Exhibit 10c1

 

NOTICE OF PERFORMANCE STOCK AWARD

 

[Date]

 

Company: [Company Name]

Minimum Performance Award [Three-Year Period]:              Shares*

Target Performance Award [Three-Year Period]:              Shares

Maximum Performance Award [Three-Year Period]:              Shares**

Date of Grant: [Grant Date]

 

PERSONAL AND CONFIDENTIAL

 

(Name and Address)

 

Dear (Salutation):

 

We are pleased to inform you that, as a key employee of the company referred to
above, you have been granted a performance award by the Compensation and Stock
Option Committee of the Board of Directors under the Fortune Brands, Inc. 2003
Long-Term Incentive Plan (the “Plan”).

 

The award is granted under and governed by the Plan and the Performance Stock
Award Terms and Conditions (the “Terms”). Your performance award will be
comprised of shares of Common Stock of Fortune Brands, Inc., although, if you
qualify under the Terms, you may be eligible to receive your award in the form
of cash.

 

Your award is based on the achievement by Fortune Brands and its consolidated
subsidiaries of the average per share targets set forth in the attached Matrix.
The minimum and maximum average return on equity and earnings per share targets
for the performance period are also set forth in the attached Matrix.

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* Minimum performance goals for performance period must be met in order for
minimum performance award to be paid.

 

** Maximum performance goals for performance period must be met in order for
maximum performance award to be paid.

 

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For your information, we have attached to this notice the following documents:
(1) the Terms, (2) the Plan, and (3) the Matrix. You should review these
documents carefully in order to fully understand how your award operates and
your rights as an award recipient.

 

Under the terms of the Plan, you do not need to sign and return, or otherwise
acknowledge your receiving, this notice. If you have any questions about your
award, please contact Grace Cherico, Stock Plans Administrator, at (847)
484-4423.

 

Sincerely yours,

 

FORTUNE BRANDS, INC.

/s/ Christopher J. Klein

Senior Vice President - Strategy

and Corporate Development

 

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PERFORMANCE STOCK OPTION

TERMS AND CONDITIONS

 

You have been granted a performance stock award under the 2003 Long-Term
Incentive Plan (the Plan).

 

The date of the grant, the minimum performance award, the target performance
award and the maximum performance award are listed at the top of your Notice of
Performance Stock Award. The average per share targets and the minimum and
maximum average return on equity and earnings per share targets for the
performance period are set forth in the Matrix attached to you Notice of
Performance Stock Award.

 

1. Number of Shares Payable Pursuant to Award; Payment in Cash. Subject to the
provisions of paragraphs 5 through 13 hereof, the number of shares of Common
Stock of Fortune Brands, Inc. (“Fortune”) payable to you pursuant to your award
shall be determined as follows:

 

(a) If the Average Consolidated Return on Equity and Cumulative Earnings Per
Share (as determined pursuant to paragraph 2) of Fortune and its consolidated
subsidiaries (the “Company”) for the relevant performance period equals the
relevant minimum goal for that performance period as set forth in the attached
Matrix, the number of shares payable to you will be your minimum performance
award set forth on the first page of this letter.

 

(b) If the Average Consolidated Return on Equity and Cumulative Earnings Per
Share (as determined pursuant to paragraph 2) of the Company for the relevant
performance period equals or exceeds the relevant maximum goal for that
performance period as set forth in the attached Matrix, the number of shares
payable to you will be your maximum performance award set forth on the first
page of this letter.

 

(c) If the Average Consolidated Return on Equity and Cumulative Earnings Per
Share (as determined pursuant to paragraph 2) of the Company for the relevant
performance period exceeds the relevant minimum goal for that performance
period, but is less than the relevant maximum goal for that performance period,
the number of shares payable to you will be interpolated between the goals set
forth in the attached Matrix within the range in which the Average Consolidated
Return on Equity and Cumulative Earnings Per Share falls.

 

(d) No shares shall be payable for any performance period if the relevant
Average Consolidated Return on Equity and Cumulative Earnings Per Share (as
determined pursuant to paragraph 2) for that performance period is less than the
relevant minimum goal for that performance period.

 

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Subject to the provisions of paragraphs 5 through 13, the shares of Common Stock
of Fortune payable to you pursuant to this performance award with respect to any
performance period shall be paid by Fortune as soon as practicable after the end
of that performance period and after receipt of the accountants’ letter for that
performance period pursuant to paragraph 14 hereof.

 

Notwithstanding anything in this Agreement to the contrary, you may elect to
receive cash rather than shares of Fortune stock if at the time of the election
(which must be made during the seven days after the date on which the exact
award amount, if any, is determined by the Committee) you meet the stock
ownership goal set forth in the Company’s Executive Stock Ownership Guidelines
for your position. If you elect to receive a cash award, you will receive an
amount equal to the number of shares of Fortune Common Stock that would be
otherwise deliverable to you under the Performance Award multiplied by the mean
between the highest and lowest selling prices for such stock as reported on the
New York Stock Exchange Composite Transactions Reporting System on the date the
Compensation and Stock Option Committee determines the exact amount of the
Award, if any.

 

2. Determination of Average Consolidate Return on Equity and Cumulative Earnings
Per Share. “Average Consolidated Return on Equity” for any performance period
means the average of the return on equity of the Company during each year of
that performance period, which for each such year shall be determined by
dividing (x) the net income of the Company for that year, as adjusted to exclude
any dividends on preferred stock of Fortune during that year, by (y) the average
of the common stockholders’ equity of the Company at the beginning and at the
end of that year. “Cumulative Earnings Per Share” means the cumulative diluted
earnings per share of Fortune during the performance period, adjusted to
eliminate restructuring and other nonrecurring charges and credits (including
all related costs and expenses).

 

3. Dividend Equivalents. Subject to the provisions of paragraphs 5, 6, 7, 9, 11,
12 and 13, with respect to the performance period you shall be paid, on the date
of payment of any shares with respect to the performance period pursuant to
paragraph 1, a cash Dividend Equivalent that is equal to the amount of the cash
dividends that would have been declared on that number of shares actually paid
to you if such shares had been issued and outstanding on any record date for the
payment of any cash dividends on Common Stock of Fortune during the performance
period and prior to the date of payment of such shares. Such Dividend Equivalent
shall be paid, subject to paragraph 16, on the date of payment of such shares
pursuant to paragraph 1. Payment of any Dividend Equivalent shall be made by
delivery to you of a check of Fortune in the amount of such Dividend Equivalent
or in such other manner as is determined by the committee of the Board of
Directors of Fortune administering the Plan (which committee is herein called
the Committee and which, on the date hereof, is the Compensation and Stock
Option Committee).

 

4. Transferability of Award. This performance award shall not be transferable by
you otherwise than by will or by the laws of descent and distribution.

 

5. Termination of Employment for Death, Disability, Retirement or Elimination of
Position. If your employment by the Company terminates during any performance
period by reason of your death, disability, retirement under a retirement plan
of the Company or the elimination of your position, you will be entitled to
receive as soon as practicable after the end of that performance period and
after receipt of the accountants’ letter for that performance period pursuant to
paragraph 14 a payment of the number of shares of Common Stock, if any, that
would otherwise be payable pursuant to paragraph 1. Also in the event of such a
termination of employment, you will be paid, on the date of payment of any
shares paid pursuant to the preceding sentence, the Dividend Equivalents that
would have been declared on that number of shares actually paid to you if such
shares had been issued and outstanding on any record date during the performance
period and prior to the date of payment of such shares, and you will not be
entitled to be credited with or to receive any other Dividend Equivalents.

 

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6. Termination of Employment for Other Reasons. Except as otherwise provided in
paragraphs 9 through 13 hereof, if your employment by the Company terminates
during a performance period other than by reason of your death, disability,
retirement under a retirement plan of the Company or the elimination of your
position, you will not be entitled to any payment of shares pursuant to
paragraph 1 with respect to that performance period and will not be entitled to
receive payment pursuant to paragraph 3 of any Dividend Equivalent.

 

7. Forfeiture of Award for Detrimental Activity. If you engage in detrimental
activity (as defined in this paragraph 7) at any time (whether before or after
termination of your employment), you will not be entitled to any payment of
shares or Dividend Equivalents hereunder and you will forfeit all rights with
respect thereto. For purposes of this paragraph 7, “detrimental activity” shall
mean willful, reckless or grossly negligent activity that is determined by the
Committee to be detrimental to or destructive of the business or property of the
Company. Any such determination of the Committee shall be final and binding for
all purposes hereof. Notwithstanding the foregoing, no payment hereunder shall
be forfeited or become not payable by virtue of this paragraph 7 on or after the
date of a Change in Control (as defined in the Plan).

 

8. Stock Exchange Listing; Fractional Shares. Fortune shall not be obligated to
deliver any shares until they have been listed (or authorized for listing upon
official notice of issuance) upon each stock exchange upon which are listed
outstanding shares of the same class as that of the shares subject to the award
and until there has been compliance with such laws or regulations as Fortune may
deem applicable. Fortune agrees to use its best efforts to effect such listing
and compliance. No fractional shares (or any cash payment in lieu thereof) will
be delivered and the number of shares to be delivered will be rounded up or down
to the nearest whole share.

 

9. Transfer of Employment; Leave of Absence. For the purposes of this Agreement,
(a) a transfer of your employment from Fortune to a subsidiary or vice versa, or
from one subsidiary to another, without an intervening period, shall not be
deemed a termination of employment, and (b) if you are granted in writing a
leave of absence, you shall be deemed to have remained in the employ of Fortune
or a subsidiary during such leave of absence.

 

10. Investment Representations. Prior to each issuance of shares of Common Stock
payable hereunder, you shall make such representations as may be required by the
Committee to the effect that such shares are to be held for investment purposes
and not with a view to or for resale or distribution except in compliance with
the Securities Act of 1933, as amended (the “Securities Act”), and shall, if
required by the Committee, give a written undertaking to Fortune in form and
substance satisfactory to the Committee that you will not publicly offer or sell
or otherwise distribute such shares other than (a) in the manner and to the
extent permitted by Rule 144 promulgated by the Securities and Exchange
Commission under the Securities Act, (b) pursuant to any other exemption from
the registration provisions of the Securities Act or (c) pursuant to an
effective registration statement thereunder.

 

11. Adjustments. (a) In the event of any merger, consolidation, stock or other
non-cash dividend, extraordinary cash dividend, split-up, spin-off, combination
or exchange of shares, reorganization or recapitalization or change in
capitalization, changes in accounting, tax or legal rules, or any other similar
corporate event, the number and kind of shares that are covered by your award
(including, in the case of any such event other than an extraordinary cash
dividend, the number of shares in respect of which Dividend Equivalents may be
credited and paid pursuant to paragraph 3) immediately prior to such event may
be proportionately and appropriately adjusted.

 

(b) Adjustments (which may be increases or decreases) may be made by the
Committee in the Average Consolidated Return on Equity and Cumulative Earnings
Per Share targets to

 

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take into account changes in law and accounting and tax rules and to make such
adjustments as the Committee deems necessary or appropriate to reflect the
inclusion or exclusion of the impact of extraordinary or unusual items, events
or circumstances, including, without limitation, acquisitions or divestitures by
or other material changes in the Company, provided that no adjustment shall be
made which would result in an increase in your compensation if your compensation
is subject to the limitation on deductibility under Section 162(m) of the
Internal Revenue Code, as amended, or any successor provision, for the year with
respect to which the adjustment occurs. The Committee also may adjust the
performance goals and measurements applicable to Performance Awards and thereby
reduce the amount to be received by any Participant pursuant to such Awards if
and to the extent that the Committee deems it appropriate, provided that no such
reduction shall be made on or after the date of a Change in Control (as defined
the Plan).

 

(c) The determination of the Committee as to the terms of any adjustment made
pursuant to this paragraph 11 shall be binding and conclusive upon you and any
other person or persons who are at any time entitled to receipt of any payment
pursuant to the award.

 

12. Change in Control of Fortune. (a) Notwithstanding any other provision
hereof, in the event that your employment is terminated on or after a Change in
Control (as defined in the Plan) (i) by the Company other than for just cause
(as defined in paragraph 12(b)) or (ii) by you because you in good faith believe
that as a result of the Change in Control you are unable effectively to
discharge your duties or the duties of the position you occupied immediately
prior to the Change in Control or because of a diminution in your aggregate
annual compensation or in your aggregate benefits below that in effect
immediately prior to the Change in Control, your award shall become
nonforfeitable and shall be paid out on the date your employment is so
terminated (x) as if each performance period hereunder had been completed or
satisfied and as if the Average Consolidated Return on Equity and Cumulative
Earnings Per Share for the Company for each performance period were sufficient
to enable a payment to you pursuant to paragraph 1(c) of the number of shares
that is equal to the mean of the minimum and maximum performance award set forth
herein with respect to that performance period, but (y) pro rated for the
portion of the performance period that elapsed prior to the termination of
employment. Also in the event of such a termination of your employment, you will
be entitled to receive payment pursuant to paragraph 3 of any Dividend
Equivalent that would have been declared, in respect of the shares you receive,
during the performance period and prior to the date of payment of such shares,
but will not be entitled to be credited with or to receive any other Dividend
Equivalents.

 

(b) For purposes of paragraph 12(a), termination shall be for “just cause” only
if such termination is based on fraud, misappropriation or embezzlement on your
part which results in a final conviction of a felony.

 

13. Divestiture; Termination of Plan. (a) In the event that your principal
employer is a subsidiary of Fortune that ceases to be such, then your employment
shall be deemed to be terminated for all purposes hereof as of the date on which
your principal employer ceases to be a subsidiary of Fortune (herein called the
Divestiture Date) and your award shall become nonforfeitable and shall be paid
out on the Divestiture Date (x) as if the performance period hereunder had been
completed or satisfied and as if the Average Consolidated Return on Equity and
Cumulative Earnings Per Share for the Company for that performance period were
sufficient to enable a payment to you pursuant to paragraph 1(c) of the number
of shares that is equal to the mean of the minimum and maximum performance award
set forth herein with respect to the performance period, but (y) pro rated for
the portion of the performance period that elapsed prior to the Divestiture
Date, all as determined by the Committee. Also in the event of such a deemed
termination of employment, you will be entitled to receive payment pursuant to
paragraph 4 hereof of any Dividend Equivalent that would have been declared, in
respect of

 

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the shares you receive, during the performance period and prior to the
Divestiture Date, but will not be entitled to be credited with or to receive any
other Dividend Equivalents.

 

(b) In the event of a termination of the Plan as provided therein, then your
employment shall be deemed to be terminated for all purposes hereof as of the
date of termination of the Plan and the provisions of paragraph 13(a) will apply
to your award with the same effect as if the date of termination of the Plan
were a Divestiture Date.

 

14. Accountants’ Letter. As soon as practicable after the end of each
performance period, the Committee shall obtain a letter from the independent
certified public accountants who have examined the consolidated financial
statements of the Company for the last year of the performance period to the
effect that they have reviewed the determination for the performance period of
the Average Consolidated Return on Equity and Cumulative Earnings Per Share of
the Company and that in their opinion such determination has been made in
accordance with paragraph 2.

 

15. Stockholder Rights. Neither you nor any other person shall have any rights
of a stockholder as to shares until such shares shall have been recorded on
Fortune’s official stockholder records as having been issued or transferred.

 

16. Tax Withholding. Upon any payment to you of shares of Common Stock hereunder
or upon any payment to you of any Dividend Equivalents hereunder, Federal income
and other tax withholding (and state and local income tax withholding, if
applicable) may be required by the Company in respect of taxes on income
realized by you. The Company may withhold such required amounts from your future
paychecks or from, if applicable, such Dividend Equivalents or may require that
you deliver to the Company the amounts to be withheld. In addition, upon any
payment to you of shares hereunder, you may pay any Federal income and other tax
withholding (and any state and local income tax withholding, if applicable) by
electing either to have the Company withhold a portion of the shares of Common
Stock otherwise deliverable to you, or to deliver other shares of Common Stock
owned by you, in either case having a fair market value (on the date that the
amount of tax you have elected to have withheld is to be determined) of the
amount to be withheld, provided that the election shall be irrevocable and shall
be subject to such rules as the Committee may adopt with respect thereto.

 

17. Governing Law. This agreement and the award provided for hereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.