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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NO. I-922
THE GILLETTE COMPANY
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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INCORPORATED IN DELAWARE 04-1366970
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
PRUDENTIAL TOWER BUILDING, BOSTON, MASSACHUSETTS 02199
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(ZIP
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 617-421-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE
BOSTON STOCK EXCHANGE
MIDWEST STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((sec.)229.405 of this chapter) 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 Gillette Common Stock held by non-affiliates
as of February 28, 1997 was approximately $37,424,000,000.*
The number of shares of Gillette Common Stock outstanding as of February
28, 1997 was 556,920,066.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the following documents have been incorporated by
reference into the 10-K as indicated:
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DOCUMENTS 10-K PARTS
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1. The Gillette Company 1996 Annual Report to Stockholders
(the "1996 Annual Report")............................................... Parts I and II
2. The Gillette Company 1997 Proxy Statement (The "1997 Proxy Statement")... Part III
</TABLE>
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* This amount does not include the value of 157,643 shares of Series C ESOP
Convertible Preferred Stock issued for $602.875 per share. For purposes of
this calculation only, Gillette Common Stock held by Executive Officers or
directors of the Company has been treated as owned by affiliates.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
The Gillette Company was incorporated under the laws of the State of
Delaware in 1917 as the successor of a Massachusetts corporation incorporated in
1912 which corporation was the successor of a Maine corporation organized in
1901 by King C. Gillette, inventor of the safety razor.
A description of the Company and its businesses appears in the 1996 Annual
Report on the inside front cover, at page 2, at pages 3 through 5 under the
caption "Letter to Stockholders" and at pages 42 and 43 under the caption
"Principal Divisions and Subsidiaries," the texts of which are incorporated by
reference. See also Item 7, "Management's Discussion" at page 5 of this report.
BUSINESS SEGMENTS
The approximate percentages of consolidated net sales and segment profit
from operations during the last five years for each of the Company's business
segments appear in the 1996 Annual Report at page 39 under the caption,
"Business Segments," and are incorporated by reference.
"Financial Information by Business Segment," and "Segment and Area
Commentary" containing information on net sales, profit from operations,
identifiable assets, capital expenditures and depreciation for each of the last
three years, appear in the 1996 Annual Report at page 38 and are incorporated by
reference.
The Company's businesses range across several industry segments, including
blades and razors, toiletries and cosmetics, stationery products, electric
shavers, small household appliances, hair care appliances, oral care appliances,
oral care products and alkaline batteries for consumer products. Descriptions of
those businesses appear in the 1996 Annual Report at pages 6 through 19, the
text of which is incorporated by reference.
DISTRIBUTION
In the Company's major geographic markets, traditional Gillette product
lines, Duracell batteries and Oral-B products are sold to wholesalers, chain
stores and large retailers and are resold to consumers primarily through food,
drug, discount stationery, hardware, toy, tobacco and department stores. Jafra
skin care products are sold to independent consultants and are resold to
consumers, primarily at classes in the home and office. Waterman and Parker
products are sold to wholesalers and retailers and are resold to consumers
through fine jewelry, fine stationery and department stores, pen specialists and
other retail outlets. Braun products are sold to wholesalers and retailers and
are resold to consumers mainly through department, discount, catalogue and
specialty stores. Oral-B products are marketed directly to dental professionals
for distribution to patients as well as through standard distribution channels.
In many small Gillette, Duracell, Braun and Oral-B markets, products are
distributed through local distributors and sales agents.
PATENTS
Certain of the Company's patents and licenses in the blade and razor
segment are of substantial value and importance when considered in the
aggregate. Additionally, the Company holds significant patents in the toiletries
and cosmetics, stationery products, Duracell, Braun, and Oral-B business
segments. No patent or license held by the Company is considered to be of
material importance when judged from the standpoint of the Company's total
business. Gillette has licensed many of its blade and razor patents to other
manufacturers. In all of these categories, Gillette competitors also have
significant patent positions. The patents and licenses held by the Company are
of varying remaining durations.
TRADEMARKS
In general, the Company's principal trademarks have been registered in the
United States and throughout the world where the Company's products are sold.
Gillette products are marketed outside the United States under various
trademarks, many of which are the same as those used in the United States. The
trademark "Gillette" is of principal importance to the Company. In addition, a
number of other trademarks owned by the
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Company and its subsidiaries have significant importance within their business
segments. The Company's rights in these trademarks endure for as long as they
are used or registered.
COMPETITION
The blades and razors segment is marked by competition in new technology,
as well as by competition in price, marketing, advertising and promotion to
retail outlets and to consumers. The Company's major competitors worldwide are
Warner-Lambert Company, with its Schick and, in North America and Europe, its
Wilkinson Sword product lines, and Societe Bic S.A., a French company.
Additional competition in the United States and in certain other markets is
provided by the American Safety Razor Company, Inc. under its own brands and a
number of private label brands, as well as other private label suppliers. The
toiletries and cosmetics segment is highly competitive in terms of price,
product innovation and market positioning, with frequent introduction of new
brands and marketing concepts, especially for products sold through retail
outlets, and with product life cycles typically shorter than in the other
business segments of the Company. Competition in the stationery products
segment, particularly in the writing instruments market, is marked by a high
degree of competition from domestic and foreign suppliers and low entry
barriers, and is focused on a wide variety of factors including product
performance, design and price, with price an especially important factor in the
commercial sector. Competition in the Braun products markets is based primarily
on product performance, innovation and price, with numerous competitors in the
small household and hair care appliances segments. Competition in the Oral-B
products markets is focused on product performance, price and dental profession
endorsement. The Duracell products markets are marked by competition in product
performance, innovation and price and in marketing, advertising and promotion to
retail outlets and to consumers. Many of the Company's competitors are larger
and have greater resources than the Company.
EMPLOYEES
At year-end, Gillette employed approximately 44,100 persons, three-quarters
of them outside the United States.
RESEARCH AND DEVELOPMENT
In 1996, research and development expenditures were $204 million, compared
with $187 million in 1995 and $169 million in 1994.
RAW MATERIALS
The raw materials used by Gillette in the manufacture of products are
purchased from a number of suppliers, and substantially all such materials are
readily available.
OPERATIONS BY GEOGRAPHIC AREA
The following table indicates the geographic sources of consolidated net
sales and profit from operations of the Company for the last three years:
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1996 1995 1994
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NET NET NET
SALES PROFIT SALES PROFIT SALES PROFIT
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United States.................................. 37% 41% 35% 37% 36% 38%
Foreign........................................ 63% 59% 65% 63% 64% 62%
</TABLE>
"Financial Information by Geographic Area" and "Segment and Area
Commentary" containing information on net sales, profit from operations and
identifiable assets for each of the last three years appear in the 1996 Annual
Report under the same captions at page 38 and are incorporated by reference.
ITEM 2. DESCRIPTION OF PROPERTY
The Company owns and leases manufacturing facilities and other real estate
properties in the United States and a number of foreign countries. The Company's
executive offices are located in the Prudential
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Center, Boston, Massachusetts where it holds a long term lease. The following
table sets forth the Company's principal manufacturing plants:
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BUSINESS SEGMENT LOCATION OWNED/LEASED
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Blades & Razors Boston, MA (US) Owned
Isleworth, UK Owned
Berlin, Germany Owned
Shanghai, China* Leased
Naucalli, Mexico* Owned
Manaus, Brazil* Owned
Toiletries & Cosmetics St. Paul, MN (US) Owned/Leased
Andover, MA (US) Owned
Stationery Santa Monica, CA (US) Leased
Saint Herblain, France Owned/Leased
Braun Kronberg, Germany Owned/Leased
Barcelona, Spain Owned/Leased
Walldurn, Germany Owned
Mexico City, Mexico Owned/Leased
Marktheidenfeld, Germany Owned
Oral-B Iowa City, IA (US) Owned
Duracell Aarschot, Belgium Owned
Cleveland, TN (US) Leased
Lancaster, SC (US) Owned
LaGrange, GA (US) Owned
Port Elizabeth, S. Africa Owned
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The above facilities are in good repair, adequately meet the Company's needs and
operate at reasonable levels of production capacity.
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* Engaged in the manufacture of products for two or more business segments.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject, from time to time, to legal proceedings and claims
arising out of its business, which cover a wide range of matters, including
antitrust and trade regulation, product liability, contracts, environmental
issues, patent and trademark matters and taxes. Management, after review and
consultation with counsel, considers that any liability from all of these legal
proceedings and claims would not materially affect the consolidated financial
position, results of operations or liquidity of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of stockholders was held on December 30, 1996 to approve
the issuance of shares of Gillette common stock, $1.00 par value, pursuant to an
Agreement and Plan of Merger, dated as of September 12, 1996 among the Company,
Alaska Acquisition Corp., a wholly owned subsidiary of the Company, and Duracell
International Inc. 323,349,108 votes were cast for the issuance, 1,235,153 votes
were cast against and 1,997,133 votes abstained.
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EXECUTIVE OFFICERS OF REGISTRANT
Information regarding the Executive Officers of the Company as of March 20,
1997 is set out below.
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NAME AND CURRENT POSITION FIVE-YEAR BUSINESS HISTORY AGE
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Alfred M. Zeien Chairman of the Board and Chief Executive Officer 67
Chairman of the Board and Chief since February 1991
Executive Officer
Michael C. Hawley President and Chief Operating Officer since April 59
President and Chief Operating 1995; Executive Vice President, International
Officer Group, December 1993 - March 1995; President,
Oral-B Laboratories, Inc., May 1989 - November
1993
Joseph E. Mullaney Vice Chairman of the Board since November 1990 63
Vice Chairman of the Board
Edward F. DeGraan Executive Vice President, Duracell North Atlantic 53
Executive Vice President Group since January 1997; Senior Vice President,
Manufacturing and Technical Operations, Gillette
North Atlantic Group, May 1991 - December 1996
Robert G. King Executive Vice President, Gillette North Atlantic 51
Executive Vice President Group since February 1997; Executive Vice
President, International Group, April 1995 -
January 1997; Group Vice President - Latin
America, March 1991 - March 1995
Jacques Lagarde Executive Vice President, Diversified Group since 58
Executive Vice President October 1993; Vice President, February 1990 -
September 1993; Chairman, Board of Management,
Braun AG, February 1990 - September 1993
Jorgen Wedel Executive Vice President, International Group 48
Executive Vice President since February 1997; President, Oral-B
Laboratories, Inc., November 1993 - January 1997;
Group General Manager, Braun North America,
November 1991 - October 1993
Joel P. Davis Senior Vice President, Corporate Planning and 51
Senior Vice President Development since April 1995; Vice President and
President, Stationery Products Group, December
1987 - March 1995
Robert E. DiCenso Senior Vice President, Personnel and 56
Senior Vice President Administration, since July 1994; Vice President,
Investor Relations, January 1993 - July 1994;
Vice President, Finance, Planning and
Administration, Diversified Group, July 1988 -
December 1992
Thomas F. Skelly Senior Vice President, Finance since May 1980 63
Senior Vice President
Charles W. Cramb Vice President and Controller since July 1995; 50
Vice President and Controller Vice President, Finance, Planning and
Administration, Diversified Group, October 1992 -
June 1995; Vice President, Finance and Strategic
Planning, North Atlantic Group, January 1990 -
September 1992
</TABLE>
The Executive Officers hold office until the first meeting of the Board of
Directors following the annual meeting of the stockholders and until their
successors are respectively elected or appointed and qualified, unless a shorter
period shall have been specified by the terms of their election or appointment,
or until their earlier resignation, removal or death.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The information required by this item appears in the 1996 Annual Report at
page 45 under the caption "common stock" and at page 39 under the caption,
"Quarterly Financial Information," and is incorporated by reference. As of
February 28, 1997, the record date for the 1997 Annual Meeting, there were
55,746 Gillette stockholders of record.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item appears in the 1996 Annual Report at
pages 40 and 41 under the caption, "Historical Financial Summary," and is
incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item appears in the 1996 Annual Report at
pages 20 through 22 under the caption, "Management's Discussion," and is
incorporated by reference.
CAUTIONARY STATEMENT
From time to time, the Company may make statements which constitute or
contain "forward-looking" information as that term is defined in the Private
Securities Litigation Reform Act of 1995 (the "Act") or by the Securities and
Exchange Commission in its rules, regulations and releases. The Company cautions
investors that any such forward-looking statements made by the Company are not
guarantees of future performance and that actual results may differ materially
from those in the forward-looking statements. The following are some of the
factors that could cause actual results to differ materially from estimates
contained in the Company's forward-looking statements:
- the pattern of the Company's sales, including variations in sales volume
within periods, which makes forward-looking statements about sales and
earnings difficult and may result in variance of actual results from
those contained in statements made at any time prior to the period's
close;
- vigorous competition within the Company's product markets, including
pricing and promotional, advertising or other activities in order to
preserve or gain market share, the timing of which cannot be foreseen by
the Company;
- the Company's reliance on the development of new products and the
inherent risks associated with new product introductions, including
uncertainty of trade and customer acceptance and competitive reaction;
- the costs and effects of unanticipated legal and administrative
proceedings;
- the impacts of unusual items resulting from ongoing evaluations of
business strategies, asset valuations and organizational structure;
- historically, almost two-thirds of the Company's sales having been made
outside the United States, making forward-looking statements more
difficult; and
- the possibility of one or more of the global markets in which the Company
competes being impacted by variations in political, economic or other
factors, such as currency exchange rates, inflation rates, recessionary
or expansive trends, tax changes, legal and regulatory changes or other
external factors over which the Company has no control.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Financial Statements and Supplementary Data for The Gillette
Company and Subsidiary Companies appear in the 1996 Annual Report at the pages
indicated below and are incorporated by reference.
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(1) Independent Auditors' Report...................................... Page 23
(2) Consolidated Statement of Income and Earnings Reinvested in the
Business for the Years Ended December 31, 1996, 1995 and 1994..... Page 24
(3) Consolidated Balance Sheet at December 31, 1996 and 1995.......... Page 25
(4) Consolidated Statement of Cash Flows for the Years Ended December
31, 1996, 1995 and 1994........................................... Page 26
(5) Notes to Consolidated Financial Statements........................ Pages 27
through 38
(6) Quarterly Financial Information................................... Page 39
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The information required by this item with respect to the Directors of the
Company appears in the 1997 Proxy Statement at pages 2 through 4 and at pages 7
and 8 under the caption "Certain Transactions with Directors and Officers", the
texts of which are incorporated by reference.
The information required for Executive Officers of the Company appears at
the end of Part I of this report at page 4.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears in the 1997 Proxy Statement
at pages 8 and 9 under the caption "Compensation of Directors", at page 14 under
the caption "Incentive Payment and Award" and at pages 14 through 17 under the
caption "Executive Compensation" and is incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item concerning the security ownership of
certain beneficial owners and management appears in the 1997 Proxy Statement at
pages 6 and 7 under the caption "Stock Ownership of Certain Beneficial Owners
and Management" and is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears in the 1997 Proxy Statement
at pages 7 through 9 under the captions "Certain Transactions with Directors and
Officers" and "Compensation of Directors" and is incorporated by reference.
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
A. FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
FINANCIAL STATEMENTS
The following appear in the 1996 Annual Report at the pages indicated below
and are incorporated into Part II by reference.
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(1) Independent Auditor's Report...................................... Page 23
(2) Consolidated Statement of Income and Earnings Reinvested in the
Business for the Years Ended December 31, 1996, 1995 and 1994..... Page 24
(3) Consolidated Balance Sheet at December 31, 1996 and 1995.......... Page 25
(4) Consolidated Statement of Cash Flows for the Years Ended
December 31, 1996, 1995 and 1994.................................. Page 26
(5) Notes to Consolidated Financial Statements........................ Pages 27
through 38
</TABLE>
SCHEDULES
The following schedule appears at page 12 of this report:
II. Valuation and Qualifying Accounts
Schedules other than those listed above are omitted because they are either
not required or not applicable.
EXHIBITS
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3(a) Composite Certificate of Incorporation of The Gillette Company, as amended,
filed as Exhibit 3(a) to The Gillette Company Annual Report on Form 10-K
for the year ended December 31, 1989, Commission File No. I-922,
incorporated by reference herein.
(b) The Bylaws of The Gillette Company, as amended April 15, 1993, filed as
Exhibit 3(b) to The Gillette Company Quarterly Report on Form 10-Q for the
period ended March 31, 1993, incorporated by reference herein.
4 Instruments Defining the Rights of Security Holders, Including Indentures.
(a) Specimen of form of certificate representing ownership of The Gillette
Company Common Stock, $1.00 par value, effective December 10, 1996, filed
herewith.
(b) Form of Certificate of Designation, Preferences and Rights of Series A
Junior Participating Preferred Stock of the Gillette Company filed as
Exhibit A to Exhibit 1 to The Gillette Company Current Report on Form 8-K,
dated December 30, 1985, Commission File No. I-911, incorporated by
reference herein.
(c) Amendment to Certificate of Designations, Preferences and Rights of Series
A Junior Participating Preferred Stock dated December 9, 1996, filed
herewith.
(d) Renewed Rights Agreement dated as of December 14, 1995 between The Gillette
Company and The First National Bank of Boston, filed as Exhibit 4 to The
Gillette Company Current Report on Form 8-K, dated December 18, 1995,
Commission File No. I-911, incorporated by reference herein.
(e) Certificate of Designation of the Series C ESOP Convertible Preferred Stock
of The Gillette Company, dated January 17, 1990, filed as Exhibit 4(e) to
The Gillette Company Annual Report on Form 10-K for the year ended December
31, 1989, Commission File No. I-922, incorporated by reference herein.
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(f) Certificate of Amendment relating to an increase in the amount of
authorized shares of preferred stock and common stock, filed as Exhibit
3(i) to The Gillette Company Quarterly Report on Form 10-Q for the period
ended March 31, 1995, Commission File No. 1-922, incorporated by reference
herein.
(g) Form of $150,000,000 6.25% note due August 15, 2003, issued pursuant to
Registration Statement No. 33-54974 of The Gillette Company, filed November
24, 1992, as amended May 14, 1993 and June 24, 1993 and the Trust Indenture
filed therewith as Exhibit 4.1, filed as part of Exhibit 4(f) to The
Gillette Company Annual Report on Form 10-K for the year ended December 31,
1993, Commission File No. 1-922, incorporated by reference herein.
(h) Form of $150,000,000 and $50,000,000 5.75% notes due October 15, 2005,
issued pursuant to Registration Statement No. 33-50303 of The Gillette
Company, filed September 17, 1993 and the Trust Indenture filed as Exhibit
4.1 to Registration Statement No. 3354974 of The Gillette Company, as
amended May 14, 1993 and June 24, 1993, filed as part of Exhibit 4(f) to
The Gillette Company Annual Report on Form 10-K for the year ended December
31, 1993, Commission File No. 1-922, incorporated by reference herein.
10 Material Contracts
*(a) The Gillette Company 1971 Stock Option Plan, as amended (subject to
stockholder approval at the April 17, 1997 annual meeting), filed as
Appendix A to the 1997 Proxy Statement, Commission File No. 1-922,
incorporated by reference herein.
*(b) The Gillette Company Stock Equivalent Unit Plan, as amended (subject to
stockholder approval at the April 17, 1997 annual meeting), filed as
Appendix B to the 1997 Proxy Statement, Commission File No. 1-922,
incorporated by reference herein.
*(c) The Gillette Company Incentive Bonus Plan, as amended, filed as Exhibit
10(c) to The Gillette Company Annual Report on Form 10-K for the year ended
December 31, 1993, Commission File No. 1-922, incorporated by reference
herein.
*(d) Description of The Gillette Company Executive Life Insurance Program, filed
as Exhibit 10(d) to The Gillette Company Annual Report on Form 10-K for the
year ended December 31, 1991, Commission File No. 1-922, incorporated by
reference herein.
(e) Directors and Officers and Company Reimbursement Indemnity Insurance and
Pension and Welfare Fund Fiduciary Responsibility Insurance policy, filed
herewith.
*(f) Description of Conversion of Outside Directors' Vested Pension Benefit into
Deferred Stock Units, filed herewith.
*(g) The Gillette Company Deferred Compensation Plan for Outside Directors,
filed herewith.
*(h) Description of severance pay and benefit arrangements for employees in the
event of a change in control, filed as Exhibit 10(j) to The Gillette
Company Annual Report on Form 10-K for the year ending December 31, 1989,
Commission File No. 1-922, incorporated by reference herein.
(i) Letter Agreement, dated July 20, 1989, between The Gillette Company and
Berkshire Hathaway Inc., filed as Exhibit 4(a) to The Gillette Company
Current Report on Form
8-K, dated July 20, 1989, Commission File No. 1-922, incorporated by
reference herein.
*(j) Description of agreement between The Gillette Company and Robert J. Murray
effective January 1, 1996, filed as Exhibit 10(l) to The Gillette Company
Annual Report on Form 10-K for the year ending December 31, 1995,
Commission File No. 1-922, incorporated by reference herein.
*(k) Description of The Gillette Company Estate Preservation Plan, filed as
Exhibit 10(n) to The Gillette Company Annual Report on Form 10-K for the
year ended December 31, 1993, Commission File No. 1-922, incorporated by
reference herein.
*(l) Description of The Gillette Company Estate Planning Program, filed as
Exhibit 10(o) to The Gillette Company Annual Report on Form 10-K for the
year ended December 31, 1993, Commission File No. 1-922, incorporated by
reference herein.
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*(m) The Gillette Company Supplemental Retirement Plan, as amended and restated
June 16, 1994, filed as Exhibit 10(a) to The Gillette Company Annual Report
on Form 10-K for the year ended December 31, 1994, Commission File No.
1-922, incorporated by reference herein.
*(n) The Gillette Company Supplemental Savings Plan, as amended, filed herewith.
(o) 364-Day and Multi-year Credit Agreements dated as of December 20, 1996
among The Gillette Company, Morgan Guaranty Trust Company of New York, as
agent, and a syndicate of domestic and foreign banks, filed herewith.
(p) Agreement and Plan of Merger dated as of September 12, 1996, by and among
The Gillette Company, Alaska Acquisition Corp. and Duracell International
Inc., filed as Exhibit 2.1 to The Gillette Company Current Report on Form
8-K filed September 16, 1996, Commission File No. 1-922, incorporated by
reference herein.
(q) Stockholders Agreement dated as of September 12, 1996 among The Gillette
Company, KKR Partners II, L.P. and DI Associates, L.P., filed as Exhibit
10.1 to The Gillette Company Current Report on Form 8-K filed September 16,
1996, Commission File No. 1-922, incorporated by reference herein.
(r) Registration Rights Agreement dated as of September 12, 1996 among The
Gillette Company, KKR Partners II, L.P. and DI Associates, L.P., filed as
Exhibit 10.2 to The Gillette Company Current Report on Form 8-K filed
September 16, 1996, Commission File No. 1-922, incorporated by reference
herein.
11 Computation of per share earnings, filed herewith.
12 Computation of the ratios of current assets to current liabilities for the
years 1996, 1995 and 1994, filed herewith.
13 Portions of the 1996 Annual Report to Stockholders of The Gillette Company
incorporated by reference in this Form 10-K, filed herewith.
22 List of subsidiaries of The Gillette Company, filed herewith.
23 Independent Auditors' Consent, filed herewith.
24 Power of Attorney, filed herewith.
27 Financial Data Schedule (not considered to be filed).
</TABLE>
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* Filed pursuant to Item 14(c).
B. REPORTS ON FORM 8-K
December 20, 1996. Announcement of various management changes in connection
with the proposed merger with Duracell International Inc.
December 31, 1996. Announcement that the necessary actions to permit the
merger with Duracell International Inc. to be completed had been taken by the
stockholders of Gillette and Duracell at special meetings held on December 30,
1996.
OTHER MATTERS
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into the following Registration Statements of the
registrant on Form S-8 (1) No. 33-27916, filed April 10, 1989, and amended
thereafter, which incorporates by reference therein Registration Statements on
Form S-8 Nos. 2-90276, 2-63951 and 1-50710, and all amendments thereto, all
relating to shares issuable and deliverable under The Gillette Company 1971
Stock Option Plan and 1974 Stock Purchase Plan and on Form S-7 No. 2-41016
relating to shares issuable and deliverable under The Gillette Company 1971
Stock Option Plan; (2) No. 33-9495, filed October 20, 1986, and all amendments
thereto, relating to shares and plan interests in The Gillette Company
Employees' Savings Plan; (3) No. 2-93230, filed September 12, 1984, and all
amendments thereto, relating to shares and plan interests in the
9
<PAGE> 11
Oral B Laboratories Savings Plan; (4) No. 33-56218, filed December 23, 1992,
relating to shares and plan interests in The Gillette Company Employees' Savings
Plan; (5) No. 33-52465, filed March 1, 1994, and all amendments thereto,
relating to shares issuable and deliverable under The Gillette Company Global
Employee Stock Ownership Plan; (6) No. 33-53257, filed April 25, 1994, and all
amendments thereto, relating to shares issuable and deliverable under The
Gillette Company Outside Director's Stock Ownership Plan; (7) No. 33-53258,
filed April 25, 1994, and all amendments thereto, relating to shares issuable
and deliverable under The Gillette Company 1971 Stock Option Plan; (8) No.
33-59125, filed May 5, 1995, and all amendments thereto, relating to shares and
plan interests in The Gillette Company Employees' Savings Plan; (9) No. 33-63707
filed October 26, 1995, and all amendments thereto, relating to shares and plan
interests in the Parker Pen 401(K) Plan; and (10) No. 333-19133 filed December
31, 1996, and all amendments thereto, relating to shares issuable and
deliverable under the Duracell Shares Plan and Stock Option Plan for Key
Employees of Duracell International Inc. and Subsidiaries.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event a claim for indemnification against such liabilities (other than the
payments by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
10
<PAGE> 12
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
of THE GILLETTE COMPANY:
Under date of January 30, 1997, we reported on the consolidated balance
sheet of The Gillette Company and subsidiary companies as of December 31, 1996
and 1995, and the related consolidated statements of income and earnings
reinvested in the business and cash flows for each of the years in the
three-year period ended December 31, 1996, as contained in the 1996 Annual
Report to Stockholders. These consolidated financial statements and our report
thereon are incorporated by reference in the annual report on Form 10-K for the
year 1996. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related financial statement schedule
listed on page 12 of this report. This financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
January 30, 1997
11
<PAGE> 13
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
--------------------- ----------
BALANCE CHARGED LOSSES BALANCE
AT TO CHARGED CHARGED AT
BEGINNING PROFIT TO TO END OF
DESCRIPTION OF YEAR AND LOSS OTHER RESERVES YEAR
- - ------------------------------------------------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1996
- - -----
Reserves deducted from assets:
Receivables................................. $82.1 $41.9 $ .7* $ 43.9 $80.8
===== ===== === ====== =====
1995
- - -----
Reserves deducted from assets:
Receivables................................. $74.8 $34.0 $ .8* $ 27.5 $82.1
===== ===== === ====== =====
1994
- - -----
Reserves deducted from assets:
Receivables................................. $69.2 $29.0 $-- $ 23.4 $74.8
===== ===== === ====== =====
</TABLE>
* Acquisition balances
12
<PAGE> 14
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE GILLETTE COMPANY
(Registrant)
By THOMAS F. SKELLY
------------------------------------
Thomas F. Skelly
Senior Vice President and Chief
Financial Officer
Date: March 20, 1997
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- - --------------------------------------------- ------------------------------ ---------------
<S> <C> <C>
* ALFRED M. ZEIEN Chairman of the Board March 20, 1997
- - --------------------------------------------- of Directors, Chief Executive
Alfred M. Zeien Officer and Director
* MICHAEL C. HAWLEY President, Chief Operating March 20, 1997
- - --------------------------------------------- Officer and Director
Michael C. Hawley
* JOSEPH E. MULLANEY Vice Chairman of the Board and March 20, 1997
- - --------------------------------------------- Director
Joseph E. Mullaney
THOMAS F. SKELLY Senior Vice President and March 20, 1997
- - --------------------------------------------- Chief Financial Officer
Thomas F. Skelly
* CHARLES W. CRAMB Vice President, March 20, 1997
- - --------------------------------------------- Controller and Principal
Charles W. Cramb Accounting Officer
* WARREN E. BUFFETT Director March 20, 1997
- - ---------------------------------------------
Warren E. Buffett
* WILBUR H. GANTZ Director March 20, 1997
- - ---------------------------------------------
Wilbur H. Gantz
* MICHAEL B. GIFFORD Director March 20, 1997
- - ---------------------------------------------
Michael B. Gifford
* CAROL R. GOLDBERG Director March 20, 1997
- - ---------------------------------------------
Carol R. Goldberg
* HERBERT H. JACOBI Director March 20, 1997
- - ---------------------------------------------
Herbert H. Jacobi
* HENRY R. KRAVIS Director March 20, 1997
- - ---------------------------------------------
Henry R. Kravis
* RICHARD R. PIVIROTTO Director March 20, 1997
- - ---------------------------------------------
Richard R. Pivirotto
* JUAN M. STETA Director March 20, 1997
- - ---------------------------------------------
Juan M. Steta
* ALEXANDER B. TROWBRIDGE Director March 20, 1997
- - ---------------------------------------------
Alexander B. Trowbridge
* JOSEPH F. TURLEY Director March 20, 1997
- - ---------------------------------------------
Joseph F. Turley
</TABLE>
*By THOMAS F. SKELLY
----------------------------------
Thomas F. Skelly
as Attorney-In-Fact
13
<PAGE> 1
Exhibit 4(a)
<TABLE>
<S> <C>
CERTIFICATE FOR CERTIFICATE FOR
NOT MORE THAN NOT MORE THAN
100,000 100,000
SHARES SHARES
NUMBER SHARES
COMMON STOCK COMMON STOCK
THE GILLETTE COMPANY
----------- INCORORATED UNDER THE LAWS OF THE STATE OF DELAWARE ----------
THIS CERTIFICATE IS TRANSFERABLE EITHER IN BOSTON, MASSACHUSETTS OR IN NEW YORK, NEW YORK
CUSIP 375766 10 2
This is to Certify that is the owner of
SEE REVERSE FOR
CERTAIN DEFINITIONS
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK WITH THE PAR VALUE OF $1.00 EACH
-----
of The Gillette Company transferable upon the books of the Corporation by said owner in person or by duly authorized attormey,
upon the surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and
shall be held subject to all of the provisions of the Certificate of Incorporation of the Corporation and all amendments
thereto, copies of which are on file with the Transfer Agent. This Certificate is not valid unless countersigned by the
Transfer Agent and registered by the Registrar.
In Witness Whereof, the Corporation has caused facsimiles of the signatures of its proper officers and of its seal to be
hereunto affixed. Dated
The Gillette Company,
By
/s/ Lloyd B. Swain /s/ Alfred M. Zeien
TREASURER CHAIRMAN
OF THE BOARD
COUNTERSIGNED AND REGISTERED:
THE FIRST NATIONAL BANK OF BOSTON
TRANSFER AGENT
AND REGISTRAR,
BY /s/
AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 2
This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Renewed Rights Agreement between The
Gillette Company (the "Company") and The First National Bank of Boston (the
"Rights Agent") dated as of December 14, 1995, as the same may be amended,
restated, renewed or extended from time to time (the "Rights Agreement"), the
terms of which are hereby incorporated herein by reference and a copy of which
is on file at the principal offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. The Company will mail to the holder of this certificate a copy of
the Rights Agreement, as in effect on the date of mailing, without charge
promptly after receipt of a written request thereof. Under certain
circumstances set forth in the Rights Agreement, Rights beneficially owned (as
such term is defined in the Rights Agreement) by any Person who is, was or
becomes an Acquiring Person or any Affiliate or Associate thereof (as such
terms are defined in the Rights Agreement), whether currently held by or on
behalf of such Person or by any subsequent holder, may become null and void.
The Rights shall not be exercisable, and shall be void so long as held, by a
holder in any jurisdiction where the requisite qualification to the issuance to
such holder, or the exercise by such holder, of the Rights in such jurisdiction
shall not have been obtained or be obtainable.
THE GILLETTE COMPANY
The Corporation will furnish without charge to each holder of any
security of the Corporation who so requests a statement of (a) the powers,
designations, preferences and relative, participating, optional or other
special rights of each class of securities or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights
and (b) the terms upon which, including the time or times at or within which,
and the price or prices at which, shares of capital stock may be purchased from
the Corporation upon the exercise of any right, option or other security of the
Corporation EVIDENCED BY THIS CERTIFICATE, which statement is incorporated
herein by reference.
<TABLE>
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian
TEN ENT - as tenants by the entireties --------------------------------
JY TEN - as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants under Uniform Gifts to Minors
in common Act
----------------------------
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
______________________________________
__________________________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
__________________________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________________________
__________________________________________________________________________________________________________________________ SHARES
OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY IRREVOCABLY CONSTITUTE AND APPOINT _____________________
__________________________________________________________________________________________________________________________________
ATTORNEY SO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED: _____________________
__________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
Signature Guaranteed: ___________________________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION,
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT
TO S.E.C. RULE 17Ad-15.
_________________________________________________ _________________________________________________
AMERICAN BANKNOTE COMPANY PRODUCTION COORDINATOR PAT STOVER 215-830-2155
680 BLAIR MILL ROAD PROOF OF NOVEMBER 1, 1996
HORSHAM, PA 19044 GILLETTE COMPANY
215-657-3480 H47145patch
_________________________________________________ _________________________________________________
SALES PERSON: DAN BURNS 617-449-3500 Opr. lr/hj rev1
_________________________________________________ _________________________________________________
/home/larry/home12/GILLETTH47145 /net/banknote/home
_________________________________________________ _________________________________________________
</TABLE>
<PAGE> 1
Exhibit 4(c)
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 05:00 PM 12/09/1996
960360463 - 0066828
THE GILLETTE COMPANY
---------------------------
AMENDMENT TO CERTIFICATE OF DESIGNATIONS,
PREFERENCES AND RIGHTS OF
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK
Pursuant to Section 151 of the
General Corporation Law of
the State of Delaware
The Gillette Company, a corporation organized and existing under the
General Corporation Law of the State of Delaware in accordance with the
provisions of Section 103 thereof (the "Corporation"), does hereby certify:
FIRST: That the Corporation filed a Certificate of Designations,
Preferences and Rights on December 30, 1985 creating a series of 400,000 shares
of preferred stock designated as "Series A Junior Participating Preferred
Stock" (the "Certificate of Designations").
SECOND: That none of the shares of the Corporation's Series A Junior
Participating Preferred Stock have been issued as of the date set forth below.
THIRD: That the Certificate of Designations is hereby amended in
accordance with the following resolution adopted by the Board at a duly
convened meeting of the Board held on December 14, 1995, pursuant to the
authority vested in it by the provisions of the Certificate of Incorporation of
the Corporation:
RESOLVED, that, subject to the filing of an Amendment to Certificate of
Designations, Preferences and Rights of Series A Junior Participating
Preferred Stock with the Secretary of State of the State of Delaware,
the Certificate of Designations, Preferences and Rights of Series A
Junior Participating Preferred Stock filed by the Company with the
Secretary of State of the State of Delaware on December 30, 1985 (the
"Certificate of Designations") be amended as follows:
<PAGE> 2
1. The Certificate of Designations is amended by deleting the word
"100" each time it appears in the Certificate of Designations and
inserting the word "10,000" in its place in each such instance.
2. Section 2(A)(i) of the Certificate of Designations is amended by
inserting the following immediately after the words "shall at any
time" in the second sentence thereof:
"after December 14, 1995 (the "Rights Declaration Date")".
3. Section 3(A) of the Certificate of Designations is amended by
inserting the following immediately after the words "shall at any
time" in the second sentence thereof:
"after the Rights Declaration Date."
4. Section 6 of the Certificate of Designations is amended by
inserting the following immediately after the words "shall at any
time" in the second sentence thereof:
"after the Rights Declaration Date".
FOURTH: That the Amendment to Certificate of Designations, Preferences
and Rights of Series A Junior Participating Preferred Stock has been duly
adopted in accordance with the provisions of the Section 151 of the General
Corporation Law of the State of Delaware.
The Corporation has caused this Certificate to be signed by its Vice
Chairman of the Board of Directors this 9th day of December, 1996.
/s/ Joseph E. Mullaney
-----------------------------
Name: Joseph E. Mullaney
Title: Vice Chairman of the
Board of Directors
2
<PAGE> 1
Exhibit 10(e)
CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD.
ENDORSEMENT NO. 12 EFFECTIVE DATE OF ENDORSEMENT JUNE 1, 1996
---- ------------------------------
ATTACHED TO AND FORMING PART OF POLICY NO. GS-212C
-------------------------------------
COMPANY THE GILETTE COMPANY
------------------------------------------------------------------------
It is understood and agreed that this POLICY is hereby amended as indicated
below. All other terms of this POLICY remain unchanged.
AUTOMATIC EXTENSION ENDORSEMENT
-------------------------------
(RENEWAL PREMIUM: $125,000)
In consideration of payment of the above-referenced premium, it is understood
and agreed that this POLICY shall be continued and the POLICY PERIOD shall be
extended to JUNE 1, 1999, 12:01 A.M. Standard Time at the address of the
Company as stated in Item I of the Declarations.
<TABLE>
It is further understood and agreed that the above-referenced premium has been
allocated and paid as follows:
<CAPTION>
Policy Year
Following Effective
Date of this Endorsement Premium
------------------------ -------
<S> <C>
Year 6/1/96-97 $125,000
Year 6/1/97-98 $165,000(Deposit)
Year 6/1/98-99 $155,000(Deposit)
--------
$445,000
Less Prepaid Premium on Hand $320,000
--------
Additional Premium $125,000
========
</TABLE>
[Stamped]
By:
---------------------------
Authorized Representative
<PAGE> 2
CORPORATE OFFICERS AND DIRECTORS ASSURANCE LTD.
ENDORSEMENT NO. 13 EFFECTIVE DATE OF ENDORSEMENT JUNE 1, 1996
---- ------------------------------
ATTACHED TO AND FORMING PART OF POLICY NO. GS-212C
-------------------------------------
COMPANY THE GILETTE COMPANY
------------------------------------------------------------------------
It is hereby understood and agreed that ITEM VII OF THE DECLARATIONS SCHEDULE
OF UNDERLYING DIRECTIONS AND OFFICERS INSURANCE is deleted in its entirety and
replaced with the following:
<TABLE>
ITEM VII Schedule of Underlying Directors and Officers Insurance:
<CAPTION>
Policy Policy
Layer Carrier Number Year Limits Retention
- - ----- ------- ------ ------ ------ ---------
<S> <C> <C> <C> <C> <C>
Primary London 757/FD960228 6/1/96-99 $10M NIL/NIL/1,000,000
1st Excess London 757/FD960229 6/1/96-99 $10M UNDERLYING
2nd Excess Chubb 81385411B 6/1/96-99 $20M UNDERLYING
3rd Excess CNA DOX132034203 6/1/96-99 $20M UNDERLYING
4th Excess ERMA 752034765-96 6/1/96-99 $10M UNDERLYING
</TABLE>
All other terms and conditions remain unchanged.
[Stamped]
By:
--------------------------
Authorized Representative
<PAGE> 3
<TABLE>
<CAPTION>
BINDER OF INSURANCE
-------------------
<S> <C>
INSURED: THE GILETTE COMPANY
ADDRESS: Prudential Tower Building
Boston, MA 02199
INSURER: ACE Insurance Company, Ltd.
COVERAGE: Directors and Officers Liability and Corporate
Reimbursement, as more fully described in the policy
wording.
POLICY FORM: D&O 6-88
POLICY PERIOD: June 1, 1996 to June 1, 1999 (Three Year Single
Aggregate)
POLICY NUMBER: GS-8099D ($10M xs $90M)/ GS-8100D ($10M xs $70M)
GROSS PREMIUM: $155,000
NET PREMIUM: $136,400
LIMIT OF LIABILITY: US$10,000,0O0 aggregate, in excess of
US$90,000,000 aggregate (D&O follow form CODA).
US$10,000,0O0 aggregate, in excess of
US$70,000,000 aggregate (Corp. Re. follow form London).
AGGREGATE LIMIT: $10,000,000
PROGRAM:
<CAPTION>
Carrier Limit of Liability
------- ------------------
<S> <C>
London $20M Primary ($0/$0/$1M)
Chubb $20M xs $20M
CNA $20M xs $40M
ERMA $10M xs $60M
CODA $20M xs/d.i.c. $70M
ACE $10M xs $90M FF CODA D&O
$10M xs $70M FF London Corp. Re.
</TABLE>
- - --------------------------------------------------------------------------------
[JOHNSON & HIGGINS LOGO] [UNISON LOGO]
THE GLOBAL TEAM
<PAGE> 4
June 4, 1996
Page 2.
CONDITIONS:
1. Followed policies are London Corp. Re. and CODA D&O.
2. Discovery Period & Percentage: as per followed policy.
3. Cancellation Period as per followed policy.
4. Coverage is D&O and Corp. Re.
5. Cover will be issued on policy form D&O 6-88.
8. Endorsements to be included:
(a) Discovery Period Endorsement.
(b) Cancellation Endorsement.
(c) Excess DIC Endorsement.
(d) Specific Combined Limit of Liability Endorsement.
(e) Endorsement amending Section II - A&C.
(f) Three Year Single Aggregate Endorsement.
(g) Reinstatement Endorsement Additional Premium of 125% of the three
year premium.
9. ACE requires copies of all underlying policies prior to issuing the ACE
policy.
This policy is issued as an offshore placement. The insurance is placed with an
Insurer not admitted to write insurance by any State. The insurer is not under
the jurisdiction of, or subject to, supervision, regulation, or examination by
the State. In case of insolvency, payment of claims in not guaranteed and you
will note be protected by any State guarantee funds.
Please note that any applicable taxes, including but not limited to Federal
Excise Tax, are in addition to the permiums and are the responsibility of the
Insured to pay.
Should you have any questions, please call me at (441) 299-8810.
Very truly yours,
/s/ George F. Leite
- - ----------------------------
George F. Leite
Assistant Vice President
cc: Joan Goldberg - J&H Boston
- - --------------------------------------------------------------------------------
[JOHNSON & HIGGINS LOGO] [UNISON LOGO]
THE GLOBAL TEAM
<PAGE> 5
-------------------------------------------------------------------------------
[JOHNSON & HIGGINS LETTERHEAD]
JOHNSON & HIGGINS MASSACHUSETTS
THREE CENTRE PLAZA
BOSTON Date: 4 June 1996
MASSACHUSETTS 02108 Contact: Clare Lawrence
USA Phone No: 071 945 7517
COVER NOTE
----------
In accordance with your instructions we hereby confirm that we have effected
the following Contract of Insurance subject, where a Policy(ies) is to be
issued, to the terms and conditions of the Policy(ies). Please check this
document carefully and if it is not in accordance with your requirements or if
any of the Insurers stated hereon are not acceptable please inform us
immediately.
POLICY NO: FD960228
TYPE: DIRECTORS AND OFFICERS AND COMPANY REIMBURSEMENT.
FORM: Manuscript Wording to be agreed by Underwriters.
PARENT
COMPANY: THE GILLETTE COMPANY
PRINCIPAL
ADDRESS: Prudential Tower Building
Boston, MA 02199,
U.S.A.
PERIOD: 36 months from June 1st, 1996 at 12:01 a.m. Local Standard Time
at the principal address.
INTEREST: Directors and Officers and Company Reimbursement.
LIMIT OF
LIABILITY: USD 10,000,000 in the aggregate for the policy period.
- - -------------------------------------------------------------------------------
[UNISON LOGO]
THE GLOBAL TEAM
A member of the British Insurance and Investment Brokers' Association
Registered in England No. 1459298 VAT Registration No. 577 7500 08
<PAGE> 6
RETENTIONS: USD Nil each of the Directors and Officers each Claim but
in no event exceeding.
USD Nil in the aggregate each Claim all Directors and
Oficers under Insuring Clause I.A.
USD 1,000,000 each Claim under Insuring Clause I.B.
INSURED
PERCENTAGE: 100% of Loss in excess of retention under Insuring Clauses
I.A., and I.B.
SITUATION: Worldwide.
CONDITIONS: New Short Rate Cancellation Table Endorsement - NMA 45.
Small Additional or Return Premiums Clause - NMA 1168
Nuclear Incident Exclusion Clause - Liability - Direct (Broad)
- NMA 1256.
Radioactive Contamination Exclusion Clause - Liability - Direct
- NMA 1477.
Several Liability Notice (Insurance) - LSW 1001 (08/94).
365 days Optional Extension Period at 22.5% Additional Premium.
Reinstatement Provision as attached.
Notification of Loss: Hanson and Peters.
Attention: Keith A. Hanson, 311, South Wacher Drive,
Suite 5500, Chicago, Illinois 60606, U.S.A.
Service of Suit Clause Nominee: Mendes and Mount,
750 Seventh Avenue, New York, New York 10019-6829, U.S.A.
PREMIUM: USD 508,200
HEREON: 10.0000% part of 100%.
EFFECTED
WITH: 10.0000% NEW HAMPSHIRE INSURANCE COMPANY
--------
10.0000%
JOHNSON & HIGGINS LIMITED
<PAGE> 7
- - --------------------------------------------------------------------------------
[JOHNSON & HIGGINS LETTERHEAD]
JOHNSON & HIGGINS MASSACHUSETTS
THREE CENTRE PLAZA
BOSTON Date: 4 June 1996
MASSACHUSETTS 02108 Contact: Clare Lawrence
USA Phone No: 071 945 7517
COVER NOTE
----------
In accordance with your instructions we hereby confirm that we have effected
the following Contract of Insurance subject, where a Policy(ies) is to be
issued, to the terms and conditions of the Policy(ies). Please check this
document carefully and if it is not in accordance with your requirements or if
any of the Insurers stated hereon are not acceptable please inform us
immediately.
POLICY NO: FD960229
TYPE: EXCESS DIRECTORS AND OFFICERS AND COMPANY REIMBURSEMENT
INDEMNITY.
FORM: Manuscript Wording to be agreed by Underwriters.
NAMED
INSURED: THE GILLETTE COMPANY
PRINCIPAL
ADDRESS: Prudential Tower Building
Boston, MA 02199,
U.S.A.
PERIOD: 36 months from June 1st, 1996 at 12:01 a.m. Local Standard Time
at Principal Address.
INTEREST: Excess Directors and Officers and Company Reimbursement as more
fully defined in the policies.
- - -------------------------------------------------------------------------------
[UNISON LOGO]
THE GLOBAL TEAM
A member of the British Insurance and Investment Brokers' Association
Registered in England No. 1459298 VAT Registration No. 577 7500 08
<PAGE> 8
LIMIT OF
LIABILITY: USD 10,000,000 in the aggregate each Policy Period.
EXCESS OF:
USD 10,000,000 in the aggregate each Policy Period.
WHICH IN TURN EXCESS OF THE INSUREDS SELF-INSURED RETENTIONS.
SITUATION: Worldwide.
CONDITIONS: To folow the underlying except:
New Short Rate Cancellation Table Endorsement - NMA 45.
Small Additional or Return Premiums Clause - NMA 1168
Nuclear Incident Exclusion Clause - Liability - Direct (Broad)
- NMA 1256.
Radioactive Contamination Exclusion Clause - Liability - Direct
- NMA 1477.
Several Liability Notice (Insurance) - LSW 1001 (08/94).
Reinstatement Provision as attached.
Service of Suit Clause Nominee: Mendes and Mount,
750 Seventh Avenue, New York, New York 10019-6829, U.S.A.
Notification of Loss: Hanson and Peters.
Attention: Keith A. Hanson, 311, South Wacker Drive,
Suite 5500, Chicago, Illinois 60606, U.S.A.
NO AMENDMENTS TO THE PRIMARY POLICY SHALL BE BINDING UPON
UNDERWRITERS UNDER THIS INSURANCE UNLESS SPECIFICALLY AGREED BY
UNDERWRITERS AND ENDORSED HEREON.
UNDERLYING
COVERAGE: This Excess Insurance has been effected in reliance upon the
following underlying coverages:
PRIMARY CARRIER: Lloyd's and Companies
POLICY NO: FD960228
LIMIT: USD 10,000,000
RETENTION: USD NIL/USD NIL/USD 1,000,000
36 MONTHS FROM JUNE 1ST, 1996 AT 12.01 A.M.
LOCAL STANDARD TIME.
PREMIUM: USD 508,500
<PAGE> 9
PREMIUM: USD 209,000
HEREON: 84.3086% part of 100%
EFFECTED
WITH: UNDERWRITERS AT LLOYD'S.
JOHNSON & HIGGINS LIMITED
<PAGE> 10
REVISED BINDER
RELIANCE INSURANCE COMPANY
1. NAMED INSURED: The Gillette Company
2. ADDRESS: Prudential Tower Building, Boston, MA 02199
3. BINDER PERIOD: FROM: 12/31/96 TO: Policy Issuance
4. POLICY NUMBER: NDA 0134456-96
5. PRODUCER: Johnson & Higgins, Boston, MA
6. POLICY PERIOD: FROM: 12/31/96 TO: 6/1/99
7. POLICY TYPE AND FORM: Excess Financial Products Insurance Policy
EX-8602 Ed. 8/90
8. BINDER TERMS:
A. Limits of Liability:
$10,000,000 Aggregate each policy period
B. Excess of:
Primary Carrier: Lloyd's London
Limits of Liability: $20,000,000
Retention:
$0 Each Director or Officer, each loss
$0 All Directors & Officers, each loss
$500,000 Corporate Reimbursement, each loss
Other Underlying:
Carrier: Federal Insurance Company
Limit of Liability: $20,000,000 excess of $20,000,000
Carrier: Continental Casualty Company
Limit of Liability: $20,000,000 excess of $40,000,000
Carrier: Executive Re Indemnity
Limit of Liability: $10,000,000 excess of $60,000,000
C. Policy Period Premium: $57,500 NET
9. POLICY PROVISIONS:
- Follow form of underlying
- Prior Notice of Claim Exclusion
- MA Amendatory
- Excess multi-year endorsement
10. SUBJECT TO: Receipt, Review and Acceptance of the Following:
-A copy of the Primary London Policy
-A copy of all underlying policies when issued
IF THIS BINDER IS SUBJECT TO RELIANCE'S RECEIPT, REVIEW, AND ACCEPTANCE OF ANY
INFORMATION, THIS BINDER IS CONDITIONAL, AND SHALL NOT BECOME FINAL UNTIL ITEM
10. ABOVE IS SATISFIED.
NO DISCOVERY PERIOD OR OTHER EXTENSION OF COVERAGE SHALL BE PROVIDED BY THIS
BINDER
12/16/96
- - ------------------------------ -------------------
Authorized Representative Date
<PAGE> 11
CNA FINANCIAL INSURANCE
- - --------------------------------------------------------------------------------
180 Maiden Lane, New York, New York 10038
March 17, 1997
Ms. Joan Goldberg
Senior Vice President
Johnson & Higgins Of Massachusetts, Inc.
Three Center Plaza
Boston, MA 02108
Re: The Gillette Company
Binder Number 132034203
Binder Expiration Date 09/01/96
Dear Ms. Goldberg,
We are pleased to enclose Binder Number 132034203 for The Gillete Company.
Please note that the conditions noted on the binder are those that have yet to
be satisfied. We will be in a position to issue the policy upon satisfaction of
these conditions.
If you should have any comments, questions, or concerns, please do not hesitate
to contact me.
Sincerely,
Dan Auslander
Underwriter
Financial Insurance - New York City
(212)440-3519
FAX:(212)440-3700
[CNA LOGO]______________________________________________________________________
FOR ALL THE COMMITMENTS YOU MAKE(R)
<PAGE> 12
Page 2 CNA FINANCIAL INSURANCE
BINDER
This certifies that, pending issuance of policy number 132034203 in the form
described below, CONTINENTAL CASUALTY COMPANY is hereby binding the coverage
described as follows:
INSURED: PRODUCER
- - ------- --------
The Directors and Officers of: Johnson & Higgins of Massachusetts, Inc.
The Gillette Company Three Center Plaza
Prudential Tower Building Boston, MA 02108
Boston, MA 02199 (617) 742-5300
ATTN: Thomas P. Welgoss ATTN: Joan Goldberg
- - --------------------------------------------------------------------------------
POLICY PERIOD: From 06/01/96 to 06/01/99
BINDER PERIOD: From 06/01/96 to 06/1/99
QUOTE NUMBER: 195730560JBS02
PRODUCT: Excess Directors' & Officers' - Corporation (for-profit)
FORM: G-17729-A
LIMIT OF LIABILITY: $20,000,000 EXCESS OF: $40,000,000
PRIMARY CARRIER: Lloyds
PRIMARY LIMIT: $20,000,000
UNDERLYING EXCESS: Federal
LIMIT: $20,000,000 excess of $20,000,000
POLICY PREMIUM: $150,000
ENDORSEMENTS ATTACHED:
FIG-1179-A
- - --------------------------------------------------------------------------------
ISSUANCE OF A POLICY IS SUBJECT TO SATISFACTION OF THE FOLLOWING CONDITIONS:
A copy of the primary carrier's policy.
A copy of the underlying excess policy(ies).
<PAGE> 13
Page 3 CNA FINANCIAL INSURANCE
BINDER
THE GILLETTE COMPANY
DIRECTORS' & OFFICERS'
Page 3
It is expressly stipulated that, except as otherwise provided herein, the
coverage provided by this binder is subject to all of the terms and conditions
provided in the policy form noted above as issued by CONTINENTAL CASUALTY
COMPANY.
This binder may be canceled at any time by the insured by giving written notice
of cancellation to CONTINENTAL CASUALTY COMPANY. This binder shall terminate
automatically at its expiration as noted in the outlined terms.
A short-rate premium charge will be made for this binder unless a policy is
issued by CONTINENTAL CASUALTY COMPANY subject to the terms outlined above.
CONTINENTAL CASUALTY COMPANY reserves the right to modify the final terms and
conditions upon review of the information received in satisfaction of the
aforementioned conditions.
CONTINENTAL CASUALTY COMPANY
By:
Daniel Auslander
Underwriter
Financial Insurance - New York City
(212)440-2519
Fax: (212)440-3700
Dated: __________________
<PAGE> 14
CHUBB GROUP OF INSURANCE COMPANIES BINDER
EXECUTIVE PROTECTION DEPARTMENT
- - --------------------------------------------------------------------------------
1. COVERAGE: Excess Fiduciary Liability
2. FORM: Form 14-02-182
3. COMPANY: Federal Insurance Company
4. INSURED: THE GILLETTE COMPANY
5. POLICY NO: 81344529
6. TERM: 7/1/96 - 7/1/99
7. BINDER PERIOD: 7/1/96 - 8/1/96
8. LIMIT OF LIABILITY: $ 5,000,000
9. DEDUCTIBLE AMOUNT: $20,000,000 Annual Aggregate - Aetna
$ 100,000 Deductible
10. CONDITIONS: Expiring Terms +
Prior Acts Coverage for Duracell effective
merger ($2,231 midterm a.p.)
11. ANNUAL PREMIUM: $29,750 - 3 year prepaid premium not
including Duracell a.p.
12. IMPORTANT BINDER CONDITIONS:
A. This binder of insurance does not itself carry any extended
reporting period. Such extended reporting period may only be exercised
if the policy is issued. If this binder of insurance is terminated for
any reason other than issuance of the policy it represents, the
insured shall have no right to exercise the extended reporting period.
B. This binder is intended for use as evidence that insurance
described above has been effected for the term indicated, against
which the Federal policy will be duly issued. Please advise Federal
Insurance Company immediately of any discrepancies, inaccuracies or
necessary changes.
By Karen E. Rothwell
-------------------------
Authorized Employee
June 30, 1996
-------------------------
Date
<PAGE> 15
CHUBB GROUP OF INSURANCE COMPANIES BINDER
EXECUTIVE PROTECTION DEPARTMENT
- - --------------------------------------------------------------------------------
1. COVERAGE: Excess Directors & Officers Liability &
Reimbursement Policy
2. FORM: Form 14-02-207
3. COMPANY: Federal Insurance Company
4. INSURED: THE GILLETTE COMPANY
5. POLICY NO: 81385411
6. TERM: 6/1/96-6/1/99
7. BINDER PERIOD: 6/1/96-7/1/96
8. LIMIT OF LIABILITY: $20,000,000 policy aggregate excess $20 million
policy aggregate and underlying retention.
9. CONDITIONS: Following underlying terms and conditions
Prior Acts Coverage for Duracell effective
merger ($46,331 midterm a.p.)
10. POLICY PREMIUM: $308,869 (net) - 3 year prepaid
12. IMPORTANT BINDER CONDITIONS:
A. This binder of insurance does not itself carry any extended
reporting period. Such extended reporting period may only be exercised
if the policy is issued. If this binder of insurance is terminated for
any reason other than issuance of the policy it represents, the
insured shall have no right to exercise the extended reporting period.
B. This binder is intended for use as evidence that insurance
described above has been effected for the term indicated, against
which the Federal policy will be duly issued. Please advise Federal
Insurance Company immediately of any discrepancies, inaccuracies or
necessary changes.
By Karen E. Rothwell
--------------------------
Authorized Employee
May 31,1996
--------------------------
Date
<PAGE> 16
May 30, 1996
Joan Goldberg
Johnson & Higgins Of Boston
Three Center Plaza
Boston, MA 02108
RE: CONFIRMATION OF BINDING FOR GILLETTE CO BOSTON X20
Dear Joan:
On behalf of Executive Risk Indemnity Inc. we are pleased to bind coverage on
the following terms:
- - - This Excess Indemnity Policy will be issued by Executive Risk Indemnity Inc.
on Form C21066 (Ed. 4/92).
- - - Limit of Liability: $10,000,000 (inclusive of defense expenses)
- - - Total Underlying Limits of Liability: $60,000,000
- - - Policy Period: From June 1, 1996 To June 1, 1999
- - - Premium: $70,000.00 Due July 1, 1996 THREE YEAR SINGLE
AGGREGATE
$87,500 REINSTATEMENT PREMIUM
- - - Assigned Policy No.: 752-034765-96
Important
- - ---------
THIS COVERAGE IS BOUND SUBJECT TO OUR RECEIPT, REVIEW AND ACCEPTANCE OF THE
FOLLOWING INFORMATION:
UNDERLYING POLICIES AND ENDORSEMENTS
<PAGE> 17
UNTIL WE RECEIVE, REVIEW AND ACCEPT THIS MATERIAL, WE RESERVE THE RIGHT TO AMEND
OR RESCIND THIS POLICY.
THIS BINDER OF COVERAGE IS SUBJECT TO OUR RECEIPT, ON OR
BEFORE JULY 1, 1996, OF PAYMENT IN FULL OF THE PREMIUM DUE. IF WE DO NOT RECEIVE
PAYMENT OF THE PREMIUM DUE ON OR BEFORE JULY 1, 1996, WE WILL ASSUME THAT YOU DO
NOT WISH TO PURCHASE THIS COVERAGE FROM US, AND THE POLICY DESCRIBED IN THE
BINDER WILL BE VOID, AS NEVER HAVING BEEN IN EFFECT. WE APPRECIATE THE
OPPORTUNITY TO BE OF SERVICE TO YOU, AND WE LOOK FORWARD TO RECEIVING PAYMENT OF
THE PREMIUM BY JULY 1, 1996 SO THAT THE COVERAGE DESCRIBED IN THE BINDER CAN BE
MADE EFFECTIVE.
If you have any questions, please call me at (860) 408-2956.
Sincerely
Jonathan Pizzo
Senior Underwriter
<PAGE> 18
GILETTE CO BOSTON X20 May 30, 1996
Page 2
May 30, 1996
Attn: Invoice #16034
Joan Goldberg Policy Name: GILLETTE CO BOSTON X20
Johnson & Higgins Of Boston Effective Date: June 1, 1996
Three Center Plaza Expiration Date: June 1, 1999
Boston, MA 02108
<TABLE>
PAYMENT INFORMATION:
<CAPTION>
Policy # Gross Premium Commission Surcharge/Tax Net Premium
- - -------- ------------- ---------- ------------- -----------
<C> <C> <C> <C> <C>
752-034765-96 $70,000.00 $0.00 $0.00 $70,000.00
ERII
TOTAL PREMIUM: $70,000.00
</TABLE>
<TABLE>
PAYMENTS MUST BE RECEIVED BY JULY 1, 1996
<CAPTION>
PAYMENT OPTIONS:
<S> <C>
1. Wire transfer $70,000.00 to: Bank of America, Illinois
Chicago, IL 60697
ABA #071000039
Credit To: Executive Risk Management Associates
Account Number: 73-11486
2. Make check(s) payable to: Executive Risk Management Associates
</TABLE>
Mail check, along with a copy of this invoice to:
Executive Risk Management Associates
P.O. Box 91394
Chicago, IL 60693
Please refer any questions concerning this bill to Bob Palmberg, at
(860) 408-2243. If payment has been issued, please disregard this invoice.
Thank you.
INVOICE
<PAGE> 1
Exhibit 10(f)
CONVERSION OF DIRECTORS' VESTED PENSION BENEFIT
-----------------------------------------------
INTO DEFERRED STOCK UNITS
-------------------------
- - - THE PRESENT VALUE OF VESTED PENSION BENEFIT AS OF 12/31/96 WILL BE
CALCULATED BY HEWITT ASSOCIATES BASED ON INFORMATION PROVIDED BY GILLETTE.
A STATEMENT THE PRESENT VALUE AND ASSUMPTIONS WILL BE PROVIDED TO EACH
DIRECTOR AT THE NOVEMBER 21, 1996, BOARD MEETING.
- - - THE NUMBER OF FULL AND PARTIAL DEFERRED STOCK UNITS (DSUs) SHALL BE
CALCULATED BY DIVIDING THE PRESENT VALUE OF THE VESTED PENSION BENEFIT BY
THE AVERAGE OF THE HIGH AND LOW STOCK PRICES AS REPORTED ON THE NEW YORK
STOCK EXCHANGE COMPOSITE INDEX FOR THE LAST TRADING DAY OF THE MONTHS OF
JULY THROUGH DECEMBER, 1996. THE NUMBER OF DSUs SHALL BE ROUNDED TO THE
NEAREST THOUSANDTH.
- - - FOR ACTIVE DIRECTORS, DEFERRED STOCK UNITS WILL ACCRUE ADDITIONAL DSUs FROM
DIVIDENDS.
- - - THE NUMBER OF ADDITIONAL DSUs FROM DIVIDENDS WILL BE CALCULATED EACH
QUARTER BY DIVIDING THE AMOUNT OF THE DIVIDEND (THE NUMBER OF DSUs CREDITED
TO THE DIRECTORS' ACCOUNTS ON THE DIVIDEND RECORD DATE MULTIPLIED BY THE
DIVIDEND RATE) BY THE FAIR MARKET VALUE (FMV) OF GILLETTE STOCK ON THE
DIVIDEND PAYMENT DATE. THE FMV SHALL BE CALCULATED BASED UPON THE AVERAGE
OF THE HIGH AND LOW PRICES FOR GILLETTE STOCK AS REPORTED ON THE NEW YORK
STOCK EXCHANGE COMPOSITE INDEX FOR THE DIVIDEND PAYMENT DATE.
<PAGE> 2
- - - WHEN A DIRECTOR RETIRES, THE DEFERRED STOCK UNIT ACCOUNT WILL BE CONVERTED
INTO A FIXED AMOUNT CALCULATED BY MULTIPLYING THE TOTAL NUMBER OF DSUs BY
THE FAIR MARKET VALUE OF GILLETTE STOCK BASED ON THE AVERAGE OF THE HIGH
AND LOW STOCK PRICES AS REPORTED ON THE NEW YORK STOCK EXCHANGE COMPOSITE
INDEX FOR THE 20 TRADING DAYS PRECEDING THE RETIREMENT DATE.
- - - FROM THE RETIREMENT DATE THROUGH THE DATE OF PAYOUT, THE CASH VALUE WILL
ACCRUE INTEREST AT AN INTEREST RATE EQUIVALENT TO THE AVERAGE YIELD ON
10-YEAR U.S. TREASURY BILLS ON THE FIRST TRADING DAY OF EACH CALENDAR YEAR.
THE RATE WILL BE ADJUSTED ANNUALLY.
- - - THIS CONVERSION WILL BE AUTOMATIC FOR ALL OUTSIDE DIRECTORS WHO HAVE NOT
ATTAINED AGE 65 AS OF THE DATE OF CONVERSION WHETHER OR NOT THEY ARE
VESTED UNDER THE CURRENT PLAN. THOSE DIRECTORS WHO ARE NOT YET VESTED WILL
BECOME FULLY VESTED AS OF DECEMBER 31, 1996.
- - - FOR THOSE DIRECTORS WHO HAVE ATTAINED AGE 65 AS OF THE CONVERSION DATE, A
ONE TIME ELECTION MAY BE MADE BY DECEMBER 15, 1996 TO CONVERT THE PRESENT
VALUE OF VESTED PENSION BENEFITS INTO DEFERRED STOCK UNITS (DSUs).
- - - IF A DIRECTOR DOES NOT CHOOSE TO CONVERT THE PRESENT VALUE OF THE VESTED
PENSION BENEFIT TO DEFERRED STOCK UNITS, THEN THE PENSION BENEFIT IS FROZEN
AS OF DECEMBER 31, 1996, AND WILL BE PAID OUT UNDER THE TERMS OF THE
CURRENT RETIREMENT PLAN FOR DIRECTORS. NO CREDIT FOR FUTURE SERVICE WILL BE
GIVEN AND THE ANNUAL PENSION
<PAGE> 3
BENEFIT PAYMENT WILL BE $28,000, REGARDLESS OF FUTURE INCREASES IN THE
AMOUNT OF THE BOARD RETAINER.
- - - DIRECTORS PARTICIPATING IN THIS PLAN MUST ELECT BY DECEMBER 15, 1996, HOW
THEY WISH TO RECEIVE PAYMENT OF THE CONVERTED AMOUNTS AFTER RETIREMENT OR
IN THE EVENT OF A CHANGE IN CONTROL. THE PAYMENTS MAY BE MADE IN UP TO 10
APPROXIMATELY EQUAL ANNUAL INSTALLMENTS WITH PAYMENTS BEGINNING WITHIN 30
DAYS FOLLOWING RETIREMENT.
- - - UPON THE DEATH OF A DIRECTOR, ANY UNPAID AMOUNTS WILL BE PAID IN A LUMP SUM
TO THE DIRECTOR'S ESTATE.
- - - THIS ACCOUNT WILL BE SEPARATE FROM ANY OTHER DEFERRED STOCK UNIT ACCOUNT
WHICH THE DIRECTOR MAY HAVE. ANNUAL ACCOUNT STATEMENTS WILL BE PROVIDED TO
THE DIRECTORS.
- - - FOR THOSE RETIRED DIRECTORS CURRENTLY RECEIVING A RETIREMENT BENEFIT, THE
PROVISIONS OF THE RETIREMENT PLAN FOR DIRECTORS CONTINUE TO APPLY.
<PAGE> 1
Exhibit 10(g)
THE GILLETTE COMPANY
DEFERRED COMPENSATION PLAN FOR
OUTSIDE DIRECTORS
1. PURPOSE
-------
The purpose of this Deferred Compensation Plan for Outside Directors (the
"Plan") is to advance the interests of The Gillette Company (the "Company") by
enhancing the ability of the Company to attract and retain Directors who are in
a position to make significant contributions to the success of the Company and
to reward Directors for such contributions by payment of one half of their
annual Board retainer on a deferred basis. The Plan also provides a means
whereby Directors may, in addition, elect deferral of the payment of the
remainder of their annual Board retainer, as well as other retainers and fees
which may otherwise become payable to them.
2. EFFECTIVE DATE OF PLAN
----------------------
The Plan shall become effective with respect to all Director retainers and
meeting fees earned on and after January 1, 1997.
3. ADMINISTRATION
--------------
The Plan shall be administered by the Personnel Committee of the Board of
Directors (the "Committee"). The Committee shall have the authority, not
inconsistent with the express provisions of the Plan, (1) to prescribe forms and
procedures in connection with any election or designation with respect to the
deferral of Directors' retainers and meeting fees, (2) to adopt, amend, and
rescind rules and regulations for the administration of the Plan and (3) to
interpret the Plan and decide any questions and settle any controversies or
disputes that may arise in connection with the Plan. Such interpretations,
determinations and actions of the Committee, and all other determinations and
actions made or taken by the Committee under authority of any provisions of the
Plan, shall be conclusive and binding on all parties.
4. DELEGATION OF AUTHORITY
-----------------------
The Committee may delegate to designated officers of the Company its duties
under the Plan subject to such conditions and limitations as the Committee may
prescribe. The Senior Vice President - Personnel and Administration of the
Company, as the designee of the Committee, shall act as the Administrator (the
"Administrator") of the Plan and shall have authority to prescribe forms and
procedures in connection with any election to defer compensation made under the
Plan.
<PAGE> 2
-2-
5. ELIGIBILITY
-----------
Directors eligible to participate in the Plan ("Eligible Directors") shall
be any Director of the Company who receives retainers and fees as a Director of
the Company and is neither an officer nor an employee of the Company or any of
its subsidiaries.
6. TERMS AND CONDITIONS
--------------------
A. Mandatory Deferrals
As of the first day of each calendar quarter, for each Eligible Director,
fifty percent (50%) of the Board retainer accruing for such quarter shall be
mandatorily deferred and converted into Deferred Stock Units ("DSUs"), which
shall be credited to an account ("Deferred Stock Unit Account") maintained for
the Eligible Director on the books of the Company. The number of DSUs (rounded
to the nearest thousandth of a share) to be credited to each Eligible Director's
Deferred Stock Unit Account shall be calculated by dividing the amount of the
mandatorily deferred quarterly retainer by the Fair Market Value of the
Company's common stock for the applicable calendar quarter. The Fair Market
Value of the Company's common stock for a calendar quarter shall be based upon
the average of the high and the low prices for the stock as reported on the New
York Stock Exchange Composite Index for the second trading day following the
Company's release of reported earnings for the preceding calendar quarter unless
for good reason the Administrator determines an alternate date or dates for
calculating the DSUs to be credited for the applicable calendar quarter.
B. Voluntary Deferrals
Each Eligible Director may elect, in lieu of receiving current payment of
all or any portion of the remainder of the quarterly Board retainer and/or all
or a portion of any other retainer and meeting fees to which such Eligible
Director otherwise would be entitled, that such payment be deferred until after
the Eligible Director's retirement or resignation as a Director of the Company,
or in either case upon an earlier Change in Control (as that term is defined in
The Gillette Company Retirement Plan) as provided below. The Eligible Director
shall make such election (i) prior to December 15 of the year preceding the year
in which the retainer and fees would be earned or (ii) with respect to an
Eligible Director's first year or partial year of service as a Director, within
thirty days following the date on which such Director first became a Director.
The Eligible Director's election shall include (a) whether the deferred amounts
shall be converted into DSUs and credited to a Deferred Stock Unit Account, or
shall be credited to an account ("Deferred Cash Account", and together with the
Deferred Stock Unit Account, "Accounts") maintained for such Eligible Director
on the books of the Company, and (b) whether payment of the Eligible Director's
Accounts shall be accelerated upon the occurrence of a Change in Control. A
deferral election made by an Eligible Director shall remain in force for the
calendar year so elected and for each year thereafter until changed or revoked
prospectively by written notice to the Administrator not later than December
<PAGE> 3
-3-
15 of the year preceding the year to which such change or revocation relates. A
deferral election may not be changed or revoked after the beginning of the year
to which it relates.
While an Eligible Director's deferral election is in effect, as of the
first day of each calendar quarter with respect to Board retainers, or as of the
date when any other retainer or meeting fee is earned, the Company shall credit
the amount of voluntarily deferred retainers and fees for the applicable period
either (i) as DSUs to a Deferred Stock Unit Account, in the same manner as
described in Paragraph 6A above based upon the average of the high and the low
prices for the Company's common stock as reported on the New York Stock Exchange
Composite Index for the applicable date above or, in the case of any month in
which the Company's earnings or other material information are reported, for the
second trading day following the Company's release of reported earnings in the
month to which the deferred amounts relate, or (ii) to a Deferred Cash Account,
in accordance with the Eligible Director's election.
C. Additional Credits to Accounts
(1) Interest amounts shall be credited semiannually, on June 30 and
December 31, to each Eligible Director's Deferred Cash Account based upon the
balances in the Eligible Director's Deferred Cash Account during that calendar
year. Interest shall be credited at a rate equivalent to the average yield on
10-year U.S. Treasury Bills on the first trading day of each calendar year
("Interest Rate"). The Interest Rate shall be adjusted annually.
(2) Each time a dividend is paid on the Company's common stock, the Company
shall make additional credits of DSUs to each Eligible Director's Deferred Stock
Unit Account. The number of DSUs to be credited shall be calculated by
multiplying the dividend amount per share of the Company's common stock by the
number of DSUs credited to the Eligible Director's account as of the record date
for the dividend, and dividing the result by the Fair Market Value of the
Company's common stock on the dividend payment date based upon the average of
the high and the low prices for the Company's common stock as reported on the
New York Stock Exchange Composite Index for that date.
D. Payment of Accounts
As of the date an Eligible Director ceases to serve as a Director of the
Company, the balance then credited to the Eligible Director's Deferred Stock
Unit Account shall be converted to a fixed amount calculated by multiplying the
number of DSUs in his or her Account by the Fair Market Value of the Company's
common stock (determined based upon the average of the high and low prices of
the stock as reported on the New York Stock Exchange Composite Index for the 20
trading days immediately preceding the applicable date). The resulting amount
shall be credited to the Eligible Director's Deferred Cash Account, which shall
continue to be credited with additional amounts as prescribed in Paragraph 6c(1)
above until paid in full.
<PAGE> 4
-4-
The entire balance of an Eligible Director's Accounts shall be paid in cash
to the Eligible Director in ten approximately equal annual installments
beginning in January of the year after the Eligible Director ceases to serve as
a Director of the Company, unless the Eligible Director has elected, at least 12
months prior to the cessation of his or her service as a Director of the
Company, to have payment of the Accounts made in a lesser number of
approximately equal annual installments or in a single lump sum.
Upon the death of an Eligible Director, any remaining amount then credited
to the Eligible Director's Accounts shall be paid in a single lump sum to the
estate of the Eligible Director.
E. Change in Control
Upon the occurrence of a Change in Control, notwithstanding anything
contained in the Plan to the contrary, the amounts then credited to the Accounts
of each Eligible Director who has previously elected to have payment of his or
her Accounts accelerated hereunder shall be paid as soon as practicable
following the Change in Control. For the purposes of the preceding sentence,
DSUs credited to the Deferred Stock Unit Accounts subject to the payment
acceleration elections of Eligible Directors shall be valued based upon the
average of the high and low prices of the Company's common stock as reported on
the New York Stock Exchange Composite Index for the 20 trading days immediately
preceding the Change in Control.
7. AMENDMENT AND TERMINATION
-------------------------
The Board of Directors may amend or terminate this Plan at any time;
however no such amendment shall reduce the then existing balance in any Eligible
Director's Account or extend the time during which the Director has elected to
receive payments. In the event of termination of the Plan, the Company may elect
to satisfy its obligations under this Plan by making an immediate lump sum
payment in cash or in such other manner as it determines appropriate.
8. PRIOR PLANS
-----------
This Plan is intended to replace The Gillette Company Outside Directors'
Stock Ownership Plan ("ODSOP") and the Directors' Deferred Compensation
Provisions, subject to the following:
(1) No new contributions to Directors' ODSOP accounts shall be made after
October 31, 1996; however these accounts shall be maintained and the shares of
Company common stock held in these accounts shall continue to earn dividends.
(2) Eligible Directors may convert cash amounts previously deferred under
the Directors' Deferred Compensation Provisions into DSUs under this Plan by
making a
<PAGE> 5
-5-
written election before December 15, 1996. These cash deferrals shall be
converted to DSUs based the average of the high and low prices of the Company's
common stock as reported on the New York Stock Exchange Composite Index for last
trading day of the months of July through December, 1996, and shall be credited
to the Eligible Director's Deferred Stock Unit Account. If such an election is
not made, the Eligible Director's cash deferral balance under the Directors'
Deferred Compensation Provisions as of December 31, 1996 shall be credited to a
Deferred Cash Account under this Plan as of January 1, 1997.
9. SEVERABILITY
------------
If it shall ever be determined that, notwithstanding the Company's intent
and purpose for establishing and maintaining this Plan, an Eligible Director is
required to include all or part of any deferred amount in his or her gross
income for any tax purposes prior to the time that such amount would be required
to be paid under the terms of the Plan, whether by taxing authorities of the
United States or other sovereign nation or political subdivisions thereof, the
Administrator has the discretion to cause the amount equal to the consequent tax
liability to be paid to the Eligible Director from his or her Accounts.
10. ADJUSTMENT PROVISIONS
---------------------
In the event of a stock dividend, stock split or combination of shares,
recapitalization or other changes in the Company's common stock, or other
distribution to common stockholders other than regular cash dividends, after the
effective date of the Plan, the number of DSUs credited to Deferred Stock Unit
Accounts and other relevant provisions hereunder shall be adjusted accordingly
by the Committee.
11. SOURCE OF PAYMENTS
------------------
All amounts payable under the Plan shall be paid by the Company from its
general assets. Notwithstanding the maintenance of records on its books as
described in Paragraph 6 above, no Eligible Director shall have any right to or
interest in any assets of the Company other than as an unsecured general
creditor, and no separate fund shall be established in which any Eligible
Director has any right or interest. The foregoing shall not prevent the Company
from establishing a fund from which to satisfy its payment obligations under the
Plan.
12. NO ASSIGNMENT OF INTEREST
-------------------------
The interest of any Eligible Director under the Plan may not be assigned,
alienated, encumbered or otherwise transferred, and shall not be subject to
attachment, garnishment, execution or levy; and any attempted assignment,
alienation, encumbrance, transfer, attachment, garnishment, execution or levy
shall be void and of no force or effect.
<PAGE> 1
Exhibit 10(n)
THE GILLETTE COMPANY
SUPPLEMENTAL SAVINGS PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1997)
1. PURPOSE. The Gillette Company Supplemental Savings Plan (the "Plan") has
been adopted by The Gillette Company (the "Company") to provide additional
benefits to certain employees of the Company and its Participating
Subsidiaries whose benefits under The Gillette Company Employees' Savings
Plan (the "Savings Plan") have been limited by the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), in order to provide
that the total benefits payable under this Plan and the Savings Plan shall
be approximately equal to the amount of benefits which would have accrued
under the Savings Plan for such employees had such limitations imposed by
the Code not been in effect.
The Plan document as amended and restated herein is a continuation of The
Gillette Company Supplemental Savings Plan for Contributions Prior to May
1, 1991 and The Gillette Company Supplemental Savings Plan for
Contributions After April 30, 1991.
The Plan is intended to constitute an "excess benefit plan" within the
meaning of Section 3(36) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), and an unfunded plan of deferred compensation
described in Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA and in
Sections 3121(v)(2) and 3306(r)(2) of the Code.
2. ELIGIBLE EMPLOYEES. Employees eligible to participate in this Plan for any
calendar year shall be those employees of the Company and Participating
Subsidiaries who are eligible to participate in the Savings Plan and (i)
whose Annual Additions are limited for such year by reason of Section 415
of the Code, based on actual participation in the Savings Plan, or (ii) who
are determined by the Committee to be management or highly compensated
employees for such year and whose contributions or Compensation taken into
account under the Savings Plan are limited for such year by reason of
another provision of the Code, based on actual participation in the Savings
Plan.
3. PARTICIPANTS. Participants are eligible employees who elect to participate
in the Plan, at such time and in such manner prescribed by the Committee,
as of the next practicable payroll period by executing and delivering to
the Company a Participation and Salary Deferral Agreement, in a form
prescribed by the Committee. Participation in the Plan may be discontinued
by a Participant at any time, effective as of the next practicable payroll
period, by executing and delivering to the Company a revocation of such
Participation and Salary Deferral Agreement. Such revocation shall operate
prospectively and shall have no effect on prior
<PAGE> 2
-2-
deferrals under this Plan. An individual who has previously participated in
the Plan shall be considered a Participant for the purposes of the Plan,
other than Section (4)(a) and (b) below, until final distribution is made of
amounts credited to the individual's accounts under the Plan.
4. Deferrals; Credits to Accounts.
------------------------------
(a) If any portion of Compensation from the Company which, but for the
limitations on contributions or Compensation contained in the
provisions of the Code set forth in Section 4(c) below, would be
contributed to the Savings Plan as Tax Deferred Savings and/or Taxed
Savings for a calendar year, a Participant may defer such Compensation
on a pre-tax basis until retirement or later elected date, termination
of employment or hardship. These deferred amounts (hereinafter
referred to as "Supplemental Savings") will be recorded in an account,
entitled the "Supplemental Savings Account," maintained for each
Participant on the books of the Company. A Participant shall always be
fully vested in amounts credited to the Supplemental Savings Account
maintained for such Participant.
(b) The Company Contribution that would have been made under the Savings
Plan in respect of each Participant's Compensation elected to be
contributed as Tax Deferred Savings and Taxed Savings for a calendar
year, which Compensation is instead deferred pursuant to Section 4(a)
above, shall not be made but an equal amount (hereinafter referred to
as "Supplemental Company Contributions") shall be recorded by the
Company in an account on its books, entitled the "Supplemental Company
Contribution Account," maintained for such Participant. Amounts
credited to a Participant's Supplemental Company Contribution Account
shall become vested at the same time the Participant becomes vested in
his Company Contributions under the Savings Plan.
(c) For the purposes of Section 4(a) above, the applicable provisions of
the Code are (i) the Section 415 limitations on Annual Additions, (ii)
the Section 402(g) limitation on Tax Deferred Savings, (iii) the
Section 401(a)(17) limitation on Compensation, and (iv) if and to the
extent determined by the Committee for a given year, the Section
401(k) and (m) limitations on contributions by and on behalf of Highly
Compensated Employees.
5. Additional Credits to Accounts.
------------------------------
(a) Each Participant, upon electing to participate in the Plan, shall
designate the Investment Fund or Funds with respect to which such
Participant's Supplemental Savings shall be deemed invested, either on
a Participation and Salary Deferral Agreement or in such other manner
prescribed by the Committee for such purpose. The election shall
specify one or more of the Investment Funds available for investment
under the Savings Plan at such time,
<PAGE> 3
-3-
and shall be in whole percentage increments of each such Investment
Fund. A Participant's election shall remain in effect with respect to
all future Supplemental Savings made on the Participant's behalf
unless and until changed by the Participant in accordance with Section
5(b) below.
If a Participant fails to make an election hereunder, all Supplemental
Savings made on behalf of the Participant shall be deemed invested in
the same Investment Fund or Funds in which the Participant's Tax
Deferred Savings are invested under the Savings Plan until the
Participant makes an election hereunder.
(b) A Participant may change the Investment Fund or Funds in which future
Supplemental Savings are deemed to be invested, at any time by
telephonic instruction to the Recordkeeper. Such change in election
shall be effective as of the close of the Business Day on which the
Recordkeeper receives such instruction or, if such instruction is
received after the close of a Business Day, as of the close of the
next following Business Day.
(c) Amounts recorded in the Supplemental Savings Account maintained for
each Participant shall be credited or debited with amounts equivalent
to gains or losses realized by the Investment Funds in which the
Participant elects to have his Supplemental Savings Account deemed
invested from time to time. Amounts recorded in the Supplemental
Company Contribution Account maintained for each Participant shall be
credited or debited with amounts equivalent to gains or losses
realized by the Gillette Company Stock Fund or, if applicable, the
Investment Funds in which the Participant elects to have his
Supplemental Company Contribution Account deemed invested from time to
time.
(d) Subject to the limitations set forth in paragraphs (i) through (iv)
below, a Participant may elect at any time to have amounts credited to
his Accounts under the Plan deemed transferred from any Investment
Fund to any of the other Investment Funds, by designating the
percentage of the Accounts deemed invested in the transferring
Investment Fund to be transferred (in whole percentage increments) and
the percentage of such transferred amount to be deemed invested in the
receiving Investment Fund or Funds (in whole percentage increments). A
separate transfer election may be made with respect to each of the
Participant's Supplemental Savings Account and Supplemental Company
Contribution Account (if eligible pursuant to paragraph (iii) below).
The Participant shall make a transfer election by telephonic
instruction to the Recordkeeper. Such transfer election shall be
effective, and the applicable Investment Funds shall be valued for the
purpose of implementing such election, as of the close of the Business
Day on which the Recordkeeper receives such instruction or, if such
instruction is received
<PAGE> 4
-4-
after the close of a Business Day, as of the close of the next
following Business Day.
Elections by Participants under this Section 5(d) shall be limited in
the following respects:
(i) The minimum amount that may be deemed transferred from any
Investment Fund shall be $250 or, if less, the entire balance of
the Participant's Accounts deemed invested in such Investment
Fund.
(ii) Amounts deemed invested in a Stable Value Fund may not be
transferred directly to either a Money Market Fund or a Bond
Fund, but must first be transferred to either an Asset
Allocation Fund, Growth and Income Fund, Growth Fund,
International Fund or the Gillette Company Stock Fund and must
remain in such Investment Fund for a period of at least 90 days.
(iii) Elections to transfer amounts credited to Supplemental Company
Contribution Accounts from the Gillette Company Stock Fund may
be made only by Participants who are Retirement Eligible,
Participants who have become Totally and Permanently Disabled,
and Participants who have incurred a Termination of Employment
on account of Retirement.
(iv) The Committee may in its discretion limit the number of
transfers which may be deemed made to or from any Investment
Fund at any time. The Committee also shall have the
discretionary right to suspend the availability of deemed
transfers among any or all of the Investment Funds at any time
without prior notice to Participants.
The provisions of this Section 5(d) also shall apply to former
employees for whom Accounts are maintained under the Plan on or
after January 1, 1997.
6. Payments from Accounts.
----------------------
(a) Except as otherwise provided in this Section, no amounts shall be
payable under the Plan to any Participant while he is employed by the
Company or any Participating Subsidiary. While employed, a Participant
may request a payment of amounts credited to the Supplemental Savings
Account maintained for such Participant on the basis of an immediate
and heavy financial hardship for which no other resources are
available to the Participant and following the Participant's
withdrawal of all amounts then available for withdrawal from the
Savings Plan. Such request shall be subject to the approval of the
Committee or its delegate. Unless an election is made in accordance
with Section 6(b) or (c) below or unless Section 6(d) below applies,
all vested amounts credited to a Participant's accounts under the Plan
shall be paid in a single lump sum as
<PAGE> 5
-5-
soon as practicable following the termination of the Participant's
employment with the Company and all Participating Subsidiaries, valued
as of the close of such termination date.
(b) A Participant may elect to defer payment of his accounts under the
Plan to any date subsequent to the date of the Participant's
termination of employment with the Company and all Participating
Subsidiaries, but not later than April 1 of the calendar year
following the calendar year in which the Participant attains age
70 1/2, provided (i) the Participant's termination of employment is on
account of retirement or total and permanent disability (such terms
having the same meanings as used under the Savings Plan), (ii) the
value of the Participant's vested account balance under the Plan as of
the close of the date of termination is at least $25,000, and (iii)
the Participant's deferral election is made at least twelve months
prior to the date of such termination. Such deferred payment shall be
valued as of the close of the elected payment date (or the next
following business day), and shall be made in a single lump sum as
soon as practicable thereafter. Pending final distribution, the
Participant's accounts shall continue to be credited or debited with
amounts equivalent to gains and losses realized by the Investment
Funds in which the Participant's Accounts are deemed invested from
time to time.
(c) A Participant may elect to receive payment of his accounts under the
Plan in the form of annual installments of from two to ten years
commencing in the calendar year following the year of the
Participant's termination of employment with the Company and all
Participating Subsidiaries, provided (i) the Participant's termination
of employment is on account of retirement or total and permanent
disability (such terms having the same meanings as used under the
Savings Plan), (ii) the value of the Participant's vested account
balance under the Plan as of the close of the date of termination is
at least $25,000, and (iii) the Participant's installment payment
election is made at least twelve months prior to the date of such
termination. Each installment payment shall be valued as of the close
of the first business day in January of the year of commencement and
each year thereafter, and shall be paid as soon as practicable
thereafter. Pending final distribution, the remaining balance in the
Participant's accounts shall continue to be credited or debited with
amounts equivalent to gains and losses realized by the Investment
Funds in which the Participant's Accounts are deemed invested from
time to time.
(d) After an Approved or Unapproved Change in Control, upon the
termination of this Plan or the Savings Plan or an amendment to this
Plan or the Savings Plan which amendment adversely affects the rights
and benefits of Participants, all unvested accounts under this Plan
shall vest and all accounts shall be paid to the Participants.
<PAGE> 6
-6-
(e) In the event of the death of a Participant, whether or not then
employed by the Company or a Participating Subsidiary, all amounts
credited to the Participant's accounts under the Plan shall vest and
shall be paid to the Participant's estate in a single lump sum valued
as of the close of the date of death.
(f) All determinations of value of Participants' accounts under the Plan
shall be made in accordance with the relevant provisions of the
Savings Plan.
(g) All payments under the Plan shall be subject to any required
withholding of Federal, state and local taxes.
7. SOURCE OF PAYMENTS. All amounts payable under the Plan shall be paid by the
Company and Participating Subsidiaries from their general assets.
Notwithstanding the maintenance of records on its books as described in
Section 4 above, no Participant shall have any right to or interest in any
assets of the Company or any Participating Subsidiary other than as an
unsecured general creditor, and no separate fund shall be established in
which any Participant has any right or interest. The foregoing shall not
prevent the Company or any Subsidiary from establishing a fund from which
to satisfy its payment obligations under the Plan.
8. PLAN AMENDMENT AND TERMINATION. The Plan may be amended or terminated by
the Company at any time and in any manner prior to an Approved or
Unapproved Change in Control of the Company, provided that no amendment or
termination shall adversely affect the rights and benefits of Participants
with respect to Compensation deferred or deducted pursuant to the Plan
prior to such action. After an Approved or Unapproved Change in Control of
the Company: (a) no amendment shall be made which adversely affects the
rights and benefits of Participants with respect to Compensation deferred
or deducted or benefits accrued pursuant to the Plan prior to such
amendment; (b) the Plan may not be terminated or amended in a manner to
provide less favorable prospective benefits unless all benefits under this
Plan which are unvested become immediately vested and the account balances
of all Participants become immediately payable and are paid to all such
Participants; and (c) no amendment may be made with respect to any
provision of the Plan which becomes operative upon an Approved or
Unapproved Change in Control.
9. NO RIGHT OF EMPLOYMENT. The adoption and operation of this Plan shall not
create in any Participant a right of continued employment with the Company
or any Subsidiary.
10. ADMINISTRATION. The Plan shall be administered by the Savings Plan
Committee appointed by the Board of Directors of the Company (the
"Committee"), which shall have the discretionary power and authority to
construe and interpret the provisions of the Plan, to determine the
eligibility of employees to participate in the Plan and the amount and
timing of payment of any benefits due under the Plan, and to determine
<PAGE> 7
-7-
all other matters in carrying out the intended purposes of the Plan. In
administering this Plan, including but not limited to considering appeals
from the denial of claims for benefits and issuing decisions thereon, rules
and procedures substantially similar to those set forth in the Savings Plan
shall govern.
11. NO ASSIGNMENT OF INTEREST. The interest of any Participant under the Plan
may not be assigned, alienated, encumbered or otherwise transferred, and
shall not be subject to attachment, garnishment, execution or levy; and any
attempted assignment, alienation, encumbrance, transfer, attachment,
garnishment, execution or levy shall be void and of no force or effect.
12. CONSTRUCTION OF TERMS. Except as expressly provided in this Plan to the
contrary, capitalized terms referenced herein shall have the same meanings
as are applied to such terms in the Savings Plan as in effect from time to
time.
THE GILLETTE COMPANY
Date: October 28, 1996 By: Robert E. DiCenso
--------------------------
Robert E. DiCenso
Senior Vice President -
Personnel and Administration
<PAGE> 1
EXHIBIT 10(O)
CONFORMED COPIES
$1,100,000,000 MULTI-YEAR CREDIT AGREEMENT
and
$400,000,000 364-DAY CREDIT AGREEMENT
dated as of
December 20, 1996
among
The Gillette Company,
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
------------------
J.P. Morgan Securities, Inc.
Arranger
<PAGE> 2
CONFORMED COPY
$1,100,000,000
MULTI-YEAR CREDIT AGREEMENT
dated as of
December 20, 1996
among
The Gillette Company,
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
-----------------
J.P. Morgan Securities Inc.,
Arranger
<PAGE> 3
TABLE OF CONTENTS*
Page
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions ...................................... 1
SECTION 1.02. Accounting Terms and Determinations .............. 13
SECTION 1.03. Types of Borrowings .............................. 13
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend .............................. 14
SECTION 2.02. Notice of Committed Borrowing .................... 14
SECTION 2.03. Money Market Borrowings .......................... 14
SECTION 2.04. Notice to Banks; Funding of Loans ................ 19
SECTION 2.05. Notes ............................................ 20
SECTION 2.06. Maturity of Loans ................................ 20
SECTION 2.07. Interest Rates ................................... 21
SECTION 2.08. Facility Fee ..................................... 24
SECTION 2.09. Termination or Reduction of Commitments .......... 25
SECTION 2.10. Scheduled Termination of Commitments ............. 25
SECTION 2.11. Optional Prepayments ............................. 25
SECTION 2.12. General Provisions as to Payments ................ 26
SECTION 2.13. Funding Losses ................................... 26
SECTION 2.14. Computation of Interest and Fees ................. 27
SECTION 2.15. Judgment Currency ................................ 27
SECTION 2.16. Foreign Withholding Taxes and Other Costs ........ 28
SECTION 2.17. Regulation D Compensation ........................ 28
SECTION 2.18. Withholding Tax Exemption ........................ 29
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness .................................... 30
SECTION 3.02. Borrowings ....................................... 31
- - -------------------
* The Table of Contents is not a part of this Agreement.
i
<PAGE> 4
Page
----
SECTION 3.03. First Borrowing by Each Eligible Subsidiary ......... 32
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Existence and Power .................... 32
SECTION 4.02. Corporate and Governmental Authorization;
Contravention .................................... 33
SECTION 4.03. Binding Effect ................................... 33
SECTION 4.04. Financial Information ............................ 33
SECTION 4.05. No Material Adverse Change ....................... 34
SECTION 4.06. Compliance with ERISA ............................ 34
SECTION 4.07. Litigation ....................................... 34
SECTION 4.08. Taxes ............................................ 34
SECTION 4.09. Full Disclosure .................................. 35
ARTICLE V
COVENANTS
SECTION 5.01. Information ...................................... 35
SECTION 5.02. Maintenance of Property; Insurance ............... 37
SECTION 5.03. Conduct of Business and Maintenance of
Existence ........................................ 38
SECTION 5.04. Compliance with Laws ............................. 38
SECTION 5.05. Earnings to Interest Expense Ratio ............... 38
SECTION 5.06. Negative Pledge .................................. 38
SECTION 5.07. Consolidations, Mergers and Sales of Assets ...... 39
SECTION 5.08. Material Subsidiary Cash Flow .................... 40
SECTION 5.09. Use of Proceeds .................................. 40
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default ................................ 40
SECTION 6.02. Notice of Default ................................ 43
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization .................... 43
SECTION 7.02. Agent and Affiliates ............................. 43
SECTION 7.03. Action by Agent .................................. 43
SECTION 7.04. Consultation with Experts ........................ 43
SECTION 7.05. Liability of Agent ............................... 44
ii
<PAGE> 5
Paqe
----
SECTION 7.06. Indemnification .................................. 44
SECTION 7.07. Credit Decision .................................. 44
SECTION 7.08. Successor Agent .................................. 45
SECTION 7.09. Agent's Fee ...................................... 45
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair ............................. 45
SECTION 8.02. Illegality ....................................... 46
SECTION 8.03. Increased Cost and Reduced Return ................ 47
SECTION 8.04. Base Rate Loans Substituted for Affected
Fixed Rate Loans ................................. 49
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
OF ELIGIBLE SUBSIDIARIES
SECTION 9.01. Corporate Existence and Power .................... 50
SECTION 9.02. Corporate and Governmental Authorization;
Contravention .................................... 50
SECTION 9.03. Binding Effect ................................... 50
SECTION 9.04. Taxes ............................................ 50
ARTICLE X
GUARANTY
SECTION 10.01. The Guaranty ..................................... 51
SECTION 10.02. Guaranty Unconditional ........................... 51
SECTION 10.03. Discharge Only Upon Payment In Full;
Reinstatement In Certain Circumstances ........... 52
SECTION 10.04. Waiver by the Company ............................ 52
SECTION 10.05. No Subrogation ................................... 52
SECTION 10.06. Stay of Acceleration ............................. 52
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices .......................................... 53
SECTION 11.02. No Waivers ....................................... 53
SECTION 11.03. Expenses; Indemnification ........................ 53
SECTION 11.04. Sharing of Set-Offs .............................. 54
SECTION 11.05. Amendments and Waivers ........................... 55
iii
<PAGE> 6
Paqe
----
SECTION 11.06. Successors and Assigns ............................. 55
SECTION 11.07. Collateral ......................................... 57
SECTION 11.08. Governing Law; Submission to Jurisdiction;
Service of Process ................................. 57
SECTION 11.09. Counterparts; Integration .......................... 58
SECTION 11.10. WAIVER OF JURY TRIAL ............................... 58
Commitment Schedule
Pricing Schedule
Exhibit A - Note
Exhibit B - Money Market Quote Request
Exhibit C - Invitation for Money Market Quotes
Exhibit D - Money Market Quote
Exhibit E - Opinion of Counsel for the Company
Exhibit F - Opinion of Special Counsel for the Agent
Exhibit G - Form of Election to Participate
Exhibit H - Form of Election to Terminate
Exhibit I - Opinion of Counsel for the Borrower (Borrowings by Eligible
Subsidiaries)
Exhibit J - Assignment and Assumption Agreement
iv
<PAGE> 7
CREDIT AGREEMENT
AGREEMENT dated as of December 20, 1996 among THE GILLETTE COMPANY,
the BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. The following terms, as used herein, have
the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b) .
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent duly completed by such Bank.
"Agent" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks hereunder, and its successors in such capacity.
"Applicable Lending Office" means, with respect to any Bank, (i) in
the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of
its Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 11.06(c).
<PAGE> 8
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 11.06(c), and their respective
successors.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Base Rate Loan" means a Committed Loan to be made by a Bank as a Base
Rate Loan in accordance with the applicable Notice of Committed Borrowing or
pursuant to Article VIII.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group and not excepted by Section 4(b) of ERISA.
"Borrower" means the Company or any Eligible Subsidiary, as the
context may require, and their respective successors, and "Borrowers" means all
of the foregoing.
"Borrowing" has the meaning set forth in Section 1.03.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Committed Loan to be made by a Bank as a CD Loan in
accordance with the applicable Notice of Committed Borrowing.
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Reference Banks" means The First National Bank of Boston, The
First National Bank of Chicago and Morgan Guaranty Trust Company of New York.
"Commitment" means (i) with respect to each Bank listed on the
Commitment Schedule, the amount set forth opposite the name of such Bank on the
Commitment Schedule and (ii) with respect to any Assignee, the amount of the
transferor Bank's Commitment assigned to it pursuant to Section 11.06(c), in
each case as such amount may be changed from time to time pursuant to Section
2.09 or 11.06(c).
"Commitment Schedule" means the Commitment Schedule attached hereto.
2
<PAGE> 9
"Committed Loan" means a loan made by a Bank pursuant to Section 2.01.
"Company" means The Gillette Company, a Delaware corporation, and its
successors.
"Company's Latest Form 10-Q" means the Company's quarterly report on
Form 10-Q for the quarter ended September 30, 1996, as filed with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934.
"Company's 1995 Form 10-K" means the Company's annual report on Form
10-K for 1995, as filed with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934.
"Consolidated Assets" means at any date the consolidated assets of the
Company and its Consolidated Subsidiaries determined as of such date.
"Consolidated Earnings Before Interest and Taxes" means, for any
fiscal period, the sum of (i) Consolidated Net Income plus (ii) Gross Interest
Expense plus (iii) to the extent deducted in determining Consolidated Net
Income, provision for taxes on income, all determined on a consolidated basis
for the Company and its Consolidated Subsidiaries for such fiscal period.
"Consolidated Net Income" means, for any fiscal period, the net income
(before preferred and common stock dividends) of the Company and its
Consolidated Subsidiaries, determined on a consolidated basis for such fiscal
period.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Company in
its consolidated financial statements if such statements were prepared as of
such date.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property
or services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all Debt of others
secured by a Lien on any asset of such Person, whether or not such Debt is
otherwise an
3
<PAGE> 10
obligation of such Person, and (vi) all Debt of others Guaranteed by such
Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions,
excluding any amounts which the Borrower is entitled to set-off against its
obligations under applicable law.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City or Boston, Massachusetts
are authorized by law to close.
"Domestic Lending Office" means, as to each Bank, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Company and the Agent; PROVIDED that any Bank may so designate
separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and
its CD Loans, on the other hand, in which case all references herein to the
Domestic Lending Office of such Bank shall be deemed to refer to either or both
of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in
Section 2.07(b).
"Duracell Credit Facility" means the Second Amended and Restated
Credit Agreement dated as of March 29,
4
<PAGE> 11
1991, as amended, among Duracell International Inc., Duracell Inc., the
financial institutions listed on the signature pages thereof and The First
National Bank of Chicago, as agent.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 3.01.
"Election to Participate" means an Election to Participate
substantially in the form of Exhibit G hereto.
"Election to Terminate" means an Election to Terminate substantially
in the form of Exhibit H hereto.
"Eligible Subsidiary" means any Substantially-Owned Consolidated
Subsidiary of the Company as to which an Election to Participate shall have been
delivered to the Agent and as to which an Election to Terminate shall not have
been delivered to the Agent. Each such Election to Participate and Election to
Terminate shall be duly executed on behalf of such Substantially-Owned
Consolidated Subsidiary and the Company in such number of copies as the Agent
may request. The delivery of an Election to Terminate shall not affect any
obligation of an Eligible Subsidiary theretofore incurred. The Agent shall
promptly give notice to the Banks of the receipt of any Election to Participate
or Election to Terminate.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Company, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
Dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Company and the Agent.
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<PAGE> 12
"Euro-Dollar Loan" means a Committed Loan to be made by a Bank as a
Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"Euro-Dollar Margin" has the meaning set forth in Section 2.07(c).
"Euro-Dollar Reference Banks" means the principal London offices of
The First National Bank of Boston, Credit Suisse and Morgan Guaranty Trust
Company of New York.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents).
"Event of Default" has the meaning set forth in Section 6.01.
"Existing Credit Agreement" means the Multi-Year Credit Agreement
dated as of April 30, 1996, among the Company, the bank parties thereto and
Morgan Guaranty Trust Company of New York, as agent, as amended to the Effective
Date.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, PROVIDED that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty Trust Company of New
York on such day on such transactions as determined by the Agent.
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<PAGE> 13
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market
Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate
pursuant to Section 8.01(ii)) or any combination of the foregoing.
"Gross Interest Expense" means, for any fiscal period, the
consolidated interest expense of the Company and its Consolidated Subsidiaries
for such period (calculated without deducting or otherwise netting consolidated
interest income of the Company and its Consolidated Subsidiaries).
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt (whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions, by "comfort letter" or other similar
undertaking of support or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the holder of such Debt of the payment thereof or
to protect such holder against loss in respect thereof (in whole or in part),
PROVIDED that the term Guarantee shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Indemnitee" has the meaning set forth in Section 11.03 (b) .
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending one,
two, three or six months thereafter, as the Borrower may elect in the applicable
Notice of Borrowing; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (c) below, be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day
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<PAGE> 14
in the calendar month at the end of such Interest Period) shall, subject to
clause (c) below, end on the last Euro-Dollar Business Day of a calendar
month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(2) with respect to each CD Borrowing, the period commencing on the date of such
Borrowing and ending 30, 60, 90, or 180 days thereafter, as the Borrower may
elect in the applicable Notice of Borrowing; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (b) below, be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing and ending 30 days thereafter; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (b) below, be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market LIBOR Borrowing, the period commencing on
the date of such Borrowing and ending such whole number of months thereafter as
the Borrower may elect in accordance with Section 2.03; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (c) below, be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day
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<PAGE> 15
in the calendar month at the end of such Interest Period) shall, subject to
clause (c) below, end on the last Euro-Dollar Business Day of a calendar
month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(5) with respect to each Money Market Absolute Rate Borrowing, the period
commencing on the date of such Borrowing and ending such number of days
thereafter (but not less than 15 days) as the Borrower may elect in accordance
with Section 2.03; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (b) below, be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Company or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market
Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans
or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in Section
2.07(c).
"Material Debt" means Debt (other than the Notes) of the Company
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal amount exceeding $50,000,000.
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<PAGE> 16
"Material Financial Obligations" means a principal amount of Debt
and/or payment obligations in respect of Derivatives Obligations of the Company
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, exceeding in the aggregate $50,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $50,000,000.
"Material Subsidiary" means any Subsidiary which either (A) is an
Eligible Subsidiary or (B) has consolidated assets, together with its
Subsidiaries, exceeding 5% of Consolidated Assets at the date of determination
of its status hereunder.
"Money Market Absolute Rate" has the meaning set forth in
Section 2.03(d).
"Money Market Absolute Rate Loan" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the Company
and the Agent; PROVIDED that any Bank may from time to time by notice to the
Company and the Agent designate separate Money Market Lending Offices for its
Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate
Loans, on the other hand, in which case all references herein to the Money
Market Lending Office of such Bank shall be deemed to refer to either or both of
such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank pursuant
to a LIBOR Auction (including such a loan bearing interest at the Base Rate
pursuant to Section 8.01(ii)).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.03.
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<PAGE> 17
"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a) (3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"Notes" means promissory notes of a Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of such Borrower to repay
the Loans made to it, and "Note" means any one of such promissory notes issued
hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as
defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in
Section 2.03(f)) .
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 11.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Pricing Schedule" means the Schedule attached hereto identified as
such.
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<PAGE> 18
"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
"Refunding Borrowing" means a Committed Borrowing which, after
application of the proceeds thereof, results in no net increase in the
outstanding principal amount of Committed Loans made by any Bank to any
Borrower.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having at least 66 2/3% of
the aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least 66 2/3% of the aggregate unpaid
principal amount of the Loans.
"Revolving Credit Period" means the period from and including the
Effective Date to but excluding the Termination Date.
"Subsidiary" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; unless
otherwise specified, "Subsidiary" means a Subsidiary of the Company.
"Substantially-Owned Consolidated Subsidiary" means any Consolidated
Subsidiary not less than 90% of the outstanding shares of each class of capital
stock or other ownership interests of which are at the time directly or
indirectly owned by the Company.
"Termination Date" means December 20, 2001, or, if such day is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such
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<PAGE> 19
liabilities under Title IV Of ERISA (excluding any accrued but unpaid
contributions), all determined as of the then most recent valuation date for
such Plan, but only to the extent that such excess represents a potential
liability of a member of the ERISA Group to the PBGC or any other Person under
Title IV of ERISA.
"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Company's
independent public accountants) with the most recent audited consolidated
financial statements of the Company and its Consolidated Subsidiaries delivered
to the Banks; PROVIDED that, if the Company notifies the Agent that the Company
wishes to amend any covenant in Article V to eliminate the effect of any change
in generally accepted accounting principles on the operation of such covenant
(or if the Agent notifies the Company that the Required Banks wish to amend
Article V for such purpose), then the Company's compliance with such covenant
shall be determined on the basis of generally accepted accounting principles in
effect immediately before the relevant change in generally accepted accounting
principles became effective, until either such notice is withdrawn or such
covenant is amended in a manner satisfactory to the Company and the Required
Banks.
SECTION 1.03. TYPES OF BORROWINGS. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to a single Borrower
pursuant to Article II on a single date and for a single Interest Period.
Borrowings are classified for purposes of this Agreement either by reference to
the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing"
is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions
of Article II under which participation therein is determined (i.e., a
"Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks
participate in proportion to their Commitments, while a "Money Market Borrowing"
is a Borrowing under Section 2.03 in which the Bank participants are determined
on the basis of their bids in accordance therewith).
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ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS TO LEND. During the Revolving Credit Period
each Bank severally agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Company or any Eligible Subsidiary pursuant to
this Section from time to time in amounts such that the aggregate principal
amount of Committed Loans by such Bank at any one time outstanding to all
Borrowers shall not exceed the amount of its Commitment. Each Borrowing under
this Section shall be in an aggregate principal amount of $15,000,000 or any
larger multiple of $1,000,000 (except that any such Borrowing may be in the
aggregate amount available in accordance with Section 3.02(b)) and shall be made
from the several Banks ratably in proportion to their respective Commitments.
Within the foregoing limits, a Borrower may borrow under this Section, repay or,
to the extent permitted by Section 2.11, prepay Loans and reborrow at any time
during the Revolving Credit Period under this Section.
SECTION 2.02. NOTICE OF COMMITTED BORROWING. The Borrower shall give
the Agent notice (a "Notice of Committed Borrowing") not later than 11:00 A.M.
(New York City time) on (x) the date of each Base Rate Borrowing, (y) the
Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar
Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business Day
in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the
case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to be CD Loans,
Base Rate Loans or Euro-Dollar Loans, and
(d) in the case of a Fixed Rate Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
SECTION 2.03. Money Market Borrowinqs.
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(a) THE MONEY MARKET OPTION. In addition to Committed Borrowings
pursuant to Section 2.01, any Borrower may, as set forth in this Section,
request the Banks during the Revolving Credit Period to make offers to make
Money Market Loans to such Borrower. The Banks may, but shall have no obligation
to, make such offers and the Borrower may, but shall have no obligation to,
accept any such offers in the manner set forth in this Section.
(b) MONEY MARKET QUOTE REQUEST. When a Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Agent by telex or facsimile transmission a Money Market Quote Request
substantially in the form of Exhibit B hereto so as to be received no later than
10:30 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day prior
to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y)
the Domestic Business Day next preceding the date of Borrowing proposed therein,
in the case of an Absolute Rate Auction (or, in either case, such other time or
date as the Company and the Agent shall have mutually agreed and the Agent shall
have notified to the Banks not later than the date of the Money Market Quote
Request for the first LIBOR Auction or Absolute Rate Auction for which such
change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$15,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Company and the Agent may agree) of any other Money Market
Quote Request.
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(c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt of a
Money Market Quote Request, the Agent shall send to the Banks by telex or
facsimile transmission an Invitation for Money Market Quotes substantially in
the form of Exhibit C hereto, which shall constitute an invitation by the
Borrower to each Bank to submit Money Market Quotes offering to make the Money
Market Loans to which such Money Market Quote Request relates in accordance with
this Section.
(d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. (i) Each Bank may
submit a Money Market Quote containing an offer or offers to make Money Market
Loans in response to any Invitation for Money Market Quotes. Each Money Market
Quote must comply with the requirements of this subsection (d) and must be
submitted to the Agent by telex or facsimile transmission at its offices
referred to in or pursuant to Section 11.01 not later than (x) 2:00 P.M. (New
York City time) on the fourth Euro-Dollar Business Day prior to the proposed
date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New York
City time) on the proposed date of Borrowing, in the case of an Absolute Rate
Auction (or, in either case, such other time or date as the Company and the
Agent shall have mutually agreed and the Agent shall have notified to the Banks
not later than the date of the Money Market Quote Request for the first LIBOR
Auction or Absolute Rate Auction for which such change is to be effective);
PROVIDED that Money Market Quotes submitted by the Agent (or any affiliate of
the Agent) in the capacity of a Bank may be submitted, and may only be
submitted, if the Agent or such affiliate notifies the Borrower of the terms of
the offer or offers contained therein not later than (x) one hour prior to the
deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes
prior to the deadline for the other Banks, in the case of an Absolute Rate
Auction. Subject to Articles III and VI, any Money Market Quote so made shall be
irrevocable except with the written consent of the Agent given on the
instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each such
offer is being made, which principal amount (w) may be greater than or less
than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger
multiple of $1,000,000 (y) may
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<PAGE> 23
not exceed the principal amount of Money Market Loans for which offers were
requested and (z) may be subject to an aggregate limitation as to the
principal amount of Money Market Loans for which offers being made by such
quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest per
annum (specified to the nearest 1/10,000th of 1%) (the "Money Market
Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or does
not specify all of the information required by subsection (d) (ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth in the
applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d) (i).
(e) NOTICE TO BORROWER. The Agent shall promptly notify the Borrower
of the terms (x) of any Money Market Quote submitted by a Bank that is in
accordance with subsection (d) and (y) of any Money Market Quote that amends,
modifies or is otherwise inconsistent with a previous Money Market Quote
submitted by such Bank with respect to the same Money Market Quote Request. Any
such subsequent Money Market Quote shall be disregarded by the Agent unless such
subsequent Money Market Quote is submitted
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solely to correct a manifest error in such former Money Market Quote. The
Agent's notice to the Borrower shall specify (A) the aggregate principal amount
of Money Market Loans for which offers have been received for each Interest
Period specified in the related Money Market Quote Request, (B) the respective
principal amounts and Money Market Margins or Money Market Absolute Rates, as
the case may be, so offered and (C) if applicable, limitations on the aggregate
principal amount of Money Market Loans for which offers in any single Money
Market Quote may be accepted.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 10:30 A.M. (New
York City time) on (x) the third Euro-Dollar Business Day prior to the proposed
date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Company and the Agent shall have mutually agreed and
the Agent shall have notified to the Banks not later than the date of the Money
Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for
which such change is to be effective), the Borrower shall notify the Agent of
its acceptance or non-acceptance of the offers so notified to it pursuant to
subsection (e). In the case of acceptance, such notice (a "Notice of Money
Market Borrowing") shall specify the aggregate principal amount of offers for
each Interest Period that are accepted. The Borrower may accept any Money Market
Quote in whole or in part; PROVIDED that:
(i) the aggregate principal amount of each Money Market
Borrowing may not exceed the applicable amount set forth in the
related Money Market Quote Request,
(ii) the principal amount of each Money Market Borrowing must be
$15,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the
case may be, and
(iv) the Borrower may not accept any offer that is described in
subsection (d) (iii) or that otherwise fails to comply with the
requirements of this Agreement.
(g) ALLOCATION BY AGENT. If offers are made by two or more Banks with
the same Money Market Margins or Money Market Absolute Rates, as the case may
be, for a greater aggregate principal amount than the amount in respect of which
such offers are accepted for the related
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Interest Period, the principal amount of Money Market Loans in respect of which
such offers are accepted shall be allocated by the Agent among such Banks as
nearly as possible (in multiples of $1,000,000, as the Agent may deem
appropriate) in proportion to the aggregate principal amounts of such offers.
Determinations by the Agent of the amounts of Money Market Loans shall be
conclusive in the absence of manifest error.
SECTION 2.04. Notice to Banks; Funding of Loans.
---------------------------------
(a) Upon receipt of a Notice of Borrowing, the Agent shall promptly
notify each Bank of the contents thereof and of such Bank's share (if any) of
such Borrowing and such Notice of Borrowing shall not thereafter be revocable by
the Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date of each
Borrowing, each Bank participating therein shall (except as provided in
subsection (c) of this Section) make available its share of such Borrowing, in
Federal or other funds immediately available in New York City, to the Agent at
its address referred to in Section 11.01. Unless the Agent determines that any
applicable condition specified in Article III has not been satisfied, the Agent
will make the funds so received from the Banks available to the Borrower at the
Agent's aforesaid address.
(c) If any Bank makes a new Loan hereunder to a Borrower on a day on
which such Borrower is to repay all or any part of an outstanding Loan from such
Bank, such Bank shall apply the proceeds of its new Loan to make such repayment
and only an amount equal to the difference (if any) between the amount being
borrowed by such Borrower and the amount being repaid shall be made available by
such Bank to the Agent as provided in subsection (b), or remitted by such
Borrower to the Agent as provided in Section 2.12, as the case may be.
(d) Unless the Agent shall have received notice from a Bank prior to
the date of any Borrowing that such Bank will not make available to the Agent
such Bank's share of such Borrowing, the Agent may assume that such Bank has
made such share available to the Agent on the date of such Borrowing in
accordance with subsections (b) and (c) of this Section 2.04 and the Agent may,
in reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such share available to the Agent, such Bank and the Borrower severally agree to
repay to the Agent forthwith on demand such corresponding amount together
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with interest thereon, for each day from the date such amount is made available
to the Borrower until the date such amount is repaid to the Agent, at (i) in the
case of the Borrower, a rate per annum equal to the higher of the Federal Funds
Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii)
in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to
the Agent such corresponding amount, such amount so repaid shall constitute such
Bank's Loan included in such Borrowing for purposes of this Agreement.
SECTION 2.05. NOTES. (a) The Loans of each Bank to each Borrower
shall be evidenced by a single Note of such Borrower payable to the order of
such Bank for the account of its Applicable Lending Office in an amount equal to
the aggregate unpaid principal amount of such Bank's Loans to such Borrower.
(b) Each Bank may, by notice to a Borrower and the Agent, request that
its Loans of a particular type to such Borrower be evidenced by a separate Note
of such Borrower in an amount equal to the aggregate unpaid principal amount of
such Loans. Each such Note shall be in substantially the form of Exhibit A
hereto with appropriate modifications to reflect the fact that it evidences
solely Loans of the relevant type. Each reference in this Agreement to a "Note"
or the "Notes" of such Bank shall be deemed to refer to and include any or all
of such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(b)
or 3.03(a), the Agent shall forward such Note to such Bank. Each Bank shall
record the date, amount, type and maturity of each Loan made by it to each
Borrower and the date and amount of each payment of principal made with respect
thereto, and may, if such Bank so elects in connection with any transfer or
enforcement of its Note of any Borrower, endorse on the schedule forming a part
thereof appropriate notations to evidence the foregoing information with respect
to each such Loan to such Borrower then outstanding; PROVIDED that the failure
of any Bank to make any such recordation or endorsement shall not affect the
obligations of any Borrower hereunder or under the Notes. Each Bank is hereby
irrevocably authorized by each Borrower so to endorse its Notes and to attach to
and make a part of any Note a continuation of any such schedule as and when
required.
SECTION 2.06. MATURITY OF LOANS. Each Loan included in any Borrowing
shall mature, and the principal
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amount thereof shall be due and payable, on the last day of the Interest Period
applicable to such Borrowing.
SECTION 2.07. INTEREST RATES. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the Base
Rate for such day. Such interest shall be payable for each Interest Period on
the last day thereof. Any overdue principal of or interest on any Base Rate Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the sum of 1% plus the rate otherwise applicable to Base Rate
Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during the Interest Period applicable thereto, at a
rate per annum equal to the sum of the CD Margin for such day plus the Adjusted
CD Rate applicable to such Interest Period; PROVIDED that if any CD Loan shall,
as a result of clause (2)(b) of the definition of Interest Period, have an
Interest Period of less than 30 days, such CD Loan shall bear interest during
such Interest Period at the rate applicable to Base Rate Loans during such
period. Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than 90 days, at intervals of 90
days after the first day thereof. Any overdue principal of or interest on any CD
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 1% plus the higher of (i) the sum of the CD Margin
for such day plus the Adjusted CD Rate applicable to the Interest Period for
such Loan and (ii) the rate applicable to Base Rate Loans for such day.
"CD Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
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[ CDBR ] *
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
- - ------------------
* The amount in brackets being rounded upward, if necessary, to the next higher
1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid
at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the
first day of such Interest Period by two or more New York certificate of deposit
dealers of recognized standing for the purchase at face value from each CD
Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD Loan of such CD Reference Bank to which such Interest
Period applies and having a maturity comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. ss. 327.4(a) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the
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United States. The Adjusted CD Rate shall be adjusted automatically on and as of
the effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the London Interbank Offered Rate applicable to such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
"Euro-Dollar Margin" means a rate per annum determined in accordance
with the Pricing Schedule.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the higher of (i) the sum of 1% plus the Euro-Dollar Margin for such
day plus the London Interbank Offered Rate applicable to the Interest Period for
such Loan and (ii) the sum of 1% plus the Euro-Dollar Margin for such day plus
the quotient obtained (rounded upward, if necessary, to the next higher 1/100 of
1%) by dividing (x) the average (rounded upward, if necessary, to the next
higher 1/16 of 1%) of the respective rates per annum at which one day (or, if
such amount due remains unpaid more than three Euro-Dollar Business Days, then
for such other period of time not longer than six months as the Agent may
select) deposits in dollars in an amount approximately equal to such overdue
payment due to each of the Euro-Dollar Reference Banks are offered to such
Euro-Dollar Reference Bank in the London interbank market for the applicable
period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a) or (b) of Section
8.01 shall exist, at a rate per annum equal to the sum of 1% plus the rate
applicable to Base Rate Loans for such day).
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(e) Subject to Section 8.01(ii), each Money Market LIBOR Loan shall
bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined in accordance with
Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.03. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.03. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof. Any overdue
principal of or interest on any Money Market Loan shall bear interest, payable
on demand, for each day until paid at a rate per annum equal to the sum of 1%
plus the Base Rate for such day.
(f) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available on
a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.08. FACILITY FEE. (a) The Company shall pay to the Agent
for the account of the Banks ratably, a facility fee at the Facility Fee Rate
(determined daily in accordance with the Pricing Schedule). Such facility fee
shall accrue (i) from and including the Effective Date to but excluding the
Termination Date (or earlier date of termination of the Commitments in their
entirety), on the daily aggregate amount of the Commitments (whether used or
unused) and (ii) from and including the Termination Date or such earlier date of
termination to but excluding the date the Loans shall be repaid in their
entirety, on the daily aggregate outstanding principal amount of the Loans.
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(b) Payments. Accrued facility fees under this Section shall be
payable quarterly on each March 31, June 30, September 30 and December 31,
beginning with March 31, 1997, and upon the date of termination of the
Commitments in their entirety (and, if later, the date the Loans shall be repaid
in their entirety).
SECTION 2.09. TERMINATION OR REDUCTION OF COMMITMENTS. The Company
may, upon at least three Domestic Business Days' notice to the Agent, (i)
terminate the Commitments at any time, if no Loans are outstanding at such time
or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000
or any larger multiple thereof, the aggregate amount of the Commitments in
excess of the aggregate outstanding principal amount of the Loans. Promptly
after receiving a notice pursuant to this subsection, the Agent shall notify
each Bank of the contents thereof.
SECTION 2.10. SCHEDULED TERMINATION OF COMMITMENTS. The Commitments
shall terminate on the Termination Date and any Loans then outstanding (together
with accrued interest thereon) shall be due and payable on such date.
SECTION 2.11. OPTIONAL PREDAYMENTS. (a) Subject in the case of Fixed
Rate Loans to Section 2.13, the Borrower may, upon at least one Domestic
Business Day's notice to the Agent, prepay any Domestic Borrowing (or any Money
Market Borrowing bearing interest at the Base Rate pursuant to Section 8.01(ii))
or upon at least three Euro-Dollar Business Days' notice to the Agent, prepay
any Euro-Dollar Borrowing, in each case in whole at any time, or from time to
time in part in amounts aggregating $15,000,000 or any larger multiple of
$1,000,000, by paying the principal amount to be prepaid together with accrued
interest thereon to the date of prepayment. Each such optional prepayment shall
be applied to prepay ratably the Loans of the several Banks included in such
Borrowing.
(b) Except as provided in subsection (a) above, the Borrower may not
prepay all or any portion of the principal amount of any Money Market Loan prior
to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share (if any) of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
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SECTION 2.12. GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrowers
shall make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when due,
in Dollars in Federal or other funds immediately available in New York City, to
the Agent at its address referred to in Section 11.01. The Agent will promptly
distribute to each Bank its ratable share of each such payment received by the
Agent for the account of the Banks. Whenever any payment of principal of, or
interest on, the Domestic Loans or of fees shall be due on a day which is not a
Domestic Business Day, the date for payment thereof shall be extended to the
next succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. Whenever any payment of
principal of, or interest on, the Money Market Loans shall be due on a day which
is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from a Borrower prior
to the date on which any payment is due from such Borrower to the Banks
hereunder that such Borrower will not make such payment in full, the Agent may
assume that such Borrower has made such payment in full to the Agent on such
date and the Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to the amount then due
such Bank. If and to the extent that such Borrower shall not have so made such
payment, each Bank shall repay to the Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for each day from the
date such amount is distributed to such Bank until the date such Bank repays
such amount to the Agent, at the Federal Funds Rate.
SECTION 2.13. FUNDING LOSSES. If a Borrower makes any payment of
principal with respect to any Fixed Rate Loan (pursuant to Article VI or VIII or
otherwise) on any day other than the last day of the Interest Period applicable
thereto, or the last day of an applicable period fixed pursuant to Section
2.07(d), or if a Borrower fails to borrow or prepay any Fixed Rate Loans after
notice has been given to any Bank in accordance with Section 2.04(a) or
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2.11(c), such Borrower shall reimburse each Bank on demand for any resulting
loss or expense incurred by it (or by an existing or prospective Participant in
the related Loan), including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties, but excluding
loss of margin for the period after any such payment or failure to borrow or
prepay, PROVIDED that such Bank shall have delivered to such Borrower a
certificate as to the amount of such loss or expense, which certificate shall be
conclusive in the absence of manifest error.
SECTION 2.14. COMPUTATION OF INTEREST AND FEES. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and all
facility fees shall be computed on the basis of a year of 360 days and paid for
the actual number of days elapsed (including the first day but excluding the
last day).
SECTION 2.15. JUDGMENT CURRENCY. If for the purpose of obtaining
judgment in any court it is necessary to convert a sum due from any Borrower
hereunder or under any of the Notes in Dollars into another currency, the
parties hereto agree, to the fullest extent that they may effectively do so,
that the rate of exchange used shall be that at which in accordance with normal
banking procedures the Agent could purchase Dollars with such other currency at
the Agent's New York office on the Domestic Business Day preceding that on which
final judgment is given. The obligations of each Borrower in respect of any sum
due to any Bank or the Agent hereunder or under any Note shall, notwithstanding
any judgment in a currency other than Dollars, be discharged only to the extent
that on the Domestic Business Day following receipt by such Bank or the Agent
(as the case may be) of any sum adjudged to be so due in such other currency
such Bank or the Agent (as the case may be) may in accordance with normal
banking procedures purchase Dollars with such other currency; if the amount of
Dollars so purchased is less than the sum originally due to such Bank or the
Agent, as the case may be, in Dollars, each Borrower agrees, to the fullest
extent that it may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Bank or the Agent, as the
case may be, against such loss, and if the amount of Dollars so purchased
exceeds (a) the sum originally due to any Bank or the Agent, as the case may be,
and (b) any amounts shared with other Banks as a result of allocations of such
excess as a disproportionate payment to
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such Bank under Section 11.04, such Bank or the Agent, as the case may be,
agrees to remit such excess to the appropriate Borrower.
SECTION 2.16. FOREIGN WITHHOLDING TAXES AND OTHER COSTS. (a) All
payments by an Eligible Subsidiary of principal of and interest on its Notes and
of all other amounts payable under this Agreement are payable without deduction
for or on account of any present or future taxes, duties or other charges levied
or imposed by the government of any jurisdiction outside the United States or by
any political subdivision or taxing authority thereof or therein through
withholding or deduction with respect to any such payments. If any such taxes,
duties or other charges are so levied or imposed, such Eligible Subsidiary will
pay additional interest or will make additional payments in such amounts so that
every net payment of principal of and interest on its Notes and of all other
amounts payable by it under this Agreement, after withholding or deduction for
or on account of any such present or future taxes, duties or other charges, will
not be less than the amount provided for herein. Such Eligible Subsidiary shall
furnish promptly to the Agent official receipts evidencing such withholding or
deduction.
(b) If the cost to any Bank of making or maintaining any Loan to an
Eligible Subsidiary is increased, or the amount of any sum received or
receivable by any Bank (or its Applicable Lending Office) is reduced by an
amount deemed by such Bank to be material, by reason of the fact that such
Eligible Subsidiary is incorporated in, or conducts business in, a jurisdiction
outside the United States the Borrower shall indemnify such Bank for such
increased costs or reduction within 15 days after demand by such Bank (with a
copy to the Agent and the Company). A certificate of such Bank claiming
compensation under this subsection (b) and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error.
(c) Each Bank will promptly notify the Company and the Agent of any
event of which it has knowledge that will entitle such Bank to additional
interest or payments pursuant to subsection (b) and will designate a different
Applicable Lending Office, if, in the judgment of such Bank, such designation
will avoid the need for, or reduce the amount of, such compensation and will not
be otherwise disadvantageous to such Bank.
SECTION 2.17. REGULATION D COMPENSATION. Each Bank may require any
Borrower to pay, contemporaneously with
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each payment of interest on the Euro-Dollar Loans to such Borrower, additional
interest on the related Euro-Dollar Loan to such Borrower of such Bank at a rate
per annum determined by such Bank up to but not exceeding the excess of (i) (A)
the applicable London Interbank Offered Rate divided by (B) one MINUS the
Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered
Rate. Any Bank wishing to require payment of such additional interest (x) shall
so notify such Borrower and the Agent, in which case such additional interest on
the Euro-Dollar Loans to such Borrower of such Bank shall be payable to such
Bank at the place indicated in such notice with respect to each Interest Period
commencing at least three Euro-Dollar Business Days after the giving of such
notice, and (y) shall notify such Borrower at least five Euro-Dollar Business
Days prior to each date on which interest is payable on the Euro-Dollar Loans to
such Borrower of the amount then due it under this Section.
SECTION 2.18. WITHHOLDING TAX EXEMPTION. At least five Domestic
Business Days prior to the first date on which interest or fees are payable
hereunder for the account of any Bank, each Bank that is not incorporated under
the laws of the United States or a state thereof agrees that it will deliver to
each of the Company and the Agent two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, certifying in either case that such
Bank is entitled to receive payments from the Company under this Agreement and
the Notes without deduction or withholding of any United States federal income
taxes. Each Bank which so delivers a Form 1001 or 4224 further undertakes to
deliver to each of the Company and the Agent two additional copies of such form
(or a successor form) on or before the date that such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by the Company or the Agent, in
each case certifying that such Bank is entitled to receive payments from the
Company under this Agreement and the Notes without deduction or withholding of
any United States federal income taxes, unless an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Bank from duly completing
and delivering any such form with respect to it and such Bank advises the
Company and the Agent that it is not capable of receiving such payments without
any deduction or withholding of United States federal income tax.
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ARTICLE III
CONDITIONS
SECTION 3.01. EFFECTIVENESS. This Agreement shall become effective
on the date that each of the following conditions shall have been satisfied (or
waived in accordance with Section 11.05):
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex, facsimile transmission or other
written confirmation from such party of execution of a counterpart hereof
by such party);
(b) receipt by the Agent for the account of each Bank of a duly
executed Note of the Company dated on or before the Effective Date
complying with the provisions of Section 2.05;
(c) receipt by the Agent of an opinion of the General Counsel of the
Company (or other counsel for the Company reasonably satisfactory to the
Agent), substantially in the form of Exhibit E hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(d) receipt by the Agent of an opinion of Davis Polk & Wardwell,
special counsel for the Agent, substantially in the form of Exhibit F
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(e) receipt by the Agent of all documents it may reasonably request
relating to the existence of the Company, the corporate authority for and
the validity of this Agreement and the Notes, and any other matters
relevant hereto, all in form and substance satisfactory to the Agent; and
(f) receipt by the Agent of evidence satisfactory to it of the payment
of all principal and interest on any loans outstanding under, and of all
other amounts payable under, the Existing Credit Agreement;
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PROVIDED that this Agreement shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied no later than
January 31, 1997. The Agent shall promptly notify the Company and the Banks of
the Effective Date, and such notice shall be conclusive and binding on all
parties hereto. The Banks that are parties to the Existing Credit Agreement,
comprising the "Required Banks" as defined therein, and the Company agree to
eliminate the requirement under Section 2.09 of the Existing Credit Agreement
that notice of optional termination of the commitments thereunder be given three
Domestic Business Days in advance, and further agree that the commitments under
the Existing Credit Agreement shall terminate in their entirety simultaneously
with and subject to the effectiveness of this Agreement and that the Company
shall be obligated to pay the accrued facility fees thereunder to but excluding
the date of such effectiveness. The Company shall, within 30 days after the
Effective Date, cause the commitments under the Duracell Credit Facility to be
terminated in their entirety and all principal, interest and other amounts
payable thereunder to be repaid in full.
SECTION 3.02. BORROWINGS. The obligation of any Bank to make a Loan
on the occasion of any Borrowing is subject to the satisfaction of the following
conditions:
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the aggregate
amount of the Commitments less the aggregate principal amount committed or
outstanding (without duplication) under the Duracell Credit Facility;
(c) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the Company
and the Borrower (if other than the Company) contained in this Agreement
(except, in the case of a Refunding Borrowing, the representations and
warranties set forth in Sections 4.05 and 4.07 as to any matter which has
theretofore been disclosed in writing by the Company to the Banks) shall be
true in all material respects on and as of the date of such Borrowing.
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Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Company and the Borrower (if other than the Company) on the date of such
Borrowing as to the facts specified in clauses (b), (c) and (d) of this Section.
SECTION 3.03. FIRST BORROWING BY EACH ELIGIBLE SUBSIDIARY. The
obligation of each Bank to make a Loan on the occasion of the first Borrowing by
each Eligible Subsidiary is subject to the satisfaction of the following further
conditions:
(a) receipt by the Agent for the account of each Bank of a duly
executed Note of such Eligible Subsidiary, dated on or before the date of
such Borrowing complying with the provisions of Section 2.05;
(b) receipt by the Agent of an opinion of counsel for such Eligible
Subsidiary acceptable to the Agent, substantially in the form of Exhibit I
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request; and
(c) receipt by the Agent of all documents which it may reasonably
request relating to the existence of such Eligible Subsidiary, the
corporate authority for and the validity of the Election to Participate of
such Eligible Subsidiary, this Agreement and the Notes of such Eligible
Subsidiary, and any other matters relevant thereto, all in form and
substance satisfactory to the Agent.
The documents referred to in this Section 3.03 shall be delivered to the Agent
by an Eligible Subsidiary no later than the date of the first Borrowing by such
Eligible Subsidiary.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants that:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, and has all corporate powers and all material governmental
licenses,
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authorizations, consents and approvals required to carry on its business as now
conducted.
SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION;
CONTRAVENTION. The execution, delivery and performance by the Company of this
Agreement and its Notes are within the Company's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official and do not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the certificate of incorporation or by-laws of the Company or
of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Company or result in the creation or imposition of any Lien on
any asset of the Company or any of its Subsidiaries.
SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of the Company and its Notes, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
the Company, in each case enforceable in accordance with their respective terms
except as the same may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity.
SECTION 4.04. FINANCIAL INFORMATION. (a) The consolidated balance
sheet of the Company and its Consolidated Subsidiaries as of December 31, 1995
and the related consolidated statements of income and cash flows for the fiscal
year then ended, reported on by KPMG Peat Marwick LLP and set forth in the
Company's Annual Report to Shareholders for 1995 incorporated by reference in
the Company's 1995 Form 10-K, a copy of which has been delivered to each of the
Banks, fairly present, in conformity with generally accepted accounting
principles, the consolidated financial position of the Company and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of September 30, 1996 and the related unaudited
consolidated statements of income and cash flows for the nine months then ended,
set forth in the Company's Latest Form 10-Q, a copy of which has been delivered
to each of the Banks, fairly present, on a basis consistent with the financial
statements referred to in subsection (a) of this Section, the consolidated
financial position of the Company and its Consolidated Subsidiaries as of such
date and their
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consolidated results of operations and cash flows for such nine-month period
(subject to normal year-end adjustments).
SECTION 4.05. NO MATERIAL ADVERSE CHANGE. Since September 30, 1996,
there has been no material adverse change in the business, operations or
financial condition of the Company and its Consolidated Subsidiaries, considered
as a whole.
SECTION 4.06. COMPLIANCE WITH ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
if such failure or amendment has resulted, or there is a reasonable possibility
that it could result, in the imposition of a Lien or the posting of a bond or
other security under ERISA or the Internal Revenue Code or (iii) incurred any
liability under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA.
SECTION 4.07. LITIGATION. Except as disclosed in the Company's 1995
Form 10-K and the Company's Latest Form 10-Q, there is no action, suit,
investigation or proceeding pending against, or to the knowledge of the Company
threatened against or affecting, the Company or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official in which
there is a reasonable possibility of an adverse decision which could materially
adversely affect the business, operations or financial condition of the Company
and its Consolidated Subsidiaries, taken as a whole, or which in any manner
draws into question the validity of this Agreement or the Notes.
SECTION 4.08. TAXES. The Company has filed (or has obtained
extensions of the time by which it is required to file) all United States
federal income tax returns and all other material tax returns required to be
filed by it and has paid all taxes shown due on the returns so filed as well as
all other material taxes, assessments and governmental charges which have become
due, except such taxes, if any, as are being contested in good faith and as to
which adequate reserves have been provided.
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SECTION 4.09. FULL DISCLOSURE. All information heretofore furnished
by the Company to the Agent or any Bank for purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Company to the Agent or any Bank will be,
true and accurate in all material respects on the date as of which such
information is stated or certified. The Company has disclosed to the Banks in
writing any and all facts which materially and adversely affect or may affect
(to the extent the Company can now reasonably foresee), the business, operations
or financial condition of the Company and its Consolidated Subsidiaries, taken
as a whole, or the ability of the Company to perform its obligations under this
Agreement.
ARTICLE V
COVENANTS
The Company agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. INFORMATION. The Company will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days after the end
of each fiscal year of the Company, a consolidated balance sheet of the
Company and its Consolidated Subsidiaries as of the end of such fiscal year
and the related consolidated statements of income and cash flows for such
fiscal year, setting forth in each case in comparative form the figures for
the-previous fiscal year, all reported on in a manner acceptable to the
Securities and Exchange Commission by KPMG Peat Marwick LLP or other
independent public accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days after the end
of each of the first three quarters of each fiscal year of the Company, (i)
a consolidated balance sheet of the Company and its Consolidated
Subsidiaries as of the end of such quarter, (ii) the related consolidated
statements of income for such quarter and for the portion of the Company's
fiscal year ended at the end of such quarter and (iii) the related
consolidated statement of cash flows for the portion of the Company's
fiscal year ended at the end of such quarter, setting forth in
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cases (ii) and (iii) in comparative form the figures for the corresponding
quarter and the corresponding portion of the Company's previous fiscal
year, all certified (subject to normal year-end adjustments) as to fairness
of presentation, generally accepted accounting principles and consistency
by the chief financial officer or the principal accounting officer of the
Company;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the principal accounting officer of the Company
(i) setting forth in reasonable detail the calculations required to
establish whether the Company was in compliance with the requirements of
Section 5.05 on the date of such financial statements and (ii) stating
whether there exists on the date of such certificate any Default and, if
any Default then exists, setting forth the details thereof and the action
which the Company is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
stating whether anything has come to their attention to cause them to
believe that there existed on the date of such statements any Default and
(ii) confirming the calculations set forth in the officer's certificate
delivered simultaneously therewith pursuant to clause (c) above;
(e) forthwith upon the occurrence of any Default, a certificate of the
chief financial officer or the principal accounting officer of the Company
setting forth the details thereof and the action which the Company is
taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and annual, quarterly or monthly
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reports which the Company shall have filed with the Securities and Exchange
Commission;
(h) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section
4043 of ERISA) with respect to any Plan which might reasonably constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows
that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA
or notice that any Multiemployer Plan is in reorganization, is insolvent or
has been terminated, a copy of such notice; (iii) receives notice from the
PBGC under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer any Plan, a copy of such notice; or (iv)
fails to make any payment or contribution to any Plan or Multiemployer Plan
or in respect of any Benefit Arrangement or makes any amendment to any Plan
or Benefit Arrangement, if such failure or amendment has resulted, or there
is a reasonable possibility that it could result, in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code, a certificate of the chief financial officer, the principal
accounting officer or the treasurer of the Company setting forth details as
to such occurrence and action, if any, which the Company or applicable
member of the ERISA Group is required or proposes to take;
(i) promptly upon any change in the rating by Standard & Poor's
Ratings Services or Moody's Investors Service, inc. of the Company's
outstanding public senior unsecured long-term debt securities or the
Company's outstanding commercial paper, a notice reporting such change and
stating the date on which such change was announced by the relevant rating
agency; and
(j) from time to time such additional information regarding the
business, operations or financial condition of the Company and its
Subsidiaries as the Agent, at the request of any Bank, may reasonably
request.
SECTION 5.02. MAINTENANCE OF PROPERTY; INSURANCE. The Company will
keep, and will cause each Subsidiary to
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keep, all property useful and necessary in its business in good working order
and condition, ordinary wear and tear excepted; will maintain, and will cause
each Subsidiary to maintain (either in the name of the Company or in such
Subsidiary's own name) with financially sound and reputable insurance companies,
insurance on all their property in at least such amounts and against at least
such risks as are usually insured against in the same general area by companies
of established repute engaged in the same or a similar business; and will
furnish to the Banks, upon written request from.the Agent, such information as
may be reasonably requested as to the insurance carried.
SECTION 5.03. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Company will preserve, renew and keep in full force and effect its corporate
existence and its rights, privileges and franchises necessary or desirable in
the normal conduct of business.
SECTION 5.04. COMPLIANCE WITH LAWS. The Company will comply, and
cause each Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, ERISA and the rules and regulations
thereunder) except where the necessity of compliance therewith is contested in
good faith by appropriate proceedings.
SECTION 5.05. EARNINGS TO INTEREST EXPENSE RATIO. At the end of each
fiscal quarter of the Company, the ratio of (x) Consolidated Earnings Before
Interest and Taxes for the four fiscal quarters then ended to (y) Gross Interest
Expense for the four fiscal quarters then ended will not be less than 6.50:1.
SECTION 5.06. NEGATIVE PLEDGE. Neither the Company nor any Subsidiary
will create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
(a) Liens existing on the date hereof securing Debt outstanding on the
date hereof in an aggregate principal amount not exceeding $25,000,000;
(b) any Lien existing on any asset of any corporation at the time such
corporation becomes a Subsidiary and not created in contemplation of such
event;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part
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of the cost of acquiring such asset, PROVIDED that such Lien attaches to
such asset concurrently with or within 90 days after the acquisition
thereof;
(d) any Lien on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Company or a
Subsidiary and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof by
the Company or a Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, PROVIDED that such Debt is not increased and is
not secured by any additional assets;
(g) any Lien arising pursuant to any order of attachment, distraint or
similar legal process arising in connection with court proceedings so long
as the execution or other enforcement thereof is effectively stayed and the
claims secured thereby are being contested in good faith by appropriate
proceedings;
(h) Liens incidental to the conduct of its business or the ownership
of its assets which (i) do not secure Debt or Derivatives Obligations and
(ii) do not in the aggregate materially detract from the value of its
assets or materially impair the use thereof in the operation of its
business;
(i) Liens on cash and cash equivalents securing Derivatives
Obligations, PROVIDED that the aggregate amount of cash and cash
equivalents subject to such Liens may at no time exceed $25,000,000; and
(j) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal amount at any time
outstanding not to exceed 5% of Consolidated Assets.
SECTION 5.07. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The
Company will not (i) consolidate or merge with or into any other Person or (ii)
sell, lease or otherwise transfer, directly or indirectly, all or substantially
all of the assets of the Company and its Subsidiaries, taken as a whole, to any
other Person; PROVIDED that the Company may merge with a Subsidiary if (A) the
Company is the corporation surviving such merger and (B)
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immediately after giving effect to such merger, no Default shall have occurred
and be continuing.
SECTION 5.08. MATERIAL SUBSIDIARY CASH FLOW. The Company will not,
and will not permit any Material Subsidiary to, enter into any arrangement which
restricts the ability of any Material Subsidiary, directly or indirectly, to
make funds available to the Company, whether by way of dividend or other
distribution, advance or otherwise.
SECTION 5.09. USE OF PROCEEDS. The proceeds of Loans hereunder will
be used by the Borrowers for their general corporate purposes, including without
limitation, any purchase, redemption, retirement or acquisition of outstanding
shares of capital stock of the Company ("Stock Repurchases"). Except for
permitted Stock Repurchases referred to in the immediately preceding sentence,
none of such proceeds will be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any "margin
stock" within the meaning of Regulation U.
ARTICLE VI
DEFAULTS
SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) any principal of any Loan shall not be paid when due, or any
interest, any fees or any other amount payable hereunder shall not be paid
within five days of the due date thereof;
(b) the Company shall fail to observe or perform any covenant
contained in Sections 5.05 to 5.09, inclusive;
(c) any Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause
(a) or (b) above) for 30 days after written notice thereof has been given
to the Company by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made or
deemed to have been made by any Borrower in this Agreement or in any
certificate,
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financial statement or other document delivered pursuant to this Agreement
shall prove to have been incorrect in any material respect when made (or
deemed made);
(e) the Company or any Subsidiary shall fail to make any payment in
respect of any Material Debt or any Material Financial Obligations when due
or within any applicable grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of such
Debt or any Person acting on such holder's behalf to accelerate the
maturity thereof;
(g) the Company or any Material Subsidiary shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against
the Company or any Material Subsidiary seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 60 days; or an order for relief shall be entered against
the Company or any Material Subsidiary under the federal bankruptcy laws as
now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due
(including any approved extensions) an
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amount or amounts aggregating in excess of $50,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate, impose liability (other than for premiums under Section 4007
of ERISA) in respect of, or to cause a trustee to be appointed to
administer any Material Plan; or a condition shall exist by reason of which
the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall occur a complete or
partial withdrawal from, or a default, within the meaning of Section
4219(c) (5) of ERISA, with respect to, one or more Multiemployer Plans
which could cause one or more members of the ERISA Group to incur a current
payment obligation in excess of $50,000,000;
(j) a judgment or order for the payment of money in excess of
$50,000,000 shall be rendered against the Company or any Material
Subsidiary and such judgment or order shall continue unsatisfied and
unstayed for a period of 30 days; or
(k) any Person or two or more Persons acting in concert shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of
1934) of 30% or more of the outstanding shares of voting stock of the
Company; or, during any two-year period, the individuals who were serving
on the board of directors of the Company at the beginning of such period or
who were nominated for election or elected to such board during such period
with the affirmative vote of at least two-thirds of such individuals still
in office cease to constitute a majority of such board;
then, and in every such event, the Agent shall (i) if requested by Banks having
more than 50% in aggregate amount of the Commitments, by notice to the Company
terminate the Commitments and they shall thereupon terminate, and (ii) if
requested by Banks holding Notes evidencing more than 50% in aggregate principal
amount of the Loans, by notice to the Company declare the Notes (together with
accrued interest thereon and all accrued fees and other amounts payable by any
Borrower hereunder) to be, and the Notes shall thereupon become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by each Borrower; PROVIDED that in the
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case of any of the Events of Default specified in clause (g) or (h) above with
respect to any Borrower, without any notice to any Borrower or any other act by
the Agent or the Banks, the Commitments shall thereupon terminate and the Notes
(together with accrued interest thereon and all accrued fees and other amounts
payable by any Borrower hereunder) shall become immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by each Borrower.
SECTION 6.02. NOTICE OF DEFAULT. The Agent shall give notice to the
Company under Section 6.01(c) promptly upon being requested to do so by any Bank
and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. APPOINTMENT AND AUTHORIZATION. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the Notes as are delegated to
the Agent by the terms hereof or thereof, together with all such powers as are
reasonably incidental thereto.
SECTION 7.02. AGENT AND AFFILIATES. Morgan Guaranty Trust Company of
New York shall have the same rights and powers under this Agreement as any other
Bank and may exercise or refrain from exercising the same as though it were not
the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with any Borrower or any Subsidiary or affiliate of any Borrower as if
it were not the Agent hereunder.
SECTION 7.03. ACTION BY AGENT. The obligations of the Agent hereunder
are only those expressly set forth herein. Without limiting the generality of
the foregoing, the Agent shall not be required to take any action with respect
to any Default, except as expressly provided in Article VI.
SECTION 7.04. CONSULTATION WITH EXPERTS. The Agent may consult with
legal counsel (who may be counsel for any Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in
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accordance with the advice of such counsel, accountants or experts.
SECTION 7.05. LIABILITY OF AGENT. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks (or when expressly
required hereby, all the Banks) or (ii) in the absence of its own gross
negligence or willful misconduct. Neither the Agent nor any of its affiliates
nor any of their respective directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement or
any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of any Borrower; (iii) the satisfaction of any condition
specified in Article III, except receipt of items required to be delivered to
the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement,
the Notes or any other instrument or writing furnished in connection herewith.
The Agent shall not incur any liability by acting in reliance upon any notice,
consent, certificate, statement, or other writing (which may be a bank wire,
telex, facsimile transmission or similar writing) believed by it to be genuine
or to be signed by the proper party or parties. Without limiting the generality
of the foregoing, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
SECTION 7.06. INDEMNIFICATION. Each Bank shall, ratably in accordance
with its Commitment, indemnify the Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrowers) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from such
indemnitees' gross negligence or willful misconduct) that such indemnitees may
suffer or incur in connection with its role as Agent hereunder or any action
taken or omitted by such indemnitees in connection therewith.
SECTION 7.07. CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such
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documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also acknowledges
that it will, independently and without reliance upon the Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
any action under this Agreement.
SECTION 7.08. SUCCESSOR AGENT. The Agent may resign at any time by
giving notice thereof to the Banks and the Company. Upon any such resignation,
the Required Banks shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Banks, and shall
have accepted such appointment, within 30 days after the retiring Agent gives
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a commercial bank organized or
licensed under the laws of the United States or of any State thereof and having
a combined capital and surplus of at least $500,000,000. Upon the acceptance of
its appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent.
SECTION 7.09. AGENT'S FEE. The Company shall pay to the Agent for
its own account fees in the amounts and at the times previously agreed upon
between the.Company and the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR. If on or prior to the first day of any Interest Period for any Fixed
Rate Borrowing:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period, or
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(b) in the case of a Committed Borrowing, Banks having 50% or more of
the aggregate amount of the Commitments advise the Agent that the Adjusted
CD Rate or the London Interbank Offered Rate, as the case may be, as
determined by the Agent will not adequately and fairly reflect the cost to
such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may
be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrowers and the Banks,
whereupon until the Agent notifies the Borrowers that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make CD
Loans or Euro-Dollar Loans, as the case may be, shall be suspended. Unless a
Borrower notifies the Agent at least one Domestic Business Day before the date
of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been
given that it elects not to borrow on such date, (i) if such Fixed Rate
Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a
Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market
LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall
bear interest for each day from and including the first day to but excluding the
last day of the Interest Period applicable thereto at the Base Rate for such
day.
SECTION 8.02. ILLEGALITY. If, on or after the date hereof, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Bank (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans to
any Borrower and such Bank shall so notify the Agent, the Agent shall forthwith
give notice thereof to the other Banks and such Borrower, whereupon until such
Bank notifies such Borrower and the Agent that the circumstances giving rise to
such suspension no longer exist, the obligation of such Bank to make Euro-Dollar
Loans to such Borrower shall be suspended. Before giving any notice to the Agent
pursuant to this Section, such Bank shall designate a different Euro-Dollar
Lending Office if such designation will avoid the need for giving such notice
and will not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. If such Bank shall determine
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that it may not lawfully continue to maintain and fund any of its outstanding
Euro-Dollar Loans to such Borrower to maturity and shall so specify in such
notice, such Borrower shall immediately prepay in full the then outstanding
principal amount of each such Euro-Dollar Loan, together with accrued interest
thereon. Concurrently with prepaying each such Euro-Dollar Loan, such Borrower
shall borrow a Base Rate Loan in an equal principal amount from such Bank (on
which interest and principal shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate
Loan.
SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If on or after
(x) the date hereof, in the case of any Committed Loan or any obligation to make
Committed Loans or (y) the date of the related Money Market Quote, in the case
of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency:
(i) shall subject any Bank (or its Applicable Lending Office) to any
tax, duty or other charge with respect to its Fixed Rate Loans, its Notes
or its obligation to make Fixed Rate Loans, or shall change the basis of
taxation of payments to any Bank (or its Lending Office) of the principal
of or interest on its Fixed Rate Loans or any other amounts due under this
Agreement in respect of its Fixed Rate Loans or its obligation to make
Fixed Rate Loans (except for changes in the rate of tax on the overall net
income of such Bank or its Applicable Lending Office imposed by the
jurisdiction in which such Bank's principal executive office or Applicable
Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any such requirement imposed by the Board of Governors
of the Federal Reserve System, but excluding (i) with respect to any CD
Loan any such requirement included in an applicable Domestic Reserve
Percentage and (ii) with respect to any Euro-Dollar Loan any such
requirement with respect
47
<PAGE> 54
to which such Bank is entitled to compensation during the relevant Interest
Period under Section 2.17), special deposit, insurance assessment
(excluding, with respect to any CD Loan, any such requirement reflected in
an applicable Assessment Rate) or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Bank (or
its Applicable Lending Office) or shall impose on any Bank (or its
Applicable Lending Office) or on the United States market for certificates
of deposit or the London interbank market any other condition affecting its
Fixed Rate Loans, its Notes or its obligation to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or
to reduce the amount of any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under its Note with respect
thereto, by an amount deemed by such Bank to be material, then, within 15 days
after demand by such Bank (with a copy to the Agent), the Company shall pay to
such Bank such additional amount or amounts as will compensate such Bank for
such increased cost or reduction.
(b) If any Bank shall have determined that, on or after the date
hereof, the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Bank (or its Parent) as a consequence of such Bank's
obligations hereunder to a level below that which such Bank (or its Parent)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
deemed by such Bank to be material, then from time to time, within 15 days after
demand by such Bank (with a copy to the Agent), the Company shall pay to such
Bank such additional amount or amounts as will compensate such Bank (or its
Parent) for such reduction.
(c) Each Bank will promptly notify the Company and the Agent of any
event of which it has knowledge, occurring on or after the date hereof, which
will entitle
48
<PAGE> 55
such Bank to compensation pursuant to this Section and will designate a
different Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of, such compensation and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
SECTION 8.04. BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE
LOANS. If (i) the obligation of any Bank to make Euro-Dollar Loans to any
Borrower has been suspended pursuant to Section 8.02 or (ii) any Bank has
demanded compensation under Section 8.03(a) with respect to its CD Loans or
Euro-Dollar Loans and a Borrower shall, by at least three Euro-Dollar Business
Days' prior notice to such Bank through the Agent, have elected that the
provisions of this Section shall apply to such Bank, then, unless and until such
Bank notifies such Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
(a) all Loans to such Borrower which would otherwise be made by such
Bank as CD Loans or Euro-Dollar Loans, as the case may be, shall be made
instead as Base Rate Loans (on which interest and principal shall be
payable contemporaneously with the related Fixed Rate Loans of the other
Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may
be, to such Borrower has been repaid, all payments of principal which would
otherwise be applied to repay such Fixed Rate Loans shall be applied to
repay its Base Rate Loans to such Borrower instead.
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
OF ELIGIBLE SUBSIDIARIES
Each Eligible Subsidiary shall be deemed by the execution and
delivery of its Election to Participate to have represented and warranted as of
the date thereof that:
49
<PAGE> 56
SECTION 9.01. CORPORATE EXISTENCE AND POWER. It is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as then conducted.
SECTION 9.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION;
CONTRAVENTION. The execution and delivery by it of its Election to Participate
and its Notes, and the performance by it of this Agreement and its Notes, are
within its corporate powers, have been duly authorized by all necessary
corporate action, require no action by or in respect of, or filing with, any
governmental body, agency or official and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of its
certificate of incorporation or by-laws or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the Company or such
Eligible Subsidiary or result in the creation or imposition of any Lien on any
asset of the Company or any of its Subsidiaries.
SECTION 9.03. BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of such Eligible Subsidiary and its Notes, when executed and
delivered in accordance with this Agreement, will constitute valid and binding
obligations of such Eligible Subsidiary, in each case enforceable in accordance
with their respective terms except as the same may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by general
principles of equity.
SECTION 9.04. TAXES. Except as disclosed to the Banks in writing
prior to the delivery of such Election to Participate, there is no income, stamp
or other tax of any country, or any taxing authority thereof or therein, imposed
by or in the nature of withholding or otherwise, which is imposed on any payment
to be made by such Eligible Subsidiary pursuant hereto or on its Notes, or is
imposed on or by virtue of the execution, delivery or enforcement of its
Election to Participate, this Agreement or its Notes.
50
<PAGE> 57
ARTICLE X
GUARANTY
SECTION 10.01. THE GUARANTY. The Company hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest on each Note issued
by any Eligible Subsidiary pursuant to this Agreement, and the full and punctual
payment of all other amounts payable by any Eligible Subsidiary under this
Agreement. Upon failure by any Eligible Subsidiary to pay punctually any such
amount, the Company shall forthwith on demand pay the amount not so paid at the
place and in the manner specified in this Agreement.
SECTION 10.02. GUARANTY UNCONDITIONAL. The obligations of the Company
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of any Eligible Subsidiary under this
Agreement or any Note, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to this Agreement
or any Note;
(iii) any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of any Eligible Subsidiary
under this Agreement or any Note;
(iv) any change in the corporate existence, structure or ownership of
any Eligible Subsidiary, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting any Eligible Subsidiary or its assets,
or any resultant release or discharge of the obligations of any Eligible
Subsidiary hereunder or under any Note;
(v) the existence of any claim, set-off or other rights which the
Company may have at any time against any Eligible Subsidiary, the Agent,
any Bank or any other Person, whether in connection herewith or any
unrelated transactions, PROVIDED that nothing herein
51
<PAGE> 58
shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against any
Eligible Subsidiary for any reason of this Agreement or any Note, or any
provision of applicable law or regulation purporting to prohibit the
payment by any Eligible Subsidiary of the principal of or interest on any
Note or any other amount payable by it under this Agreement; or
(vii) any other act or omission to act or delay of any kind by any
Eligible Subsidiary, the Agent, any Bank or any other Person or any other
circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of or defense to the
Company's obligations hereunder.
SECTION 10.03. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN
CERTAIN CIRCUMSTANCES. The Company's obligations hereunder shall remain in full
force and effect until the Commitments shall have terminated and the principal
of and interest on the Notes and all other amounts payable by the Company and
each Eligible Subsidiary under this Agreement shall have been paid in full. If
at any time any payment of any principal of or interest on any Note or any other
amount payable by any Eligible Subsidiary under this Agreement is rescinded or
must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of any Eligible Subsidiary or otherwise, the Company's
obligations hereunder with respect to such payment shall be reinstated at such
time as though such payment had been due but not made at such time.
SECTION 10.04. WAIVER BY THE COMPANY. The Company irrevocably waives
acceptance hereof, presentment; demand, protest and any notice not provided for
herein, as well as any requirement that at any time any action be taken by any
Person against any Eligible Subsidiary or any other Person.
SECTION 10.05. NO SUBROGATION. If the Company makes any payment under
this Article X in respect of any obligation of an Eligible Subsidiary, the
Company shall not be subrogated to the rights of the holder of such obligation
against such Eligible Subsidiary with respect to such payment.
SECTION 10.06. STAY OF ACCELERATION. In the event that acceleration
of the time for payment of any amount payable by any Eligible Subsidiary under
this
52
<PAGE> 59
Agreement or the Notes is stayed upon the insolvency, bankruptcy or
reorganization of such Eligible Subsidiary, all such amounts otherwise subject
to acceleration under the terms of this Agreement shall nonetheless be payable
by the Company hereunder forthwith on demand by the Agent made at the request of
the Required Banks.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (x) in the case of any Borrower or the Agent, at its address, facsimile
number or telex number set forth on the signature pages hereof (or, in the case
of an Eligible Subsidiary, its Election to Participate), (y) in the case of any
Bank, at its address, facsimile number or telex number set forth in its
Administrative Questionnaire or (z) in the case of any party, such other
address, facsimile number or telex number as such party may hereafter specify
for the purpose by notice to the Agent and the Company. Each such notice,
request or other communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in this Section and the
appropriate answerback is received, (ii) if given by facsimile transmission,
when transmitted to the facsimile number specified in this Section and
confirmation of receipt is received, (iii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iv) if given by any other means, when delivered at
the address specified in this Section; PROVIDED that notices to the Agent under
Article II or Article VIII shall not be effective until received.
SECTION 11.02. NO WAIVERS. No failure or delay by the Agent or any
Bank in exercising any right, power or privilege hereunder or under any Note
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 11.03. EXPENSES; INDEMNIFICATION. (a) The Company shall pay
(i) all out-of-pocket expenses of the
53
<PAGE> 60
Agent, including reasonable fees and disbursements of special counsel for the
Agent, in connection with the preparation of this Agreement, any waiver or
consent hereunder or any amendment hereof or any Default or alleged Default
hereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses
incurred by the Agent or any Bank, including (without duplication) the
reasonable fees and disbursements of outside counsel and the allocated cost of
inside counsel, in connection with such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
The Company shall indemnify each Bank against any transfer taxes, documentary
taxes, assessments or charges made by any governmental authority by reason of
the execution and delivery of this Agreement, any Election to Participate or
Election to Terminate or any Note.
(b) The Company agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) brought or threatened
relating to or arising out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder; provided that no Indemnitee shall have the right to
be indemnified hereunder for such Indemnitee's own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.
SECTION 11.04. SHARING OF SET-OFFS. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest due
with respect to the Note of any Borrower held by it which is greater than the
proportion received by any other Bank in respect of the aggregate amount of
principal and interest due with respect to the Note of such Borrower held by
such other Bank, the Bank receiving such proportionately greater payment shall
purchase such participations in the Notes of such Borrower held by the other
Banks, and such other adjustments shall be made, as may be required so that all
such payments of principal and interest with respect to the Notes of such
Borrower held by the Banks shall be shared by the Banks pro rata; PROVIDED that
nothing in this Section shall impair the right of any Bank to exercise any right
of
54
<PAGE> 61
set-off or counterclaim it may have and to apply the amount subject to such
exercise to the payment of indebtedness of a Borrower other than its
indebtedness hereunder. Each Borrower agrees, to the fullest extent it may
effectively do so under applicable law, that any holder of a participation in a
Note, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of such Borrower in the amount of such participation.
SECTION 11.05. AMENDMENTS AND WAIVERS. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Company and the Required Banks
(and, if the rights or duties of the Agent are affected thereby, by the Agent);
PROVIDED that no such amendment or waiver shall, unless signed by all the Banks,
(i) increase or decrease the Commitment of any Bank (except for a ratable
decrease in the Commitments of all Banks) or subject any Bank to any additional
obligation, (ii) reduce the principal of or rate of interest on any Loan or any
fees hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or any fees hereunder or for termination of any Commitment,
(iv) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Notes, or the number of Banks, which shall be required
for the Banks or any of them to take any action under this Section or any other
provision of this Agreement or (v) change the provisions of Article X; PROVIDED
FURTHER that no such amendment, waiver or modification shall, unless signed by
an Eligible Subsidiary, (w) subject such Eligible Subsidiary to any additional
obligation, (x) increase the principal of or rate of interest on any outstanding
Loan of such Eligible Subsidiary, (y) accelerate the stated maturity of any
outstanding Loan of such Eligible Subsidiary or (z) change this PROVISO.
SECTION 11.06. SUCCESSORS AND ASSIGNS. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that no Borrower may assign
or otherwise transfer any of its rights under this Agreement without the prior
written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrowers and the Agent, such Bank shall
55
<PAGE> 62
remain responsible for the performance of its obligations hereunder, and the
Borrowers and the Agent shall continue to deal solely and directly with such
Bank in connection with such Bank's rights and obligations under this Agreement.
Any agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrowers hereunder including, without
limitation, the right to approve any amendment, modification or waiver of any
provision of this Agreement; PROVIDED that such participation agreement may
provide that such Bank will not agree to any modification, amendment or waiver
of this Agreement described in clause (i), (ii) or (iii) of Section 11.05
without the consent of the Participant. The Borrowers agree that each
Participant shall, to the extent provided in its participation agreement, be
entitled to the benefits of Article VIII with respect to its participating
interest. An assignment or other transfer which is not permitted by subsection
(c) or (d) below shall be given effect for purposes of this Agreement only to
the extent of a participating interest granted in accordance with this
subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to an
initial Commitment of not less than $5,000,000) of all, of its rights and
obligations under this Agreement and the Notes, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
in substantially the form of Exhibit J hereto executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed consent of the Company and
the Agent; PROVIDED that if an Assignee is an affiliate of such transferor Bank
or was a Bank immediately prior to such assignment, no such consent shall be
required, but the Assignee and the transferor Bank shall provide prompt notice
of such assignment, together with information concerning addresses and related
information with respect to the Assignee, to the Agent; and PROVIDED FURTHER
that such assignment may, but need not, include rights of the transferor Bank in
respect of outstanding Money Market Loans. Upon execution and delivery of such
instrument and payment by such Assignee to such transferor Bank of an amount
equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption, and the transferor Bank shall be released from its
obligations hereunder to a corresponding extent, and no further consent or
action by any party shall be required.
56
<PAGE> 63
Upon the consummation of any assignment pursuant to this subsection (c), the
transferor Bank, the Agent and the Borrowers shall make appropriate arrangements
so that, if required, new Notes are issued to the Assignee. In connection with
any such assignment, the transferor Bank shall pay to the Agent an
administrative fee for processing such assignment in the amount of $2,500. If
the Assignee is not incorporated under the laws of the United States or a state
thereof, it shall deliver to the Company and the Agent certification as to
exemption from deduction or withholding of any United States federal income
taxes in accordance with Section 2.18.
(d) Any Bank may at any time assign all or any portion of it's rights
under this Agreement and its Notes to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights
shall be entitled to receive any greater payment under Section 8.03 or 11.03(a)
than such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Company's prior written
consent or by reason of the provisions of Section 8.02 or 8.03 requiring such
Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
(f) If any Reference Bank transfers its Notes to an unaffiliated
institution, the Agent shall, in consultation with the Company and with the
consent of the Required Banks, appoint another Bank to act as a Reference Bank
hereunder.
SECTION 11.07. COLLATERAL. Each of the Banks represents to the Agent
and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 11.08. GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE OF
PROCESS. This Agreement, each Election to Participate, each Election to
Terminate and each Note shall be governed by and construed in accordance with
the laws of the State of New York. Each Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby.
57
<PAGE> 64
Each Borrower irrevocably waives, to the fullest extent permitted by law, any
objection which it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. Each Borrower
hereby appoints CT Corporation System its authorized agent to accept and
acknowledge service of any and all processes which may be served in any suit,
action or proceeding of the nature referred to in this Section 11.08 and
consents to process being served in any such suit, action or proceeding upon CT
Corporation System in any manner or by the mailing of a copy thereof by
registered or certified mail, postage prepaid, return receipt requested, to such
Borrower's address referred to in Section 11.01; and (d) agrees that such
service (i) shall be deemed in every respect effective service of process upon
it in any such suit, action or proceeding and (ii) shall, to the fullest extent
permitted by law, be taken and held to be valid personal service upon and
personal delivery to it. A copy of any summons or complaint served on an
Eligible Subsidiary pursuant to the foregoing shall be sent to the Company by
registered or certified mail. Each Eligible Subsidiary represents and warrants
that CT Corporation System has agreed in writing to accept such appointment and
that true copies of such acceptance will be furnished to the Agent prior to or
concurrently with delivery of such Eligible Subsidiary's Election to
Participate. Nothing in this Section 11.08 shall affect the right of any Bank to
serve process in any manner permitted by law or limit the right of any Bank to
bring proceedings against the Company or any Eligible Subsidiary in the courts
of any jurisdiction or jurisdictions.
SECTION 11.09. COUNTERPARTS; INTEGRATION. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
SECTION 11.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE AGENT
AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
58
<PAGE> 65
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
THE GILLETTE COMPANY
By /s/ Lloyd B. Swaim
-------------------------------------
Title: Vice President and
Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Sandra J.S. Kurek
-------------------------------------
Title: Associate
59
<PAGE> 66
CREDIT SUISSE
By /s/ Lynn Allegaert
-------------------------------------
Title: Member of
Senior Management
By /s/ David W. Kratovil
-------------------------------------
Title: Member of
Senior Management
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Jack M. Harcourt
-------------------------------------
Title: Authorized Officer
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ S. Thomas Knoff
-------------------------------------
Title: Authorized Agent
FLEET NATIONAL BANK
By /s/ Roger C. Boucher
-------------------------------------
Title: Vice President
ABN AMRO BANK N.V. NEW YORK
BRANCH
By /s/ Frances Logan
-------------------------------------
Title: Vice President
By /s/ John M. Kinney
-------------------------------------
Title: Assistant Vice President
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<PAGE> 67
BANK OF AMERICA ILLINOIS
By /s/ John W. Pocalyko
-------------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ Terry M. Pitcher
-------------------------------------
Title: Authorized Signatory
THE CHASE MANHATTAN BANK
By /s/ Peter C. Eckstein
-------------------------------------
Title: Vice President
ROYAL BANK OF CANADA
By /s/ Sheryl L. Greenberg
-------------------------------------
Title: Manager
BANCA COMMERCIALE ITALIANA,
NEW YORK BRANCH
By /s/ John Michalisin
-------------------------------------
Title: Vice President
By /s/ Charles Dougherty
-------------------------------------
Title: Vice President
BANK BRUSSELS LAMBERT, NEW YORK
BRANCH
By /s/ John Kippax
-------------------------------------
Title: Vice President
By /s/ Dominick H.J. Vangaever
-------------------------------------
Title: Senior Vice President
Credit
61
<PAGE> 68
THE BANK OF TOKYO-MITSUBISHI, LTD
By /s/ Michael J. Cronin
-------------------------------------
Title: Attorney-in-fact
BANQUE PARIBAS
By /s/ John J. McCormick, III
-------------------------------------
Title: Vice President
By /s/ Duane P. Helkowski
-------------------------------------
Title: Assistant Vice President
CITIBANK, N.A.
By /s/ Robert M. Spence
-------------------------------------
Title: Managing Director (AIF)
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By /s/ Stephan A. Wiedemann
-------------------------------------
Title: Vice President
By /s/ Thomas A. Foley
-------------------------------------
Title: Assistant Vice President
MELLON BANK, N.A.
By /s/ R. Jane Westrich
-------------------------------------
Title: Vice President
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<PAGE> 69
THE SANWA BANK, LIMITED
By /s/ Yutaka Higashino
-------------------------------------
Title: Senior Vice President
WACHOVIA BANK OF GEORGIA, N.A.
By /s/ Terence A. Snellings
-------------------------------------
Title: Senior Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ Sandra J.S. Kurek
-------------------------------------
Title: Associate
63
<PAGE> 70
<TABLE>
COMMITMENT SCHEDULE
<CAPTION>
Bank Commitment
---- ----------
<S> <C>
Morgan Guaranty Trust Company of New York $ 134,200,000
Credit Suisse $ 110,000,000
The First National Bank of Boston $ 88 000,000
The First National Bank of Chicago $ 88 000,000
Fleet National Bank $ 88 000,000
ABN AMRO Bank N.V. New York Branch $ 55 000,000
Bank of America Illinois $ 55 000,000
The Bank of Nova Scotia $ 55 000,000
The Chase Manhattan Bank $ 55 000,000
Royal Bank of Canada $ 55,000,000
Banca Commerciale Iraliana, New York Branch $ 35,200,000
Bank Brussels Lambert, New York Branch $ 35,200,000
The Bank of Tokyo-Mitsubishi, Ltd $ 35,200,000
Banque Paribas $ 35,200,000
Citibank, N.A. $ 35,200,000
Deutsche Bank AG, New York and/or
Cayman Islands Branches $ 35,200,000
Mellon Bank, N.A. $ 35,200,000
The Sanwa Bank, Limited $ 35,200,000
Wachovia Bank of Georgia, N.A. $ 35,200,000
--------------
Total $1,100,000,000
</TABLE>
<PAGE> 71
PRICING SCHEDULE
<TABLE>
The "Euro-Dollar Margin", "CD Margin" and "Facility Fee Rate" for any
day are the respective per annum percentages set forth below in the applicable
row under the column corresponding to the Status that exists on such day:
<CAPTION>
====================================================================================================
Level Level Level Level Level
Status I II III IV V
- - ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Facility Fee
Rate 0.055% 0.070% 0.080% 0.090% 0.1375%
- - ----------------------------------------------------------------------------------------------------
Euro-Dollar
Margin
0.120% 0.130% 0.170% 0.185% 0.2625%
- - ----------------------------------------------------------------------------------------------------
CD Margin 0.245% 0.255% 0.295% 0.310% 0.3875%
====================================================================================================
</TABLE>
For purposes of this Schedule, the following terms have the following
meanings:
"Level I Status" exists at any date if, at such date, the Company's
long-term debt is rated AA- or higher by S&P or Aa3 OR higher by Moody's.
"Level II Status" exists at any date if, at such date, (i) the
Company's long-term debt is rated A OR higher by S&P or A2 or higher by Moody's
and (ii) Level I Status does not exist.
"Level III Status" exists at any date if, at such date, (i) the
Company's long-term debt is rated A- OR higher by S&P or A3 or higher by Moody's
and (ii) neither Level I Status nor Level II Status exists.
"Level IV Status" exists at any date if, at such date, (i) the
Company's long-term debt is rated BBB+ OR higher by S&P or Baal or higher by
Moody's and (ii) none of Level I Status, Level II Status and Level III Status
exists.
<PAGE> 72
"Level V Status" exists at any date if, at such date, no other Status
exists.
"Moody's" means Moody's Investors Service, Inc.
"S&P" means Standard & Poor's Ratings Services
"Status" refers to the determination of which of Level I Status,
Level II Status, Level III Status, Level IV Status or Level V Status exists at
any date.
The credit ratings to be utilized for purposes of this Schedule are those
assigned to the senior unsecured long-term debt securities of the Company
without third-party credit enhancement, and any rating assigned to any other
debt security of the Company shall be disregarded. The rating in effect at any
date is that in effect at the close of business on such date.
2
<PAGE> 73
EXHIBIT A
NOTE
New York, New York
, 19
For value received, [name of Borrower], a [jurisdiction of
incorporation] corporation (the "Borrower"), promises to pay to the order of
(the "Bank"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Bank to the Borrower pursuant to the
Credit Agreement referred to below on the last day of the Interest Period
relating to such Loan. The Borrower promises to pay interest on the unpaid
principal amount of each such Loan on the dates and at the rate or rates
provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of Morgan Guaranty Trust Company of
New York, 60 Wall Street, New York, New York.
All Loans made by the Bank, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Bank and, if the Bank so elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing information with respect
to each such Loan then outstanding may be endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; PROVIDED that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This note is one of the Notes referred to in the Multi-Year Credit
Agreement dated as of December 20, 1996
<PAGE> 74
among The Gillette Company, the banks listed on the signature pages thereof and
Morgan Guaranty Trust Company of New York, as Agent (as the same may be amended
from time to time, the "Credit Agreement"). Terms defined in the Credit
Agreement are used herein with the same meanings. Reference is made to the
Credit Agreement for provisions for the prepayment hereof and the acceleration
of the maturity hereof.
The Gillette Company has, pursuant to the provisions of the Credit
Agreement, unconditionally guaranteed the payment in full of the principal of
and interest on this note.*
[NAME OF BORROWER]
By
--------------------------------
Title:
- - ----------------
* To be deleted in case of Notes executed and delivered by the Company.
2
<PAGE> 75
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- - --------------------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
3
<PAGE> 76
EXHIBIT B
Form of Money Market Quote Request
----------------------------------
[Date]
To: Morgan Guaranty Trust Company of New York
(the "Agent")
From: [Name of Borrower]
Re: Multi-Year Credit Agreement (the "Credit Agreement") dated
as of December 20, 1996 among The Gillette Company, the
Banks listed on the signature pages thereof and the Agent
We hereby give notice pursuant to Section 2.03 of the Credit Agreement that
we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing: _____________________
Principal Amount* Interest Period** Maturity Date
- - ----------------- ----------------- -------------
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
*Amount must be $15,000,000 or a larger multiple of $1,000,000.
**Not less than one month (LIBOR Auction) or not less than 15 days
(Absolute Rate Auction), subject to the provisions of the definition of Interest
Period.
<PAGE> 77
Terms used herein have the meanings assigned to them in the Credit
Agreement.
[NAME OF BORROWER]
By _____________________
Title:
2
<PAGE> 78
EXHIBIT C
Form of Invitation for Money Market Quotes
------------------------------------------
To: [Name of Bank]
Re: Invitation for Money Market Quotes to [Name
of Borrower] (the "Borrower")
Pursuant to Section 2.03 of the Multi-Year Credit Agreement dated as of
December 20, 1996 among The Gillette Company, the Banks parties thereto and the
undersigned, as Agent, we are pleased on behalf of the Borrower to invite you to
submit Money Market Quotes to the Borrower for the following proposed Money
Market Borrowing(s):
Date of Borrowing: ___________________
Principal Amount Interest Period Maturity Date
- - ---------------- --------------- -------------
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [9:30 A.M.]
(New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
-------------------------------
Authorized Officer
<PAGE> 79
EXHIBIT D
Form of Money Market Quote
--------------------------
To: Morgan Guaranty Trust Company of New York,
as Agent
Re: Money Market Quote to [Name of Borrower]
(the "Borrower")
In response to your invitation on behalf of the Borrower dated _____, 19 ,
we hereby make the following Money Market Quote on the following terms:
1. Quoting Bank: ____________________________
2. Person to contact at Quoting Bank:
---------------------------------
3. Date of Borrowing: ________________________*
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
- - -------- --------- ---------------------------------
$
$
[Provided, that the aggregate principal amount of Money Market Loans for
which the above offers may be accepted shall not exceed $_____.]**
- - -----------
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the individual
offers exceeds the
(notes continued on following page)
<PAGE> 80
We understand and agree that the offer(s) set forth above, subject to the
satisfaction of the applicable conditions set forth in the Multi-Year Credit
Agreement dated as of December 20, 1996 among The Gillette Company, the Banks
listed on the signature pages thereof and yourselves, as Agent, irrevocably
obligates us to make the Money Market Loan(s) for which any offer(s) are
accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated: __________________________ By: _____________________________
Authorized Officer
- - -----------------
amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger
multiple of $1,000,000.
*** Not less than one month or not less than 15 days, as specified in the
related Invitation. No more than five bids are permitted for each Interest
Period.
**** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%)
and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
2
<PAGE> 81
EXHIBIT E
OPINION OF
COUNSEL FOR THE COMPANY
-----------------------
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am Vice Chairman of the Board of The Gillette Company (the
"Company"), and I am rendering this opinion pursuant to Section 3.01(c) of the
Multi-Year Credit Agreement dated as of December 20, 1996 among the Company, the
banks parties thereto and Morgan Guaranty Trust Company of New York, as Agent
(the "Credit Agreement"). Terms defined in the Credit Agreement are used herein
as therein defined.
I have examined or caused to be examined by counsel retained by or on
the staff of the Company, among other things, originals or copies, certified or
otherwise identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted or
have had conducted such other investigations of fact and law as I have deemed
necessary or advisable for purposes of this opinion.
I am admitted to practice in the State of Ohio and the Commonwealth of
Massachusetts. No opinion is expressed herein with respect to or as to the
effect of any laws other than the laws of the Commonwealth of Massachusetts, the
federal laws of the United States of America and the General Corporation Law of
the State of Delaware.
Upon the basis of the foregoing, I am of the opinion that:
<PAGE> 82
1. The Company is a corporation duly incorporated, validly existing
and in Good standing under the laws of Delaware and has all corporate powers and
all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
2. The execution, delivery and performance by the Company of the
Credit Agreement and the Notes issued by it are within the Company's corporate
powers, have been duly authorized by all necessary corporate action, require no
action by or in respect of, or filing with, any Governmental body, agency or
official and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or by-laws
of the Company or of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Company and known to me or, to the best of my
knowledge, result in the creation or imposition of any Lien on any asset of the
Company or any of its Subsidiaries.
3. The provision in Section 11.08 of the Credit Agreement that the
Credit Agreement and each Note shall be construed in accordance with and
Governed by the law of the State of New York is a valid choice of law provision
under Massachusetts law and should be respected by a court sitting in
Massachusetts.
4. If a court sitting in Massachusetts were to apply Massachusetts
law as the law Governing the Credit Agreement and the Notes, the Credit
Agreement would constitute a valid and binding agreement of the Company and the
Notes issued by it would constitute valid and binding obligations of the
Company, in each case enforceable in accordance with their respective terms.
5. Except as disclosed in the Company's 1995 Form 10-K and the
Company's Latest Form 10-Q, there is no action, suit or proceeding pending
against, or to the best of my knowledge threatened against or affecting, the
Company or any of its Subsidiaries before any court or arbitrator or any
Governmental body, agency or official, in which there is a reasonable
possibility of an adverse decision which could materially adversely affect the
business, operations or financial condition of the Company and its Consolidated
Subsidiaries, considered as a whole, or which in any manner draws into question
the validity of the Credit Agreement or the Notes.
My opinion in paragraph 4 above as to the enforceability of the Credit
Agreement and the Notes issued
2
<PAGE> 83
by the Company is subject to bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforceability of creditors' rights in general,
usury laws and the general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). With respect
to the foregoing, I express no opinion, however, as to the enforceability of
Section 11.03(b) of the Credit Agreement to the extent the rights to
indemnification provided for therein are violative of any law, rule or
regulation (including any federal or state securities law, rule or regulation)
or public policy.
To the extent that the obligations of the Company may be dependent
upon such matters, I assume for purposes of this opinion that each Bank is duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation; and that the Credit Agreement has been duly
authorized, executed and delivered by the Banks and constitutes the legal, valid
and binding obligation of the Banks, enforceable against the Banks in accordance
with its terms. I do not express any opinion as to the effect of the compliance
by any of the Banks with any state or federal laws or as to the regulatory
status or nature of the business of any of the Banks.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without my prior written consent.
Very truly yours,
Joseph E. Mullaney
3
<PAGE> 84
EXHIBIT F
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
--------------------------------------
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Multi-Year Credit
Agreement (the "Credit Agreement") dated as of December 20, 1996 among The
Gillette Company, a Delaware corporation (the "Company"), the banks parties
thereto (the "Banks") and Morgan Guaranty Trust Company of New York, as Agent
(the "Agent"), and have acted as special counsel for the Agent for the purpose
of rendering this opinion pursuant to Section 3.01(d) of the Credit Agreement.
Terms defined in the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Company of the
Credit Agreement and its Notes are within the Company's corporate powers and
have been duly authorized by all necessary corporate action.
<PAGE> 85
2. The Credit Agreement constitutes a valid and binding agreement of
the Company and each Note issued by it constitutes a valid and binding
obligation of the Company, in each case enforceable in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and by general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York)
in which any Bank is located which limits the rate of interest that such Bank
may charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
2
<PAGE> 86
EXHIBIT G
FORM OF ELECTION TO PARTICIPATE
, 19
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent for
the Banks named in the Multi-
Year Credit Agreement dated as of December 20, 1996
among The Gillette Company,
such Banks and such Agent (as amended
from time to time, the "Credit Agreement")
Dear Sirs:
Reference is made to the Credit Agreement described above. Terms not
defined herein which are defined in the Credit Agreement shall have for the
purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a [jurisdiction of
incorporation] corporation, hereby elects to be an Eligible Subsidiary for
purposes of the Credit Agreement, effective from the date hereof until an
Election to Terminate shall have been delivered on behalf of the undersigned in
accordance with the Credit Agreement. The undersigned confirms that the
representations and warranties set forth in Article IX of the Credit Agreement
are true and correct &s to the undersigned as of the date hereof, and the
undersigned hereby agrees to perform all the obligations of an Eligible
Subsidiary under, and to be bound in all respects by the terms of, the Credit
Agreement, including without limitation Sections 11.08 and 11.10 thereof, as if
the undersigned were a signatory party thereto.
[Tax disclosure pursuant to Section 9.04, if any]
<PAGE> 87
The address to which all notices to the undersigned Eligible
Subsidiary under the Credit Agreement should be directed is: . This
instrument shall be construed in accordance with and governed by the laws of
the State of New York.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
By _______________________________
Title:
The undersigned hereby confirms that [name of Eligible Subsidiary] is
an Eligible Subsidiary for purposes of the Credit Agreement described above.
THE GILLETTE COMPANY
By _______________________________
Title:
Receipt of the above Election to Participate is hereby acknowledged
on and as of the date set forth above.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By _______________________________
Title:
<PAGE> 88
EXHIBIT H
FORM OF ELECTION TO TERMINATE
, 19
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK; as Agent for
the Banks named in the Multi-Year Credit
Agreement dated as of
December 20, 1996 among The Gillette
Company, such Banks and such Agent
(as amended from time to time,
the "Credit Agreement")
Dear Sirs:
Reference is made to the Credit Agreement described above. Terms not
defined herein which are defined in the Credit Agreement shall have for the
purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a [jurisdiction of
incorporation] corporation, hereby elects to terminate its status as an Eligible
Subsidiary for purposes of the Credit Agreement, effective as of the date
hereof. The undersigned hereby represents and warrants that all principal and
interest on all Notes of the undersigned and all other amounts payable by the
undersigned pursuant to the Credit Agreement have been paid in full on or prior
to the date hereof. Notwithstanding the foregoing, this Election to Terminate
shall not affect any obligation of the undersigned under the Credit Agreement or
under any Note heretofore incurred.
This instrument shall be construed in accordance with and governed by
the laws of the State of New York.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
<PAGE> 89
By __________________________
Title:
The undersigned hereby confirms that the status of [name of Eligible
Subsidiary] as an Eligible Subsidiary for purposes of the Credit Agreement
described above is terminated as of the date hereof.
THE GILLETTE COMPANY
By __________________________
Title:
Receipt of the above Election to Terminate is hereby acknowledged on
and as of the date set forth above.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By __________________________
Title:
2
<PAGE> 90
EXHIBIT I
OPINION OF
COUNSEL FOR THE BORROWER
(BORROWINGS BY ELIGIBLE SUBSIDIARIES)
[date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am counsel to [name of Eligible Subsidiary, jurisdiction of
incorporation] (the "Borrower") and give this opinion pursuant to Section
3.03(b) of the Multi-Year Credit Agreement (as amended to the date hereof, the
"Credit Agreement") dated as of December 20, 1996 among The Gillette Company
(the "Company"), the banks parties thereto and Morgan Guaranty Trust Company of
New York, as Agent. Terms defined in the Credit Agreement are used herein as
therein defined.
I have examined originals or copies, certified or otherwise identified
to my satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as I have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation validly existing and in good standing
under the laws of [jurisdiction of incorporation] and is a Substantially-Owned
Consolidated Subsidiary of the Company.
2. The execution and delivery by the Borrower of its Election to
Participate and its Notes and the performance by the Borrower of the Credit
Agreement and its
<PAGE> 91
Notes are within the Borrower's corporate powers, have been duly authorized by
all necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of the Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Borrower.
3. The execution and delivery by the Borrower of its Election to
Participate and its Notes and the performance by the Borrower of the Credit
Agreement and its Notes do not contravene, or constitute a default under, any
provision of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Company or any of its Subsidiaries and known to me
or, to the best of my knowledge, result in the creation or imposition of any
Lien on any asset of the Company or any of its Subsidiaries.*
4. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and its Notes constitute valid and binding obligations of the
Borrower, in each case enforceable in accordance with their respective terms,
except as the same may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity.
Very truly yours,
- - --------------------------
* The opinion in this paragraph may be given by Counsel for the Company.
2
<PAGE> 92
EXHIBIT J
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of __________ , 19__ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), THE GILLETTE COMPANY (the "Company")
and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, this Assignment and Assumption Agreement (the "Agreement")
relates to the Multi-Year Credit Agreement dated as of December 20, 1996 among
the Company, the Assignor and the other Banks party thereto, as Banks, and the
Agent (as amended and in effect on the date hereof, the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans in an aggregate principal amount at any time
outstanding not to exceed $__________ ;
WHEREAS, Committed Loans made by the Assignor under the Credit
Agreement in the aggregate principal amount of $__________ are outstanding at
the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the
rights of the Assignor under the Credit Agreement in respect of [a portion of]
its Commitment thereunder in an amount equal to $__________ (the "Assigned
Amount"), together with [a corresponding portion of] its outstanding Committed
Loans, and the Assignee proposes to accept assignment of such rights and assume
the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms not otherwise defined
herein shall have the respective meanings set forth in the Credit Agreement.
<PAGE> 93
SECTION 2. ASSIGNMENT. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount of the
Committed Loans made by the Assignor outstanding at the date hereof. Upon the
execution and delivery hereof by the Assignor, the Assignee, the Company and the
Agent and the payment of the amounts specified in Section 3 required to be paid
on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the
rights and be obligated to perform the obligations of a Bank under the Credit
Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii)
the Commitment of the Assignor shall, as of the date hereof, be reduced by a
like amount and the Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee. The
assignment provided for herein shall be without recourse to the Assignor.
SECTION 3. PAYMENTS. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.* It is
understood that commitment and/or facility fees accrued to the date hereof are
for the account of the Assignor and such fees accruing from and including the
date hereof are for the account of the Assignee. Each of the Assignor and the
Assignee hereby agrees that if it receives any amount under the Credit Agreement
which is for the account of the other party hereto, it shall receive the same
for the account of such other party to the extent of such other party's interest
therein and shall promptly pay the same to such other party
[SECTION 4. CONSENT OF THE COMPANY AND THE AGENT. This Agreement is
conditioned upon the consent of the Company and the Agent pursuant to Section
11.06(c) of the Credit Agreement. The execution of this Agreement by the
- - --------------------
* Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion of
any upfront fee to be paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generically or by formula rather
than as a fixed sum.
2
<PAGE> 94
Company and the Agent is evidence of this consent. Pursuant to Section 11.06(c)
the Borrower agrees to execute and deliver a Note [and to cause each Eligible
Subsidiary to execute and deliver a Note] payable to the order of the Assignee
to evidence the assignment and assumption provided for herein.]*
SECTION 5. NON-RELIANCE ON ASSIGNOR. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of any
Borrower, or the validity and enforceability of the obligations of any Borrower
in respect of the Credit Agreement or any Note. The Assignee acknowledges that
it has, independently and without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Borrowers.
SECTION 6. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By
---------------------
Title:
- - -----------------------
* Consent is required if the Assignee is not an affiliate of the
Assignor and was not a Bank immediately prior to the assignment.
3
<PAGE> 95
[ASSIGNEE]
By
---------------------
Title:
[THE GILLETTE COMPANY]
By
---------------------
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
---------------------
Title:
4
<PAGE> 96
CONFORMED COPY
$400,000,000
364-DAY CREDIT AGREEMENT
dated as of
December 20, 1996
among
The Gillette Company,
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
--------------
J.P. Morgan Securities Inc.,
Arranger
<PAGE> 97
TABLE OF CONTENTS*
Page
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions ............................................. 1
SECTION 1.02. Accounting Terms and Determinations ..................... 13
SECTION 1.03. Types of Borrowings ..................................... 13
ARTICLE II
THE CREDITS
SECTION 2 01. Commitments to Lend ..................................... 14
SECTION 2 02. Notice of Committed Borrowing ........................... 14
SECTION 2 03. Money Market Borrowings ................................. 14
SECTION 2 04. Notice to Banks; Funding of Loans ....................... 19
SECTION 2 05. Notes ................................................... 20
SECTION 2 06. Maturity of Loans ....................................... 20
SECTION 2 07. Interest Rates .......................................... 21
SECTION 2 08. Facility Fee ............................................ 24
SECTION 2 09. Termination or Reduction of Commitments ................. 25
SECTION 2 10. Scheduled Termination of Commitments .................... 25
SECTION 2 11. Optional Prepayments .................................... 25
SECTION 2 12. General Provisions as to Payments ....................... 26
SECTION 2 13. Funding Losses .......................................... 26
SECTION 2.14. Computation of Interest and Fees ........................ 27
SECTION 2.15. Judgment Currency ....................................... 27
SECTION 2.16. Foreign Withholding Taxes and Other Costs................ 28
SECTION 2.17. Regulation D Compensation ............................... 28
SECTION 2.18. Withholding Tax Exemption ............................... 29
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness ........................................... 30
SECTION 3.02. Borrowings .............................................. 31
- - ----------------
*The Table of Contents is not a part of this Agreement.
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Page
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SECTION 3.03. First Borrowing by Each Eligible Subsidiary ............. 32
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Existence and Power ........................... 32
SECTION 4.02. Corporate and Governmental Authorization;
Contravention ........................................... 33
SECTION 4.03. Binding Effect .......................................... 33
SECTION 4 04. Financial Information ................................... 33
SECTION 4 05. No Material Adverse Change .............................. 34
SECTION 4 06. Compliance with ERISA ................................... 34
SECTION 4 07. Litigation .............................................. 34
SECTION 4 08. Taxes ................................................... 34
SECTION 4 09. Full Disclosure ......................................... 35
ARTICLE V
COVENANTS
SECTION 5.01. Information ............................................. 35
SECTION 5.02. Maintenance of Property; Insurance ...................... 37
SECTION 5.03. Conduct of Business and Maintenance of
Existence ............................................... 38
SECTION 5 04. Compliance with Laws .................................... 38
SECTION 5 05. Earnings to Interest Expense Ratio ...................... 38
SECTION 5 06. Negative Pledge ......................................... 38
SECTION 5 07. Consolidations, Mergers and Sales of Assets ............. 39
SECTION 5 08. Material Subsidiary Cash Flow ........................... 40
SECTION 5 09. Use of Proceeds ......................................... 40
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default ....................................... 40
SECTION 6.02. Notice of Default ....................................... 43
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization ........................... 43
SECTION 7.02. Agent and Affiliates .................................... 43
SECTION 7.03. Action by Agent ......................................... 43
SECTION 7.04. Consultation with Experts ............................... 43
SECTION 7.05. Liability of Agent ...................................... 44
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Page
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SECTION 7.06. Indemnification ......................................... 44
SECTION 7.07. Credit Decision ......................................... 44
SECTION 7.08. Successor Agent ......................................... 45
SECTION 7.09. Agent's Fee ............................................. 45
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair .................................... 45
SECTION 8.02. Illegality .............................................. 46
SECTION 8.03. Increased Cost and Reduced Return ....................... 47
SECTION 8.04. Base Rate Loans Substituted for Affected
Fixed Rate Loans ........................................ 49
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
OF ELIGIBLE SUBSIDIARIES
SECTION 9.01. Corporate Existence and Power ........................... 50
SECTION 9.02. Corporate and Governmental Authorization;
Contravention ........................................... 50
SECTION 9.03. Binding Effect .......................................... 50
SECTION 9.04. Taxes ................................................... 50
ARTICLE X
GUARANTY
SECTION 10.01. The Guaranty ............................................ 51
SECTION 10.02. Guaranty Unconditional .................................. 51
SECTION 10.03. Discharge Only Upon Payment In Full;
Reinstatement In Certain Circumstances .................. 52
SECTION 10.04. Waiver by the Company ................................... 52
SECTION 10.05. No Subrogation .......................................... 52
SECTION 10.06. Stay of Acceleration .................................... 53
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices ................................................. 53
SECTION 11.02. No Waivers .............................................. 53
SECTION 11.03. Expenses; Indemnification ............................... 54
SECTION 11.04. Sharing of Set-Offs ..................................... 54
SECTION 11.05. Amendments and Waivers .................................. 55
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Page
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SECTION 11.06. Successors and Assigns .................................. 55
SECTION 11.07. Collateral .............................................. 57
SECTION 11.08. Governing Law; Submission to Jurisdiction;
Service of Process ...................................... 57
SECTION 11.09. Counterparts; Integration ............................... 58
SECTION 11.10. WAIVER OF JURY TRIAL .................................... 58
Commitment Schedule
Exhibit A - Note
Exhibit B - Money Market Quote Request
Exhibit C - Invitation for Money Market Quotes
Exhibit D - Money Market Quote
Exhibit E - Opinion of Counsel for the Company
Exhibit F - Opinion of Special Counsel for the Agent
Exhibit G - Form of Election to Participate
Exhibit H - Form of Election to Terminate
Exhibit I - Opinion of Counsel for the Borrower
(Borrowings by Eligible Subsidiaries)
Exhibit J - Assignment and Assumption Agreement
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CREDIT AGREEMENT
AGREEMENT dated as of December 20, 1996 among THE GILLETTE COMPANY,
the BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. The following terms, as used herein, have
the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent duly completed by such Bank.
"Agent" means Morgan Guaranty Trust Company of New York in its
capacity as agent for the Banks hereunder, and its successors in such capacity.
"Applicable Lending Office" means, with respect to any Bank, (i) in
the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of
its Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 11.06(c).
<PAGE> 102
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 11.06(c), and their respective
successors.
"Base Rate" means, for any day, a rate per annum equal to the higher
of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Base Rate Loan" means a Committed Loan to be made by a Bank as a Base
Rate Loan in accordance with the applicable Notice of Committed Borrowing or
pursuant to Article VIII.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group and not excepted by Section 4(b) of ERISA.
"Borrower" means the Company or any Eligible Subsidiary, as the
context may require, and their respective successors, and "Borrowers" means all
of the foregoing.
"Borrowing" has the meaning set forth in Section 1.03.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Committed Loan to be made by a Bank as a CD Loan in
accordance with the applicable Notice of Committed Borrowing.
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Reference Banks" means The First National Bank of Boston, The
First National Bank of Chicago and Morgan Guaranty Trust Company of New York.
"Commitment" means (i) with respect to each Bank" listed on the
Commitment Schedule, the amount set forth opposite the name of such Bank on the
Commitment Schedule and (ii) with respect to any Assignee, the amount of the
transferor Bank's Commitment assigned to it pursuant to Section 11.06(c), in
each case as such amount may be changed from time to time pursuant to Section
2.09 or 11.06(c).
"Commitment Schedule" means the Commitment Schedule attached hereto.
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<PAGE> 103
"Committed Loan" means a loan made by a Bank pursuant to Section 2.01.
"Company" means The Gillette Company, a Delaware corporation, and its
successors.
"Company's Latest Form 10-Q" means the Company's quarterly report on
Form 10-Q for the quarter ended September 30, 1996, as filed with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934.
"Company's 1995 Form 10-K" means the Company's annual report on Form
10-K for 1995, as filed with the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934.
"Consolidated Assets" means at any date the consolidated assets of the
Company and its Consolidated Subsidiaries determined as of such date.
"Consolidated Earnings Before Interest and Taxes" means, for any
fiscal period, the sum of (i) Consolidated Net Income plus (ii) Gross Interest
Expense plus (iii) to the extent deducted in determining Consolidated Net
Income, provision for taxes on income, all determined on a consolidated basis
for the Company and its Consolidated Subsidiaries for such fiscal period.
"Consolidated Net Income" means, for any fiscal period, the net income
(before preferred and common stock dividends) of the Company and its
Consolidated Subsidiaries, determined on a consolidated basis for such fiscal
period.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of the Company in
its consolidated financial statements if such statements were prepared as of
such date.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all Debt of others
secured by a Lien on any asset of such Person, whether or not such Debt is
otherwise an
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<PAGE> 104
obligation of such Person, and (vi) all Debt of others Guaranteed by such
Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing.transactions,
excluding any amounts which the Borrower is entitled to set-off against its
obligations under applicable law.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Domestic Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in New York City or Boston, Massachusetts
are authorized by law to close.
"Domestic Lending Office" means, as to each Bank, its office located
at its address set forth in its Administrative Questionnaire (or identified in
its Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Company and the Agent; PROVIDED that any Bank may so designate
separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and
its CD Loans, on the other hand, in which case all references herein to the
Domestic Lending Office of such Bank shall be deemed to refer to either or both
of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section
2.07(b).
"Duracell Credit Facility" means the Second Amended and Restated
Credit Agreement dated as of March 29,
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<PAGE> 105
1991, as amended, among Duracell International Inc., Duracell Inc., the
financial institutions listed on the signature pages thereof and The First
National Bank of Chicago, as agent.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 3.01.
"Election to Participate" means an Election to Participate
substantially in the form of Exhibit G hereto.
"Election to Terminate" means an Election to Terminate substantially
in the form of Exhibit H hereto.
"Eligible Subsidiary" means any Substantially- Owned Consolidated
Subsidiary of the Company as to which an Election to Participate shall have been
delivered to the Agent and as to which an Election to Terminate shall not have
been delivered to the Agent. Each such Election to Participate and Election to
Terminate shall be duly executed on behalf of such Substantially-Owned
Consolidated Subsidiary and the Company in such number of copies as the Agent
may request. The delivery of an Election to Terminate shall not affect any
obligation of an Eligible Subsidiary theretofore incurred. The Agent shall
promptly give notice to the Banks of the receipt of any Election to Participate
or Election to Terminate.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Company, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
Dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Company and the Agent
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"Euro-Dollar Loan" means a Committed Loan to be made by a Bank as a
Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"Euro-Dollar Margin" has the meaning set forth in Section 2.07(c).
"Euro-Dollar Reference Banks" means the principal London offices of
The First National Bank of Boston, Credit Suisse and Morgan Guaranty Trust
Company of New York.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents).
"Event of Default" has the meaning set forth in Section 6.01.
"Existing 364-Day Credit Agreement" means the 364-Day Credit
Agreement dated as of April 30, 1996, among the Company, the bank parties
thereto and Morgan Guaranty Trust Company of New York, as agent, as amended to
the Effective Date.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, PROVIDED that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty Trust Company of New
York on such day on such transactions as determined by the Agent.
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"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market
Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate
pursuant to Section 8.01(ii)) or any combination of the foregoing.
"Gross Interest Expense" means, for any fiscal period, the
consolidated interest expense of the Company and its Consolidated Subsidiaries
for such period (calculated without deducting or otherwise netting consolidated
interest income of the Company and its Consolidated Subsidiaries).
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt (whether arising by virtue of partnership arrangements, by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions, by "comfort letter" or other similar
undertaking of support or otherwise) or (ii) entered into for the purpose of
assuring in any other manner the holder of such Debt of the payment thereof or
to protect such holder against loss in respect thereof (in whole or in part),
PROVIDED that the term Guarantee shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Indemnitee" has the meaning set forth in Section 11.03(b).
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending one,
two, three or six months thereafter, as the Borrower may elect in the applicable
Notice of Borrowing; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (c) below, be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day
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<PAGE> 108
in the calendar month at the end of such Interest Period) shall, subject to
clause (c) below, end on the last Euro-Dollar Business Day of a calendar
month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(2) with respect to each CD Borrowing, the period commencing on the date of such
Borrowing and ending 30, 60, 90, or 180 days thereafter, as the Borrower may
elect in the applicable Notice of Borrowing; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (b) below, be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing and ending 30 days thereafter; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (b) below, be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market LIBOR Borrowing, the period commencing on
the date of such Borrowing and ending such whole number of months thereafter as
the Borrower may elect in accordance with Section 2.03; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (c) below, be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day
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in the calendar month at the end of such Interest Period) shall, subject to
clause (c) below, end on the last Euro-Dollar Business Day of a calendar
month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(5) with respect to each Money Market Absolute Rate Borrowing, the period
commencing on the date of such Borrowing and ending such number of days
thereafter (but not less than 15 days) as the Borrower may elect in accordance
with Section 2.03; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (b) below, be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"LIBOR Auction" means a solicitation of Money Market Quotes setting
forth Money Market Margins based on the London Interbank Offered Rate pursuant
to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Company or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market
Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans
or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in Section
2.07(c).
"Material Debt" means Debt (other than the Notes) of the Company
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal amount exceeding $50,000,000.
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<PAGE> 110
"Material Financial Obligations" means a principal amount of Debt
and/or payment obligations in respect of Derivatives Obligations of the Company
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, exceeding in the aggregate $50,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate
Unfunded Liabilities in excess of $50,000,000.
"Material Subsidiary" means any Subsidiary which either (A) is an
Eligible Subsidiary or (B) has consolidated assets, together with its
Subsidiaries, exceeding 5% of Consolidated Assets at the date of determination
of its status hereunder.
"Money Market Absolute Rate" has the meaning set forth in Section
2.03(d).
"Money Market Absolute Rate Loan" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic
Lending Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the Company
and the Agent; PROVIDED that any Bank may from time to time by notice to the
Company and the Agent designate separate Money Market Lending Offices for its
Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate
Loans, on the other hand, in which case all references herein to the Money
Market Lending Office of such Bank shall be deemed to refer to either or both of
such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank pursuant
to a LIBOR Auction (including such a loan bearing interest at the Base Rate
pursuant to Section 8.01(ii)).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money Market
Loan in accordance with Section 2.03.
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"Multiemployer Plan" means at any time an employee pension benefit
plan within the meaning of Section 4001(a)(3) of ERISA to which any member of
the ERISA Group is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions, including for
these purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
"Notes" means promissory notes of a Borrower, substantially in the
form of Exhibit A hereto, evidencing the obligation of such Borrower to repay
the Loans made to it, and "Note" means any one of such promissory notes issued
hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as
defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in
Section 2.03(f)).
"Parent" means, with respect to any Bank, any Person controlling such
Bank.
"Participant" has the meaning set forth in Section 11.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than
a Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Prime Rate" means the rate of interest publicly announced by Morgan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
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"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
"Refunding Borrowing" means a Committed Borrowing which, after
application of the proceeds thereof, results in no net increase in the
outstanding principal amount of Committed Loans made by any Bank to any
Borrower.
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having at least 66 2/3% of
the aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least 66 2/3% of the aggregate unpaid
principal amount of the Loans.
"Revolving Credit Period" means the period from and including the
Effective Date to but excluding the Termination Date.
"Subsidiary" means, as to any Person, any corporation or other entity
of which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; unless
otherwise specified, "Subsidiary" means a Subsidiary of the Company.
"Substantially-Owned Consolidated Subsidiary" means any Consolidated
Subsidiary not less than 90% of the outstanding shares of each class of capital
stock or other ownership interests of which are at the time directly or
indirectly owned by the Company.
"Termination Date" means December 19, 1997, or, if such day is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"Unfunded Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of
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a member of the ERISA Group to the PBGC or any other Person under Title IV of
ERISA.
"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Company's
independent public accountants) with the most recent audited consolidated
financial statements of the Company and its Consolidated Subsidiaries delivered
to the Banks; PROVIDED that, if the Company notifies the Agent that the Company
wishes to amend any covenant in Article V to eliminate the effect of any change
in generally accepted accounting principles on the operation of such covenant
(or if the Agent notifies the Company that the Required Banks wish to amend
Article V for such purpose), then the Company's compliance with such covenant
shall be determined on the basis of generally accepted accounting principles in
effect immediately before the relevant change in generally accepted accounting
principles became effective, until either such notice is withdrawn or such
covenant is amended in a manner satisfactory to the Company and the Required
Banks.
SECTION 1.03. TYPES OF BORROWINGS. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to a single Borrower
pursuant to Article II on a single date and for a single Interest Period.
Borrowings are classified for purposes of this Agreement either by reference to
the pricing of Loans comprising such Borrowing (E.G., a "Euro-Dollar Borrowing"
is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions
of Article II under which participation therein is determined (I.E., a
"Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks
participate in proportion to their Commitments, while a "Money Market Borrowing"
is a Borrowing under Section 2.03 in which the Bank participants are determined
on the basis of their bids in accordance therewith).
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ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS TO LEND. During the Revolving Credit Period
each Bank severally agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Company or any Eligible Subsidiary pursuant to
this Section from time to time in amounts such that the aggregate principal
amount of Committed Loans by such Bank at any one time outstanding to all
Borrowers shall not exceed the amount of its Commitment. Each Borrowing under
this Section shall be in an aggregate principal amount of $15,000,000 or any
larger multiple of $1,000,000 (except that any such Borrowing may be in the
aggregate amount available in accordance with Section 3.02(b)) and shall be made
from the several Banks ratably in proportion to their respective Commitments.
Within the foregoing limits, a Borrower may borrow under this Section, repay or,
to the extent permitted by Section 2.11, prepay Loans and reborrow at any time
during the Revolving Credit Period under this Section.
SECTION 2.02. NOTICE OF COMMITTED BORROWING. The Borrower shall give
the Agent notice (a "Notice of Committed Borrowing") not later than 11:00 A.M.
(New York City time) on (x) the date of each Base Rate Borrowing, (y) the
Domestic Business Day before each CD Borrowing and (z) the third Euro-Dollar
Business Day before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Domestic Borrowing or a Euro-Dollar Business Day
in the case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to be CD Loans,
Base Rate Loans or Euro-Dollar Loans, and
(d) in the case of a Fixed Rate Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
SECTION 2.03. MONEY MARKET BORROWINGS.
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(a) THE MONEY MARKET OPTION. In addition to Committed Borrowings
pursuant to Section 2.01, any Borrower may, as set forth in this Section,
request the Banks during the Revolving Credit Period to make offers to make
Money Market Loans to such Borrower. The Banks may, but shall have no obligation
to, make such offers and the Borrower may, but shall have no obligation to,
accept any such offers in the manner set forth in this Section.
(b) MONEY MARKET QUOTE REQUEST. When a Borrower wishes to request
offers to make Money Market Loans under this Section, it shall transmit to the
Agent by telex or facsimile transmission a Money Market Quote Request
substantially in the form of Exhibit B hereto so as to be received no later than
10:30 A.M. (New York City time) on (x) the fifth Euro-Dollar Business Day prior
to the date of Borrowing proposed therein, in the case of a LIBOR Auction or (y)
the Domestic Business Day next preceding the date of Borrowing proposed therein,
in the case of an Absolute Rate Auction (or, in either case, such other time or
date as the Company and the Agent shall have mutually agreed and the Agent shall
have notified to the Banks not later than the date of the Money Market Quote
Request for the first LIBOR Auction or Absolute Rate Auction for which such
change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$15,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Company and the Agent may agree) of any other Money Market
Quote Request.
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(c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt of a
Money Market Quote Request, the Agent shall send to the Banks by telex or
facsimile transmission an Invitation for Money Market Quotes substantially in
the form of Exhibit C hereto, which shall constitute an invitation by the
Borrower to each Bank to submit Money Market Quotes offering to make the Money
Market Loans to which such Money Market Quote Request relates in accordance with
this Section.
(d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. (i) Each Bank may
submit a Money Market Quote containing an offer or offers to make Money Market
Loans in response to any Invitation for Money Market Quotes. Each Money Market
Quote must comply with the requirements of this subsection (d) and must be
submitted to the Agent by telex or facsimile transmission at its offices
referred to in or pursuant to Section 11.01 not later than (x) 2:00 P.M. (New
York City time) on the fourth Euro-Dollar Business Day prior to the proposed
date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New York
City time) on the proposed date of Borrowing, in the case of an Absolute Rate
Auction (or, in either case, such other time or date as the Company and the
Agent shall have mutually agreed and the Agent shall have notified to the Banks
not later than the date of the Money Market Quote Request for the first LIBOR
Auction or Absolute Rate Auction for which such change is to be effective);
PROVIDED that Money Market Quotes submitted by the Agent (or any affiliate of
the Agent) in the capacity of a Bank may be submitted, and may only be
submitted, if the Agent or such affiliate notifies the Borrower of the terms of
the offer or offers contained therein not later than (x) one hour prior to the
deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes
prior to the deadline for the other Banks, in the case of an Absolute Rate
Auction. Subject to Articles III and VI, any Money Market Quote' so made shall
be irrevocable except with the written consent of the Agent given on the
instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each such
offer is being made, which principal amount (w) may be greater than or less
than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger
multiple of $1,000,000 (y) may
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not exceed the principal amount of Money Market Loans for which offers were
requested and (z) may be subject to an aggregate limitation as to the
principal amount of Money Market Loans for which offers being made by such
quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest per
annum (specified to the nearest 1/10,000th of 1%) (the "Money Market
Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or does
not specify all of the information required by subsection (d) (ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth in
the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d) (i).
(e) NOTICE TO BORROWER. The Agent shall promptly notify the Borrower
of the terms (x) of any Money Market Quote submitted by a Bank that is in
accordance with subsection (d) and (y) of any Money Market Quote that amends,
modifies or is otherwise inconsistent with a previous Money Market Quote
submitted by such Bank with respect to the same Money Market Quote Request. Any
such subsequent Money Market Quote shall be disregarded by the Agent unless such
subsequent Money Market Quote is submitted
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solely to correct a manifest error in such former Money Market Quote. The
Agent's notice to the Borrower shall specify (A) the aggregate principal amount
of Money Market Loans for which offers have been received for each Interest
Period specified in the related Money Market Quote Request, (B) the respective
principal amounts and Money Market Margins or Money Market Absolute Rates, as
the case may be, so offered and (C) if applicable, limitations on the aggregate
principal amount of Money Market Loans for which offers in any single Money
Market Quote may be accepted.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 10:30 A.M. (New
York City time) on (x) the third Euro-Dollar Business Day prior to the proposed
date of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Company and the Agent shall have mutually agreed and
the Agent shall have notified to the Banks not later than the date of the Money
Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for
which such change is to be effective), the Borrower shall notify the Agent of
its acceptance or non-acceptance of the offers so notified to it pursuant to
subsection (e). In the case of acceptance, such notice (a "Notice of Money
Market Borrowing") shall specify the aggregate principal amount of offers for
each Interest Period that are accepted. The Borrower may accept any Money Market
Quote in whole or in part; PROVIDED that:
(i) the aggregate principal amount of each Money Market Borrowing may
not exceed the applicable amount set forth in the related Money Market
Quote Request,
(ii) the principal amount of each Money Market Borrowing must be
$15,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on 'the basis of ascending
Money Market Margins or Money Market Absolute Rates, as the case may be,
and
(iv) the Borrower may not accept any offer that is described in
subsection (d) (iii) or that otherwise fails to comply with the
requirements of this Agreement.
(g) ALLOCATION BY AGENT. If offers are made by two or more Banks with
the same Money Market Margins or Money Market Absolute Rates, as the case may
be, for a greater aggregate principal amount than the amount in respect of which
such offers are accepted for the related
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Interest Period, the principal amount of Money Market Loans in respect of which
such offers are accepted shall be allocated by the Agent among such Banks as
nearly as possible (in multiples of $1,000,000, as the Agent may deem
appropriate) in proportion to the aggregate principal amounts of such offers.
Determinations by the Agent of the amounts of Money Market Loans shall be
conclusive in the absence of manifest error.
SECTION 2.04. NOTICE TO BANKS; FUNDING OF LOANS.
(a) Upon receipt of a Notice of Borrowing, the Agent shall promptly
notify each Bank of the contents thereof and of such Bank's share (if any) of
such Borrowing and such Notice of Borrowing shall not thereafter be revocable by
the Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date of
each Borrowing, each Bank participating therein shall (except as provided in
subsection (c) of this Section) make available its share of such Borrowing, in
Federal or other funds immediately available in New York City, to the Agent at
its address referred to in Section 11.01. Unless the Agent determines that any
applicable condition specified in Article III has not been satisfied, the Agent
will make the funds so received from the Banks available to the Borrower at the
Agent's aforesaid address.
(c) If any Bank makes a new Loan hereunder to a Borrower on a day on
which such Borrower is to repay all or any part of an outstanding Loan from such
Bank, such Bank shall apply the proceeds of its new Loan to make such repayment
and only an amount equal to the difference (if any) between the amount being
borrowed by such Borrower and the amount being repaid shall be made available by
such Bank to the Agent as provided in subsection (b), or remitted by such
Borrower to the Agent as provided in Section 2.12, as the case may be.
(d) Unless the Agent shall have received notice from a Bank prior to
the date of any Borrowing that such Bank will not make available to the Agent
such Bank's share of such Borrowing, the Agent may assume that such Bank has
made such share available to the Agent on the date of such Borrowing in
accordance with subsections (b) and (c) of this Section 2.04 and the Agent may,
in reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such share available to the Agent, such Bank and the Borrower severally agree to
repay to the Agent forthwith on demand such corresponding amount together
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with interest thereon, for each day from the date such amount is made available
to the Borrower until the date such amount is repaid to the Agent, at (i) in the
case of the Borrower, a rate per annum equal to the higher of the Federal Funds
Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii)
in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to
the Agent such corresponding amount, such amount so repaid shall constitute such
Bank's Loan included in such Borrowing for purposes of this Agreement.
SECTION 2.05. NOTES. (a) The Loans of each Bank to each Borrower shall
be evidenced by a single Note of such Borrower payable to the order of such Bank
for the account of its Applicable Lending Office in an amount equal to the
aggregate unpaid principal amount of such Bank's Loans to such Borrower.
(b) Each Bank may, by notice to a Borrower and the Agent, request
that its Loans of a particular type to such Borrower be evidenced by a separate
Note of such Borrower in an amount equal to the aggregate unpaid principal
amount of such Loans. Each such Note shall be in substantially the form of
Exhibit A hereto with appropriate modifications to reflect the fact that it
evidences solely Loans of the relevant type. Each reference in this Agreement to
a "Note" or the "Notes" of such Bank shall be deemed to refer to and include any
or all of such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(b) or
3.03(a), the Agent shall forward such Note to such Bank. Each Bank shall record
the date, amount, type and maturity of each Loan made by it to each Borrower and
the date and amount of each payment of principal made with respect thereto, and
may, if such Bank so elects in connection with any transfer or enforcement of
its Note of any Borrower, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to each
such Loan to such Borrower then outstanding; PROVIDED that the failure of any
Bank to make any such recordation or endorsement shall not affect the
obligations of any Borrower hereunder or under the Notes. Each Bank is hereby
irrevocably authorized by each Borrower so to endorse its Notes and to attach to
and make a part of any Note a continuation of any such schedule as and when
required.
SECTION 2.06. MATURITY OF LOANS. Each Loan included in any Borrowing
shall mature, and the principal
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amount thereof shall be due and payable, on the last day of the Interest Period
applicable to such Borrowing.
SECTION 2.07. INTEREST RATES. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the Base
Rate for such day. Such interest shall be payable for each Interest Period on
the last day thereof. Any overdue principal of or interest on any Base Rate Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the sum of 1% plus the rate otherwise applicable to Base Rate
Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during the Interest Period applicable thereto, at a
rate per annum equal to the sum of the CD Margin for such day plus the Adjusted
CD Rate applicable to such Interest Period; PROVIDED that if any CD Loan shall,
as a result of clause (2)(b) of the definition of Interest Period, have an
Interest Period of less than 30 days, such CD Loan shall bear interest during
such Interest Period at the rate applicable to Base Rate Loans during such
period. Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than 90 days, at intervals of 90
days after the first day thereof. Any overdue principal of or interest on any CD
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 1% plus the higher of (i) the sum of the CD Margin
for such day plus the Adjusted CD Rate applicable to the Interest Period for
such Loan and (ii) the rate applicable to Base Rate Loans for such day.
"CD Margin" means a rate per annum equal to 0.265%.
The "Adjusted CD Rate" applicable to any Interest Period means a rate
per annum determined pursuant to the following formula:
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ACDR = [ CDBR ] *
[ ---------- ] +AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
___________
* The amount in brackets being rounded upward, if necessary, to the next higher
1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid
at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the
first day of such Interest Period by two or more New York certificate of deposit
dealers of recognized standing for the purchase at face value from each CD
Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD Loan of such CD Reference Bank to which such Interest
Period applies and having a maturity comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of new non-personal time deposits in dollars in New York City having a
maturity comparable to the related Interest Period and in an amount of $100,000
or more. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. ss. 327.4(a) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the
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United States. The Adjusted CD Rate shall be adjusted automatically on and as of
the effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the London Interbank Offered Rate applicable to such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
"Euro-Dollar Margin" means a rate per annum equal to 0.140%.
The "London Interbank Offered Rate" applicable to any Interest Period
means the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which deposits in dollars are offered to
each of the Euro-Dollar Reference Banks in the London interbank market at
approximately 11:00 A.M. (London time) two Euro-Dollar Business Days before the
first day of such Interest Period in an amount approximately equal to the
principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to
which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the higher of (i) the sum of 1% plus the Euro-Dollar Margin for
such day plus the London Interbank Offered Rate applicable to the Interest
Period for such Loan and (ii) the sum of 1% plus the Euro-Dollar Margin for such
day plus the quotient obtained (rounded upward, if necessary, to the next higher
1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the
next higher 1/16 of 1%) of the respective rates per annum at which one day (or,
if such amount due remains unpaid more than three Euro-Dollar Business Days,
then for such other period of time not longer than six months as the Agent may
select) deposits in dollars in an amount approximately equal to such overdue
payment due to each of the Euro-Dollar Reference Banks are offered to such
Euro-Dollar Reference Bank in the London interbank market for the applicable
period determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a) or (b) of Section
8.01 shall exist, at a rate per annum equal to the sum of 1% plus the rate
applicable to Base Rate Loans for such day).
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(e) Subject to Section 8.01(ii), each Money Market LIBOR Loan shall
bear interest on the outstanding principal amount thereof, for the Interest
Period applicable thereto, at a rate per annum equal to the sum of the London
Interbank Offered Rate for such Interest Period (determined in accordance with
Section 2.07(c) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.03. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.03. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof. Any overdue
principal of or interest on any Money Market Loan shall bear interest, payable
on demand, for each day until paid at a rate per annum equal to the sum of 1%
plus the Base Rate for such day.
(f) The Agent shall determine each interest rate applicable to the
Loans hereunder. The Agent shall give prompt notice to the Borrower and the
participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available on
a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.08. FACILITY FEE. (a) The Company shall pay to the Agent for
the account of the Banks ratably, a facility fee at the rate of 0.035% per
annum. Such facility fee shall accrue (i) from and including the Effective Date
to but excluding the Termination Date (or earlier date of termination of the
Commitments in their entirety), on the daily aggregate amount of the Commitments
(whether used or unused) and (ii) from and including the Termination Date or
such earlier date of termination to but excluding the date the Loans shall be
repaid in their entirety, on the daily aggregate outstanding principal amount of
the Loans.
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(b) PAYMENTS. Accrued facility fees under this Section shall be
payable quarterly on each March 31, June 30, September 30 and December 31,
beginning with March 31, 1997, and upon the date of termination of the
Commitments in their entirety (and, if later, the date the Loans shall be repaid
in their entirety).
SECTION 2.09. TERMINATION OR REDUCTION OF COMMITMENTS. The Company
may, upon at least three Domestic Business Days' notice to the Agent, (i)
terminate the Commitments at any time, if no Loans are outstanding at such time
or (ii) ratably reduce from time to time by an aggregate amount of $25,000,000
or any larger multiple thereof, the aggregate amount of the Commitments in
excess of the aggregate outstanding principal amount of the Loans. Promptly
after receiving a notice pursuant to this subsection, the Agent shall notify
each Bank of the contents thereof.
SECTION 2.10. SCHEDULED TERMINATION OF COMMITMENTS. The Commitments
shall terminate on the Termination Date and any Loans then outstanding (together
with accrued interest thereon) shall be due and payable on such date.
SECTION 2.11. OPTIONAL PREPAYMENTS. (a) Subject in the case of Fixed
Rate Loans to Section 2.13, the Borrower may, upon at least one Domestic
Business Day's notice to the Agent, prepay any Domestic Borrowing (or any Money
Market Borrowing bearing interest at the Base Rate pursuant to Section 8.01(ii))
or upon at least three Euro-Dollar Business Days' notice to the Agent, prepay
any Euro-Dollar Borrowing, in each case in whole at any time, or from time to
time in part in amounts aggregating $15,000,000 or any larger multiple of
$1,000,000, by paying the principal amount to be prepaid together with accrued
interest thereon to the date of prepayment. Each such optional prepayment shall
be applied to prepay ratably the Loans of the several Banks included in such
Borrowing.
(b) Except as provided in subsection (a) above, the Borrower may not
prepay all or any portion of the principal amount of any Money Market Loan prior
to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section,
the Agent shall promptly notify each Bank of the contents thereof and of such
Bank's ratable share (if any) of such prepayment and such notice shall not
thereafter be revocable by the Borrower.
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SECTION 2.12. GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrowers
shall make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when due,
in Dollars in Federal or other funds immediately available in New York City, to
the Agent at its address referred to in Section 11.01. The Agent will promptly
distribute to each Bank its ratable share of each such payment received by the
Agent for the account of the Banks. Whenever any payment of principal of, or
interest on, the Domestic Loans or of fees shall be due on a day which is not a
Domestic Business Day, the date for payment thereof shall be extended to the
next succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. Whenever any payment of
principal of, or interest on, the Money Market Loans shall be due on a day which
is not a Euro-Dollar Business. Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from a Borrower prior
to the date on which any payment is due from such Borrower to the Banks
hereunder that such Borrower will not make such payment in full, the Agent may
assume that such Borrower has made such payment in full to the Agent on such
date and the Agent may, in reliance upon such assumption, cause to be
distributed to each Bank on such due date an amount equal to the amount then due
such Bank. If and to the extent that such Borrower shall not have so made such
payment, each Bank shall repay to the Agent forthwith on demand such amount
distributed to such Bank together with interest thereon, for each day from the
date such amount is distributed to such Bank until the date such Bank repays
such amount to the Agent, at the Federal Funds Rate.
SECTION 2.13. FUNDING LOSSES. If a Borrower makes any payment of
principal with respect to any Fixed Rate Loan (pursuant to Article VI or VIII or
otherwise) on any day other than the last day of the Interest Period applicable
thereto, or the last day of an applicable period fixed pursuant to Section
2.07(d), or if a Borrower fails to borrow or prepay any Fixed Rate Loans after
notice has been given to any Bank in accordance with Section 2.04(a) or
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2.11(c), such Borrower shall reimburse each Bank on demand for any resulting
loss or expense incurred by it (or by an existing or prospective Participant in
the related Loan), including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties, but excluding
loss of margin for the period after any such payment or failure to borrow or
prepay, PROVIDED that such Bank shall have delivered to such Borrower a
certificate as to the amount of such loss or expense, which certificate shall be
conclusive in the absence of manifest error.
SECTION 2.14. COMPUTATION OF INTEREST AND FEES. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and all
facility fees shall be computed on the basis of a year of 360 days and paid for
the actual number of days elapsed (including the first day but excluding the
last day).
SECTION 2.15. JUDGMENT CURRENCY. If for the purpose of obtaining
judgment in any court it is necessary to convert a sum due from any Borrower
hereunder or under any of the Notes in Dollars into another currency, the
parties hereto agree, to the fullest extent that they may effectively do so,
that the rate of exchange used shall be that at which in accordance with normal
banking procedures the Agent could purchase Dollars with such other currency at
the Agent's New York office on the Domestic Business Day preceding that on which
final judgment is given. The obligations of each Borrower in respect of any sum
due to any Bank or the Agent hereunder or under any Note shall, notwithstanding
any judgment in a currency other than Dollars, be discharged only to the extent
that on the Domestic Business pay following receipt by such Bank or the Agent
(as the case may be) of any sum adjudged to be so due in such other currency
such Bank or the Agent (as the case may be) may in accordance with normal
banking procedures purchase Dollars with such other currency; if the amount of
Dollars so purchased is less than the sum originally due to such Bank or the
Agent, as the case may be, in Dollars, each Borrower agrees, to the fullest
extent that it may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Bank or the Agent, as the
case may be, against such loss, and if the amount of Dollars so purchased
exceeds (a) the sum originally due to any Bank or the Agent, as the case may be,
and (b) any amounts shared with other Banks as a result of allocations of such
excess as a disproportionate payment to
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such Bank under Section 11.04, such Bank or the Agent, as the case may be,
agrees to remit such excess to the appropriate Borrower.
SECTION 2.16. FOREIGN WITHHOLDING TAXES AND OTHER COSTS. (a) All
payments by an Eligible Subsidiary of principal of and interest on its Notes and
of all other amounts payable under this Agreement are payable without deduction
for or on account of any present or future taxes, duties or other charges levied
or imposed by the government of any jurisdiction outside the United States or by
any political subdivision or taxing authority thereof or therein through
withholding or deduction with respect to any such payments. If any such taxes,
duties or other charges are so levied or imposed, such Eligible Subsidiary will
pay additional interest or will make additional payments in such amounts so that
every net payment of principal of and interest on its Notes and of all other
amounts payable by it under this Agreement, after withholding or deduction for
or on account of any such present or future taxes, duties or other charges, will
not be less than the amount provided for herein. Such Eligible Subsidiary shall
furnish promptly to the Agent official receipts evidencing such withholding or
deduction.
(b) If the cost to any Bank of making or maintaining any Loan to an
Eligible Subsidiary is increased, or the amount of any sum received or
receivable by any Bank (or its Applicable Lending Office) is reduced by an
amount deemed by such Bank to be material, by reason of the fact that such
Eligible Subsidiary is incorporated in, or conducts business in, a jurisdiction
outside the United States the Borrower shall indemnify such Bank for such
increased costs or reduction within 15 days after demand by such Bank (with a
copy to the Agent and the Company). A certificate of such Bank claiming
compensation under this subsection (b) and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error.
(c) Each Bank will promptly notify the Company and the Agent of any
event of which it has knowledge that will entitle such Bank to additional
interest or payments pursuant to subsection (b) and will designate a different
Applicable Lending Office, if, in the judgment of such Bank, such designation
will avoid the need for, or reduce the amount of, such compensation and will not
be otherwise disadvantageous to such Bank.
SECTION 2.17. REGULATION D COMPENSATION. Each Bank may require any
Borrower to pay, contemporaneously with
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each payment of interest on the Euro-Dollar Loans to such Borrower, additional
interest on the related Euro-Dollar Loan to such Borrower of such Bank at a rate
per annum determined by such Bank up to but not exceeding the excess of (i) (A)
the applicable London Interbank Offered Rate divided by (B) one MINUS the
Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered
Rate. Any Bank wishing to require payment of such additional interest (x) shall
so notify such Borrower and the Agent, in which case such additional interest on
the Euro-Dollar Loans to such Borrower of such Bank shall be payable to such
Bank at the place indicated in such notice with respect to each Interest Period
commencing at least three Euro-Dollar Business Days after the giving of such
notice, and (y) shall notify such Borrower at least five Euro-Dollar Business
Days prior to each date on which interest is payable on the Euro-Dollar Loans
to such Borrower of the amount then due it under this Section.
SECTION 2.18. WITHHOLDING TAX EXEMPTION. At least five Domestic
Business Days prior to the first date on which interest or fees are payable
hereunder for the account of any Bank, each Bank that is not incorporated under
the laws of the United States or a state thereof agrees that it will deliver to
each of the Company and the Agent two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, certifying in either case that such
Bank is entitled to receive payments from the Company under this Agreement and
the Notes without deduction or withholding of any United States federal income
taxes. Each Bank which so delivers a Form 1001 or 4224 further undertakes to
deliver to each of the Company and the Agent two additional copies of such form
(or a successor form) on or before the date that such form expires or becomes
obsolete or after the occurrence of any event requiring a change in the most
recent form so delivered by it, and such amendments thereto or extensions or
renewals thereof as may be reasonably requested by the Company or the Agent, in
each case certifying that such Bank is entitled to receive payments from the
Company under this Agreement and the Notes without deduction or withholding of
any United States federal income taxes, unless an event (including without
limitation any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which renders all
such forms inapplicable or which would prevent such Bank from duly completing
and delivering any such form with respect to it and such Bank advises the
Company and the Agent that it is not capable of receiving such payments without
any deduction or withholding of United States federal income tax.
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ARTICLE III
CONDITIONS
SECTION 3.01. EFFECTIVENESS. This Agreement shall become effective on
the date that each of the following conditions shall have been satisfied (or
waived in accordance with Section 11.05):
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex, facsimile transmission or other
written confirmation from such party of execution of a counterpart hereof
by such party);
(b) receipt by the Agent for the account of each Bank of a duly
executed Note of the Company dated on or before the Effective Date
complying with the provisions of Section 2.05;
(c) receipt by the Agent of an opinion of the General Counsel of the
Company (or other counsel for the Company reasonably satisfactory to the
Agent), substantially in the form of Exhibit E hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(d) receipt by the Agent of an opinion of Davis Polk & Wardwell,
special counsel for the Agent, substantially in the form of Exhibit F
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(e) receipt by the Agent of all documents it may reasonably request
relating to the existence of the Company, the corporate authority for and
the validity of this Agreement and the Notes, and any other matters
relevant hereto, all in form and substance satisfactory to the Agent; and
(f) receipt by the Agent of evidence satisfactory to it of the
payment of all principal and interest on any loans outstanding under, and
of all other amounts payable under, the Existing 364-Day Credit Agreement;
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PROVIDED that this Agreement shall not become effective or be binding on
any party hereto unless all of the foregoing conditions are satisfied no
later than January 31, 1997. The Agent shall promptly notify the Company
and the Banks of the Effective Date, and such notice shall be conclusive
and binding on all parties hereto. The Banks that are parties to the
Existing 364-Day Credit Agreement, comprising the "Required Banks" as
defined therein, and the Company agree to eliminate the requirement under
Section 2.09 of the Existing 364-Day Credit Agreement that notice of
optional termination of the commitments thereunder be given three Domestic
Business Days in advance, and further agree that the commitments under the
Existing 364-Day Credit Agreement shall terminate in their entirety
simultaneously with and subject to the effectiveness of this Agreement and
that the Company shall be obligated to pay the accrued facility fees
thereunder to but excluding the date of such effectiveness. The Company
shall, within 30 days after the Effective Date, cause the commitments under
the Duracell Credit Facility to be terminated in their entirety and all
principal, interest and other amounts payable thereunder to be repaid in
full.
SECTION 3.02. BORROWINGS. The obligation of any Bank to make a Loan on
the occasion of any Borrowing is subject to the satisfaction of the following
conditions:
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the aggregate
amount of the Commitments less the aggregate principal amount committed or
outstanding (without duplication) under the Duracell Credit Facility;
(c) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the Company
and the Borrower (if other than the Company) contained in this Agreement
(except, in the case of a Refunding Borrowing, the representations and
warranties set forth in Sections 4.05 and 4.07 as to any matter which has
theretofore been disclosed in writing by the Company to the Banks) shall be
true in all material respects on and as of the date of such Borrowing.
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Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Company and the Borrower (if other than the Company) on the date of such
Borrowing as to the facts specified in clauses (b), (c) and (d) of this Section.
SECTION 3.03. FIRST BORROWING BY EACH ELIGIBLE SUBSIDIARY. The
obligation of each Bank to make a Loan on the occasion of the first Borrowing by
each Eligible Subsidiary is subject to the satisfaction of the following further
conditions:
(a) receipt by the Agent for the account of each Bank of a duly
executed Note of such Eligible Subsidiary, dated on or before the date of
such Borrowing complying with the provisions of Section 2.05;
(b) receipt by the Agent of an opinion of counsel for such Eligible
Subsidiary acceptable to the Agent, substantially in the form of Exhibit I
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request; and
(c) receipt by the Agent of all documents which it may reasonably
request relating to the existence of such Eligible Subsidiary, the
corporate authority for and the validity of the Election to Participate of
such Eligible Subsidiary, this Agreement and the Notes of such Eligible
Subsidiary, and any other matters relevant thereto, all in form and
substance satisfactory to the Agent.
The documents referred to in this Section 3.03 shall be delivered to the Agent
by an Eligible Subsidiary no later than the date of the first Borrowing by such
Eligible Subsidiary.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants that:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, and has all corporate powers and all material governmental
licenses,
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authorizations, consents and approvals required to carry on its business as now
conducted.
SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION.
The execution, delivery and performance by the Company of this Agreement and its
Notes are within the Company's corporate powers, have been duly authorized by
all necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of the Company or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the Company
or result in the creation or imposition of any Lien on any asset of the Company
or any of its Subsidiaries.
SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of the Company and its Notes, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
the Company, in each case enforceable in accordance with their respective terms
except as the same may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity.
SECTION 4.04. FINANCIAL INFORMATION. (a) The consolidated balance
sheet of the Company and its Consolidated Subsidiaries as of December 31, 1995
and the related consolidated statements of income and cash flows for the fiscal
year then ended, reported on by KPMG Peat Marwick LLP and set forth in the
Company's Annual Report to Shareholders for 1995 incorporated by reference in
the Company's 1995 Form 10-K, a copy of which has been delivered to each of the
Banks, fairly present, in conformity with generally accepted accounting
principles, the consolidated financial position of the Company and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of September 30, 1996 and the related unaudited
consolidated statements of income and cash flows for the nine months then ended,
set forth in the Company's Latest Form 10-Q, a copy of which has been delivered
to each of the Banks, fairly present, on a basis consistent with the financial
statements referred to in subsection (a) of this Section, the consolidated
financial position of the Company and its Consolidated Subsidiaries as of such
date and their
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consolidated results of operations and cash flows for such nine-month period
(subject to normal year-end adjustments).
SECTION 4.05. NO MATERIAL ADVERSE CHANGE. Since September 30, 1996,
there has been no material adverse change in the business, operations or
financial condition of the Company and its Consolidated Subsidiaries, considered
as a whole.
SECTION 4.06. COMPLIANCE WITH ERISA. Each member of the ERISA Group
has fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
if such failure or amendment has resulted, or there is a reasonable possibility
that it could result, in the imposition of a Lien or the posting of a bond or
other security under ERISA or the Internal Revenue Code or (iii) incurred any
liability under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA.
SECTION 4.07. LITIGATION. Except as disclosed in the Company's 1995
Form 10-K and the Company's Latest Form 10-Q, there is no action, suit,
investigation or proceeding pending against, or to the knowledge of the Company
threatened against or affecting, the Company or any of its Subsidiaries before
any court or arbitrator or any governmental body, agency or official in which
there is a reasonable possibility of an adverse decision which could materially
adversely affect the business, operations or financial condition of the Company
and its Consolidated Subsidiaries, taken as a whole, or which in any manner
draws into question the validity of this Agreement or the Notes.
SECTION 4.08. TAXES. The Company has filed (or has obtained extensions
of the time by which it is required to file) all United States federal income
tax returns and all other material tax returns required to be filed by it and
has paid all taxes shown due on the returns so filed as well as all other
material taxes, assessments and governmental charges which have become due,
except such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided.
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SECTION 4.09. FULL DISCLOSURE. All information heretofore furnished by
the Company to the Agent or any Bank for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all such information
hereafter furnished by the Company to the Agent or any Bank will be, true and
accurate in all material respects on the date as of which such information is
stated or certified. The Company has disclosed to the Banks in writing any and
all facts which materially and adversely affect or may affect (to the extent the
Company can now reasonably foresee), the business, operations or financial
condition of the Company and its Consolidated Subsidiaries, taken as a whole, or
the ability of the Company to perform its obligations under this Agreement.
ARTICLE V
COVENANTS
The Company agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. INFORMATION. The Company will deliver to each of the
Banks:
(a) as soon as available and in any event within 90 days after the
end of each fiscal year of the Company, a consolidated balance sheet of the
Company and its Consolidated Subsidiaries as of the end of such fiscal year
and the related consolidated statements of income and cash flows for such
fiscal year, setting forth in each case in comparative form the figures for
the previous fiscal year, all reported on in a manner acceptable(degree) to
the Securities and Exchange Commission by KPMG Peat Marwick LLP or other
independent public accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days after the
end of each of the first three quarters of each fiscal year of the Company,
(i) a consolidated balance sheet of the Company and its Consolidated
Subsidiaries as of the end of such quarter, (ii) the related consolidated
statements of income for such quarter and for the portion of the Company's
fiscal year ended at the end of such quarter and (iii) the related
consolidated statement of cash flows for the portion of the Company's
fiscal year ended at the end of such quarter, setting forth in
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cases (ii) and (iii) in comparative form the figures for the corresponding
quarter and the corresponding portion of the Company's previous fiscal
year, all certified (subject to normal year-end adjustments) as to fairness
of presentation, generally accepted accounting principles and consistency
by the chief financial officer or the principal accounting officer of the
Company;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the principal accounting officer of the Company
(i) setting forth in reasonable detail the calculations required to
establish whether the Company was in compliance with the requirements of
Section 5.05 on the date of such financial statements and (ii) stating
whether there exists on the date of such certificate any Default and, if
any Default then exists, setting forth the details thereof and the action
which the Company is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
stating whether anything has come to their attention to cause them to
believe that there existed on the date of such statements any Default and
(ii) confirming the calculations set forth in the officer's certificate
delivered simultaneously therewith pursuant to clause (c) above;
(e) forthwith upon the occurrence of any Default, a certificate of
the chief financial officer or the principal accounting officer of the
Company setting forth the details thereof and the action which the Company
is taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and annual, quarterly or monthly
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reports which the Company shall have filed with the Securities and Exchange
Commission;
(h) if and when any member of the ERISA Group (i) gives or is
required to give notice to the PBGC of any "reportable event" (as defined
in Section 4043 of ERISA) with respect to any Plan which might reasonably
constitute grounds for a termination of such Plan under Title IV of ERISA,
or knows that the plan administrator of any Plan has given or is required
to give notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA
or notice that any Multiemployer Plan is in reorganization, is insolvent or
has been terminated, a copy of such notice; (iii) receives notice from the
PBGC under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer any Plan, a copy of such notice; or (iv)
fails to make any payment or contribution to any Plan or Multiemployer Plan
or in respect of any Benefit Arrangement or makes any amendment to any Plan
or Benefit Arrangement, if such failure or amendment has resulted, or there
is a reasonable possibility that it could result, in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code, a certificate of the chief financial officer, the principal
accounting officer or the treasurer of the Company setting forth details as
to such occurrence and action, if any, which the Company or applicable
member of the ERISA Group is required or proposes to take;
(i) promptly upon any change in the rating by Standard & Poor's
Ratings Services or Moody's Investors Service, Inc. of the Company's
outstanding public senior unsecured long-term debt securities or the
Company's outstanding commercial paper, a notice reporting such change and
stating the date on which such change was announced by the relevant rating
agency; and
(j) from time to time such additional information regarding the
business, operations or financial condition of the Company and its
Subsidiaries as the Agent, at the request of any Bank, may reasonably
request.
SECTION 5.02. MAINTENANCE OF PROPERTY; INSURANCE. The Company will
keep, and will cause each Subsidiary to
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keep, all property useful and necessary in its business in good working order
and condition, ordinary wear and tear excepted; will maintain, and will cause
each Subsidiary to maintain (either in the name of the Company or in such
Subsidiary's own name) with financially sound and reputable insurance companies,
insurance on all their property in at least such amounts and against at least
such risks as are usually insured against in the same general area by companies
of established repute engaged in the same or a similar business; and will
furnish to the Banks, upon written request from the Agent, such information as
may be reasonably requested as to the insurance carried.
SECTION 5.03. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Company will preserve, renew and keep in full force and effect its corporate
existence and its rights, privileges and franchises necessary or desirable in
the normal conduct of business.
SECTION 5.04. COMPLIANCE WITH LAWS. The Company will comply, and cause
each Subsidiary to comply, in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including, without limitation, ERISA and the rules and regulations thereunder)
except where the necessity of compliance therewith is contested in good faith by
appropriate proceedings.
SECTION 5.05. EARNINGS TO INTEREST EXPENSE RATIO. At the end of each
fiscal quarter of the Company, the ratio of (x) Consolidated Earnings Before
Interest and Taxes for the four fiscal quarters then ended to (y) Gross Interest
Expense for the four fiscal quarters then ended will not be less than 6.50:1.
SECTION 5.06. NEGATIVE PLEDGE. Neither the Company nor any Subsidiary
will create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
(a) Liens existing on the date hereof securing Debt outstanding on
the date hereof in an aggregate principal amount not exceeding $25,000,000;
(b) any Lien existing on any asset of any corporation at the time
such corporation becomes a Subsidiary and not created in contemplation of
such event;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part
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of the cost of acquiring such asset, PROVIDED that such Lien attaches to
such asset concurrently with or within 90 days after the acquisition
thereof;
(d) any Lien on any asset of any corporation existing at the time
such corporation is merged or consolidated with or into the Company or a
Subsidiary and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof
by the Company or a Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, PROVIDED that such Debt is not increased and is
not secured by any additional assets;
(g) any Lien arising pursuant to any order of attachment, distraint
or similar legal process arising in connection with court proceedings so
long as the execution or other enforcement thereof is effectively stayed
and the claims secured thereby are being contested in good faith by
appropriate proceedings;
(h) Liens incidental to the conduct of its business or the ownership
of its assets which (i) do not secure Debt or Derivatives Obligations and
(ii) do not in the aggregate materially detract from the value of its
assets or materially impair the use thereof in the operation of its
business;
(i) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash
equivalents subject to such Liens-may at no time exceed $25,000,000; and
(j) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal amount at any time
outstanding not to exceed 5% of Consolidated Assets.
SECTION 5.07. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The Company
will not (i) consolidate or merge with or into any other Person or (ii) sell,
lease or otherwise transfer, directly or indirectly, all or substantially all of
the assets of the Company and its Subsidiaries, taken as a whole, to any other
Person; PROVIDED that the Company may merge with a Subsidiary if (A) the Company
is the corporation surviving such merger and (B)
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immediately after giving effect to such merger, no Default shall have occurred
and be continuing.
SECTION 5.08. MATERIAL SUBSIDIARY CASH FLOW. The Company will not, and
will not permit any Material Subsidiary to, enter into any arrangement which
restricts the ability of any Material Subsidiary, directly or indirectly, to
make funds available to the Company, whether by way of dividend or other
distribution, advance or otherwise.
SECTION 5.09. USE OF PROCEEDS. The proceeds of Loans hereunder will be
used by the Borrowers for their general corporate purposes, including without
limitation, any purchase, redemption, retirement or acquisition of outstanding
shares of capital stock of the Company ("Stock Repurchases"). Except for
permitted Stock Repurchases referred to in the immediately preceding sentence,
none of such proceeds will be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any "margin
stock" within the meaning of Regulation U.
ARTICLE VI
DEFAULTS
SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) any principal of any Loan shall not be paid when due, or any
interest, any fees or any other amount payable hereunder shall not be paid
within five days of the due date thereof;
(b) the Company shall fail to observe or perform any covenant
contained in Sections 5.05 to 5.09, inclusive;
(c) any Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause
(a) or (b) above) for 30 days after written notice thereof has been given
to the Company by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made or
deemed to have been made by any Borrower in this Agreement or in any
certificate,
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financial statement or other document delivered pursuant to this Agreement
shall prove to have been incorrect in any material respect when made (or
deemed made);
(e) the Company or any Subsidiary shall fail to make any payment in
respect of any Material Debt or any Material Financial Obligations when due
or within any applicable grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of such
Debt or any Person acting on such holder's behalf to accelerate the
maturity thereof;
(g) the Company or any Material Subsidiary shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Company or any Material Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect or
seeking the appointment of a trustee, receiver, liquidator, custodian or
other similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of 60 days; or an order for relief shall be entered
against the Company or any Material Subsidiary under the federal bankruptcy
laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due
(including any approved extensions) an
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amount or amounts aggregating in excess of $50,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate, impose liability (other than for premiums under Section 4007
of ERISA) in respect of, or to cause a trustee to be appointed to
administer any Material Plan; or a condition shall exist by reason of which
the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall occur a complete or
partial withdrawal from, or a default, within the meaning of Section
4219(c) (5) of ERISA, with respect to, one or more Multiemployer Plans
which could cause one or more members of the ERISA Group to incur a current
payment obligation in excess of $50,000,000;
(j) a judgment or order for the payment of money in excess of
$50,000,000 shall be rendered against the Company or any Material
Subsidiary and such judgment or order shall continue unsatisfied and
unstayed for a period of 30 days; or
(k) any Person or two or more Persons acting in concert shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of
1934) of 30% or more of the outstanding shares of voting stock of the
Company; or, during any two-year period, the individuals who were serving
on the board of directors of the Company at the beginning of such period or
who were nominated for election or elected to such board during such period
with the affirmative vote of at least two-thirds of such individuals still
in office cease to constitute a majority of such board;
then, and in every such event, the Agent shall (i) if requested by Banks having
more than 50% in aggregate amount of the Commitments, by notice to the Company
terminate the Commitments and they shall thereupon terminate, and (ii) if
requested by Banks holding Notes evidencing more than 50% in aggregate principal
amount of the Loans, by notice to the Company declare the Notes (together with
accrued interest thereon and all accrued fees and other amounts payable by any
Borrower hereunder) to be, and the Notes shall thereupon become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by each Borrower; provided that in the
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case of any of the Events of Default specified in clause or (h) above with
respect to any Borrower, without any notice to any Borrower or any other act by
the Agent or the Banks, the Commitments shall thereupon terminate and the Notes
(together with accrued interest thereon and all accrued fees and other amounts
payable by any Borrower hereunder) shall become immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by each Borrower.
SECTION 6.02. NOTICE OF DEFAULT. The Agent shall Give notice to the
Company under Section 6.01(c) promptly upon being requested to do so by any Bank
and shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. APPOINTMENT AND AUTHORIZATION. Each Bank irrevocably
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers under this Agreement and the Notes as are delegated to
the Agent by the terms hereof or thereof, together with all such powers as are
reasonably incidental thereto.
SECTION 7.02. AGENT AND AFFILIATES. Morgan Guaranty Trust Company of
New York shall have the same rights and powers under this Agreement as any other
Bank and may exercise or refrain from exercising the same as though it were not
the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with any Borrower or any Subsidiary or affiliate of any Borrower as if
it were not the Agent hereunder.
SECTION 7.03. ACTION BY AGENT. The obligations of the Agent hereunder
are only those expressly set forth herein. Without limiting the generality of
the foregoing, the Agent shall not be required to take any action with respect
to any Default, except as expressly provided in Article VI.
SECTION 7.04. CONSULTATION WITH EXPERTS. The Agent may consult with
legal counsel (who may be counsel for any Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in Good faith in
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accordance with the advice of such counsel, accountants or experts.
SECTION 7.05. LIABILITY OF AGENT. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks (or when expressly
required hereby, all the Banks) or (ii) in the absence of its own gross
negligence or willful misconduct. Neither the Agent nor any of its affiliates
nor any of their respective directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement or
any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of any Borrower; (iii) the satisfaction of any condition
specified in Article III, except receipt of items required to be delivered to
the Agent; or (iv) the validity, effectiveness or Genuineness of this Agreement,
the Notes or any other instrument or writing furnished in connection herewith.
The Agent shall not incur any liability by acting in reliance upon any notice,
consent, certificate, statement, or other writing (which may be a bank wire,
telex, facsimile transmission or similar writing) believed by it to be genuine
or to be signed by the proper party or parties. Without limiting the generality
of the foregoing, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
SECTION 7.06. INDEMNIFICATION. Each Bank shall, ratably in accordance
with its Commitment, indemnify the Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrowers) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from such
indemnitees' gross negligence or willful misconduct) that such indemnitees may
suffer or incur in connection with its role as Agent hereunder or any action
taken or omitted by such indemnitees in connection therewith.
SECTION 7.07. CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such
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documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also acknowledges
that it will, independently and without reliance upon the Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
any action under this Agreement.
SECTION 7.08. SUCCESSOR AGENT. The Agent may resign at any time by
giving notice thereof to the Banks and the Company. Upon any such resignation,
the Required Banks shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Banks, and shall
have accepted such appointment, within 30 days after the retiring Agent gives
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a commercial bank organized or
licensed under the laws of the United States or of any State thereof and having
a combined capital and surplus of at least $500,000,000. Upon the acceptance of
its appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent.
SECTION 7.09. AGENT'S FEE. The Company shall pay to the Agent for its
own account fees in the amounts and at the times previously agreed upon between
the Company and the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR
UNFAIR. If on or prior to the first day of any Interest Period for any Fixed
Rate Borrowing:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period, or
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(b) in the case of a Committed Borrowing, Banks having 50% or more of
the aggregate amount of the Commitments advise the Agent that the Adjusted
CD Rate or the London Interbank Offered Rate, as the case may be, as
determined by the Agent will not adequately and fairly reflect the cost to
such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may
be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrowers and the Banks,
whereupon until the Agent notifies the Borrowers that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make CD
Loans or Euro-Dollar Loans, as the case may be, shall be suspended. Unless a
Borrower notifies the Agent at least one Domestic Business Day before the date
of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been
given that it elects not to borrow on such date, (i) if such Fixed Rate
Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a
Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market
LIBOR Borrowing, the Money Market LIBOR Loans comprising such Borrowing shall
bear interest for each day from and including the first day to but excluding the
last day of the Interest Period applicable thereto at the Base Rate for such
day.
SECTION 8.02. ILLEGALITY. If, on or after the date hereof, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Bank (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans to
any Borrower and such Bank shall so notify the Agent, the Agent shall forthwith
give notice thereof to the other Banks and such Borrower, whereupon until such
Bank notifies such Borrower and the Agent that the circumstances giving rise to
such suspension no longer exist, the obligation of such Bank to make Euro-Dollar
Loans to such Borrower shall be suspended. Before giving any notice to the Agent
pursuant to this Section, such Bank shall designate a different Euro-Dollar
Lending Office if such designation will avoid the need for giving such notice
and will not, in the judgment of such Bank, be otherwise disadvantageous to such
Bank. If such Bank shall determine
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that it may not lawfully continue to maintain and fund any of its outstanding
Euro-Dollar Loans to such Borrower to maturity and shall so specify in such
notice, such Borrower shall immediately prepay in full the then outstanding
principal amount of each such Euro-Dollar Loan, together with accrued interest
thereon. Concurrently with prepaying each such Euro-Dollar Loan, such Borrower
shall borrow a Base Rate Loan in an equal principal amount from such Bank (on
which interest and principal shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate
Loan.
SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If on or after
(x) the date hereof, in the case of any Committed Loan or any obligation to make
Committed Loans or (y) the date of the related Money Market Quote, in the case
of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency:
(i) shall subject any Bank (or its Applicable Lending Office) to any
tax, duty or other charge with respect to its Fixed Rate Loans, its Notes
or its obligation to make Fixed Rate Loans, or shall change the basis of
taxation of payments to any Bank (or its Lending Office) of the principal
of or interest on its Fixed Rate Loans or any other amounts due under this
Agreement in respect of its Fixed Rate Loans or its obligation to make
Fixed Rate Loans (except for changes in the rate of tax on the overall net
income of such Bank or its Applicable Lending Office imposed by the
jurisdiction in which such Bank's principal executive office or Applicable
Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any such requirement imposed by the Board of Governors
of the Federal Reserve System, but excluding (i) with respect to any CD
Loan any such requirement included in an applicable Domestic Reserve
Percentage and (ii) with respect to any Euro-Dollar Loan any such
requirement with respect
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to which such Bank is entitled to compensation during the relevant Interest
Period under Section 2.17), special deposit, insurance assessment
(excluding, with respect to any CD Loan, any such requirement reflected in
an applicable Assessment Rate) or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Bank (or
its Applicable Lending Office) or shall impose on any Bank (or its
Applicable Lending Office) or on the United States market for certificates
of deposit or the London interbank market any other condition affecting its
Fixed Rate Loans, its Notes or its obligation to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or
to reduce the amount of any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under its Note with respect
thereto, by an amount deemed by such Bank to be material, then, within 15 days
after demand by such Bank (with a copy to the Agent), the Company shall pay to
such Bank such additional amount or amounts as will compensate such Bank for
such increased cost or reduction.
(b) If any Bank shall have determined that, on or after the date
hereof, the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency (including any determination by any such authority, central
bank or comparable agency that, for purposes of capital adequacy requirements,
the Commitments hereunder do not constitute commitments with an original
maturity of one year or less, which shall be deemed to be a change in the
interpretation and administration of such requirements), has or would have the
effect of reducing the rate of return on capital of such Bank (or its Parent) as
a consequence of such Bank's obligations hereunder to a level below that which
such Bank (or its Parent) could have achieved but for such adoption, change,
request or directive (taking into consideration its policies with respect to
capital adequacy) by an amount deemed by such Bank to be material, then from
time to time, within 15 days after demand by such Bank (with a copy to the
Agent), the Company shall pay to such Bank such additional amount or amounts as
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will compensate such Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Company and the Agent of any
event of which it has knowledge, occurring on or after the date hereof, which
will entitle such Bank to compensation pursuant to this Section and will
designate a different Applicable Lending Office if such designation will avoid
the need for, or reduce the amount of, such compensation and will not, in the
judgment of such Bank, be otherwise disadvantageous to such Bank. A certificate
of any Bank claiming compensation under this Section and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error. In determining such amount, such Bank may use any
reasonable averaging and attribution methods.
SECTION 8.04. BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE
LOANS. If (i) the obligation of any Bank to make Euro-Dollar Loans to any
Borrower has been suspended pursuant to Section 8.02 or (ii) any Bank has
demanded compensation under Section 8.03(a) with respect to its CD Loans or
Euro-Dollar Loans and a Borrower shall, by at least three Euro-Dollar Business
Days' prior notice to such Bank through the Agent, have elected that the
provisions of this Section shall apply to such Bank, then, unless and until such
Bank notifies such Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
(a) all Loans to such Borrower which would otherwise be made by such
Bank as CD Loans or Euro-Dollar Loans, as the case may be, shall be made
instead as Base Rate Loans (on which interest and principal shall be
payable contemporaneously with the related Fixed Rate Loans of the other
Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case may
be, to such Borrower has been repaid, all payments of principal which would
otherwise be applied to repay such Fixed Rate Loans shall be applied to
repay its Base Rate Loans to such Borrower instead.
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ARTICLE IX
REPRESENTATIONS AND WARRANTIES
OF ELIGIBLE SUBSIDIARIES
Each Eligible Subsidiary shall be deemed by the execution and delivery
of its Election to Participate to have represented and warranted as of the date
thereof that:
SECTION 9.01. CORPORATE EXISTENCE AND POWER. It is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as then conducted.
SECTION 9.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION.
The execution and delivery by it of its Election to Participate and its Notes,
and the performance by it of this Agreement and its Notes, are within its
corporate powers, have been duly authorized by all necessary corporate action,
require no action by or in respect of, or filing with, any governmental body,
agency or official and do not contravene, or constitute a default under, any
provision of applicable law or regulation or of its certificate of incorporation
or by-laws or of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Company or such Eligible Subsidiary or result in the
creation or imposition of any Lien on any asset of the Company or any of its
Subsidiaries.
SECTION 9.03. BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of such Eligible Subsidiary and its Notes, when executed and
delivered in accordance with this Agreement, will constitute valid and binding
obligations of such Eligible Subsidiary, in each case enforceable in accordance
with their respective terms except as the same may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by general
principles of equity.
SECTION 9.04. TAXES. Except as disclosed to the Banks in writing prior
to the delivery of such Election to Participate, there is no income, stamp or
other tax of any country, or any taxing authority thereof or therein, imposed by
or in the nature of withholding or otherwise, which is imposed on any payment to
be made by such Eligible Subsidiary pursuant hereto or on its Notes, or is
imposed on
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or by virtue of the execution, delivery or enforcement of its Election to
Participate, this Agreement or its Notes.
ARTICLE X
GUARANTY
SECTION 10.01. THE GUARANTY. The Company hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest on each Note issued
by any Eligible Subsidiary pursuant to this Agreement, and the full and punctual
payment of all other amounts payable by any Eligible Subsidiary under this
Agreement. Upon failure by any Eligible Subsidiary to pay punctually any such
amount, the Company shall forthwith on demand pay the amount not so paid at the
place and in the manner specified in this Agreement.
SECTION 10.02. GUARANTY UNCONDITIONAL. The obligations of the Company
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of any Eligible Subsidiary under this
Agreement or any Note, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to this
Agreement or any Note;
(iii) any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of any Eligible Subsidiary
under this Agreement or any Note;
(iv) any change in the corporate existence, structure or ownership
of any Eligible Subsidiary, or any insolvency, bankruptcy, reorganization
or other similar proceeding affecting any Eligible Subsidiary or its
assets, or any resultant release or discharge of the obligations of any
Eligible Subsidiary hereunder or under any Note;
(v) the existence of any claim, set-off or other rights which the
Company may have at any time against
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any Eligible Subsidiary, the Agent, any Bank or any other Person, whether
in connection herewith or any unrelated transactions, PROVIDED that
nothing herein shall prevent the assertion of any such claim by separate
suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against any
Eligible Subsidiary for any reason of this Agreement or any Note, or any
provision of applicable law or regulation purporting to prohibit the
payment by any Eligible Subsidiary of the principal of or interest on any
Note or any other amount payable by it under this Agreement; or
(vii) any other act or omission to act or delay of any kind by any
Eligible Subsidiary, the Agent, any Bank or any other Person or any other
circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of or defense to the
Company's obligations hereunder.
SECTION 10.03. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN
CERTAIN CIRCUMSTANCES. The Company's obligations hereunder shall remain in full
force and effect until the Commitments shall have terminated and the principal
of and interest on the Notes and all other amounts payable by the Company and
each Eligible Subsidiary under this Agreement shall have been paid in full. If
at any time any payment of any principal of or interest on any Note or any other
amount payable by any Eligible Subsidiary under this Agreement is rescinded or
must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of any Eligible Subsidiary or otherwise, the Company's
obligations hereunder with respect to such payment shall be reinstated at such
time as though such payment had been due but not made at such time.
SECTION 10.04. WAIVER BY THE COMPANY. The Company irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not PROVIDED for
herein, as well as any requirement that at any time any action be taken by any
Person against any Eligible Subsidiary or any other Person.
SECTION 10.05. NO SUBROGATION. If the Company makes any payment
under this Article X in respect of any obligation of an Eligible Subsidiary, the
Company shall not be subrogated to the rights of the holder of such obligation
against such Eligible Subsidiary with respect to such payment.
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SECTION 10.06. STAY OF ACCELERATION. In the event that acceleration
of the time for payment of any amount payable by any Eligible Subsidiary under
this Agreement or the Notes is stayed upon the insolvency, bankruptcy or
reorganization of such Eligible Subsidiary, all such amounts otherwise subject
to acceleration under the terms of this Agreement shall nonetheless be payable
by the .Company hereunder forthwith on demand by the Agent made at the request
of the Required Banks.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. NOTICES. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to such
party: (x) in the case of any Borrower or the Agent, at its address, facsimile
number or telex number set forth on the signature pages hereof (or, in the case
of an Eligible Subsidiary, its Election to Participate), (y) in the case of any
Bank, at its address, facsimile number or telex number set forth in its
Administrative Questionnaire or (z) in the case of any party, such other
address, facsimile number or telex number as such party may hereafter specify
for the purpose by notice to the Agent and the Company. Each such notice,
request or other communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in this Section and the
appropriate answerback is received, (ii) if given by facsimile transmission,
when transmitted to the facsimile number specified in this Section and
confirmation of receipt is received, (iii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iv) if given by any other means, when delivered at
the address specified in this Section; PROVIDED that notices to the Agent under
Article II or Article VIII shall not be effective until received.
SECTION 11.02. NO WAIVERS. No failure or delay by the Agent or any
Bank in exercising any right, power or. privilege hereunder or under any Note
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein PROVIDED shall
be cumulative and not exclusive of any rights or remedies provided by law.
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SECTION 11.03. EXPENSES; INDEMNIFICATION. (a) The Company shall pay
(i) all out-of-pocket expenses of the Agent, including reasonable fees and
disbursements of special counsel for the Agent, in connection with the
preparation of this Agreement, any waiver or consent hereunder or any amendment
hereof or any Default or alleged Default hereunder and (ii) if an Event of
Default occurs, all out-of-pocket expenses incurred by the Agent or any Bank,
including (without duplication) the reasonable fees and disbursements of outside
counsel and the allocated cost of inside counsel, in connection with such Event
of Default and collection, bankruptcy, insolvency and other enforcement
proceedings resulting therefrom. The Company shall indemnify each Bank against
any transfer taxes, documentary taxes, assessments or charges made by any
governmental authority by reason of the execution and delivery of this
Agreement, any Election to Participate or Election to Terminate or any Note.
(b) The Company agrees to indemnify the Agent and each Bank, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) brought or threatened
relating to or arising out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder; PROVIDED that no Indemnitee shall have the right to
be indemnified hereunder for such Indemnitee's own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.
SECTION 11.04. SHARING OF SET-OFFS. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest due
with respect to the Note of any Borrower held by it which is greater than the
proportion received by any other Bank in respect of the aggregate amount of
principal and interest due with respect to the Note of such Borrower held by
such other Bank, the Bank receiving such proportionately greater payment shall
purchase such participations in the Notes of such Borrower held by the other
Banks, and such other adjustments shall be made, as may be required so that all
such payments of principal and interest with respect to
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the Notes of such Borrower held by the Banks shall be shared by the Banks pro
rata; PROVIDED that nothing in this Section shall impair the right of any Bank
to exercise any right of set-off or counterclaim it may have and to apply the
amount subject to such exercise to the payment of indebtedness of a Borrower
other than its indebtedness hereunder. Each Borrower agrees, to the fullest
extent it may effectively do so under applicable law, that any holder of a
participation in a Note, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a participation
were a direct creditor of such Borrower in the amount of such participation.
SECTION 11.05. AMENDMENTS AND WAIVERS. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Company and the Required Banks
(and, if the rights or duties of the Agent are affected thereby, by the Agent);
PROVIDED that no such amendment or waiver shall, unless signed by all the Banks,
(i) increase or decrease the Commitment of any Bank (except for a ratable
decrease in the Commitments of all Banks) or subject any Bank to any additional
obligation, (ii) reduce the principal of or rate of interest on any Loan or any
fees hereunder, (iii) postpone the date fixed for any payment of principal of or
interest on any Loan or any fees hereunder or for termination of any Commitment,
(iv) change the percentage of the Commitments or of the aggregate unpaid
principal amount of the Notes, or the number of Banks, which shall be required
for the Banks or any of them to take any action under this Section or any other
provision of this Agreement or (v) change the provisions of Article X; PROVIDED
FURTHER that no such amendment, waiver or modification shall, unless signed by
an Eligible Subsidiary, (w) subject such Eligible Subsidiary to any additional
obligation, (x) increase the principal of or rate of interest on any
outstanding Loan of such Eligible Subsidiary, (y) accelerate the stated maturity
of any outstanding Loan of such Eligible Subsidiary or (z) change this Proviso.
SECTION 11.06. SUCCESSORS AND ASSIGNS. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that no Borrower may assign
or otherwise transfer any of its rights under this Agreement without the prior
written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of
55
<PAGE> 156
its Loans. In the event of any such grant by a Bank of a participating interest
to a Participant, whether or not upon notice to the Borrowers and the Agent,
such Bank shall remain responsible for the performance of its obligations
hereunder, and the Borrowers and the Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
under this Agreement. Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall retain the sole right
and responsibility to enforce the obligations of the Borrowers hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; PROVIDED that such participation
agreement may provide that such Bank will not agree to any modification,
amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of
Section 11.05 without the consent of the Participant. The Borrowers agree that
each Participant shall, to the extent provided in its participation agreement,
be entitled to the benefits of Article VIII with respect to its participating
interest. An assignment or other transfer which is not permitted by subsection
(c) or (d) below shall be given effect for purposes of this Agreement only to
the extent of a participating interest granted in accordance with this
subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part (equivalent to an
initial Commitment of not less than $5,000,000) of all, of its rights and
obligations under this Agreement and the Notes, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
in substantially the form of Exhibit J hereto executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed consent of the Company and
the Agent; PROVIDED that if an Assignee is an affiliate of such transferor Bank
or was a Bank immediately prior to such assignment, no such consent shall be
required, but the Assignee and the transferor Bank shall provide prompt notice
of such assignment, together with information concerning addresses and related
information with respect to the Assignee, to the Agent; and PROVIDED FURTHER
that such assignment may, but need not, include rights of the transferor Bank in
respect of outstanding Money Market Loans. Upon execution and delivery of such
instrument and payment by such Assignee to such transferor Bank of an amount
equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption,
56
<PAGE> 157
and the transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant to this subsection
(c), the transferor Bank, the Agent and the Borrowers shall make appropriate
arrangements so that, if required, new Notes are issued to the Assignee. In
connection with any such assignment, the transferor Bank shall pay to the Agent
an administrative fee for processing such assignment in the amount of $2,500. If
the Assignee is not incorporated under the laws of the United States or a state
thereof, it shall deliver to the Company and the Agent certification as to
exemption from deduction or withholding of any United States federal income
taxes in accordance with Section 2.18.
(d) Any Bank may at any time assign all or any portion of its rights
under this Agreement and its Notes to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.03 or
11.03(a) than such Bank would have been entitled to receive with respect to the
rights transferred, unless such transfer is made with the Company's prior
written consent or by reason of the provisions of Section 8.02 or 8.03 requiring
such Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
(f) If any Reference Bank transfers its Notes to an unaffiliated
institution, the Agent shall, in consultation with the Company and with the
consent of the Required Banks, appoint another Bank to act as a Reference Bank
hereunder.
SECTION 11.07. COLLATERAL. Each of the Banks represents to the Agent
and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 11.08. GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE OF
PROCESS. This Agreement, each Election to Participate, each Election to
Terminate and each Note shall be governed by and construed in accordance with
the laws of the State of New York. Each Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York
57
<PAGE> 158
and of any New York State court sitting in New York City for purposes of all
legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. Each Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. Each Borrower hereby appoints CT Corporation System
its authorized agent to accept and acknowledge service of any and all processes
which may be served in any suit, action or proceeding of the nature referred to
in this Section 11.08 and consents to process being served in any such suit,
action or proceeding upon CT Corporation System in any manner or by the mailing
of a copy thereof by registered or certified mail, postage prepaid, return
receipt requested, to such Borrower's address referred to in Section 11.01; and
(d) agrees that such service (i) shall be deemed in every respect effective
service of process upon it in any such suit, action or proceeding and (ii)
shall, to the fullest extent permitted by law, be taken and held to be valid
personal service upon and personal delivery to it. A copy of any summons or
complaint served on an Eligible Subsidiary pursuant to the foregoing shall be
sent to the Company by registered or certified mail. Each Eligible Subsidiary
represents and warrants that CT Corporation System has agreed in writing to
accept such appointment and that true copies of such acceptance will be
furnished to the Agent prior to or concurrently with delivery of such Eligible
Subsidiary's Election to Participate. Nothing in this Section 11.08 shall affect
the right of any Bank to serve process in any manner permitted by law or limit
the right of any Bank to bring proceedings against the Company or any Eligible
Subsidiary in the courts of any jurisdiction or jurisdictions.
SECTION 11.09. COUNTERPARTS; INTEGRATION. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
SECTION 11.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE
AGENT AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY
IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
58
<PAGE> 159
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
THE GILLETTE COMPANY
By /s/ Lloyd B. Swaim
------------------------------------
Title: Vice President and Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Sandra J.S. Kurek
------------------------------------
Title: Associate
59
<PAGE> 160
CREDIT SUISSE
By /s/ Lynn Allegaert
------------------------------------
Title: Member of Senior Management
By /s/ David W. Kratovil
------------------------------------
Title: Member of Senior Management
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Jack M. Harcourt
------------------------------------
Title: Authorized Officer
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ S. Thomas Knoff
------------------------------------
Title: Authorized Agent
FLEET NATIONAL BANK
By /s/ Roger C. Boucher
------------------------------------
Title: Vice President
ABN AMRO BANK N.V. NEW YORK BRANCH
By /s/ Frances Logan
------------------------------------
Title: Vice President
By /s/ John M. Kinney
------------------------------------
Title: Assistant Vice President
60
<PAGE> 161
BANK OF AMERICA ILLINOIS
By /s/ John W. Pocalyko
------------------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ Terry M. Pitcher
------------------------------------
Title: Authorized Signatory
THE CHASE MANHATTAN BANK
By /s/ Peter C. Eckstein
------------------------------------
Title: Vice President
ROYAL BANK OF CANADA
By /s/ Sheryl L. Greenberg
------------------------------------
Title: Manager
BANCA COMMERCIALE ITALIANA,
NEW YORK BRANCH
By /s/ John Michalisin
------------------------------------
Title: Vice President
By /s/ Charles Dougherty
------------------------------------
Title: Vice President
BANK BRUSSELS LAMBERT, NEW YORK BRANCH
By /s/ John Kippax
------------------------------------
Title: Vice President
By /s/ Dominick H.J. Vangaever
------------------------------------
Title: Senior Vice President Credit
61
<PAGE> 162
THE BANK OF TOKYO-MITSUBISHI, LTD
By /s/ Michael J. Cronin
------------------------------------
Title: Attorney-in-fact
BANQUE PARIBAS
By /s/ John J. McCormick, III
------------------------------------
Title: Vice President
By /s/ Duane P. Helkowski
------------------------------------
Title: Assistant Vice President
CITIBANK, N.A.
By /s/ Robert M. Spence
------------------------------------
Title: Managing Director (AIF)
DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By /s/ Stephan A. Wiedemann
------------------------------------
Title: Vice President
By /s/ Thomas A. Foley
------------------------------------
Title: Assistant Vice President
MELLON BANK, N.A.
By /s/ R. Jane Westrich
------------------------------------
Title: Vice President
62
<PAGE> 163
THE SANWA BANK, LIMITED
By /s/ Yutaka Higashino
------------------------------------
Title: Senior Vice President
WACHOVIA BANK OF GEORGIA, N.A.
By /s/ Terence A. Snellings
------------------------------------
Title: Senior Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ Sandra J.S. Kurek
------------------------------------
Title: Associate
63
<PAGE> 164
<TABLE>
COMMITMENT SCHEDULE
<CAPTION>
Bank Commitment
---- ----------
<S> <C>
Morgan Guaranty Trust Company of New York $ 48,800,000
Credit Suisse $ 40,000,000
The First National Bank of Boston $ 32 000 000
The First National Bank of Chicago $ 32 000 000
Fleet National Bank $ B2 000 000
ABN AMRO Bank N.V. New York Branch $ 20 000 000
Bank of America Illinois $ 20 000 000
The Bank of Nova Scotia $ 20,000,000
The Chase Manhattan Bank $ 20,000,000
Royal Bank of Canada $ 20,000,000
Banca Commerciale Italiana, New York Branch $ 12,800 000
Bank Brussels Lambert, New York Branch $ 12,800,000
The Bank of Tokyo-Mitsubishi, Ltd $ 12,800,000
Banque Paribas $ 12,800,000
Citibank, N.A. $ 12,800,000
Deutsche Bank AG, New York and/or $ 12,800,000
Cayman Islands Branches
Mellon Bank, N.A. $ 12,800,000
The Sanwa Bank, Limited $ 12,800,000
Wachovia Bank of Georgia, N.A. $ 12,800,000
------------
Total $400,000,000
</TABLE>
<PAGE> 165
EXHIBIT A
NOTE
New York, New York
, 19
For value received, [name of Borrower], a [jurisdiction of
incorporation] corporation (the "Borrower"), promises to pay to the order of
(the "Bank"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Bank to the Borrower pursuant to the
Credit Agreement referred to below on the last day of the Interest Period
relating to such Loan. The Borrower promises to pay interest on the unpaid
principal amount of each such Loan on the dates and at the rate or rates
provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of Morgan Guaranty Trust Company of
New York, 60 Wall Street, New York, New York.
All Loans made by the Bank, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Bank and, if the Bank so elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing information with respect
to each such Loan then outstanding may be endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; PROVIDED that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This note is one of the Notes referred to in the 364-Day Credit
Agreement dated as of December 20, 1996 among
<PAGE> 166
The Gillette Company, the banks listed on the signature pages thereof and Morgan
Guaranty Trust Company of New York, as Agent (as the same may be amended from
time to time, the "Credit Agreement"). Terms defined in the Credit Agreement are
used herein with the same meanings. Reference is made to the Credit Agreement
for provisions for the prepayment hereof and the acceleration of the maturity
hereof.
The Gillette Company has, pursuant to the provisions of the Credit
Agreement, unconditionally guaranteed the payment in full of the principal of
and interest on this note.*
[NAME OF BORROWER]
By
-------------------------------
Title:
- - ----------
* To be deleted in case of Notes executed and delivered by the Company.
2
<PAGE> 167
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- - --------------------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
3
<PAGE> 168
EXHIBIT B
Form of Money Market Quote Request
----------------------------------
[Date]
To: Morgan Guaranty Trust Company of New York (the "Agent")
From: [Name of Borrower]
Re: 364-Day Credit Agreement (the "Credit Agreement") dated as of
December 20, 1996 among The Gillette Company, the Banks listed on
the signature pages thereof and the Agent
We hereby give notice pursuant to Section 2.03 of the Credit
Agreement that we request Money Market Quotes for the following proposed Money
Market Borrowing(s):
Date of Borrowing:
-------------------------
Principal Amount* Interest Period** Maturity Date
- - ----------------- ----------------- -------------
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
- - ----------
* Amount must be $15,000,000 or a larger multiple of $1,000,000.
** Not less than one month (LIBOR Auction) or not less than 15 days
(Absolute Rate Auction), subject to the provisions of the definition of Interest
Period.
<PAGE> 169
Terms used herein have the meanings assigned to them in the Credit
Agreement.
[NAME OF BORROWER]
By
------------------------------
Title
2
<PAGE> 170
EXHIBIT C
Form of Invitation for Money Market Quotes
------------------------------------------
To: [Name of Bank]
Re: Invitation for Money Market Quotes to [Name of Borrower] (the
"Borrower")
Pursuant to Section 2.03 of the 364-Day Credit Agreement dated as of
December 20, 1996 among The Gillette Company, the Banks parties thereto and the
undersigned, as Agent, we are pleased on behalf of the Borrower to invite you to
submit Money Market Quotes to the Borrower for the following proposed Money
Market Borrowing(s):
Date of Borrowing:
-------------------------
Principal Amount* Interest Period** Maturity Date
- - ----------------- ----------------- -------------
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [9:30 A.M.]
(New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
-------------------------------------
Authorized Officer
<PAGE> 171
EXHIBIT D
Form of Money Market Quote
--------------------------
To: Morgan Guaranty Trust Company of New York, as Agent
Re: Money Market Quote to [Name of Borrower] (the "Borrower")
In response to your invitation on behalf of the Borrower
dated ________________, 19__, we hereby make the following Money Market Quote
on the following terms:
1. Quoting Bank: _______________________________________________
2. Person to contact at Quoting Bank:___________________________
3. Date of Borrowing:___________________________________________*
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
- - --------- --------- ---------------------------------
$
$
[Provided, that the aggregate principal amount of Money Market Loans for which
the above offers may be accepted shall not exceed $____________ .]**
- - ----------
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the individual
offers exceeds the
(notes continued on following page)
<PAGE> 172
We understand and agree that the offer(s) set forth above, subject to
the satisfaction of the applicable conditions set forth in the 364-Day Credit
Agreement dated as of December 20, 1996 among The Gillette Company, the Banks
listed on the signature pages thereof and yourselves, as Agent, irrevocably
obligates us to make the Money Market Loan(s) for which any offer(s) are
accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated: By:
------------------------------ ------------------------------
Authorized Officer
- - ----------
amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger
multiple of $1,000,000.
*** Not less than one month or not less than 15 days, as specified in the
related Invitation. No more than five bids are permitted for each Interest
Period.
**** Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%)
and specify whether "PLUS" or "MINUS".
***** Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
2
<PAGE> 173
by the Company is subject to bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforceability of creditors' rights in general,
usury laws and the general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). With respect
to the foregoing, I express no opinion, however, as to the enforceability of
Section 11.03(b) of the Credit Agreement to the extent the rights to
indemnification provided for therein are violative of any law, rule or
regulation (including any federal or State securities law, rule or regulation)
or public policy.
To the extent that the obligations of the Company may be dependent
upon such matters, I assume for purposes of this opinion that each Bank is duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation; and that the Credit Agreement has been duly
authorized, executed and delivered by the Banks and constitutes the legal, valid
and binding obligation of the Banks, enforceable against the Banks in accordance
with its terms. I do not express any opinion as to the effect of the compliance
by any of the Banks with any state or federal laws or as to the regulatory
status or nature of the business of any of the Banks.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without my prior written consent.
Very truly yours,
Joseph E. Mullaney
3
<PAGE> 174
EXHIBIT E
OPINION OF
COUNSEL FOR THE COMPANY
-----------------------
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am Vice Chairman of the Board of The Gillette Company (the
"Company"), and I am rendering this opinion pursuant to Section 3.01(c) of the
364-Day Credit Agreement dated as of December 20, 1996 among the Company, the
banks parties thereto and Morgan Guaranty Trust Company of New York, as Agent
(the "Credit Agreement"). Terms defined in the Credit Agreement are used herein
as therein defined.
I have examined or caused to be examined by counsel retained by or on
the staff of the Company, among other things, originals or copies, certified or
otherwise identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted or
have had conducted such other investigations of fact and law as I have deemed
necessary or advisable for purposes of this opinion.
I am admitted to practice in the State of Ohio and the Commonwealth of
Massachusetts. No opinion is expressed herein with respect to or as to the
effect of any laws other than the laws of the Commonwealth of Massachusetts, the
federal laws of the United States of America and the General Corporation Law of
the State of Delaware.
Upon the basis of the foregoing, I am of the opinion that:
<PAGE> 175
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of Delaware and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted.
2. The execution, delivery and performance by the Company of the Credit
Agreement and the Notes issued by it are within the Company's corporate powers,
have been duly authorized by all necessary corporate action, require no action
by or in respect of, or filing with, any governmental body, agency or official
and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or by-laws
of the Company or of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Company and known to me or, to the best of my
knowledge, result in the creation or imposition of any Lien on any asset of the
Company or any of its Subsidiaries.
3. The provision in Section 11.08 of the Credit Agreement that the Credit
Agreement and each Note shall be construed in accordance with and governed by
the law of the State of New York is a valid choice of law provision under
Massachusetts law and should be respected by a court sitting in Massachusetts.
4. If a court sitting in Massachusetts were to apply Massachusetts law as
the law governing the Credit Agreement and the Notes, the Credit Agreement would
constitute a valid and binding agreement of the Company and the Notes issued by
it would constitute valid and binding obligations of the Company, in each case
enforceable in accordance with their respective terms.
5. Except as disclosed in the Company's 1995 Form 10-K and the Company's
Latest Form 10-Q, there is no action, suit or proceeding pending against, or to
the best of my knowledge threatened against or affecting, the Company or any of
its Subsidiaries before any court or arbitrator or any governmental body, agency
or official, in which there is a reasonable possibility of an adverse decision
which could materially adversely affect the business, operations or financial
condition of the Company and its Consolidated Subsidiaries, considered as a
whole, or which in any manner draws into question the validity of the Credit
Agreement or the Notes.
My opinion in paragraph 4 above as to the enforceability of the Credit
Agreement and the Notes issued
2
<PAGE> 176
EXHIBIT F
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
--------------------------------------
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the 364-Day Credit
Agreement (the "Credit Agreement") dated as of December 20, 1996 among The
Gillette Company, a Delaware corporation (the "Company"), the banks parties
thereto (the "Banks") and Morgan Guaranty Trust Company of New York, as Agent
(the "Agent"), and have acted as special counsel for the Agent for the purpose
of rendering this opinion pursuant to Section 3.01(d) of the Credit Agreement.
Terms defined in the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Company of the
Credit Agreement and its Notes are within the Company's corporate powers and
have been duly authorized by all necessary corporate action.
<PAGE> 177
2. The Credit Agreement constitutes a valid and binding agreement of
the Company and each Note issued by it constitutes a valid and binding
obligation of the Company, in each case enforceable in accordance with its
terms, except as the same may be limited by bankruptcy, insolvency or similar
laws affecting creditors' rights generally and by general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York) in
which any Bank is located which limits the rate of interest that such Bank may
charge or collect.
This opinion is rendered solely to you in connection with the above
matter. This opinion may not be relied upon by you for any other purpose or
relied upon by any other person without our prior written consent.
Very truly yours,
2
<PAGE> 178
EXHIBIT G
FORM OF ELECTION TO PARTICIPATE
, 19
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent for
the Banks named in the 364-Day
Credit Agreement dated as of December 20, 1996
among The Gillette Company,
such Banks and such Agent (as amended
from time to time, the "Credit Agreement")
Dear Sirs:
Reference is made to the Credit Agreement described above. Terms not
defined herein which are defined in the Credit Agreement shall have for the
purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a [jurisdiction of
incorporation] corporation, hereby elects to be an Eligible Subsidiary for
purposes of the Credit Agreement, effective from the date hereof until an
Election to Terminate shall have been delivered on behalf of the undersigned in
accordance with the Credit Agreement. The undersigned confirms that the
representations and warranties set forth in Article IX of the Credit Agreement
are true and correct as to the undersigned as of the date hereof, and the
undersigned hereby agrees to perform all the obligations of an Eligible
Subsidiary under, and to be bound in all respects by the terms of, the Credit
Agreement, including without limitation Sections 11.08 and 11.10 thereof, as if
the undersigned were a signatory party thereto.
[Tax disclosure pursuant to Section 9.04, if any]
<PAGE> 179
The address to which all notices to the undersigned Eligible
Subsidiary under the Credit Agreement should be directed is: . This
instrument shall be construed in accordance with and governed by the laws of
the State of New York.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
By
------------------------------------
Title:
The undersigned hereby confirms that [name of Eligible Subsidiary] is
an Eligible Subsidiary for purposes of the Credit Agreement described above.
THE GILLETTE COMPANY
By
------------------------------------
Title:
Receipt of the above Election to Participate is hereby acknowledged on
and as of the date set forth above.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By
------------------------------------
Title:
2
<PAGE> 180
Company and the Agent is evidence of this consent. Pursuant to Section 11.06(c)
the Borrower agrees to execute and deliver a Note [and to cause each Eligible
Subsidiary to execute and deliver a Note] payable to the order of the Assignee
to evidence the assignment and assumption provided for herein.]*
SECTION 5. NON-RELIANCE ON ASSIGNOR. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of any
Borrower, or the validity and enforceability of the obligations of any Borrower
in respect of the Credit Agreement or any Note. The Assignee acknowledges that
it has, independently and without reliance on the Assignor, and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and will continue to be
responsible for making its own independent appraisal of the business, affairs
and financial condition of the Borrowers.
SECTION 6. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By
--------------------------------
Title:
- - ---------
* Consent is required if the Assignee is not an affiliate of the Assignor
and was not a Bank immediately prior to the assignment.
3
<PAGE> 181
[ASSIGNEE]
By
-----------------------------------
Title:
[THE GILLETTE COMPANY]
By
-----------------------------------
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
-----------------------------------
Title:
4
<PAGE> 182
EXHIBIT H
FORM OF ELECTION TO TERMINATE
, 19
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent for
the Banks named in the 364-Day Credit
Agreement dated as of
December 20, 1996 among The Gillette
Company, such Banks and such Agent
(as amended from time to time, the
"Credit Agreement")
Dear Sirs:
Reference is made to the Credit Agreement described above. Terms not
defined herein which are defined in the Credit Agreement shall have for the
purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a [jurisdiction of
incorporation] corporation, hereby elects to terminate its status as an Eligible
Subsidiary for purposes of the Credit Agreement, effective as of the date
hereof. The undersigned hereby represents and warrants that all principal and
interest on all Notes of the undersigned and all other amounts payable by the
undersigned pursuant to the Credit Agreement have been paid in full on or prior
to the date hereof. Notwithstanding the foregoing, this Election to Terminate
shall not affect any obligation of the undersigned under the Credit Agreement or
under any Note heretofore incurred.
This instrument shall be construed in accordance with and governed by
the laws of the State of New York.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
<PAGE> 183
By.
-----------------------------------
Title:
The undersigned hereby confirms that the status of [name of Eligible
Subsidiary] as an Eligible Subsidiary for purposes of the Credit Agreement
described above is terminated as of the date hereof.
THE GILLETTE cOMPANY
By.
-----------------------------------
Title:
Receipt of the above Election to Terminate is hereby acknowledged on
and as of the date set forth above.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By.
-----------------------------------
Title:
2
<PAGE> 184
EXHIBIT I
OPINION OF
COUNSEL FOR THE BORROWER
(BORROWINGS BY ELIGIBLE SUBSIDIARIES)
[date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am counsel to [name of Eligible Subsidiary, jurisdiction of
incorporation] (the "Borrower") and give this opinion pursuant to Section
3.03(b) of the 364-Day Credit Agreement (as amended to the date hereof, the
"Credit Agreement") dated as of December 20, 1996 among The Gillette Company
(the "Company"), the banks parties thereto and Morgan Guaranty Trust Company of
New York, as Agent. Terms defined in the Credit Agreement are used herein as
therein defined.
I have examined originals or copies, certified or otherwise identified
to my satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law.as I have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation validly existing and in good
standing under the laws of [jurisdiction of incorporation] and is a
Substantially-Owned Consolidated Subsidiary of the Company.
2. The execution and delivery by the Borrower of its Election to
Participate and its Notes and the performance by the Borrower of the Credit
Agreement and its
<PAGE> 185
Notes are within the Borrower's corporate powers, have been duly authorized by
all necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of the Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Borrower.
3. The execution and delivery by the Borrower of its Election to
Participate and its Notes and the performance by the Borrower of the Credit
Agreement and its Notes do not contravene, or constitute a default under, any
provision of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Company or any of its Subsidiaries and known to me
or, to the best of my knowledge, result in the creation or imposition of any
Lien on any asset of the Company or any of its Subsidiaries.*
4. The Credit Agreement constitutes a valid and binding agreement of
the Borrower and its Notes constitute valid and binding obligations of the
Borrower, in each case enforceable in accordance with their respective terms,
except as the same may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity.
Very truly yours,
- - ------------
* The opinion in this paragraph may be given by Counsel for the Company.
2
<PAGE> 186
EXHIBIT J
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of___________ , 19___ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), THE GILLETTE COMPANY (the
"Company") and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the
"Agent").
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, this Assignment and Assumption Agreement (the
"Agreement") relates to the 364-Day Credit Agreement dated as of December 20,
1996 among the Company, the Assignor and the other Banks party thereto, as
Banks, and the Agent (as amended and in effect on the date hereof, the "Credit
Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has
a Commitment to make Loans in an aggregate principal amount at any time
outstanding not to exceed $______________ ;
WHEREAS, Committed Loans made by the Assignor under the Credit
Agreement in the aggregate principal amount of $______________ are outstanding
at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of
the rights of the Assignor under the Credit Agreement in respect of [a portion
of] its Commitment thereunder in an amount equal to $____________ (the "Assigned
Amount"), together with [a corresponding portion of] its outstanding Committed
Loans, and the Assignee proposes to accept assignment of such rights and assume
the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Credit
Agreement.
<PAGE> 187
SECTION 2. ASSIGNMENT. The Assignor hereby assigns and sells to
the Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount of the
Committed Loans made by the Assignor outstanding at the date hereof. Upon the
execution and delivery hereof by the Assignor, the Assignee, the Company and the
Agent and the payment of the amounts specified in Section 3 required to be paid
on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the
rights and be obligated to perform the obligations of a Bank under the Credit
Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii)
the Commitment of the Assignor shall, as of the date hereof, be reduced by a
like amount and the Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee. The
assignment provided for herein shall be without recourse to the Assignor.
SECTION 3. PAYMENTS. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.* It is
understood that commitment and/or facility fees accrued to the date hereof are
for the account of the Assignor and such fees accruing from and including the
date hereof are for the account of the Assignee. Each of the Assignor and the
Assignee hereby agrees that if it receives any amount under the Credit Agreement
which is for the account of the other party hereto, it shall receive the same
for the account of such other party to the extent of such other party's interest
therein and shall promptly pay the same to such other party.
[SECTION 4. CONSENT OF THE COMPANY AND THE AGENT. This Agreement
is conditioned upon the consent of the Company and the Agent pursuant to Section
11.06(c) of the Credit Agreement. The execution of this Agreement by the
- - ----------
* Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion of
any upfront fee to be paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generically or by formula rather
than as a fixed sum.
2
<PAGE> 1
EXHIBIT 11
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS, SHARES IN MILLIONS)
<TABLE>
<CAPTION>
1996 1995 1994
------ ------- ------
<S> <C> <C> <C>
NET INCOME PER COMMON SHARE -- ASSUMING NO DILUTION
Net income as reported........................................ $948.7 $1069.1 $919.1
Less: Preferred Stock Dividends, net of tax benefit........... (4.6) (4.7) (4.7)
------ ------- ------
Net income available to Common Shareholders................... $944.1 $1064.4 $914.4
====== ======= ======
Average common shares outstanding............................. 553.5 549.9 548.2
Reported net income per common share.......................... $ 1.71 $ 1.94 $ 1.67
NET INCOME PER COMMON SHARE -- ASSUMING FULL DILUTION
Net income available to Common Shareholders (as above)........ $944.1 $1064.4 $914.4
Add: Series C ESOP Preferred Stock dividend, net of tax
benefit.................................................... 4.6 4.7 4.7
Deduct: Additional ESOP costs, net of tax benefit............. (.7) (1.6) (2.2)
------ ------- ------
Adjusted net income available to common shareholders.......... $948.0 $1067.5 $916.9
====== ======= ======
Average common shares outstanding............................. 553.5 549.9 548.2
Add: Conversion of Series C ESOP Preferred Stock.............. 6.4 6.5 6.6
Net additional common shares upon exercise of stock
options.................................................. 10.0 8.2 5.9
------ ------- ------
Adjusted average common shares outstanding.................... 569.9 564.6 560.7
------ ------- ------
Net income per common share -- assuming full dilution......... $ 1.66 $ 1.89 $ 1.64
</TABLE>
1994 per share amounts and average number of shares outstanding have been
restated to give effect to the two-for-one stock split effected as a 100% common
stock dividend to holders of record on June 1, 1995.
14
<PAGE> 1
Exhibit 12
COMPUTATION OF THE RATIOS OF CURRENT ASSETS TO CURRENT
LIABILITIES FOR THE YEARS 1996, 1995 AND 1994
1996 1995 1994
---- ---- ----
Current Assets 4573.2 4087,7 3587.6
Current Liabilities 2934.7 2590.4 2161.4
------ ------ ------
Current Ratio 1.62 1.58 1.66
<PAGE> 1
Exhibit 13
ABOUT THE COVER
Shown against a backdrop of some leading Company brands, the six products on the
cover of our Annual Report represent the six businesses that make up the
Gillette portfolio, arranged in the order of their addition to the Company.
* The SensorExcel shaving system, for the blade and razor business on
which the Company was founded in 1901.
* The Gillette Series Clear Stick deodorant/antiperspirant, for the
toiletries and cosmetics business that Gillette entered in 1948 with
the acquisition of Toni.
* The Waterman Boucheron fountain pen, for stationery products, which
became a Gillette business in 1955 with the purchase of Paper Mate.
* The Braun Flex Integral 400 electric shaver, for the Braun small
electric appliance business acquired in 1967.
* The Oral-B Advantage toothbrush, for the Oral-B oral care business
purchased in 1984.
* The Duracell PowerCheck AA battery, for the Duracell battery business
that merged into Gillette in 1996.
- - --------------------------------------------------------
FINANCIAL HIGHLIGHTS 1
- - --------------------------------------------------------
LETTER TO STOCKHOLDERS 3
- - --------------------------------------------------------
POWERING UP WITH DURACELL 6
- - --------------------------------------------------------
REVIEW OF OPERATIONS 8
- - --------------------------------------------------------
MANAGEMENT'S DISCUSSION 20
- - --------------------------------------------------------
FINANCIAL STATEMENTS 24
- - --------------------------------------------------------
HISTORICAL FINANCIAL SUMMARY 40
- - --------------------------------------------------------
PRINCIPAL DIVISIONS AND SUBSIDIARIES 42
- - --------------------------------------------------------
DIRECTORS AND OFFICERS 44
- - --------------------------------------------------------
CORPORATE AND STOCKHOLDER INFORMATION 45
- - --------------------------------------------------------
<PAGE> 2
THE GILLETTE
COMPANY
Founded in 1901, The Gillette Company is the world leader in male grooming
products, a category that includes blades and razors, shaving preparations and
electric shavers. Gillette also holds the number one position worldwide in
selected female grooming products, such as wet shaving products and hair
epilation devices. The Company is the world's top seller of writing instruments
and correction products, toothbrushes and oral care appliances. In addition, the
Company is the world leader in alkaline batteries.
Gillette manufacturing operations are conducted at 64 facilities in 27
countries, and products are distributed through wholesalers, retailers and
agents in over 200 countries and territories.
<PAGE> 3
LETTER TO
STOCKHOLDERS
We are pleased to report that The Gillette Company finished its 95th year in
record fashion, achieving new highs in sales, net income and earnings per share.
The year's most significant event was the merger with Duracell International,
adding the long-sought "new leg" to our business portfolio.
We again attained record results in each of our business segments,
geographic regions and operating groups, continuing a pattern of strong,
consistent growth.
In 1996, net sales for the combined companies increased 10% to $9.70
billion, with sales of both the pre-merger Gillette and Duracell businesses up
10%. Before special charges, net income improved 15% to $1.23 billion, and
earnings per common share rose 14% to $2.22. For pre-merger Gillette
shareholders, earnings per share rose 20%, compared with 1995, due to both
improved performance and the accretion from the merger pooling.
Reported results for the year were affected by special one-time charges
related to the merger. These included $65 million for transaction costs and a
$348 million charge for integration activities to combine the operations of the
two companies. These charges, all taken in the fourth quarter, were equivalent
to $.51 per common share. After these charges, net income amounted to $949
million, and earnings per share were $1.71.
For the 91st consecutive year, the Company paid cash dividends on its
common stock. Dividends declared rose 20% to 72 cents, up from 60 cents in 1995.
This marks the second consecutive year of a 20% dividend increase and the 19th
successive annual increase in dividends per common share, reflecting our
continued strong business fundamentals.
Duracell is an excellent strategic fit for our tightly focused,
technologically driven consumer products business. Duracell and Gillette share
numerous characteristics, including global brand franchises, common distribution
channels, exceptional merchandising opportunities and geographic expansion
potential. Given the distribution similarities of blades and batteries, we
expect the Duracell business will gain significant economies of scale and
greater market penetration through Gillette's worldwide distribution network.
With only 20% of Duracell sales outside North America and Western Europe,
there are significant growth opportunities ahead. We believe there will be
substantial possibilities to achieve greater efficiency in administrative,
distribution and support areas, which will free up additional resources to
invest in future growth. To learn more about the potential we foresee for the
Duracell product line, please read "Powering Up With Duracell," which follows
this letter.
The Company's strong growth in 1996 was reflected in the superior
performance of Gillette stock, which again outperformed the stock market
averages in terms of total return. The annual return to investors last year was
50%, nearly double the returns for the Dow Jones Industrial Average and the
Standard & Poor's 500.
[Picture of Gillette Chairman Alfred M. Zeien, left, and President Michael C.
Hawley]
[Caption: Gillette Chairman Alfred M. Zeien, left, and President Michael C.
Hawley]
3
<PAGE> 4
This exceptional performance reflects a long-term pattern. Since the end of
1990, the compound annual return to shareholders has been 32%, compared with 19%
for the Dow Jones Industrial Average and 18% for the Standard & Poor's 500. In
dollar terms, the market value of Gillette stock increased more than $36 billion
during this period.
- - --------------------------------------------------------------------------------
"Since the end of 1990,
the compound annual return to
shareholders has been 32%."
- - --------------------------------------------------------------------------------
Over the last 10 years, Gillette stock has moved up at a 31% average annual
rate, about twice that of the major market averages. The value of a $1,000
investment in Gillette stock at the end of 1986 grew to $15,423 by the end of
1996, more than three times the value of a comparable investment in either of
the market averages.
<TABLE>
<CAPTION>
Compounded
Investment Value Rate of
12/31/86 12/31/96 Return
- - -----------------------------------------------------
<S> <C> <C> <C>
Gillette $1,000 $15,423 31%
DJIA $1,000 $ 4,653 17%
S&P 500 $1,000 $ 4,127 15%
- - -----------------------------------------------------
</TABLE>
This strong performance is the result of focusing on the Company's mission
- - - to achieve or enhance clear leadership, worldwide, in the core consumer
product categories in which we choose to compete. In 1996, a record 81% of our
sales came from the 13 product categories in which we hold the world leadership
position. This proportion has grown 25 percentage points from 56% in the past
five years. The Duracell merger has given the Company clear world leadership in
the fast-growing alkaline battery category. In the past year, we also have added
Braun hair care appliances and ThermoScan infrared ear thermometers to our
leadership categories.
In addition, more than 95% of our sales came from our core categories. This
proportion has risen six percentage points in the last five years. As we focus
our efforts on these core businesses, we look to improve their sales and market
position worldwide.
[GRAPH}
GILLETTE FIVE-YEAR PRICE TREND
Closing Weekly Stock Price
Year Price
---- -----
1992 $25
1993 $27
1994 $35
1995 $43
1996 $70
We continue to emphasize our three growth drivers - research and
development, capital spending and advertising. We expect total spending on these
growth drivers to rise as fast as sales to assure future growth. For 1996,
investment in the three growth drivers climbed 18%, well ahead of the 10% sales
growth. A majority of last year's increased investment was in capital spending
to enlarge capacity across all product lines, to geographically expand our
businesses, to develop more efficient production methods and to launch new
products.
In 1996, 41% of Gillette sales came from products introduced in the past
five years. Excluding Duracell, the percentage was at an all-time high of 47% of
sales. Our objective is to maintain the new product ratio at well above 40% of
sales, and we expect to generate a significant increase in this ratio in 1997.
During 1996, we again introduced more than 20 new products, maintaining the
accelerated pace of recent years. We expect this strong program to continue in
1997. We also will broaden distribution of recently introduced products, such as
the SensorExcel for Women shaving system, Duracell PowerCheck batteries, the
Satin Care female shaving gel line and ThermoScan infrared ear thermometers.
In addition to the Duracell merger, we made two smaller acquisitions and
entered into an important joint venture in 1996. We acquired the Factory for
Consumer Products, a major Russian blade manufacturer that strengthens our
leadership position in the world's second largest blade market. We also acquired
Astra, the leading Czech producer of blades and razors. For 1997, these two
acquisitions will add more than five points to our unit market share in the
worldwide blade market. Lastly, we established a joint venture with Luxor Pen
Company, India's
4
<PAGE> 5
leading writing instruments marketer, giving us broad distribution in this large
and growing market.
Geographic expansion also has played an important role in our recent
success, with our business in developing markets showing especially significant
progress. Sales in Korea and Poland climbed sharply last year, while those in
Russia and India nearly doubled. All four countries are now among our top 25
markets.
Other areas of great progress in 1996 are highlighted below.
* The Sensor franchise continued its exceptional performance, as sales
advanced 18%. This growth was driven by the SensorExcel shaving system and
outstanding acceptance of our newest female system, SensorExcel for Women. Total
sales of Sensor products now exceed the total worldwide sales of all competitors
combined.
* Gillette Series male grooming products again registered significant
sales growth. The performance was particularly strong outside the United States,
where sales more than doubled, aided by gains in established markets and entry
into new areas. The superior quality of these products, their trade and consumer
acceptance around the world and the synergies with Sensor shaving systems give
us confidence that this line will continue its excellent growth into 1997 and
beyond.
- - --------------------------------------------------------------------------------
"In 1996, 41% of Gillette sales
came from products introduced in
the past five years."
- - --------------------------------------------------------------------------------
* The Company's oral care products - Oral-B toothbrushes and dental
products, as well as Braun Oral-B oral care appliances - achieved sizable gains
again in 1996. Driven by very successful internally developed products, oral
care sales approached $900 million, more than double the level of five years
ago. Oral-B expanded its worldwide leadership position in toothbrushes, and the
Braun Oral-B plaque remover outsold all competitors combined.
* Duracell PowerCheck, the first battery with a fuel gauge tester, was
launched at midyear in North America and selected European markets in the AA
size. Another in a long line of value-added features from Duracell, PowerCheck
technology will be extended to other geographies and battery sizes as it is
rolled out worldwide in 1997.
- - --------------------------------------------------------------------------------
"A record 81% of our sales came
from the 13 product categories in which
we hold the world leadership position."
- - --------------------------------------------------------------------------------
Our strong 1996 results reflect the exceptional efforts of our talented,
world-class employees, whose ranks were enriched by the merger with Duracell
during the year. We look forward to our joint success in the years ahead.
*
Joseph F. Turley will not be standing for reelection to the Board this year,
having reached the mandatory retirement age for directors. Mr. Turley, who began
his Gillette career in 1960, was President of the Company from 1981 to 1988, the
year he retired. He was elected to the Board in 1980 and has served as a
director since then. His outstanding management skills while involved in
operational responsibilities, together with his perceptive counsel as a
director, have contributed importantly to the Company's progress.
In closing, the addition of Duracell has created a stronger Gillette
Company, with a continued focus on technology-based innovation, a broadly
diversified new products portfolio and substantial geographic expansion
opportunities. The combination has significantly augmented our growth potential,
and we look for accelerated sales and earnings growth through 1997 and into the
next century.
/s/ Alfred M. Zeien
- - -------------------------
Alfred M. Zeien
Chairman of the Board
/s/ Michael C. Hawley
- - -------------------------
Michael C. Hawley
President
March 3, 1997
5
<PAGE> 6
POWERING UP
WITH DURACELL
The merger of Gillette and Duracell has united two great companies, forging a
$10 billion consumer products giant whose stable of powerful global brands makes
it a formidable player in the world's consumer marketplace.
[Picture of a Duracell PowerCheck Mobile]
[Caption: Duracell PowerCheck Mobiles, which operated in cities across the
United States in the summer of 1996, were part of the marketing campaign
supporting the introduction of Duracell PowerCheck AA batteries.]
Duracell's world leadership in the high-growth alkaline battery category
dramatically expands the broad range of quality consumer products in which
Gillette holds the top position worldwide. These include male grooming products,
selected female grooming products, writing instruments, correction products,
toothbrushes and oral care appliances, among others.
Gillette and Duracell have made a match that augurs well for immediate
acceleration in the Company's growth rate and substantial enhancement of
long-term growth opportunities, given their many similarities in origin,
accomplishments and outlook.
Like Gillette, Duracell was founded on the talents of two extraordinary
men. Just as King C. Gillette's revolutionary idea of a safety razor with
disposable blades was transformed by William E. Nickerson's engineering genius
into a splendid new consumer product manufactured by the millions, so too Samuel
Ruben's brilliant technological breakthroughs in portable energy were converted
into indispensable marketbasket items through the manufacturing prowess of
Philip Rogers Mallory.
And with shrewd business judgment, each partnership created a
repeat-purchase product that consumers would need to buy again and again.
From this masterful beginning, Duracell has achieved market primacy today
through a number of other characteristics shared with Gillette. These include
vigorous new product programs supplying superior, technologically driven
products; peerless manufacturing skill and strength, resulting in uniformly high
product
[Picture of woman sitting in front of a computer terminal]
[Caption: Sizable investments in research and development have enabled Duracell
to meet growing global demand for longer-lasting batteries with value-added
product innovations.]
6
<PAGE> 7
quality; a global presence that offers significant potential for expansion; and
strong consumer brand loyalty around the world
These strengths have enabled Duracell to gain - and hold by a healthy
margin the worldwide leadership of the highly profitable and fast-growing
alkaline battery business. The Duracell brand is today the world's top-selling
alkaline battery, with such consumer- perceptible advantages as freshness dating
and the new on-battery fuel gauge tester.
By the year 2000, the global alkaline battery market is expected to nearly
double in size, to an estimated $7 billion annually, and the Duracell brand is
poised to further strengthen its leading share in several ways.
The first, and most immediate, is geographic expansion. Only one-fifth of
Duracell's business is now in markets outside Europe and North America. In these
international markets where Duracell has not been strongly represented, there
are quick, clear benefits to be gained from linkage with Gillette's
well-established marketing and distribution networks.
Secondly, there is ample opportunity in both new and established markets to
upgrade consumers from lower-value zinc carbon batteries to better-performing,
longer-lasting Duracell alkaline technology. The message to consumers is a
persuasive one - alkaline batteries deliver five to six times the life for two
to three times the price.
Such conversion opportunities exist throughout the world, but are
particularly striking in emerging markets. China, India and Russia, for example,
together account for about six billion batteries annually - some 30 percent of
the world's consumer battery market but less than five percent of batteries
currently sold in these countries is alkaline.
[Picture of man sitting on chair in front of store]
[Caption: Duracell battery sales are increasing rapidly in developing markets, a
major source of potential growth.]
Another growth opportunity stems from Duracell's major research investments
in new alkaline technology that could significantly expand the capabilities of
alkaline batteries, thus dramatically expanding their worldwide market.
Incremental to Duracell's thriving alkaline battery business is the market
for high-power rechargeable batteries, a newer technology whose growth rate is
accelerating with the proliferation of consumer electronic devices like cellular
phones and camcorders. To ensure a substantial share of this market, Duracell
devotes a sizable research effort to developing proprietary rechargeable
technology.
Skillful marketing of superior technology to achieve worldwide leadership
is a shared trait of two powerhouses like Gillette and Duracell. With the merger
of these stellar performers, the Company's prospects in the global consumer
marketplace have never been brighter.
[Picture of new, state-of-the-art Duracell alkaline battery manufacturing plant]
Caption: A new, state-of-the-art Duracell alkaline battery manufacturing plant
will begin production in 1997 in China, the world's largest battery market.
7
<PAGE> 8
BLADES &
RAZORS
Extending the Company's remarkable record of growth, blade and razor sales rose
well above those of 1995, and profits advanced even more rapidly. This
performance further strengthened the clear worldwide leadership Gillette holds
in its principal line of business.
The extraordinary market success of the Sensor family of shaving systems, a
reflection of increasing consumer upgrading to better-performing twin blade
products, continued in 1996 to be the primary factor in the Company's
outstanding blade and razor results.
Within the male portion of this franchise, the top-of-the-line SensorExcel
system again registered excellent gains in sales and market share. Distribution
was extended to some 80 additional markets during the year, and geographic
expansion is continuing. The original Sensor system, launched in 1990, remained
the best seller in the United States and most other major markets.
Another significant contributor to the upward sales trend was the new
SensorExcel for Women shaving system, which generated exceptional demand in the
key markets worldwide where it was introduced. Broadened distribution is planned
for 1997. The Sensor for Women system, launched in 1992, retained substantial
shares in the United States and abroad. The strong performance of these two
innovative products reflects the continuing shift
[Picture of the SensorExcel.]
[Caption: The SensorExcel shaving system's innovative skin guard consists of
five soft, flexible microfins that deliver unrivaled shaving closeness and
comfort.]
[CHART]
Sales of Product Line
$ Millions
Year Sales
---- -----
1992 1,978
1993 2,118
1994 2,351
1995 2,635
1996 2,836
8
<PAGE> 9
by women around the world from disposable razors to refillable shaving systems.
With the increasing prominence of the Sensor franchise, the Atra and Trac
II twin blade shaving systems, important brands since the 1970's, have gradually
yielded their standing as market leaders. Both systems, however, continued to
hold sizable share positions worldwide.
Gillette twin blade disposable razor sales moved moderately higher, paced
by the sustained strong growth of CustomPlus razors, especially in Latin
America, where they are sold under the Prestobarba Max name. Brisk demand in
Europe and North America for new pivoting versions of this razor also
contributed to the sales gain. Gillette disposable razors were again the world's
top sellers, with the Good News brand the number one disposable razor in the
United States for the 21st consecutive year.
In the double edge blade market, the Company strengthened its
long-established world leadership. Although declining slightly overall, double
edge blade sales climbed sharply in developing markets, as the Company
accelerated growth prospects through geographic expansion and acquisition.
During the year, Gillette created selling organizations in Romania and the
Former Yugoslavia, increased its presence in the Former Soviet Union by
acquiring the region's second largest blade business, and purchased a Czech
blade manufacturer with the leading share in that republic and several other
markets.
These initiatives have dramatically enlarged the Company's double edge
blade capacity in emerging markets where these blades are dominant, and also
have enormously expanded the number of Gillette consumers potentially upgrading
from double edge blades to more profitable twin blade products.
9
<PAGE> 10
TOILETRIES &
COSMETICS
Paced by sizable advances in several major categories, the toiletries and
cosmetics business turned in another strong performance in 1996, as consumers
increasingly converted to better-performing products. Sales moved considerably
higher, and profits posted a substantial gain.
Worldwide sales of deodorants/antiperspirants, Gillette's principal
toiletries category, rose sharply for the fourth consecutive year.
In the United States, where the Company's market share reached its highest
level in more than two decades, the sales advance was chiefly attributable to
continued strong demand for clear gel versions of all four Gillette brands Right
Guard, Gillette Series, Soft & Dri and Dry Idea. Also contributing were new
clear stick versions of Right Guard and Gillette Series
deodorants/antiperspirants, which attracted excellent trade and consumer
response following their introduction in North America in late 1996.
International deodorant/antiperspirant sales also were markedly higher, due
primarily to rapid gains by the Gillette Series brand, particularly in Latin
America.
Sales of Gillette shave preparations increased significantly in the United
States and abroad. Gillette brands notably improved their share in key markets,
further strengthening the Company's leading position in the worldwide shave
preparations business. Satin Care for Women shaving gel
10
<PAGE> 11
turned in a superb perfor-mance, nearly doubling sales in the United States and
al-most tripling them in Europe. This innovative, non-soap-based gel, now
available in four formulas, was introduced successfully in more than 40
international markets during 1996, and broadened distribution is under way.
Gillette Series shave preparations also generated sharply higher sales, both in
the United States and abroad, where their rollout continued.
In the after-shave category, worldwide sales of the Gillette Series brand
climbed substantially, and Satin Care skin replenishing creme for women was
launched in the Asia-Pacific region, with further distribution planned in 1997.
The White Rain brand, which includes both hair care and body wash products,
recorded somewhat lower sales in 1996, as strong showings by the White Rain
Solutions hair care line and newly introduced White Rain body wash were unable
to offset weaker sales of other White Rain products.
The Jafra skin care and color cosmetics line - which is sold in North
America, Latin America and Europe by independent consultants at classes in the
home or office - is the Company's entry in the personalized direct selling
portion of the toiletries and cosmetics business. Sales of Jafra's high-quality
products posted a slight increase, due principally to gains in the United States
and Mexico, Jafra's largest market, where Jafra retained its leading share among
direct sellers. During the year, Jafra successfully introduced a global palette
of color cosmetics and two prestige fragrances. Several other new products are
planned for 1997.
With a powerful combination of accelerated new product development,
technologically superior products and an expanding world presence, the Company's
resurgent toiletries business has a solid foundation for continued strong
growth.
[Picture of Right Guard Clear Stick deoderant/antiperspirant.]
[Caption: The Company's proprietary Clear Stick technology enables Right Guard
Clear Stick deodorant/antiperspirant to provide maximum effectiveness without
messy white residue.]
[CHART]
Sales of Product Line
$ Millions
Year Sales
---- -----
1992 971
1993 1,047
1994 1,162
1995 1,236
1996 1,375
11
<PAGE> 12
STATIONERY
PRODUCTS
Despite intense competition, Gillette strengthened its position last year as the
worldwide leader in the writing instruments and correction products businesses.
Sales showed good progress, and profits were significantly above those of 1995.
With its Parker, Paper Mate and Waterman franchises, the Company holds a
strong position within all writing systems, price levels, distribution channels
and geographic areas.
Worldwide sales of Parker writing instruments showed little change. During
the latter part of the year, the new Parker Frontier line of mid-priced writing
intruments was introduced to excellent trade and consumer response in the United
States, as well as in Europe and selected other international markets. At
year-end, several other promising new Parker products, including the Norman
Rockwell Limited Edition pen, were launched in a number of key markets around
the world.
Paced by a strong performance in the United States, Paper Mate writing
instruments registered a notable advance in worldwide sales, with a broad array
of lines contributing.
In the low-priced category, sales of Paper Mate Write Bros. stick pens
moved appreciably higher. The Dynagrip mid-priced pen line,
[Picture of a Parker Frontier pen.]
[Caption: The ergonomic design of the new Parket Frontier pen features an
innovative soft-touch gripping section for a supremely comfortable, secure feel
in your hand.]
[CHART]
Sales of Product Line
$ Millions
Year Sales
---- -----
1992 520
1993 633
1994 807
1995 862
1996 915
12
<PAGE> 13
[PHOTOGRAPH OF SMILING WOMAN]
[LOGO 4 PENS] led by sustained demand for the disposable Dynagrip, posted
[CAPTION: a substantial increase in sales, as did top-selling Flair
The Waterman porous point pens. Another plus was the Paper Mate
Phileas line of Gel-Writer pen, whose sales grew rapidly in its first full
writing instruments] marketing year. Worldwide pencil sales climbed
significantly, reflecting continued strong growth in Paper
Mate Sharpwriter disposable mechanical pencils.
Sales of Waterman luxury writing instruments matched those of the year
before, as lower sales in Europe, Waterman's largest market, offset sizable
advances in the United States and throughout the rest of the world. Sales growth
in these geographic areas was achieved in the mid-priced range, with the new
Expert II and Phileas lines, while the highly successful introductions of the
Boucheron Limited Edition fountain pen and the L'Etalon gold nib line spurred
sharp sales increases in the prestige segment.
[LOGO PAPERMATE PEN PACKAGE]
Worldwide sales of Liquid Paper correction products rose substantially, due
principally to continued brisk demand for Liquid Paper correction pens. Much
higher sales of Liquid Paper DryLine correction films also were a factor. Liquid
Paper correction fluids, which showed little change in sales, retained their
traditional number one market position.
The Company's stationery products business has demonstrated continued
leadership in product innovation, as well as an increasingly strong global
presence. In 1996, for example, Gillette began a joint venture with Luxor, the
largest writing instruments manufacturer in India, bringing the Company instant
leadership in this important market and a solid foundation for future expansion.
Such initiatives provide a sound basis for sustained profitable growth in the
years ahead.
[LOGO PAPERMATE COLOR PEN PACKAGES]
13
<PAGE> 14
[PHOTOGRAPH OF SMILING MAN]
BRAUN
In 1996, Braun again achieved record results. Sales were notably above the
previous year's level, reflecting strong, sustained demand for oral care
appliances and the addition of ThermoScan infrared ear thermometers. Braun
profits climbed substantially.
Although sales of Braun hair removal [LOGO DENTAL TOOLS]
products were lower, due largely to unfavorable [CAPTION:
foreign exchange rates, Braun maintained its The Braun Oral-B oral
worldwide value leadership of the men's electric care center]
shaver market. This number one position was
strongly supported by the premium Flex Integral family of pivoting head shavers,
which recorded sizable sales gains. A major contributor to the advance was a
new, lower-priced Flex Integral range, whose excellent reception by consumers
helped increase the Flex family's share of the world shaver market.
Women's electric hair epilators posted a considerable increase in sales, as
the Braun Silk-epil brand again strengthened its leading market position
worldwide. Driving sales appreciably higher was the Silk-epil Comfort model,
featuring several improvements for more comfortable epilation. This new epilator
was introduced throughout the world during the year.
[LOGO WOMEN'S SHAVER]
Worldwide sales of oral care appliances surged in 1996. The Braun Oral-B
plaque remover generated
14
<PAGE> 15
substantial growth in sales and market [LOGO COFFEE MAKER]
share, significantly expanding its [CAPTION:
worldwide leadership. A new model, The Braun
offering a new brush head/bristle FlavorSelect
configuration combined with higher speed coffeemaker]
oscillation for greater cleaning
performance, was enthusiastically received by the trade and consumers. With the
rapid increase in consumers using Braun Oral-B plaque removers, which outsell
their nearest competitor by a margin of six to one, sales of replacement brush
heads climbed sharply.
The successful launch of the Braun Oral-B Interclean, the first electric
interdental plaque remover, created a new category of interdental cleaning.
Providing an easy, effective alternative to manual flossing, the Interclean
plaque remover employs a unique rotary filament technology to remove interdental
plaque. Response from both dental professionals and consumers has been
excellent.
Although overall sales of hair care products showed little change,
hairstyler sales rose substantially, and Braun improved its leading position in
this worldwide market.
Among household appliances, which registered lower sales, Braun maintained
its number one standing in the world handblender market and successfully
introduced the MultiGourmet foodsteamer and a new range of steam irons in
Europe.
In its first year under Braun management, [LOGO THERMOSCAN]
the ThermoScan infrared ear thermometer
business recorded major sales gains
and enlarged its clear market
leadership. Distribution of this innovative personal diagnostic appliance was
extended outside North America during the year to selected markets in Europe and
Asia, where consumer response was very favorable.
With its growing geographic presence - Braun established sales operations
in Indonesia, Vietnam and Peru in 1996 - and its steady flow of technologically
superior new products, Braun is poised for continued progress in the years to
come.
[Picture of the Braun Flex Integral 400 electric shaver.]
[Caption: The Braun Flex Integral 400 electric shaver delivers faster, closer
shaves by incorporating a middle cutter positioned between two shaving foils
mounted on a pivoting head.]
[CHART]
Sales of Product Line
$ Millions
Year Sales
---- -----
1992 1,326
1993 1,249
1994 1,348
1995 1,621
1996 1,773
15
<PAGE> 16
ORAL-B
Enlarging its clear leadership of the fast-growing global toothbrush market,
Oral-B boosted sales sharply to a record level in 1996. Profits grew at a faster
pace, as substantial investments in new product technology delivered superior
returns.
In a well-established partnership with the dental profession, Oral-B
develops, markets and distributes worldwide a broad array of innovative oral
care products. Led by toothbrushes, the Oral-B line also includes interdental
products, specialty toothpastes, mouth rinses and professional dental products.
Oral-B toothbrushes are used by more dentists and consumers than any other
brand in the United States and many other major markets. Worldwide sales
registered a sizable increase, driven by the strong growth of the Advantage
toothbrush line. During the year, this line was enhanced by a significant
improvement in bristle technology - micro-textured bristles that are
specifically designed to fight plaque with the whole bristle, not just the tip.
Available on both the Advantage and Advantage Control Grip models,
micro-textured bristles provide triple the cleaning surfaces of ordinary
bristles.
Contributing substantially to Oral-B's record performance was the Pro oral
care
{Picture of an Oral-B Advantage toothbrush.]
[Caption: A major technological improvement, new micro-textured bristles on the
Oral-B Advantage toothbrush provide triple the cleaning surfaces of ordinary
bristles.]
[CHART]
Sales of Product Line
$ Millions
Year Sales
---- -----
1992 366
1993 363
1994 402
1995 440
1996 547
16
<PAGE> 17
business, acquired in late 1995. The Pro line, consisting primarily of
toothbrushes, is marketed in Latin America. During 1996, Oral-B introduced the
Pro Plus toothbrush with a tapered brush head and rubberized grip for greater
comfort and control. Trade and consumer response has been excellent.
In the rapidly growing children's toothbrush market, sharply higher sales
of Squish Grip and Gripper children's toothbrushes also spurred the advance in
Oral-B sales. These innovative brushes, featuring squeezable handles, brilliant
colors and traditional Oral-B brush head quality, were introduced in the United
States in 1995 and were rolled out internationally last year.
Worldwide sales of interdental products were well above 1995 levels,
reflecting gains throughout Oral-B's range of quality dental flosses. The Ultra
Floss brand, whose interlocking fibers stretch thin to fit between teeth and
then spring back to brush away plaque, posted a particularly sizable increase.
Late in the year, Oral-B introduced in the United States a new floss that is
easy to insert between teeth and resists shredding. International distribution
is underway.
Aided by substantial growth in children's toothpaste, worldwide sales of
Oral-B toothpastes moved well ahead. Oral rinses turned in a strong showing, as
sales of anti-plaque and anti-cavity rinses rose markedly abroad. In the
professional products category, sales climbed well above those of a year ago.
Oral-B again grew geographically in 1996, establishing sales organizations
in Portugal and India, and opening a joint venture toothbrush manufacturing
plant in Vietnam. With continued geographic expansion, as well as strong
commitment to innovative oral care products supported by effective advertising
and promotion, Oral-B is well-positioned to continue its worldwide growth.
17
<PAGE> 18
DURACELL
With the Duracell merger at year-end, Gillette achieved clear worldwide
leadership in the rapidly growing alkaline battery business. Sales of Duracell
products were appreciably above those of 1995. Profits also moved higher, before
one-time costs related to the merger.
Alkaline batteries, a disposable energy source that powers a broad range of
consumer products, are Duracell's principal line of business. Worldwide sales
showed good progress, with gains in both domestic and international markets.
Alkaline unit volume moved considerably above that of 1995, driven by geographic
expansion and the rapid prolifera-tion of consumer devices such as pagers and
portable CD players.
Duracell alkaline batteries are available in five major cell sizes, of
which the largest category is AA. Sales of these batteries posted a notable
increase, paced by the excellent trade and consumer reception given new Duracell
PowerCheck AA batteries, introduced at midyear in North America and Europe. The
innovative PowerCheck technology, which features an on-battery, heat-sensitive
strip that gauges remaining battery power when activated, also will be available
on AAA, C and D batteries in 1997. Distribution initially will take place in the
18
<PAGE> 19
United States, Europe and selected other markets. Also contributing to the
advance in alkaline battery sales was the exceptional progress made in the large
developing markets of Brazil, China and Eastern Europe.
In late 1996, Duracell completed construction of new alkaline battery
manufacturing plants in China and India, markets that together consume about
five billion household batteries annually, or nearly one-fourth of the world's
total. Both plants will begin production during 1997.
Duracell's specialty battery business consists of lithium batteries used
principally in cameras and electronic devices, as well as zinc air batteries
that power hearing aids. Sales in 1996 matched those of a year ago.
Duracell's newest battery category, one that offers growth potential, is
high-power rechargeable batteries for use in such increasingly popular consumer
products as cellular phones and camcorders. Worldwide sales of Duracell
rechargeable batteries rose significantly, reflecting gains by nickel metal
hydride rechargeables. At midyear, Duracell's joint venture with Toshiba of
Japan and Varta of Germany opened a large new plant in the United States to
manufacture nickel metal hydride cells for rechargeable battery packs.
In addition to its demonstrated technological leadership, Duracell has
strengthened its number one position in the global alkaline battery marketplace
through geographic expansion and acquisition. Over the past five years, Duracell
has established operations in nearly 20 countries, including China, India,
Poland and Russia. Complementing these moves were two acquisitions in 1996. In
April, Duracell purchased Eveready South Africa, whose zinc carbon battery is
the best seller in that country, and in October, acquired Sunpower, a leading
alkaline battery brand in South Korea.
For the future, the combination of Duracell's high-quality products and
Gillette's renowned selling and merchandising organization bodes well for
continued business progress.
[Picture of a Duracell PowerCheck AA battery.]
[Caption: After you press the dots on a Duracell PowerCheck AA battery, its
power tester strip displays an easy-to-read measure of remaining battery power.]
[CHART]
Sales of Product Line
$ Millions
Year Sales
---- -----
1992 1,589
1993 1,674
1994 1,865
1995 2,040
1996 2,251
19
<PAGE> 20
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION
[ ] RESULTS OF OPERATIONS
In 1996, the Company achieved record levels of net sales and, before
merger-related costs, record profit from operations, net income and net income
per common share.
In December 1996, Gillette completed a merger with Duracell International
Inc. by exchanging 109.7 million shares of Gillette common stock for all of the
outstanding common stock of Duracell. In addition, Duracell employee stock
options were converted into options to purchase approximately 4.4 million shares
of Gillette common stock. Each share of Duracell was exchanged for .904 of one
share of Gillette common stock. The transaction was accounted for as a pooling
of interests, and all financial statements presented for prior periods have been
restated to include the financial information of Duracell as though it had
always been a part of Gillette.
SALES
Net sales in 1996 climbed 10% to $9.7 billion, compared with $8.8 billion in
1995. The growth was due to a 10% increase from volume and new products, while
the effect of unfavorable exchange rates was offset by higher selling prices. In
1995, these factors affected sales by an 8% gain and a 3% increase,
respectively.
Sales in the United States increased 16% in 1996, following an 8% gain in
1995. Foreign sales rose 7%, after a 13% increase in 1995. This advance was
paced by strong growth in AMEE markets, but was partially offset by the effect
of sluggish economic conditions in key European markets and Japan. Sales of
operations outside the United States represented about 63% of sales in 1996 and
65% in 1995.
<TABLE>
An analysis of sales by business segment follows.
<CAPTION>
(Millions of dollars) % Increase
---------------------------- ----------------
96 95 94 96/95 95/94
- - ---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Blades & Razors ....... $2,836 $2,635 $2,351 8 12
Toiletries &
Cosmetics .......... 1,375 1,236 1,162 11 6
Stationery Products ... 915 862 807 6 7
Braun Products ........ 1,773 1,621 1,348 9 20
Oral-B Products ....... 547 440 402 24 9
Duracell Products ..... 2,251 2,040 1,865 10 9
Other ................. 1 -- -- -- --
-------------------------- -----------
$9,698 $8,834 $7,935 10 11
========================== ===========
</TABLE>
Further information by business segment is set forth on pages 8 through 19.
Sales of blade and razor products were well above those of a year earlier,
due to sharp increases in the United States and developing international
markets. The continued growth and expansion of the Gillette Sensor franchise,
including the SensorExcel and Sensor Excel for Women shaving systems, were the
primary contributors to this increase, as they were in 1995.
In 1996, toiletries and cosmetics sales rose considerably, with gains in
most major markets. The increase was attributable to the continued expansion of
the Gillette Series male grooming line, the success of Satin Care female shaving
gel, the growth of clear gel deodorant/antiperspirant products and new products.
Sales of Jafra products improved in 1996 in Mexico, Jafra's largest market,
where economic conditions are stabilizing. In 1995, toiletries and cosmetics
sales were above those of the prior year, due to the Gillette Series line and
other deodorant/antiperspirant brands.
Sales of stationery products were above those of the year before, as
increases in the United States and AMEE markets were partially offset by
shortfalls in Europe and Latin America. In 1995, sales were higher, paced by
gains in the United States, Europe and Asia-Pacific.
Braun product sales in 1996 were notably above those of 1995, due to
significant increases in the United States that included sales resulting from
the acquisition of Thermoscan Inc. in November 1995. Without Thermoscan, sales
were virtually unchanged, as continued favorable consumer response to new
products was adversely impacted by economic conditions in the key markets of
Japan, Germany and Italy. In 1995, sales were substantially higher than those of
the previous year, due to the success of new products.
Sales of Oral-B products climbed significantly, reflecting increases in the
United States, Latin America and other major markets. The success of new
products and the favorable impact of the Pro oral care business, which was
acquired in the third quarter of 1995, contributed to these gains. In 1995, the
success of new products in international markets was the primary factor in the
appreciable gain in sales.
In 1996, sales of Duracell products rose considerably, due to alkaline
battery volume growth in the United States and most international markets, along
with the favorable impact of acquisitions in South Africa and Korea. Sales in
1995 were notably higher than in the prior year, due to volume growth of
alkaline batteries in most geographic regions.
GROSS PROFIT
Gross profit increased $506 million in 1996 and $493 million in 1995. As a
percent of sales, gross profit was 62.0% in 1996, compared with 62.4% and 63.2%
in 1995 and 1994, respectively. The decrease in 1996 was
20
<PAGE> 21
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION
due primarily to sales of new battery products with lower profit margins,
partially offset by improved gross margins in other business segments.
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to 40.9% of sales,
compared with 42.0% and 42.9% in 1995 and 1994, respectively. In absolute terms,
these expenses rose 6.9% in 1996, 9.1% in 1995 and 13.6% in 1994.
These increases reflected the higher level of marketing support given to
major brands, such as the Gillette Sensor franchise, the Gillette Series line,
new Braun products and Duracell batteries. In 1996, $710 million was spent on
advertising, including sampling, and $978 million on sales promotion, for a
total of $1,688 million, an increase of 9% over 1995. This compares with 1995
amounts of $704 million, $846 million and $1,550 million, respectively. In 1994,
these were $641 million, $759 million and $1,400 million, respectively. The
spending in 1996 represented 17.4% of sales, compared with 17.5% and 17.6% in
1995 and 1994, respectively. Spending for research and development increased 9%
in 1996, compared with 10% in 1995 and 5% in 1994. Other marketing and
administrative expenses rose 5% in 1996, 8% in 1995 and 9% in 1994.
PROFIT FROM OPERATIONS
Due to the merger with Duracell International Inc., the Company recorded, in the
fourth quarter, merger transaction and restructuring costs of $65 million and
$348 million, respectively. Merger transaction costs consisted primarily of fees
for investment bankers, attorneys, accountants, financial printing and other
related charges. The restructuring costs included $166 million for the severance
of approximately 1,700 employees, primarily in international locations, and $182
million for exit costs. The ongoing restructuring programs will be completed
during 1997 and 1998. Total merger-related costs reduced profit from operations
by $413 million, net income by $283 million and net income per common share by
$.51.
Before merger-related costs, profit from operations in 1996 was $2.05
billion, compared with $1.80 billion in 1995 and $1.61 billion in 1994. Compared
with 1995, profit from operations increased 14%, representing 21.1% of sales,
compared with 20.4% and 20.3% in 1995 and 1994, respectively.
Within the United States, profit from operations, before merger-related
costs, rose 26%, compared with increases of 7% and 9% in 1995 and 1994,
respectively. Outside the United States, it increased 7%, compared with 15% and
17% in 1995 and 1994, respectively.
<TABLE>
An analysis of profit from operations by business segment follows.
<CAPTION>
% Increase/
(Millions of dollars) (Decrease)
------------------------------------ -----------------
96(a) 96(b) 95 94 96/95(b) 95/94
- - ---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Blades & Razors ... $1,062 $1,098 $ 960 $ 878 14 9
Toiletries &
Cosmetics ...... 87 91 75 79 21 (6)
Stationery
Products ....... 122 122 109 95 12 15
Braun Products .... 300 300 255 200 18 27
Oral-B Products ... 58 58 33 25 75 31
Duracell Products . 142 450 428 388 5 10
----------------------------------- -----------
1,771 2,119 1,860 1,665 14 12
----------------------------------- ===========
Corporate (135) (70) (61) (50)
-----------------------------------
$1,636 $2,049 $1,799 $1,615
===================================
<FN>
(a) after merger-related charges (b) before merger-related charges
See Notes to Consolidated Financial Statements for geographic area and segment
data.
</TABLE>
Profits for the blade and razor segment rose substantially in 1996 and
considerably in 1995, due to continued sales growth, improved product mix and
lower product costs.
In 1996, the toiletries and cosmetics segment reported significantly higher
profits, due to sales growth, lower product costs and lower operating expenses.
Profits in 1995 declined, as substantial gains in most markets did not offset
the unfavorable impact of adverse economic conditions on Jafra Mexico.
Profits for the stationery segment climbed sharply in 1996 and 1995, due to
sales growth driven by new products, improved product mix and lower product
costs.
In 1996 and 1995, profits for the Braun segment were significantly higher,
reflecting increased sales of products with higher profit margins, as well as
lower operating costs.
Oral-B profits increased substantially in 1996 and 1995, due primarily to
the success of new products with higher margins, as well as lower operating
expenses.
Before merger-related charges, the Duracell segment reported higher profits
in 1996 and 1995, due to increased sales volume and lower operating expenses.
NONOPERATING CHARGES/INCOME
Net interest expense (interest expense less interest income) amounted to $67
million in 1996, $73 million in 1995 and $68 million in 1994. The decrease in
1996 was due primarily to lower average interest rates. Net interest expense was
higher in 1995, due to lower interest income.
Net exchange losses of $32 million in 1996, which compared with the 1995
and 1994 totals of $16 million and $81 million, respectively, were attributable
prima-
21
<PAGE> 22
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION
rily to subsidiaries in highly inflationary countries. Translation adjustments
resulting from currency fluctuations in non-highly inflationary countries are
accumulated in a separate section of stockholders' equity, as noted on page 28.
In 1996, the negative adjustment was $22 million, compared with a negative
adjustment of $100 million in 1995 and a favorable adjustment of $45 million in
1994.
TAXES AND NET INCOME
The effective tax rate was 37.8% in 1996, compared with rates of 37.1% in 1995
and 37.0% in 1994.
Net income for 1996 was $949 million, compared with $1,069 million in 1995
and $919 million in 1994. Net income per common share in 1996 was $1.71,
compared with $1.94 and $1.67 in 1995 and 1994, respectively. Excluding the
charge for merger-related costs, net income increased 15% to $1,232 million, and
net income per common share increased 14% to $2.22.
[ ] FINANCIAL CONDITION
Since the Gillette merger with Duracell was accomplished through the exchange of
stock, with no new debt incurred, the Company's financial condition continued to
be strong in 1996. Net debt of the Company increased $422 million during 1996,
reflecting spending for the acquisition of businesses in the Company's core
categories, particularly the battery business, and increased capital spending.
Net debt (total debt net of associated swaps, less cash and short-term
investments) at December 31, 1996, amounted to $2.08 billion, compared with
$1.66 billion in 1995 and $1.43 billion in 1994.
After the issuance of shares for the exchange with Duracell shareholders,
the Company's market value exceeded $43 billion at the end of 1996, while book
equity amounted to $4.49 billion. Stock repurchase programs of Gillette and
Duracell were terminated after the merger was announced in 1996.
Net cash provided by operating activities in 1996 was $1.01 billion,
compared with $1.05 billion in 1995 and $1.03 billion in 1994. Growth in working
capital requirements in all three years reflected the growth in the business.
The current ratio of the Company was 1.62 for 1996, compared with ratios of 1.58
for 1995 and 1.66 for 1994.
Capital spending in 1996 amounted to a record $830 million, compared with
$593 million in 1995 and $498 million in 1994. Spending in all three years
principally reflected significant investments in the blade and razor, Duracell
and Braun product segments.
In 1996, the Company spent $300 million for acquisitions, principally in
the battery business, compared with $278 million in 1995 and $26 million in
1994. Acquisitions in 1995 and 1994 were in other core business areas.
In December 1996, the Company replaced the revolving credit facilities of
Gillette and Duracell with new revolving facilities provided by a syndicate of
19 banks for $400 million, expiring December 1997, and $1.1 billion, expiring
December 2001. The Company will continue to use these facilities to provide
back-up to its commercial paper program.
The Company generally borrows through the U.S. commercial paper market. At
year-end 1996, there was $1.09 billion outstanding under the Gillette and
Duracell commercial paper programs, compared with $599 million at the end of
1995 and $510 million at the end of 1994.
Both Moody's and Standard & Poor's reconfirmed the Company's long-term
credit ratings in 1996 following the merger announcement. Moody's rates the
Company's long-term debt Aa3, while the Standard & Poor's rating is AA-. The
commercial paper rating is P1 by Moody's and A1+ by S&P.
Gillette will continue to have capital available for growth through both
internally generated funds and substantial credit resources. The Company has
substantial unused lines of credit and access to worldwide financial market
sources for funds.
FORWARD-LOOKING INFORMATION
Management is unaware of any trends or conditions that could have a material
adverse effect on the Company's consolidated financial position, future results
of operations or liquidity.
However, investors should also be aware of factors that could have a
negative impact on prospects and the consistency of progress. These include
political, economic or other factors such as currency exchange rates, inflation
rates, recessionary or expansive trends, taxes and regulations and laws
affecting the worldwide business in each of the Company's markets; competitive
product, advertising, promotional and pricing activity; dependence on the rate
of development and degree of acceptance of new product introductions in the
marketplace; and the difficulty of forecasting sales at certain times in certain
markets.
22
<PAGE> 23
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
RESPONSIBILITY FOR
FINANCIAL STATEMENTS
The Company is responsible for the objectivity and integrity of the accompanying
consolidated financial statements, which have been prepared in conformity with
generally accepted accounting principles. The financial statements of necessity
include the Company's estimates and judgments relating to matters not concluded
by year-end. Financial information contained elsewhere in the Annual Report is
consistent with that included in the financial statements.
The Company maintains a system of internal accounting controls that
includes careful selection and development of employees, division of duties, and
written accounting and operating policies and procedures augmented by a
continuing internal audit program. Although there are inherent limitations to
the effectiveness of any system of accounting controls, the Company believes
that its system provides reasonable, but not absolute, assurance that its assets
are safeguarded from unauthorized use or disposition and that its accounting
records are sufficiently reliable to permit the preparation of financial
statements that conform in all material respects with generally accepted
accounting principles.
KPMG Peat Marwick LLP, independent auditors, are engaged to render an
independent opinion regarding the fair presentation in the financial statements
of the Company's financial condition and operating results. Their report appears
below. Their examination was made in accordance with generally accepted auditing
standards and included a review of the system of internal accounting controls to
the extent they considered necessary to determine the audit procedures required
to support their opinion.
The Audit Committee of the Board of Directors is composed solely of
directors who are not employees of the Company. The Committee meets periodically
and privately with the independent auditors, with the internal auditors and with
the financial officers of the Company to review matters relating to the quality
of the financial reporting of the Company, the internal accounting controls and
the scope and results of audit examinations. The Committee also reviews
compliance with the Company's statement of policy as to the conduct of its
business, including proper accounting, financial reporting and management of the
relationship with the auditors. In addition, it is responsible for recommending
the appointment of the Company's independent auditors, subject to stockholder
approval.
- - -------------------------------------------------------------------------------
INDEPENDENT AUDITORS'
REPORT
[LOGO]
KPMG Peat Marwick LLP
THE STOCKHOLDERS AND BOARD OF DIRECTORS OF THE GILLETTE COMPANY
We have audited the accompanying consolidated balance sheet of The Gillette
Company and subsidiary companies as of December 31, 1996 and 1995, and the
related consolidated statements of income and earnings reinvested in the
business and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Gillette
Company and subsidiary companies at December 31, 1996 and 1995, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
/s/ KPMG Peat Marwick LLP
- - -------------------------
Boston, Massachusetts
January 30, 1997
23
<PAGE> 24
<TABLE>
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME AND EARNINGS
REINVESTED IN THE BUSINESS
<CAPTION>
(Millions of dollars, except per share amounts)
Years Ended December 31, 1996, 1995 and 1994 1996 1995 1994
- - -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES ......................................................... $9,697.7 $8,834.5 $7,935.1
Cost of Sales ..................................................... 3,681.7 3,324.0 2,917.9
----------------------------------
GROSS PROFIT ...................................................... 6,016.0 5,510.5 5,017.2
Selling, General and Administrative Expenses ...................... 3,966.7 3,711.3 3,402.5
Merger-Related Costs .............................................. 413.0 -- --
----------------------------------
PROFIT FROM OPERATIONS ............................................ 1,636.3 1,799.2 1,614.7
Nonoperating Charges (Income)
Interest income .................................................. (9.9) (12.5) (20.5)
Interest expense ................................................. 76.8 85.4 88.4
Other charges - net .............................................. 44.4 26.5 88.4
----------------------------------
111.3 99.4 156.3
----------------------------------
INCOME BEFORE INCOME TAXES ........................................ 1,525.0 1,699.8 1,458.4
Income Taxes ...................................................... 576.3 630.7 539.3
----------------------------------
NET INCOME ........................................................ 948.7 1,069.1 919.1
Preferred Stock dividends, net of tax benefit ..................... 4.6 4.7 4.7
----------------------------------
NET INCOME AVAILABLE TO COMMON STOCKHOLDERS ....................... 944.1 1,064.4 914.4
Earnings Reinvested in the Business at beginning of year .......... 3,704.2 3,028.6 2,438.8
----------------------------------
4,648.3 4,093.0 3,353.2
Common Stock dividends declared ................................... 479.6 388.8 324.6
----------------------------------
Earnings Reinvested in the Business at end of year ................ $4,168.7 $3,704.2 $3,028.6
==================================
NET INCOME PER COMMON SHARE ....................................... $ 1.71 $ 1.94 $ 1.67
Weighted average number of common shares outstanding (millions)... 553.5 549.9 548.2
- - -----------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
24
<PAGE> 25
<TABLE>
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE
SHEET
<CAPTION>
(Millions of dollars)
December 31, 1996 and 1995 1996 1995
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ................................................. $ 76.9 $ 81.6
Short-term investments, at cost, which approximates market value .......... 7.0 1.6
Receivables, less allowances: 1996 - $80.8; 1995 - $82.1 .................. 2,724.6 2,290.8
Inventories ............................................................... 1,358.2 1,267.6
Deferred income taxes ..................................................... 359.3 246.8
Prepaid expenses .......................................................... 227.2 199.3
---------------------
TOTAL CURRENT ASSETS ..................................................... 4,753.2 4,087.7
---------------------
PROPERTY, PLANT AND EQUIPMENT, at cost less accumulated depreciation ....... 2,565.8 2,053.2
INTANGIBLE ASSETS, less accumulated amortization ........................... 2,626.2 2,403.4
OTHER ASSETS ............................................................... 490.1 395.8
---------------------
$10,435.3 $8,940.1
=====================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Loans payable ............................................................. $ 656.7 $ 634.7
Current portion of long-term debt ......................................... 14.5 26.5
Accounts payable and accrued liabilities .................................. 1,964.9 1,609.8
Income taxes .............................................................. 298.6 319.4
---------------------
TOTAL CURRENT LIABILITIES ................................................ 2,934.7 2,590.4
---------------------
LONG-TERM DEBT ............................................................. 1,490.4 1,048.4
DEFERRED INCOME TAXES ...................................................... 298.9 303.4
OTHER LONG-TERM LIABILITIES ................................................ 1,190.5 1,076.1
MINORITY INTEREST .......................................................... 29.9 21.5
STOCKHOLDERS' EQUITY
8.0% Cumulative Series C ESOP Convertible Preferred, without par value,
Issued: 1996 - 157,925 shares; 1995 - 160,701 shares ................... 95.2 96.9
Unearned ESOP compensation ................................................ (25.2) (34.3)
Common stock, par value $1 per share
Authorized 1,160,000,000 shares
Issued: 1996 - 671,431,800 shares; 1995 - 667,068,820 shares ............. 671.4 667.1
Additional paid-in capital ................................................ 1,158.6 1,011.7
Earnings reinvested in the business ....................................... 4,168.7 3,704.2
Cumulative foreign currency translation adjustments ....................... (521.6) (499.5)
Treasury stock, at cost:
1996 - 115,353,687 shares; 1995 - 115,254,353 shares ................... (1,056.2) (1,045.8)
---------------------
TOTAL STOCKHOLDERS' EQUITY ............................................... 4,490.9 3,900.3
---------------------
$10,435.3 $8,940.1
=====================
- - ------------------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
25
<PAGE> 26
<TABLE>
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT
OF CASH FLOWS
<CAPTION>
(Millions of dollars)
Years Ended December 31, 1996, 1995 and 1994 1996 1995 1994
- - -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income .............................................. $ 948.7 $1,069.1 $ 919.1
Adjustments to reconcile net income to net cash
provided by operating activities:
Merger-related costs ................................... 283.0 -- --
Depreciation and amortization .......................... 381.1 343.5 302.9
Other .................................................. -- (2.8) 9.9
Changes in assets and liabilities, net of effects
from acquisition of businesses:
Accounts receivable ................................... (459.1) (387.2) (206.4)
Inventories ........................................... (104.8) (118.9) (108.5)
Accounts payable and accrued liabilities .............. 66.9 91.2 82.2
Other working capital items ........................... (141.6) 20.6 11.0
Other noncurrent assets and liabilities ............... 34.2 31.6 19.1
--------------------------------
Net cash provided by operating activities ............ 1,008.4 1,047.1 1,029.3
--------------------------------
INVESTING ACTIVITIES
Additions to property, plant and equipment .............. (829.7) (593.1) (498.0)
Disposals of property, plant and equipment .............. 40.9 30.6 25.5
Acquisition of businesses, less cash acquired ........... (299.4) (276.7) (25.6)
Other ................................................... (6.4) 3.9 19.6
--------------------------------
Net cash used in investing act...ivities ............. (1,094.6) (835.3) (478.5)
--------------------------------
FINANCING ACTIVITIES
Purchase of treasury stock .............................. (11.4) (28.9) (12.3)
Proceeds from exercise of stock option and
purchase plans ....................................... 149.5 83.3 44.8
Decrease in long-term debt .............................. (164.5) (8.7) (200.6)
Increase (decrease) in loans payable .................... 577.7 123.3 (48.0)
Dividends paid .......................................... (450.8) (382.2) (320.4)
--------------------------------
Net cash provided by (used in) financing activities .. 100.5 (213.2) (536.5)
--------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH .................. (19.0) 4.4 (0.4)
--------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ......... (4.7) 3.0 13.9
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ........... 81.6 78.6 64.7
--------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR ................. $ 76.9 $ 81.6 $ 78.6
================================
Supplemental disclosure of cash paid for:
Interest ............................................... $ 94.0 $ 95.0 $ 91.0
Income taxes ........................................... $ 586.1 $ 414.6 $ 303.8
Noncash investing and financing activities:
Acquisition of businesses
Fair value of assets acquired ......................... $ 361.4 $ 394.9 $ 19.0
Cash paid ............................................. 300.1 278.3 25.6
--------------------------------
Liabilities assumed .................................. $ 61.3 $ 116.6 $ (6.6)
================================
- - -----------------------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
26
<PAGE> 27
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
[ ] BUSINESS COMBINATION
In December 1996, Gillette completed a merger with Duracell International Inc.,
hereafter collectively referred to as the Company, by exchanging 109.7 million
shares of its common stock for all of the common stock of Duracell. Each share
of Duracell was exchanged for .904 of one share of Gillette common stock. In
addition, outstanding Duracell employee stock options were converted at the same
exchange factor into options to purchase approximately 4.4 million shares of
Gillette common stock.
The merger constituted a tax-free reorganization and has been accounted for
as a pooling of interests under Accounting Principles Board Opinion No. 16.
Accordingly, all prior period consolidated financial statements presented have
been restated to include the combined results of operations, financial position
and cash flows of Duracell as though it had always been a part of Gillette.
Prior to the merger, Duracell's fiscal year ended on June 30. In recording
the business combination, Duracell's prior period financial statements have been
restated to a year ended December 31, to conform with Gillette's fiscal
year-end.
There were no transactions between Gillette and Duracell prior to the
combination, and immaterial adjustments were recorded to conform Duracell's
accounting policies. Certain reclassifications were made to the Duracell
financial statements to conform to Gillette's presentations.
<TABLE>
The results of operations for the separate companies and the combined
amounts presented in the consolidated financial statements follow.
<CAPTION>
Nine Months
Ended Year Ended Year Ended
September 30, December 31, December 31,
(Millions of dollars) 1996 1995 1994
- - -------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales
Gillette ........... $5,225.9 $6,794.7 $6,070.2
Duracell ........... 1,470.8 2,039.8 1,864.9
--------------------------------------
Combined ......... $6,696.7 $8,834.5 $7,935.1
======================================
Net Income
Gillette. .......... $ 696.7 $ 823.5 $ 698.3
Duracell ........... 136.7 245.6 220.8
--------------------------------------
Combined ......... $ 833.4 $1,069.1 $ 919.1
======================================
</TABLE>
In connection with the merger, the Company recorded in the fourth quarter a
charge to operating expenses of $413 million ($283 million after taxes, or $.51
per common share) for direct and other merger-related costs pertaining to the
merger transaction and certain restructuring programs.
Merger transaction costs consisted primarily of fees for investment
bankers, attorneys, accountants, financial printing and other related charges.
Restructuring costs included severance and outplacement of terminated employees
and exit costs.
<TABLE>
Details of the merger-related costs follow.
<CAPTION>
1996 Utilized
(Millions of dollars) Provision in 1996 Balance
- - --------------------------------------------------------------
<S> <C> <C> <C>
Merger Transaction Costs ..... $ 65.0 $ 30.3 $ 34.7
Restructuring Costs
Employee severance ......... 165.9 -- 165.9
Exit costs ................. 182.1 84.8 97.3
-----------------------------
Total $413.0 $115.1 $297.9
=============================
</TABLE>
Restructuring activities primarily relate to the consolidation of
distribution and administrative functions. These actions will result in the
phased reduction of approximately 1,700 employees, primarily in international
locations, and will include consolidation and closure of certain facilities.
Exit costs include activities such as cancellation of lease agreements and
distributor contracts, and the writedown of unutilized assets. At December 31,
1996, $185 million and $113 million relating to these programs were classified
as current liabilities and long-term liabilities, respectively.
[ ] SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Gillette Company is a global consumer products firm with manufacturing
operations conducted at 64 facilities in 27 countries and products distributed
through wholesalers, retailers and agents in over 200 countries and territories.
The Company is the world leader in male grooming products, a category that
includes blades and razors, shaving preparations and electric shavers, and also
in selected female grooming products, such as wet shaving products and hair
epilation appliances. The Company is the world's top seller of writing
instruments and correction products and is the world leader in toothbrushes,
oral care appliances and alkaline batteries.
BASIS OF PRESENTATION AND
PRINCIPLES OF CONSOLIDATION
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses. Actual results
could differ from those estimates.
27
<PAGE> 28
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of the Company
and its subsidiaries. Inter-company accounts and transactions are eliminated.
The Company has certain manufacturing and research joint venture contracts
that are accounted for using the equity method of accounting. These contracts
commit the Company to fund and guarantee approximately $48 million of capital
contributions and loan commitments.
Accounts of subsidiaries outside the United States and Canada are included
on the basis of fiscal years generally ending November 30, except for the Braun
group of companies, whose fiscal year ends September 30.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash, time deposits and all highly liquid debt
instruments with an original maturity of three months or less.
INVENTORIES
Inventories are stated at the lower of cost or market. In general, cost is
currently adjusted standard cost, which approximates actual cost on a first-in,
first-out basis.
DEPRECIATION
Depreciation is computed primarily on a straight-line basis over the estimated
useful lives of assets.
ADVERTISING
Advertising costs are expensed in the year incurred.
INTANGIBLE ASSETS
Intangible assets principally consist of goodwill, which is amortized on the
straight-line method, generally over a period of 40 years. Other intangible
assets are amortized on the straight-line method over a period of from 13 to 40
years. The carrying amounts of intangible assets are assessed for impairment
when operating profit from the applicable related business indicates that the
carrying amounts of the assets may not be recoverable.
NET INCOME PER COMMON SHARE
Net income per common share is calculated by dividing net income less dividends
on preferred stock, net of tax benefits, by the weighted average number of
common shares outstanding.
The calculation of fully diluted net income per common share assumes
conversion of the preferred stock into common stock, and also adjusts net income
for the ESOP debt service expense due to the assumed replacement of the
preferred stock dividends with common stock dividends. The dilutive effect is
not significant.
INCOME TAXES
The Company reinvests unremitted earnings of foreign operations and,
accordingly, does not provide for Federal income taxes that could result from
the remittance of such earnings. These unremitted earnings amounted to $2.83
billion at December 31, 1996.
RECLASSIFICATION OF PRIOR YEARS
Prior year financial statements have been reclassified to conform to the 1996
presentations.
[ ] ACQUISITIONS AND DIVESTITURES
In 1996, the Company acquired businesses in the Duracell, blade and razor and
stationery segments for an aggregate amount of $300 million. These acquisitions
have been accounted for by the purchase method of accounting. Their results of
operations, which have been included in the Company's consolidated financial
statements, have not materially affected the consolidated financial position,
results of operations or liquidity of the Company.
In 1995, the Company acquired businesses in the blade and razor, Braun and
Oral-B segments and completed payments on prior acquisitions for a total cost of
$278 million.
[ ] FOREIGN CURRENCY
TRANSLATION
Net exchange gains or losses resulting from the translation of assets and
liabilities of foreign subsidiaries, except those in highly inflationary
economies, are accumulated in a separate section of stockholders' equity titled,
"Cumulative foreign currency translation adjustments." Also included are the
effects of exchange rate changes on intercompany transactions of a long-term
investment nature and transactions designated as hedges of net foreign
investments.
<TABLE>
An analysis of this account follows.
<CAPTION>
(Millions of dollars) 1996 1995 1994
- - -----------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year ... $(499.5) $(400.0) $(445.0)
Translation adjustments,
including the effect of
hedging ..................... 18.4 (124.8) 48.5
Related income tax effect ..... (40.5) 25.3 (3.5)
------------------------------
Balance at end of year ......... $(521.6) $(499.5) $(400.0)
==============================
</TABLE>
Included in Other charges are net exchange losses of $32 million, $16
million and $81 million for 1996, 1995 and 1994, respectively.
28
<PAGE> 29
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
<TABLE>
[ ] INVENTORIES
December 31, December 31,
(Millions of dollars) 1996 1995
- - ----------------------------------------------------------
<S> <C> <C>
Raw materials and supplies ... $ 281.2 $ 273.1
Work in process .............. 161.4 185.4
Finished goods ............... 915.6 809.1
-----------------------
$1,358.2 $1,267.6
=======================
[ ] PROPERTY, PLANT AND
EQUIPMENT
- - ----------------------------------------------------------
Land ......................... $ 69.2 $ 57.0
Buildings .................... 673.4 612.0
Machinery and equipment ...... 3,818.6 3,266.6
-----------------------
4,561.2 3,935.6
Less accumulated
depreciation .............. 1,995.4 1,882.4
-----------------------
$2,565.8 $2,053.2
=======================
[ ] INTANGIBLE ASSETS
- - ----------------------------------------------------------
Goodwill ($43.8 million not
subject to amortization) .. $2,126.0 $1,829.8
Other intangible assets ...... 1,133.2 1,119.6
-----------------------
3,259.2 2,949.4
Less accumulated
amortization .............. 633.0 546.0
-----------------------
$2,626.2 $2,403.4
=======================
[ ] ACCOUNTS PAYABLE AND
ACCRUED LIABILITIES
- - ----------------------------------------------------------
Accounts payable ............. $ 547.3 $ 498.0
Advertising and sales
promotion ................. 356.2 301.3
Payroll and payroll taxes .... 269.8 270.1
Other taxes .................. 74.0 71.1
Interest payable ............. 6.8 11.4
Dividends payable on
common stock .............. 100.1 66.7
Merger-related costs ......... 184.6 --
Miscellaneous ................ 426.1 391.2
-----------------------
$1,964.9 $1,609.8
=======================
[ ] OTHER LONG-TERM
LIABILITIES
- - ----------------------------------------------------------
Pensions ..................... $ 470.7 $ 466.2
Postretirement medical ....... 309.9 310.1
Incentive plans .............. 153.0 131.6
Merger-related costs ......... 113.3 --
Miscellaneous ................ 143.6 168.2
-----------------------
$1,190.5 $1,076.1
=======================
</TABLE>
[ ] DEBT
Commercial paper included in Loans payable was nil at December 31, 1996, and
$223 million at December 31, 1995. The Company's commercial paper program is
supported by its revolving credit facilities.
<TABLE>
A summary of long-term debt follows.
<CAPTION>
December 31, December 31,
(Millions of dollars) 1996 1995
- - ------------------------------------------------------
<S> <C> <C>
Commercial paper ........... $1,087.3 $ 376.0
5.75% Notes due 2005 ....... 200.0 200.0
6.25% Notes due 2003 ....... 150.0 150.0
4.75% Notes due 1996 ....... -- 150.0
8.03% Guaranteed ESOP
notes due through 2000 .. 31.3 41.2
Other, primarily foreign
currency borrowings ..... 36.3 157.7
------------------------
Total long-term debt 1,504.9 1,074.9
Less current portion 14.5 26.5
------------------------
Long-term portion $1,490.4 $1,048.4
========================
</TABLE>
At December 31, 1996, the Company had swap agreements that converted the
$150 million notes due 2003 and the $200 million notes due 2005 from U.S.
dollar-denominated long-term fixed rate debt securities into Deutschmark
principal and floating interest rate obligations over the term of the respective
issues, resulting in an aggregate principal amount of $355 million at a weighted
average interest rate of 3.3%. At December 31, 1995, the Company had swap
agreements that converted the $500 million in U.S. dollar-denominated long-term
fixed rate debt notes into multicurrency principal and floating interest rate
obligations, with an aggregate principal amount of $533 million at a weighted
average interest rate of 4.7%.
The Company also had a forward exchange contract at December 31, 1996,
maturing in 1997, that established a $32 million Yen principal, .7% interest
obligation, with respect to $34 million of U.S. dollar commercial paper debt
included in Long-Term Debt. At December 31, 1995, a similar contract established
a $42 million Yen principal, .5% interest obligation, with respect to $43
million of U.S. dollar commercial paper debt included in Long-Term Debt.
Additionally, at December 31, 1996, Duracell had interest rate swaps,
maturing in 1998 and 1999, that converted $150 million of U.S. dollar commercial
paper debt, included in Long-Term Debt, and $50 million of Loans payable from
floating to fixed rate obligations at a weighted average interest rate of 7.1%.
Such contracts had a weighted average interest rate of 7.4% at December 31,
1995.
29
<PAGE> 30
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Exchange rate movements give rise to changes in the values of the foreign
currency related agreements that offset changes in the value of the underlying
exposure. Amounts associated with these agreements were liabilities of $3.4
million at December 31, 1996, and $32.6 million at December 31, 1995.
The weighted average interest rate on Loans payable, including associated
swaps, was 4.4% at December 31, 1996, and 6.0% at December 31, 1995. The
weighted average interest rate on total long-term debt, including associated
swaps, and excluding the guaranteed ESOP notes, was 5.3% at December 31, 1996,
compared with 5.5% at December 31, 1995.
The Company has a $400 million revolving bank credit agreement that expires
in December 1997 and a $1.1 billion revolving bank credit agreement expiring in
December 2001, both of which may be used for general corporate purposes. Under
the agreements, the Company has the option to borrow at various interest rates,
including the prime rate, and is required to pay an average facility fee of .05%
per annum. At year-end 1996 and 1995, there were no borrowings under such
agreements.
In addition, at December 31, 1996, Duracell had $794 million in revolving
credit facilities, of which borrowings thereon amounted to $30 million and $110
million at year-end 1996 and 1995, respectively. In January 1997, outstanding
borrowings were repaid and the facilities terminated.
Based on the Company's intention and ability to maintain its $1.1 billion
revolving credit agreement beyond 1997, $1.09 billion of commercial paper
borrowings and $13 million of loans payable were classified as long-term debt at
December 31, 1996. As of December 31, 1995, $376 million of commercial paper
borrowings, the $150 million notes due 1996 and $119 million of loans payable
were so classified.
Aggregate maturities of total long-term debt for the five years subsequent
to December 31, 1996, are $14.5 million, $16.4 million, $18.2 million, $5.0
million and $.2 million, respectively.
Unused lines of credit, excluding the above Duracell revolving credit
facilities, amounted to $2.4 billion at December 31, 1996.
[ ] FINANCIAL INSTRUMENTS
The Company uses financial instruments, principally swaps, forward contracts and
options, to effectively achieve its financing strategy and to hedge foreign
currency, commodity and equity-linked employee compensation exposures. These
contracts hedge transactions and balances for periods consistent with its
committed exposures and do not constitute investments independent of these
exposures. The Company does not hold or issue financial instruments for trading
purposes, nor is it a party to any leveraged contracts.
Realized and unrealized foreign exchange gains and losses on financial
instruments are recognized and offset foreign exchange gains and losses on the
underlying exposures. The interest differential paid or received on swap and
forward agreements is recognized as an adjustment to interest expense.
In the fourth quarter of 1996, the Company purchased foreign currency put
options that protect 1997 U.S. dollar results of foreign operations in selected
currencies. The strike price is $1.24 billion, with a cost of $9.9 million. The
options, which mature in 1997, are marked to market and are included within
profit from operations. At December 31, 1995, a similar contract, which expired
unexercised in 1996, had a strike price of $847 million and a cost of $4.7
million.
The Company has also hedged certain employee compensation expenses linked
to its stock price by entering into equity swap and option contracts that mature
in 1998, 2002 and 2003. At December 31, 1996, the notional principal amount of
such contracts was $53 million, with a cost of $7.8 million. At December 31,
1995, the notional principal amounts of such contracts was $33 million, with a
cost of $2.8 million. The cost is amortized over the duration of the contracts,
and gains or losses are recognized as adjustments to the carrying amount of the
underlying liabilities.
In addition, the Company utilizes swaps to fix the price on a portion of
certain commodities used in the manufacturing process. As of year-end 1996, $45
million of commodity swaps was outstanding, maturing through June 1998. Such
contracts at December 31, 1995, amounted to $25 million. The maturity of the
contracts highly correlates to the actual purchases of the commodity, and
contract values are reflected in the cost of the commodity as it is actually
purchased.
At December 31, 1996, Duracell had foreign exchange contracts of $342
million related to identified third party commitments and intercompany
transactions. These contracts mature within one year and will not be renewed. At
December 31, 1995, similar contracts amounted to $213 million.
The above amounts exclude the swap and forward agreements described in the
Debt note.
30
<PAGE> 31
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
Several major international financial institutions are counterparties to
the Company's financial instruments. It is Company practice to monitor the
financial standing of the counterparties and to limit the amount of exposure
with any one institution. The Company may be exposed to credit loss in the event
of nonperformance by the counterparties to these contracts, but does not
anticipate such nonperformance.
With respect to trade receivables, concentration of credit risk is limited,
due to the diverse geographic areas covered by Company operations. Any probable
bad debt loss has been provided for in the allowance for doubtful accounts.
<TABLE>
The estimated fair values of the Company's financial instruments are
summarized below.
<CAPTION>
Carrying Estimated
(Millions of dollars) Amount Fair Value
- - --------------------------------------------------------------
<S> <C> <C>
DECEMBER 31, 1996
Long-term investments ........... $ 108.0 $ 112.4
Total long-term debt ............ (1,504.9) (1,490.8)
Foreign currency, interest rate
and commodity contracts ...... (3.8) (13.9)
Equity contracts ................ 14.0 18.8
DECEMBER 31, 1995
Long-term investments ........... $ 86.7 $ 89.3
Total long-term debt ............ (1,074.9) (1,079.5)
Foreign currency, interest rate
commodity contracts .......... (18.6) (38.0)
Equity contracts ................ 3.2 3.3
</TABLE>
The carrying amounts for cash, short-term investments, receivables,
accounts payable and accrued liabilities, and loans payable approximate fair
value because of the short maturity of these instruments. The fair value of
long-term investments is estimated based on quoted market prices. The fair value
of long-term debt, including the current portion, is estimated based on current
rates offered to the Company for debt of the same remaining maturities. The fair
values of foreign currency, interest rate, equity and commodity contracts are
estimated based on dealer quotes. These values represent the estimated amount
the Company would receive or pay to terminate agreements, taking into
consideration current market rates and the current credit worthiness of the
counterparties.
[ ] CONTINGENCIES
The Company is subject to legal proceedings and claims arising out of its
business that cover a wide range of matters, including antitrust and trade
regulation, contracts, environmental issues, product liability, patent and
trademark matters, and taxes.
In connection with its merger with Duracell International Inc., the Company
assumed certain environmental liabilities. These liabilities arose when Duracell
was notified by certain state and Federal environmental protection agencies that
it is a potentially responsible party under Superfund legislation. The Company
has accrued its best estimate of its obligations with respect to these sites at
December 31, 1996. It is reasonably possible that the Company's recorded
estimate of its obligations may change in the near term.
Management, after review and consultation with counsel, considers that any
liability from all of these pending lawsuits and claims would not materially
affect the consolidated financial position, results of operations or liquidity
of the Company.
[ ] COMMITMENTS
Minimum rental commitments under noncancellable leases, primarily for office and
warehouse facilities, are $58 million in 1997, $44 million in 1998, $29 million
in 1999, $23 million in 2000, $21 million in 2001 and $23 million for years
thereafter. Rental expense amounted to $93 million in 1996, $88 million in 1995
and $84 million in 1994. In 1996, the Company exercised its option to purchase a
group headquarters facility for approximately $70 million.
[ ] RESEARCH AND DEVELOPMENT
Research and development costs, included in selling, general and administrative
expenses, amounted to $204 million in 1996, $187 million in 1995 and $169
million in 1994.
31
<PAGE> 32
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
[ ] INCOME TAXES
Deferred income taxes are recognized for the expected tax consequences of
temporary differences by applying enacted statutory tax rates, applicable to
future years, to differences between the financial reporting basis and tax basis
of assets and liabilities.
<TABLE>
Income before income taxes and income tax expense are summarized below.
<CAPTION>
(Millions of dollars) 1996 1995 1994
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes
United States ..................... $ 879.8 $ 738.4 $ 667.0
Foreign ........................... 645.2 961.4 791.4
------------------------------------
Total income before
income taxes .................... $1,525.0 $1,699.8 $1,458.4
====================================
Current tax expense
Federal ........................... $ 319.4 $ 265.8 $ 103.7
Foreign ........................... 306.5 270.6 259.4
State ............................. 67.4 51.7 33.5
Deferred tax expense
Federal ........................... (65.6) 7.9 96.3
Foreign ........................... (51.7) 36.7 33.8
State ............................. .3 (2.0) 12.6
------------------------------------
Total income tax expense ........... $ 576.3 $ 630.7 $ 539.3
====================================
</TABLE>
<TABLE>
A reconciliation of the statutory Federal income tax rate to the Company's
effective tax rate follows.
<CAPTION>
(Percent) 1996 1995 1994
- - ------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory Federal tax rate ......... 35.0% 35.0% 35.0%
Tax benefit not currently
utilized ........................ .4 .3 .2
Utilization of net operating
loss carryforwards .............. (.4) (.5) (.2)
Goodwill amortization .............. .3 .3 .3
Rate differential on
foreign income .................. -- (.9) 1.2
Effect of foreign currency
translation ..................... .2 .4 --
State taxes (net of
Federal tax benefits) ........... 2.6 1.9 2.1
Other differences .................. (1.7) .6 (1.6)
--------------------------------
Effective tax rate before
merger-related costs ............ 36.4 37.1 37.0
Merger-related costs ............... 1.4 -- --
--------------------------------
Effective tax rate ................. 37.8% 37.1% 37.0%
================================
</TABLE>
<TABLE>
The components of deferred tax assets and deferred tax liabilities are
shown below.
<CAPTION>
1996 1995
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
(Millions of dollars) Assets Liabilities Assets Liabilities
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CURRENT
Advertising and
sales promotion .......... $ 30.9 $ -- $ 11.4 $ --
Benefit plans ............... 69.0 -- 49.7 --
Inventory reserves .......... 23.2 -- 19.8 --
Merger-related
costs .................... 85.2 -- -- --
Misc. reserves and
accruals ................. 41.0 -- 28.9 --
Operating loss ..............
and credit
carryforwards ............ 12.6 -- 14.6 --
Other ....................... 97.4 -- 122.4 --
-------------------- ----------------------
Total current .............. 359.3 -- 246.8 --
------ ====== ------- ======
Net current ................ 359.3 -- 246.8
====== =======
NONCURRENT
Benefit plans ............... 136.4 -- 121.4 --
Intangibles ................. -- 250.7 -- 265.5
Merger-related
costs .................... 44.8 -- -- --
Operating loss
and credit
carryforwards ............ 37.8 -- 47.2 --
Property, plant
and equipment ............ -- 223.5 -- 184.4
Other ....................... -- 17.0 1.6 --
-------------------- ----------------------
Total noncurrent ........... 219.0 491.2 170.2 449.9
-------------------- ----------------------
Valuation allowance .......... $(26.7) $(23.7)
====== ======
Net noncurrent ............... $298.9 $303.4
====== ======
Net Deferred Tax
Assets/Liabilities ........ $ 60.4 $ 56.6
====== ======
</TABLE>
32
<PAGE> 33
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
[ ] PENSION PLANS
The Company has various retirement programs, including defined benefit, defined
contribution and other plans, that cover most employees worldwide. In the U.S.,
the Company has noncontributory defined benefit plans in effect for
substantially all of its employees. Benefits are based primarily on years of
service and employees' compensation. The funding policy of the Company for these
plans is to contribute annually the amount necessary to meet the minimum funding
standards established by the Employee Retirement Income Security Act. In
Germany, under common local practice and enabling tax law, pension costs are
accrued but unfunded.
<TABLE>
Total pension expense for 1996 was $89.9 million, compared with $97.5
million and $79.0 million in 1995 and 1994, respectively. The components of net
pension expense follow.
<CAPTION>
1996 1995 1994
------------------- ------------------- -------------------
(Millions of dollars) Domestic Foreign Domestic Foreign Domestic Foreign
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Defined Benefit Plans
Service cost--benefits earned .................... $ 28.8 $ 31.9 $ 24.2 $ 29.9 $ 22.1 $ 27.5
Interest cost on projected benefit obligation .... 55.7 53.3 53.4 50.2 44.3 42.9
Actual return on plan assets ..................... (118.0) (66.1) (152.7) (58.6) (.9) (33.7)
Net amortization and deferral .................... 64.1 29.0 113.2 27.6 (38.3) 6.3
------------------ ------------------ -----------------
30.6 48.1 38.1 49.1 27.2 43.0
Other Pension Costs
Defined contribution plans ....................... -- 3.7 -- 4.1 -- 3.3
Foreign plans not on SFAS 87 ..................... -- 7.5 -- 6.2 -- 5.5
------------------ ------------------ -----------------
Total Pension Expense ............................. $ 30.6 $ 59.3 $ 38.1 $ 59.4 $ 27.2 $ 51.8
================== ================== =================
</TABLE>
<TABLE>
The funded status of the Company's principal defined benefit plans and the amounts recognized in the balance
sheet at December 31 follow.
- - ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Vested benefit .................................... $ 629.2 $ 675.5 $ 601.4 $ 599.1 $ 463.6 $ 511.8
Nonvested benefit ................................. 89.2 32.9 88.1 33.8 84.3 25.4
------------------ ------------------- -----------------
Accumulated benefit obligation .................... 718.4 708.4 689.5 632.9 547.9 537.2
Benefit obligation related to future
compensation levels ............................ 160.8 101.1 147.8 90.8 99.6 86.7
------------------ ------------------- -----------------
Projected benefit obligation ...................... 879.2 809.5 837.3 723.7 647.5 623.9
Fair value of plan assets, invested primarily
in equities and debt securities ................ 815.7 461.7 689.7 361.6 523.2 325.4
------------------ ------------------- -----------------
Plan assets less than projected benefit obligation (63.5) (347.8) (147.6) (362.1) (124.3) (298.5)
Unrecognized transition obligation ................ 1.1 9.9 .3 12.1 .1 11.0
Unrecognized prior service cost ................... 7.7 12.5 17.7 9.7 20.8 12.4
Unrecognized net loss ............................. 97.2 38.3 158.3 34.6 129.6 28.9
Minimum liability adjustment ...................... (25.8) (11.3) (23.3) (16.8) (2.4) (8.2)
------------------ ------------------- -----------------
Net prepaid (accrued) pension cost included
in consolidated balance sheet .................. $ 16.7 $(298.4) $ 5.4 $(322.5) $ 23.8 $(254.4)
================== ================== =================
</TABLE>
<TABLE>
The primary assumptions used in determining related obligations of the plans are shown below.
<CAPTION>
(Percent)
- - ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rates 7 6- 8-1/4 6 3/4,7-1/2 6 - 9 7-1/2, 8-1/2 5- 9
Increases in compensation levels 5 3- 6-1/2 5, 6-1/2 3-1/2- 6-1/2 5, 6-1/2 3-1/2- 6-1/2
Long-term rates of return on assets 9 6-10-1/2 9 6 -10-1/2 9 5-10
- - ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 34
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
[ ] OTHER RETIREE BENEFITS
The Company and its subsidiaries provide certain health care and life insurance
benefits to eligible retired employees, principally in the United States.
Substantially all of the Company's domestic employees and some employees in
other countries become eligible for these benefits upon retirement. Domestic
participants under the Gillette plans who retire after January 1, 1992, share in
the cost of their health care benefits if hired before July 1, 1990, or pay all
of such costs if hired after that date. The Employee Stock Ownership Plan (ESOP)
was established to assist Gillette employees in financing retiree medical costs.
Duracell health care benefits are offered on a shared-cost basis.
<TABLE>
The other postretirement benefit expense for 1996, 1995 and 1994 was $16.4
million, $19.2 million and $16.2 million, respectively, as follows.
<CAPTION>
(Millions of dollars) 1996 1995 1994
- - ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest cost ........................... $ 19.2 $ 23.4 $ 19.8
Service cost (income) ................... 1.6 .2 (1.4)
Actual return on assets ................. (3.5) (3.4) --
Net amortization and expense ............ (.9) (1.0) (2.2)
--------------------------------
Other postretirement benefit
expense .............................. $ 16.4 $ 19.2 $ 16.2
================================
</TABLE>
<TABLE>
The status of the Company's plans and the amounts recognized in the balance
sheet follow.
<CAPTION>
(Millions of dollars) ................... 1996 1995 1994
- - ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Retirees ................................ $171.9 $182.2 $154.1
Fully eligible active employees ......... 25.3 30.8 34.9
Other active employees .................. 69.1 67.2 81.4
--------------------------------
Accumulated postretirement
benefit obligation ................... 266.3 280.2 270.4
Fair value of plan assets ............... (24.0) (17.4) (10.3)
Unrecognized net gain ................... 67.6 47.3 30.6
--------------------------------
Accrued postretirement liability ........ $309.9 $310.1 $290.7
================================
</TABLE>
<TABLE>
Primary assumptions used in determining costs and benefits obligations of
the principal retiree benefit plans are shown below.
<CAPTION>
1996 1995 1994
- - ----------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rates ............................ 7% 6.75, 8% 8, 8.5%
Health care cost trend
rates--initial ......................... 10% 10, 11% 10.6, 12%
Health care cost trend
rates--ultimate ........................ 5% 5, 5.4% 5, 5.4%
Years in which
ultimate trend rate
achieved ............................... 2001 2001, 2002 2001, 2002
</TABLE>
A one percentage point increase in the trend rate would have increased the
accumulated postretirement benefit obligation by 13%, and interest and service
cost by 16%, in 1996. Outside the United States, the assumptions used were
consistent with, but not identical to, those used domestically.
ESOP shares allocated to eligible participants reduce the Company's
obligations over the period of allocation. The account balance is assumed to
have an annual yield of 12%. In addition, the Company established a retiree
health benefits account within its principal domestic pension plan that will be
used to partially fund health care benefits for future retirees.
[ ] PREFERRED STOCK
PURCHASE RIGHTS
At December 31, 1996, the Company had 562,395,094 preferred stock purchase
rights outstanding as follows: one right for each share of common stock
outstanding and a total of 6,316,981 rights for the outstanding Series C
preferred stock. Each right may be exercised to purchase one ten-thousandth of a
share of junior participating preferred stock for $225. The rights will only
become exercisable, or separately transferable, on the earlier of the tenth
business day after the Company announces that a person has acquired 15% or more,
or the tenth business day after a tender offer commences that could result in
ownership of more than 15%, of the Company's common stock.
If any person acquires 15% or more of the common stock (except in an offer
for all common stock that has been approved by the Board of Directors), or in
the event of certain mergers or other transactions involving a 15% or more
stockholder, each right not owned by that person or related parties will enable
its holder to purchase, at the right's exercise price, common stock (or a
combination of common stock and other assets) having double that value. In the
event of certain merger or asset sale transactions with another party, similar
terms would apply to the purchase of that party's common stock.
The rights, which have no voting power, expire on December 14, 2005,
subject to extension. Upon approval by the Board of Directors, the rights may be
redeemed for $.01 each under certain conditions, which may change after any
person becomes a 15% stockholder.
At December 31, 1996, there were authorized 5,000,000 shares of preferred
stock without par value, of which 157,925 Series C shares were issued and
outstanding and 400,000 Series A shares were reserved for issuance upon exercise
of the rights.
34
<PAGE> 35
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
[ ] EMPLOYEE STOCK
OWNERSHIP PLAN
In 1990, the Company sold to the ESOP 165,872 shares of a new issue of 8%
cumulative Series C convertible preferred stock for $100 million, or $602.875
per share.
Each share of Series C stock is entitled to vote as if it were converted to
common stock and is convertible into 40 common shares at $15.07188 per share. At
December 31, 1996, 157,925 Series C shares were outstanding, of which 116,082
shares were allocated to employees and the remaining 41,843 shares were held in
the ESOP trust for future allocations. The 157,925 Series C shares are
equivalent to 6,316,981 shares of common stock, about 1.1% of the Company's
outstanding voting stock.
The Series C stock is redeemable upon the occurrence of certain change in
control or other events, at the option of the Company or the holder, depending
on the event, at varying prices not less than the purchase price plus accrued
dividends.
The ESOP purchased the Series C shares with borrowed funds guaranteed by
the Company. Company contributions to the ESOP and the dividends paid on the
Series C shares are used to pay loan principal and interest semiannually over a
10-year period.
As the ESOP loan is repaid, a corresponding amount of Series C stock held
in the trust is released to participant accounts. Allocations are made quarterly
to the accounts of eligible employees, generally on the basis of an equal amount
per participant. In general, regular U.S. employees participate in the ESOP
after completing one year of service with the Company.
The unpaid balance of this loan is reported as a liability of the Company.
An unearned ESOP compensation amount is reported as an offset to the Series C
shares in the equity section.
<TABLE>
Plan costs and activity for this plan follow.
(Millions of dollars) 1996 1995 1994
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
Compensation expense ................. $ 4.4 $ 6.0 $ 6.4
Cash contributions and
dividends paid .................... 13.0 14.2 13.9
Principal payments ................... 9.9 10.3 9.2
Interest payments .................... 3.1 3.9 4.7
</TABLE>
[ ] STOCK OPTION AND STOCK
EQUIVALENT UNIT PLANS
At December 31, 1996, the Company had stock-based compensation plans described
below that include the pre-merger plans of Duracell. Effective with the merger,
and in accordance with the terms of the Duracell stock option plans, outstanding
Duracell options were assumed by the Company and converted to options to
purchase Gillette common stock at a ratio of .904 of one share of Gillette
common stock for each share of Duracell stock.
Stock option plans authorize the granting of options on shares of the
Company's common stock to selected key employees, including those who also may
be officers, and to nonemployee directors, at not less than the fair market
value of the stock on the date of grant. Outstanding options have 10-year terms.
They are exercisable one year from the date of grant (except the Duracell
options, which became exercisable upon the merger), provided the employee
optionee is still employed or the director continues to serve. The plans also
permit payment for options exercised in shares of the Company's common stock
(except Duracell options) and the granting of incentive stock options.
The Company applied APB Opinion No. 25 and related Interpretations in
accounting for its plans. Accordingly, no compensation cost has been recognized
for its fixed stock option plans in its results of operations. Had the Company
recorded a charge for the fair value of options granted consistent with FASB
Statement 123, net income and net income per common share would have been
reduced by $46.5 million and $.08 in 1996 and $32.3 million and $.06 in 1995,
respectively. There is no effect on fully diluted earnings per share.
<TABLE>
The fair value of each option grant for the Company's plans is estimated on
the date of the grant using the Black Scholes option pricing model, with the
following weighted average assumptions used for grants in 1996 and 1995.
<CAPTION>
1996 1995
- - -------------------------------------------------------------------------------
<S> <C> <C>
Risk-free interest rates .............. 6.5, 6.7% 6.0, 6.5%
Expected option lives ................. 4.6, 7.0 years 4.6, 7.0 years
Expected volatilities ................. 22.0, 29.0% 22.4, 29.4%
Expected dividend yields .............. 1.2, 2.1% 1.4, 2.3%
</TABLE>
35
<PAGE> 36
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
<TABLE>
A summary of the status of the Company's stock option plan at December 31, 1996, 1995 and 1994 follows.
<CAPTION>
1996 1995 1994
------------------------ ------------------------ ------------------------
Weighted Average Weighted Average Weighted Average
(Thousands of shares) Shares Exercise Price Shares Exercise Price Shares Exercise Price
- - -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year .... 20,750 $29.61 20,501 $25.07 19,537 $21.71
Granted 4,459 58.02 4,467 42.01 4,068 34.94
Exercised (4,983) 26.32 (3,739) 18.71 (2,510) 12.93
Cancelled (493) 40.98 (479) 35.91 (594) 33.68
------- ------- -------
Outstanding at year-end 19,733 36.58 20,750 29.61 20,501 25.07
======= ======= =======
Options exercisable at year-end 15,705 13,069 11,854
======= ======= =======
Weighted average fair value of
options granted during the year $ 16.78 $ 11.48 $ 11.39
</TABLE>
<TABLE>
The following table summarizes information about fixed stock options outstanding at December 31, 1996.
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------------------- ----------------------------------
Weighted Average
Remaining
Range of Number Years of Weighted Average Number Weighted Average
Exercise Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
- - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 5-10 1,232 2.3 $ 7 1,232 $ 7
14-18 1,385 4.6 17 1,385 17
22-30 2,813 6.4 24 2,813 24
33-42 9,754 6.7 37 9,754 37
43-51 414 5.9 45 414 45
53-64 4,135 7.0 59 107 61
------ ------
$ 5-64 19,733 6.0 $37 15,705 $31
====== ======
</TABLE>
Eligible Gillette employees may participate in two other plans. The Stock
Equivalent Unit Plan provides for awards of basic stock units to key employees,
although awards have not been made to executive officers since 1990. Each unit
is treated as equivalent to one share of the Company's common stock. However,
the employee only receives appreciation, if any, in the market value of the
stock and dividend equivalent units as dividends are paid. Appreciation on basic
stock units is limited to 100% of the original market value. Benefits accrue
over seven years, and vesting commences in the third year. Plan expense amounted
to $23 million in 1996, $27 million in 1995 and $19 million in 1994.
The Stock Purchase Plan provides for the sale at fair market value of the
Company's common stock to selected key employees, excluding officers and
directors. At December 31, 1996, 185,048 shares were reserved for issuance under
the plan.
36
<PAGE> 37
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
[ ] COMMON STOCK AND ADDITIONAL
PAID-IN CAPITAL
Gillette and Duracell terminated their stock repurchase programs after the
merger was announced in 1996. Gillette repurchased 210,400 shares for $11.4
million in 1996. During 1994 and 1995, Duracell repurchased 904,000 shares for
$41.2 million.
<TABLE>
Dividends declared per common share in 1996, 1995 and 1994 were $.72, $.60,
and $.50 for Gillette and $1.16, $1.04 and $.88 for Duracell, respectively.
<CAPTION>
(Thousands of shares) (Millions of dollars)
----------------------------------- --------------------------------------
Common Stock
----------------------------------- Additional
Common Paid-in Treasury
Issued In Treasury Outstanding Stock Capital Stock
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993 .................. 662,447 (115,396) 547,051 $662.4 $ 925.5 $(1,047.1)
Conversion of Series C ESOP Preferred Stock ... -- 53 53 -- .3 .5
Stock option and purchase plans ............... 2,242 -- 2,242 2.3 44.1 --
Purchase of Duracell Treasury stock ........... (399) -- (399) (.4) (11.9) --
----------------------------------- --------------------------------
Balance at December 31, 1994 .................. 664,290 (115,343) 548,947 664.3 958.0 (1,046.6)
Conversion of Series C ESOP Preferred Stock ... -- 89 89 -- .5 .8
Stock option and purchase plans ............... 3,284 -- 3,284 3.3 81.6 --
Purchase of Duracell Treasury stock ........... (505) -- (505) (.5) (28.4) --
----------------------------------- --------------------------------
Balance at December 31, 1995 .................. 667,069 (115,254) 551,815 667.1 1,011.7 (1,045.8)
Conversion of Series C ESOP Preferred Stock ... -- 110 110 -- .7 1.0
Stock option and purchase plans ............... 4,363 -- 4,363 4.3 146.2 --
Purchase of Gillette Treasury stock ........... -- (210) (210) -- -- (11.4)
----------------------------------- --------------------------------
Balance at December 31, 1996 .................. 671,432 (115,354) 556,078 $671.4 $1,158.6 $(1,056.2)
=================================== ================================
</TABLE>
37
<PAGE> 38
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
<TABLE>
[ ] FINANCIAL INFORMATION BY BUSINESS SEGMENT
<CAPTION>
(Millions of dollars) Blades & Toiletries & Stationery Braun Oral-B Duracell
1996 Razors Cosmetics Products Products Products Products Other Corporate Total
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ................ $2,835.7 $1,375.2 $ 914.6 $1,773.4 $547.5 $2,250.8 $ .5 $ -- $ 9,697.7
Profit from operations* .. 1,061.8 86.9 122.2 300.3 57.6 142.3 (.3) (134.5) 1,636.3
Identifiable assets ...... 2,591.2 874.0 1,244.4 1,533.8 595.3 3,153.6 2.7 440.3 10,435.3
Capital expenditures ..... 353.4 64.7 43.1 119.8 38.1 200.7 .1 9.8 829.7
Depreciation ............. 95.7 26.4 20.2 77.9 14.8 50.9 .6 6.1 292.6
*After merger-related
costs of .............. 36.4 4.0 -- -- -- 307.6 -- 65.0 413.0
1995
- - ------------------------------------------------------------------------------------------------------------------------------------
Net sales ................ $2,634.7 $1,236.2 $ 862.2 $1,621.1 $440.0 $2,039.8 $ .5 $ -- $ 8,834.5
Profit from operations ... 960.7 74.9 108.7 254.9 32.9 427.9 (.4) (60.4) 1,799.2
Identifiable assets ...... 2,123.0 695.3 1,171.2 1,483.1 523.6 2,599.8 3.3 340.8 8,940.1
Capital expenditures ..... 219.5 54.4 43.5 110.5 39.6 122.0 .1 3.5 593.1
Depreciation ............. 84.6 28.4 19.1 69.8 11.6 48.0 .4 3.6 265.5
1994
-----------------------------------------------------------------------------------------------------------------------------------
Net sales ................ $2,350.7 $1,162.0 $ 806.7 $1,348.2 $401.9 $1,864.9 $ .7 $ -- $ 7,935.1
Profit from operations ... 878.2 79.3 94.9 200.4 25.0 388.0 (.5) (50.6) 1,614.7
Identifiable assets ...... 1,833.6 615.2 1,103.4 1,089.9 347.5 2,453.9 3.0 320.8 7,767.3
Capital expenditures ..... 181.1 33.0 30.4 110.0 38.2 98.2 .4 6.7 498.0
Depreciation ............. 72.5 20.2 23.8 57.3 8.0 42.8 .4 1.9 226.9
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
[ ] FINANCIAL INFORMATION BY GEOGRAPHIC AREA
<CAPTION>
(Millions of dollars) Western Latin Total United
1996 Europe America Other Foreign States Corporate Total
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales ................ $3,067.7 $1,105.2 $1,944.1 $6,117.0 $3,580.7 $ -- $ 9,697.7
Profit from operations* .. 534.8 210.2 306.1 1,051.1 719.7 (134.5) 1,636.3
Identifiable assets ...... 3,838.0 1,089.9 1,549.6 6,477.5 3,517.5 440.3 10,435.3
*After merger-related
costs of .............. 118.7 36.1 56.8 211.6 136.4 65.0 413.0
1995
- - -------------------------------------------------------------------------------------------------------------------------
Net sales ................ $3,031.0 $1,043.1 $1,663.4 $5,737.5 $3,097.0 $ -- $ 8,834.5
Profit from operations ... 639.8 235.7 302.8 1,178.3 681.3 (60.4) 1,799.2
Identifiable assets ...... 3,754.8 874.1 1,018.4 5,647.3 2,952.0 340.8 8,940.1
1994
- - -------------------------------------------------------------------------------------------------------------------------
Net sales ................ $2,650.7 $1,031.1 $1,375.0 $5,056.8 $2,878.3 $ -- $ 7,935.1
Profit from operations ... 533.9 259.9 234.6 1,028.4 636.9 (50.6) 1,614.7
Identifiable assets ...... 3,237.2 825.9 887.4 4,950.5 2,496.0 320.8 7,767.3
- - -------------------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] SEGMENT AND AREA COMMENTARY
Profit from operations is net sales less cost of sales and selling, general and
administrative expenses, but is not affected either by nonoperating
charges/income or by income taxes. Nonoperating charges/income consists
principally of net interest expense and exchange losses.
In calculating profit from operations for individual business segments,
substantial expenses incurred at the operating level that are common to more
than one segment are allocated on a net sales basis. Certain headquarters
expenses of an operational nature also are allocated to business segments and
geographic areas.
The principal products included in each of the Company's major business
segments are described in the review of operations, which appears earlier.
All intercompany transactions have been eliminated, and transfers of
finished goods between geographic areas are not significant. Assets in the
Corporate column include deferred income tax assets, prepaid and intangible
pension assets, oil and gas investments and nonqualified benefit trusts.
38
<PAGE> 39
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
OTHER FINANCIAL INFORMATION
[ ] BUSINESS SEGMENTS
<TABLE>
The percentages of consolidated net sales and segment profit from operations, before corporate expenses, during the last
five years for each of the Company's major business segments are set forth below.
<CAPTION>
Blades & Toiletries & Stationery Braun Oral-B Duracell
Razors Cosmetics Products Products Products Products
-------------- -------------- --------------- ---------------- --------------- ----------------
Net Segment Net Segment Net Segment Net Segment Net Segment Net Segment
(Percent) Sales Profit Sales Profit Sales Profit Sales Profit Sales Profit Sales Profit
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996* .... 29 52 14 4 10 6 18 14 6 3 23 21
1995 ..... 30 51 14 4 10 6 18 14 5 2 23 23
1994 ..... 30 53 15 5 10 6 17 12 5 1 23 23
1993* .... 30 55 15 4 9 4 17 11 5 3 24 23
1992 ..... 29 51 14 7 8 4 20 12 5 3 24 23
<FN>
* Segment profit percentages are before 1996 merger-related costs and 1993 realignment/restructuring expenses.
- - -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
[ ] QUARTERLY FINANCIAL INFORMATION
<CAPTION>
(Millions of dollars, except per share amounts) Three Months Ended
------------ -------------------------------------------
1996 March 31 June 30 September 30 December 31* Total Year
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales ..................................... $2,058.9 $2,272.1 $2,365.7 $3,001.0 $9,697.7
Gross profit .................................. 1,286.7 1,430.2 1,478.6 1,820.5 6,016.0
Profit from operations ........................ 414.0 469.8 508.2 244.3 1,636.3
Income before income taxes .................... 389.9 439.9 485.7 209.5 1,525.0
Net income .................................... 249.3 276.7 307.4 115.3 948.7
Net income per common share ................... .45 .50 .55 .21 1.71
Dividends declared per common share
Gillette ..................................... -- .18 .18 .36 .72
Duracell ..................................... .29 .29 .29 .29 1.16
Gillette stock price range: (composite basis)
High ......................................... 57 7/8 62 1/2 72 1/4 77 3/4
Low .......................................... 50 48 1/4 55 1/4 68
<FN>
*In the fourth quarter of 1996, merger-related costs reduced profit from operations and income before income taxes by
$413.0 million, net income by $283.0 million and net income per common share by $.51.
</TABLE>
<TABLE>
<CAPTION>
1995
- - ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales ..................................... $1,884.5 $2,057.6 $2,175.5 $2,716.9 $8,834.5
Gross profit .................................. 1,175.2 1,310.0 1,362.2 1,663.1 5,510.5
Profit from operations ........................ 362.6 411.1 441.5 584.0 1,799.2
Income before income taxes .................... 349.9 381.3 406.2 562.4 1,699.8
Net income .................................... 221.5 239.4 255.8 352.4 1,069.1
Net income per common share ................... .40 .44 .46 .64 1.94
Dividends declared per common share
Gillette ..................................... -- .15 .15 .30 .60
Duracell ..................................... .26 .26 .26 .26 1.04
Gillette stock price range: (composite basis)
High ......................................... 42 5/8 45 1/8 48 1/4 55 3/8
Low .......................................... 35 3/8 39 7/8 40 1/2 47 1/8
- - ------------------------------------------------------------------------------------------------------------------------
</TABLE>
39
<PAGE> 40
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
HISTORICAL FINANCIAL SUMMARY
<TABLE>
(Millions of dollars, except per share amounts, stock prices and employees)
<CAPTION>
Profit Income Net Depreciation
Net from before Net interest and Total Capital
Year sales operations taxes income expense amortization assets expenditures
- - -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1996(a) $9,698 $1,636 $1,525 $ 949 $ 67 $381 $10,435 $830
1995 8,834 1,799 1,700 1,069 73 344 8,940 593
- - -----------------------------------------------------------------------------------------------------------------
1994 7,935 1,615 1,458 919 68 303 7,767 498
1993(b) 7,085 1,091 907 421 66 303 7,116 396
1992(c) 6,752 1,263 1,061 601 114 298 6,400 370
1991(c) 6,188 1,144 844 432 225 277 6,169 339
1990(c) 5,709 1,020 633 382 319 259 5,921 285
- - -----------------------------------------------------------------------------------------------------------------
<FN>
Per common share amounts, shares outstanding and stock prices have been restated
to reflect two-for-one stock splits in 1991 and 1995.
(a) In 1996, charges for merger-related costs reduced profit from operations and
income before income taxes by $413 million, net income by $283 million and net
income per common share by $.51.
(b) In 1993, charges for realignment and restructuring expenses reduced profit
from operations and income before income taxes by $328 million, net income by
$212 million and net income per common share by $.39. In addition, in 1993, the
cumulative effect of adopting mandated changes in the methods of accounting for
income taxes, postretirement benefits and postemployment benefits reduced net
income by $139 million and net income per common share by $.25.
(c) Charges for extraordinary items reduced net income by $75 million in 1992,
$109 million in 1991 and $6 million in 1990 and net income per common share by
$.14 in 1992, $.22 in 1991 and $.01 in 1990.
</TABLE>
[PIE CHART] [PIE CHART]
SOURCE OF 1996 SALES
PERCENT BY BUSINESS SEGMENT PERCENT BY GEOGRAPHIC AREA
Business Segment Percentage Geographic Area Percentage
- - ---------------- ---------- --------------- ----------
Blades & Razors 29% United States 37%
Duracell Products 23% Western Europe 32%
Braun Products 18% Other 20%
Toiletries & Cosmetics 14% Latin America 11%
Stationery Products 10%
Oral-B Products 6%
40
<PAGE> 41
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Per Common Share
-----------------------------
Net property, Dividends declared Average com-
plant and Long-term Stockholders' Net -------------------- mon shares Year-end
equipment debt equity income Gillette Duracell outstanding stock price Employees Year
- - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$2,566 $1,490 $4,491 $1.71 $.72 $1.16 554 $77-3/4 44,100(a) 1996
2,053 1,048 3,900 1.94 .60 1.04 550 52-1/8 41,900 1995
- - -----------------------------------------------------------------------------------------------------------------------------------
1,750 1,073 3,253 1.67 .50 .88 548 37-3/8 40,700 1994
1,507 1,234 2,582 .77 .42 .64 545 29-3/4 41,000(b) 1993
1,396 1,124 2,538 1.10 .36 .16 541 28-3/8 38,800(c) 1992
1,262 1,473 2,134 .81 .31 -- 509 28 39,200(c) 1991
1,183 2,456 607 .72 .27 -- 453 15-5/8 38,300(c) 1990
- - -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
[GRAPH] [GRAPH]
INVESTOR RETURNS
Compounded Annual Return to Investors, Value of $1,000
Assuming Reinvestment of Dividends (through 12/31/96) Invested 12/31/86
Compounded Annual Return 1996 Value
------------------------ ----------
5 YEARS
Gillette 24% Gillette $15,423
DJIA 18% DJIA $ 4,653
S&P 500 15% S&P 500 $ 4,127
10 YEARS
Gillette 31%
DJIA 17%
S&P 500 15%
41
<PAGE> 42
PRINCIPAL DIVISIONS
AND SUBSIDIARIES
[ ] GILLETTE NORTH
ATLANTIC GROUP
Executive Vice President,
Robert G. King
Vice Presidents:
Sharon E. Keith, Marketing Research
Herbert W. Moller,
Finance and Strategic Planning
Richard W. Monaghan,
Human Resources
BUSINESS MANAGEMENT
Senior Vice President, Peter K. Hoffman
Vice Presidents:
Peter M. Clay, Gillette Toiletries
John M. Darman, Male Shaving
Carole E. Johnson, Personal Care
Mary Ann Pesce, Female Shaving
MANUFACTURING AND TECHNICAL OPERATIONS
Senior Vice President,
Michael T. Cowhig
Vice Presidents:
Dr. Richard J. Bertozzi,
Toiletries Technology Laboratory
Ralph J. Chesnauskas,
Engineering and Implementation
Thomas L. Gallerani,
Shaving Technology Laboratory
Detlef-J. Schacht, Manufacturing
and Distribution
Hans Peter Schaefer,
Program and Materials Management
EUROPEAN DIVISION
President, Allan G. Boath
General Managers:
Franco Bigontina, Southeast Europe
Alain Calviera, Western Europe
Luis Gigliani, Southwest Europe
Robert H. Leger, Northern Europe
Brian M. Nohe, Central Europe
NORTH AMERICAN DIVISION
President, Ronald J. Rossi
Gillette U.S.A.
Vice President and General Manager, Bruce Swinsky
Gillette Canada
President, Donald N. MacDuff
[ ] INTERNATIONAL
GROUP
Executive Vice President,
Jorgen Wedel
Vice Presidents:
Eric L. Adams, Business Management
Donald Gaiter, Technical Operations
Frank O'Connell, Human Resources
Claudio E. Ruben,
Finance and Administration
LATIN AMERICAN GROUP
Group Vice President,
Norman M. Roberts
General Managers:
Carlos Daireaux, Brazil
Alberto Duenas, Venezuela
Hans Eben, Andean Region
Milton C. Henrique, Colombia
Fabio Marulanda, Stationery Group
Jorge Micozzi, Argentina
Praxedes M. Rivera-Ferrer,
Caribbean Region
Kenneth Rule, Mexico
AFRICA, MIDDLE EAST AND
EASTERN EUROPE (AMEE) GROUP
Group Vice President,
Jose Luis Ribera
General Managers:
James G. Denham, Turkey
Gurbrinder S. Gill, Eastern Region
Silvio R. Perl, Operations Group
Albert Richard, Former Soviet Union
David J. Waldron, Stationery Group
ASIA-PACIFIC GROUP
Group Vice President, Ian E. Jackson
Area General Managers:
G. Bruce Dean, Australia, New
Zealand and South Pacific
Richard L. Guilfoile, Japan
Ying Meng Lai,
China, Hong Kong and Korea
Marcel A. Reid, Stationery Group
Chin Yong Teh, Southeast Asia
[ ] DURACELL NORTH
ATLANTIC GROUP
Executive Vice President,
Edward F. DeGraan
Vice Presidents:
Ana M. Herrera, Human Resources
Ronald V. Waters, Finance
MANUFACTURING AND TECHNICAL OPERATIONS
Senior Vice President,
Edward A. Battocchio
Vice Presidents:
D. Nevin Caldwell, Manufacturing
John E. Siddall,
Manufacturing Services
NEW PRODUCTS AND TECHNOLOGY
President, J. Norman Allen
Research and Development,
Advanced Engineering
Vice President, Dr. Alwyn H. Taylor
COMMERCIAL OPERATIONS
President, Steven G. Staves
Presidents:
Bruce E. Travis, North America
David W. Young, Europe
Business Management
Senior Vice President,
Robert C. Giacolone
42
<PAGE> 43
PRINCIPAL DIVISIONS
AND SUBSIDIARIES
[ ] DIVERSIFIED
GROUP
Executive Vice President,
Jacques Lagarde
Finance, Planning and Administration
Vice President, Mark D. Cutler
BRAUN AG
BOARD OF MANAGEMENT
Archie Livis, Chairman
Norbert Gehrke, Personnel
Dieter Timmermann, Finance
Bernhard Wild, Business Management
and Technical Operations
HEADQUARTERS
Duncan Adamson, Group Controller
Dieter Bach, Legal
Karl H. Hellbusch,
Corporate Accounting and Treasury
Dr. Lothar Heuwinkel,
Corporate Quality
Albrecht Jestadt,
Research and Development
Udo Milutzki, Corporate Engineering
and Program Management
Dieter Rams, Corporate Identity Affairs
Walter Zimmermann,
Manufacturing Operations
BUSINESS MANAGEMENT
Gilbert Greaves, Shaving Products
and Hair Care
Michael Hansen, Household Products
Irma Hollinga, Personal Diagnostic
Appliances and Clocks
Alex Resly, Oral Care
GROUP SALES - EUROPE
Executive Director, Edward D. Shirley
Central Europe
Group General Manager, Josef Vanicek
GROUP SALES - NORTH AMERICA
Executive Director, Philip Hung
GROUP SALES - INTERNATIONAL AFFILIATED
MARKETS
Executive Director, Hans Brocker
Australia, China, East Asia
Group General Manager,
Kok Liang Choong
GROUP SALES - JAPAN
Group General Manager, Hans Th. Pauli
STATIONERY PRODUCTS GROUP
President, Robert P. Hanafee, Jr.
Manufacturing and Technical Operations
Senior Vice President, Charles F. Deehan
Vice Presidents:
Robert C. Straskulic, Finance
Robert H. Terranova, Human Resources
Susan L. Wagner, Marketing Research
BUSINESS MANAGEMENT
Peter J. Bentley, Parker Pen
Peter J. Siddall,
Paper Mate and Liquid Paper
Jean Y. Veillon, Waterman
GEOGRAPHIC DIVISIONS
Presidents:
Donald W. Hoeder, Europe
Brian E. McFarland, North America
ORAL-B LABORATORIES
President, A. Bruce Cleverly
Senior Vice Presidents:
Edward D. Blanchard,
Human Resources
Kerry J. Gleeson, Marketing
Michelle E. Viotty, Finance
Gerald J. Wroblewski,
Technical Operations
Area Vice Presidents:
John H. Bower, Western Europe
Eng Seng Dieu, Asia-Pacific
Mario O. Mariasch, Latin America
and AMEE Markets
J. Ross McMullin, North America
JAFRA COSMETICS INTERNATIONAL
President, Robert A. Crespi
Vice Presidents:
Cynthia K. Beesemyer, Marketing
William H. Harris, Human Resources
Arthur Kierstead, Technical Operations
Carlos Matos, Finance
Area General Managers:
Ingelise Badsted, Central Europe
Alfredo Munda, Mexico
F. Guy Walker, North America
43
<PAGE> 1
EXHIBIT 22
THE GILLETTE COMPANY
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
ORGANIZED
UNDER
NAME LAWS OF
------------------
<S> <C>
Compania Gillette de Argentina............................................ Delaware
Its Subsidiary:
Gillette Argentina S.A. ............................................. Argentina
Gillette Australia Pty Ltd................................................ Australia
Braun Inc. ............................................................... Delaware
Duracell International Inc. .............................................. Delaware
Its subsidiaries:
Duracell Batteries Limited........................................... United Kingdom
Duraname Corp. ...................................................... Delaware
NV Duracell Belgium SA............................................... Belgium
Duracell Inc......................................................... Delaware
Its subsidiaries:
Duracell GmbH................................................... Germany
Duracell SpA.................................................... Italy
Eveready South Africa (pty) Limited............................. South Africa
Gillette Beteiligungs -- GmbH............................................. Germany
Its subsidiaries:
Gillette Deutschland GmbH & Co. ..................................... Germany
Societe de Participations Financieres Gillette....................... France
Its subsidiary:
Waterman S.A. .................................................. France
Braun AG............................................................. Germany
Its subsidiaries:
Braun Electric Austria Gesellschaft mbH......................... Austria
Braun Canada Ltd./Ltee.......................................... Canada
Braun Espanola, S.A. ........................................... Spain
Braun Finland Oy................................................ Finland
Braun France S.A. .............................................. France
Braun Ireland Ltd. ............................................. Ireland
Braun Italia S.r.l. ............................................ Italy
Braun Japan K.K. ............................................... Japan
Braun de Mexico y Cia. de C.V. ................................. Mexico
Braun Nederland B.V. ........................................... Netherlands
Braun (U.K.) Ltd. .............................................. United Kingdom
Gillette do Brasil, Inc. and Jafra Comercio Participacoes e Servicos, Delaware
Inc. ...................................................................
Their subsidiary:
Gillette do Brasil & Cia. ........................................... Brazil
Its subsidiary:
Gillette do Brazil Ltda. ....................................... Brazil
Gillette Canada Inc. ..................................................... Canada
Its subsidiaries:
Oral-B Laboratories Pty. Limited..................................... Australia
Oral-B Laboratories GmbH............................................. Germany
Oral-B Laboratorios, S.A. de C.V. ................................... Mexico
Gillette de Colombia S.A. ................................................ Colombia
Colton Gulf Coast, Inc. .................................................. Delaware
Colton North Central, Inc. ............................................... Delaware
Gillette Capital Corporation.............................................. Delaware
Its subsidiary:
Jafra Cosmetics International, Inc. ................................. California
Gillette Czech Inc. and Gillette Eastern Europe, Inc...................... Delaware
Their subsidiary:
Astra a.s. .......................................................... Czech Republic
Gillette Espanola, S.A. .................................................. Spain
Gillette Far East Trading Limited......................................... Hong Kong
</TABLE>
15
<PAGE> 2
THE GILLETTE COMPANY
SUBSIDIARIES OF REGISTRANT -- (CONTINUED)
<TABLE>
<CAPTION>
ORGANIZED
UNDER
NAME LAWS OF
------------------
<S> <C>
Gillette Foreign Sales Corporation Limited................................ Jamaica
Gillette France S.A. ..................................................... France
Gilfin B.V. .............................................................. Netherlands
Parkfin Limited........................................................... United Kingdom
Compania Giva, S.A. ...................................................... Delaware
Indian Shaving Products Limited........................................... India
Compania Interamericana Gillette, S.A. ................................... Panama
Gillette Egypt S.A.E. .................................................... Egypt
Gillette Pakistan Limited................................................. Pakistan
Inversiones Gilco (Chile) Limitada........................................ Chile
Gillette Group Italy S.p.A................................................ Italy
Grupo Jafra, S.A. de C.V. ................................................ Mexico
Gillette (Japan) Inc. .................................................... Delaware
Gillette Manufacturing (USA), Inc. ....................................... Massachusetts
Gillette de Mexico, Inc. and Mexico Manufacturing Company................. Delaware
Their subsidiary:
Gillette de Mexico S.A. de C.V. ..................................... Mexico
Gillette del Peru, Inc. and Lima Manufacturing Company.................... Delaware
Partners in:
Gillette del Peru, S.C. ............................................. Peru
Gillette (Philippines), Inc. ............................................. Philippines
Gillette Sanayi ve Ticaret A.S. .......................................... Turkey
Gillette (Shanghai) Limited............................................... China
Shenmei Daily Use Products Limited Company................................ China
Gillette South Africa Limited............................................. South Africa
Gillette South Asia Inc. and Saratoga Investment, Inc..................... Delaware
Their subsidiary:
Gillette India Private Limited....................................... India
Its subsidiary:
Luxor Pen Company.................................................... India
Gillette (Switzerland) AG................................................. Switzerland
Gillette Industries Plc................................................... United Kingdom
Its subsidiaries:
Gillette U.K. Limited................................................ United Kingdom
Jafra Cosmetics International Limited................................ United Kingdom
Parker Pen Holdings.................................................. United Kingdom
The Gillette Company (USA), Inc. ......................................... Massachusetts
Gillette Poland S.A. ..................................................... Poland
Gillette Home Diagnostics, Inc............................................ Delaware
Its subsidiary:
Thermoscan Inc....................................................... Delaware
Gillette Oral Care, Inc................................................... Delaware
</TABLE>
All of the voting securities of each subsidiary listed above are owned by
its parent company or parent partners except that the percentage ownership in
Indian Shaving Products Limited, Shenmei Daily Use Products Limited Company,
Gillette (Shanghai) Limited, Gillette Pakistan Limited, Gillette Egypt S.A.E.
and Luxor Pen Company is 58%, 50%, 70%, 75.25%, 90.2% and 50%, respectively.
There are a number of additional subsidiaries in the United States and
foreign countries which, considered in the aggregate, do not constitute a
significant subsidiary.
16
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Stockholders and Board of Directors
of THE GILLETTE COMPANY:
We consent to incorporation by reference in the following registration
statements of The Gillette Company (1) No. 33-9495 on Form S-8, (2) No. 2-93230
on Form S-8, (3) Nos. 33-56218 and 33-27916 on Form S-8 which incorporate by
reference therein registration statements on Form S-8 Nos. 2-90276, 2-63951 and
1-50710 and No. 2-41016 on Form S-7, (4) No. 33-54974 on Form S-3, (5) No.
33-50303 on Form S-3, (6) No. 33- 52465 on Form S-8, (7) No. 33-53257 on Form
S-8, (8) No. 33-53258 on Form S-8, (9) No. 33-55051 on Form S-3, (10) No.
33-59125 on Form S-8, (11) No. 33-63707 on Form S-8 (12) No. 333-16735 on Form
S-4 and (13) No. 333-19133 on Form S-8 of our reports dated January 30, 1997,
relating to the consolidated balance sheet of The Gillette Company and
subsidiary companies as of December 31, 1996 and 1995, consolidated statements
of income and earnings reinvested in the business, and cash flows for each of
the years in the three-year period ended December 31, 1996, and the related
financial statement schedule, which reports appear in the December 31, 1996
Annual Report on Form 10-K of The Gillette Company.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
March 20, 1997
17
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
We, the undersigned hereby constitute Thomas F. Skelly and Joseph E.
Mullaney, or either of them, our true and lawful attorneys with full power to
sign for us in our name and in the capacity indicated below the Annual Report on
Form 10-K pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, filed for the Company with the Securities and Exchange Commission for the
year ended December 31, 1996, and any and all amendments and supplements
thereto, hereby ratifying and confirming our signatures as they may be signed by
our said attorneys, or either of them, to said Report and to any and all
amendments and supplements to said Report.
WITNESS Our Hand and Seal on the Date set forth below.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- - --------------------------------------------- ------------------------------ ---------------
<S> <C> <C>
ALFRED M. ZEIEN Chairman of the Board March 20, 1997
- - --------------------------------------------- of Directors, Chief Executive
Alfred M. Zeien Officer and Director
MICHAEL C. HAWLEY President, Chief Operating March 20, 1997
- - --------------------------------------------- Officer and Director
Michael C. Hawley
JOSEPH E. MULLANEY Vice Chairman of the Board and March 20, 1997
- - --------------------------------------------- Director
Joseph E. Mullaney
THOMAS F. SKELLY Senior Vice President and March 20, 1997
- - --------------------------------------------- Chief Financial Officer
Thomas F. Skelly
CHARLES W. CRAMB Vice President, Controller and March 20, 1997
- - --------------------------------------------- Principal Accounting Officer
Charles W. Cramb
WARREN E. BUFFETT Director March 20, 1997
- - ---------------------------------------------
Warren E. Buffett
WILBUR H. GANTZ Director March 20, 1997
- - ---------------------------------------------
Wilbur H. Gantz
MICHAEL B. GIFFORD Director March 20, 1997
- - ---------------------------------------------
Michael B. Gifford
CAROL R. GOLDBERG Director March 20, 1997
- - ---------------------------------------------
Carol R. Goldberg
HERBERT H. JACOBI Director March 20, 1997
- - ---------------------------------------------
Herbert H. Jacobi
HENRY R. KRAVIS Director March 20, 1997
- - ---------------------------------------------
Henry R. Kravis
RICHARD R. PIVIROTTO Director March 20, 1997
- - ---------------------------------------------
Richard R. Pivirotto
JUAN M. STETA Director March 20, 1997
- - ---------------------------------------------
Juan M. Steta
ALEXANDER B. TROWBRIDGE Director March 20, 1997
- - ---------------------------------------------
Alexander B. Trowbridge
JOSEPH F. TURLEY Director March 20, 1997
- - ---------------------------------------------
Joseph F. Turley
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE GILLETTE COMPANY FOR THE YEAR ENDED DECEMBER 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000041499
<NAME> THE GILLETTEE COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 76,900
<SECURITIES> 7,000
<RECEIVABLES> 2,805,400
<ALLOWANCES> 80,800
<INVENTORY> 1,358,200
<CURRENT-ASSETS> 4,753,200
<PP&E> 4,561,200
<DEPRECIATION> 1,995,400
<TOTAL-ASSETS> 10,435,300
<CURRENT-LIABILITIES> 2,951,800
<BONDS> 1,490,400
671,400
0
<COMMON> 95,200
<OTHER-SE> 3,724,300
<TOTAL-LIABILITY-AND-EQUITY> 10,435,300
<SALES> 9,697,700
<TOTAL-REVENUES> 9,697,700
<CGS> 3,681,700
<TOTAL-COSTS> 3,681,700
<OTHER-EXPENSES> 4,379,700
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,800
<INCOME-PRETAX> 1,524,900
<INCOME-TAX> 576,200
<INCOME-CONTINUING> 948,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 948,700
<EPS-PRIMARY> 1.71
<EPS-DILUTED> 1.66
</TABLE>
