;
Nacco Industries, Inc.; and Hilliard Lyons Trust Company.
DONALD G. CALDER, age 59, director since 1995. President and CFO, G.L. Ohrstrom
& Co., Inc., a private investment firm, since March 1977; Vice President from
October 1996 to February 1997; Partner of the predecessor partnership, G.L.
Ohrstrom & Co., from 1970 to 1996. Chairman and CEO of Harrow Industries, Inc.
since January 1997 and director since 1978. Vice President (from 1981 to
1996), Treasurer (from 1991 to 1993), and director (from 1981 to present) of
Roper Industries, Inc. Other directorships: Carlisle Companies Incorporated;
and Central Securities Corporation.
OWSLEY BROWN FRAZIER*, age 61, director since 1964. Our Vice Chairman since
1983.
RICHARD P. MAYER, age 57, director since 1994. Retired; former Chairman and
Chief Executive Officer of Kraft General Foods North America (now Kraft Foods
Inc.) from 1989 to February 1995. Other directorships: Dean Foods Company and
True North Communications Inc.
_____________
* Geo. Garvin Brown III, Owsley Brown II, and Owsley Brown Frazier are first
cousins. Each may be deemed a "control" person of ours because of his
beneficial ownership of our Class A Common Stock.
4
STEPHEN E. O'NEIL, AGE 64, director since 1978. Principal, The O'Neil Group,
since May, 1991; Partner, Mishkin, O'Neil & McAllister, New York, from 1988 to
1991. Other directorships: Alger American Fund, Inc.; Alger Fund, Inc.; Castle
Convertible Fund, Inc.; NovaCare, Inc.; and Spectra Fund, Inc.
WILLIAM M. STREET, age 58, director since 1971. Our Vice Chairman since 1987.
Other directorship: National City Bank of Kentucky.
JAMES S. WELCH, age 67, director since 1976. Partner, Ogden Newell & Welch,
Louisville, Kentucky, since 1959. Other Directorship: Hilliard Lyons Trust
Company.
STANDING COMMITTEES. We have an Audit Committee, which in fiscal 1997 was
composed of outside directors James S. Welch, Barry D. Bramley, Richard P.
Mayer, and Stephen E. O'Neil. We also have a Compensation Committee, which in
fiscal 1997 was composed of outside directors Stephen E. O'Neil, Richard P.
Mayer, and Donald G. Calder.
The Audit Committee:
. recommends to the Board the engagement of independent accountants;
. considers and approves the range of audit and non-audit services performed
by independent accountants and the fees for such services;
. reviews our policies and procedures on maintaining accounting records and
the adequacy of our internal controls;
. reviews management's implementation of recommendations made by the
independent accountants and internal auditors; and
. reviews how well we comply with laws and regulations affecting our
business.
It met twice during fiscal 1997.
The Compensation Committee sets the compensation of our most highly paid
officers and administers short and long term bonus awards to these officers
under the Brown-Forman Omnibus Compensation Plan (adopted by stockholders in
1995; discussed in more detail below). It met twice in fiscal 1997.
The Board has no standing nominating committee.
DIRECTORS' MEETINGS. The Board met six times during fiscal 1997. Each current
director attended at least 75% of the aggregate number of Board and applicable
committee meetings held in fiscal 1997.
5
STOCK OWNERSHIP
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THIS SECTION DESCRIBES (A) PEOPLE WHO OWN BENEFICIALLY 5% OR MORE OF OUR VOTING
STOCK, AND (B) HOW MUCH STOCK OUR DIRECTORS AND EXECUTIVE OFFICERS OWN. UNDER
THE SEC'S DEFINITION OF "BENEFICIAL OWNERSHIP," SOME SHARES ARE SHOWN AS OWNED
BY MORE THAN ONE PERSON AND ARE THEREFORE COUNTED MORE THAN ONCE.
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VOTING STOCK OWNED BY "BENEFICIAL OWNERS." This table shows each "beneficial
owner" of more than 5% of our Class A Common Stock, our only class of voting
stock, as of April 30, 1997. The Securities and Exchange Commission defines
"beneficial ownership" to include shares over which a person has sole or shared
voting or investment power. Under this definition, "beneficial owners" may or
may not get any economic benefit from the shares attributed to them, such as
receiving either dividends or sale proceeds. UNDER THIS DEFINITION, SOME SHARES
SHOWN BELOW ARE OWNED BY MORE THAN ONE PERSON. Some "beneficial owners" share
voting and investment powers as members of advisory committees of certain trusts
of which corporate fiduciaries act as trustees. Counting each share only once,
the aggregate number of shares of Class A Common Stock beneficially owned by the
people in this table is 20,558,041 shares, or 70.9% of the outstanding shares of
that class.
====================================================================================================================================
AMOUNT AND NATURE OF "BENEFICIAL OWNERSHIP"
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TOTAL SOLE AND SHARED
NAME AND ADDRESS SOLE VOTING AND INVESTMENT SHARED VOTING AND VOTING AND INVESTMENT
POWER INVESTMENT POWER POWER PERCENT OF CLASS
====================================================================================================================================
W.L. LYONS BROWN, JR.
501 So. Fourth Avenue 3,408 13,661,777 13,665,185 47.1%
Louisville, Kentucky
OWSLEY BROWN FRAZIER
850 Dixie Highway 595,333 11,483,684 12,079,017 41.7%
Louisville, Kentucky
DACE B. STUBBS
Log House Farm, Bell Road 0 9,367,370 9,367,370 32.3%
Bedford, Kentucky
OWSLEY BROWN II
850 Dixie Highway 520,554 5,316,001 5,836,555 20.1%
Louisville, Kentucky
INA B. BOND
8215 West U.S. Highway 42 0 4,327,530 4,327,530 14.9%
Skylight, Kentucky
ROBINSON S. BROWN, JR.
5208 Avish Lane 200,915 2,861,286 3,062,201 10.6%
Harrods Creek, Kentucky
SANDRA A. FRAZIER
10801 Electron Drive 166,728 2,116,314 2,283,042 7.9%
Louisville, Kentucky
==================================================================================================================================
6
STOCK OWNED BY DIRECTORS AND EXECUTIVE OFFICERS. The following table shows the
"beneficial ownership" as of April 30, 1997, by each director nominee, by each
Named Executive Officer (as defined below), and by all directors and executive
officers as a group, of our Class A and Class B Common Stock. As of April 30,
1997, no one on this table had any beneficial ownership interest in our 4%
Cumulative Preferred Stock.
==================================================================================================================================
CLASS A COMMON STOCK CLASS B COMMON STOCK
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VOTING & SOLE & SHARED VOTING & INVESTMENT POWER SOLE & SHARED
INVESTMENT POWER INVESTMENT POWER INVESTMENT POWER
------------------------------------------------------------------------------------------------------
NAME SOLE SHARED TOTAL % OF CLASS SOLE SHARED TOTAL % OF CLASS
==================================================================================================================================
Barry D. Bramley 100 0 100 * 1,000 0 1,000 *
John P. Bridendall 34,428 0 34,428 * 8,282 0 8,282 *
Geo. Garvin Brown III 41,709 1,308,075 1,349,784 4.7% 3,950 63,726 67,676 *
Owsley Brown II 520,554 5,316,001 5,836,555 20.1% 4,234 4,744,731 4,748,965 11.9%
Donald G. Calder 3,000 0 3,000 * 0 0 0 *
Owsley Brown Frazier 595,333 11,483,684 12,079,017 41.7% 110,086 7,920,275 8,030,361 20.1%
Richard P. Mayer 3,000 0 3,000 * 3,000 0 3,000 *
Stephen E. O'Neil 0 0 0 * 0 1,400/1/ 1,400 *
Steven B. Ratoff 6,835 0 6,835 * 1,000 0 1,000 *
Richard E. Stearns 11,047 0 11,047 * 282 0 282 *
William M. Street 330,898 0 330,898 1.1% 0 0 0 *
James S. Welch 4,800 1,800/2/ 6,600 * 0 0 0 *
All Directors and Executive 1,585,722 16,843,782 18,429,504 63.6% 139,595 12,686,032 12,825,627 32.1%
Officers as a Group/3/
====================================================================================================================================
* Less than 1%.
1 Owned by The O'Neil Foundation, of which Mr. O'Neil is President. Mr. O'Neil
disclaims beneficial ownership of these shares.
2 Owned by Mr. Welch's wife. Mr. Welch disclaims beneficial ownership of these
shares.
3 In computing the aggregate number of shares and percentages owned by all
directors and executive officers as a group, we counted each share only once.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Executive officers,
directors, and "beneficial owners" of more than 10% of our Class A Common Stock
must file reports of changes in ownership of our stock pursuant to Section 16(a)
of the Securities Exchange Act of 1934. We have reviewed the reports and written
representations we received from these people. Based solely on this review, we
believe that, during fiscal 1997, all reporting people met the filing
requirements except for Stephen E. O'Neil, who was late filing two Form 4's, one
reporting a sale of Class A stock and one reporting a sale of Class B stock.
7
EXECUTIVE COMPENSATION
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THIS SECTION IS A REPORT FROM THE COMPENSATION COMMITTEE OF THE BOARD OF
DIRECTORS. THIS COMMITTEE CONSISTS OF THREE "OUTSIDE" (NON-EMPLOYEE) MEMBERS OF
THE BOARD. THEIR REPORT EXPLAINS OUR COMPENSATION PHILOSOPHY, HOW COMPENSATION
DECISIONS ARE MADE FOR OUR MOST SENIOR EXECUTIVES, AND HOW WE COMPLY WITH
SECTION 162(M) OF THE INTERNAL REVENUE CODE (WHICH GOVERNS OUR ABILITY TO DEDUCT
THE SALARIES OF OUR MOST HIGHLY PAID OFFICERS).
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COMPENSATION COMMITTEE REPORT
FUNCTION. The Compensation Committee ("we") is composed of three non-employee
directors. We met twice in fiscal 1997 to review the compensation of the
company's senior leadership. In addition, we received compensation
recommendations prepared by the company's management.
We administer short and long term bonus plans for the company's nine senior
executives, who are referred to as "Executive Officers." Within the Executive
Officers there are three subgroups:
. the Top Three, who comprise the Executive Committee of the Board of
Directors;
. the Next Two, who, together with the Top Three, constitute the five most
highly compensated Executive Officers; together those five are referred to
as "Named Executive Officers"; and
. four additional officers.
Our committee sets the salaries for the Top Three. The company sets the salaries
for the remaining six Executive Officers.
COMPENSATION PHILOSOPHY. We set compensation targets for the nine Executive
Officers using the same philosophy the company uses in setting compensation for
all salaried employees: first, to offer sufficient compensation to attract and
retain high-quality talent; and second, to tie bonus potential to the company's
successful financial performance.
TOP THREE OFFICERS. We rely in part on survey data to set the salary and
bonuses for the Top Three officers. As these three executives work as a team, we
look not just at their individual compensation but also at their aggregate
compensation as a group.
We review the results of two different surveys, one from the Hay Management
Consultants and the other from Hewitt Associates. Hay surveys compensation of
officers at companies that are approximately the same size as Brown-Forman
(examples would include General Signal Corporation, The Whitman Corporation, and
Murphy Oil Corporation). Hewitt surveys companies in the consumer products
business, regardless of size; this is the field from which we typically recruit
executives
8
(examples would include the Adolph Coors Company; Heublein, Inc.; Hershey Foods
Corporation; and The Seagram Company Ltd.). We blend this data on a 50% - 50%
basis to come up with compensation levels that we believe are representative of
the market.
The compensation mix of the Top Three officers consists of salary (39%), annual
bonus (28%), and long term compensation (33%). Salaries are set with respect to
the market data. The targets for the annual bonus and long term cash bonus are
based on shareholder value added ("SVA"), which measures the after-tax income
returned to shareholders in excess of the company's cost of capital. Long term
compensation consists of cash, which is paid based upon reaching SVA goals over
three years, and stock options, which vest after three years and are exercisable
within ten years.
We set compensation targets that are somewhat above the market level to attract
and retain the type of executives who will provide the leadership the company
needs for success.
In considering compensation for fiscal 1997, we looked at the general trend of
total pay increases for other top executives in the U.S. (approximately 10%),
the compensation increases for company employees who are not eligible for
bonuses (approximately 4%), and the company's performance last fiscal year.
Because of an unexpected surge in survey data, we decided to be conservative in
our approach pending a second year's confirmation of the true direction of the
market data. We decided that the aggregate compensation increase for the top
three officers should be 5%. We also set the compensation of the CEO, Owsley
Brown II, at a level slightly below the level that would otherwise have been
indicated by the survey data.
NEXT TWO; OTHER EXECUTIVE OFFICERS. We set the short and long term bonuses for:
(a) the next two most highly paid officers, Mr. Ratoff and Mr. Stearns; and (b)
the company's four other executive officers, in each case upon the
recommendation of the Management Compensation Review Committee, whose members
are Owsley Brown II, William M. Street, and Owsley Brown Frazier. The Management
Compensation Review Committee sets the salaries for Mr. Ratoff and Mr. Stearns
and for the company's other four executive officers.
COMPLIANCE WITH TAX LAW LIMITS ON DEDUCTIBILITY OF COMPENSATION: Section 162(m)
of the Internal Revenue Code limits to $1 million the amount of annual
compensation an employer may deduct when paid to a Named Executive Officer. The
law does, however, let employers deduct compensation over $1 million if it is
"performance based" and paid under a formal compensation plan that meets the
Code's requirements. We took appropriate steps in setting goals under the
Omnibus Plan in a manner designed to assure the deductibility of all
compensation paid to Named Executive Officers, and we expect the company to be
able to deduct all fiscal 1997 compensation.
CONCLUSION: Based upon the information available at the time we set
compensation for fiscal 1997 for Named Executive Officers, we believe that the
levels of compensation were consistent with targeted levels and that
compensation increases during fiscal 1997 were granted prudently.
STEPHEN E. O'NEIL, Chairman RICHARD P. MAYER DONALD G. CALDER
9
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THE NEXT SECTION CONTAINS CHARTS THAT SHOW THE AMOUNT OF COMPENSATION EARNED BY
OUR FIVE MOST HIGHLY PAID EXECUTIVE OFFICERS. AS EXPLAINED BELOW, THE "BONUS"
COLUMN OF THE SUMMARY COMPENSATION TABLE INCLUDES AWARDS OF RESTRICTED STOCK
GRANTED FOR PRIOR YEARS, EVEN THOUGH SOME OF THOSE SHARES OF STOCK WILL NOT VEST
UNTIL FUTURE YEARS.
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10
SUMMARY COMPENSATION TABLE
====================================================================================================================================
ANNUAL LONG TERM
COMPENSATION COMPENSATION
--------------------------------------------------------------
AWARDS: PAYOUTS:
FISCAL YEAR CLASS B SHARES LONG TERM ALL OTHER
NAME AND PRINCIPAL POSITIONS ENDING SALARY BONUS (1) UNDERLYING OPTIONS INCENTIVE PAYMENTS COMPENSATION (3)
APRIL 30, ($) ($) (#) (2) ($) ($)
====================================================================================================================================
OWSLEY BROWN II 1997 669,582 562,470 30,347 114,487 18,260
Chairman of the Board and 1996 656,670 1,161,098 0 99,578 18,039
Chief Executive Officer 1995 639,312 1,016,370 0 45,076 16,439
====================================================================================================================================
WILLIAM M. STREET 1997 486,491 401,633 4,051 72,815 14,944
Vice Chairman; President
and Chief Executive 1996 476,780 796,708 0 63,301 14,585
Officer, Brown-Forman
Beverages Worldwide 1995 467,599 740,667 0 28,683 13,442
====================================================================================================================================
OWSLEY BROWN FRAZIER 1997 404,932 182,948 5,298 57,430 12,101
Vice Chairman 1996 393,755 388,308 0 49,968 11,459
1995 370,456 398,189 0 22,621 10,668
====================================================================================================================================
STEVEN B. RATOFF 1997 353,015 129,692 4,144 0 11,034
Executive Vice President 1996 338,444 251,769 0 0 60,320
and Chief Financial Officer 1995 129,029 121,320 0 0 4,869
(hired during fiscal 1995)
====================================================================================================================================
RICHARD E. STEARNS 1997 389,350 184,814 4,921 24,434 5,625
President & CEO, Lenox 1996 344,869 0 0 18,083 5,625
Incorporated 1995 273,217 373,019 0 32,565 5,625
==================================================================================================================================
For 1997, we changed the composition of the bonus package we award to our senior
executives. We no longer award restricted stock based on annual performance
goals, so the bonus portion of ANNUAL compensation as shown in this table has
been reduced. We now award up to 50% of LONG TERM bonus compensation as stock
options, with the balance in cash to be paid at the end of three-year
performance periods (when it will appear on this table as a long term
compensation payout). Stock options' value can increase or decrease; the present
value (as of the grant date) of the stock option awards in the Long Term
Compensation: Awards column appear in the table on page 13.
(1) The "Bonus" column includes: (a) cash payments under the annual incentive
plan; and (b) for fiscal years 1995 and 1996, the total value (as of fiscal
year end) of restricted shares awarded in those fiscal years.
(NOTE THAT, UNDER SECURITIES AND EXCHANGE COMMISSION POLICY, THE TOTAL VALUE
OF RESTRICTED SHARES AWARDED IN FISCAL YEARS 1995 AND 1996 APPEARS IN THE
ANNUAL COMPENSATION COLUMN, EVEN THOUGH AWARDS VEST OVER SEVERAL YEARS AND
REMAIN SUBJECT TO BEING FORFEITED UNTIL THEY VEST.)
We pay dividends to holders of restricted shares as we do on unrestricted
shares. See the table on the next page for shares awarded to these executive
officers, shares vested during the last three fiscal years, and shares
outstanding at the end of the last three fiscal years.
(2) Represents Stock Appreciation Rights payouts.
(3) Represents our contributions to our 401(k) plan on behalf of the Named
Executive Officers and additional Savings Plan contributions such officers
may have elected (as well as medical reimbursement funds credited) under the
Flexible Reimbursement Plan, discontinued in 1996. The figures for Mr.
Ratoff also include $56,403 in 1996 and $4,869 in 1995 that he received for
moving expenses.
11
RESTRICTED SHARES: AWARDED, VESTED, AND OUTSTANDING
As shown in the "awarded" column below, we stopped awarding restricted stock in
fiscal 1996, when the Restricted Stock Plan was superseded by the Omnibus Plan.
Prior awards will continue to vest one-third each in the second, third, and
fourth years after they are awarded. In 1992, we switched from making awards in
Class B Common Stock to making awards in Class A Common Stock.
====================================================================================================================================
CLASS A COMMON STOCK CLASS B COMMON STOCK
----------------------------------------------------------------------------------------------------------------------
FISCAL YEAR VESTED DURING OUTSTANDING AT VESTED DURING OUTSTANDING AT
ENDING AWARDED YEAR END OF YEAR YEAR END OF YEAR
NAME APRIL 30, -------------------------------------------------------------------------------------------------------
# $ # $ # $ # $ # $
====================================================================================================================================
BROWN 1997 0 0 14,015 707,757 31,429 1,587,165 0 0 0 0
1996 16,359 638,001 12,507 487,773 45,444 1,772,316 0 0 0 0
1995 13,395 435,338 6,372 207,090 41,592 1,351,740 4,101 135,333 0 0
====================================================================================================================================
STREET 1997 0 0 10,613 535,957 22,128 1,117,464 0 0 0 0
1996 10,851 423,189 9,593 374,127 32,741 1,276,899 0 0 0 0
1995 10,024 325,780 5,004 162,630 31,483 1,023,198 3,222 106,326 0 0
====================================================================================================================================
FRAZIER 1997 0 0 6,711 338,906 12,835 648,168 0 0 0 0
1996 5,594 218,166 5,966 232,674 19,546 762,294 0 0 0 0
1995 6,436 209,170 3,015 97,988 19,918 647,335 1,941 64,053 0 0
====================================================================================================================================
RATOFF 1997 0 0 626 31,613 4,709 237,805 0 0 0 0
1996 3,459 134,901 0 0 5,335 208,065 0 0 0 0
1995 1,876 60,970 0 0 1,876 60,970 0 0 0 0
====================================================================================================================================
STEARNS 1997 0 0 3,284 165,842 5,134 259,267 0 0 0 0
1996 0 0 2,029 79,131 8,418 328,302 0 0 0 0
1995 5,555 180,538 600 19,500 10,447 339,528 279 9,207 0 0
====================================================================================================================================
Dollar values are based on the following fiscal year end closing prices (to the
nearest cent):
========================================================
FISCAL YEAR CLASS A CLOSING CLASS B CLOSING
END PRICE PRICE
========================================================
1997 $50.50 $50.50
1996 $39.00 $39.50
1995 $32.50 $33.00
========================================================
12
VALUE OF STOCK APPRECIATION RIGHTS VESTED DURING FISCAL 1997
(based on Class B Common Stock's five-day average closing price of $50.42)
Although we discontinued the SAR Plan in 1994, earlier awards vested for four of
the Named Executive Officers during fiscal 1997 and will be paid during fiscal
1998. "Value realized" means the difference between the market value of
underlying Class B Common Stock when SAR's vest and the related SAR's "strike"
price. For the Named Executive Officers, the accrued values realized for SAR's
which vested during fiscal 1997 were as follows: Owsley Brown II, $116,432;
William M. Street, $74,072; Owsley Brown Frazier, $58,406; and Richard E.
Stearns, $28,062.
OPTION GRANTS UNDER THE OMNIBUS PLAN
Approved by stockholders in July 1995, the Omnibus Plan simplified our executive
compensation program by combining the existing short term and long term bonus
plans under a single "umbrella" plan. The Omnibus Plan took the place of both
the Management Incentive Compensation Plan and the Restricted Stock Plan. In
addition, the Omnibus Plan lets us offer different types of incentive
compensation, including stock options, stock appreciation rights, market value
units, and performance units. Stock options awarded in fiscal 1997 under this
plan are described below.
For fiscal years beginning in 1996, the Compensation Committee implemented a new
program for long term awards. Instead of restricted share awards, this program
features overlapping three-year performance periods, awards payable primarily in
cash, and stock options for the non-cash portion of awards. These features
provide increased flexibility in tailoring performance goals to business units
smaller than the company itself. We granted options for approximately 160,000
shares of our stock under the first performance period of the plan. As required
by the Omnibus Plan, we will buy all shares needed to exercise these options on
the open market, so there will be no dilution of shareholder value by awarding
authorized but unissued shares.
====================================================================================================================================
NUMBER OF SHARES OF
CLASS B COMMON STOCK PERCENT OF TOTAL
UNDERLYING OPTIONS OPTIONS GRANTED TO PER SHARE EXPIRATION DATE: PRESENT VALUE AS OF
NAME GRANTED EMPLOYEES IN FISCAL EXERCISE PRICE APRIL 30, GRANT DATE *
YEAR
====================================================================================================================================
BROWN 30,347 19% $36.125 2006 $325,920
STREET 4,051 3% $36.125 2006 $ 43,502
FRAZIER 5,298 3% $36.125 2006 $ 56,898
RATOFF 4,144 3% $36.125 2006 $ 44,506
STEARNS 4,921 3% $36.125 2006 $ 52,852
====================================================================================================================================
* We used the Black-Scholes option pricing model to determine present value.
We assumed a risk-free interest rate of 6.48%, stock price volatility of
26%, a yield of 2.88%, and option life of six years (to allow for voluntary
early exercises and exercises that may accelerate as a result of
disability, termination, retirement, or death).
13
RETIREMENT PLAN DESCRIPTIONS
- --------------------------------------------------------------------------------
THIS SECTION DESCRIBES RETIREMENT AND SAVINGS PLANS WE CURRENTLY HAVE IN EFFECT
FOR OUR EXECUTIVES.
- --------------------------------------------------------------------------------
Our executives participate in several different retirement and savings plans:
(1) RETIREMENT PLANS: We maintain both tax-qualified retirement plans and non-
qualified supplemental excess retirement plans. Most salaried employees
participate in the Salaried Employees Retirement Plan. This plan provides
monthly retirement benefits based on age at retirement, years of service,
and the average of the five highest consecutive years' compensation during
the final ten years of employment. Retirement benefits are not offset by
Social Security benefits, and are normally payable at age 65. A
participant's interest in plan benefits vests after five years of service.
The following table shows the estimated annual benefits (straight life
annuity) payable upon retirement at normal retirement age to participants at
specified levels of compensation and years of service:
================================================================================
AVERAGE HIGHEST 5
CONSECUTIVE YEARS' YEARS OF SERVICE CLASSIFICATION
COMPENSATION DURING --------------------------------------------------
FINAL 10 YEARS 10 YEARS 20 YEARS 30 YEARS
- --------------------------------------------------------------------------------
$ 400,000 $ 68,681 $137,363 $ 206,044
$ 800,000 $138,681 $277,363 $ 416,044
$1,200,000 $208,681 $417,363 $ 626,044
$1,600,000 $278,681 $557,363 $ 836,044
$2,000,000 $348,681 $697,363 $1,046,044
================================================================================
Federal tax law limits the benefits that we might otherwise pay to key
employees under "qualified" plans such as the Salaried Employees Retirement
Plan. Therefore, for certain key employees, we also maintain a non-qualified
Supplemental Excess Retirement Plan ("SERP"). The SERP provides retirement
benefits to make up the difference between a participant's accrued benefit
calculated under the Salaried Employees Retirement Plan and the ceiling
imposed by Federal tax law. SERP participants may choose to get a discounted
current cash payment instead of a SERP retirement benefit. The SERP also
provides supplemental retirement benefits for certain key employees who join
us in mid-career, subject to special vesting requirements.
For the Named Executive Officers, covered compensation for fiscal 1997 for
these plans and service credited as of April 30, 1997, were as follows:
Owsley Brown II, $1,192,679 and 30 years; William M. Street, $860,010 and 30
years; Owsley Brown Frazier, $575,074 and 30 years; Steven B. Ratoff,
$469,883 and 3 years; and Richard E. Stearns, $389,350 and 10 years.
14
(2) SAVINGS PLAN: Subject to a maximum the IRS sets annually ($9,500 for
calendar 1997), participants in our Savings Plan may contribute between 2%
and 10% of their compensation to their Savings Plan accounts. Our match of
participants' contributions is currently 4.25% (on the first 5% of the
employee's contribution), and vests fully after four years of service.
DIRECTOR COMPENSATION
- --------------------------------------------------------------------------------
THIS SECTION DESCRIBES HOW WE COMPENSATE OUR DIRECTORS.
- --------------------------------------------------------------------------------
We do not pay our three employee directors additional compensation for serving
on our Board or its committees. We compensate our directors who are not
employees at an annual rate of $23,000, payable in equal monthly installments,
plus $1,250 per Board meeting and $1,050 per committee meeting attended;
committee chairmen get an additional $525 for chairing committee meetings. We
reimburse all directors for reasonable and necessary expenses they incur in
performing their duties as directors, and we provide an additional travel
allowance to those directors who must travel to Board meetings from outside the
United States. We had an agreement with W.L. Lyons Brown, Jr., our former
Chairman and Chief Executive Officer, which began August 1, 1993, and continued
until August 31, 1996, under which we compensated Mr. Brown for his services.
15
FIVE-YEAR PERFORMANCE GRAPH
- --------------------------------------------------------------------------------
THIS CHART SHOWS HOW BROWN-FORMAN CLASS B COMMON STOCK HAS PERFORMED AGAINST
THREE STOCK INDEXES OVER THE LAST FIVE YEARS.
- --------------------------------------------------------------------------------
The graph below compares the cumulative total stockholder return on our Class B
Common Stock against three indexes which include that stock: the Standard &
Poor's 500 Stock Index, the Dow Jones Consumer Non-Cyclical Index (82
companies), and the S&P Beverage Alcohol Index. While the latter index might
appear to be a reasonable one against which to measure our stock's performance,
it contains only four companies, unevenly matched in relative market
capitalization (relative capitalization shown in parentheses): Anheuser-Busch
Companies (53%), The Seagram Company Ltd. (36% -- which has substantial holdings
outside the beverage alcohol business), Adolph Coors Company (2%), and Brown-
Forman (9%). Therefore, we included the Dow Jones Consumer Non-Cyclical Index as
a more diversified index, even though portions of our business are somewhat
cyclical. As a diversified producer of both beverage alcohol products and
consumer durables including china, crystal, luggage, and silverware, our
business is not easily categorized with other more specific industry indexes.
These numbers assume that $100 was invested in our Class B Stock and in each
index on April 30, 1992, and that all quarterly dividends were reinvested at the
average of the closing stock prices at the beginning and end of the quarter. The
cumulative returns shown on the graph represent the value that these investments
would have had on April 30 in the years since 1992.
[GRAPH APPEARS HERE]
----------------------------------------
1992 1993 1994 1995 1996 1997
====================================================================
BROWN-FORMAN CLASS B $ 100 $ 110 $ 126 $ 144 $ 177 $ 232
- --------------------------------------------------------------------
DJ CONSUMER NON-CYCLICAL $ 100 $ 92 $ 95 $ 125 $ 167 $ 227
- --------------------------------------------------------------------
S&P 500 $ 100 $ 109 $ 115 $ 135 $ 176 $ 220
- --------------------------------------------------------------------
S&P BEVERAGE ALCOHOL $ 100 $ 98 $ 107 $ 111 $ 137 $ 171
- --------------------------------------------------------------------
16
OTHER INFORMATION
- --------------------------------------------------------------------------------
THIS SECTION SETS OUT OTHER INFORMATION YOU SHOULD KNOW BEFORE YOU CAST YOUR
VOTE.
- --------------------------------------------------------------------------------
TRANSACTIONS WITH MANAGEMENT
One of our directors, James S. Welch, is a partner in Ogden Newell & Welch, a
Louisville law firm which rendered services to us during fiscal 1997. We also
plan to use this firm's services in fiscal 1998.
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Our Board has appointed Coopers & Lybrand L.L.P. as the independent certified
public accountants to audit our consolidated financial statements for the fiscal
year ending April 30, 1998. Coopers & Lybrand L.L.P. has served us in this
capacity continuously since 1933. We know of no direct or material indirect
financial interest that Coopers & Lybrand L.L.P. has in us or any of our
subsidiaries, or of any connection with us or any of our subsidiaries by Coopers
& Lybrand L.L.P. in the capacity of promoter, underwriter, voting trustee,
director, officer, or employee.
A Coopers & Lybrand L.L.P. representative will attend the annual meeting, will
be given the opportunity to make a statement if he wants to, and will be
available to respond to appropriate questions.
OTHER PROPOSED ACTION
As of June 30, 1997, our management knows of no business to come before the
meeting other than the election of directors. If any other business should
properly be presented to the meeting, however, the proxies will be voted in
accordance with the judgment of the persons holding them.
STOCKHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
If you have a proposal you want to be considered at the 1998 Annual Meeting of
Stockholders and to be included in the proxy materials for that meeting, we must
receive it in writing by March 4, 1998.
By Order of the Board of Directors
MICHAEL B. CRUTCHER
Secretary
Louisville, Kentucky
June 30, 1997
17
- --------------------------------------------------------------------------------
P R O X Y
BROWN-FORMAN CORPORATION
THIS PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
FOR USE BY HOLDERS OF SHARES OF CLASS A COMMON STOCK
ANNUAL STOCKHOLDERS' MEETING, JULY 24, 1997
THE UNDERSIGNED hereby appoint(s) Owsley Brown II, Owsley Brown Frazier, and
William M. Street, and each of them, attorneys and proxies, with power of sub-
stitution, to vote all of the shares of Class A Common Stock of Brown-Forman
Corporation standing of record in the name of the undersigned at the close of
business on June 12, 1997, at the Annual Meeting of Stockholders of the Corpo-
ration, to be held on July 24, 1997, and at all adjourned sessions thereof, in
accordance with the Notice and the Proxy Statement received, for the election
of directors of the Corporation and upon such other matters as may properly
come before the meeting.
Election of Directors, Nominees:
Barry D. Bramley; Geo. Garvin Brown
III; Owsley Brown II; Donald G. Calder;
Owsley Brown Frazier; Richard P. Mayer;
Stephen E. O'Neil; William M. Street;
James S. Welch
Change of Address
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(If you have written in the above space, please mark the corresponding box on
the reverse side of this card.)
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES,
SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
-----------
SEE REVERSE
SIDE
-----------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4762
[X} Please mark your votes as in this example.
THIS PROXY, WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED BELOW
BY THE UNDERSIGNED STOCKHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE ELECTION OF THE DIRECTORS NAMED.
- -------------------------------------------------------------------------------
FOR* WITHHELD
1. Election of Directors [_] [_]
(see reverse)
*For all nominee(s), except vote withheld from the following:
- ----------------
2. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
[_] Change of Address on Reverse Side
- --------------------------------------------------------------------------------
SIGNATURE(S) _________________________________________ DATE __________, 1997
NOTE: Please mark, sign, date and return the proxy card promptly using the
enclosed envelope. This proxy must be signed exactly as the name or names
appear above. If you are signing as a trustee, executor, etc., please so
indicate.
- -------------------------------------------------------------------------------