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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NO. I-922
THE GILLETTE COMPANY
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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INCORPORATED IN DELAWARE 04-1366970
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
PRUDENTIAL TOWER BUILDING, BOSTON, MASSACHUSETTS 02199
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 617-421-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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COMMON STOCK, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE
BOSTON STOCK EXCHANGE
CHICAGO STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K ((sec.)229.405 of this chapter) is not contained herein,
and will not be contained to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K [X].
The aggregate market value of Gillette Common Stock held by non-affiliates
as of February 27, 1998 was approximately $52,280,000,000.*
The number of shares of Gillette Common Stock outstanding as of February
27, 1998 was 561,318,276.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the following documents have been incorporated by
reference into this Form 10-K as indicated:
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DOCUMENTS 10-K PARTS
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1. The Gillette Company 1997 Annual Report to Stockholders
(the "1997 Annual Report")............................... Parts I and II
2. The Gillette Company 1998 Proxy Statement (The "1998
Proxy Statement")......................................... Part III
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* This amount does not include the value of 153,551 shares of Series C ESOP
Convertible Preferred Stock issued for $602.875 per share. For purposes of
this calculation only, Gillette Common Stock held by Executive Officers or
directors of the Company has been treated as owned by affiliates.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
The Gillette Company was incorporated under the laws of the State of
Delaware in 1917 as the successor of a Massachusetts corporation incorporated in
1912 which corporation was the successor of a Maine corporation organized in
1901 by King C. Gillette, inventor of the safety razor.
A description of the Company and its businesses appears in the 1997 Annual
Report on the inside front cover, at pages 2 through 5 under the caption "Letter
to Stockholders" and at pages 18 through 21 under the caption "AMEE: Gateway to
Growth" the texts of which are incorporated by reference. See also Item 7,
"Management's Discussion" at page 5 of this report.
INDUSTRY SEGMENTS
The approximate percentages of consolidated net sales and segment profit
from operations during the last five years for each of the Company's business
segments appear in the 1997 Annual Report at page 41 under the caption,
"Business Segments," and are incorporated by reference.
"Financial Information by Business Segment," containing information on net
sales, profit from operations, identifiable assets, capital expenditures and
depreciation for each of the last three years, appears in the 1997 Annual Report
at page 40 and is incorporated by reference.
The Company's businesses range across several industry segments, including
blades and razors, toiletries and cosmetics, stationery products, electric
shavers, small household appliances, hair care appliances, oral care appliances,
oral care products and alkaline batteries for consumer products. Descriptions of
those businesses appear in the 1997 Annual Report at pages 6 through 17, the
text of which is incorporated by reference.
DISTRIBUTION
In the Company's major geographic markets, traditional Gillette product
lines, Duracell batteries and Oral-B products are sold to wholesalers, chain
stores and large retailers and are resold to consumers primarily through food,
drug, discount, stationery, hardware, toy, tobacco and department stores. Jafra
skin care products are sold to independent consultants and are resold to
consumers, primarily at classes in the home and office. Waterman and Parker
products are sold to wholesalers and retailers and are resold to consumers
through fine jewelry, fine stationery and department stores, pen specialists and
other retail outlets. Braun products are sold to wholesalers and retailers and
are resold to consumers mainly through department, discount, catalogue and
specialty stores. Oral-B products are marketed directly to dental professionals
for distribution to patients as well as through standard distribution channels.
In many small Gillette, Duracell, Braun and Oral-B markets, products are
distributed through local distributors and sales agents.
PATENTS
Certain of the Company's patents and licenses in the blade and razor
segment are of substantial value and importance when considered in the
aggregate. Additionally, the Company holds significant patents in its toiletries
and cosmetics, stationery products, Duracell, Braun, and Oral-B businesses. No
patent or license held by the Company is considered to be of material importance
when judged from the standpoint of the Company's total businesses. Gillette has
licensed many of its blade and razor patents to other manufacturers. In all of
these categories, Gillette competitors also have significant patent positions.
The patents and licenses held by the Company are of varying remaining durations.
TRADEMARKS
In general, the Company's principal trademarks have been registered in the
United States and throughout the world where the Company's products are sold.
Gillette products are marketed outside the United States under various
trademarks, many of which are the same as those used in the United States. The
trademark "Gillette" is of principal importance to the Company. In addition, a
number of other trademarks owned by the
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Company and its subsidiaries have significant importance within their
industries. The Company's rights in these trademarks endure for as long as they
are used or registered.
COMPETITION
The blades and razors segment is marked by competition in new technology,
as well as by competition in price, marketing, advertising and promotion to
retail outlets and to consumers. The Company's major competitors worldwide are
Warner-Lambert Company, with its Schick and, in North America and Europe, its
Wilkinson Sword product lines, and Societe Bic S.A., a French company.
Additional competition in the United States and in certain other markets is
provided by the American Safety Razor Company, Inc. under its own brands and a
number of private label brands, as well as other private label suppliers. The
toiletries and cosmetics segment is highly competitive in terms of price,
product innovation and market positioning, with frequent introduction of new
brands and marketing concepts, especially for products sold through retail
outlets, and with product life cycles typically shorter than in the other
businesses of the Company. Competition in the stationery products segment,
particularly in the writing instruments market, is marked by a high degree of
competition from domestic and foreign suppliers and low entry barriers, and is
focused on a wide variety of factors including product performance, design and
price, with price an especially important factor in the commercial sector.
Competition in the Braun products markets is based primarily on product
performance, innovation and price, with numerous competitors in the small
household and hair care appliances segments. Competition in the Oral-B products
markets is focused on product performance, price and dental profession
endorsement. The Duracell products markets are marked by competition in product
performance, innovation and price and in marketing, advertising and promotion to
retail outlets and to consumers. Many of the Company's competitors are larger
and have greater resources than the Company.
EMPLOYEES
At year-end, Gillette employed approximately 44,000 persons, three-quarters
of them outside the United States.
RESEARCH AND DEVELOPMENT
In 1997, research and development expenditures were $212 million, compared
with $204 million in 1996 and $187 million in 1995.
RAW MATERIALS
The raw materials used by Gillette in the manufacture of products are
purchased from a number of suppliers, and substantially all such materials are
readily available.
OPERATIONS BY GEOGRAPHIC AREA
The following table indicates the geographic sources of consolidated net
sales and profit from operations of the Company for the last three years:
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1997 1996 1995
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NET NET NET
SALES PROFIT SALES PROFIT SALES PROFIT
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United States.................................. 37% 38% 37% 41% 35% 37%
Foreign........................................ 63% 62% 63% 59% 65% 63%
</TABLE>
"Financial Information by Business Segment" and "Financial Information by
Geographic Area" containing information on net sales, profit from operations and
identifiable assets for each of the last three years appear in the 1997 Annual
Report under the same captions at page 40 and are incorporated by reference.
ITEM 2. DESCRIPTION OF PROPERTY
The Company owns and leases manufacturing facilities and other real estate
properties in the United States and a number of foreign countries. The Company's
executive offices are located in the Prudential
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Center, Boston, Massachusetts where it holds a long term lease. The following
table sets forth the Company's principal manufacturing plants:
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BUSINESS SEGMENT LOCATION OWNED/LEASED
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Blades & Razors Boston, MA (US) Owned
Isleworth, UK Owned
Berlin, Germany Owned
Shanghai, China* Leased
Naucalli, Mexico* Owned
Manaus, Brazil* Owned
Devens, MA(US) Leased
Toiletries & Cosmetics St. Paul, MN (US)* Owned/Leased
Andover, MA (US) Owned
Reading, UK Owned/Leased
Stationery Santa Monica, CA (US) Leased
Saint Herblain, France Owned/Leased
Braun Kronberg, Germany Owned/Leased
Barcelona, Spain Owned/Leased
Walldurn, Germany Owned/Leased
Marktheidenfeld, Germany Owned
Mexico City, Mexico Owned/Leased
Oral-B Iowa City, IA (US) Owned
Duracell Port Elizabeth, S. Africa Owned
Aarschot, Belgium Owned
Lancaster, SC (US) Owned
LaGrange, GA (US) Owned
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The above facilities are in good repair, adequately meet the Company's needs and
operate at reasonable levels of production capacity.
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* Engaged in the manufacture of products for two or more business segments.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject, from time to time, to legal proceedings and claims
arising out of its business, which cover a wide range of matters, including
antitrust and trade regulation, product liability, contracts, environmental
issues, patent and trademark matters and taxes. Management, after review and
consultation with counsel, considers that any liability from all of these legal
proceedings and claims would not materially affect the consolidated financial
position, results of operations or liquidity of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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EXECUTIVE OFFICERS OF REGISTRANT
Information regarding the Executive Officers of the Company as of March 19,
1998 is set out below.
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NAME AND CURRENT POSITION FIVE-YEAR BUSINESS HISTORY AGE
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Alfred M. Zeien Chairman of the Board and Chief Executive Officer since 68
Chairman of the Board and Chief February 1991
Executive Officer
Michael C. Hawley President and Chief Operating Officer since April 1995; 60
President and Chief Operating Executive Vice President, International Group, December
Officer 1993 - March 1995; President, Oral-B Laboratories, Inc.,
May 1989 - November 1993
Joseph E. Mullaney Vice Chairman of the Board and Chief Legal Officer since 64
Vice Chairman of the Board November 1990
and Chief Legal Officer
Edward F. DeGraan Executive Vice President, Duracell North Atlantic Group 54
Executive Vice President since January 1997; Senior Vice President, Manufacturing
and Technical Operations, Gillette North Atlantic Group,
May 1991 - December 1996
Robert G. King Executive Vice President, Gillette North Atlantic Group 52
Executive Vice President since February 1997; Executive Vice President,
International Group, April 1995 - January 1997; Group Vice
President - Latin America, March 1991 - March 1995
Jacques Lagarde Executive Vice President, Diversified Group since October 59
Executive Vice President 1993; Vice President, February 1990 - September 1993;
Chairman, Board of Management, Braun AG, February 1990 -
September 1993
Jorgen Wedel Executive Vice President, International Group since 49
Executive Vice President February 1997; President, Oral-B Laboratories, Inc.,
November 1993 - January 1997; Group General Manager, Braun
North America, November 1991 - October 1993
John M. Coleman Senior Vice President and General Counsel since February 1, 48
Senior Vice President and General 1998; Senior Vice President - Law and Public Affairs,
Counsel Campbell Soup Company, September 1989 - December 1997
Charles W. Cramb Senior Vice President, Finance, Chief Financial Officer and 51
Senior Vice President, Principal Accounting Officer since July 1997; Vice
Chief Financial Officer President and Controller, July 1995 - June 1997; Vice
and Principal Accounting Officer President, Finance, Planning and Administration,
Diversified Group, October 1992 - June 1995
Joel P. Davis Senior Vice President, Corporate Planning and Development 52
Senior Vice President since April 1995; Vice President and President, Stationery
Products Group, December 1987 - March 1995
Robert E. DiCenso Senior Vice President, Personnel and Administration, since 57
Senior Vice President July 1994; Vice President, Investor Relations, January 1993
-June 1994
</TABLE>
The Executive Officers hold office until the first meeting of the Board of
Directors following the annual meeting of the stockholders and until their
successors are elected or appointed and qualified, unless a shorter period shall
have been specified by the terms of their election or appointment, or until
their earlier resignation, removal or death.
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
The information required by this item with respect to the Company's common
stock appears in the 1997 Annual Report on the inside back cover under the
caption "common stock" and at page 41 under the caption, "Quarterly Financial
Information," and is incorporated by reference. As of February 27, 1998, the
record date for the 1998 Annual Meeting, there were 56,720 Gillette stockholders
of record.
On November 14, 1997, the Company sold 6 percent notes due November 14,
2000 in the aggregate principal amount of $300 million to a syndicate of
underwriters led by ABN AMRO Bank N.V. The underwriters subscribed to the notes
at 100.960% of their principal amount less a combined management and
underwriting commission of 0.200% and a selling concession of 1.175% of the
principal amount of the notes. In addition, the Company paid certain expenses of
the underwriters. The notes were sold pursuant to the exemption provided by
Regulation S for offers and sales of securities outside the United States.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item appears in the 1997 Annual Report at
pages 42 and 43 under the caption, "Historical Financial Summary," and is
incorporated by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item appears in the 1997 Annual Report at
pages 22 through 24 under the caption, "Management's Discussion," and is
incorporated by reference.
CAUTIONARY STATEMENT
From time to time, the Company may make statements which constitute or
contain "forward-looking" information as that term is defined in the Private
Securities Litigation Reform Act of 1995 (the "Act") or by the Securities and
Exchange Commission in its rules, regulations and releases. The Company cautions
investors that any such forward-looking statements made by the Company are not
guarantees of future performance and that actual results may differ materially
from those in the forward-looking statements. The following are some of the
factors that could cause actual results to differ materially from estimates
contained in the Company's forward-looking statements:
- the pattern of the Company's sales, including variations in sales volume
within periods, which makes forward-looking statements about sales and
earnings difficult and may result in variance of actual results from
those contained in statements made at any time prior to the period's
close;
- vigorous competition within the Company's product markets, including
pricing and promotional, advertising or other activities in order to
preserve or gain market share, the timing of which cannot be foreseen by
the Company;
- the Company's reliance on the development of new products and the
inherent risks associated with new product introductions, including
uncertainty of trade and customer acceptance and competitive reaction;
- the costs and effects of unanticipated legal and administrative
proceedings;
- the impacts of unusual items resulting from ongoing evaluations of
business strategies, asset valuations and organizational structure;
- historically, almost two-thirds of the Company's sales having been made
outside the United States, making forecasting of sales more difficult;
- the impact on sales or earnings of fluctuations in exchange rates in one
or more of the Company's geographic markets;
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- the impact of the year 2000 on the Company's order, production,
distribution and financial systems and the systems of its suppliers and
customers;
- 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.
ITEM 7A. DISCLOSURES CONCERNING MARKET RISK SENSITIVE INSTRUMENTS
The following statements provide information about the Company's market
sensitive financial instruments and constitutes a "forward-looking statement."
The Company uses financial instruments, including fixed and variable rate debt,
as well as swap, forward and option contracts to finance its operations and to
hedge interest rate, currency, commodities, and certain equity-linked
compensation liability exposures as well as to enhance its stock repurchase
program. The swap, forward and option contracts are entered into for periods
consistent with related underlying exposures and do not constitute positions
independent of those exposures. The Company does not hold or issue financial
instruments for trading, profit, or speculative purposes.
Derivative positions are constantly monitored using techniques including
fair market value, sensitivity analysis and a value at risk model. A near term
change in currency, interest rates, commodity prices and stock equity prices
when evaluated with the above three methodologies for:
- forward contracts
- foreign currency swaps
- interest rate swaps,
- commodity swaps and
- equity contracts,
will not materially impact the consolidated financial position, results of
operations or cash flows of the Company.
The above financial instruments, when individually evaluated by the various
methods, do not expose the Company to material market risks. When the
instruments above are combined with each other, and with the underlying
exposures, a further reduction in market risk for the Company is realized.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following Financial Statements and Supplementary Data for The Gillette
Company and Subsidiary Companies appear in the 1997 Annual Report at the pages
indicated below and are incorporated by reference.
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(1) Independent Auditors' Report................................ Page 25
(2) Consolidated Statement of Income for the Years Ended
December 31, 1997, 1996 and 1995............................ Page 26
(3) Consolidated Balance Sheet at December 31, 1997 and 1996.... Page 27
(4) Consolidated Statement of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995............................ Page 28
(5) Consolidated Statement of Stockholders' Equity for the
periods ended December 31, 1997, 1996 and 1995.............. Page 29
(6) Notes to Consolidated Financial Statements.................. Pages 30
through 40
(7) Computation of per share earnings........................... Pages 26
and 30
(8) Quarterly Financial Information............................. Page 41
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The information required by this item with respect to the Directors of the
Company appears in the 1998 Proxy Statement at pages 2 through 4 and at pages 7
and 8 under the caption "Certain Transactions with Directors and Officers", the
texts of which are incorporated by reference.
The information required for Executive Officers of the Company appears at
the end of Part I of this report at page 4.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item appears in the 1998 Proxy Statement
at pages 8 through 17 under the captions "Compensation of Directors", "Gillette
Comparative Five-Year Investment Performance", "Personnel Committee Report on
Executive Compensation", "Executive Compensation" and "Retirement Plan" and is
incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item concerning the security ownership of
certain beneficial owners and management appears in the 1998 Proxy Statement at
pages 6 and 7 under the caption "Stock Ownership of Certain Beneficial Owners
and Management" and is incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item appears in the 1998 Proxy Statement
at pages 7 through 9 under the captions "Certain Transactions with Directors and
Officers" and "Compensation of Directors" and is incorporated by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K
A. FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
FINANCIAL STATEMENTS
The following appear in the 1997 Annual Report at the pages indicated below
and are incorporated into Part II by reference.
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(1) Independent Auditor's Report................................ Page 25
(2) Consolidated Statement of Income for the Years Ended
December 31, 1997, 1996 and 1995............................ Page 26
(3) Consolidated Balance Sheet at December 31, 1997 and 1996.... Page 27
(4) Consolidated Statement of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995............................ Page 28
(5) Consolidated Statement of Stockholders' Equity for the
periods ended December 31, 1997, 1996 and 1995.............. Page 29
(6) Notes to Consolidated Financial Statements.................. Pages 30
through 40
(7) Computation of per share earnings........................... Pages 26
and 30
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SCHEDULES
The following schedule appears at page 13 of this report:
II. Valuation and Qualifying Accounts
Schedules other than those listed above are omitted because they are either
not required or not applicable.
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EXHIBITS
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3(a) Composite Certificate of Incorporation of The Gillette
Company, as amended, filed as Exhibit 3(a) to The Gillette
Company Annual Report on Form 10-K for the year ended
December 31, 1989, Commission File No. I-922, incorporated
by reference herein.
(b) The Bylaws of The Gillette Company, as amended April 15,
1993, filed as Exhibit 3(b) to The Gillette Company
Quarterly Report on Form 10-Q for the period ended March 31,
1993, incorporated by reference herein.
4 Instruments Defining the Rights of Security Holders,
Including Indentures.
(a) Specimen of form of certificate representing ownership of
The Gillette Company Common Stock, $1.00 par value,
effective December 10, 1996, filed as Exhibit 4(a) to The
Gillette Company Annual Report on Form 10-K for the year
ended December 31, 1996, Commission File No. 1-922,
incorporated by reference herein.
(b) Form of Certificate of Designation, Preferences and Rights
of Series A Junior Participating Preferred Stock of the
Gillette Company filed as Exhibit A to Exhibit 1 to The
Gillette Company Current Report on Form 8-K, dated December
30, 1985, Commission File No. I-911, incorporated by
reference as Exhibit 4(c) to The Gillette Company Annual
Report on Form 10-K for the year ended December 31, 1996,
Commission File No. 1-922, incorporated by reference herein.
(c) Amendment to Certificate of Designations, Preferences and
Rights of Series A Junior Participating Preferred Stock
dated December 9, 1996, filed as Exhibit 4(c) to The
Gillette Company Annual Report on Form 10-K for the year
ended December 31, 1996, File No. 1-922, incorporated by
reference herein.
(d) Renewed Rights Agreement dated as of December 14, 1995
between The Gillette Company and The First National Bank of
Boston, filed as Exhibit 4 to The Gillette Company Current
Report on Form 8-K, dated December 18, 1995, Commission File
No. I-911, incorporated by reference herein.
(e) Certificate of Designation of the Series C ESOP Convertible
Preferred Stock of The Gillette Company, dated January 17,
1990, filed as Exhibit 4(e) to The Gillette Company Annual
Report on Form 10-K for the year ended December 31, 1989,
Commission File No. I-922, incorporated by reference herein.
(f) Certificate of Amendment relating to an increase in the
amount of authorized shares of preferred stock and common
stock, filed as Exhibit 3(i) to The Gillette Company
Quarterly Report on Form 10-Q for the period ended March 31,
1995, Commission File No. 1-922, incorporated by reference
herein.
(g) Form of $150,000,000 6.25% note due August 15, 2003, issued
pursuant to Registration Statement No. 33-54974 of The
Gillette Company, filed November 24, 1992, as amended May
14, 1993 and June 24, 1993 and the Trust Indenture filed
therewith as Exhibit 4.1, filed as part of Exhibit 4(f) to
The Gillette Company Annual Report on Form 10-K for the year
ended December 31, 1993, Commission File No. 1-922,
incorporated by reference herein.
(h) Form of $150,000,000 and $50,000,000 5.75% notes due October
15, 2005, issued pursuant to Registration Statement No.
33-50303 of The Gillette Company, filed September 17, 1993
and the Trust Indenture filed as Exhibit 4.1 to Registration
Statement No. 3354974 of The Gillette Company, as amended
May 14, 1993 and June 24, 1993, filed as part of Exhibit
4(f) to The Gillette Company Annual Report on Form 10-K for
the year ended December 31, 1993, Commission File No. 1-922,
incorporated by reference herein.
(i) Fiscal Agency Agreement dated as of November 14, 1997,
including form of $300,000,000 6% notes due November 14,
2000, among The Gillette Company, Morgan Guaranty Trust
Company of New York, London office and Banque Paribas
Luxembourg, filed herewith.
10 Material Contracts
*(a) The Gillette Company 1971 Stock Option Plan, as amended
filed as Appendix A to the 1997 Proxy Statement, Commission
File No. 1-922, incorporated by reference herein.
*(b) The Gillette Company Stock Equivalent Unit Plan, as amended
filed herewith.
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*(c) The Gillette Company Incentive Bonus Plan, as amended, filed herewith.
*(d) The Gillette Company Executive Life Insurance Program, filed herewith.
(e) Directors and Officers and Company Reimbursement Indemnity Insurance and Pension and Welfare
Fund Fiduciary Responsibility Insurance policy, filed as Exhibit 10(e) to The Gillette Company
Annual Report on Form 10-K for the year ended December 31, 1996, Commission File No. 1-922,
incorporated by reference herein.
*(f) Description of Conversion of Outside Directors' Vested Pension Benefit into Deferred Stock
Units, filed as Exhibit 10(f) to The Gillette Company Annual Report on Form
10-K for the year ended December 31, 1996, Commission File No. 1-922, incorporated by
reference herein.
*(g) The Gillette Company Deferred Compensation Plan for Outside Directors, filed as Exhibit 10(g)
to The Gillette Company Annual Report on Form 10-K for the year ended December 31, 1996,
Commission File No. 1-922, incorporated by reference herein.
*(h) Description of severance pay and benefit arrangements for employees in the event of a change
in control, filed as Exhibit 10(j) to The Gillette Company Annual Report on Form 10-K for the
year ending December 31, 1989, Commission File No. 1-922, incorporated by reference herein.
(i) Letter Agreement, dated July 20, 1989, between The Gillette Company and Berkshire Hathaway
Inc., filed as Exhibit 4(a) to The Gillette Company Current Report on Form
8-K, dated July 20, 1989, Commission File No. 1-922, incorporated by reference herein.
*(j) Description of agreement between The Gillette Company and Robert J. Murray effective January
1, 1996, filed as Exhibit 10(l) to The Gillette Company Annual Report on Form 10-K for the
year ending December 31, 1995, Commission File No. 1-922, incorporated by reference herein.
*(k) Description of The Gillette Company Estate Planning Program, filed as Exhibit 10(o) to The
Gillette Company Annual Report on Form 10-K for the year ended December 31, 1993, Commission
File No. 1-922, incorporated by reference herein.
*(l) The Gillette Company Estate Preservation Plan, filed herewith.
*(m) The Gillette Company Supplemental Retirement Plan, as amended and restated June 16, 1994,
filed as Exhibit 10(a) to The Gillette Company Annual Report on Form 10-K for the year ended
December 31, 1994, Commission File No. 1-922, incorporated by reference herein.
*(n) The Gillette Company Supplemental Savings Plan, as amended, filed as Exhibit 10(n) to The
Gillette Company Annual Report on Form 10-K for the year ended December 31, 1996, Commission
File No. 1-922 incorporated by reference herein.
(o) Multi-year Credit Agreement dated as of December 20, 1996 among The Gillette Company, Morgan
Guaranty Trust Company of New York, as agent, and a syndicate of domestic and foreign banks,
filed as Exhibit 10(o) to The Gillette Company Annual Report on Form 10-K for the year ended
December 31, 1996, Commission File No.
1-922, incorporated by reference herein.
(p) $1,000,000,000 364-Day Credit Agreement dated as of December 20, 1996 and amended and restated
as of October 20, 1997 among The Gillette Company, Morgan Guaranty Trust Company of New York,
as agent and a syndicate of domestic and foreign banks, filed herewith.
(q) Agreement and Plan of Merger dated as of September 12, 1996, by and among The Gillette
Company, Alaska Acquisition Corp. and Duracell International Inc., filed as Exhibit 2.1 to The
Gillette Company Current Report on Form 8-K filed September 16, 1996, Commission File No.
1-922, incorporated by reference herein.
</TABLE>
9
<PAGE> 11
<TABLE>
(r) Stockholders Agreement dated as of September 12, 1996 among The Gillette Company,
KKR Partners II, L.P. and DI Associates, L.P., filed as Exhibit 10.1 to The Gillette
Company Current Report on Form 8-K filed September 16, 1996, Commission File
No. 1-922, incorporated by reference herein.
<C> <S>
(s) Registration Rights Agreement dated as of September 12, 1996 among The Gillette
Company, KKR Partners II, L.P. and DI Associates, L.P., filed as Exhibit 10.2 to The
Gillette Company Current Report on Form 8-K filed September 16, 1996, Commission
File No. 1-922, incorporated by reference herein.
12 Computation of the ratios of current assets to current liabilities for the years
1997, 1996 and 1995, filed herewith.
13 Portions of the 1997 Annual Report to Stockholders of The Gillette Company
incorporated by reference in this Form 10-K, filed herewith.
22 List of subsidiaries of The Gillette Company, filed herewith.
23 Independent Auditors' Consent, filed herewith.
24 Power of Attorney, filed herewith.
27 Financial Data Schedule (not considered to be filed).
</TABLE>
- ---------------
* Filed pursuant to Item 14(c).
B. REPORTS ON FORM 8-K
There were no reports on Form 8-K filed by the registrant during the fourth
quarter of the period covered by this report.
OTHER MATTERS
For the purposes of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into the following Registration Statements of the
registrant on Form S-8 (1) No. 33-27916, filed April 10, 1989, and amended
thereafter, which incorporates by reference therein Registration Statements on
Form S-8 Nos. 2-90276, 2-63951 and 1-50710, and all amendments thereto, all
relating to shares issuable and deliverable under The Gillette Company 1971
Stock Option Plan and 1974 Stock Purchase Plan and on Form S-7 No. 2-41016
relating to shares issuable and deliverable under The Gillette Company 1971
Stock Option Plan; (2) No. 33-9495, filed October 20, 1986, and all amendments
thereto, relating to shares and plan interests in The Gillette Company
Employees' Savings Plan; (3) No. 2-93230, filed September 12, 1984, and all
amendments thereto, relating to shares and plan interests in the Oral B
Laboratories Savings Plan; (4) No. 33-56218, filed December 23, 1992, relating
to shares and plan interests in The Gillette Company Employees' Savings Plan;
(5) No. 33-52465, filed March 1, 1994, and all amendments thereto, relating to
shares issuable and deliverable under The Gillette Company Global Employee Stock
Ownership Plan; (6) No. 33-53257, filed April 25, 1994, and all amendments
thereto, relating to shares issuable and deliverable under The Gillette Company
Outside Director's Stock Ownership Plan; (7) No. 33-53258, filed April 25, 1994,
and all amendments thereto, relating to shares issuable and deliverable under
The Gillette Company 1971 Stock Option Plan; (8) No. 33-59125, filed May 5,
1995, and all amendments thereto, relating to shares and plan interests in The
Gillette Company Employees' Savings Plan; (9) No. 33-63707 filed October 26,
1995, and all amendments thereto, relating to shares and plan interests in the
Parker Pen 401(K) Plan; (10) No. 333-19133 filed December 31, 1996, and all
amendments thereto, relating to shares issuable and deliverable under the
Duracell Shares Plan and Stock Option Plan for Key Employees of Duracell
International Inc. and Subsidiaries and (11) No. 333-25533 filed April 21, 1997,
and all amendments thereto, relating to shares issuable and deliverable under
The Gillette Company 1971 Stock Option Plan.
10
<PAGE> 12
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event a claim for indemnification against such liabilities (other than the
payments by the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer, or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
11
<PAGE> 13
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
of THE GILLETTE COMPANY:
Under date of January 28, 1998, we reported on the consolidated balance
sheet of The Gillette Company and subsidiary companies as of December 31, 1997
and 1996, and the related consolidated statements of income, cash flows and
stockholders' equity for each of the years in the three-year period ended
December 31, 1997, as contained in the 1997 Annual Report to Stockholders. These
consolidated financial statements and our report thereon are incorporated by
reference in the annual report on Form 10-K for the year 1997. In connection
with our audits of the aforementioned consolidated financial statements, we also
audited the financial statement schedule on page 13 of this report. The
financial statement schedule is the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
January 28, 1998
12
<PAGE> 14
THE GILLETTE COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
---------------------- ----------
CHARGED LOSSES
BALANCE AT TO CHARGED BALANCE AT
BEGINNING PROFIT CHARGED TO TO END OF
DESCRIPTION OF YEAR AND LOSS OTHER RESERVES YEAR
----------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
1997
- -----
Reserves deducted from assets:
Receivables....................... $81 $42 -- $49 $74
=== === === === ===
1996
- -----
Reserves deducted from assets:
Receivables....................... $82 $42 $ 1* $44 $81
=== === === === ===
1995
- -----
Reserves deducted from assets:
Receivables....................... $75 $34 $ 1* $28 $82
=== === === === ===
</TABLE>
* Acquisition balances
13
<PAGE> 15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
THE GILLETTE COMPANY
(Registrant)
By CHARLES W. CRAMB
------------------------------------
Charles W. Cramb
Senior Vice President, Chief
Financial Officer and
Principal Accounting Officer
Date: March 20, 1998
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
* ALFRED M. ZEIEN Chairman of the Board March 20, 1998
- ----------------------------------------------------- of Directors, Chief Executive Officer
Alfred M. Zeien and Director
* MICHAEL C. HAWLEY President, Chief Operating Officer March 20, 1998
- ----------------------------------------------------- and Director
Michael C. Hawley
* JOSEPH E. MULLANEY Vice Chairman of the Board, Chief March 20, 1998
- ----------------------------------------------------- Legal Officer and Director
Joseph E. Mullaney
* CHARLES W. CRAMB Senior Vice President, March 20, 1998
- ----------------------------------------------------- Chief Financial Officer and
Charles W. Cramb Principal Accounting Officer
* WARREN E. BUFFETT Director March 20, 1998
- -----------------------------------------------------
Warren E. Buffett
* WILBUR H. GANTZ Director March 20, 1998
- -----------------------------------------------------
Wilbur H. Gantz
* MICHAEL B. GIFFORD Director March 20, 1998
- -----------------------------------------------------
Michael B. Gifford
* CAROL R. GOLDBERG Director March 20, 1998
- -----------------------------------------------------
Carol R. Goldberg
* HERBERT H. JACOBI Director March 20, 1998
- -----------------------------------------------------
Herbert H. Jacobi
* HENRY R. KRAVIS Director March 20, 1998
- -----------------------------------------------------
Henry R. Kravis
* RICHARD R. PIVIROTTO Director March 20, 1998
- -----------------------------------------------------
Richard R. Pivirotto
* JUAN M. STETA Director March 20, 1998
- -----------------------------------------------------
Juan M. Steta
* ALEXANDER B. TROWBRIDGE Director March 20, 1998
- -----------------------------------------------------
Alexander B. Trowbridge
*By CHARLES W. CRAMB
---------------------------------------------------
Charles W. Cramb
as Attorney-In-Fact
</TABLE>
14
<PAGE> 1
EXHIBIT 4(i)
CONFORMED COPY
Dated November 14, 1997
THE GILLETTE COMPANY
U.S.$300,000,000
6 per cent. Notes
Due November 14, 2000
-------------------------------------
FISCAL AGENCY AGREEMENT
-------------------------------------
ALLEN & OVERY
New York
K:\17928\00386\0003B.DOC
<PAGE> 2
- --------------------------------------------------------------------------------
THE GILLETTE COMPANY
U.S.$300,000,000
6 PER CENT. NOTES
DUE NOVEMBER 14, 2000
FISCAL AGENCY AGREEMENT
This AGREEMENT is dated November 14, 1997 and made BETWEEN:
(1) THE GILLETTE COMPANY, having its office at Prudential Tower Building,
Boston, Massachusetts 02199 (hereinafter referred to as "GILLETTE" or the
"COMPANY");
(2) MORGAN GUARANTY TRUST COMPANY OF NEW YORK, LONDON OFFICE having its office
at 60 Victoria Embankment, London EC4Y 0JP (hereinafter referred to as the
"FISCAL AGENT"); and
(3) BANQUE PARIBAS LUXEMBOURG having its office at 10A Boulevard Royal, L-2093
Luxembourg (hereinafter referred to, together with the Fiscal Agent and
with any additional or successor paying agents which may be appointed
pursuant to Clause 20, as the "PAYING AGENTS").
WHEREAS:
(A) Gillette, pursuant to an authorisation by its board of directors on
September 18, 1997 has agreed to issue 6 per cent. Notes Due November 14,
2000 (the "NOTES") having an aggregate principal amount of
U.S.$300,000,000.
(B) The Notes will be issued in bearer form in the denomination of U.S$1,000,
U.S. $10,000 and U.S. $100,000 each with interest coupons (the "COUPONS")
attached.
(c) The Notes will be initially represented by a temporary global Note without
interest coupons (the "TEMPORARY GLOBAL NOTE") in or substantially in the
form of Schedule 2 this Agreement which shall, following authentication by
or on behalf of the Fiscal Agent, be delivered (outside the United States
or its possessions) to a common depositary for Cedel Bank, societe anonyme
("CEDEL BANK") and Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System ("EUROCLEAR"). The Temporary
Global Note will be exchangeable for definitive Notes not earlier than 40
days after November 14, 1997 (the "EXCHANGE DATE").
(D) The definitive Notes and Coupons for which the Temporary Global Note will
be exchanged (subject to its provisions) will be in, or substantially in,
the respective forms set out in Parts A and B of Schedule 1. The conditions
of the Notes (the "CONDITIONS") will be in, or substantially in, the form
set out in Part C of Schedule 1 this Agreement.
NOW IT IS HEREBY AGREED as follows:
- --------------------------------------------------------------------------------
<PAGE> 3
2
- --------------------------------------------------------------------------------
1. INTERPRETATION
(1) Words and expressions defined in the Conditions and not otherwise defined
in this Agreement shall have the same meanings when used in this Agreement.
(2) References in this Agreement to principal and/or interest shall include any
Additional Amounts payable pursuant to Condition 5.
2. UNDERTAKINGS OF AGENTS
The Fiscal Agent undertakes to act as Fiscal Agent and the Paying Agents
undertake to act as Paying Agent for Gillette with respect to the Notes and
to perform the functions respectively expressed to be performed by them in,
and otherwise comply with, the Conditions and the provisions of this
Agreement and, in connection therewith, shall take all such action as may
be incidental thereto.
3. AUTHENTICATION AND DELIVERY OF NOTES
(1) Gillette undertakes that it will deliver (outside the United States or its
possessions) to, or to the order of, the Fiscal Agent, not later than the
Exchange Date, definitive Notes (with Coupons attached) in an aggregate
principal amount of U.S$300,000,000 or such lesser amount as is the
principal amount of Notes represented by the Temporary Global Note in order
to enable the exchange of the Temporary Global Note for definitive Notes in
accordance with its terms. Each definitive Note and Coupon so delivered
shall be duly executed on behalf of Gillette.
(2) Gillette authorises and instructs the Fiscal Agent to authenticate the
Temporary Global Note and the definitive Notes delivered pursuant to
subclause (1).
(3) Gillette authorises and instructs the Fiscal Agent to cause interests in
the Temporary Global Note to be exchanged for definitive Notes in
accordance with its terms. Following the exchange of the last interest in
the Temporary Global Note, the Fiscal Agent shall cause the Temporary
Global Note to be cancelled and delivered to Gillette or as it may direct.
(4) The Fiscal Agent shall cause all Notes delivered to and held by it under
this Agreement to be maintained in safe custody and shall ensure that
interests in the Temporary Global Note are issued only in accordance with
the terms of the Temporary Global Note and this Agreement.
(5) So long as any of the Notes is outstanding the Fiscal Agent shall, within
seven days of any request by Gillette, certify to Gillette the number of
definitive Notes held by it under this Agreement.
4. PAYMENT TO THE FISCAL AGENT
(1) Gillette will, not later than 10.00 a.m. (New York City time) on each date
on which any payment of principal and/or interest in respect of any of the
Notes becomes due and payable in accordance with the Conditions, transfer
to an account specified by the Fiscal Agent such amount of U.S.
- --------------------------------------------------------------------------------
<PAGE> 4
3
- --------------------------------------------------------------------------------
dollars as shall be sufficient for the purposes of the payment of principal
and/or interest in same day funds.
(2) Gillette shall ensure that, not later than two Business Days preceding the
date on which any payment is to be made to the Fiscal Agent pursuant to
subclause (1), the Fiscal Agent shall receive a copy of a payment
instruction to the bank through which the payment is to be made. For the
purposes of this subclause (2), "BUSINESS DAY" means a day on which banks
are open for business in London and New York City.
5. NOTIFICATION OF NON-PAYMENT BY GILLETTE
The Fiscal Agent shall notify by telex or facsimile each of the other
Paying Agents forthwith:
(a) if it has not by the relevant date specified in clause 4(1)
received unconditionally the full amount in U.S. dollars
required for the payment; and
(b) if it receives unconditionally the full amount of any sum due
in respect of the Notes or Coupons after such date.
The Fiscal Agent shall, at the expense of Gillette, forthwith upon receipt
of any amount as described in subparagraph (b), cause notice of that
receipt to be published under Condition 10.
6. DUTIES OF THE PAYING AGENTS
(1) Subject to the payments to the Fiscal Agent provided for by clause 4 being
duly made, the Paying Agents shall act as paying agents of Gillette in
respect of the Notes and pay or cause to be paid on behalf of Gillette, on
and after each date on which any payment becomes due and payable, the
amounts of principal and/or interest then payable on surrender or, in the
case of the Temporary Global Note, endorsement, of Notes or Coupons under
the Conditions and this Agreement. If any payment provided for by clause 4
is made late but otherwise under the terms of this Agreement the Paying
Agents shall nevertheless act as paying agents.
(2) If default is made by Gillette in respect of any payment, unless and until
the full amount of the payment has been made under the terms of this
Agreement (except as to the time of making the same) or other arrangements
satisfactory to the Fiscal Agent have been made, neither the Fiscal Agent
nor any of the other Paying Agents shall be bound to act as paying agents.
(3) If on presentation of a Notes or Coupon the amount payable in respect of
the Notes or Coupon is not paid in full (otherwise than as a result of
withholding or deduction for or on account of any present or future tax,
assessment or governmental charge as permitted by the Conditions) the
Paying Agent to whom the Notes or Coupon is presented shall procure that
the Notes or Coupon is enfaced with a memorandum of the amount paid and the
date of payment.
7. REIMBURSEMENT OF THE PAYING AGENTS
The Fiscal Agent shall charge the account referred to in clause 4 for all
payments made by it under this Agreement and will credit or transfer to the
respective accounts of the other Paying Agents the
- --------------------------------------------------------------------------------
<PAGE> 5
4
- --------------------------------------------------------------------------------
amount of all payments made by them under the Conditions. immediately upon
notification from them, subject in each case to any applicable laws or
regulations.
8. NOTICE OF ANY WITHHOLDING OR DEDUCTION OR PAYMENT OF ADDITIONAL AMOUNTS
If Gillette is, in respect of any payment in respect of the Notes,
compelled to withhold or deduct any amount for or on account of any present
or future tax, assessment or governmental charge or to pay any Additional
Amount as contemplated by Condition 5, Gillette shall give notice to the
Fiscal Agent as soon as reasonably practicable after it becomes aware of
the requirement to make the withholding or deduction or to pay any
Additional Amount and shall give to the Fiscal Agent such information as
the Fiscal Agent shall require to enable it to comply with the requirement.
9. DUTIES OF THE FISCAL AGENT IN CONNECTION WITH REDEMPTION FOR TAXATION
REASONS
If Gillette decides to redeem all the Notes for the time being outstanding
under Condition 4, it shall give notice of the decision to the Fiscal Agent
at least 15 days before notice is to be given to Noteholders of the
relevant redemption date, unless shorter notice is acceptable to the Fiscal
Agent.
10. PUBLICATION OF NOTICES
On behalf of and at the request and expense of Gillette, the Fiscal Agent
shall cause to be published ALL notices required to be given by Gillette
under the Conditions.
11. CANCELLATION OF NOTES AND COUPONS
(1) All Notes which are surrendered in connection with redemption (together
with all unmatured Coupons attached to or delivered with Notes) and all
Coupons which are paid shall be cancelled by the Paying Agent to which they
are surrendered. Each of the Paying Agents shall give to the Fiscal Agent
details of all payments made by it and shall deliver all cancelled Notes
and Coupons to the Fiscal Agent (or as the Fiscal Agent may specify). Where
Notes are purchased by or on behalf of Gillette, Gillette may procure that
the Notes (together with all unmatured Coupons appertaining to the Notes)
are cancelled and delivered to the Fiscal Agent or its authorised agent.
(2) The Fiscal Agent or its authorised agent shall (unless otherwise instructed
by Gillette in writing) destroy all cancelled Notes and Coupons and furnish
Gillette with a certificate of destruction containing written particulars
of the serial numbers of the Notes and the number by maturity date of
Coupons so destroyed.
12. ISSUE OF REPLACEMENT NOTES AND COUPONS
(1) Gillette shall cause a sufficient quantity of additional forms of Notes and
Coupons to be available, upon request, to the Paying Agent in Luxembourg
(the "REPLACEMENT AGENT") at its specified office for the purpose of
issuing replacement Notes or Coupons as provided below.
- --------------------------------------------------------------------------------
<PAGE> 6
5
- --------------------------------------------------------------------------------
(2) The Replacement Agent shall, subject to the following provisions of this
clause, cause to be authenticated (in the case only of replacement Notes)
and delivered any replacement Notes or Coupons which Gillette may determine
to issue in place of Notes or Coupons which have been lost, stolen,
mutilated, defaced or destroyed.
(3) In the case of a mutilated or defaced Notes, the Replacement Agent shall
ensure that (unless otherwise covered by such indemnity as Gillette and the
Replacement Agent may require) any replacement Notes only has attached to
it Coupons corresponding to those attached to the mutilated or defaced
Notes which is presented for replacement.
(4) The Replacement Agent shall obtain verification, in the case of an
allegedly lost, stolen or destroyed Notes or Coupon in respect of which the
serial number is known, that the Notes or Coupon has not previously been
redeemed or paid. The Replacement Agent shall not issue a replacement Notes
or Coupon unless and until the applicant has:
(a) paid such expenses and costs as may be recurred in connection
with the replacement;
(b) furnished it with such evidence and indemnity as Gillette and
the Replacement Agent may reasonably require; and
(c) in the case of a mutilated or defaced Notes or Coupon,
surrendered it to the Replacement Agent.
(5) The Replacement Agent shall cancel mutilated or defaced Notes or Coupons in
respect of which replacement Notes or Coupons have been issued pursuant to
this clause and all Notes which are so cancelled shall be delivered by the
Replacement Agent to the Fiscal Agent (or as it may specify). The Fiscal
Agent shall furnish Gillette with a certificate stating the serial numbers
of the Notes or Coupons received by it and cancelled pursuant to this
clause and shall, unless otherwise requested by Gillette, destroy all those
Notes and Coupons and furnish Gillette with a destruction certificate
containing the information specified in clause 11(2).
(6) The Replacement Agent shall, on issuing any replacement Notes or Coupon,
forthwith inform Gillette and the other Paying Agents of the serial number
of the replacement Notes or Coupon issued and (if known) of the serial
number of the Notes or Coupon in place of which the replacement Notes or
Coupon has been issued. Whenever replacement Coupons are issued under this
clause, the Fiscal Agent shall also notify the other Paying Agents of the
maturity dates of the lost, stolen, mutilated, defaced or destroyed Coupons
and of the replacement Coupons issued.
(7) Whenever a Notes or Coupon for which a replacement Notes or Coupon has been
issued and the serial number of which is known is presented to a Paying
Agent for payment, the relevant Paying Agent shall immediately send notice
to Gillette and the Fiscal Agent.
13. RECORDS AND CERTIFICATES
(1) The Fiscal Agent shall keep a full and complete record of all Notes and
Coupons (other than serial numbers of Coupons) and of their redemption
and/or purchase by or on behalf of Gillette, cancellation or payment (as
the case may be) and of all replacement Notes or Coupons issued in
- --------------------------------------------------------------------------------
<PAGE> 7
6
- --------------------------------------------------------------------------------
substitution for lost, stolen, mutilated, defaced or destroyed Notes or
Coupons. The Fiscal Agent shall at all reasonable times make the records
available to Gillette.
(2) The Fiscal Agent shall give to Gillette, as soon as possible and in any
event within four months after the date of redemption, purchase, payment or
replacement of a Note or Coupon (as the case may be), a certificate stating
(a) the aggregate principal amount of Notes which have been redeemed and
the aggregate amount in respect of Coupons which have been paid, (b)the
total number of each denomination by maturity date of those Coupons, (c)
the aggregate principal amounts of Notes (if any) which have been purchased
by or on behalf of Gillette and cancelled (subject to delivery of the Notes
to the Fiscal Agent) and the serial numbers of such Notes in definitive
form and the total number of each denomination by maturity date of the
Coupons attached to or surrendered with the purchased Notes, and (d) the
aggregate principal amounts of Notes which have been surrendered and
replaced and the serial numbers of those Notes in definitive form and the
total number of each denomination by maturity date of those Coupons
surrendered therewith.
14. COPIES OF THIS AGREEMENT AVAILABLE FOR INSPECTION
The Paying Agents shall hold copies of this Agreement available for
inspection by Noteholders and Couponholders. For this purpose, Gillette
shall furnish the Paying Agents with sufficient copies of such document.
15. COMMISSIONS AND EXPENSES
(1) Gillette shall pay to the Fiscal Agent such commissions in respect of the
services of the Paying Agents under this Agreement as shall be agreed
between Gillette and the Fiscal Agent. Gillette shall not be concerned with
the apportionment of payment among the Paying Agents.
(2) Gillette shall also pay to the Fiscal Agent an amount equal to any value
added tax which may be payable in respect of the commissions (other than
any amounts which may otherwise be reimbursed by credit or otherwise)
together with all reasonable expenses recurred by the Paying Agents in
connection with their services under this Agreement.
(3) The Fiscal Agent shall arrange for payment of the commissions due to the
other Paying Agents and arrange for the reimbursement of their expenses
promptly afar receipt of the relevant moneys from Gillette.
(4) At the request of the Fiscal Agent, the parties to this Agreement may from
time to time during the continuance of this Agreement review the
commissions agreed initially pursuant to subclause (1) with a view to
determining whether the parties can mutually agree upon any changes to the
commissions.
16. INDEMNITY
(1) Gillette undertakes to indemnify each of the Paying Agents and their
directors, officers, employees and controlling persons against all losses,
liabilities, costs, claims, actions, damages, expenses or demands which any
of them may recur or which may be made against any of them as a result of
or
- --------------------------------------------------------------------------------
<PAGE> 8
7
- -------------------------------------------------------------------------------
in connection with the appointment of or the exercise of the powers and
duties by any Paying Agent under this Agreement except as may result from
its wilful default, negligence or bad faith or that of its directors,
officers, employees or controlling persons or any of them, or breach by it
of the terms of this Agreement.
(2) Each of the Paying Agents severally undertakes to indemnify Gillette and
its directors, officers, employees and controlling persons against all
losses, liabilities, costs, claims, actions, damages, expenses or demands
which any of them may incur or which may be made against any of them as a
result of its wilful default, negligence or bad faith or that of its
directors, officers, employees or controlling persons or any of them, or
breach by it of the terms of this Agreement.
17. REPAYMENT BY FISCAL AGENT
Any money deposited with the Fiscal Agent or any other Paying Agent for the
payment of the principal of or interest on any Notes and remaining
unclaimed for two years afar such principal or interest has become due and
payable, shall be paid to Gillette upon its request and the holder of such
Notes or the relevant Coupon shall thereafter, as an unsecured general
creditor, look only to Gillette for payment thereof and all liability of
the Fiscal Agent or such other Paying Agent with respect to such money
shall thereupon cease.
18. CONDITIONS OF APPOINTMENT
(1) Subject as provided in subclause (3) of this clause the Fiscal Agent shall
be entitled to deal with money paid to it by Gillette for the purposes of
this Agreement in the same manner as other money paid to a banker by its
customers and shall not be liable to account to Gillette for any interest
or other mounts in respect of the money. No money held by any Paying Agent
need be segregated except as required by law or contemplated in subclause
(2) of this clause.
(2) In acting under this Agreement and in connection with the Notes and the
Coupons the Paying Agents shall act solely as agents of Gillette and will
not assume any obligations towards or relationship of agency or trust for
or with any of the owners or holders of the Notes or the Coupons, except
that funds received by the Paying Agents for the payment of any sums due in
respect of any Notes and Coupons shall be held by them on trust for the
relevant Noteholders and Couponholders, as the case may be, until the
expiration of the relevant period under Condition 13.
(3) No Paying Agent shall exercise any right of set-off or lien against
Gillette or any holders of Notes or Coupons in respect of any moneys
payable to or by it under the terms of this Agreement.
(4) Except as ordered by a court of competent jurisdiction or required by law
or otherwise instructed by Gillette, each of the Paying Agents shall be
entitled to treat the holder of any Notes or Coupon as the absolute owner
for all purposes (whether or not the Notes or Coupon shall be overdue and
notwithstanding any notice of ownership or other writing on the Notes or
Coupon or any notice of previous loss or theft of the Notes or Coupon or
trust or other interest therein).
(5) The Paying Agents shall be obliged to perform such duties and only such
duties as are set out in this Agreement and the Notes and no implied duties
or obligations shall be read into this Agreement or the Notes against the
Paying Agents.
- --------------------------------------------------------------------------------
<PAGE> 9
8
- --------------------------------------------------------------------------------
(6) The Fiscal Agent may consult with legal and other professional advisers and
the opinion of the advisers shall be full and complete protection in
respect of action taken, omitted or suffered under this Agreement in good
faith and in accordance with the opinion of the advisers.
(7) Each of the Paying Agents shall be protected and shall incur no liability
for or in respect of action taken, omitted or suffered in reliance upon any
instruction, request or order from Gillette or any other Paying Agent, or
any Notes or Coupon, or any notice, resolution, direction, consent,
certificate, affidavit, statement, facsimile, telex or other paper or
document which it reasonably believes to be genuine and to have been
delivered, signed or sent by the proper party or parties or upon written
instructions from Gillette.
(8) Any of the Paying Agents, their officers, directors, employees or
controlling persons may become the owner of, or acquire any interest in,
Notes or Coupons with the same rights that it or he would have if the
Paying Agent concerned were not appointed under this Agreement, and may
engage or be interested in any financial or other transaction with
Gillette, and may act on, or as depositary, trustee or agent for, any
committee or body of holders of Notes or Coupons or other obligations of
Gillette, as freely as if the Paying Agent were not appointed under this
Agreement.
(9) The Fiscal Agent shall not be under any obligation to take any action under
this Agreement which it expects will result in any expense or liability
accruing to it, the payment of which within a reasonable time is not, in
its opinion, assured to it.
19. COMMUNICATION WITH PAYING AGENTS
A copy of all communications relating to the subject matter of this
Agreement between Gillette and any of the Paying Agents other than the
Fiscal Agent shall be sent to the Fiscal Agent.
20. TERMINATION OF APPOINTMENT
(1) Gillette may terminate the appointment of any Paying Agent at any time
and/or appoint additional or other Paying Agents by giving to the Paying
Agent whose appointment is concerned and, where appropriate, the Fiscal
Agent at least 90 days' prior written notice to that effect, provided that,
so long as any of the Notes is outstanding, (a) in the case of a Paying
Agent the notice shall not expire less than 45 days before any due date for
the payment of interest and (b) notice shall be given under Condition 10 at
least 30 days before the removal or appointment of a Paying Agent.
(2) Notwithstanding the provisions of subclause (1), if at any time Paying
Agent becomes incapable of acting, or is adjudged bankrupt or insolvent, or
files a voluntary petition in bankruptcy or makes an assignment for the
benefit of its creditors or consents to the appointment of an
administrator, liquidator or administrative or other receiver of all or any
substantial part of its property, or if an administrator, liquidator or
administrative or other receiver of it or of all or a substantial part of
its property is appointed, or it admits in writing its inability to pay or
meet its debts as they may mature or suspends payment of its debts, or if
an order of any court is entered approving any petition filed by or
against it under the provisions of any applicable bankruptcy or insolvency
law or if a public officer takes charge or control of the Paying Agent or
of its property or affairs for the purpose of rehabilitation,
administration or liquidation, Gillette may forthwith without notice
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<PAGE> 10
9
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terminate the appointment of the Paying Agent, in which event notice shall
be given to the Noteholders under Condition 10 as soon as is practicable.
(3) The termination of the appointment of a Paying Agent under this Agreement
shall not entitle the Paying Agent to any amount by way of compensation but
shall be without prejudice to any amount then accrued due.
(4) All or any of the Paying Agents may resign their respective appointments
under this Agreement at any time by giving to Gillette and, where
appropriate, the Fiscal Agent at least 90 days' prior written notice to
that effect provided that, so long as any of the Notes is outstanding, the
notice shall not, in the case of a Paying Agent, expire less than 45 days
before any due date for the payment of interest. Following receipt of a
notice of resignation from a Paying Agent, Gillette shall promptly, and in
any event not less than 30 days before the resignation takes effect, give
notice to the Noteholders under Condition 10. If any of the Paying Agents
shall resign or be removed pursuant to subclauses (1) or (2) above or in
accordance with this subclause (4), Gillette shall promptly and in any
event within 30 days appoint a successor (being a leading bank acting
through its office in London or, in the case of a Paying Agent who is not
to be the Fiscal Agent, in Luxembourg). If Gillette fails to appoint a
successor within such period, such Paying Agent may select a leading bank
acting through its office in London or, in the case of a Paying Agent who
is not to be the Fiscal Agent, in Luxembourg, to act as Paying Agent
hereunder and Gillette shall appoint that bank as the successor Paying
Agent.
(5) Notwithstanding the provisions of subclauses (1), (2) and (4), so long as
any of the Notes is outstanding, or monies sufficient to pay the principal
and interest on all outstanding Notes have been made available for payment
and either paid or returned to Gillette, as the case may be, as provided in
the Notes, the termination of the appointment of a Paying Agent (whether by
Gillette or by the resignation of the Paying Agent) shall not be effective
unless upon the expiry of the relevant notice there is (a) a Fiscal Agent,
(b) a Paying Agent (which may be the Fiscal Agent) having its specified
office in a European city which, so long as the Notes are listed on the
Luxembourg Stock Exchange, shall be Luxembourg and, (c) so long as the
Notes are listed on the Luxembourg Stock Exchange, a Replacement Agent in
Luxembourg.
(6) Any successor Paying Agent shall execute and deliver to its predecessor,
Gillette and, where appropriate, the Fiscal Agent an instrument accepting
the appointment under this Agreement, and the successor Paying Agent,
without any further act, deed or conveyance, shall become vested with all
the authority, rights, powers, trusts, immunities, duties and obligations
of the predecessor with like effect as if originally named as a Paying
Agent.
(7) If the appointment of a Paying Agent under this Agreement is terminated
(whether by Gillette or by the resignation of the Paying Agent), the Paying
Agent shall on the date on which the termination takes effect deliver to
its successor Paying Agent (or, if none, the Fiscal Agent) all Notes and
Coupons surrendered to it but not yet destroyed and all records concerning
the Notes and Coupons maintained by it (except such documents and records
as it is obliged by law or regulation to retain or not to release) and pay
to its successor Paying Agent (or, if none, to the Fiscal Agent) the
amounts (if any) held by it in respect of Notes or Coupons which have
become due and payable but
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<PAGE> 11
10
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which have not been presented for payment, but shall have no other duties
or responsibilities under this Agreement.
(8) If the Fiscal Agent or any of the other Paying Agents shall change its
specified office, it shall give to Gillette and, where appropriate, the
Fiscal Agent not less than 45 days' prior written notice to that effect
giving the address of the new specified office. As soon as practicable
thereafter and in any event at leas 30 days before the change, the Fiscal
Agent shall give to the Noteholders on behalf of and at the expense of
Gillette notice of the change and the address of the new specified office
under Condition 10.
(9) A corporation into which any Paying Agent for the time being may be merged
or converted or a corporation with which the Paying Agent may be
consolidated or a corporation resulting from a merger, conversion or
consolidation to which the Paying Agent shall be a party shall, to the
extent permitted by applicable law, be the successor Paying Agent under
this Agreement without the execution or filing of any paper or any further
act on the part of any of the parties to this Agreement. Notice of any
merger, conversion or consolidation shall forthwith be given to Gillette
and, where appropriate, the Fiscal Agent.
21. MEETINGS OF NOTEHOLDERS
(1) The provisions of Schedule 3 shall apply to meetings of the Noteholders and
shall have effect in the same manner as if set out m this Agreement
provided that, so long as any of the Notes are represented by the Temporary
Global Note, the expression "Noteholders" shall include the persons for the
time being shown in the records of Morgan Guaranty Trust Company of New
York, Brussels office, as operator of the Euroclear system ("EUROCLEAR")
and/or Cedel Bank, societe anonyme ("CEDEL BANK") as the holders of a
particular principal amount of such Notes (each an "ACCOUNTHOLDER") (in
which regard a certificate or other document issued by Euroclear or Cedel
Bank as to the principal amount of such Notes standing to the account of
any person shall be conclusive and binding) for all purposes other than
with respect to the payment of principal and interest on such Notes, the
right to which shall be vested as against Gillette solely in the bearer of
the Temporary Global Note in accordance with and subject to its terms, and
the expressions "HOLDER" and "HOLDERS" shall be construed accordingly and
the expression "NOTES" shall mean units of U.S. $1,000 principal amount of
the Notes.
(2) Without prejudice to subclause (a), each of the Paying Agents shall, on
the request of any holder of Notes, issue Voting Certificates and Block
Voting Instructions (as defined in paragraph 1 of Schedule 3) together, if
so required by Gillette, with reasonable proof satisfactory to Gillette of
their due execution on behalf of the Paying Agent under the provisions of
Schedule 3 and shall forthwith give notice to Gillette under Schedule 3 of
any revocation or amendment of a Voting Certificate or Block Voting
Instruction. Each Paying Agent shall keep a full and complete record of all
Voting Certificates and Block Voting Instructions issued by it and shall,
not less than 24 hours before the time appointed for holding any meeting or
adjourned meeting, deposit at such place as the Fiscal Agent shall
designate or approve, full particulars of all Voting Certificates and Block
Voting Instructions issued by it in respect of any meeting or adjourned
meeting.
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<PAGE> 12
11
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22. NOTICES
Any notice required to be given under this Agreement to any of the
parties shall be delivered in person, sent by pre-paid post (first
class if inland, first class airmail if overseas) or by facsimile or
telex addressed to:
Gillette: The Gillette Company
Prudential Tower Building
Boston, Massachusetts 02199
Facsimile No: 617 421 7699
Telephone No: 617 421 7717
(Attention: Treasurer)
The Fiscal and Paying Agent: Morgan Guaranty Trust Company of
New York, London branch
60 Victoria Embankment
London EC4Y OJP
Telex No: 896631 MGTG
Facsimile No: 011 44 171 325 8154
(Attention: Global Trust and Agency
Services)
The Paying Agent: Banque Paribas Luxembourg
10A Boulevard Royal
L-2093 Luxembourg
Telex No: 60764 PROM LU
Facsimile No: 011 352 464 64332
(Attention: Department des
Operations de Marche)
or such other address of which notice in writing has been given to the
other parties to this Agreement under the provisions of this clause.
Any such notice shall take effect, if delivered in person, at the time
of delivery, if sent by post, three days in the case of inland post or
seven days in the case of overseas post after despatch, and, in the
case of telex or facsimile, 24 hours afar the time of despatch,
provided that in the case of a notice given by telex or facsimile
transmission such notice shall forthwith be confirmed by post. The
failure of the addressee to receive such confirmation shall not
invalidate the relevant notice given by telex or facsimile.
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<PAGE> 13
12
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23. TAXES
Gillette agrees to pay any and all stamp and other documentary taxes or
duties which may be payable in connection with the execution, delivery,
performance and enforcement of this Agreement.
24. COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of which,
taken together, shall constitute one and the same agreement and any party
may enter into this Agreement by executing a counterpart.
25. DESCRIPTIVE HEADINGS
The descriptive headings in this Agreement are for convenience of reference
only and shall not define or limit the provisions of this Agreement.
26. GOVERNING LAW, SUBMISSION TO JURISDICTION AND WAIVER OF JURY TRIAL
(1) This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York, United States of America (without reference
to any conflict of law rules).
(2) Each party expressly submits to the non-exclusive jurisdiction of the
courts of the State of New York and to the Federal Courts situated in New
York City (without recourse to arbitration). Each party expressly waives
any objection to such jurisdiction on the grounds that it is an
inconvenient forum or any other similar grounds. Each party irrevocably
waives, to the fullest extent permitted by applicable law, its right to a
jury trial.
27. AMENDMENTS
This Agreement may be amended by Gillette and the Fiscal Agent, without the
consent of any Noteholder or Couponholder, either (i) for the purpose of
curing any ambiguity or of curing, correcting or supplementing any
defective provision contained in this Agreement, (ii) permitting payment of
the principal of or interest IN the Notes in the United States, (iii) in
any other manner which Gillette and the Fiscal Agent may mutually deem
necessary or desirable and which shall not be inconsistent with the Notes
and Coupons and shall not adversely affect to the interests of the holders
of the Notes or any Coupons in any material respect or (iv) as permitted by
Condition 9.
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<PAGE> 14
13
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SIGNED by each of the parties (or their duly authorised representatives) on
November 14, 1997.
THE GILLETTE COMPANY
By: GIAN CAMUZZI
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, LONDON OFFICE
(in its capacity as Fiscal Agent and Paying Agent)
By: BRIAN LEIGH
BANQUE PARIBAS LUXEMBOURG
By: BRIAN LEIGH
Without prejudice to the foregoing execution of this Agreement by the parties to
this Agreement, Banque Paribas Luxembourg hereby expressly and specifically
confirms its agreement with the provisions of Clause 26.
BANQUE PARIBAS LUXEMBOURG
By: BRIAN LEIGH
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<PAGE> 15
14
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SCHEDULE 1
PART A
FORM OF DEFINITIVE NOTES
(Face of Notes)
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000000 [ISIN] 00 00000
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THE GILLETTE COMPANY
(incorporated with limited liability under the laws of the State of Delaware)
U.S.$300,000,000
6 per cent. Notes Due November 14, 2000
The issue of the Notes was authorised by a resolution of the board of directors
of The Gillette Company ("GILLETTE" or the "COMPANY")passed on September 18,
1997.
This Note forms one of a series of Notes issued as bearer Notes in denominations
of U.S.$1,000, U.S.$10,000 and U.S.$100,000, each, in an aggregate amount of
U.S.$300,000,000.
Gillette for value received and subject to and in accordance with the Conditions
endorsed hereon hereby promises to pay to the bearer on November 14, 2000 (or on
such earlier date as the principal sum may become repayable under the
Conditions) the principal sum of:
U.S.$[ ] ([ ] United States Dollars)
together with interest on such principal sum at the rate of 6 per cent. per
annum payable annually in arrears on November 14 and together with such other
amounts as may be payable, all subject to and under the Conditions.
The Notes are issued pursuant to a Fiscal Agency Agreement(the "AGENCY
AGREEMENT") dated November 14, 1997 between inter altos, Gillette and Morgan
Guaranty Trust Company of New York, London office as Fiscal Agent. The Notes
have the benefit of, and are subject to, the provisions contained in the Agency
Agreement and the Conditions.
Neither this Note nor any of the Coupons relating to this Note shall become
valid or enforceable for any purpose unless and until this Note has been
authenticated by or on behalf of the Fiscal Agent.
IN WITNESS WHEREOF Gillette has caused this Note to be signed in its corporate
name by a duly authorised officer.
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<PAGE> 16
15
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Dated as of [ ], 1997
Issued in [London, England]
THE GILLETTE COMPANY
By:
Name:
Title:
CERTIFICATE OF AUTHENTICATION
This is one of the Notes described
in the Agency Agreement.
By or on behalf of
Morgan Guaranty Trust Company of
New York, London office
as Fiscal Agent
(without recourse, warranty or liability)
................................
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.
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<PAGE> 17
16
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(Reverse of Notes)
CONDITIONS OF THE NOTES
[To be incorporated from Part C hereto]
FISCAL AND PAYING AGENT
Morgan Guaranty Trust Company
of New York, London office
60 Victoria Embankment
London EC4Y 0JP
OTHER PAYING AGENT
Banque Paribas Luxembourg
10A Boulevard Royal
L-2093 Luxembourg
and/or such other or further Fiscal Agent or Paying Agents and/or specified
offices as may from time to time be appointed by Gillette and notice of which
has been given to the Noteholders.
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<PAGE> 18
17
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SCHEDULE 1
PART B
- FORM OF COUPON-
(Face of Coupon)
THE GILLETTE COMPANY
U.S.$300,000,000 6 per cent. Notes Due November 14, 2000
This Coupon relating to a Note
in the denomination of
U.S. $[1,000/10,000/100,000] payable Coupon for
to bearer, separately U.S.$[ ]
negotiable and subject to the due on
Conditions of the Notes [ ], [ ]
THE GILLETTE COMPANY
By: ................
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 165(j) AND 1287(a) OF THE INTERNAL REVENUE CODE.
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00 000000 [ISIN] 00 000000
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<PAGE> 19
18
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(Reverse of Coupon)
FISCAL AND PAYING AGENT:
Morgan Guaranty Trust Company
of New York, London office
60 Victoria Embankment
London EC4Y 0JP
OTHER PAYING AGENT:
Banque Paribas Luxembourg
10A Boulevard Royal
L-2093 Luxembourg
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<PAGE> 20
19
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SCHEDULE 1
PART C
TERMS AND CONDITIONS OF THE NOTES
The Notes will be issued in the aggregate principal amount of U.S.$300,000,000
under a fiscal agency agreement dated as of November 14, 1997 (the "FISCAL
AGENCY AGREEMENT") between the Company, Morgan Guaranty Trust Company of New
York, London office as fiscal and paying agent (the "FISCAL AGENT") and Banque
Paribas Luxembourg as paying agent (the "PAYING AGENT" and together with the
Fiscal Agent, the "PAYING AGENTS"). The Notes are dated November 14, 1997 and
will mature at par on November 14, 2000, unless previously redeemed.
These terms and conditions of the Notes are qualified in their entirety by the
provisions of the Fiscal Agency Agreement, copies of which will be available for
inspection at the offices of the Paying Agents and the office of any additional
paying agents appointed by the Company in accordance with Condition 3 below. As
used under this heading, all capitalised terms not otherwise defined herein
shall have the meanings given in the Fiscal Agency Agreement. The holders of the
Notes and holders of the interest coupons are deemed to have notice of all the
provisions of the Fiscal Agency Agreement applicable to them.
1. STATUS OF THE NOTES AND FORM, DENOMINATIONS AND TRANSFER
(1) The obligations of the Company under the Notes will constitute direct,
unsecured and unsubordinated obligations of the Company and will rank pan
passu without any preference amongst themselves with all other present and
future unsecured and unsubordinated indebtedness of the Company save for
those preferred by mandatory provisions of law.
The Fiscal Agency Agreement and the Notes will not limit other
indebtedness or securities which may be issued by the Company and will
contain no financial or similar restrictions on the Company, except as
described below under Condition 6.
(2) The Notes will be represented initially by a single Temporary Global Note,
in bearer form (the "GLOBAL NOTE"), without interest coupons, which will be
deposited on or about November 14, 1997 with a common depositary of Morgan
Guaranty Trust Company of New York, Brussels office, as operator for the
Euroclear System ("EUROCLEAR"), and Cedel Bank, societe anonyme ("CEDEL
BANK") for credit to certain accounts maintained by Euroclear or Cedel
Bank.
The Global Note will be exchangeable for definitive Notes in bearer form
in denominations of U.S.S1,000, U.S.$10,000 and U.S.$100,000 with interest
coupons attached, not earlier than 40 days afar November 14, 1997. Such
exchange will only be made upon certification that the beneficial owner is
not a United States person or, if it is a United States person, that either
it is a foreign branch of a U.S. financial institution that meets certain
requirements or it acquired the Notes through such a foreign branch and
continues to hold the Notes through that financial institution and if it is
a financial institution, that it has not acquired such Notes for resale to
any United States person or persons in the United States or its
possessions.
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<PAGE> 21
20
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Title to the definitive Notes and coupons will pass by delivery. The
Company and the Fiscal Agent and any paying agent may treat the holder of
any Note and the holder of any coupon as the absolute owner thereof
(whether or not such Note or coupon shall be overdue and notwithstanding
any notice of ownership or writing thereon or any notice of previous loss
or theft or trust or other interest thereto) for the purpose of making
payment and for all other purposes.
The Notes and coupons will carry a legend substantially to the following
effect: "Any United States person who holds this obligation will be subject
to limitations under the United States income tax laws, including the
limitations provided in Section 1650) and 1287(a) of the Internal Revenue
Code." The sections referred to in such legend provide that persons who are
subject to United States taxation, with certain exceptions, will not be
entitled to deduct any loss on the Notes and will not be entitled to
capital gains treatment of any gain on sale, disposition or payment of
principal of the Notes.
2. INTEREST
The Notes will bear interest from, and including, November 14, 1997 to, but
excluding November 14, 2000 at a rate of 6 per cent. per annum, payable annually
in arrears on November 14 in each year the Notes are outstanding, commencing
November 14, 1998.
3. PAYMENTS
Principal of, and interest (which term includes any Additional Amounts, as
defined herein, unless the context otherwise requires) on, the Notes will be
payable in U.S. dollars against surrender of such Notes or coupons, as the case
may be, at such paying agencies outside the United States and its possessions as
the Company may appoint from me to time or, at the option of the holder, by
transfer to a U.S. dollar account maintained by the payee with, or by cheque
drawn in U.S. dollars on, a bank located outside the United States and its
possessions, subject m each case to all applicable laws and regulations. If the
date for payment of any amount in respect of any Note or coupon is not a Payment
Business Day, the holder thereof shall not be entitled to payment until the next
following Payment Business Day in the relevant place and shall not be entitled
to further interest or other payment in respect of such delay. For these
purposes, "PAYMENT BUSINESS Day" means any day which is a day on which
commercial banks and foreign exchange markets settle payments in the relevant
place of presentation, and in London and New York City. No payment of principal
of, or interest on, any Note may be made at any office of the Fiscal Agent or
any other paying agent maintained by the Company m the United States, nor may
payment be made to any address in the United States or by transfer to an account
maintained in the United States. Notwithstanding the foregoing, if U.S. dollar
payments in respect of the Notes or any coupons at the offices of all paying
agents outside the United States and its possessions become illegal or are
effectively precluded because of the imposition of exchange controls or similar
restrictions on the full payment or receipt of such amounts in U.S. dollars, the
Company will appoint an office or agency in the United States at which such
payments may be made.
The Company has initially appointed the paying agents listed at the end hereof.
The Company may at any time terminate the appointme and appoint additional or
other paying agents outside the United States and its possessions, provided
that, until all outstanding Notes have been cancelled and delivered to the
Fiscal Agent, or moines sufficient to pay the principal of, and interest on, all
outstanding Notes have been made available for payment and either paid or
returned to the Company, as the case may
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<PAGE> 22
21
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be, as provided m the Notes, the Company will maintain a paying agent in a
European city for payments on Notes or coupons (which will be Luxembourg so long
as the Notes are listed on the Luxembourg Stock Exchange and the rules of the
Luxembourg Stock Exchange so require). Notice of any such termination or
appointment and of any change in the office through which any paying agent will
act will be given in accordance with Condition 10.
In case of early redemption, the Notes should be presented for payment together
with all relative unmatured coupons, failing which the full amount of any such
missing unmatured coupons (or, in the case of payment not being made in full,
that proportion of the full amount of such missing unmatured coupons which the
sum of principal so paid bears to the total amount of principal due) will be
deducted from the sum due for payment. Each amount so deducted will be paid m
the mariner mentioned above against surrender of the relative missing coupon at
any time before the expiry of five years following the due date for payment of
such principal (whether or not such coupons would have become unenforceable
pursuant to Condition 13).
All monies paid by the Company to the Fiscal Agent for the payment of principal
of, or interest on, any Note which remains unclaimed at the end of two years
after such principal or interest shall have become due and payable will be
repaid to the Company upon the Company's request and the holder of such Note or
any coupon will thereafter look only to the Company for payment thereof.
As set out in the Fiscal Agency Agreement, the Fiscal Agent and each paying
agent will act as agents of the Company and will not assume any obligation or
relationship of agency or trust for or with the holders of the Notes except that
funds held by the paying agents for payment to the holders of the Notes will be
held in trust.
4. REDEMPTION AND PURCHASE
The Notes are not redeemable before maturity except as provided under this
Condition. The Notes will be redeemed by the Company m full at a redemption
price equal to 100 per cent. of the principal amount of the Notes on November
14, 2000 (the "Maturity Date") if they have not been otherwise redeemed as
described herein.
The Notes may be redeemed at the option of the Company, as a whole but not in
part, at any time before maturity, upon the giving of a notice of redemption as
described below, at a redemption price equal to 100 per cent. of the principal
amount of the Notes, together with accrued interest to the date fixed for
redemption if the Company determines that, as a result of any change in or
amendment to the laws (or any regulations or rulings promulgated thereunder) of
the United States or of any political subdivision or taxing authority thereof or
therein affecting taxation, or any change in official position regarding the
application or interpretation of such laws, regulations or rulings (including a
holding by a court of competent jurisdiction or any change in official position
regarding or application of any treaty affecting taxation to which the United
States is a party), which change or amendment becomes effective on or afar
November 12, 1997, the Company has or will become obligated to pay Additional
Amounts with respect to the Notes as described under Condition 5. Before the
publication of any notice of redemption of the Notes, pursuant to. the
foregoing, the Company shall deliver to the Fiscal Agent an opinion of a tax
advisor to the Company (who may be an employee of the Company) stating that the
Company is entitled to effect such redemption and a certificate setting out
facts showing that the conditions precedent to the right of the Company as to
redeem have occurred.
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<PAGE> 23
22
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Notice of redemption will be given by the Company not less than 30 nor more than
60 days before the date fixed for redemption, which date and the redemption
price will be specified in the notice.
The Company or any of its subsidiaries may purchase the Notes but having done so
they may not resell or reissue those Notes.
- - SPECIAL TAX REDEMPTION
If the Company shall determine, based upon an opinion of a tax advisor to the
Company (who may be an employee of the Company), that any payment made outside
the United States and its possessions by the Company or any of its paying agents
of principal of, or interest on, any Note or coupon would, under any present or
future laws or regulations of the United States affecting taxation or otherwise,
be subject to any certification, identification, documentation, information or
other reporting requirement of any kind with regard to the nationality,
residence or identity of a beneficial owner of such Note, or of any coupon, who
is a United States Alien (as defined under Condition 5) (other than such a
requirement which can be satisfied by the custodian nominee or other agent (if
any) of the beneficial owner certifying to the effect that such beneficial owner
is a United States Alien, provided that payment by such custodian, nominee or
agent to such beneficial owner is not otherwise subject to any such
requirement), the Company shall, at its election, either redeem the Notes as a
whole at a redemption price equal to 100 per cent. of the principal amount of
the Notes together with accrued interest to the date fixed for redemption, or,
if the conditions of the second succeeding paragraph are satisfied, pay the
Additional Amounts specified in such paragraph. The Company shall make such
determination and election as soon as practicable and publish prompt notice
thereof (the "Determination Notice") stating the effective date of such
certification, documentation, identification, information or other reporting
requirement, whether the Company has elected to redeem the Notes or pay the
Additional Amounts specified in the second succeeding paragraph, and (if
applicable) the last date by which the redemption of the Notes must take place,
as provided in the next succeeding sentence. If the Company elects to redeem the
Notes, such redemption shall take place on such date, not later than one year
after the publicaination Notice, as the Company shall elect by notice to the
Fiscal Agent at least 15 days before notice is given to holders of the Notes of
the date fixed for redemption. Notice of such redemption of the Notes will be
given to the holders of the Notes not more than 60 nor less than 30 days before
the date fixed for such redemption. Notwithstanding the foregoing, the Company
will not so redeem the Notes if the Company shall subsequently determine, not
less than 30 days before the date fixed for redemption, that subsequent payments
on the Notes would not be subject to any such certification, identification,
documentation, information or other reporting requirement, in which case the
Company shall publish prompt notice of such determination and any earlier
redemption notice shall be revoked and of no further effect.
Each notice referred to in the prig paragraph shall be given in the manner
described below under Condition 10.
If, and so long as, the certification, identification, documentation,
information or other reporting requirement referred to in the second preceding
paragraph would be fully satisfied by payment of a backup withholding tax or
similar charge, the Company may elect to pay as Additional Amounts such amounts
as may be necessary so that every net payment made outside the United States and
its possessions following the effective date of such requirement by the Company
or any paying agent of principal of, or interest on, any Note or coupon of which
the beneficial owner is a United States Alien (but without any requirement that
the nationality, residence or identity of such beneficial owner be disclosed to
the Company or any
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paying agent or any governmental authority), afar deduction or withholding for,
or on account of, such backup withholding tax or similar charge, will not be
less than the amount provided for in such Note or coupon to be then due and
payable. However, the Company may elect not to pay such Additional Amounts in
respect of any backup withholding tax or similar charge, which (a) would not be
applicable to a payment of principal of, or interest on, any Note or coupon made
by the Company or any one of its paying agents (i) directly to the beneficial
owner or to a custodian, nominee or other agent of the beneficial owner of such
Note or (ii) if such custodian, nominee or other agent were to certify to the
effect that such beneficial owner is a United States Alien or (b) is imposed as
a result of presentation of such Note or coupon for payment more than 10 days
after the date on which such payment became due and payable or on which payment
thereof is duly provided for, whichever occurred later. In the event the Company
elects to pay any Additional Amounts pursuant to this paragraph, the Company
shall have the right to redeem the Note at any time pursuant to the applicable
provisions of the second preceding paragraph, the redemption price of which
shall not be reduced for applicable withholding taxes. If the Company elects to
pay Additional Amounts pursuant to this paragraph and the condition specified in
the first sentence of the paragraph should not be satisfied, then the Company
shall redeem the Notes pursuant to the applicable provisions of the second
preceding paragraph.
5. PAYMENT OF Additional Amounts
All payments of principal and interest on the Notes and coupons will be made
without deduction of, withholding of, or deduction for or on account of, any
present or future taxes, assessments or governmental charges of whatever nature
imposed or levied by or on behalf of the government of the United States, or any
political subdivision or taxing authority thereof or therein, unless the
withholding or deduction of such taxes, assessments or governmental charges is
required by law or the application or interpretation thereof. In that event the
Company will, subject to the exceptions and limitations set out below, pay such
additional amounts (the "Additional Amounts") to the holder of any Note, or of
any coupon, who is a United States Alien as may be necessary in order that every
net payment of the principal of, or interest on, such Note afar deduction or
withholding for, or on account of, any such present or future tax, assessment or
governmental charge upon, or as a result of, such payment, will not be less than
the amount provided for in such Note or coupon to be then due and payable.
However, the Company will not be required to make any payment of Additional
Amounts to any such holder for or on account of:
(a) any such tax, assessment or other governmental charge which would not have
been so imposed but for (i) the existence of any present or former
connection between such holder (or between a fiduciary, settlor,
beneficiary, member or shareholder of, or possessor of a power over, such
holder, if such holder is an estate, a trust, a partnership or a
corporation) and the United States, including, without limitation, such
holder (or such fiduciary, settlor, beneficiary, member, shareholder or
possessor) being or having been a citizen or resident thereof or being or
having been engaged in a trade or business or present therein or having, or
having had, a permanent establishment therein or (ii) the presentation by
the holder of any such Note or coupon for payment on a date more than 10
days afar the date on which such payment became due and payable or the date
on which payment thereof is duly provided for, whichever occurs later;
(b) any estate, inheritance, gift, sales, transfer or personal property tax or
any similar tax, assessment or other governmental charge;
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(c) any tax, assessment or other governmental charge imposed by reason of such
holder's past or present status as a personal holding company, foreign
personal holding company, controlled foreign corporation related to the
Company through stock ownership, private foundation or other tax exempt
organisation in each case with respect to the United States, or as a
corporation which accumulates earnings to avoid United States federal
income tax;
(d) any tax, assessment or other governmental charge which is payable otherwise
than by withholding from payments on or in respect of any Note or coupon;
any tax, assessment or other governmental charge required to be withheld by
any paying agent from any payment of principal of, or interest on, any Note
if such payment can be made without such withholding by any other paying
agent in Europe;
(f) any tax, assessment or other governmental charge which would not have been
imposed but for the failure to comply with any certification,
identification, documentation, information or other reporting requirement
concerning the nationality, residence, identity or connection with the
United States of the holder or beneficial owner of such Note or coupon, if
such compliance is required by statute or by regulation of the United
States or of any political subdivision or taxing authority thereof or
therein as a precondition to relief or exemption from such tax, assessment
or other governmental charge;
(g) any tax, assessment or other governmental charge imposed by reason of such
holder's past or present status as the actual or constructive owner of 10
per cent. or more of the total combined voting power of all classes of
stock of the Company entitled to vote;
(h) any tax, assessment or governmental charge which would 'not be applicable
to a payment of principal or interest on any Ner agent were to certify that
such beneficial owner is a United States Alien); or
(i) any combination of terms (a), (b), (c) (d), (e), (f), (g) or (h);
nor shall Additional Amounts be paid with respect to any payment in respect of a
Note or coupon to a United States Alien holder who is a fiduciary or partnership
or other than the sole beneficial owner of such Note or coupon to the extent
that a beneficiary or settlor with respect to such fiduciary or a member of such
partnership or a beneficial owner would not have been entitled to such
Additional Amounts had such beneficiary, settlor, member or beneficial owner
been the holder of the Note or coupon.
The term "United States Alien" means any person who, for United States federal
income tax purposes, is a foreign corporation, a non-resident alien individual,
a non-resident alien fiduciary of a foreign estate or trust, or a foreign
partnership one or more of the members of which,' for United States federal
income tax purposes, is a foreign corporation, a non-resident alien individual
or a non-resident alien fiduciary of a foreign estate or trust.
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6. Negative Pledge
- - Certain Definitions
The term "Subsidiary" means a corporation of which at the time of determination
the Company or one or more Subsidiaries of the Company, or the Company and one
or more Subsidiaries, own or control directly or indirectly sufficient
securities having general voting power under ordinary circumstances to elect a
majority of the board of directors of such corporation irrespective of whether
at the time of determination securities of any other class or classes shall
have, or might have, voting power by reason of the happening of any contingency.
The term "Restricted Subsidiary" means any Subsidiary substantially all the
property of which is located, or substantially all the business of which is
carried on, within the United States of America and which owns a Principal
Property, but does not include a Subsidiary of the Company engaged primarily in
the development and sale or financing of real property.
The term "Principal Property" means any manufacturing or processing plant or
facility (other than any pollution control facility) which is located within the
continental United States of America and is owned by the Company or any
Restricted Subsidiary, whether owned at or acquired after November 12, 1997 and
the book value (net of any depreciation reserves) of which on the date as of
which the determination is being made exceeds 2 per cent. of Consolidated Net
Tangible Assets other than (i) any property which in the good faith opinion of
the Board of Directors of the Company is not of material importance to the total
business conducted by the Company as an entirety or (ii) any portion of a
particular property which is similarly found not to be of material importance to
the use or operation of such property
The term "Attributable Debt" m respect of the sale and leaseback transactions
described below, is defined to mean the amount determined by multiplying the
greater, at the time such transaction is entered into, of (i) the fair value of
the property, plant or facility subject to such arrangement (as detempany acting
in good faith) or (ii) the net proceeds of the sale of such property, plant or
facility to the lender or investor, by a fraction of which the numerator shall
be the unexpired initial term of the lease of such real property as of the date
of determination of such computation and of which the denominator shall be the
full initial term of such lease. Attributable Debt shall not include any such
arrangement for financing air, water or noise pollution control facilities or
sewage or solid waste disposal facilities or involving industrial development
bonds which are tax exempt pursuant to Section 103 of the United States Internal
Revenue Code, as amended (or which receive similar tax treatment under any
subsequent amendments thereto or successor laws thereof).
The term "Consolidated Net Tangible Assets" means the aggregate amount of assets
(less applicable reserves) after deducting therefrom (a)all current liabilities
(excluding any thereof constituting Funded Debt by reason of being extendible or
renewable at the option of the borrower), and (b) all goodwill, trade names,
trademarks, patents, unamortized debt discount and expense and other like
intangibles, all as set forth on the books and records of the Company and its
consolidated subsidiaries and computed in accordance with generally accepted
accounting principles in the United States.
The term "Funded Debt" means all indebtedness whether or not evidenced by a
bond, debenture, note or similar instrument or agreement, for the repayment of
money borrowed, having a maturity of more than 12 months from the date of its
creation or having a maturity of less than 12 months from the date of its
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creation but by its terms being renewable or extendible beyond 12 months from
such date at the option of the borrower. For the purpose of determining "Funded
Debt" of any corporation, there shall be excluded any particular indebtedness
if, on or prior to the maturity thereof, there shall have been deposited with a
proper depositary in trust the necessary funds for the payment, redemption or
satisfaction of such indebtedness.
The term "Lien" means any pledge, mortgage or other lien (including lease
purchase, instalment purchase and other title retention financing arrangements)
on or in respect of any Principal Property owned by the Company or any
Restricted Subsidiary, or on any shares of stock or indebtedness for money
borrowed of any Restricted Subsidiary.
- - LIMITATIONS ON LIENS
So long as any of the Notes remains outstanding, the Company will not, nor will
it permit any Restricted Subsidiary to, secure indebtedness for money borrowed
or a guarantee for indebtedness for money borrowed (hereafter referred to as
"Secured Debt") by placing a Lien on any Principal Property now or hereafter
owned by the Company or any Restricted Subsidiary or on any shares of stock or
indebtedness for money borrowed of any Restricted Subsidiary without equally and
rateably securing the Notes, unless (i) the aggregate principal amount of such
Secured Debt then outstanding plus (ii) all Attributable Debt of the Company and
its Restricted Subsidiaries in respect of sale and leaseback transactions
described below covering Principal Properties (other than sale and leaseback
transactions under (b) of "Limitations on Sale and Leaseback Transactions") does
not exceed an amount equal to 10 per cent. of Consolidated Net Tangible Assets.
This restriction will not apply to, and there shall be excluded in computing
such Secured Debt for purposes of this restriction (a) Liens existing as of
November 12, 1997; (b) Liens on property or assets or shares of stock or
indebtedness for money borrowed existing at the time of acquisition thereof
(including acquisition through merger or consolidation) or to secure the payment
of all or any part of the purchase price or construction cost thereof or to
secure indebtedness incurred prior to, at the time of or within 360 days after
the later of the acquisition of such property or assets or shares of stock or
indebtedness for money borrowed or the completion of the construction of and
commencement of operation of such property, for the purpose of financing all or
any part of the purchase price or construction cost thereof; (c) Liens on any
property or assets to secure all or any part of the cost of development,
operation, construction, alteration, repair or improvement of all or any part of
such property or assets, or to secure debt incurred befor or within 360 days
after the completion of such development, operation, construction, alteration,
repair or improvement, whichever is later, for the purpose of financing all or
any part of such cost; (d) Liens in favour of, or which secure indebtedness
owing to, the Company or any Restricted Subsidiary, (e)Liens to secure the
performance of government contracts, including the assignment of moneys due or
to come due thereon, (f) any pledges, liens or deposits as security for the
performance of any bid, tender, contract, lease or undertaking not in connection
with the securing of debt; any pledges, liens or deposits with any governmental
agency required or permitted to qualify the Company or any Restricted Subsidiary
to conduct business, to maintain serf-insurance or to obtain the benefits of any
law pertaining to worker's compensation, unemployment insurance, old age
pensions, social security or similar matters, or to obtain any stay or discharge
in any legal or administrative proceedings; any mechanics', worker's,
repairmen's, materialmen's or warehousemen's liens or other similar liens
arising in. the ordinary course of business or deposits or pledges to obtain the
release of any of the foregoing liens; any security interest created in
connection with the sale, discount or guarantee of notes, chattel mortgages,
leases, accounts receivable, trade acceptances or other paper, or contingent
repurchase obligations, arising out of sales of merchandise in the ordinary
course of business; or other liens, deposits or pledges similar to those
referred to in this clause (f); (g) Liens arising by reason of any attachment,
judgment, decree or order
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of any court or other governmental authority, so long as any appropriate legal
proceedings which may have been initiated for review of such attachment,
judgment, decree or order shall not have been finally terminated or so long as
the period within which such prigs may be initiated shall not have expired, (h)
Liens on property securing obligations issued by a domestic governmental Company
to finance the cost of acquisition or construction of such property, (i)Liens
securing indebtedness owing by any Restricted Subsidiary to the Company, (j)
Liens on any assets of a corporation existing at the time such corporation is
merged into or consolidated with the Company or any Restricted Subsidiary or at
the time of a purchase, lease or other acquisition of the assets or shares of a
corporation or firm as an entirety or substantially as an entirety by the
Company or any Restricted Subsidiary, (k) Liens for taxes or assessments,
landlord's liens and similar hens and charges incidental to the conduct of the
business, or the ownership of the assets of the Company or of any Restricted
Subsidiary, which were not incurred IN connection with the borrowing of money
and which do not, m the opinion of the Company acting in good faith, materially
impair the use of such assets in the operation of the business of the Company or
such Restricted Subsidiary or the value of such assets for the purposes thereof
and (1)extensions, substitutions, replacements or renewals of the foregoing.
For these purposes, debt created by the Company or any Restricted Subsidiary
shall not be cumulated with a guarantee of the same debt by the Company or any
other Restricted Subsidiary for the same financial obligation.
- - Limitations on Sale and Leaseback Transactions
So long as any of the Notes remain outstanding, the Company will not, nor will
it permit any Restricted Subsidiary to, enter into any sale and leaseback
transaction (exempt a lease for a period not exceeding five years) covering any
Principal Property which was or is owned or leased by the Company or any
Restricted Subsidiary and which has been or is to be sold or transferred more
THAN 360 days afar such property has been owned by the Company or such
Restricted Subsidiary and completion of construction and commencement of full
operation thereof, unless (a)the Attributable Debt m respect thereto and all
other sale and leaseback transactions entered into afar November 12, 1997 (other
than those the proceeds of which are applied to reduce Funded Debt or acquire
additional real property under Co) following), plus the aggregate principal
amount of then outstanding Secured Debt not otherwise permitted or excepted
without equally and rateably securing the Notes does not exceed 10 per cent. of
Consolidated Net Tangible Assets, or (b) an amount equal to the value of the
Principal Property sold and leased back is applied within 360 days afar the sale
or transfer to (x)the voluntary retirement of Funded Debt (including the Notes)
or (y) the acquisition of additional real property.
7. EVENTS OF DEFAULT
A default will occur under the Notes:
(a) if the Company shall fail to make any payment of principal of any of
the Notes or the Company shall fail to make any payment of interest on
any of the Notes (whether at maturity or on redemption or otherwise)
for 30 days afar such payment becomes due and payable; or
(b) if the Company shall fail to perform or observe any other term,
covenant or agreement contained in the Notes, for a period of 60 days
(180 days with respect to the Company's
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compliance with Condition 6 above) after written notice thereof to the
Company and the Fiscal Agent by the holders of 25 per cent. or more m
aggregate principal amount of the Notes at the time outstanding; or
(c) on a court having jurisdiction entering a decree or order for relief
in respect of the Company or any Significant Subsidiary m an
involuntary ease under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or appointing a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any Significant Subsidiary or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and such decree or order having remained
unstayed and in effect for a period of 60 consecutive days; or
(d) on the Company or any Significant Subsidiary commencing a voluntary
case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or consenting to the entry of an order for
relief in an involuntary ease under such law, or consenting to the
appointment of or taking possession by a receiver, liquidator,
assignee, trustee, custodian, sequestrator or similar official of the
Company or any Significant Subsidiary if the effect of the foregoing
would have a material adverse effect on the Group or on any
substantial part of its property, or making any general assignment for
the benefit of creditors, or failing generally to pay its debts as
they become due.
If a default shall occur and be continuing, the holder of any Note, on
written notice to the Company and the Fiscal Agent, may declare to be due
and payable in respect of such Note the principal amount thereof plus
interest accrued thereon.
For the purposes of this Condition, "Significant Subsidiary" shall mean any
significant subsidiary as defined m regulation S-X as promulgated by the
Securities and Exchange Commission and "Group" shall mean the Company and
its consolidated subsidiaries for the time being.
8. CONSOLIDATION, MERGER OR SALE OF ASSETS
The Company may, without the consent of the holders of the Notes, consolidate
with or merge into or sell, convey or lease all or substantially all of its
property to another corporation, provided that the successor corporation (a)
assumes all payment and related obligations of the Company under the Fiscal
Agency Agreement and the Notes, (b) is a corporation organised and validly
existing under the laws of the United States or any State thereof or the
District of Columbia and (c) shall not immediately thereafter be in default of
any such payments or obligations. Following such assumption the Company shall be
discharged from all obligations and covenants under the Fiscal Agency Agreement
and the Notes.
9. MODIFICATION OF FISCAL AGENCY AGREEMENT AND NOTES
The Fiscal Agency Agreement and the terms and conditions of the Notes and
coupons may be modified or amended by the Company and the Fiscal Agent, without
the consent of the holder of any Note or coupon, for the purposes, among other
things, of (a) curing any ambiguity, or curing, correcting or supplementing any
defective provisions contained therein, (b) permitting payment of the principal
of, or interest on, the Notes in the United States or (c) in any other manner
which the Company and the Fiscal Agent may deem
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necessary or desirable and which will not be inconsistent with the Notes and
coupons and which will not adversely affect the interests of the holders of the
Notes or any coupons m any material respect.
Modifications and amendments to the Fiscal Agency Agreement or to the terms and
conditions of the Notes and coupons may also be made by the Company and the
Fiscal Agent, and future compliance therewith or past default by the Company may
be waived, either with the written consent of the holders of at least 25 per
cent. in aggregate principal amount of the Notes at the time outstanding, or by
the adoption of an Ordinary Resolution at a meeting of the holders of the Notes;
provided, however, that no such modification, amendment or waiver may, without
the consent in writing of the holders of at least 75 per cent. m aggregate
principal amount of the Notes at the time outstanding or the passing of an
Extraordinary Resolution as defined below, inter alia (a) waive a default in the
payment of the principal of, or interest on, any Note or change the stated
maturity of the principal of or payment date of interest on any Note, (b)reduce
the principal amount of or interest on any Note, (c) change the obligation of
the Company to pay Additional Amounts (as described in Condition 5), (d) change
the currency of payment of principal of or interest on any Note, (e) impair the
right to institute suit for the enforcement of any such payment on or with
respect to any Note, (f) modify the obligation to maintain an office or agency
in Europe, (g) reduce the above-stated percentage of holders of the Notes
necessary to modify or amend the Fiscal Agency Agreement or the terms and
conditions of the Notes or the coupons or reduce the percentage of votes
required for the adoption of a resolution or the quorum required at any meeting
of holders of the Notes at which a resolution is to be adopted, or (h)reduce the
above-stated percentage of outstanding Notes necessary to waive any future
compliance or past default. The quorum required for adopting a resolution at any
such meeting or any adjournment thereof will be persons holding or representing
at least (in the case of an Ordinary Resolution) 25 per cent. and (in the case
of an Extraordinary Resolution) 50 per cent. in principal amount of the Notes at
the time outstanding. Any modifications, amendments or waivers to the Fiscal
Agency Agreement or to the terms and conditions of the Notes or the coupons made
in accordance with the foregoing will be conclusive and binding on all holders
of the Notes and on all holders of coupons, whether or not they have given such
consent or were present at such meeting, and on all future holders of the Notes
and coupons. Any instrument given by or on behalf of any holder of a Note in
connection with any consent to any such modification, amendment or waiver will
be irrevocable once given and will be conclusive and binding on all subsequent
holders of such Note and any coupons. For the purposes of this section
"Extraordinary Resolution" shall mean a resolution passed at a meeting of the
Noteholders duly convened and held in accordance with the provisions contained
in the Fiscal Agency Agreement by a majority consisting of not less than 75 per
cent. of the votes given on a poll or a show of hands and "Ordinary Resolution"
shall mean a resolution passed at a meeting of the Noteholders duly convened and
held in accordance with the provisions contained in the Fiscal Agency Agreement
by a majority consisting of more than 50 per cent. of votes given on a poll or a
show of hands.
10. NOTICES
Notices to holders of the Notes will be given by publication in a daily
newspaper of general circulation in London, England. In addition, so long as the
Notes are listed on the Luxembourg Stock Exchange and the rules of such Exchange
shall so require, notices to holders of the Notes will be given by publication
in a daily newspaper of general circulation in Luxembourg. If publication m
either London or Luxembourg is not practical, such publication shall be made
elsewhere in Europe. Such publication is expected to be made in the Financial
Times and the Luxemburger Wort. Such notices will be deemed to have been given
on the date of such publication, and if published in such newspapers on
different dates, on the date of the first such publication.
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11. REPLACEMENT OF NOTES AND COUPONS
Notes (including any coupons appertaining to the Notes) that become mutilated,
destroyed, stolen or lost will be replaced by the Company at the expense of the
holder upon delivery to the Paying Agent IN Luxembourg (the "Replacement Agent")
of the Notes and coupons or evidence of the loss, theft or destruction thereof
satisfactory to the Company and the Replacement Agent. In the case of a lost,
stolen or destroyed Note or coupon, an indemnity satisfactory to the Replacement
Agent and the Company may be required at the expense of the holder of such Note
or coupon before a replacement Note or coupon, as the case may be, will be
issued.
12. Further ISSUES
The Company may from time to time, without the consent of the holder of any Note
or coupon, issue further Notes pursuant to an agreement supplemental to the
Fiscal Agency Agreement so as to form a single series with the Notes for all
purposes.
13. Prescription
The Notes and coupons will become void unless presented for payment within a
period of ten years (in the case of principal) and five years (in the case of
interest) after the Relevant Date (as defined in this Condition 13).
For the purposes of these Terms and Conditions, the "Relevant Date" in respect
of any payment means (in the case of Notes) the due date for payment and (in the
case of coupons) the date for payment shown on the coupons.
14. Governing Law
The Fiscal Agency Agreement, the Notes and the coupons will be governed by and
construed in accordance with the laws of the State of New York.
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SCHEDULE 2
FORM OF TEMPORARY GLOBAL NOTE
THE GILLETTE COMPANY
TEMPORARY GLOBAL NOTE
representing
U.S.$300,000,000
6 per cent. NOTES DUE November 14, 2000
This Note is a Temporary Global Note without interest coupons in respect of a
duly authorised issue of notes of The Gillette Company ("Gillette or the
"Company""), designated as specified in the title hereof (the "Notes"), limited
to the aggregate principal amount of U.S.$300,000,000 and issued under a Fiscal
Agency Agreement dated November 14, 1997 (the "Agency Agreement") between, inter
alios, Gillette and Morgan Guaranty Trust Company of New York, London office as
fiscal agent (the "Fiscal Agent"). References herein to the Conditions (or to
any particular numbered Condition) shall be to the Conditions (or that
particular one of them) set out in Part C of Schedule 1 to the Agency Agreement.
1. Promise to pay
Subject as provided in this Temporary Global Note, for value received,
Gillette promises to pay to the bearer upon presentation and surrender the
principal amount of this Temporary Global Note (being at the date hereof
U.S.$300,000,000) on the Maturity Date (as defined in Condition 4) (or on
such earlier date as the said principal amount may become repayable in
accordance with the Conditions) and to pay interest on the principal amount
for the time being outstanding at the rate of 6 per cent. per annum from
November 14, 1997, payable annually in arrears on November 14 m each year
until payment of the principal amount has been made or duly provided for in
full together with such other amounts (if any) as may be payable, all
subject to and in accordance with the Conditions.
2. EXCHANGE FOR DEFINITIVE NOTES AND PURCHASES
The definitive Notes to be issued on exchange will be in bearer form in the
denomination of U.S.$1,000, U.S.$10,000 or U.S.$100,000 each with interest
coupons ("Coupons"), in each case in the respective form set out in the
schedules to the Agency Agreement.
On and after the day being 40 days after the closing date for the Notes
(the "Exchange Date") this Temporary Global Note may be exchanged in whole
or in part (free of charge to the bearer) at the specified office of the
Fiscal Agent (or such other place as the Fiscal Agent may direct) for duly
executed and authenticated definitive Notes (together with the Coupons
appertaining thereto) and Gillette shall procure that the Fiscal Agent
shall deliver, in full or partial exchange for this Temporary Global Note,
definitive Notes (together with the Coupons appertaining thereto) in an
aggregate principal amount equal to the principal amount of this Temporary
Global Note submitted for exchange. Notwithstanding the foregoing, no
definitive Notes will be so issued and delivered unless there shall have
been presented to the Fiscal Agent a certificate from Morgan Guaranty
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Trust Company of New York, Brussels office, as operator of the Euroclear
System ("Euroelear") or Cedel Bank, societe anonyme ("Cedel Bank")
substantially in the form of the certificate attached as Exhibit A.
Any person who would, but for the provisions of this Temporary Global Note
and of the Agency Agreement, otherwise be entitled to receive a definitive
Note or definitive Notes shall not be entitled to require the exchange of
an appropriate part of this Temporary Global Note unless and until he shall
have delivered or caused to be delivered to Euroclear or Cedel Bank a
certificate substantially in the form of the certificate attached as
Exhibit B (copies of which form of certificate will be available at the
offices of Euroclear in Brussels and Cedel Bank in Luxembourg and the
specified office of each of the Paying Agents).
Upon (i) any exchange of a part of this Temporary Global Note for a
definitive Note or (ii) the purchase by or on behalf of Gillette and
cancellation of a part of this Temporary Global Note m accordance with the
Conditions, the portion of the principal mount hereof so exchanged or so
purchased and cancelled shall be endorsed by or on behalf of the Fiscal
Agent on behalf of Gillette on Part I of the Schedule hereto, whereupon the
principal mount hereof shall be reduced for all purposes by the amount so
exchanged or so purchased and cancelled and, in each case, endorsed.
3. Payments
Until the entire principal amount of this Temporary Global Note has been
extinguished, this Temporary Global Note shall in all respects be entitled
to the same benefits as the definitive Notes for which it may be exchanged,
except that the holder of this Temporary Global Note shall not (unless upon
due presentation of this Temporary Global Note for exchange, issue and
delivery of definitive Notes are improperly withheld or refused and such
withholding or refusal is continuing at the relevant payment date) be
entitled (i) (subject to (ii) below) to receive any payment of interest on
this Temporary Global Note except upon certification as hereafter provided
or (ii) on and afar the Exchange Date, to receive any payment on this
Temporary Global Note. Upon any payment of principal or interest on this
Temporary Global Note the amount so paid shall be endorsed by or on behalf
of the Fiscal Agent on behalf of Gillette on Part II of the Schedule
hereto.
Payments of interest in respect of Notes for the time being represented by
this Temporary Global Note shall be made to the bearer only upon
presentation to the Fiscal Agent of a certificate from Euroclear or from
Cedel Bank substantially in the form of the certificate attached as Exhibit
A. Any person who would, but for the provisions of this Temporary Global
Note, otherwise be beneficially entitled to a payment of interest on this
Temporary Global Note shall not be entitled to require such payment unless
and until he shall have delivered or caused to be delivered to Euroclear or
Cedel Bank a certificate substantially in the. form of the certificate
attached as Exhibit B (copies of which form of certificate will be
available at the offices of Euroclear in Brussels and Cedel Bank m
Luxembourg and the specified office of each of the Paying Agents).
Upon any payment of principal and endorsement of such payment on Part II of
the Schedule hereto, the principal amount of this Temporary Global Note
shall be reduced for all purposes by the principal amount so paid and
endorsed.
All payments of any amounts payable and paid to the bearer of this
Temporary Global Note shall be valid and, to the extent of the sums so
paid, effectual to satisfy and discharge the liability for the moneys
payable hereon, on the relevant definitive Notes and Coupons.
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33
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4. NOTICES
For so long as the Notes are represented by this Temporary Global Note and
this Temporary Global Note is held on behalf of Euroclear and/or Cedel
Bank, notices to Noteholders may be given by delivery of the relevant
notice to Euroclear and/or Cedel Bank (as the case may be) for
communication to the relative Accountholders (as defined below) rather than
by publication as required by Condition 10, provided that so long as the
Notes are listed on the Luxembourg Stock Exchange and the rules of the
Luxembourg Stock Exchange so require, notices shall also be published in a
leading newspaper having general circulation in Luxembourg (which is
expected to be the Luxemburger Wort).
5. ACCOUNTHOLDERS
For so long as the Notes are represented by this Temporary Global Note and
this Temporary Global Note is held on behalf of Euroclear and/or Cedel
Bank, each person who is for the time being shown in the records of
Euroclear or Cedel Bank as the holder of a particular principal mount of
the Notes (each an "Accountholder") (in which regard any certificate or
other document issued by Euroclear or Cedel Bank as to the principal amount
of the Notes standing to the account of any person shall be conclusive and
binding for all purposes) shall be treated as the holder of such principal
amount of the Notes for all purposes (including for the purposes of any
quorum requirements of, or the right to demand a poll at, meetings of the
Noteholders) other than with respect to the payment of principal and
interest on such Notes, the right to which shall be vested, as against
Gillette, solely in the bearer of this Temporary Global Note in accordance
with and subject to its terms. Each Accountholder must look solely to
Euroclear or Cedel Bank, as the case may be, for its share of each payment
made to the bearer of this Temporary Global Note.
6. PRESCRIPTION
Claims against Gillette m respect of principal and interest on the Notes
represented by this Temporary Global Note will be void unless it is
presented for payment within a period of 10 years (in the case of
principal) and five years (in the case of interest) from the Relevant Date
(as defined in Condition 13).
7. AUTHENTICATION
This Temporary Global Note shall not be or become valid or obligatory for
any purpose unless and until authenticated by or on behalf of the Fiscal
Agent.
8. GOVERNING LAW
This Temporary Global Note is governed by, and shall be construed in
accordance with, the laws of the State of New York, United States of
America (without reference to any conflict of law rules).
IN WITNESS whereof Gillette has caused this Temporary Global Note to be signed
in its corporate name by a duly authorised officer.
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34
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THE GILLETTE COMPANY
By: ......................
Duly authorised
Name:
Title:
Issued in London on November 14, 1997.
Certificate of authentication
This is the Temporary Global Note
described in the Agency Agreement.
...............................
Duly authorised
for and on behalf of
Morgan Guaranty Trust Company
of New York, London office
as Fiscal Agent.
(without recourse, warranty or liability)
ANY UNITED STATES PERSON WHO HOLDS THIS OBLIGATION WILL BE SUBJECT TO
LIMITATIONS UNDER THE UNITED STATES INCOME TAX LAWS, INCLUDING THE LIMITATIONS
PROVIDED IN SECTIONS 1650) AND 1287(a) OF THE INTERNAL REVENUE CODE.
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35
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THE SCHEDULE
PART I
EXCHANGES FOR DEFINITIVE NOTES
AND PURCHASES AND CANCELLATIONS
The following exchanges of a part of this Temporary Global Note for definitive
Notes and/or purchases and cancellations of a part of the aggregate principal
amount of this Temporary Global Note have been made:
Date Part of the Part of the Remaining Notation
of aggregate aggregate principal made by or on
exchange principal principal amount of behalf of
or amount of this amount of this the
cancellation Temporary this Temporary Temporary Fiscal Agent
Global Note Global Note Global Note
exchanged for purchased and following
definitive cancelled exchange
Notes or purchase
and
cancellation
U.S.$ U.S$ U.S$
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36
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PART II
PAYMENTS OF PRINCIPAL AND INTEREST
The following payments on this Temporary Global Note have been made:
Date Amount of Amount of Remaining Notation
of interest paid principal paid principal made by
payment amount of or on
this behalf of the
Temporary Fiscal Agent
Global Note
following
payment
U.S.$ U.S.$ U.S.$
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37
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EXHIBIT A
CERTIFICATE OF CLEARING SYSTEM
THE GILLETTE COMPANY
US$300,000,000
6 PER CENT. NOTES DUE NOVEMBER 14, 2000
(the "Securities")
This is to certify that, based solely on certifications we have received m
writing, by tested telex or by electronic transmission from member organisations
appearing in our records as persons being entitled to a portion of the principal
amount set forth below (our "Member Organisations") substantially to the effect
set forth in the agency agreement (the "Agency Agreement"), as of the date
hereof, U.S.$[ ] principal amount of the above-captioned Securities (i) is owned
by persons that are not citizens or residents of the United States, domestic
partnerships, domestic corporations or any estate or trust the income of which
is subject to United States Federal income taxation regardless of its source
("United States persons"), (ii) is owned by United States persons that (a) are
foreign branches of United States financial institutions (as defined in U.S.
Treasury Regulations Section 1.165-12(c)(1)(v)) ("financial institutions")
purchasing for their own account or for resale, or Co) acquired the Securities
through foreign branches of United States financial institutions and who hold
the Securities through such United States financial institutions on the date
hereof (and m either case (a) or Co), each such United States financial
institution has agreed, on its own behalf or through its agent, that we may
advise Gillette or Gillette's agent that it will comply with the requirements of
Section 1650)(3)(A), (B) or (c) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) is owned by United States or
foreign financial institutions for purposes of resale during the restricted
period (as defined m U.S. Treasury Regulations Section 1.1635(c)(2)(i)(D)(7)),
and to the further effect that United States or foreign financial institutions
described in clause (iii) above (whether or not also described in clause (i) or
(ii)) have certified that they have not acquired the Securities for purposes of
resale directly or indirectly to a United States person or to a person within
the United States or its possessions.
If the Securities are of the category contemplated in Section 230.903(c)(3) of
Regulation S under the Securities Act of 1933, as amended, then this is also to
certify with respect to such principal amount of Securities set forth above
that, except as set out below, we have received in writing, by tested telex or
by electronic transmission, from our Member Organisations entitled to a portion
of such principal amount, certifications with respect to such portion,
substantially to the effect set out in the Agency Agreement.
We further certify (i) that we are not making available herewith for exchange
(or, if relevant, exercise of any rights or collection of any interest) any
portion of the Temporary Global Security excepted in such certifications and
(ii) that as of the date hereof we have not received any notification from any
of our Member Organisations to the effect that the statements made by such
Member Organisations with respect to any portion of the part submitted herewith
for exchange (or, if relevant, exercise of any rights or collection of any
interest) are no longer true and cannot be relied upon as of the date hereof.
We understand that this certification is required in connection with certain tax
laws and, if applicable, certain securities laws of the United States. In
connection therewith, if administrative or legal proceedings are commenced or
threatened in connection with which this certification is or would be relevant,
we irrevocably authorise you to produce this certification to any interested
party in such proceedings.
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38
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*Dated
[Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the
Euroclear System] [Cedel Bank, societe anonyme]
By ...................................
Authorised Signatory
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* To be dated no earlier than the date to which this certification relates,
namely (a) the payment date or (b) the date set for the exchange of the
Temporary Global Note for the Definitive Notes.
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39
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EXHIBIT B
THE GILLETTE COMPANY
U.S.$300,000,000
6 PER CENT. NOTES DUE NOVEMBER 14, 2000
CERTIFICATE INCORPORATED BY REFERENCE TO CERTIFICATE
OF CLEARING SYSTEM
(the "Securities")
This is to certify that as of the date hereof, and except as set forth below,
the above-captioned Securities held by you for our account (i) are owned by
person(s) that are not citizens or residents of the United States, domestic
partnerships, domestic corporations or any estate or trust the income of which
is subject to United States Federal income taxation regardless of its source
("United States person(s)"), (ii) are owned by United States person(s) that (a)
are foreign branches of United States financial institutions (as defined m u.s.
Treasury Regulations Section 1.165-12(c)(1)(v)) ("financial institutions")
purchasing for their own account or for resale, or Co) acquired the Securities
through foreign branches of United States financial institutions and who hold
the Securities through such United States financial institutions on the date
hereof (and in either case (a) or (b), each such United States financial
institution hereby agrees, on its own behalf or through its agent, that you may
advise Gillette or Gillette's agent that it will comply with the requirements of
Section 165(j)(3)(A), (B) or (c) of the Internal Revenue Code of 1986, as
amended, and the regulations thereunder), or (iii) are owned by United States or
foreign financial institution(s) for purposes of resale during the restricted
period (as defined in U.S. Treasury Regulations Section 1.1635(c)(2)(i)(D)(7)),
and in addition if the owner of the Securities is a United States or foreign
financial institution described in clause (iii) above (whether or not also
described in clause (i) or (ii)) this is further to certify that such financial
institution has not acquired the Securities for the purposes of resale directly
or indirectly to a United States person or to a person within the United States
or its possessions.
If the Securities axe of the category contemplated in Section 230.903(c)(3) of
Regulation S under the Securities Act of 1933, as amended, (the "Act"), then
this is also to certify that, except as set forth below (i) in the case of debt
securities, the Securities are beneficially owned by (a) non-U.S. person(s) or
(b) U.S. person(s) who purchased the Securities in transactions which did not
require registration under the Act; or (ii) in the case of equity securities,
the Securities are owned by (x) non-U.S. person(s) (and such person(s) are not
acquiring the Securities for the account or benefit of U.S. person(s)) or (y)
U.S. person(s) who purchased the Securities in a transaction which did not
require registration under the Act. If this certification is being delivered in
connection with the exercise of warrants pursuant to Section 230.902(m) of
Regulation S under the Act, then this is further to certify that, except as set
forth below, the Securities are being exercised by and on behalf of non-U.S.
person(s). As used in this paragraph the term "U.S. person" has the meaning
given to it by Regulation S under the Act.
As used herein, "United States" means the United States of America .(including
the States and the District of Columbia); and its "possessions" include Puerto
Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the
Northern Mariana Islands.
We undertake to advise you promptly by tested telex on or prior to the date on
which you intend to submit your certification relating to the Securities held by
you for our account m accordance with your operating
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<PAGE> 41
40
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procedures if any applicable statement herein is not correct on such date, and
in the absence of any such notification it may be assumed that this
certification applies as of such date.
This certification excepts and does not relate to U.S.$[ ] of such interest in
the above Securities IN respect of which we are not able to certify and as to
which we understand exchange and delivery of definitive Securities (or, if
relevant, exercise of any rights or collection of any interest) cannot be made
until we do so certify.
We understand that this certification is required in connection with certain tax
laws and, if applicable, certain securities laws of the United States. In
connection therewith, if administrative or legal proceedings are commenced or
threatened in connection with which this certification is or would be relevant,
we irrevocably authorise you to produce this certification to any interested
party in such proceedings.
* Dated
By ......................
[Name of person giving certification]
(As, or as agent for, the beneficial
owner(s) of the Securities
to which this certification relates)
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* To be dated no earlier than the fifteenth day before the date to which this
certification relates, namely (a) the payment dale or (b) the date set for
the exchange of the Temporary Global Note for the definitive Notes.
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SCHEDULE 3
PROVISIONS FOR MEETINGS OF NOTEHOLDERS
1. As used in this schedule the following expressions shall have the following
meanings unless the context otherwise requires:
(a) "Voting Certificate" shall mean an English language certificate issued
by a Paying Agent and dated in which it is stated:
(i) that on the date of the Voting Certificate Notes (not being Notes
in respect of which a Block Voting Instruction has been issued
and is outstanding in respect of the meeting specified in the
Voting Certificate and any adjourned meeting) were deposited with
the Paying Agent or (to the satisfaction of the Paying Agent)
were held to its order or under its control and that the Notes
will not cease to be so deposited or held until the first to
occur of:
(A) the conclusion of the meeting specified in the Voting
Certificate or, if applicable, any adjourned meeting; and
(B) the surrender of the Voting Certificate to the Paying Agent
who issued the same; and
(ii) that the bearer of the Voting Certificate is entitled to attend
and vote at the meeting and any adjourned meeting in respect of
the Notes represented by the Voting Certificate;
(b) "Block Voting Instruction" shall mean an English language document
issued by a Paying Agent and dated in which:
(i) it is certified that Notes (not being Notes in respect of which a
Voting Certificate has been issued and is outstanding in respect
of the meeting specified in the Block Voting Instruction and any
adjourned meeting) have been deposited with the Paying Agent or
(to the satisfaction of the Paying Agent) were held to its order
or under its control and that the Notes will not cease to be so
deposited or held until the first to occur of:
(A) the conclusion of the meeting specified in the document or,
if applicable, any adjourned meeting; and
(B) the surrender to the Paying Agent not less than 48 hours
before the time for which the meeting or any adjourned
meeting is convened of the receipt issued by the Paying
Agent in respect of each deposited Notes which is to be
released or (as the case may require) the Notes ceasing with
the agreement of the Paying Agent to be held to its order or
under its control and the giving of notice by the Paying
Agent to Gillette under paragraph 17 of the necessary
amendment to the Block Voting Instruction;
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42
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(ii) it is certified that each holder of the Notes has
instruction the Paying Agent that the vote(s) attributable
to the Notes so deposited or held should be cast m a
particular way in relation to the resolution to be put to
the meeting or any adjourned meeting and that all the
instructions are, during the period commencing 48 hours
before the time for which the meeting or any adjourned
meeting is convened and ending at the conclusion or
adjournment, neither revocable nor capable of amendment;
(iii) the total number, total principal amount and the serial
numbers (if available) of the Notes so deposited or held are
listed distinguishing, with regard to each resolution,
between those m respect of which instructions have been
correctly given that the attributable votes should be cast
in favour of the resolution and those in respect of which
instructions have been so given that the attributable votes
should be cast against the resolution; and
(iv) one or more persons named in the Block Voting Instruction (a
"proxy") is or are authorised and instructed by the Paying
Agent to cast the votes attributable to the Notes so listed
in accordance with the instructions referred to in
subparagraph (iii) as set out in the Block Voting
Instruction.
The holder of any Voting Certificate or the proxies named in any Block
Voting Instruction shall for all purposes in connection with the relevant
meeting or adjourned meeting of Noteholders be deemed to be the holder of
the Notes to which the Voting Certificate or Block Voting Instruction
relates and the Paying Agent with which the Notes have been deposited or
the person holding the same to the order or under the control of the Paying
Agent shall be deemed for such purpose not to be the holder of those Notes.
2. Gillette may at any time and shall upon a requisition in writing signed by
the holders of not less than one-tenth in principal amount of the Notes for
the time being outstanding convene a meeting of the Noteholders and if
Gillette makes default for a period of seven days in convening a meeting
the same may be convened by the requisitionists. Every meeting shall be
held at such place as the Fiscal Agent may approve.
3. At least 21 days' notice (exclusive of the day on which the notice is given
and the day on which the meeting is held) specifying the place, day and
hour of meeting shall be given to the Noteholders before any meeting of the
Noteholders m the manner provided by Condition 10. The notice shall state
generally the nature of the business to be transacted at the meeting. Such
notice shall include a statement to the effect that Notes my be deposited
with Paying Agents for the purpose of obtaining Voting Certificates or
appointing proxies. A copy of the notice shall be sent by post to Gillette
(unless the meeting is convened by Gillette).
4. Some person (who may but need not be a Noteholder) nominated in writing by
Gillette shall be entitled to take the chair at every meeting but if no
nomination is made or if at any meeting the person nominated shall not be
present within fifteen minutes afar the time appointed for holding the
meeting the Noteholders present shall choose one of their number to be
Chairman.
5. At any meeting persons present holding Notes or Voting Certificates or
being proxies and holding or representing m the aggregate at least 25 per
cent. of the principal amount of the Notes for the time being outstanding
shall (except for the purpose of passing an Extraordinary Resolution) form
a quorum for the passing of an Ordinary Resolution and no business (other
than the choosing of a Chairman) shall be transacted at any meeting unless
the .requisite quorum be present at the commencement of business. The
quorum at any meeting for passing AN Extraordinary Resolution
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43
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shall be persons present holding Notes or Voting Certificates or being
proxies and holding or representing in the aggregate not less than 50 per
cent. of the principal amount of the Notes for the time being outstanding;
without limiting the provisions of paragraph 18, the following matters
shall only be capable of being effected after having been approved by
Extraordinary Resolution:
(a) waiver of a default in the payment of the principal of, or interest
on, any Note or change of the stated maturity of the principal of or
payment date of interest on any Note;
(b) reduction of the principal amount of or interest on any Note;
(c) change of the obligation of Gillette to pay Additional Amounts;
(d) change the currency of payment of principal or interest on any Note;
(e) impair the right to institute suit for the enforcement of any such
payment on or with respect to any Note;
(f) modify the obligation to maintain an office or agency in Europe;
(g) reduce the above-stated percentage of holders of the Notes necessary
to amend or modify the Fiscal Agency Agreement or the terms and
conditions of the Notes or the coupons or reduce the percentage of
votes required for the adoption of a resolution (including an
Extraordinary Resolution) or the quorum required at any meeting of
holders of the Notes at which a resolution is to be adopted;
(h) the sanctioning of any scheme or proposal as is described in paragraph
18(f); and
(i) reduce the stated percentage of outstanding Notes necessary pursuant
to the conditions to waive any future compliance or past default.
and all other matters shall be effected after being approved by.
Ordinary Resolution.
6. If within fifteen minutes alter the time appointed for any meeting a quorum
is not present the meeting shall if convened upon the requisition of
Noteholders be dissolved. IN any other case it --- shall stand adjourned to
the same day in the next week (or if the day is a public holiday the next
succeeding business day) at the same time and place (except in the case of
a meeting at which an Extraordinary Resolution is to be proposed in which
case it shall stand adjourned for the period being not less than 14 days
nor more than 42 days, and at such place as may be appointed by the
Chairman and approved by the Fiscal Agent) and at the adjourned meeting
persons present holding Notes or Voting Certificates or being proxies
whatever the principal amount of the Notes so held or represented by them
shall (subject as provided below) form a quorum and have power to pass any
resolution and to decide upon all matters which could properly have been
dealt with at the meeting from which the adjournment took place had the
requisite quorum been present, provided that at any adjourned meeting the
business of which includes the passing of an Extraordinary Resolution, the
quorum shall be persons present holding Notes or Voting Certificates or
being proxies and holding or representing in the aggregate not less than
one-third of the principal amount of the Notes for the time being
outstanding.
7. Notice of any adjourned meeting at which an Extraordinary Resolution is to
be submitted shall be given in the same manner as notice of an original
meeting but as if l0 were substituted for 21 in paragraph 3 and the notice
shall (except in cases where the proviso to paragraph 6 shall apply
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44
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when it shall state the relevant quorum) state that the persons present
holding Notes or Voting Certificates or being proxies at the adjourned
meeting whatever the principal amount of the Notes held or represented by
them will form a quorum. Subject as provided above it shall not be
necessary to give any notice of an adjourned meeting.
8. Every question submitted to a meeting shall be decided by a simple majority
vote which shall be taken in the first instance by a show of hands or if
(before or on the declaration of the result of the show of hands) a poll is
demanded by the Chairman or Gillette or by one or more persons present
holding Notes or Voting Certificates or being proxies and holding or
representing in the aggregate not less than one-fiftieth part of the
principal amount of the Notes then outstanding then by a poll. In case of
equality of votes the Chairman shall both on a show of hands and on a poll
have a casting vote in addition to any votes to which he may be entitled as
a Noteholder or as a holder of a Voting Certificate or as a proxy.
9. At any meeting a declaration by the Chairman that a resolution has been
carried or carried by a particular majority or lost or not carried by a
particular majority shall be conclusive evidence of the fact without proof
of the number or proportion of the votes recorded in favour of or against
the resolution unless a poll is demanded in accordance with paragraph 8.
10. Subject to paragraph 12, if at any meeting a poll is demanded it shall be
taken in such manner and, subject as provided below, either at once or
after an adjournment, as the Chairman may direct and the result of the poll
shall be deemed to be the resolution of the meeting at which the poll was
demanded as at the date of the taking of the poll. The demand for a poll
shall not prevent the continuance of the meeting for the transaction of any
business other than the motion on which the poll has been demanded.
11. The Chairman may with the consent of (and shall if directed by) any meeting
adjourn the same from time to time and from place to place but no business
shall be transacted at any adjourned meeting except business which might
lawfully (but for lack of required quorum) have been transacted at the
meeting from which the adjournment took place.
12. Any poll demanded at any meeting on the election of a Chairman or on any
question of adjournment shall be taken at the meeting without adjournment.
13. Any director or officer of Gillette and its lawyers and financial advisers
may attend and speak at any meeting. Save as provided above no person shall
be entitled to attend and speak nor shall any person be entitled to vote at
any meeting of the Noteholders .or join with others in requesting the
convening of a meeting unless he either produces the Notes of which he is
the holder or a Voting Certificate or is a proxy. Neither Gillette nor any
of its subsidiaries shall be entitled to vote at any meeting in respect of
Notes held by it for the benefit of any such company. Nothing contained in
this Agreement shall prevent any of the proxies named in any Block Voting
Instruction from being a director, officer of or otherwise connected with
Gillette.
14. Subject as provided in paragraph 13 at any meeting:
(a) on a show of hands every person who is present in person and produces
a Note or Voting Certificate or is a proxy shall have one vote; and
(b) on a poll every person who is so present shall have one vote in
respect of each US.S1,000 in principal amount of the Notes so produced
or represented by the Voting Certificate so produced or in respect of
which he is a proxy or in respect of which he is the Noteholder.
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45
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Without prejudice to the obligations of the proxies named in any Block
Voting Instruction any person entitled to more than one vote need not use
all his votes or cast all the votes to which he is entitled m the same way.
15. The proxies named in any Block Voting Instruction or form of proxy need not
be Noteholders.
16. Each Block Voting Instruction together (if so requested by Gillette) with
reasonable proof satisfactory to Gillette of its due execution on behalf of
the relevant Paying Agent shall be deposited at such place as the Fiscal
Agent shall approve not less than 24 hours before the time appointed for
holding the meeting or adjourned meeting at which the proxies named in the
Block Voting Instruction propose to vote and m default the Block Voting
Instruction shall not be treated as valid unless the Chairman of the
meeting decides otherwise before the meeting or adjourned meeting proceeds
to business. A notarially certified copy of each Block Voting Instruction
shall (if so requested by Gillette) be deposited with the Fiscal Agent
before the commencement of the meeting or adjourned meeting but the Fiscal
Agent shall not be obliged to investigate or be concerned with the validity
of or the authority of the proxies named in any Block Voting Instruction.
17. Any vote given in accordance with the terms of a Block Voting Instruction
shall be valid notwithstanding the previous revocation or amendment of the
Block Voting Instruction or of any of the Noteholders' instructions
pursuant to which it was executed, provided that no intimation in writing
of the revocation or amendment shall have been received from the relevant
Paying Agent by Gillette at its registered office (or such other place as
may have been approved by the Fiscal Agent for the purpose) by the time
being 24 hours before the time appointed for holding the meeting or
adjourned meeting at which the Block Voting Instruction is to be used.
18. A meeting of the Noteholders shall in addition to the powers provided above
have the following powers exercisable by Extraordinary Resolution (subject
to the provisions relating to quorum contained in paragraphs 5 and 6) only
namely:
(a) power to sanction any compromise or arrangement proposed to be made
between Gillette and the Noteholders and Couponholders or any of them;
(b) power to sanction any abrogation, modification, compromise or
arrangement in respect of the rights of the Noteholders and
Couponholders against Gillette or against any of its property whether
the rights shall arise hereunder or otherwise;
(c) power to give any authority or sanction which under the Notes or
hereunder is required to be given by Extraordinary Resolution;
(d) power to appoint any persons (whether Noteholders or not) as a
committee to represent the interests of the Noteholders and to confer
upon the committee any powers or discretions which the Noteholders
could themselves exercise by Extraordinary Resolution; and
(e) power to sanction any scheme or proposal for the exchange or sale of
the Notes for or the conversion of the Notes into or the cancellation
of the Notes m consideration of shares, stock, Notes, Notes,
debentures, debenture stock and/or other obligations and/or securities
of Gillette or any other company formed or to be formed, or for or
into or in consideration of cash, or partly for or into or in
consideration of the shares, stock, Notes, Notes,
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<PAGE> 47
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debentures, debenture stock and/or other obligations and/or securities
as provided above and partly for or into or in consideration of cash.
19. Any business which is to be approved by an Ordinary Resolution may also be
approved by the written consent of at least 25 per cent. in aggregate
principal mount of the Notes at the time outstanding and any business which
is to be approved by an Extraordinary Resolution may also be approved by
the written consent of at least 75 per cent. m aggregate principal mount of
the Notes at the time outstanding and, m each case, shall be deemed for all
purposes to have been approved by the requisite resolution passed at a
meeting of the Noteholders duly convened and held hereunder.
20. Any resolution passed at a meeting of the Noteholders duly convened and
held hereunder shall be binding upon all the Noteholders whether present or
not present at the meeting and whether or not voting and upon all
Couponholders and each of them shall be bound to give effect to the
resolution accordingly and the passing of any resolution shall be
conclusive evidence that the circumstances justify the passing of the
resolution. Notice of any resolution duly passed by the Noteholders shall
be published under Condition 10 by Gillette within 14 days of the passing
of the resolution, provided that the non-publication of the notice shall
not invalidate the resolution.
21. The expression "Ordinary Resolution" when used in this Schedule and in the
Conditions means a resolution passed at a meeting of the Noteholders duly
convened and held in accordance with the provisions contained in this
Agreement by a majority consisting of more than half of the persons voting
thereat upon a show of hands or if a poll shall be duly demanded then by a
majority consisting of more than half of the votes given on the poll, and
the expression "Extraordinary Resolution" when used in this Schedule and m
the Conditions means a resolution passed at a meeting of the Noteholders
duly convened and held in accordance with the provisions contained in this
Agreement by a majority consisting of not less than three-fourths of the
persons voting thereat upon a show of hands or if a poll shall be duly
demanded then by a majority consisting of not less than three-fourths of
the votes given on the poll.
22. Minutes of all resolutions and prigs at every meeting shall be made and
duly entered in books to be from time to time provided for that purpose by
Gillette and any Minutes purporting to be signed by the Chairman of the
meeting at which the resolutions were passed or proceedings had shall be
conclusive evidence of the matters contained in the Minutes and until the
contrary is proved every meeting in respect of the proceedings of which
Minutes have been made shall be deemed to have been duly held and convened
and all resolutions passed or proceedings had to have been duly passed or
had.
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<PAGE> 1
EXHIBIT 10(b)
THE GILLETTE COMPANY
STOCK EQUIVALENT UNIT PLAN, AS AMENDED
1. PURPOSE. The purpose of the Stock Equivalent Unit Plan is to provide an
incentive and reward to key salaried employees of The Gillette Company and
its subsidiaries who can make substantial contributions to the success of
the business. To that end, the Plan provides an opportunity for such key
salaried employees to participate in that success through awards of stock
equivalent units, subject to the conditions set forth in the Plan.
DEFINITIONS. Unless the context otherwise requires, the following words have
the following meanings for purposes of the Plan.
2.1 Basic stock unit - A stock equivalent unit awarded to a participant
pursuant to Section 4.2.
2.2 Committee - The Personnel Committee established by the Board of
Directors of the Company.
2.3 Company - The Gillette Company, a Delaware corporation.
2.4 Disability - Mental or physical disability, either occupational or
non-occupational in cause, which, in the opinion of the Committee, on the
basis of medical evidence satisfactory to it, prevents the employee from
engaging in any occupation or employment for wage or profit and is likely to
be permanent.
2.5 Dividend equivalent unit - A stock equivalent unit which is credited to
a participant's account as the result of conversion of amounts credited to
the account in respect of dividends, as provided in Section 5.2.
2.6 Employee - Any person, whether or not an officer or director of the
Company or any subsidiary, who is regularly employed by the Company or a
subsidiary on a salaried full-time basis, or who, under conditions approved
by the Committee, is regularly employed by the Company or subsidiary on a
salaried part-time basis.
2.7.1 Maturity date (with respect to awards made on or before 12/31/83) -
When used with respect to an award, March 15 of the tenth calendar year
following the calendar year in which the award was made.
2.7.2 Maturity date (with respect to awards made after 12/31/83) - When used
with respect to an award, March 15 of the seventh calendar year following
the calendar year in which the award was made.
2.8 Normal retirement date - In the case of any participant, the date
established by his employer as his normal retirement date (or, if no such
plan is maintained by his employer, the normal retirement date prescribed
under The Gillette Company Retirement Plan).
2.9 Plan - The Stock Equivalent Unit Plan set forth herein, as from time to
time amended.
<PAGE> 2
2.10 Share - A share of the Company's common stock as the same is
constituted from time to time.
2.11 Stock equivalent unit - A measure of value equal in amount to the value
of one share at the time of reference.
2.12 Subsidiary - Any corporation in which the Company owns, directly or
indirectly, stock possessing fifty percent or more of the total combined
voting power of all classes of stock or over which the company has effective
operating control.
2.13(A) Total credits - When used with respect to an individual account, the
sum of (a) the excess, if any, of (i) the value of that number of shares
which is equal to the number of basic stock units credited to the account in
respect of awards in designated years, after adjustment for any prior
payments, over (ii) the value on the date of the respective awards of that
number of shares which corresponds, after adjustment for stock splits, stock
dividends and similar capital changes, to the number of basic stock units
referred to in (i), except that for awards made after 12/31/78, the amount
of the excess cannot exceed an amount equal to the value on the date of the
respective awards of that number of shares which corresponds, after
adjustment for stock splits, stock dividends and similar capital changes, to
the number of basic stock units referred to in (i), plus (b) the value of
that number of shares which is equal to the number of dividend equivalent
units then credited to the account in respect of such awards plus (c) any
amounts then credited to the account based on dividend payments attributable
to such awards which have not been converted into dividend equivalent units.
2.14 Value - When used with respect to a share.
(a) On the date of an award of basic stock units, the average of the
reported high and low sales prices of the shares as quoted on a composite
basis;
(b) For purposes of converting dividend credits into dividend equivalent
units, the average of the reported closing prices of the shares as quoted on
a composite basis on the last business day of the months of December,
January, and February immediately preceding the March 15 on which such
conversion occurs;
(c) For purposes of determining the amount payable in respect of an interest
which becomes vested or for purposes of determining the amount payable, in
cases not covered by (d) or (e) below, in respect of an interest which
previously became vested, the average of the reported closing prices of the
shares as quoted on a composite basis on the last business day of the twelve
calendar months immediately preceding the March 15 on which such vesting
occurs or the month in which such payment becomes payable;
(d) For purposes of determining the amount payable to a terminating
participant or to the estate of a deceased participant, the average of the
reported closing prices of the shares as quoted on a composite basis on the
last business day of the twelve calendar months immediately preceding the
month in which the participant's employment terminates or the participant
dies or the twelve consecutive calendar months including and ending with
that month if such termination or death occurs on or after the last business
day of that month;
(e) For purposes of determining the amount payable with respect to an award
on or after the maturity date thereof, the average of the reported closing
prices of the shares as quoted on a composite basis on the last business day
of the twelve calendar months immediately preceding such
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<PAGE> 3
maturity date;
2.15 Unapproved Change in Control shall mean the happening of any one of the
following events, which, in each case, was not recommended to the
shareholders by a vote of at least two-thirds of the non-employee directors
of the Company then still in office who were in office two years prior to
such event:
(a) Any person within the meaning of Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "1934 Act"), other than the Company
or any of its subsidiaries, has become the beneficial owner, within the
meaning of Rule 13d-3 under the 1934 Act, of 20% or more of the combined
voting securities;
(b) A tender offer or exchange offer, other than an offer by the Company,
pursuant to which shares of the Company's common stock have been purchased;
(c) The stockholders or directors of the Company have approved an agreement
to merge or consolidate with or into another corporation and the Company is
not the surviving corporation or an agreement to sell or otherwise dispose
of all or substantially all of the Company's assets (including a plan of
liquidation); or
(d) During any period of two consecutive years, individuals who at the
beginning of such period constituted the board of directors cease for any
reason to constitute at least a majority thereof. For this purpose, new
directors who were elected, or nominated (or approved for nomination in the
case of nomination by a Committee of the Board) for election by shareholders
of the Company, by at least two thirds of the directors then still in office
who were, or are deemed to have been directors at the beginning of the
period, shall be deemed to have been directors at the beginning of the
period.
2.16 Approved Change in Control shall mean the happening of any one of the
following events, which, in each case was recommended to the shareholders by
a vote of at least two-thirds of the non-employee directors of the Company
then still in office who were in office two years prior to such event:
(a) Any person within the meaning of Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "1934 Act"), other than the Company or
any of its subsidiaries, has become the beneficial owner, within the meaning
of Rule 13d-3 under the 1934 Act, of 20% or more of the combined voting
securities;
(b) A tender offer or exchange offer, other than an offer by the Company,
pursuant to which shares of the Company's common stock have been purchased;
(c) The stockholders or directors of the Company have approved an agreement
to merge or consolidate with or into another corporation and the Company is
not the surviving corporation or an agreement to sell or otherwise dispose
of all or substantially all of the Company's assets (including a plan of
liquidation); or
(d) During any period of two consecutive years, individuals who at the
beginning of such period constituted the board of directors cease for any
reason to constitute at least a majority thereof. For this purpose, new
directors who were elected, or nominated (or approved for nomination in the
case of nomination by a Committee of the Board) for election by shareholders
of the Company, by the beginning of the period, shall be deemed to have been
directors at the beginning of the period.
ADMINISTRATION.
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<PAGE> 4
3.1 The Plan shall be administered by the Personnel Committee heretofore
established by the Board of Directors of the Company no member of which
shall be an employee of the Company or of any subsidiary. The Committee
shall have authority, not inconsistently with the Plan, (a) to determine
which of the eligible employees of the Company and its subsidiaries shall be
awarded basic stock units; (b) to determine the times when basic stock units
shall be awarded and the number of basic stock units to be awarded to each
participant; (c) to determine the time or times when amounts may become
payable with respect to stock equivalent units within the limits provided in
the Plan; (d) to prescribe the form of the instruments evidencing any basic
stock units awarded under the Plan (which forms need not be identical); (e)
to adopt, amend and rescind rules and regulations for the administration of
the Plan and the stock equivalent units and for its own acts and
proceedings; and (f) to decide all questions and settle all controversies
and disputes which may arise in connection with the Plan. All decisions,
determinations and interpretations of the Committee shall be binding on all
parties concerned.
3.2 The maximum number of basic stock units which may be awarded under the
Plan is 41,400,000 subject to adjustment as determined by the Committee in
event of a dividend payable in shares, a stock split or a combination of
shares. No basic stock units may be awarded under the Plan after April 18,
2002.
PARTICIPATION.
4.1 The participants in the Plan shall be such key salaried employees as may
be selected from time to time by the Committee. Directors who are not
employees shall not be eligible. The employees to whom basic stock units are
awarded at any time may include employees to whom basic stock units were
previously granted under the Plan.
4.2 Awards of basic stock units shall be made from time to time by the
Committee in its discretion. In addition, with respect to any award, the
Committee shall have discretion to provide that all or any portion of that
award shall be contingent on achievement by the participant or by any unit
or units of the Company of any performance goal or goals over any period or
periods of time ending before March 15 of the third year following the date
of the award. Notwithstanding the above, the Committee may not award more
than 100,000 basic stock units to any participant in any calendar year
subject to adjustment as provided under Section 8.3.
INDIVIDUAL ACCOUNTS.
5.1 The Committee shall maintain a separate account for each award made
under the Plan. Each such account shall show the information necessary to
compute the participant's total credits in respect of each award, including
the number of basic stock units awarded to the participant, the value of an
equal number of shares on the date of the award, the amount credited to the
account in respect of dividends, as provided below, the number of dividend
equivalent units credited to the account and details as to any payments
under the Plan which are deducted from the account.
5.2 Whenever the Company pays a dividend (other than a stock dividend) upon
its outstanding
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<PAGE> 5
common stock, there shall be credited to the separate account for each award
a dollar amount equal to the value of such dividend per share multiplied by
the number of stock equivalent units credited to the account on the record
date for such dividend. However, no such credits shall be made with respect
to any award after the maturity date thereof or after the date on which the
participant ceases to be an employee. As of March 15 in each year the
aggregate of the amounts so credited to the account since the prior March 15
shall be converted into a number of dividend equivalent units by dividing
such aggregate by the value of a share.
5.3 In the event of a dividend payable in shares, or in the event of a stock
split or combination of shares, the Committee shall make a corresponding
change in the number of basic stock units and dividend equivalent units then
credited to the account.
5.4 On the maturity date of an award, the total amount payable with respect
to such award shall become a fixed amount which will not change thereafter
except that the Committee may provide for the payment of interest beginning
at maturity on amounts whose payment is deferred to a date thereafter. Such
fixed amount shall be the total credits in respect of such award on such
maturity date.
5.5 Whenever a payment is made under the Plan to a participant with respect
to any award, there shall be a corresponding reduction in the number of
stock equivalent units and other amounts credited to the participant's
account in respect of such award, or in the case of a payment after maturity
date or after the date on which the participant ceases to be an employee, in
the amount then credited to the account. A similar reduction shall be made
if a participant forfeits any portion of his interest in any awards.
PAYMENT.
6.1 Payments to a participant under the Plan may be made from time to time
when segments of his total credits in respect of an award become vested, or
payment may be deferred, all in accordance with rules established from time
to time by the Committee.
6.2.1 With respect to awards made on or before 12/31/83 fifteen percent of
the total credits in respect of an award shall become vested on March 15 of
the fourth calendar year following the calendar year of the award, an
additional fifteen percent thereof (or, in cases of vesting after one or
more prior payments under Section 6.3, the applicable vesting percentage
thereof as provided below) shall become vested on March 15 of the fifth,
sixth, seventh, eighth, and ninth calendar years following the calendar year
of the award, and any unvested balance thereof shall become vested on the
maturity date of such award.
6.2.2 With respect to awards made after 12/31/83 twenty percent of the total
credits in respect of an award shall become vested on March 15 of the third
calendar year following the calendar year of the award, an additional twenty
percent thereof (or, in cases of vesting after one or more prior payments
under Section 6.3, the applicable vesting percentage thereof as provided
below) shall become vested on March 15 of the fourth, fifth, and sixth
calendar years following the calendar year of the award, and any unvested
balance thereof shall become vested on the maturity date of
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<PAGE> 6
such award.
6.2.3 Such vesting as described above shall occur only if the participant is
an employee on the date of vesting and has been an employee continuously
since the date of the award. The total credits in respect of all awards not
at that time subject to any contingency pursuant to Section 4.2 shall become
fully vested if the participant, while an employee, dies, incurs a
disability, retires prior to his normal retirement date with the consent of
the Company and under conditions approved by the Committee, or retires on or
after his normal retirement date, and the total amount payable with respect
thereto shall become a fixed amount which will not change thereafter, except
that the Committee may provide for the payment of interest on amounts whose
payment is deferred to a date thereafter. If the employment of a participant
terminates as a result of the merger, sale or other absorption or
termination of operations of a subsidiary or a division, all credits in
respect of any such participant's award not at that time subject to any
contingency pursuant to Section 4.2 may become vested if the Committee, in
its sole discretion, determines such action to be in the best interests of
the Company, and the total amount payable with respect thereto shall become
a fixed amount which will not change thereafter, except that the Committee
may provide for the payment of interest on amounts whose payment is deferred
to a date thereafter. In connection with the determination of any
participant's vested rights under this paragraph 6.2.3, the Committee may
retroactively remove any contingency in effect pursuant to Section 4.2.
Notwithstanding the above, in the event of an Unapproved or Approved Change
in Control, if a participant retires prior to his normal retirement date the
consent of the Company shall not be required and all credits and all
contingencies with respect to the awards of such participant shall become
fully vested and immediately payable.
6.2.3.1 In the event of an Unapproved Change in Control, all contingencies
then in effect pursuant to Section 4.2 shall be automatically removed and
the total credits in respect of all awards of a participant shall become
fully vested and payable (1) upon termination of the employment of a
participant for any reason within one year of the Unapproved Change in
control, or (2) upon termination of the employment of a participant at any
time after an Unapproved Change in Control if such termination (a) is
initiated by the Company, except that termination for willful misconduct
shall not be treated as a termination under this subparagraph (2), or (b) is
initiated by the participant for Good Reason. In the event of an Approved
Change in Control, all contingencies then in effect pursuant to Section 4.2
shall be automatically removed and the total credits in respect of all
awards of a participant shall become fully vested and payable upon
termination of the employment of a participant after an Approved Change in
Control if such termination is (i) initiated by the Company, except that
termination for willful misconduct shall not be treated as a termination
under this sentence, or (ii) initiated by the participant for Good Reason.
Good Reason, as used herein, shall mean any of the following: Assignment of
any duties inconsistent with the position, duties, responsibilities and
status of the employee or reduction or adverse change in the nature or
status of responsibilities of the employee from those which existed on the
date immediately preceding an Approved or Unapproved Change in Control; any
reduction by the Company or any successor entity in the employees'
compensation including benefits, other than such reduction required by law
or required to maintain the tax-qualified status of any benefit Plan, from
those which existed on the date immediately preceding an Approved or
Unapproved Change in Control; or the Company or any successor entity
requiring the employee to be based at a location in excess
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<PAGE> 7
of fifty miles from the location where the employee is based on the date
immediately preceding an Approved or Unapproved Change in Control.
"6.2.3.2 Notwithstanding any other provision of this Plan, (a) upon an
employer-initiated termination of employment of a participant pursuant to
the Restructuring Plan approved by the Board of Directors of the Company at
its meeting on December 18, 1986, or the Reorganization Plan approved by the
Board of Directors of the Company at its meeting on December 14, 1989 or the
1994 Realignment Plan and Parker Integration Plan, or (b) upon the sale or
other disposition of the unit, division or subsidiary in which a participant
is employed pursuant to the Restructuring Plan approved by the Board of
Directors of the Company at its meeting on December 18, 1986, or the
Reorganization Plan approved by the Board of Directors of the Company at its
meeting on December 14, 1989, which sale or other disposition results in the
participant no longer being employed by the Company or any of its
subsidiaries, or (c) upon the sale of the Jafra Cosmetics business pursuant
to a certain Acquisition Agreement dated January 26, 1998 ('Jafra Sale')
where a participant either (i) continues to be employed by Jafra immediately
following the Jafra Sale or (ii) is terminated from the employment of the
Company or any of its subsidiaries as a direct result of the Jafra Sale, all
contingencies then in effect pursuant to Section 4.2 shall be automatically
removed except with respect to contingencies which expire on February 19,
1987. Further, in such event, the total credits in respect of all awards of
a participant for which no contingencies remain in effect shall become fully
vested and the amount of such awards shall be fixed and payable. With
respect to awards or segments of awards which become vested under this
subparagraph or any other award or segment thereof which becomes payable by
reason of the participant's termination of employment, the participant may
elect to receive such awards upon termination of employment or may, prior to
the date participant's employment with the Company or any subsidiary
terminates, elect to defer such award in accordance with the provisions of
Paragraph 6.2.3 and rules established from time to time by the Committee.
Notwithstanding the above, the removal of contingencies and the granting of
vesting and deferral rights provided for in this Subparagraph 6.2.3.2 shall
serve as partial consideration for a settlement of all claims and disputes
which the participant may have against the Company, its subsidiaries,
employees and agents and shall be subject to the execution by the
participant of a release and settlement agreement in a form to be prescribed
by the Committee." Effective as of (Closing Date of Jafra Sale).
6.2.4 In order to make proper adjustment for any previous payments under
Section 6.3, the applicable vesting percentage to be used in computing
vested segments under the foregoing provisions of this Section 6.2 and in
computing the amount of a payment under Section 6.3 or Section 6.4 shall be
determined as follows:
(a) In computing such vested segment or the amount or a payment under
section 6.3 for awards made prior to 12/31/83, the applicable vesting
percentage to be applied to the total credits in respect of a particular
award shall be equal in value to a fraction whose numerator is fifteen (or
ten in the case of the final vested installment) and whose denominator is
(i) 100 minus (ii) fifteen multiplied by the number of vested segments
previously paid to the participant under Section 6.3. Payment of each vested
segment shall be considered a separate payment.
(b) In the case of a payment under section 6.4 for awards made prior to
12/31/83, the applicable vesting percentage to be applied to the total
credits in respect of a particular award shall be equal in value to a
fraction whose numerator is (i) fifteen multiplied by the number of segments
of the
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<PAGE> 8
award which have become vested in accordance with the foregoing provisions
prior to the date on which the participant ceases to be an employee (but not
more than 100 minus (ii) fifteen multiplied by the number of vested
segments previously paid to the participant under Section 6.3, and whose
denominator is 100 minus (ii) above.
(c) In computing such vested segment or the amount or a payment under
section 6.3 for awards made after 12/31/83, the applicable vesting
percentage to be applied to the total credits in respect of a particular
award shall be equal in value to a fraction whose numerator is twenty and
whose denominator is (i) 100 minus (ii) twenty multiplied by the number of
vested segments previously paid to the participant under Section 6.3.
Payment of each vested segment shall be considered a separate payment.
(d) In the case of a payment under section 6.4 for awards made after
12/31/83, the applicable vesting percentage to be applied to the total
credits in respect of a particular award shall be equal in value to a
fraction whose numerator is (i) twenty multiplied by the number of segments
of the award which have become vested in accordance with the foregoing
provisions prior to the date on which the participant ceases to be an
employee (but not more than 100 minus (ii) twenty multiplied by the number
of vested segments previously paid to the participant under Section 6.3, and
whose denominator is 100 minus (ii) above.
6.3 Prior to any date on which a participant is to acquire a vested interest
or additional vested interest in the total credits in respect of an award,
the participant shall make an election, at the time and in a manner
specified by the Committee, as to the time when payment is to be made of the
segment or segments of such total credits which may become vested on such
date. The participant may elect (a) to receive payment within a reasonable
time after such date or (b) to defer payment in accordance with rules
established from time to time by the Committee. In the event of an Approved
or Unapproved Change in Control, the participant may, upon any date, revoke
his election to defer receipt of any or all interests in respect of an award
and the Company shall make payment to the participant of the value of any
vested interest or interests, within a reasonable time after such revocation
and with respect to interests which have not yet vested as of the date of
such revocation, within a reasonable time after such interests become
vested. If no such election is made, payment shall be made within a
reasonable time after the date on which such vested interest or additional
vested interest is acquired.
The amount of any payment shall be computed by multiplying the total credits
in respect of the award at the time of payment, or in the case of revocation
of an election to defer, at the time of such revocation, by the applicable
vesting percentage. The Committee may provide for the payment of interest
beginning upon maturity for amounts deferred beyond maturity.
6.4 If a participant ceases to be an employee for any reason not specified
in Section 6.2, his vested interest in respect of each award shall thereupon
become a fixed amount which will not change thereafter. Such fixed amounts
shall be determined by multiplying the total credits in respect of each
award on the date of termination of employment by the applicable vesting
percentage. The participant shall thereupon forfeit his interest in any
amounts then credited to his account to the extent his interest has not
become vested. Payment of vested interests shall be made in accordance with
rules established from time to time by the Committee.
<PAGE> 9
6.5 If a participant dies prior to termination of his employment, an amount
equal to his total credits in respect of all awards not subject to any
contingency pursuant to Section 4.2 shall be paid to his executor or
administrator or as otherwise provided by law valued as of the date of
death.
6.6 All payments will be made in cash and will be subject to any required
tax withholdings.
AMENDMENT AND TERMINATION.
7.1 The Board of Directors of the Company or the Personnel Committee of the
Board of Directors if and to the extent authorized may at any time amend the
Plan for the purposes of satisfying the requirements of any changes in
applicable laws or regulations or for any other purpose which may be
permitted by law, except that neither the Board of Directors or the
Personnel Committee of the Board of Directors may, without the approval of
the stockholders of the Company, increase the maximum number of basic stock
units that may be awarded under the Plan or increase the time within which
basic stock units may be awarded, as provided in Section 3.2, or extend the
maturity date of an award beyond March 15 of the tenth calendar year
following the calendar year in which the award was made. Notwithstanding the
above, in the event of an Approved or Unapproved Change in Control, no
amendment to the Plan which provides for prospective Plan benefits and other
terms and conditions any less favorable to Plan participants than those
which existed prior to the amendment shall be effective unless it provides
that all contingencies which are then in existence be removed and all awards
which are unvested prior to such amendment shall become immediately vested
and payable.
7.2 The Board of Directors of the Company may terminate the Plan at any time
except that after an Approved or Unapproved Change in Control such Plan may
not be terminated without providing that all contingencies then in existence
shall be removed and all unvested awards shall become immediately vested and
payable.
7.3 No such amendment or termination shall adversely affect the rights of
any participant (without his consent) under any award previously made or
after an Approved Change in Control deprive a participant of a benefit or
right which became operative upon an Approved Change in Control or after an
Unapproved Change in Control deprive a participant of a benefit or right
which became operative upon an Unapproved Change in Control.
MISCELLANEOUS.
8.1 The interest under the Plan of any participant, his heirs or legatees
shall not be alienable by the participant, his heirs or legatees by
assignment or any other method and shall not be subject to being taken by
his creditors by any process whatsoever.
8.2 The Plan shall not be deemed to give any participant or employee the
right to be retained in the employ of the Company or any subsidiary nor
shall the Plan interfere with the fight of the Company or any subsidiary to
discharge any employee at any time.
8.3 In the event of a stock dividend, split-up or combinations of shares,
recapitalization for merger
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in which the Company is the surviving corporation or other similar capital
change, the number and kind of shares of stock or securities of the Company
to be used as a basis for granting awards under the Plan, the units then
outstanding or to be granted thereunder, the maximum number of basic stock
units which may be granted, the unit value and other relevant provisions
shall be appropriately adjusted by the Board of Directors of the Company,
whose determination shall be binding on all persons. In the event of a
consolidation or a merger in which the Company is not the surviving
corporation or complete liquidation of the Company, all outstanding basic
stock units and dividend equivalent units shall thereafter accrue no further
value, provided that at least twenty days prior to the effective date of any
such consolidation or merger, the Board of Directors shall either (a) make
all outstanding basic units and dividend equivalent units immediately vested
and payable, or (b) arrange to have the surviving corporation grant
replacement units to the participants.
MARCH, 1998
10
<PAGE> 1
EXHIBIT 10(c)
THE GILLETTE COMPANY
INCENTIVE BONUS PLAN
1. PURPOSE. The purpose of this Incentive Bonus Plan is to foster continuing
long-term growth in earnings of The Gillette Company by rewarding key management
for outstanding performance in the accomplishment of assigned goals under the
Company's Management by Objectives Program through awards of cash bonuses.
2. DEFINITIONS.
PROFIT FROM OPERATIONS - The amount reported as profit from operations in
the annual financial statements of the Company after adjustments to exclude the
results of operations of businesses acquired or disposed of during the incentive
year and any other adjustment, all as determined by the Committee to be
necessary or appropriate to insure comparability between profit from operations
figures from year to year for the purposes of this Plan.
BASE SALARY EARNINGS - The actual base salary, exclusive of any bonus awards
made under this Plan and any other payments, earned by the participant during
the fiscal year of his or her employing unit ending during the incentive year of
the Plan as reported on the Company's records.
BASE SALARY - The eligible employee's annual base salary rate of earnings in
effect as of December 31 of any Incentive Year.
BONUS AWARD - An amount awarded to a participant as determined pursuant to
Paragraph V.
BONUS POOL - An amount earned in any incentive year as determined pursuant
to Paragraph III, from which bonus awards may be paid.
CHAIRMAN- The Chairman of the Board of Directors of the Company.
COMMITTEE - The Personnel Committee established by the Board of Directors of
the Company.
COMPANY - The Gillette Company, a Delaware Corporation.
INCENTIVE YEAR - A fiscal year of the Company in which the Plan is in
effect.
MANAGEMENT REPORTING FORM - The annual written review of individual
performance and assignment of goals conducted under the Company's Management by
Objectives Program.
ELIGIBLE POSITION - For each incentive year, a key management position which
the Chairman and President determine to have a significant impact on the
attainment of the Company's objectives.
ELIGIBLE EMPLOYEE - For each incentive year, a person whether or not an
officer or director of the Company or any subsidiary, who is regularly employed
by the Company or a subsidiary on a full-time basis, or who, under conditions
approved by the Committee, is regularly employed by the Company or a subsidiary
on a part-time basis, who (a) has been notified of his or her eligibility, (b)
has been assigned
<PAGE> 2
goals under the Company's Management by Objectives Program to be accomplished
during the incentive year, (c) holds an eligible position for all or a
substantial part of the incentive year except in the case of a Partial Plan Year
as provided under Section XIII of the Plan, or is transferred during the
incentive year from an eligible position to an ineligible position for career
developmental purposes as determined by the Company, and (d) is an employee on
the date of the granting of awards (or is an employee whose employment is
terminated by death, retirement or disability or as a direct result of action
initiated by the Company pursuant to the Restructuring Plan approved by the
Board of Directors of the Company at its meeting on December 18, 1986 or the
Reorganization Plan approved by the Board of Directors at its meeting on
December 14, 1989 or after an approved Change in Control or for any reason after
an Unapproved Change in Control).
PARTICIPANT - An eligible employee who has been granted an award under the
Plan.
PLAN - The Incentive Bonus Plan as set forth herein, as from time to time
amended.
PRESIDENT - The President of the Company.
PROJECTED BONUS POOL - Projected bonus pool in any given year shall mean the
amount of the bonus pool which would be earned assuming the Growth Goals for
that year are achieved.
RETIREMENT ELIGIBILITY DATE - The earliest date upon which a participant
becomes eligible to retire under the terms of The Gillette Company Retirement
Plan or, with respect to individuals not participating in that Plan, the
earliest date upon which that individual could have become eligible to retire
under the terms of The Gillette Company Retirement Plan had he or she been a
participant in that Plan.
SAVINGS PLAN EQUIVALENCY - An amount computed by multiplying an employee's
rate of contributions (up to a maximum of 5%) under The Gillette Company
Employees' Savings Plan or one half of the employee's rate of savings under The
Gillette Company Retirement Income Savings Plan, as applicable, as of the
January 1 immediately preceding the date of an award, by the amount of that
award that is deferred under Paragraph VI (a) and (c) of this Incentive Bonus
Plan.
SUBSIDIARY - Any corporation (1) in which the Company owns, directly or
indirectly, stock possessing 50 percent or more of the total combined voting
power of all classes of stock, (2) over which the Company has effective
operating control, or (3) in which the Company has a material interest.
SALES GROWTH - The amount reported as growth in net sales in the annual
financial statements of the Company after adjustments as determined by the
Committee to be necessary or appropriate to insure comparability between net
sales from year to year for the purposes of the Plan.
RETURN ON ASSETS - Return on Assets shall be defined as hereinafter
determined by the Committee from time to time in its discretion.
GROWTH GOALS - Growth Goals shall mean the specific percentage of increase
in Profit from Operations, Sales Growth and Return on Assets determined by the
Committee for any given year which if achieved would result in a bonus pool
being earned.
3. BONUS POOL AND RESERVE. If Growth Goals for any fiscal year the Plan is
in effect are
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<PAGE> 3
met, a bonus pool shall be earned. Such Growth Goals shall be determined by the
Committee as soon as is practicable after the commencement of each incentive
year.
With respect to any incentive year after 1990, the Committee may, within its
sole discretion, establish a contingency reserve which, in any given incentive
year shall not exceed thirty five percent (35%) of the amount of the projected
bonus pool for that incentive year, from which contingency reserve bonus awards
may be made to recognize outstanding performance in that incentive year should a
bonus pool not otherwise be earned. In addition, with respect to any plan year
after 1990 the Committee may, within its sole discretion, elect to carry forward
up to fifteen percent (15%) of the bonus pool earned in that year to any one or
more of the next ensuing three years with the Committee having sole discretion
as to whether to distribute all or a portion of such carried forward amounts in
any one or more of those three years.
4. ELIGIBILITY. The Chairman and the President shall make the selection of
eligible positions and eligible employees, except with respect to themselves,
for each incentive year. Selection as an eligible employee in any incentive year
shall not bind the Company to select the individual in any other incentive year.
Selection of any individual in any incentive year shall not bind the Company to
select any other individual holding the same position in the same or any other
incentive year.
"5. AMOUNT OF BONUS AWARD. As soon as is practicable after the end of the
incentive year, the amount, if any, of the award of each eligible employee shall
be determined by the Chairman and the President, except with respect to
themselves, after evaluating the eligible employee's performance in relation to
his or her assigned goals as contained in his or her Management Reporting Form
relating to the incentive year. Bonus awards shall be determined as a percentage
of the eligible employee's base salary earnings, however, in no event shall the
percentage be less than 5 percent nor more than 70 percent with respect to any
plan year prior to 1997 or less than 5% nor more than 75% with respect to any
plan year commencing on or after January 1, 1997. Proposed awards to officers of
the Company and other senior management employees whose compensation is
regularly reviewed by the Committee shall be subject to review and approval of
the Committee. In addition, in connection with any bonus award the Committee
shall have discretion to make an award or awards under this Corporation's Stock
Equivalent Unit Plan and to provide that all or any portion of any such award
shall be contingent on achievement by the participant or by any unit or units of
the Company of any performance goal or goals over any period or periods of time
ending before March 15 of the third year following the date of the award.
Notwithstanding the above, (1) with respect to the 1994, 1995 an 1996 plan
years, the Personnel Committee, in its sole discretion, in special circumstances
may grant an eligible employee a bonus award which is greater than 70 percent of
the eligible employee' s base salary earnings and (2) commencing with the 1997
plan year, the Personnel Committee, in its sole discretion, in special.
circumstances may grant an eligible employee a bonus award which is greater than
75 percent of the eligible employee's base salary earnings."
6. DEFERRAL, VESTING AND PAYMENT OF AWARDS. Awards are payable in cash.
(a) With respect to awards relating to the 1979 Incentive Year, a percentage
of each award equal to twice the percentage the award bears to the base salary
earnings of the participant (up to a maximum of 40 percent (40%) of the award)
and with respect to awards relating to any Incentive Year after 1979, but before
1984 a percentage of each award equal to one and one half times the percentage
the award bears to the base salary earnings of the participant (up to a maximum
of 30 percent (30%) of the award)
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<PAGE> 4
shall be deferred. Such mandatory deferred amounts shall vest at the end of the
third calendar year following the close of the incentive year for which the
bonus award was earned or upon the retirement eligibility date of the
participant, whichever occurs first. Such vested amounts shall become payable
when the participant ceases to be an employee if the participant has reached his
or her retirement eligibility date at cessation of employment, or at age 65 if
the participant has not reached his or her retirement eligibility date at
cessation of employment provided, however, that a participant who has reached
his or her retirement eligibility date at cessation of employment may elect,
prior to cessation of employment, to defer such amounts beyond retirement in
accordance with rules to be prescribed by the Committee. Notwithstanding the
above, in the event an employee's employment with the Company or any of its
subsidiaries is terminated as a direct result of action initiated by the Company
pursuant to the Restructuring Plan approved by the Board of Directors of the
Company at its meeting on December 18, 1986, or the Reorganization Plan approved
by the Board of Directors of the Company at its meeting on December 14, 1989,
and such employee retires under a Company-sponsored retirement plan at cessation
of employment, the employee may elect to receive all amounts which would become
payable by reason of such termination of employment in up to ten approximately
equal consecutive annual installments. Such election must be made prior to the
employee's termination of employment in accordance with rules to be prescribed
by the Committee and if no such election is made, payment of such amounts shall
be made within a reasonable time after the date of termination.
(b) The remainder of the bonus award described in (a) above and all of any
award made with respect to the Incentive Year 1984 and thereafter shall vest
immediately upon the grant of the award and be payable as soon as is practicable
after the financial statements for the incentive year are available
(c) As prescribed by the rules pursuant to this Plan, an individual may
elect to defer payment of all or a portion of any award payable under
Subparagraph (b) above to March 1 of any future year or to retirement.
Notwithstanding any prior voluntary deferral, all amounts so deferred shall
become payable when the participant ceases to be an employee for any reason
other than retirement under a Company-sponsored retirement plan upon cessation
of employment. With respect to participants whose employment ceases and who,
upon cessation of employment, retire under a Company-sponsored retirement plan,
such participants may, prior to termination of employment, elect to defer
payment of any awards beyond retirement in accordance with rules to be
prescribed by the Committee and if no such election is made, payment of such
amounts shall be made within a reasonable time after the date of termination of
employment.
Notwithstanding the above, in the event an employee's employment with the
Company or any of its subsidiaries is terminated as a direct result of action
initiated by the Company pursuant to the Restructuring Plan approved by the
Board of Directors of the Company at its meeting on December 18, 1986, or the
Reorganization Plan approved by the Board of Directors at its meeting on
December 14, 1989, the employee may elect to receive all amounts which would
become payable by reason of such termination of employment in up to ten
approximately equal consecutive annual installments but in no event may payments
end beyond March 1, of the tenth year following termination of employment, with
respect to employees who have not retired under a Company-sponsored retirement
plan upon cessation of employment. Such election must be made prior to the
employee's termination of employment in accordance with rules to be prescribed
by the Committee and if no such election is made, payment of such amounts shall
be made within a reasonable time after the date of termination.
"Notwithstanding the above, in connection with the sale of Jafra Cosmetics
business pursuant to a certain Acquisition Agreement dated January 26, 1998
("Jafra Sale"), where an employee either (I)
4
<PAGE> 5
continues to be employed by Jafra immediately following the Jafra Sale or (ii)
is terminated from the employment of the Company or any or its subsidiaries as a
direct result of the Jafra Sale, the employee may elect to receive all amounts
which would become payable by reason of the foregoing events in up to ten
approximately equal consecutive annual installments but in no event may payments
end beyond ten years following the date of the Jafra Sale. Such election must be
made prior to the date of the Jafra Sale in accordance with rules to be
prescribed by the Committee and if no such election is made, payment of such
amounts shall be made within a reasonable time after the date of termination."
Effective as of (Closing Date of Sale of Jafra).
Notwithstanding the provisions of this subparagraph, the right to defer
payment beyond termination shall serve as partial consideration for a settlement
of all claims which the participant may have against the Company, its
subsidiaries, employees and agents and shall be subject to execution by the
participant of a release and settlement agreement in a form to be prescribed by
the Committee.
(d) Amounts deferred under subparagraph (a) and (c) above shall be credited
to an individual account in the name of the participant.
The account of an employee who is participating in The Gillette Company
Employees' Savings Plan or The Gillette Company Ltd/Ltee Retirement Income
Savings Plan shall also be credited with a Savings Plan Equivalency based on the
participant's rate of contributions under The Gillette Company Employees'
Savings Plan or savings under The Gillette Company Ltd./Ltee Retirement Income
Savings Plan, as applicable, on the January 1 immediately preceding the date of
an award.
Amounts equivalent to interest at the rate applicable to the Fixed Income
Fund of The Gillette Company Employees' Savings Plan shall be credited to the
total amount in the employee's account in so far as the Company shall deem
practicable in the same manner as such amounts are credited under The Gillette
Company Employees' Savings Plan. Upon payment to the participant of an amount
deferred under subparagraph (a) or (c) above, the related Savings Plan
Equivalency and amounts equivalent to interest credited thereon will be paid. A
participant whose employment ceases prior to his or her retirement eligibility
date will forfeit unvested amounts deferred under subparagraph (a) above, as
well as the related Savings Plan Equivalency and amounts equivalent to interest
credited thereon. In the event that the Savings Plan Equivalency no longer
exists by virtue of termination of the Savings Plan and/or The Fixed Income Fund
of the Savings Plan, the amounts in each employee's account shall be credited
with a rate of return adjusted each January 2 to reflect the interest rate in
effect on January 2 for two year United States Treasury Notes.
(e) If a participant dies or becomes totally and permanently disabled while
an employee of the Company or a subsidiary, an amount equal to all deferred
amounts, vested and unvested, Savings Plan Equivalency amounts and amounts
equivalent to interest accrued thereon shall be paid to the participant or, in
the case of death, to the participant's executor or administrator or as
otherwise provided by law.
(f) All payments shall be subject to any required withholdings.
(g) Prior to the happening of a Change in Control, either Approved or
Unapproved, as those terms are defined in The Gillette Company Employees'
Savings Plan, with respect to amounts deferred pursuant to subparagraph (c), an
individual who has made such deferral may, in accordance with rules prescribed
by the Committee, revoke all deferral elections in the event of a Change in
Control of the Corporation, with such revocation to take effect, at the option
of the participant, if a Change in Control occurs prior to
5
<PAGE> 6
January 1, 1988, upon the happening of any Change in Control or January 1, 1998,
or if a Change in Control occurs on or after January 1, 1988, upon the happening
of a Change in Control and the Company shall make payment to the participant of
such deferred amounts for which such deferral has been revoked plus interest as
provided in subparagraph (d) above.
(h) In the event of a Change in Control, either Approved or Unapproved, as
those terms are defined in The Gillette Company Employees' Savings Plan, amounts
deferred pursuant to subparagraph (a) above will become immediately payable.
7. AMENDMENT AND TERMINATION. The Board of Directors of the Company, or the
Personnel Committee of the Board of Directors, if and to the extent authorized,
in absolute discretion of the body so acting and without notice, may at any time
amend or terminate the Plan, provided that no such amendment or termination
shall adversely affect the fights of any participant under any award previously
granted. Further, neither the Board of Directors nor the Personnel Committee of
the Board of Directors shall have the discretion once a plan year has commenced
not to make awards if a bonus pool is earned for that plan year or after a
contingency reserve has been established in any plan year not to make awards
from such contingency reserve.
8. ASSIGNMENT. Bonus payments under this Plan shall be paid only to
participants. No bonus payment herein provided, nor any part thereof, and no
fight or claim to any of the monies payable pursuant to the provisions of this
Plan shall be anticipated, assigned, or otherwise encumbered, nor be subject to
attachment, garnishment, execution or levy of any kind, prior to the actual
payment and delivery of said amount to the Plan participant and any attempted
assignment or other encumbrance or attachment, garnishment, execution or levy
shall be of no force or effect, except as otherwise provided by law.
Notwithstanding the above, if a participant is adjudged incompetent, the
Committee may direct that any amounts payable be paid to the participant's
guardian or legal representative.
9. EMPLOYMENT AND PLAN RIGHTS. The Plan shall not be deemed to give any
eligible employee or participant the fight to be retained in the employ of the
Company or any subsidiary nor shall the Plan interfere with the right of the
Company or any subsidiary to discharge any employee at any time nor shall the
Plan be deemed to give any employee any fight to any award until such award is
actually made.
10. ADMINISTRATION AND AUTHORITY. The Plan shall be administered by the
Committee except as otherwise provided herein. The Committee shall have the
authority, consistent with the Plan, to (a) determine adjustments to Profit from
Operations, Net Sales and Return on Assets as provided in Paragraph II of this
Plan, (b) determine the percentage increase of annual Profit from Operations,
Net Sales, and Return on Assets, i.e., Growth Goals, necessary to earn a bonus
pool, if any, for each incentive year, (c) establish an earned reserve and
approve payments of awards from the earned reserve in accordance with Paragraph
III of the Plan, (d) review and approve bonus awards made to officers and other
senior management employees whose compensation is regularly reviewed by it, (e)
determine the amount of any bonus awards to be granted to the Chairman and the
President, (f) adopt, amend and rescind rules and regulations for the
administration of the Plan and for its own acts and proceedings and (g) decide
all questions and settle all controversies and disputes which may arise in
connection with the Plan. The Committee may delegate any or all responsibilities
assigned to it pursuant to subparagraph (f).
The Chairman and the President, except with respect to themselves, shall
have authority, consistent with the Plan, (a) to select eligible positions,
eligible employees, and participants under the Plan, (b) to
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<PAGE> 7
recommend to the Committee the amount of bonus awards to participants listed
under (d) in the preceding paragraph, (c) to determine the amount of bonus
awards to participants other than those listed in (d) of the preceding
paragraph, and (e) evaluate the performance or review evaluations of the
performance of eligible employees in the accomplishment of assigned objectives.
The Chairman and President may delegate any or all administrative
responsibilities delegated to them by the Committee.
All decisions, determinations and interpretations of the Committee or the
Chairman and the President or their delegees with respect to the exercise of
their respective responsibilities shall be binding on all parties concerned.
11. INDIVIDUAL ACCOUNTS. The Committee shall maintain a separate account
under the Plan for each participant. Each account shall show the amount awarded,
vested and unvested portions of awards, amounts deferred, Savings Plan
Equivalency amounts, if applicable, and amounts equivalent to interest credited
thereon.
12. FORFEITURES. Subject to Section III of this Plan, all amounts forfeited
by participants under the terms of this Plan shall revert to the Company.
13. PARTIAL PLAN YEAR IN THE EVENT OF CHANGE IN CONTROL. Notwithstanding
any other provisions of this Plan to the contrary, in the event of a Change in
Control, either Approved or Unapproved, as those terms are defined in The
Gillette Company Employees' Savings Plan or if the Company is merged, dissolved
or otherwise ceases to exist after July 1, of any plan year, the Board of
Directors or the Personnel Committee of the Board of Directors shall pay
participants awards from the Bonus Pool or Contingency Reserve, if applicable,
adjusted as follows:
The achievement of the Growth Goals for that year from the beginning of the
plan year to the happening of its first or any of the aforementioned events (the
"Partial Plan year") shall be compared against the results for the same period
of the preceding year and the bonus pool will be determined on a prorated basis
for the Partial Plan Year.
MARCH, 1998
7
<PAGE> 1
THE GILLETTE COMPANY
EXECUTIVE LIFE INSURANCE PLAN
ARTICLE 1
ESTABLISHMENT AND PURPOSE
1.1. ESTABLISHMENT. This Plan was established January 1, 1988 and amended
July 1, 1990. The Plan as set forth herein, unless otherwise stated, is
effective and applicable only for participants terminating active employment or
retiring on or after July 1, 1990.
1.2. PURPOSE. The purpose of the Plan is to provide life insurance
protection under a split-dollar arrangement as a benefit to certain executive
employees of the Employer, in order to encourage such employees to continue
their employment with the Employer, to reward such employees for their service
with the Employer, and to induce desirable persons to enter into the Employer's
employ in the future. The Plan amends the Prior Plan and the life insurance
policies thereunder to replace the life insurance protection provided to a
Participant under the Prior Plan with the life insurance protection provided
under the Plan.
ARTICLE 2
DEFINITIONS
Except as otherwise provided, the following terms have the definitions
hereinafter indicated whenever used in this Plan with initial capital letters:
2.1. BASE SALARY. "Base Salary" means a Participant's annualized base
salary, exclusive of overtime, bonuses and other compensation, in effect at the
time of the Participant's death or earlier Retirement.
2.2. BENEFICIARY. "Beneficiary" means the person, persons, entity or
entities designated to be the recipient of the Participant's share of the
proceeds of a Policy in accordance with the terms of Section 5.4.
2.3. COMMITTEE. "Committee" means the Executive Life Insurance Plan
Committee, which shall be composed of the Senior Vice President-Administration
and the Treasurer of the Company.
2.4. COMPANY. "Company" means The Gillette Company, a Delaware corporation,
and its successors and assigns.
<PAGE> 2
2.5. (Section reserved for future use).
2.6. ELIGIBLE EMPLOYEE. "Eligible Employee" means an Employee who is
selected by the Committee to participate in the Plan.
2.7. EMPLOYEE. "Employee" means any person who is or was before Retirement
employed by the Employer on a regular, full-time salaried basis as an executive
employee, including officers of the Employer.
2.8. EMPLOYER. "Employer" means the Company and its subsidiaries.
2.9. ENROLLMENT AGREEMENT. "Enrollment Agreement" means the written
agreement entered into by the Company and an Eligible Employee pursuant to which
such Eligible Employee becomes a Participant in the Plan as of the date
specified in such agreement.
2.10. INSURER. "Insurer" means the insurance company that provides life
insurance coverage on a Participant under the Plan or the insurance company to
whom application for such coverage has been made.
2.11. PARTICIPANT. "Participant" means an Eligible Employee who is
participating in the Plan pursuant to an Enrollment Agreement.
2.12. PLAN. "Plan" means The Gillette Company Executive Life Insurance Plan
as set forth herein together with any and all amendments and supplements hereto.
2.13. POLICY. "Policy" means, with respect to each Employee, any policy of
individual life insurance on the Employee's life which the Employer acquires or
otherwise utilizes pursuant to Article 5 to provide benefits under the Plan.
2.14. POLICY PROCEEDS. "Policy Proceeds" means the aggregate amount payable
by the Insurer pursuant to the Policy to the Participant's Beneficiary and the
Employer upon the death of the Participant.
2.15. PRIOR PLAN. "Prior Plan" means The Gillette Company Executive Group
Life Insurance Plan which provided life insurance coverage through a group life
insurance contract issued by John Hancock Mutual Life Insurance Company.
2.16. RETIREMENT. "Retirement" means termination of an Employee's
employment with the Employer, for reasons other than death, on or after the date
the Employee reaches the Employee's earliest retirement date under a retirement
plan sponsored by the Employer.
<PAGE> 3
ARTICLE 3
PLAN RIGHTS AND OBLIGATIONS
The rights of Participants are set forth herein. Each Participant is bound
by the terms of the Plan. As a condition of participation in this Plan, an
Eligible Employee's participation in the Prior Plan and any other group life
insurance arrangement sponsored by the Employer shall terminate as of the date
specified in the Eligible Employee's Enrollment Agreement on which the Eligible
Employee becomes a Participant in the Plan.
ARTICLE 4
AMOUNT OF COVERAGE
4.1. PRE-RETIREMENT COVERAGE. The amount of life insurance coverage to be
provided to a Participant while the Participant continues to be employed by the
Employer shall be equal to four times the Participant's Base Salary (coverage
rounded up, if necessary, to the next $1,000), subject to a minimum of $600,000
and a maximum of $2,000,000.
4.2. POST-RETIREMENT COVERAGE. The amount of life insurance coverage to be
provided to a Participant after the Participant's Retirement shall be equal to
the Participant's Base Salary (coverage rounded up, if necessary to the next
$1,000), subject to a minimum of $150,000 and a maximum of $500,000.
4.3. TERMINATION OF PARTICIPATION AND COVERAGE: REPAYMENT OF PREMIUMS.
Termination of a Participant's participation hereunder will occur upon any of
the following events: (1) termination of the Plan, (2) failure of the
Participant (or, in the case of an assignment pursuant to Section 5.5, the
Participant's assignee) to pay contributions required under Section 7.1 within
the time prescribed by the Committee, or (3) termination of the Participant's
employment with the Employer for reasons other than the Participant's death or
Retirement. Thereafter, the Participant shall have no life insurance coverage
under the Plan. Notwithstanding Sections 4.1 and 4.2, the amount of a
Participant's life insurance coverage shall be limited if and to the extent
necessary to comply with the provisions of Section 7.2, concerning repayment of
premiums to the Company.
<PAGE> 4
ARTICLE 5
POLICY OWNERSHIP AND RIGHTS
5.1. INTRODUCTION. The provisions of this Article establish certain rights
and obligations of the Employer and each Participant with respect to the Policy
or Policies used to provide benefits under the Plan. The terms of this Article
shall apply separately to each Participant.
5.2. ACQUISITION OF POLICY. The Employer shall apply for a Policy or
Policies or utilize an existing Policy or Policies to provide the Participant's
benefits under the Plan. The Employer and the Participant shall take all
reasonable actions (1) to cause the Insurer to issue the Policy, and (2) to
cause the Policy to conform to the provisions of this Plan. The Policy shall be
subject to the terms and conditions of this Plan.
5.3. POLICY OWNERSHIP. The Employer shall be the sole and absolute owner of
each Policy, and may exercise all ownership rights granted to the owner thereof
by the terms of the Policy, except as may otherwise be provided herein.
5.4. BENEFICIARY DESIGNATION. The Participant shall select the Beneficiary
to receive the death benefit to which the Participant is entitled under Section
6.2 of the Plan, by specifying the same on a designation of beneficiary form
prescribed by the Committee. Upon receipt of such form, the Employer shall
execute and deliver to the Insurer the forms necessary to designate the persons
or entities selected by the Participant as the beneficiaries to receive the
death benefit to which the Participant is entitled under Section 6.2 of the
Plan. The Employer shall also be a named beneficiary in the Policy for any
remaining Policy Proceeds referred to in Section 6.2 of the Plan.
The Employer shall take all reasonable steps to cause the beneficiary
designation provisions of the Policy to conform to the provisions hereof. The
Employer shall not terminate, alter or amend the Participant's designation
without the express written consent of the Participant. The Employer shall not
be responsible for any loss or delay in transmitting the designation of
beneficiary information to the Insurer.
<PAGE> 5
A Participant who has designated a beneficiary under the Prior Plan shall
be deemed to have selected such beneficiary as the Participant's Beneficiary
under this Plan. A Participant may change his or her Beneficiary from time to
time by execution of a designation of beneficiary form as provided above.
If the Participant fails to designate a Beneficiary as provided above, or
if all designated Beneficiaries predecease the Participant or die prior to
distribution of the Participant's death benefit, then such death benefit shall
be paid to the Participant's estate (or, in the case of an assignment pursuant
to Section 5.5, to the Participant's assignee).
5.5. ASSIGNMENT. An Employee shall have the right at any time to absolutely
and irrevocably assign all of the Employee's right, title and interest in and to
this Plan and any Policy which has been or may be acquired hereunder to an
assignee. This right shall be exercisable by the execution and delivery to the
Employer of a written assignment, on a form prescribed the Committee. Upon
receipt of such written assignment executed by the Employee and duly accepted by
the assignee thereof, the Employer shall consent thereto in writing, and shall
thereafter treat the Employee's assignee as the sole owner of all of the right,
title and interest in and to this Plan and in and to any Policy which has been
or may be acquired hereunder. Thereafter, the Employee shall have no right,
title or interest in and to this Plan or any Policy which has been or may be
acquired hereunder, all such rights being vested in and exercisable only by such
assignee, and any designation of Beneficiary made by the Employee prior to such
assignment shall be null and void. If an Employee has made an assignment under
the Prior Plan, such assignment shall be effective for purposes of this Plan.
ARTICLE 6
DEATH BENEFITS
6.1. PROMPT COLLECTION. Upon the death of a Participant, the Employer with
the cooperation of the Beneficiary, shall promptly take all action necessary to
initiate payment by the Insurer of the Policy Proceeds.
6.2. DIVISION OF POLICY PROCEEDS. A death benefit equal to the amount of
life insurance coverage to which the Participant is entitled under Article 4 of
this Plan, if any, shall be paid directly from the Insurer to the Participant's
designated Beneficiary, and any remaining Policy Proceeds shall be paid to the
Employer, provided that in no event shall the portion of the Policy Proceeds
paid to the Employer be less than the amount to which the Employer is entitled
pursuant to Section 7.2.
<PAGE> 6
6.3. INTEREST ON POLICY PROCEEDS. Any interest payable by the Insurer with
respect to a Beneficiary's share of the Policy Proceeds shall be paid to the
Beneficiary and any interest payable by the Insurer with respect to the
Employer's share of the Policy Proceeds shall be paid to the Employer.
ARTICLE 7
POLICY PREMIUMS
7.1. PAYMENT OF PREMIUMS AND PARTICIPANT CONTRIBUTIONS. The Employer shall
pay the premiums on each Policy to the Insurer on or before the due date or
within the grace period provided therein. Each Participant shall be required to
make contributions to the Plan in accordance with and to the extent required by
the schedule attached hereto as Appendix I, which schedule may be changed from
time to time by the Committee. The Employer shall collect any such contributions
from the Participant through payroll deductions or, if unable to do so, directly
from the Participant.
7.2. REPAYMENT TO COMPANY. The Employer shall be repaid from the Policy
Proceeds or cash surrender value of each Policy the amount of the premiums on
the Policy which the Employer paid hereunder (not including any contributions by
a Participant), reduced by the outstanding balance of any indebtedness which was
incurred by the Employer and secured by the Policy, including any interest due
on such indebtedness. Any such indebtedness shall be satisfied out of the Policy
Proceeds or cash surrender value of the Policy. In no event shall the amount
repaid to the Employer exceed the amount of the Policy Proceeds or cash
surrender value of the Policy remaining after satisfaction of any such
indebtedness.
ARTICLE 8
PLAN ADMINISTRATION
8.1. NAMED FIDUCIARY; ADMINISTRATION. The Committee is hereby designated as
the named fiduciary under this Plan. The named fiduciary shall have authority to
control and manage the operation and administration of this Plan, and it shall
be responsible for establishing and carrying out a funding policy and method
consistent with the objectives of this Plan. The Committee shall also have the
power to establish, adopt, or revise such rules, regulations, procedures and
forms as it may deem advisable for the administration of the Plan. The
interpretation and construction of the Plan by the Committee and
<PAGE> 7
any action taken thereunder, shall be binding and conclusive upon all parties in
interest. No member of the Committee shall, in any event, be liable to any
person for any action taken or omitted to be taken in connection with the
interpretation, construction or administration of the Plan, so long as such
action or omission to act is made in good faith. (Members of the Committee shall
be eligible to participate in the Plan while serving as members of the
Committee, but a member of the Committee shall not vote or act upon any matter
that relates solely to such member's interest in the Plan as a Participant.)
8.2. DETERMINATION OF BENEFITS. The Committee shall make all determinations
concerning eligibility to participate, rights to benefits, the amount of
benefits, and any other question under this Plan. Any decision by the Committee
denying a claim by a Participant or Beneficiary for benefits under this Plan
shall be stated in writing and delivered or mailed to the Participant or
Beneficiary. Such decision shall set forth the specific reasons for the denial
written in a manner calculated to be understood by the Participant or
Beneficiary. In addition, the Committee shall afford a reasonable opportunity to
the Participant or Beneficiary for a full and fair review of the decision
denying such claim.
ARTICLE 9
MISCELLANEOUS
9.1. NO CONTRACT OF EMPLOYMENT. Nothing contained herein shall be construed
to be a contract of employment for any term of years, nor as conferring upon an
Employee the right to continue in the employ of the Company in any capacity.
9.2. AMENDMENT AND TERMINATION OF PLAN. The Company, through action of the
Personnel Committee of its Board of Directors, may, in its sole discretion,
amend or terminate the Plan in whole or in part at any time. In addition,
without limiting the foregoing, the Committee shall have the power to amend the
Plan on behalf of the Company where such amendment would not result in a
material increase in the cost of the Plan for the Company. The Plan will also
terminate, without notice, upon the total cessation of the business of the
Company or upon the bankruptcy, receivership or dissolution of the Company.
9.3. CONFLICTING PROVISIONS. In the event of a conflict between the
provisions of this Plan and the provisions of any collateral assignment,
beneficiary designation or other document related to a Policy, the provisions of
the Plan shall prevail.
<PAGE> 8
9.4. NOTICE. Any notice, consent, or demand required or permitted to be
given under the provisions of this Plan shall be in writing, and shall be signed
by the party giving or making the same. If such notice, consent, or demand is
mailed, it shall be sent by United States certified mail, postage prepaid,
addressed to such party's last known address as shown on the records of the
Company. If notice, consent or demand is sent to the Company, it shall be sent
to Senior Vice President of Administration, Prudential Tower Building, 39th
Floor, Boston, MA 02199. The date of such mailings shall be deemed the date of
notice, consent, or demand. Either party may change the address to which notice
is to be sent by giving notice of the change of address in the manner aforesaid.
9.5. GOVERNING LAW. This Plan shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
9.6. GENDER, SINGULAR AND PLURAL. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, or neuter, as the identity
of the person or persons may require. As the context may require, the singular
may be read as the plural and the plural as the singular.
9.7. CAPTIONS. The captions of the articles, sections, and paragraphs of
this Plan are for convenience only and shall not control or affect the meaning
or construction of any of its provisions.
9.8. VALIDITY. In the event any provision of this Plan is held invalid,
void, or unenforceable, the same shall not affect, in any respect whatsoever,
the validity of any other provision of this Plan.
9.9. BINDING EFFECT. This Plan shall be binding upon, and inure to the
benefit of the Employer and its successors and assigns, and the Participants and
their successors, assigns, heirs, executors, administrators and beneficiaries.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed on
behalf of the Company by its officer thereunto duly authorized, effective as of
the date and year first above written.
THE GILLETTE COMPANY
By: /s/ Lloyd B. Swain
Title: Vice President and Treasurer
Date: March 13, 1992
<PAGE> 9
THE GILLETTE COMPANY
EXECUTIVE LIFE INSURANCE PLAN
APPENDIX I
PARTICIPANT CONTRIBUTION SCHEDULE
A Participant who receives pre-retirement coverage must make contributions
with respect to the portion of such coverage equal to two times Base Salary up
to $250,000, in accordance with the following table:
<TABLE>
<CAPTION>
MONTHLY CONTRIBUTION RATE
AGE OF PARTICIPANT PER $1,000 OF COVERAGE
------------------------ -------------------------
<S> <C>
Under 30 $.06
Age 30, but less than 35 .07
Age 35, but less than 40 .08
Age 40, but less than 45 .10
Age 45, but less than 50 .19
Age 50, but less than 55 .32
Age 55, but less than 60 .42
Age 60, but less than 65 .50
Age 65 to 70 .56
</TABLE>
Changes in the monthly contribution rate to reflect changes in a
Participant's age will become effective on the first day of the month following
the Participant's birthday.
-10-
<PAGE> 10
AMENDMENTS TO THE GILLETTE COMPANY
EXECUTIVE LIFE INSURANCE PLAN
----------------------------------
The Gillette Company Executive Life Insurance Plan, as amended and restated
effective as of July 1, 1990, is hereby amended in accordance with Section 9.2
thereof, effective as of January 1, 1996, in the following respects:
1. The final sentence of Section 4.3 is deleted in its entirety.
2. Section 6.2 is amended to read as follows:
"6.2. DIVISION OF POLICY PROCEEDS. A death benefit equal to the amount
of life insurance coverage to which the Participant is entitled under
Article 4 of this Plan, if any, shall be paid directly from the Insurer to
the Participant's designated Beneficiary, and any remaining Policy Proceeds
shall be paid to the Employer."
3. Article 6 is amended by adding at the end thereof the following new Section
6.4:
"6.4. ADDITIONAL PAYMENT IF INSUFFICIENT POLICY PROCEEDS. In the event
that, at the time of a Participant's death, the aggregate Policy Proceeds
on Policies covering the Participant, reduced by the outstanding balance of
any indebtedness incurred by the Employer and secured by the Policies
(including any interest due on such indebtedness), is less than the amount
of life insurance coverage to which the participant is entitled under
Article 4, the Employer shall pay directly to the designated Beneficiary an
additional amount equal, on an after-tax basis, to the excess of such life
insurance coverage over the available Policy Proceeds."
4. Section 7.2 is amended to read as follows:
"7.2. RECOVERY BY EMPLOYER. The Employer shall receive from the Policy
Proceeds of each Policy the amount thereof reduced by (i) the amount of
life insurance coverage paid from such Policy to the designated Beneficiary
pursuant to Section 6.2, and (ii) the outstanding balance of any
indebtedness incurred by the Employer and secured by the Policy (including
any interest due on such indebtedness). In the event that, prior to the
death of the Participant covered by a Policy, the Employer surrenders the
Policy to the Insurer, the Employer shall receive the entire cash surrender
value of the Policy reduced by (i) the outstanding balance of any
indebtedness incurred by the Employer and secured by the Policy (including
any interest due on such indebtedness), and (ii) the amount, if any,
transferred into another Policy."
This Amendment has been executed this 18th day of March, 1996, on behalf of The
Gillette Company Executive Life Insurance Plan Committee by its duly authorized
member, effective as of the date and year first above written.
THE GILLETTE COMPANY EXECUTIVE
LIFE INSURANCE PLAN COMMITTEE
By: /s/ Lloyd B. Swain
--------------------
<PAGE> 11
AMENDMENTS TO THE GILLETTE COMPANY
EXECUTIVE LIFE INSURANCE PLAN
----------------------------------
The Gillette Company Executive Life Insurance Plan, as amended and restated
effective as of July 1, 1990, is hereby amended in accordance with Section 9.2
thereof, effective as of January 1, 1997, in the following respects:
1. Section 2.7 is amended to read as follows:
"2.7. EMPLOYEE. 'Employee' means any person who is or was before
Retirement employed by the Employer as an executive employee and satisfied
the job grade, officer status, employment status and/or other eligibility
criteria, as set forth in Appendix II."
2. The following schedule shall be attached to the Plan as Appendix II:
"APPENDIX II
"ELIGIBILITY REQUIREMENTS FOR PARTICIPATION
"GRADE LEVEL/OFFICER STATUS: Grade 25 or above, or holding any of the
following By-Law officer positions in The Gillette Company: Chairman of the
Board, Chief Executive Officer, President, Vice Chairman of the Board,
Executive Vice President, Senior Vice President, Vice President, Internal
Auditor, Patent and Trademark Counsel, or Secretary.
"EMPLOYMENT STATUS: Full-time employee who is generally treated by The
Gillette Company as a United States employee for employment and benefit
purposes."
3. The foregoing amendments shall not adversely affect the participation, or
eligibility for continued participation, of any employee who was a
Participant in this Plan as of December 31, 1996.
This Amendment has been executed this 24th day of September, 1997, on behalf of
The Gillette Company Executive Life Insurance Plan Committee by its duly
authorized member, effective as of the date and year first above written.
THE GILLETTE COMPANY EXECUTIVE
LIFE INSURANCE PLAN COMMITTEE
By: /s/ Robert E. DiCenso
------------------------
<PAGE> 1
EXHIBIT 10(1)
THE GILLETTE COMPANY
ESTATE PRESERVATION PLAN
(EFFECTIVE JANUARY 1, 1993 (REVISED))
1. PURPOSE. Effective January 1, 1993, The Gillette Company has adopted The
Gillette Company Estate Preservation Plan for the purpose of providing eligible
executive employees of the Company and its subsidiaries and affiliates the
opportunity to purchase life insurance covering the lives of the employee and
his or her spouse, if any, and providing a death benefit upon the second to die
of the employee and such spouse (or upon the death of the employee if there is
no spouse).
2. DEFINITIONS. When used herein, the following terms shall have the
respective meaning ascribed to them below. Terms expressed in the singular shall
be construed to include the plural, and terms expressed in the masculine shall
be construed to include the feminine unless the context plainly indicates
otherwise.
(a) "Active at Work" means performing all duties of regular employment at
the customary place of employment, and not absent due to illness or medical
treatment for more than 5 consecutive working days in the previous 3
months.
(b) "Beneficiary" means the person(s) or entity(ies) designated by the
Owner of the Policy, to whom the death benefit provided for under such
Policy shall be paid in accordance with Section 10.
(c) "Collateral-Assignment" means the Collateral-Assignment executed by
the Owner in favor of the Company with respect to the Company's interest in
the Policy. A specimen form of Collateral-Assignment is annexed hereto and
made a part hereof.
(d) "Committee" means the Personnel Committee of the Board of Directors
of the Company.
(e) "Company" means The Gillette Company, a Delaware corporation.
(f) "Effective Date" means January 1, 1993.
(g) "Eligible Executive" means an executive employee of the Company or
one of its subsidiaries or affiliates who is designated as being eligible
to participate in the Plan in accordance with Section 3.
(h) "Initial Enrollment Date" shall mean the first day of the month
following an individual's designation as an Eligible Executive, but no
earlier than the Effective Date.
(i) "Insureds" means the Participant and his or her lawful spouse on the
relevant date.
(j) "Insurer" means the insurance company that issues the Policy under
the Plan.
<PAGE> 2
-2-
(k) "Owner" means the Participant, the Insureds or such other person(s)
or entity(ies) designated by the Participant to be the owner of the Policy.
(i) "Participant" means an Eligible Executive who elects to participate
in the Plan and who satisfies the conditions for enrollment as set forth in
Section 4.
(m) "Plan" means The Gillette Company Estate Preservation Plan as set
forth herein, as it may be modified from time to time hereafter.
(n) "Plan Administrator" means the Senior Vice President - Personnel and
Administration of the Company or such other officer of the Company
designated bv the Committee to administer the Plan.
(o) "Plan Year" means the calendar year.
(p) "Policy" means the insurance policy issued by the Insurer to the
Owner pursuant to the terms of the Plan.
(q) "Policy Date" means the effective date of a Policy. The Policy Date
with respect to any Policy may be a January 1 or July 1. The Policy Date
with respect to Policies issued during the initial enrollment period shall
be January 1, 1993.
(r) "Policy Year" means each 12-consecutive month period designated as
such in a Policy. The first Policy Year with respect to a Policy shall
commence on the applicable Policy Date.
(s) "Split Dollar Agreement" means the Split Dollar Agreement executed by
the Owner, the Eligible Executive and the Company with respect to the
Company's interest in the Policy. A specimen form of Split Dollar Agreement
is annexed hereto and made a part hereof.
3. ELIGIBILITY. The Eligible Executives shall be those executive employees of
the Company and its subsidiaries and affiliates who are designated by the Plan
Administrator as eligible under this Plan based upon their job grade, officer
status, employment status or other eligibility criteria, as set forth in Exhibit
A hereto.
The Plan does not constitute a contract of employment or a promise of continuing
employment, and nothing in the Plan shall interfere with the right of the
Company and its subsidiaries and affiliates to terminate the employment of any
employee at any time.
4. ENROLLMENT IN PLAN. An Eligible Executive shall enroll in the Plan, and
thereby become a Participant hereunder, by (i) completing an application to
participate in the Plan, (ii) designating the Owner of the Policy to be
purchased, (iii) completing the documents and instruments furnished by the
Insurer for underwriting purposes, (iv) if applicable, causing his or her spouse
to complete the documents and instruments furnished by the Insurer, and to
submit to a medical examination, for underwriting purposes, (v) executing, and
if applicable causing his or her spouse to
<PAGE> 3
-3-
execute, the Split-Dollar Agreement and such other documents and instruments
deemed necessary or desirable by the Company, and (vi) causing the Owner of the
Policy to designate a Beneficiary and to execute the Split-Dollar Agreement,
Collateral-Assignment and such other documents and instruments deemed necessary
or desirable by the Insurer or the Company.
If an Eligible Executive elects to enroll when first eligible under the Plan and
meets the Insurer's Active at Work test, and the Initial Enrollment Date is
other than a Policy Date, the Company in its discretion may provide for
temporary coverage during the period between the Initial Enrollment Date and the
Policy Date, through a policy underwritten by the Insurer on the life of the
Eligible Executive and, upon the submission and approval by the Insurer of all
application material, the joint lives of the Insureds.
If an Eligible Executive initially declines to participate in the Plan, and
later elects to enroll in the Plan, the Company in its discretion may provide
for temporary coverage until the Eligible Executive's Policy Date, subject to
the Insurer's limitations on underwriting such coverage.
5. AMOUNT OF COVERAGE. The death benefit coverage that may be purchased under
a Policy shall be the amount specified in Exhibit A hereto ("Coverage").
6. COST OF COVERAGE. The cost of the Coverage under a Policy for each Policy
Year shall be determined by the Insurer based upon the assumptions and
guidelines agreed to by the Insurer and the Company. It is the Company's intent
that differences in the cost of the Coverage for each of the Participants
covered by Policies having the same Policy Date shall be attributable solely to
the respective attained ages of the Insureds on such Policy Date, provided that
the Participant elected to enroll when first eligible under the Plan and met the
Insurer's Active at Work test.
The portions of the cost of the Coverage under each Policy to be paid by each of
the Owner thereof and the Company shall be determined in accordance with the
terms of the related Split-Dollar Agreement and Collateral-Assignment, based
upon the assumptions and guidelines set forth in Exhibit A hereto.
7. PURCHASE OF POLICIES. The Policies shall be purchased by each Owner from
the Insurer designated by the Company. The Company shall take all reasonable
steps necessary to enable the Insurer to issue the Policies in conformance with
the terms of this Plan. Each Owner shall be the sole and absolute owner of the
Policy purchased by such Owner and may exercise all ownership rights granted by
the terms of the Policy, subject to the terms of the related Split-Dollar
Agreement and Collateral-Assignment.
The benefit provided under the Plan is the opportunity for a Participant or
designated Owner to purchase and own the Policy under the terms and conditions
set forth therein. The actual benefits to be derived from ownership of the
Policy are not guaranteed by the Company, the Plan Administrator or the Insurer
(other than payment by the Insurer of the specified death benefit proceeds upon
the death of the survivor of the Insureds in accordance with the terms of the
Policy and any cash value increases as and when credited by the Insurer under
the Policy). Neither the Company nor the Plan
<PAGE> 4
-3-
Administrator guarantees any specific level or rate of cash value accumulation
under any Policy purchased under the Plan.
8. PAYMENT OF PREMIUMS. While the related Split-Dollar Agreement remains in
effect, the Company shall remit to the Insurer the total premium due under the
Policy for each Policy Year, which shall include the amount of the Company's
contribution toward premium as set forth in the Split-Dollar Agreement. The
Owner (or the Participant on behalf of the Owner) shall remit to the Company the
balance of the premium due under the Policy for such Policy Year, in such manner
and at such time or times as the Company and the Owner shall agree. In the event
that the Owner (or the Participant on behalf of the Owner) fails to remit any
amount due the Company for any Policy Year, the Company shall be deemed to have
paid such amount for its own account in determining the Company's interest in
the Policy pursuant to the related Split-Dollar Agreement and
Collateral-Assignment.
Following the termination of the Split-Dollar Agreement while either or both of
the Insureds are alive, the Owner shall be responsible for payment to the
Insurer of the total premium due (if any) under the Policy for each Policy Year
thereafter.
9. COMPANY INTEREST IN POLICY. As a condition to a Participant's enrollment in
the Plan, the Participant and his or her designated Owner with respect to the
Policy shall execute a Split-Dollar Agreement and the Owner shall execute a
Collateral-Assignment, which documents shall establish the rights of the Company
with respect to the death benefit proceeds and cash value under the Policy. The
terms of the particular Split-Dollar Agreement and Collateral-Assignment
executed by a Participant and related Owner shall apply solely to such
Participant and Owner.
At any time while the Split-Dollar Agreement is in effect, the Company's
interest in each Policy shall be equal to the Company's cumulative contributions
toward the premium under the Policy, including amounts deemed to have been paid
for the Company's account in accordance with the terms of the Split-Dollar
Agreement. Following the termination of the Split-Dollar Agreement, the Company
shall receive from the Insurer the amount of the Company's cumulative
contributions toward the premium under the Policy and, upon receipt of such
amount, the Company shall have no further interest in or responsibility for the
Policy. In the event that, upon the termination of the Split-Dollar Agreement,
there is insufficient cash value under the Policy to satisfy the Company's
interest therein, the Company shall have the right to receive the cash value or
death benefit proceeds available at such time and any additional amounts
available under the Policy thereafter (up to the dollar amount of the Company's
remaining interest), and neither the Insureds nor the Owner shall have any
liability to the Company for the unpaid balance (other than to the extent of
amounts mistakenly received under the Policy prior to full satisfaction of the
Company's interest):
The Split-Dollar Agreement and Collateral-Assignment shall contain provisions
implementing the foregoing paragraphs of this Section and such other provisions,
including limitations on the Owner's rights and benefits under the Policy, as
the Company determines to be necessary or desirable in order to secure and
protect its interest in the Policy. Anything contained herein to the contrary
notwithstanding, the Owner shall at all times have the right to cancel or
surrender the Policy and thereby terminate the related Split-Dollar Agreement.
<PAGE> 5
-5-
10. PAYMENT OF DEATH BENEFIT. Subject to the terms of the related Split-Dollar
Agreement and Collateral-Assignment, the death benefit payable under a Policy
upon the death of the survivor of the Insureds shall be paid to the Beneficiary
in such form and at such time or times as the Beneficiary may elect in
accordance with the terms of the Policy.
11. SOURCE OF BENEFITS. Any benefit payable to or on account of a Participant
under this Plan shall be paid by the Insurer in accordance with the Policy and,
if applicable, the related Split-Dollar Agreement and Collateral Assignment.
12. NON-ALIENATION OF BENEFITS. Except to the extent provided in the Policy and
the related Split-Dollar Agreement and Collateral-Assignment, the benefits
provided under this Plan may not be assigned or alienated and shall not be
subject to attachment, garnishment or other legal or equitable process.
13. ADMINISTRATION. The Plan Administrator shall be the named fiduciary under
the Plan, and shall have the discretionary authority to control and manage the
operation and administration of the Plan, including but not limited to the power
to construe and interpret the provisions of the Plan, to determine the
eligibility of employees to participate in the Plan and the benefit entitlements
of Participants, and to establish rules and procedures (and to amend, modify or
rescind the same) for the administration of the Plan. The Plan Administrator may
delegate ministerial duties to other employees of the Company and to third
parties. The Plan Administrator shall be eligible to participate in the Plan but
shall not act upon any matter that relates solely to his interest in the Plan as
a Participant.
The Plan Administrator shall make all determinations concerning a Participant's
entitlement to benefits under the Plan. If a Participant believes that he has
been denied a benefit under the Plan to which he is entitled, the Participant
may file a written request for such benefit with the Plan Administrator, setting
forth his claim. Any decision by the Plan Administrator denying a claim for
benefits by a Participant shall be set forth in writing specifying the reasons
for the denial in a manner calculated to be understood by the Participant and
advising the Participant of his or her right to obtain a review of such
decision. Participants may request a review of any decision denying a benefit
claim by filing a request for such in writing to the Plan Administrator within
60 days of the Participant's receipt of the denial of his claim, otherwise he
shall be barred and estopped from challenging such claim denial. The Plan
Administrator shall conduct a full and fair review of the request for review and
the underlying claim and shall render a decision thereon in writing, generally
within 60 days of receiving the Participant's request for review (but may extend
the period for rendering a decision to 120 days if special circumstances warrant
the extension). The interpretation and construction of the Plan by the Plan
Administrator, and any action taken thereunder, shall be binding and conclusive
upon all persons and entities claiming to have an interest under the Plan.
The Plan Administrator shall not be liable to any person for any action taken or
omitted to be taken in connection with the interpretation, construction or
administration of the Plan provided that such action or omission is made in good
faith.
<PAGE> 6
-6-
14. NOTICES. Any notice or document required to be given to or filed with the
Company or the Plan Administrator shall be deemed given or filed if delivered by
certified or registered mail, return receipt requested, to such party's
attention at the Company's offices, Prudential Tower Building, Boston,
Massachusetts 02199.
15. AMENDMENT AND TERMINATION. The Plan may be amended or terminated at any
time and from time to time, in whole or in part, by the Plan Administrator;
provided, how, ever, that any amendment that would materially increase the cost
of the Plan to the Company or would result in a material change in the nature of
the benefits provided under the Plan, or any termination of the Plan, shall not
be effective without the approval of the Committee. No such amendment or
termination shall adversely affect the rights of any Participant (without his or
her consent) under any Policy theretofore issued pursuant to the Plan or any
related Split-Dollar Agreement and Collateral-Assignment theretofore entered
into.
16. VALIDITY. In the event any provision of the Plan is held invalid, void or
unenforceable, the same shall not affect in any respect the validity of the
remaining provisions of the Plan.
17. GOVERNING DOCUMENTS. In the event of any inconsistency between the terms of
the Plan set forth herein and the terms of any Policy purchased with respect to
a Participant or the related Split-Dollar Agreement or Collateral-Assignment,
the terms of such Policy or agreement shall be controlling as to that
Participant, his or her spouse, the designated Owner and Beneficiary, and any
assignee or successor-in-interest of any of the foregoing persons.
18. APPLICABLE LAW. The provisions of the Plan shall be construed and
administered in accordance with the laws of the Commonwealth of Massachusetts,
except to the extent superseded by applicable Federal law.
THE GILLETTE COMPANY
By: /s/ Robert E. DiCenso
---------------------------------
Robert E. DiCenso
Senior Vice President - Personnel and
Administration
Date: 4/9/97
<PAGE> 7
-7-
THE GILLETTE COMPANY ESTATE PRESERVATION PLAN
EXHIBIT A
- ---------
ELIGIBILITY REQUIREMENTS FOR PARTICIPATION
Grade Level/Officer Status: Grade 25 or above, or holding any of the following
By-Law officer positions in The Gillette Company: Chairman of the Board,
Chief Executive Officer, President, Vice Chairman of the Board, Executive
Vice President, Senior Vice President, Vice President, Internal Auditor,
Patent and Trademark Counsel, or Secretary.
Employment Status: Full-time employee who is generally treated by The Gillette
Company as a United States employee for employment and benefit purposes.
AMOUNT OF COVERAGE
$1,000,000 face amount per Participant and spouse
$500,000 face amount per unmarried Participant
COMPANY/OWNER PORTIONS OF POLICY PREMIUM
The respective portions of the annual premium due under a Policy to be paid by
each of the Company and the Owner initially shall be determined at the inception
of the Policy on the basis that (1) the Company shall make five equal annual
payments commencing on the Policy Date and each anniversary thereof, (2) the
Owner shall make fifteen equal annual payments commencing on the Policy Date and
each anniversary thereof, and (3) for Participants who enroll when first
eligible under the Plan, the present value (determined as of the Policy Date
using a 7.5% pre-tax/4.5% post-tax per annum discount rate) of the cumulative
payments to be made by each of the Company and the Owner shall be the same. Any
or all of the above guidelines may be adjusted at the Company's discretion for
Participants who do not enroll when first eligible or do not meet the Insurer's
Active at Work test.
The amount of the Company's contribution toward the annual premium under a
Policy shall not change unless agreed to by the Company in writing. The amount
of the Owner's portion of the annual premium due under a Policy may change from
year to year in accordance with the terms of the Policy and the related
Split-Dollar Agreement.
MANNER OF PAYMENT OF OWNER PORTION OF PREMIUM
The Owner's portion of the premium due under the Policy shall be paid to the
Company either (1) in a single lump sum at the beginning of each Policy Year
upon advance notification by the Company or (2) by payroll deduction from the
Participant's regular salary, as shall be elected by the Participant.
<PAGE> 8
-8-
ATTACHMENTS
- -----------
Specimen form of Split-Dollar Agreement
Specimen form of Collateral-Assignment
Specimen form of Certification of Trustee(s) and Proposed Insureds
<PAGE> 1
EXHIBIT 10(p)
COMPOSITE CONFORMED COPY
$1,000,000,000
364-DAY CREDIT AGREEMENT
dated as of
December 20, 1996
and amended and restated as of October 20, 1997
among
The Gillette Company,
The Banks Listed Herein
and
Morgan Guaranty Trust Company of New York,
as Agent
------------------------
J.P. Morgan Securities Inc.,
Arranger
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TABLE OF CONTENTS*
PAGE
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions .......................................... 1
SECTION 1.02. Accounting Terms and Determinations...................13
SECTION 1.03. Types of Borrowings...................................13
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend . ................................14
SECTION 2.02. Notice of Committed Borrowing.........................14
SECTION 2.03. Money Market Borrowings...............................14
SECTION 2.04. Notice to Banks; Funding of Loans.....................19
SECTION 2.05. Notes ................................................20
SECTION 2.06. Maturity of Loans.....................................20
SECTION 2.07. Interest Rates........................................21
SECTION 2.08. Facility Fee..........................................24
SECTION 2.09. Termination or Reduction of Commitments...............25
SECTION 2.10. Scheduled Termination of Commitments..................25
SECTION 2.11. Optional Prepayments..................................25
SECTION 2.12. General Provisions as to Payments.....................26
SECTION 2.13. Funding Losses .......................................26
SECTION 2.14. Computation of Interest and Fees......................27
SECTION 2.15. Judgment Currency.....................................27
SECTION 2.16. Foreign Withholding Taxes and Other Costs.............28
SECTION 2.17. Regulation D Compensation ............................28
SECTION 2.18. Withholding Tax Exemption.............................29
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness ........................................30
SECTION 3.02. Borrowings ...........................................31
*The Table of Contents is not a part of this Agreement.
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PAGE
SECTION 3.03. First Borrowing by Each Eligible Subsidiary...........32
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Existence and Power.........................32
SECTION 4.02. Corporate and Governmental Authorization;
Contravention.........................................33
SECTION 4.03. Binding Effect........................................33
SECTION 4.04. Financial Information.................................33
SECTION 4.05. No Material Adverse Change............................34
SECTION 4.06. Compliance with ERISA.................................34
SECTION 4.07. Litigation............................................34
SECTION 4.08. Taxes.................................................34
SECTION 4.09. Full Disclosure.......................................35
ARTICLE V
COVENANTS
SECTION 5.01. Information...........................................35
SECTION 5.02. Maintenance of Property; Insurance....................37
SECTION 5.03. Conduct of Business and Maintenance of
Existence ............................................38
SECTION 5.04. Compliance with Laws..................................38
SECTION 5.05. Earnings to Interest Expense Ratio....................38
SECTION 5.06. Negative Pledge ......................................38
SECTION 5.07. Consolidations, Mergers and Sales of Assets...........39
SECTION 5.08. Material Subsidiary Cash Flow.........................40
SECTION 5.09. Use of Proceeds.......................................40
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default.....................................40
SECTION 6.02. Notice of Default.....................................43
ARTICLE VII
THE AGENT
SECTION 7.01. Appointment and Authorization.........................43
SECTION 7.02. Agent and Affiliates..................................43
SECTION 7.03. Action by Agent.......................................43
SECTION 7.04. Consultation with Experts.............................43
SECTION 7.05. Liability of Agent....................................44
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PAGE
SECTION 7.06. Indemnification.......................................44
SECTION 7.07. Credit Decision.......................................44
SECTION 7.08. Successor Agent.......................................45
SECTION 7.09. Agent's Fee...........................................45
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair..................................45
SECTION 8.02. Illegality............................................46
SECTION 8.03. Increased Cost and Reduced Return.....................47
SECTION 8.04. Base Rate Loans Substituted for Affected
Fixed Rate Loans......................................49
ARTICLE IX
REPRESENTATIONS AND WARRANTIES
OF ELIGIBLE SUBSIDIARIES
SECTION 9.01. Corporate Existence and Power.........................50
SECTION 9.02. Corporate and Governmental Authorization;
Contravention.........................................50
SECTION 9.03. Binding Effect........................................50
SECTION 9.04. Taxes.................................................50
ARTICLE X
GUARANTY
SECTION 10.01. The Guaranty..........................................51
SECTION 10.02. Guaranty Unconditional................................51
SECTION 10.03. Discharge Only Upon Payment In Full;
Reinstatement In Certain Circumstances................52
SECTION 10.04. Waiver by the Company ................................52
SECTION 10.05. No Subrogation .......................................52
SECTION 10.06. Stay of Acceleration .................................53
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices................................................53
SECTION 11.02. No Waivers.............................................53
SECTION 11.03. Expenses; Indemnification..............................54
SECTION 11.04. Sharing of Set-Offs....................................54
SECTION 11.05. Amendments and Waivers.................................55
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PAGE
SECTION 11.06. Successors and Assigns.............................55
SECTION 11.07. Collateral.........................................57
SECTION 11.08. Governing Law; Submission to Jurisdiction;
Service of Process.................................57
SECTION 11.09. Counterparts; Integration..........................58
SECTION 11.10. WAIVER OF JURY TRIAL...............................58
Commitment Schedule
Exhibit A - Note
Exhibit B - Money Market Quote Request
Exhibit C - Invitation for Money Market Quotes
Exhibit D - Money Market Quote
Exhibit E - Opinion of Counsel for the Company
Exhibit F - Opinion of Special Counsel for the Agent
Exhibit G - Form of Election to Participate
Exhibit H - Form of Election to Terminate
Exhibit I - Opinion of Counsel for the Borrower
(Borrowings by Eligible Subsidiaries)
Exhibit J - Assignment and Assumption Agreement
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CREDIT AGREEMENT
AGREEMENT dated as of December 20, 1996 among THE GILLETTE COMPANY, the
BANKS listed on the signature pages hereof and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. The following terms, as used herein, have the
following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes setting
forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Administrative Questionnaire" means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent duly completed by such Bank.
"Agent" means Morgan Guaranty Trust Company of New York in its capacity as
agent for the Banks hereunder, and its successors in such capacity.
"Applicable Lending Office" means, with respect to any Bank, (i) in the
case of its Domestic Loans, its Domestic Lending Office, (ii) in the case of its
Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case of its
Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 11.06(c).
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"Bank" means each bank listed on the signature pages hereof, each Assignee
which becomes a Bank pursuant to Section 11.06(c), and their respective
successors.
"Base Rate" means, for any day, a rate per annum equal to the higher of (i)
the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal Funds
Rate for such day.
"Base Rate Loan" means a Committed Loan to be made by a Bank as a Base Rate
Loan in accordance with the applicable Notice of Committed Borrowing or pursuant
to Article VIII.
"Benefit Arrangement" means at any time an employee benefit plan within the
meaning of Section 3(3) of ERISA which is not a Plan or a Multiemployer Plan and
which is maintained or otherwise contributed to by any member of the ERISA Group
and not excepted by Section 4(b) of ERISA.
"Borrower" means the Company or any Eligible Subsidiary, as the context may
require, and their respective successors, and "Borrowers" means all of the
foregoing.
"Borrowing" has the meaning set forth in Section 1.03.
"CD Base Rate" has the meaning set forth in Section 2.07(b) .
"CD Loan" means a Committed Loan to be made by a Bank as a CD Loan in
accordance with the applicable Notice of Committed Borrowing.
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Reference Banks" means The First National Bank of Boston, The First
National Bank of Chicago and Morgan Guaranty Trust Company of New York.
"Commitment" means (i) with respect to each Bank listed on the Commitment
Schedule, the amount set forth opposite the name of such Bank on the Commitment
Schedule and (ii) with respect to any Assignee, the amount of the transferor
Bank's Commitment assigned to it pursuant to Section 11.06(c), in each case as
such amount may be changed from time to time pursuant to Section 2.09 or
11.06(c).
"Commitment Schedule" means the Commitment Schedule attached hereto.
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"Committed Loan" means a loan made by a Bank pursuant to Section 2.01.
"Company" means The Gillette Company, a Delaware corporation, and its
successors.
"Company's Latest Form 10-Q" means the Company's quarterly report on Form
10-Q for the quarter ended June 30, 1997, as filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934.
"Company's 1996 Form 10-K" means the Company's annual report on Form 10-K
for 1996, as filed with the Securities and Exchange Commission pursuant to the
Securities Exchange Act of 1934.
"Consolidated Assets" means at any date the consolidated assets of the
Company and its Consolidated Subsidiaries determined as of such date.
"Consolidated Earnings Before Interest and Taxes" means, for any fiscal
period, the sum of (i) Consolidated Net Income plus (ii) Gross Interest Expense
plus (iii) to the extent deducted in determining Consolidated Net Income,
provision for taxes on income, all determined on a consolidated basis for the
Company and its Consolidated Subsidiaries for such fiscal period.
"Consolidated Net Income" means, for any fiscal period, the net income
(before preferred and common stock dividends) of the Company and its
Consolidated Subsidiaries, determined on a consolidated basis for such fiscal
period.
"Consolidated Subsidiary" means at any date any Subsidiary or other entity
the accounts of which would be consolidated with those of the Company in its
consolidated financial statements if such statements were prepared as of such
date.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles, (v) all Debt of others
secured by a Lien on any asset of such Person, whether or not such Debt is
otherwise an
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obligation of such Person, and (vi) all Debt of others Guaranteed by such
Person.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions,
excluding any amounts which the Borrower is entitled to set-off against its
obligations under applicable law.
"Dollars" and the sign "$" mean lawful money of the United States of
America.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City or Boston, Massachusetts are
authorized by law to close.
"Domestic Lending Office" means, as to each Bank, its office located at its
address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office by
notice to the Company and the Agent; PROVIDED that any Bank may so designate
separate Domestic Lending Offices for its Base Rate Loans, on the one hand, and
its CD Loans, on the other hand, in which case all references herein to the
Domestic Lending Office of such Bank shall be deemed to refer to either or both
of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
"Domestic Reserve Percentage" has the meaning set forth in Section 2.07(b).
"Duracell Credit Facility" means the Second Amended and Restated Credit
Agreement dated as of March 29,
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1991, as amended, among Duracell International Inc., Duracell Inc., the
financial institutions listed on the signature pages thereof and The First
National Bank of Chicago, as agent.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 3.01.
"Election to Participate" means an Election to Participate substantially in
the form of Exhibit G hereto.
"Election to Terminate" means an Election to Terminate substantially in the
form of Exhibit H hereto.
"Eligible Subsidiary" means any Substantially-Owned Consolidated Subsidiary
of the Company as to which an Election to Participate shall have been delivered
to the Agent and as to which an Election to Terminate shall not have been
delivered to the Agent. Each such Election to Participate and Election to
Terminate shall be duly executed on behalf of such Substantially-Owned
Consolidated Subsidiary and the Company in such number of copies as the Agent
may request. The delivery of an Election to Terminate shall not affect any
obligation of an Eligible Subsidiary theretofore incurred. The Agent shall
promptly give notice to the Banks of the receipt of any Election to Participate
or Election to Terminate.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, or any successor statute.
"ERISA Group" means the Company, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
Dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office, branch or
affiliate located at its address set forth in its Administrative Questionnaire
(or identified in its Administrative Questionnaire as its Euro-Dollar Lending
Office) or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Euro-Dollar Lending Office by notice to the Company
and the Agent.
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"Euro-Dollar Loan" means a Committed Loan to be made by a Bank as a
Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"Euro-Dollar Margin" has the meaning set forth in Section 2.07(c) .
"Euro-Dollar Reference Banks" means the principal London offices of The
First National Bank of Boston, Credit Suisse and Morgan Guaranty Trust Company
of New York.
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Bank to United
States residents).
"Event of Default" has the meaning set forth in Section 6.01.
"Existing 364-Day Credit Agreement" means the 364-Day Credit Agreement
dated as of April 30, 1996, among the Company, the bank parties thereto and
Morgan Guaranty Trust Company of New York, as agent, as amended to the Effective
Date.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, PROVIDED that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
day shall be the average rate quoted to Morgan Guaranty Trust Company of New
York on such day on such transactions as determined by the Agent.
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"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money Market
Loans (excluding Money Market LIBOR Loans bearing interest at the Base Rate
pursuant to Section 8.01(ii)) or any combination of the foregoing.
"Gross Interest Expense" means, for any fiscal period, the consolidated
interest expense of the Company and its Consolidated Subsidiaries for such
period (calculated without deducting or otherwise netting consolidated interest
income of the Company and its Consolidated Subsidiaries).
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt of any other Person
and, without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Debt (whether
arising by virtue of partnership arrangements, by agreement to keep-well, to
purchase assets, goods, securities or services, to take-or-pay, or to maintain
financial statement conditions, by "comfort letter" or other similar undertaking
of support or otherwise) or (ii) entered into for the purpose of assuring in any
other manner the holder of such Debt of the payment thereof or to protect such
holder against loss in respect thereof (in whole or in part), PROVIDED that the
term Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Indemnitee" has the meaning set forth in Section ll.03(b).
"Interest Period" means: (1) with respect to each Euro-Dollar Borrowing,
the period commencing on the date of such Borrowing and ending one, two, three
or six months thereafter, as the Borrower may elect in the applicable Notice of
Borrowing; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (c) below, be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day
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in the calendar month at the end of such Interest Period) shall, subject to
clause (c) below, end on the last Euro-Dollar Business Day of a calendar
month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(2) with respect to each CD Borrowing, the period commencing on the date of such
Borrowing and ending 30, 60, 90, or 180 days thereafter, as the Borrower may
elect in the applicable Notice of Borrowing; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (b) below, be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing and ending 30 days thereafter; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (b) below, be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market LIBOR Borrowing, the period commencing on
the date of such Borrowing and ending such whole number of months thereafter as
the Borrower may elect in accordance with Section 2.03; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (c) below, be
extended to the next succeeding Euro-Dollar Business Day unless such
Euro-Dollar Business Day falls in another calendar month, in which case
such Interest Period shall end on the next preceding Euro-Dollar Business
Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day
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in the calendar month at the end of such Interest Period) shall, subject to
clause (c) below, end on the last Euro-Dollar Business Day of a calendar
month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(5) with respect to each Money Market Absolute Rate Borrowing, the period
commencing on the date of such Borrowing and ending such number of days
thereafter (but not less than 15 days) as the Borrower may elect in accordance
with Section 2.03; PROVIDED that:
(a) any Interest Period which would otherwise end on a day which is
not a Euro-Dollar Business Day shall, subject to clause (b) below, be
extended to the next succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"LIBOR Auction" means a solicitation of Money Market Quotes setting forth
Money Market Margins based on the London Interbank Offered Rate pursuant to
Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For the purposes of this Agreement, the Company or any Subsidiary shall be
deemed to own subject to a Lien any asset which it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
capital lease or other title retention agreement relating to such asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money Market Loan
and "Loans" means Domestic Loans or Euro-Dollar Loans or Money Market Loans or
any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in Section
2.07(c).
"Material Debt" means Debt (other than the Notes) of the Company and/or one
or more of its Subsidiaries, arising in one or more related or unrelated
transactions, in an aggregate principal amount exceeding $50,000,000.
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"Material Financial Obligations" means a principal amount of Debt and/or
payment obligations in respect of Derivatives Obligations of the Company and/or
one or more of its Subsidiaries, arising in one or more related or unrelated
transactions, exceeding in the aggregate $50,000,000.
"Material Plan" means at any time a Plan or Plans having aggregate Unfunded
Liabilities in excess of $S0,000,000.
"Material Subsidiary" means any Subsidiary which either (A) is an Eligible
Subsidiary or (B) has consolidated assets, together with its Subsidiaries,
exceeding 5% of Consolidated Assets at the date of determination of its status
hereunder.
"Money Market Absolute Rate" has the meaning set forth in Section 2.03(d).
"Money Market Absolute Rate Loan" means a loan to be made by a Bank
pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its Domestic Lending
Office or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Money Market Lending Office by notice to the Company
and the Agent; PROVIDED that any Bank may from time to time by notice to the
Company and the Agent designate separate Money Market Lending Offices for its
Money Market LIBOR Loans, on the one hand, and its Money Market Absolute Rate
Loans, on the other hand, in which case all references herein to the Money
Market Lending Office of such Bank shall be deemed to refer to either or both of
such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank pursuant to a
LIBOR Auction (including such a loan bearing interest at the Base Rate pursuant
to Section 8.01(ii)).
"Money Market Loan" means a Money Market LIBOR Loan or a Money Market
Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section 2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money Market Loan
in accordance with Section 2.03.
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"Multiemployer Plan" means at any time an employee pension benefit plan
within the meaning of Section 4001(a) (3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
"Notes" means promissory notes of a Borrower, substantially in the form of
Exhibit A hereto, evidencing the obligation of such Borrower to repay the Loans
made to it, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as defined in
Section 2.02) or a Notice of Money Market Borrowing (as defined in Section
2.03(f)).
"Parent" means, with respect to any Bank, any Person controlling such Bank.
"Participant" has the meaning set forth in Section 11.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an association,
a trust or any other entity or organization, including a Government or political
subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Prime Rate" means the rate of interest publicly announced by MorGan
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
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"Reference Banks" means the CD Reference Banks or the Euro-Dollar Reference
Banks, as the context may require, and "Reference Bank" means any one of such
Reference Banks.
"Refunding Borrowing" means a Committed Borrowing which, after application
of the proceeds thereof, results in no net increase in the outstanding principal
amount of Committed Loans made by any Bank to any Borrower.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Required Banks" means at any time Banks having at least 66 2/3% of the
aggregate amount of the Commitments or, if the Commitments shall have been
terminated, holding Notes evidencing at least 66 2/3% of the aggregate unpaid
principal amount of the Loans.
"Revolving Credit Period" means the period from and including the Effective
Date to but excluding the Termination Date.
"Subsidiary" means, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; unless
otherwise specified, "Subsidiary" means a Subsidiary of the Company.
"Substantially-Owned Consolidated Subsidiary" means any Consolidated
Subsidiary not less than 90% of the outstanding shares of each class of capital
stock or other ownership interests of which are at the time directly or
indirectly owned by the Company.
"Termination Date" means October 19, 1998, or, if such day is not a
Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of
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a member of the ERISA Group to the PBGC or any other Person under Title IV of
ERISA.
"United States" means the United States of America, including the States
and the District of Columbia, but excluding its territories and possessions.
SECTION 1.02. ACCOUNTING TERMS AND DETERMINATIONS. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with
generally accepted accounting principles as in effect from time to time, applied
on a basis consistent (except for changes concurred in by the Company's
independent public accountants) with the most recent audited consolidated
financial statements of the Company and its Consolidated Subsidiaries delivered
to the Banks; PROVIDED that, if the Company notifies the Agent that the Company
wishes to amend any covenant in Article V to eliminate the effect of any change
in generally accepted accounting principles on the operation of such covenant
(or if the Agent notifies the Company that the Required Banks wish to amend
Article V for such purpose), then the Company's compliance with such covenant
shall be determined on the basis of generally accepted accounting principles in
effect immediately before the relevant change in generally accepted accounting
principles became effective, until either such notice is withdrawn or such
covenant is amended in a manner satisfactory to the Company and the Required
Banks.
SECTION 1.03. TYPES OF BORROWINGS. The term "Borrowing" denotes the
aggregation of Loans of one or more Banks to be made to a single Borrower
pursuant to Article II on a single date and for a single Interest Period.
Borrowings are classified for purposes of this Agreement either by reference to
the pricing of Loans comprising such Borrowing (E.G., a "Euro-Dollar Borrowing"
is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions
of Article II under which participation therein is determined (I.E., a
"Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks
participate in proportion to their Commitments, while a "Money Market Borrowing"
is a Borrowing under Section 2.03 in which the Bank participants are determined
on the basis of their bids in accordance therewith).
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ARTICLE II
THE CREDITS
SECTION 2.01. COMMITMENTS TO LEND. During the Revolving Credit Period each
Bank severally agrees, on the terms and conditions set forth in this Agreement,
to make loans to the Company or any Eligible Subsidiary pursuant to this Section
from time to time in amounts such that the aggregate principal amount of
Committed Loans by such Bank at any one time outstanding to all Borrowers shall
not exceed the amount of its Commitment. Each Borrowing under this Section shall
be in an aggregate principal amount of $15,000,000 or any larger multiple of
$1,000,000 (except that any such Borrowing may be in the aggregate amount
available in accordance with Section 3.02(b)) and shall be made from the several
Banks ratably in proportion to their respective Commitments. Within the
foregoing limits, a Borrower may borrow under this Section, repay or, to the
extent permitted by Section 2.11, prepay Loans and reborrow at any time during
the Revolving Credit Period under this Section.
SECTION 2.02. NOTICE OF COMMITTED BORROWING. The Borrower shall give the
Agent notice (a "Notice of Committed Borrowing") not later than 11:00 A.M. (New
York City time) on (x) the date of each Base Rate Borrowing, (y) the Domestic
Business Day before each CD Borrowing and (z) the third Euro-Dollar Business Day
before each Euro-Dollar Borrowing, specifying:
(a) the date of such Borrowing, which shall be a Domestic Business Day
in the case of a Domestic Borrowing or a Euro-Dollar Business Day in the
case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to be CD Loans,
Base Rate Loans or Euro-Dollar Loans, and
(d) in the case of a Fixed Rate Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
SECTION 2.03. MONEY MARKET BORROWINGS.
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(a) THE MONEY MARKET OPTION. In addition to Committed Borrowings pursuant
to Section 2.01, any Borrower may, as set forth in this Section, request the
Banks during the Revolving Credit Period to make offers to make Money Market
Loans to such Borrower. The Banks may, but shall have no obligation to, make
such offers and the Borrower may, but shall have no obligation to, accept any
such offers in the manner set forth in this Section.
(b) MONEY MARKET QUOTE REQUEST. When a Borrower wishes to request offers to
make Money Market Loans under this Section, it shall transmit to the Agent by
telex or facsimile transmission a Money Market Quote Request substantially in
the form of Exhibit B hereto so as to be received no later than 10:30 A.M. (New
York City time) on (x) the fifth Euro-Dollar Business Day prior to the date of
Borrowing proposed therein, in the case of a LIBOR Auction or (y) the Domestic
Business Day next preceding the date of Borrowing proposed therein, in the case
of an Absolute Rate Auction (or, in either case, such other time or date as the
Company and the Agent shall have mutually agreed and the Agent shall have
notified to the Banks not later than the date of the Money Market Quote Request
for the first LIBOR Auction or Absolute Rate Auction for which such change is to
be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day in
the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be $
15,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto, subject
to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Company and the Agent may agree) of any other Money Market
Quote Request.
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(c) INVITATION FOR MONEY MARKET QUOTES. Promptly upon receipt of a Money
Market Quote Request, the Agent shall send to the Banks by telex or facsimile
transmission an Invitation for Money Market Quotes substantially in the form of
Exhibit C hereto, which shall constitute an invitation by the Borrower to each
Bank to submit Money Market Quotes offering to make the Money Market Loans to
which such Money Market Quote Request relates in accordance with this Section.
(d) SUBMISSION AND CONTENTS OF MONEY MARKET QUOTES. (i) Each Bank may
submit a Money Market Quote containing an offer or offers to make Money Market
Loans in response to any Invitation for Money Market Quotes. Each Money Market
Quote must comply with the requirements of this subsection (d) and must be
submitted to the Agent by telex or facsimile transmission at its offices
referred to in or pursuant to Section 11.01 not later than (x) 2:00 P.M. (New
York City time) on the fourth Euro-Dollar Business Day prior to the proposed
date of Borrowing, in the case of a LIBOR Auction or (y) 9:30 A.M. (New York
City time) on the proposed date of Borrowing, in the case of an Absolute Rate
Auction (or, in either case, such other time or date as the Company and the
Agent shall have mutually agreed and the Agent shall have notified to the Banks
not later than the date of the Money Market Quote Request for the first LIBOR
Auction or Absolute Rate Auction for which such change is to be effective);
PROVIDED that Money Market Quotes submitted by the Agent (or any affiliate of
the Agent) in the capacity of a Bank may be submitted, and may only be
submitted, if the Agent or such affiliate notifies the Borrower of the terms of
the offer or offers contained therein not later than (x) one hour prior to the
deadline for the other Banks, in the case of a LIBOR Auction or (y) 15 minutes
prior to the deadline for the other Banks, in the case of an Absolute Rate
Auction. Subject to Articles III and VI, any Money Market Quote so made shall be
irrevocable except with the written consent of the Agent given on the
instructions of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form of Exhibit
D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each such
offer is being made, which principal amount (w) may be greater than or less
than the Commitment of the quoting Bank, (x) must be $5,000,000 or a larger
multiple of $1,000,000 (y) may
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not exceed the principal amount of Money Market Loans for which offers were
requested and (z) may be subject to an aggregate limitation as to the
principal amount of Money Market Loans for which offers being made by such
quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or subtracted
from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest per
annum (specified to the nearest 1/10,000th of 1%) (the "Money Market
Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or does
not specify all of the information required by subsection (d) (ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth in the
applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d) (i).
(e) NOTICE TO BORROWER. The Agent shall promptly notify the Borrower
of the terms (x) of any Money Market Quote submitted by a Bank that is in
accordance with subsection (d) and (y) of any Money Market Quote that
amends, modifies or is otherwise inconsistent with a previous Money Market
Quote submitted by such Bank with respect to the same Money Market Quote
Request. Any such subsequent Money Market Quote shall be disregarded by the
Agent unless such subsequent Money Market Quote is submitted
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solely to correct a manifest error in such former Money Market Quote. The
Agent's notice to the Borrower shall specify (A) the aggregate principal amount
of Money Market Loans for which offers have been received for each Interest
Period specified in the related Money Market Quote Request, (B) the respective
principal amounts and Money Market Margins or Money Market Absolute Rates, as
the case may be, so offered and (C) if applicable, limitations on the aggregate
principal amount of Money Market Loans for which offers in any single Money
Market Quote may be accepted.
(f) ACCEPTANCE AND NOTICE BY BORROWER. Not later than 10:30 A.M. (New York
City time) on (x) the third Euro-Dollar Business Day prior to the proposed date
of Borrowing, in the case of a LIBOR Auction or (y) the proposed date of
Borrowing, in the case of an Absolute Rate Auction (or, in either case, such
other time or date as the Company and the Agent shall have mutually agreed and
the Agent shall have notified to the Banks not later than the date of the Money
Market Quote Request for the first LIBOR Auction or Absolute Rate Auction for
which such change is to be effective), the Borrower shall notify the Agent of
its acceptance or non-acceptance of the offers so notified to it pursuant to
subsection (e). In the case of acceptance, such notice (a "Notice of Money
Market Borrowing") shall specify the aggregate principal amount of offers for
each Interest Period that are accepted. The Borrower may accept any Money Market
Quote in whole or in part; PROVIDED that:
(i) the aggregate principal amount of each Money Market Borrowing may
not exceed the applicable amount set forth in the related Money Market
Quote Request,
(ii) the principal amount of each Money Market Borrowing must be
$15,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of ascending
Money Market Margins or Money Market Absolute Rates, as the case may be,
and
(iv) the Borrower may not accept any offer that is described in
subsection (d) (iii) or that otherwise fails to comply with the
requirements of this Agreement.
(g) ALLOCATION BY AGENT. If offers are made by two or more Banks with the
same Money Market Margins or Money Market Absolute Rates, as the case may be,
for a greater aggregate principal amount than the amount in respect of which
such offers are accepted for the related
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Interest Period, the principal amount of Money Market Loans in respect of which
such offers are accepted shall be allocated by the Agent among such Banks as
nearly as possible (in multiples of $1,000,000, as the Agent may deem
appropriate) in proportion to the aggregate principal amounts of such offers.
Determinations by the Agent of the amounts of Money Market Loans shall be
conclusive in the absence of manifest error.
SECTION 2.04. NOTICE TO BANKS; FUNDING OF LOANS.
(a) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify
each Bank of the contents thereof and of such Bank's share (if any) of such
Borrowing and such Notice of Borrowing shall not thereafter be revocable by the
Borrower.
(b) Not later than 12:00 Noon (New York City time) on the date of each
Borrowing, each Bank participating therein shall (except as provided in
subsection (c) of this Section) make available its share of such Borrowing, in
Federal or other funds immediately available in New York City, to the Agent at
its address referred to in Section 11.01. Unless the Agent determines that any
applicable condition specified in Article III has not been satisfied, the Agent
will make the funds so received from the Banks available to the Borrower at the
Agent's aforesaid address.
(c) If any Bank makes a new Loan hereunder to a Borrower on a day on which
such Borrower is to repay all or any part of an outstanding Loan from such Bank,
such Bank shall apply the proceeds of its new Loan to make such repayment and
only an amount equal to the difference (if any) between the amount being
borrowed by such Borrower and the amount being repaid shall be made available by
such Bank to the Agent as provided in subsection (b), or remitted by such
Borrower to the Agent as provided in Section 2.12, as the case may be.
(d) Unless the Agent shall have received notice from a Bank prior to the
date of any Borrowing that such Bank will not make available to the Agent such
Bank's share of such Borrowing, the Agent may assume that such Bank has made
such share available to the Agent on the date of such Borrowing in accordance
with subsections (b) and (c) of this Section 2.04 and the Agent may, in reliance
upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such share available to the Agent, such Bank and the Borrower severally agree to
repay to the Agent forthwith on demand such corresponding amount together
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with interest thereon, for each day from the date such amount is made available
to the Borrower until the date such amount is repaid to the Agent, at (i) in the
case of the Borrower, a rate per annum equal to the higher of the Federal Funds
Rate and the interest rate applicable thereto pursuant to Section 2.07 and (ii)
in the case of such Bank, the Federal Funds Rate. If such Bank shall repay to
the Agent such corresponding amount, such amount so repaid shall constitute such
Bank's Loan included in such Borrowing for purposes of this Agreement.
SECTION 2.05. NOTES. (a) The Loans of each Bank to each Borrower shall be
evidenced by a single Note of such Borrower payable to the order of such Bank
for the account of its Applicable Lending Office in an amount equal to the
aggregate unpaid principal amount of such Bank's Loans to such Borrower.
(b) Each Bank may, by notice to a Borrower and the Agent, request that its
Loans of a particular type to such Borrower be evidenced by a separate Note of
such Borrower in an amount equal to the aggregate unpaid principal amount of
such Loans. Each such Note shall be in substantially the form of Exhibit A
hereto with appropriate modifications to reflect the fact that it evidences
solely Loans of the relevant type. Each reference in this Agreement to a "Note"
or the "Notes" of such Bank shall be deemed to refer to and include any or all
of such Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(b) or
3.03(a), the Agent shall forward such Note to such Bank. Each Bank shall record
the date, amount, type and maturity of each Loan made by it to each Borrower and
the date and amount of each payment of principal made with respect thereto, and
may, if such Bank so elects in connection with any transfer or enforcement of
its Note of any Borrower, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to each
such Loan to such Borrower then outstanding; PROVIDED that the failure of any
Bank to make any such recordation or endorsement shall not affect the
obligations of any Borrower hereunder or under the Notes. Each Bank is hereby
irrevocably authorized by each Borrower so to endorse its Notes and to attach to
and make a part of any Note a continuation of any such schedule as and when
required.
SECTION 2.06. MATURITY OF LOANS. Each Loan included in any Borrowing shall
mature, and the principal
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amount thereof shall be due and payable, on the last day of the Interest Period
applicable to such Borrowing.
SECTION 2.07. INTEREST RATES. (a) Each Base Rate Loan shall bear interest
on the outstanding principal amount thereof, for each day from the date such
Loan is made until it becomes due, at a rate per annum equal to the Base Rate
for such day. Such interest shall be payable for each Interest Period on the
last day thereof. Any overdue principal of or interest on any Base Rate Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the sum of 1% plus the rate otherwise applicable to Base Rate
Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal amount
thereof, for each day during the Interest Period applicable thereto, at a rate
per annum equal to the sum of the CD Margin for such day plus the Adjusted CD
Rate applicable to such Interest Period; PROVIDED that if any CD Loan shall, as
a result of clause (2) (b) of the definition of Interest Period, have an
Interest Period of less than 30 days, such CD Loan shall bear interest during
such Interest Period at the rate applicable to Base Rate Loans during such
period. Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than 90 days, at intervals of 90
days after the first day thereof. Any overdue principal of or interest on any CD
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 1% plus the higher of (i) the sum of the CD Margin
for such day plus the Adjusted CD Rate applicable to the Interest Period for
such Loan and (ii) the rate applicable to Base Rate Loans for such day.
"CD Margin" means a rate per annum equal to 0.270%.
The "Adjusted CD Rate" applicable to any Interest Period means a rate per
annum determined pursuant to the following formula:
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[ CDBR ] *
ACDR = [ ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
----------------
* The amount in brackets being rounded upward, if necessary, to the
next higher 1/100 of 1%
The "CD Base Rate" applicable to any Interest Period is the rate of
interest determined by the Agent to be the average (rounded upward, if
necessary, to the next higher 1/100 of 1%) of the prevailing rates per annum bid
at 10:00 A.M. (New York City time) (or as soon thereafter as practicable) on the
first day of such Interest Period by two or more New York certificate of deposit
dealers of recognized standing for the purchase at face value from each CD
Reference Bank of its certificates of deposit in an amount comparable to the
principal amount of the CD Loan of such CD Reference Bank to which such Interest
Period applies and having a maturity comparable to such Interest Period.
"Domestic Reserve Percentage" means for any day that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the
maximum reserve requirement (including without limitation any basic,
supplemental or emergency reserves) for a member bank of the Federal Reserve
System in New York City with deposits exceeding five billion dollars in respect
of new non-personal time deposits in dollars in New York City having a maturity
comparable to the related Interest Period and in an amount of $100,000 or more.
The Adjusted CD Rate shall be adjusted automatically on and as of the effective
date of any change in the Domestic Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in effect on
such day which is payable by a member of the Bank Insurance Fund classified as
adequately capitalized and within supervisory subgroup "A" (or a comparable
successor assessment risk classification) within the meaning of 12 C.F.R. ss.
327.4(a) (or any successor provision) to the Federal Deposit Insurance
Corporation (or any successor) for such Corporation's (or such successor's)
insuring time deposits at offices of such institution in the
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United States. The Adjusted CD Rate shall be adjusted automatically on and as of
the effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding principal
amount thereof, for each day during the Interest Period applicable thereto, at a
rate per annum equal to the sum of the Euro-Dollar Margin for such day plus the
London Interbank Offered Rate applicable to such Interest Period. Such interest
shall be payable for each Interest Period on the last day thereof and, if such
Interest Period is longer than three months, at intervals of three months after
the first day thereof.
"Euro-Dollar Margin" means a rate per annum equal to 0.145%.
The "London Interbank Offered Rate" applicable to any Interest Period means
the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at which deposits in dollars are offered to each of
the Euro-Dollar Reference Banks in the London interbank market at approximately
11:00 A M (London time) two Euro-Dollar Business Days before the first day
of such Interest Period in an amount approximately equal to the principal amount
of the Euro-Dollar Loan of such Euro-Dollar Reference Bank to which such
Interest Period is to apply and for a period of time comparable to such Interest
Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the higher of (i) the sum of 1% plus the Euro-Dollar Margin for such day plus
the London Interbank Offered Rate applicable to the Interest Period for such
Loan and (ii) the sum of 1% plus the Euro-Dollar Margin for such day plus the
quotient obtained (rounded upward, if necessary, to the next higher 1/100 of 1%)
by dividing (x) the average (rounded upward, if necessary, to the next higher
1/16 of 1%) of the respective rates per annum at which one day (or, if such
amount due remains unpaid more than three Euro-Dollar Business Days, then for
such other period of time not longer than six months as the Agent may select)
deposits in dollars in an amount approximately equal to such overdue payment due
to each of the Euro-Dollar Reference Banks are offered to such Euro-Dollar
Reference Bank in the London interbank market for the applicable period
determined as provided above by (y) 1.00 minus the Euro-Dollar Reserve
Percentage (or, if the circumstances described in clause (a) or (b) of Section
8.01 shall exist, at a rate per annum equal to the sum of 1% plus the rate
applicable to Base Rate Loans for such day).
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(e) Subject to Section 8.01(ii), each Money Market LIBOR Loan shall bear
interest on the outstanding principal amount thereof, for the Interest Period
applicable thereto, at a rate per annum equal to the sum of the London Interbank
Offered Rate for such Interest Period (determined in accordance with Section
2.07(c) as if the related Money Market LIBOR Borrowing were a Committed
Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted by the
Bank making such Loan in accordance with Section 2.03. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.03. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof. Any overdue
principal of or interest on any Money Market Loan shall bear interest, payable
on demand, for each day until paid at a rate per annum equal to the sum of 1%
plus the Base Rate for such day.
(f) The Agent shall determine each interest rate applicable to the Loans
hereunder. The Agent shall give prompt notice to the Borrower and the
participating Banks of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference Bank
does not furnish a timely quotation, the Agent shall determine the relevant
interest rate on the basis of the quotation or quotations furnished by the
remaining Reference Bank or Banks or, if none of such quotations is available on
a timely basis, the provisions of Section 8.01 shall apply.
SECTION 2.08. FACILITY FEE. (a) The Company shall pay to the Agent for the
account of the Banks ratably, a facility fee at the rate of 0.030% per annum.
Such facility fee shall accrue (i) from and including the Effective Date to but
excluding the Termination Date (or earlier date of termination of the
Commitments in their entirety), on the daily aggregate amount of the Commitments
(whether used or unused) and (ii) from and including the Termination Date or
such earlier date of termination to but excluding the date the Loans shall be
repaid in their entirety, on the daily aggregate outstanding principal amount of
the Loans.
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(b) Payments. Accrued facility fees under this Section shall be payable
quarterly on each March 31, June 30, September 30 and December 31, beginning
with March 31, 1997, and upon the date of termination of the Commitments in
their entirety (and, if later, the date the Loans shall be repaid in their
entirety).
SECTION 2.09. TERMINATION OR REDUCTION OF COMMITMENTS. The Company may,
upon at least three Domestic Business Days' notice to the Agent, (i) terminate
the Commitments at any time, if no Loans are outstanding at such time or (ii)
ratably reduce from time to time by an aggregate amount of $25,000,000 or any
larger multiple thereof, the aggregate amount of the Commitments in excess of
the aggregate outstanding principal amount of the Loans. Promptly after
receiving a notice pursuant to this subsection, the Agent shall notify each Bank
of the contents thereof.
SECTION 2.10. SCHEDULED TERMINATION OF COMMITMENTS. The Commitments shall
terminate on the Termination Date and any Loans then outstanding (together with
accrued interest thereon) shall be due and payable on such date.
SECTION 2.11. OPTIONAL PREPAYMENTS. (a) Subject in the case of Fixed Rate
Loans to Section 2.13, the Borrower may, upon at least one Domestic Business
Day's notice to the Agent, prepay any Domestic Borrowing (or any Money Market
Borrowing bearing interest at the Base Rate pursuant to Section 8.01(ii)) or
upon at least three Euro-Dollar Business Days' notice to the Agent, prepay any
Euro-Dollar Borrowing, in each case in whole at any time, or from time to time
in part in amounts aggregating $15,000,000 or any larger multiple of $1,000,000,
by paying the principal amount to be prepaid together with accrued interest
thereon to the date of prepayment. Each such optional prepayment shall be
applied to prepay ratably the Loans of the several Banks included in such
Borrowing.
(b) Except as provided in subsection (a) above, the Borrower may not prepay
all or any portion of the principal amount of any Money Market Loan prior to the
maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this Section, the
Agent shall promptly notify each Bank of the contents thereof and of such Bank's
ratable share (if any) of such prepayment and such notice shall not thereafter
be revocable by the Borrower.
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SECTION 2.12. GENERAL PROVISIONS AS TO PAYMENTS. (a) The Borrowers shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (New York City time) on the date when due,
in Dollars in Federal or other funds immediately available in New York City, to
the Agent at its address referred to in Section 11.01. The Agent will promptly
distribute to each Bank its ratable share of each such payment received by the
Agent for the account of the Banks. Whenever any payment of principal of, or
interest on, the Domestic Loans or of fees shall be due on a day which is not a
Domestic Business Day, the date for payment thereof shall be extended to the
next succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business Day
falls in another calendar month, in which case the date for payment thereof
shall be the next preceding Euro-Dollar Business Day. Whenever any payment of
principal of, or interest on, the Money Market Loans shall be due on a day which
is not a Euro-Dollar Business Day, the date for payment thereof shall be
extended to the next succeeding Euro-Dollar Business Day. If the date for any
payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from a Borrower prior to
the date on which any payment is due from such Borrower to the Banks hereunder
that such Borrower will not make such payment in full, the Agent may assume that
such Borrower has made such payment in full to the Agent on such date and the
Agent may, in reliance upon such assumption, cause to be distributed to each
Bank on such due date an amount equal to the amount then due such Bank. If and
to the extent that such Borrower shall not have so made such payment, each Bank
shall repay to the Agent forthwith on demand such amount distributed to such
Bank together with interest thereon, for each day from the date such amount is
distributed to such Bank until the date such Bank repays such amount to the
Agent, at the Federal Funds Rate.
SECTION 2.13. FUNDING LOSSES. If a Borrower makes any payment of principal
with respect to any Fixed Rate Loan (pursuant to Article VI or VIII or
otherwise) on any day other than the last day of the Interest Period applicable
thereto, or the last day of an applicable period fixed pursuant to Section
2.07(d), or if a Borrower fails to borrow or prepay any Fixed Rate Loans after
notice has been given to any Bank in accordance with Section 2.04(a) or
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2.11(c), such Borrower shall reimburse each Bank on demand for any resulting
loss or expense incurred by it (or by an existing or prospective Participant in
the related Loan), including (without limitation) any loss incurred in
obtaining, liquidating or employing deposits from third parties, but excluding
loss of margin for the period after any such payment or failure to borrow or
prepay, PROVIDED that such Bank shall have delivered to such Borrower a
certificate as to the amount of such loss or expense, which certificate shall be
conclusive in the absence of manifest error.
SECTION 2.14. COMPUTATION OF INTEREST AND FEES. Interest based on the Prime
Rate hereunder shall be computed on the basis of a year of 365 days (or 366 days
in a leap year) and paid for the actual number of days elapsed (including the
first day but excluding the last day). All other interest and all facility fees
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed (including the first day but excluding the last day).
SECTION 2.15. JUDGMENT CURRENCY. If for the purpose of obtaining judgment
in any court it is necessary to convert a sum due from any Borrower hereunder or
under any of the Notes in Dollars into another currency, the parties hereto
agree, to the fullest extent that they may effectively do so, that the rate of
exchange used shall be that at which in accordance with normal banking
procedures the Agent could purchase Dollars with such other currency at the
Agent's New York office on the Domestic Business Day preceding that on which
final judgment is given. The obligations of each Borrower in respect of any sum
due to any Bank or the Agent hereunder or under any Note shall, notwithstanding
any judgment in a currency other than Dollars, be discharged only to the extent
that on the Domestic Business Day following receipt by such Bank or the Agent
(as the case may be) of any sum adjudged to be so due in such other currency
such Bank or the Agent (as the case may be) may in accordance with normal
banking procedures purchase Dollars with such other currency; if the amount of
Dollars so purchased is less than the sum originally due to such Bank or the
Agent, as the case may be, in Dollars, each Borrower agrees, to the fullest
extent that it may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Bank or the Agent, as the
case may be, against such loss, and if the amount of Dollars so purchased
exceeds (a) the sum originally due to any Bank or the Agent, as the case may be,
and (b) any amounts shared with other Banks as a result of allocations of such
excess as a disproportionate payment to
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such Bank under Section 11.04, such Bank or the Agent, as the case may be,
agrees to remit such excess to the appropriate Borrower.
SECTION 2.16. FOREIGN WITHHOLDING TAXES AND OTHER COSTS. (a) All payments
by an Eligible Subsidiary of principal of and interest on its Notes and of all
other amounts payable under this Agreement are payable without deduction for or
on account of any present or future taxes, duties or other charges levied or
imposed by the government of any jurisdiction outside the United States or by
any political subdivision or taxing authority thereof or therein through
withholding or deduction with respect to any such payments. If any such taxes,
duties or other charges are so levied or imposed, such Eligible Subsidiary will
pay additional interest or will make additional payments in such amounts so that
every net payment of principal of and interest on its Notes and of all other
amounts payable by it under this Agreement, after withholding or deduction for
or on account of any such present or future taxes, duties or other charges, will
not be less than the amount provided for herein. Such Eligible Subsidiary shall
furnish promptly to the Agent official receipts evidencing such withholding or
deduction.
(b) If the cost to any Bank of making or maintaining any Loan to an
Eligible Subsidiary is increased, or the amount of any sum received or
receivable by any Bank (or its Applicable Lending Office) is reduced by an
amount deemed by such Bank to be material, by reason of the fact that such
Eligible Subsidiary is incorporated in, or conducts business in, a jurisdiction
outside the United States the Borrower shall indemnify such Bank for such
increased costs or reduction within 15 days after demand by such Bank (with a
copy to the Agent and the Company). A certificate of such Bank claiming
compensation under this subsection (b) and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error.
(c) Each Bank will promptly notify the Company and the Agent of any event
of which it has knowledge that will entitle such Bank to additional interest or
payments pursuant to subsection (b) and will designate a different Applicable
Lending Office, if, in the judgment of such Bank, such designation will avoid
the need for, or reduce the amount of, such compensation and will not be
otherwise disadvantageous to such Bank.
SECTION 2.17. REGULATION D COMPENSATION. Each Bank may require any Borrower
to pay, contemporaneously with
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each payment of interest on the Euro-Dollar Loans to such Borrower, additional
interest on the related Euro-Dollar Loan to such Borrower of such Bank at a rate
per annum determined by such Bank up to but not exceeding the excess of (i) (A)
the applicable London Interbank Offered Rate divided by (B) one MINUS the
Euro-Dollar Reserve Percentage over (ii) the applicable London Interbank Offered
Rate. Any Bank wishing to require payment of such additional interest (x) shall
so notify such Borrower and the Agent, in which case such additional interest on
the Euro-Dollar Loans to such Borrower of such Bank shall be payable to such
Bank at the place indicated in such notice with respect to each Interest Period
commencing at least three Euro-Dollar Business Days after the giving of such
notice, and (y) shall notify such Borrower at least five Euro-Dollar Business
Days prior to each date on which interest is payable on the Euro-Dollar Loans to
such Borrower of the amount then due it under this Section.
SECTION 2.18. WITHHOLDING TAX EXEMPTION. At least five Domestic Business
Days prior to the first date on which interest or fees are payable hereunder for
the account of any Bank, each Bank that is not incorporated under the laws of
the United States or a state thereof agrees that it will deliver to each of the
Company and the Agent two duly completed copies of United States Internal
Revenue Service Form 1001 or 4224, certifying in either case that such Bank is
entitled to receive payments from the Company under this Agreement and the Notes
without deduction or withholding of any United States federal income taxes. Each
Bank which so delivers a Form 1001 or 4224 further undertakes to deliver to each
of the Company and the Agent two additional copies of such form (or a successor
form) on or before the date that such form expires or becomes obsolete or after
the occurrence of any event requiring a change in the most recent form so
delivered by it, and such amendments thereto or extensions or renewals thereof
as may be reasonably requested by the Company or the Agent, in each case
certifying that such Bank is entitled to receive payments from the Company under
this Agreement and the Notes without deduction or withholding of any United
States federal income taxes, unless an event (including without limitation any
change in treaty, law or regulation) has occurred prior to the date on which any
such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Bank from duly completing and
delivering any such form with respect to it and such Bank advises the Company
and the Agent that it is not capable of receiving such payments without any
deduction or withholding of United States federal income tax.
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ARTICLE III
CONDITIONS
SECTION 3.01. EFFECTIVENESS. This Agreement shall become effective on the
date that each of the following conditions shall have been satisfied (or waived
in accordance with Section 11.05):
(a) receipt by the Agent of counterparts hereof signed by each of the
parties hereto (or, in the case of any party as to which an executed
counterpart shall not have been received, receipt by the Agent in form
satisfactory to it of telegraphic, telex, facsimile transmission or other
written confirmation from such party of execution of a counterpart hereof
by such party);
(b) receipt by the Agent for the account of each Bank of a duly
executed Note of the Company dated on or before the Effective Date
complying with the provisions of Section 2.05;
(c) receipt by the Agent of an opinion of the General Counsel of the
Company (or other counsel for the Company reasonably satisfactory to the
Agent), substantially in the form of Exhibit E hereto and covering such
additional matters relating to the transactions contemplated hereby as the
Required Banks may reasonably request;
(d) receipt by the Agent of an opinion of Davis Polk & Wardwell,
special counsel for the Agent, substantially in the form of Exhibit F
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(e) receipt by the Agent of all documents it may reasonably request
relating to the existence of the Company, the corporate authority for and
the validity of this Agreement and the Notes, and any other matters
relevant hereto, all in form and substance satisfactory to the Agent; and
(f) receipt by the Agent of evidence satisfactory to it of the payment
of all principal and interest on any loans outstanding under, and of all
other amounts payable under, the Existing 364-Day Credit Agreement;
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PROVIDED that this Agreement shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied no later than
January 31, 1997. The Agent shall promptly notify the Company and the Banks of
the Effective Date, and such notice shall be conclusive and binding on all
parties hereto. The Banks that are parties to the Existing 364-Day Credit
Agreement, comprising the "Required Banks" as defined therein, and the Company
agree to eliminate the requirement under Section 2.09 of the Existing 364-Day
Credit Agreement that notice of optional termination of the commitments
thereunder be given three Domestic Business Days in advance, and further agree
that the commitments under the Existing 364-Day Credit Agreement shall terminate
in their entirety simultaneously with and subject to the effectiveness of this
Agreement and that the Company shall be obligated to pay the accrued facility
fees thereunder to but excluding the date of such effectiveness. The Company
shall, within 30 days after the Effective Date, cause the commitments under the
Duracell Credit Facility to be terminated in their entirety and all principal,
interest and other amounts payable thereunder to be repaid in full.
SECTION 3.02. BORROWINGS. The obligation of any Bank to make a Loan on the
occasion of any Borrowing is subject to the satisfaction of the following
conditions:
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the aggregate
amount of the Commitments less the aggregate principal amount committed or
outstanding (without duplication) under the Duracell Credit Facility;
(c) the fact that, immediately before and after such Borrowing, no
Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the Company
and the Borrower (if other than the Company) contained in this Agreement
(except, in the case of a Refunding Borrowing, the representations and
warranties set forth in Sections 4.05 and 4.07 as to any matter which has
theretofore been disclosed in writing by the Company to the Banks) shall be
true in all material respects on and as of the date of such Borrowing.
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Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Company and the Borrower (if other than the Company) on the date of such
Borrowing as to the facts specified in clauses (b), (c) and (d) of this Section.
SECTION 3.03. FIRST BORROWING BY EACH ELIGIBLE SUBSIDIARY. The obligation
of each Bank to make a Loan on the occasion of the first Borrowing by each
Eligible Subsidiary is subject to the satisfaction of the following further
conditions:
(a) receipt by the Agent for the account of each Bank of a duly
executed Note of such Eligible Subsidiary, dated on or before the date of
such Borrowing complying with the provisions of Section 2.05;
(b) receipt by the Agent of an opinion of counsel for such Eligible
Subsidiary acceptable to the Agent, substantially in the form of Exhibit I
hereto and covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request; and
(c) receipt by the Agent of all documents which it may reasonably
request relating to the existence of such Eligible Subsidiary, the
corporate authority for and the validity of the Election to Participate of
such Eligible Subsidiary, this Agreement and the Notes of such Eligible
Subsidiary, and any other matters relevant thereto, all in form and
substance satisfactory to the Agent.
The documents referred to in this Section 3.03 shall be delivered to the Agent
by an Eligible Subsidiary no later than the date of the first Borrowing by such
Eligible Subsidiary.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants that:
SECTION 4.01. CORPORATE EXISTENCE AND POWER. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of
Delaware, and has all corporate powers and all material governmental licenses,
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authorizations, consents and approvals required to carry on its business as now
conducted.
SECTION 4.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION. The
execution, delivery and performance by the Company of this Agreement and its
Notes are within the Company's corporate powers, have been duly authorized by
all necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official and do not contravene, or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of the Company or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the Company
or result in the creation or imposition of any Lien on any asset of the Company
or any of its Subsidiaries.
SECTION 4.03. BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of the Company and its Notes, when executed and delivered in
accordance with this Agreement, will constitute valid and binding obligations of
the Company in each case enforceable in accordance with their respective terms
except as the same may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity.
SECTION 4.04. FINANCIAL INFORMATION. (a) The consolidated balance sheet of
the Company and its Consolidated Subsidiaries as of December 31, 1996 and the
related consolidated statements of income and cash flows for the fiscal year
then ended, reported on by KPMG Peat Marwick LLP and set forth in the Company's
Annual Report to Shareholders for 1996 incorporated by reference in the
Company's 1996 Form 10-K, a copy of which has been delivered to each of the
Banks, fairly present, in conformity with generally accepted accounting
principles, the consolidated financial position of the Company and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Company and its
Consolidated Subsidiaries as of June 30, 1997 and the related unaudited
consolidated statements of income and cash flows for the six months then ended,
set forth in the Company's Latest Form 10-Q, a copy of which has been delivered
to each of the Banks, fairly present, on a basis consistent with the financial
statements referred to in subsection (a) of this Section, the consolidated
financial position of the Company and its Consolidated Subsidiaries as of such
date and their consolidated results
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of operations and cash flows for such six-month period (subject to normal
year-end adjustments).
SECTION 4.05. NO MATERIAL ADVERSE CHANGE. Since June 30, 1997, there has
been no material adverse change in the business, operations or financial
condition of the Company and its Consolidated Subsidiaries, considered as a
whole.
SECTION 4.06. COMPLIANCE WITH ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in compliance in all
material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
if such failure or amendment has resulted, or there is a reasonable possibility
that it could result, in the imposition of a Lien or the posting of a bond or
other security under ERISA or the Internal Revenue Code or (iii) incurred any
liability under Title IV of ERISA other than a liability to the PBGC for
premiums under Section 4007 of ERISA.
SECTION 4.07. LITIGATION. Except as disclosed in the Company's 1996 Form
10-K and the Company's Latest Form 10-Q, there is no action, suit, investigation
or proceeding pending against, or to the knowledge of the Company threatened
against or affecting, the Company or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official in which there is a
reasonable possibility of an adverse decision which could materially adversely
affect the business, operations or financial condition of the Company and its
Consolidated Subsidiaries, taken as a whole, or which in any manner draws into
question the validity of this Agreement or the Notes.
SECTION 4.08. TAXES. The Company has filed (or has obtained extensions of
the time by which it is required to file) all United States federal income tax
returns and all other material tax returns required to be filed by it and has
paid all taxes shown due on the returns so filed as well as all other material
taxes, assessments and governmental charges which have become due, except such
taxes, if any, as are being contested in good faith and as to which adequate
reserves have been provided.
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SECTION 4.09. FULL DISCLOSURE. All information heretofore furnished by the
Company to the Agent or any Bank for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all such information
hereafter furnished by the Company to the Agent or any Bank will be, true and
accurate in all material respects on the date as of which such information is
stated or certified. The Company has disclosed to the Banks in writing any and
all facts which materially and adversely affect or may affect (to the extent the
Company can now reasonably foresee), the business, operations or financial
condition of the Company and its Consolidated Subsidiaries, taken as a whole, or
the ability of the Company to perform its obligations under this Agreement.
ARTICLE V
COVENANTS
The Company agrees that, so long as any Bank has any Commitment hereunder
or any amount payable under any Note remains unpaid:
SECTION 5.01. INFORMATION. The Company will deliver to each of the Banks:
(a) as soon as available and in any event within 90 days after the end
of each fiscal year of the Company, a consolidated balance sheet of the
Company and its Consolidated Subsidiaries as of the end of such fiscal year
and the related consolidated statements of income and cash flows for such
fiscal year, setting forth in each case in comparative form the figures for
the previous fiscal year, all reported on in a manner acceptable to the
Securities and Exchange Commission by KPMG Peat Marwick LLP or other
independent public accountants of nationally recognized standing;
(b) as soon as available and in any event within 45 days after the end
of each of the first three quarters of each fiscal year of the Company, (i)
a consolidated balance sheet of the Company and its Consolidated
Subsidiaries as of the end of such quarter, (ii) the related consolidated
statements of income for such quarter and for the portion of the Company's
fiscal year ended at the end of such quarter and (iii) the related
consolidated statement of cash flows for the portion of the Company's
fiscal year ended at the end of such quarter, setting forth in
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cases (ii) and (iii) in comparative form the figures for the corresponding
quarter and the corresponding portion of the Company's previous fiscal
year, all certified (subject to normal year-end adjustments) as to fairness
of presentation, generally accepted accounting principles and consistency
by the chief financial officer or the principal accounting officer of the
Company;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of the
chief financial officer or the principal accounting officer of the Company
(i) setting forth in reasonable detail the calculations required to
establish whether the Company was in compliance with the requirements of
Section 5.05 on the date of such financial statements and (ii) stating
whether there exists on the date of such certificate any Default and, if
any Default then exists, setting forth the details thereof and the action
which the Company is taking or proposes to take with respect thereto;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a) above, a statement of the firm of
independent public accountants which reported on such statements (i)
stating whether anything has come to their attention to cause them to
believe that there existed on the date of such statements any Default and
(ii) confirming the calculations set forth in the officer's certificate
delivered simultaneously therewith pursuant to clause (c) above;
(e) forthwith upon the occurrence of any Default, a certificate of the
chief financial officer or the principal accounting officer of the Company
setting forth the details thereof and the action which the Company is
taking or proposes to take with respect thereto;
(f) promptly upon the mailing thereof to the shareholders of the
Company generally, copies of all financial statements, reports and proxy
statements so mailed;
(g) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and annual, quarterly or monthly
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reports which the Company shall have filed with the Securities and Exchange
Commission;
(h) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section
4043 of ERISA) with respect to any Plan which might reasonably constitute
grounds for a termination of such Plan under Title IV of ERISA, or knows
that the plan administrator of any Plan has given or is required to give
notice of any such reportable event, a copy of the notice of such
reportable event given or required to be given to the PBGC; (ii) receives
notice of complete or partial withdrawal liability under Title IV of ERISA
or notice that any Multiemployer Plan is in reorganization, is insolvent or
has been terminated, a copy of such notice; (iii) receives notice from the
PBGC under Title IV of ERISA of an intent to terminate, impose liability
(other than for premiums under Section 4007 of ERISA) in respect of, or
appoint a trustee to administer any Plan, a copy of such notice; or (iv)
fails to make any payment or contribution to any Plan or Multiemployer Plan
or in respect of any Benefit Arrangement or makes any amendment to any Plan
or Benefit Arrangement, if such failure or amendment has resulted, or there
is a reasonable possibility that it could result, in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code, a certificate of the chief financial officer, the principal
accounting officer or the treasurer of the Company setting forth details as
to such occurrence and action, if any, which the Company or applicable
member of the ERISA Group is required or proposes to take;
(i) promptly upon any change in the rating by Standard & Poor's
Ratings Services or Moody's Investors Service, Inc. of the Company's
outstanding public senior unsecured long-term debt securities or the
Company's outstanding commercial paper, a notice reporting such change and
stating the date on which such change was announced by the relevant rating
agency; and
(j) from time to time such additional information regarding the
business, operations or financial condition of the Company and its
Subsidiaries as the Agent, at the request of any Bank, may reasonably
request.
SECTION 5.02. MAINTENANCE OF PROPERTY; INSURANCE. The Company will
keep, and will cause each Subsidiary to
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keep, all property useful and necessary in its business in good working order
and condition, ordinary wear and tear excepted; will maintain, and will cause
each Subsidiary to maintain (either in the name of the Company or in such
Subsidiary's own name) with financially sound and reputable insurance companies,
insurance on all their property in at least such amounts and against at least
such risks as are usually insured against in the same general area by companies
of established repute engaged in the same or a similar business; and will
furnish to the Banks, upon written request from the Agent, such information as
may be reasonably requested as to the insurance carried.
SECTION 5.03. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Company
will preserve, renew and keep in full force and effect its corporate existence
and its rights, privileges and franchises necessary or desirable in the normal
conduct of business.
SECTION 5.04. COMPLIANCE WITH LAWS. The Company will comply, and cause each
Subsidiary to comply, in all material respects with all applicable laws,
ordinances, rules, regulations, and requirements of governmental authorities
(including, without limitation, ERISA and the rules and regulations thereunder)
except where the necessity of compliance therewith is contested in good faith by
appropriate proceedings.
SECTION 5.05. EARNINGS TO INTEREST EXPENSE RATIO. At the end of each fiscal
quarter of the Company, the ratio of (x) Consolidated Earnings Before Interest
and Taxes for the four fiscal quarters then ended to (y) Gross Interest Expense
for the four fiscal quarters then ended will not be less than 6.50:1.
SECTION 5.06. NEGATIVE PLEDGE. Neither the Company nor any Subsidiary will
create, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired by it, except:
(a) Liens existing on the date hereof securing Debt outstanding on the
date hereof in an aggregate principal amount not exceeding $25,000,000;
(b) any Lien existing on any asset of any corporation at the time such
corporation becomes a Subsidiary and not created in contemplation of such
event;
(c) any Lien on any asset securing Debt incurred or assumed for the
purpose of financing all or any part
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of the cost of acquiring such asset, PROVIDED that such Lien attaches to
such asset concurrently with or within 90 days after the acquisition
thereof;
(d) any Lien on any asset of any corporation existing at the time such
corporation is merged or consolidated with or into the Company or a
Subsidiary and not created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof by
the Company or a Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, PROVIDED that such Debt is not increased and is
not secured by any additional assets;
(g) any Lien arising pursuant to any order of attachment, distraint or
similar legal process arising in connection with court proceedings so long
as the execution or other enforcement thereof is effectively stayed and the
claims secured thereby are being contested in good faith by appropriate
proceedings;
(h) Liens incidental to the conduct of its business or the ownership
of its assets which (i) do not secure Debt or Derivatives Obligations and
(ii) do not in the aggregate materially detract from the value of its
assets or materially impair the use thereof in the operation of its
business;
(i) Liens on cash and cash equivalents securing Derivatives
Obligations, PROVIDED that the aggregate amount of cash and cash
equivalents subject to such Liens may at no time exceed $25,000,000; and
(j) Liens not otherwise permitted by the foregoing clauses of this
Section securing Debt in an aggregate principal amount at any time
outstanding not to exceed 5% of Consolidated Assets.
SECTION 5.07. CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The Company will
not (i) consolidate or merge with or into any other Person or (ii) sell, lease
or otherwise transfer, directly or indirectly, all or substantially all of the
assets of the Company and its Subsidiaries, taken as a whole, to any other
Person; PROVIDED that the Company may merge with a Subsidiary if (A) the Company
is the corporation surviving such merger and (B)
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immediately after giving effect to such merger, no Default shall have occurred
and be continuing.
SECTION 5.08. MATERIAL SUBSIDIARY CASH FLOW. The Company will not, and will
not permit any Material Subsidiary to, enter into any arrangement which
restricts the ability of any Material Subsidiary, directly or indirectly, to
make funds available to the Company, whether by way of dividend or other
distribution, advance or otherwise.
SECTION 5.09. USE OF PROCEEDS. The proceeds of Loans hereunder will be used
by the Borrowers for their general corporate purposes, including without
limitation, any purchase, redemption, retirement or acquisition of outstanding
shares of capital stock of the Company ("Stock Repurchases"). Except for
permitted Stock Repurchases referred to in the immediately preceding sentence,
none of such proceeds will be used, directly or indirectly, for the purpose,
whether immediate, incidental or ultimate, of purchasing or carrying any "margin
stock" within the meaning of Regulation U.
ARTICLE VI
DEFAULTS
SECTION 6.01. EVENTS OF DEFAULT. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) any principal of any Loan shall not be paid when due, or any
interest, any fees or any other amount payable hereunder shall not be paid
within five days of the due date thereof;
(b) the Company shall fail to observe or perform any covenant
contained in Sections 5.05 to 5.09, inclusive;
(c) any Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by clause
(a) or (b) above) for 30 days after written notice thereof has been given
to the Company by the Agent at the request of any Bank;
(d) any representation, warranty, certification or statement made or
deemed to have been made by any Borrower in this Agreement or in any
certificate,
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financial statement or other document delivered pursuant to this Agreement
shall prove to have been incorrect in any material respect when made (or
deemed made);
(e) the Company or any Subsidiary shall fail to make any payment in
respect of any Material Debt or any Material Financial Obligations when due
or within any applicable grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with the
giving of notice or lapse of time or both, would enable) the holder of such
Debt or any Person acting on such holder's behalf to accelerate the
maturity thereof;
(g) the Company or any Material Subsidiary shall commence a voluntary
case or other proceeding seeking liquidation, reorganization or other
relief with respect to itself or its debts under any bankruptcy, insolvency
or other similar law now or hereafter in effect or seeking the appointment
of a trustee, receiver, liquidator, custodian or other similar official of
it or any substantial part of its property, or shall consent to any such
relief or to the appointment of or taking possession by any such official
in an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against
the Company or any Material Subsidiary seeking liquidation, reorganization
or other relief with respect to it or its debts under any bankruptcy,
insolvency or other similar law now or hereafter in effect or seeking the
appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such
involuntary case or other proceeding shall remain undismissed and unstayed
for a period of 60 days; or an order for relief shall be entered against
the Company or any Material Subsidiary under the federal bankruptcy laws as
now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due
(including any approved extensions) an
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amount or amounts aggregating in excess of $50,000,000 which it shall have
become liable to pay under Title IV of ERISA; or notice of intent to
terminate a Material Plan shall be filed under Title IV of ERISA by any
member of the ERISA Group, any plan administrator or any combination of the
foregoing; or the PBGC shall institute proceedings under Title IV of ERISA
to terminate, impose liability (other than for premiums under Section 4007
of ERISA) in respect of, or to cause a trustee to be appointed to
administer any Material Plan; or a condition shall exist by reason of which
the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall occur a complete or
partial withdrawal from, or a default, within the meaning of Section
4219(c) (5) of ERISA, with respect to, one or more Multiemployer Plans
which could cause one or more members of the ERISA Group to incur a current
payment obligation in excess of $50,000,000;
(j) a judgment or order for the payment of money in excess of
$50,000,000 shall be rendered against the Company or any Material
Subsidiary and such judgment or order shall continue unsatisfied and
unstayed for a period of 30 days; or
(k) any Person or two or more Persons acting in concert shall have
acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of
1934) of 30% or more of the outstanding shares of voting stock of the
Company; or, during any two-year period, the individuals who were serving
on the board of directors of the Company at the beginning of such period or
who were nominated for election or elected to such board during such period
with the affirmative vote of at least two-thirds of such individuals still
in office cease to constitute a majority of such board;
then, and in every such event, the Agent shall (i) if requested by Banks having
more than 50% in aggregate amount of the Commitments, by notice to the Company
terminate the Commitments and they shall thereupon terminate, and (ii) if
requested by Banks holding Notes evidencing more than 50% in aggregate principal
amount of the Loans, by notice to the Company declare the Notes (together with
accrued interest thereon and all accrued fees and other amounts payable by any
Borrower hereunder) to be, and the Notes shall thereupon become, immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by each Borrower; PROVIDED that in the
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case of any of the Events of Default specified in clause (g) or (h) above with
respect to any Borrower, without any notice to any Borrower or any other act by
the Agent or the Banks, the Commitments shall thereupon terminate and the Notes
(together with accrued interest thereon and all accrued fees and other amounts
payable by any Borrower hereunder) shall become immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by each Borrower.
SECTION 6.02. NOTICE OF DEFAULT. The Agent shall give notice to the Company
under Section 6.01(c) promptly upon being requested to do so by any Bank and
shall thereupon notify all the Banks thereof.
ARTICLE VII
THE AGENT
SECTION 7.01. APPOINTMENT AND AUTHORIZATION. Each Bank irrevocably appoints
and authorizes the Agent to take such action as agent on its behalf and to
exercise such powers under this Agreement and the Notes as are delegated to the
Agent by the terms hereof or thereof, together with all such powers as are
reasonably incidental thereto.
SECTION 7.02. AGENT AND AFFILIATES. Morgan Guaranty Trust Company of New
York shall have the same rights and powers under this Agreement as any other
Bank and may exercise or refrain from exercising the same as though it were not
the Agent, and Morgan Guaranty Trust Company of New York and its affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with any Borrower or any Subsidiary or affiliate of any Borrower as if
it were not the Agent hereunder.
SECTION 7.03. ACTION BY AGENT. The obligations of the Agent hereunder are
only those expressly set forth herein. Without limiting the generality of the
foregoing, the Agent shall not be required to take any action with respect to
any Default, except as expressly provided in Article VI.
SECTION 7.04. CONSULTATION WITH EXPERTS. The Agent may consult with legal
counsel (who may be counsel for any Borrower), independent public accountants
and other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in
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accordance with the advice of such counsel, accountants or experts.
SECTION 7.05. LIABILITY OF AGENT. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Banks (or when expressly
required hereby, all the Banks) or (ii) in the absence of its own gross
negligence or willful misconduct. Neither the Agent nor any of its affiliates
nor any of their respective directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement or
any borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of any Borrower; (iii) the satisfaction of any condition
specified in Article III, except receipt of items required to be delivered to
the Agent; or (iv) the validity, effectiveness or genuineness of this Agreement,
the Notes or any other instrument or writing furnished in connection herewith.
The Agent shall not incur any liability by acting in reliance upon any notice,
consent, certificate, statement, or other writing (which may be a bank wire,
telex, facsimile transmission or similar writing) believed by it to be genuine
or to be signed by the proper party or parties. Without limiting the generality
of the foregoing, the use of the term "agent" in this Agreement with reference
to the Agent is not intended to connote any fiduciary or other implied (or
express) obligations arising under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of market custom and is intended
to create or reflect only an administrative relationship between independent
contracting parties.
SECTION 7.06. INDEMNIFICATION. Each Bank shall, ratably in accordance with
its Commitment, indemnify the Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by the
Borrowers) against any cost, expense (including counsel fees and disbursements),
claim, demand, action, loss or liability (except such as result from such
indemnitees' gross negligence or willful misconduct) that such indemnitees may
suffer or incur in connection with its role as Agent hereunder or any action
taken or omitted by such indemnitees in connection therewith.
SECTION 7.07. CREDIT DECISION. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank, and based
on such
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documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Bank also acknowledges
that it will, independently and without reliance upon the Agent or any other
Bank, and based on such documents and information as it shall deem appropriate
at the time, continue to make its own credit decisions in taking or not taking
any action under this Agreement.
SECTION 7.08. SUCCESSOR AGENT. The Agent may resign at any time by giving
notice thereof to the Banks and the Company. Upon any such resignation, the
Required Banks shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Banks, and shall
have accepted such appointment, within 30 days after the retiring Agent gives
notice of resignation, then the retiring Agent may, on behalf of the Banks,
appoint a successor Agent, which shall be a commercial bank organized or
licensed under the laws of the United States or of any State thereof and having
a combined capital and surplus of at least $500,000,000. Upon the acceptance of
its appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent.
SECTION 7.09. AGENT'S FEE. The Company shall pay to the Agent for its own
account fees in the amounts and at the times previously agreed upon between the
Company and the Agent.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. BASIS FOR DETERMINING INTEREST RATE INADEQUATE OR UNFAIR. If
on or prior to the first day of any Interest Period for any Fixed Rate
Borrowing:
(a) the Agent is advised by the Reference Banks that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Banks in the relevant market for such Interest Period, or
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(b) in the case of a Committed Borrowing, Banks having 50% or more of
the aggregate amount of the Commitments advise the Agent that the Adjusted
CD Rate or the London Interbank Offered Rate, as the case may be, as
determined by the Agent will not adequately and fairly reflect the cost to
such Banks of funding their CD Loans or Euro-Dollar Loans, as the case may
be, for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrowers and the Banks,
whereupon until the Agent notifies the Borrowers that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make CD
Loans or Euro-Dollar Loans, as the case may be, shall be suspended. Unless a
Borrower notifies the Agent at least one Domestic Business Day before the date
of any Fixed Rate Borrowing for which a Notice of Borrowing has previously been
given that it elects not to borrow on such date, (i) if such Fixed Rate
Borrowing is a Committed Borrowing, such Borrowing shall instead be made as a
Base Rate Borrowing and (ii) if such Fixed Rate Borrowing is a Money Market
LIBOR Borrowing the Money Market LIBOR Loans comprising such Borrowing shall
bear interest for each day from and including the first day to but excluding the
last day of the Interest Period applicable thereto at the Base Rate for such
day.
SECTION 8.02. ILLEGALITY. If, on or after the date hereof, the adoption of
any applicable law, rule or regulation, or any change in any applicable law,
rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance by any Bank (or
its Euro-Dollar Lending Office) with any request or directive (whether or not
having the force of law) of any such authority, central bank or comparable
agency shall make it unlawful or impossible for any Bank (or its Euro-Dollar
Lending Office) to make, maintain or fund its Euro-Dollar Loans to any Borrower
and such Bank shall so notify the Agent, the Agent shall forthwith give notice
thereof to the other Banks and such Borrower, whereupon until such Bank notifies
such Borrower and the Agent that the circumstances giving rise to such
suspension no longer exist, the obligation of such Bank to make Euro-Dollar
Loans to such Borrower shall be suspended Before giving any - notice to the
Agent pursuant to this Section, such Bank shall designate a different
Euro-Dollar Lending Office if such designation will avoid the need for giving
such notice and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. If such Bank shall determine
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that it may not lawfully continue to maintain and fund any of its outstanding
Euro-Dollar Loans to such Borrower to maturity and shall so specify in such
notice, such Borrower shall immediately prepay in full the then outstanding
principal amount of each such Euro-Dollar Loan, together with accrued interest
thereon. Concurrently with prepaying each such Euro-Dollar Loan, such Borrower
shall borrow a Base Rate Loan in an equal principal amount from such Bank (on
which interest and principal shall be payable contemporaneously with the related
Euro-Dollar Loans of the other Banks), and such Bank shall make such a Base Rate
Loan.
SECTION 8.03. INCREASED COST AND REDUCED RETURN. (a) If on or after (x) the
date hereof, in the case of any Committed Loan or any obligation to make
Committed Loans or (y) the date of the related Money Market Quote, in the case
of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency:
(i) shall subject any Bank (or its Applicable Lending Office) to any
tax, duty or other charge with respect to its Fixed Rate Loans, its Notes
or its obligation to make Fixed Rate Loans, or shall change the basis of
taxation of payments to any Bank (or its Lending Office) of the principal
of or interest on its Fixed Rate Loans or any other amounts due under this
Agreement in respect of its Fixed Rate Loans or its obligation to make
Fixed Rate Loans (except for changes in the rate of tax on the overall net
income of such Bank or its Applicable Lending Office imposed by the
jurisdiction in which such Bank's principal executive office or Applicable
Lending Office is located); or
(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any such requirement imposed by the Board of Governors
of the Federal Reserve System, but excluding (i) with respect to any CD
Loan any such requirement included in an applicable Domestic Reserve
Percentage and (ii) with respect to any Euro-Dollar Loan any such
requirement with respect
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to which such Bank is entitled to compensation during the relevant Interest
Period under Section 2.17), special deposit, insurance assessment
(excluding, with respect to any CD Loan, any such requirement reflected in
an applicable Assessment Rate) or similar requirement against assets of,
deposits with or for the account of, or credit extended by, any Bank (or
its Applicable Lending Office) or shall impose on any Bank (or its
Applicable Lending Office) or on the United States market for certificates
of deposit or the London interbank market any other condition affecting its
Fixed Rate Loans, its Notes or its obligation to make Fixed Rate Loans;
and the result of any of the foregoing is to increase the cost to such Bank (or
its Applicable Lending Office) of making or maintaining any Fixed Rate Loan, or
to reduce the amount of any sum received or receivable by such Bank (or its
Applicable Lending Office) under this Agreement or under its Note with respect
thereto, by an amount deemed by such Bank to be material, then, within 15 days
after demand by such Bank (with a copy to the Agent), the Company shall pay to
such Bank such additional amount or amounts as will compensate such Bank for
such increased cost or reduction.
(b) If any Bank shall have determined that, on or after the date hereof the
adoption of any applicable law rule or regulation regarding capital adequacy, or
any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency (including any determination by any such authority, central bank or
comparable agency that, for purposes of capital adequacy requirements, the
Commitments hereunder do not constitute commitments with an original maturity of
one year or less, which shall be deemed to be a change in the interpretation and
administration of such requirements), has or would have the effect of reducing
the rate of return on capital of such Bank (or its Parent) as a consequence of
such Bank's obligations hereunder to a level below that which such Bank (or its
Parent) could have achieved but for such adoption, change, request or directive
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, then from time to time, within 15
days after demand by such Bank (with a copy to the Agent), the Company shall pay
to such Bank such additional amount or amounts as
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will compensate such Bank (or its Parent) for such reduction.
(c) Each Bank will promptly notify the Company and the Agent of any event
of which it has knowledge, occurring on or after the date hereof, which will
entitle such Bank to compensation pursuant to this Section and will designate a
different Applicable Lending Office if such designation will avoid the need for,
or reduce the amount of such compensation and will not in the judgment of such
Bank, be otherwise disadvantageous to such Bank. A certificate of any Bank
claiming compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence of
manifest error. In determining such amount, such Bank may use any reasonable
averaging and attribution methods.
SECTION 8.04. BASE RATE LOANS SUBSTITUTED FOR AFFECTED FIXED RATE LOANS. If
(i) the obligation of any Bank to make Euro-Dollar Loans to any Borrower has
been suspended pursuant to Section 8.02 or (ii) any Bank has demanded
compensation under Section 8.03(a) with respect to its CD Loans or Euro-Dollar
Loans and a Borrower shall, by at least three Euro-Dollar Business Days' prior
notice to such Bank through the Agent, have elected that the provisions of this
Section shall apply to such Bank, then, unless and until such Bank notifies such
Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist:
(a) all Loans to such Borrower which would otherwise be made by such
Bank as CD Loans or Euro-Dollar Loans, as the case may be, shall be made
instead as Base Rate Loans (on which interest and principal shall be
payable contemporaneously with the related Fixed Rate Loans of the other
Banks), and
(b) after each of its CD Loans or Euro-Doilar Loans, as the case may
be, to such Borrower has been repaid, all payments of principal which would
otherwise be applied to repay such Fixed Rate Loans shall be applied to
repay its Base Rate Loans to such Borrower instead.
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ARTICLE IX
REPRESENTATIONS AND WARRANTIES
OF ELIGIBLE SUBSIDIARIES
Each Eligible Subsidiary shall be deemed by the execution and delivery of
its Election to Participate to have represented and warranted as of the date
thereof that:
SECTION 9.01. CORPORATE EXISTENCE AND POWER. It is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as then conducted.
SECTION 9.02. CORPORATE AND GOVERNMENTAL AUTHORIZATION; CONTRAVENTION. The
execution and delivery by it of its Election to Participate and its Notes, and
the performance by it of this Agreement and its Notes, are within its corporate
powers, have been duly authorized by all necessary corporate action, require no
action by or in respect of, or filing with, any governmental body, agency or
official and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of its certificate of incorporation or by-laws
or of any agreement, judgment, injunction, order, decree or other instrument
binding upon the Company or such Eligible Subsidiary or result in the creation
or imposition of any Lien on any asset of the Company or any of its
Subsidiaries.
SECTION 9.03. BINDING EFFECT. This Agreement constitutes a valid and
binding agreement of such Eligible Subsidiary and its Notes, when executed and
delivered in accordance with this Agreement, will constitute valid and binding
obligations of such Eligible Subsidiary, in each case enforceable in accordance
with their respective terms except as the same may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and by general
principles of equity.
SECTION 9.04. TAXES. Except as disclosed to the Banks in writing prior to
the delivery of such Election to Participate, there is no income, stamp or other
tax of any country, or any taxing authority thereof or therein, imposed by or in
the nature of withholding or otherwise, which is imposed on any payment to be
made by such Eligible Subsidiary pursuant hereto or on its Notes, or is imposed
on
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or by virtue of the execution, delivery or enforcement of its Election to
Participate, this Agreement or its Notes.
ARTICLE X
GUARANTY
SECTION 10.01. THE GUARANTY. The Company hereby unconditionally guarantees
the full and punctual payment (whether at stated maturity, upon acceleration or
otherwise) of the principal of and interest on each Note issued by any Eligible
Subsidiary pursuant to this Agreement, and the full and punctual payment of all
other amounts payable by any Eligible Subsidiary under this Agreement. Upon
failure by any Eligible Subsidiary to pay punctually any such amount, the
Company shall forthwith on demand pay the amount not so paid at the place and in
the manner specified in this Agreement.
SECTION 10.02. GUARANTY UNCONDITIONAL. The obligations of the Company
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or release
in respect of any obligation of any Eligible Subsidiary under this
Agreement or any Note, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to this Agreement
or any Note;
(iii) any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of any Eligible Subsidiary
under this Agreement or any Note;
(iv) any change in the corporate existence, structure or ownership of
any Eligible Subsidiary, or any insolvency, bankruptcy, reorganization or
other similar proceeding affecting any Eligible Subsidiary or its assets,
or any resultant release or discharge of the obligations of any Eligible
Subsidiary hereunder or under any Note;
(v) the existence of any claim, set-off or other rights which the
Company may have at any time against
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any Eligible Subsidiary, the Agent, any Bank or any other Person, whether
in connection herewith or any unrelated transactions, PROVIDED that nothing
herein shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against any
Eligible Subsidiary for any reason of this Agreement or any Note, or any
provision of applicable law or regulation purporting to prohibit the
payment by any Eligible Subsidiary of the principal of or interest on any
Note or any other amount payable by it under this Agreement; or
(vii) any other act or omission to act or delay of any kind by any
Eligible Subsidiary, the Agent, any Bank or any other Person or any other
circumstance whatsoever which might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of or defense to the
Company's obligations hereunder.
SECTION 10.03. DISCHARGE ONLY UPON PAYMENT IN FULL; REINSTATEMENT IN
CERTAIN CIRCUMSTANCES. The Company's obligations hereunder shall remain in full
force and effect until the Commitments shall have terminated and the principal
of and interest on the Notes and all other amounts payable by the Company and
each Eligible Subsidiary under this Agreement shall have been paid in full. If
at any time any payment of any principal of or interest on any Note or any other
amount payable by any Eligible Subsidiary under this Agreement is rescinded or
must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of any Eligible Subsidiary or otherwise, the Company's
obligations hereunder with respect to such payment shall be reinstated at such
time as though such payment had been due but not made at such time.
SECTION 10.04. WAIVER BY THE COMPANY. The Company irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not provided for
herein, as well as any requirement that at any time any action be taken by any
Person against any Eligible Subsidiary or any other Person.
SECTION 10.05. NO SUBROGATION. If the Company makes any payment under this
Article X in respect of any obligation of an Eligible Subsidiary, the Company
shall not be subrogated to the rights of the holder of such obligation against
such Eligible Subsidiary with respect to such payment.
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SECTION 10.06. STAY OF ACCELERATION. In the event that acceleration of the
time for payment of any amount payable by any Eligible Subsidiary under this
Agreement or the Notes is stayed upon the insolvency, bankruptcy or
reorganization of such Eligible Subsidiary, all such amounts otherwise subject
to acceleration under the terms of this Agreement shall nonetheless be payable
by the Company hereunder forthwith on demand by the Agent made at the request of
the Required Banks.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telex, facsimile
transmission or similar writing) and shall be given to such party: (x) in the
case of any Borrower or the Agent, at its address, facsimile number or telex
number set forth on the signature pages hereof (or, in the case of an Eligible
Subsidiary, its Election to Participate), (y) in the case of any Bank, at its
address, facsimile number or telex number set forth in its Administrative
Questionnaire or (z) in the case of any party, such other address, facsimile
number or telex number as such party may hereafter specify for the purpose by
notice to the Agent and the Company. Each such notice, request or other
communication shall be effective (i) if given by telex, when such telex is
transmitted to the telex number specified in this Section and the appropriate
answerback is received, (ii) if given by facsimile transmission, when
transmitted to the facsimile number specified in this Section and confirmation
of receipt is received, (iii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iv) if given by any other means, when delivered at
the address specified in this Section; PROVIDED that notices to the Agent under
Article II or Article VIII shall not be effective until received.
SECTION 11.02. NO WAIVERS. No failure or delay by the Agent or any Bank in
exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
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SECTION 11.03. EXPENSES; INDEMNIFICATION. (a) The Company shall pay (i) all
out-of-pocket expenses of the Agent, including reasonable fees and disbursements
of special counsel for the Agent, in connection with the preparation of this
Agreement, any waiver or consent hereunder or any amendment hereof or any
Default or alleged Default hereunder and (ii) if an Event of Default occurs, all
out-of-pocket expenses incurred by the Agent or any Bank, including (without
duplication) the reasonable fees and disbursements of outside counsel and the
allocated cost of inside counsel, in connection with such Event of Default and
collection, bankruptcy, insolvency and other enforcement proceedings resulting
therefrom. The Company shall indemnify each Bank against any transfer taxes,
documentary taxes, assessments or charges made by any governmental authority by
reason of the execution and delivery of this Agreement, any Election to
Participate or Election to Terminate or any Note.
(b) The Company agrees to indemnify the Agent and each Bank their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) brought or threatened
relating to or arising out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder; PROVIDED that no Indemnitee shall have the right to
be indemnified hereunder for such Indemnitee's own gross negligence or willful
misconduct as determined by a court of competent jurisdiction.
SECTION 11.04. SHARING OF SET-OFFS. Each Bank agrees that if it shall, by
exercising any right of set-off or counterclaim or otherwise, receive payment of
a proportion of the aggregate amount of principal and interest due with respect
to the Note of any Borrower held by it which is greater than the proportion
received by any other Bank in respect of the aggregate amount of principal and
interest due with respect to the Note of such Borrower held by such other Bank,
the Bank receiving such proportionately greater payment shall purchase such
participations in the Notes of such Borrower held by the other Banks, and such
other adjustments shall be made, as may be required so that all such payments of
principal and interest with respect to
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the Notes of such Borrower held by the Banks shall be shared by the Banks pro
rata; PROVIDED that nothing in this Section shall impair the right of any Bank
to exercise any right of set-off or counterclaim it may have and to apply the
amount subject to such exercise to the payment of indebtedness of a Borrower
other than its indebtedness hereunder. Each Borrower agrees, to the fullest
extent it may effectively do so under applicable law, that any holder of a
participation in a Note, whether or not acquired pursuant to the foregoing
arrangements, may exercise rights of set-off or counterclaim and other rights
with respect to such participation as fully as if such holder of a participation
were a direct creditor of such Borrower in the amount of such participation.
SECTION 11.05. AMENDMENTS AND WAIVERS. Any provision of this Agreement or
the Notes may be amended or waived if, but only if, such amendment or waiver is
in writing and is signed by the Company and the Required Banks (and, if the
rights or duties of the Agent are affected thereby, by the Agent); PROVIDED that
no such amendment or waiver shall, unless signed by all the Banks, (i) increase
or decrease the Commitment of any Bank (except for a ratable decrease in the
Commitments of all Banks) or subject any Bank to any additional obligation, (ii)
reduce the principal of or rate of interest on any Loan or any fees hereunder,
(iii) postpone the date fixed for any payment of principal of or interest on any
Loan or any fees hereunder or for termination of any Commitment, (iv) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the
Notes, or the number of Banks, which shall be required for the Banks or any of
them to take any action under this Section or any other provision of this
Agreement or (v) change the provisions of Article X; PROVIDED FURTHER that no
such amendment, waiver or modification shall, unless signed by an Eligible
Subsidiary, (w) subject such Eligible Subsidiary to any additional obligation,
(x) increase the principal of or rate of interest on any outstanding Loan of
such Eligible Subsidiary, (y) accelerate the stated maturity of any outstanding
Loan of such Eligible Subsidiary or (z) change this PROVISO.
SECTION 11.06. SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns, except that no Borrower may assign or
otherwise transfer any of its rights under this Agreement without the prior
written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of
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its Loans. In the event of any such grant by a Bank of a participating interest
to a Participant, whether or not upon notice to the Borrowers and the Agent,
such Bank shall remain responsible for the performance of its obligations
hereunder, and the Borrowers and the Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
under this Agreement. Any agreement pursuant to which any Bank may grant such a
participating interest shall provide that such Bank shall retain the sole right
and responsibility to enforce the obligations of the Borrowers hereunder
including, without limitation, the right to approve any amendment, modification
or waiver of any provision of this Agreement; PROVIDED that such participation
agreement may provide that such Bank will not agree to any modification,
amendment or waiver of this Agreement described in clause (i), (ii) or (iii) of
Section 11.05 without the consent of the Participant. The Borrowers agree that
each Participant shall, to the extent provided in its participation agreement,
be entitled to the benefits of Article VIII with respect to its participating
interest. An assignment or other transfer which is not permitted by subsection
(c) or (d) below shall be given effect for purposes of this Agreement only to
the extent of a participating interest granted in accordance with this
subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all or a proportionate part (equivalent to an
initial Commitment of not less than $5,000,000) of all, of its rights and
obligations under this Agreement and the Notes, and such Assignee shall assume
such rights and obligations, pursuant to an Assignment and Assumption Agreement
in substantially the form of Exhibit J hereto executed by such Assignee and such
transferor Bank, with (and subject to) the subscribed consent of the Company and
the Agent; PROVIDED that if an Assignee is an affiliate of such transferor Bank
or was a Bank immediately prior to such assignment, no such consent shall be
required, but the Assignee and the transferor Bank shall provide prompt notice
of such assignment, together with information concerning addresses and related
information with respect to the Assignee, to the Agent; and PROVIDED FURTHER
that such assignment may, but need not, include rights of the transferor Bank in
respect of outstanding Money Market Loans. Upon execution and delivery of such
instrument and payment by such Assignee to such transferor Bank of an amount
equal to the purchase price agreed between such transferor Bank and such
Assignee, such Assignee shall be a Bank party to this Agreement and shall have
all the rights and obligations of a Bank with a Commitment as set forth in such
instrument of assumption,
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and the transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant to this subsection
(c), the transferor Bank, the Agent and the Borrowers shall make appropriate
arrangements so that, if required, new Notes are issued to the Assignee. In
connection with any such assignment, the transferor Bank shall pay to the Agent
an administrative fee for processing such assignment in the amount of $2,500. If
the Assignee is not incorporated under the laws of the United States or a state
thereof, it shall deliver to the Company and the Agent certification as to
exemption from deduction or withholding of any United States federal income
taxes in accordance with Section 2.18.
(d) Any Bank may at any time assign all or any portion of its rights under
this Agreement and its Notes to a Federal Reserve Bank. No such assignment shall
release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights shall
be entitled to receive any greater payment under Section 8.03 or 11.03(a) than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Company's prior written
consent or by reason of the provisions of Section 8 02 or 8 03 requiring such
Bank to designate a different Applicable Lending Office under certain
circumstances or at a time when the circumstances giving rise to such greater
payment did not exist.
(f) If any Reference Bank transfers its Notes to an unaffiliated
institution, the Agent shall, in consultation with the Company and with the
consent of the Required Banks, appoint another Bank to act as a Reference Bank
hereunder.
SECTION 11.07. COLLATERAL. Each of the Banks represents to the Agent and
each of the other Banks that it in good faith is not relying upon any "margin
stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 11.08. GOVERNING LAW; SUBMISSION TO JURISDICTION; SERVICE OF
PROCESS. This Agreement each Election to Participate, each Election to Terminate
and each Note shall be governed by and construed in accordance with the laws of
the State of New York. Each Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York
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and of any New York State court sitting in New York City for purposes of all
legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. Each Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum. Each Borrower hereby appoints CT Corporation System
its authorized agent to accept and acknowledge service of any and all processes
which may be served in any suit, action or proceeding of the nature referred to
in this Section 11.08 and consents to process being served in any such suit,
action or proceeding upon CT Corporation System in any manner or by the mailing
of a copy thereof by registered or certified mail, postage prepaid, return
receipt requested, to such Borrower's address referred to in Section 11.01; and
(d) agrees that such service (i) shall be deemed in every respect effective
service of process upon it in any such suit, action or proceeding and (ii)
shall, to the fullest extent permitted by law, be taken and held to be valid
personal service upon and personal delivery to it. A copy of any summons or
complaint served on an Eligible Subsidiary pursuant to the foregoing shall be
sent to the Company by registered or certified mail. Each Eligible Subsidiary
represents and warrants that CT Corporation System has agreed in writing to
accept such appointment and that true copies of such acceptance will be
furnished to the Agent prior to or concurrently with delivery of such Eligible
Subsidiary's Election to Participate. Nothing in this Section 11.08 shall affect
the right of any Bank to serve process in any manner permitted by law or limit
the right of any Bank to bring proceedings against the Company or any Eligible
Subsidiary in the courts of any jurisdiction or jurisdictions.
SECTION 11.09. COUNTERPARTS; INTEGRATION. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement constitutes the entire agreement and understanding among the
parties hereto and supersedes any and all prior agreements and understandings,
oral or written, relating to the subject matter hereof.
SECTION 11.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE AGENT AND
THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
THE GILLETTE COMPANY
By
------------------------------------
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
------------------------------------
Title:
CREDIT SUISSE FIRST BOSTON
By
------------------------------------
Title:
By
------------------------------------
Title:
BANKBOSTON, N.A.
By
------------------------------------
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By
------------------------------------
Title:
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FLEET NATIONAL BANK
By
------------------------------------
Title:
ABN AMRO BANK N.V.
By
------------------------------------
Title:
By
------------------------------------
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By
------------------------------------
Title:
THE BANK OF NOVA SCOTIA
By
------------------------------------
Title:
THE CHASE MANHATTAN BANK
By
------------------------------------
Title:
ROYAL BANK OF CANADA
By
------------------------------------
Title:
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BANCA COMMERCIALE ITALIANA,
NEW YORK BRANCH
By
------------------------------------
Title:
BANK BRUSSELS LAMBERT, NEW YORK
BRANCH
By
------------------------------------
Title:
By
------------------------------------
Title:
THE BANK OF TOKYO-MITSUBISHI, LTD
By
------------------------------------
Title:
BANQUE PARIBAS
By
------------------------------------
Title:
By
------------------------------------
Title:
CITIBANK, N.A.
By
------------------------------------
Title:
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DEUTSCHE BANK AG, NEW YORK AND/OR
CAYMAN ISLANDS BRANCHES
By
------------------------------------
Title:
By
------------------------------------
Title:
MELLON BANK, N.A.
By
------------------------------------
Title:
THE SANWA BANK, LIMITED
By
------------------------------------
Title:
WACHOVIA BANK OF GEORGIA, N.A.
By
------------------------------------
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By
------------------------------------
Title:
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COMMITMENT SCHEDULE
<TABLE>
<CAPTION>
Bank Commitment
---- ----------
<S> <C>
Morgan Guaranty Trust Company of New York $ 122,000,000
Credit Suisse First Boston $ 100,000,000
BankBoston, N.A. $ 80,000,000
The First National Bank of Chicago $ 80,000,000
Fleet National Bank $ 80,000,000
ABN AMRO Bank N.V. $ 50,000,000
Bank of America National Trust and Savings $ 50,000,000
Association
The Bank of Nova Scotia $ 50,000,000
The Chase Manhattan Bank $ 50,000,000
Royal Bank of Canada $ 50,000,000
Banca Commerciale Italiana, New York Branch $ 32,000,000
Bank Brussels Lambert, New York Branch $ 32,000,000
The Bank of Tokyo-Mitsubishi, Ltd. $ 32,000,000
Banque Paribas $ 32,000,000
Citibank, N.A. $ 32,000,000
Deutsche Bank AG, New York and/or Cayman $ 32,000,000
Islands Branches
Mellon Bank, N.A. $ 32,000,000
The Sanwa Bank, Limited $ 32,000,000
Wachovia Bank of Georgia, N.A. $ 32,000,000
--------------
Total $1,000,000,000
</TABLE>
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EXHIBIT A
NOTE
New York, New York
, 19
For value received, [name of Borrower], a [jurisdiction of incorporation]
corporation (the "Borrower"), promises to pay to the order of (the "Bank"), for
the account of its Applicable Lending Office, the unpaid principal amount of
each Loan made by the Bank to the Borrower pursuant to the Credit Agreement
referred to below on the last day of the interest Period relating to such Loan.
The Borrower promises to pay interest on the unpaid principal amount of each
such Loan on the dates and at the rate or rates provided for in the Credit
Agreement. All such payments of principal and interest shall be made in lawful
money of the United States in Federal or other immediately available funds at
the office of Morgan Guaranty Trust Company of New York, 60 Wall Street, New
York, New York.
All Loans made by the Bank, the respective types and maturities thereof and
all repayments of the principal thereof shall be recorded by the Bank and, if
the Bank so elects in connection with any transfer or enforcement hereof,
appropriate notations to evidence the foregoing information with respect to each
such Loan then outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; PROVIDED that the failure of the Bank to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Credit Agreement.
This note is one of the Notes referred to in the 364-Day Credit Agreement
dated as of December 20, 1996 among The Gillette Company, the banks listed on
the signature pages thereof and Morgan Guaranty Trust Company of New York, as
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<PAGE> 70
Agent (as the same may be amended from time to time, the "Credit Agreement").
Terms defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof.
The Gillette Company has, pursuant to the provisions of the Credit
Agreement, unconditionally guaranteed the payment in full of the principal of
and interest on this note.
[NAME OF BORROWER]
By
-----------------------------
Title:
- ------------------
* To be deleted in case of Notes executed and delivered by the Company.
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Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
- --------------------------------------------------------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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<PAGE> 72
EXHIBIT B
FORM OF MONEY MARKET QUOTE REQUEST
----------------------------------
[Date]
To: Morgan Guaranty Trust Company of New York (the "Agent")
From: [Name of Borrower]
Re: 364-Day Credit Agreement (the "Credit
Agreement") dated as of December 20, 1996
among The Gillette Company, the Banks listed
on the signature pages thereof and the Agent
We hereby give notice pursuant to Section 2.03 of the Credit Agreement that
we request Money Market Quotes for the following proposed Money Market
Borrowing(s):
Date of Borrowing:
--------------------
Principal Amount* Interest Period** Maturity Date
- ---------------- --------------- -------------
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
- ----------------------
*Amount must be $15,000,000 or a larger multiple of $1,000,000.
**Not less than one month (LIBOR Auction) or not less than 15 days
(Absolute Rate Auction), subject to the provisions of the definition of Interest
Period.
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Terms used herein have the meanings assigned to them in the Credit
Agreement.
[NAME OF BORROWER]
By
-----------------------
Title:
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EXHIBIT C
FORM OF INVITATION FOR MONEY MARKET QUOTES
------------------------------------------
To: Name of Bank]
Re: Invitation for Money Market Quotes to [Name
of Borrower] (the "Borrower")
Pursuant to Section 2.03 of the 364-Day Credit Agreement dated as of
December 20, 1996 among The Gillette Company, the Banks parties thereto and the
undersigned, as Agent, we are pleased on behalf of the Borrower to invite you to
submit Money Market Quotes to the Borrower for the following proposed Money
Market Borrowing(s):
Date of Borrowing:
----------------------
Principal Amount Interest Period Maturity Date
- ---------------- --------------- -------------
$
Such Money Market Quotes should offer a Money Market [Margin] [Absolute
Rate]. [The applicable base rate is the London Interbank Offered Rate.]
Please respond to this invitation by no later than [2:00 P.M.] [9:30 A.M.]
(New York City time) on [date].
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
---------------------------
Authorized Officer
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EXHIBIT D
FORM OF MONEY MARKET QUOTE
--------------------------
To: Morgan Guaranty Trust Company of New York,
as Agent
Re: Money Market Quote to [Name of Borrower]
(the "Borrower")
In response to your invitation on behalf of the Borrower dated _____, 19__,
we hereby make the following Money Market Quote on the following terms:
1. Quoting Bank:
--------------------------------
2. Person to contact at Quoting Bank:
-----------------------------------
3. Date of Borrowing: *
---------------------------
4. We hereby offer to make Money Market Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest Money Market
Amount** Period*** [Margin****] [Absolute Rate*****]
- --------- --------- ---------------------------------
$
$
[Provided, that the aggregate principal amount of Money Market Loans for which
the above offers may be accepted shall not exceed $ .]**
--------
* As specified in the related Invitation.
** Principal amount bid for each Interest Period may not exceed principal amount
requested. Specify aggregate limitation if the sum of the individual offers
exceeds the
(notes continued on following page)
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We understand and agree that the offer(s) set forth above, subject to the
satisfaction of the applicable conditions set forth in the 364-Day Credit
Agreement dated as of December 20, 1996 among The Gillette Company, the Banks
listed on the signature pages thereof and yourselves, as Agent, irrevocably
obligates us to make the Money Market Loan(s) for which any offer(s) are
accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated: By:
------------------ -------------------------
Authorized Officer
- -------------------
amount the Bank is willing to lend. Bids must be made for $5,000,000 or a larger
multiple of $1,000,000. *** Not less than one month or not less than 15 days, as
specified in the related Invitation. No more than five bids are permitted for
each Interest Period. **** Margin over or under the London Interbank Offered
Rate determined for the applicable Interest Period. Specify percentage (to the
nearest 1/10,000 of 1%) and specify whether "PLUS" or "MINUS". ***** Specify
rate of interest per annum (to the nearest 1/10,000th of 1%).
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EXHIBIT E
OPINION OF
COUNSEL FOR THE COMPANY
-----------------------
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am Vice Chairman of the Board of The Gillette Company (the "Company"),
and I am rendering this opinion pursuant to Section 3.01(c) of the 364-Day
Credit Agreement dated as of December 20, 1996 among the Company, the banks
parties thereto and Morgan Guaranty Trust Company of New York, as Agent (the
"Credit Agreement"). Terms defined in the Credit Agreement are used herein as
therein defined.
I have examined or caused to be examined by counsel retained by or on the
staff of the Company, among other things, originals or copies, certified or
otherwise identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted or
have had conducted such other investigations of fact and law as I have deemed
necessary or advisable for purposes of this opinion.
I am admitted to practice in the State of Ohio and the Commonwealth of
Massachusetts. No opinion is expressed herein with respect to or as to the
effect of any laws other than the laws of the Commonwealth of Massachusetts, the
federal laws of the United States of America and the General Corporation Law of
the State of Delaware.
Upon the basis of the foregoing, I am of the opinion that:
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1. The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of Delaware and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted.
2. The execution, delivery and performance by the Company of the Credit
Agreement and the Notes issued by it are within the Company's corporate powers,
have been duly authorized by all necessary corporate action, require no action
by or in respect of, or filing with, any governmental body, agency or official
and do not contravene, or constitute a default under, any provision of
applicable law or regulation or of the certificate of incorporation or by-laws
of the Company or of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Company and known to me or, to the best of my
knowledge, result in the creation or imposition of any Lien on any asset of the
Company or any of its Subsidiaries.
3. The provision in Section 11.08 of the Credit Agreement that the Credit
Agreement and each Note shall be construed in accordance with and governed by
the law of the State of New York is a valid choice of law provision under
Massachusetts law and should be respected by a court sitting in Massachusetts.
4. If a court sitting in Massachusetts were to apply Massachusetts law as
the law governing the Credit Agreement and the Notes, the Credit Agreement would
constitute a valid and binding agreement of the Company and the Notes issued by
it would constitute valid and binding obligations of the Company, in each case
enforceable in accordance with their respective terms.
5. Except as disclosed in the Company's 1995 Form 10-K and the Company's
Latest Form 10-Q, there is no action, suit or proceeding pending against, or to
the best of my knowledge threatened against or affecting, the Company or any of
its Subsidiaries before any court or arbitrator or any governmental body, agency
or official, in which there is a reasonable possibility of an adverse decision
which could materially adversely affect the business, operations or financial
condition of the Company and its Consolidated Subsidiaries, considered as a
whole, or which in any manner draws into question the validity of the Credit
Agreement or the Notes.
My opinion in paragraph 4 above as to the enforceability of the Credit
Agreement and the Notes issued
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<PAGE> 79
by the Company is subject to bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforceability of creditors' rights in general,
usury laws and the general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law). With respect
to the foregoing, I express no opinion, however, as to the enforceability of
Section 11.03(b) of the Credit Agreement to the extent the rights to
indemnification provided for therein are violative of any law, rule or
regulation (including any federal or state securities law, rule or regulation)
or public policy.
To the extent that the obligations of the Company may be dependent upon
such matters, I assume for purposes of this opinion that each Bank is duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation; and that the Credit Agreement has been duly
authorized, executed and delivered by the Banks and constitutes the legal, valid
and binding obligation of the Banks, enforceable against the Banks in accordance
with its terms. I do not express any opinion as to the effect of the compliance
by any of the Banks with any state or federal laws or as to the regulatory
status or nature of the business of any of the Banks.
This opinion is rendered solely to you in connection with the above matter.
This opinion may not be relied upon by you for any other purpose or relied upon
by any other person without my prior written consent.
Very truly yours,
Joseph E. Mullaney
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<PAGE> 80
EXHIBIT F
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
--------------------------------------
[Effective Date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the 364-Day Credit Agreement
(the "Credit Agreement") dated as of December 20, 1996 among The Gillette
Company, a Delaware corporation (the "Company"), the banks parties thereto (the
"Banks") and Morgan Guaranty Trust Company of New York, as Agent (the "Agent"),
and have acted as special counsel for the Agent for the purpose of rendering
this opinion pursuant to Section 3.01(d) of the Credit Agreement. Terms defined
in the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as we have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Company of the Credit
Agreement and its Notes are within the Company's corporate powers and have been
duly authorized by all necessary corporate action.
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<PAGE> 81
2. The Credit Agreement constitutes a valid and binding agreement of the
Company and each Note issued by it constitutes a valid and binding obligation of
the Company, in each case enforceable in accordance with its terms, except as
the same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
We are members of the Bar of the State of New York and the foregoing
opinion is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York) in
which any Bank is located which limits the rate of interest that such Bank may
charge or collect.
This opinion is rendered solely to you in connection with the above matter.
This opinion may not be relied upon by you for any other purpose or relied upon
by any other person without our prior written consent.
Very truly yours,
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<PAGE> 82
EXHIBIT G
FORM OF ELECTION TO PARTICIPATE
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent for
the Banks named in the 364-Day
Credit Agreement dated as of December 20, 1996
among The Gillette Company,
such Banks and such Agent (as amended
from time to time, the "Credit Agreement")
Dear Sirs:
Reference is made to the Credit Agreement described above. Terms not
defined herein which are defined in the Credit Agreement shall have for the
purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a [jurisdiction of
incorporation] corporation, hereby elects to be an Eligible Subsidiary for
purposes of the Credit Agreement, effective from the date hereof until an
Election to Terminate shall have been delivered on behalf of the undersigned in
accordance with the Credit Agreement. The undersigned confirms that the
representations and warranties set forth in Article IX of the Credit Agreement
are true and correct as to the undersigned as of the date hereof, and the
undersigned hereby agrees to perform all the obligations of an Eligible
Subsidiary under, and to be bound in all respects by the terms of, the Credit
Agreement, including without limitation Sections 11.08 and 11.10 thereof, as if
the undersigned were a signatory party thereto.
[Tax disclosure pursuant to Section 9.04, if any]
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<PAGE> 83
The address to which all notices to the undersigned Eligible Subsidiary
under the Credit Agreement should be directed is: _____. This instrument shall
be construed in accordance with and governed by the laws of the State of New
York.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
By
--------------------------------
Title:
The undersigned hereby confirms that [name of Eligible Subsidiary] is an
Eligible Subsidiary for purposes of the Credit Agreement described above.
THE GILLETTE COMPANY
By
--------------------------------
Title:
Receipt of the above Election to Participate is hereby acknowledged on and
as of the date set forth above.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By
--------------------------------
Title:
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<PAGE> 84
EXHIBIT H
FORM OF ELECTION TO TERMINATE
, 19
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent for
the Banks named in the 364-Day Credit
Agreement dated as of December 20, 1996
among The Gillette Company, such Banks and such Agent
(as amended from time to time,
the "Credit Agreement")
Dear Sirs:
Reference is made to the Credit Agreement described above. Terms not
defined herein which are defined in the Credit Agreement shall have for the
purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a [jurisdiction of
incorporation] corporation, hereby elects to terminate its status as an Eligible
Subsidiary for purposes of the Credit Agreement, effective as of the date
hereof. The undersigned hereby represents and warrants that all principal and
interest on all Notes of the undersigned and all other amounts payable by the
undersigned pursuant to the Credit Agreement have been paid in full on or prior
to the date hereof. Notwithstanding the foregoing, this Election to Terminate
shall not affect any obligation of the undersigned under the Credit Agreement or
under any Note heretofore incurred.
This instrument shall be construed in accordance with and governed by the
laws of the State of New York.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
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<PAGE> 85
By
--------------------------------
Title:
The undersigned hereby confirms that the status of [name of Eligible
Subsidiary] as an Eligible Subsidiary for purposes of the Credit Agreement
described above is terminated as of the date hereof.
THE GILLETTE COMPANY
By
--------------------------------
Title:
Receipt of the above Election to Terminate is hereby acknowledged on and as
of the date set forth above.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Agent
By
-------------------------------
Title:
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<PAGE> 86
EXHIBIT I
OPINION OF
COUNSEL FOR THE BORROWER
(BORROWINGS BY ELIGIBLE SUBSIDIARIES)
[date]
To the Banks and the Agent
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am counsel to [name of Eligible Subsidiary, jurisdiction of
incorporation] (the "Borrower") and give this opinion pursuant to Section
3.03(b) of the 364-Day Credit Agreement (as amended to the date hereof, the
"Credit Agreement") dated as of December 20, 1996 among The Gillette Company
(the "Company"), the banks parties thereto and Morgan Guaranty Trust Company of
New York, as Agent. Terms defined in the Credit Agreement are used herein as
therein defined.
I have examined originals or copies, certified or otherwise identified to
my satisfaction, of such documents, corporate records, certificates of public
officials and other instruments and have conducted such other investigations of
fact and law as I have deemed necessary or advisable for purposes of this
opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Borrower is a corporation validly existing and in good standing
under the laws of [jurisdiction of incorporation] and is a Substantially-Owned
Consolidated Subsidiary of the Company.
2. The execution and delivery by the Borrower of its Election to
Participate and its Notes and the performance by the Borrower of the Credit
Agreement and its
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<PAGE> 87
Notes are within the Borrower's corporate powers, have been duly authorized by
all necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official and do not contravene , or
constitute a default under, any provision of applicable law or regulation or of
the certificate of incorporation or by-laws of the Borrower or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Borrower.
3. The execution and delivery by the Borrower of its Election to
Participate and its Notes and the performance by the Borrower of the Credit
Agreement and its Notes do not contravene, or constitute a default under, any
provision of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Company or any of its Subsidiaries and known to me
or, to the best of my knowledge, result in the creation or imposition of any
Lien on any asset of the Company or any of its Subsidiaries.*
4. The Credit Agreement constitutes a valid and binding agreement of the
Borrower and its Notes constitute valid and binding obligations of the Borrower,
in each case enforceable in accordance with their respective terms, except as
the same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
Very truly yours,
- ----------------------
* The opinion in this paragraph may be given by Counsel for the Company.
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<PAGE> 88
EXHIBIT J
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of _____________, 19__ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee"), THE GILLETTE COMPANY (the "Company")
and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Agent (the "Agent").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the "Agreement") relates
to the 364-Day Credit Agreement dated as of December 20, 1996 among the Company,
the Assignor and the other Banks party thereto, as Banks, and the Agent (as
amended and in effect on the date hereof, the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has a
Commitment to make Loans in an aggregate principal amount at any time
outstanding not to exceed $_______________ ;
WHEREAS, Committed Loans made by the Assignor under the Credit Agreement in
the aggregate principal amount of $________________are outstanding at the date
hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the rights
of the Assignor under the Credit Agreement in respect of [a portion of] its
Commitment thereunder in an amount equal to $______________ (the "Assigned
Amount"), together with [a corresponding portion of] its outstanding Committed
Loans, and the Assignee proposes to accept assignment of such rights and assume
the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 1. DEFINITIONS. All capitalized terms not otherwise defined herein
shall have the respective meanings set forth in the Credit Agreement.
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<PAGE> 89
SECTION 2. ASSIGNMENT. The Assignor hereby assigns and sells to the
Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount of the
Committed Loans made by the Assignor outstanding at the date hereof. Upon the
execution and delivery hereof by the Assignor, the Assignee, the Company and the
Agent and the payment of the amounts specified in Section 3 required to be paid
on the date hereof (i) the Assignee shall, as of the date hereof, succeed to the
rights and be obligated to perform the obligations of a Bank under the Credit
Agreement with a Commitment in an amount equal to the Assigned Amount, and (ii)
the Commitment of the Assignor shall, as of the date hereof, be reduced by a
like amount and the Assignor released from its obligations under the Credit
Agreement to the extent such obligations have been assumed by the Assignee. The
assignment provided for herein shall be without recourse to the Assignor.
SECTION 3. PAYMENTS. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore agreed between them.* It is
understood that commitment and/or facility fees accrued to the date hereof are
for the account of the Assignor and such fees accruing from and including the
date hereof are for the account of the Assignee. Each of the Assignor and the
Assignee hereby agrees that if it receives any amount under the Credit Agreement
which is for the account of the other party hereto, it shall receive the same
for the account of such other party to the extent of such other party's interest
therein and shall promptly pay the same to such other party.
[SECTION 4. CONSENT OF THE COMPANY AND THE AGENT. This Agreement is
conditioned upon the consent of the Company and the Agent pursuant to Section
11.06(c) of the Credit Agreement. The execution of this Agreement by the
- ---------------------------
*Amount should combine principal together with accrued interest and
breakage compensation, if any, to be paid by the Assignee, net of any portion of
any upfront fee to be paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generically or by formula rather
than as a fixed sum.
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<PAGE> 90
Company and the Agent is evidence of this consent. Pursuant to Section 11.06(c)
the Borrower agrees to execute and deliver a Note [and to cause each Eligible
Subsidiary to execute and deliver a Note] payable to the order of the Assignee
to evidence the assignment and assumption provided for herein.]*
SECTION 5. NON-RELIANCE ON ASSIGNOR. The Assignor makes no representation
or warranty in connection with, and shall have no responsibility with respect
to, the solvency, financial condition, or statements of any Borrower, or the
validity and enforceability of the obligations of any Borrower in respect of the
Credit Agreement or any Note. The Assignee acknowledges that it has,
independently and without reliance on the Assignor, and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and will continue to be responsible for
making its own independent appraisal of the business, affairs and financial
condition of the Borrowers.
SECTION 6. GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 7. COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
[ASSIGNOR]
By
--------------------------
Title:
- -----------------------
*Consent is required if the Assignee is not an affiliate of the Assignor
and was not a Bank immediately prior to the assignment.
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<PAGE> 91
[ASSIGNEE]
By
----------------------------
Title:
[THE GILLETTE COMPANY]
By
----------------------------
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By
----------------------------
Title:
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<PAGE> 1
Exhibit 12
COMPUTATION OF THE RATIOS OF CURRENT ASSETS TO CURRENT
LIABILITIES FOR THE YEARS 1997, 1996 AND 1995
1997 1996 1995
---- ---- ----
Current Assets 4690 4753 4088
Current Liabilities 2641 2935 2590
---- ---- ----
Current Ratio 1.78 1.62 1.58
<PAGE> 1
Exhibit 13
THE GILLETTE COMPANY
-----------------
Founded in 1901, The Gillette COmpany is the world leader in male grooming,
a category that includes blades, razor and shaving preperations. Gillette also
holds the number one position worldwide in selected female grooming products,
such as wet shaving products and hair epilation devices. The Company is the
world's top seller of writing instruments and correction products, toothbrushes
and oral care appliances. In addition, the Company is the world leader in
alkaline batteries.
Gillette manufacturing operations are conducted at 64 facilities in 26
countries, and products are distributed through wholesalers, retailers and
agents in over 200 countries and territories.
-----------------
CONTENTS
-----------------
FINANCIAL HIGHLIGHTS 1
LETTER TO STOCKHOLDERS 2
REVIEW OF OPERATIONS 6
AMEE:GATEWAY TO GROWTH 18
MANAGEMENT'S DISCUSSION 22
FINANCIAL STATEMENTS 26
HISTORICAL FINANCIAL SUMMARY 42
PRINCIPAL DIVISIONS AND SUBSIDIARIES 44
DIRECTORS AND OFFICERS 46
CORPORATE AND STOCKHOLDER INFORMATION 47
-----------------
<PAGE> 2
LETTER TO STOCKHOLDERS
We are pleased to report that Gillette completed another successful year,
achieving record sales and earnings. In its first year as part of the Company,
Duracell was a major contributor to this performance.
[PHOTO OF CHAIRMAN ALFRED M. ZEIEN]
Chairman Alfred M. Zeien
We again attained record results in each of our business segments, geographic
regions and operating groups, on a local currency basis, continuing the pattern
of strong, consistent progress achieved in recent years. As expected, the
addition of Duracell accelerated sales and profit growth in 1997.
For the year, net sales increased 4% to $10.1 billion, exceeding the $10
billion mark for the first time. Net income improved at a faster 16% rate to
$1.4 billion. Basic earnings per share were up 15% to $2.55, and fully diluted
per share earnings also grew 15% to $2.49. These profit measures are compared
with 1996 results before merger-related charges.
The Company's operating profit also reached record levels in 1997, growing
13% to $2.3 billion, and the operating profit margin reached 23.1%, up two
points for the year. Since 1990, Gillette has added over $1.3 billion to profit
from operations, and the operating margin has improved more than five percentage
points. The 1997 margin represents the Companys highest operating profit margin
since 1967, when Gillette was essentially a double edge blade company.
We've made similar progress at the net income line, adding more than $1
billion to net income in the last seven years. The net income margin in 1997 was
the highest in 35 years, reaching 14.2% of sales, up seven and a half percentage
points since 1990.
These results were achieved despite a sales growth rate that was below our
usual performance, due to several significant factors.
- - The strength of the U.S. dollar relative to most foreign currencies reduced
sales growth by four percentage points. In Western Europe, for example, the
Company's sales, as reported in dollars, were 3% below those of 1996. If Europe
an exchange rates had held at prior year levels, however, dollar sales would
have grown 4%. The reported sales decline in Europe was in sharp contrast to
increases of 10% in Latin America and 13% in the remainder of our international
markets.
- - In the North Atlantic region, comprising North America and Western Europe,
we intentionally shipped our older blade systems at a rate below consumer take
away during the second half of the year, as we attempted to reduce trade
inventory levels prior to the launch of the next generation shaving system.
- - Battery sales were inhibited in the first half of the year by the planned
conversion from Duracell distributors to the Gillette sales force in a number of
international markets.
- - And finally, demand for several key new products
exceeded our ability to supply them, further constraining our sales performance.
For the 92nd consecutive year, the Company paid cash dividends on its common
stock. Dividends declared rose 19% to 86 cents, up from 72 cents in 1996. This
marks the 20th successive annual increase in dividends per common share,
reflecting our continued
PAGE 2
<PAGE> 3
strong business fundamentals and improved outlook. In the last five years, the
dividend rate has more than doubled, climbing at a 19% average annual rate.
Gillette stock also continued its superior performance. Although somewhat below
the high reached in July, Gillette stock closed the year at $100 7/16. The
annual return to investors was 30% in 1997, well ahead of the Dow Jones
Industrial Average. This exceptional performance reflects a long-term pattern.
Since the end of 1990, the compounded annual return to shareholders has been
32%, compared with 20% for both the Dow Jones Industrial Average and the
Standard & Poors 500. In dollar terms, the market value of Gillette stock has
increased $50 billion during this period, from $6 billion to $56 billion. Since
1987, Gillette stock has moved up at a 33% average annual rate, nearly twice
that of the major market averages. The value of a $1,000 investment at the end
of 1987 grew to $16,989 by the end of 1997, more than three times the value of a
comparable investment in either of the market averages.
The Company's outstanding progress in recent years is due to the focus on
its mission to achieve or enhance clear leadership, worldwide, in the core
consumer product categories in which we choose to compete. In 1997, nearly
three-quarters of net sales came from categories where Gillette holds the world
leadership position. This proportion has increased 18 percentage points in the
last five years. In addition, 96% of our sales came in our core categories. This
percentage also has improved markedly in the last few years, growing 10
percentage points since 1990, as we concentrate marketing and technical efforts
on these key business areas.
In pursuing our mission, we are committed to living by our values, one of
which is responsibility to the environment. With the addition of Duracell,
already a leader in the battery industry's environmental initiatives, the
Company has placed renewed emphasis on its performance in this area. Since 1990,
Gillette has spent more than $60 million for major environmental projects around
the world. During this period, we have cut our worldwide emissions by 80%,
reduced packaging by 12% and realized energy efficiency gains of 10%. Most
notably, Gillette applies stringent environmental standards at each of its
facilities worldwide, frequently exceeding local requirements. The Company's
market progress reflects our emphasis on three principal growth drivers research
and development, capital spending and advertising. Our goal is to increase total
spending on these growth drivers at least as fast as sales to assure continued
growth. In 1997, investment in these growth drivers climbed 5%, slightly ahead
of the 4% advance in sales. Capital spending rose substantially during the year
to expand our business geographically, to develop more efficient production
methods, to enlarge capacity across all major product categories and to launch
superior new products.
A record 49% of Gillette sales in 1997 came from products introduced in the
past five years. This was well above the 41% figure achieved in 1996. Our
objective is to maintain the new product ratio at well above 40% of sales each
year. During the year, we again launched more than 20 new products, maintaining
the accelerated pace of recent years. We expect this strong new products program
to continue in 1998, as we introduce next generation products in several core
businesses.
<TABLE>
<CAPTION>
Investment Value Annualized
12/31/87 12/31/97 Return
=====================================================
<S> <C> <C> <C>
Gillette $1,000 $16,989 33%
DJIA $1,000 $ 5,516 19%
S&P 500 $1,000 $ 5,225 18%
=====================================================
</TABLE>
PAGE 3
<PAGE> 4
The long-anticipated successor to the Sensor shaving system will be
launched at midyear in the United States, Canada and selected international
markets, followed by a rollout into Europe later in the year. Extensive consumer
testing has shown that this revolutionary product delivers shaving performance
far superior to any blade product now on the market, achieving an advantage over
the SensorExcel shaving system as dramatic as the original Sensor system
achieved over the Atra Plus brand.
Plans call for rapid geographic rollout of this superior new product and a
comprehensive communications effort combining advertising, public relations and
point-of-sale materials in one coordinated program. Over the next several years,
in an unprecedented new products program, our blade and razor business will be
further strengthened by the launch of a number of significant new wet shaving
products.
During 1998, we also will introduce major new products in several other
business segments. Duracell Ultra, the first Duracell alkaline battery
specifically designed for today's demanding high-drain devices, will be
available at retail in May. Later in the year, Oral-B will introduce the next
generation toothbrush, enhancing its reputation for technologically superior
products. In the Braun segment, we will complement our plaque remover line with
an innovative new product that should assure continued leadership in this
fast-growing category.
The Company's oral care product line Oral-B toothbrushes and dental
products and the Braun Oral-B line of oral care appliances has been an
exceptional performer. It is Gillettes fastest growing product category, with
sales more than doubling in the last five years to exceed $1 billion for the
first time in 1997.
The results of the Duracell battery business in 1997 confirm our belief
that Duracell is an outstanding addition to Gillette. As expected, Duracell has
accelerated our sales and profit growth rates, and we see substantial
opportunities for business expansion.
For Duracell, 1997 was a year of transition. In North America and Western
Europe, we created the Duracell North Atlantic Group, similar to the Gillette
organization in this region. In the rest of the world, we integrated Duracell
operations with Gillette. These actions align Duracell with the Gillette
organizational structure around the world. In addition, we refocused Duracells
technical efforts, emphasizing primary alkaline product development, where we
see a significant opportunity to develop consumer-perceptible product
improvements.
Further, we eliminated the manufacturing operations for rechargeable cells
and exited the computer rechargeable battery business, preferring to source
products in the fast-growing camcorder and mobile communications markets, where
retail opportunities appear more promising.
We are generating meaningful new products in the primary alkaline and
specialty battery categories, several of which will be launched during 1998. In
international markets outside of Western Europe, we have achieved dramatic
increases in retail distribution in established markets, and there is certainly
more to come, aided by Gillette's worldwide distribution network. We expect
continued accelerated growth from the Duracell segment in the years ahead,
driven by consumer upgrading to superior-performing alkaline technology, further
geographic expansion and new products.
PAGE 4
<PAGE> 5
The Company's International Group, which markets blade and razor, toiletry,
stationery and battery products outside of North America and Western Europe,
made outstanding progress in 1997, despite currency-related weakness in several
Asian markets in the second half of the year. Among our four operating groups,
International was the primary contributor to our increased sales and profits in
1997, a trend we expect will continue over the next several years.
The key growth engine within International was the Africa, Middle East and
Eastern Europe (AMEE) Group. In markets such as India, Poland, Russia, South
Africa and Turkey, we registered exceptional growth in 1997, with sales up more
than 30%. Each of these countries is now among Gillette's top 25 markets. For a
closer look at the Company's progress in the AMEE region, see the special report
entitled AMEE: Gateway to Growth, which begins on page 18.
Two recent developments in 1998 are noteworthy.
[ ] The Board of Directors has recommended to the stockholders an increase in
the Company's authorized common stock. If this is approved at the annual meeting
on April 16, the Board will declare a two-for-one stock split in the form of a
100% stock dividend. The Board also has proposed an increase of 19% in the
annual dividend rate.
[ ] As announced in January, we have reached a definitive agreement to sell
the Jafra Cosmetics business, which we acquired in 1973. Under Gillette
management, Jafra has grown from a regional U.S. business to a leading
international direct selling company. While Jafra is a strong, growing business,
it no longer fits the Company's business strategy.
[ ] [ ] [ ]
We would like to note the retirement and accomplishments of three longtime
colleagues and to thank them for their many years of dedicated service.
Juan M. Steta will not be standing for reelection to the Board this year,
having reached the mandatory retirement age for directors. Mr. Steta has been a
director since 1987. His wise counsel has contributed importantly to the
Company's progress over the last decade.
Joseph E. Mullaney, Vice Chairman, Legal, will retire in April after 25 years
with the Company. Mr. Mullaney joined Gillette in 1972, was named General
Counsel a year later and was elected to the Board of Directors in 1990. His
leadership in legal matters, together with his perceptive insights as a
director, has had a significant impact on the success of the Company.
Thomas F. Skelly, Senior Vice President, Finance, retired in 1997 after 30
years of exceptional service. Mr. Skelly was named Controller in 1973 and served
as Chief Financial Officer of the Company for 17 years. We will miss his seless
dedication and personable leadership style.
Every day, more than 1.2 billion people around the globe use one or more
Gillette products. Our 44,000 exceptionally talented, world-class employees
continually work to develop, produce and sell technologically superior products
to meet the ever-increasing needs of these consumers. With an innovative,
broadly diversified new products portfolio and outstanding geographic expansion
opportunities in all product categories, we plan to deliver, through 1998 and
beyond, the excellent sales and earnings growth you have come to expect from The
Gillette Company.
/s/ Alfred M. Zeien
Alfred M. Zeien
Chairman of the Board
/s/ Michael C. Hawley
Michael C. Hawley
President
March 2, 1998
PAGE 5
<PAGE> 6
BLADES & RAZORS
Building on the record results of 1996, Gillette further strengthened its
worldwide leadership position in the blade and razor business last year. Sales
increased slightly, and profits were well above those of the prior year.
The Company's sustained growth in its principal line of business reflects
the exceptional market performance of its technologically superior products.
Foremost among these is the Sensor family of shaving systems, which has achieved
remarkable success worldwide, outselling all competitive products combined.
Within the male portion of this franchise, the top-of-the-line SensorExcel
shaving system, introduced in 1993, again set the pace, generating significant
advances in sales and market share. This products continuing international
rollout during 1997 included launches in India, the worlds largest blade market,
and in the Former Soviet Union, the third largest. The original Sensor system,
launched in 1990, retained sizable share positions in the United States and
abroad.
Brisk demand for the SensorExcel for Women system, introduced in 1996, also
strengthened the Sensor franchise. This innovative product registered especially
rapid sales gains in Western Europe and Latin America and more than doubled its
share of market in North America. The Sensor for Women system, launched in 1992,
also held substantial shares in many markets. The popularity of these two
products reflects the continuing shift by women around the world from disposable
razors to refillable shaving systems.
The Atra and Trac II twin blade shaving systems, major brands for more than
20 years, have gradually been overtaken by Sensor products as the market
leaders. Both older brands maintained important share positions in 1997,
however.
Gillette twin blade disposable razor sales rose moderately. This was due
primarily to strong sales of CustomPlus razors, particularly in Latin America,
where they are sold as part of the Prestobarba Max franchise. Another factor was
the excellent trade and consumer reception given the new Agility womens
disposable razor, introduced in North America in late 1997. Gillette disposable
razors remained the clear market leaders worldwide, with the Good News brand the
best seller in the United States for the 22nd consecutive year.
Complementing gains by twin blade disposable razors and shaving systems,
the Company's double edge blade business also showed vitality. Sales moved ahead
modestly, as substantial advances in emerging markets more than offset lower
sales elsewhere. This enabled Gillette to strengthen its traditional number one
position in the double edge category.
In July, Gillette will begin shipping a revolutionary shaving system that,
by offering extraordinary improvement over any blade product now available,
should enhance the Company's preeminence in the world shaving market.
[PICTURE OF GILLETTE RAZOR PRODUCTS]
PAGE 6
<PAGE> 7
THE GILLETTE COMPANY 1997 ANNUAL REPORT
[GILLETTE RAZOR PHOTO]
The Gillette SensorExcel for Women shaving system
<PAGE> 8
THE GILLETTE COMPANY 1997 ANNUAL REPORT
[GILLETTE GROOMING PRODUCTS PHOTO]
A selection of Gillette Series male grooming products
<PAGE> 9
TOILETRIES & COSMETICS
Reflecting continued growth in several core product categories, the
Company's toiletries and cosmetics business again improved its performance.
Sales were slightly above those of a year ago, and profits advanced
significantly.
Worldwide sales of deodorants/antiperspirants, Gillettes largest toiletries
category, posted a modest increase in 1997.
In the United States, where technologically innovative clear stick versions
of the Right Guard and Gillette Series brands showed particular strength, the
Company's share of the deodorant/antiperspirant market continued to rise,
reaching its highest level in over 20 years. Abroad, deodorant/antiperspirant
sales climbed sharply. The major contributor to the gain was the Gillette Series
brand, which generated strong demand in international areas, especially in the
new markets of Eastern Europe and the Former Soviet Union.
Shave preparations turned in another superior performance, with substantial
growth both in the United States and abroad. Sales of Gillette Series shave
preparations moved markedly higher in established markets, and the brand was
well-received in a number of introductory markets abroad. Sales of Satin Care
for Women, a soap-free aerosol shaving gel available in four formulas, grew even
more rapidly. At year-end, Satin Care nonaerosol gel in an innovative soft touch
bottle was introduced in North America to excellent trade response.
Reflecting these advances, the Company further strengthened its leading
position in the worldwide shave preparations business.
Gillette also achieved sizable sales gains in the after-shave category.
This was due primarily to the very favorable reception given Gillette Series
after-shaves in Eastern Europe, the Former Soviet Union and other new markets.
Satin Care skin replenishing creme for women was another positive factor. First
distributed in the Asia-Pacific region in 1996, this advanced new after-shave
skin conditioner was introduced successfully in North America during the year.
The upward trend in the Company's toiletries business also reflected
excellent consumer response worldwide to newly introduced Gillette Series shower
gels.
Among hair care products, the White Rain brand recorded a significant
decline in overall sales, despite a good showing by the White Rain Solutions
hair care line.
Worldwide sales of Jafra skin care and color cosmetics products moved ahead
slightly. A major contributor was the superior performance in Mexico, where
Jafra was again the leader among direct sellers. In early 1998, Gillette
announced a definitive agreement to divest Jafra. Although a profitable, growing
business, Jafra no longer fits Gillette's business strategy.
The Company's tightly focused, technologically driven toiletries business,
featuring innovative products marketed with a global perspective, is in an
excellent position for strong, sustained growth in the years to come.
PAGE 9
<PAGE> 10
STATIONERY PRODUCTS
Stationery products sales showed little change from those of 1996, and
Gillette remained the clear worldwide leader in the very competitive writing
instruments and correction products businesses. Profits were sharply higher than
in the prior year.
With its well-established Parker, Paper Mate and Waterman franchises,
Gillette holds a strong position within all writing systems, price levels,
distribution channels and geographic areas.
Worldwide sales of Parker writing instruments grew modestly, paced by the
performance of Frontier mid-priced pens in Western Europe and the United States.
Improved models of Parker Insignia pens featuring new finishes also contributed
to the upward trend, with strong sales in Western Europe. In the prestige
category, the Limited Edition Parker Snake fountain pen in 18-carat gold and
sterling silver was enthusiastically received in key markets. During the year,
distribution of Parker writing instruments was rapidly extended throughout
Eastern Europe, India and Russia, spurring strong sales advances in these areas.
The Paper Mate brand showed good sales progress around the world, with
gains made by a wide range of writing instruments.
Sales of low-priced Paper Mate pens rose slightly, reflecting the
successful introduction of Comfort Mate pens in the United States and a
considerable increase in stick pen sales in Latin America. The Dynagrip
mid-priced pen line, buoyed by substantial demand for the disposable Dynagrip
model, recorded significantly higher sales, as did the Paper Mate Gel-Writer
brand.
Another positive factor was the Flexgrip refillable pen family, which
posted a notable gain in sales. Led by a strong performance in the United
States, the Company's pencil sales were up sharply. This was due chiefly to the
well-established Paper Mate Sharpwriter disposable mechanical pencil.
Waterman luxury writing instrument sales fell well below those of the
previous year, primarily reflecting weak currencies in Western Europe, Watermans
largest market. By contrast, good sales progress was achieved in Latin America
and particularly in Eastern Europe, where distribution was significantly
broadened with the opening of Waterman boutiques in Warsaw, Prague and Budapest.
Supported by considerable increases in the United States, sales of Liquid
Paper correction products moved ahead. A major contributor to the advance was
Liquid Paper DryLine correction films, which generated substantial sales gains
in both domestic and international markets. Another plus was the sustained
growth of Liquid Paper correction pens. Despite lower sales, Liquid Paper
correction fluids remained the worldwide market leader.
With its superior products, powerful brand names and extensive global
presence, the Company's stationery products business has a solid foundation for
future growth.
[GILLETTE PRODUCT PHOTO]
PAGE 10
<PAGE> 11
THE GILLETTE COMPANY 1997 ANNUAL REPORT
[WATERMAN PEN PHOTO]
The Waterman Carne fountain pen
<PAGE> 12
THE GILLETTE COMPANY 1997 ANNUAL REPORT
[BRAUN ORAL-B PHOTO]
The Braun Oral-B Ultra plaque remover
<PAGE> 13
BRAUN
After several years of considerable sales and profit growth, Braun in 1997
felt the effects of unfavorable foreign exchange rates and economic downturn in
key markets. Sales were marginally lower, while profits matched the prior years
record results.
Although dollar sales of mens electric shavers fell significantly in 1997,
unit volume rose moderately and Braun remained a leader in the worldwide market.
The Flex Integral family of pivoting head shavers was strengthened at
year-end by the launch of two new rechargeable models. The top-of-the-line Flex
Integral ultra speed shaver featuring an ultra speed motor for faster, closer
shaves was very well-received in its introductory markets of Germany and Japan,
and distribution throughout the rest of the world is under way. Consumers also
responded favorably to a line of moderately priced Flex Integral shavers
available in several attractive colors with youthful appeal.
Sales of the Braun Silk-epil electric hair epilator for women were aided by
the products expansion into new international markets. With substantial gains in
the Pacific Rim region, the Braun Silk-epil brand improved its top market
position worldwide.
The exceptional success of the Braun oral care appliance line continued in
1997. Worldwide sales of Braun Oral-B plaque removers climbed sharply, propelled
by strong demand for an improved model, introduced in 1996, that offers high
speed brush head oscillation for greater cleaning performance. In a very
positive trend, the rapid growth in plaque removers drove sales of replacement
brush heads markedly higher.
The Braun Oral-B Interclean electric interdental plaque remover generated
excellent sales, especially in the United States. This innovative oral care
appliance is now being rolled out in Western Europe with outstanding results.
Paced by these advances, Braun significantly enlarged the worldwide
leadership position in oral care appliances it has held for the past five years.
In the household appliance area, which showed little change in sales, Braun
food processors were a top performer, reflecting broadened distribution of the
superior CombiMax model. New products were well-received in the growing hand
blender and steam iron categories.
Hair care appliance sales decreased substantially, but the line was
strengthened at year-end by the launch of the new Braun Sensation Volumizer hair
dryer in selected European markets.
Led by an excellent showing abroad, ThermoScan infrared ear thermometers
recorded a sharp sales gain. Late in the year, the ThermoScan EZ thermometer
with a unique foldable design was introduced in the United States. Additional
distribution of this innovative product is planned.
Supported by strong market positions and a growing geographic presence,
Braun is well-positioned for sustained progress in the future.
[BRAUN PRODUCT PHOTO]
PAGE 13
<PAGE> 14
ORAL-B
Recognized worldwide for its superior oral care products, Oral-B delivered
another outstanding performance in 1997. Sales and profits rose sharply to
record levels, strengthening Oral-B's clear leadership of the global toothbrush
market.
Oral-B toothbrushes, the foundation and largest category of Oral-B's
thriving oral care business, are the brand used by more dentists and consumers
than any other in the United States and many major international markets.
Worldwide sales climbed significantly, led by premium Advantage and
Advantage Control Grip toothbrushes with micro-textured bristles. A major
technological advance, micro-textured bristles are designed to fight plaque with
the entire bristle, not just the tip, thus providing increased cleaning
surfaces.
Children's toothbrush sales also recorded a sizable advance. In the United
States, this was chiefly attributable to Oral-B's partnership with the top-rated
Nickelodeon cable television network, through which Oral-B has introduced
exceptionally popular Nickelodeon and Rugrats toothbrushes and toothpastes. The
success of these new product offerings has enabled Oral-B to gain the number one
position in the children's oral care market. Abroad, Oral-B Squish Grip and
Gripper children's toothbrushes posted markedly higher sales.
Another contributor to Oral-B's record results was strong progress in
geographic expansion. During the year, Contura mid-priced toothbrushes were
introduced successfully in the Asia-Pacific region, Pro toothbrushes were
distributed more broadly in Latin America and the Prudent oral care business was
acquired in India. In addition, Oral-B generated substantial sales gains in new
markets such as Hungary, India, Poland, Russia and Turkey.
Worldwide sales of interdental products moved ahead rapidly, spurred by
growth throughout Oral-B's range of quality dental flosses. The top performer,
an improved floss that resists shredding, was launched in the United States in
late 1996 and rolled out worldwide during the year. The well-established Super
Floss and Ultra Floss brands also recorded notable sales increases.
Reflecting major advances in children's toothpastes, worldwide sales of
Oral-B specialty toothpastes rose significantly. Oral rinse sales moved
considerably higher, while sales of professional products showed little change.
Underlying Oral-B's superior performance is its strong commitment to new
product development in partnership with the dental profession. This commitment,
evidenced by an accelerating ow of innovative products, should further enhance
Oral-B's excellent growth prospects.
[ORAL-B PHOTO]
PAGE 14
<PAGE> 15
THE GILLETTE COMPANY 1997 ANNUAL REPORT
[ORAL-B NICKELODEON PHOTO]
Oral-B Nickelodeon toothbrushes and toothpaste
<PAGE> 16
THE GILLETTE COMPANY 1997 ANNUAL REPORT
[DURACELL BATTERY PHOTO]
Duracell Ultra high-tech alkaline batteries
<PAGE> 17
DURACELL
Enlarging its clear worldwide leadership of the fast-growing alkaline
battery business, Duracell generated record results last year. Sales moved
considerably higher, and profits climbed even more rapidly.
Integration activities following the year-end 1996 merger of Gillette and
Duracell were nearly completed in 1997, and the teaming of Duracell's
high-quality products and Gillette's worldwide distribution network has been
even more successful than originally anticipated. While sales in
well-established Duracell markets showed good progress during the year,
exceptional gains were achieved in international areas where Duracell's business
traditionally had been less developed.
Alkaline batteries, a disposable energy source that powers a wide array of
consumer products, are Duracell's largest line of business. Reflecting growth
both in the United States and abroad, worldwide sales registered a notable
increase. Alkaline unit volume climbed significantly, fueled by broadened
international distribution and the growing popularity of consumer devices such
as pagers and portable CD players.
A major contributor to this outstanding performance was Duracell's
innovative PowerCheck technology, which features an on-battery, heat-sensitive
strip that gauges remaining battery power when activated. Duracell PowerCheck
technology was introduced worldwide on AAA, C and D batteries in 1997, following
its highly successful launch on AA batteries in 1996.
In another technological breakthrough, Duracell is launching this spring
the Duracell Ultra high-tech alkaline battery, which provides the longest
lasting alkaline battery performance for high technology consumer devices, a
fast-growing market that includes cellular phones, digital and ash cameras and
camcorders. With this innovation, Duracell is poised to redefine the battery
business, strengthening its standing as the worlds number one alkaline battery
brand.
Duracell's specialty battery business, consisting of lithium and zinc air
batteries, showed good sales progress worldwide, paced by gains in the United
States.
High-power rechargeable batteries posted moderately higher sales. This was
chiefly attributable to the sizable growth in nickel metal hydride rechargeables
in the United States and Latin America. At midyear, Duracell announced that it
would discontinue manufacturing rechargeable batteries. Instead, it will focus
its efforts on developing proprietary technology to enhance the performance of
rechargeable batteries sourced from third parties for use in telecommunications
devices and camcorders.
A powerful combination of quality products, strong brand name and
increasing global presence offers Duracell, the newest member of the Gillette
family of products, an outstanding opportunity to grow faster in the years
ahead.
[DURACELL BATTERIES PHOTO]
PAGE 17
<PAGE> 18
AMEE: GATEWAY TO GROWTH
In less than a decade, Gillette's AMEE region an acronym for Africa, Middle
East and Eastern Europe has developed into one of the Company's star performers,
generating exceptional sales and profit growth. All signs are that the best is
yet to come.
Covering nearly half of the worlds land mass, the 103 countries and
territories that make up the AMEE region stretch eastward from the Baltic Sea to
India's Bay of Bengal and from the Cape of Good Hope at Africa's southern tip to
Cape Krestovskiy, 400 miles north of the Arctic Circle in the Former Soviet
Union.
Many of the 2.5 billion people more than 40 percent of the worlds
population who live in this immense area are experiencing a substantial
improvement in living standards that has stimulated strong demand for quality
consumer products.
Younger people in the AMEE markets have become much more like the teens and
young adults elsewhere in the world in their attitudes, purchase interests and,
increasingly, their discretionary income, said Jose Luis Ribera, group vice
president, AMEE Group.
The political and economic reforms underlying these developments among them
the end of the Cold War, reductions in trade barriers and the opening of markets
previously closed to foreign investment also have enabled Gillette to seize the
resulting business opportunities and to begin to tap the regions tremendous
growth potential.
Beginning in the late 1980s and especially in the past five years, the
Company's presence in AMEE markets has evolved from a largely opportunistic
export business that relied on third-party distributors to substantial
on-the-ground Gillette operations. Today, the Company has 16 manufacturing
facilities and more than 5,500 employees in the region, where sales growth rates
ranging up to 70 percent annually from an increasingly sizable base provide a
strong profit contribution.
Regardless of where the Company's products are manufactured or sold,
consumers can be sure of uniform high quality and sound value. In the AMEE
region, Gillette markets the same world-class products, with the same quality
and the same package,
[WARSAW ORAL-B PHOTO]
Oral-B toothbrushes are a popular brand in Poland's thriving marketplace.
[ISTANBUL GILLETTE PHOTO]
Careful inspection assures blade quality meets exacting Gillette standards.
[ST. PETERSBERG GILLETTE PHOTO]
Street vendors are part of the growing retail network that brings diverse
Company products to Russian consumers.
PAGE 18
<PAGE> 19
that we do everywhere else, said Jorgen Wedel, executive vice president,
International Group. Depending on local conditions, the range of products we
offer in various markets may differ. But a Sensor razor is a Sensor razor
everywhere.
Gillette has achieved its standing as one of the worlds most global
companies through a strategy of geographic expansion by acquisition, joint
venture and internal development to access major markets where it once had no
significant position.
The Company's principal line of business blades and razors has led the
march into new AMEE markets. In 1989, Gillette blade production began in
Pakistan. In 1991, a large Turkish blade firm was acquired and operations in
Egypt were significantly expanded. In 1992, the Company substantially enlarged
blade production in India and acquired Poland's leading blade manufacturer. In
1993, joint venture blade manufacturing got under way in Russia. In 1995, a
major Indian blade company was purchased. In 1996, Gillette acquired the chief
blade producer in the Czech Republic and a large blade business in the Former
Soviet Union. In all, access to markets representing upwards of eight billion
blade units has been gained in less than a decade.
The opening of these new markets has generated tremendous volume growth in
all of the Company's shaving products, from double edge blade brands to the
Sensor family of shaving systems. More important, these initiatives have greatly
enlarged the number of new Gillette customers. While most now use double edge
blades over two-thirds of 1997 blade shipments in the AMEE region were in this
form, given low incomes in many areas the Company is aggressively pursuing the
upgrading strategy that has been so successful elsewhere. This involves
converting double edge users to better performing and more profitable twin blade
shaving products, both disposable razors and shaving systems.
Blades and razors for men and, increasingly, for women are the first and by
far the largest category of Gillette business in the AMEE region.
[MOSCOW BRAUN PHOTO]
Booming steam iron sales have helped make Russia Braun's third largest market
for household appliances.
[LODZ POLAND EQUIPMENT PHOTO]
Modern facilities and state-of-the art equipment spur productivity gains.
[JOHANNESBURG DISPLAY PHOTO]
Prominent display of women's shaving products heightens brand awareness,
boosting sales throughout South Africa.
PAGE 19
<PAGE> 20
Once this base has been established in a new market, the rest of the Companys
product portfolio soon follows: toiletries and stationery products, electric
shavers and other small electrical appliances, toothbrushes and batteries.
Among the Company's toiletries brands, Gillette Series male grooming
products and, more recently, the Satin Care women's line are making strong
advances, particularly in the countries of the Former Soviet Union and in
Eastern Europe. Sales of shave preparations, the largest product category, have
more than doubled in the past two years, while the Gillette
deodorant/antiperspirant business in AMEE markets has quadrupled over the same
period.
The Company's prestige writing instruments also have achieved substantial
gains across the region, with Parker and Waterman boutiques opening last year in
Budapest, Moscow, Prague and Warsaw. In India a country whose rapidly growing
middle class is larger than the total population of Germany Parker products were
introduced in 1996 through a joint venture with Luxor Pen Company, India's
largest writing instruments manufacturer. The excellent trade and consumer
reception given the Parker brand virtually doubled Gillettes stationery products
business in India during 1997.
Braun small electrical appliance sales also are rising at impressive rates
in many key AMEE markets, with exceptionally strong results in Russia and
Poland. Russia, for example, currently is Brauns third largest market worldwide
for household appliances, including products such as meat grinders and steam
irons. In addition, Braun's share of Russia's thriving electric shaver market
has nearly doubled since 1995.
Oral-B which in 1997
strengthened its leading share position in South Africa and gained the number
one spot in Turkeys fast-growing toothbrush market has entered more than a dozen
other AMEE markets in the past several years. Oral-B toothbrushes, the first
step in the introduction of a comprehensive range of oral care products, have
been universally well-received. In India, where an Oral-B sales organization was
created in 1996, a local oral care company was acquired in 1997 to broaden the
Companys market presence.
[NEW DELHI GILLETTE PHOTO]
[MOSCOW BRAUN PHOTO]
[ST. PETERSBURG GILLETTE PHOTO]
PAGE 20
<PAGE> 21
Duracell battery operations outside North America and Western Europe have
been successfully melded into the Company's International Group, with very
encouraging results in the AMEE region. Given the distribution similarities of
batteries and blades, sizable advances in market penetration are being realized,
with major gains in retail distribution, display and promotion of the Duracell
brand. As with blades, the Company is pursuing an upgrading strategy in
batteries, converting consumers from zinc carbon to better- performing alkaline
batteries, which now account for only about 20 percent of sales in AMEE markets.
In addition to this outstanding global product portfolio, another key
contributor to the Company's flourishing business in the AMEE region is
Gillettes strategy of training local nationals for the highest positions as soon
as possible a strategy that has been notably successful.
In India, for example, where the Company's Indian Shaving Products (ISP)
subsidiary has been established since 1986, the management team consists
entirely of Indian nationals, many of whom also have worked for Gillette in
Turkey, the Middle East, the United Kingdom and the United States. Moreover, ISP
frequently has supplied managers to staff local acquisitions and joint ventures,
as well as the Braun and Oral-B businesses as they entered India in recent
years.
This reservoir of highly skilled individuals is what will drive Gillettes
growth even faster, said Gurbrinder Gill, general manager, Eastern Region, AMEE
Group, describing the Company's exciting prospects in the Indian subcontinent.
Gillettes top 10 markets none of them as yet an AMEE market contain only
17 percent of the worlds 5.8 billion people, but currently account for about
three-quarters of the Company's sales. Even with Gillette's already formidable
presence in many AMEE countries, it is clear that these emerging markets offer
enormous growth potential, just now in its initial stage of being realized.
As Gillette broadens and deepens its reach within the AMEE region, supplying a
wide range of superior products that satisfy the rising expectations of area
consumers, the Company expects to fully capitalize on this historic business
opportunity.
[JOHANNESBURG WATERMAN PHOTO]
[PRAGUE DURACELL PHOTO]
[JEVICKO GILLETTE PHOTO]
PAGE 21
<PAGE> 22
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
MANAGEMENT'S DISCUSSION
RESULTS OF OPERATIONS
In 1997, the Company achieved record levels of net sales, profit from
operations, net income and basic net income per common share.
NET SALES
Net sales in 1997 climbed 4% to $10.1 billion, compared with $9.7 billion in
1996. The growth was attributable to a 7% gain in volume and new products, as
well as a 1% increase in prices, while the effect of unfavorable exchange rates
depressed sales by 4%. In 1996, growth was due to a 10% increase from volume and
new products, while the effect of unfavorable exchange was offset by higher
selling prices.
Sales in the United States advanced 3% in 1997, following a 16% increase in
1996. Foreign sales rose 4%, after a 7% gain in 1996. This advance was paced by
growth in AMEE markets, but was partially offset by continued sluggish economic
conditions in Japan and Germany and by weaker foreign exchange. Sales of
operations outside the United States represented about 63% of sales in both 1997
and 1996.
An analysis of sales by business segment follows.
<TABLE>
<CAPTION>
% Increase/
(Millions of dollars) (Decrease)
-------------------------- --------------
97 96 95 97/96 96/9
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Blades & Razors ............. $ 2,881 $2,836 $2,635 2 8
Toiletries & Cosmetics ...... 1,410 1,375 1,236 3 11
Stationery Products ......... 924 915 862 1 6
Braun Products .............. 1,744 1,773 1,621 (2) 9
Oral-B Products ........... 624 547 440 14 24
Duracell Products ........... 2,478 2,251 2,040 10 10
Other ....................... 1 1 -- -- --
-------------------------- --------------
$10,062 $9,698 $8,834 4 10
-------------------------- --------------
</TABLE>
Further information by business segment is set forth on pages 6 through 17.
Sales of blades and razors were slightly above those of a year earlier,
reflecting considerably higher sales in developing international markets and
marginally higher sales in the United States. Sales were well below those of
1996 in Western Europe, due to exchange. The continued growth of the Gillette
Sensor franchise was partially offset by planned trade inventory reductions of
older Gillette systems in the United States and Western Europe and by
unfavorable exchange in Western Europe. The Gillette Sensor franchise was the
primary contributor to 1996 sales growth.
In 1997, toiletries and cosmetics sales rose modestly. The increase was
attributable to continued expansion of the Gillette Series male grooming line,
the success of Satin Care female grooming products and the growth of clear
deodorants/antiperspirants. Jafra sales were slightly above those of the prior
year, as softness in the United States and Germany was offset by significant
increases in Mexico. In 1996, toiletries and cosmetics sales rose considerably,
due to the Gillette Series line and Satin Care products.
Sales of stationery products were about the same as those of 1996, as
decreases in Western Europe, due to exchange, offset gains in other
international markets and in the United States. In 1996, sales were above those
of the year before, as increases in the United States and AMEE markets were
partially countered by shortfalls in Western Europe and Latin America.
Braun product sales in 1997 were marginally below those of 1996, due to
continued adverse economic conditions in Japan and Germany, combined with
unfavorable exchange rates in Japan and Western Europe. In 1996, Braun sales
were notably higher, due to the acquisition of Thermoscan Inc. in November 1995.
Sales of Oral-B products grew substantially, with advances in all geographic
areas. The gain was attributable to increased volume in North America and the
success of new products in other major markets. In 1996, sales climbed
significantly, reflecting gains in the United States, Latin America and other
major markets.
In 1997, sales of Duracell products were considerably higher, particularly
in the United States, AMEE and Asia-Pacific markets, aided by the full-year
impact of 1996 acquisitions in South Africa and South Korea. Excluding the
acquisitions, sales were higher. In 1996, sales rose notably, due to alkaline
battery volume growth in most markets, along with the favorable impact of
acquisitions in South Africa and South Korea.
GROSS PROFIT
Gross profit increased $215 million in 1997 and $506 million in 1996. As a
percent of sales, gross profit was 61.9% in 1997, compared with 62.0% in 1996
and 62.4% in 1995. The slight decrease in 1997 was due to a less favorable
product mix, mostly offset by improved margins in many segments.
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses amounted to 38.8% of sales,
compared with 40.9% and 42.0% in 1996 and 1995, respectively. In absolute terms,
these expenses declined 1.5% in 1997, and rose 6.9% in 1996 and 9.1% in 1995.
PAGE 22
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T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
MANAGEMENT'S DISCUSSION
In 1997, $641 million was spent on advertising, including sampling, and
$1,060 million on sales promotion, for a total of $1,701 million, an increase of
1% over 1996. This includes the continued marketing support given to major
brands, such as the Gillette Sensor franchise, the Gillette Series line, new
Braun products and Duracell batteries. This compares with 1996 amounts of $710
million, $978 million and $1,688 million, respectively. In 1995, these were $704
million, $846 million and $1,550 million, respectively. The spending in 1997
represented 16.9% of sales, compared with 17.4% and 17.5% in 1996 and 1995,
respectively. Spending for research and development increased 4% in 1997,
compared with 9% in 1996 and 10% in 1995. Other marketing and administrative
expenses declined 4% in 1997, and rose 5% in 1996 and 8% in 1995.
PROFIT FROM OPERATIONS
Profit from operations in 1997 was $2.32 billion, compared with $2.05 billion in
1996, before merger-related costs, and $1.80 billion in 1995. Compared with
1996, profit from operations increased 13%, representing 23.1% of sales,
compared with 21.1% and 20.4% in 1996 and 1995, respectively. Costs related to
the merger with Duracell International Inc. in 1996 reduced profit from
operations by $413 million, net income by $283 million and basic net income per
common share by $.51.
Within the United States, profit from operations rose 5%, compared with
increases of 26% and 7% in 1996 and 1995, respectively. Outside the United
States, it climbed 17%, compared with 7% and 15% in 1996 and 1995, respectively.
An analysis by business segment follows.
<TABLE>
<CAPTION>
(Millions of dollars) % Increase(b)
------------------------------------- --------------
97 96(a) 96(b) 95 97/96 96/95
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Blades & Razors ............. $1,186 $1,062 $1,098 $ 961 8 14
Toiletries & Cosmetics ...... 124 87 91 75 36 21
Stationery Products ......... 156 122 122 109 28 12
Braun Products .............. 304 300 300 255 1 18
Oral-B Products ........... 85 58 58 33 47 75
Duracell Products ........... 526 142 450 428 17 5
------------------------------------ ------------
2,381 1,771 2,119 1,861 12 14
------------------------------------
Corporate/Other.............. (57) (135) (70) (62)
------------------------------------
$2,324 $1,636 $2,049 $1,799
------------------------------------
</TABLE>
(a) after merger-related charges (b) before merger-related charges
See Notes to Consolidated Financial Statements for geographic area and segment
data.
Profits for the blade and razor segment moved well ahead in 1997 and rose
substantially in 1996, due to continued sales growth, improved product mix and
lower product costs.
In 1997, toiletries and cosmetics reported substantially higher profits, due
to sales growth, improved product mix and lower operating expenses. Profits in
1996 rose significantly, due to the same factors.
Profits for the stationery segment climbed sharply in 1997 and 1996, due to
sales growth driven by new products, improved product mix and lower product
costs.
In 1997, Braun profits were about the same as in 1996, reflecting lower
sales of higher margin products. In 1996, profits rose significantly, due to
increased sales of products with higher profit margins, as well as to lower
operating costs.
Oral-B profits increased significantly in 1997 and 1996, due primarily to
the success of new products with higher margins, as well as to lower operating
expenses.
The Duracell segment reported excellent profit growth in 1997, led by
developing international markets, and higher profits in 1996, due to increased
sales volume and lower operating expenses. These comparisons are before
merger-related charges in 1996.
NONOPERATING
CHARGES/INCOME
Net interest expense (interest expense less interest income) amounted to $69
million in 1997, $67 million in 1996 and $73 million in 1995. The increase in
1997 reflected higher average borrowing levels, due to the full-year impact of
1996 acquisitions and significant capital spending. Net interest expense was
lower in 1996, due primarily to lower average interest rates.
Net exchange losses of $18 million in 1997, which compared with 1996 and
1995 totals of $32 million and $16 million, respectively, were attributable
primarily to subsidiaries in highly inflationary countries. Translation
adjustments resulting from currency fluctuations in non-highly inflationary
countries are accumulated in a separate section of stockholders' equity, as
noted on page 29. In 1997, the negative adjustment was $268 million, compared
with negative adjustments of $22 million and $100 million in 1996 and 1995,
respectively.
TAXES AND NET INCOME
The effective tax rate was 35.8% in 1997, compared with rates of 37.8% in 1996
and 37.1% in 1995.
Net income for 1997 was $1,427 million, compared with $949 million in 1996
and $1,069 million in 1995. Basic net
PAGE 23
<PAGE> 24
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
MANAGEMENT'S DISCUSSION
income per common share in 1997 was $2.55, compared with $1.71 and $1.94 in 1996
and 1995, respectively. Excluding the charge for merger-related costs in 1996,
net income increased 16% over the $1,232 million in 1996, and basic net income
per common share rose 15% over the $2.22 in 1996.
FINANCIAL CONDITION
The Company's financial condition strengthened further in 1997, with net
debt being reduced by $211 million through strong operating cash flow.
Net debt (total debt net of associated swaps, less cash and short-term
investments) at December 31, 1997, amounted to $1.87 billion, compared with
$2.08 billion in 1996 and $1.66 billion in 1995. The increase in 1996 resulted
from acquisition spending in the Company's core categories and significant
capital spending.
The market value of Gillette equity was over $56 billion at the end of 1997.
The Company's book equity position amounted to $4.84 billion at the end of 1997,
compared with $4.47 billion at the end of 1996 and $3.88 billion at the end of
1995.
Net cash provided by operating activities in 1997 was $1.28 billion,
compared with $1.01 billion in 1996 and $1.05 billion in 1995. Growth in working
capital requirements in all three years reflected the growth in the business.
The current ratio of the Company was 1.78 for 1997, compared with ratios of 1.62
for 1996 and 1.58 for 1995.
Capital spending in 1997 amounted to a record $973 million, compared with
$830 million in 1996 and $593 million in 1995. Spending in all three years
principally reflected significant investments in the blade and razor, Duracell
and Braun product segments.
Acquisition activity in 1997 was in the oral care business and amounted to
$3 million. The Company spent $300 million for acquisitions in 1996, principally
in the battery business, and $278 million in 1995 in other core business
categories.
Following the announcement in September 1997 of its authorized share
repurchase program, the Company replaced its $400 million revolving credit
agreement with a new $1.0 billion revolving credit facility, expiring in October
1998. In addition, the Company also has a $1.1 billion revolving credit
agreement that expires in December 2001. Both facilities are provided by a
syndicate of 19 banks and are used by the Company to provide back-up to its
commercial paper program.
The Company generally borrows through the U.S. commercial paper market. At
year-end 1997, there was $780 million outstanding under the commercial paper
program, compared with $1.09 billion at the end of 1996 and $599 million at the
end of 1995.
In November 1997, the Company issued $300 million, 6% Notes due November
2000 to refinance existing short-term debt and for other general corporate
purposes.
Net cash generated during the accounting period necessary for harmonization
of year-ends in 1997 was $24 million.
In June 1997, Standard & Poor's raised the Company's long-term debt rating
from AA- to AA. Moody's maintained the long-term debt rating of Aa3. The
commercial paper rating is A1+ by Standard & Poor's and P1 by Moody's. Both
Standard & Poor's and Moody's reaffirmed the Company's long-term debt and
commercial paper ratings following its share repurchase program announcement.
Gillette will continue to have capital available for growth through both
internally generated funds and substantial credit resources. The Company has
substantial unused lines of credit and access to worldwide financial market
sources for funds.
FORWARD-LOOKING STATEMENTS AND CAUTIONARY STATEMENT
This report contains "forward-looking statements" about the Company's prospects
and progress. Investors should be aware of factors that could have a negative
impact on prospects and the consistency of progress. These include political,
economic or other factors such as currency exchange rates, inflation rates,
recessionary or expansive trends, taxes and regulations and laws affecting the
worldwide business in each of the Company's markets; competitive product,
advertising, promotional and pricing activity; dependence on the rate of
development and degree of acceptance of new product introductions in the
marketplace; and the difficulty of forecasting sales at certain times in certain
markets. Any such "forward-looking statements" are also qualified by the
detailed statement under Item 7, Cautionary Statement, in the Company's most
recent Annual Report on Form 10-K, and under Item 5, Forward-Looking Statements,
in the Company's most recent Quarterly Report on Form 10-Q.
YEAR 2000
The Company has developed comprehensive global plans to assess and address, in a
timely manner, its information systems - including order, production,
distribution and financial systems - in conjunction with the Year 2000. The
financial impact of completing the required changes is not expected to be
material.
PAGE 24
<PAGE> 25
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
RESPONSIBILITY FOR FINANCIAL STATEMENTS
The Company is responsible for the objectivity and integrity of the accompanying
consolidated financial statements, which have been prepared in conformity with
generally accepted accounting principles. The financial statements of necessity
include the Company's estimates and judgments relating to matters not concluded
by year-end. Financial information contained elsewhere in the Annual Report is
consistent with that included in the financial statements.
The Company maintains a system of internal accounting controls that includes
careful selection and development of employees, division of duties, and written
accounting and operating policies and procedures augmented by a continuing
internal audit program. Although there are inherent limitations to the
effectiveness of any system of accounting controls, the Company believes that
its system provides reasonable, but not absolute, assurance that its assets are
safeguarded from unauthorized use or disposition and that its accounting records
are sufficiently reliable to permit the preparation of financial statements that
conform in all material respects with generally accepted accounting principles.
KPMG Peat Marwick LLP, independent auditors, are engaged to render an
independent opinion regarding the fair presentation in the financial statements
of the Company's financial condition and operating results. Their report appears
below. Their examination was made in accordance with generally accepted auditing
standards and included a review of the system of internal accounting controls to
the extent they considered necessary to determine the audit procedures required
to support their opinion.
The Audit Committee of the Board of Directors is composed solely of
directors who are not employees of the Company. The Committee meets periodically
and privately with the independent auditors, with the internal auditors and with
the financial officers of the Company to review matters relating to the quality
of the financial reporting of the Company, the internal accounting controls and
the scope and results of audit examinations. The Committee also reviews
compliance with the Company's statement of policy as to the conduct of its
business, including proper accounting, financial reporting and management of the
relationship with the auditors. In addition, it is responsible for recommending
the appointment of the Company's independent auditors, subject to stockholder
approval.
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
[KPMG Peat Marwick LLP -- logo]
THE STOCKHOLDERS AND BOARD OF DIRECTORS
OF THE GILLETTE COMPANY
We have audited the accompanying consolidated balance sheet of The Gillette
Company and subsidiary companies as of December 31, 1997 and 1996, and the
related consolidated statements of income, cash flows and stockholders' equity
for each of the years in the three-year period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Gillette
Company and subsidiary companies at December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the years in the three-year
period ended December 31, 1997, in conformity with generally accepted accounting
principles.
[KPMG Peat Marwick LLP -- signature]
Boston, Massachusetts
January 28, 1998
PAGE 25
<PAGE> 26
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
(Millions of dollars, except per share amounts)
Years Ended December 31, 1997, 1996 and 1995 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES ....................................... $10,062 $9,698 $8,834
Cost of Sales ................................... 3,831 3,682 3,324
----------------------------
GROSS PROFIT .................................... 6,231 6,016 5,510
Selling, General and Administrative Expenses .... 3,907 3,967 3,711
Merger-Related Costs ............................ -- 413 --
----------------------------
PROFIT FROM OPERATIONS .......................... 2,324 1,636 1,799
Nonoperating Charges (Income)
Interest income ................................ (9) (10) (12)
Interest expense ............................... 78 77 85
Other charges - net ............................ 34 44 26
----------------------------
103 111 99
----------------------------
INCOME BEFORE INCOME TAXES ...................... 2,221 1,525 1,700
Income Taxes .................................... 794 576 631
----------------------------
NET INCOME ...................................... $ 1,427 $ 949 $1,069
----------------------------
NET INCOME PER COMMON SHARE, BASIC .............. $ 2.55 $ 1.71 $ 1.94
Net Income per Common Share, assuming
full dilution ................................. $ 2.49 $ 1.66 $ 1.89
Weighted average number of common shares
outstanding (millions) ........................ 559 554 550
</TABLE>
- --------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
PAGE 26
<PAGE> 27
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
(Millions of dollars)
December 31, 1997 and 1996 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents ........................ $ 105 $ 84
Receivables, less allowances:
1997 - $74; 1996 - $81 ......................... 2,522 2,725
Inventories ...................................... 1,500 1,358
Deferred income taxes ............................ 320 359
Prepaid expenses ................................. 243 227
------------------------
TOTAL CURRENT ASSETS ............................ 4,690 4,753
------------------------
PROPERTY, PLANT AND EQUIPMENT, at cost less
accumulated depreciation ........................ 3,104 2,586
INTANGIBLE ASSETS, less accumulated amortization .. 2,423 2,626
OTHER ASSETS ...................................... 647 450
------------------------
$ 10,864 $ 10,415
------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Loans payable .................................... $ 552 $ 657
Current portion of long-term debt ................ 9 15
Accounts payable and accrued liabilities ......... 1,794 1,964
Income taxes ..................................... 286 299
------------------------
TOTAL CURRENT LIABILITIE ........................ 2,641 2,935
------------------------
LONG-TERM DEBT .................................... 1,476 1,490
DEFERRED INCOME TAXES ............................. 359 299
OTHER LONG-TERM LIABILITIES ....................... 1,101 1,190
MINORITY INTEREST ................................. 39 30
CONTINGENT REDEMPTION VALUE OF COMMON STOCK PUT
OPTIONS ......................................... 407 --
STOCKHOLDERS' EQUITY
8.0% Cumulative Series C ESOP Convertible
Preferred, without par value, Issued: 1997 -
154,156 shares; 1996 - 157,925 shares ......... 93 95
Unearned ESOP compensation ....................... (17) (25)
Common stock, par value $1 per share
Authorized 1,160,000,000 shares
Issued: 1997 - 676,290,921 shares;
1996 - 671,431,800 shares ..................... 676 671
Additional paid-in capital ....................... 986 1,159
Earnings reinvested in the business .............. 5,021 4,169
Currency translation and pension adjustments ..... (810) (542)
Treasury stock, at cost:
1997 - 115,821,565 shares;
1996 - 115,353,687 shares ....................... (1,108) (1,056)
TOTAL STOCKHOLDERS' EQUITY ...................... 4,841 4,471
------------------------
$ 10,864 $ 10,415
------------------------
</TABLE>
- -----------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
PAGE 27
<PAGE> 28
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(Millions of dollars)
Years Ended December 31, 1997, 1996 and 1995 1997 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income .................................... $ 1,427 $ 949 $ 1,069
Adjustments to reconcile net income to net cash
provided by operating activities:
Merger-related costs ......................... -- 283 --
Depreciation and amortization ................ 422 381 343
Other ........................................ (23) -- (3)
Changes in assets and liabilities,
net of effects from acquisition of businesses:
Accounts receivable ......................... (340) (459) (387)
Inventories ................................. (157) (105) (119)
Accounts payable and accrued liabilities .... 29 67 91
Other working capital items ................. 80 (142) 21
Other noncurrent assets and liabilities ..... (158) 34 32
------------------------------
Net cash provided by operating activities 1,280 1,008 1,047
------------------------------
INVESTING ACTIVITIES
Additions to property, plant and equipment .... (973) (830) (593)
Disposals of property, plant and equipment .... 59 41 31
Acquisition of businesses, less cash acquired.. (3) (299) (277)
Other ......................................... 12 (1) 3
------------------------------
Net cash used in investing activities ...... (905) (1,089) (836)
------------------------------
FINANCING ACTIVITIES
Purchase of treasury stock .................... (53) (11) (28)
Proceeds from sale of put options ............. 27 -- --
Proceeds from exercise of stock option and
purchase plans .............................. 210 150 83
Proceeds from long-term debt .................. 300 -- --
Decrease in long-term debt .................... (6) (165) (9)
Increase (decrease) in loans payable .......... (383) 578 123
Dividends paid ................................ (466) (451) (382)
------------------------------
Net cash provided by (used in) financing
activities ................................ (371) 101 (213)
------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH ........ (7) (19) 4
NET CASH FROM HARMONIZATION PERIOD ............. 24 -- --
------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS .......... 21 1 2
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.. 84 83 81
------------------------------
CASH AND CASH EQUIVALENTS AT END OF YEAR ....... $ 105 $ 84 $ 83
------------------------------
Supplemental disclosure of cash paid for:
Interest ..................................... $ 101 $ 94 $ 95
Income taxes ................................. $ 451 $ 586 $ 415
Noncash investing and financing activities:
Acquisition of businesses
Fair value of assets acquired ............... $ 3 $ 361 $ 395
Cash paid ................................... 3 300 278
------------------------------
Liabilities assumed ........................ $ -- $ 61 $ 117
------------------------------
- ----------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
PAGE 28
<PAGE> 29
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
CONSOLIDATED STATEMENT OF
STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Unearned Additional
Preferred ESOP Common Paid-in
(Millions of dollars) Shares Compensation Stock Capital
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 ........... $98 $ (44) $ 664 $ 958
-----------------------------------------------
Net income ............................ -- -- -- --
Cumulative translation adjustments .... -- -- -- --
Minimum liability adjustment .......... -- -- -- --
Dividends declared .................... -- -- -- --
Stock option and purchase plans
(3,284,028 shares) ................... -- -- 3 82
Conversion of Series C ESOP
preferred stock (89,051 shares) ...... (1) -- -- --
Purchase of Duracell treasury stock
(504,974 shares) ..................... -- -- -- (28)
Earned ESOP compensation .............. -- 10 -- --
-----------------------------------------------
Balance at December 31, 1995 ........... 97 (34) 667 1,012
-----------------------------------------------
Net income ............................ -- -- -- --
Cumulative translation adjustments .... -- -- -- --
Minimum liability adjustment .......... -- -- -- --
Dividends declared .................... -- -- -- --
Stock option and purchase plans
(4,362,980 shares) ................... -- -- 4 146
Conversion of Series C ESOP
preferred stock (111,066 shares) ..... (2) -- -- 1
Purchase of Gillette treasury stock
(210,400 shares) ..................... -- -- -- --
Earned ESOP compensation .............. -- 9 -- --
-----------------------------------------------
Balance at December 31, 1996 ........... 95 (25) 671 1,159
-----------------------------------------------
Net income ............................ -- -- -- --
Net results of year-end
harmonization ........................ -- -- -- --
Cumulative translation adjustments .... -- -- -- --
Dividends declared .................... -- -- -- --
Stock option and purchase plans
(4,859,121 shares) ................... -- -- 5 206
Conversion of Series C ESOP
preferred stock (150,722 shares) ..... (2) -- -- 1
Purchase of Gillette treasury stock
(618,600 shares) ..................... -- -- -- --
Proceeds from sale of put options ..... -- -- -- 27
Contingent liability of put options ... -- -- -- (407)
Earned ESOP compensation .............. -- 8 -- --
-----------------------------------------------
Balance at December 31, 1997 ........... $93 $ (17) $676 $ 986
-----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Currency
Translation Total
Earnings Treasury and Pension Stockholders'
(Millions of dollars) Reinvested Stock Adjustments Equity
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance at December 31, 1994 ........... $3,029 $ (1,047) $ (401) $3,257
---------------------------------------------------
Net income ............................ 1,069 -- -- 1,069
Cumulative translation adjustments .... -- -- (100) (100)
Minimum liability adjustment .......... -- -- (20) (20)
Dividends declared .................... (394) -- -- (394)
Stock option and purchase plans
(3,284,028 shares) ................... -- -- -- 85
Conversion of Series C ESOP
preferred stock (89,051 shares) ...... -- 1 -- --
Purchase of Duracell treasury stock
(504,974 shares) ..................... -- -- -- (28)
Earned ESOP compensation .............. -- -- -- 10
---------------------------------------------------
Balance at December 31, 1995 ........... 3,704 (1,046) (521) 3,879
---------------------------------------------------
Net income ............................ 949 -- -- 949
Cumulative translation adjustments .... -- -- (22) (22)
Minimum liability adjustment .......... -- -- 1 1
Dividends declared .................... (484) -- -- (484)
Stock option and purchase plans
(4,362,980 shares) ................... -- -- -- 150
Conversion of Series C ESOP
preferred stock (111,066 shares) ..... -- 1 -- --
Purchase of Gillette treasury stock
(210,400 shares) ..................... -- (11) -- (11)
Earned ESOP compensation .............. -- -- -- 9
---------------------------------------------------
Balance at December 31, 1996 ........... 4,169 (1,056) (542) 4,471
---------------------------------------------------
Net income ............................ 1,427 -- -- 1,427
Net results of year-end
harmonization ........................ (89) -- -- (89)
Cumulative translation adjustments .... -- -- (268) (268)
Dividends declared .................... (486) -- -- (486)
Stock option and purchase plans
(4,859,121 shares) ................... -- -- -- 211
Conversion of Series C ESOP
preferred stock (150,722 shares) ..... -- 1 -- --
Purchase of Gillette treasury stock
(618,600 shares) ..................... -- (53) -- (53)
Proceeds from sale of put options ..... -- -- -- 27
Contingent liability of put options ... -- -- -- (407)
Earned ESOP compensation .............. -- -- -- 8
---------------------------------------------------
Balance at December 31, 1997 ........... $5,021 $ (1,108) $ (810) $4,841
---------------------------------------------------
</TABLE>
Dividends declared per common share in 1997, 1996 and 1995 were $.86, $.72 and
$.60, respectively, for Gillette, and in 1996 and 1995, $1.16 and $1.04,
respectively, for Duracell.
- --------------------------------------------------------------------------------
See accompanying Notes to Consolidated Financial Statements.
PAGE 29
<PAGE> 30
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
NATURE OF OPERATIONS
The Gillette Company is a global consumer products firm with manufacturing
operations conducted at 64 facilities in 26 countries and products distributed
through wholesalers, retailers and agents in over 200 countries and territories.
The Company is the world leader in male grooming, a category that includes
blades, razors and shaving preparations, and also in selected female grooming
products, such as wet shaving products and hair epilation devices. The Company
is the world's top seller of writing instruments and correction products and is
the world leader in toothbrushes, oral care appliances and alkaline batteries.
BASIS OF PRESENTATION AND
PRINCIPLES OF CONSOLIDATION
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses. Actual results
could differ from those estimates.
The consolidated financial statements include the accounts of the Company
and its subsidiaries. Intercompany accounts and transactions are eliminated.
At the end of 1997, the year-ends of all operating groups were harmonized
with a common calendar year-end of December 31. The results of the accounting
period necessary for harmonization - in the aggregate a loss of $24 million are
reflected as a charge in the stockholders' equity section of the balance sheet.
Also reflected in this section is a charge of $51 million adjusting for
seasonality of advertising.
In the first quarter of 1997, Duracell entities outside of North America
changed their year-end reporting periods to coincide with those of Gillette
operations, resulting in a charge of $14 million to stockholders' equity.
CASH AND
CASH EQUIVALENTS
Cash and cash equivalents include cash, time deposits and all highly liquid debt
instruments with an original maturity of three months or less.
INVENTORIES
Inventories are stated at the lower of cost or market. In general, cost is
currently adjusted standard cost, which approximates actual cost on a first-in,
first-out basis.
DEPRECIATION
Depreciation is computed primarily on a straight-line basis over the estimated
useful lives of assets.
ADVERTISING
Advertising costs are expensed in the year incurred.
INTANGIBLE ASSETS
Intangible assets principally consist of goodwill, which is amortized on the
straight-line method, generally over a period of 40 years. Other intangible
assets are amortized on the straight-line method over a period of from 13 to 40
years. The carrying amounts of intangible assets are assessed for impairment
when operating profit from the applicable related business indicates that the
carrying amounts of the assets may not be recoverable.
NET INCOME
PER COMMON SHARE
Basic net income per common share is calculated by dividing net income less
dividends on preferred stock, net of tax benefits, by the weighted average
number of common shares outstanding.
The calculation of fully diluted net income per common share assumes
conversion of the preferred stock into common stock, and also adjusts net income
for the ESOP debt service expense due to the assumed replacement of the
preferred stock dividends with common stock dividends. Fully diluted and basic
net income per common share are presented in accordance with SFAS 128.
Net income and shares used to compute net income per share, basic and
assuming full dilution, are reconciled below.
<TABLE>
<CAPTION>
(Millions) 1997 1996 1995
- -----------------------------------------------------------------
<S> <C> <C> <C>
Net income as reported .................. $1,427 $949 $1,069
Less: Preferred stock dividends ......... 4 5 5
-----------------------
Net income, basic ....................... $1,423 $944 $1,064
-----------------------
Effect of dilutive securities:
Convertible preferred stock ............ 4 4 3
-----------------------
Net income, assuming full dilution ...... $1,427 $948 $1,067
-----------------------
Common shares, basic .................... 559 554 550
Effect of dilutive securities:
Convertible preferred stock ............ 6 6 7
Stock options .......................... 9 10 8
-----------------------
Common shares, assuming full
dilution ............................... 574 570 565
-----------------------
</TABLE>
PAGE 30
<PAGE> 31
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES
The Company reinvests unremitted earnings of foreign operations and,
accordingly, does not provide for Federal income taxes that could result from
the remittance of such earnings. These unremitted earnings amounted to $3.2
billion at December 31, 1997.
RECLASSIFICATION OF PRIOR YEARS
Prior year financial statements have been reclassified to conform to the 1997
presentations.
EFFECT OF
ACCOUNTING CHANGES
In 1997, the Financial Accounting Standards Board issued SFAS 130, "Reporting
Comprehensive Income," and SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." Both statements will be adopted by the
Company in 1998. Current financial statements are presented substantially in
accordance with SFAS 131.
BUSINESS COMBINATIONS AND DIVESTITURES
In January 1998, the Company announced an agreement to sell its Jafra skin care
and color cosmetics business. The transaction is not expected to have a material
impact on financial results.
In 1997, the Company acquired an oral care business for $3 million. This
acquisition has been accounted for by the purchase method of accounting. Its
results of operations, which have been included in the Company's consolidated
financial statements, have not materially affected the consolidated financial
position, results of operations or liquidity of the Company.
In 1996, the Company acquired businesses in the Duracell, blade and razor
and stationery segments for an aggregate amount of $300 million.
In December 1996, Gillette completed a merger with Duracell International
Inc. by exchanging 109.7 million shares of its common stock for all of the
common stock of Duracell. Each share of Duracell was exchanged for .904 of one
share of Gillette common stock.
The merger constituted a tax-free reorganization and has been accounted for
as a pooling of interests. Accordingly, all prior period consolidated financial
statements presented have been restated to include the combined results of
operations, financial position and cash flows of Duracell as though it had
always been a part of Gillette.
FOREIGN CURRENCY
TRANSLATION
Net exchange gains or losses resulting from the translation of assets and
liabilities of foreign subsidiaries, except those in highly inflationary
economies, are accumulated in a separate section of stockholders' equity. Also
included are the effects of exchange rate changes on intercompany transactions
of a long-term investment nature and transactions designated as hedges of net
foreign investments.
An analysis of cumulative translation adjustments follows.
<TABLE>
<CAPTION>
(Millions of dollars) 1997 1996 1995
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year ............ $ (522) $ (500) $ (400)
Translation adjustments, including
the effect of hedging .................. (222) 18 (125)
Related income tax effect ............... (46) (40) 25
----------------------------
Balance at end of year .................. $ (790) $ (522) $ (500)
----------------------------
</TABLE>
Included in Other charges are net exchange losses of $18 million, $32
million and $16 million for 1997, 1996 and 1995, respectively.
INVENTORIES
<TABLE>
<CAPTION>
December 31, December 31,
(Millions of dollars) 1997 1996
- ------------------------------------------------------------------
<S> <C> <C>
Raw materials and supplies ......... $ 279 $ 281
Work in process .................. 186 161
Finished goods ..................... 1,035 916
---------------------
$1,500 $1,358
---------------------
</TABLE>
PAGE 31
<PAGE> 32
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PROPERTY, PLANT AND
EQUIPMENT
<TABLE>
<CAPTION>
December 31, December 31,
(Millions of dollars) 1997 1996
- -------------------------------------------------------------------
<S> <C> <C>
Land .................................. $ 80 $ 69
Buildings ............................... 734 673
Machinery and equipment ................. 4,377 3,839
---------------------
5,191 4,581
Less accumulated depreciation ......... 2,087 1,995
---------------------
$3,104 $2,586
---------------------
</TABLE>
INTANGIBLE ASSETS
<TABLE>
- ----------------------------------------------------------
<S> <C> <C>
Goodwill ($44 million not
subject to amortization) ............... $2,023 $2,126
Other intangible assets ................. 1,128 1,133
----------------
3,151 3,259
Less accumulated amortization ......... 728 633
----------------
$2,423 $2,626
----------------
</TABLE>
ACCOUNTS PAYABLE AND
ACCRUED LIABILITIES
<TABLE>
- --------------------------------------------------------
<S> <C> <C>
Accounts payable ...................... $ 542 $ 547
Advertising and sales promotion ....... 360 356
Payroll and payroll taxes ........... 221 270
Other taxes ........................... 25 74
Dividends payable on common stock ..... 120 100
Merger-related costs .................. 101 185
Miscellaneous ....................... 425 432
----------------
$1,794 $1,964
----------------
</TABLE>
OTHER LONG-TERM LIABILITIES
<TABLE>
- -------------------------------------------------
<S> <C> <C>
Pensions ....................... $ 450 $ 471
Postretirement medical ......... 302 310
Incentive plans ................ 171 153
Merger-related costs ........... 32 113
Miscellaneous ................ 146 143
----------------
$1,101 $1,190
----------------
</TABLE>
DEBT
Commercial paper included in Loans payable was nil at December 31, 1997, and
December 31, 1996. The Company's commercial paper program is supported by its
revolving credit facilities.
A summary of long-term debt follows.
<TABLE>
<CAPTION>
December 31, December 31,
(Millions of dollars) 1997 1996
- ---------------------------------------------------------------
<S> <C> <C>
Commercial paper .................... $ 780 $1,087
5.75% Notes due 2005 .............. 200 200
6.25% Notes due 2003 .............. 150 150
6.00% Notes due 2000 .............. 300 --
8.03% Guaranteed ESOP notes
due through 2000 ................. 22 31
Other, multicurrency borrowings ..... 33 37
---------------------
Total long-term debt ................ 1,485 1,505
Less current portion .............. 9 15
---------------------
Long-term portion ................... $1,476 $1,490
---------------------
</TABLE>
At December 31, 1997, the Company had swap agreements that converted the
$650 million U.S. dollar-denominated long-term fixed rate debt notes into
multicurrency principal and floating interest rate obligations over the term of
the respective issues, resulting in an aggregate principal amount of $604
million at a weighted average interest rate of 4.8%. As of December 31, 1996,
the Company had swap agreements that converted the $350 million in U.S.
dollar-denominated long-term fixed rate debt notes into Deutschmark principal
and floating interest rate obligations, with an aggregate principal amount of
$355 million at a weighted average interest rate of 3.3%.
The Company also had forward exchange contracts at December 31, 1997,
maturing in 1998 and 1999, that established $373 million in multicurrency
principal, 4.2% interest obligations with respect to $356 million of U.S. dollar
commercial paper debt included in Long-Term Debt and $33 million of foreign
currency debt included in Loans payable. At December 31, 1996, the Company had a
forward exchange contract that established a $32 million Yen principal, .7%
interest obligation with respect to $34 million of U.S. dollar commercial paper
debt included in Long-Term Debt.
Additionally, at December 31, 1996, Duracell had interest rate swaps that
converted $150 million of U.S. dollar commercial paper debt, included in
Long-Term Debt, and $50 million of loans payable from floating to fixed rate
obligations at a weighted average interest rate of 7.1%.
PAGE 32
<PAGE> 33
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Exchange rate movements give rise to changes in the values of the foreign
currency-related agreements that offset changes in the values of the underlying
exposures. Amounts associated with these agreements were receivables of $62
million at December 31, 1997, and liabilities of $3 million at December 31,
1996.
The weighted average interest rate on Loans payable, including associated
swaps, was 4.2% at December 31, 1997, and 4.4% at December 31, 1996. The
weighted average interest rate on total long-term debt, including associated
swaps and excluding the guaranteed ESOP notes, was 5.3% at December 31, 1997 and
December 31, 1996.
The Company has a $1.0 billion revolving bank credit agreement that expires
in October 1998 and a $1.1 billion revolving bank credit agreement expiring in
December 2001, both of which may be used for general corporate purposes. Under
the agreements, the Company has the option to borrow at various interest rates,
including the prime rate, and is required to pay an average facility fee of
.043% per annum. At year-end 1997 and 1996, there were no borrowings under such
agreements.
In addition, at December 31, 1996, Duracell had $794 million in revolving
credit facilities, of which borrowings thereon amounted to $30 million. In
January 1997, these borrowings were repaid and the facilities terminated.
Based on the Company's intention and ability to maintain its $1.1 billion
revolving credit agreement beyond 1998, $780 million of commercial paper
borrowings and $20 million of loans payable were classified as long-term debt at
December 31, 1997. As of December 31, 1996, $1.09 billion of commercial paper
borrowings and $13 million of loans payable were so classified.
Aggregate maturities of total long-term debt for the five years subsequent
to December 31, 1997, are $9 million in 1998, $20 million in 1999 and $305
million in 2000.
Unused lines of credit amounted to $2.6 billion at December 31, 1997.
FINANCIAL INSTRUMENTS
The Company uses financial instruments, principally swaps, forward contracts
and options, to effectively achieve its financing strategy and to hedge foreign
currency, commodity and equity-linked employee compensation exposures. These
contracts hedge transactions and balances for periods consistent with their
committed exposures and do not constitute investments independent of these
exposures. The Company does not hold or issue financial instruments for trading
purposes, nor is it a party to any leveraged contracts.
Realized and unrealized foreign exchange gains and losses on financial
instruments are recognized and offset foreign exchange gains and losses on the
underlying exposures. Any gain or loss from a financial instrument that ceases
to be an effective hedge is recognized in the income statement. The interest
differential paid or received on swap and forward agreements is recognized as an
adjustment to interest expense.
At December 31, 1997, there were no foreign currency put options to hedge
1998 U.S. dollar results of foreign operations. At December 31, 1996, the
Company had foreign currency put options with a strike price of $1.24 billion
and a cost of $10 million. These options expired $64 million in the money and
were included in profit from operations in 1997.
The Company has also hedged certain employee benefit expenses linked to its
stock price by entering into equity swap and option contracts that mature in
1998, 2002 and 2003. At December 31, 1997, and December 31, 1996, the notional
principal amounts of such contracts were $53 million, at a cost of $8 million.
The cost is amortized over the duration of the contracts, and gains or losses
are recognized as adjustments to the carrying amount of the underlying
liabilities.
In addition, the Company utilizes commodity swaps to fix the price on a
portion of certain raw materials used in the manufacturing process. As of
year-end 1997, $31 million of commodity swaps was outstanding, maturing through
December 1998. Such contracts at December 31, 1996, amounted to $45 million. The
maturity of the contracts highly correlates to the actual purchases of the
commodity, and contract values are reflected in the cost of the commodity as it
is actually purchased.
The above amounts exclude the swap and forward agreements described in the
Debt note, as well as the equity put options associated with the share
repurchase program, which are described separately in the notes.
Several major international financial institutions are counterparties to the
Company's financial instruments. It is Company practice to monitor the financial
standing of the counterparties and to limit the amount of exposure with any one
institution. The Company may be exposed to credit loss in the event of
nonperformance by the counterparties to these contracts, but does not anticipate
such nonperformance.
PAGE 33
<PAGE> 34
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
With respect to trade receivables, concentration of credit risk is limited,
due to the diverse geographic areas covered by Company operations. Any probable
bad debt loss has been provided for in the allowance for doubtful accounts.
The estimated fair values of the Company's financial instruments are
summarized below.
<TABLE>
<CAPTION>
Carrying Estimated
(Millions of dollars) Amount Fair Value
- ----------------------------------------------------------
<S> <C> <C>
DECEMBER 31, 1997
Long-term investments ............. $ 146 $ 148
Total long-term debt .............. (1,485) (1,485)
Foreign currency, interest rate
and commodity contracts .......... 70 65
Equity contracts .................. 28 28
DECEMBER 31, 1996
Long-term investments ............. $ 108 $ 112
Total long-term debt .............. (1,505) (1,491)
Foreign currency, interest rate
and commodity contracts .......... (4) (14)
Equity contracts .................. 14 19
</TABLE>
The carrying amounts for cash, short-term investments, receivables, accounts
payable and accrued liabilities, and loans payable approximate fair value
because of the short maturity of these instruments. The fair value of long-term
investments is estimated based on quoted market prices. The fair value of
long-term debt, including the current portion, is estimated based on current
rates offered to the Company for debt of the same remaining maturities. The fair
values of foreign currency, interest rate, equity and commodity contracts are
estimated based on dealer quotes. These values represent the estimated amount
the Company would receive or pay to terminate agreements, taking into
consideration current market rates and the current creditworthiness of the
counterparties.
CONTINGENCIES
The Company is subject to legal proceedings and claims arising out of its
business that cover a wide range of matters, including antitrust and trade
regulation, contracts, environmental issues, product liability, patent and
trademark matters, and taxes.
Management, after review and consultation with counsel, considers that any
liability from all of these pending lawsuits and claims would not materially
affect the consolidated financial position, results of operations or liquidity
of the Company.
COMMITMENTS
Minimum rental commitments under noncancellable leases, primarily for office
and warehouse facilities, are $62 million in 1998, $43 million in 1999, $35
million in 2000, $28 million in 2001, $16 million in 2002 and $35 million for
years thereafter. Rental expense amounted to $93 million in 1997, $93 million in
1996 and $88 million in 1995.
RESEARCH AND DEVELOPMENT
Research and development costs, included in selling, general and
administrative expenses, amounted to $212 million in 1997, $204 million in 1996
and $187 million in 1995.
MERGER-RELATED COSTS
In December 1996, Gillette completed a merger with Duracell International
Inc. In connection with the merger, the Company recorded a charge to operating
expenses of $413 million for direct and other merger-related costs pertaining to
the merger transaction and certain restructuring programs.
Merger transaction costs consisted primarily of fees for investment bankers,
attorneys, accountants, financial printing and other related charges.
Restructuring costs included severance and outplacement of terminated employees
and exit costs.
Details of the merger-related costs follow.
<TABLE>
<CAPTION>
1996 Utilized
(Millions of dollars) Provision to Date Balance
- --------------------------------------------------------------------
<S> <C> <C> <C>
Merger Transaction Costs .......... $ 65 $ 61 $ 4
Restructuring Costs
Employee severance ............... 166 82 84
Exit costs ....................... 182 137 45
--------------------------
Total .............................. $413 $280 $133
--------------------------
</TABLE>
Restructuring activities primarily relate to the consolidation of
distribution and administrative functions. These actions will result in the
phased reduction of approximately 1,700 employees. Through December 31, 1997,
the reductions totaled 922 employees. Exit costs include activities such as
cancellation of lease agreements and distributor contracts, and the writedown of
unutilized assets.
PAGE 34
<PAGE> 35
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INCOME TAXES
Deferred income taxes are recognized for the expected tax consequences of
temporary differences by applying enacted statutory tax rates, applicable to
future years, to differences between the financial reporting basis and tax basis
of assets and liabilities.
Income before income taxes and income tax expense are summarized below.
<TABLE>
<CAPTION>
(Millions of dollars) 1997 1996 1995
- ------------------------------------------------------------------
<S> <C> <C> <C>
Income before income taxes
United States ................. $1,119 $ 880 $ 739
Foreign ......................... 1,102 645 961
-----------------------------
Total income before
income taxes .................... $2,221 $1,525 $1,700
-----------------------------
Current tax expense
Federal ......................... $ 247 $ 320 $ 266
Foreign ......................... 311 307 270
State ......................... 59 67 52
Deferred tax expense
Federal ......................... 77 (66) 8
Foreign ......................... 87 (52) 37
State ......................... 13 -- (2)
-----------------------------
Total income tax expense ......... $ 794 $ 576 $ 631
-----------------------------
</TABLE>
A reconciliation of the statutory Federal income tax rates to the Company's
effective tax rate follows.
<TABLE>
<CAPTION>
(Percent) 1997 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Statutory Federal tax rate ......... 35.0% 35.0% 35.0%
Goodwill amortization .............. .3 .3 .3
Rate differential on
foreign income .................... .4 -- (.9)
Effect of foreign currency
translation ..................... .1 .2 .4
State taxes (net of
Federal tax benefits) ............. 2.1 2.6 1.9
Other differences .................. (2.1) (1.7) .4
----------------------------
Effective tax rate before
merger-related costs .............. 35.8% 36.4% 37.1%
Merger-related costs ............... -- 1.4 --
----------------------------
Effective tax rate ................. 35.8% 37.8% 37.1%
----------------------------
</TABLE>
The components of deferred tax assets and deferred tax liabilities are shown
below.
<TABLE>
<CAPTION>
1997 1996
---------------------- ---------------------
Deferred Deferred Deferred Deferred
Tax Tax Tax Tax
(Millions of dollars) Assets Liabilities Assets Liabilities
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CURRENT
Advertising and sales
promotion .................... $ 32 $ -- $ 31 $ --
Benefit plans ................. 77 -- 69 --
Merger-related costs and
certain restructuring
programs ................... 36 -- 85 --
Miscellaneous reserves
and accruals ............... 91 -- 64 --
Operating loss and credit
carryforwards ................ 7 -- 13 --
Other ....................... 77 -- 97 --
------------------- ----- ----
Total current ................ 320 $ -- 359 $ --
----- ---- ----- ----
Net current ................ $ 320 $ 359
----- -----
NONCURRENT
Benefit plans ................. $ 163 $ -- $ 136 $ --
Intangibles ................... -- 230 -- 251
Merger-related costs and
certain restructuring
programs ................... 12 -- 45 --
Operating loss and credit
carryforwards ................ 33 -- 38 --
Property, plant and
equipment .................... -- 246 -- 223
Other ....................... -- 60 -- 17
------------------- -----------------
Total noncurrent 208 536 219 491
------------------- -----------------
Valuation allowance ......... $ (31) $ (27)
----- -----
Net noncurrent ................ $359 $299
---- ----
TOTAL
Net Deferred Tax Assets/
Liabilities .................. $ 39 $ 60
---- -----
</TABLE>
PAGE 35
<PAGE> 36
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PENSION PLANS
The Company has various retirement programs, including defined benefit,
defined contribution and other plans, that cover most employees worldwide. In
the U.S., the Company has noncontributory defined benefit plans in effect for
substantially all of its employees. Benefits are based primarily on years of
service and employees' compensation. The funding policy of the Company for these
plans is to contribute annually the amount necessary to meet the minimum
funding standards established by the Employee Retirement Income Security Act. In
Germany, under common local practice and enabling tax law, pension costs are
accrued but unfunded.
Total pension expense for 1997 was $79 million, compared with $90 million
and $97 million in 1996 and 1995, respectively. The components of net pension
expense follow.
<TABLE>
<CAPTION>
1997 1996 1995
------------------ ------------------ -----------------
(Millions of dollars) Domestic Foreign Domestic Foreign Domestic Foreign
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Defined Benefit Plans
Service cost-benefits earned .......................... $ 30 $ 35 $ 29 $ 32 $ 24 $ 30
Interest cost on projected benefit obligation ......... 60 55 56 53 54 50
Actual return on plan assets .......................... (185) (87) (118) (66) (153) (59)
Net amortization and deferral ......................... 117 42 64 29 113 28
----------------------------------------------------------
22 45 31 48 38 49
Other Pension Costs
Defined contribution plans ............................ -- 4 -- 4 -- 4
Foreign plans not on SFAS 87 .......................... -- 8 -- 7 -- 6
---------------------------------------------------------
Total Pension Expense .................................. $ 22 $ 57 $ 31 $ 59 $ 38 $ 59
---------------------------------------------------------
</TABLE>
The funded status of the Company's principal defined benefit plans and the
amounts recognized in the balance sheet at December 31 follow.
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Vested benefit ............................................. $ 694 $ 702 $ 629 $ 676 $ 602 $ 599
Nonvested benefit .......................................... 95 28 89 33 88 34
--------------------------------------------------------
Accumulated benefit obligation ............................. 789 730 718 709 690 633
Benefit obligation related to future
compensation levels ....................................... 170 101 161 101 148 91
--------------------------------------------------------
Projected benefit obligation ............................... 959 831 879 810 838 724
Fair value of plan assets, invested primarily
in equities and debt securities ........................... 990 550 816 462 690 362
--------------------------------------------------------
Plan assets greater/(less) than projected benefit obligation 31 (281) (63) (348) (148) (362)
Unrecognized transition obligation ......................... 2 8 1 10 -- 12
Unrecognized prior service cost ............................ 11 15 8 13 18 10
Unrecognized net loss ...................................... 9 8 97 38 158 34
Minimum liability adjustment ............................... (26) (9) (26) (11) (23) (17)
--------------------------------------------------------
Net prepaid (accrued) pension cost included
in consolidated balance sheet ............................. $ 27 $(259) $ 17 $ (298) $ 5 $ (323)
--------------------------------------------------------
</TABLE>
The primary assumptions used in determining related obligations of the plans
are shown below.
<TABLE>
<CAPTION>
(Percent)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Discount rates ............................... 7 6- 8 1/4 7 6- 8 1/4 6 3/4, 7 1/2 6 - 9
Increases in compensation levels ............. 5 3- 6 5 3- 6 1/2 5, 6 1/2 3 1/2- 6 1/2
Long-term rates of return on assets .......... 9 6-10 9 6-10 1/2 9 6 -10 1/2
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
PAGE 36
<PAGE> 37
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OTHER RETIREE BENEFITS
The Company and its subsidiaries provide certain health care and life insurance
benefits to eligible retired employees, principally in the United States.
Substantially all of the Company's domestic employees and some employees in
other countries become eligible for these benefits upon retirement. Domestic
participants under the Gillette plans who retire after January 1, 1992, share in
the cost of their health care benefits if hired before July 1, 1990, or pay all
of such costs if hired after that date. The Employee Stock Ownership Plan (ESOP)
was established to assist Gillette employees in financing retiree medical costs.
Duracell health care benefits are offered on a shared-cost basis.
Other postretirement benefit expense for 1997, 1996 and 1995 was $12
million, $16 million and $19 million, respectively, as follows.
<TABLE>
<CAPTION>
(Millions of dollars) 1997 1996 1995
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest cost ........................ $ 17 $ 19 $ 23
Service cost ......................... 5 2 --
Actual return on assets .............. (6) (4) (3)
Net amortization and expense ......... (4) (1) (1)
----------------------------
Other postretirement benefit expense.. $ 12 $ 16 $ 19
----------------------------
</TABLE>
The status of the Company's plans and the amounts recognized in the balance
sheet follow.
<TABLE>
<CAPTION>
(Millions of dollars) 1997 1996 1995
- -----------------------------------------------------------------
<S> <C> <C> <C>
Retirees ............................ $163 $172 $182
Fully eligible active employees ... 18 25 31
Other active employees .............. 67 69 67
----------------------
Accumulated postretirement
benefit obligation ................. 248 266 280
Fair value of plan assets ........... (33) (24) (17)
Unrecognized net gain ............. 87 68 47
----------------------
Accrued postretirement liability .... $302 $310 $310
----------------------
</TABLE>
Primary assumptions used in determining costs and benefit obligations of the
principal retiree benefit plans are shown below.
<TABLE>
<CAPTION>
1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rates ................. 7% 7% 6.75,8%
Health care cost trend
rates--initial ................ 9% 10% 10,11%
Health care cost trend
rates--ultimate ............... 5% 5% 5,5.4%
Years in which ultimate
trend rate achieved ......... 2001 2001 2001,2002
</TABLE>
A one percentage point increase in the trend rate would have increased the
accumulated postretirement benefit obligation by 12%, and interest and service
cost by 14%, in 1997. Outside the United States, the assumptions used were
consistent with, but not identical to, those used domestically.
ESOP shares allocated to eligible participants reduce the Company's
obligations over the period of allocation. The account balance is assumed to
have an annual yield of 12%. In addition, the Company established a retiree
health benefits account within its principal domestic pension plan that will be
used to partially fund health care benefits for future retirees.
SHARE REPURCHASE PROGRAM
On September 18, 1997, the Company's Board of Directors authorized a share
repurchase program to purchase up to 25 million shares in the open market or in
privately negotiated transactions, depending on market conditions and other
factors. The Company repurchased 618,600 shares for $53 million in 1997.
During 1997, the Company sold equity put options as an enhancement to its
ongoing share repurchase program. These options provide the Company with an
additional source to supplement open market purchases of its common stock. The
options were priced based on the market value of the Company's stock at the date
of issuance. The redemption value of the options, which represents the options'
price multiplied by the number of shares under option, is presented in the
accompanying consolidated balance sheet as "Contingent Redemption Value of
Common Stock Put Options." At December 31, 1997, no shares of outstanding common
stock were subject to repurchase under the terms and conditions of these
options.
Gillette and Duracell terminated their existing share repurchase programs
after the merger was announced in 1996. Gillette repurchased 210,400 shares for
$11 million in 1996. During 1995, Duracell repurchased 504,974 shares for $28
million.
PREFERRED STOCK
PURCHASE RIGHTS
At December 31, 1997, the Company had 566,635,606 preferred stock purchase
rights outstanding as follows: one right for each share of common stock
outstanding and a total of 6,166,250 rights for the outstanding Series C
preferred stock. Each right may be exercised to purchase one ten-thousandth of
PAGE 37
<PAGE> 38
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
a share of junior participating preferred stock for $225. The rights will only
become exercisable, or separately transferable, on the earlier of the tenth
business day after the Company announces that a person has acquired 15% or more,
or the tenth business day after a tender offer commences that could result in
ownership of more than 15%, of the Company's common stock.
If any person acquires 15% or more of the common stock (except in an offer
for all common stock that has been approved by the Board of Directors), or in
the event of certain mergers or other transactions involving a 15% or more
stockholder, each right not owned by that person or related parties will enable
its holder to purchase, at the right's exercise price, common stock (or a
combination of common stock and other assets) having double that value. In the
event of certain merger or asset sale transactions with another party, similar
terms would apply to the purchase of that party's common stock.
The rights, which have no voting power, expire on December 14, 2005, subject
to extension. Upon approval by the Board of Directors, the rights may be
redeemed for $.01 each under certain conditions, which may change after any
person becomes a 15% stockholder.
At December 31, 1997, there were authorized 5,000,000 shares of preferred
stock without par value, of which 154,156 Series C shares were issued and
outstanding and 400,000 Series A shares were reserved for issuance upon exercise
of the rights.
EMPLOYEE STOCK
OWNERSHIP PLAN
In 1990, the Company sold to the ESOP 165,872 shares of a new issue of 8%
cumulative Series C convertible preferred stock for $100 million, or $602.875
per share.
Each share of Series C stock is entitled to vote as if it were converted to
common stock and is convertible into 40 common shares at $15.07188 per share. At
December 31, 1997, 154,156 Series C shares were outstanding, of which 125,719
shares were allocated to employees and the remaining 28,437 shares were held in
the ESOP trust for future allocations. The 154,156 Series C shares are
equivalent to 6,166,250 shares of common stock, about 1.1% of the Company's
outstanding voting stock.
The Series C stock is redeemable upon the occurrence of certain change in
control or other events, at the option of the Company or the holder, depending
on the event, at varying prices not less than the purchase price plus accrued
dividends. The ESOP purchased the Series C shares with borrowed funds guaranteed
by the Company. Company contributions to the ESOP and the dividends paid on the
Series C shares are used to pay loan principal and interest semiannually over a
10-year period.
As the ESOP loan is repaid, a corresponding amount of Series C stock held in
the trust is released to participant accounts. Allocations are made quarterly to
the accounts of eligible employees, generally on the basis of an equal amount
per participant. In general, regular U.S. employees participate in the ESOP
after completing one year of service with the Company.
The unpaid balance of this loan is reported as a liability of the Company.
An unearned ESOP compensation amount is reported as an offset to the Series C
shares in the equity section.
Plan costs and activity for this plan follow.
<TABLE>
<CAPTION>
(Millions of dollars) 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Compensation expense ......................... $ 3 $ 4 $6
Cash contributions and
dividends paid ............................ 11 13 14
Principal payments ......................... 9 10 10
Interest payments ............................ 2 3 4
</TABLE>
STOCK OPTION AND STOCK EQUIVALENT UNIT PLAN
At December 31, 1997, the Company had stock-based compensation plans described
below that include the pre-merger plans of Duracell.
Stock option plans authorize the granting of options on shares of the
Company's common stock to selected key employees, including those who also may
be officers, and to nonemployee directors, at not less than the fair market
value of the stock on the date of grant. Outstanding options have seven- to
10-year terms. Options granted prior to April 17, 1997, are exercisable one year
from the date of grant (except the Duracell options, which became exercisable
upon the merger), provided the employee optionee is still employed or the
director continues to serve. Options granted after April 16, 1997, become
exercisable in one-third increments over a three-year period, beginning one year
after the grant date. The plans also permit payment for options exercised in
shares of the Company's common stock (except Duracell options) and the granting
of incentive stock options.
The Company applied APB 25 and related interpretations in accounting for its
plans. Accordingly, no compensation cost has been recognized for its fixed stock
option plans in its results of operations. Had the Company recorded a charge for
the fair value of options granted consistent with SFAS 123,
PAGE 38
<PAGE> 39
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
net income and basic net income per common share would have been reduced by $88
million and $.16 in 1997, $47 million and $.08 in 1996 and $32 million and $.06
in 1995, respectively. The impact on net income per common share, assuming full
dilution, is $.15, $.08 and $.06 in 1997, 1996 and 1995, respectively.
The fair value of each option grant for the Company's plans is estimated on
the date of the grant using the Black-Scholes option pricing model, with the
following weighted average assumptions used for grants in 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
Risk-free interest rates ........... 6.6% 6.5, 6.7% 6.0, 6.5%
Expected option lives .............. 4.6 years 4.6, 7.0 years 4.6, 7.0 years
Expected volatilities ............ 19.2% 22.0, 29.0% 22.4, 29.4%
Expected dividend yields ........... .9% 1.2, 2.1% 1.4, 2.3%
- -------------------------------------------------------------------------------------
</TABLE>
A summary of the status of the Company's stock option plans at December 31,
1997, 1996 and 1995 follows.
<TABLE>
<CAPTION>
1997 1996 1995
----------------------- ----------------------- --------------------------
Weighted Average Weighted Average Weighted Average
(Thousands of shares) Shares Exercise Price Shares Exercise Price Shares Exercise Price
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year* ......... 19,268 $ 37.42 20,750 $ 29.61 20,501 $ 25.07
Granted ................................... 5,293 94.29 4,459 58.02 4,467 42.01
Exercised ................................. (5,047) 31.17 (4,983) 26.32 (3,739) 18.71
Cancelled ................................. (100) 74.98 (493) 40.98 (479) 35.91
------ ------ ------
Outstanding at year-end* ................ 19,414 54.35 19,733 36.58 20,750 29.61
------ ------ ------
Options exercisable at year-end ........... 14,167 15,705 13,069
------ ------ ------
Weighted average fair value of options
granted during the year ................ $25.84 $16.78 $11.48
</TABLE>
*Options outstanding at year-end 1996 include 4,855 pre-merger Duracell options.
Options outstanding at the beginning of 1997 reflect the conversion of each
Duracell option to .904 of a Gillette option.
The following table summarizes information about fixed stock options
outstanding at December 31, 1997.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------- -----------------------------
Weighted Average
Number Remaining Number
Range of Outstanding Years of Weighted Average Exercisable Weighted Average
Exercise Prices (Thousands) Contractual Life Exercise Price (Thousands) Exercise Price
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$6-10 379 1.3 $ 9 379 $ 9
14-18 902 3.1 17 902 17
22-27 2,067 5.0 23 2,067 23
31-42 6,817 6.0 38 6,817 38
43-50 263 4.0 48 263 48
54-74 3,739 8.4 59 3,739 59
78-95 5,247 9.5 94 --
------ ------
$6-95 19,414 7.0 $54 14,167 $40
------ ------
</TABLE>
Eligible Gillette employees may participate in two other plans. The Stock
Equivalent Unit Plan provides for awards of basic stock units to key employees,
although awards have not been made to executive officers since 1990. Each unit
is treated as equivalent to one share of the Company's common stock. However,
the employee only receives appreciation, if any, in the market value of the
stock and dividend equivalent units as dividends are paid. Appreciation on basic
stock units is limited to 100% of the original market value. Benefits accrue
over seven years, and vesting commences in the third year. Plan expense amounted
to $21 million in 1997, $23 million in 1996 and $27 million in 1995.
The Stock Purchase Plan provides for the sale at fair market value of the
Company's common stock to selected key employees, excluding officers and
directors. At December 31, 1997, 140,868 shares were reserved for issuance under
the plan.
PAGE 39
<PAGE> 40
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL INFORMATION BY BUSINESS SEGMENT
<TABLE>
<CAPTION>
(Millions of dollars) Blades & Toiletries & Stationery Braun
1997 Razors Cosmetics Products Products
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales ......................................... $2,881 $1,410 $ 924 $1,744
Profit from operations ............................ 1,186 124 156 304
Identifiable assets ............................... 3,006 1,004 1,299 1,544
Capital expenditures .............................. 423 88 40 126
Depreciation ...................................... 111 37 23 77
1996
- ---------------------------------------------------------------------------------------------------
Net sales ......................................... $2,836 $1,375 $ 915 $1,773
Profit from operations* ........................... 1,062 87 122 300
Identifiable assets ............................... 2,591 874 1,244 1,534
Capital expenditures .............................. 353 65 43 120
Depreciation ...................................... 96 26 20 78
*After merger-related
costs of ......................................... 36 4 -- --
1995
- ---------------------------------------------------------------------------------------------------
Net sales ......................................... $2,635 $1,236 $ 862 $1,621
Profit from operations ............................ 961 75 109 255
Identifiable assets ............................... 2,123 695 1,171 1,483
Capital expenditures .............................. 219 54 43 111
Depreciation ...................................... 85 28 19 70
- ---------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(Millions of dollars) Oral-B Duracell
1997 Products Products Other Corporate Total
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales ......................................... $624 $2,478 $ 1 $ -- $10,062
Profit from operations ............................ 85 526 -- (57) 2,324
Identifiable assets ............................... 622 3,138 -- 251 10,864
Capital expenditures .............................. 45 165 -- 86 973
Depreciation ...................................... 17 58 -- 7 330
1996
- --------------------------------------------------------------------------------------------------------
Net sales ......................................... $547 $2,251 $ 1 $ -- $ 9,698
Profit from operations* ........................... 58 142 -- (135) 1,636
Identifiable assets ............................... 595 3,154 3 420 10,415
Capital expenditures .............................. 38 201 -- 10 830
Depreciation ...................................... 15 51 1 6 293
*After merger-related
costs of ......................................... -- 308 -- 65 413
1995
- --------------------------------------------------------------------------------------------------------
Net sales ......................................... $440 $2,040 $-- $ -- $ 8,834
Profit from operations ............................ 33 428 (1) (61) 1,799
Identifiable assets ............................... 524 2,600 3 319 8,918
Capital expenditures .............................. 40 122 -- 4 593
Depreciation ...................................... 12 48 -- 3 265
- --------------------------------------------------------------------------------------------------------
</TABLE>
FINANCIAL INFORMATION BY GEOGRAPHIC AREA
<TABLE>
<CAPTION>
(Millions of dollars) Western Latin Total United
1997 Europe America Other Foreign States Corporate Total
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales ............................. $2,966 $1,219 $2,195 $6,380 $3,682 $ -- $10,062
Profit from operations ................ 718 309 455 1,482 899 (57) 2,324
Identifiable assets ................... 3,865 1,310 1,504 6,679 3,934 251 10,864
1996
- ------------------------------------------------------------------------------------------------------------------
Net sales ............................. $3,068 $1,105 $1,944 $6,117 $3,581 $ -- $ 9,698
Profit from operations* ............... 535 210 306 1,051 720 (135) 1,636
Identifiable assets ................... 3,838 1,090 1,549 6,477 3,518 420 10,415
*After merger-related
costs of ............................. 119 36 57 212 136 65 413
1995
- ------------------------------------------------------------------------------------------------------------------
Net sales ............................. $3,031 $1,043 $1,663 $5,737 $3,097 $ -- $ 8,834
Profit from operations ................ 640 236 303 1,179 681 (61) 1,799
Identifiable assets ................... 3,755 874 1,018 5,647 2,952 319 8,918
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
Profit from operations is net sales less cost of sales and selling, general and
administrative expenses, but is not affected either by nonoperating
charges/income or by income taxes. Nonoperating charges/income consists
principally of net interest expense and exchange losses.
In calculating profit from operations for individual business segments,
substantial expenses incurred at the operating level that are common to more
than one segment are allocated on a net sales basis. Certain headquarters
expenses of an operational nature also are allocated to business segments and
geographic areas.
The principal products included in each of the Company's major business
segments are described in the review of operations, which appears earlier.
All intercompany transactions have been eliminated, and transfers of
finished goods between geographic areas are not significant. Assets in the
Corporate column include deferred income tax assets, nonqualified benefit
trusts, construction in progress costs related to Corporate Information
Technology initiatives, other financial instruments managed by the Corporate
Treasury department and the effects of fiscal harmonization.
PAGE 40
<PAGE> 41
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
OTHER FINANCIAL INFORMATION
BUSINESS SEGMENTS
The percentages of consolidated net sales and segment profit from operations,
before corporate expenses, for each of the Company's major business segments
during the last five years are set forth below.
<TABLE>
<CAPTION>
Blades & Toiletries & Stationery Braun Oral-B Duracell
Razors Cosmetics Products Products Products Products
--------------- --------------- -------------- --------------- --------------- ----------------
Net Segment Net Segment Net Segment Net Segment Net Segment Net Segment
(Percent) Sales Profit Sales Profit Sales Profit Sales Profit Sales Profit Sales Profit
- ------------------------------------------------------------------------------------- -----------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 ......... 29 50 14 5 9 7 17 13 6 3 25 22
1996* ........ 29 52 14 4 10 6 18 14 6 3 23 21
1995 ......... 30 51 14 4 10 6 18 14 5 2 23 23
1994 ......... 30 53 15 5 10 6 17 12 5 1 23 23
1993* ........ 30 55 15 4 9 4 17 11 5 3 24 23
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Segment profit percentages are before 1996 merger-related costs and 1993
realignment/restructuring expenses.
- --------------------------------------------------------------------------------
QUARTERLY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
(Millions of dollars, except per share amounts) Three Months Ended
-------------------------------------------------
1997 March 31 June 30 September 30 December 31 Total Year
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales ....................................... $2,180 $ 2,285 $ 2,437 $ 3,160 $ 10,062
Gross profit .................................... 1,355 1,426 1,507 1,943 6,231
Profit from operations .......................... 466 518 575 765 2,324
Income before income taxes ...................... 442 496 550 733 2,221
Net income ...................................... 283 319 354 471 1,427
Net income per common share, basic .............. .51 .57 .63 .84 2.55
Net income per common share, assuming
full dilution ................................. .50 .55 .62 .82 2.49
Dividends declared per common share ............. -- .21 1/2 .21 1/2 .43 .86
Stock price range: (composite basis)
High ........................................... 86 1/8 99 5/8 106 3/8 102 5/16
Low ............................................ 72 72 1/4 77 7/8 83 7/8
1996*
- ---------------------------------------------------------------------------------------------------------------
Net sales ....................................... $2,059 $ 2,272 $ 2,366 $ 3,001 $ 9,698
Gross profit .................................... 1,287 1,430 1,479 1,820 6,016
Profit from operations .......................... 414 470 508 244 1,636
Income before income taxes ...................... 390 440 486 209 1,525
Net income ...................................... 249 277 308 115 949
Net income per common share, basic .............. .45 .50 .55 .21 1.71
Net income per common share, assuming
full dilution .................................. .44 .48 .54 .20 1.66
Dividends declared per common share
Gillette ....................................... -- .18 .18 .36 .72
Duracell ....................................... .29 .29 .29 .29 1.16
Gillette stock price range: (composite basis)
High ........................................... 57 7/8 62 1/2 72 1/4 77 3/4
Low ............................................ 50 48 1/4 55 1/4 68
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
*In the fourth quarter of 1996, merger-related costs reduced profit from
operations and income before income taxes by $413 million, net income by $283
million, basic net income per common share by $.51 and net income per common
share, assuming full dilution, by $.50.
PAGE 41
<PAGE> 42
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
HISTORICAL FINANCIAL SUMMARY
(In millions, except per share amounts, stock prices and employees)
<TABLE>
<CAPTION>
Profit Income Net Depreciation
Net from before Net Interest and Total Capital
Year Sales Operations Taxes Income Expense Amortization Assets Expenditures
- ------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C>
1997 $10,062 $2,324 $2,221 $1,427 $ 69 $422 $10,864 $973
1996(a) 9,698 1,636 1,525 949 67 381 10,415 830
- ------------------------------------------------------------------------------------------------------------------------
1995 8,834 1,799 1,700 1,069 73 343 8,918 593
1994 7,935 1,615 1,458 919 68 303 7,766 498
1993(b) 7,085 1,091 907 421 66 303 7,116 396
1992(c) 6,752 1,263 1,061 601 114 298 6,400 370
1991(c) 6,188 1,144 844 432 225 277 6,169 339
1990(c) 5,709 1,020 633 382 319 259 5,921 285
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Per common share amounts, shares outstanding and stock prices have been restated
to reflect two-for-one stock splits in 1991 and 1995.
(a) In 1996, charges for merger-related costs reduced profit from operations and
income before income taxes by $413 million, net income by $283 million, basic
net income per common share by $.51 and net income per common share, assuming
full dilution, by $.50.
(b) In 1993, charges for realignment and restructuring expenses reduced profit
from operations and income before income taxes by $328 million, net income by
$212 million, basic net income per common share by $.39 and net income per
common share, assuming full dilution, by $.38. In addition, in 1993, the
cumulative effect of adopting mandated changes in the methods of accounting for
income taxes, postretirement benefits and postemployment benefits reduced net
income by $139 million and net income per common share, basic and assuming full
dilution, by $.25.
(c) Charges for extraordinary items reduced net income by $75 million in 1992,
$109 million in 1991 and $6 million in 1990 and basic net income per common
share by $.14 in 1992, $.22 in 1991 and $.01 in 1990.
Source of 1997 Sales
- --------------[Pie Charts]---------
Percent by Business Segment
- ---------------------------
<TABLE>
<S> <C>
Blades & Razors 29%
Duracell Products 25%
Braun Products 17%
Toiletries & Cosmetics 14%
Stationery Products 9%
Oral-B Products 6%
</TABLE>
Percent by Geographic Area
- --------------------------
<TABLE>
<S> <C>
United States 37%
Western Europe 29%
Other 22%
Latin America 12%
- -----------------------------------
</TABLE>
PAGE 42
<PAGE> 43
T H E G I L L E T T E C O M P A N Y A N D
S U B S I D I A R Y C O M P A N I E S
HISTORICAL FINANCIAL SUMMARY
<TABLE>
<CAPTION>
Per Common Share
--------------------------------------
Net Income
-------------------
Dividends Average
Net Property, Assuming Declared Common
Plant and Long-Term Stockholders' Full ------------------- Shares Year-end
Equipment Debt Equity Basic Dilution Gillette Duracell Outstanding Stock Price Employees Year
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$3,104 $1,476 $4,841 $2.55 $2.49 $.86 $ -- 559 $100 7/16 44,000 1997
2,586 1,490 4,471 1.71 1.66 .72 1.16 554 77 3/4 44,100 (a)1996
- ------------------------------------------------------------------------------------------------------------------------------------
2,053 1,048 3,879 1.94 1.89 .60 1.04 550 52 1/8 41,900 1995
1,750 1,073 3,257 1.67 1.64 .50 .88 548 37 3/8 40,700 1994
1,507 1,234 2,582 .77 .75 .42 .64 545 29 3/4 41,000 (b)1993
1,396 1,124 2,538 1.10 .36 .16 541 28 3/8 38,800 (c)1992
1,262 1,473 2,134 .81 .31 -- 509 28 39,200 (c)1991
1,183 2,456 607 .72 .27 -- 453 15 5/8 38,300 (c)1990
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Investor Returns
- -------------------[Bar Chart]------------------
Compounded Annual Return to Investors, Assuming
Reinvestment of Dividends (through 12/31/97)
<TABLE>
<CAPTION>
5 Years 10 Years
<S> <C> <C>
Gillette 30% 33%
DJIA 22% 19%
S&P 500 20% 18%
</TABLE>
- --------------[Mountain Chart]-------------
Value of $1,000
Invested 12/31/87
[Plot points not available]
Gillette $16,989
DJIA 5,516
S&P 500 5,225
- -------------------------------------------
PAGE 43
<PAGE> 44
CORPORATE AND
STOCKHOLDER INFORMATION
ANNUAL MEETING
The Annual Meeting of stockholders will take place on Thursday, April 16, 1998,
at the John F. Kennedy Library and Museum, Columbia Point, Boston,
Massachusetts. The meeting will convene at 10 a.m.
CORPORATE HEADQUARTERS
Prudential Tower Building
Boston, Massachusetts 02199
(617) 421-7000
INCORPORATED
State of Delaware
COMMON STOCK
Major stock exchanges: New York, Boston, Midwest, Pacic, Frankfurt, Zurich
New York Stock Exchange Symbol: G
At year-end, stockholders numbered 56,900, living in all 50 states and more than
30 countries abroad.
TRANSFER AGENT AND REGISTRAR
BankBoston, N.A.
c/o Boston EquiServe L.P.
P.O. Box 8040
Boston, Massachusetts 02266-8040
(781) 575-2322
By fax: (781) 828-8813
Toll-free: (888) 218-2841
Hearing impaired: (800) 952-9245 (TTY/TDD)
Via Internet: http://www.EQUISERVE.com
AUDITORS
KPMG Peat Marwick LLP
FORM 10-K
The Company's 1997 Annual Report on Form 10-K, led with the Securities and
Exchange Commission, is available without charge from the Officce of the
Secretary by written request, or by calling toll-free (800) 291-7615.
INVESTLINKsm - DIRECT
STOCK PURCHASE PROGRAM
InvestLinksm is a direct stock purchase program designed to promote long-term
ownership among investors who are committed to investing a minimum amount and
building their Gillette share ownership over time. The program is sponsored and
administered by BankBoston, N.A., Gillette's transfer agent. InvestLinksm
provides an economical, convenient way to purchase your first shares or to
purchase additional shares of the Companys common stock directly from the
Company. Program participants may also reinvest their cash dividends through
InvestLinksm. You may request an enrollment application and a brochure from:
BankBoston, N.A.
"InvestLink" Program
P.O. Box 8040
Boston, Massachusetts 02266-8040
(781) 575-2322
Toll-free: (800) 643-6989
Hearing impaired: (800) 952-9245 (TTY/TDD)
QUARTERLY REPORTS
Currently, the Company mails quarterly reports only to registered holders of
Gillette common stock. If your shares are registered in the name of a broker or
other nominee, and you would like to receive the quarterly reports, the Company
will gladly mail them directly to you. You may add your name to our mailing list
by writing to the Office of the Secretary, or by calling toll-free
(800) 291-7615.
Printed in U.S.A. [graphic] This annual report is printed on recycled paper.
<PAGE> 1
EXHIBIT 22
THE GILLETTE COMPANY
SUBSIDIARIES OF REGISTRANT
<TABLE>
<CAPTION>
ORGANIZED
UNDER
LAWS OF
NAME ---------
<S> <C>
Gillette Argentina S.A. .................................... Argentina
Gillette Australia Pty Ltd.................................. Australia
Braun Inc. ................................................. Delaware
Duracell Inc. .............................................. Delaware
Its subsidiaries:
Duracell Batteries Limited............................. United Kingdom
Duraname Corp. ........................................ Delaware
NV Duracell Belgium SA................................. Belgium
Duracell GmbH.......................................... Germany
Duracell SpA........................................... Italy
Eveready South Africa (pty) Limited.................... South Africa
Gillette Beteiligungs -- GmbH............................... Germany
Its subsidiaries:
Gillette Deutschland GmbH & Co. ....................... Germany
Societe de Participations Financieres Gillette......... France
Its subsidiary:
Waterman S.A. .................................... France
Braun AG............................................... Germany
Its subsidiaries:
Braun Electric Austria Gesellschaft mbH........... Austria
Braun Canada Ltd./Ltee............................ Canada
Braun Espanola, S.A. ............................. Spain
Braun Finland Oy.................................. Finland
Braun France S.A. ................................ France
Braun Ireland Ltd. ............................... Ireland
Braun Italia S.r.l. .............................. Italy
Braun Japan K.K. ................................. Japan
Braun de Mexico y Cia. de C.V. ................... Mexico
Braun Nederland B.V. ............................. Netherlands
Braun (U.K.) Ltd. ................................ United Kingdom
Gillette do Brasil, Inc. and Jafra Comercio Participacoes e Delaware
Servicos, Inc. ...........................................
Its subsidiary:
Gillette do Brazil Ltda. ......................... Brazil
Gillette Canada Inc. ....................................... Canada
Its subsidiaries:
Oral-B Laboratories Pty. Limited....................... Australia
Oral-B Laboratories GmbH............................... Germany
Oral-B Laboratorios, S.A. de C.V. ..................... Mexico
Gillette de Colombia S.A. .................................. Colombia
Colton Gulf Coast, Inc. .................................... Delaware
Colton North Central, Inc. ................................. Delaware
Gillette Capital Corporation................................ Delaware
Its subsidiary:
Jafra Cosmetics International, Inc. ................... California
Gillette Czech Inc. and Gillette Eastern Europe, Inc........ Delaware
Their subsidiary:
Astra a.s. ............................................ Czech Republic
Gillette Espanola, S.A. .................................... Spain
Gillette Far East Trading Limited........................... Hong Kong
Gillette Foreign Sales Corporation Limited.................. Jamaica
Gillette France S.A. ....................................... France
Gilfin B.V. ................................................ Netherlands
Parkfin Limited............................................. United Kingdom
Compania Giva, S.A. ........................................ Delaware
</TABLE>
15
<PAGE> 2
THE GILLETTE COMPANY
SUBSIDIARIES OF REGISTRANT -- (CONTINUED)
<TABLE>
<CAPTION>
ORGANIZED
UNDER
LAWS OF
NAME ---------
<S> <C>
Indian Shaving Products Limited............................. India
Compania Interamericana Gillette, S.A. ..................... Panama
Gillette Egypt S.A.E. ...................................... Egypt
Gillette Pakistan Limited................................... Pakistan
Inversiones Gilco (Chile) Limitada.......................... Chile
Gillette Group Italy S.p.A.................................. Italy
Grupo Jafra, S.A. de C.V. .................................. Mexico
Gillette (Japan) Inc. ...................................... Delaware
Grupo Gillette S.A. de C.V. ................................ Mexico
Its subsidiary:
Gillette de Mexico S.A. de C.V. ....................... Mexico
Gillette del Peru, Inc. and Lima Manufacturing Company...... Delaware
Partners in:
Gillette del Peru, S.C. ............................... Peru
Gillette (Philippines), Inc. ............................... Philippines
Gillette Sanayi ve Ticaret A.S. ............................ Turkey
Gillette (Shanghai) Limited................................. China
Shenmei Daily Use Products Limited Company.................. China
Gillette South Africa Limited............................... South Africa
Gillette South Asia Inc. and Saratoga Investment, Inc....... Delaware
Their subsidiaries:
Gillette India Private Limited......................... India
Luxor Writing Instruments Private Ltd.................. India
Gillette (Switzerland) AG................................... Switzerland
Gillette Industries Plc..................................... United Kingdom
Its subsidiaries:
Gillette U.K. Limited.................................. United Kingdom
Jafra Cosmetics International Limited.................. United Kingdom
Parker Pen Holdings.................................... United Kingdom
The Gillette Company (USA), Inc. ........................... Massachusetts
Gillette Poland S.A. ....................................... Poland
Gillette Home Diagnostics, Inc.............................. Delaware
Its subsidiary:
Thermoscan Inc......................................... Delaware
Gillette Oral Care, Inc..................................... Delaware
</TABLE>
All of the voting securities of each subsidiary listed above are owned by
its parent company or parent partners except that the percentage ownership in
Indian Shaving Products Limited, Shenmei Daily Use Products Limited Company,
Gillette (Shanghai) Limited, Gillette Pakistan Limited, Gillette Egypt S.A.E.
and Luxor Pen Company is 58%, 50%, 70%, 76.49%, 92% and 50%, respectively.
There are a number of additional subsidiaries in the United States and
foreign countries which, considered in the aggregate, do not constitute a
significant subsidiary.
16
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
The Stockholders and Board of Directors
of THE GILLETTE COMPANY:
We consent to incorporation by reference in the following registration
statements of The Gillette Company and any amendments thereto (1) No. 33-9495 on
Form S-8, (2) No. 2-93230 on Form S-8, (3) Nos. 33-56218 and 33-27916 on Form
S-8 which incorporate by reference therein registration statements on Form S-8
Nos. 2-90276, 2-63951 and 1-50710 and No. 2-41016 on Form S-7, (4) No. 33-54974
on Form S-3, (5) No. 33-50303 on Form S-3, (6) No. 33- 52465 on Form S-8, (7)
No. 33-53257 on Form S-8, (8) No. 33-53258 on Form S-8, (9) No. 33-55051 on Form
S-3, (10) No. 33-59125 on Form S-8, (11) No. 33-63707 on Form S-8 (12) No.
333-16735 on Form S-4, (13) No. 333-19133 on Form S-8, (14), No. 333-25533 on
Form S-8 and (15) 333-44257 on Form S-3 of our report dated January 28, 1998,
relating to the consolidated balance sheet of The Gillette Company and
subsidiary companies as of December 31, 1997 and 1996, consolidated statements
of income, cash flows and stockholders' equity for each of the years in the
three-year period ended December 31, 1997 and the Valuation and Qualifying
Account Schedule, which reports appear or are incorporated by reference in the
December 31, 1997 Annual Report on Form 10-K of The Gillette Company.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
March 20, 1998
17
<PAGE> 1
EXHIBIT 24
POWER OF ATTORNEY
We, the undersigned hereby constitute Charles W. Cramb and John M. Coleman,
or either of them, our true and lawful attorneys with full power to sign for us
in our name and in the capacity indicated below the Annual Report on Form 10-K
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, filed
for the Company with the Securities and Exchange Commission for the year ended
December 31, 1997, and any and all amendments and supplements thereto, hereby
ratifying and confirming our signatures as they may be signed by our said
attorneys, or either of them, to said Report and to any and all amendments and
supplements to said Report.
WITNESS Our Hand and Seal on the Date set forth below.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
ALFRED M. ZEIEN Chairman of the Board March 19, 1998
- ----------------------------------------------------- of Directors, Chief Executive Officer
Alfred M. Zeien and Director
MICHAEL C. HAWLEY President, Chief Operating Officer March 19, 1998
- ----------------------------------------------------- and Director
Michael C. Hawley
JOSEPH E. MULLANEY Vice Chairman of the Board, Chief March 19, 1998
- ----------------------------------------------------- Legal Officer and Director
Joseph E. Mullaney
CHARLES W. CRAMB Senior Vice President, Chief March 19, 1998
- ----------------------------------------------------- Financial Officer and
Charles W. Cramb Principal Accounting Officer
WARREN E. BUFFETT Director March 19, 1998
- -----------------------------------------------------
Warren E. Buffett
WILBUR H. GANTZ Director March 19, 1998
- -----------------------------------------------------
Wilbur H. Gantz
MICHAEL B. GIFFORD Director March 19, 1998
- -----------------------------------------------------
Michael B. Gifford
CAROL R. GOLDBERG Director March 19, 1998
- -----------------------------------------------------
Carol R. Goldberg
HERBERT H. JACOBI Director March 19, 1998
- -----------------------------------------------------
Herbert H. Jacobi
HENRY R. KRAVIS Director March 19, 1998
- -----------------------------------------------------
Henry R. Kravis
RICHARD R. PIVIROTTO Director March 19, 1998
- -----------------------------------------------------
Richard R. Pivirotto
JUAN M. STETA Director March 19, 1998
- -----------------------------------------------------
Juan M. Steta
ALEXANDER B. TROWBRIDGE Director March 19, 1998
- -----------------------------------------------------
Alexander B. Trowbridge
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE GILLETTE COMPANY FOR THE YEAR ENDED DECEMBER 31,
1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000041499
<NAME> THE GILLETTE COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 105,000
<SECURITIES> 0
<RECEIVABLES> 2,596,000
<ALLOWANCES> 74,000
<INVENTORY> 1,500,000
<CURRENT-ASSETS> 4,690,000
<PP&E> 5,191,000
<DEPRECIATION> 2,087,000
<TOTAL-ASSETS> 10,864,000
<CURRENT-LIABILITIES> 2,641,000
<BONDS> 1,476,000
0
93,000
<COMMON> 676,000
<OTHER-SE> 4,072,000
<TOTAL-LIABILITY-AND-EQUITY> 10,864,000
<SALES> 10,062,000
<TOTAL-REVENUES> 10,062,000
<CGS> 3,831,000
<TOTAL-COSTS> 3,831,000
<OTHER-EXPENSES> 3,907,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 78,000
<INCOME-PRETAX> 2,221,000
<INCOME-TAX> 794,000
<INCOME-CONTINUING> 1,427,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,427,000
<EPS-PRIMARY> 2.55
<EPS-DILUTED> 2.49
</TABLE>
