<PAGE> 1
Filed pursuant to Rule 424(B)(1)
Registration No. 333-44257
PROSPECTUS
10,000,000 Shares
[GILLETTE LOGO]
Common Stock
(par value $1.00 per share)
All of the shares of Common Stock (the "Common Stock") of The Gillette Company
(the "Company") offered hereby (the "Offering") are being sold by the Selling
Stockholders (the "Selling Stockholders") identified herein. See "Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
the Common Stock by the Selling Stockholders. The Common Stock is listed on the
New York Stock Exchange (the "NYSE") under the symbol "G". On February 3, 1998,
the last reported sale price of the Common Stock on the NYSE Composite
Transactions Tape was $101 7/8 per share. See "Price Range of Common Stock and
Dividends."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
===========================================================================================================
PROCEEDS TO
PRICE TO UNDERWRITING SELLING
PUBLIC DISCOUNT(1) STOCKHOLDERS(2)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share $101.00 $2.78 $98.22
- -----------------------------------------------------------------------------------------------------------
Total (3) $1,010,000,000 $27,800,000 $982,200,000
- -----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) The Company will pay certain expenses of the Selling Stockholders in
connection with the Offering.
(3) The Selling Stockholders have granted the Underwriters an option,
exercisable within 30 days after the date of this Prospectus, to purchase up to
an additional 1,500,000 shares of Common Stock, on the same terms as set forth
above, solely to cover overallotments, if any. If such option is exercised in
full, the total Price to Public, Underwriting Discount and Proceeds to Selling
Stockholders will be $1,161,500,000, $31,970,000, and $1,129,530,000,
respectively. See "Underwriting."
The shares of Common Stock offered by this Prospectus are offered by the
Underwriters, subject to prior sale, when, as and if received and accepted by
the Underwriters and subject to approval of certain legal matters by Davis Polk
& Wardwell, counsel for the Underwriters. It is expected that delivery of the
shares of Common Stock offered hereby will be made against payment therefor on
or about February 9, 1998 at the offices of J.P. Morgan Securities Inc., 60 Wall
Street, New York, New York.
J.P. Morgan & Co.
Credit Suisse First Boston
Goldman, Sachs & Co.
Merrill Lynch & Co.
Morgan Stanley Dean Witter
February 4, 1998
<PAGE> 2
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING,
AND MAY BID FOR, AND PURCHASE, SHARES OF THE COMMON STOCK IN THE OPEN MARKET.
SEE "UNDERWRITING."
No person is authorized in connection with the Offering to give any information
or to make any representation not contained or incorporated by reference in this
Prospectus, and any information or representation not contained or incorporated
herein must not be relied upon as having been authorized by the Company, the
Selling Stockholders or any Underwriter. This Prospectus relates solely to the
Common Stock and it may not be used or relied on in connection with any other
offer or sale of securities of the Company. This Prospectus does not constitute
an offer to sell or a solicitation of any offer to buy by any person in any
jurisdiction in which it is unlawful for such person to make such an offer or
solicitation. Neither the delivery of this Prospectus at any time nor any sale
made hereunder shall under any circumstance imply that the information herein is
correct as of any date subsequent to the date hereof.
No action has been or will be taken by the Company or any Underwriter that would
permit a public offering of the Common Stock or possession or distribution of
this Prospectus in any jurisdiction where action for that purpose is required,
other than in the United States. Persons into whose possession this Prospectus
comes are required by the Company and the Underwriters to inform themselves
about and to observe any restrictions as to the Offering of the Common Stock and
the distribution of this Prospectus.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information.................... 3
Incorporation of Certain Documents by
Reference.............................. 3
The Company.............................. 4
Recent Developments...................... 5
Use of Proceeds.......................... 7
Price Range of Common Stock and
Dividends.............................. 7
<CAPTION>
PAGE
<S> <C>
Capitalization........................... 8
Selected Consolidated Financial Data..... 9
Selling Stockholders..................... 10
Description of Capital Stock............. 11
Underwriting............................. 14
Legal Matters............................ 15
Experts.................................. 15
</TABLE>
2
<PAGE> 3
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 and at its regional offices at
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such materials can
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, on payment of prescribed charges. The
Company makes filings of reports, proxy statements and other information
pursuant to the Exchange Act with the Commission electronically, and such
materials may be inspected and copied at the Commission's Web site
(http://www.sec.gov). In addition, such material filed by the Company can be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on Form S-3
(the "Registration Statement") under the Securities Act, with respect to the
shares of Common Stock offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which have
been omitted in accordance with the rules and regulations of the Commission, and
the exhibits relating thereto, which have been filed with the Commission. Copies
of the Registration Statement and the exhibits are on file at the offices of the
Commission and may be obtained upon payment of the fees prescribed by the
Commission, or examined without charge at the public reference facilities of the
Commission described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed with the Commission by the Company are
incorporated herein by reference and made a part hereof:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
(2) The Company's Quarterly Reports on Form 10-Q for the quarterly
periods ended March 31, 1997, June 30, 1997 and September 30, 1997.
(3) The Company's Current Report on Form 8-K filed on September 22,
1997.
(4) The Company's Current Report on Form 8-K filed on January 29, 1998.
(5) The description of the Company's capital stock contained in the
Company's Registration Statement on Form 8-A/A filed on November 12,
1996.
All documents subsequently filed by the Registrant pursuant to Section 13(a),
Section 13(c), Section 14 and Section 15(d) of the Exchange Act after the date
of this Prospectus prior to the termination of the Offering shall be deemed
incorporated herein by reference from the date of filing of such documents. Any
statement contained in a document incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein, or in any other subsequently filed
document that also is incorporated by reference herein, modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom this Prospectus
is delivered, upon the written or oral request of such person, a copy of any or
all of the documents that have been incorporated by reference in this
Prospectus, other than exhibits to such documents. Such documents may be
obtained by writing to The Gillette Company, Prudential Tower Building, Boston,
Massachusetts 02199, Attention: Corporate Secretary, or by calling (617)
421-7000.
3
<PAGE> 4
THE COMPANY
The Company's businesses range across several industry segments, including
blades and razors, Duracell products (alkaline batteries for consumer products),
Braun products (electric shavers, small household appliances, hair care
appliances and oral care appliances), toiletries and cosmetics, stationery
products, and Oral-B products (oral care products).
The approximate percentages of consolidated net sales for each of the Company's
business segments are set forth below:
<TABLE>
<CAPTION>
=================================================================================
BLADES DURACELL BRAUN TOILETRIES STATIONERY ORAL-B
& RAZORS PRODUCTS PRODUCTS & COSMETICS PRODUCTS PRODUCTS
---------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Nine months ended
September 30, 1997 29% 24% 17% 15% 9% 6%
</TABLE>
Founded in 1901, The Gillette Company is the world leader in male grooming
products, including blades and razors and shaving preparations. The Company 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. Duracell is the world leader in alkaline batteries for
consumer products.
The Company has a wide array of well-established brands including razor and
blade products under the Sensor Excel, Sensor, Atra, Trac II, Custom Plus and
Good News names, Duracell consumer batteries, Braun electric shavers and
appliances, Gillette Series, Right Guard, Soft & Dri and Dry Idea deodorant
antiperspirant brands, White Rain hair care line, Jafra cosmetics, Parker, Paper
Mate, Waterman and Flair writing instruments, Liquid Paper correction products
and Oral-B dental products.
The Company is divided into four operating groups. The North Atlantic Group is
responsible for marketing the Company's razor and blade and toiletries products
in Western Europe and North America. The International Group is responsible for
marketing the Company's razor and blade, battery, toiletries and stationery
products outside Western Europe and North America. The Duracell North Atlantic
Group is responsible for marketing the Company's battery products in Western
Europe and North America. The Diversified Group is responsible for marketing the
Company's Braun, Oral B and Jafra products worldwide and the Company's
stationery products in Western Europe and North America.
The executive offices of the Company are located at Prudential Tower Building,
Boston, Massachusetts 02199, and the Company's telephone number is (617)
421-7000.
4
<PAGE> 5
RECENT DEVELOPMENTS
1997 Results
On January 28, 1998, the Company announced its earnings for the three months
ended December 31, 1997 and the year ended December 31, 1997.
Sales for the three months ended December 31, 1997, were $3.16 billion, a gain
of 5% from $3 billion in 1996. Without the negative impact of exchange, sales
would have increased by 10%. Profit from operations was $765 million, up 16%
from $657 million a year earlier. Net income increased 18% to $471 million,
compared with $398 million last year. Basic net income per common share of 84
cents climbed 17% from the 72 cents reported in the prior year's fourth quarter.
Total year sales rose 4% to $10.06 billion, compared with $9.70 billion in 1996.
Profit from operations was $2.32 billion, an increase of 13% from the $2.05
billion of the year before. Net income of $1.43 billion climbed 16% from the
$1.23 billion last year. Basic net income per common share of $2.55 compared
with $2.22, a gain of 15% over that of the prior year.
All comparisons with 1996 results are before one-time costs related to the
Duracell merger, which reduced 1996 profit from operations by $413 million, net
income by $283 million and basic net income per common share by 51 cents in both
the fourth quarter and the total year.
The consolidated income account, excluding one-time merger-related costs,
follows.
<TABLE>
<CAPTION>
=================================================
THREE MONTHS ENDED TOTAL YEAR ENDED
DECEMBER 31 DECEMBER 31
Millions of dollars, except per share amounts 1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $3,160.2 $3,001.0 $10,062.1 $9,697.7
Profit from Operations (a) 764.9 657.3 2,323.5 2,049.3
Income Before Income Taxes (a) 732.9 622.5 2,221.3 1,938.0
Income Taxes 262.0 224.2 794.1 706.3
Net Income (b) $ 470.9 $ 398.3 $ 1,427.2 $1,231.7
Preferred Stock Dividends 1.2 1.1 4.6 4.6
Net Income Available to Common Stockholders (b) $ 469.7 $ 397.2 $ 1,422.6 $1,227.1
Basic Net Income Per Common Share Before One-Time,
Merger-Related Costs $ 0.84 $ 0.72 $ 2.55 $ 2.22
Effect of One-Time, Merger-Related Costs -- $ 0.51 -- $ 0.51
Net Income Per Common Share, Basic $ 0.84 $ 0.21 $ 2.55 $ 1.71
Average Number of Common
Shares Outstanding (Thousands) 560,189 555,117 558,851 553,501
Net Income Per Common Share, Assuming Full
Dilution $ 0.82 $ 0.20 $ 2.49 $ 1.66
</TABLE>
- ---------------
(a) Excludes $413 million for one-time, merger-related costs in the fourth
quarter and total year 1996.
(b) Excludes $283 million for one-time, merger-related costs in the fourth
quarter and total year 1996.
Harmonization of Year-ends
On January 28, 1998, the Company announced that, beginning in 1998, it will
harmonize the various year-ends for each of its operating groups into a common
calendar year-end of December 31. The Company's Braun operation has historically
ended its year on September 30 and the Company's other international operating
units have previously ended their years on November 30, while the rest of the
corporation has operated on a calendar cycle.
5
<PAGE> 6
In order to provide comparable results between 1997 and 1998, the Company will
also report its 1997 results on a pro forma calendar quarter-end basis. The
Company does not plan to report pro forma financial results prior to 1997 as it
would be cost-prohibitive.
In the 1997 financial statements, Braun's results for the three-month "stub"
period ended December 31, 1997 and the results of the other Gillette
international operations for the one-month "stub" period ended December 31,
1997, in the aggregate a small loss, will be reflected as a charge in the
stockholders' equity section of the 1997 balance sheet. Also reflected in this
section will be a charge adjusting for seasonality of advertising. The
accounting for the "stub" period will be consistent with what other companies
have done in the past in similar circumstances.
The harmonization is in line with a Financial Accounting Standards Board
proposed exposure draft. The change is possible because of the technology now
available which permits rapid reporting of international results. It is designed
to make it easier to focus on the various segments of the Company's business by
providing a common reporting period.
Agreement to Sell Jafra Cosmetics International
On January 28, 1998, the Company announced a definitive agreement to sell its
Jafra Cosmetics International business to a private investment fund managed by
Clayton, Dubilier & Rice, Inc.
Terms of the transaction, including price, were not disclosed by the Company.
The transaction is expected to be completed early in the second quarter of 1998.
Jafra sales represent a very small portion of the Company's total sales, and the
transaction is not expected to have a material impact on the Company's financial
results.
6
<PAGE> 7
USE OF PROCEEDS
The Company will not receive any of the proceeds of the Common Stock offered
hereunder by the Selling Stockholders.
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The Common Stock is listed for trading on the New York Stock Exchange under the
symbol "G". The Common Stock is also listed on the Boston, Midwest and Pacific
stock exchanges in the United States. The following table sets forth the high
and low sale prices of the Common Stock as reported on the NYSE Composite
Transactions Tape, and the dividends paid on the Common Stock, for the periods
indicated:
<TABLE>
<CAPTION>
========================================
DIVIDENDS
PRICE RANGE PAID PER
HIGH LOW SHARE(1)
---------- ---------- ----------
<S> <C> <C> <C>
YEARS ENDED DECEMBER 31,
1996:
First Quarter $ 57 7/8 $50 $ 0.150
Second Quarter 62 1/2 48 1/4 0.180
Third Quarter 72 1/4 55 1/4 0.180
Fourth Quarter 77 3/4 68 0.180
1997:
First Quarter 86 1/8 72 0.180
Second Quarter 99 5/8 72 1/4 0.215
Third Quarter 106 3/8 77 7/8 0.215
Fourth Quarter 102 5/16 83 7/8 0.215
1998:
First Quarter (through January 31, 1998) 103 7/8 97 3/16 --
</TABLE>
(1) In addition to the Company dividends shown in the table, pre-merger
dividends paid by Duracell International Inc. ("Duracell") in 1996 were $.29 for
each quarter.
The Board of Directors has declared a quarterly dividend of $.215 per share
payable to holders of record on February 2, 1998. Purchasers of the Common Stock
offered hereby will not receive this dividend.
Future dividends will be determined by the Company's Board of Directors in light
of the earnings and financial condition of the Company and its subsidiaries and
other factors.
The last reported sale price of the Common Stock on the New York Stock Exchange
as of a recent date is set forth on the cover page of this Prospectus.
7
<PAGE> 8
CAPITALIZATION
The following table sets forth the capitalization of the Company and its
consolidated subsidiaries at September 30, 1997 as adjusted to give effect to
the sale of $300 million aggregate principal amount of notes by the Company in
November, 1997 and the use of the net proceeds of $299 million to reduce
short-term debt.
<TABLE>
<CAPTION>
==================
AS OF
SEPTEMBER 30, 1997
AS ADJUSTED
------------------
<S> <C>
Dollars in millions
Loans Payable $ 421
Current Portion of Long-Term Debt 11
Long-Term Debt 1,782
Minority Interest 37
Contingent Redemption Value of Common Stock Put Options 43
Stockholders' Equity
8.0% Cumulative Series C ESOP Conv. Preferred, without par value
Issued: 155,306 shares 93
Unearned ESOP Compensation (21)
Common Stock, par value $1.00 per share
Authorized: 1,160,000,000 shares
Issued: 675,658,859 shares 676
Additional paid-in capital 1,233
Earnings reinvested in the business 4,867
Cumulative foreign currency translation adjustments (683)
Treasury stock, at cost: 115,581,641 shares (1,084)
----------
Total Stockholders' Equity 5,081
----------
Total Capitalization $ 7,375
==========
</TABLE>
8
<PAGE> 9
SELECTED CONSOLIDATED FINANCIAL DATA
The income statement and balance sheet data presented below for the nine months
ended September 30, 1997 and 1996 and as of September 30, 1997 and 1996,
respectively, were derived from the unaudited consolidated financial statements
of the Company incorporated herein by reference. The income statement and
balance sheet data presented below for each of the years in the three-year
period ended December 31, 1996 and as of December 31, 1996 and 1995,
respectively, were derived from the audited consolidated financial statements
and notes thereto incorporated herein by reference. The balance sheet data as of
December 31, 1994 was derived from the audited consolidated financial statements
and notes thereto of the Company for the year ended December 31, 1994 not
incorporated by reference herein. The Selected Consolidated Financial Data
should be read in conjunction with the audited consolidated financial statements
and notes thereto and the unaudited interim period consolidated financial
statements and notes thereto of the Company incorporated by reference herein.
The results for the nine month periods ended September 30, 1997 and September
30, 1996 are not necessarily indicative of the results for the entire year.
<TABLE>
<CAPTION>
===================================================================
Millions of dollars, except share data NINE MONTHS ENDED
and Percent of Net Sales SEPTEMBER 30, YEAR ENDED DECEMBER 31,
1997 1996 1996 1995 1994
----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Sales $6,902 $6,697 $9,698 $8,834 $7,935
Cost of Sales 2,614 2,501 3,682 3,324 2,918
Gross Profit 4,288 4,196 6,016 5,510 5,017
Selling, General and Administrative
Expenses 2,729 2,804 3,967 3,711 3,402
Profit from Operations 1,559 1,392 2,049(1) 1,799 1,615
Income before Income Taxes 1,488 1,315 1,938(1) 1,700 1,458
Net Income $ 956 $ 833 $1,232(1) $1,069 $ 919
Percent of Net Sales 13.9% 12.4% 12.7% 12.1% 11.6%
PER SHARE DATA:
Net Income per Common Share $ 1.71 $ 1.50 $ 2.22(1) $ 1.94 $ 1.67
Common Stock Dividends Declared(2) 0.43 0.36 0.72 0.60 0.50
</TABLE>
<TABLE>
<CAPTION>
=================================================================
Millions of dollars, except share data AT SEPTEMBER 30, AT DECEMBER 31,
1997 1996 1996 1995 1994
---------- ----------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working Capital (3) $ 2,860 $2,529 $ 2,490 $2,159 $1,867
Net Property, Plant and Equipment 2,790 2,302 2,566 2,053 1,750
Total Assets 10,522 9,454 10,435 8,940 7,767
Total Debt 2,213 1,903 2,162 1,710 1,514
Total Stockholders' Equity 5,081 4,475 4,491 3,900 3,253
OTHER DATA:
Capital Expenditures $ 609 $ 521 $ 830 $ 593 $ 498
Weighted Average Shares Outstanding 558 553 554 550 548
</TABLE>
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(1) The information for the year ended December 31, 1996 is before costs related
to the Duracell merger, which reduced both Profit from Operations and Income
before Income Taxes by $413 million, and Net Income and Net Income per Common
Share by $283 million and $.51 respectively.
(2) In addition to the Company dividends shown in the table, pre merger
dividends declared by Duracell were $.87 for the nine months ended September 30,
1996 and $1.16, $1.04 and $.88 for the years ended December 31, 1996, 1995 and
1994, respectively.
(3) Working Capital equals current assets minus current liabilities (excluding
Loans Payable and Current Portion of Long-Term Debt).
9
<PAGE> 10
SELLING STOCKHOLDERS
The Selling Stockholders acquired the shares of Common Stock offered hereby from
the Company pursuant to an Agreement and Plan of Merger by and among the
Company, Alaska Acquisition Corp. and Duracell, pursuant to which Duracell
became a wholly-owned subsidiary of the Company.
Henry R. Kravis, a director of the Company, is a general partner of KKR
Associates, the sole general partner of each of the Selling Stockholders.
The following table sets forth certain information regarding ownership of the
Company's Common Stock by the Selling Stockholders at December 31, 1997.
<TABLE>
<CAPTION>
=======================================================================================
SHARES OF COMMON
STOCK BENEFICIALLY NUMBER OF SHARES SHARES OF COMMON STOCK
OWNED PRIOR TO OF COMMON STOCK TO BE BENEFICIALLY OWNED
OFFERING OFFERED HEREBY(1) AFTER OFFERING(2)
SELLING STOCKHOLDER NUMBER PERCENT NUMBER PERCENT NUMBER PERCENT
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
KKR Partners II, L.P. 817,927 0.146% 220,143 0.039% 597,784 0.107%
DI Associates, L.P. 36,336,472 6.483% 9,779,857 1.745% 26,556,615 4.738%
</TABLE>
- ---------------
(1) Assumes no exercise of the Underwriters' overallotment option. If the
overallotment option were exercised in full, KKR Partners II, L.P. would offer
253,164 shares of Common Stock and DI Associates, L.P. would offer 11,246,836
shares of Common Stock.
(2) Certain shares to be beneficially owned after the Offering may be
transferred by the Selling Stockholders to KKR Associates, which is an existing
beneficial owner of all of such shares.
10
<PAGE> 11
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 1,160,000,000 shares of
Common Stock, $1.00 par value, and 5,000,000 shares of preferred stock, without
par value.
COMMON STOCK
Subject to the preferences of any outstanding preferred stock, the holders of
Common Stock are entitled to receive dividends when and as declared by the Board
of Directors and paid by the Company. The holders of Common Stock are entitled
to one vote per share and to share ratably, after provision for payment of
creditors and for any payments to which the holders of any outstanding preferred
stock may be entitled, in the assets of the Company in the event of any
liquidation, dissolution or winding-up of the Company. There is no cumulative
voting. Other than the preferred stock purchase rights referred to below,
holders of Common Stock have no preemptive or other subscription rights, and
there are no conversion, redemption or sinking fund provisions applicable
thereto. The Board of Directors is authorized to issue from time to time all of
the authorized and unissued shares of Common Stock.
BankBoston, N.A. is the registrar and transfer agent of the shares of the
Company's Common Stock.
At December 31, 1997, 560,469,356 shares of Common Stock were outstanding and
held of record by 53,680 holders.
PREFERRED STOCK
The Board of Directors is authorized to fix the terms of one or more series of
the class of preferred stock and to issue from time to time any or all of the
authorized and unissued shares of preferred stock. Issues of preferred stock may
limit or qualify the rights of holders of the Common Stock.
Series C ESOP Convertible Preferred Stock
At December 31, 1997, 154,156 shares of Series C ESOP Convertible Preferred
Stock, no par value per share ("ESOP Preferred Stock"), were issued and
outstanding. All of the issued and outstanding ESOP Preferred Stock is held by
the Company's Employee Stock Ownership Plan. The holders of the ESOP Preferred
Stock are entitled to receive cash dividends in the amount of $48.23 per share
per annum. Such dividends accrue whether or not declared and cumulate if not
paid when accrued. If full cumulative dividends on the ESOP Preferred Stock have
not been declared and paid or set apart for payment when due, the Company may
not pay dividends on any other class of stock ranking junior to the ESOP
Preferred Stock, including the Common Stock. Upon any liquidation, dissolution
or winding up of the Company, holders of ESOP Preferred Stock are entitled to
receive liquidating distributions in the amount of $602.875 per share, plus an
amount equal to all accumulated and unpaid dividends.
As of December 31, 1997 each share of ESOP Preferred Stock was convertible into
40 shares of Common Stock at $15.071875 per share, subject to adjustment for
stock dividends, stock splits and the like. In any matter submitted to a vote of
the holders of the Common Stock of the Company each share of ESOP Preferred
Stock is entitled to a number of votes equal to the number of shares of Common
Stock into which such share could be converted (whether or not then convertible)
on the record date for determining the stockholders entitled to vote.
The ESOP Preferred Stock is redeemable upon the occurrence of certain changes in
control or other events, at the option of the Company or the holder, depending
on the event, at varying prices not less than $602.875 per share plus
accumulated and unpaid dividends.
Preferred Stock Purchase Rights
Pursuant to a Renewed Rights Agreement dated as of December 14, 1995, effective
as of December 9, 1996, between the Company and the First National Bank of
Boston, as Rights Agent (the "Rights Agreement"), a right is attached to each
outstanding share of Common Stock and each share of ESOP Preferred Stock is
entitled to 40 rights (all of such rights being referred to collectively by the
"Rights").
11
<PAGE> 12
At December 31, 1997, the Company had 566,635,606 Rights outstanding as follows:
one Right for each share of Common Stock outstanding and a total of 6,166,250
Rights for the outstanding ESOP Preferred Stock. Each Right may be exercised to
purchase one ten-thousandth of a share of Series A Junior Participating
Preferred Stock (the "Series A 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 of the 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.
The form of Rights Agreement between the Company and the Rights Agent specifying
the terms of the Rights has been filed with the Securities and Exchange
Commission as an exhibit to the Company's Form 8-K dated December 18, 1995,
incorporated by reference into the Company's Form 8A/A filed on November 12,
1996 and incorporated by reference herein. The foregoing description of the
Rights does not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement.
Series A Junior Participating Preferred Stock
The Board of Directors has reserved 400,000 shares of Series A Stock for
issuance upon exercise of the Rights, which shares have the following terms.
Each share of Series A Stock will be entitled, subject to the rights of holders
of any other series of preference stock having superior rights, to receive
cumulative quarterly cash dividends payable on the fifteenth day of January,
April, July and October in each year equal to the greater of (a) $20, or (b)
subject to certain anti-dilution adjustments, currently 10,000 times the
aggregate per share amount of all cash dividends, and 10,000 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock, declared
on the Common Stock since the immediately preceding quarterly dividend payment
date on the Series A Stock. Accrued but unpaid dividends shall not bear
interest.
Holders of shares of Series A Stock shall, subject to certain anti-dilution
adjustments, be entitled to 10,000 votes currently on all matters submitted to a
vote of the Company's stockholders, voting together with the Common Stock as a
single class, except as otherwise required by law. In the event that, at the
time of any annual meeting of stockholders for the election of directors, the
amount of dividends in arrears upon the Series A Stock shall be equal to six
full quarterly dividends, the holders of shares of Series A Stock, voting
separately as a class, shall have the right to elect two members of the Board of
Directors, which right shall continue until all accrued dividends shall have
been paid. In addition, during such time as dividends on the Series A Stock are
in arrears as set forth above, the terms of the Series A Stock limit the
Company's ability to pay dividends and to redeem or repurchase or otherwise
acquire shares of its stock.
Upon any liquidation (voluntary or otherwise), dissolution or winding up of the
Company, holders of Series A Stock shall be entitled to receive, before any
distribution is made with respect to shares of stock ranking junior to the
Series A Stock, an amount equal to the greater of (a) $200 per share, or (b)
subject to certain anti-dilution adjustments, currently 10,000 times the
aggregate per share amount to be distributed to holders of the Common Stock.
In the event of any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or other property, then in any such case the shares of
Series A Stock shall be similarly exchanged or changed in an amount per share,
subject to certain anti-dilution adjustments, equal to 10,000 times the
aggregate amount of stock, securities, cash
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and/or any other property (payable in kind), as the case may be, into which or
for which each share of Common Stock is changed or exchanged.
The shares of Series A Stock will rank pari passu with (or, if determined by the
Board of Directors, junior and subordinate to) all other series of preferred
stock of the Company with respect to dividends and/or liquidation preference.
The Series A Stock may be issued in fractional shares, and is not subject to
mandatory redemption.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW
Under Article 9 of the Certificate of Incorporation of the Company and the
related provisions of Article XIII of the bylaws of the Company, the Board of
Directors of the Company is classified into three classes as nearly equal in
number as possible, with one class being elected each year for a three-year
term. A director may only be removed for cause and only by the majority vote of
the outstanding shares entitled to vote. The affirmative vote of at least 75% of
the votes of the shares entitled to vote is required to amend or repeal Article
9 of the Certificate of Incorporation or Article XIII of the bylaws or to adopt
any provision inconsistent therewith.
The bylaws provide that special meetings of stockholders may be called only by
the Chief Executive Officer or the Board of Directors of the Company. The bylaws
also provide that in general stockholder proposals intended to be presented at a
meeting of stockholders, including proposals for the nomination of directors,
must be received by the Company 60 days in advance of the meeting.
The Company's bylaws contain provisions requiring the Company to indemnify any
director, officer, employee or agent to the fullest extent permitted under
Delaware law. The Company's Certificate of Incorporation provides that a
director of the Company shall not be personally liable to the Company or its
stockholders for monetary damages arising out of the director's breach of that
person's fiduciary duty as a director, except to the extent that Delaware law
does not permit exemption from such liability.
The Board of Directors is expressly authorized to adopt, amend or repeal the
bylaws of the Company, except as provided in the Certificate of Incorporation
and subject to the power of the stockholders to adopt, amend or repeal the
bylaws.
The Company is subject to the provisions of Section 203 of the General
Corporation Law of Delaware. In general, this statute prohibits a publicly-held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of the
transaction in which the person becomes an interested stockholder, unless the
business combination is approved in a prescribed manner. An "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within the prior three years did own) 15% or more of the corporation's voting
stock.
Certain of the provisions of the bylaws, Certificate of Incorporation and
Delaware law described in "Description of Capital Stock" may have anti-takeover
effects.
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UNDERWRITING
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this Prospectus (the "Underwriting Agreement"), the
Underwriters named below have severally agreed to purchase, and the Selling
Stockholders have severally agreed to sell to them, the respective number of
shares of Common Stock set forth opposite their names below. Under the terms and
conditions of the Underwriting Agreement, the Underwriters are obliged to take
and pay for all such shares of Common Stock (other than those covered by the
overallotment option described below), if any are taken. Under certain
circumstances, the commitments of nondefaulting Underwriters may be increased as
set forth in the Underwriting Agreement.
<TABLE>
<CAPTION>
==========
NUMBER OF
SHARES
----------
<S> <C>
UNDERWRITERS
J.P. Morgan Securities Inc. 2,000,000
Credit Suisse First Boston Corporation 2,000,000
Goldman, Sachs & Co. 2,000,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated 2,000,000
Morgan Stanley & Co. Incorporated 2,000,000
----------
Total 10,000,000
==========
</TABLE>
The Underwriters propose initially to offer the Common Stock directly to the
public at the price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $1.67 per
share. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $.10 per share to certain other dealers. After the initial
public offering of the Common Stock, the public offering price and such
concession may be changed.
Pursuant to the Underwriting Agreement, the Selling Stockholders have severally
granted the Underwriters an option, exercisable for 30 days from the date of
this Prospectus, to purchase up to an additional 1,500,000 shares of Common
Stock on the same terms and conditions as set forth on the cover page hereof.
The Underwriters may exercise such option to purchase solely for the purpose of
covering overallotments, if any, made in connection with the sale of the Common
Stock offered hereby. To the extent such option is exercised, such Underwriter
will have a commitment, subject to certain conditions, to purchase approximately
the same percentage of such additional Common Stock as the number set forth next
to each Underwriter's name in the preceding tables bears to the total number of
shares of Common Stock offered hereby.
In connection with the Offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
Specifically, the Underwriters may overallot in connection with the Offering,
creating a syndicate short position. In addition, the Underwriters may bid for,
and purchase, shares of Common Stock in the open market to cover syndicate short
positions or stabilize the price of the Common Stock. Finally, the underwriting
syndicate may reclaim selling concessions allowed for distributing the Common
Stock in the Offering if the syndicate repurchases previously distributed Common
Stock in syndicate covering transactions, in stabilization transactions or
otherwise. Any of these activities may stabilize or maintain the market price of
the Common Stock above independent market levels. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.
Each of the Selling Stockholders, with certain limited exceptions, and the
Company have agreed that, without the consent of J.P. Morgan Securities Inc.
they will not, for a period of 90 days after the date of this Prospectus, (A)
sell, pledge, assign or transfer or dispose of any equity securities of the
Company or any option, right, warrant or contract to purchase any equity
securities of the Company or any securities convertible into or exercisable or
exchangeable for any equity security of the Company or (B) enter into any swap
or other agreement that transfers, in whole or in part, any of the economic
consequences of ownership of the Stock, whether any such transaction described
in clause (A) or (B) above is to be settled by delivery of Stock or such other
securities, in cash or otherwise, other than, with respect to the Company, (u)
any issuances of Stock, options, phantom stock or other
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<PAGE> 15
securities or rights pursuant to any employee or director compensation, option,
savings, benefit or other plan of the Company, (v) hedging transactions and
programs in connection with any such plan, (w) any issuances upon exercise,
conversion or exchange of any securities or obligations outstanding on the date
of the Underwriting Agreement, (x) any issuances of equity securities as
consideration for an acquisition, (y) any purchases of stock or uses of put
options or other derivative securities pursuant to the previously announced
stock repurchase program, and (z) any issuances of Stock, and securities or
agreements with respect to, in the aggregate not greater than 1,000,000 shares
of Stock.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
From time to time in the ordinary course of their respective businesses, certain
of the Underwriters and their affiliates have engaged in and may in the future
engage in commercial and/or investment banking transactions with the Company,
its affiliates and the Selling Stockholders.
LEGAL MATTERS
The validity of the Common Stock being offered hereby will be passed upon for
the Company by Joseph E. Mullaney, Esq., Vice Chairman of the Board of the
Company. As of February 3, 1998, Mr. Mullaney beneficially owned approximately
260,696 shares of Common Stock, including options to purchase 150,000 shares of
Common Stock and 736 shares of Common Stock through his interest in the
Company's Employee Stock Ownership Plan. Certain legal matters will be passed
upon for the Underwriters by Davis Polk & Wardwell, New York, New York.
EXPERTS
The consolidated financial statements and schedule of the Company appearing in
its annual report on Form 10-K for the year ended December 31, 1996, have been
audited by KPMG Peat Marwick LLP, independent auditors, as set forth in their
reports included therein and incorporated herein by reference. Such consolidated
financial statements and schedule are incorporated herein by reference in
reliance upon such reports given upon authority of such firm as experts in
accounting and auditing.
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