SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1998 Commission File Number 1-922
THE GILLETTE COMPANY
(Exact name of registrant as specified in its charter)
Incorporated in Delaware 04-1366970
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Prudential Tower Building, Boston, Massachusetts 02199
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 421-7000
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Title of each class
Common Stock, $1.00 par value
Shares Outstanding September 30, 1998 . . . . . . . . . . . 1,109,307,413
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PAGE 1
PART I. FINANCIAL INFORMATION
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
(Millions, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Sales........................................ $2,531 $2,701 $6,881 $7,066
Cost of Sales.................................... 974 1,033 2,639 2,706
Gross Profit................................. 1,557 1,668 4,242 4,360
Selling, General and Administrative expenses..... 982 966 2,638 2,721
Reorganization/Realignment Expense............... 535 - 535 -
Profit from Operations....................... 40 702 1,069 1,639
Non-operating Charges (Income):
Interest income................................ (3) (2) (6) (7)
Interest expense............................... 27 18 61 56
Exchange....................................... 5 4 18 8
Other charges - net............................ 2 2 (2) 12
31 22 71 69
Income before Income Taxes .................. 9 680 998 1,570
Income Taxes..................................... 3 243 352 561
Net Income................................... 6 437 646 1,009
Net Income per Common Share, basic .............. $ - $ .39 $ .57 $ .90
Net Income per Common Share, assuming full dilution $ - $ .38 $ .56 $ .88
Dividends declared per common share ............. $.1275 $.1075 $ .255 $ .215
Weighted average number of common shares outstanding
Basic ....................................... 1,116 1,120 1,120 1,117
Assuming full dilution....................... 1,143 1,150 1,149 1,148
<FN>
See Accompanying Notes to Consolidated Financial Statements.
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PAGE 2
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
ASSETS
(Millions of dollars)
<CAPTION>
September 30 December 31
1998 1997
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents........................ $ 113 $ 105
Receivables, less allowances of $71
$74 at 12/31/97).............................. 2,577 2,522
Inventories:
Raw materials and supplies.................... 275 279
Work in process............................... 250 186
Finished goods................................ 1,259 1,035
Total Inventories.......................... 1,784 1,500
Deferred Income Taxes............................ 404 320
Prepaid expenses................................. 260 243
Total Current Assets....................... 5,138 4,690
Property, Plant and Equipment, at cost............. 5,646 5,191
Less accumulated depreciation................... 2,325 2,087
Net Property, Plant and Equipment.......... 3,321 3,104
Intangible Assets, less accumulated amortization... 2,341 2,423
Other Assets....................................... 667 647
$11,467 $10,864
<FN>
See Accompanying Notes to Consolidated Financial Statements
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PAGE 3
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(Millions of dollars)
<CAPTION>
September 30 December 31
1998 1997
(Unaudited)
<S> <C> <C>
Current Liabilities:
Loans payable.................................... $ 1,110 $ 552
Current portion of long-term debt................ 9 9
Accounts payable................................. 541 542
Accrued liabilities.............................. 1,302 1,132
Dividends payable................................ - 120
Income taxes..................................... 361 286
Total Current Liabilities..................... 3,323 2,641
Long-Term Debt..................................... 1,961 1,476
Deferred Income Taxes.............................. 252 359
Other Long-Term Liabilities........................ 1,052 1,101
Minority Interest.................................. 32 39
Contingent redemption value of common stock
put options...................................... 152 407
Stockholders' Equity:
8.0% Cumulative Series C ESOP Convertible
Preferred, without par value, issued: 1998,
150,021 shares; 1997, 154,156 shares........... 90 93
Unearned ESOP Compensation....................... (14) (17)
Common stock, par value $1.00 per share:
Authorized 2,320,000,000 shares
Issued: 1998, 1,357,106,961 shares;
1997, 1,352,581,842 shares............. 1,357 1,353
Additional paid-in capital....................... 664 309
Earnings reinvested in the business.............. 5,377 5,021
Accumulated other comprehensive income........... (828) (810)
Treasury stock, at cost:
1998, 247,799,548 shares;l997, 231,643,130 shares (1,951) (1,108)
Total Stockholders' Equity.................. 4,695 4,841
$11,467 $10,864
<FN>
See Accompanying Notes to Consolidated Financial Statements
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PAGE 4
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions of dollars)
(Unaudited)
<CAPTION> Nine Months Ended
September 30
1998 1997
<S> <C> <C>
Operating Activities
Net income $ 646 $ 1,009
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for Reorganization/Realignment 535 -
Depreciation and amortization 347 311
Other (46) (70)
Changes in assets and liabilities, net of
effects from acquisition of businesses:
Accounts receivable (44) 286
Inventories (317) (357)
Accounts payable and accrued liabilities (220) (418)
Other working capital items (23) 96
Other non-current assets and liabilities (188) (107)
Net cash provided by operating activities 690 750
Investing Activities
Additions to property, plant & equipment (620) (609)
Disposals of property, plant & equipment 56 35
Sale of Business 200 -
Other 5 -
Net cash used in investing activities (359) (574)
Financing Activities
Purchase of Treasury Stock (784) (29)
Proceeds from sale of put options 31 2
Proceeds from exercise of stock option and
purchase plans 69 119
Funding German Pension Plans (253) -
Increase(Decrease) in long-term debt 188 (4)
Increase in loans payable 836 105
Dividends paid (410) (344)
Net cash used in financing activities (323) (151)
Effect of Exchange Rate Changes on Cash - (6)
Increase in Cash and Cash Equivalents 8 19
Cash and Cash Equivalents at Beginning of Year 105 84
Cash and Cash Equivalents at End of Quarter $ 113 $ 103
Supplemental disclosure of cash paid for:
Interest $ 81 $ 78
Income taxes $ 326 $ 331
<FN>
See Accompanying Notes to Consolidated Financial Statements
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PAGE 5
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(Millions of dollars)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Income $ 6 $ 437 $ 646 $1,009
Other Comprehensive Income, net of tax:
Foreign Currency Translation Adj. (29) (76) (18) (162)
Comprehensive Income $ (23) $ 361 $ 628 $ 847
Foreign currency translation adjustments are after favorable(unfavorable) tax effects
for three months of $32 million in 1998 and $(29) million in 1997 and for nine months
of $33 million in 1998 and $(60) million in 1997.
Accumulated Other Comprehensive Income
The accumulated balances for the components of Other Comprehensive Income are:
Accumulated
Foreign Other
Currency Pension Comprehensive
Translation Adjustment Income
Balance December 31, 1996 $(522) $ (20) $(542)
Change in period (28) - (28)
Balance March 31, 1997 (550) (20) (570)
Change in period (58) - (58)
Balance June 30, 1997 $(608) $ (20) $(628)
Change in period (76) - (76)
Balance September 30, 1997 $(684) $ (20) $(704)
Balance December 31, 1997 $(790) $ (20) $(810)
Change in period 24 - 24
Balance March 31, 1998 (766) (20) (786)
Change in period (13) - (13)
Balance June 30, 1998 $(779) $ (20) $(799)
Change in period (29) - (29)
Balance September 30, 1998 $(808) $ (20) $(828)
<FN>
See Accompanying Notes to Consolidated Financial Statements
</TABLE
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PAGE 6
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
COMPUTATION OF NET INCOME PER COMMON SHARE
(Millions of dollars, except per share amounts; shares in millions)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
1998 1997 1998 1997
<S> <C> <C> <C> <C>
Net Income as reported....................... $ 6 $ 437 $ 646 $1,009
Less: Preferred stock dividends............. 1 1 3 3
Net Income, basic............................ $ 5 $ 436 $ 643 $1,006
Effect of dilutive securities:
Convertible preferred stock.............. 1 1 4 3
Net Income, assuming full dilution........... $ 6 $ 437 $ 647 $1,009
Common shares, basic......................... 1,116 1,120 1,120 1,117
Effect of dilutive securities:
Convertible preferred stock.............. 12 13 12 13
Stock options............................ 15 17 17 18
Common shares, assuming full dilution........ 1,143 1,150 1,149 1,148
Net Income per Common Share
Basic...................................... $ - $ .39 $ .57 $ .90
Assuming full dilution..................... $ - $ .38 $ .56 $ .88
<FN> See Accompanying Notes to Consolidated Financial Statements
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PAGE 7
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Accounting Comments
Reference is made to the registrant's 1997 annual report to stockholders, which
contains, at pages 26 through 41, financial statements and the notes thereto,
which are incorporated by reference in the registrant's annual report on Form
10-K for the year ended December 31, 1997.
For interim reporting purposes, advertising expenses are charged to operations
as a percentage of sales based on estimated sales and related advertising
expense for the full year.
Results for the first nine months of 1997 have been recast, to reflect the
harmonization of operating results on a common calendar quarter basis, in the
Consolidated Statements of Income and Cash Flows to provide comparability to
1998 results. The Consolidated Balance Sheet as of December 31, 1997, is as
prevoiusly reported. The components of Other Comprehensive Income for interim
periods remain as previously reported.
At the Annual Meeting on April 16, 1998, the stockholders approved an increase
in the authorized common stock, $1 par value, to 2.32 billion shares from 1.16
bolloin shares. Accordingly, a two-for-one stock split, in the form of a 100%
common stock dividend, was effective for stockholders of record on May 15, 1998.
All share information has been restated to give effect to the stock split.
With respect to the financial information for the interim periods included in
this report, which is unaudited, the management of the Company believes that all
adjustments necessary for a fair presentation of the results for such interim
periods have been included.
Accounting Pronouncements
In February, 1998, the Financial Accounting Standards Board issued SFAS No. 132,
"Employers' Disclosure about Pensions and Other Postretirement Benefits," which
revises employers' disclosures about pension and other postretirement benefit
plans. It does not change the measurement or recognition of those plans. The
statement is effective for fiscal years beginning after December 15, 1997. The
adoption of this statement will not have a material impact on the disclosures in
the consolidated financial statements.
In March, 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 ("SOP 98-1"), "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." The statement is effective
for fiscal years beginning after December 15, 1998. Earlier application is
encouraged in fiscal years for which annual financial statements have not been
issued. The statement defines which costs of computer software developed or
obtained for internal use are capitalized and which costs are expensed. The
the company adopted SOP 98-1 effective January 1st, 1998. The adoption of
SOP 98-1 did not materially effect the consolidated financial statements.
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PAGE 8
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In April, 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of Start-Up
Activities." The statement is effective for fiscal years beginning after
December 15, 1998. The statement requires costs of start-up activities and
organization costs to be expensed as incurred and to write off any previously
deferred expenses. The Company will adopt SOP 98-5 for calendar year 1999.
The adoption of SOP 98-5 will not materially affect the consolidated financial
statements.
In June, 1998, the Financial Accounting Standards Board issued SFAS No.133,
"Accounting for Derivative Instruments and Hedging Activities." The statement
requires companies to recognize all derivatives as either assets or liabilities,
with the instruments measured at fair value. The accounting for changes in fair
value, gains or losses, depends on the intended use of the derivative and its
resulting designation. The statement is effective for all fiscal quarters of
fiscal years beginning after June 15, 1999. The Company will adopt SFAS 133 no
later than January 1, 2000. It has not yet been determined if the adoption of
SFAS 133 will have a material impact on the consolidated financial statements.
Merger Related Costs
In conjunction with the 1996 merger with Duracell International Inc., the
Company recorded, in the fourth quarter of 1996, a pre-tax charge to operating
expenses of $413 million. Restructuring activities, which will be substantially
complete at the end of 1998, primarily relate to the consolidation of
distribution and administrative functions, which will result in the phased
reduction of approximately 1,700 employees. Through September 30, 1998, the
reductions total 1,360 employees.
Activity through September 30, 1998 follows:
1996 Charges
(Millions of dollars) Provision to Date Balance
Merger Transaction Costs $ 65 $ 61 $ 4
Restructuring Costs
Employee Severance 166 112 54
Exit Costs 182 182 -
Total $413 $355 $ 58
Reorganization and Realignment
On September 28, 1998, the Company announced a reorganization that includes a
new management structure and a consolidation of commercial and administrative
operations, as well as a realignment of worldwide manufacturing operations,
resulting in the closure of a number of factories. The new organization
structure will be effective January 1, 1999, and the initial stage of the
realignment program will begin in the fourth quarter, 1998. The reorganization
and realignment program will be implemented over the next 18 months and will
result in the net reduction of approximately 4,700 employees across all business
segments and geographies. The reorganization actions will affect all employee
groups and result in a reduction of approximately 11 percent of the Company's
43,000 employees. The Company plans to close 14 factories and 12 warehouses and
to close or consolidate approximately 30 office facilities worldwide.
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PAGE 9
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In connection with the reorganization and realignment, the Company recorded in
the third quarter a charge to operating expenses of $535 million ($347 million
after taxes, or $.31 and $.30 net income per common share-basic and fully
diluted, respectively). Employee severance and related costs are estimated to
be $390 million. Exit costs are estimated at $145 million and include the
cancellation of lease agreements and the writedown of assets that have been
impared by reorganization and realignment activities. When fully implemented the
ongoing pre-tax savings from the reorganization and realignment program will be
approximately $200 million annually.
Share Repurchase Program
In late 1997, a share repurchase program was approved which authorized the
repurchase of up to 50 million shares. Since the inception of the program
through September 30, 1998, 18 million shares have been repurchased. During the
third quarter of this year, the Company repurchased 15 million shares at a cost
of $728 million, bringing 1998 year-to-date repurchases to 17 million shares at
September 30, 1998. During 1998, the Company continued to sell written put
options to enhance the ongoing share repurchase program, with proceeds from the
sale of put options totalling $31 million. At September 30, 1998, the "in the
money" obligation (i.e., when the option strike price is greater than the
closing price for Gillette common stock on September 30, 1998) related to the
written put options maturing on specific dates during the fourth quarter of
1998, was approximately $37 million.
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PAGE 10
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Financial Information by Business Segment
Net sales, profit from operations and identifiable assets for each of the
Company's business segments are set forth below. There are no intersegment
revenues.
<CAPTION> Net Sales
Three Months Ended Nine Months Ended
September 30 September 30
(Millions of dollars) 1998 1997 1998 1997
<S> <C> <C> <C> <C>
Blades & Razors $ 768 $ 745 $2,094 $2,071
Toiletries 290 366 896 1,037
Stationery Products 188 208 572 623
Braun Products 501 597 1,188 1,281
Oral-B Products 143 153 444 446
Duracell Products 641 631 1,687 1,607
Sub-total Reportable Segments 2,531 2,700 6,881 7,065
Other/Corporate - 1 - 1
Total $2,531 $2,701 $6,881 $7,066
Profit from Operations
Three Months Ended Nine Months Ended
September 30 September 30
(Millions of dollars) 1998 1997 1998 1997
<S> <C> <C> <C> <C>
Blades & Razors $ 281 $ 324 $ 820 $ 879
Toiletries 19 42 70 118
Stationery Products 11 28 58 95
Braun Products 97 148 195 219
Oral-B Products 15 22 62 54
Duracell Products 134 144 362 302
Sub-total Reportable Segments 557 708 1,567 1,667
Reorganization and Realignment (535) - (535) -
Other/Corporate 18 (6) 37 (28)
Total $ 40 $ 702 $1,069 $1,639
Identifiable Assets
Sept 30 June 30 Dec 31 Sept 30 June 30 Dec 31
(Millions of dollars) 1998 1998 1997 1997 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Blades & Razors $ 3,291 $ 3,189 $ 3,006 $ 2,788 $ 2,639 $ 2,591
Toiletries 832 794 1,004 978 944 874
Stationery Products 1,328 1,282 1,299 1,216 1,235 1,244
Braun Products 1,686 1,472 1,544 1,317 1,288 1,534
Oral-B Products 651 611 622 563 558 595
Duracell Products 3,098 3,017 3,138 3,056 3,030 3,154
Sub-total Reportable Segments 10,886 10,365 10,613 9,918 9,694 9,992
Other/Corporate 581 716 251 604 514 423
Total $11,467 $11,081 $10,864 $10,522 $10,208 $10,415
</TABLE>
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PAGE 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
In reviewing the following analysis, it should be understood that results for
any interim period are not necessarily indicative of the results for the entire
year.
Third Quarter 1998 versus 1997
Sales for the quarter ended September 30, 1998, were $2.53 billion, a decrease
of 6% over the same quarter of the prior year. Excluding unfavorable exchange
and the divestiture of Jafra Cosmetics International, sales would have been down
2%. Sales of domestic operations were somewhat below those of the prior year
while sales in our international operations were well below the prior year.
Sales in Western Europe were higher than the prior year, due to new products and
favorable exchange. Sales in Latin America were significantly below 1997 due
primarily to unmatched Jafra sales in 1997, higher interest rates in Brazil and
unfavorable exchange in Brazil, Mexico and Colombia. Sales in other
international markets were significantly below the prior year, due to the
economic collapse in Russia and the continuing Asian financial crisis.
Company management reviews segment performance exclusive of reorganization and
realignment charges. Consequently, as required by SFAS 131, the reported
segments do not include reorganization and realignment charges, which were
recorded in the third quarter.
Sales of blade and razor products were somewhat above those of the prior year,
buoyed by significant sales from the launch of MACH3. International sales were
higher due to significant gains in Western Europe which were partially offset by
the negative economic factors in Latin America, Russia and Asia. International
profits were considerably below the prior year. In the United States, sales
were somewhat below the prior year and profit was significantly below the prior
year due to start-up costs associated with MACH3. Consumer offtake of MACH3 has
continued to grow since advertising broke on August 10th. The MACH3 razor was
the top seller in the razor market in September and total Gillette dollar share
of the blade and razor market in September was up 5.0 points versus a year ago
to 70.8%.
Sales of Duracell products rose slightly, as the successful launch of the
Duracell Ultra battery and price increases, in the United States and Western
Europe, more than offset significant declines in Asia Pacific and Latin America.
Despite strong growth in the United States, overall Duracell profits were
lower.
Braun sales were significantly below 1997, reflecting primarily the adverse
impact of the Asian business environment as well as sales shortfalls in the
United States and Western Europe. Braun profits were markedly below the prior
year.
Toiletries sales and profits were markedly below prior year, due in part to
unmatched 1997 Jafra sales and profits since the divestiture on April 30, 1998.
Excluding Jafra, toiletries sales were well below the prior year and profits
dropped sharply.
Sales of stationery products were considerably below 1997. Sales were somewhat
below the prior year in the United States and down significantly in foreign
markets. Profits were lower in the United States and down significantly in
foreign markets.
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PAGE 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Sales of Oral-B products in the third quarter were lower versus the prior year,
due to volume shortfalls, primarily in Asia, as well as unfavorable exchange in
Latin America and Asia. Foreign and domestic profits were down significantly.
Nine Months 1998 versus 1997
Sales for the nine months ended September 30, 1998, were $6.88 billion, 3% below
the $7.07 billion of 1997. Excluding unfavorable exchange and the divestiture
of Jafra Cosmetics International, sales growth was 2%, attributable to new
products, pricing and volume. Sales of domestic operations were about the same
as prior year. Sales in international operations were moderately below prior
year. Excluding unfavorable exchange, international sales equalled the prior
year. Sales in Western Europe were somewhat above the prior year, despite
unfavorable exchange. Sales in Latin America were well below the prior year due
to unmatched Jafra sales in 1997 and trade destocking, as a result of higher
interest rates, in Brazil. Sales in other international markets were
significantly below the prior year due to the economic collapse in Russia and
the continuing Asian financial crisis.
Company management reviews segment performance exclusive of reorganization and
realignment charges. Consequently, as required by SFAS 131, the reported
segments do not include reorganization and realignment charges, which were
recorded in the third quarter.
Sales of blade and razor products were unchanged versus those of the prior year
and profits were lower primarily due to Mach3 start-up expenses. Higher sales
(in the United States and Western Europe), driven by Gillette MACH3, were offset
by lower results in other international markets, primarily due to broad based
negative economic factors.
Sales of Duracell products were moderately above those of the prior year as the
launch of Duracell Ultra and price increases contributed to notably higher sales
in the United States and Western Europe. Profits were significantly above prior
year due to strong gains in the United States and Western Europe.
Braun sales were well below the prior year due to significant shortfalls caused
by the Asian financial crisis. Sales in the United States and Western Europe
were about the same as prior year. Profits through nine months were down
considerably due to lower sales.
Toiletries sales were substantially below prior year and profits were down
significantly. The sales shortfall was primarily due to the divestiture of
Jafra, as well as continued softness in White Rain.
Sales of stationery products were well below prior year and profits were
markedly lower due primarily to the financial crisis in Asia.
Sales of Oral-B products were virtually unchanged versus the prior year, as
increases in sales in Western Europe, Latin America and the United States were
offset by significant shortfalls in Asia Pacific. Profits were up significantly,
due to improved product mix and cost containment.
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PAGE 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Gross profit was $4.24 billion, a decrease of $118 million, or 3%, from 1997.
Gross profit as a percentage of sales was 61.6%, compared to 61.7% in 1997.
Selling, general and administrative expenses decreased by $83 million, or 3%.
Combined advertising and sales promotion expenses decreased 1% versus prior
year. Spending on research and development increased 3%, while other marketing
and administrative expenses decreased 5%. In addition, The Company recognized a
charge of $535 million in the third quarter for reorganization and realignment.
Profit from Operations, including the charge for reorganization and realignment
was $1,069 million, down 35% from $1,639 million a year earlier. Excluding the
charge for reorganization and realignment Profit from Operations would have been
$1,604 million, 2% below 1997.
Net interest expense was higher due to increased borrowings to fund the share
repurchase program and the German pension plans. Net exchange losses were
higher, due to both Asia and Latin America and the effective tax rate was lower.
Net income of $646 million, including the after-tax impact of reorganization and
realignment, decreased 36%, compared with $1,009 million in 1997. Diluted net
income per common share of $.56 was 36% below the $.88 of a year earlier.
Excluding the $.30 impact of reorganization and realignment, diluted net income
per common share would have been $.86, or 2% below the prior year.
Financial Condition
Net cash provided by operating activities for the nine months ended September
30, 1998, amounted to $690 million, compared with $750 million in the same
period last year. The reorganization and realignment program announced on
September 28th had no cash impact in the third quarter.
Net debt (Loans Payable, Current portion of long-term debt and Long-Term debt,
net of associated swaps, less Cash and cash equivalents) at September 30, 1998,
amounted to $2.96 billion, compared to $1.87 billion at year end 1997. The
increase in net debt was primarily due to the funding of the share repurchase
program as well as German pension plans. The Company's current ratio at
September 30, 1998, was 1.55, compared to 1.78 at December 31, 1997, reflecting
the impact of higher loans payable and an increase in accrued liabilities for
reorganization and realignment. Of the $113 million in cash at September 30,
1998, $60 million is in a restricted escrow, pending regulatory approval of an
investment by the Company in a Korean Battery business.
On August 3, 1998, the Company issued $200 million 5.75% Notes due August 2001.
The proceeds were used to reduce short-term debt and for other Corporate
purposes.
Jafra Cosmetics International was divested on April 30, 1998, the impact on
Profit from Operations and Net Income was not material.
<PAGE>
PAGE 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Year 2000
The Company is undertaking a comprehensive approach to understand and address
its potential exposure to the Year 2000 problem - covering all potentially
affected areas (applications, computers, facilities, manufacturing equipment,
suppliers, customers, etc.) at all locations company-wide. Efforts to address
the Year 2000 problem began in 1995 at major sites and a formal Program
Management Office was established in 1997. The Program Management Office has
focused on: program policy setting, progress tracking, including building a
central internal website reporting tool which contains a database of items
across the Company that are potentially vulnerable; leveraging common solutions
and identifying best practices. The Program Management Office is maintaining
regular communications with the business units, each of which has an appointed
team leader who is responsible for maintaining progress and monthly reporting.
The Program Management Office developed a structured, six phase program which is
being consistently implemented across the Company at all locations worldwide.
The first phase is discovery. This phase includes identifying all potentially
affected items, including information technology and non-information technology
items, assessing compliance and defining the potential business impact of each
non-compliant item. The central database was built in this phase.
The second phase is planning. A specific resolution strategy is designed for
each non-compliant item. Non-compliant items are prioritized by their importance
to the overall operations of the business. Once the items are prioritized, the
planning phase includes identifying the tasks and resources necessary to remedy
non-compliance and when the work will be finished.
The third phase is resolution, where the actual corrective work is done. In
addition to work within the Company, Year 2000 readiness of all of our major
customers and suppliers is assessed in this phase.
The fourth phase is testing, validating that the corrective work activities have
been completed.
The fifth phase is implementation, where the corrected items are placed back in
operation.
The sixth and final phase is certification that the corrective work has been
successful.
At September 30, 1998, 83% of the affected items identified are at the sixth
phase, i.e. certified to be Year 2000 compliant. Plans are in place to have 93%
of the items compliant by year end. The remaining efforts have been identified,
are well understood, resources are assigned and the work is well underway.
The Company also has an extensive quality assurance program in place. This
program is designed to ensure that Year 2000 activities are effectively
accomplishing the objectives of the above-mentioned, six-phase program. KPMG is
assisting the Company in this effort. In addition, this work is supplemented by
reviews by the Company's internal audit program.
<PAGE>
PAGE 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company has several multi-year initiatives in progress to support the
changing business and also to address the Year 2000 issue, such as SAP and JDE.
The Company is currently developing detailed contingency plans. Included are
planning for possible schedule slippage, the identification of appropriate
resources and assembling response teams to deal with unexpected issues, which
may very well occur.
Despite the comprehensive approach that is being taken to prevent a Year 2000
problem, the Company cannot be completely sure that issues will not arise, or
events will not occur that could have material adverse affects on the Company's
results of operations or financial condition. The Company, nevertheless, does
not expect a material failure. The Year 2000 program is designed to minimize
the likelihood of any failure occurring. The most reasonably likely worst case
scenario is that a short-term disruption will occur with a small number of
customers or suppliers, requiring an appropriate response. In addition, the
Company's operations are dependent on infrastructures within all countries in
which it operates and therefore a failure of any one of those infrastructures
could materially adversely affect its operations.
Spending for the program is budgeted, expensed as incurred and centrally
tracked. Total spending is not expected to be material.
Euro Conversion
The Company has a Euro project team in place working on specific actions to
ensure the Company's ability to operate effectively during the Euro transition
phase and through final Euro conversion. Costs to prepare for the conversion
are not expected to be material. Strategic business issues relating to the Euro,
such as pricing implications, are being carefully monitored and addressed, but
are not expected to have a material impact on results of operations.
PART II. OTHER INFORMATION
Item 1. 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.
<PAGE>
PAGE 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Item 5. Other Information
Stockholder Proposals for Annual Meeting
The Company has amended its bylaws in connection with the notice required to
present a proposal at the annual meeting of stockholders. The new provisions
conform with the amended proxy rules recently adopted by the Securities and
Exchange Commission. Stockholder proposals intended to be presented at the 1999
annual meeting and any annual meeting thereafter, including proposals for the
nomination of directors, must be received by the Company at its principal
executive offices (Prudential Tower Building, Suite 4800, Boston, MA 02199,
Attn: Secretary) not less than 45 days in the current year prior to the date on
which the corporation first mailed or electronically delivered its proxy
materials for the prior year's annual meeting of stockholders, or, for the 1999
annual meeting, by January 27, 1999.
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 Company's reliance on new systems implementation; 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; the impact on sales or earnings of fluctuations in exchange
rates in one or more of the Company's geographic markets; the impact of the year
2000 on the Company's order, production, distribution and financial systems and
the systems of its suppliers and customers; 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 inflation rates, recessionary
or expansive trends, tax changes, legal and regulatory changes or other external
factors over which the Company has no control.
<PAGE>
PAGE 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Item 6 (a) Exhibits
Exhibit 3 (ii) Amended by-laws as of October 15, 1998
Exhibit 10 Amended and Restated 364-Day $2,000,000,000 Revolving Credit
Agreement dated as of October 19, 1998
Exhibit 27 Financial Data Schedule
Item 6 (b) Reports on Form 8-K
The Company filed a current report on Form 8-K dated September 28, 1998, which
referred to an announcement by the Company on the same day of a company-wide
reorganization, an after-tax charge to earnings of approximately $350 million
and that the Company expected lower third quarter profits.
<PAGE>
PAGE 18
SIGNATURE
SIGNATURES
Pursuant to the requirements 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)
CHARLES W. CRAMB
Charles W. Cramb
Senior Vice President-Finance,
Chief Financial Officer and
Principal Accounting Officer
November 12, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The data reported in this exhibit are based on unaudited statements but
include all adjustments which the company considers necessary for a fair
presentation of results for this period.
</LEGEND>
<CIK> 0000041499
<NAME> THE GILLETTE COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 113,000
<SECURITIES> 0
<RECEIVABLES> 2,648,000
<ALLOWANCES> 71,000
<INVENTORY> 1,784,000
<CURRENT-ASSETS> 5,138,000
<PP&E> 5,646,000
<DEPRECIATION> 2,325,000
<TOTAL-ASSETS> 11,467,000
<CURRENT-LIABILITIES> 3,323,000
<BONDS> 1,961,000
0
90,000
<COMMON> 1,357,000
<OTHER-SE> 3,248,000
<TOTAL-LIABILITY-AND-EQUITY> 11,467,000
<SALES> 6,881,000
<TOTAL-REVENUES> 6,881,000
<CGS> 2,639,000
<TOTAL-COSTS> 2,639,000
<OTHER-EXPENSES> 2,638,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,000
<INCOME-PRETAX> 998,000
<INCOME-TAX> 352,000
<INCOME-CONTINUING> 646,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 646,000
<EPS-PRIMARY> .57
<EPS-DILUTED> .56
</TABLE>
BYLAWS
of
THE GILLETTE COMPANY
As Amended October 15, 1998
ARTICLE I
Certificate of Incorporation - Offices
The name and the nature of the business or purposes of the corporation and
the location of its registered office shall be as set forth in its certificate
of incorporation. The corporation may also have offices in such other places as
the board of directors may from time to time determine or the business of the
corporation may require. These bylaws shall be subject to all requirements and
provisions of law applicable to the corporation and to all requirements and
provisions of the certificate of incorporation. In these bylaws, references to
the certificate of incorporation mean the provisions of the certificate of
incorporation (as that term is defined in the General Corporation Law of the
State of Delaware) of the corporation as from time to time in effect, and
reference to these bylaws or to any requirement or provisions of law means these
bylaws or such requirement or provision of law as from time to time in effect.
ARTICLE II
Annual Meeting
The annual meeting of the stockholders for the election of directors and
for the transaction of such other business as may properly come before the
meeting shall be held at the office of the corporation in Delaware or at the
office of the corporation in Boston, Massachusetts, or at such other place
within or without the State of Delaware as may be specified by resolution of the
board of directors or by a writing filed with the secretary signed by the chief
executive officer or by a majority of the directors at the hour stated in the
notice of meeting on the third Thursday of April in each year, if it be not a
legal holiday, and, if it be a legal holiday at the place where the meeting is
to be held, then at the same hour on the next succeeding day which is not a
Saturday or Sunday and not a legal holiday. Purposes for which the annual
meeting is to be held additional to those prescribed by law, by the certificate
of incorporation and by these bylaws may be specified by resolution of the board
of directors or by a writing filed with the secretary signed by the chief
executive officer or by a majority of the directors. If the election of
directors shall not be held on the day above designated for the annual meeting,
the board of directors shall cause the election to be held as soon thereafter as
conveniently may be, at a special meeting of the stockholders called for the
purpose of holding such election.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise properly brought before the meeting by or at the
direction of a majority of the total number of directors which the corporation
would have if there were no vacancies, or (c) otherwise properly requested to be
brought before the meeting by a stockholder. For business to be properly
requested to be brought before an annual meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the secretary of
the corporation. To be timely, a stockholder's notice must be delivered to or
mailed (including electronic mail) and received at the principal executive
offices of the corporation, not less than 45 days, in the current year, prior to
the date on which the corporation first mailed or electronically delivered its
proxy materials for the prior year's annual meeting of the stockholders;
provided, however, that in the event that the date of the meeting is not
publicly announced by the corporation by mail (including electronic mail), press
release, filings with the Securities and Exchange Commission or otherwise, more
than 55 days, in the current year, before the date on which the corporation
first mailed or electronically delivered its proxy materials for the prior
year's annual meeting of stockholders, notice by the stockholder to be timely
must be delivered to or mailed (including electronic mail) and received at the
principal executive offices of the corporation not later than the close of
business on the tenth day following the day on which such announcement of the
date of the meeting was made. A stockholder's notice to the secretary shall set
forth as to each matter the stockholder proposes to bring before the annual
meeting (a) a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting such business at the annual
meeting, (b) the name and address, as they appear on the corporation's books, of
the stockholder proposing such business, (c) the class and number of shares of
the corporation which are beneficially owned by the stockholder, and (d) any
material interest of the stockholder in such business. Notwithstanding anything
in these bylaws to the contrary, no business shall be conducted at an annual
meeting except in accordance with the procedures set forth in this Article II.
The chairman of an annual meeting shall, if the facts warrant, determine and
declare to the meeting that the business was not properly brought before the
meeting in accordance with the provisions of this Article II, and if he should
so determine, he shall so declare to the meeting any such business not properly
brought before the meeting shall not be transacted.
ARTICLE III
Special Meetings of Stockholders
Special meetings of the stockholders may be held either within or without
the State of Delaware, at such time and place and for such purposes as shall be
specified in a call for such meeting made by resolution of the board of
directors or by a writing filed with the secretary signed by the chief executive
officer or by a majority of the directors.
ARTICLE IV
Notice of Stockholders' Meetings
Except where some other notice is required by law or by the certificate of
incorporation, a written or printed notice of each meeting of stockholders,
stating the place, day and hour thereof and the purposes for which the meeting
is called, shall be given by or under the direction of the secretary, not less
than ten nor more than sixty days before the date fixed for such meeting, to
each stockholder entitled to vote at such meeting and to each stockholder who,
by law or the certificate of incorporation or these bylaws, is entitled to
notice thereof by leaving such notice with the stockholder or at such
stockholder's residence or usual place of business or by depositing such notice
in the United States mail, postage prepaid, addressed to such stockholder at the
address carried on the books of the corporation. In case of the death, absence,
incapacity or refusal of the secretary, such notice may be given by a person
designated either by the secretary or by the person or persons calling the
meeting or by the board of directors. Every stockholder shall for all purposes
be deemed to have received notice of a meeting in due season if such stockholder
shall be present or represented by proxy at such meeting or shall in writing
waive such notice before or after the meeting. If a meeting is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place are announced at the meeting at which the adjournment is taken,
except that if the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at said adjourned meeting and to each stockholder who, by law or the
certificate of incorporation or these bylaws, is entitled to notice thereof, in
the same manner as would the original notice of any meeting be given.
ARTICLE V
Nomination of Director Candidates
Subject to the rights of holders of any class or series of stock having a
preference over the common stock as to dividends or upon liquidation,
nominations for the election of directors may be made by the Board of Directors
or a committee appointed by the Board of Directors or by any stockholder
entitled to vote in the election of directors generally. However, any
stockholder entitled to vote in the election of directors generally may nominate
one or more persons for election as director(s) at a meeting only if written
notice of such stockholder's intent to make such nomination or nominations has
been received by the secretary of the corporation not less than 60 days in
advance of such meeting; provided, however, that in the event that the date of
the meeting was not publicly announced by the corporation by mail, press release
or otherwise more than 70 days prior to the meeting, notice by the stockholder
to be timely must be delivered to the secretary of the corporation not later
than the close of business on the tenth day following the day on which such
announcement of the date of the meeting was communicated to stockholders. Each
such notice shall set forth: (a) the name and address of the stockholder who
intends to make the nomination and of the person or persons to be nominated; (b)
a representation that the stockholder is a holder of record of stock of the
corporation entitled to vote for the election of directors on the date of such
notice and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated by the Board of Directors; (e) the consent of each
nominee to serve as a director of the corporation if so elected; and (f) a
certification that each nominee meets the qualifications prescribed in these
Bylaws.
In the event that a person is validly designated as a nominee in accordance
with the preceding paragraph of this Article V, and shall thereafter become
unable or unwilling to stand for election to the Board of Directors, the Board
of Directors or the stockholder who proposed such nominee, as the case may be,
may designate a substitute nominee upon delivery, not fewer than five days prior
to the date of the meeting for the election of such nominee, of a written notice
to the secretary setting forth such information regarding such substitute
nominee as would have been required to be delivered to the secretary pursuant to
the preceding paragraph of this Article V had such substitute nominee been
initially proposed as a nominee. Such notice shall include a signed consent to
serve as a director of the corporation, if elected, of each such substitute
nominee.
In the event that a nominee should become unable to stand for election to
the Board of Directors prior to the meeting and notice of a substitute nominee
cannot be furnished as provided by the foregoing, the chairman of the meeting
may, but shall not be required to, adjourn the meeting so as to provide such
additional time as may be reasonably necessary to permit the designation of a
substitute nominee and the provision of a notice to the secretary, as provided
by the foregoing, a minimum of five days prior to the reconvening of such
meeting.
If the chairman of the meeting for the election of directors determines
that a nomination of any candidate for election as a director at such meeting
was not made in accordance with the applicable provisions of this Article V,
such nomination shall be void; provided, however, that nothing in this Article V
shall be deemed to limit any voting rights upon the occurrence of dividend
arrearages provided to holders of Preferred Stock pursuant to the Preferred
Stock Designation for any series of Preferred Stock.
<PAGE>
ARTICLE VI
Quorum of Stockholders
Except as otherwise provided by law, the certificate of incorporation or
these bylaws, at any meeting of the stockholders thirty-three and one third
percent in interest of all stock issued and outstanding and entitled to vote
upon a question to be considered at the meeting shall constitute a quorum for
the consideration of such question, but a less interest may adjourn any meeting
from time to time, and the meeting may be held as adjourned without further
notice, except as otherwise required by law, the certificate of incorporation or
these bylaws. When a quorum is present at any meeting, except where a larger
vote is required by law, by the certificate of incorporation, or by these
bylaws, a plurality of the votes properly cast for election to office shall
elect to such office, and a majority of the votes properly cast upon any
question other than an election to office shall decide such question.
ARTICLE VII
Proxies and Voting
Except as otherwise provided in the certificate of incorporation, and
subject to the provisions of Article XII of these bylaws, each stockholder of
record shall at every meeting of the stockholders be entitled to one vote for
each share of the capital stock held by such stockholder. Stockholders entitled
to vote at a meeting of stockholders or to express consent or dissent to
corporate action in writing may authorize another person or persons to act for
them by proxy, but no proxy shall be voted or acted upon after three years from
its date, unless said proxy provides for a longer period. Persons holding stock
in a fiduciary capacity shall be entitled to vote the shares so held, and
persons whose stock is pledged shall be entitled to vote, unless in the transfer
by the pledgors on the books of the corporation they shall have expressly
empowered the pledgees to vote thereon, in which case only the pledgees, or
their proxies, may represent said stock and vote thereon.
If the shares stand of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety or otherwise, or if two or more persons have the same fiduciary
relationship respecting the same shares, unless the secretary of the corporation
is given written notice to the contrary and is furnished with a copy of the
instrument or order appointing them or creating the relationship wherein it is
so provided, their acts with respect to voting shall have the following effect:
(1) If only one votes, that act binds all;
(2) If more than one vote, the act of the majority so voting binds all;
(3) If more than one vote, but the vote is evenly split on any particular
matter, each faction may vote the securities in quesion proportionally, or any
person voting the shares, or a beneficiary, if any, may apply to the Court of
Chancery of the State of Delaware or such other court as may have jurisdiction
to appoint an additional person to act with the persons so voting the shares,
which shall then be voted as determined by a majority of such persons and the
person appointed by the Court. If the instrument so filed shows that any such
tenancy is held in unequal interests, a majority or even-split for the purposes
of these bylaws shall be a majority or even-split in interest.
In case of the death, bankruptcy, minority or mental incapacity of any
stockholder the person entitled to transfer such stockholder's shares shall be
entitled to vote in respect of such shares, and if there shall be more than one
such person, the right to vote shall be the same as if the shares stood of
record in the names of two or more persons, as provided above. A vote given in
accordance with a proxy shall be valid notwithstanding the previous death of the
stockholder or revocation of the proxy unless information in writing of the
death or revocation shall have been previously received by the secretary of the
corporation. Shares of the capital stock of the corporation belonging to the
corporation shall not be voted, directly or indirectly, provided, however, that
this sentence shall not be construed as limiting the right of the corporation to
vote stock held by it in a fiduciary capacity.
The secretary shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
said meeting, arranged in alphabetical order and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open, at the place where said meeting is to be held or at
such other place in the city where such meeting is to be held as may be
specified in the notice of the meeting, for a period of at least ten days, for
the examination of any stockholder, for any purpose germane to the meeting, and
during ordinary business hours, and shall be produced and kept at the time and
place of the meeting during the whole time thereof, and subject to the
inspection of any stockholder who may be present. The stock ledger shall be the
only evidence as to who are stockholders entitled to examine the stock ledger or
such list, or to vote in person or by proxy at such meeting, or, subject to the
provisions of Article XXVIII of these bylaws, to inspect the accounts or books
of the corporation.
ARTICLE VIII
Action by Written Consent
Any action required by the General Corporation Law of the State of Delaware
to be taken at any annual or special meeting of the stockholders of the
corporation, or any action which may be taken at any annual or special meeting
of such stockholders in accordance with these bylaws and the certificate of
incorporation, as amended, of the corporation, may be taken without a meeting,
without prior notice and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted and shall be delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
In order that the corporation may determine the stockholders entitled to
consent to corporate action in writing without a meeting, the board of directors
may fix a record date, which record date shall not precede the date upon which
the resolution fixing the record date is adopted by the board of directors, and
which date shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the board of directors. Any
stockholder of record seeking to have the stockholders authorize or take
corporate action by written consent shall, by written notice to the secretary,
request the Board of Directors to fix a record date. The Board of Directors
shall promptly, but in all events within ten (l0) days after the date on which
such a request is received, adopt a resolution fixing the record date. If no
record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required by
law, shall be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the corporation in
accordance with this bylaw. If no record date has been fixed by the board of
directors and prior action by the board of directors is required by law, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the board of directors adopts the resolution taking such prior action.
Every written consent shall bear the date of signature of each stockholder
who signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty days of the record
date, as determined in paragraph two above, written consents signed by a
sufficient number of holders to take action are delivered to the corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
Upon receipt by the corporation in accordance with this Article VIII of
written consents which purport to be signed by holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take the action set forth in such written consents at a meeting at
which all shares entitled to vote thereon were present and voted, the
corporation shall cause such written consents to be reviewed (with all
reasonable speed) by duly qualified and objective inspectors to be appointed by
the board of directors of the corporation. Such review shall be made to
determine the sufficiency of such written consents, including, without
limitation, the compliance of such written consents with these bylaws and the
General Corporation Law of the State of Delaware. If, upon completion of such
review, the inspectors determine that such written consents are sufficient to
take the action or actions set forth therein without a meeting, such action or
actions shall thereupon be immediately effective. In the event that the number
of consents is determined by the inspectors to be inadequate and thereafter, but
within the period provided by this Article VIII, additional consents are
delivered to the corporation in accordance with this Article VIII, the
corporation shall cause such additional consents to be reviewed by the
inspectors on the same basis as though such additional consents had been
delivered and reviewed with the written consents which were previously reviewed.
If, upon completion of such additional review, the inspectors determine that
such written consents are sufficient to take the action or actions set forth
therein without a meeting, such action or actions shall thereupon be immediately
effective.
ARTICLE IX
Stock Certificates
Every holder of stock in the corporation shall be entitled to have a
certificate or certificates certifying the number of shares such stockholder
owns in the corporation signed by, or in the name of the corporation by, the
chairman of the board of directors, a vice chairman of the board of directors, a
president or a vice president and the treasurer or an assistant treasurer, or
the secretary or an assistant secretary of the corporation. Any of or all the
signatures on the certificate may be facsimile. In case any officer, transfer
agent, or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the corporation
with the same effect as if such person were such officer, transfer agent, or
registrar at the date of issue. In case any certificate shall be alleged to be
lost or destroyed or mutilated, a new certificate may be issued in place thereof
upon reasonable evidence of the loss or destruction or mutilation and upon such
indemnity, if any, as the board of directors shall require. Certificates of
stock shall be in such form as shall in conformity with law be prescribed from
time to time by the board of directors.
ARTICLE X
Transfers of Stock
Subject to the restrictions, if any, imposed by the certificate of
incorporation, title to a certificate of stock and to the shares represented
thereby shall be transferred only by delivery of the certificate properly
endorsed, or by delivery of the certificate accompanied by a written assignment
of the same, or a written power of attorney to sell, assign, or transfer the
same or the shares represented thereby, properly executed; but, except as may be
otherwise required by law or by Article XII of these bylaws, the person
registered on the stock ledger of the corporation as the owner of shares shall
have the exclusive right to receive dividends thereon and to vote thereon as
such owner, shall be held liable for such calls and assessments, if any, as may
lawfully be made thereon, and may in all respects be treated by the corporation
and its transfer agents and registrars, if any, as the exclusive owner thereof.
The corporation shall not be bound to take notice of or recognize any trust,
charge or equity affecting any of the shares of the capital stock or recognize
any person as having any interest therein except the person or persons whose
name or names appear on the corporation's stock ledger as the legal owner or
owners thereof. It shall be the duty of the stockholders to notify the
corporation of their post office addresses.
ARTICLE XI
Acquisitions of Stock
(a) The corporation shall not acquire any of its voting equity securities,
as defined below, at a price above the average market price, as defined below,
of such securities from any person who is the beneficial owner, as defined
below, of more than three percent of the corporation's voting equity securities
and has been such for less than two years, unless such acquisition is pursuant
to the same offer and terms as made to all holders of securities of such class
and to all holders of any other class from or into which such securities may be
converted.
(b) This provision shall not apply to any acquisition that has been
approved by a vote of a majority of the shares entitled to vote, excluding those
owned by any such beneficial owner any of whose shares are proposed to be
acquired pursuant to that vote.
(c) This provision shall not restrict the corporation from: (1) reacquiring
shares in the open market in transactions in which all stockholders have an
equal chance to sell their shares, and in number of shares that do not exceed in
any one day the daily average trading volume for the preceding three months; (2)
offering to acquire at market price all shares, but not less than all shares, of
any stockholder owning less than 100 shares of common stock; or (3) reacquiring
shares pursuant to the terms of a stock option plan that has been approved by a
vote of a majority of the common shares.
(d) A person will be deemed to be the beneficial owner of any voting equity
security of which that person would be deemed the beneficial owner pursuant to
Rule 13d-3 under the Securities and Exchange Act of 1934, as amended (or any
successor rule or regulation).
(e) Average market price means the weighted average of sale prices for
shares of the subject class of the corporation's voting equity securities
determined by (1) multiplying the closing sale prices of shares of the subject
class of the corporation's voting stock as reported on the Composite Tape for
New York Stock Exchange-listed stocks for each of the ten full trading sessions
immediately preceding the earlier of the first public announcement of, or the
signing of a definitive agreement for, a purchase of the corporation's voting
equity securities by the number of shares of such voting equity securities
traded during each respective trading session, (2) adding the products of these
multiplications, and (3) dividing the sum by the total number of shares of the
corporation's voting equity securities traded during that period.
(f) Voting equity securities of the corporation means equity securities
issued from time to time by the corporation which by their terms are entitled to
be voted generally in the election of the directors or similar officials of the
corporation.
ARTICLE XII
Record Date
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, except action by shareholder consent, the board of directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days (or such longer period as may be required by law) before the date of such
meeting, nor more than sixty days prior to any other action, and in such case
such stockholders and only such stockholders as shall be stockholders of record
on the date so fixed shall be entitled to such notice of, and to vote at, such
meeting, or to receive payment of such dividend, or other distribution or
allotment of rights, or to exercise such rights, or for the purpose of such
other lawful action, except action by stockholder consent, as the case may be,
notwithstanding any transfer of any stock on the stock ledger of the corporation
after such record date fixed as aforesaid.
If no record date is fixed, as provided above, the record date for
determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held and the record date
for determining stockholders for any other purpose, except action by stockholder
consent, shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the board of directors may fix a new record date for the adjourned meeting.
<PAGE>
ARTICLE XIII
The Board of Directors
Directors need not be stockholders. No director shall be elected or
reelected who shall have attained the age of seventy prior to or on the date of
such election or reelection. No director who shall have been an officer or
employee of the corporation, other than a chief executive officer or a chief
operating officer, shall be elected or reelected if he or she shall have
attained the age of sixty-five or if his or her employment with the corporation
shall have terminated prior to or on the date of such election or reelection.
The Board of Directors shall consist of not less than seven nor more than
fifteen directors, the exact number of directors to be determined from time to
time by resolution adopted by affirmative vote of a majority of the entire Board
of Directors. The directors shall be divided into three classes, designated
Class I, Class II and Class III. Each class shall consist, as nearly as may be
possible, of one-third of the total number of directors constituting the entire
Board of Directors. At the 1986 Annual Meeting of Stockholders, Class I
directors shall be elected for a one-year term, Class II directors for a
two-year term and Class III directors for a three-year term. At each succeeding
annual meeting of stockholders, beginning in 1987, successors to the class of
directors whose term expires at that annual meeting shall be elected for a
three-year term. If the number of directors is changed, any increase or decrease
shall be apportioned among the classes so as to maintain the number of directors
in each class as nearly equal as possible, and any additional director of any
class elected to fill a vacancy resulting from an increase in such class shall
hold office for a term that shall coincide with the remaining term of that
class, but in no case will a decrease in the number of directors shorten the
term of any incumbent director. A director shall hold office until the annual
meeting for the year in which that director's term expires and until that
director's successor shall be elected and shall qualify, subject, however, to
prior death, resignation, retirement, disqualification or removal from office.
Any vacancy on the Board of Directors may be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that director's
predecessor. Notwithstanding the foregoing, whenever the holder of any one or
more classes or series of preferred stock issued by the corporation shall have
the right, voting separately by class or series, to elect directors at an annual
or special meeting of stockholders, the election, term of office, voting powers
and other attributes of such directorships shall be governed by the resolutions
of the Board of Directors creating that class or series, and such directors so
elected shall not be divided into classes pursuant to this Article unless
expressly provided by such resolutions.
<PAGE>
ARTICLE XIV
Powers of the Board of Directors
The business of the corporation shall be managed by the board of directors
which shall have and may exercise all the powers of the corporation except such
as are expressly conferred upon the stockholders by law, by the certificate of
incorporation or by these bylaws, except as in the certificate of incorporation
otherwise provided.
ARTICLE XV
Meetings of the Board of Directors
The board of directors may hold meetings and have one or more offices and
keep the books of the corporation within or without the State of Delaware in
such place or places as may from time to time be determined by a majority of the
entire board of directors. A regular meeting of the board of directors may be
held without call or formal notice immediately after and at the same place as
the annual meeting of the stockholders, or any special meeting of the
stockholders at which a board of directors is elected.
Special meetings of the board of directors may be held at any place either
within or without the State of Delaware at any time when called by a majority of
the board of directors, the chairman of the board of directors, the president,
treasurer or secretary, reasonable notice of the time and place thereof being
given to each director. A waiver of such notice in writing, signed by the person
or persons entitled to said notice, whether before or after the time stated
therein, shall be deemed equivalent to such notice. No notice of any adjourned
meeting of the board of directors shall be required. In any case it shall be
deemed sufficient notice to the directors to send notice in writing (which may
include electronic facsimile), at least twenty-four hours before the meeting, to
them at their usual or last known business or residence addresses. With respect
to any meeting of the board of directors other than a regularly scheduled
meeting, reasonable efforts shall be made also to give notice by telephone at
least twenty-four hours before the meeting and, upon request of any director,
reasonable efforts shall be made to enable such director to participate in the
meeting by telephone.
ARTICLE XVI
Quorum of the Board of Directors
Except during the existence of a national emergency, or except as otherwise
required by law, the certificate of incorporation or these bylaws, a majority of
the total number of directors, but in no case less than two directors, shall
constitute a quorum for the transaction of all business. During the existence of
a national emergency, two directors shall constitute a quorum for the
transaction of all business. A lesser number than a quorum may adjourn any
meeting from time to time, and the meeting may be held as adjourned without
further notice. When a quorum is present at any meeting, a majority of the
directors in attendance thereat shall, except where a larger vote is required by
law, by the certificate of incorporation or by these bylaws, decide any question
brought before such meeting. A "national emergency" for the purposes of these
bylaws shall include any emergency resulting from an attack on the United States
or on a locality in which the corporation conducts its business or customarily
holds meetings of the board of directors or the stockholders, or during any
nuclear or atomic disaster or during the existence of any catastrophe, or other
similar emergency condition and shall terminate for the purposes of these bylaws
either upon the cessation of active hostilities or such other event or upon the
due adoption by the stockholders at an annual meeting or at a special meeting
called for the purpose of a resolution declaring such termination, whichever
shall first occur. Nothing in this Article XVI shall be exclusive of any other
provisions for emergency powers which may be from time to time adopted by the
corporation.
ARTICLE XVII
Committees of the Board of Directors
There shall be four standing committees of the board of directors,
identified as the executive committee, the audit committee, the finance
committee, and the personnel committee. In addition, the board of directors may,
pursuant to the procedures hereinafter outlined in this Article XVII, from time
to time create such additional committees as it may deem necessary or
appropriate. All committees shall have only such powers and duties as are
hereinafter described and as may specifically from time to time be voted by
resolution of a majority of the whole board of directors.
The board of directors may, by resolution adopted by a majority of the
whole board, (a) designate, change the membership of or terminate the existence
of any committee or committees, each committee to consist of two or more of the
directors; (b) designate one or more directors as alternate members of any such
committee who may replace any absent or disqualified member at any meeting of
the committee; and (c) determine the extent to which each such committee shall
have and may exercise the powers of the board of directors in the management of
the business and affairs of the corporation, including the power to authorize
the seal of the corporation to be affixed to all papers which may require it.
<PAGE>
ARTICLE XVIII
The Executive Committee
The executive committee shall consist of such members of the board of
directors as the board shall from time to time determine, including ex officio
the chief executive officer of the corporation. No elective member of the
executive committee shall be an employee of the corporation, with the exception
of the chairman of the committee, who may be an employee of the corporation. In
no event shall a majority of the members of the executive committee be employees
of the corporation. The members and the chairman of the executive committee
shall be elected annually by resolution passed by a majority of the whole board
of directors at its first meeting following the annual meeting of stockholders
or at any other time. The members shall hold office until the first meeting of
the board of directors following the next annual meeting of the stockholders and
until their successors are respectively elected and qualified or until their
earlier resignation, removal or death.
The executive committee shall be available to review and make
recommendations to the board of directors with respect to various corporate
matters including (i) the nature of the business and its existing components,
and the strategies for their growth; (ii) plans for the addition of product
lines, whether developed internally or through acquisition; (iii) plans for the
elimination of product lines; (iv) the potential impact of major outside
influences on the business; (v) plans for succession to senior management
positions; and (vi) the distribution of the ownership of the corporation's
shares and the corporation's program for shareholder relations. The executive
committee shall bring to the board of directors, for its review, consideration
and appropriate action, all such matters which are of major significance to the
existing operation of the business and its future.
The executive committee shall also recommend to the board of directors
nominees for election or reelection as directors; and it shall review and make
recommendations to the board of directors with respect to the composition,
responsibilities, organization and procedures of the board of directors and its
committees.
Meetings of the executive committee shall be held at such times as may be
requested by the chief executive officer or by the chairman of the executive
committee, but normally no fewer than four times each calendar year. At least
once each calendar year, at a time designated by the chief executive officer,
the executive committee shall conduct an overall review of the major matters
within the scope of its responsibilites. Reasonable notice of all meetings shall
be given by the secretary. A majority shall constitute a quorum of the executive
committee. A majority of the committee in attendance shall decide any question
brought before any meeting of the committee.
<PAGE>
ARTICLE XIX
The Audit Committee
The audit committee shall consist of such members of the board of directors
as the board shall from time to time determine, no one of whom shall be an
employee of the corporation. The members and the chairman of the audit committee
shall be elected annually by resolution passed by a majority of the whole board
of directors at its first meeting following the annual meeting of stockholders
or at any other time. The members shall hold office until the first meeting of
the board of directors following the next annual meeting of the stockholders and
until their successors are respectively elected and qualified or until their
earlier resignation, removal or death.
The audit committee shall review with the corporation's independent
auditors the results of their examination of the financial operations of the
corporation and shall make recommendations to the board of directors with
respect thereto. It shall also review annually the corporation's internal audit
function. In addition, the committee shall review, at least annually, the
performance of the corporation's pension fund managers and make recommendations
as to the adequacy of such management and shall satisfy itself that the
corporation's pension fund is operated in accord with legal requirements and
sound financial principles.
The chief executive officer, although not a member of the audit committee,
shall receive notice of and shall customarily attend all meetings of the
committee, except that the committee may at its discretion elect to meet in
executive session without the presence of the chief executive officer or other
corporate officers and shall so meet at least once each calendar year with the
corporation's independent auditors to review their report on the operation of
the business.
Meetings of the audit committee shall be held at such times as may be
requested by the chief executive officer, the chairman of the committee or any
member of the committee, but normally no fewer than three times each calendar
year. Reasonable notice of all meetings shall be given by the secretary. A
majority shall constitute a quorum of the audit committee. A majority of the
committee in attendance shall decide any question brought before any meeting of
the committee.
ARTICLE XX
The Finance Committee
The finance committee shall consist of such members of the board of
directors as the board shall from time to time determine, no one of whom shall
be an employee of the corporation. The members and the chairman of the finance
committee shall be elected annually by resolution passed by a majority of the
whole board of directors at its first meeting following the annual meeting of
stockholders or at any other time. The members shall hold office until the first
meeting of the board of directors following the next annual meeting of the
stockholders and until their successors are respectively elected and qualified
or until their earlier resignation, removal or death.
The finance committee shall be available to review and make recommendations
to the board of directors with respect to financial policies of the corporation,
including (i) the company's financial condition and its requirements for funds,
(ii) the timing and the types of financing to be undertaken, (iii) cash flow,
borrowing and dividend policy and criteria for assessing such programs, and (iv)
financial terms of proposed acquisitions and sales or other disposition of
divisions or subsidiaries of the corporation.
The chief executive officer, although not a member of the finance
committee, shall receive notice of and shall customarily attend all meetings of
the committee, except that the committee may at its discretion elect to meet in
executive session without the presence of the chief executive officer or other
corporate officers.
Meetings of the finance committee shall be held at such times as may be
requested by the chief executive officer, the chairman of the committee or any
member of the committee, but normally no fewer than three times each calendar
year. Reasonable notice of all meetings shall be given by the secretary. A
majority shall constitute a quorum of the finance committee. A majority of the
committee in attendance shall decide any question brought before any meeting of
the committee.
ARTICLE XXI
The Personnel Committee
The personnel committee shall consist of such members of the board of
directors as the board shall from time to time determine, no one of whom shall
be an employee of the corporation. The members and the chairman of the personnel
committee shall be elected annually by resolution passed by a majority of the
whole board of directors at its first meeting following the annual meeting of
stockholders or at any other time. The members shall hold office until the first
meeting of the board of directors following the next annual meeting of the
stockholders and until their successors are respectively elected and qualified
or until their earlier resignation, removal or death.
The personnel committee shall be designated as the committee of the board
of directors required to administer the corporation's stock purchase, stock
option and stock equivalent unit plans and other executive incentive plans, with
authority to grant or to approve or disapprove participation by specific
employees in those plans as required by the terms of those plans; shall review
and make recommendations to the management and/or board of directors on the
personnel policies of the corporation, particularly as related to fringe
benefits; shall review and make recommendations to the board of directors on the
compensation of all officers of the corporation and such other executives and
employees as the personnel committee shall determine; and shall, upon request of
the chief executive officer or the chief operating officer of the corporation,
review and make recommendations on stock option plans, stock purchase plans and
employees' savings and bonus plans, pension and retirement plans, and any other
plans, systems and practices of the corporation relating directly or indirectly
to compensation, which are in effect or are proposed to be adopted with respect
to any of the employees of the corporation or its subsidiaries.
The chief executive officer and the chief operating officer, although not
members of the personnel committee, shall receive notice of and shall
customarily attend all meetings of the committee.
The chief legal officer of the corporation shall be the secretary of the
personnel committee.
Meetings of the personnel committee shall be held at such times as may be
requested by the chief executive officer, the chairman of the committee, any
member of the committee or the secretary of the committee. Reasonable notice of
all meetings shall be given by the secretary of the corporation. Two members
shall constitute a quorum of the personnel committee. A majority of the
committee in attendance shall decide any question brought before any meeting of
the committee.
ARTICLE XXII
Delegation of Powers
In addition to the provisions of Article XVII of these bylaws, the board of
directors may from time to time delegate any of its powers to officers,
attorneys or agents of the corporation subject to such regulations as may be
imposed by the board.
ARTICLE XXIII
Action Without a Meeting
Any action required or permitted to be taken at any meeting of the board of
directors or of any committee thereof may be taken without a meeting, if consent
thereto in writing is given by all members of the board or of such committee, as
the case may be, and the writing or writings constituting such consent are filed
with the minutes of the proceedings of the board or committee.
<PAGE>
ARTICLE XXIV
Minutes
The board of directors shall cause minutes to be kept of its proceedings
and of those of the stockholders, and at the annual meetings and at any other
time when required by the stockholders, the board of directors shall present a
statement of the assets and liabilities of the corporation and of the condition
of the corporation's affairs.
ARTICLE XXV
Officers
The officers of the corporation shall be a chairman of the board of
directors; a president of the corporation; one or more vice presidents, any of
whom may be designated executive vice president or senior vice president; a
treasurer; and a secretary. The board of directors may from time to time elect
or appoint one or more vice chairmen of the board of directors; one or more
additional presidents; a controller; a general counsel; a tax counsel; a patent
counsel; a trademark counsel; an internal auditor and also such other officers,
including subordinate officers, and agents as the board of directors shall from
time to time elect or appoint for such term of office as they shall designate
and with such powers and duties as they or the chief executive officer may
designate. Officers shall be elected or appointed, and any designations to the
titles of such officers shall be fixed annually by the board of directors at its
first meeting following the annual meeting of stockholders or at any other time.
The chairman of the board of directors, any vice chairmen of the board of
directors and the president of the corporation shall be chosen from among the
directors. Any two or more offices may be held by the same person. The officers
shall hold office until the first meeting of the board of directors following
the next 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. Subject to law and to the
provisions of these bylaws, each officer shall have such duties and powers as
are prescribed by law or these bylaws and as are commonly incident to the office
and such duties and powers as the board of directors or the chief executive
officer may from time to time designate.
ARTICLE XXVI
Resignations and Removals
Any director or officer may resign by giving written notice to the board of
directors, the chief executive officer or the secretary. Such resignation shall
take effect at the time stated therein, or if no time be so stated then upon its
delivery, and without in either case the necessity of its being accepted unless
the resignation shall so state. The continuing directors may act notwithstanding
any vacancy in the board and all acts done by the board of directors or by any
director shall be valid notwithstanding any defects in the election or
qualification of any such director.
The board of directors may by a majority vote of its entire number remove
from office any officer of the corporation, either with or without cause. The
board of directors may at any time terminate or modify the authority of any
agent.
The stockholders at any meeting called for the purpose, by the affirmative
vote of a majority of the stock of the corporation entitled to vote, considered
for the purpose as one class, may remove from office for cause any director and
elect a successor.
No director or officer resigning, and (except where a right to receive
compensation shall be expressly provided in a duly authorized written agreement)
no director or officer removed, shall have any right to any compensation as such
director or officer for any period following resignation or removal, or any
right to damages on account of such removal, whether such compensation be by the
month or by the year or otherwise.
ARTICLE XXVII
Vacancies
If the office of any director becomes vacant at any time by reason of
death, resignation, retirement, disqualification, removal from office or
otherwise, or if any new directorship is created by any increase in the
authorized number of directors, a majority of the directors then in office,
although less than a quorum, or the sole remaining director, may choose a
successor or fill the newly created directorship, and the director so chosen
shall hold office, subject to the provisions of these bylaws, until the
expiration of the term of the class to which he or she has been assigned or
until a successor shall be duly elected and qualified.
Vacancies on the committees of the board of directors may be filled by the
board of directors by resolution adopted by a majority of the whole board at any
meeting of the board.
When one or more directors shall resign from the board, effective at a
future date, a majority of the directors then in office shall have power to fill
such vacancy or vacancies, the vote or action by writing thereon to take effect
when such resignation or resignations shall become effective.
Any vacancy occurring in any other office may be filled by the directors at
any meeting of the board, and the officers so chosen shall hold office for the
unexpired term in respect of which the vacancy occurred and until their
successors shall be duly elected and qualified unless sooner displaced.
ARTICLE XXVIII
Inspection of Accounts and Books
No account or book of the corporation shall be open to the inspection of
any stockholder (except as provided by the laws of Delaware) unless such
inspection in any case shall have been authorized by a resolution of a majority
of the entire board of directors who shall be the sole judges as to whether any
such inspection shall be allowed, and the stockholders' rights in this respect
are and shall be restricted and limited accordingly.
ARTICLE XXIX
Indemnification
(a) The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which he or she reasonably believed to be
in or not opposed to the best interests of the corporation, and, with respect to
any criminal action or proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if such person acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
the Court of Chancery or such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in paragraphs (a) and (b), or in defense
of any claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by such
person in connection therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director, officer, employee or
agent is proper in the circumstances because such person has met the applicable
standard of conduct set forth in paragraphs (a) and (b). Such determination
shall be made (1) by the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such action, suit or proceeding,
or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (3) by the stockholders.
(e) Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this Article XXIX.
(f) The indemnification and advancement of expenses provided by or granted
pursuant to the other sub-sections of this Article XXIX shall not be exclusive
of any other rights of indemnification, whether existing at the time of the
adoption of this Article XXIX or thereafter, to which those indemnified or
advanced expenses may be entitled under any other bylaw or agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in their
official capacity and as to action in another capacity while holding such
office.
(g) The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against such person and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify such person
against such liability under the provisions of this Article XXIX or otherwise.
(h) For the purposes of this Article XXIX, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such director,
officer, employee or agent with respect to an employee benefit plan, its
participants or beneficiaries; and a person who acted in good faith and in a
manner he or she reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this Article XXIX.
(i) The indemnification and advancement of expenses provided by or granted
pursuant to, this Article XXIX shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person. Each person who is or
becomes a director, officer, employee or agent as aforesaid shall be deemed to
have served or to have continued to serve in such capacity in reliance upon the
indemnity and advancement of expenses herein provided for in this Article XXIX.
ARTICLE XXX
Seal
The common seal of the corporation shall be circular in form with the name
of the corporation around the periphery and the words and figures "Incorporated
1917 Delaware" within.
ARTICLE XXXI
Execution of Papers
Except as the board of directors may generally or in particular cases
authorize the execution thereof in some other manner, all deeds, leases,
transfers, contracts, agreements, debentures, bonds, notes, checks, drafts and
other obligations made, accepted or endorsed by the corporation shall be signed
in the name and on behalf of the corporation by the chairman of the board of
directors or by any vice chairman of the board of directors, president or vice
president, including executive vice president or senior vice president, or by
the treasurer or secretary, and the signature of any such officer may be
facsimile and in case any such officer who shall have signed, or whose facsimile
signature shall have been used on any debenture, note or other document shall
cease to be such officer of the corporation, whether because of death,
resignation, or otherwise, before such debenture, note or other document shall
have been delivered by the corporation, such debenture, note or other document
may nevertheless be adopted by the corporation and be issued and delivered as
though the person who signed such debenture, note or other document or whose
facsimile signature shall have been used thereon had not ceased to be such
officer and the delivery of any such debenture, note or other document shall be
deemed the adoption thereof by the corporation.
ARTICLE XXXII
Amendments
Except as otherwise provided in the Certificate of Incorporation, the
foregoing bylaws may be altered or amended by the stockholders or by a majority
of the entire board of directors at any regular meeting or at any special
meeting duly called for that purpose.
I, Jill C. Richardson, Secretary of The Gillette Company, a Delaware
corporation, hereby certify that the foregoing is a true copy of the Bylaws of
said Corporation, as amended on October 15, 1998. I further certify that said
Bylaws have not been amended or revoked, and remain in full force and effect as
of the date hereof.
WITNESS my hand and the seal of said corporation this 16th day of October, 1998.
By:
Jill C. Richardson, Secretary
<PAGE>
CONFORMED COPY
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of October 19, 1998
among THE GILLETTE COMPANY (the "Borrower"), the BANKS listed on the
signature pages hereof (the "Banks") and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent (the "Agent").
WITNESSETH:
WHEREAS, the parties hereto have heretofore entered into a 364-Day
Credit Agreement dated as of December 20, 1996 and an amendment and
restatement thereof dated as of October 20, 1997 (collectively, the
"Agreement");
WHEREAS, no Loans are outstanding under the Agreement at the date hereof;
and
WHEREAS, the parties hereto desire to amend the Agreement to increase
the aggregate amount of the Commitments to $2,000,000,000, to make the other
amendments specified below and to restate the Agreement in its entirety to
read as set forth in the Agreement with the amendments specified below;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. Definitions; References. Unless otherwise specifically defined
herein, each term used herein which is defined in the Agreement shall have
the meaning assigned to such term in the Agreement. Each reference to
"hereof", "hereunder", "herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other similar reference
contained in the Agreement shall from and after the date hereof refer to
the Agreement as amended hereby.
SECTION 2. Amendment of the Agreement. (a) Each reference to "1996" in
the definition of "Company's 1996 Form 10-K", in Section 4.04(a) and in
Section 4.07 is changed to "1997".
(b) Each reference to "1997" in the definition of "Company's Latest
Form 10-Q". in Section 4.04(b) and in Section 4.05 is changed to "1998".
(c) The date "October 19, 1998" appearing in the definition of
"Termination Date" is changed to "October 18, 1999".
SECTION 3. Changes in Commitments. With effect from and including the
date this Amended and Restated Credit Agreement becomes effective in
accordance with Section 5 hereof:
(a) the Commitment Schedule annexed hereto shall be substituted for
the Commitment Schedule attached to the Agreement;
(b) each Person listed on the signature pages hereof which is not a
party to the Agreement (a "New Bank") shall become a Bank party to the
Agreement;
(c) the Commitment of each Bank shall be the amount set forth opposite
the name of such Bank on the Commitment Schedule; and
(d) any Bank not listed in the Commitment Schedule shall upon such
effectiveness cease to be a Bank party to the Agreement, and all accrued
fees and other amounts payable under the Agreement for the account of such
Bank shall be due and payable on such date; provided that the provisions
of Sections 8.03 and 11.03 of the Agreement shall continue to inure to the
benefit of each such Bank.
SECTION 4. Governing Law. This Amended and Restated Credit Agreement
shall be governed by and construed in accordance with the laws of the State
of New York.
SECTION 5. Counterparts; Effectiveness. This Amended and Restated Credit
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 Amended and Restated Credit Agreement
shall become effective as of the date hereof when the Agent shall have
received (i) duly executed counterparts hereof signed by the Company and the
Banks (or, in the case of any party as to which an executed counterpart
shall not have been received, the Agent shall have received telegraphic,
telex or other written confirmation from such party of excution of a
counterpart hearof by such party);(ii)a duly execuyet Note for each of the
New Banks (a "New Note"), dated on or before the date of effectiveness
hereof and otherwise in compliance with Section 2.05 of the Agreement;
(iii) an opinion of the General Counsel of the Company (or such other counsel
for the Company as may be acceptable to the Agent) substantially in the form
of Exhibit E to the Agreement with reference to this Amended and Restated
Credit Agreement, the Agreement as amended and restated hereby and the Notes
(including the New Notes); and (iv) 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.
IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Credit Agreement to be duly executed as of the date first above
written.
THE GILLETTE COMPANY
By /s/ Gian Camuzzi
Title: Vice President - Treasurer
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By /s/ Diana H. Imhof
Title: Vice President
CREDIT SUISSE FIRST BOSTON
By /s/ David W. Kratovil
Title: Director
By /s/ Robert Hetu
Title: Vice President
ABN AMRO BANK N.V.
By /s/ Diane R. Maurice
Title: Vice President
By /s/ Thomas F. Fleming, Jr.
Title: Executive Vice President
BANKBOSTON, N.A.
By /s/ John P. O'Loughlin
Title: Vice President
THE FIRST NATIONAL BANK OF
CHICAGO
By /s/ Tom Dao
Title: Corporate Banking Officer
BANCA COMMERCIALE ITALIANA
NEW YORK BRANCH
By /s/ C. Dougherty
Title: Vice President
By /s/ Karen Purelis
Title: Vice President
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /s/ David Noda
Title: Managing Director
THE CHASE MANHATTAN BANK
By /s/ Karen M. Sharf
Title: Vice President
CITIBANK, N.A.
By /s/ Robert M. Spence
Title: Attorney in Fact
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS BRANCHES
By /s/ Stephan A. Wiedemann
Title: Director
By /s/ Hans-Josef Thiele
Title: Director
MELLON BANK, N.A.
By /s/ R. Jane Westrich
Title: Vice President
ROYAL BANK OF CANADA
By /s/ Sheryl L. Greenberg
Title: Senior Manager
BANCO SANTANDER
By /s/ Dom J. Rodriguez
Title: Vice President
By /s/ Robert E. Schlegel
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ Michael R. Bradley
Title: Authorized Signatory
PARIBAS
By /s/ David I. Canavan
Title: Director
By /s/ Duane Helkowski
Title: Vice President
FLEET NATIONAL BANK
By /s/ Deanne M. Horn
Title: Assistant Vice President
GENERALE BANK, NEW YORK BRANCH
By /s/ E. Matthews
Title: Senior Vice President
By /s/ Hans Neukomm
Title: General Manager
SOCIETE GENERALE, NEW YORK BRANCH
By /s/ Robert Petersen
Title: Vice President
STATE STRFET BANK AND TRUST COMPANY
By /s/ Lise Anne Boutiette
Title: Vice President
WACHOVIA BANK OF GEORGIA, N.A.
By /s/ John P. Raffertv
Title: Senior Vice President
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By /s/ Diana H. Imhof
Title: Vice President
COMMITMENT SCHEDULE
Bank Commitment
Morgan Guaranty Trust Company of New York $220,000,000
Credit Suisse First Boston 200,000,000
ABN AMRO Bank N.V. 160,000,000
BankBoston, N.A. 160,000,000
The First National Bank of Chicago 160,000,000
Banca Commerciale Italiana, New York Branch 100,000,000
Bank of America National Trust and Savings Association 100,000,000
The Chase Manhattan Bank 100,000,000
Citibank, N.A. 100,000,000
Deutsche Bank AG, New York and/or
Cayman Islands Branches 100.000.000
Mellon Bank, N.A. 100,000,000
Royal Bank of Canada 100,000,000
Banco Santander 50,000,000
The Bank of Nova Scotia 50,000.000
Banque Paribas 50,000,000
Fleet National Bank 50,000,000
Generale Bank, New York Branch 50,000,000
Societe Generale 50,000,000
State Street Bank and Trust Company 50,000,000
Wachovia Bank of Georgia, N.A. 50,000,000
Total $2,000,000,000
